TMI Tax Updates - e-Newsletter
November 4, 2015

Case Laws in this Newsletter:

Income Tax Customs FEMA Service Tax Central Excise CST, VAT & Sales Tax Wealth tax

TMI SMS

• TDS u/s 194J on professional fees paid to doctor is required on Dentistry expenses paid for beauty and personality by the Cine Artist - Tri

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• Misuse of the scheme to promote export - Notification could not be retrospective - Exporters can't claim benefit as no right had accrued -SC

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• Amendment of Bills of Entry to claim exemption/ refund has to be allowed when notification was in existence at the time of clearance - Tri

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News

1. Among others Special Investigation Team (SIT) calls for greater vigilance by law enforcement and intelligence agencies while examining the cases of persons holding Directorship in more than 20 Companies and where more than 20 companies are operating from the same address

2. Misuse of the Special scheme to promote export - some benefits which had already accrued to exporters under the EXIM Policy were taken away. - Validity and Scope of Notifications - Power to DGFT to amend the policy - Notifications are Retrospective or prospective - Whether Notifications were issued in public interest

3. RBI Reference Rate for US $

4. Auction for Sale (Re-Issue) of Government Stock

Notifications

Income Tax

1. F. No. 4(19)-W&M/2014 - dated 30-10-2015 - IT

Sovereign Gold Bonds Scheme, 2015

2. 87/2015 - dated 30-10-2015 - IT

Notification No. 01/2015, dated the 1st January, 2015 superseded, CBDT directs specified Income-tax authorities to be subordinate of Income-tax authorities mentioned under the Table

SEZ

3. S.O. 2979 (E) - dated 26-10-2015 - SEZ

Rescinds the sector specific Special Economic Zone for pharmaceuticals at Plot No.C-21, MIDC, Shendre Five Star Industrial Area, District Aurangabad in the State of Maharashtra

4. S.O. 2978(E) - dated 26-10-2015 - SEZ

Rescinds the sector specific Special Economic Zone for information technology and information technology enabled services including electronic hardware at villages B.M. Kaval and Rachanamadu, Kangeri Hobli, District Bangalore in the State of Karnataka

Circulars / Instructions / Orders

Income Tax

1. LETTER F.NO.225/261/2015/ITA.II - dated 28-10-2015

U/s 245R of Income Tax Act - Advance Ruling Representation of cases before Authority for Advance Ruling

2. File No 279/Misc/142/2007-ITJ - dated 27-8-2015

Filing Review Petition/Miscellaneous Application before High Court/ITAT

3. No.500/98/2015-FT&TR-V - dated 14-8-2015

Representation before Authority of Advance Rulings

DGFT

4. 08/2015 - dated 3-11-2015

Application for Duty Credit Scrips of additional 2% under Market Linked Focus Product Scheme (MLFPS)

Highlights / Catch Notes

Income Tax

• High Court Rules Tribunal Wrong to Accept Late Evidence from Assessee in Second Appeal Stage.

  Case-Laws - HC : Tribunal was not justified in accepting the additional evidence filed by the assessee at the second appellate stage, and we are also of the view that the reasons assigned by the assessee for not having produced the same earlier before the Assessing Officer, is not worthy of acceptance - HC
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• Trust's Share Transfers Taxed as Capital Gains; Trust Must Report Gains as Income from Capital Assets.

  Case-Laws - AT : Transaction of shares - Assessment of income - the shares held by the assessee trust are capital assets in its hands and gain arising on the transfer of these shares by the assessee trust, shall be taxable under the head income from the capital gains in the hands of assessee trust. - AT
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• Vision Plus Software Expenses Ruled as Revenue Expenditure, Deductible u/s 37 of Income Tax Act.

  Case-Laws - AT : Addition on account of license fees, connectivity charges and co-ordination charges for the use of Vision plus software - revenue v/s capital expenditure - held as revenue expenditure deductible u/s. 37 - AT
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• Credit notes for distributors meeting sales targets are not subject to TDS u/s 194H.

  Case-Laws - AT : TDS on sales promotion & selling expenses u/s 194H - Only the credit notes were provided only to the distributors who have achieved the target which they can redeem at the time of subsequent purchases. So we are of the opinion that the transaction is out of the purview of the TDS provision. - AT
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• Cine Artist Must Deduct TDS on Dental Service Fees u/s 194J, Vital for Professional Appearance and Revenue.

  Case-Laws - AT : TDS on Dentistry expenses - assessee is a cine artist /actress and her beauty and personality is one of the most important trait for generating business and revenue - assessee is required to deduct TDS u/s 194J of the Act on the professional fees paid to doctor - AT
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Customs

• Court Denies Assistance to Petitioners Exploiting Export Scheme Without Actual Exports for Undue Benefits.

  Case-Laws - SC : This Court, or for that matter the High Court in exercise of its writ jurisdiction, cannot come to the aid of such petitioners/exporters who, without making actual exports, play with the provisions of the Scheme and try to take undue advantage thereof - SC
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• Supreme Court Rules EXIM Policy Changes Do Not Violate Exporters' Rights; No Retrospective Effect u/s 5.

  Case-Laws - SC : Misuse of the Special scheme to promote export - some benefits which had already accrued to exporters under the EXIM Policy were taken away. - Notification issued u/s 5 could not be retrospective in nature, such retrospectivity have not deprived the writ petitioners/exporters of their right inasmuch as no right had accrued in favour of such persons under the Scheme - SC
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• Customs Should Not Over-Scrutinize Imported Goods for Renovation Under LTAPSA, Avoid Denying Exemption Benefits on Technicalities.

  Case-Laws - SC : Import of goods in replacement under Long Term Assured Parts Supply Agreement (LTAPSA) - once authorities are satisfied that the impugned goods are required for renovation, the customs department does not need to go deep into the matter and by hairsplitting and semantic niceties deny the benefit of the exemption notification. - SC
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• Refund of Excess Duty Under Notification No. 119/2008-Cus Hinges on Documentary Evidence for Bill Amendment.

  Case-Laws - AT : Refund of excess duty paid to claim exemption under Notification No. 119/2008-Cus. - re-assessment / amendment of the bills of entry - amendment has to be allowed when a request is based on documentary evidence, which was in existence at the time of clearance - AT
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Service Tax

• CENVAT Credit Allowed for Employee Township Expenses Related to Petroleum Manufacturing Activities.

  Case-Laws - AT : Denial of CENVAT Credit - Expenses which were incurred by the appellant for setting up of the township/colony for their employees is expenses which is in relation to the business activity of the appellant which is manufacturing final products i.e. petroleum products - credit allowed - AT
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• Refund of Unutilized CENVAT Credit: Understanding the Formula in Appendix 5 of Notification No. 5/2006 for Mixed Turnover.

  Case-Laws - AT : Refund of unutilized CENVAT Credit - Formula as given in appendix 5 of the Notification No. 5/2006, only provides to work out the limit of eligible amount where an assessee has got both export and domestic turnover. - AT
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• Service Tax Penalty Waived u/s 80 Due to Payment After Audit; Departmental Coordination Issues Cited.

  Case-Laws - AT : Waiver of penalty u/s 80 - service tax was paid at the instance of Audit team - discrepancy occurred due to lack of co-ordination between the two Departments of the assessee - penalty set aside - AT
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• Advance Service Tax Adjustments Allowed Without Prior Notice u/r 6(4A) and 6(1A) of 1994 Rules.

  Case-Laws - AT : Adjustment of advance / excess payment of service tax without intimation - Rule 6(4A) of Service Tax Rules, 1994 - case is covered by Rule 6(1A)according to which the adjustment of advance payment is permissible against service tax liability in the subsequent period without any limit of the amount - AT
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• CENVAT Credit Denied for Mall Construction Inputs: Excise Duty and Service Tax Not Applicable to Output Services.

  Case-Laws - AT : CENVAT Credit - construction of mall by contractor - Cenvat credit of the excise duty paid on various inputs and service tax paid on various input services - not the inputs/input services for the appellants in respect of their output services - Prima facie case is not in favor of appellant - AT
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• Lease Rent Equalization in Balance Sheets Not 'Income' u/s 67; Not Subject to Service Tax.

  Case-Laws - AT : Valuation - Section 67 - Associated enterprises - lease rent equalisation shown in Balance sheet - - The amount shown in the balance sheet is not an 'income' for the purposes of computing Tax under the Income Tax Act. In the result it is also not a 'payment' actually received or receivable, and therefore neither 'consideration' nor the 'gross amount charged' - No service tax - AT
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Central Excise

• Switching System, Power Plant, and Inverter Setup Not Considered Manufacturing Under Law.

  Case-Laws - AT : Whether assembly, installation and commissioning of switching system along with power plant, inverter etc. would amount to manufacture - Held No - AT
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• No Interest on Provisional Assessments if Duty Paid Before Finalization: Important Taxpayer Information.

  Case-Laws - AT : Interest liability - Provisional assessment - interest is not payable if assessee pays the duty before finalisation - AT
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• Refund Claim Denial: Unjust Enrichment, Limitation Bar, and Finality of Settled Issues by Commissioner (Appeals.

  Case-Laws - AT : Denial of refund claim - Unjust enrichment - Bar of limitation - Duty paid under protest - once the issue has been settled by the Commissioner (Appeals) without challenging the same, Rvenue could not again raised the same issue by way of another show cause notice and deciding the same contrarily by taking U-turn. - AT
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• Revenue's Demand Overturned: Cenvat Credit Investigation Wasn't Extended Within One-Year Limit; Demand Beyond Period Invalid.

  Case-Laws - AT : The informations provided by the appellant are more than sufficient for the Revenue, that if at all they are of the view that the Cenvat credit is not admissible they could have extended their investigation and could have issued show cause notice well within the normal period of one year - Demand beyond normal period of limitation set aside - AT
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• Valuation for Captive Consumption: Expenses Excluded, Fact Suppression Found, Extended Limitation Period Applies u/r 6(b)(ii)/Rule 8.

  Case-Laws - AT : Valuation - Captive consumption - computation of value as per Rule 6(b)(ii) of old Rules or Rule 8 of the new Rules - non inclusion of certain expenses - This is a clear-cut case of suppression of facts with willful intention to evade payment of duty and hence extended period of limitation is correctly invokable - AT
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• Supreme Court Grants Tax Relief for Apparel Goods Under Exemption Notification No. 38/2003-CE, April 30, 2003.

  Case-Laws - SC : Textile goods / Ready Made Garments (RMG) - article of apparel or clothing accessories - process of affixing a brand name or trade name / affixing lables after purchase of goods - Benefit of Exemption Notification No. 38/2003-CE dated 30th April, 2003 allowed - SC
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• Exemption Denied for EOU Cotton Yarn Clearance to DTA Due to Imported Wax Use in Final Product.

  Case-Laws - SC : Clearance of goods to DTA by an EOU - cotton yarn was manufactured out of indigenous cotton and imported wax, as wax was contained in the final product (yarn) - benefit of exemption denied - SC
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• Supreme Court Rules: Availing MODVAT/CENVAT Credit Does Not Disqualify Manufacturers from SSI Exemption in Excise Law.

  Case-Laws - SC : SSI Exemption - CENVAT credit - whether availing the benefit of MODVAT/CENVAT credit in respect of branded goods of third parties manufactured by the assessees on job work basis, disentitles them from availing the benefit of SSI exemption - Held No - SC
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Case Laws:

• Income Tax

• 2015 (11) TMI 75
  Addition u/s 69B - unexplained investment - estimation of value of the property - total amount spent by the three co-owners in acquiring the farm - Held that:- As regards the probative value of the report of a DVO, the settled legal position appears to be that in the absence of there being material with the AO to come to a conclusion that the Assessee had paid extra consideration for the purchase of property over and above what is stated in the sale deed, an addition under Section 69B of the Act “solely on the basis of the report of the Valuation Officer” cannot be sustained. See Commissioner of Income Tax v. Puneet Sabharwal (2010 (12) TMI 846 - Delhi High Court ) In the facts of the present case it is plain that the seized document, which raised the suspicion of the Revenue about a possible undisclosed investment made by the Assessees, did not form the basis for the additions. The statement made by the DR before the ITAT, which was accepted by the ITAT, makes it clear that the addition was sought to be sustained only on the basis of the report of the DVO. Thus the Court finds that the additions made in the hands of the Assessees, are in the facts and circumstances of the case, unsustainable in law. The question is answered in the negative i.e. in favour of the Assessees and against the Revenue.

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• 2015 (11) TMI 74
  Rejection of book results u/s. 143(3) - estimating total income - revision u/s 263 - Held that:- We find that there was sufficient material available on record for the Assessing Officer to reach the conclusion that the books of account as produced by the Respondent Assessee were not reliable. The rejection of books of account were on account of cumulative factors such as the Respondent Assessee not being able to give the names and addresses of the persons who purchased the frames in cash. It is not only the failure of the Respondent-Assesssee in giving the names and addresses of the purchasers in cash of the defective frames but various other factors which are listed herein above including the fall in the GP ratio from 34.73% in the preceding assessment year to 20.35% in the subject assessment year. The grievance about the submissions made in respect of the order passed by the Commissioner of Income Tax under Section 263 of the Act on behalf of Respondent Assessee cannot be now countenanced as the order dated 27th March, 2006 passed by the Commissioner of Income Tax under Section 263 was accepted by the Appellant. Be that as it may, we are of the view that there was material on record which supports the view taken by the Assessing Officer in rejecting the books of account under Section 145(3) of the Act. This has been confirmed by the Commissioner of Income Tax and the Tribunal by the impugned order. In the above facts, no substantial question of law arises for our consideration. - Decided against assessee.

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• 2015 (11) TMI 73
  Treatment of the purchase and sale of shares - Determination of income - short term capital gains and long term capital gains or business income - Held that:- The Court finds merit in the contention of learned Senior counsel for Assessee that the ITAT appears to have prejudged the issue whether the Assessee was also a trader in shares apart from being an investor. That conclusion was required to be arrived at by the CIT (A) after re-examining the matter in the light of the issues highlighted by the ITAT. The CIT (A) should have been given a free hand to arrive at an independent decision uninfluenced by the observations of the ITAT on merits. Accordingly, the impugned order of ITAT is modified by directing that the CIT (A) will undertake the exercise of examining the materials de novo and arriving at a decision uninfluenced by the observations and/or conclusions of the ITAT including whether the Assessee was both a trader and an investor.

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• 2015 (11) TMI 72
  Monetary limit - whether the said Instruction No.3 would apply to pending appeals as well? - Held that:- The legal position that has been made explicit is that Instruction No.3/2011 dated 9th February 2011 would not be applicable to appeals already been filed prior to the said date whether before the ITAT or before the High Court.

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• 2015 (11) TMI 71
  Penalty under section 271E - violation of the provisions of section 269T - ITAT deleted penalty levy - Whether the Tribunal was correct in accepting the additional evidence placed before it by the assessee when the same was not produced before the Assessing Officer and the Appellate Commissioner, when the assessee has not assigned any reasons for not producing the same before the Assessing Officer? - Held that:- It is clear that the question as to whether the firms in question were group concerns or not was always under consideration, right from the stage of the assessee submitting its reply to the notice, and it was for the assessee to have filed necessary documents at the initial stage itself, when it took the stand that the firms were group concerns or sister concerns. Filing of the additional evidence at a late stage, even when the said documents are said to be available with the assessee at the initial stage itself, makes the authenticity of the documents doubtful. The main agreements dated 5.10.2004 are both unregistered documents. There could be substance in the submission of the learned counsel for the Revenue, that the said documents could have been prepared at a later date for the purposes of this case. Merits of the said documents shall be considered while dealing with the second substantial question of law. At present, we have to only consider whether the filing of additional documents, which were available with the assessee at the initial stage, would be justified or not, when they have been filed at the stage of second appeal before the Tribunal. In the facts and circumstances of the case and for the reasons given hereinabove, we are of the view that the Tribunal was not justified in accepting the additional evidence filed by the assessee at the second appellate stage, and we are also of the view that the reasons assigned by the assessee for not having produced the same earlier before the Assessing Officer, is not worthy of acceptance. As such, we answer the first substantial question of law in favour of the Revenue Whether the Tribunal was correct in holding that the repayment made by the assessee in favour of Annapoorneshwari Investment and Adarsh Enterprises is in the nature of current account transaction and hence the same is not in violation of section 269T? - Held that:- The common partner between the assessee and AE is one Sri Satish Pai, but no such plea had been raised by the assessee before the Assessing Officer, as has been categorically held by the Appellate Commissioner in his order. The Tribunal has, in paragraph 14, justified the same by observing that Satish Pai is a partner in the assessee firm, as also a partner in AE. It is not understood as to on what basis the same has been observed by the Tribunal, because the Appellate Commissioner has specifically stated that no such plea had ever been taken by the assessee with regard to such common partner being there between the assessee firm and the firm AE. On perusal of the replies given to the notices and other documents, the assessee has only stated that Sri Rama Krishna is a common partner between the assessee firm and the firm AI, but nothing has been said about the assessee and AE firms having a common partner. On being asked, Sri Parthasarathi, learned counsel for the respondent-assessee could not place any document from the entire record to show that such information was ever given to any of the authorities below. As such, the observation made by the Tribunal in paragraph 14 of its order with regard to Sri Satish Pai being a partner in the assessee firm as well as the firm AE, is not borne out from the record. Thus if the additional documents are accepted on record, answer to the second substantial question of law, would still be in favour of the Revenue and against the assessee.

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• 2015 (11) TMI 70
  Computation of qualifying income by applying the Explanation (baa) under section 80 HHC - whether Processing Charges, Processing hall and cold storage service charges and storage charges are not in the nature of turnover of the business? - Held that:- Insofar as two out of the three items of claims for deduction under section 80 HHC are concerned, Explanation (baa) would apply. Insofar as the processing charges alone are concerned, the matter requires re-examination by the assessing officer. In view of the above, we hold that the Tribunal was not right without analysing the nature of the processing charges in coming to the conclusion that Explanation (baa) to section 80 HHC would apply to processing charges also. Therefore, that portion of the order of the Tribunal alone is set aside. However, the order of remand is confirmed and the assessing authority is at liberty to examine the nature of the income that comes under the heading processing charges. The other questions of law are answered against the assessee.

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• 2015 (11) TMI 69
  Transaction of shares - Assessment of income - whether the shares held by the assessee on behalf of its settler i.e. Mahindra & Mahindra Ltd. was capital asset and whether the income arising from sale proceeds of these shares in pursuant to exercise of the options by the eligible employees was to be determined under the head capital gains or under the head income from business? - Held that:- In the case of a trader, the motive is to maximize the profits, as the main object of the proper is mechanized the profits by doing the business of trading. The attributes available in the transaction of the assesee trust are unlike that of a trader and are more like that of an investor. The assessee trust is not free or authorized to sell the shares, held by it on behalf of the settler company, to any person in the free market at fair market price. Under such circumstances, the assessee trust is not in a position to earn maximum profits. Thus, it could be safely said that certainly assessee trust is not in the business of trading of shares. The shares held by the assessee trust cannot be categorised as "stock- in-trade" of the assessee trust. The assessee trust is like an extended arm or special purpose vehicle of the settler company, created for the purpose of carrying out certain transactions on behalf of the settler company, as discussed in detail in the above paras, and therefore, under these facts & circumstances, the nature and character of shares held by the assessee trust, on behalf of the assessee trust, and resultant gain or loss arising from the transfer of these shares, should also be same, as it would have been in the hands of settler company. Thus, viewed from this angle also the shares held by the assessee trust are capital assets in its hands and gain arising on the transfer of these shares by the assessee trust, shall be taxable under the head income from the capital gains in the hands of assessee trust. - Decided in favour of assessee Income of the assessee trust - whether chargeable to tax at maximum margin rate? - Held that:- The long term capital gain on shares is chargeable to tax at maximum marginal rate which cannot exceed the rate provide u/s 112 of the Act. Therefore, we hold that the action of AO in not providing the benefit of section 112 to the assessee with regard to the income assessable under the head income from capital gains is contrary to law and facts and the same is reversed. The AO is directed to charge tax on capital gains as per section 112 of the Act. With regard to other issue raised by the assessee i.e. availability of benefit of second proviso to section 112, it is seen by us that same has not been examined properly on facts. For this limited purpose, we send this issue back to the file of the AO. The assessee shall place requisite details and evidences before the AO to establish that the impugned shares were listed with stock exchange and assessee was eligible for the benefit of second proviso of section 112, as per facts. The AO shall give full opportunity to the assessee and shall confine his examination limited to this factual requirement only - Decided in favour of assessee for statistical purposes.

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• 2015 (11) TMI 68
  Addition on account of license fees, connectivity charges and co-ordination charges for the use of Vision plus software - revenue v/s capital expenditure - Software only is not the soul of assessee’s business as argued by the ld. DR. - Held that:- In the case of southern Switchgear Ltd. (1997 (12) TMI 105 - SUPREME Court ), the technical knowledge and information remained with the assessee even after termination of agreement which constituted enduring benefit to the assessee whereas in the present case, the software in question is an application software and after termination of license agreement, said software was to be delivered back to the licensor and the same cannot be made to use by the assessee in any manner. Similarly in the case of Jones Woodhead and Sons (1997 (2) TMI 4 - SUPREME Court) relied on by the Assessing Officer is also distinguishable on facts inasmuch as in that case the agreement between the assessee and the foreign collaborator was in relation to setting up of a new business and the foreign collaborator besides furnishing information and technical know-how, rendered valuable assistance in setting up of the factory itself. No such situation arises in the present case. In view of this discussion and relying on various decisions cited by assessee, we are of the considered opinion that the license fee etc. paid by the assessee to M/s. GECC(USA) is revenue expenditure deductible u/s. 37 of the Act. Decided in favour of assessee. Depreciation @ 60% on printer, switches, networking equipments, batteries, pen drives etc. - Held that:- A perusal of impugned order shows that the ld. CIT(A) after following direct decision of jurisdictional High Court in the case of M/s. BSES Rajdhani Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT ] has observed that the matter is already settled and the printers, switches, networking equipments, UPS and pen drives are held as integral part of the computer system and hence eligible for depreciation @ 60%. - Decided in favour of assessee.

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• 2015 (11) TMI 67
  Deduction under section l0A - profits derived by the eligible undertaking would be computed after set-off of brought forward unabsorbed depreciation from prior years - Held that:- This is settled principle of law that even after amendment to Section 10A by the Finance Act 2000 w.e.f. 01.04.2001, Section 10A continues to be an exemption provision, though it is termed as provision providing deduction. CIT Vs TEI Technologies (P) Ltd. [2012 (9) TMI 47 - DELHI HIGH COURT] held that Section 10A as it stands though decided as deduction provision is essential and in substances exemption provision. The ratio of the judgement in the case cited as Yokogawa India Ltd. (2011 (8) TMI 845 - Karnataka High Court) is inter alia that the profits and gains u/s 10A were not to be included in the income of the assessee at all and as such the question of setting off of loss of assessee of any profits that under Section 72(2) of the Act, unabsorbed business loss is to be first set off and thereafter unabsorbed depreciation treated as current year depreciation u/s 32(2) is to be first set off; that since deduction u/s 10A has to be excluded from the total income of the assessee, the question of unabsorbed business loss being set off against such profits & gains of the undertaking does not arise. The case at hand is squarely covered by the judgement (supra) and as such, the A.O. and Ld. CIT(A) have erred in holding that the deduction u/s 10A of the Act in respect of the profits by the eligible undertaking would be computed after set off of brought forward unabsorbed depreciation from prior year. - Decided against revenue. Interest earned from mere parking the funds in the fixed deposits - eligibility of deduction u/s 10A - Held that:- For claiming the benefit of deduction available u/s 10A of the Act, there must be direct nexus between deposits and business activities. Since, this is a benefit given to the industrial activities only, interest earned from mere parking the funds in the fixed deposits is not eligible for exemption u/s 10A of the Act. So, the judgements relied upon by the Ld. A.R., are inapplicable to the facts and circumstances of the case. Even the Ld. A.R. has failed to point out as to how the surplus money deposited with the bank amounts to activities in the course of business and the interest accrued thereon is to be treated as income from business activities. So, the interest income has been rightly declared as income from other sources by the A.O. and affirmed by Ld. CIT(A). - Decided against assessee.

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• 2015 (11) TMI 66
  Transfer pricing adjustment - selection of comprabales - Xcel Vision Technologies - Held that:- The learned CIT (Appeals) once he has applied certain filters like salary cost filter of 25%, RPT filter in excess of 0 %, turnover filter, etc., the filters should be consistently applied. Modifying them, as has been done by the learned CIT (Appeals) in the impugned order with respect to the salary cost filter of 25% of revenues, is arbitrary especially when the salary cost to this company is 24.70% of revenues, which is below the filter of 25% applied by the learned CIT (Appeals) himself. In this factual matrix, the salary cost of this company being 24.70% of revenues which is below the filter of 25% applied by the learned CIT (Appeals), we hold and direct that the company, i.e. Xcel Vision be excluded from the list of comparables to the assessee. Cherry Soft Technologies Ltd - CIT (Appeals) applied the on-site revenue filter of 75%. According to the assessee, the company is export oriented and has export turnover in excess of 75% of sales, its foreign currency expenses are less than 50% of sales and therefore the conclusion of the learned CIT (Appeals) to exclude this company by applying the on-site was incorrect. From the record it appears that these submissions/arguments put forth by the assessee have not been examined by the learned CIT (Appeals) and therefore, in the interest of justice and equity, we deem it fit to restore the matter to the file of the learned CIT (Appeals) for examination afresh in the light of the submissions put forth by the assessee and to adjudicate thereon on the comparability of Cherry Soft Technologies Ltd. after affording adequate opportunity to the assessee of being heard and to submit details/submissions in this regard. Working Capital and Risk Adjustment - Held that:- . Keeping in mind the order of the co-ordinate bench of this Tribunal granting the assessee an adhoc 2% adjustment towards working capital and risk differentials, in its order in the assessee's own case for Assessment Year 2003-04, we restore this matter to the file of the Assessing Officer / TPO and direct them to examine and de novo adjudicate on the assessee's claim for grant of working capital and risk adjustment, taking into account the facts of the case for the year under consideration in the light of the Tribunal’s order for Assessment Year 2003-04 M/s. Flextronics Software Systems Ltd.,Infosys Technologies Ltd., L&T Infotech Ltd., Satyam Computer Services Ltd. and iFlex Solutions Ltd. companies having turnover of more than Rs. 200 Crores, should be excluded from the list of comparable companies Geometric Software Solutions Ltd. - his company, having RPT of 16.25% fails the RPT filter of 15% applied and followed by other co-ordinate benches of this Tribunal, is to be excluded from the list of comparables. Even otherwise from the observations of the learned CIT (Appeals) from the Annual Report of this company as laid out in para 16.2 of this order, it is evident from its diversified activities that this company is functionally different and dis-similar from the assessee in the case on hand, who is a mere provider of software development services. Visualsoft Technologies Ltd. - CIT (Appeals), in our view from the facts recorded in the impugned order, has not factually brought out or established that the on-site revenue of this company was in excess of 75% of its revenues. In these circumstances, it cannot be said that the assessee has failed the on-site filter of more than 75% of its on-site revenues being from exports and therefore in our view, in the factual matrix of the case the learned CIT (Appeals) has erroneously excluded this company from the list of comparables when it has passed the on-site filter applied as has been contended by Revenue. We, therefore, restore this company i.e. Visual Soft Technologies Ltd. to the final set of comparable companies to the assessee for computing the ALP of its international transactions.

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• 2015 (11) TMI 65
  Reopening of assessment - receipt of accommodation entry - Held that:- n a perusal of the reasons recorded for re-opening of the assessment in the impugned assessment year as well as the reasons recorded for re-opening the assessment in assessee's own case in the assessment year 2003-04, which is extracted in entirety in the order of the co-ordinate bench under reference, the reasons are found to be identical. No sufficiency of evidence or material for forming the belief is not open to scrutiny but the existence of belief is must for a valid exercise of power. If it is impossible for any prudent person to form a belief on the basis of material or evidence that the income chargeable to tax has escaped assessment and reason which have been recorded would not lead to a prudent person to form an opinion that the income has escaped assessment within the meaning of section 147 then the action of the Assessing Officer in reopening the assessment u/s 147/148 is contrary to the powers permitted under the said provisions of Act. In the case in hand, the reasons recorded by the Assessing Officer do not indicate even a remote nexus between the application money received by the assessee with the alleged accommodation entries provided by Shri Giriraj Vijayvargiya or the alleged beneficiary of the accommodation entries. Accordingly, in the facts and circumstances of the case, we hold that the reopening in these cases are not valid and consequently the same is quashed - Decided in favour of assessee

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• 2015 (11) TMI 64
  Transfer pricing adjustment - Computation of Arms Length Price - Held that:- E-Zest Solutions Ltd. to be excluded from the list of comparable companies chosen by the TPO as KPO services are not comparable to software development services and are therefore not comparable. Infosys Technologies Ltd., Tata Elxsi Ltd. and Wipro Ltd. held to be functionally not comparable with a software development service provider such as the Assessee in the case of 3DPLM Software Solutions Ltd.[2014 (12) TMI 612 - ITAT BANGALORE] and 24/7 Customer.Com Pvt. Ltd. [2013 (1) TMI 45 - ITAT BANGALORE] Celestial Biolabs Ltd. is not a comparable company with a software development service provider such as the Assessee Avani Cincom Technologies Ltd. and KALS Information Systems Ltd. be omitted from the list as is functionally dis-similar and different from the assessee and hence is not comparable. TPO/AO is directed to compute the arithmetic mean of the remaining comparable companies and allow adjustment of + / - 5% of the net margin as contemplated by the provisions of Sec.92C of the Act, if the Assessee is entitled to such adjustment as a result of exclusion of the comparable companies.

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• 2015 (11) TMI 63
  Disallowance U/s 40(a)(ia) - packing material expenses in the form of job charges paid without deduction of tax u/s-194C - Held that:- A work does not include where supply of a product according to requirements or specification of a customer by using materials purchased from a person other than the customers. Hence, the provision of Sec. 194C does not attract to the present case. The case cited by the Ld. DR is not applicable as it was decided in the context of the provisions of Bombay Sales Tax Act 1959 and it has no nexus with the provisions of section 194C of the Act and consequently there was no application of provisions of section 40(a)(ia) of the Act. Hence, this ground of Revenue’s appeal is dismissed.- Decided in favour of assessee. Disallowance of sales promotion & selling expenses - assessee failed to produce any details such as address, PAN etc., of the payee - genuineness of the expenses not proved - violation of section 40(a)(ia) viz a viz section 194C - CIT(A) deleted the addition - Held that:- It has been noted that the Ld. AO recorded the transaction not genuine in the absence of the complete address of the distributors. But the AO did not issue even a single notice to any of the party out of the list provided at the time of assessment under section 133(6) of the Act. So it was not appropriate on the part of the AO to conclude the parties not genuine. Besides the AO has also not appreciated the volume of the business viz a viz the PAN India dealer network. With regard to the violation of the provisions of section 194H read with section 40(a)(ia), the AO held such transaction as of principal and agent. From the aforesaid submission of the assessee, it is clear that the transaction was of a purchase and sale. There was no monetary transaction between the parties for the target incentive. Only the credit notes were provided only to the distributors who have achieved the target which they can redeem at the time of subsequent purchases. So we are of the opinion that the transaction is out of the purview of the TDS provision. At the end, we find no infirmity in the order of the CIT(A) - Decided in favour of assessee.

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• 2015 (11) TMI 62
  Adjustment of seized cash against self assessment tax liability - determination of tax liability - Held that:- This issue has reached the corridors of various courts as to the legality of the adjustment of seized cash and that itself makes the issue highly debatable and hence in any case cannot be the subject matter of rectification u/s 154 of the Act. It is well settled that an issue which is highly debatable cannot be rectified u/s 154 of the Act. The action of the Learned AO in adjusting the seized cash towards the tax liability determined on completion of search assessment is in order. With regard to charging of interest u/s 234B and 234 C of the Act for non-payment and short payment of advance tax is concerned, we have already held that the amendment in section 132B of the Act is held to be prospective in operation from 1.6.2013 and accordingly not applicable for Asst Year 2006-07. Hence we hold that no interest u/s 234B and 234 C of the Act shall be charged by the Learned AO from the date of seizure of cash to the date of completion of assessment in respect of seized cash of Rs. 20,00,000/-.

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• 2015 (11) TMI 61
  Addition u/s 68 - CIT(A) deleted the addition - Held that:- The assessee has discharged its primary onus by establishing identity and creditworthiness of the share holders. The transactions stood confirmed also, on the basis of confirmation letters of all these share holders. The AO doubted the genuineness by relying upon some statements which were not recorded by the Assessing Officer. The statements relied by ld. Assessing Officer were not tested in the assessment proceedings conducted by the Assessing Officer. No opportunity of cross examination was provided by the Assessing Officer to the assessee before using these statements against the Assessing Officer. The assessee discharged its onus as per law, as stipulated section 68 of the Act. On the other hand, the Assessing Officer was not in position to controvert the factual material and documentary evidences placed by the assessee and he could not bring anything contrary on record to negate the documentary evidences furnished by the assessee. In view of the peculiar facts and circumstances of this case, order of ld.CIT(A) is upheld. - Decided against revenue.

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• 2015 (11) TMI 60
  Disallowance of purchases - whether no business could be carried out without effecting purchases? - Held that:- Assessee has failed to produce the details as well bills/invoices for purchases for verification before the authorities below rather the assessee has admitted before the authorities below that it has no details/invoices of such purchases as the same were purchase from grey market. The assessee has claimed as revenue expenditure to be set off against business income in the Return of income filed with Revenue, the primary and initial onus is on the assessee to prove that the said expenses(not being capital expenditure or personal expenses of the assessee) of Rs. 3,35,134/- are genuine and the same are incurred or laid out wholly and exclusively for the purpose of the business or profession carried on by the assessee. Merely saying that the purchase of Rs. 61134/- out of total purchases of Rs. 3,35,134/- are incurred through banking channels is not sufficient until the assessee prove by cogent evidence’s that the expenses are incurred wholly and exclusively for the purpose of business or profession carried on by the assessee . Since , the assessee could not produce any cogent material even before us to establish that the said expenditure is neither capital expenditure nor personal expenses of the assessee and is incurred wholly and exclusively for the purpose of business or profession carried on by the assessee , we find no error or illegality in the orders of the authorities below and the same are hereby upheld and the contentions of the assessee are hereby rejected . Thus, the addition made by the assessing officer and as confirmed by the CIT(A) is hereby confirmed. - Decided against assessee. Addition on friendly loans - Held that:- The assessee has claimed that he filed the loan confirmations of Rs. 1,95,000.00 before the CIT(A) as part of additional evidence under Rule 46A of Income Tax Rules,1962 with respect to loans availed from close relatives as per confirmations at pages 31 to 33 of paper book submitted before us . The CIT(A) called for the remand report from the assessing officer which was submitted by the assessing officer vide remand report dated 02nd August 2013. However, the orders of authorities below does not contain any discussions about these loan confirmations and about satisfaction that ingredients of Section 68 of the Act are complied with. These loan confirmations of Rs. 1,95,000.00 filed by the assessee need verifications by the authorities below and also assessee has to discharge the primary onus/ burden cast u/s 68 of the Act with respect to loans of Rs. 1,95,000/- raised from close relatives. The interest of justice will be best served if the matter is restored to the file of assessing officer for de-novo consideration with respect to these loans of Rs. 2,14,000/- added by the assessing officer in the assessment order u/s 143(3) of the Act and as confirmed by the CIT(A) in the first appellate proceedings and the assessee is directed to appear before the assessing officer to satisfy that all the ingredients of the section 68 of the Act are duly complied with by the assessee about the identity, creditworthiness and genuineness of these loan transaction. - Decided in favour of assessee by way of remand.

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• 2015 (11) TMI 59
  Disallowance of claim under section 10B - Held that:- The source of the information for the AO for ascertaining the date of commercial production i.e. year 1997 was form 56G which is certificate issued by the Chartered Accountant for claiming the deduction under section 10B of the Act. There was a letter issued by the Ministry of Industry, Government of India in the year 1997 for registering the assessee with Secretariat for Industrial Assistance(SIA for short) for availing these facilities and privileges admissible under the 100% export oriented scheme, probably, that date has been recorded by the Chartered Accountant as the year of production. However, the date of registration as SIA and the date of commencement of the commercial production for the deduction u/s 10B of the Act are two different things and has no nexus of whatsoever. So on this basis we conclude that the year of production is 2000-01 as per the letter submitted to the Development Commissioner MEPZ and the assessee is entitled for deduction under section 10B of the Act for the present assessment year i.e., 2009-10 under consideration - Decided in favour of assessee. Disallowance under section 14A - CIT(A) deleted the addition - Held that:- The AO has invoked the rule 8D of the Act because he disallowed the claim for deduction under section 10B of the Act. So the assessee was to pay the taxes under the normal provisions of the Act rather than under the provisions of MAT under section 115JB of the Act. However Ld.CIT(A) has restored the claim of assessee for the deduction u/s 10B of the Act, so even otherwise, the deduction claim by the assessee is disallowed by the Ld. CIT(A) then the assessee will be entitled to claim the deduction u/s 10B of the Act. Accordingly Ld. CIT(A) has deleted the addition made by AO. From the aforesaid discussion it is revealed that the assessee is entitled for the claim of deduction under section 10B of the Act which will include the disallowance, if any, made under section 14A of the Act. - Decided in favour of assessee.

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• 2015 (11) TMI 58
  Disallowance u/s'14A - Held that:- There is no doubt that the assessee definitely has to incur higher expenses for rendering professional services and thereby earning professional receipts. The contention of the assessee that the value of jewellary of Rs. 41,63,417/- included by the assessing officer in the determination of average investment need to be excluded is to be accepted as any gain on sale of jewellary is taxable under the Act. Keeping in view the peculiar facts and circumstances of the case , the end of justice will be met if the disallowance of the expenses is restricted to 10% of common expenses of Rs. 12,83,814/- whereby the disallowance will come to Rs. 1,28,381/- u/s 14A of the Act. The amount of disallowance is restricted to Rs. 1,28,381/- keeping in view the peculiar facts and circumstances of the case and shall neither be construed as our making any aspersion on the applicability of Section 14A of the Act read with rule 8D of Income Tax Rules,1962 for the impugned assessment nor setting any precedent whatsoever.- Decided partly in favour of assessee. Disallowance of Foreign Exchange Fluctuation Loss on balance maintained in foreign currency in EEFC A/c. - Held that:- The assessee is consistently following the accounting policy of offering to tax both income/loss on mark to market basis as on the date of balance-sheet in the return of income filed with the revenue with respect to the EEFC account. The LD AR has made statement before us that the EEFC account is being maintained by the assessee and the credits in the earlier years were on account of professional fee received by the assessee in foreign exchange in the earlier years. We, therefore, hold that on the basis of principles of consistency in the accounting policy followed by the assessee from several years which accounting policy is also in consonance with the prescribed Indian accounting standards, the loss incurred by the assessee on account of foreign exchange fluctuation loss in the EEFC account as at the year end is to be allowed and the addition made by the assessing officer and as confirmed by the CIT(A) needs to be deleted. - Decided in favour of assessee. Disallowance of Dentistry expenses u/s 40(a)(ia) - non deduction of TDS - Held that:- We have observed that the assessee is a cine artist /actress and her beauty and personality is one of the most important trait for generating business and revenue. The assessee spent dentistry charges which are part and parcel of her beautification to generate the revenue. The assessee has paid 89,500/- towards the material cost while the rest Rs. 85350/- is towards the professional fees paid to doctor for treatment of her teeth. The assessee is required to deduct TDS u/s 194J of the Act on the professional fees paid to doctor which the assessee has failed to deduct and hence Rs. 85,350/- being professional fees out of total expenditure of Rs. 1,74,850/- is held to be disallowable expenditure u/s 40(a)(ia) of the Act as no TDS was deducted by the assessee u/s 194J of the Act while we allow expenditure of Rs. 89,500/- being incurred by the assessee towards the material cost paid for her treatment. - Decided partly in favour of assessee.

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• 2015 (11) TMI 57
  Netting of interest income with interest expense - Disallowance of interest paid to Saraswat Co- op. Bank Ltd - Appellant prays that the claim of the assessee be allowed u/s 57 - whether CIT(A) had failed to appreciate that had assessee not made Fixed Deposit and obtained over-draft, it would lent the money directly, in which case there would have been no interest income on Fixed Deposit and no interest expense on Overdraft - Held that:- After considering the provisions of section 56 and 57 of the Act and also the decisions relied upon by both the parties, we hold that the expenditure(other than capital expenditure) shall be allowable only if it is incurred for the purpose of earning income and not vice-versa as held by the Hon’ble Supreme Court in the case of CIT v.. V. Gopinathan (2001 (2) TMI 10 - SUPREME Court) . Hence the netting of interest expenditure against interest income from FDR cannot be allowed as the expenditure of interest incurred by the assessee is not wholly and exclusively laid out or expended for making or earning income as per mandate of Section 57(iii) of the Act rather it is vice versa. The assessee has raised the plea for the first time before us that she has given the interest free loan of Rs. 98 lacs to GPL as a measure of commercial expediency because she is the Director of the said company. However the said plea has not been verified by the authorities below. We, therefore, hold that to the extent of borrowing made from SCBL for lending to GPL of Rs. 98 lacs, the interest attributable thereof paid to SCBL shall be allowable to be set off against the interest income if the assessee is able to prove before the assessing officer that the said interest free loan of Rs. 98 lacs given to GPL has been given as a measure of commercial expediency as held by the Hon’ble Supreme Court it the case of S.A Builders (2006 (12) TMI 82 - SUPREME COURT) and hence to that extent we allow the appeal subject to verification by the assessing officer and accordingly set aside the matter to the file of assessing officer for necessary verification as detailed above and the assessee will be given proper and adequate opportunity in accordance with the principles of natural justice.However, the interest expenditure paid to SCBL and attributable to the advance of Rs. 92 lacs given to PMIPL shall not be allowed as expenditure to be set off against the interest income from FDR as per reasoning given by us above and hence the contention of the assessee to this extent is rejected. - Decided partly in favour of assessee for statistical purposes.

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• Customs

• 2015 (11) TMI 84
  Refund of excess duty paid to claim exemption under Notification No. 119/2008-Cus. - re-assessment / amendment of the bills of entry - Imported Ferro Molybdenum – Held That:- assessing officer has a duty to assess according to the law and refusal to amend the document would result in an irregular assessment - amendment has to be allowed when a request is based on documentary evidence, which was in existence at the time of clearance - In terms of provisions of Section 149 appellant is eligible for amendment – Decision made in case of Hero Cycles Ltd. Vs. Union of India [2009 (6) TMI 4 - BOMBAY HIGH COURT] followed - Decided in favour of Assessee.

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• 2015 (11) TMI 83
  Refund of Cess claimed – Import natural rubber – Refund rejected on grounds that assessment made in Bills of Entry were appealable and had attained finality, no appeal having been filed and in some cases refund were time barred and all cases were hit by unjust enrichment – Appellant contended that refund claims are admissible when there is no assessment order on dispute - Assessment by assessing officer resulting in payment of duty when goods were exempted, is a case of sheer omission on part of assessing officer - As regards unjust enrichment, Certificate from cost accountant certifies that amount of cess was not charged in profit and loss account as expenses, rather it is show as Cess recoverable. Held That:- Clause (ii) under Section 27 does not apply as duty is paid by appellant in pursuance of order of assessment, thus appellant’s appeal on this point is rejected - There has been no accidental slip or omission - CVD duty was paid equivalent to cess as was understood by department as well as appellant thus Section 154 does not cover the case - no rectification of assessment order was ever sought by appellant – Matter already decided against appellant on first two issue thus Court does not find it necessary to discuss third issue i.e unjust enrichment – Decided against the assessee.

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• 2015 (11) TMI 82
  Valuation – Import of Worn Clothing – Value enhanced to US$ 1.40 per KG from US$ 0.80 – Goods confiscated with redemption fine and penalty - Appellant contended that upward revision of value was not as per law as transaction value has to be accepted in absence of any evidence to reject the same - Transaction value first needs to be rejected before determining value – Held that:- Goods involved in present case are worn garments whose value depends upon the condition, quality and nature of goods and in the absence of goods, it is impossible to arrive at the correct value thus there was no legal basis available to Commissioner (Appeals) to enhance value from US$ 0.80 per KG to US$ 1.40 per KG - Confiscation is legally sustainable as appellant did not have any import licence - Redemption fine determined on a reasonable basis having regard to margin of profit and penalty imposed is in no way arbitrary or unreasonable – Decided partly in favour of assessee.

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• 2015 (11) TMI 81
  Import of goods in replacement under Long Term Assured Parts Supply Agreement (LTAPSA) - Valuation of the import of parts of the Gas Turbine Hot Section of a naphtha based power plant which have to be replaced after 12,500 fired hours of use under a Long Term Assured Parts Supply Agreement dated 20 th December, 2000 entered into with GE, USA - Benefit of the exemption notification No.21 of 2002 dated 1.3.2002 - Held that:- Rules 4 and 9 would only apply in case imported goods are "sold" for export to India. The expression "shall be the price actually paid or payable for the goods when sold for export to India" would necessarily postulate that transaction value would be based upon goods that are sold in the course of export from a foreign country to India. It is clear on the facts that there is no sale in the present case, a fact that has been accepted by the revenue as well. All that happens under the LTAPSA is that parts are replaced without any further charge after a certain number of hours of the running of the power plant. This being the case, counsel for the assessee is correct in his submission that neither Rules 4 nor Rule 9 would apply, as Rule 4 itself, if applicable, makes Rule 9 also apply. Further, it is clear that Rule 4(2)(g) and Rule 9(1)(d) refer only to the very goods that are imported and not to goods which may have been imported much earlier to the imported goods. Therefore, what is necessary is that there should be proceeds which arise from re-sale, disposal, or use of the very imported goods by the buyer. - As it is clear that there is no subsequent re-sale, disposal or use of the very imported goods - that is the parts imported under the two bills of entry dated 25.6.2003, the assessee is right in his contention that in any case neither of these sub-rules would apply. Prices stated in the invoices accompanying the bills of entry in the present case are list unit prices or catalogue prices. By no stretch of imagination can they said to be prices after re-exported items' value has been taken into account. This being the case, on facts in the present case, both the Commissioner and the learned Tribunal were wrong in arriving at a conclusion that the invoice price in the present case is only an incremental value price and not the price of the articles supplied by GE, USA. This being the case on facts, we are afraid that both the Commissioner's order and the Tribunal's order would have to be set aside on this ground alone. A conjoint reading of Section 17(3) and Rule 10(1)(b) would make it clear that the proper officer may require the importer to produce any contract with reference to the imported goods consequent upon which the importer shall produce such contract. On the facts of the present case, the proper officer has not called upon the assessee to produce any contract in relation to the imported goods. This being the case, it is clear that there is no infraction of Rule 10. - Decided in favor of assessee. Claim of Exemption - Both the requisite certificate as well as the recommendation of the Principal Secretary, Government of Karnataka, have been dealt with in the proper perspective. The Tribunal is quite correct in stating that once these authorities are satisfied that the impugned goods are required for renovation, the customs department does not need to go deep into the matter and by hairsplitting and semantic niceties deny the benefit of the exemption notification. The finding of the Commissioner has been correctly set aside by the Tribunal - decided in favour of assessee.

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• 2015 (11) TMI 80
  Misuse of the Special scheme to promote export - some benefits which had already accrued to exporters under the EXIM Policy were taken away. - Validity and Scope of Notifications - Power to DGFT to amend the policy - Notifications are Retrospective or prospective - Whether Notifications were issued in public interest - Held that:- As a matter of fact, immediately after the introduction of the scheme, it was found that there was unprecedented sharp rise in the export in Gem and Jewellery articles. It raised certain suspicion in the mind of the authorities as to whether these were genuine exports. The matter was investigated and on the basis of intelligence gathered by the Central Government, it was learnt that there was rampant misuse of the scheme by certain status holders. - With regard to the import of capital goods under the Duty Free Credit Entitlement Scheme the matter was deliberated upon and it was decided not to allow all capital goods other than the professional equipment and office equipment mentioned in paragraph 3.8 of EXIM Policy against DFCE to service providers. - misuse of the scheme had also come to the notice of DRI and other intelligence officials who had gathered the necessary information and collected supported documents. Based on the intelligence gathered, a note on the misuse of Duty From Credit Entitlement (DFCE) and Target Plus Scheme was prepared which is annexed with the counter affidavit. The Government has, thus, demonstrated that based on the aforesaid exercise undertaken, Notification dated January 28, 2004 as well as Public Notice of the even date were issued. - strenuous efforts made by learned counsel for the wit petitioners to show that the exports by them were genuine and there was no misuse, we have no hesitation in accepting the plea of the Union that the purport behind Notifications was bona fide which was actuated with the conditions of public interest in mind. - Decided in favor of revenue. Validity of notification - Held that:- Exactly the same benefit which is sought to be given to the status holders for achieving incremental growth as provided in the scheme was already conferred upon. Obviously, purpose of the scheme was not to give double benefit for same exports. In fact, if that is allowed, it would be a clear case of misuse of the scheme inasmuch as for the same export turnover units operating under SEZ/EOU/EHTP/STP would get the certain incentives and the status holders also manage to extract the same benefits exploiting the scheme by exporting the goods manufactured by these STZ/EOU etc. On considering the issue in this hue, we agree with the opinion of the High Court that such a sub-note (ii) was merely clarificatory in nature. Each such status holder has to independently attain the growth target stipulated in the scheme to avail the benefit. Obviously, if it has not been able to achieve 25% incremental growth, such export house cannot take the advantage by including exports of a non status holders to show that it has achieved 25% incremental growth.- the Notification dated January 28, 2004 was clarificatory in nature and its validity stands upheld. - Decided in favor of revenue. Validity of Public Notice dated 28-1-2004 - Jurisdiction of DGFT - to exclude the export performance related to class of goods - Held that:- Public Notice dated January 28, 2004 was published in the Gazette of India in accordance with the requirement of law. The question, however, is as to whether by this Public Notice, DGFT was only carrying out the EXIM Policy or this Public Notice amounted to change in the said EXIM Policy. It is crystal clear that the Public Notice alters the provisions of EXIM Policy. It would, therefore, amount to amending the EXIM Policy, whether clarificatory or otherwise. There may be a valid justification and rational for exclusion of four items contained therein, as pleaded by the Union. However, it had to be done in accordance with law. When the DGFT had no power in this behalf, he could not have excluded such items from the purview of EXIM Policy by means of Public Notice. The power of DGFT is only to be exercised for procedural purposes and both the High Courts have rightly remarked that para 3.2.6 inserted by public notice goes beyond the procedural conditions. - public notice dated January 28, 2004 issued by DGFT, so far it excludes the aforesaid four items, is ultra vires. What was sought to be achieved by the said Public Notice, was formalised by the Central Government by issuing Notifications dated April 21 and 23, 2004 in exercise of powers conferred on the Central Government by Section 5 of the Act and the same four items were excluded. Validity of subsequent Notification to exclude the export performance related to class of goods covered by para 2 of the Public Notice dated April 28, 2004 - retrospective or prospective - Held that:- delegated or subordinate legislation can only be prospective and not retrospective, unless rule making authority has been vested with power under a statute to make rules with retrospective effect. In the present case, Section 5 of the Act does not give any such power specifically to the Central Government to make rules retrospective - No doubt, this Section confer powers upon the Central Government to ‘amend’ the policy which has been framed under the aforesaid provisions. However, that by itself would not mean that such a provision empowers the Government to do so retrospective. - if the Status Holders had achieved 25% incremental growth in exports, they acquired the right to receive the benefit under the Scheme, which could not be taken away. Doctrine of Promissory Estoppel - Held that:- So far so good. The effect of the aforesaid discussion would be that if the Status Holders had achieved 25% incremental growth in exports, they acquired the right to receive the benefit under the Scheme, which could not be taken away. The pertinent and crucial question is as to whether these exporters/writ petitioners acquired any such right? A sagacious approach with practical sense leads us to conclude that these writ petitioners/exporters had actually achieved the targets set down in the original Scheme and thereby acquired any “vested right”. It was pernicious and blatant misuse of the provisions of the Scheme and periscopic viewing thereof establishes the same. Thus, the impugned decision reflected in the notifications dated April 21 and 23, 2004, did not take away any vested right of these exporters and amendments were necessitated by over-whelming public interest/ considerations to prevent the misuse of the Scheme. Even when impugned Notification issued under Section 5 could not be retrospective in nature, such retrospectivity have not deprived the writ petitioners/exporters of their right inasmuch as no right had accrued in favour of such persons under the Scheme. This Court, or for that matter the High Court in exercise of its writ jurisdiction, cannot come to the aid of such petitioners/exporters who, without making actual exports, play with the provisions of the Scheme and try to take undue advantage thereof. To this extent, direction of the Bombay High Court granting these exporters benefit of the Scheme for the past period is set aside. Notification No. 48/2005 dated February 20, 2006 and Notification No. 8/2006 dated June 12, 2006 cannot be applied retrospectively and they would be effective only from the dates they were issued. - Decided in favour of revenue.

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• 2015 (11) TMI 79
  Classification of goods - classification of the ships/vessel, brought in for breaking up along with surplus fuel - clarification by Joint DGFT versus clarification by CBEC - Supreme Court after hearing theparties and going through the case dismissed the appeal as devoid of merit - The appeal was filed by Revenue against the decision of tribunal [2014 (8) TMI 44 - CESTAT AHMEDABAD]; wherein tribunal held that anopinion/clarification issued by Joint DGFT has to be considered as a clarification issued by DGFT & will be binding on the customs so far as ITC restrictions are concerned under Foreign Trade Policy. However, the same clarification issued by DGFT may not be binding on the Customs for the classification of the same goods under the Customs Tariff Act which is the sole domain of the Customs Authorities. However, so far as classification of the ships/vessel, brought in for breaking up along with surplus fuel, will have to be considered classifiable under Heading 89.08 of the Import policy as an integral part of the vessel/ship, as per opinion given by DGFT under F.No.IPC/4/5(684)/97/82/PC-2(A), dt.26.06.2013. As the imports under ITC(HS) 89.08 are free without any restrictions, therefore, such MGO/HSD contained in the vessels brought in for breaking up, cannot be held as liable for confiscation under Section 111(d) of the Customs Act, 1962 and no penalties upon the appellants are imposable in the present appeals under Section 112(a) of the Customs Act, 1962.

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• 2015 (11) TMI 78
  Confiscation of goods - Redemption fine - Classification of goods - Provisional assessment - antique goods - Supreme Court after hearing the counsel for the appellant and carefully perusing the material available on record did not find any reason to interfere with the impugned order and hence dismissed the appeal. Appeal was filed by Assessee against the decision of Tribunal [2015 (4) TMI 560 - CESTAT MUMBAI]; wherein Tribunal held that From these evidences available on record and the coverage of CTH 97.05 as given in the HSN explanatory notes, we are of the considered view that the goods imported by the appellant merit classification under CTH 97.05. - Since the goods falling under CTH 97.05 are restricted items, they need a licence for importation. In the present case, it is a fact on record that the appellant did not have the requisite licence and the goods are liable to confiscation under section 111(d) of the Customs Act. In view of this legal position, the confiscation and the option to redeem the goods on payment of fine ordered by the adjudicating authority cannot be faulted at all.

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• FEMA

• 2015 (11) TMI 77
  Confiscation of amount seized from appellant premises - amount was obtained by any unfair means - offence under Section 9(1)(b) of the Act - Held that:- It is apparent that the alleged confessional statement dated 30.04.1991, said to have been recorded from the appellant by the Officers of the Directorate of Enforcement has not been corroborated by any independent witness. Further, neither Mohamed Hilal of Kuwait, nor Jahubar Nissar, from whose residence the alleged document was said to have been seized was examined in this case. Their statements were also not recorded. - neither the copy of the seized document (document serial No.35, sheet No.11 of bunch A) was furnished to the appellant nor its contents were disclosed to him. In the absence of independent and cogent evidence, it cannot be heard to say that the alleged confessional statement dated 30.04.1991, said to have been recorded from the appellant was proved by the Directorate of Enforcement. - alleged statement was subsequently retracted by the appellant in his reply. - retracted confession cannot be trusted and form basis to maintain the charge that the appellant had contravened the provisions of Section 9 (1) (b) of the Foreign Exchange Management Act 1999. Since the Directorate of Enforcement has miserably failed to substantiate their case, presumptions has to be drawn as contemplated under Section 114 of the Evidence Act in favour of the appellant. Impugned order set aside - Decided in favour of Appellant.

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• Service Tax

• 2015 (11) TMI 107
  Refund claim - Unutilized CENVAT Credit - Determination of Date of Export of service - Rule 5 - Period of limitation - Held that:- export of service shall complete only when the (a) services is provided from India and use outside India (b) payment of such services is received by the service provider in convertible foreign exchange. In the present case it is undisputed fact that though the part of the services provided in the year 2007 and part of the services provided in the quarter April, 2008-June,2008 but remittance in convertible foreign exchange were admittedly received by the service provider during 5/8/2008 to 19/11/2008 therefore even applying Section 11B one year period expire on 5/8/2009 whereas the refund was admittedly filed on 15/4/2009 that is well within the one year time period as provided under Section 11B therefore the refund claim is not liable for rejection on time bar. Export of service is complete only when foreign exchange is received in India as per Export of Service Rules, 2005 (i). In the Section 11B, relevant date for refund of export of goods is date of export. Section 11B is made applicable for claiming refund under Rule 5 of the Cenvat Credit Rules as per condition 6 of Notification 5/2006. In case of export of Services, export is complete only when foreign exchange is received in India. Therefore relevant date of export of services is date of receipt of foreign exchange. In the present case all the four claims have been filed within 1 year from the date of receipt of foreign exchange and are therefore filed in time and cannot be held as time barred. - Lower appellate authority has also held that in the case of export of service the relevant date is the date when the assessee has received the payment of service exported and within one year from the date of receipt of the payment of service exported, the assessee is required to file the refund claim. It is a case of refund under Rule 5 in respect of export of services for which export has been defined in the Export of Service Rules, 2005. Section 11B only specifies one year period from the relevant date and relevant date is not same in respect of goods as well as services. Since the fact of the present case is different from the case of GTN Engineering (I) Ltd, [2011 (8) TMI 960 - MADRAS HIGH COURT] the same is not applicable. In view of the above discussion, I find that Ld. Commissioner (Appeals) has rightly allowed the refund to the respondent. - Decided against Revenue.

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• 2015 (11) TMI 106
  Valuation - Section 67 - Associated enterprises - lease rent equalisation shown in Balance sheet - Held that:- General rule in case of associated enterprises is that even a book adjustment or any credit or debit entry in any account by whatever name called in the books of accounts of the Service Provider is equated with receipt of 'the gross amount charged' by the Service Provider to the service Recipient. This method, however, is one of the modes of payment included in the definition of 'gross amount charged' contained in clause (c) of the Explanation to section 67 of the Act. The other modes of payment are by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes. To qualify as 'gross amount charged' there must first be a payment. It is this payment which must be in the nature of a consideration for the Service. The word 'consideration' has been defined in clause (a) of the explanation to section 67 to include any amount that is payable for the taxable services provided or to be provided. Lease rent equalisation is only an entry made in the balance sheet. But the question is whether it is an amount 'payable' for it to constitute 'consideration' for the services rendered by the appellant. For this purpose, the appellants have relied upon Accounting Standards. The appellants justify that there is a specific Accounting Standard for operating leases, which is AS19. In order to understand the meaning of the lease rent accounting recourse can be had to AS19. Such an approach has also been followed by the Hon'ble Supreme Court in Dai-Ichi Karkaria (1999 (8) TMI 920 - SUPREME COURT OF INDIA) and Association of Leasing and Financial Service Co vs Union of India (2010 (10) TMI 4 - SUPREME COURT OF INDIA ). The department has not been able to show us any contrary decision or furnish any reasons why we should not follow AS19. The audit report relied upon by the Ld. Sp. Counsel and the Commissioner concludes that the lease rent equalisation is an 'income', and chargeable to service tax as the gross amount received by the appellants. - The amount shown in the balance sheet is not an 'income' for the purposes of computing Tax under the Income Tax Act. In the result it is also not a 'payment' actually received or receivable, and therefore neither 'consideration' nor the 'gross amount charged' in terms of clauses (a) and (c) respectfully of the explanation to Section 67 of the Act. Hence the appellant is not liable to pay Service Tax on the amount of lease rent equalisation shown in the balance sheet. - Decided in favour of assessee.

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• 2015 (11) TMI 105
  Levy of penalty - delay in payment of service tax – Revenue contends that setting aside penalty under Sec. 78 is not justified as case involves collection of service tax and non-payment to Government - Held That:- Declaration of liability in ST3 returns shows that assessee is duty bound and undertook to discharge service tax liability and whatever demand raised in SCN was paid alongwith interest – Commissioner (Appeals) has taken all aspects into consideration and passed the order – No infirmity found in the same – Decided in favour of assessee.

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• 2015 (11) TMI 104
  Waiver of pre deposit - CENVAT Credit - whether the appellant would be eligible for Cenvat credit of central excise duty paid on various inputs like steel, cement, glass etc. and various capital goods like lifts etc. and of service tax paid on various input services used in or in relation of the construction of malls - Held that:- It is the contractors who have used various inputs like cement, construction steel, glass etc. and various input services which were used by them for providing the service of commercial or industrial construction (construction of malls) to the appellants. The appellants as recipient of the construction service by the contractors could take Cenvat credit of the service tax paid by the contractors as they had used the malls for providing the service of renting of immovable property which is taxable under Section 65 (105) (zzzz). However, the appellants would not be eligible for Cenvat credit of the excise duty paid on various inputs and service tax paid on various input services, as the inputs and input services, in question, having been, used by the appellants contractors who constructed the malls, are not the inputs/input services for the appellants in respect of their output services. Notwithstanding the fact that the appellant have paid service tax on the amount of rent/lease charges received by them by renting/leasing of the space in the malls for commercial purposes, they would not be eligible for Cenvat credit of excise duty paid on various inputs and service tax paid on various input services used by their contractors in or in relation of construction of malls, as these inputs/input services are not the inputs/input services for the appellant in respect of the output services provided by them. - appellants would be eligible for Cenvat credit in respect of inputs, capital goods and input services used in or in relation to providing the CAM services. - these are not the cases for total unconditional waiver and conditions have to be imposed to safeguard the interests of the Revenue - Partial stay granted.

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• 2015 (11) TMI 103
  Adjustment of advance / excess payment of service tax without intimation - Rule 6(4A) of Service Tax Rules, 1994 - Held that:- Appellant have deposited advance service tax of Rs. 2,57,205/-. As regard the condition provided in the proviso to Rule 6 (1A), it is observed that regarding the excess payment though the specific intimation was not given to the Superintendent, but from facts, it is clear that excess payment was reflected in ST3 returns for the period Oct-Dec 2009 and adjustment thereof was reflected in the ST3 returns for the quarter ending March, 2010. The details of these excess amount as well as adjustment was revealed only on the scrutiny of these returns therefore it cannot be said that appellant have not complied with conditions prescribed in the proviso to Rule 6(1A) of Service Tax Rules, 1994. The Adjudicating Authority as well as the Ld. Commissioner(Appeals) have denied the adjustment only on the ground that the case of the appellant is covered under Rule 6(4A) and not under 6(1A) and in terms of Rule 6(4A) the adjustment is allowed only for Rs. 1,00,000/- whereas I observed that the appellant through out from the date of show cause notice maintained that claim for adjustment is under Rule 6(4A). Intention of the rule is very clear that whatsoever excess amount was paid in advance, the same should be adjusted against forth coming tax liability and if it is not allowed it will amount that government will unjustly enriched with excess amount which cannot be intention of the law. Similar case, this tribunal is of the view that amount paid in excess because what was required to be paid is nothing but service tax paid in advance. Therefore the same is allowed to be adjusted in subsequent liability of the service tax - appellants case is covered by Rule 6(1A) of Service Tax Rules, 1994 according to which the adjustment of advance payment is permissible against service tax liability in the subsequent period without any limit of the amount, therefore the impugned order is not sustainable, hence the same is set aside - Decided in favour of assessee.

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• 2015 (11) TMI 102
  Waiver of penalty u/s 80 - service tax was paid at the instance of Audit team - Reverse charge mechanism - Business Auxiliary Services and Management Consultant Services - Held that:- there is no case of contumacious conduct and/or suppression of facts, or any case of mis-statement with intention to evade the payment of duty/tax is made out against the appellant. The explanation given by the appellant, at the very first instance, at the time of recording of the statement, that the discrepancy occurred due to lack of co-ordination between the two Departments as separate officers were dealing with the banking matter and other dealing with the Central Excise and Service Tax compliances have not been found to be untrue, by both the Courts below. Further I find from the conduct of the appellant that they have co-operated with the audit and immediately on finding the discrepancy, that is short payment of service tax, without waiting for any instruction from the Revenue, they have deposited the service tax, short paid along with interest. - appellant have been paying about Rs. 15 crores of Central Excise & Service Tax P.A. during the period in question. Further the appellant being entitled to CENVAT credit on the service tax paid on the input services, there is no incentive to evade the service tax liability. Thus I hold that the appellant is entitled to the benefit under the provisions of Section 80 of the Finance Act. I further find under the facts and circumstances that the ingredients of penalty under Section 70 are not there as there is no finding as to the delayed filing of the returns. - Impugned order is set aside - Decided in favour of assessee.

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• 2015 (11) TMI 101
  Refund claim - Refund of unutilized CENVAT Credit - Rule 5 of CENVAT Credit Rules, 2004 read with Notification No. 5/2006 CE (N.T.) - Held that:- Input services in the nature of works contract service, civil construction service, interior decoration service, architect service availed by the appellant in repair, renovation, modernisation of its office are eligible input service. It is the discretion of the Management of the assessee company to decide in what type of office and the location, it wants to work for providing the output service. I find that there is no dispute as regards the amount of service availed. Further the service of storage and warehousing, have been incurred admittedly for packing & moving gadgets or things from one office premises to another. As the appellant operated from more than one premises, the said service is admittedly an eligible input service. So far event management services are concerned, it has been explained that the same is incurred in organising conferences, training sessions and meetings which are essential for the smooth running and business promotion. Accordingly I uphold the same as eligible input service. So far the cable operator service is concerned, the same have been incurred for availing/seeing business channels on television sets, installed in the office premises for the staff to remain updated with the business news & developments which is essential for providing efficient output service. Thus the same is also held to be eligible input service. Formula as given in appendix 5 of the Notification No. 5/2006, only provides to work out the limit of eligible amount where an assessee has got both export and domestic turnover. Accordingly the eligible amount under appendix 5 shall be reworked without deduction of the amount towards credit allegedly wrongly availed, as the same are been found to be eligible. Accordingly there can be no deduction also for credit already utilised during the quarter. - Decided in favour of assessee.

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• 2015 (11) TMI 100
  Denial of CENVAT Credit - construction service, repairs and maintenance service, security service, manpower recruitment and supply service, works contract service etc - services utilized for residential colony/township of the appellant factories - Held that:- Appellant has various factories which are situated in remote areas. In order to run the factories smoothly, without any stoppages, they had constructed township/residential colonies near factory premises and accommodated the employees working in such factories. It is a fact, that appellant had produced Cost Accountant's certificate indicting that the expenses incurred for setting up of the township/colony and various expenses incurred for maintenance and upkeep of such factory was charged to balance sheet/profit and loss account as expenses and the said expenses were considered as cost of production was produced before the adjudicating authority, as well as the first appellate authority and both the lower authorities did not controvert the said certificate in any way nor both the lower authorities have directed for special audit of the records of the appellant as provided under Section 14AA of the Central Excise Act, 1944. Expenses which were incurred by the appellant for setting up of the township/colony for their employees is expenses which is in relation to the business activity of the appellant which is manufacturing final products i.e. petroleum products. It is also noted that while arriving at the price of the finished goods manufactured in these factory premises appellant had considered the expenses and included the same while arriving at the cost of production of the final products manufactured in those factory premises. It would mean that setting up of residential colony/township is in 'relation to the business activity of the appellant which is manufacturing of petroleum products and clearing the same on payment of excise duty. The Central Excise duty paid by the appellant on their finished goods is on advalorem which has been arrived at after considering all the expenses that had gone into manufacturing of the finished goods which included the cost of setting up of township and the residential colony. Intention of the legislature is to provide for credit in respect of the inputs, capital goods and input services which are used in or in relation for manufacture of the final products and that duty is paid only on the value addition which takes place. This intent of the legislature clearly comes out in a press note dated 12.8.2004 which was issued by the Ministry of Finance when the draft Cenvat Credit Rules, was circulated for inviting comments from trade and industry. If the cost of various services availed if it forms part of the assessable value of the goods manufactured and sold by the Appellant, there was no reason to deny cenvat credit of the duty/taxes paid on various inputs/inputs services availed, for undertaking the business operations. Issue seems to be now squarely covered by the judgement of the Hon'ble High Court of Bombay in the case of Coca Cola India Pvt Ltd. We find strong force in the contentions raised by the learned Counsel that the Hon'ble High Court in the case of Manikgarh Cement (2010 (10) TMI 10 - BOMBAY HIGH COURT ) had not decided the issue, as it was never raised before them i.e. cost of setting up of the township/colony and the maintenance cost thereof is included in the cost of production for arriving at assessable value of the final products. It is settled law that a decision is an authority only on the proposition that it decides and not what was not urged or considered therein or what can be said to be logically flowing from {see Mittal Engineering Works (P) Ltd. (1996 (11) TMI 66 - SUPREME COURT OF INDIA), Fiat India Pvt. Ltd. - [2012 (8) TMI 791 - SUPREME COURT] In view of this we hold that the ratio as laid down by the Hon'ble High Court of Bombay in the case of Coca Cola India Pvt. Ltd. (2009 (8) TMI 50 - BOMBAY HIGH COURT) is specifically on the point raised by the appellant before the lower authorities as well as before us. - Impugned order is liable to be set aside - Decided in favour of assessee.

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• 2015 (11) TMI 99
  Condonation of delay - Inordinate delay of 2841 days - Supreme Court held that appeal, being devoid of any merit, deserves to be dismissed. Therefore, Appeal dismissed on bar of limitation as well as merit.

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• 2015 (11) TMI 98
  Imposition of penalty - Scope of Cargo handling services - cleaning of the mining area - transportation of the gypsum from one place to railway station - activity of loading of gypsum into railway wagons/rakes through mechanical loaders - Supreme Court after condoning the delay did not any ground to interfere with impugned order. The appeal was filed against the decision of Tribunal [2014 (12) TMI 506 - CESTAT NEW DELHI]; wherein Tribunal held that First two services fall under different categories which were introduced subsequently and for which the appellant had started paying service tax from those dates, we find no reasons to hold that the said two services are part & parcel of the ‘cargo handling services’, which according to the Revenue falls under clause (c). - loading of the goods into racks or wagons through mechanical loaders does not fall under the category of ‘Cargo Handling Services’.

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• Central Excise

• 2015 (11) TMI 95
  SSI Exemption - CENVAT credit - whether availing the benefit of MODVAT/CENVAT credit in respect of branded goods of third parties manufactured by the assessees on job work basis, disentitles them from availing the benefit of the aforesaid Notifications - Notification nos. 8/1999, 8/2000, 8/2001, 8/2002 and 8/2003 - Held that:- A holistic reading of the Notification, in the light of the other paragraphs, brings into focus the overall scheme. It, inter alia, provides that the clearances bearing the brand name or trade name of third parties which are ineligible for grant of this exemption, for the purposes of determining aggregate value of clearances for home consumption, are not to be included. These Notifications also make it clear that the exemption contained therein is not to apply to the specified goods bearing a brand name or trade name, whether registered or not, of any person, except under certain circumstances specifically stipulated therein. The Notifications also clarify that for the purpose of these Notifications, where the goods manufactured by a manufacturer bear brand name or trade name (whether registered or not) of any manufacturer of trade, they shall not be deemed to have been manufactured by such other manufacturer or trade. Reading of the aforesaid provisions in the Notifications unambiguously points out that for the purposes of availing the benefit of Notification by an SSI Unit, the clearances for home consumption only are to be taken into consideration, except in those cases where it is clearly provided otherwise. It becomes apparent that so far as manufacture of branded goods of third party on job work basis by the SSI Unit is concerned, they are to be dealt with differently in the sense that they do not come within the ambit of exemption on which normally excise duty, as per the provisions of the Act, is payable. As a sequitur, it also follows that once excise duty is paid by the manufacturer on such branded goods manufactured, the brand name whereof belongs to another person, on job work basis, the SSI Unit would be entitled to CENVAT/MODVAT credit on the inputs which were used for manufacture of such goods as on those inputs also excise duty was paid. To put it otherwise, these branded goods manufactured by the SSI Units meant for third parties are regulated by the normal provisions of excise law and will have no bearing or relevance insofar as availing the benefit of those exemption notifications in respect of its own products manufactured by the SSI Units is concerned. - Admittedly, in respect of home production, the assessee had not availed the benefit of two options simultaneously as no CENVAT credit is claimed in respect of those goods. While doing so, the Tribunal has taken note of the judgment of this Court in Ramesh Food Products case and rightly analysed the same. - Decided in favour of assessee.

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• 2015 (11) TMI 94
  Clearance of goods to DTA by an EOU - Denial of concessional rate of duty - benefit of Notification No.8/97-C.E. dated 01.03.1997 - cotton yarn was made of indigenous as well as imported cotton coated with imported wax. cotton yarn was manufactured out of indigenous cotton and imported wax, as wax was contained in the final product (yarn) - Held that:- Cotton yarn can be produced without wax as well. However, such cotton yarn without wax would be of inferior quality for the purposes of buyer in comparison with cotton yarn coated with wax as the use of cotton yarn with wax thereupon acting as lubricant is much more useful and becomes a value addition making it better quality cotton yarn, insofar as requirement of the buyer in using such cotton yarn for manufacture of knitted fabircs is concerned. When matter is examined from this angle, an irresistible conclusion is arrived at, namely, wax was used as raw material and not as consumable, insofar as end product of the assessee is concerned. For the assessee, end product is cotton yarn and not knitted hosiery. Knitted hosiery is the end product of the buyer. If buyer removes the wax after manufacture of knitted fabrics, that may not be of any consequence insofar as the assessee is concerned and would be totally extraneous to determine the issue at the hands of the assessee. Those units which manufacture goods out of both imported and indigenous raw material would not be entitled to the benefit of Notification No.8/97. No doubt, as per para 3 (b), if imported consumables are used, benefit of the notification would still be available. However, in the present case, we find, as a fact, that wax is not used as consumable but as raw material. For same reasons, other circulars also will not advance the case of the assessee. - Decided against assessee.

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• 2015 (11) TMI 93
  Textile goods / Ready Made Garments (RMG) - article of apparel or clothing accessories - process of affixing a brand name or trade name / affixing lables after purchase of goods - Benefit of Exemption Notification No. 38/2003-CE dated 30th April, 2003 - Whether process undertaken by assessee fall within the processes that are mentioned in the Notification - Held that:- For the purpose of arriving at the value of the job at the hands of job workers, factory gate is treated as "deemed" factory gate as if the processed fabric was sold by the assessee. It cannot be disputed that the fact situation in these cases is identical where the job workers had paid the excise duty at the time of supply of these processed fabric to the respondent assessees. Once that could be treated as sale, the necessary corollary is that so far as the assessees are concerned, they had purchased processed fabric from the job workers and, therefore, would satisfy the condition of "subsequent purchase" contained in Notification No. 38/2003. - this position is accepted even by the Department which can be discerned from Circular No. 737/53/2003-CX dated 19.08.2003. Though certain doubts for carrying out the obligation under Standards of Weights and Measures Act, 1976 were clarified by the said Circular, incidentally it touched upon this very process that is undertaken by the assessees herein and remarked that such process would be covered by Notification No. 38/2003 and would be fully exempt from payment of excise duty. - benefit of exemption notification is rightly extended by the Tribunal to the respondents-assessees - Decided against Revenue.

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• 2015 (11) TMI 92
  Availment of fraudulent CENVAT Credit - Bogus invoices - Credit availed on the basis of duty-paying invoices without receiving any HR trimmings covered by such invoices - Violation of principle of natural justice - Opportunity of cross examination not granted - Invocation of extended period of limitation - Held that:- during the only statement that could be recorded of the appellant No.2, who was the Director of the main appellant-company, this point was raised and it was pointed out that if MS ingot is manufactured using HR trimmings then the cost of production of MS ingots would be much higher than the selling price and therefore no businessman can afford to use HR trimmings for such purpose. - in the facts and circumstances of the case denial of cross-examination does not prejudicially affected the rights of the main appellant. We also note that even if the statements are ignored and only documents which have been recovered during the searches are analysed the demand in the case will stand on its own feet. Main appellant has not produced any independent evidence so as to support that HR trimmings covered by the invoices were received by them and utilized by them except the copy of the invoices. We are not convinced that any manufacturer will receive goods without any transport documents whatsoever. In fact the appellant has not produced any transportation details to support that he has received the goods. On the contrary, there are enough documentary evidence to support that vehicle number mentioned in the invoices were in fact went to Gujarat Viramgam area with the HR trimmings - goods covered by invoices i.e. HR trimmings were never transported to the main appellant s factory and the invoices based on which CENVAT credit has been taken were the invoices which were purchased without goods covered by such invoices. We also note the appellant s submission about the explanation given in the CENVAT credit Rules. Present case is relating to getting only the invoices without getting the corresponding goods and is a case of fraud which cannot happen without the active connivance of the Director himself. Under the circumstances we hold that the appellant has not only not taken adequate and reasonable care before availing the CENVAT credit but had acted in fraudulent manner to avail the credit. In the facts and circumstances of the case, extended period of 5 years has been correctly invoked. Purported consignee as per the invoice was different from the actual consignee who were Viramgam based traders. Thus, the manipulation in the name of consignee was done with the sole purpose of evading excise duty by mis-using the credit of duty paid on the HR trimmings. In view of the said position, in our view, the goods are confiscable under Rule 25(1)(d) and penalty is also imposable. - proper confiscation of HR trimmings and, therefore, appellants at sr. No. 3 to 8 are liable for penal action under the provisions of Rules 26 of the said Rules. We have no doubt that the HR trimmings so diverted to Viramgam were liable to confiscation and the appellants Nos. 3 to 8 have dealt with the goods and were concerned with such goods and were in the knowledge that such goods are liable to confiscation. Under the circumstances, the penalty imposed on them is correct. Commissioner has not passed any order relating to interest under Section 11AB of the Central Excise Act, 1944. As we have confirmed the duty amount, it goes without saying that the appellant will be required to pay interest as per the provisions of Section 11AB of the Central Excise Act, 1944 - However, penalty on some so-appellants is reduced. - Decided partly in favour of assessee.

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• 2015 (11) TMI 91
  Valuation - Captive consumption - computation of value as per Rule 6(b)(ii) of old Rules or Rule 8 of the new Rules - non inclusion of certain expenses - Cenvat Credit - Supplementary invoices - Invocation of extended period of limitation - suppression of facts and willful mis-statement - Held that:- for the period upto 30/06/2000 the value has to be determined as per the Board s circular 1996 and thereafter as per CAS-4. We also note that value as per CAS-4 generally works out to be much lower compared to earlier method. CAS-4 does not consider many components such as interest and financing components as cost of production, even though in real life if the goods were to be sold, manufacturer will include these components. - For the period prior to 01/07/2000 the value determined by the Commissioner is correct and we uphold the same. As far as computation of value after 01/07/2000 is concerned the same can be computed as per CAS-4. We also note that respondent-assessee has not produced any such costing details/CAS-4 certificate during adjudication or before this Tribunal. In fact, from May, 2001 onwards, respondent-assessee has accepted 1996 circular, paid differential duty and took credit of same in other plant. However, it is not clear whether entire differential duty was paid or only part of it was paid. If entire duty was paid and credit thereof taken in other plant, those assessment need not be disturbed. However, if not, respondent-assessee will be required to submit the CAS-4 certificate from Cost Accountant supported by the details which may be examined by the Commissioner. Commissioner is free to take necessary help from Asstt. Director (Cost), if considered necessary. If the monthwise duty paid (and credit taken) is more than computed as per CAS-4, same need not be disturbed at this stage. Extended period of limitation - Held that:- Since the respondent-assessee themselves are following the circular of 1996 and were not disputing any part of the circular, it was their boundan duty to compute the value strictly as per the circular. In the present facts and circumstances of the case, we find that though the respondent-assessee was purportedly following the circular but were including only few components in the category of overheads and were excluding other components, some of which were specifically listed in the circular and were to be included as per the circular of 1996 and these facts were in the exclusive knowledge of the respondent-assessee. In fact, it also appears that after computing the overheads in percentage in the above manner, they were just giving these figures (i.e. amount or %)to the Chartered Accountant who in turn were issuing the certificate without going into the question which are the items of expenditure within the category of overheads which have been included or excluded. We find that it is an admitted position that in the price declaration submitted to the department they were only indicating in terms of percentage overheads i.e., overheads constitute 3.34% as against the actual computation of 33.7%. For purpose of computation of value, the details provided by any assessee are normally accepted until and unless there is intelligence to the contrary. This is a clear-cut case of suppression of facts with willful intention to evade payment of duty and hence extended period of limitation is correctly invokable and for the same reason penalty under Section 11AC is also impossable. Demand of duty up to 30/06/2000 as proposed in the notice is confirmed. Penalty of equal amount under Section 11AC/Rule 173Q as proposed in the show cause notice is also confirmed. Demand of duty from 01/07/2000 to 31/03/2001 is required to be computed based upon the value determined under CAS-4. Respondent-assessee will provide within three months from the receipt of order the necessary certificate from the Cost/Chartered Accountant along with details which will be examined by the Commissioner as per our directions in earlier part of this order. The quantum of short-levy (from July 2000 to March, 2001) will there after be arrived. Respondent-assessee will be liable to penalty equal to the amount of short-levy so determined under Section 11AC/173Q. In case, respondent-assessee fails to produce details as per CAS-4 short-levy as proposed in the show cause notice along with penalty will stand confirmed. As far as second and subsequent show cause notices are concerned, value is to be determined as per CAS-4 and thereafter duty leviable. If there is short-levy, the same will be paid by the respondent-assessee. In case, respondent-assessee fails to produce details as per CAS-4, short-levy as proposed in the show cause notice will stand confirmed. No penalty under Section 11AC/Rule 173Q/Rule 25 will be impossable. - confiscation is not warranted. Similarly, penalties in other notices are also not warranted. - Decided substantially against the assessee.

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• 2015 (11) TMI 90
  Availment of fraudulent CENVAT Credit - Bogus invoices - Non receipt of actual goods - Held that:- Revenue has produced evidence from the bank of the appellant that no money has been paid to the purported five suppliers of sponge iron. The least that is expected from the appellant was to produce evidence from the banking channels that the money for the so called as sponge iron purchased was indeed paid to the five suppliers, corresponding to the alleged fictitious invoices. In addition, the appellant could have produced some transportation documents and the transporter to prove that the goods have been transported from the manufacturers or dealers place to the appellant s factory. Since no explanation whatsoever is coming forward from appellant, in our view the case against the appellant stands even if the statements given by seven persons are ignored. In view of this position, in our view the contentions of the revenue are correct and the demands of duty, interest and penalty, etc. are in order. The penalty under Section 11AC is correctly imposed as this is a case of fraudulent availment of Cenvat credit, interest under section 11AB would be payable. As far as the appellant No.2 they were the directors at the relevant time. Their conduct during investigation as also the statements made by Shri Naval Kishore Vasu, General Manager and Shri KK Agarwal, authorised signatory leaves no doubt that the fraudulent availment of Cenvat credit was at their instance alone. Shri Naval Kishore Vasu was authorised to give statement by appellant No.2 & 3 and therefore, in a way the appellant No.2 & 3 have admitted their role in the fraudulent availment of Cenvat credit, we find that penalty imposed are not on the higher side. - Decided against assesse.

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• 2015 (11) TMI 89
  Denial of CENVAT Credit - credit was availed such as Steel Plates, Foundation Bolt, HR Steel Coils, M.S. Angles, C.R. Sheets, Aluminum Coils & Aluminum Sheets used in the fabrication and erection of storage tanks - Capital goods - Held that:- Steel materials were used for fabrication and erection of storage tank within the factory of the appellant. The said storage tanks are undisputedly used for the storage of input finished goods and chemicals plant which is further used in the manufacture of the final product. In the chemical plant the storage tank is vital part of the entire plant and machinery. Therefore, in my view storage tank are capital goods. - Cenvat credit in respect of input used in fabrication and erection of storage tank is admissible. As regard the Cenvat credit availed by the appellant in respect of aluminium sheets/coils etc. for insulation of pipes and tubes installed in the appellant factory, I find that in the chemical plant tubes and pipes are integral part of the entire plant. The pipes and tubes are compulsory for the purpose of maintaining temperature insulation and for such insulation the aluminium coils and sheets are used, therefore aluminium coils and sheets are used in plant and the credit should be allowed on such material. Cenvat Credit on the same item i.e. Aluminium sheets/coils used for insulation for the purpose of cooling system, has been allowed. Following the ratio of the above judgments, I am of the view that appellant is entitle for the Cenvat credit in respect of aluminium coils/sheets etc. used for insulation of pipes and tubes in the plant of the appellant. - The foundation bolt admittedly classified by the supplier under Chapter 84 as spare parts. In the definition of capital goods provided under the Cenvat Credit Rules certain chapter has been specified. One of the chapters is chapter 84, and should be used in the factory of the appellant. Since foundation bolt is classified under Chapter 84 and admittedly used in the factory of the appellant, this is sufficient to qualify the item as capital goods in term of definition of capital goods. Therefore the Cenvat credit on the foundation bolt is clearly admissible. Appellant have clearly expressed their intention and activity related to availment of Cenvat Credit on the items in question. With this information, the Revenue was at their own liberty to question the admissibility of Cenvat credit. I am of the view that the informations provided by the appellant are more than sufficient for the Revenue, that if at all they are of the view that the Cenvat credit is not admissible they could have extended their investigation and could have issued show cause notice well within the normal period of one year. In failing to do so, the suppression of facts cannot be alleged on the Appellant. - demand of Cenvat Credit is not sustainable on merit as well as on limitation. The impugned order is set aside - Decided in favour of assessee.

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• 2015 (11) TMI 88
  Denial of refund claim - Unjust enrichment - Bar of limitation - Duty paid under protest - Held that:- Refund which was rejected on the ground of unjust enrichment by the original authority vide order dated 13/9/1989 has been allowed by setting aside the Order-in-Original. It is undisputed that after this order in appeal dated 24/4/1990, the Revenue has not filed any appeal against the said order dated 24/4/1990 therefore same attained finality. Thereafter by way of another show cause notice the Asstt. Commissioner again raised point of unjust enrichment and the same was adjudicated against assessee and Commissioner (Appeals) upheld the same vide impugned order. - proceedings is absolutely non est and infructuous for the reason that once the issue has been settled by the Commissioner (Appeals) without challenging the same, Rvenue could not again raised the same issue by way of another show cause notice and deciding the same contrarily by taking U-turn. The Asstt. Commissioner and Ld. Commissioner (Appeals) in the subsequent proceedings held that the provision of unjust enrichment is applicable in the case pertaining to the period before the enactment of provision of unjust enrichment and that the refund is sanctioned subsequent to the enactment. Even though contention of the Ld. Asstt. Commissioner is taken as correct but this contention could have been raised not by issuing fresh show cause notice but by way of appeal against the earlier order (dated 24/4/1999) of the Commissioner (Appeals). Since the department failed to file an appeal against the said order, the order dated 24/4/1999 passed by the Commissioner (Appeals) has attained finality and all the proceedings subsequent to that by way of another show cause and adjudication and appeal become non-est and therefore the order dated 24/4/1999 shall prevail by which it was held that unjust enrichment is not applicable. In view of this position the refund claim rejected on the ground of unjust enrichment in the impugned order is not sustainable. - impugned order rejecting claim on the ground of unjust enrichment as well as limitation is not sustainable, hence, the same is set aside. - Decided in favour of assessee.

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• 2015 (11) TMI 87
  Interest liability - Provisional assessment - Held that:- Appellant had paid the entire differential duty before the finalisation of the provisional assessment sought. There is no dispute that the provisional assessment were finalised by the authorities on 27.08.2012, after almost two months when the appellant paid the differential duty arising out of such finalisation and there is no difference in duty paid. I find that the first appellate authority has not considered this vital fact in his order and also on the provisions of Section 7(4). The said rules specifically states that the interest liability arises on the assessee consequent to the order of final assessment as per sub-rule (3). In the case in hand, when the amount is already discharged and on final assessment there are no dues from the appellant, liability of interest does not arise. - issue is now settled by the Hon'ble High Court in CEAT Ltd. [2015 (2) TMI 794 - BOMBAY HIGH COURT] as well as earlier decision holding that interest is not payable if assessee pays the duty before finalisation, I find the impugned order is unsustainable and liable to be set aside - Decided in favour of assessee.

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• 2015 (11) TMI 86
  Availment of CENVAT Credit - returned goods - Activity amounts to Manufacture or not - held that:- From the reading Rule 16, it is very clear that taking the status of supplier, even if it is presumed that the activity of supplier is not of manufacture but by virtue of above Rule 16, he was permitted to receive the duty paid goods and taken credit and in case the said duty paid goods after under going the process can be cleared on payment of duty i.e. in case of non-manufacture of activity, equal amount of Cenvat credit to be paid and in case of manufacture duty, transaction value to be paid in terms of Section 4 and as per explanation given in the said rule, duty so paid, that means in case of manufacture or non manufacturing activity, the recipient is entitle for availing the Cenvat credit on such duty. In view of the said provisions, it is absolutely clear that even if the activity of supply is not amount to manufacture but he has paid the said duty is available as Cenvat credit to the appellant. In view of my above discussion, I am of the view that the appellant is legally entitle for Cenvat credit in respect of laminated film received by them for packaging purpose. Therefore impugned order is set aside - Decided in favour of assessee.

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• 2015 (11) TMI 85
  Manufacture - digital local telephone exchange - Whether assembly, installation and commissioning of switching system along with power plant, inverter etc. would amount to manufacture - Held that:- In view of the decision of Assessee's own previous case [2015 (6) TMI 401 - CESTAT NEW DELHI]; activity undertaken by the appellant does not amount to manufacture. Consequently, appellant are not required to pay duty. In these circumstances, we set aside the impugned order - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2015 (11) TMI 97
  Challenge to order of attachment - recovery from the buyer of the immovable property - Default in payment of sales tax by the seller of the property - power under BST Act - Held that:- A harmonious reading of the judgments in Macson and SICOM would tend us to conclude that it is only in those cases where the buyer had purchased the entire unit i.e. the entire business itself, that he would be responsible to discharge the liability of Central Excise as well. Otherwise, the subsequent purchaser cannot be fastened with the liability relating to the dues of the Government unless there is a specific provision in the Statute, claiming "first charge for the purchaser". Jurisdiction under Article 226 of the Constitution of India is not to be exercised so as to permit a party so as to wriggle out binding contract and obligation thereunder, if incurred voluntarily. However, in the present case, we do not find how the general stipulation in the agreement and sale certificate would enable the authorities to levy attachment and on the properties, which are no longer belonging to the dealer. The Petitioners are not the defaulters nor they are successor in interest. In these circumstances, the attempt to foist the liability of the defaulting dealer on the Petitioners and proceed against their properties is in issue before us. The legality and validity of the attachment order dated 24th December, 2013 is the question before us. That cannot be answered by relying on a general stipulation or clause in a contract or sale deed. It is a pure legal question and that is how even the Sales Tax Authorities approach it. As a result of the above discussion, this Writ Petition succeeds. Rule is made absolute in terms of prarer clauses (a) and (b) of the Writ Petition. The attachment order impugned in this Writ Petition is quashed and aside. - Decided in favour of appellant.

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• 2015 (11) TMI 96
  Levy of penalty in respect of tax which became due on account of non-furnishing of 'C' Forms - Held that:- in the instant case, on production of 'C' Form at the appellate stage, the Appellate Authority has granted the benefit of concessional rate which had been denied by the Assessing Authority on the ground that the 'C' Forms were not furnished. Therefore, it is not a case of assessee trying to understate his liability to tax. His conduct in claiming concessional rate of tax in his return cannot be construed as a deliberate act in defiance of law or contumacious or dishonest or acted in conscious disregard of its obligations. But, by no stretch of imagination it could be said that he had any intention of avoiding any payment of tax or his action is contrary to any law or that he is understating his liability to pay tax in the returns. Therefore, he cannot be saddled with the liability to pay penalty for no fault of his. Therefore, the order passed by the authorities levying penalty is unjustified and illegal. - Decided partly in favour of assessee.

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• Wealth tax

• 2015 (11) TMI 76
  Guest House - Addition to wealth tax - meaning of Sec.2(ea)(i) - asset - the flat at Chennai was located near the appellant's factory and was used by its employees for accommodation purposes. - reopening of such assessments on the ground that the flat at Chennai was in the nature of guest house and therefore constituted an “Asset” under section 2(ea) of the Act, was only a conclusion arrived at on a change of opinion by the AO and on reexamination of the facts that were already on record - Held that:- Assessee had product units located across India and a factory also existed in Chennai. The flat at Chennai was visited by Assessee’s employees in connection with official work from Kolkata and Bangalore. It was used as transit accommodation for the senior executives, finance managers, administrative staff and engineers from other units. Thus the flat was used for the purpose of business of the Assessee. The decision of the Hon’ble Gujarat High Court clearly supports the contention raised on behalf of the Assessee. We therefore hold that the flat at Chennai cannot be regarded as “Asset” within the meaning of the Act. It can be seen from the provisions of the IT Act, that “Accommodation in the nature of a guest house has been given an extended meaning under Explanation to Sec.37(4) and Sec.37(5) of the IT Act. Such extended meaning cannot be applied under the provisions of the Act, especially in the context of Sec.2(ea) of the Act, defining the term “Asset” for the purpose of the Act. We are therefore of the view that the aforesaid decision of the Hon’ble Calcutta High Court cannot be applied to the facts of the present case. We are of the view that the decision rendered by the Hon’ble Gujarat High Court referred to earlier, applies to the facts of the present case. Following the said decision which were rendered on identical facts as that of the Assessee’s case, we are of the view that the value of guest house at Chennai, cannot be considered as “Asset” under the Act. - Decided in favour of assessee.

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