TMI Tax Updates - e-Newsletter
November 9, 2015

Case Laws in this Newsletter:

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

TMI SMS

• Integration process of ERP software by deputing ERP implementation team - Not in the nature of sale of software / goods - No VAT - HC

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Articles

1. PROPOSED PAYMENT PROCESS UNDER GST – NEW & IMPROVED

   By: Pradeep Jain

2. TRANSPORTATION OF GOODS UNDER NEGATIVE LIST

   By: Dr. Sanjiv Agarwal

News

1. Government decides to impose a Swachh Brarat Cess at the rate of 0.5% on all serviceS presently liable to service tax, with effect from 15th November 2015; Proceeds from this cess to be exclusively used for Swachh Bharat initiatives

Notifications

Central Excise

1. 43/2015 - dated 6-11-2015 - CE

Seeks to further amend notification No. 12/2012-Central Excise, dated 17.03.2012

Companies Law

2. F. No. 1/4/2013 CL-V - dated 6-11-2015 - Co. Law

Companies (Share Capital and Debentures) Third Amendment Rules, 2015

Circulars / Instructions / Orders

Income Tax

1. 16/2015 - dated 6-11-2015

Prescribed time limit in passing order u/s 12AA of the Income-tax Act, 1961

Highlights / Catch Notes

Income Tax

• Advances from Producers Not Assessable Income if Returned Due to Non-Materialization of Assignments.

  Case-Laws - AT : Accrual of income - Advances received from various producers - whether assessable as income for the respective assessment years or not? - When the assessee has returned these amounts in the subsequent years as the proposed assignment were not materialised then it would not be proper and appropriate to treat these amounts as income of the assessee - AT
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• TDS Deduction Dispute: Assessee Challenges Responsibility for Reimbursed Expenses Without Direct Contract with NBHC.

  Case-Laws - AT : Requirement of TDS - assessee reimbursed the expenses to the bank and the bank ought to have deducted the TDS when there was a contract in between the bank and the NBHC, but there was no contract between the assessee and NBHC - AT
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• Section 145 Rejection Unjustified: No Evidence of Inflated Purchases or Suppressed Sales Found in Income Estimation.

  Case-Laws - AT : Rejection of book results u/s 145 - estimating the income at 5 percent of gross receipts - no material was brought to establish that the purchases and expenses had been inflated or the sales had been suppressed and in the absence of any such material or finding given, there was no justification in invoking the provisions of Section 145(2) - AT
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• Clarification: TDS credit rejected due to receipt not taxed; refund applicable if no tax liability exists.

  Case-Laws - AT : Rejection of TDS credit - the corresponding receipt has not been offered to tax - it clear that if there was no liability to pay tax, the TDS paid is liable to be refunded - AT
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• Assessing Officer Summons Suppliers for Alleged Bogus Purchases; Absence of Books Not Assessee's Fault (Section 131.

  Case-Laws - AT : Addition made towards bogus purchase of sulphur and cement - suppliers have been produced before the Learned AO under summons proceedings u/s 131 - Just because the suppliers had not brought their books of accounts during the course of summons proceeding, the assessee could not be faulted with - AT
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• Section 11 Exemption Granted: Trusts Recognized as Owners of Meditation Hall After Building Possession Transfer.

  Case-Laws - AT : Exemption u/s 11 - Under the Indian law, a land can belong to one person and the building can be owned by other person. - When the physical possession of the building is handed over to the assessee-trusts and allowed the assessee-trusts to enjoy the same - assessee-trusts became the owners of the meditation hall - Exemption allowed - AT
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Customs

• Amendments uphold additional duty exemption for imports, maintaining parity with domestic goods u/s 3.

  Case-Laws - HC : Exemption from levy of additional duty (CVD) where the manufactured goods are exempted from duty of excise - Amendments to nullify the decision of Apex Court - The amendments are not ultra vires Section 3 since the importers are not placed in a more disadvantageous position than that of the domestic manufacturers - HC
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• Court Rejects Appellant's Heavy Workload Defense in Fraudulent Drawback Claims and Misdeclaration Case.

  Case-Laws - HC : Fraudulent drawback claim - Misdeclaration of goods and serial numbers - . Considering the number of consignments and the value thereof, the submission that there was heavy pressure of work and therefore, the Appellant cannot be held responsible is unacceptable - HC
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Service Tax

• Tribunal Urged to Condon Delay in Filing Appeal to Ensure Meritorious Case is Heard Properly.

  Case-Laws - AT : Condonation of delay - It appears that the meritorious appeal may be converted into demeritorious one if delay is not condoned. When Tribunal had granted an opportunity earlier making certain observations, it would be proper to condone the delay - AT
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• Residential Staff Quarters Construction Exempt from Service Tax u/s 65(30a) Definition of 'Complex Construction'.

  Case-Laws - AT : Construction of residential quarters for staff - Residential Complex or Commercial complex service - staff quarters constructed by the respondent are not covered under the definition of ‘Construction of complex’ under Section 65(30a) ibid and therefore the activity does not attract Service tax - AT
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• No penalty for delayed service tax if tax and interest are paid before show cause notice issued.

  Case-Laws - AT : Levy of penalty for delayed payment of service tax - no show cause notice could be issued for imposition of penalty when service tax alongwith interest is paid before issuance of show cause notice. - AT
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• Appellant Cannot Switch Back from Composition Scheme in Works Contract Service Tax Calculation.

  Case-Laws - AT : Works contract service - Composition Scheme being optional, having opted for it, appellant has no locus standi to revert back to workout the gross value charged for the services rendered. - AT
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Central Excise

• Tribunal to Reconsider If Software Value Should Be Included in Cellular Phone Transaction Value for Duty Payments.

  Case-Laws - SC : Valuation of goods - Under valuation - whether the value of the software was to be included while arriving at the transaction value of the cellular phones and for the purpose of payment of duty - larger bench of the tribunal to decide the matter afresh - SC
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• Does Assembling Pumps with Engines Constitute Manufacturing Under Excise Laws? Court Examines Tax Implications for New Products.

  Case-Laws - HC : Manufacture - whether the bought out Pumps and own manufactured I.C. Engine put in single carton by the assessee would amount to manufacture of Power Driven Pumps - Mere addition in the value - HC
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• Court Supports Assessee's Claim for Duty Abatement on Pan Masala Machines Due to Lack of Clear Rules.

  Case-Laws - HC : Pan Masala Packaging Machines - When the rules do not provide for the manner in which duty is required to be abated, no fault can be found in the approach of the assessee in suo motu taking the benefit of such abatement - HC
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• Petitioner Must Receive Central Excise Registration Despite Previous Registration Issues or Outstanding Dues from Former Unit.

  Case-Laws - HC : Department cannot refuse to grant Central Excise registration in respect of the premises in question to the petitioner on the ground that the earlier registration has not been surrendered and that there are outstanding dues of the erstwhile unit. - HC
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• Revenue Authorities Failed to Instruct Sample Testing; Cannot Claim Appellant Misstated Product Classification Now.

  Case-Laws - AT : Revenue authorities, on receipt of classification list, did not direct the appellant to go for the drawal of the samples and get the same tested in order to ascertain the correct classification of the product - revenue authorities now cannot turnaround and allege that there was suppression, mis-statement on the part of appellant - AT
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• Court Upholds Duty Demand for Goods Shortage and Clandestine Removal; Parallel Invoices Confirmed by Revenue Authorities.

  Case-Laws - AT : Duty demand - Shortage of goods - Clandestine removal of goods - there was an established case of issuance of parallel invoices by appellant with same numbers. - Burden of proof was discharged by Revenue - AT
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VAT

• ERP Software Integration Not Subject to VAT as No Goods Transfer Occurs, Rules Court.

  Case-Laws - HC : Levy of VAT - transfer of goods or not - integration process of the developed ERP software is undertaken by the assessee by deputing ERP implementation team to render ERP implementation service - no portion of the consideration received could be attributed to sale of the software - HC
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• Court Rules Non-Woven Felts for Car Matting as Textile, Qualifying for Tax Exemption Under Fabric Classification.

  Case-Laws - HC : Exemption from tax - Classification of goods - manufacturing of non-woven felts used in cars as a matting - Once the product manufactured by the assessee is held to be fabric, the nature would remain the same and it would continue to remain as textile/fabric - HC
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• High Court Rules Entry Tax on Tea Imports and Sales Unlawful, Impacting Local and Inter-State Trade.

  Case-Laws - HC : Levy of entry tax - levy of entry tax on the import of tea and local sale and inter-State sale of the blended tea is untenable. - HC
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Case Laws:

• Income Tax

• 2015 (11) TMI 340
  Non-compete fee - revenue expenditure v/s capital expenditure - Held that:- The said amount was difference in the value of tangible/intangible assets of the going concern which was purchased by the assessee and the lump sum amount was paid for taking over the business, so it was in the nature of the goodwill and since the assessee was having the enduring benefit particularly when there was a covenant on the seller for not to run the similar type of business for three years. Therefore, the said amount cannot be considered as revenue in nature as has been held by the ld. CIT(A). Since the amount under consideration was in excess of the value of tangible & intangible asset and was a part of the lump sum consideration for acquiring the business, so it was a goodwill. Thus we set aside the findings of the ld. CIT(A) on this issue and upheld the view taken by the AO that the non-compete fee was nothing but goodwill of the business and a capital expenditure. Whether the assessee is eligible for depreciation on the goodwill? - Held that:- As the non-compete fee paid by the assessee was capital in nature and goodwill it was eligible for depreciation u/s 32 of the Act as relying on SMIF Securities Ltd. (2012 (8) TMI 713 - SUPREME COURT) wherein held that the goodwill is eligible for depreciation u/s 32 Addition on expenses incurred in connection with purchase/acquisition of business assets - purchase of division on slump sale - CIT(A) deleted the addition - Held that:- In the present case, it is an admitted fact that the impugned expenditure was incurred in connection with the acquiring of assets and since the expenses incurred were related to bring the assets into existence those were capital in nature and not the revenue in nature. We, therefore, reverse the findings of the ld. CIT(A) on this issue and hold that the expenses incurred by the assessee for acquiring the assets were capital in nature, so those to be capitalized and the AO is directed to allow the depreciation as per law on those capitalized expenditure. Payment made to the holding company - Revenue v/s capital expenditure - Held that:- In the present case, by incurring the impugned expenses, the assessee had not acquired any tangible/intangible asset which had any lasting and enduring benefit to the assessee's business. The payments were made for using the trade mark of M/s Nitrex Mauritius and to obtain expertise in the field of commerce, finance, manufacturing etc. which were needed for smooth running of the business as the assessee was new in this business and the expenses were paid only for one year. Therefore, we are of the view that the ld. CIT(A) was fully justified in directing the AO to treat those expenses as revenue in nature, we do not see any infirmity in the order of the ld. CIT(A) on this issue. - Decided in favour of assessee. Commission paid on export sales excessive - CIT(A) deleted the addition - Held that:- The commission was paid at the same rate which was paid by the seller of the business i.e. M/s ICI India Ltd., the said contention had not been rebutted. It is also noticed that M/s Asha Export is not related to the assessee and the commission was paid for the services provided by M/s Asha Export. In the present case, the AO did not bring any material on record to substantiate that the commission paid by the assessee was excessive. We, therefore, do not see any infirmity in the order of the ld. CIT(A) on this issue. It is also noticed that nothing is brought on record to substantiate that any new evidence was furnished by the assessee before the ld. CIT(A) in violation of Rule 46A of the IT Rules, 1962.- Decided in favour of assessee. Disallowance made by the AO on account of water charges - CIT(A) reduced disallowance admitting fresh evidences - Held that:- In the present case, it is noticed that the assessee produced the Bills of Rs. 30,64,348/- out of total water charges of Rs. 72,92,206/- . However, before the ld. CIT(A), the details of bills from April 4 to March 5 amounting to Rs. 52,12,320/- were furnished. In the present case, it appears that new evidences were furnished before the ld. CIT(A) which were not before the AO. We, therefore, to meet the ends of justice, deem it appropriate to send this issue back to the file of the AO for proper verification and adjudication after providing due and reasonable opportunity of being heard to the assessee. Accordingly, the appeal of the department is partly allowed for statistical purposes. Disallowance of expenses against business income - CIT(A) allowed the claim - Held that:- No infirmity in the order of the ld. CIT(A), particularly when the assessee had written off bad debts in its books of account and insurance claim relating to the business was less recovered to the extent of Rs. 3,57,206/- which was allowable as a business loss u/s 37(1) of the Act. Similarly, the annual performance incentive payable was related to the trading business of the assessee which had subsequently been transferred but since the income till 14.10.2005 had been offered by the assessee in the profit and loss account and this performance incentive payable was related to the period ending on 14.10.2005, therefore, it was to be paid by the assessee and was allowable as expenditure. In that view of the matter, we do not see any valid ground to interfere with the findings of the ld. CIT(A).- Decided in favour of assessee. Disallowance of expenses on account of ESOP expenses - whether expenses not related to slump sale - CIT(A) allowed the claim - Held that:- In order to give effect to the business transfer transaction, it became necessary for the assessee to ensure that the management staff accepts to part with their employment with the assessee company and accept the employment of the new company, as the same was a pre-requisite for consummation of the transactions. At the time of parting share holding from management was bought back which was required to be funded by the assessee company. However, the impugned amount was non-recoverable and was a loss on account of business transfer, so it was required to be deducted from the capital gain in respect of slump sale of trading business. In our opinion the ld. CIT(A) was justified in holding that the impugned amount was allowable from the capital gain arisen to the assessee. We do not see any valid ground to interfere with the findings of the ld. CIT(A) - Decided in favour of assessee. Disallowance made by the AO out of the dividend income - CIT(A) restricted part disallowance - Held that:- In the present case, it is noticed that the assessee earned the dividend income of Rs. 3,77,330/- while the AO worked out the disallowance at Rs. 3,97,880/- which was more than the said income. The disallowance was made by the AO in accordance with Rule 8D of the I.T Rules, 1962. The said rule is applicable for the assessment year 2008-09 while the assessment year under consideration is 2007-08. Therefore, the AO was not justified in working out the disallowance by applying the provisions of Rule 8D. In our opinion, the ld. CIT(A) was fair and reasonable in restricting the disallowance of Rs. 37,740/- - Decided in favour of assessee in part. Disallowance on account of Foreign Exchange Fluctuation loss - CIT(A) allowed the claim - Held that:- In the present case, it is noticed that the ECB loan taken by the assessee was old one and in preceding and subsequent year, there was gain on account of increase in exchange rates which had been accepted by the AO but the loss on account of the decrease in exchange rate had been disallowed. It is well settled that no one can blow hot and cold from the same windpipe. However, in the present case, the AO accepted the gains but disallowed the loss which is not permissible. CIT(A) was fully justified in directing the AO to delete the impugned addition.- Decided in favour of assessee. Disallowance u/s 14A - assessee suo motu disallowed a sum of Rs. 2,85,288/- in accordance with the provisions contained u/s 14A of the Act r.w Rule 8D - CIT(A) deleted addition - Held that:- AO without establishing the nexus between the expenses claimed and the tax free income was not justified in making the disallowance of Rs. 12,09,198/-as against the disallowance of Rs. 2,85,288/- suo motu made by the assessee. It is also not the case of the AO that the disallowance worked out suo motu by the assessee u/s 14A of the Act r.w. Rule 8D of I.T Rules at Rs. 2,85,288/- was wrong since no discrepancy was pointed out in the said working of the assessee. We, therefore, are of the view that the ld. CIT(A) rightly deleted the disallowance made by the AO. We do not see any valid ground to interfere with the findings of the ld. CIT(A). - Decided in favour of assessee.

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• 2015 (11) TMI 339
  Accrual of income - Advances received from various producers - whether assessable as income for the respective assessment years or not? - Held that:- The amounts received by the assessee from various producers towards advances cannot be assessed as income of the assessee. Therefore, we set aside the orders of the lower authorities and delete the additions in respect of the advances treated as income of the assessee. These token amounts were received by the assessee for giving preference to the parties for making himself available for future assignments, if finalised after deliberations and consideration of various factors and criteria. Which means that by receiving these advances as token amounts, the assessee is binding not to take up any other assignment prior to finalising the proposed assignment. It is also important to note that on accepting the amounts, the assignments itself is not finalised but the finalisation of the assignment is also dependant on acceptance of the terms and conditions mutually by both the parties. When the assessee has returned these amounts in the subsequent years as the proposed assignment were not materialised then it would not be proper and appropriate to treat these amounts as income of the assessee.See S. Priyadarsan. Versus Joint Commissioner Of Income-tax [2001 (7) TMI 298 - ITAT MADRAS-B] - Decided in favour of assessee.

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• 2015 (11) TMI 306
  Compulsory pre-emptive purchase under Chapter XXC of the Income Tax Act, 1961 passed by the Appropriate Authority under Section 269UD - Whether the impugned order did not contain any finding that the consideration for the transaction was undervalued by the parties in order to evade taxes, which is the mischief sought to be prevented? - Held that:- Undoubtedly one of the objects of the provision is to prevent evasion of taxes by showing an undervaluation which is more than 15% of the true value of the property and which in turn carries an implication that some portion of the value is not shown in the agreement or the deed but passes by way of unaccounted money. But it is not possible to say that it must be alleged in the show cause notice or a finding must be rendered in the order that there is evasion of taxes as a sine qua non for its validity. Nor is it possible to hold that the onus of establishing undervaluation with a view to evade tax is on the revenue. The true position seems to be that a significant undervaluation, greater than 15% below the fair market value raises a rebuttable presumption that there is an attempt to evade taxes. In C.B. Gautam’s case (1992 (11) TMI 1 - SUPREME Court) this Court observed that an allegation of such undervaluation of more than 15% raises a rebuttable presumption of evasion of taxes which renders an opportunity to show cause necessary. Therefore, such an opportunity must be read into the provisions of Chapter XXC The High Court has failed to render a finding on the relevance of comparable sale instances, particularly, why a sale instance in an adjoining locality has been considered to be valid instead of a sale instance in the same locality. The other aspects of the impugned order of the appropriate authority in the earlier part of judgment seems to have been missed. In the result, we find that the appeal deserves to be allowed and is hereby allowed. The impugned order dated 20.02.2004 passed by the High Court of Bombay at Nagpur is set aside. Consequently, order dated 29.07.1994 passed by the appropriate authority under Section 269UD (1) of the Act is also set aside.

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• 2015 (11) TMI 305
  Materials properly scrutinized or not - Whether plea of the assessee that the AO has not scrutinized the materials submitted before him and made additions based on a priori considerations – Held that:- When there is a clear and categoric admission of the undisclosed income by the assessee himself, there is no necessity to scrutinize the documents - The document can be of some relevance, if the undisclosed income is determined higher than what is now determined by the department - loose sheets found during the search are not the sole basis for determining the tax liability - It is a piece of evidence to prove undisclosed income - The printout statements of undisclosed income is not disputed by the assessee and in his sworn statements it is accepted - outstanding loans to be recovered are in the range of Rs. 25 Lakhs to 30 Lakhs – thus, the order of the Tribunal and HC is upheld – Decided against assessee.

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• 2015 (11) TMI 304
  Unexplained cash credit under Section 68 - Held that:- The orders of the CIT (A) and ITAT deleting the addition made by the AO of the sum corresponding to 65185 shareholders are set aside. The said sum will stand added to the income of the Assessee. However, the orders of the CIT (A) as confirmed by the ITAT deleting the addition made in respect of the amount brought in by 50 + 17 shareholders are upheld. Also, the order of the CIT (A), affirmed by the ITAT, remanding the matter to the AO in respect of 8 persons and some part of 25 persons who were not traceable and whose addresses had not been furnished is upheld. Payment of supplemental lease rent - Disallowance under Section 195 read with Section 40 (a) (i) of the Act for non-deduction of tax at source from payment to non-residents for maintenance reserve (supplemental lease rent) - CIT (A) deleted the addition confirmed by ITAT - Held that:- On facts the Revenue was unable to point out any clause in the agreement that required the lessor to provide facilities or services in connection with the leased aircraft. Therefore, the supplemental rent did not fall within the ambit of the exclusionary provisions of Section 10 (15A) of the Act. Since prior to 1st April 1996 such payments continued to be exempted under Section 10 (15A) of the Act, they were not chargeable to tax. Consequently, there was no obligation on the Assessee to deduct the tax at source under Section 195 of the Act. The question of holding the Assessee as an Assessee in default under Section 201 (1) of the Act, therefore, did not arise. Thus the Court affirms the order of the ITAT deleting the additions made by the AO under Section 195 read with Section 40 (a) (i) of the Act on account of the non-deduction of tax at source for the payment of supplemental lease rent to the various lessors, i.e., ILFC, AMTEC, Malaysian Airlines and Lufthansa. Training and manpower development - Held that:- Payment for payment for training and manpower development the Court remands the matter for both periods i.e. FYs 1994-95 to 1998-99 and AY 1996-97 to the ITAT for a fresh decision in accordance with law as the insertion of an Explanation below Section 9 (2) of the Act with retrospective effect from 1st June 1976, making the place of rendering services redundant, has not been considered. Again, it is necessary for the ITAT to consider, in the context of the agreement with HFTL and the Article 13 (4) (c) of the DTAA with UK, whether any technology was 'made available' to the Assessee and whether there was payment for such services. Payment for the computerised reservation system - non-deduction of TDS from payment to non-residents for computerized reservation system - Held that:- The Court finds that no objection was raised in AY 1995-96 with respect to the certificates issued by ITO (TDS). The ITAT also confirmed that the said certificate issued by ITO (TDS) was valid. The Revenue has not able to persuade this Court to hold that the said decision is perverse. The Assessee has made the payment after obtaining the said certificates. The issue is decided in favour of the Assessee and against the Revenue. Free tickets - Held that:- Free charged tickets were being issued on account of business promotion to various persons and merely because they have been issued to spouses or infants or where full names had not been given it cannot be presumed that they were not for business purposes. It was held that ‘this discretion of the management at the time of issue of FOCs is of the issuance thereof and the Department to the best of our understanding has no right to question the prudency of the decision.’ There was no basis for disallowance of 50% of such expenses. The view taken by the CIT (A) as concurred with by the ITAT appears to be plausible. The disallowance of 50% of these expenses appears to be not based on any material. Accordingly, the said issue is answered in favour of the Assessee and against the Revenue. Interest on borrowed capital - Held that:- The CIT (A) allowed the claim of the Assessee after observing that the AO did not hold the interest payment to be excessive or unreasonable and it was found factually that ‘not a single paisa has been advanced to the four sister concerns out of the borrowed funds’ and that the AO has himself accepted that ‘the outstanding amounts were on account of the trading connections.’ Accordingly, the addition of Rs. 1,42,76,534 made by the AO was deleted. The ITAT accepted the factual finding that the Assessee had allowed its sister concerns to retain the amount as a result of the trading transactions. Further the entire amount was taken by the Assessee for the business purpose. Therefore, there could be no disallowance of interest. Foreign travel expenses - Held that:- The CIT (A) found that the decision of the AO was ill founded, without proper appreciation of the facts of the Assessee’s case and that the entire foreign travelling expenses were incurred after obtaining approval from the R.B.I. for purchase of foreign currency from the market which can never be done as an afterthought. It was observed that the agreement of the Assessee with Hughes Flight Training Ltd. clearly provided that the latter was not to give training to the flight crews in India. The CIT (A) demarcated the expenditure incurred on travel of relatives of the directors and confirmed an addition to that extent in the sum of Rs. 2200. The expenditure on travel in which the destination of the journeys were not mentioned was also separated and this expenditure in the sum of Rs. 8,26,638 was restored the matter back to the AO for a fresh determination so as to give an opportunity to the Assessee to produce the necessary evidences. The addition of the remaining expenditure in the sum of was deleted. Consultancy charges - Held that:- On this aspect the ITAT, for the AY 1995-96 held that the services rendered by Sahara India International Corporation Limited (‘SIICL’) to the Assessee was in connection with the lease of two aircrafts and the payment made to it for the services rendered. The Revenue had been unable to show as to how such payment should be treated as unreasonable. The Court finds that even in the present appeal the Revenue has been unable to show that the said payment has been excessive or unreasonable. The issue is decided in favour of the Assessee and against the Revenue. Staff welfare expenses - Held that:- CIT (A) was right in observing that it was not necessary for every employee to sign a voucher and that the AO has erred in treating the staff welfare expenses as entertainment expenses. However, the CIT (A) found that the expenses claimed as conveyance expenses were in the nature of entertainment expenses as defined by Section 37(2)(iii) and directed the AO to restrict the disallowance insofar as conveyance expenses. The Court is unable to find any illegal infirmity in the order of the CIT (A) as upheld by the ITAT Advertisement and publicity expenses - Held that:- The issue has been answered in favour of the Assessee by the decision of the Gujarat High Court in Saurashtra Cement and Chemical Industries v. CIT [1994 (10) TMI 30 - GUJARAT High Court] which observed that merely because the expenditure relates to an earlier year, it does not become a liability payable in the earlier year unless it can be said that the liability was determined and crystallized in the year in question on the basis of maintaining accounts on the mercantile basis. Air travel tax - Held that:- Section 43B is only attracted when the Assessee claims deduction for any sum payable by way of tax or duty under any law for the time being in force, and, where, as in the case of the Assessee, no charge is claimed or made to the profit or loss account, there was no question of disallowing the amount taken to the balance sheet on the liabilities side or of ‘adding back’ and deleted the addition. The Court upholds the order of the ITAT which affirmed the order by the CIT (A) deleting the above addition. Limitation under Section 201 - Held that:- The payment in question for the AY 1995-96 pertained to the payment made to Jeppson & Co. for navigational data. It is noticed that the issue is covered by the decision in CIT v. Mak Japan Broadcasting (2008 (4) TMI 182 - DELHI HIGH COURT) and it is answered in favour of the Assessee and against the Revenue. This amendment to Section 210 of the Act with effect from 1st April 2010 provided for an extended limitation period of seven years. However, that amendment was prospective as held in Bhura Exports Limited v. The Income Tax Officer (TDS) (2011 (8) TMI 449 - CALCUTTA HIGH COURT ).

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• 2015 (11) TMI 303
  Receipt arising on assignment of TDR - whether not taxable in the hands of the assessee society? - whether the appellant society is the legal and beneficial owner of the land and the FSI is available to the society and therefore, the right to construct additional built up area on the land belonged to the appellant society and not with its members ? - Held that:- the issues arising herein stand concluded in favour of the respondent-assessee and against the revenue by the decisions of this Court in CIT Vs. Sambhaji Nagar Coop. Hsg.Society Ltd [2014 (12) TMI 1069 - BOMBAY HIGH COURT]

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• 2015 (11) TMI 302
  Maintainability of the petition on the ground of there being an alternative statutory remedy - Disallowance of the final installment of the price paid for milk - Held that:- This court is of the opinion that the petitioner has made out a strong case to contend that the present writ petition is maintainable despite the fact that the petitioner has availed of an alternative remedy against the impugned order, inasmuch as, the lapse on the part of the Assessing Officer is quite glaring and the high pitched assessment made as a result of ignoring the decision of the jurisdictional High Court results in palpable injustice to the petitioner. Nonetheless, without expressing any opinion on the maintainability of the present petition, considering the fact that the petitioner has already availed of the remedy of appeal before the Commissioner of Income-tax (Appeals) against the impugned order in relation to several points, including the point involved in the present case, this court is not inclined to exercise its extraordinary jurisdiction, inasmuch as, interference by this court would result in examination of the same order, may be, on different points by the Commissioner (Appeals) as well as this court, leading to an anomalous situation. High Court must be followed by all authorities and subordinate Tribunals when it has been declared by the highest court in the State and they cannot ignore it either in initiating proceedings or deciding the rights involved in such a proceeding. If in spite of the earlier exposition of law by the High Court having been pointed out and attention being pointedly drawn to that legal position, proceedings are initiated, it must be held to be a wilful disregard of the law laid down by the High Court and would amount to civil contempt as defined in section 2(b) of the Contempt of Court’s Act, 1971. Subject to the above observations, the petition is disposed of as not entertained. However, having regard to the peculiar facts of the case, the Commissioner (Appeals) is directed to hear and decide the appeal as expeditiously as possible, and preferably within a period of two months from the date of receipt of a copy of this order. Considering the fact that in earlier years the issue had been decided in favour of the petitioner, there shall be no coercive recovery pursuant to the demand notice to the extent of Rs. 48,92,85,432/-, which is the component pertaining to the addition in question.

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• 2015 (11) TMI 301
  Entitlement to Issue Management Expenses - Held that:- It is not in dispute that in CIT v. Havels India Ltd.[2012 (5) TMI 604 - DELHI HIGH COURT] this Court has held that “the expenditure incurred in connection with issue of debentures or obtaining loan” should be considered as revenue expenditure. In the present case the expenditure incurred is in relation to issuance of convertible bonds. Accordingly, the question framed is answered in the affirmative i.e. in favour of the Assessee and against the Revenue. Additions made on the basis of the show cause notices without the AO conducting any independent enquiry could not be sustained.

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• 2015 (11) TMI 300
  Revision u/s 263 - Held that:- Section 263 has been invoked on 3 grounds namely the claim of deduction on account of amortized value of lease hold land which according to CIT was not allowable, the claim of depreciation at 15% on office equipment and the deduction u/s. 35D of the Act. On the aforesaid 3 issues, it is seen that during the course of assessment proceedings, A.O had raised query on all the aforesaid 3 issues and the same were also replied by the Assessee vide letters dated 21.03.2013, 08.01.2013, 08.11.2012, the copies of which are placed in the paper book at page 37 to 79 of the paper book. Thus it is seen that on the aforesaid 3 grounds, the A.O had raised the query, the same were replied by the Assessee and it appears that the reply of the Assessee was found acceptable to the A.O because no addition on these aforesaid 3 issues were made by the A.O in the assessment order. We find that the Hon’ble Apex Court in the case of CIT vs. Max India Ltd. (2007 (11) TMI 12 - Supreme Court of India) has held that where two views are possible and ITO has taken one view with which CIT does not agree, order of the A.O cannot be considered as erroneous order prejudicial to the interest of Revenue unless the view taken by the A.O is unsustainable in law. On the merits on the issue of amortization of cost of lease hold land, we find that the claim of Assessee of amortized value of lease hold land development was not u/s. 35D whereas ld. CIT in the order has held that the claim of Assessee was u/s. 35D and therefore in such a situation, A.O’s order on that issue cannot be considered to be erroneous more so because there was no such claim u/s. 35D by Assessee. As far as the claim of depreciation on office equipments @ 15% is concerned, it is Assessee’s submission that the claim of depreciation at 15% on the office equipment which comprises of similar items as are in the present year, has been allowed by the A.O in earlier years in the assessment order passed u/s. 143(3) and those orders have attained finality. As far as the claim of deduction u/s. 35D is concerned it is not the case of the Revenue that the expenses have been incurred in the year under consideration but on the contrary it is assessee’s submission that the same have been incurred in earlier years and the deduction u/s. 35D has also been allowed in earlier years. It is also not a case of the Revenue that on the issue of deduction under 35D, deduction for earlier years has been withdrawn by Revenue. In such a situation, without disturbing the earlier years, it cannot be said that the claim of deduction u/s. 35D was not allowable to the Assessee. The aforesaid submissions of ld. A.R has also not been controverted by Revenue. Further, before us Revenue has not brought any material on record to demonstrate that the view taken by the A.O was impermissible view and was contrary to law or was upon erroneous application of legal principles initiating the exercising of revisionary powers u/s. 263. Thus CIT was not justified in resorting to revisionary powers u/s. 263 - Decided in favour of assessee.

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• 2015 (11) TMI 299
  Registration u/s 12AA denied - whether aims and objectives of the Trust are charitable in nature? - Held that:- Respondent society which was admittedly running a Polytehnic College and the activities were interwoven for furthering the projects and activities pertaining to education, registration should be granted to the respondent society with the rider that the same could always be cancelled if it came to the notice of the CIT that the society was not carrying on the activities as per its objects. See Commissioner of Income Tax Versus Varanasi Welfare Trust, Varanasi [2014 (11) TMI 446 - ALLAHABAD HIGH COURT] - Decided in favour of assessee.

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• 2015 (11) TMI 298
  Disallowance of rent to Warehouse + contract payment to NBHC u/s 40(a)(ia) - non deduction of TDS - Held that:- In the present case, it is an admitted fact that the assessee reimbursed the salary to the guards of the bank and there was no contract in between the assessee and NBHC. Guards were deputed by the bank, but the expenses were reimbursed by the assessee. The assessee reimbursed the expenses to the bank and the bank ought to have deducted the TDS when there was a contract in between the bank and the NBHC, but there was no contract between the assessee and NBHC. Therefore, provisions of section 40a(ia) were wrongly applied by the ld. AO, as the assessee was not required to deduct TDS u/s 194C of the Act on the reimbursement of the expenses. In that view of the matter, addition on account of disallowance is deleted. As regards to the other issue relating to the payment of rent paid to the warehousing Corporation, the ld. CIT(A) categorically observed that the assessee was asked to produce evidence that the Haryana Warehousing Corporation and Central Warehousing Corporation are entities which are government and statutory authorities or local authorities covered u/s 10(20) or 10(20A) of the Act, but the assessee was not in a position to produce any evidence. It is well settled that when any assessee claims any benefit or exemption under any provision of the statute, it is for the assessee to produce the relevant documents or evidence, on the basis of which it is claiming such a benefit or exemption. However, in the present case, it is noticed that the AO in the assessment order nowhere stated that he asked the assessee to produce such an evidence - set aside this issue back to the file of AO, to be decided afresh in accordance with law, after providing due and reasonable opportunity of being heard to the assessee. - Decided partly in favour of assessee for statistical purposes.

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• 2015 (11) TMI 297
  Rejection of book results under section 145 - estimating the income at 5 percent of gross receipts - Held that:- Stock register may be important for manufacturing industries but when it comes to the case of contractor, it may not be important as the entire material purchased, might have been consumed and charged to profit and loss accountant and the closing stock working progress has been shown by the assessee. In the circumstances, in our opinion, the non-maintenance of stock register alone cannot enable the Assessing Officer to reject the books of account. The Hon'ble Gujarat High Court in the case of CIT Vs. Vikram Plastic [1998 (8) TMI 43 - GUJARAT High Court] held that no specific discrepancies or defects in the books of account of the assessee has been pointed out, nor any material was brought to establish that the purchases and expenses had been inflated or the sales had been suppressed and in the absence of any such material or finding given, there was no justification in invoking the provisions of Section 145(2) of the Act. Thus in the present case Assessing Officer was not justified in rejecting the book results without pointing any specific defects in the books of account. - Decided in favour of assessee. Taxing of interest received due to late payment of amount due to it - business income or income from other sources - Held that:- The interest received by the assessee on account of delay in the payment of money due to it cannot be taxed separately but only as an income from business. Accordingly, this ground of appeal filed by the assessee is allowed in its favour. See CIT Vs. Govinda Choudhury & Sons [1992 (4) TMI 8 - SUPREME Court] - Decided in favour of assessee.

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• 2015 (11) TMI 296
  Breach of natural justice - non speaking order - CIT(A) has dismissed the assessee's appeal, ex parte, qua the assessee - Held that:- The learned CIT(Appeals) has disposed of the assessee's appeal, ex parte, qua the assessee, observing that assessee did not substantiate its claim. Since assessee was not present, therefore, in order to provide substantial justice to assessee, consider it appropriate to provide one more opportunity in conformity with the principles of natural justice. The order of ld. CIT(A) is accordingly set aside and the matter is restored back to his file to decide the appeal de novo in accordance with law, of course, after affording reasonable opportunity of being heard to the assessee. - Decided in favour of assessee by way of remand.

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• 2015 (11) TMI 295
  Treatment of share premium receipts - capital or revenue receipt - Held that:- CIT(A) correctly followed the decision of Hyderabad Bench of ITAT in the case of M/s. PVP Ventures Limited, Hyderabad [2013 (11) TMI 225 - ITAT HYDERABAD] wherein it was held that the receipt as share premium is a capital receipt and cannot be considered as revenue receipt. - Decided against revenue

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• 2015 (11) TMI 294
  Addition on account of commission paid to the director - CIT(A) deleted the addition - Held that:- Assessing Officer has disallowed the commission paid to Shri Gautam Khandelwal, shareholder and director of the company on the ground that it is actually dividend. However, as recorded by the learned Commissioner (Appeals), Shri Gautam Khandelwal, is only 4.28% of the shareholder of the company and distribution of dividend, if at all, it is declared by the company would be very negligible, hence, it is hard to believe that for avoiding payment of distribution tax on such negligible amount of dividend, the assessee would have paid dividend to Shri Gautam Khandelwal in the garb of commission. Moreover, the assessee has produced material on record to show that commission payment is in terms with the terms of appointment and towards services rendered by the director. Nothing has been brought on record by the Assessing Officer to controvert the aforesaid claim of the assessee. That being the case, the disallowance of commission paid, in our view, is without any valid reason. Accordingly, finding no infirmity in the order of the learned Commissioner (Appeals) - Decided against revenue. Disallowance of plantation expenses - CIT(A) deleted the addition - Held that:- As could be seen the only reason on which the Assessing Officer disallowed the expenditure is it is of enduring benefit, hence, is a capital expenditure. Having held so, strangely enough, the Assessing Officer did not allow any depreciation. However, as could be seen from the submissions made by the assessee right from the assessment stage, the expenditure incurred was not merely for beautification of the factory premises but for Prevention of Pollution Control and Environment Safety. It is also evident, the assessee has to incur such expenditure as mandated by pollution control and environmental safety laws. It is also evident that the allegation of the Assessing Officer that such expenditure is not recurring in nature is without any basis as the learned Commissioner (Appeals) has recorded a finding of fact that the assessee had been incurring such expenditure from earlier assessment years and the Assessing Officer has allowed such expenditure fully. Considering the aforesaid facts and circumstances, we do not find any reason for disallowance of the plantation expenditure claimed by the assessee. Accordingly, we uphold the order of the learned CIT(A) - Decided against revenue.

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• 2015 (11) TMI 293
  Revision u/s 263 - Disallowance of interest u/s 36(1)(iii) - Held that:- AO asked details of the loan and advance being balance-sheet items (asset) and no question was raised on allowability or disallowability of the interest. Even the AO did not go into the point of interest-free advance in the question asked from the assessee. Thus merely asking the details of loan and advance without questioning the claim of the interest would not by any stretch of imagination raise a presumption that the issue of allowability of claim of interest was in the view of the AO. Further, the assessment order does not remotely indicate any thing that there was any thought process by the AO on the interest claim. Rather the AO's query was restricted to the balance sheet item and does not touch the profit and loss account of the assessee. Therefore, we are in complete agreement with the CIT that there is a lack of inquiry on the part of the AO which renders the assessment order erroneous so far as it is prejudicial to the interests of the revenue. Rejection of TDS credit - AO rejected the claim of the credit of the said amount of TDS u/s 194C towards mobilisation advance on the ground as such credit cannot be allowed when the corresponding receipt has not been offered to tax - Held that:- As decided in assessee's own case for the assessment year 2002-03 as held if the amount is a mobilisation advance and not an income at all, the question of paying income tax would net arise. When the gross receipts is offered and in that assessment year he has suffered loss, the question of paying any tax on the said amount also does not arise. A conjoint reading of Sections 194C, 199 & 237 of the Act makes it clear that if there was no liability to pay tax, the TDS paid is liable to be refunded and that is absolutely what the Tribunal has stated. - Decided in favour of assessee. Disallowance of interest on account of interest-free advance made to Shri Manohar Shetty - Held that:- Interest-free loan was given from borrowed fund. In view of our finding on this issue for the assessment year 2006-07, we uphold the impugned order of the CIT(A) qua this issue as the argument that the interest free loan had been given for the purpose of facilitating the procedure of getting the work contract from NHAI does not appeal to reason and therefore fails to fulfill the test of preponderance of probability and also commercial expediency. In short, it cannot be held that the loan was for the purpose of business. It is by chance and opening balance was there which was made a cog in the wheel of the reverse engineering. Besides it is admittedly not from own funds. Besides, MS cannot be held as a sister concern of the appellant. Therefore A.O. is justified to treat the interest receivable from MS as the income of the appellant - Decided against assessee.

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• 2015 (11) TMI 292
  Unexplained receipts of share application money - CIT(A) deleted the addition on the ground that the assessee had provided all the necessary details, including confirmation letters, share application forms, ward/circle where the share applicants/investing companies were assessed, and thus have discharged the burden of proof that lay on the assessee also the AO had made enquiries by issuing summons u/s 131 to the share applicants and that all the share applicants have replied to the summons and the AO had recorded statements from some share applicants also - Held that:- The assessee had discharged the onus that lay on it u/s 68 of the Act. The A.O. has not brought on record any adverse material to disprove the claim of the assessee. The factual finding of the Ld.CIT(A) could not be controverted by the Ld.D.R. Under these circumstances we uphold the order of the First Appellate Authority and dismiss this ground of the Revenue. - Decided in favour of assessee.

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• 2015 (11) TMI 291
  Addition made towards unaccounted receipt - assessee claimed TDS - CIT(A) deleted the addition - Held that:- The payment for the same had been received by the assessee after TDS in April 2006. We find that the assessee has duly accounted for this receipt in its profit and loss account in consonance with the mercantile system of accounting regularly employed by it. We also hold that the assessee had not claimed the TDS on the subject mentioned receipt in Asst Year 2006-07 as stated by the Learned AO and instead claimed the same with offer of corresponding income in Asst Year 2007-08. Hence we find no infirmity in the order of the Learned CITA in this regard. - Decided against revenue. Addition made towards bogus purchase of sulphur and cement - CIT(A) deleted the addition - Held that:- Assessee filled complete details of purchases made by the assessee from different parties together with the details of sales made out of such purchases. The said paper book also contained the details of payments made to those suppliers for purchases made by the assessee by account payee cheques. We have perused the entire paper book filed by the assessee in this regard. We also observe that the Learned CIT(A) had called for a remand report from the Learned AO with regard to the production of these documents and the Learned AO did not offer any comments on the same. We also find that the suppliers have been produced before the Learned AO under summons proceedings u/s 131 of the Act. Just because the suppliers had not brought their books of accounts during the course of summons proceeding, we hold that the assessee could not be faulted with. Hence we find no infirmity in the order of the Learned CIT(A) - Decided against revenue.

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• 2015 (11) TMI 290
  Disallowance of prorata depreciation - Held that:- When a loan is waived/written off by an assessee, it is not an allowable deduction as it is capital in nature and similarly when the loan is waived in favour of assessee it retains its capital nature and does not result into a taxable receipt. It further submitted that when an asset is revalued up-ward depreciation allowance as per Income Tax Act remains as per WDV of assets. Similarly, the assessee pleaded that when fixed assets of a company are revalued downward due to receipt of grant or waiver of loan, the consequent reduction in depreciation on the amount of waiver is not justified. However, the Assessing Officer did not agree with the contention of the assessee and made the addition confirmed by ITAT. - Decided against assessee. Allowability of prior period expenses - Held that:- FAA has correctly allowed the claim of the assessee by observing that lodging of the claim by the company on railways for the wagons not reaching their destination and being reversed in all cases where the railways have been able to prove their delivery at some plant or stock yard of the assessee though not the original destination, appears to be a regular feature, in past many years. Thus there is sufficient force in the submissions of the assessee and this is a regular feature, which is normal debit in almost every year.Thereafter he further held that since this debit of Rs. 102 lakhs is on account of a claim accounted as income in the earlier A.Y. which has been reversed in this year after settlement with the railways, it is allowable in this year. Therefore the disallowance of Rs. 102 lakhs is deleted in this year also. - Decided against revenue. Allowability of depreciation on water supply and sewerage plant - Held that:- This issue is covered in favour of the assessee and against the Revenue by the decision of the ITAT in a ssessee's own case for the A.Y. 2007-08 Disallowance of interest claimed on KFW Germany loan transfer to Foreign Exchange Fluctuation Reserve - Held that:- Admittedly this issue has arisen for the A.Y. 1998-99 onwards to the A.Y. 2002-03. The ITAT had deleted the disallowance in all these years. For the A.Y. 2007-08 the ITAT upheld the order of the Ld.CIT(A), where this disallowance has been deleted. Depreciation on assets not in active use is covered in favour of the assessee and against the Revenue for all the earlier A.Ys. Rate of depreciation allowable on "fibre optic computer net working" and on "UPS of computers" - Held that:- Admittedly this issue is covered in favour of the assessee by the order of the Tribunal for the A.Y. 2007-08, wherein the Revenue was directed to grant depreciation at the rate of 60%, by following the judgement of the Jurisdictional High Court in the case of CIT vs. BSES Yamuna Powers Ltd [2010 (8) TMI 58 - DELHI HIGH COURT ] - Decided in favour of assessee. Disallowance u/s 43B of provident fund dues deposited within the grace period - Held that:- The fact that the PF dues were deposited within the grace period, allowed under the respective Act, and before the due date of submitting the return u/s 139(1) of the Act is not in dispute - See Commissioner of Income Tax Versus AIMIL Limited and others [2009 (12) TMI 38 - DELHI HIGH COURT] wherein held the assessee can get the benefit if the actual payment is made before the return is filed, - Decided in favour of assessee.

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• 2015 (11) TMI 289
  Disallowance of expenditure under Section 153A - Held that:- No incriminating material was found during the search regarding the additions made in the assessment order, that the additions were not justified, that the order passed by the AO was non-est, that the AO had not complied with the section 153D of the Act - Decided in favour of assessee.

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• 2015 (11) TMI 288
  Exemption under Section 11 denied - as per AO diversion of fund to the private limited companies for construction of a meditation hall by two private companies would amount to diversion of fund other than the object of the trusts - Held that:- The moment Shri V. Vijaykumar relinquished his trusteeship, it cannot be said that Shri V. Vijaykumar’s son and daughter-in-law are interested persons in the trusts. Therefore, this Tribunal is of the considered opinion that there is no violation of Section 13(1)(d) of the Act. It is not in dispute that the entire corpus donation and other donations were used for the construction of meditation hall at Varadalapalam Mandal. Therefore, even if the claim of the assessees with regard to receipt of corpus donation is disbelieved, then the so-called donation has to be treated as income of the assessee and it is to be allowed as application for creating infrastructure. Since admittedly the donations were used for construction of meditation hall, this Tribunal is of the considered opinion that the entire income has to be held as application of income. Therefore, the CIT(Appeals) has rightly allowed the claim of the assessee. The fact that the meditation hall was handed over to the assessee-trusts is not in dispute. The property tax assessment by local body also stands in the name of two assessee-trusts. Therefore, this Tribunal is of the considered opinion that when the two companies constructed the meditation hall and handed over the same to the assessee-trusts and the property tax assessment stands in the name of assessee-trusts, the assessees are the owners of the property under the provisions of Income-tax Act. Under the Indian law, a land can belong to one person and the building can be owned by other person. In the case before us, the land in which the meditation hall was constructed belongs to a different person, but the building was constructed by the two companies on the funds advanced by the assessee-trusts. After construction, the building was handed over to the assessee-trusts. Therefore, there was transfer of property within the meaning of Section 2(47) of the Act. Under the common law, registration of document is required when the property value exceeds more than Rs. 100/-. However, under Section 2(47) of the Act, registration of the document is not mandatory. When the physical possession of the building is handed over to the assessee-trusts and allowed the assessee-trusts to enjoy the same, this Tribunal is of the considered opinion that the assessee-trusts became the owners of the meditation hall. Therefore, for all practical purpose, the assessee-trusts become the owner of the meditation hall constructed by the two companies on the funds advanced by the assessee-trusts. The treatment of the assessee in the accounts of the companies or trusts cannot override the provisions of Income-tax Act. In other words, the provisions of Income-tax Act would prevail over the treatment of the assessee in the accounts. Therefore, this Tribunal is of the considered opinion that there is no violation of any of the provisions of Sections 11, 12 & 13 of the Act. - Decided in favour of assessee.

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• Customs

• 2015 (11) TMI 313
  Exemption from levy of additional duty (CVD) where the manufactured goods are exempted from duty of excise - Amendments to nullify the decision of Apex Court - Notification No.30/2004-CE, dated 9.7.2004 provides the exemption subject to no cenvat credit - Apex Court in the case of Aidek Tourism Services Private Limited v. Commissioner of Customs [2015 (3) TMI 690 - SUPREME COURT], and S.R.F. Limited v. Commissioner of Customs [2015 (4) TMI 561 - SUPREME COURT], the Supreme Court held that the benefit of the said exemption Notification was available to importers of the goods described in the table under the Notification and that the proviso to the Notification may not have any application to importers, as they could not in any case, avail CENVAT credit. Petitioners seek the declaration that the words "and not the buyer of such goods" incorporated in the original Notification No. 30/2004 dated 9.7.2004, through the amending Notification No.34/2015 dated 17.07.2015 is null and void in the light of Section 3(1) of the Customs Tariff Act, 1975 and Section 5A of the Central Excise Act, 1944 - Request of release the goods covered by 6 Bills of Lading, by extending the total exemption from payment of additional duty in terms of the original exemption Notification dated 9.7.2004. Held that:- Wherever the Notifications prescribed conditions, which were merely procedural in nature, but did not involve the payment of any duty of excise on the inputs, the Court interpreted the Notifications in favour of the assessee, in view of the fact that an importer could not comply with those procedural formalities. But, wherever the Notifications imposed either (i) a condition that the input used for the manufacture of the exempted goods, should have suffered a duty or (ii) a condition that duty ought to have been paid and CENVAT credit not claimed, the Court interpreted such Notifications in favour of the Revenue (except perhaps in the case of AIDEK and SRF). A Notification such as the one bearing No.030/2004 dated 9.7.2004, which merely stipulates a condition that no CENVAT credit ought to have been availed in respect of the duties paid on the inputs, is in no way different from a Notification, which stipulates a condition that the inputs ought to have suffered a duty and no CENVAT credit should have been claimed on the same - Only restriction imposed upon a contracting party is that they should not subject the importer to internal tax in excess of those applied to like domestic products. The principle behind Article III of GATT 1947 is what is incorporated in Section 3 of the Customs Tariff Act 1975. We have no quarrel with the proportion that an importer cannot be subjected to a tax which is in excess of those imposed upon like domestic products. - denial of the benefit of the exemption notification to the importer does not put him to a disadvantageous position than the domestic manufacturer, neither Section 3 nor the provisions of GATT would stand breached. Therefore, we have no hesitation in rejecting the arguments on the basis of Article III of GATT. Merely because an organization representing the interests of domestic manufacturers made a representation to the Government, the amendments issued to the exemption notification cannot be said to be a malafide exercise of power. As a matter of fact by the impugned amendment notifications dated 17.07.2015 and 21.07.2015, the Government had done something that may hit some of the domestic manufacturers also. A domestic manufacturer who would have otherwise been entitled to the benefit of the exemption notification dated 9.7.2004, may not any more be entitled to the benefit of the notification, unless he satisfies the newly incorporated proviso and the Explanation. Therefore, the amendments cannot be seen in isolation. It can be found from the chart that certain exemptions could be absolute and unconditional. If an exemption notification is absolute and unconditional, all domestic manufacturers, will be entitled to the benefit of the same. As a consequence, the importers will also be entitled to the benefit of the same. - in cases where the exemption is only conditional, it is only those domestic manufacturers who fulfill the conditions, who will be entitled to the benefit of the exemption notification. A domestic manufacturer who does not fulfill the condition prescribed in the exemption notification, will not be entitled to the benefit of exemption. Since he is manufacturing goods outside the country, he would not have paid Duty of Excise to the Government of India on the inputs used in his product. Nevertheless he would equate himself with a person who has not claimed CENVAT credit and avail the benefit of the exemption notification. The result is that a domestic manufacturer pays an extra amount of Rs. 100/-, in the example given above, while the importer does not pay anything. Neither Section 3 of the Customs Tariff Act, 1975, nor Article III of GATT required that an importer should be placed in a more advantageous position than the domestic manufacturer. The only requirement under GATT and even under Section 3 of the Customs Tariff Act is that the importer should not be put to a disadvantageous position than the domestic manufacturer. But what the petitioners want is to place the importer in an advantageous position. This is not permissible. The exemption notifications dated 17.07.2015 and 21.07.2015 are issued in exercise of the power conferred by Section 5A. Section 5A(1) itself empowers the Central Government to grant exemption either absolutely or subject to such conditions as they may stipulate. If the Central Government has the power to grant exemption subject to certain conditions, they have the power even to modify the conditions. This is why neither the source of power nor the method of exercise of such power is questioned by the writ petitioners. The impugned amendments are not in excess of the delegated power conferred under Section 5A(1). Therefore, at the outset, the amendments are not ultra vires Section 5A(1). The amendments are not ultra vires Section 3 since the importers are not placed in a more disadvantageous position than that of the domestic manufacturers. By prescribing certain conditions for availing the benefit of exemption, the impugned amendments treat even the domestic manufacturers differently. Placing the importers on par with those domestic manufacturers who do not get the benefit of the exemption notification, does not strike at the root of Section 3. Therefore, the notifications do not offend Section 3. The petitioners cannot even assail the impugned notifications on the strength of Article 14 of the Constitution. If the domestic manufacturers themselves are classified into two categories depending upon the nature of the conditions imposed, the classification is reasonable and it has a nexus with the object sought to be achieved by the notification. It must be remembered that the notifications do not seek to differentiate between the importers and domestic manufacturers. They actually seek to discriminate one set of domestic manufacturers from another set of domestic manufacturers. A decision as to the category into which an importer will fall cannot therefore be taken to be discriminatory offending Article 14 of the Constitution. In respect of the exemption notifications that are absolute and unconditional, all domestic manufacturers will be entitled to the benefit of the exemption notification. Therefore, the importers will also be entitled. But, insofar as exemption notifications that are conditional in nature, the respondents will have to see whether all domestic manufacturers will automatically get exemption or some of them may not get exemption due to non fulfillment of the conditions prescribed in the notification. If some of them are not entitled, due to non fulfillment of the conditions, the importers, for whom it is impossible of complying with those conditions, are also not entitled to the benefit. It is this position that is sought to be clarified by the impugned amendment notifications dated 17.7.2015 and 21.7.2015. Hence, there are no merits in the writ petitions. - Decided against assessee.

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• 2015 (11) TMI 312
  Fraudulent drawback claim - Misdeclaration of goods and serial numbers - Held that:- As observed by the Commissioner of Customs, there is sufficient corroboration by the fact that as many as 100 consignments were allowed to be cleared without proper verification. The Appellant has been unable to show that any relevant piece of evidence has been overlooked or that the appreciation of the evidence by the Commissioner or the CESTAT is perverse. - As regards the procedure followed, it is not the case of the Department that the EDI computer system had thrown up these discrepancies. The Department has been able to substantiate that the Appellant had given oral instructions to his subordinates on how they should act. - The Court is conscious that in the criminal case the CBI chargesheet did not name the Appellant as an accused. However, that cannot by itself lead to the inference that in the adjudication proceedings, where the standard is of preponderance of probabilities, the Department has failed to establish its case. - Joseph Kuok was exonerated in the adjudication proceedings does not in any affect the case against the Appellant. The case of the Department against the Appellant stands substantiated by the evidence on record. Considering the number of consignments and the value thereof, the submission that there was heavy pressure of work and therefore, the Appellant cannot be held responsible is unacceptable. - There is no legal infirmity in the impugned orders of the Commissioner of Customs or the CESTAT. Further, the penalty levied on the Appellant cannot be said to be excessive. It does not call for interference. - Decided against assessee.

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• 2015 (11) TMI 311
  Duty demand - Period of import - Held that:- On a perusal of the order passed by the High Court, we find though such a ground was taken, the same has not been adverted to. In view of the aforesaid, we grant liberty to the petitioners to file applications for review within a period of four weeks from today. In case the applications for review are filed within the stipulated time frame, the same shall be dealt with on merits. In case the petitioners meet with unsuccess before the High Court, liberty is granted to them to challenge the main order which is under assail in the present special leave petitions as well as the orders that are likely to be passed in review applications. - Decided against assessee.

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• 2015 (11) TMI 310
  Release on bail - Offences punishable under Sections 22(c), 23(c) and 28 of Narcotic Drugs and Psychotropic Substances Act, 1985 – Petitioner contended that article seized is not contraband and she is not involved in any other criminal cases nor have any criminal antecedents - FSL report did not mention the percentage of drugs in article – Bail shall be granted conditionally – Respondent contended that they made out prima facie case about the accused’s involvement in offence and she have been carrying KETAMINE in her back-pack in a concealed manner - Court should be satisfied that during bail, the petitioner is not going to commit any other offence. - Supreme Court after hearing the parties dismissed the petition held that foundation of the bail order shall not influence the learned trial judge during the trial - Tribunal in the impugned order [2015 (10) TMI 2028 - KARNATAKA HIGH COURT] held that Contraband article is mentioned at Sl. No. 110A of Schedule-H to the NDPS Act thus not prohibited – Some minute details such as it is not mentioned that when the back pack checked was offloaded and brought to airport authorities for inspection; whether the bag was locked and who had the key and how they opened the bag; are missing - Contraband article seized from exclusive possession of Petitioner at the time of seizure; no prima facie material given in support of same.

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• 2015 (11) TMI 309
  Waiver of pre deposit - Misdeclaration of goods - export of Muriate of Potash (MOP) of fertilizer grade as Oil Well Chemical (drilling chemical additive) - Smuggling of goods in violation of the relevant notification of the DGFT - appellant failed to establish that it had procured the goods from a seller - Supreme Court dismissed the appeal filed by the assessee however, granted another 8 weeks time to comply with the Tribunal's order. The appeal was filed against the decision of High Court [2014 (8) TMI 736 - ALLAHABAD HIGH COURT]; wherein High Court held that Tribunal has furnished cogent reasons and also dealt with the issue of financial hardship. On the balance, the Tribunal has directed a deposit of Rs. 20.00 lacs. The impugned order of the Tribunal does not suffer from any perversity nor does the appeal raise any substantial question of law. However, the time for depositing Rs. 20.00 lacs granted by the Tribunal is extended by a further period of four weeks.

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• Corporate Laws

• 2015 (11) TMI 308
  Entitlement to fee continuity benefit claimed under the provisions of Securities & Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 - whether the appellant is entitled to the fee continuity benefit in terms of the Regulations. Regulation 10 mandates that every applicant eligible for grant of a certificate shall pay such fees and in such manner as specified in Schedule III. - Held that:- The facts of the case have been properly appreciated by SAT for coming to the conclusion that the amalgamation was not on account of any compulsion of law. The compulsion of the appellant was a business compulsion to do business as a broker with NSE. Initially the Vadodara Stock Exchange Ltd. had chosen to form another subsidiary company limited by guarantee ignoring the circular of the SEBI dated 16.12.1999 and also the bye rules of NSE laying down conditions for membership but later it decided to have a subsidiary company which could get registration as a broker with NSE. Such decision was effected through amalgamation. Such a situation cannot be treated as a compulsion of law for amalgamation. Even if we accept the submission that the compulsion of law be given a liberal meaning so as to include orders and directions of the SEBI, in the present case it is not possible to accept that amalgamation was forced upon the appellant under orders or directions of the SEBI. Only because the appellant and the parent company Vadodara Stock Exchange Ltd. subsequently decided and opted to do business as a broker with NSE, they chose the path of amalgamation. They could have as well chosen the path of winding up of the earlier subsidiary company. In the facts of the case it is not possible to accept that there was any compulsion of law for the merger/ amalgamation of the VSE Securities Ltd. with the appellant. When the facts disclose that amalgamation/ merger had to be resorted to as an alternative to liquidation then it may be successfully urged that merger/ amalgamation was on account of compulsion of law so as to attract the exemption assured by the SEBI under the circular dated 30.09.2002. The facts of this case even remotely do not suggest any such or similar situation.

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• 2015 (11) TMI 307
  Denial of benefit of fee continuity in terms of paragraph 4 of Schedule III to the Securities & Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 - whether stock brokers who have converted their individual/partnership membership into a corporate entity prior to April 01, 1997 are entitled to the fee continuity benefit in terms of paragraph 4 of Schedule III - Held that:- 'Levy’ and ‘collection’ are not synonyms and generally they occur at different stages. In the present case the legislative intention is to put an embargo on collection in future, in case the converted corporate entity is found entitled to the benefits of fee continuity. Such embargo is clearly to operate prospectively even if there existed some kind of liability in the past on account of fees leviable prior to insertion of paragraph 4 of Schedule III to the Regulations. In any case the rationale in not permitting retrospective operation of laws is only to ensure that subjects are not adversely affected by creation of legal liabilities and obligations for a period already bygone. In the present case the provisions do not create any obligation or liability. They only confer benefits by way of fee continuity on account of fees already paid by the earlier entity before its conversion into a new corporate entity. Even if we were to apply the test of fairness, no exception can be taken to extention of the benefit of fee exemption as provided by the relevant provision in the Regulations. Since the policy behind grant of benefits is to encourage corporatization of individual or partnership members of a stock exchange, the action of extending such benefits without any curb on the basis of date of conversions cannot be held as unfair. As noted earlier the SEBI itself extended the benefit to those converting not only from 21.1.1998 but from 1.4.1997. There is nothing in paragraph 4 or in the explanation to support the stand of the SEBI that the benefits must be confined to conversions taking place after a particular date when no such date finds place in the Regulations. As a result, appeals preferred by SEBI are dismissed and the judgments and orders under appeal passed by SAT are upheld.

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• Service Tax

• 2015 (11) TMI 338
  Rectification of mistake - CENVAT Credit - Renting of property - Jurisdiction to raise demand - Held that:- Department is not suppose to know each and every declaration made outside the Central Excise law. We also note that the Service Tax Registration Certificate, Service Tax Returns and Audit Report did not reveal that Cenvat Credit is being utilized to pay the service tax on the renting of property located at Mumbai. This issue came up in the audit report for the year 2013-2013 issued on 17.1.2013 and the show cause notice was issued on 18.10.2013. During the audit 100% of the invoices may not be seen by audit. The debit invoices do not indicate that the service tax paid from the input service tax credit. Therefore there is no basis for setting aside the demand on limitation. - service tax demand was confirmed on account of wrong utilization of the input service tax credit. Therefore there is no mistake in the order - if the appellant had not paid the service tax out of the input service tax credit, they would have had to pay the tax by cash. To this extent the benefit of interest has accrued to them, therefore interest is payable as held in the order - no mistake apparent on record in our order - Rectification denied.

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• 2015 (11) TMI 337
  Condonation of delay - Assessee underwent financial sickness and became unviable due to no payment of its dues by the service recipient - Due to such closure, Department was not aware of the address at which the orders would be served on the appellant - Held that:- The pitiable condition of the appellant as narrated, deserves consideration since no one prefers to be prejudiced without seeking appeal remedy, facing huge demand ex parte. Appellant reached to Tribunal belatedly for the reasons aforesaid. It appears that the meritorious appeal may be converted into demeritorious one if delay is not condoned. When Tribunal had granted an opportunity earlier making certain observations, it would be proper to condone the delay. - Delay condoned.

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• 2015 (11) TMI 336
  Contesting the service tax liability after admitted the same before adjudicating authority - levy of penalty - Benefit of exemption and abatement as per Notification 9/2004-ST and 1/2006-ST - Duty demand u/s 11D - Held that:- miscellaneous application is devoid of merits and needs to be dismissed for more than one reason. Firstly, we find that the appeal has been filed by the appellant in November, 2010 and the miscellaneous application is filed in April 2015, almost after a gap of five years. The assessee is not able to explain such a delay in filing or taking up additional grounds of appeal before the Tribunal. Appellant had conceded the issue on merits before the adjudicating authority, inasmuch as the adjudicating authority has recorded clearly that the appellant is not disputing the service tax liability demanded along with interest, but the request was to consider and take a lenient view while imposing penalties. Due to these reasons, we hold that the appellant cannot today agitate the issue on merits. Assessee are not contesting the factual findings as to that they had collected the service tax liability from their clients and did not deposit the same to the government treasury. On this factual matrix, we find that the prayer made by the learned counsel as to invoking the provisions of Section 80 to set aside the penalties are unacceptable and not in consonance with the law. In the absence of any justifiable reason, the appellant could not have kept with them an amount collected as service tax. - impugned order is correct and does not suffer from any infirmity - Decided against assessee.

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• 2015 (11) TMI 335
  Denial of refund claim - CHA and terminal handling charges - Held that:- Perusal of the adjudication order shows that learned adjudicating authority while sanctioning refund of Rs. 36,644/- has thoroughly examined the liability aspect of the respondent and also relevancy of the input services which was CHA and terminal handling charges suffering service tax. He held that such services were integrally connected with the export. He has also examined the documents furnished before him in support of claim of refund. - When an elaborate order has been passed by the learned adjudicating authority, interference to the order of that authority is undesirable on merit and unproductive for the Tribunal for which Revenue appeal is dismissed. Also dismissal is desirable on the count of pecuniary limit prescribed for the appeal by the Board to reduce the dispute without repetitive litigation in appeal. - Decided against Revenue.

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• 2015 (11) TMI 334
  Levy of penalty - Activity of supply of temporary labourers to various service recipients - ST3 return not filed - Held that:- Appellant has accepted and admitted that they are liable to discharge the Service Tax liability and interest thereon. They were contesting before the first appellate authority only on the quantum cum tax benefit and also extended period cannot be invoked in some demands. We find that first appellate authority has addressed all the arguments raised by the appellant and reduced the tax liability, in accordance with the law. In our considered view, the appellant having admitted the tax liability and also that all the reliefs which were claimed before the first appellate authority were extended, has not made any case for setting aside penalties. - impugned order is a well reasoned order; considered the entire facts of the case in its correct perspective. We do not find any reason to interfere in such a reasoned order. - Decided against assessee.

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• 2015 (11) TMI 333
  Construction of residential quarters for staff of New Parli Thermal Power Station - Residential Complex or Commercial complex service - Held that:- Revenue has not contested the finding of adjudicating authority in other grounds of appeal strongly. It is also undisputed that the residential buildings constructed by the appellants are allotted by New Parli Thermal Power Station Ltd. as quarters for residential purposes to their employees. We find that the concurrent findings of both the lower authorities are correct and in consonance of law. - Appeal disposed of.

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• 2015 (11) TMI 332
  Waiver of pre deposit - whether pre-deposit of 7.5% of the impugned service tax liability in terms of Section 35F (as amended w.e.f. 06.08.2014 of the Central Excise Act 1944 read with Section 83 of the Finance Act, 1994 is required to be made while filing appeals against order-in-original dated 30.09.2014 when the Show Cause notice in respect thereof was issued before 06.08.2014 - Held that:- Allahabad High Court after inter alia considering the judgements of Kerala High Court in the case of Muthoot Finance Ltd. Vs. Union of India & Ors [2015 (3) TMI 634 -Kerala High Court] and Andhra Pradesh High Court in the case of K Rama Mohanarao Vs. Union of India (2015 (4) TMI 813 - ANDHRA PRADESH HIGH COURT) and the judgement of Supreme Court in the case of Hoosein Kasam Dada (India) Ltd. (supra) came to a clear finding that mandatory pre-deposit is required to be made in respect of the appeals filed on or after 06.08.2014. Defect memos requiring the appellants to make pre-deposit in terms of Section 35F of the Central Excise Act, 1944 (as amended with effect from 06.08.2014) read with Section 83 of the Finance Act, 1994 is upheld - Decided against assessee.

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• 2015 (11) TMI 331
  Imposition of interest and penalty - GTA service, Supply of Tangible Goods Service and Management, Maintenance & Repair Service - Held that:- Strangely the Review order does not challenge the concessional penalty extended by learned Adjudicating authority. It has come to erroneous conclusion that no penalty was levied under Section 78 of the Finance Act, 1994. Revenue has made the observations erroneously without any reason recorded in review order. Learned Adjudicating authority did not impose penalty under Section 78 of the Finance Act, 1994 in respect of GTA Service and Supply of Tangible Goods Service since tax liability was discharged under proviso to Section 73 (1) of Finance Act, 1994. His decision does not appear to be unreasonable. - Decided against Revenue.

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• 2015 (11) TMI 330
  Levy of penalty for delayed payment of service tax - Suppression of facts - appellants are engaged in the manufacture of Detergent Cakes/Powder, Scouring Powder/Bar and were procuring the raw material i.e. Linear Alkyl Benzene (LAB) from M/s.Reliance Industries Ltd., Gujarat to their unit at Ban Majra and Majra - appellants were on mistaken belief that M/s.Reliance was paying the eservice tax - Due tax along with interest paid before issuance of SCN - Held that:- Appellants have paid service tax alongwith interest prior to issuance of show cause notice. Further, the service tax was voluntarily paid by them and the same was informed to the department vide their letter dated 7.6.2011. The Department has not been able to establish any suppression of facts with intention to evade payment of duty on the part of the appellant. In such situation, the imposition of penalty is not warranted. In CCE, Bangalore vs. Master Kleen-[2011 (9) TMI 788 - KARNATAKA HIGH COURT] it has been held that no show cause notice could be issued for imposition of penalty when service tax alongwith interest is paid before issuance of show cause notice. Applying the ratio laid in the above case, and taking into consideration the facts presented, I am of the view that the penalty imposed is unjustified - impugned order is set aside - Decided against Revenue.

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• 2015 (11) TMI 329
  Works contract service - composition scheme once opted, can be changed or not - Held that:- Appellant had opted for discharge of service tax liability on the services rendered by them under the category of works contract by opting to pay the service tax under Composition Scheme. The provisions of Rule 3 (1) of the said Composition Scheme would be applicable in this kind of option to discharge the said service tax liability on works contract - Rule 3(1) starts with an non-obstante clause which indicates that the provision of Section 67 may not be applicable in this case. It is very clear that the said scheme is an optional one and once an assessee opts to discharge the service tax liability under the Composition Scheme, he has to follow the provisions in the said Composition Scheme which will not be bound by the provisions to Section 67 of the Finance Act, 1994. Composition Scheme being optional, having opted for it, appellant has no locus standi to revert back to workout the gross value charged for the services rendered. Factually also we find that the appellant had charged an amount to the service recipient as per the contract entered by them, which would be that the service tax liability under works contract services needs to be discharged on the gross amount charged i.e. entire gross amount charged for the works contract and there cannot be any deduction that can be claimed. - on merits appellant has no case and the differential tax liability as worked out by the adjudicating authority along with interest is correct and needs to be upheld - However, imposed penalty is set aside - Decided partly in favour of assessee.

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• Central Excise

• 2015 (11) TMI 325
  Denial of concessional rate of duty - whether the clearances made by 100% EOUs are entitled to concessional rate of Customs duty provided under EPCG Schemes - Clearances made by 100% EOU - Held that:- concessional rate of duty shall be leviable in respect of clearances effected by 100% EOUs to EPCG units and even the condition of import through specific ports has been clarified to be inapplicable as clearance by 100% EOUs have been considered as clearance from any port in India including the specified port. We, therefore, hold that the concessional rate of duty has been rightly availed of by the appellants and there is no case for further demand of duty. Since there has been no evasion of duty the question of imposition of any penalty on any of the appellants does not arise. No infirmity in the findings of the Tribunal [2006 (12) TMI 296 - CESTAT, AHMEDABAD] - Decided against Revenue.

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• 2015 (11) TMI 324
  Valuation of goods - Under valuation - whether the value of the software was to be included while arriving at the transaction value of the cellular phones and for the purpose of payment of duty - Held that:- When these proceedings were pending, certain other information came to the notice of the Department on the basis of which further Show Cause Notices were issued by different Commissionerates. - One of the pieces of evidence which came to the notice of the Department was that as far as foreign exporter is concerned, it wanted to sell the goods, viz., cellular phones and software as one package with single invoice but the splitting thereof was done at the instance of the assessees. It was also found by the Department that Tata and Reliance had imported cellular phones and software as one item at one price and paid the duty accordingly. Suffice is to state that on the basis of these evidences, the CESTAT has decided the cases in favour of the Department and it is for this reason that two appeals by the assessees are preferred. - evidence which has surfaced later on and relied upon by the Department in other Show Cause Notices shall be considered as common evidence in all these cases. - Impugned order is set aside - Matter remanded back to larger bench of the tribunal.

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• 2015 (11) TMI 323
  Benefit of exemption Notification No. 5/99-CE dated 28.02.1999 - credit under Rule 57A or Rule 57B or Rule 57Q of the Central Excise Rules, 1944 - Held that:- The product of the respondent is covered by the description of goods at Serial No. 133 of the Table annexed with the General Exemption Notification. The assessee, however, had utilized the MODVAT credit in the previous two years prior to 28.02.1999. As per the assessee, after the issuance of this notification, no such MODVAT credit was ever taken or utilized. Even the earlier MODVAT credit which was utilised was returned or paid back on 10.01.2005. In this We note that five-Member Bench of the Tribunal in the case of 'Franco Italian Co. Pvt. Ltd. v. Commissioner' [2000 (8) TMI 109 - CEGAT, COURT NO. III, NEW DELHI] had taken the view that even if the MODVAT credit was utilised but, thereafter, refunded, it would amount to not utilising the said MODVAT credit. Same view has been taken by the High Court of Allahabad in 'Hello Mineral Water (P) Ltd. v. Union of India' [2004 (7) TMI 98 - HIGH COURT OF JUDICATURE AT ALLAHABAD]. - as far as the aforesaid two judgments are concerned, they were accepted by the Department and no appeal was filed thereagainst - No reason to interfere with this order - Decided against Revenue.

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• 2015 (11) TMI 322
  Manufacture - whether the bought out Pumps and own manufactured I.C. Engine put in single carton by the assessee would amount to manufacture of Power Driven Pumps - Admissibility of exemption claim - Held that:- Clause (b) of Section 35 L provides that an appeal shall lie to the Supreme court from any order passed by the Tribunal relating among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment. Thus, the exclusion of power of the High Court to entertain an appeal under Section 35 G of the Act is limited to an order of the Tribunal relating, among other things to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment. Thus Section 35 G of the Act does not exclude the power of the High Court to entertain an appeal against an order passed by the Appellate Tribunal on the question of manufacture. Finding recorded by the Tribunal in the impugned order that by putting together a Pump and Engine and a platform the assessee had produced a new item viz. "P.D. Pump" is wholly baseless and also without consideration to the findings of fact based on relevant material and evidences recorded by the Adjudicating Authority. Merely putting together one bought out item with own manufactured item in a carton does not involve any process amounting to manufacture under Section 2(f) of the Act. - activity of manufacture must involve any process incidental or ancillary to the completion of a manufactured product, or any process which is specified in relation to any goods in the Section or Chapter notes of the first schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture, or any process which, in relation to the goods satisfied in the third schedule involves packing or repacking of such goods in a unit container or lebelling or relebelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer. Mere addition in the value of a product would not amount to manufacture. To bring the process within the definition of manufacture, it must be shown that due to the process original identity of the product undergoes transformation and it becomes a distinct and new product. - impugned final order of the Tribunal arising from the order in original no.9-11 dated 31.1.2006 and remand the matter to the Tribunal to pass an order afresh - Decided in favour of Revenue.

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• 2015 (11) TMI 321
  Exemption under the levy of central excise as per Notification Nos.63/95 dated 16.03.1995 - whether the petitioner is ex facie entitled to exemption under Notification Nos.63/95 dated 16.03.1995 and 4/2006 dated 01.03.2006, have been overlooked - Held that:- Petitioner was issued with a show cause notice dated 26.12.2014 by the Commissioner of Central Excise, Tirunelveli, to show cause as to why the products viz., Ilemenite, Zircon, Rutile, Sillimanite, leucoxene manufactured out of sea sand (ore) and cleared the same during the period from 01.03.2011 to 31.03.2014 should not be classified as concentrates of Ilemenite, Zircon, Rutile, Sillimanite, leucoxene under chapter sub heading 26140020, 26151000, 26060090 and 26140090 of CETA respectively, within 30 days from the date of receipt of the same. - petitioner has given a representation dated 01.04.2015 to the respondents giving the details of the documents to be furnished as per the order passed on 10.03.2015 and sent a reminder on 05.05.2015, however all of a sudden, to their surprise, the impugned letter dated 12.05.2015 was issued informing the petitioner that it is not reasonable to call for the documents which are not cited as relied upon documents in the show cause notice, on that basis, the petitioner was asked to submit his explanation, hence, the petitioner came to this court challenging the impugned communication dated 12.05.2015 raising two issues that in spite of a specific direction given by this court in other decision to furnish all the relevant documents which are relied on in the show cause notice, the respondent failed to furnish the same, as a result, the petitioner is neither able to give reply nor able to raise the basic and preliminary issue whether the Central Excise Department has jurisdiction to assess and levy central excise from the petitioner in view of notification No.63/95 granting full exemption to the petitioner's mine from the application of the Act. In the judgment of the ESI Court at Tirunelveli in ESIOP.No.8/2012 that the petitioner comes under the purview of the Mines Act and their activities are mining activity, hence, it is necessary for the respondents to decide the preliminary issue whether the petitioner is entitled to exemption under Notification Nos.63/95 dated 16.03.1995 and 4/2006 dated 01.03.2006 for the reason that para 17(11) of the notification states that 'mine' has meaning given in Section 2(i)(j) of the Mines Act, 1952 and as per Section 2(i)(j) the word 'mine' includes not only the mine area, but also the place where sand is processed, the place where the workshops are located and any adjacent premises. 27. Similarly, another notification No.4/06 dated 01.03.20006 also exempts all ores from the levy of central excise. In this context, it is pertinent to refer to various orders and judgments of both civil and criminal courts, holding that all the units of the petitioner firm are coming within the definition of 'mine' Impugned order dated 12.05.2015 informing the petitioner that it is not reasonable to call for the documents which are not cited as relied upon documents in the show cause notice dated 26.12.2014, is partly set aside - Decided partly in favour of assessee.

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• 2015 (11) TMI 320
  Valuation - pan masala or pan masala with tobacoo pouches - Levy of duty under Section 3A - Notification No. 30/2008-CE (N.T.), dated 1.7.2008 - Held that:- Even if the machine manufactures in a particular month pan masala or pan masala with tobacoo pouches of 50.0 and Rs. 1.00, its deemed production would still be 37,44,000 pouches on which duty would be leviable. The proviso to Rule 8 would not be applicable nor can there be a supposition that there would be deemed to be an addition in the number of operating packing machines for the month in question on the strength that a new retail sale price has come into existence on an existing manufacturing machine. - for the purpose of Rule 5, pouches within a particular RSP slab would be the same for the purpose of determining the deemed production per month. When a RSP which is under a different slab, only then it would be treated to be a new retail sale price. In the instant case, there is no dispute that the assessee had ever manufactured pan masala with tobacoo in pouches above Rs. 1.00, and, therefore, maximum deemed production as specified in Column-3 to the Table in Rule 5 could not exceed the figure indicated thereunder. - No substantial question of law arises for consideration - Decided against Revenue.

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• 2015 (11) TMI 319
  Contravention of the provisions of rule 7, rule 9 and rule 10 of the PMPM Rules - Assessee not paid appropriate central excise duty by due date and had wrongly taken abatement of duty and adjustment of the same towards payment of duty - Compounded levy scheme - Held that:- Assessee did not produce the notified goods during a continuous period of fifteen days in the month of March and accordingly claimed that it was entitled to abatement of duty on a proportionate basis for the period when the factory was not producing notified goods and accordingly adjusted duty to that extent from the duty payable in the month of April. The contention of the revenue is that abatement amounts to refund and, therefore, the procedure for availing refund as laid down under section 11B of the Act is required to be followed. In this regard, it may be noted that the expression "abatement" has not been defined anywhere in the Act or in the PMPM Rules. Adjustments made were not more than the amounts of duties mandated to be abated as per rule 10 of the PMPM Rules, the action of the respondent assessee in computing the proportionate amount of duty towards the abatement and setting it off against the duty payable in the next month does not adversely affect the revenue in any manner. The abatement, in the opinion of this court, is not akin to refund and means reduction or diminution of the duty. Therefore, when the duty stands reduced to the extent provided in the rule, there is no liability to pay the same, inasmuch as, to that extent the duty stands abated. Therefore, if the assessee has correctly calculated the proportion of duty and set off the same against the duty payable for the next month, it cannot be said that the said action is contrary to the statutory scheme. When the rules do not provide for the manner in which duty is required to be abated, nor do they provide that abatement shall be by an order of the Commissioner or any authority, but nonetheless provide for abatement of duty and the extent of entitlement to such abatement, no fault can be found in the approach of the assessee in suo motu taking the benefit of such abatement. - it cannot be said that the view adopted by the Tribunal is not a plausible view warranting interference by this court. In the absence of any infirmity in the impugned order passed by the Tribunal, it is not possible to state that the same gives rise to any question of law, much less, a substantial question of law - Decided against Revenue.

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• 2015 (11) TMI 318
  Imposition of penalty - Whether in the facts and circumstances of the case, the Tribunal was justified in negating the penalty on the respondent, Managing Director of the unit despite there was specific malafide role attributed to him - Held that:- Tribunal has recorded that it is an admitted position as agreed by both the sides that the very same issues are covered on merits in favour of the assessee by the decision of the Tribunal in the case of M/s Jayant Agro Organics Limited, [2003 (9) TMI 133 - CESTAT, MUMBAI] - decision of the Tribunal in the case of M/s Jayant Agro Organics Limited (supra) has been confirmed by the Supreme Court, no infirmity can be found in the impugned order passed by the Tribunal whereby its earlier decision in the case of Jayant Agro Organics Limited (supra) has merely been applied to the facts of the present case. - No substantial question of law arises - Decided against Revenue.

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• 2015 (11) TMI 317
  Rejection of application for adding subject plot in the Central Excise Registration Certificate of the petitioner firm - Recovery of duty u/s 11 - Purchase of plot from transferee of loan defaulted property - Rejection of request since due not paid by previous owners - Held that:- A careful reading of the proviso to section 11 of the Act shows that the consequences contemplated therein, namely, enabling the officer so empowered by the Central Board of Excise and Customs to attach and sell the goods specified therein purchased by the transferee for recovering the duty or other sums recoverable or due from the defaulting predecessor at the time of such transfer, would come into effect only if the defaulter transfers or otherwise disposes of his business or trade in whole or in part, or effects any change in the ownership thereof, in consequence of which, he is succeeded in such business or trade by the transferee - mere transfer of one or more species of assets does not necessarily bring about the transfer of the "ownership of the business" for "ownership of a business" is much wider than mere ownership of discrete or individual assets. In fact, "ownership of business" is wider than the sum of the ownership of a business’ constituent assets. Above all, transfer of "ownership of business" requires that the business be sold as a going concern. The court was of the view that section 15(1) was intended to operate only when there is complete transfer of "ownership of business" so as to render the transferee as a successor-in-interest of the transferor. Only in such an eventuality does section 15(1) make the transferee liable for the transferor’s sales tax liabilities. The proviso to section 11 of the Act clearly provides that the dues of the defaulter can be recovered from the person who succeeds in such business or trade of the defaulter. Evidently therefore, a pre-requisite for exercise of powers under the proviso to section 11 of the Act is that the successor should have purchased the business or trade of such person. As held by the Supreme Court in the above decision, the business is an activity, directed with a certain purpose, more often towards producing income or profit. Hence, the mere transfer of one or more species of assets does not necessarily bring about the transfer of the business. The transfer of a business requires that the business be sold as a going concern which is clearly not the position in the present case. Besides, on a perusal of the provisions of sub-section (1) of section 15 of the Karnataka Sales Tax Act, it is apparent that the provisions thereof are more rigorous, inasmuch as, the same envisage that the transferor and transferee shall be jointly and severally liable to pay any tax or penalty or any other amount payable in respect of such business and remaining unpaid at the time of transfer. Under the said provision, the transferor is deemed to be the dealer liable to pay the tax or penalty or other amount under the Act. The respondents also seek to recover the central excise dues of the defaulter unit from the petitioner in view of the above referred condition imposed by GIIC at the time of sale in favour of M/s Poonam Enterprise. In the opinion of this court, the terms and conditions of sale are an agreement between GIIC and M/s Poonam Enterprises and may also be binding on the petitioner as its successor in title. However, the said agreement does not create any right in favour of the Central Excise authorities and merely protects the rights of GIIC qua M/s Poonam Enterprise or its successor. Reliance placed upon the said condition, therefore, does not carry the case of the respondents any further and in the absence of any statutory power being vested in the authorities under the Central Excise Act empowering them to recover the outstanding dues from the petitioner or its predecessor in title, the sale being of the assets of the defaulter unit and not a going concern, it is not permissible for the respondents to seek to recover the outstanding dues of M/s Nakhua Poly Containers P. Ltd. from the petitioners. Recovery is sought to be made from the petitioner not in respect of any of its dues, but the dues of the erstwhile defaulter. When the assets of the defaulter unit came to be sold to M/s Poonam Enterprise by GIIC, section 11E of the Act had not been brought on the statute book and, therefore, crown debts did not have any priority over the claims of the secured creditors. The properties of the defaulter unit came to be sold to M/s Poonam Enterprise by way of auction sale in the year 2009 and accordingly ceased to be the property of the defaulter unit. Since the properties of the defaulter unit had already been disposed of prior to the insertion of section 11E of the Act, no charge can be said to be created on the properties in question so as to enable the respondents to invoke section 11E of the Act. - Once the properties are sold prior to the insertion of section 11E of the Act, the said provision would not act retrospectively to cover properties which are no longer the properties of the assessee or other person. The provisions of section 11E of the Act would, therefore, have no applicability to the facts of the present case. Stand adopted by the respondent authorities is that unless the earlier registration is surrendered and cancelled and outstanding dues of the Government are paid, the fresh registration for the same premises cannot be issued. As held hereinabove, insofar as payment of outstanding dues of the Government is concerned, the unit has not been sold as a going concern and hence, the question of invoking the proviso to section 11 of the Act would not arise. The question as to whether fresh registration can be given to the petitioner despite the fact that the earlier registration has not been surrendered stands concluded by the above decision. Resultantly, the respondents cannot refuse to grant Central Excise registration in respect of the premises in question to the petitioner on the ground that the earlier registration has not been surrendered and that there are outstanding dues of the erstwhile unit. - Decided in favour of assessee.

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• 2015 (11) TMI 316
  Simultaneous availment of SSI exemption and modvat credit - Held that:- As per Notfn 8/99 as amended for the purpose of determining the aggregate value of clearances by a manufacturer, the clearance value of goods bearing the brand name of other persons are excluded. On the identical issue, in the case of Nebulae Health Care Ltd. Vs CC Chennai (2006 (8) TMI 74 - CESTAT, CHENNAI), this Tribunal after taking into consideration the Supreme Court judgement in the case of Commissioner Vs Ramesh Food Products (2004 (11) TMI 103 - SUPREME COURT OF INDIA) and the Tribunal's Larger Bench decision in the case of Kamani Foods Vs Collector (1994 (1) TMI 109 - CEGAT, NEW DELHI) allowed the appeal of the assessee. We find that the Revenue preferred appeal against this Tribunal order and the Hon'ble Supreme Court in their order [2015 (11) TMI 95 - SUPREME COURT] in the case of CCE Chennai Vs Nebulae Health Care Ltd. dismissed the Revenue appeal and upheld this Tribunal's order. - appellants have rightly paid excise duty on the goods bearing the brand name of 'HLL" and accordingly filed declaration to avail Modvat credit on the inputs used in the manufacture of branded goods belonging to another person which is outside the scope of SSI exemption under Notfn 8/99. - respondents are eligible for Modvat credit on the inputs used in the manufacture of goods bearing the brand name of "HLL" - Decided against Revenue.

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• 2015 (11) TMI 315
  Classification of goods - Classification under Chapter Heading number 27.01 or under Chapter Heading number 34.03 - benefit of lower rate of duty - Bar of limitation - Held that:- If the Department had any doubts as to the classification of the said products, they should have informed the appellant to produce further documents in order to correctly classify the products. There being no correspondence from the Department, before the approval of the classification list, it has to be inferred that the classification done by the appellant is acceptable to the Department. The appellant having got the classification list approved, clear the said products as per the approved classification list discharging the duty as per the classification list, cannot be charged with the allegation of mis- statement or suppression of facts to evade payment of duty. Further, it is noticed that the revenue authorities, on receipt of classification list, did not direct the appellant to go for the drawal of the samples and get the same tested in order to ascertain the correct classification of the product, during the relevant period. Having not done so, revenue authorities now cannot turnaround and allege that there was suppression, mis-statement on the part of appellant. There is nothing on record to show that during the relevant period, the job cards of the products in question were indicative of the classification under chapter 34. In any case, revenue having failed to indicate to the appellant assessee that the classification sought by them is unacceptable now cannot rely upon the job cards which were of latter period. It is settled law that the case of classification of a product, the revenue has to play a proactive role, which is absent in the case in hand. - Demand is otherwise barred by limitation - impugned order is unsustainable on the ground of limitation, and is liable to be set aside - decided in favour of assessee.

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• 2015 (11) TMI 314
  Duty demand - Shortage of goods - Clandestine removal of goods - violation of natural justice - Held that:- There is no material coming up even today in the course of hearing from the appellant to discard the allegation of issuance of parallel invoices by the appellant to the four buyers as is stated in Sl. No. (ii) to (v) of para 1 appearing at the outset of this order to demonstrate that removal of the quantity of the goods to them had suffered duty. The JMD who was present on the spot on the date and time of investigation had no answer to the parallel invoices issued by appellant in respect of the alleged clearance to the buyers of the goods as above. Law mandates that what that is manufactured and cleared is to be accounted in the statutory record and anything cleared unaccounted not suffering excise duty is questionable. - there was an established case of issuance of parallel invoices by appellant with same numbers. Those were recovered from the four buyers aforesaid. That proved quantum of unaccounted transactions entered into between the appellant and those buyers. - At no point of time the appellant discarded the evidence gathered by investigation to defend against issuance of parallel invoice nor demolished the stand of investigation adducing any evidence to the contrary. Burden of proof was discharged by Revenue. Allegation of clandestine removal was established from cogent evidence and Revenue proved its case with precision without the adjudication being made under surmise or suspicion. Bureau of Indian Standard (BIS) has prescribed certain standard value in respect of goods manufactured in India. It would be proper if the matter goes back to adjudicating authority on this limited count of conversion of the quantity found into proper weight following the standard laid down by that Bureau to serve interest of justice. - Decided partly in favour of assessee.

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• CST, VAT & Sales Tax

• 2015 (11) TMI 328
  Levy of VAT - transfer of goods or not - integration process of the developed ERP software is undertaken by the assessee by deputing ERP implementation team to render ERP implementation service - tribunal observed that activities of business consultancy services and implementation of the Enterprises Re-source Planning software as pure services not involving any sale of goods or any transfer of property in goods in the execution of works contract - Held that:- Integration process of the developed ERP software is undertaken by the assessee by deputing ERP implementation team to render ERP implementation service. What this team does is, they install the ERP software, integrate it and implement at the client's end. This implementation is performed not only by the assessee's personnel but also along with the employees of the client. The members of the ERP Software implementation team of the assessee play various roles in the ERP software implementation process depending on their skills. The team with the skill ensures that the ERP software is appropriately integrated in the system of the client. In the process the experts will take all necessary steps to provide functional data for the installation of the ERP software and it becomes useful for the client. In the process there is no transfer of any goods involved. Unless the goods is in existence and deliverable so that the right in the goods is transferred, VAT is not attracted. There is no marketable commodity in existence to be sold. Unless such a commodity, whether tangible or intangible, exists there cannot be a sale. The entire consideration received for providing services to the client have been subjected to service tax. Therefore, no portion of the consideration received could be attributed to sale of the software. Therefore, the finding recorded by the Tribunal is based on legal evidence and supported by the legal position as declared by the Apex Court in several judgments referred to in the order. In that view of the matter, we do not see any merits in this revision petition - Decided against Revenue.

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• 2015 (11) TMI 327
  Exemption from tax - Classification of goods - manufacturing of non-woven felts used in cars as a matting - Classification under item No. 68 or under tariff item No. 22G - Held that:- Tax Board has rightly come to the conclusion that it falls within the definition of "fabric" and is thus exempt. A fabric has been defined to mean "All textiles no matter how constructed, how manufactured, or the nature of the material from which made." and the expression "textile" is described as "any product manufactured from fibres through twisting, interlacing, bonding, looping, or any other means in such a manner that the flexibility, strength and other characteristic properties of the individual fibres are not suppressed". "Fabric" has also been defined as "a collective term applied to cloth, no matter how constructed or manufactured and regardless of the kind of fiber from which made. In structure it is planner produced by interlacing yarns, fibres or filaments. Textile fabrics include the following varieties, bonding, felted, knitted, braided and woven". Once the product manufactured by the assessee is held to be fabric, the nature would remain the same and it would continue to remain as textile/fabric. - assessee displayed the samples of the products in question not only before the Tax Board but was available in the file of the learned AO and the Tax Board has come to a definite finding of fact and after verification of the items has come to the conclusion that the items fully withstand the test of pliability and once the factual finding has come on record, the view of the Tax Board, after analysing the material on record, appears to be well justified. - Decided against Revenue.

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• 2015 (11) TMI 326
  Levy of entry tax - petitioner imports tea from outside and blends the same with the local varieties and sells the same in packed condition inside the State and outside the State in course of inter-State trade and commerce - Held that:- Entry 40 of the Schedule discloses that tea is specified goods. Upon reading of sub-sections (1) and (2) of section 2, the view taken by the Commissioner does not appear to be correct. It may be that the petitioner imports the tea from outside and a part of it is sold in Assam by blending and a part of it is sold in other States as inter-State sale. He paid VAT for the sale in Assam and Central sales tax for the sale outside the State. - tea imported should be sold in the same form in order to get exemption of entry tax does not appear to be a correct view. By blending local varieties, there is no change in the nature of the product both for the local sale of local variety and after blending with the imported goods, VAT is paid and for inter-State sale Central sales tax is paid and the tea even after blending very much remains as specified goods. - levy of entry tax on the import of tea and local sale and inter-State sale of the blended tea is untenable. - Decided in favor of assessee.

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