TMI Tax Updates - e-Newsletter
November 9, 2016

Case Laws in this Newsletter:

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

TMI SMS

• There is no Excise duty on the waste as there is no tariff heading for classifying the scrap arising while Manufacturing Chapter 30 goods

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Articles

1. Registration, Amendment and Cancellation under GST Law

   By: Sanjeev Singhal

2. INNOVATIONS IN TELECOM INDUSTRY

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. FAQs on GST Enrolment Procedure

2. GST portal goes live, GSTN software almost ready

3. Enrolment Plan for your State

4. प्रधानमंत्री का 8 नवम्बर को राष्ट्र के नाम सन्देश- 8 नवम्बर 2016 की रात्रि 12 बजे से वर्तमान में जारी 500 रुपये और 1,000 रुपये के करेंसी नोट लीगल टेंडर नहीं रहेंगे यानि ये मुद्राएँ कानूनन अमान्य होंगी।

5. Text of Prime Minister’s address to the Nation

6. Historic announcements on ending corruption and black money by PM; Five hundred and one thousand rupee notes will no longer be legal tender from midnight tonight

7. Commerce and Industry Minister says ECGC’s role is very crucial in the trying times in sustaining the flow of exports

8. The Union Finance Minister Shri Arun Jaitley to Inaugurate Two Day Economic Editors’ Conference-2016 on 10th November, 2016

9. RBI Reference Rate for US $

10. Government of India and Asian Development Bank (ADB) sign $48 Million Loan to improve Assam’s Power Distribution System

11. The Co-Chairs of the India-UK Financial Partnership (IUKFP), Mr Uday Kotak and Sir Gerry Grimstone calls on the Union Finance Minister Shri Arun Jaitley; Appraises the Finance Minister on progress of the partnership and presented the two most recent Papers on ‘Financial Inclusion’ and ‘Responsible Shareholder Engagement – An Indian Stewardship Code’; FM expresses his satisfaction on the working of this Partnership

12. Auction for Sale (Re-issue) Government Stocks

Circulars / Instructions / Orders

FEMA

1. 15 - dated 7-11-2016

External Commercial Borrowings (ECB) – Clarifications on hedging

DGFT

2. 42/2015-2020 - dated 8-11-2016

Amendments in Standard Input Output Norms (SION) - reg

Central Excise

3. 1050/38/2016-CX - dated 8-11-2016

Combined Annual Return Form for Central Excise and Service Tax-reg

Highlights / Catch Notes

Income Tax

• Call Center Wins Tax Deduction u/s 10A for Electronic Data Transmission via Internet Lines Outside India.

  Case-Laws - AT : Deduction u/s 10A - call centre - customized electronic data is being transmitted outside India electronically - assessee is using Internet lines for telephone calls to its international customer rather than traditional telephone lines - Exemption u/s 10A allowed - AT
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• AO to Exclude Loan Interest from Closing Stock Valuation; Deduction Allowed u/s 36(1)(iii) of Income Tax Act.

  Case-Laws - AT : Nature of Interest paid on loans taken - AO directed to exclude the interest incurred on loans from the valuation of closing stock and allow the same as deduction u/s 36(1)(iii) of the Act. - AT
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• Bond Issue Expenses Not Allowable as Revenue Expenditure u/s 37(1); Assess Applicability of Section 35D(1)(ii) Deduction.

  Case-Laws - AT : Allowability of bond issue expenses - The expenses are having definite role in reorganizing the company and thus played a role in enhancing the value of the company. - the bond issue expenses in the case of the assessee are not allowable u/s 37(1) of the Act as revenue expenditure - Deduction u/s 35D(1)(ii) to be examined by the AO - AT
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• Assessees must prove business purpose for commission payments, even if paid by cheque and TDS deducted.

  Case-Laws - AT : Mere payment of commission through account payee cheque after deduction of TDS does not absolve the assessee from discharging its burden with regard to proving business purpose of the payments - AT
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• Company's Deduction Claim Approved u/s 10A for Data Processing and Support Services to Parent Company.

  Case-Laws - AT : Claim of deduction u/s 10A - Its activities are in the nature of data processing, customization of data, acting as the back office of the parent company and acting as support center to the parent company - Deduction / Exemption u/s 10A allowed - AT
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Customs

• Classification of Datacolour Autolab 32 under Customs Law: Tariff Heading 9032.89 per Rule 3(c) Interpretation Guidelines.

  Case-Laws - AT : Classification of imported goods - Datacolour Autolab 32, Laboratory Dispenser and Solution Maker - In terms of rule 3(c) of the General Rules for Interpretation of the Import Tariff, the goods be classified under 9032.89 - AT
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Indian Laws

• Prime Minister Highlights Economic Reforms, Social Welfare Initiatives, and Unity for National Progress in Address to Nation

  News : Text of Prime Minister’s address to the Nation
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• New Section 8 in Pradhan Mantri Scheme Boosts Transparency and Accountability in Government Processes.

  News : प्रधानमंत्री का 8 नवम्बर को राष्ट्र के नाम सन्देश
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Service Tax

• Transportation Subsidy from Maharashtra Not Part of Gross Value for Goods Transport Agency Tax Purposes.

  Case-Laws - AT : GTA service - whether transportation subsidy received from the Government of Maharashtra can treated as part of the gross value of the GTA service? - Held No - AT
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Central Excise

• Court Sets Aside Demand on Suo-Motu Credit for Amount Paid Under Protest; No Dispute on Cenvat Eligibility.

  Case-Laws - AT : Suo-motu credit of the amount paid - demand was set aside - the amount paid “under protest” by a debit in Cenvat account. - there cannot be a dispute as to eligibility to avail the Cenvat credit/recredit of the said amount in their Cenvat account. - AT
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• Excise Duty Not Applicable on Band Aid Production Waste Due to Lack of Specific Tariff Classification Under Chapter 30.

  Case-Laws - AT : Excise duty on the waste of band aid - there is no tariff heading for classifying the scrap arising during the course of Manufacturing of Chapter 30, hence in the absence of any classification of the product, demand of the duty is unsustainable - AT
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• Shredded Band-Aid Not Excisable: Classified as Waste, Lacks Marketability and Manufacturing Criteria for Excise Tax.

  Case-Laws - AT : Shredded Band-Aid may not become an excisable product as it is not a manufactured item and is a waste that gets generated during the course of manufacturing and packing of final product “Band-Aid” as the shredded Band-Aid has no market and the product is not marketable - AT
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Case Laws:

• Income Tax

• 2016 (11) TMI 295
  Reopening of assessment - ITAT quashed reopening orders - Held that:- The Tribunal by the impugned order has rendered a finding of fact that this very issue which forms the basis of reopening notices was a subject matter of consideration during the regular assessment proceedings under Section 143(3) of the Act. Consequently, the reopening notices for both the assessment years were not based on reason to believe that the income chargeable to tax has escaped assessment as it proceeds on a mere change of opinion Thus, following the Apex Court decision in Commissioner of Income Tax Vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA ] the impugned order of the Tribunal set aside the reopening notices dated 20th March, 2009 for both the assessment years. The impugned order of the Tribunal is unexceptionable as on the finding of fact that the notices of reopening are based on change of opinion, it applied the law as laid down by the Apex Court in Kelvinator of India (supra) that reopening notices on a mere change in opinion were not sustainable.

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• 2016 (11) TMI 294
  Legality and validity of making a reference to the Valuation Officer - Estimation of value of assets by Valuation Officer - Held that:- From the bare reading of aforesaid statutory provisions, it appears that Section 50C of the Act which has been introduced is applied to a seller and not to the purchaser and therefore, ascertaining an amount of capital gain, it will be the tax in the hands of seller on the basis of jantri price and making a reference and inquiring from the petitioner is of no avail and to this, learned counsel has rightly relied upon a decision of this Court in case of Commissioner of Incometax- IV V/s. Sarjan Realities Ltd., reported in (2012 (9) TMI 1076 - GUJARAT HIGH COURT) wherein it is quite clear that provision of Section 50C would apply to a seller only and not the purchaser and therefore, to make reference casually in case of petitioner, who is purchaser, is not just and proper. Unexplained investment - addition u/s 69 - Held that:- Assessing Officer had no cogent material available nor to satisfy himself about the requirement of Section 69 of the Act and therefore, in the absence of it, the reference could not have been made under Section 142A of the Act. Simply because prior to 2 days the reference order came to be made, it cannot be said that the action of making reference during the period of assessment is justified. In fact, no purpose would be served to make such reference especially when the contingencies reflected hereinabove are not satisfied on the background of present facts. Therefore, considering this set of circumstance, we are of the opinion that the action of making reference is not tenable.

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• 2016 (11) TMI 293
  Application for registration under Section 10 (23C)(vi) rejected - petitioner has shown M/s Amarnath Builders Private Limited (for short the 'Company') as a creditor for the sum of about Rs. 37 lacs - Held that:- Company has leased land in favour of the petitioner for the purpose of running the educational institution thereon. We will refer to the lease later with reference to the other objection. If the company has granted an interest free loan to the petitioner for the purpose of establishing and running the educational institution, the exemption cannot be refused. The mere receipt of an interest free loan is not indicative of a commercial activity for profit. However, whether the loan was in fact so granted as alleged by the petitioner is another matter which respondent No.3 would consider in the event of a fresh application or an additional affidavit in support of the existing application being filed. Whether there is nothing to indicate as to what would happen to the construction put up on the land leased by the company to the petitioner for the purpose of setting up the educational institution - Held that:- The company and the petitioner had admittedly entered into a lease deed dated 12.10.2011 under which the company leased in favour of the petitioner land measuring in the aggregate about 5,600 square meters in a colony developed by the said company. The lease was at a nominal rent of Rs. 72, 800/- for a period of 30 years. The period of 30 years was extendable on terms and conditions to be mutually agreed upon. On the expiry of the lease by efflux of time, the lessee, i.e. the petitioner would be entitled to remove the construction upon the leased land. The lease deed is clear. In fact, it confers a benefit upon the petitioner to the extent that although the construction is put up by the lessor i.e. the Company at its own cost as stipulated in Clause 1, the petitioner is entitled under Clause 6 to remove the construction upon the expiry of the terms of the lease. There is no ambiguity in these provisos. The terms and conditions of the lease deed cannot be a ground for refusing the exemption sought under Section 10 (23C)(vi). The petition is, therefore, disposed of with liberty to the petitioner to either file a fresh affidavit in support of its existing application or a fresh application containing the necessary undertakings confining its activities only to educational purposes

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• 2016 (11) TMI 292
  Validity of revision orders u/s 263 - Held that:- Elaborate enquires were made not only before the assessment proceedings started but also during the course of the assessment proceedings and the assessee has fully complied with all queries raised by the Revenue Authorities. The contention that the present Assessing Officer did not make full enquiry is not acceptable, because when the assessment records were transmitted from one DCIT to another DCIT, the other DCIT was well aware of the queries raised during the course of proceedings. The Officer was also aware of all the replies filed by the assessee, supported by relevant documentary evidences. Considering the facts above the assessment order is neither erroneous nor prejudicial to the interest of the Revenue. We, therefore, set aside the impugned order passed by the Principal CIT u/s 263 and restore that of the Assessing Officer passed u/s 143(3) of the Act. - Decided in favour of assessee.

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• 2016 (11) TMI 291
  Penalty u/s 271(1)(c) - capital gain computation - indexed cost of improvement rejected - Held that:- Assessee’s valuation report itself does not indicate any fact about incurring of any cost of improvement. The valuation report is given by a Registered Valuer, which is relied on by the assessee. Assessee cannot disregard its own evidence based on one Shri M.C. Patel vague statement that over a period of seven years he has incurred expenditure around Rs. 2 lacs on behalf of the assessee. There being no year-wise break-up or objectivity in the statement, the same cannot be relied on as against the statutory valuation report. The assessee’s explanation is bereft of any evidence or plausibility. This is grossly against the surrounding circumstances, human conduct and preponderance of possibilities as held by the Hon’ble Supreme Court in the case of Sumati Dayal (1995 (3) TMI 3 - SUPREME Court ). The assessee filed valuation report alongwith return of income and its claim of cost of improvement runs contrary to the evidence of valuation report. In view of these glaring inconsistencies, the Hon’ble Supreme Court judgment in the case of Reliance Petroproducts Pvt Ltd (2010 (3) TMI 80 - SUPREME COURT ) cannot be applied to assessee’s case. Thus no infirmity in the orders of the authorities below confirming the penalty which are upheld. - Decided against assessee.

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• 2016 (11) TMI 290
  Deduction u/s 10A - call centre - AO submitted that the activities of the assessee were not in the nature of call centre and, therefore, the assessee was not entitled for deduction under section 10A - Held that:- From the facts elaborated by the assessee there is no dispute that it is a call Centre engaged in managing accounts receivable and recovery. The calls are made by the “Predictive Dialer Software” and after the call the inputs of the relevant information obtained from the data of the US Financial Institution is made in real-time system which is transmitted to the customer outside India electronically using the Internet system. In view of the explanation of the assessee, it is evident that customized electronic data is being transmitted outside India electronically. The Assessing Officer has also mentioned that assessee is using Internet lines for telephone calls to its international customer rather than traditional telephone lines. This observation also supports that activities of the assessee are in the nature of call Centre and therefore in our considered opinion, the assessee is entitled for deduction under section 10A of the Act. In prior assessment years, the Assessing Officer has accepted the claim of the assessee and deductions have been allowed. In the year under consideration, there is no change in the business activity of the assessee, thus, in our view, the principle of consistency also demand that this deduction should be allowed to the assessee. Whether if the deduction under section 10A of the Act is allowed to the assessee, then the export turnover for computation of deduction under section 10A should be reduced by the communication and insurance expenses? - Held that:- In the case of the assessee, the expenses on communication and insurance have not been incurred in foreign exchange and also not included in the invoices issued to the foreign customer. Apropos the above discussion, since the assessee has not charged the expenses on telecommunication and insurance from its customers, the same are not required to be excluded while computing the export turnover for the purpose of determining deduction u/s 10A of the Act. Once, the telecommunication insurance expenses are not part of export turnover, in our considered opinion, there is no reason for reducing the expenses incurred on communication and insurance from the export turnover for the purpose of computation of deduction under section 10A of the Act. We find that order of the learned Commissioner of Income-tax (Appeals) on the issue in dispute is well reasoned and no interference on our part is required. Accordingly, we uphold the same. - Decided against revenue

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• 2016 (11) TMI 289
  Reassessment proceeding under section 153C - whether certain documents belonging to the assessee were found and seized during the search action under section 132 of the Act at the premises of “Rajdarbar Group” on 31st July, 2008 - Held that:- Since no addition has been made on the basis of material seized belonging to assessee, on the basis of which, proceedings under section 153C of the Act have been initiated in the case of the assessee, in our opinion, the first condition of no incriminating material found in the case of the assessee, during the course of search, is satisfied. Regarding the second condition, the assessee submitted that assessment for the year under consideration was not abated as the return of income under section 139(1) of the Act was filed on 30/10/2005 and limitation for issue of notice under section 143(2) was also over and no notice under section 143(2) of the Act was received before the date of search, thus the proceedings in the assessment year under consideration stood completed. The learned Commissioner of Income Tax (Departmental Representative) also could not controvert this position of completion of assessment. As both the conditions laid down in the decision of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT ]have been satisfied in the case of the assessee in the year under consideration, respectfully following it, we hold that no addition could have been made in the case of the assessee in the instant assessment year. - Decided in favour of assessee

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• 2016 (11) TMI 288
  Interest paid on loans taken - whether amount should be capitalized and added to the value of the closing stock of the assessee or not? - Held that:- We are of the considered opinion that the AO was wrong in changing the method of valuation of closing stock. This method is being followed by the assessee, year after year and has been accepted by the Revenue. Loading of interest cost to closing stock is definitely changing the method of valuation of stock. Interest expenditure incurred on loans used for acquiring current assets, which includes closing stock, is allowable u/s 36(1)(iii). Respectfully following the propositions laid down by the Hon’ble Bombay High Court in the case of Lokhandwala Constructions [2003 (1) TMI 93 - BOMBAY High Court ] to the facts of this case, we direct the AO to exclude the interest incurred on loans from the valuation of closing stock and allow the same as deduction u/s 36(1)(iii) of the Act. Grants received from Government of Uttar Pradesh - Held that:- The amounts received by the assessee from Government of UP cannot be taxed as income of the assessee. The AO is directed to exclude the same from the taxable income of the assessee. See case of Lucknow Development Authority, Gomti Nagar, Lucknow [2013 (9) TMI 570 - ALLAHABAD HIGH COURT] Ad hoc disallowance of 56% of the development expenses - Held that:- When the matter was taken up before the first appellate authority, the same was dismissed without addressing the contention of the assessee that no reason whatsoever was mentioned in the assessment order for making this disallowance. As the AO has failed to give any reason whatsoever, for disallowing 56% of the development expenses, and as the ld.CIT(A) failed to address this issue, the disallowance in question is hereby deleted and this ground of the assessee is allowed.

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• 2016 (11) TMI 287
  Allowability of bond issue expenses - nature of expenses - assessee has raised an alternative plea of allowing the bond issue expenses under section 35D(1)(ii) - Held that:- The bonds have been raised for restructuring or rehabilitation of the sick mills through voluntarily retirement scheme of employees etc., the advantage is definitely of enduring nature to the assessee. The expenditure in the nature of interest on the bond is payable every year, which is an expense of recurring nature whereas the arranger fee paid by the assessee is one-time fee in connection with raising of bonds and thus the expenditure is covered over the maturity life of the bond. The expenditures on bond issue expenses has been incurred in connection with the restructuring of the various units of the company, which are profit-making centers. The expenses are having definite role in reorganizing the company and thus played a role in enhancing the value of the company. In view of the discussion, we hold that the bond issue expenses in the case of the assessee are not allowable u/s 37(1) of the Act as revenue expenditure. We find that under section 35D(1)(ii) of the Act expenditure incurred by the assessee after commencement of business in connection with expansion of his undertaking or in connection with setting up of a new unit are allowed subject to the fulfillment of the conditions laid down in the said section. The expenditure specified under the section include legal charges for drafting of agreement, expenses incurred by company in connection with issue for public subscription, or shares or debentures of the company etc. As this issue has not been examined by the lower authorities, we feel it appropriate to restore the issue to the Assessing Officer for examining the allowability of the bond issue expenses under section 35D of the Act and decide the issue in accordance to the law. The assessee is directed to produce all the details of the expenses alongwith other evidences. Accordingly, the ground of the appeal is allowed for statistical purposes

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• 2016 (11) TMI 286
  Disallowance of commission payment - proof of business purpose of the payments - Held that:- As decided in assessee's own case in AY. 2008-09 there are no agreements and also there was no evidence of any correspondence or any personal meetings between the assessee and the commission agents to suggest that there was any relationship on the basis of which the commission agents procured customers for the assessee for which they were entitled to receive commission. The understanding between the parties was an oral understanding and it was doubtful that such an oral understanding could have been arrived at without any longstanding relationship having been established between the assessee and the commission agents involving such huge amounts of money over a period of time. Further, the assessee is unable to furnish the details of customers introduced by each agent and also the exact working of commission payment made to each of the agents. Mere payment of commission through account payee cheque after deduction of TDS does not absolve the assessee from discharging its burden with regard to proving business purpose of the payments - Decided against assessee

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• 2016 (11) TMI 285
  Claim of deduction under section 10A - Held that:- As decided in assessee's own case for assessment year 2006-07 the assessee is involved in providing back office support and thereby entitled to the benefit under the definition of the term „computer software . Its activities are in the nature of data processing, customization of data, acting as the back office of the parent company and acting as support center to the parent company. Clearly it could not have been deprived of the benefit of Section 10A, as is argued by the revenue. This contention is accordingly rejected as unmerited - Decided in favour of assessee

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• 2016 (11) TMI 284
  Reopening of assessment - assessee is earning high level of operating profits and consequently the claim of assessee of deduction u/s 10A of the Act is excessive - Held that:- The reopening based on the findings in the assessment proceedings of subsequent years cannot be used to reopen assessment of previous assessment years when there was no specific allegation with regard to the order in question. Here also we have perused the order of the Tribunal dated 26.08.2014 in case of the assessee for Assessment Year 2009-10 whereby an addition with respect to disallowance u/s 10A has been deleted. Almost two years have passed after the date of pronouncement of the order. On a specific question of the bench about filing of the appeal against this order before higher forum the parties could not point out whether an appeal has been filed before Hon”ble Hon'ble Delhi High Court against the order of the Tribunal. In AY 2006-07, Hon'ble Delhi High Court did not quashed reopening notice only because of the reason that there was still time for filing the appeal by revenue before the Hon'ble High Court. In the present case the time limit has already been expired for filing of appeal against that order. In view of this we are of the opinion that when the very basis for the issue of notice u/s 148 no longer survives, the reopening is invalid on that count. Interest earned on deposits with banks - amount shown by the assessee under the head “business income but according to AO it is taxable under the head “income from other source” - Held that:- As there is no order framed in the case of the assessee u/s 143(3) and return is accepted u/s 143(1) of the Act we are of the view that there is no error in the order of the ld CIT(A) in upholding the validity of the reopening following the decision of the Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Javeri Stock Brokers Pvt. Ltd. [2007 (5) TMI 197 - SUPREME Court]. In view of this we uphold the reopening of the assessment in the case of the assessee u/s 147 of the Act Reduction in deduction available u/s 10A - Held that:- In view of admission of the parties that there is no change in the facts and circumstances of the case in the present year compared to Assessment Year 2009-10 , therefore following the decision of the coordinate bench we delete the addition made by the Assessing Officer in restricting the amount of deduction claimed u/s 10A of Rs. 39280361/- to Rs. 11374842/-. denying deduction u/s 10A on interest income from bank deposits - Held that:- No infirmity in the order of the ld CIT(A) in holding that the interest income earned by the assessee on surplus funds is chargeable to tax under the head income from other sources and not business income. Non granting the set off and carry forward unabsorbed amount of depreciation - Held that:- From the detail available on record it is not possible to ascertain about the exact claim of depreciation which remained unabsorbed in the hands of the assessee same is allowable to assessee as current years depreciation as per provisions of section 32(2) of the Act. In view this we set aside this ground of appeal to the file of Assessing Officer to grant set off of this, sum if any remaining unabsorbed , in accordance with provision of section 32(2) of the Act making consequential adjustment to the computation of income after affording opportunity of hearing to the assessee

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• Customs

• 2016 (11) TMI 264
  Classification of imported goods - Datacolour Autolab 32, Laboratory Dispenser and Solution Maker - classified under heading 8479.89 of the First Schedule or under 9032.89 of the First Schedule to the Customs Tariff Act, 1975 - equipment imported is used for callibrated mixing and dispensing of coloured dyes - Held that: - The item under import is a laboratory dispenser and solution maker with single 12 position turntable to enable the dispensing a combination of colours as a solution. It is intended to achieve fast, accurate and repeatable dispensing of recipes and the preparation of solutions with great precision. Therefore, it would appear to be an instrument. The evolving production techniques in the textile industry require precisely measured combination of dyes and colours and hence the equipment performs the function of measuring. Likewise, it is a pre-mixed quantity of solution which is to be dispensed, and, therefore the equipment performs a controlling function. Further, without any human intervention the dispenser starts operates and stops at pre-set intervals. Hence, the classification claimed under 9032.89 of the First Schedule to the Customs Tariff Act, 1975 as ‘automatic regulating or controlling instruments and apparatus’ is also a distinct possibility. In terms of rule 3(c) of the General Rules for Interpretation of the Import Tariff, the impugned goods be classified under 9032.89 of the First Schedule to the Customs Tariff Act, 1975 - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 263
  Levy of Additional customs duty - import of 29” color television sets - benefit of N/N. 5/99-C.Ex. - declared MRP/RSP value - Weights and Measures (Packaged Commodities) Rules, 1977 - Held that: - provisions of Notification 5/99 seeks to impose CVD if the retail sale price is declared on the package. When the retail sale price tag is affixed by the supplier situated abroad or the same is affixed on landing in India, the provisions make it amply clear that countervailing duty needs to be discharged on the basis of MRP/RSP declared. Yet another angle to the entire case would be assuming that the overseas supplier has not affixed the MRP/RSP the goods would not have been cleared by the Customs department as the product colour television sets is covered under Standards of Weights and Measures (Packaged Commodities) Rules, 1977 and would have been confiscated. The Indian Metrological Department would have insisted upon affixing MRP in the customs bonded area. In that case the CVD would have been discharged on the MRP/RSP sticker affixed by the importer - demand of additional duty not justified - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 262
  Rejection of Refund claim - Held that: - the issue is regarding the refund of an amount arising out of favourable decision from the Apex Court in respect of very same assessee - It can be seen from the reproduced findings of the first appellate authority that he has followed the law as is settled by the higher judicial forum. On such a factual finding, in the grounds of appeal, it is seen that the revenue in not contradicting the findings in any manner. In our considered view, the assessee herein has produced the C.A. Certificate which indicates that the incident of duty in this case has been borne by the assessee. The said certificate is not contested by the revenue nor any contrary evidence is brought on record to disbelieve the certificate - in the facts and circumstances of this case, the impugned order is correct and legal and does not suffer from any infirmity - appeal disposed off - decided against appellant.

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• 2016 (11) TMI 261
  Rejection of refund claim - refund of 4% SAD under N/N. 102/2007 dt. 14.9.2007 - non-submission of original TR-6 Challan - Held that: - if an indemnity bond is given by the appellant to the department, the refund can be sanctioned. However, from the records it is not appearing that the appellant has ever given any indemnity bond, I therefore remand the matter to the original adjudicating authority with a direction that the adjudicating authority shall allow the appellant to execute an indemnity bond against the losts of original TR 6 challan and on that basis refund can be reprocessed. Needless to say that the appellant shall be granted an opportunity of personal hearing and to submit that necessary indemnity bond. The de novo adjudication shall be concluded within a period of three months from the date of receipt of this order. The appeal is disposed of by way of remand in the above terms.

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• Service Tax

• 2016 (11) TMI 283
  Demand - Whether the service tax is liable to be paid on the Entertainment Tax in the case of Cable Operator Service - Held that: - the appellant have submitted the details of the payment of Entertainment Tax made to the government authority through their bank account. It appears that the appellant have not submitted all the documents before the lower authority - even though the Entertainment Tax amount is not shown separately in the bills, but it is proved from the challan and payments particulars that the Entertainment Tax has been paid by the appellant to the concerned government authority, the amount of Entertainment Tax shall not be liable to service tax - Appeal is disposed of by way of remand.

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• 2016 (11) TMI 282
  Imposition of penalty u/s 78 - receipt of commission for arranging supply of refractories to the clients - business auxiliary service - Held that: - The determination of tax liability was a consequence of routine scrutiny of service tax returns followed by summons of the balance sheet of the appellant. From this it can be inferred that there was no attempt at subterfuge or suppression. Moreover, the promptitude with which the determined tax liability was deposited along with interest reinforces the inference. Though the first appellate authority has pointed out to the lack of any evidence of non-collection of tax from their customers, we cannot accept that assertion to be tenable. It is a matter of record that the non-payment of tax was discovered upon scrutiny of balance sheet; there is no earthly reason to presume that the tax component of the transaction was suppressed when the transaction itself is recorded in the financials. Indeed, there is no allegation of any failure to remit. In these circumstances, we find no reason not to accept the submission that the tax-liability should be computed on ‘cum-tax’ basis - the commission received shall be subject to ‘cum-tax’ method of computation of taxable value - penalty u/s 78 set aside - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 281
  GTA service - whether transportation subsidy received from the Government of Maharashtra can treated as part of the gross value of the GTA service? - reliance placed on the decision of Commissioner of Central Excise, Bangalore Vs. Mazagon Dock Ltd. [2005 (7) TMI 105 - SUPREME COURT OF INDIA] - Held that: - The Hon’ble Supreme Court held that the subsidy which is given by the Government is not paid by the buyer of the goods. Similarly, in the case of service the subsidy of transportation given by the Government is not paid by the service provider. The gross amount of the service can only be taken the value which is paid payable by the service recipient. In the present case also, the subsidy given by the government, since not a part of the amount paid by the service recipient to the service provider, the subsidy cannot be included in the gross value of service. Therefore, the ratio of the Hon’ble Supreme Court judgment is directly applicable to the present case. The subsidy amount will not attract service tax. The adjudicating authority is directed to re-quantify the service tax liability by reducing the amount of subsidy. Waiver of penalty - the appellant has shown reasonable cause for non payment of service tax. Therefore, they are entitled for the waiver of penalties imposed under Section 76 & 78 invoking Section 80 of the Finance Act, 1994. - the Penalties under Section 76 & 78 are waived - late fee imposed by the Ld. Commissioner for an amount of Rs. 2,000/- is upheld - appeal allowed - decided partly in favor of appellant.

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• 2016 (11) TMI 280
  Taxability - classification of service under the head “Works Contract Services” or “Construction of Residential Complex Services”? - Held that: - the issue raised needs to be reconsidered by the adjudicating authority after the judgment of the tribunal in the case of Krishna homes Vs. CCE [2014 (3) TMI 694 - CESTAT AHMEDABAD] and also after the amendment to the statuary provision from 1.7.2010. The adjudicating authority has not addressed to the points raised by the appellant in their written submissions and the findings are also sketchy as to the issue that from 1.7.2010 “Works Contract Services” gets attracted for the services as rendered by the appellant. In our view this, these two issue needs reconsideration by the adjudicating authority. Accordingly, without expressing any opinion of the merits of the case leaving all the issues open, we set aside the impugned order to that extent and remit the matter back to the adjudicating authority to reconsider the issue afresh after following the principle of natural justice. Service tax liability - amount collected as “Management, Maintenance or Repair Services” - Held that: - the issue is no more res-intigra as this bench in the case of Kumar Behary Rathi [2013 (12) TMI 269 - CESTAT MUMBAI] has held that service tax is not leviable on such amounts which are collected as maintain charges for up keep of the apartment’s premises. Since the issue is covered directly by the order of the tribunal, we find that service tax liability on this issue is settled in the favour of the assessee. Accordingly, that portion of the order which confirmed the demand of services tax liability, interest thereof and penalties imposed are set aside. Appeal disposed off - decided partly in favor of assessee.

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• 2016 (11) TMI 279
  Demand of duty along with interest and penalty - payment of duty utilising the balance of CENVAT credit - whether the Service Tax due on 5.11.2008 paid through Cenvat Credit which was earned during 30.11.2008 to 31.1.2009 is permissible in terms of Rule 3(4) of Cenvat Credit Rules, 2004? - the appellant paid the amount through Cenvat Credit on 30.11.2008, 31.12.2008 and 31.01.2009 whereas this amount was due on 5.11.2008 - Held that: - the fact is not under dispute that the service tax due in the month of November 2008 was discharged through Cenvat Credit earned during the period 30.11.2008 to 31.1.2009. Rule 3(4) of Cenvat Credit Rules, 2002 - From the proviso of above Rule, it can be seen that the service tax liability of a particular month if to be discharged from Cenvat account it can be paid only Cenvat credit availed and lying in balance on the last day of the month for which the service tax is due. In the present case the service tax of Rs. 12,57,365/- is due for the month of November 2008 whereas the same was paid from the Cenvat Credit earned from 30.11.2008 to 31.1.2009, which is not permitted as per the clear language of the proviso to Rule 3(4) of the Cenvat Credit Rules,2004 - the appellant was required to pay the dues of Rs. 12,57,365/- from cash and not from Cenvat account, however, since the appellant have discharged the service tax from the Cenvat account, I hold that the appellant shall deposit Rs. 12,57,365/- in cash and the same amount shall stand restored in their Cenvat account. In view of the facts and circumstances of the case, the appellant have undisputedly paid the service tax but from Cenvat account instead of cash there is no intention of evasion of tax. In any case, the Cenvat credit was available in the subsequent period and to that extent the cash payment of service tax, if any, shall stand reduced to this extent. The reliance placed by the appellant on the decision of Metal Temple Pvt. Ltd. Vs. Commissioner of Central Excise, Kolhapur [2015 (6) TMI 468 - CESTAT MUMBAI] not applicable as the judgment is on the issue of Rule 8(3A) of Central Excise Rules, 2002 and on the issue that whether the Cenvat Credit during the default period can be utilized for payment of duty on the current clearances. In the present case, the issue is not related to the current liability but it is related to the dues of the previous period and as per Rule 3(4) of Cenvat Credit Rules, 2004, the service tax of the previous period of November 2008 can be paid from the Cenvat credit balance available as of 30.11.2008 only. Therefore, the fact of the judgment relied upon and the facts of the present case are different. The appellants have shown reasonable cause for waiver of penalties under Section 80 of the Finance Act. I, therefore waive the penalties imposed under Section 76 & 77 of the Finance Act. Appeal disposed off - decided partly in favor of appellant.

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• Central Excise

• 2016 (11) TMI 278
  CENVAT Credit - input services - maintenance and repair service - erection, commission and installation services - Held that: - the issue is no more res integra being decided by the Larger Bench of the Tribunal in the case of Parry Engg. & Electronics P. Ltd [2016 (1) TMI 546 - CESTAT AHMEDABAD], where under it is held that the Assessee is entitled to avail CENVAT Credit of various input services in relation to wind mills installed and situated away from the factory premises, used for generation of electricity. In the result, the impugned order is set aside - appeals allowed - decided in favor of appellant.

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• 2016 (11) TMI 277
  Entitlement for exemption under N/N. 6/2001 as amended by N/N. 47/2002-CE dated 06.09.2002 - cables to a water treatment plant set up - exemption certificate - Held that: - The admitted facts are that the cables for which the exemption has been claimed are entitled for the same if used in water treatment plant. There is no allegation regarding mis-use of the impugned goods for other than entitled purpose. The exemption was denied only on the ground that the certificate in terms of condition 47A of the notification was not in the name of the appellant. We have perused the condition which only states that the certificate should be issued by the jurisdictional District Collector where the water treatment plant is located stating that such goods are cleared for entitled use. There is no stipulation that the certificate should be in the name of the manufacturer. In the absence of any allegation regarding the diversion of impugned goods and in the presence certificate issued by the District Collector in favor of the person who procured the impugned goods, we find no justification in the finding of the lower authority to deny the exemption. Accordingly, the impugned order is set-aside to this extent - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 276
  Recovery of CENVAT Credit - input services - Health Insurance services - Air Travel Services - Held that: - I find that in the aforesaid judgments both these services are considered to fall within the scope of definition of input services as business activity defined under Rule 2(l) of CENVAT Credit Rules 2004. Therefore, I do not have any hesitation to follow the said decisions and hold that Credit is admissible on these input services. Consequently, the impugned order is set aside - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 275
  MODVAT credit - Rule 57G of the Central Excise Rules, 1944 - Held that: - the impugned order has not considered the factual matrix in proper perspective. Appellant imported the goods and discharged appropriate duty. He is eligible to avail modified credit of the countervailing duty paid. While availing such credit he availed less than credit eligible, subsequently on his own noticing he availed the balance credit. We find that there is no dispute as to availment amount of the credit in first instance, hence availing differential credit subsequently is not barred or hit by the provisions of Rule 57G of the Central Excise Rules, 1944. This view settled by the judgement of the Tribunal in the case of Parasrampuria Synthetics Limited [1998 (7) TMI 398 - CEGAT, NEW DELHI]. Appeal allowed - decided against appellant.

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• 2016 (11) TMI 274
  Suo-motu credit of the amount paid - eligibility to avail the Cenvat credit/recredit - Held that:- We find that the adjudicating authority has come to a correct conclusion inasmuch, the findings of the fact of adjudicating authority are not disputed i.e. the demand of the duty on the respondent has been set aside by the adjudicating authority and upheld by the Tribunal. We also note that the amount paid by the respondent is “under protest” by a debit in Cenvat account. Adjudicating authority has correctly relied upon the various case laws as decided by the Tribunal, that in this factual position, there cannot be a dispute as to eligibility to avail the Cenvat credit/recredit of the said amount in their Cenvat account. We find that the ratio of the judgement of the Hon'ble High Court of Karnataka in the case of Motorola India [2006 (7) TMI 223 - HIGH COURT OF KARNATAKA AT BANGALORE ] will directly cover the issue in favour of the respondent.

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• 2016 (11) TMI 273
  Demand - Penalty - the issue as stated by both sides is regarding the excisability of the furniture’s assembled at the site of the customers - Held that: - the contentions raised by the learned departmental representative as the decision of the Tribunal in the respondent’s own case, covers the issue squarely the issue and the said decision of the Tribunal is upheld by the Honourable High Court of Delhi - Decided in favor of the assessee.

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• 2016 (11) TMI 272
  Denial of exemption under N/N. 63/1995 CE dated 16.03.1995 - extended period of limitation - demand of duty with interest - imposition of penalties - Held that: - The Notification No. 63/95 clearly restricts the exemption in serial no. 2 thereof only to manufacture of goods interalia, BEL for supply to Ministry of Defence for official purposes. There is no extension of this benefit to vendors or job workers. The appellant's argument that they started availing exemption after clarification by a department officer will not help their case. An erroneous clarification cannot be taken shelter of to claim erroneous benefit. Interestingly the appellant has also produced a letter dated 27.10.2009 from the Board to Chief Commissioner, LTU Bangalore clarifying that vendors would not be covered by the notification. Therefore, we are of the considered opinion that appellants are not entitled to the benefit of exemption under the notification 63/95. Hence on merits the appellants do not have a case. Extended period of limitation - Held that: - the appellant had all along kept the department informed about the availment of benefit under the notification, not only through their monthly returns but also in written communication to the jurisdictional Range superintendant. On such score, the SCN covering the period December 2009 to February 2011 should have been issued within normal period of limitation provided under Section 11A of the Central Excise Act, 1944. However, said notice was issued only on 04.09.2013, hence the entire demand in the impugned order is hit by limitation and has to be set aside, which we hereby do. Refund of deposit made under protest during investigation allowed since extended period of limitation is not invokable - appeal allowed - decided in favor of appellant.

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• 2016 (11) TMI 271
  Demand - Whether the appellant is liable to pay Central Excise duty on the waste of band aid generated in the hands of the job worker - Rule 21 Central Excise Rules 2002 - Held that: - the finished products Band-Aid can be considered finished product only when they packed and certified as fit for dispatch to the market, on approval of the quality control section of the appellant - shredded Band-Aid may not become an excisable product as it is not a manufactured item and is a waste that gets generated during the course of manufacturing and packing of final product “Band-Aid” as the shredded Band-Aid has no market and the product is not marketable. Band-Aid falls under chapter 30, hence any scrap that arises during the course of manufacturing of final product needs to be classified which in the case in hand, should be under chapter 30; there is no tariff heading for classifying the scrap arising during the course of Manufacturing of Chapter 30, hence in the absence of any classification of the product, demand of the duty is unsustainable - Appeal allowed.

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• 2016 (11) TMI 270
  Cenvat credit - Held that: - the respondents had fabricated the tanks for storage of molasses in the factory during the period November 2003 to June 2004 and availed Cenvat credit of the duty paid on plates, angles, channels. It is undisputed that during the period in question, storage tank was mentioned as capital goods in the definition of capital goods and was eligible for availment of Cenvat credit of duty paid on such tanks - Decided in favor of the assessee.

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• 2016 (11) TMI 269
  Reversal of Cenvat credit - Demand - Held that: - the bone of the contention in the case is whether the respondent is required to pay duty on the scrap on the cenvat credit availed on the inputs and capital goods - Tribunals decision in respondents own case in order dated 16.04.2015 relying upon various judgments in para 6 held in favour of the respondent who was an appellant in that case - Decided in favor of the assessee.

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• 2016 (11) TMI 268
  Refund claim - excess duty paid on Target Achievement discount, Cash discount, Turnover tax, Freight, Octroi, during the period from July, 1985 to September, 1996 in respect of Electric Fans falling under sub-heading no. 8414.80 of the First Schedule to the Central Excise Tariff Act, 1985 - refund claim for refund of pre-deposit amount of Rs. 23 Lakh - Whether the amount of Rs. 23 Lakhs is included in the amount of Rs. 54,30,017/- or not and (ii) If it is not included, the assessee is eligible for refund as the refund claim is within the time limit? - provisional assessment covered by Rule 9B of the erstwhile Central Excise Rules, 1944 - Held that: - In appeal No. E/541/2007, the lower appellate authority has set aside order of original authority and has held that appellant are eligible for refund of Rs. 54,30,017.82/- with interest. In appeal E/817/2009 in the second ground of litigation, lower appellate authority has once again held that appellants are eligible for said amount of interest. It is seen that in both orders the appellate authorities have analysed the matter in great detail and only there after arrived at the conclusion of sanction of refund and interest. We do not find any infirmities in these impugned orders. Hence no merit found in these appeals. Interest on delayed refund - Department has argued that since the period involved in the refund claim is July 1985 to September 1996, the interest liability will not arise in their case since provisions of 11BB have come into force w.e.f 26.05.1995 - Held that: - the provisional assessment itself was finalized only on 27.08.1998 and the refund claim filed on 23.02.1999. The order of refund was vide Order in Original dated 10.08.2007. This being so there is no merit in the departments contention against grant of interest on delayed refund as ordered by lower appellate authority in OIA dated 10.11.2009. Appeal dismissed - decided against Revenue.

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• 2016 (11) TMI 267
  Demand - Clandestine manufacture - Held that: - Department in the present appeal has not brought out any evidence to corroborate clandestine manufacture or clearance of excisable goods. Even if it is considered that high power consumption has not been satisfactorily explained, based on that alone, charge of clandestine manufacture cannot be upheld - Decided in favor of the assessee.

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• 2016 (11) TMI 266
  Clandestine removal - Demand - Penalty - Held that: - In this case the sole allegation against the appellants is that they have received the inputs clandestinely manufactured by M/s Nabha Steels Ltd. and M/s Pushpanjali Steel Alloys Pvt. Ltd. - In the case of M/s Nabha Steels Ltd. and M/s Pushpanjali Steel Alloys Pvt. Ltd., this tribunal has already held that they were not involved in the activity of clandestinely removal of the goods to the appellants - As inputs have not been received by the appellants therefore, the question of manufacturing does not arise - Decided in favor of the assessee.

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• 2016 (11) TMI 265
  Cenvat credit - capital goods - availing 100% credit on moulds and dies - Penalty - Held that: - under the facts and circumstances there is no mala fide and /or contumacious conduct on the part of the appellant in availing 100% Cenvat credit on moulds and dies during the period October, 2003 to May, 2004 - the appellant have calculated the interest element and paid the same on the excess credit so taken in for the first year under intimation to the Revenue, before the issue of show cause notice - Appeal allowed.

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• CST, VAT & Sales Tax

• 2016 (11) TMI 260
  Rectification of mistake u/s 84 of the TNVAT Act - whether the respondent would be entitled to accept the C and F declaration forms, after the assessments are completed? - Held that: - the decision in the case of State of A.P. v. Hyderabad Asbestos Corporation Ltd. [1994 (4) TMI 302 - SUPREME COURT OF INDIA] relied upon and circular dated 28.02.2001 relied upon where the circular instructing the Assessing Authorities that they are empowered to revise the assessments under Section 55 of the erstwhile Tamil Nadu General Sales Tax Act, which is in pari materia with Section 84 of the TNVAT Act on furnishing of declaration forms - it would be well within the jurisdiction of the respondent to accept the forms and consider the same, in accordance with law. There will be a direction to the respondent to entertain the petitioner's petitions under Section 84 of the TNVAT Act, dated 07.09.2016 for all the seven assessment years and direct the petitioner to appear in person and produce C and F declaration forms and on verification, the respondent shall re-do the assessments in accordance with law. In the light of the above directions, the attachment of the petitioner's bank account shall be lifted and no coercive action shall be initiated till the petitions under Section 84 of the TNVAT Act, are considered and disposed of. The above exercise shall be complied with by the respondent, within a period of four weeks - petition disposed off - decided in favor of petitioner.

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• 2016 (11) TMI 259
  Input tax credit - validity of order - to afford an opportunity of personal hearing and consider the relevant records - Held that: - the petitioner has agreed to produce the original documents and taking the said circumstances in this particular case that the petitioner was totally incapacitated and he is not able to give a reply, the matter is remitted back to the authority concerned for giving an opportunity for production of originals and thereafter, pass an appropriate order - Petition disposed by way of remand - Decided in favor of the assessee.

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