TMI Tax Updates - e-Newsletter
November 8, 2016

Case Laws in this Newsletter:

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

TMI SMS

• VAT - @4% or 12.5% - tissue paper, napkin, toilet paper rolls etc. retain the essential characteristics of paper - to be taxed at 4% - HC

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• Expenditure related to exempted income - Provisions of Sec.14A are clearly applicable to the investment made in a EOU covered under u/s 10B

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Articles

• HISTORY OF SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985
• S.14A may not be applicable even if some dividend is earned incidentally when commercially expedient investment in shares for business purposes is made

News

• Make in India 'Electronics & IT Sector- Achievement Report

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Notifications

FEMA

• 379/2016-RB - dated 4-11-2016 - FEMA
  Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Sixteenth Amendment) Regulations, 2016

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Highlights / Catch Notes

Income Tax

• Disallowance of expenditure on advertisement on television - the corporate advertisement expenditure facilitates the business having a direct impact on sales and profitability of the Assessee - HC
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• Expenditure related to income which does not form part of total income - The provisions of section 14A are clearly applicable to the investment made in a EOU covered under the provisions of section 10B - AT
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• Claim of depreciation on the lump sum consideration paid for creation of client base as an intangible asset - Client creation cost is an intangible asset and is eligible for depreciation at 25% - AT
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• Deduction u/s 80IB - converting the proprietorship into a partnership firm resulted into transfer of plant and machinery previously used by the undertaking - there was a transfer of the industrial undertaking as a whole along with its assets and liabilities - deduction allowed - AT
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• Penalty u/s 272A (2)(k) - delay in is furnishing return of tds - assessee had voluntarily filed return before issuance of the notice for initiation of penalty - it is a fit case for deleting the penalty as the assessee came forward with honesty - AT
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• Loss on account of sale of units - the instant transactions in units cannot be construed to be ‘buy-back transactions’ because in all the cases the dates of sale are much after the date of respective purchases - the points raised by the AO regarding the illegality in nature of transactions became irrelevant - AT
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• Capital gains - Revaluation at market value results in notional imaginary profit which cannot be taxed. Revaluation of an asset which an assessee continues to hold is not a taxable event and does not give rise to any taxable income - No tax liability - AT
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• Capital gains - section 45(3) does not seek to substitute by any other figure the value agreed between the partners at which the asset is transferred by a partner to the firm. The ITO's actions are completely contrary to the scheme of the statute. - AT
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• Computation of capital gains - the cost of inflation index should be made applied with reference to the year in which the capital asset was first acquired by the previous owner. If only for the purpose of computing indexed cost of acquisition, the date of acquisition by the previous owner is excluded then it will lead to absurd result. - AT
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Customs

• Export of iron ore - enhanced rate of duty - let export order - the the stand of the exporter is correct that enhanced duty would be applicable only to the material loaded after the duty was enhanced - AT
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• Classification of imported goods - WISMO modules and connectors - to be classified under CTH 8517 90 attracting a concessional rate of 10% Basic Customs Duty (BCD) under the Notification 5/2004 Cus.dated 08.01.2004 - AT
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• Refund of excess paid Customs duty on short quantity received between ship ullage and quantity received in shore tanks - assessment has to be done on the basis of the shore tank quantity not on basis of ship ullage report - refund allowed - AT
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• Classification of imported goods - fenbendazole contains imidazole ring. Any chemical containing imidazole is classifiable under heading 29332100 to 29332990. - AT
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• Re-import for repair - export after repair after 6 months - since the bond executed for the purpose of Notification No. 158/95 has been extended it is as good as the period for re-export of the goods also stand extended - denial of exemption not justified - AT
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• Eligibilty of exemption as per the notification no 16/2000 dt. 01.03.2000 allowed on import of Pulse Sprint Flat Bed Treadmill, Pulse Ascent Elevated Treadmill, Pursuit Cycle and Pace Stepper - AT
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• Waiver of pre-dposite - Classification of steam coal - matter is pending before the larger bench - trade parlance theory - to be classified as Bituminous coal under Tariff entry 2701 12 00 or under tariff entry 2701 19 20 - stay granted - AT
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• Classification of Compact Disc Re Writer (CDRW) - the goods CDRW are not covered by CTH 8471 7020 since this is a specific heading only for hard disc drives(HDD). Therefore the appellants are not eligible for exemption as per the Notification No.6/2002 - AT
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FEMA

• FDI - Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Sixteenth Amendment) Regulations, 2016 - Notification
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Service Tax

• Health Checkup and Treatment Services - Unless and until the KKT Scheme has been examined in full, the respondent cannot come to a conclusion that the nature of transaction done by the petitioner would fall within the definition of section 65(105)(zzzzo) of the Finance Act - HC
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Central Excise

• SSI exemption - use of brand name - The brand name apparently cannot belong to two different entities if the appellants arguments of HP and HPC are two different legal entities for SSI exemption then use of common brand bane will deprive atleast one of them from SSI exemption - AT
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• Cenvat Credit - As the rent-a-cab service has been excluded from the definition of 'input service' by the 2011 amendment w.e.f., 1.4.2011, it has to be held that prior to the amendment, rent-a-cab service came within the definition of input service. - HC
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• Refund - unjust enrichment - assessee has submitted Balance Sheet, Books of Account and Chartered Accountant certificate before the adjudicating authority to the effect incidence of duty has not been passed to any other person - refund allowed - AT
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• Cenvat Credit - it is not tenable to hold that the various iron and steel angles, channels, etc. used in conjunction with hoppers, are pure civil structures and cannot be considered as accessories or components of such hoppers - AT
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VAT

• Rate of tax on tissue paper - @4% or 12.5% - The word 'paper' used in the Entry is in generic form, which will include all types of paper, which has its essential characteristics - The tissue paper, napkin, toilet paper rolls etc. retain the essential characteristics of paper. It is only that it is in different strength and is used for different purposes - to be taxed at 4% - HC
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• Levy of tax u/s 8(1) of the CST Act - Inter-State sale of LPG - no tax could be levied on interState sales of LPG since the local sales thereof are exempt from payment of tax - HC
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• Interest on refund - nothing prevents a constitutional court from granting such interest in extraordinary circumstances where the money has been withheld by the State for a long period of time without any authority in law - HC
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Case Laws:

• Income Tax

• 2016 (11) TMI 258
  Addition on account of guarantee commission chargeable to its Associate Enterprises - Held that:- Tribunal by the impugned order held that the external comparable of HSBC Bank and Allahabad Bank to determine 3% as the ALP of the commission is not appropriate. This for the reason that the financial year to which the data obtained from HSBC Bank and Allahabad Bank are not indicated. Moreover, the circumstances in which the guarantee was given coupled with the terms and conditions of charging 3% commission by the two Banks not known. Besides, internal comparable available at almost the same rate of commission was not even examined. The impugned order further records that identical issue which arose for consideration before the Tribunal in the earlier Assessment Years and similar addition made by the Assessing Officer on account of commission was deleted. These orders of the Tribunal were accepted by the Revenue as no question of law on this issue was raised by the Revenue alluding to the fact that no appeal to the High Court was filed by the Revenue on this issue. Expenditure on advertisement on television - Held that:- The expenditure on corporate advertisement films is in respect of ongoing business. The expenditure for advertisement of a brand or corporate name of an existing ongoing business is in the nature of maintaining the brand and/or corporate image and it is not for creation of a brand. Further, the test of enduring benefit urged by the Revenue was considered by the Apex Court in Empire Jute Co. Ltd. vs. CIT [1980 (5) TMI 1 - SUPREME Court ] to hold that it is not a conclusive test in all cases so that such expenditure is always on capital account. The Court observed that what is to be examined is the nature of advantage obtained in the commercial sense by incurring the expenditure. If the expenditure consists of merely facilitating the assessee to carry on business more profitably leaving the fixed capital untouched, it would be on revenue account. The entire expenditure, the Court observed, has to be looked at from a businessman's point of view. In the present facts, the expenditure on account of corporate advertisement is to essentially maintain the corporate image and not create a corporate image. Further, the impugned order holds on facts that the corporate advertisement expenditure facilitates the business having a direct impact on sales and profitability of the Respondent-Assessee. Thus the view taken by the impugned order that corporate advertisement enhances the business of the Assessee resulting in increased sales of its product in Revenue field, is a possible view, on the present facts.

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• 2016 (11) TMI 257
  Attachment order - recovery orders - property in question was owned by the directors of Baldev Ship Breakers Ltd. Baldev Ship Breakers Ltd. as well as both the directors were in arrears of tax - sale of property - Held that:- Mere communication to the bank would not take shape of the attachment of the property which can be so in terms of rule 48 of the Procedure for Recovery of tax, which happened only on 23.3.2009, that is, long after the property for realisation of the dues of the bank, was sold to Arvindsinh V. Jadeja who in turn, sold part of it to the petitioner. At best, this communication put the bank to notice that the borrower had also other dues. It only guards the bank against a possible future claim from the income tax department. However, in any case, such communication would not make the title of the petitioner imperfect. Despite such communication by incometax department to the bank, the moot question would be, did the department have a prior charge over the property which before raising of the dues of the department was already mortgaged in favour of the financial institution? Even if the bank had disregarded such a communication of the incometax department and not shared with the department, proceeds of the sale of such property, at best, it may be a dispute between the incometax department and the bank and in any case, cannot harm the petitioner who was the subsequent purchaser for consideration without notice. On such grounds, petition is allowed. Impugned attachment is lifted qua the properties in question. We clarify that this would have no effect on the rest of the properties stated to have been purchased by Arvindsinh V. Jadeja which are not the subject matter of this petition.

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• 2016 (11) TMI 256
  Disallowance u/s 14A - whether section 10B is a deduction or an exemption provision? - Held that:- The language of the heading of Chapter III, it is clear that income as contemplated under section 10B is outside the scope of ‘total income’ and has no relevance with the gross total income. It is, therefore, a section which provides for exemption of income and not for deduction. It is further important to note that provisions of section 14A are applicable in relation to “income which does not form part of total income”. This very phrase is the heading for Chapter III under which the section 10B and also section 10(33) lies. This makes it very apparent and conclusive that the provisions of section 14A are clearly applicable to the investment made in a EOU covered under the provisions of section 10B. The claim of the appellant that section 14A is not applicable to investment made in an EOU covered under the provisions of section 10B is, therefore, not accepted. This ground of appeal is, therefore, dismissed Disallowance under Rule 8D(2)(ii) in respect of shares and mutual funds - Held that:- The assessee has demonstrated that the interest paid was to the specific loans utilized towards purchase of car, purchase of machinery, working capital etc. The Assessing Officer has not been able to establish that the interest was towards loans for non-specific purpose, which could be attributed to the investment in shares on proportionate basis. No investment in shares/mutual funds have been made out of the borrowed funds and, therefore, no disallowance under Rule 8D2(ii) of the Rules could be made for interest on proportionate basis towards investment in shares/mutual funds which could earn exempted income. Inclusion of amount of capital of EOU for the purpose of disallowance under section 14A - Held that:- no borrowed funds were utilized for the purpose of EOU. The profits earned by the EOU contributed to the reserves & surplus. Thus, the entire amount of ₹ 15,45,31,633/- as on 31.03.2009 is out of capital and profit earned over the year. The Assessing Officer has in the assessment order not provided any basis to show that the investment in the EOU has been made out of borrowed funds. The Unit has on its own taken some loans on which interst is being paid and is being debited to its Profit & Loss Account for the purpose of computing its profit. The Assessing Officer has not brought anything on record to show that the head office has taken loans for the purpose of investment in the EOU. The Assessing Officer has taken the opening investment in the EOU at ₹ 16,04,07,523/- and the closing investment at ₹ 15,45,31,633/-. The disallowance under Section 14A on the average of this investment is deleted as the funds are out of appellant’s own sources

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• 2016 (11) TMI 255
  Claim of depreciation/deffered revenue expenditure on the lump sum consideration paid for creation of client base as an intangible asset - Held that:- Client creation cost is an intangible asset and is eligible for depreciation at 25%. Assessing Officer is directed to allow depreciation as claimed in the computation of income.

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• 2016 (11) TMI 254
  Allowability of charges paid to Software Technology Park of India, Noida - prior period expenditure - applicability of sec 35D - Held that:- The annual charges of STPI were ₹ 4 lacs which were claimed in four equal quarterly installments. There was some dispute of ₹ 3 Lacs charges of earlier year which were also settled/paid in current year. ₹ 1 lac paid on 13.07.2002, paid on 14.08.2002 and payable as on 31.03.2003 is the charges for the FY 2002-03 i.e. previous year in question hence expenses for current year only not registration or prior period expenses. ₹ 1 lac paid on 15.04.2002, ₹ 1 lac on 15.05.2002 and ₹ 1 lac paid on 25.07.2002 are for the FY 2001- 02. These were pending and not expended in earlier years as there was some dispute between assessee & STPI, which was resolved in current year and payment and expenses booked. Since it was settled in current year and crystallized in current year, it is expended in current year by the assessee. The said payments are in cheque and there is no necessity for further verification of the same. The service charges charged by STPI are routine in nature & every software exporter has to pay to STPI. It does not attract provisions of Section 35D of the Act. Bogus purchase of certain software - Held that:- The purchase of the software from the Gigaware Software Solutions for ₹ 3,35,625/-, the Ld. AR submitted its bank statements to that extent before the Assessing Officer. Thus the finding recorded by the CIT(A) that the bank account was not produced is incorrect. It is noted that the assessee has produced the relevant documents at the time of the Assessment proceedings. Thus the finding given by the CIT(A) as well as by the Assessing Officer that the relevant documents were not produced is incorrect.

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• 2016 (11) TMI 253
  TDS u/s 195 - Disallowance of expenses - no particulars were filed in respect of the lease rentals paid, the legal and professional cost and travel cost were in the nature of provision and no TDS has been made in respect of the selling cost - Held that:- AR has filed voluminous documents and details as part of the paper book evidencing that the above expenses were actually incurred and the same were for the purpose of the assessee’s business. Similarly, with regard to the selling cost the Ld. AR has filed exhaustive details with regard to the payments made to various non-resident parties and the services rendered by the said parties alongwith copies of agreements and invoices. It is argued that the payments made to the said non-resident parties were for the purpose of marketing and consultancy services rendered outside India and the said payments were not exigible to tax deduction at source u/s 195 of the Act as there was no income accruing or arising in India in the hands of the said non-resident parties in view of Section 9(1)(vii) of the Act read with Section 90(2) and the treaty provisions as per the India-USA DTAA. Thus the finding of the CIT(A) that the AO has completely misconstrued the facts and legal provisions with regard to the above additions is correct. The AO has also not given any adverse material observation whatsoever against the above submission of the assessee and the voluminous details filed as part of the remand proceeding. The AO has also not been able to make out any case for TDS u/s 195 of the Act in the case of selling cost. In view of the above, the impugned additions made by the AO was rightly rejected by the CIT(A). - Decided against revenue

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• 2016 (11) TMI 252
  Addition towards closing stock as suppressed - Held that:- We find that in remand proceedings, the Assessing Officer himself has analysed the submission of the assessee and satisfied himself that the items worth ₹ 48,08,683/, under reference, were appearing in the closing stock. In our opinion, once the Assessing Officer has himself admitted that there was no understatement of the stock and accordingly on the basis of his comments, the learned Commissioner of Income-tax (Appeals) has allowed relief to the assessee and then subsequently filing further appeal on the same issue is not justified unless any discrepancy or intentional misreporting of facts by the Assessing Officer in remand report is observed. In our opinion, the findings of the learned Commissioner of Income-tax (Appeals) on the issue in dispute is well reasoned, and no interference on our part is required, accordingly, we confirm the finding of the learned Commissioner of Income-tax (Appeals) on the issue in dispute . - Decided against revenue Addition under the head ‘Detention and Demurrage Charges’ - payment in the nature of penalty or not - Held that:- We find that the assessee has given detail of bills in respect of ‘Detention and Demurrage Charges’ before the learned Commissioner of Income-tax (Appeals). The complete detail of the expenditure under reference including invoices raised by the parties were forwarded to the Assessing Officer, who did not dispute the expenses were in violation of the statutory acts or laws and therefore not allowable under section 37 of the Act. It is clear from the perusal of the details and submission that these “Detention and demurrage charges” represent contractual charges paid for delay in loading/unloading of material and are part of normal business activities. There is no element of any violation of statutory Acts or Laws. Rather these payments are in the nature of compensation for breach of contractual obligations. Various court’s decisions cited by appellant in its submission above squarely favour the view that there is no penal element in this expense. - Decided against revenue Deduction under section 80IB - converting the proprietorship into a partnership firm resulted into transfer of plant and machinery previously used by the undertaking - Held that:- The issue has already been decided in favour of the assessee by the judgment of the jurisdictional High Court reported in . Prisma Electronics, M/s. Advance Valve Global [2014 (8) TMI 209 - ALLAHABAD HIGH COURT ] wherein held that the Tribunal was justified in dismissing the appeals of the revenue holding that the assessee was entitled for deduction under Section 80-IB of the Act and was not hit by the provisions of Section 80-IB(2)(i) of the Act. The Tribunal was also justified in holding that upon conversion of the proprietorship concern to a partnership concern there was no transfer of plant and machinery to the partnership firm, inasmuch as there was a transfer of the industrial undertaking as a whole along with its assets and liabilities.- Decided against revenue Rejection of books of accounts - estimating gross profit - Held that:- We find that the assessee has explained fall in gross profit rate as computed by AO. The assessee has thereafter for the purpose of comparison of results with last year converted the result of this year in the form of job work and explained that gross profit rate of the assessee in the year under consideration should have been 35.75%, which is much more than the gross profit rate of 24 percent declared by the assessee in the immediately preceding year. The Assessing Officer failed to notice functions carried out with assessee in immediately preceding year, which the assessee explained before the learned Commissioner of Income-tax (Appeals). We also agree with the finding of the learned Commissioner of Income-tax (Appeals) that the Assessing Officer has not found any discrepancy or defect in the books of accounts of the assessee and, therefore, rejection of books of accounts merely on the low gross profit rate was not justified.- Decided against revenue

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• 2016 (11) TMI 251
  Addition made on account of full value consideration enhanced by AO on sale of building on estimate basis - estimation is on the basis of the interim report of the Assistant District Valuation Officer - assessee trust - Held that:- The value of the consideration declared by the assessee as full value consideration received in accrued cannot be substituted by the value estimated by the DVO. The assessee has submitted necessary evidence in the form of confirmation from the buyer as well as confirmation from the authorities of the assessee club. We also observed that no other material or evidence was found from the assessee, which could lead to prove that value received by the assessee was higher than what is declared in the return of income. Thus we delete the addition made by the Assessing Officer and sustained by the learned Commissioner of Income-tax (Appeals) on the issue in dispute. - Decided in favour of assessee Denial of exemption under section 11 - AO assessing the assessee club as AOP - AO has withdrawn the exemption on the ground that the assessee has sold the flat for the benefit of person referred to in subsection 3 of Section 13 and thus violated the provisions of section 13 - Held that:- Though the property was purchased by the assessee, but it could not be registered in the name of the assessee and the seller gave a power-of-attorney in the name of Sh. Surender Sharma. Moreover, the Government of Delhi also refused to transfer the property in the name of the assessee, because, the property was restricted for specific use of factory and not for the office. In view of the restriction on the use of the property and lack of title in the favour of the assessee, the assessee was compelled to transfer the property to Sh. Surender Sharma in absence of any buyer as stated by Sh. Dinesh Chand Gupta, President of the club at the time of assessment proceeding. In his statement recorded on 18/02/2005 under section 131 of the Act, he stated the facts and circumstances under which the property was sold to Sh. Surender Sharma and justified that the property was sold at market value. Relevant part of the statement has already been reproduced by the Assessing Officer in the assessment order . In view of above circumstances, we find that there is no violation of provisions of section 13(2) (f) of the Act in the case of the assessee and accordingly the benefit of exemption under section 11 of the Act cannot be withdrawn. Thus the actions of the Assessing Officer in assessing the assessee club as AOP and withdrawing of exemption are held as incorrect and not according to the law - Decided in favour of assessee Disallowance @ 20% of expenditure incurred under the head cultural and sports expenses - Held that:- We find that the Assessing Officer has not pointed out any specific vouchers or bill in respect of the expenses which were not found with assessee or not produced before him and he has made disallowance purely on ad hoc manner, which is not permitted by law. Disallowance has been made in ad hoc manner without any justified reasons, therefore the disallowance made by the Assessing Officer and confirmed by the learned Commissioner of Income-tax (Appeals) is deleted. See State of Orissa Versus Maharaja Shri BP Singh Deo [1969 (12) TMI 2 - SUPREME Court ] wherein held that even in case of best judgment, the Assessing Officer does not have an arbitrary power and the assessment must be based on some relevant material - Decided in favour of assessee Disallowance of annual general meetings and members meeting - Held that:- We find that the Assessing Officer has not pointed out any specific defects either in the vouchers or bills or in books of accounts in respect of the expenses claimed by the assessee. The Assessing Officer has not also given any reasoning how the part of expenses were personal in nature. In view of above, the disallowance made by the Assessing Officer in ad-hoc manner cannot be sustained.- Decided in favour of assessee Addition on account of membership fees - Held that:- The membership and subscription amounts received by the applicant-trust/society from its members cannot be characterized as "voluntary contribution" within the meaning of the said expression under section 12 of the Incometax Act, 1961. The entire income of the trust is exempted under section 11 of the Income-tax Act, 1961. No justification in treating the receipt of subscription amounts from the members as voluntary contribution or a donation.See Trustees Of Shri Kot Hindu Stree Mandal Versus Commissioner Of Income-Tax [1993 (9) TMI 44 - BOMBAY High Court ] - Decided in favour of assessee

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• 2016 (11) TMI 250
  Penalty u/s 272A (2)(k) - delay in is furnishing return of tds - Held that:- We have seen that before levying the penalty neither the ACIT/AO nor the Commissioner (Appeal) while deciding the appeal of the assessee made any observation that the assessee acted deliberately in defiance of law or was guilty by the act of his conduct. As per our considered opinion while levying the penalty the authority must record its satisfaction that the act of the assessee was deliberate and was not condonable. In the present case neither the order of AO nor ld. Commissioner (Appeals) order revealed that the act of assessee was deliberate or in defiance of law or the assessee is guilty of her conduct. We noticed that there is no reference in the order of penalty that there was any wilful negligence or magnified on the part of assessee in the matter of filing return of TDS. Having considered the entirety of the fact, moreover the assessee has not taken any lame excuse while furnishing the reply to the notice of initiation of penalty. She had voluntarily filed return before issuance of the notice for initiation of penalty. In our considered opinion that it is a fit case for deleting the penalty as the assessee came forward with honesty. However, the observation made hereinabove may not be precedent for future references. With these observations we delete the penalty for all three assessment years by accepting appeal of the assessee.

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• 2016 (11) TMI 249
  Operational income from mall - treated as capital gain or income from business - Held that:- Issue under consideration is squarely covered by the order of the Tribunal in assessee's own case, wherein Tribunal have held that operational income received by the assessee company from running of Malls in the form of rent and service charges are assessable as business income in place of income from house property. Respectfully following the order of the Tribunal we do not find any infirmity in this part of order of the Ld. CIT(A) accepting assessee’s claim of income from business. Disallowance of interest expenses - Held that:- In the instant case though the interest payable relates to share application money taken in earlier year the liability to pay interest was crystallized during the year as the assessee as well as IL&FS has decided not to proceed with the allotment of shares in pursuance of agreement dt. 01/12/2007. It was not a suo motto decision of the assessee. No prudent businessman will suo motto make payment of expense unless and until it is due and payable nor will leave what is due to him. We have carefully gone through the terms of agreement dt. 01/12/2007 between the assessee and IL&FS for payment of interest on share application money and found that it is not a suo motto decision of the Assessee as alleged by the Ld. AO. The decision of payment of interest is consideration for use of funds for the purpose of business of the company hence allowable. It is neither payment to related party which attracts section 40A(2)(b) nor personal expense or capital expense. It is expense for the business of the assessee hence' fully allowable under the provisions of the Act. - Decided in favour of assessee

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• 2016 (11) TMI 248
  Disallowance of loss on account of sale of units to bank and non-bank clients - Held that:- Assessing Officer has reproduced the details of such transactions in the assessment order itself which clearly show that assessee had purchased the units before effecting sales and in-fact the mode of delivery has also been tabulated. The salient features of the transactions have not been given cognizance by the Assessing Officer, though the same have been noted by him in the assessment order itself. Similar is the position at the stage of CIT(A) also. Considering the aforesaid factual matrix, which has not been rebutted at any stage, in our view, the instant transactions in units cannot be construed to be ‘buy-back transactions’ because in all the cases the dates of sale are much after the date of respective purchases and further these have been effected through physical /bank receipts, as asserted by the assessee, consistently before the lower authorities. Under these circumstances, in our view, the points raised by the Assessing Officer regarding the illegality in nature of transactions became irrelevant because the entire edifice of the Assessing Officer is based on a misconception that the instant transaction is buy-back in securities. Therefore, on this preliminary issue itself, we do not find any merit to uphold the orders of the authorities below. Consequently, the order of the CIT(A) is set aside and the Assessing Officer is directed to delete the addition. As a consequence, on this issue assessee succeeds. Allowance of expenditure incurred on mobilization of deposits abroad - Held that:- As decided in assessee's own case in previous AYs the objection of the revenue is devoid of legally sustainable merits. As far as the question of expenditure not being debited in the books of accounts of India operations is concerned, this is not really relevant in the light of law laid down by the Hon'ble Supreme Court in the case of Kedarnath Jute Mills Limited (1971 (8) TMI 10 - SUPREME Court ). As long as the expenditure is really incurred and is otherwise deductible, the deduction cannot be declined on the ground that it has not been debited in the books of accounts. We have also noted that as noted in the Assessing Officer’s order itself, the requisite details were duly furnished by the assessee. Keeping all these factors in mind, as also entirety of the case, we deem it fit and proper to delete the impugned disallowance. Addition under section 37(2A) - expenditure in the nature of entertainment - Held that:- It is noticed that the expenditure was claimed to be incurred on assessee’s employees and no outsider was involved and, thus, the same has been rightly treated by the CIT(A) as not to be in the nature of entertainment. In assessment years 1989- 90 and 1990-91, similar expenditures has been held to be allowable by the Tribunal in assessee’s own case. Therefore, considering the factual matrix, the order of the CIT(A) on this aspect is affirmed and Revenue fails. Disallowance on account of salary paid to expatriate employees who were employed in India for the services rendered in India - Held that:- There is no material led by the Revenue to say that employees in question are not rendering services in relation to the India operations of the assessee bank. As a consequence, following the parity of reasoning upheld by the Tribunal in assessment year 1992-93(supra), herein also we affirm the decision of the CIT(A) in deleting the disallowance on account of salary paid to expatriate employees, who were rendering services in India to the assessee bank. Thus, on this aspect Revenue fails.

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• 2016 (11) TMI 247
  Reopening of assessment - whether there was short term capital gain? - Held that:- The reasons recorded by the AO before issuing notice u/s.148 of the Act for making reassessment u/s.147 of the Act, shows that the AO had information that the Partnership Firm had revalued its assets. If at all any income accrues or arises owing to such revaluation, it was an issue which had to be dealt with in the assessment of the firm, which is a separate taxable entity. The Assessee’s source of income is “share income from partnership firm”. Even assuming that income accrued and arose in the hands of the firm consequent to revaluation of the assets by the firm, the income that might accrue in the hands of the partner would be in the nature of “share income from the firm”. In terms of Sec.10(2A) of the Act, partner’s share in the total income of the firm is not to be included in the total income of the partner. Therefore, looked at from any angle, the AO could not on the basis of the reasons recorded formed belief that income chargeable to tax in the hands of the Assessee has escaped assessment. Since the formation of such belief is a requirement for initiating proceedings u/s.147 of the Act and since on the facts and circumstances of the present case such formation of belief does not exist, the initiation of reassessment proceedings, were rightly held to be not valid in law by the CIT(A). In the instant case, the year of transfer was the financial year ended March 31, 2006. The ITO was wholly unjustified in invoking section 45(3) which had no application in the assessment year 2008-09 or for that matter in the assessment year 2006-07. Even otherwise, section 45(3) seeks to determine the capital gains with reference to the value of the asset recorded in the books of account of the firm. The value so recorded is statutorily deemed to be the full value of consideration received or accruing to the partner as a result of the transfer of the capital asset to the firm. Thus, section 45(3) does not seek to substitute by any other figure the value agreed between the partners at which the asset is transferred by a partner to the firm. The ITO's actions are completely contrary to the scheme of the statute. We therefore uphold the order of the CIT(A) in so far as it relates to his conclusion that the AO was not justified in assessing short term capital gain. As far as the question whether the AO was justified in bringing to tax a sum of ₹ 37,03,36,187/- as share of revaluation profit, is concerned, the law is well settled that for accounting purposes, stock is valued at cost or market price, whichever is lower. The market value is taken only when it falls below the cost. After conversion of inventory into fixed assets the firm revalued the developed land including construction thereon in order to bring it in line with the current market value and for justifying the bank finance of nearly ₹ 250 crores. Such revaluation was neither colourable nor a device. It is settled law that revaluation in the books of account of an asset which the assessee continues to own does not result in any profit or income. Revaluation at market value results in notional imaginary profit which cannot be taxed. Revaluation of an asset which an assessee continues to hold is not a taxable event and does not give rise to any taxable income. A person cannot make a profit from himself. In the event of sale, in computing the capital gains, only the actual cost of the asset would have been considered as the cost of acquisition and not the revalued cost. Thus, even in case of transfer of the capital asset, the revaluation would not have resulted in any tax benefit or advantage. There was no withdrawal by the Partners from capital account and therefore there cannot be any income liable to taxation in their hands. We therefore concur with the view of the CIT(A) on this issue also. We therefore confirm the order of the CIT(A) by holding that the assessee did not make any short term capital gains of ₹ 96,37,85,635/- taxable under section 45(3) of the Act or otherwise and that on revaluation of its fixed assets by the firm (of its land and building) there was no income that accrued or arose in the hands of the partners and the addition of ₹ 37,03,36,187/- on account of alleged revaluation profit is not sustainable and was rightly deleted by the CIT(A).- Decided against revenue

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• 2016 (11) TMI 246
  Capital gain computation - taking the cost inflation index factor of 1981 i.e. 100 - disregarding the valuation report made by DVO u/s 55A - Held that:- Considering the totality of the facts and the scheme of the Act relating to taxation of capital gains, we are of the considered opinion that as per the schematic interpretation the cost of inflation index should be made applied with reference to the year in which the capital asset was first acquired by the previous owner. If only for the purpose of computing indexed cost of acquisition, the date of acquisition by the previous owner is excluded then it will lead to absurd result. Such interpretation of section 48 will be against the intent and object of the enactment and will be against the overall scheme of taxation of capital gains in case of inherited assets. The cardinal principles of interpretation of statutes is that if literal meaning of the statute leads to an absurdity then the statute should be interpreted in a manner which will result in harmonious interpretation which avoids absurdity and promote the objective of an enactment. We, therefore, direct the AO to re-compute the capital gains by applying cost inflation index of 100 per cent applicable for financial year 1981-82. Hence, we uphold the order of Ld. CIT(A) on this point and this ground of Revenue’s appeal is dismissed.

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• 2016 (11) TMI 245
  Disallowance u/ 14A - Held that:- As per section 14A, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income, which is exempt from tax. The relevance is the expenditure in relation to income. The quantification has to be undertaken in relation to the exempt income. The investment which has not generated exempt income should be excluded from the calculation of ratio to determine the disallowance. Similarly, for the administrative expenses, 0.5% of average investments from which the exempt income is received should be considered instead of average of the total investments.Considering the above discussion, we direct the AO to recalculate the disallowance as per rule 8D as per the above guidance. Accordingly, ground raised by assessee is allowed. Disallowance of commission payment - genuity of expenditure - AR submitted that the commission was paid through banking channels and properly credited in the account of Shri C.P. Sharma and since, Mr. Sharma does not have any PAN, at the rate of 20% was deducted and credited in the central govt. account - Held that:- The genuineness of the transaction should be provided beyond doubt. There has to be live link with the business of the assessee and the expenditure incurred, the assessee should also be in a position to prove the expenditure with proper records beyond doubt. The assessee has submitted before us the details of commission payment (Refer page 37 of the paper book). From the above statement, we have noticed that assessee had paid 15% of freight as commission payment and deducted 20% as TDS out of the commission. Considering the high value transaction, and such person does not have PAN, it does raise eye brows. The assessee has to prove that such persons exists and why he does not have PAN even though having high value transaction. Unless assessee proves the genuineness of existence of such person, it cannot be held as genuine merely because it paid relevant TDS. Accordingly, we are bound to accept the findings of the DRP and hence, ground raised by the assessee is rejected. Disallowance of share expenses - claim maid u/s 35D - Held that:- The term public issue has wider meaning. It cannot be restricted to issue of shares/debentures to retail investors, it also applied to institutional investors. Even to issue shares to institutional investors, it involves expenditure. It has to be treated similar to the expenses incurred on issue of shares to retail investors. See DCIT vs. Deccan Chronicle Holdings Ltd., [2015 (8) TMI 914 - ITAT HYDERABAD] - Decided in favour of assessee Disallowance of expenses relating to the shipping division - said expenses should be considered as expenses pertaining to the shipping division as computed under the provisions of section 115VG - Held that:- From the record, it is clear that the direct expenditures relating to shipping divisions are recorded in their books properly, but, the management of the company has not allocated any share of head office expenditure to this division. The allocation of expenditure to the various divisions is subjective matter, it involves various factors like the involvement of management time, personnel etc. These informations are not available on the record. We have noticed from the financial statement of the shipping division that no management personnel expenditures or management related expenses were debited to P & L A/c. It is a fact that management time and personnel involve running of any business activity. The assessee has not brought anything on record to prove that the shipping division can function independently without any management involvement. In absence of such information and for the sake of clarity and justice, we find it appropriate to remit this issue to the file of the AO to determine the share of head office expenditure for this division as the assessee also not clear with the quantum of expenditure adopted to allocate the share of expenditure by the AO in the first place. We direct the assessee also to submit the relevant details of expenditure and extent of management involvement in running of this division. In the result, this ground of assessee is allowed for statistical purposes. Disallowance of Employees Stock Option Expenses - Held that:- The revenue authorities denied the deduction of ₹ 60,48,569/- towards ESOP expenses because of the revised return not being filed by the assessee. However, the assessee filed a letter dated 18/03/2015 before the AO claiming the said expenses. According to the ld. AR, the ESOP expenses are allowed from the AY 2012-13 on wards without any dispute as claimed by the assessee, but, for AY 2011-12 the above was not allowed by the AO on the plea that such claim can only be made through a revised return and not by way of a letter. Following the said decision of the Hon’ble Delhi High Court in the case of Principal CIT Vs. Western India Shipyard Ltd.[2015 (10) TMI 539 - DELHI HIGH COURT ] we remit the issue to the file of the AO to accept the letter filed by the assessee for claiming the ESOP expenses and decide the issue in accordance with law after providing reasonable opportunity of hearing to the assessee. Accordingly, this ground is allowed for statistical purposes.

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• Customs

• 2016 (11) TMI 226
  Export of iron ore - enhanced rate of duty - let export order - assessee contended that enhanced duty would be applicable only to the material loaded after the duty was enhanced - AR argued that in all the cases let export order on the shipping bill has been given after the complete loading of the ship - Held that: - following the decision of the Tribunal in the case of Kineta Minerals & Metals Ltd. 2009 [ 2009 (1) TMI 272 - CESTAT, BANGALORE] (Tribunal) the contentions of the exporter accepted - Revenue Appeal dismissed.

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• 2016 (11) TMI 225
  Levy of anti-dumping duty - Plain Gypsum board - exported from China PR, Indonesia, Thailand and UAE - Notification No.6/2013-Cus. ADD dated 12.4.2013 - Held that: - the DA has examined this issue and discussed in the Finding. In para 14(v) the DA examined the various like articles individually and gave a finding for each one. He excluded fire boards, fire heat boards, impact boards, ceiling boards, ECHO boards, heat boards, anti-mold/weather boards, thermal boards, ceiling tiles from the purview of consideration. The investigation was done only for plain gypsum boards of all thickness. Regarding lack of causal link between the dumping and injury to DI - The market share of dumped imports in total demand has increased significantly. The dumped imports were undercutting the price of the DI in the market. There is a clear finding on price undercutting and price suppression/depression. Regarding the excess capacity available with the DI - Held that: - Annexure-II to AD Rules requires that the determination of injury shall involve an objective examination of impact of imports on DI - The losses of DI increased during POI, the volume of imports increased - Appeal rejected.

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• 2016 (11) TMI 224
  Rejection of request for Amendment/replacement of licences - Section 149 of the Customs Act, 1962 - amendment sought after demand notice - Held that: - it is not in dispute that the documents namely licences on the basis of which the benefit has been claimed existed prior to the assessment. In these circumstances, Section 149 of the Customs Act is clearly applicable - replacement of licence allowed - appeal dismissed - decided against Revenue.

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• 2016 (11) TMI 223
  Classification of imported goods - WISMO modules and connectors - classifed under CTH 8473 21 00 and avail the benefit of Notification No. 5/2004-Cus dated 08.01.2004 under Sl.No.355 or classified under CTH 8517 90 attracting a concessional rate of 10% Basic Customs Duty (BCD) as available at SI.No.359 of the Notification 5/2004 Cus.dated 08.01.2004, as amended - Held that: - the issue is similar as decided in the case Linkwell Telesystems (P) Ltd. vs. CC&CE, Hyderabad-II [2009 (5) TMI 446 - CESTAT, BANGALORE] and the decision apply where it was held that classifiable under Tariff item 8529 90 90 ibid and not under heading 85.17 ibid which relates to line telegraphy. The impugned items would be correctly classifiable under CTH 8529 90 90 - Benefit of concessional rate of duty under Notification No. 21.2002-Cus. is available. - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 222
  Refund claim - Refund of excess paid Customs duty on short quantity received between ship ullage and quantity received in shore tanks - Held that: - In an identical matter relating to Ruchi infrastructure Limited, the Hon'ble CESTAT, Bangalore [2007 (11) TMI 210 - CESTAT, BANGALORE] held that It is now well settled that the assessment has to be done on the basis of the shore tank quantity not on basis of ship ullage report. To the effect that the shore tank receipts are alone to be considered and not the ship ullage reports, CBEC also has issued Circular dated 27.12.2002 and 26.07.2016 clarifying that in case of all bulk liquid cargo imports, shore tank receipt quantity, i.e. dip measurement in tanks on shore should be taken on basis for levy of customs duty. Appeal dismissed - decided against Revenue.

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• 2016 (11) TMI 221
  Classification of imported goods - Fenbendazole - whether classified under heading 29332990 or under heading 29339900 - Harmonised Commodity Data Base of World Customs Organization (WCO) - Held that: - the only ground on which the impugned order is based is the so called database of world customs organization. The Revenue has failed to produce the same and therefore, the same cannot be considered for the purpose of classification - The learned Counsel has clearly demonstrated from the structure of the compounds that fenbendazole contains imidazole ring. Any chemical containing imidazole is classifiable under heading 29332100 to 29332990. In view of the above, the classification sought by the appellant is upheld. The appeal is accordingly allowed.

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• 2016 (11) TMI 220
  Re-import for repair - export after repair - Denial of exemption under N/N. 158/95-Cus. dated 14.11.95 - whether the denial of exemption on the ground that re-imported goods not exported within six months, and further six months if extension sought, justified? - Held that: - the shipping bill for the re-export of the goods was admittedly filed within 1 year. As regard second shipping bill that was filed by the appellant only in order to comply the requirement of computer system. Therefore it cannot be said that the date of filing of shipping bill is online shipping bill but it is continuation of the first shipping bill filed by the appellant. Therefore the shipping bill was filed within one year for export of the goods. Extension of six months period - Held that: - the bond executed under Notification No. 158/95-Cus. has been extended and such extension has been accepted by the Revenue. In this fact the period of six months for re-export of the goods stand extended till the validity of the extended period of the bond. Therefore it cannot be said that the appellant has violated the condition prescribed under Notification No. 158/95-Cus. - since the bond executed for the purpose of Notification No. 158/95 has been extended it is as good as the period for re-export of the goods also stand extended - denial of exemption not justified - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 219
  Eligibilty of exemption - N/N. 16/2000 dt. 01.03.2000 - import of Pulse Sprint Flat Bed Treadmill, Pulse Ascent Elevated Treadmill, Pursuit Cycle and Pace Stepper - classification in dispute - whether the items fall under exemption exemption Entry No. 331 or these items are General Physical Exercise equipments used in gymnasium falling under CTH 95069.90? - duty paid under protest - whether refund claim justified? - Held that: - exemption Notification No. 16/2000-Cus. exempts all goods of Chapter 94 which is required for games and sports, subject to compliance the condition No. 76 of the Notification - exemption is available on the condition that when apex body certifies that the requisites for games and sports are required to be used in a national or international championship or competition to be held in India or abroad. Certificate from Sports Authority of India - the Sports Authority of India has certified the specific imported goods that the said equipments are used for national or international tournaments. In our view, the department has no jurisdiction to question the certificate issued by Sports Authority of India. As per the Condition 76 only certification from the apex body is required, so long that condition is complied with exemption is available to the imported goods. Moreover for the purpose of national or international tournaments, the fitness of the player is the primary criteria for preparing to face the competition of national or international tournaments. Therefore it cannot be said that these fitness equipments are not used by the appellant for national or international tournaments. We are therefore of the considered view that on the basis of certificate dt. 14.6.2000 issued by Sport Authority of India addressed to the Assistant Commissioner of Customs, Bombay in respect of equipments imported by the appellant exemption notification is clearly admissible to the appellant - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 218
  Waiver of pre-dposite - Classification of steam coal - matter is pending before the larger bench - trade parlance theory - to be classified as Bituminous coal under Tariff entry 2701 12 00 or under tariff entry 2701 19 20 - Held that:- where some of the appellants have obtained waiver of predeposit which has not been challenged or stayed by higher appellate forum, it would tantamount to undue hardship for the remaining appellants on identical issue if predeposit is insisted upon them. Further, as a Tribunal, this appellate forum is bound to follow the ratio of the judgments laid down by the jurisdictional High Court or if no such judgment is available, of the other High Courts and/or Hon’ble Apex Court. This is the judicial discipline that is required of us to follow. This is what the doctrine of stare decisis enjoins us to do. Since our aforesaid decision of 16/05/2016 in Century Textiles case, even the coordinate Bench of the Tribunal at Ahmedabad have, vide their Interim Order No.125-140/2016 dt. 08/06/2016 referred sixteen more appeals on identical issue to the Larger Bench, following their earlier Interim Order No.385 to 505 dt. 07/09/2015. Thus, no new facts have emerged to deviate from the earlier view taken by us in Century Textiles case. Full waiver of pre-deposit granted.

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• 2016 (11) TMI 217
  Compact Disc Re Writer (CDRW) - classification of goods - whether goods to be classified under CTH 8471.70.60 under Tariff heading 8471.70 - Claiming benefit of exemption from levy of additional customs duty (CVD) - benefit of N/N. 6/2002-C.Ex - Held that: - Sl. No. 261A envisages inter alia the benefit of notification 6/2002 to be extended to CD-ROM drive and not CDRW. Further, as correctly observed by the original authority, CDRW is required to be classified as 8471.7090 as all other subheadings of 8471-70 are specific headings; in any case ,goods CDRW are not covered by CTH 8471 7020 since this is a specific heading only for hard disc drives(HDD). Therefore the appellants are not eligible for exemption as per the Notification No.6/2002 and is a clear case of mis-declaration of goods - appeal rejected - decided against appellant.

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• Corporate Laws

• 2016 (11) TMI 212
  Scheme of Arrangement and Amalgamation - Held that:- On consideration of all the relevant facts and the procedural requirements in terms of Section 391-394 of the Act and the relevant Rules and on due consideration of the reports of the Regional Director, Ministry of Corporate Affairs, New Delhi and the Official Liquidator, the Scheme of Arrangement and Amalgamation is hereby sanctioned and as a result thereto, the Assets and Liabilities of the Maghan Pulp and Paper Industries Private Limited (Transferor Company) shall stand vested in Maghan Paper Mills Private Limited (Transferee Company) and the Transferor Company shall be dissolved without being wound up. The Transferor and Transferee Companies shall comply with the provisions of Accounting Standard-14 of Institute of Chartered Accountant of India as has been undertaken. The Scheme of Arrangement and Amalgamation shall be binding on the Petitioner-Transferor and Transferee Companies, their respective Shareholders, Creditors and all concerned.

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• Service Tax

• 2016 (11) TMI 244
  Recovery of the inadmissible credit - Input Services - ‘Rent a Cab’ - ‘Cleaning Services’ - Held that: - ‘Rent- a- Cab’ and ‘Cleaning Services’ are Input Services as defined under Rule 2(l) of the Cenvat Credit Rules 2004 in view of the judgment of this Tribunal in the case of Hindustan Zinc Ltd vs CCE, Jaipur [2012 (12) TMI 228 - CESTAT NEW DELHI] and also the cleaning services are incurred in cleaning the Telephone exchanges for providing the telephone service, hence eligible to credit. Utilisation of credit - Rule 6(3)(c) of CCR,2004 - Held that: - I find that the the Ld. Commissioner (Appeals) has rightly held that the respondents are eligible to utilize 20% of the CENVAT credit as laid down under Rule 6(3)(c) of CCR,2004 and reduced the liability; also dropped the penalty keeping in view the circumstance of the case. Thus, I do not find any discrepancy in the above order. The impugned order upheld - Appeal dismissed - decided against Revenue.

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• 2016 (11) TMI 243
  Imposition of penalties - Section 73(3) of the Finance Act, 1994 - Held that: - the tax liability and the interest have been discharged before the issuance of the show-cause notice and on being pointed out by the authorities. Provisions of Section 73(3) of the Finance Act, 1994 categorically provided that if the service tax liability and the interest thereof is paid on their own or on pointed out by the lower authorities, there is no need to issue the show-cause notice. This view was upheld by the Hon'ble High Court of Karnataka in the case of CCE, Bangalore v. Adecco Flexione Workforce Solutions Ltd. [2011 (9) TMI 114 - KARNATAKA HIGH COURT] In view of the foregoing, invoking provisions of Section 80 of the Finance Act, 1994, I set aside the penalties imposed on the appellant while upholding the service tax liability and interest thereof - appeal disposed off - decided partly in favor of appellant.

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• 2016 (11) TMI 242
  Utilization of CENVAT credit for discharge of service tax liability - GTA services - Held that: - reliance placed on the decision of COMMISSIONER CENTRAL EXCISE AND CUSTOMS Versus PANCHMAHAL STEEL LTD. [2014 (12) TMI 876 - GUJARAT HIGH COURT] where it was held that though the assessee was liable to pay service tax on G.T.A. Service, it could have utilized Cenvat credit for the purpose of paying such duty - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 241
  Imposition of penalties - Manpower Recruitment and Supply Agency Services - invocation of Section 73(3) of the Finance Act, 1994 - Held that: - the appellant has discharged the entire service tax liability and part interest thereof before the issuance of show-cause notice and the balance interest was deposited as per the direction of the Tribunal in stay order No. S/1344/13/CSTB/C-I dated 24.09.2013. I find strong force in the contention raised by the learned Counsel that the issue is covered by the provisions to Section 73(3) of the Finance Act, 1994 as the demand is within the limitation. Accordingly, the service tax liability and interest thereof as confirmed by the lower authorities are upheld and the penalties are set aside - appeal disposed off - decided partly in favor of appellant.

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• 2016 (11) TMI 240
  Use of CENVAT credit for discharge of service tax liability - services of design development of fabrics received from a person situated abroad - reverse charge mechanism - Held that: - Since the issue involved in this case also the discharge of service tax under reverse charge mechanism by service recipient from a person who situated abroad, there is no bar in utilizing the credit available in CENVAT credit for discharging the service tax liability. Accordingly, I set aside the impugned order - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 239
  Issuance of SCN - section 73(3) of Finance Act, 1994 - Held that: - appellant having discharged the service tax liability and interest, though being pointed out by the officers during a visit, are eligible for the benefit of provisions of section 73(3) of Finance Act, 1994. The said section provides for non-issuance of show-cause notice in the case the assessee discharged the service tax liability and the interest thereof on his own ascertainment on being pointed out by the officers. In the case in hand, appellant being a public sector undertaking may have overlooked the provisions of Business Auxiliary Service and on being pointed out discharged the entire tax amount with interest. In our view, this is a fit case wherein the revenue authorities should not have issued any show-cause notice as per the provisions of 73(3) of Finance Act, 1994. Appellant has made out a case for setting aside the penalties imposed under Section 78, as provisions of Section 73(3) will apply in its full force. We also hold that it is a fit case for invoking Section 80 of the Finance Act, 1994 to set aside the penalty imposed by the adjudicating authority. The service tax liability and the interest upheld and penalty imposed by the adjudicating authority set aside by invoking provisions of Section 80 of the Finance Act, 1994 - appeal allowed - decided partly in favor of appellant.

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• 2016 (11) TMI 238
  Classification of taxable services - activity of treatment under KKT scheme - Health Checkup and Treatment Services - appellant contended that the KKT is a Welfare Scheme introduced by the Government of Tamil Nadu for the benefit of those who cannot afford costly medical treatment and that will not construed as an Insurance Scheme, but a Welfare Scheme - Held that: - one fundamental error which has crept in the impugned proceedings is that the authority while adjudicating the show cause notice did not examine the scope of the transaction between the petitioner and the Government/STAR. In fact that should have been the first endeavour of the adjudicating authority, since the petitioner raised a preliminary objection by stating that KKT is a Welfare Scheme and not an Insurance policy, no approval was obtained from IRDA and therefore, they will not fall within the definition of "Health Check up and Treatment Services" Unless and until the Scheme has been examined in full, the respondent cannot come to a conclusion that the nature of transaction done by the petitioner would fall within the definition of section 65(105)(zzzzo) of the Finance Act - the Scheme propounded by the Government arrangement with STAR, the petitioner and the Government, conclusion could not have been arrived at and the case laws referred to could not have been made applicable without going into the facts and the terms of the subject schemes which may be distinct and different from those considered in the decision relied on by the respondent - Petition allowed by way of remand.

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• 2016 (11) TMI 237
  Cenvat credit - Input services - Mandap Keeping Services and Rent-a-Cab Services - Rule 2(l) of the CENVAT Credit Rules, 2004 - Held that: - the Mandap Keeper Services used to organize meetings and events for promotion of their products such as a new vehicle launch, sales promotion events and also for business dealer meets, conferences, Executive Level Meetings etc. which activities being important for the respondent to promote the sale of vehicles are connected to the business of manufacture of the respondent for which they are entitled to avail CENVAT credit, especially when the expense so mentioned is part of cost on which excise duty is paid. Regarding Rent-a-Cab services used by the executives of the respondent for the purpose of travelling required for business meetings, visits to the dealerships, visits to the vendor sites, dealers meet, business promotion activities, vehicles launch, conferences etc. is a an expenditure in relation to business being incurred by the respondent in order to promote the sales and for efficient running of the business for which they are entitled to avail CENVAT credit as the rent-a-cab service has been excluded from the definition of 'input service' by the 2011 amendment w.e.f., 1.4.2011, it has to be held that prior to the amendment, rent-a-cab service came within the definition of input service. As the assessment years in issue in the present case are 2009-10 and 2010-11, both prior to the amendment, the respondent is entitled to CENVAT credit on this service. - Revenue Appeal dismissed.

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• Central Excise

• 2016 (11) TMI 236
  Refund - Unjust enrichment - Provisional assessment - There is thus no dispute that the appellant has, in fact, remitted excess excise duty which has been duly quantified and determined to be refundable - Held that: - a mandatory exercise that is to be undertaken by a manufacturer in order to establish nil unjust enrichment. While this may be easier achieved in cases where the transaction is direct as between the manufacturer and end-user, the level of difficulty increases with the number of intermediaries involved - Appeal allowed by way of remand.

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• 2016 (11) TMI 235
  Refund claim - 100% EOU - utilisation of CENVAT credit on input and input services - export of industrial sewing machine needles falling under Chapter subheading 8452 30 of the First Schedule of CETA 1985 - Held that: - I am of the considered opinion that the impugned order is not sustainable in law as all the services involved in the present appeals have been held to be input services by various decisions of the Tribunal and the High Court as held in the cases. Further, I also note that with regard to all the services the Commissioner (A) in the appellant's own case for the earlier period has allowed the refund under Rule 5 of CCR, 2004 and the department has not filed appeal against the same. In view of this situation, the impugned orders are liable to be set aside and I set aside the impugned orders by allowing all the three appeals with consequential relief, if any.

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• 2016 (11) TMI 234
  Refund - unjust enrichment - Consumer Welfare Fund - Held that: - the respondent have submitted Balance Sheet, Books of Account and Chartered Accountant certificate before the adjudicating authority to the effect incidence of duty has not been passed to any other person - the appellant, in addition also submitted the declaration of the customer to the Commissioner (Appeals) wherein it was declared by the customer that they have not received the supplementary excise invoice nor they have availed CENVAT credit - Appeal dismissed - Decided in favor of the assessee.

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• 2016 (11) TMI 233
  Confiscation - Rule 25 of Central Excise Rules, 2002 - Penalty - Held that: - lower Authorities fell in error in applying the provisions of Rule 25 in respect of Betel Nut which is not an excisable goods in the form in which it was seized - Appeal allowed.

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• 2016 (11) TMI 232
  Demand and recovery of an amount equal to 10% of value of exempted goods cleared in terms of Rule 6 (3) (i) of Cenvat Credit Rules, 2004 - no maintenance of separate account of inputs used for manufacture of exempted final products - Some exclusions are made for application of this provision under sub-Rule (6) of Rule 6 of Cenvat Credit Rules, 2004 - Held that: - There is nothing in the amending notification to indicate the presumption that the amendment carried out in sub-Rule (6) of Rule 6 vide Notification No. 6/2010-CE dated 27/02/2010, should be considered clarificatory and apply to the clearances made in May and June, 2009. The amendment carried out by Notification No. 6/2010-CE cannot be given retrospective effect. Imposition of penalty u/r 15 (2) of Cenvat Credit Rules, 2004 - Held that: - the said sub-Rule provides for penalty where Cenvat credit in respect of inputs have been utilized wrongly by reason of fraud, collusion or willful mis-statement or suppression of facts or contravention of any of the provisions of Excise Act or Rules made thereunder with intent to evade payment of duty. We find the findings of the lower Authorities are devoid of merit in this regard. Admittedly the duty free clearances were entered in the ER-1 for the month of May 2009 and June 2009. The Original Authority records that Notification No. 6/2006-CE was not mentioned in the ER-1 and accordingly the appellants suppressed the fact from the Department. In the present case, we find the show cause notice clearly mentions that the appellants have applied to the Jurisdictional Assistant Commissioner on 25/4/2009 itself who granted permission for clearance on 13/5/2009. In such situation, we find there is no basis to allege suppression or mis-statement or intention to evade payment of duty against the appellant. The notice itself has been issued within the normal period. We find no justification for imposition of penalty equal to the confirmed amount in the present case. Accordingly, we set aside the penalty imposed on the appellant. Appeal disposed off - decided partly in favor of appellant.

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• 2016 (11) TMI 231
  Reversal of Cenvat Credit - job-work - payment of an amount equal to cenvat credit attributable to the inputs which were not received back from the job worker - Held that: - the department did not identify which type of inputs were retained by the job worker, it is not at all tenable to invoke Cenvat Credit Rules, 2004 to demand and recover certain amount of credit. The proceedings against the respondent are devoid of merit as well as hit by time bar. The present appeal against the impugned order has no merit - appeal dismissed - decided against Department.

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• 2016 (11) TMI 230
  Manufacturing activity or not - emergence of new marketable product or not - Whether the main appellant is liable to Central Excise duty on the aluminium channels, brought from market on which they have carried out process like cutting, drilling and bending as per the requirement of the customers, will amount to manufacture or not - Held that: - Such drilling and bending is also carried out at site of the customers depending upon the requirement of structure to be installed in the premises alongwith other civil work. In such situation, it is necessary to have a clear recording on the facts as to what type of new identifiable product emerges from aluminium sections brought in by the main appellant - In such a situation we are unable to agree with the findings of the Original Authority that a new and different article having distinct name, character or use as emerged in the present case. Regarding the second issue of addition of trading activity for the turnover of the appellants to arrive at the SSI exemption, the impugned orders held that the suppliers did not have manufacturing facility and the purchase and sale transaction of the wall mounted brackets is not acceptable - In this connection, the appellant contested that simply because the suppliers from whom they procured these materials do not themselves have manufacturing facility by itself cannot lead to a conclusion that the whole transaction is bogus - Appeal allowed by way of remand.

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• 2016 (11) TMI 229
  Demand - Cenvat credit - Period of limitation - the plant and machinery and capital goods involved in the manufacture of cement/electricity are huge structures integrated into a particular plant and machinery to obtain desired results - Held that: - Even to place the hoppers, in a particular manner, fabrications are required. Without such fabrication, the hoppers cannot be put into use. Here, it is not tenable to hold that the various iron and steel angles, channels, etc. used in conjunction with hoppers, are pure civil structures and cannot be considered as accessories or components of such hoppers. Such argument will be factually and legally devoid of merits. There could be no justification for invoking demand for the extended period as there could be no ground for alleged suppression, fraud, collusion or willful mis-statement in availing the credit on these items by the appellants - Appeal allowed.

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• 2016 (11) TMI 228
  SSI exemption - use of brand name - Notification No. 8/2003-CE - exclusion of export turnover - It was alleged that these two partnership firms cannot be considered as separate legal entities for the purpose of calculation of SSI exemption and there turnover has to be clubbed together for this purpose - it has been brought out during investigation that HP and HPC do not have separate arrangement for keeping raw materials and finished goods and these are stored in common premises only - Held that: - it is clear that there is complete common administration and financial control of the two firms. Day-to-day affairs of HPC are managed by the partners of the HP - The brand name apparently cannot belong to two different entities if the appellants arguments of HP and HPC are two different legal entities for SSI exemption then use of common brand bane will deprive atleast one of them from SSI exemption. Regarding the claim of the appellant for exclusion of export turnover, we find that the appellants themselves did not export the product - in the absence of categorical evidence supported by documents, the claim of the appellant cannot be considered - Appeal dismissed - decided against the assessee.

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• 2016 (11) TMI 227
  Violation of provisions of Rule 8(3A) - default in duty payment of more than 30 days - all the subsequent clearances were to be made on cash payment only without utilizing cenvat credit - whether the Revenue's claim that clearances subsequent to March, 2006 made by utilizing cenvat credit shall be deemed to have been cleared without payment of duty in terms of the said rules justified? - Held that: - the appellants have fully discharged the default amount, by 16.06.2006 in cash, with applicable interest for the delayed payment. In such situation to hold that the clearances subsequent to March, 2006 as non-duty paid clearance only on the ground that the cenvat credit has been used for payment of such liability, is not legally sustainable - The ratio of the Hon’ble Supreme Court’s decision in the case of Jayaswal Neco Ltd. [2015 (8) TMI 404 - SUPREME COURT] referred where interpreting the terms paid excise duty for each consignment by debit to Account Current held that it could not be said to be the only mode of payment of duty during this period. Payment through cenvat credit is also a valid mode of payment - there is no violation of provisions of Rule 8(3A) - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2016 (11) TMI 216
  Classification of goods - tissue papers - Whether the tissue paper would be covered by Entry 57 Schedule 'C' of the Haryana Value Added Tax Act, 2003, which is assessable at the rate of 4% or it is assessable under the Residue Entry at the rate of 12.5%? - user test need to be applied or not? - Held that: - If the case of the appellant is considered in the light of enunciation of law, as referred to above, Entry 57 in Schedule 'C' only prescribes 'paper', 'paper board' and 'newsprint'. It does not provide for any inclusions or exclusions. It further does not provide for any user test. The word 'paper' used in the Entry is in generic form, which will include all types of paper, which has its essential characteristics. It is not in dispute that even the tissue paper, napkin, toilet paper rolls etc. retain the essential characteristics of paper. It is only that it is in different strength and is used for different purposes. There is no competing entry to find out whether product falls in entry 'A' or 'B'. The residuary entry is to be invoked in case, with liberal construction to the specific entry, the product could not be found to be forming part thereof - appeal allowed - decided against Revenue.

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• 2016 (11) TMI 215
  Interest on refund - Article 14 of the Constitution of India - Writ of mandamus - Period of limitation - Held that: - Clause (aa) to sub section (1) of Section 54 of the GST Act was inserted by the Gujarat Act 11 of 1993 - under the said provision a dealer entitled to refund by virtue of an order of assessment would receive in addition to such amount, simple interest at the specified rate to be calculated from the date immediately following the date of closure of the accounting year to which such amount relates till the date of order of the assessment - Combined reading of this explanation would show that the interest in terms of Section 54(1)(aa) would be available wherever the refund arises out of an assessment for the financial year commencing from 01.04.1993 or onwards - For classification, however, to be reasonable and to pass the test of Article 14, twin conditions must be satisfied viz. that the same distinguishes persons or things from those which are left out of such class and that the same is based on rational relation to the object sought to be achieved by the law - When the legislature frames a new provision which either creates or extinguishes existing rights, there is invariable requirement of making such a provision applicable from a certain date. Regarding Interest - When the Assessing Officer wanted to tax the petitioner by denying the set off on tax paid on purchase of raw materials for manufacture of goods which are sold outside the State, the petitioner relied on the decision of the Tribunal in case of Wood Polymers Ltd [1982 (3) TMI 231 - GUJARAT HIGH COURT] - Held that: - Till such appeal is decided, the Revenue would have to keep such an issue alive whenever it arises in case of other assesses - The fact, that the Revenue had carried the judgement of the Tribunal in appeal before the High Court and such appeal was pending, did not permit the Assessing Officer to ignore judgement of the Tribunal and compel the assessee to go in appeal. The Tribunal in view of the fact that the first appellate authority had proceeded ex parte merely remanded the proceedings before the first appellate authority for fresh consideration and disposal - Not on the ground that interest, as a matter of course, must be paid on the principal of compensatory basis, in the present case, we are inclined to grant such interest on the ground that the department had unauthorizedly and illegally for nearly three decades withheld the amount which legally belonged to the petitioner. we have noticed that the claim of interest can arise out of a statutory provision providing for such interest or contractual relations, nothing prevents a constitutional court from granting such interest in extraordinary circumstances where the money has been withheld by the State for a long period of time without any authority in law - Decided in favor of the petitioner.

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• 2016 (11) TMI 214
  Levy of tax u/s 8(1) of the CST Act - Inter-State sale of LPG - it was contended that, no tax could be levied on interState sales of LPG since the local sales thereof are exempt from payment of tax - Held that: - The term “rate of tax” used in the proviso and “rate applicable” in the main body of subsection( 1) of section 8 must receive similar interpretation. Further, under subsection( 2) of section 8, it is provided that tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of interState trade or commerce but not falling within the subsection( 1), shall be at the rate applicable to the sale or purchase of such goods inside the appropriate State under the Sales Tax law of that State. In contrast to subsection( 1), thus subsection( 2) does not provide for the lower of the two tax rates, 2% as prescribed for interState sales generally or the rate that may be prescribed by the local Sales Tax law. It prescribes only one rate of tax namely, that which is applicable to the sale or purchase of goods in question within the State on the local sales. There is therefore, no warrant to interprete the expression “rate applicable to the sale or purchase of such goods” used in subsection( 1) of section 8 as to mean the prescribed rate and not the rate which may be applicable taking into account the exemption totally or partially that may have been granted by the State Government. The expression “within the State of Gujarat” does not aim to collect tax on interState sale. In fact, learned Advocate General also stated that this could not be and is not even the intention of the State legislation - we do not find that the amended entry 69 is in any way unconstitutional or outside the legislative competence of the State delegated legislation. Our interpretation and the order of dismissing the appeal would take care of other prayers of the petitioner in the Special Civil Application. Same is disposed of accordingly - appeal dismissed - decided against Revenue.

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• 2016 (11) TMI 213
  Levy of VAT - engine text beds - permanently embedded to earth - principles of natural justice - Held that: - The petitioner has given detailed objections/clarifications to the Commercial Tax Officer (Enforcement), Group III, Coimbatore. The fate of such objections/clarifications is not known to the petitioner. If, for any reason, the Enforcement Wing Officials do not agree with the objections/ clarifications given by the petitioner, the petitioner is entitled to know the basis and reasons for such disagreement. This having not been furnished, the conduct of the officials of the Enforcement Wing also does not satisfy the principles of natural justice - There will be a direction to the Commercial Tax Officer (Enforcement) Group III, Coimbatore to consider the petitioner's objections/ clarifications, afford an opportunity of personal hearing, consider all the documents and thereafter give a reply after recording reasons petition allowed - decided in favor of petitioner.

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