TMI Tax Updates - e-Newsletter
November 7, 2016

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. GST: 10 POINT SERIES ON TIME OF SUPPLY OF SERVICES

   By: Puneet Agrawal

2. GST: 10 POINT SERIES ON TIME OF SUPPLY OF GOODS

   By: Puneet Agrawal

3. GST Council fixes four-tier rate structure at 5%, 12%, 18% and 28%

   By: Bimal jain

4. Rates for Goods & Services Tax

   By: Monarch Bhatt

News

1. Procedure for enrollment of existing VAT Dealers on the GST System Portal - Government of Goa

2. Private sector needs to invest big-time, says Jaitley

3. Repurchase of Government Securities through Reverse Auction

Highlights / Catch Notes

Income Tax

• 561-Day Delay in Filing Under Sec 285BA Deemed Minor; No Penalties Imposed Due to Lack of Intentional Misconduct.

  Case-Laws - AT : Penalty u/s 271FA - delay of 561 days in furnishing AIR u/s 285BA - No mala fides can be attributed to the assessee so as to invoke the penalty proceedings under section 271FA - t the breach is only technical or venial breach of the provisions of the Act and such a breach could have flown from a bona fide ignorance of the assessee - AT
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• Assessing Officer's Claim of Diverted Interest-Bearing Funds to Partners Incorrect; Credit Balance Remained in Capital Accounts.

  Case-Laws - AT : The amount of advance given to partners and sister concerns is debited to the capital account of the partners, still there is a credit balance in the partners capital account, therefore, the A.O. was not correct in holding that the assessee has diverted its interest bearing funds to its partners and sister concerns. - AT
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• Comparable Companies with Diminishing Revenue Not Automatically Excluded in Transfer Pricing Adjustments for Fair Comparison.

  Case-Laws - AT : TPA - selection of comparable - the companies having diminishing revenue should not be excluded, but, only the companies having persistent losses should be expelled from the final tally of comparables. - AT
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• Transfer Pricing Rules Not Applicable to Transactions with Canadian Branch; Total Revenue Declared for Taxation Purposes.

  Case-Laws - AT : Determination of ALP - transactions of the assessee with its Branch Office in Canada - total revenue earned by branch office Canada has been offered for taxation - Provisions of TP cannot be applied - AT
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• Assessing Officer's Transfer Pricing Adjustment Overturned for Using Both TNMM and Profit Split Method Simultaneously.

  Case-Laws - AT : Transfer pricing adjustment - the action of the AO was not sustainable because he on the one hand had accepted TNMM and also used profit split method for attribution of profit on the international transaction at 50:50 ratio. - either of the two methods could have been used and not both - AT
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• No Penalty u/s 271(1)(c) for Transfer Pricing Adjustment; Transaction Value Considered "Nil" Instead of Disallowed.

  Case-Laws - AT : Penalty u/s. 271(1)(c) - T.P. adjustment - It is not a case of a disallowance of any claim of expenditure under section 37(1) albeit the value of the transaction has been taken at “Nil”. - No penalty - AT
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Customs

• CBEC mandates statutory auditor review for SAD refund correlation; refund approved after importer's accounts examination.

  Case-Laws - AT : Refund of SAD - The main misgiving on the part of the Revenue authorities is that the correlation cannot be established beyond doubt - CBEC has made the requirement that such correlation is to be examined and certified by the statutory auditor/CA after examining the books of accounts of the importer - refund allowed - AT
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• Court Overturns Fine: No Prohibition on Importing Dumper Caterpillar Vehicles Through Non-Specified Ports, Restrictions Misinterpreted.

  Case-Laws - AT : Import of consignment containing 6 Dumper Caterpillar - import through non-specified ports - there is no prohibition on their importation. By any stretch of imagination, the word' restriction' cannot be equated or read as 'prohibition' - redemption fine and penalty set aside - AT
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• Appellants Penalized for Aiding Fraudulent Drawback Benefits; Documentary Evidence Confirms Involvement in Scheme.

  Case-Laws - AT : Imposition of penalties - Apart from the statement there are ample documentary evidences which clearly establish that appellants were involved in aiding and abetting fraudulent availement of drawback - levy of penalty confirmed - AT
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• Court Disallows Valuation Enhancement of Stainless Steel Circles Compared to CR Coil, Citing Incorrect Customs Valuation Practices.

  Case-Laws - AT : Valuation - enhancement of value - Comparison of the circle of stainless steel to prime product namely CR Coil is incorrect and cannot be allowed - AT
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• Hot Rolled Coils imports: No quality distinction in Customs Tariff or DFRC Licences; Non-prime goods not confiscated, benefits upheld.

  Case-Laws - AT : Import of consignments of Hot Rolled Coils - No different treatment is given to prime quality and nonprime quality material either in the Customs Tariff or in the DFRC Licences. Therefore even if it is admitted that the part of the imported goods is on non-prime quality material the goods are neither liable for confiscation nor the DFRC benefit can be denied - AT
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• Court Rules Price Hike on Nickel Cathodes Illegal; Valuation of 24.030 Metric Tons Challenged.

  Case-Laws - AT : Valuation - 24.030 MT of ‘unwrought, unalloyed electrolytic nickel cathodes’ - assessable value - enhancement of declared price - upward revision is without authority of law. - AT
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Service Tax

• Taxpayer's Refund Claim Denied: Full Contract Amount Received Indicates Service Tax Was Collected, Raises Unjust Enrichment Concerns.

  Case-Laws - AT : Refund - unjust enrichment - When the appellant himself has calculated the tax liability from the amount received from ONGC by working backwards, it cannot be now said that they have not collected the amount of service tax from ONGC; especially when there is no dispute that they have received in full the contracted amount. - AT
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• CENVAT Credit Permitted for Input Services Used in Construction of Rented Immovable Properties Under Service Tax Rules.

  Case-Laws - AT : Denial of CENVAT Credit - demand of service tax under the category of renting of immovable property - construction services - CENVAT credit on input services which are used for construction activities allowed - AT
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• Stage Carriage Permits Not Contract Carriages Under Motor Vehicles Act, Section 2(7); Affects Service Tax Applicability.

  Case-Laws - AT : Tour operator service - stage carriage permit - They do not at all become contract carriages as they do not conform to the definition of contract carriage in Section 2(7) of M.V. Act. - AT
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• Court Rules Board Can't Add Conditions to GTA Service Tax Abatement; Notification No. 32/2004-ST Stands Unchanged.

  Case-Laws - AT : GTA - Denial of benefit of N/N. 32/2004-ST dated 3.12.2004 - 75% abatement - the Board cannot prescribe any condition or procedure for availing any Exemption Notification. If at all any procedure is required, it should be part and parcel of the Notification, which is not the case here - AT
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Central Excise

• Turnover Tax Deductible in Goods Valuation Under Central Excises and Salt Act, 1944.

  Case-Laws - AT : Valuation (Central Excise) - Turnover tax - whether at the time of working out valuation of the goods, under the Central Excises and Salt Act, 1944, the turnover tax can be deducted? - Held Yes - AT
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• Appellant's Refund Denied for Duty Overpayment Due to Lack of Required Provisional Assessment for Price Variations.

  Case-Laws - AT : Price variation clause - refund claim - reduction in price, resulting in excess payment of duty - in such case where price variation was anticipated, the appellant should have sought provisional assessment as provided in law - No refund - AT
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• Credit on Returned Goods u/r 16 Violated Due to Lack of Invoices; Demand Confirmed Against Parties.

  Case-Laws - AT : Availing credit on returned goods - Rule 16 - clearances were made without cover of invoice as required under law and their records mis-declared the actual facts by suppressing the disappearance of the machines - demand confirmed - AT
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VAT

• Court Upholds Exemption for Assessee's Claim on Tubular Hose Cloth, Overrules Board's Order as Incorrect.

  Case-Laws - HC : Classification - dumping hose cloth was in no way different from the cloth used for banians and it was only tubular in shape and therefore, held that the Assistant Commissioner rightly exempted the assessee's claim and the Board's order to the contrary cannot be sustained as correct. - HC
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Case Laws:

• Income Tax

• 2016 (11) TMI 211
  Validity of Assessment u/s 153A - addition made on the basis of the incriminating material found during the search? - Held that:- The search was conducted on 22-03-2006. Various materials: documents, agreements, invoices and statements in the form of accounts and calculations were seized. On 18 April 2006 and 3 May 2006, the assessee’s sons (including one of the appellants, Abhay Gupta) recorded statements under oath; the assessee too made her statement under oath, admitting that though returns were filed ostensibly on her behalf, she was not in control of the business. She and all other family members made short statements and endorsed the statements under oath, of those who elaborated the trading and business operations relating to clandestine income. These statements under oath were part of the record and continued to be so. They were never explained in any reasonable manner. Their probative value is undeniable; the occasion for making them arose because of the search and seizure that occurred and the seizure of various documents, etc. that pointed to undeclared income. In these circumstances, the assessee’s argument that they could not be acted upon or given any weight is insubstantial and meritless. This court also notices that the decision in CIT Vs. Anil Bhatia (2012 (8) TMI 368 - DELHI HIGH COURT ) which held that such statements are relevant, though noticed, has not been doubted in any later decision, including Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT ], which is the mainstay of the assessee’s case. Consequently the first question of law is answered against the assessee and in the revenue’s favour. Rejection of books of accounts - estimating turn over and applying a high GP rate to estimate profit - Held that:- ITAT’s findings do not reveal any fundamental error, calling for correction. The inferences drawn in respect of undeclared income were premised on the materials found as well as the statements recorded by the assessees. These additions therefore were not baseless. Given that the assessing authorities in such cases have to draw inferences, because of the nature of the materials – since they could be scanty (as one habitually concealing income or indulging in clandestine operations can hardly be expected to maintain meticulous books or records for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In this case, the differences of opinion between the CIT (A) on the one hand and the AO and ITAT on the other cannot be the sole basis for disagreeing with what is essentially a factual surmise that is logical and plausible. These findings do not call for interference. The second question of law is answered again in favour of the revenue and against the assessee.

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• 2016 (11) TMI 210
  Addition u/s 40A(3) - Held that:- There is no dispute that the provisions of s.40A(3) apply to block assessments in general. The provision however, would apply only where expenditure in question has been incurred and claimed in the computation of income. The Supreme Court, in the case of Attar Singh Gurmukh Singh Vs. Income Tax Officer, Ludhiana (1991 (8) TMI 5 - SUPREME Court) reiterates this position as well. In the present case, the Tribunal confirms as a finding of fact at para 17 of its order that no expenditure has been incurred except the investment in gold. The consideration paid towards the investment has been duly brought to tax as unexplained income, such income not having been claimed as expenditure in the computation of income. The objection of the Revenue is that the valuation of the gold per gram is not Rs. 500 but more as revealed by other disallowances made in the order of assessment and if the higher rate was taken into consideration, one could assume that certain expenditure has been incurred and claimed. We are not persuaded to accept this submission in so far as there is no necessity to consider any other valuation except that relating to the subject disallowance, being Rs. 500 per gram adopted by the Assessing officer after due consideration and application of mind. We are thus of the view that the provisions of 40A(3) are wholly inapplicable to the facts and circumstances of this case. The substantial question of law is answered in favour of the assessee

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• 2016 (11) TMI 209
  MAT credit to be set off from the tax payable before levying interest under section 234B and 234C - Held that:- We notice that the issues raised in the substantial question of law in the above appeals have been considered and the question was decided in favour of the assessee by the judgment of this Court in Commissioner of Income Tax Vs. Chemplast Sanmar Ltd, reported in (2009 (4) TMI 61 - MADRAS HIGH COURT ) affirmed in the case reported in Commissioner of Income Tax Vs. Tulsyan Nec Ltd.(2010 (12) TMI 23 - Supreme Court of India ), wherein held MAT credit would lapse after five succeeding assessment years under section 115JAA(3); that no interest would be payable on such credit by the Government under the proviso to section 115JAA(2) and that the assessee would be liable to pay interest under sections 234B and 234C on the shortfall in the payment of advance tax despite existence of the MAT credit standing to the account of the assessee. Thus, despite the MAT credit standing to the account of the assessee, the liability of the assessee gets increased instead of it getting reduced - Decided in favour of assessee

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• 2016 (11) TMI 208
  Applicability of provision of Section 22 and 23 to the properties owned by the Assessee - Held that:- As far as the decision in Chennai Properties & Investments Ltd v.CIT (2015 (5) TMI 46 - SUPREME COURT) wherein noted that the main object of the Appellant Assessee in that case was “to purchase or otherwise acquire and hold the properties known as “Chennai House” and to let out such properties and to make advances upon the security of lands or buildings or other property, or any interest therein”. What was emphasized was that holding the aforesaid properties and earning income by letting out properties was the “main object of the company”. The above facts in Chennai Properties & Investments Ltd (supra) clearly distinguishes it in its applicability to the facts of the present case where a categorical stand was recorded in para 5 of the judgment of CIT v. Ansal Housing Finance & Leasing Co. Ltd. (2012 (11) TMI 323 - DELHI HIGH COURT) that letting out of properties “was not part of business and object of the Assessee”. Consequently, this Court is not persuaded to accept the plea of the Assessee that in view of the decision in Chennai Properties & Investments Ltd (supra) the Court should reconsider the correctness of its ruling in CIT v. Ansal Housing Finance & Leasing Co. Ltd. (supra). - Decided against assessee.

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• 2016 (11) TMI 207
  Penalty u/s 271FA - delay of 561 days in furnishing AIR - whether there is sufficient cause for the assessee for noncompliance with the requirement of Section 285BA of the Act till the notice was served? - Held that:- On a careful consideration of the matter, we find that except the instant alleged breach, nothing more is alleged against the assessee. As a matter of fact, the Director of Income Tax (Intelligence and Criminal investigation) who passed the penalty order himself observed in his order vide para No 3 that the assessee got the accounts of all branches consolidated and audited, and also filed Income Tax/TDS returns. The order of the Director of Income Tax (Intelligence and Criminal investigation) does not speak as to how the assessee stood to gain by contravening with the provisions of Section 285BA of the Act or the act of assessee resulted in any loss to the Revenue. No mala fides can be attributed to the assessee so as to invoke the penalty proceedings under section 271FA of the Act and the learned Director of Income Tax (Intelligence and Criminal investigation) should have taken note that the breach is only technical or venial breach of the provisions of the Act and such a breach could have flown from a bona fide ignorance of the assessee that he is liable to act in the manner prescribed by the statute, and should not have invoked the penalty proceedings. Thus the Penalty proceedings are liable to be set aside. - Decided in favour of asseessee

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• 2016 (11) TMI 206
  Additions towards notional interest on advances given to partners and sister concerns - Held that:- We find force in the arguments of the assessee for the reason that the partners have withdrawn an amount of Rs. 59,73,600/- during the financial year 2006-07, relevant to assessment year 2007-08 out of the amount standing to the credit of their capital account. Though the assessee is having borrowed funds, the borrowed funds represent the deployment of funds in the business assets in the form of stock in trade and receivables. The assessee has not diverted any interest bearing funds to its partners or sister concerns. The amount of advance given to partners and sister concerns is debited to the capital account of the partners, still there is a credit balance in the partners capital account, therefore, the A.O. was not correct in holding that the assessee has diverted its interest bearing funds to its partners and sister concerns. The CIT(A) after considering the relevant details rightly deleted additions made by the A.O. - Decided in favour of assessee. Additions towards advances turning bad - Held that:- On perusal of the paper book filed by the assessee, we find that these advances were given in the normal course of business towards purchase of raw materials. When the suppliers not supplied the goods, the assessee has classified these advances under the head “advances to suppliers” and kept under current assets. The assessee has written off these advances in the books of accounts as bad debts. Even if these amounts are not allowed as deduction u/s 36(1)(v) of the Act, the assessee can always claim deduction u/s 37 of the Act, as the scope of section 37 of the Act is vide enough to include all such amounts paid for the purpose of business and are to be allowed unless and otherwise the advance is capital in nature. In the present case on hand, on perusal of the details available on record, we noticed that these advances are given for the purpose of purchase of raw materials. The assessee has written off these advances in the books of accounts. Therefore, we are of the view that the A.O. was erred in holding that the advances are in the nature of capital advances and hence, not allowable as deduction u/s 37 of the Act. The CIT(A) after considering the relevant details rightly deleted additions made by the A.O - Decided in favour of assessee.

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• 2016 (11) TMI 205
  Determination of arm’s length price (ALP) in respect of transactions of the assessee with its Branch Office in Canada - Held that:- Not only the income but, also the expenses and all the items of balance sheet of branch office, Canada have also been merged with the figures of head office. It is the total income as also including the total revenue earned by branch office Canada, which has been offered for taxation. Under such circumstances and in the backdrop of the foregoing discussion, the transfer pricing provisions cannot apply in respect of transactions between the Indian head office and branch office in Canada. The impugned order is set aside pro tanto. Addition due to transfer pricing adjustment - filters for selecting the comparable companies - Companies whose software development service revenue less than Rs. 1 crore were excluded - Held that:- We are not convinced with the argument advanced on behalf of the assessee in this regard. When functionally similar companies are chosen and then average of the profit rate of such similarly functional companies is taken into account for determining the ALP of the international transaction undertaken by the assessee, the size of some of the companies in the whole lot of comparable companies, becomes meaningless. Averaging of the profit rates of the whole lot of functionally similar companies of different sizes, viz., some having higher while some others having lower turnover vis-à-vis the assessee, irons out the effect of such differences. The Hon’ble jurisdictional High Court in the case of ChrysVapital Investment Advisors (India) Pvt. Ltd. vs. DCIT (2015 (4) TMI 949 - DELHI HIGH COURT ) has held that high profit/turnover cannot be a criteria to exclude an otherwise comparable company. This issue being no more res integra, does not deserve the acceptance by us of the argument advanced on behalf of the assessee. We, therefore, hold that the TPO was justified in applying this filter. Companies who have less than 25% of the revenues as export sales were excluded - Held that:- the assessee’s export revenue is roughly 21% of total revenue. If we apply the filter of excluding the companies having less than 25% of the revenue’s from export sales, it would tend to eliminate the companies which are similarly placed as the assessee. - Both the sides agreed that if, in the given circumstances, the filter of excluding the companies with export sales of more than 30% of the total revenue is applied, that would serve the purpose. In our considered opinion, this proposition put forth by the ld. AR and as accepted by the ld. DR, is in order. Companies who have more than 25% related party transactions (sales as well as expenditure combined) of the operating revenues were excluded - Held that:- The decision as to whether a company should be included in the list of comparables by applying the filter of more than 25% RPTs, would depend on the outcome of two such percentages of RPTs. If either of the two breaches the 25% threshold, then the company will cease to be comparable. The impugned order, combining sales and expenses, for calculating the percentage of the RPTs is set aside to this extent and the TPO is, accordingly, directed to apply this filter in the manner discussed above. Companies who have diminishing revenues/persistent losses for the period under consideration were excluded - Held that:- if we exclude the companies having diminishing profits, it would mean that the companies whose profit pattern is also similar to that of the assessee would face the axe. Doing so would mean excluding the comparable companies from the final tally, which is not appropriate. However, the companies having persistent losses, obviously, cannot be compared with the assessee because it has earned positive income not only in this year, but, in the preceding year as well. We, therefore, hold that the companies having diminishing revenue should not be excluded, but, only the companies having persistent losses should be expelled from the final tally of comparables. Companies whose onsite income is more than 75% of the export revenues were excluded - Held that:- the companies whose onsite income is more than 75% of the export limit should be rather included. Since the necessary complete information is not available with the ld. AR for verifying the veracity of the contention of the foreign branch earning 100% onsite services, we consider it expedient to direct the TPO/AO to examine the break-up of the revenues earned by branch office, Canada, for seeing if the same is from onsite/offsite services. The application of the filter will be then decided accordingly by the TPO. Disallowance of adjustment on account of idle capacity - Held that:- The effect of differences between the international transaction and comparable uncontrolled transactions is always given in the net operating profit margin of the comparable uncontrolled transactions. There is no mandate for adjusting the assessee’s profit margin under the provisions of Rule 10B(1)(e). The assessee’s contention that its operating costs should be reduced to the extent its employees remained idle is, ergo, incapable of acceptance. The adjustment, if any, could have been allowed, if the assessee had demonstrated that the comparable companies had more under-utilization of their labour force vis-à-vis the assessee. The onus to prove such under-utilization of employees of the comparables, for claiming adjustment, squarely lies on the assessee. On a specific query, the ld. AR could not point out that the utilization of employees by the comparable companies was less than the assessee. Under such circumstances, we are of the considered opinion that no such adjustment can be granted. We, therefore, approve the view taken by the authorities on this issue.

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• 2016 (11) TMI 204
  Rectification of mistake - Rental income earned from sublease of the property - “income from house property” or “business income” - Held that:- Tribunal after appreciation of facts has held that the sub leasing of the property was not part of the business activity of the assessee. The Tribunal, as the facts were available before it, has given a categorical factual finding upon which the relevant case laws have been relied upon. With due respect to the all case laws relied upon by the Ld. Counsel for the assessee, we find no mistake apparent on record in this case as the said case laws are not applicable because the factual finding given by the Tribunal is contrary to the facts of the cases before the Hon’ble Supreme Court as relied upon by the Ld. Counsel for the assessee. So far the reliance of the Ld. Counsel on the subsequent decision of the Tribunal is concerned, in our view, any finding arrived by a co-ordinate Bench of the Tribunal in subsequent decision can not be held to be a reason enough to hold that there was any mistake in the earlier order of different Bench of the Tribunal. Moreover, we deem it fit to mention further here that this Tribunal has no power to review etc. If the assessee has any grievance against the impugned order, proper course to agitate the same is by filing an appeal before the next appellate authority i.e. the Hon’ble Bombay High Court, but, not with the present application under section 254(2) of the Act. The Tribunal, vide impugned order, has not only considered the submissions of the assessee but has given a categorical finding on all of the issues which were raised before the Tribunal by the Ld. Counsel for the assessee

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• 2016 (11) TMI 203
  Cost of acquisition of the property - FMV - A.O. has determined cost of acquisition of the property based on the SRO value of the property fixed by the State Government for the purpose of determination of stamp duty - Held that:- . In the present case on hand, the assessee has adopted fair market value of the property as on 1.4.1981 as cost of acquisition which is based on a certificate issued by the registered valuer. The A.O. without assigning any reasons disbelieved registered valuer’s report and adopted SRO value of the property for the purpose of determination of computation of cost of acquisition, when Act specifically provides powers to the A.O. under the provisions of section 55(2) of the Act, to refer the valuation of the property to the valuation officer, when he is of the opinion that the fair market value of the property adopted by the assessee is higher than the fair market value of the property. The A.O., without exercising the option of referring the matter to the valuation officer, simply adopted SRO value which is fixed in a different context to determine the cost of acquisition of the property. Therefore, we are of the opinion that the A.O. was erred in adopting SRO value to substitute the fair market value adopted by the assessee, which is based on a registered valuer certificate. CIT(A) after considering the relevant details has rightly directed the A.O. to substitute value adopted by the assessee as fair market value of the property as on 1.4.1981 to compute cost of acquisition. We do not find any reasons to interfere with the CIT(A) order. Hence, we inclined to upheld CIT(A) order and reject ground raised by the revenue. Benefit of indexation - Held that:- In the present case on hand, the assessee got right over property by way of inheritance through a partition deed which was acquired by his father prior to 1.4.1981. When the assessee got right over property by any of the mode specified u/s 49(1) of the Act, then for the purpose of computation of indexed cost of acquisition, the period of holding of previous owner has to be considered. The CIT(A) after considering the relevant details rightly held that the assessee is eligible for indexation benefit from the period the asset was first held by the previous owner or 1.4.1981 whichever is later as per the provisions of section 49(1) of the Act. We do not see any reasons to interfere with the order of CIT(A). Hence, we inclined to uphold the CIT(A) order and reject ground raised by the revenue.

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• 2016 (11) TMI 202
  Transfer pricing adjustment - MAM - TNMM - comparability - Held that:- It is an admitted fact that the assessee entered into international transaction with Moriseiki, Japan and to determine the arm’s length price, the assessee adopted TNMM method as most appropriate method in accordance with OECD Guidelines, and the operating profit/operating cost was considered as profit level indicator. The AO was of the view that the assessee ought to have earned gross profit rate of 38.09% on the direct sales made by the HO in India and 50% of that gross profit was attributable to the assessee. In the present case, it is an admitted fact that in the subsequent year, the DRP considered the TNMM as the most appropriate method and worked out the arithmetic mean margin at 5.60% on the basis of 5 comparables while the assessee had calculated the average margin on the basis of 13 comparables at 5.84% and since the facts in the year under consideration are similar to the facts involved in the subsequent year as there was no change in the functions, utilization of assets and risk profile of the assessee. Therefore, the ld. CIT(A) rightly held that the action of the AO was not sustainable because he on the one hand had accepted TNMM and also used profit split method for attribution of profit on the international transaction at 50:50 ratio. In our opinion either of the two methods could have been used and not both, therefore, the ld. CIT(A) was fully justified in holding that the action of the AO was not sustainable in the eyes of law. In the present case, when the AO himself accepted that the transaction was benchmarked under the provision of Section 92 of the Act, so there was no need to attribute the profit separately to the assessee PE. Since, there is no change in the facts for the year under consideration vis-à-vis subsequent year, the ld. CIT(A) rightly restricted the adjustment to the international transaction at Rs. 54,37,717/-. We do not see any infirmity in the impugned order passed by the ld. CIT(A). - Decided against revenue

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• 2016 (11) TMI 201
  Disallowance of the provision for liquidated damages - Held that:- Assessee is eligible for the deduction in respect of provision for liquidated damages as revenue expenditure allowable u/s 37(1) of the Act. Foreign exchange fluctuation loss - Held that:- The issue relating to foreign exchange fluctuation loss is decided in favour of the assessee and against the Revenue. See CIT Vs Woodward Governor [2010 (6) TMI 65 - BOMBAY HIGH COURT].

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• 2016 (11) TMI 200
  Penalty u/s. 271(1)(c) - T.P. adjustment - Held that:- It is not a case of a disallowance of any claim of expenditure under section 37(1) albeit the value of the transaction has been taken at “Nil”. We find great substance in the arguments placed by the Ld. Counsel, because as reiterated above, here the issue related to transfer pricing adjustment which has been made by departmental authorities by taking the value of the international transaction at “Nil”. While arriving at such a conclusion, neither the TPO nor the DRP has given any analysis as to why such an adjustment is required to be made when TNMM has been applied and when overall profit margin and the method has not been disturbed. The TPO for making an adjustment in the ALP has to benchmark the transaction and the ALP with the comparables under the prescribed Indian Transfer Pricing Regulations. He cannot value the ALP of the transaction at “Nil” without adhering to the proper procedure of law laid down under the Act and relevant rules. It is further noticed that, no penalty was levied in the case of the assessee for non-furnishing of the information and documents as required under section 92D(3), for which separate penal provision under section 271G have been prescribed. Thus on these facts and circumstances, prima facie we are of the opinion that no case can be made for the levy of penalty u/s 271(1)(c). Accordingly, we hold that penalty levied by the AO under section 271(1) (c) cannot be legally and factually sustained and therefore, the deletion of penalty by the Ld. CIT(A) is affirmed. - Decided in favour of assessee

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• Customs

• 2016 (11) TMI 179
  Penalty - Evasion of duty - Notification No. 140/87-Cus. Dated 27.3.1987 - Held that: - On investigation, it was established that the goods were diverted to the local market from the port of importation (Kandla Gujarat) and never reached the factory premises of the Company, at North Karnataka, thereby contravening the conditions of the exemption notification inasmuch as the imported goods were not utilised for manufacturing the final products, but diverted into local market - The statements of others especially Shri Srinivas Naik, Whole-time Director, and Shri Vinayak D. Gavdi, Manager (Administration) clearly establishes that both Shri R N Shetty and Shri Vijay Venkatarao Kamat are responsible for the said evasion of duty. As regards the plea of limitation, it is observed that the goods were imported and cleared under License No. 0001145 dated 21.02.1990 availing the benefit of exemption under Notification No. 140/87-Cus. Dated 27.3.1987, which prescribes certain conditions, according to which they were to use the imported goods for manufacture of specified goods which were to be exported - It is settled law that when the goods are imported under certain conditions and under Bond, limitation does not apply till the conditions are fulfilled and the Bond is discharged - Appeals are dismissed - Decided against the assessee.

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• 2016 (11) TMI 178
  Refund of SAD - Notification No.102/2007-Cus. dated 14.9.2007 - In the present cases, the lower authorities have rejected the refunds since the correlation between the imported goods and those locally sold on payment of VAT has not been established beyond doubt - Held that: - The Notification as well as the Circulars notified by the CBEC for such refund claims requires the submission of documents from which the correlation between the two can be established. It is on record that such documents have been submitted. The main misgiving on the part of the Revenue authorities is that the correlation cannot be established beyond doubt - It is to overcome such difficulties, that the CBEC vide their Circular dated 28.4.2008 as well as subsequent Circular dated 13.10.2008 has made the requirement that such correlation is to be examined and certified by the statutory auditor/CA after examining the books of accounts of the importer - Appeal allowed.

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• 2016 (11) TMI 177
  Penalty - Evasion of duty - Held that: - when the breach of law is patent from record, penalty of Rs. 4,50,000/- (Rupees four lakh fifty thousand only) imposed on the appellant under section 112(a) of the Customs Act, 1962 appears to be reasonable and there shall be no interference by the Tribunal - Section 114AA is applicable when documents are falsified with conscious knowledge to cause evasion. In this case, appellant s questionable modus operandi and oblique motive demonstrated its involvement in causing evasion - On the basis of evidence, material facts and attendant circumstances, it is considered proper that any leniency in reduction of penalty will be a bonus to breach of law and that shall be an inspiration to the perpetrator of offence - Appeal dismissed.

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• 2016 (11) TMI 176
  Confiscation of imported goods u/s Sections 111(d) of the CA, 1962 - option to pay redemption fine u/s 125 of the act - imposition of penalties - import of consignment containing 6 Dumper Caterpillar - 730 - interpretation of statute - prohibition and restriction - whether the said dumpers imported by Appellant will have to conform to the conditions set out in the Import Licensing Notes to Chapter 87 prescribed under Import-Export policy 2004-2009 for new 'motor vehicles'? - section 112 (a) of Customs Act, 1962 - Held that: - there is no prohibition in force against import of the vehicles. There is only restriction in Import Licensing Notes of Chapter 87 of import export policy 2004-2009, that importation of new vehicles shall be permitted only through specified Customs Port at Nhava Sheva, Kolkatta, Chennai, ICD-Tuglakhabad, Delhi Air Cargo and Mumbai Port Other conditions of import are also specified in the said Licensing notes. However, there is no prohibition on their importation. By any stretch of imagination, the word' restriction' cannot be equated or read as 'prohibition'. This being so, invocation of 111(d) is not in order, Possibly one or more of the situations attracting confiscation as listed out in 111(a) to (p) may well have been applicable to the facts of this case, but definitely not 111(d). In the event the goods are not liable for confiscation under 111(d) and by implication the invocation of 112(a) and Section 125 are also not sustainable. We therefore have no hesitation in setting aside the impugned order to the extent of confiscation of the goods under Section 111(d), imposition of redemption fine under Section 125 and imposition of penalty under Section 112 (a) of the Act (ibid) - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 175
  Imposition of penalties - whether the appellants are involved in aiding and abetting fraudulent claim of drawback? - Held that: - As regard the repeated request of the appellant for cross examination of various persons, I find that Adjudicating authority has called witnesses for cross examination but they were not available therefore case was denovo adjudicated on the basis of available evidences. I do not find anything wrong in deciding the case on the basis of evidences or whatsoever documents available with the Adjudicating authority. Apart from the statement there are ample documentary evidences which clearly establish that appellants were involved in aiding and abetting fraudulent availement of drawback. Therefore even if cross examination of the witnesses could not be conducted the same will not vitiate the proceedings carried out by the Adjudicating authority. As per facts and circumstances of the case and the evidences relied upon by the Adjudicating authority, I do not find any infirmity in the order. The impugned order is upheld and appeals are dismissed - decided against appellant.

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• 2016 (11) TMI 174
  Valuation - enhancement of value - Stainless Steel Scraps Sheets - use of product as such - Comparison of the circle of stainless steel with CR coil - Held that: - No evidences whatsoever is on the record to substantiate the claim that stainless steel of 316L grade comes of premium of US$300PMT as compared to 304L grade variety. Without any evidence such assertions is unsubstantiated and liable to be rejected. Stainless Steel circle imported by the appellant are cut pieces of approx. half kg each. The LME price of CR coils of stainless steel has been taken for comparison. CR Coils are prime product of continuous length. Comparison of the circle of stainless steel to prime product namely CR Coil is incorrect and cannot be allowed - appeal allowed - enhancement of value not justified - decided against appellant.

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• 2016 (11) TMI 173
  Enhancements of fine and penalties - import of consignments of Hot Rolled Coils - whether goods are of prime quality or are defectives, hereby losing eligibility for duty free clearance under the DFRC licenses? - Held that: - the IIT report itself shows that the compositions of the goods are in order. It is only the physical appearance of goods is of non-prime quality. In our view, quality of goods particularly steel items can be correctly ascertained only on the basis of composition of goods. Therefore only because on physical examination it appears to be non-prime material cannot be concluded that the goods are of other than prime quality. We further observed that in the DFRC license the tariff description is given as appearing in the tariff heading No. 72082790, the goods imported by the assessee is undisputedly falls in the same tariff heading and the description of goods was also given as hot rolled coils from stock'. We therefore find that there is no mis-declaration in the bill of entry vis-a-vis description given in the DFRC license. So long both the description falls under the same tariff heading number, it cannot be said that two different descriptions were declared under DFRC and in the Bill of Entry. Moreover, the composition is matching but on the physical examination the goods found to be non-prime quality. This cannot be the reason to allege that there is a mis-declaration. No different treatment is given to prime quality and nonprime quality material either in the Customs Tariff or in the DFRC Licences. Therefore even if it is admitted that the part of the imported goods is on non-prime quality material the goods are neither liable for confiscation nor the DFRC benefit can be denied - Revenue's appeal of enhancement of fines and penalties set aside - appeal disposed off - decided against Revenue.

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• 2016 (11) TMI 172
  Valuation - 24.030 MT of ‘unwrought, unalloyed electrolytic nickel cathodes’ - assessable value - enhancement of declared price of of US $ 7055 per MT to US $ 8420 per MT - London Metal Exchange - Held that: - the decision in the case of Eicher Tractors Ltd v. Commissioner of Customs, Mumbai [2000 (11) TMI 139 - SUPREME COURT OF INDIA] relied upon where it was held that rejection of declared value with valid reasons to be a pre-requisite for sequential application of rule 5 to rule 8 before arriving at the assessable value. The difference in approach between the earlier and later Rules finds a significant place in the judgement - The impugned order has not followed the prescriptions laid down in the prevailing Rules as detailed in the decision in Eicher Tractors Ltd for enhancement of assessable value. Therefore, the upward revision is without authority of law. Duties of customs on the said import shall be levied on the declared value - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 171
  Confiscation of imported goods - option of redemption on payment of redemption fine of Rs. 50,000/- - imposition of penalty - misdeclaration of weight - Held that: - the appellants had filed the Bill of Entry on the basis of the documents received by them. They have also paid the duty on the transaction value as assessed initially. On finding excess weight, they were willing to pay the differential duty also, and waived the show cause notice and personal hearing as they were in urgent need of the goods. Subsequent to the adjudication order, they paid the differential duty, redemption fine and penalty and cleared the goods. However, their contention is that the redemption fine and penalty are not warranted on the facts of the case. In view of the specific facts of the case, we find that the imposition of penalty on the appellants cannot be sustained. Hence, the penalty of Rs. 30,000/- imposed on the appellants is set-aside - appeal disposed off - decided partly in favor of appellant.

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• 2016 (11) TMI 170
  Demand - import of Marine Gas Oil (MGO) - denial of benefit of exemption under N/N. 21/2002-Cus - the certificate of DGHC issued for duty-free import was for Marine Gas Oil whereas the goods imported was Light Diesel oil (LDO) - Held that: - reliance placed on the decision of the case of Transocean Discoverer 534 LLC [2015 (7) TMI 816 - CESTAT BANGALORE] where it was held that what was imported was Marine Gas Oil and not Light Diesel Oil and hence the benefit of exemption under CN 21/2002, Sl.No.217, against the Essentiality Certificate issued by the Directorate General of Hydrocarbons, will be available to said Marine Gas Oil - appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2016 (11) TMI 167
  Entitlement to move an application for conducting the investigation in to the affairs of Respondent 1 Company under Section 213 of Companies Act, 2013 - Held that:- There is no dispute that the applicant's shareholding is 37% in the equity capital of Respondent-I M/s R.S. India Wind Energy Pvt Ltd. Therefore, the applicant fulfils the criteria prescribed under Sub Clause (a) of Sec 213 and is entitled to move an application for conducting the investigation in to the affairs of Respondent 1 Company under Section 213 of Companies Act, 2013. The purpose of investigation is to discover something which is apparently not visible to the naked eyes. The petitioner has brought out some apparent malpractices in the working of Respondent 1 Company to show that deeper probe is necessary. There has been complaint of mismanagement in the affairs of Respondent-I company. The applicant has also made out a good case by showing that there has been prima facie violations of the provisions of Companies Act in the maintenance of the minutes of various proceedings of the Respondent-I company. Apparent misdeeds and dishonesty in the maintenance of minutes of the company in contravention of the provisions of the Act cannot be ruled out. Law makes the investigation comprehensive of all sorts of illegalities. Sub clause 1 clause (b) of section 213 is wide enough to include contravention of any law. There has been prima facia existence of malpractices in tampering of records, which cannot be overlooked. In the facts, it appears that deeper probe in the affairs of Respondent No. l company is necessary. There is also a prayer in the company application for an investigation in to the affairs of Respondent 11 Power Wind Ltd. However it has not been explained in the application as to under what circumstances a probe is necessary against Respondent 11 Company. In the absence of sufficient material to show that affairs of Respondent 11 Company necessitates investigation, the same cannot be allowed.

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• 2016 (11) TMI 166
  Validity of resolution passed in EGM - violation of direction of the then Company Law Board - Held that:- There were specific directions of the Company Law Board for maintaining the status quo of the share capital of the respondent No. 1 company and constitution of Board of Directors of the Company. But in violation of that a notice for Extraordinary General Meeting was given and Extraordinary General Meeting has been purportedly held on 21-9-2015 whereby names of respondent Nos. 2, 3, 4 and 5 have been removed from the Board of Directors and names of Mr. Manoj Kumar Chaudhury as Managing Director, Niranjan Kumar Maurya as Director and Mr. Rajesh Kumar Ranjan as Director have been added thereby status quo position which ought to be maintained as per the direction of the then Company Law Board has been violated. The Application deserves to be allowed and the resolutions passed at the Extraordinary General Meeting dated 21-9-2015 also deserve to be declared as null and void. Consequently, the names of Mr. Manoj Kumar Chaudhury as Managing Director, Niranjan Kumar Maurya as Director and Mr. Rajesh Kumar Rajan as Director of the Respondent No. 1 company should be deleted from the MCA portal and the names of the respondent Nos. 2, 3, 4 and 5 as the Directors of Respondent No. 1 Company deserves to be restored in the MCA Portal.

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• Service Tax

• 2016 (11) TMI 199
  Levy of tax - erection and commissioning of transmission lines - erection of poles required for distribution of electricity for clients - N/N. 45/2010-ST dated 20.07.2010 - Held that: - the activity of appellant as enumerated in paragraph No.2 herein above is undisputed and is in respect of transmission and distribution of electricity and undisputed also. If that be so, we hold that Notification No. 45/2010 dated 20.07.2010 will apply in full force for the period covered in this appeal as per wordings of notification. Accordingly, we hold that for the period in question in this appeal no tax liability arises. However, we have to note the concern of the learned D.R. that the appellant has collected amounts from their customers as service tax. Since no records are produced, we remit the matter back only for a limited purpose to examine whether appellant has collected service tax from their customers/clients during the period, if so same should be recovered with interest from the appellant - appeal allowed - remand on limited point - decided in favor of appellant.

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• 2016 (11) TMI 198
  Service tax liability - Management, Maintenance and Repair services of ATM - services brought under service tax net from 01.05.2006 - Held that: - the service tax liability on ATM operation as Management, Maintenance and Repair services was brought under the service tax net from 01.05.2006. The activity conducted by the respondent of erection of ATM maintenance thereof was sought to be taxed under the Management, Maintenance and Repair services for the earlier period holding that the ATM machine is also a machine. Cleaning services - Held that: - the cleaning activity undertaken by the respondent is in respect of soiled notes stuck in the machine, various other operations of the ATM machine and removal of waste paper in and around the machine. Agreement entered by the respondent with their service recipient clearly indicate that the cleaning activity in respect of ATM Machine only. The Adjudicating Authority was correct in dropping the proceedings initiated by the show-cause notice - reliance placed on judgement of the Tribunal in the case of NCR Corporation India Pvt. Ltd. [2008 (5) TMI 27 - CESTAT BANGALORE] wherein identical issue was decided in favour of the assessee - appeal rejected - decided against Revenue.

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• 2016 (11) TMI 197
  Jurisdiction of revisionary authority - section 35EE of the Central Excise Act, 1944 - rebate of service tax - input services used for export of services - Held that: - As per provision of Section 35EE, the competent authority is revisionary authority to deal with the aforesaid matters of rebate. Considering the above provisions, we are of the view that present appeal should be transferred to revisionary authority, Government of India. We are therefore direct the registry to transfer this matter to the revisionary authority - appeal disposed off.

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• 2016 (11) TMI 196
  Scope of erection, installation and commissioning service - is service covered under consulting engineers service? - CBEC vide Circular No.79/9/2004-ST dated 13.05.2004 - Held that: - the score of taxation is examined from the activity described by investigation. Boards circular is candid on the scope of the taxing entry. Further, when a taxing entry was not in statue book, proposition for taxing erection, installation and commissioning service during the material period does not arise. Therefore, adjudication order has no leg to stand. Accordingly, the appeal is allowed.

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• 2016 (11) TMI 195
  Rejection of refund claim - contract with ONGC for execution of job under MSP Platform project and said job is based on turn-key basis - turn-key and work contract - limitation bar - Held that: - the appellant had deposited the amount in the month of March 2005, May 2005, September 05 and November 2005. As regards the amount deposited by the appellant as service tax liability, nothing is brought on record that the said amounts were deposited by them on the directions of Revenue authorities; that the amounts were deposited under protest. It is seen from the records the appellant themselves have classified the services under the category of “Commissioning, Installation and Consulting Engineering Services” and paid the service tax liability - refund application filed on 21.06.2006 for the amount deposited in March 2005 and May 2005 are hit by limitation. Unjust enrichment - Held that: - On perusal of the contract entered with the ONGC, we find that the said contract is lump-sum contract. The service tax liability paid by the appellant is calculated by working back from the lumpsum contracted amount. In short the appellant had received an amount as per contract nothing more and nothing less. When the appellant himself has calculated the tax liability from the amount received from ONGC by working backwards, it cannot be now said that they have not collected the amount of service tax from ONGC; especially when there is no dispute that they have received in full the contracted amount. Further, we find that the claim of the learned Counsel as to the service tax liability does not arise on the services rendered by them is without any basis inasmuch as vivisecting the contract entered with ONGC was done by appellant himself and discharged the service tax liability. Appeal dismissed - decided against appellant.

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• 2016 (11) TMI 194
  Levy of tax - amount received by the appellant from IOCL as commission for operating a petrol pump - Business Auxiliary Service or not? - Held that: - on merits there is no case for appellant nor there is any case on limitation. Since there is no serious contest for this demand, we uphold that portion of the order which confirms the demand raised along with interest and also penalty. Denial of CENVAT Credit - demand of service tax under the category of renting of immovable property - construction services - Held that: - there is no dispute as to the fact that the appellant had received the services from the service provider for the construction of pre-fabricated building; which was used by appellant for renting out the premises to various outlets and appellant had discharged the service tax liability on such amounts under the category of ‘Renting of Immovable Property Services’ - reliance placed on the decision of Navratna S.G. Highway Prop P. Ltd. [2012 (7) TMI 316 - CESTAT, AHMEDABAD] where it was held that malls which were constructed at various locations for renting out shops and service tax liability discharged for ‘renting of immovable property services’ assessee cannot be denied the CENVAT credit on input services which are used for construction and maintenance of various malls - demand for reversal of credit set aside. Appeal disposed off - decided partly in favor of appellant.

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• 2016 (11) TMI 193
  Tour operator service - contract carriage permit - stage carriage permit - period of the dispute, 01-04-2000 to 2007-08 - whether Department claim that various chartered/contract/tour services provided by APSRTC to the public fall under the “tour operator” services as defined under the clause (115) of Sec.65 of the Finance Act, 1994 and that APSRTC were providing various tour operator services and evading payment of Service Tax? Held that: - It is not disputed that the vehicles used by the assessee for the impugned services are "stage carriage" vehicles and are carrying out the impugned activities only on the basis of temporary permits issued by A.P. Transport Authorities. They do not at all become contract carriages as they do not conform to the definition of contract carriage in Section 2(7) of M.V. Act. The assessee admittedly obtains special permit for meeting special situation under Section 88(8) of the Act which does not fail in the definition of tourist vehicle or contract carriage and attract levy of service tax. - the impugned activities carried out by the assessee will not attract the definition of "Tour operator 'under section Section 65 (52) of Finance Act, 1994 prior to 10.092004 and under Section 65 (115) for the remainder period covered in this case. This being so, the demands involved in the appeals filed by the assessee cannot sustain and the related impugned orders are liable to be set aside - appeal dismissed - decided against appellant.

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• 2016 (11) TMI 192
  Denial of benefit of N/N. 32/2004-ST dated 3.12.2004 by which 75% abatement from the gross value of GTA service has been provided - GTA service - reverse charge mechanism - Held that: - the appellant is discharging service tax on reverse charge basis as a recipient of service. Firstly, the condition if any imposed on goods transport agency cannot be practically complied with by the recipient of service. Secondly, the department could not prove that the goods transport agency has availed the benefit of cenvat credit and Notification 12/2003-ST. The Notification does not provide any condition that any declaration as sought by the department is required to be obtained from the goods transport agency and produce to the department in order to avail the Exemption Notification. Therefore, the Board circular which prescribes the procedure for obtaining the declaration, is not flowing from the Notification. In our view, the Board cannot prescribe any condition or procedure for availing any Exemption Notification. If at all any procedure is required, it should be part and parcel of the Notification, which is not the case here. The appellant had provided a declaration from the goods transport agency on their letterhead. It is very surprising to note that the lower authority has discarded the said certificate merely on the ground that the declaration was obtained on the letterhead and not on each consignment note. Once a transport agency gives the declaration that they are not availing the cenvat credit, that means they are not availing cenvat credit in all the transactions. Therefore, individual consignment need not bear such declaration. As per the above position, we are of the considered view that the ground on which the Exemption Notification was denied to the appellant is absolutely incorrect - Exemption Notification cannot be denied - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2016 (11) TMI 191
  Demand - Imposition of penalty - Compounded Levy Scheme - CTD bars, falling under Chapter heading 72 of the Central Excise Tariff Act, 1985 - Held that: - The Tribunal, while directing the Commissioner to fix the ACP, has set aside the penalty also. Penalty, as such, cannot be imposed, in the light of the decision of the Hon'ble Supreme Court in Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise[2015 (11) TMI 1172 - SUPREME COURT], wherein, the issue, which came up for consideration before the Hon'ble Supreme Court, was to the correctness of the judgments of High Courts, which struck down Rules 96ZO, 96 ZP and 96 ZQ of the Central Excise Rules, 1994, relating to penalty, as ultra vires of a parent Act and violative of Articles 14 and 19(1)(g) of the Constitution of India. Insofar as penalty is concerned, the Hon'ble apex Court held that it is ultra vires - Appeal dismissed.

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• 2016 (11) TMI 190
  CENVAT credit - Input service - GTA service - Rule 2(l) of the CENVAT Credit Rules 2004 - Held that: - the Hon’ble High Court of Bombay in the case of CCE Nagpur Vs Ultratech Cement Ltd [2010 (10) TMI 13 - BOMBAY HIGH COURT ] has considered the issue at length and held that definition of input service under Rule 2(l) of CENVAT Credit Rules is very vide and covered not only services which are directly or indirectly used in or in relation to the manufacturing of final product but also after manufacture of final product - Appeal allowed partly.

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• 2016 (11) TMI 189
  Refund of unutilized credit of service tax - 100% EOU - Rule 5 of CENVAT Credit Rules, 2004 - input services i.e. bank charges, Business Exhibition services, Freight inwards, import clearance, maintenance and repair, telecommunication and security services under Rule 5 of the Cenvat Credit Rules 2004 - Held that: - the disputed services viz. Banking and Business Exhibition Services have nexus with the business of manufacture and export of finished goods and the same falls in the definition of ‘input services’ prescribed in Rule 2(l) of the Cenvat Credit Rules, 2004 - the Courts have given very extended interpretation to the definition of ‘input services’ - refund allowed - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 188
  Refund claim of unutilized accumulated cenvat credit in respect of clearances of goods made to SEZ unit during the period in dispute under Rule 5 of the Cenvat Credit Rules, 2004 - supplies made to SEZ are considered as physical export for all the purposes - reference made to the CBEC Circular No. 1001/8/2015-CX.8 dated 28.04.2015 and decision in the case of Sirmaxo Chemicals Pvt. Ltd. Vs. CCE, Thane-II [2016 (6) TMI 543 - CESTAT MUMBAI] where it was held that according to the SEZ Act, supply of goods from DTA to the SEZ constitutes export. Further, as per Section 51 of the SEZ Act, the provisions of the SEZ Act shall have over riding effect over provisions of any other law in case of any inconsistency. Section 53 of the SEZ Act makes an SEZ a territory outside the customs territory of India. Held that: - The ratio of the judgment relied upon by the learned counsel for the respondent squarely applies. It is clear that in respect of supplies made to SEZ unit, it shall be eligible for all benefits available under the Central Excise Act 1944 and Rules made thereunder. Therefore there is no infirmity in the order passed by the Commissioner (Appeals) which warrants interference by the Tribunal - appeal dismissed - decided against Revenue.

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• 2016 (11) TMI 187
  Reversal of CENVAT credit at the time of clearance of capital goods on which Cenvat credit has been taken - the capital goods were cleared after using the same in the factory for as much as three years and duty stands paid on the transaction value - Held that: - w.e.f. 13/11/07, the Cenvat Credit Rules has been amended to provide for reversal of Cenvat credit after reduction by 2.5% per quarter, however, these provisions are not applicable for the period prior to the amendment. Prior to the amendment to the relevant rules w.e.f. 13/11/07, Cenvat credit availed at the time of purchase of the capital goods is not required to be reversed when cleared after use - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 186
  Incidence of fire in the factory - remission of duty involved on the semi-finished goods and finished goods - necessary intimation on incidence of fire in the factory of the Appellant was not submitted to the department; whereby the department was not in a position to assess the extent of damage and duty involved on damaged finished goods - Held that: - I have seen the copy of the letter dated 22.10.2006 intimating the incidence of fire, addressed to the Superintendent is enclosed in the appeal paper book, which the department is disputing being not received by them. Keeping aside the said disputed fact for a while, I find that the other available evidences enclosed with the appeal paper book, if considered, it cannot be denied that there was an incidence of fire in the factory premises of the Appellant on 21/22.10.2006. Also, an insurance claim has been filed by the appellant against the damages and their claim was considered. Also, from the evidences on record, nowhere, it is forthcoming that after the incidence of fire, the department has issued demand notice for recovery of duty on the goods destroyed in the said fire, being failed to receive any such intimation from the Appellant. In the result, I am of the opinion that the matter needs to be remanded to the adjudicating authority to consider the evidences afresh and arrive at a conclusion on the issue of remission of duty. I also find that appellant had claimed remission of duty on both semi-finished and finished goods and I am not expressing any opinion on the eligibility of same - reasonable opportunity of hearing be allowed to the appellant - Appeal is allowed by way of remand.

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• 2016 (11) TMI 185
  Reversal of irregular credit - Interest and penalty for taking the Cenvat credit wrongly - Before the credit was taken or utilized, the mistake was brought to its notice. The assessee accepted the mistake and immediately reversed the entry - Held that: - the issue is no more res intera and is settled in favour of the appellant by a decision of the Hon'ble Karnataka High Court in the case of CCE &ST., LTU, Bangalore Vs. Bill Forge Pvt. Ltd. [2011 (4) TMI 969 - KARNATAKA HIGH COURT] where it was held that interest and penalty is not imposable where credit wrongly availed has been reversed prior to utilization. The appellant had merely availed the credit and reversed the same before utilizing the availed credit for remittance of duty, interest liability would not arise - no interest is demandable from the appellant and no penalty can be imposed - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 184
  Cenvat Credit - 100% EOU - Rule 3(7)(a) of Cenvat Credit Rules 2004 - Held that: - I find that the dispute to be redressed is the eligibility of Cenvat Credit amount of Rs. 4,05,206/- and Rs. 1,82,136/-. The appellant's claim is that the said demand is on account of wrong calculation and application wrong rate of duty. The Ld Commissioner (Appeal) in the impugned order has observed that the said issue has not been raised before the Adjudicating Authority, hence, in absence of verification of the facts, the claims cannot be considered. In the interest of justice, I am of the view that the matter needs to be remanded to the Adjudicating Authority to examine the said claim of the appellant. Needless to mention a reasonable opportunity of hearing be granted to the appellant. Consequently, the impugned Order is set aside to the said extent and the Appeal is remanded to the Adjudicating Authority for consideration of eligibility of Cenvat Credit amount of Rs. 4,05,206/- and Rs. 1,82,136/- - matter remanded - appeal disposed off.

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• 2016 (11) TMI 183
  SSI exemption - use of brand name of others - assigned brand name - Notification No. 8/99 dated 01.03.1999 - Differential duty - Held that: - the adjudicating authority has not considered the issue in its correct perspective, inasmuch as once a deed is executed in respect of assigning of the trade names and brand name to the appellant then said brand name have to be held as to be used only by the appellant for the period in question as the agreement transfers all the rights on such brand name and trade name to the appellant - While the assignment deed dated 24-6-99, the erstwhile owner who happens to be the assignor have agreed to assign and transfer to the assesses before us, the trade mark Bullworker and have also agreed to do all acts necessary to register the same in favour of and in the name of the assignees the appellant before us with the Registrar of Trade Marks, Mumbai. Section 37 clearly enables the owner of a registered trade mark can assign and transmit whether with or without the goodwill concerned in respect of either of all the goods in respect of which the trade mark is registered or of some only of those good - Appeal allowed.

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• 2016 (11) TMI 182
  Valuation (Central Excise) - Turnover tax - whether at the time of working out valuation of the goods, under the Central Excises and Salt Act, 1944, the turnover tax can be deducted? - Held that: - the issue is no longer res integra in view of the judgments of the Hon’ble Supreme Court in the case of Commissioner Vs. Sujata Textile Mills Ltd. [2005 (3) TMI 120 - SUPREME COURT OF INDIA] where it was held that under Section 4(4)(d)(ii) of the Central Excises and Salt Act, 1944, the value is not to include the amount of duty of excise, sales tax and other taxes if any payable on goods. Under Section 18 of the Karnataka Sales Tax Act, 1957 a registered dealer has to pay a tax known as ‘turnover tax’ and by virtue of sub-section (3) of Section 18 he is not permitted to pass on that tax to the customer. The question is whether at the time of working out valuation of the goods, under the Central Excises and Salt Act, 1944, the turnover tax can be deducted. To be remembered that at this stage it will not have been actually paid. Turnover tax need not be included in valuation - appeal dismissed - decided against Appellant-Revenue.

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• 2016 (11) TMI 181
  Price variation clause - refund claim - reduction in price, resulting in excess payment of duty - Gear set - Gear Pin - redetermination of assessable value after clearance of the goods from the factory - the decision in the case of Commissioner of Central Excise v. Tesla Transormers Ltd. [2012 (8) TMI 843 - CESTAT NEW DELHI] and Commissioner of Central Excise v. P.C. Pole Factory [2012 (8) TMI 140 - CESTAT, MUMBAI] referred, where it was held that in such case where price variation was anticipated, the appellant should have sought provisional assessment as provided in law - further it is stated that both the judgements had relied upon the order of the Hon’ble Supreme Court in the case of Mauria Udyog Ltd. v. Commissioner - [2007 (10) TMI 619 - SUPREME COURT] wherein the Hon’ble Supreme Court had dismissed the Petition for Special Leave to Appeal against the judgement and order dated 22.08.2006 of the Punjab and Haryana High Court. Held that: - there are conflicting judgements of the Tribunal on this issue. However, considering that the judgements in the case of Tesla Transformers Ltd. and P.C. Pole Factory, which are on identical facts are based on the judgement of the Hon’ble Punjab & Haryana in the case of Mauria Udyog which has been upheld by the Hon’ble Supreme Court. It is categorically mentioned in the latter that the issue is squarely covered by the judgement of the Hon’ble Supreme Court and also ruled that constitution of Larger Bench by the Tribunal was not necessary. Respectfully following the said judgement, I am not recommending constitution of a Larger Bench and deciding the matter in favour of the Revenue on the basis of the judgements in the cases of Mauria Udyog Ltd., P.C. Pole Factory and Tesla Transformers Ltd. The order passed by Commissioner (Appeals) is correct and legal and is therefore upheld - The appeal filed by the party is rejected.

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• 2016 (11) TMI 180
  Availing credit on returned goods - Clandestinely removal - Suppression of facts - Rule 16 of the Central Excise Rules, 2002 - Held that: - sub-rule (1) of the Rule lays down the requirement of such goods to be recorded, entitlement of assessee to input credit on such goods and its utilization as per rules. It does not cover the situation where such goods have been removed - The plea that the demand is barred by limitation cannot be sustained as the assessee did not disclose the clearance of scrapped machines in ER-1 return, such clearances were made without cover of invoice as required under law and their records mis-declared the actual facts by suppressing the disappearance of the machines - Decided against the assessee.

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• CST, VAT & Sales Tax

• 2016 (11) TMI 169
  Permission to operate bank account - provisional attachment of bank property in terms of section 45(1) of the VAT Act - when presently no enforceable demand of the petitioner exists, can department attach the bank account? - limitation period - provisional attachment would not extend beyond a period of one year from the date of order - Held that: - learned AGP did not controvert that after 12.2.2014, no extension of fresh order of attachment was passed. He also could not controvert that by virtue of the interim order and the final order passed by the VAT Tribunal presently, it would not be possible for the department to recover any further tax dues from the petitioner, the petitioner having fulfilled the condition of predeposit - no hesitation in declaring that the petitioner would be free to operate the said bank account. The order of attachment has in any case expired with afflux of time. Even otherwise, it is doubtful whether the department could take any coercive action when no dues of a dealer exist - petition disposed off - decided in favor of petitioner.

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• 2016 (11) TMI 168
  Taxability - sale of damping cloth - classification of goods - “Damping cloth” is used in offset machine as a vital component/accessory of the machine or were used in offset printing machine - classifiable under Entry No.49, in Part-DD of the First Schedule up to 26.3.2002 and thereafter, under Entry 21(ix) in Part-D of the first schedule with effect from 27.3.2002 at the rate of 12% for both the periods or as knitted pile fabrics, falling under heading 60-01 of Chapter 60 of the First Schedule to the Central Excise Tariff Act, 1985 and the goods prescribed under heading 60-01 and 60-02 of the Central Excise Tariff Act has been exempted under the TNGST Act in Entry No.10 of Part A of third schedule to the TNGST Act, 1959? - whether damping cloth is textile falling within Item 4 of Third Schedule of the Tamil Nadu General Sales Tax Act - Held that: - Held that: - reliance placed on the decision of the case of Silver Chem Industries vs. the State of Tamil Nadu [1979 (11) TMI 246 - MADRAS HIGH COURT] where the assessee claimed exemption in relation to a turnover relating to sales of damping hose cloth, on the ground that it is textiles. The Appellate Assistant Commissioner allowed the claim and the Board of Revenue examined the order of the Appellate Assistant Commissioner on suo motu revision. The Board held that it was a finished product and it was not called as textile in ordinary or popular sense and was not commonly understood as textile, as a result of which the order of the Appellate Assistant Commissioner stood modified and the turnover was taken to be assessable. The Hon'ble Division Bench has held that dumping hose cloth was in no way different from the cloth used for banians and it was only tubular in shape and therefore, held that the Assistant Commissioner rightly exempted the assessee's claim and the Board's order to the contrary cannot be sustained as correct. The decision of the Hon'ble Division Bench clearly applies to the facts and circumstances of the case and the clarification issued by the second respondent that the product was classifiable under Entry No.49 is not in consonance with the law laid down by the Hon'ble Division Bench of this Court and therefore, calls for interference - petition allowed - decided in favor of petitioner.

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• Indian Laws

• 2016 (11) TMI 165
  Pre-deposit requirement - Validity of Section 45- AA of the Employees State Insurance Act, 1948 as it imposes a condition of pre-deposit of 25% of the demanded amount for entertaining the appeal - Held that:- The requirement of pre-deposit under Section 45-AA is not mandatory and the Appellate Authority is empowered to waive, either partially or completely, the requirement of predeposit in the same circumstances and conditions as explained in detail in the PSPCL case (2016 (2) TMI 245 - PUNJAB AND HARYANA HIGH COURT ). To summarize, the Appellate Authority is empowered to partially or completely waive the condition of pre-deposit in given facts and circumstances. It is, however, not to be exercised in a routine manner or as a matter of course. Only when a strong prima facie case is made out, will the Appellate Authority consider, whether to grant interim protection/ injunction or not. Partial or complete waiver will be granted only in deserving and appropriate cases where the Appellate Authority is satisfied that the entire purpose of the appeal would be frustrated or rendered nugatory because of the condition of pre-deposit for hearing the appeal and a reasoned order would require to be passed. Accordingly, the order dated 21.02.2014 (Annexure P-20) passed by the Appellate Authority is quashed. The matter is remitted to the first appellate authority where the petitioners may file an application for interim injunction/protection before the appeals are taken up for hearing by the first appellate authority who shall adjudicate the application for grant of interim injunction/protection to the petitioner in the light of the principles set out above.

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