TMI Tax Updates - e-Newsletter
December 14, 2016

Case Laws in this Newsletter:

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

Articles

• TRANSFER OF PENDING PROCEEDINGS TO NATIONAL COMPANY LAW TRIBUNAL UNDER SECTION 434 OF COMPANIES ACT, 2013
• GST : WHAT IS IN STORE

News

• Transcription of the Finance Minister’s Statement made to media today

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• RBI Reference Rate for US $

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Circulars / Instructions / Orders

DGFT

• 46/2015-2020 - dated 13-12-2016
  Deletion of Kuth root having ITC-HS Code 12119046 appearing at Sl. No. 506 of Appendix 3B of MEIS schedule – regd.

Highlights / Catch Notes

Income Tax

• Revision u/s 263 - In the present case the petitioner had informed the department as to its address before the initiation of proceeding. Therefore it was obligatory on the part of the department to attempt to serve notice at the new address. - HC
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Customs

• Merchant Overtime Fee (MOT) - the services are rendered within the range of such officer and since admittedly these functions were executed during "normal working hours", such levy is impermissible - HC
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• Import of medical equipment - failure to fulfillment of export obligation - it would be fully open to the authority to ask the person who have availed of the benefit of exemption to pay the duty payable in respect of the equipments which have been imported without payment of customs duty - AT
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• Rejection of declared value - Import of Sodium Saccharin - The enhancement of the value which was done mainly based on NIDB data and Profoma Invoice of the Chinese manufacturer cannot be sustained - AT
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• Rejection of value of imported goods - Revenue explains that issuance of SCN is sufficient compliance of Rule 10A. We do not understand how a citizen can be dealt to the detriment of Justice without following the procedure known to law. - AT
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Service Tax

• Business auxiliary services - preparation of ID cards for fresh and renewed bus passes - the activity carried out by the appellant is definitely in the nature of IT services and hence will have to be necessarily excluded from quantification under category of BAS - AT
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Central Excise

• CENVAT credit - job-work - the transport of material directly to the job worker’s premises to avoid payment of extra period and same time, cannot lead to denial of credit. - AT
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• Classification of goods - The commutators remain a part of motor, which in turn is used as a component of other machine. In view of the above, the correct classification of commutators is 85.03 - AT
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• Valuation of Compact Fluorescent Lamps to be done on MRP basses even if sold in bulk - However, no case of contumacious conduct or suppression is made out, extended period of limitation not applicable - AT
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Case Laws:

• Income Tax

• 2016 (12) TMI 624
  Denial of natural justice - non appearance by the Authorised Representative on whom the assessee was absolutely relied - Held that:- There is merit in the submissions of the assessee as the propositions canvassed by the the assessee are supported by the facts narrated by him. The assessee has been cheated by the ld. Counsel/ld. AR and therefore the assessee has submitted that the assessee in the instant case has not got the natural justice and therefore we are of the view that the assessee should not suffer because of gross negligence of the ld. AR. Therefore we remit the case back to the file of the ld. CIT(A) to decide the appeal afresh after giving an opportunity of being heard to the assessee.

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• 2016 (12) TMI 623
  Disallowance of loss incurred in hedging against foreign exchange fluctuation - CIT(A) delted the disallowance - Held that:- The loss so arisen were on account of abuse of fiduciary powers by the employee therefore allowable as business loss u/s. 28(1). We also found that loss arisen out of cancellation of foreign exchange transactions does not partake the character of speculative transactions nor it qualified as a separate and distinct business to constitute the speculative business. We also found that at the advice of Foreign Exchange Consultants, the assessee company has cancelled the contracts which were unauthorized and booked the loss. The said employee was later terminated from services and criminal complaint was also filed against him. All this shows that the loss was genuine and the said loss was a regular business loss as the transactions were entered by the accused employee with the banks in the name of the assessee company. Accordingly, it was the assessee’s duty to bear the loss arising out of cancellation of such unauthorised contracts. Coming to the objection of the AO that loss has been classified as exceptional hence, not permissible as per para 12 of AS-5. When items of income and expense with profit or loss from ordinary activities are of such size, nature or incidence that their disclosure is relevant to explain the performance of the enterprise for the period, the nature and amount of such items is required to be disclosed separately . Thus, merely by qualifying it as exceptional loss does not lose the character of business loss and hence has to be allowed. For each and every aspect, the CIT(A) has dealt with the issue threadbare and after controverting the objections of AO and after applying judicial pronouncements to each aspect reached to the conclusion that loss so incurred was allowable as business loss. Disallowance u/s.14A - assessee had made a suo-mote disallowance - assessee had earned dividend income of mainly from Mutual Funds, which has been claimed as exempt u/s. 10(35)- Held that:- Though the learned AO acknowledged the fact that borrowed funds have not been utilized for earning exempt income, but he has made further disallowance u/s. 14A r.w.rule 8D at ₹ 84,30,296/- (ie disallowance as per Rule 8D - ₹ 87,86,399/- less expenditure already disallowed in return of income of ₹ 3,56,103/-). While filing the return the assessee had suomoto disallowed proportionate salary of two employees who were engaged in MF activities, and hence the said disallowance of ₹ 3,56,103/- was made. The additional disallowance u/s. 14A requires finding of incurrence of expenditure for earning exempt income. The mere receipt of dividend income would not be sufficient for invoking the provisions of section 14A by applying Rule 8D unless AO record reasons for not accepting the computation of disallowance offered by assessee as attributable to earning of exempt income having regard to the accounts of assessee. AO cannot apply Rule 8D without showing how assessee's method is incorrect. We set aside the matter back to the file of the AO for deciding afresh

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• 2016 (12) TMI 622
  Revision u/s 263 - allowance of depreciation on goodwill - Held that:- Assessing Officer has accepted the assessee’s claim of depreciation on goodwill on the reduced w.d.v. as on 1/4/2010 after making enquiries, proper verification and application of mind and therefore, ld. Pr. CIT has wrongly assumed the jurisdiction u/s 263 of the Act and the same is uncalled for and unwarranted and deserves to be quashed. We accordingly set aside the order of ld. Pr. CIT passed u/s 263 of the Act and restore that of the Assessing Officer passed u/s 143(3) of the Act dated 30.3.2014. - Decided in favour of assessee.

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• 2016 (12) TMI 621
  Disallowance under section 14A r/w rule 8D - Held that:- Undisputedly, the total exempt income earned by the assessee during the relevant previous year is ₹ 31,232. Therefore, the expenditure relatable to such exempt income cannot exceed the quantum of exempt income. Moreover, the disallowance to be made under section 14A r/w rule 8D(2) should be of a reasonable amount, therefore, considering the facts and circumstances of the case, we are of the view that 5% of the dividend income earned should be considered for disallowance under section 14A. Amount received from FirstRand Bank Ltd., South Africa - capital or revenue receipt - Held that:- the entire issue has to be examined afresh by the Assessing Officer. The assessee has to demonstrate that there was a contract between the assessee and the bank, either in the capacity of a preferred partner or otherwise and in pursuance to such contract, the assessee has complied to the conditions imposed by terminating all his business professional / engagements in the field of investment banking or not accepting any offer relating to business / professional commitment in the field of investment bank from any other entity. If the assessee is able to establish these facts certainly the amount received by the assessee from FirstRand Bank Ltd., South Africa, can be treated as compensation received for financial loss suffered due to cancellation / termination of the contract, thereby, rendering it as a capital receipt, hence, not taxable. In view of the aforesaid, we are inclined to set aside the impugned order of the learned Commissioner (Appeals).

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• 2016 (12) TMI 620
  Validity of the order passed under section 263 - method of valuation of unlisted shares unquestioned - non-enquiry or inadequate enquiry - Held that:- AO after having asked a pertinent question of the method of valuing unlisted shares in his letter dated 12th January, 2000 did not pursue that line of enquiry. The required information was not furnished by the Appellant nor any explanation offered for not furnishing the same. It is also not a case where the Assessing Officer was satisfied with regard to his query by some other explanation offered by the Appellant. In fact, merely asking a question which goes to the root of the matter and not carrying it further is a case of nonenquiry, if the query is not otherwise satisfied while responding to another query. In the present facts, the question raised has not been responded to by some explanation which would render the enquiry commenced, futile. In fact, the CIT in his order dated 20th March, 2002 specifically exercised powers under Section 263 of the Act on the basis that the necessary information was not furnished by the Appellant in support of its claim nor the Assessing Officer enquired into the same. Thus, this is a case of nonenquiry and not inadequate enquiry. Therefore, the order of the Assessing Officer is certainly erroneous. There is no dispute that the order of the Assessing Officer is prejudicial to the Revenue. Thus no enquiry was conducted to find out the method of valuation of shares at ₹ 50/per share when purchased on 1st April, 1996 and sold at ₹ 10/per share on 1st April, 1996, substantial question of law admitted for our consideration is answered in the negative i.e. in favour of the Revenue

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• 2016 (12) TMI 619
  Penalty under Section 271D - violation of the provisions of Section 269SS - Held that:- CIT (Appeals) dealt with the cash balances in the assessee's account and came to the conclusion that the cash taken by him was from agriculturists and had been utilized for the purpose of the assessee's business. It is further found that all the persons who had kept their amounts were agriculturists; that such persons had the means to deposit the amounts; that the deposits were treated as genuine and that the assessment of the amounts were accepted and explained. The CIT (Appeals) and the Tribunal also accepted the reasons for the appellant's accepting the same. They found that there were no malafides in doing so. Thus, even without going into the issue on merits, we see no reason to interfere with the exercise of discretion not to levy penalty.The exercise of discretion cannot be said to be perverse or arbitrary. - Decided against revenue

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• 2016 (12) TMI 618
  Unexplained cash credit under section 69 - Held that:- The entire amount which is sought to be added by the A.O., entries have been explained by the assessee by producing Special Audit Report and in the Special Audit Report the Special Auditor has stated all the entries, the learned CIT(A) as well as the learned tribunal are justified in deleting the said addition by observing that the A.O. was not justified in making addition of the aforesaid amount on account of unexplained cash credit under section 69 of the Act, which has been explained in the Special Audit Report. - Decided in favour of assessee

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• 2016 (12) TMI 617
  Addition u/s 68 - CIT (A) and the ITAT deleted the additions made - Held that:- The CIT (A)’s reasoning that the materials clearly pointed to the share applicants’ possessing substantial means to invest in the assessee’s company. The AO seized certain material to say that minimal or insubstantial amounts was paid as tax by such share applicants and did not carry out a deeper analysis or rather chose to ignore it. In these circumstances, the inferences drawn by the CIT (A) are not only factual but facially accurate. - Decided in favour of assessee

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• 2016 (12) TMI 616
  Validity of reopening of assessment - disposal of objections filed by the Assessee - Held that:- In the light of the reasons assigned by the respondent in the impugned order dated 16.11.2016, the case on hand cannot be stated to be one where the respondent has not considered the petitioner's objections and in the process of consideration, the respondent has taken a stand to the extent permissible at this point of time as if any further findings are rendered by him it would amount to pre-deciding the matter. Therefore, the respondent has satisfied the directions issued by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd vs. Income Tax Officer and others (2002 (11) TMI 7 - SUPREME Court ) 1 SCC 72 and has disposed of the objections filed by the Assessee by passing a speaking order which does not call for any interference at this stage. Accordingly, the writ petition is dismissed leaving it open to the petitioner to work out their remedies available under the Act.

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• 2016 (12) TMI 615
  Prospectivity of Section 80 HHC as amended in 2005 - Held that:- As far as issue relating to turnover below 10 crores and above 10 crores is concerned, the same has already been answered in the recent order in C.I.T. -5 & ANR. VS. M/S. AVANI EXPORTS & ANR.(2015 (4) TMI 193 - SUPREME COURT ) making it clear that it applied to both categories. Having seen the twin conditions and since 80HHC benefit is not available after 1.4.05, we are satisfied that cases of exporters having a turnover below and those above 10 cr.

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• 2016 (12) TMI 614
  Revision u/s 263 - non proper service of notice - Held that:- Section 263 requires a notice to be issued by the department in respect of such proceedings. In the instant case the department has not served notice on the petitioner. Two attempts to serve the petitioner where at an address which was not the prevailing address of the petitioner at the material point of time. Two attempts to serve on the old address therefore cannot be counted as a notice under Section 263. Although the impugned order records that, not finding the petitioner at the old address a notice was affixed on such address. For the affixture of notice to take effect it must be shown that, an attempt was made to serve the notice at the last known address of the assessee. In the present case the petitioner had informed the department as to its address before the initiation of proceeding. Therefore it was obligatory on the part of the department to attempt to serve notice at the new address. Not having done so the attempts of the department to serve at the old address and claim good service on the basis of affixture of notice at the old address, in view, cannot be upheld as a good service. Thus the department did not comply with the provisions of Section 263 of the Income-tax Act, 1961 by serving proper notice thereunder on the petitioner. - Decided in favour of assessee

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• 2016 (12) TMI 613
  Rejection of books of account - addition applying net profit rate at 9.75% subject to interest and depreciation and subject to income declared by the assessee - Held that:- As in assessee's own case for assessment year 2005-06 and 2007-08 we modify the order of the ld. CIT(A) on this issue with the direction to the AO to apply the net profit rate of 9.75% subject to depreciation and interest. Apropos rejection of books of account, it was submitted that Coordinate Bench has been taking consistent view that interest and depreciation is to be allowed for application for net profit rate. Therefore, the rejection of books of account is upheld. The ground raised in respect of rejection of books of account is dismissed. Addition in respect of interest on FDR & NSC - income from other sources OR business receipts - Held that:- As during the course of hearing, a query was raised to ld. Counsel for the assessee to demonstrate from the contract whether such FDRs were made for getting the performance guarantee from its banker. The ld. Counsel for the assessee could not point out from the record. However, he submitted that requisite evidence was placed before the AO. In the absence of the contract, it cannot be inferred that the FDRs were made by the assessee was out of commercial expediency. We, therefore, deem it in the interest of justice to restore this issue to the file of the AO to verify whether the FDRs receipts made by the assessee were out of commercial expediency. The AO observed that the assessee was required to make the FDRs with the banker for getting the performance guarantee/ bank guarantee as to the contract executed by the assessee. Thus, he would treat interest as income from business receipt, if the assessee fails to establish the nexus between the contract and the FDRs, in that event, no relief would be granted.- Decided in favour of assessee for statistical purposes. Disallowance on account of sales and administrative expenses incurred at the petrol pump of the assessee - Held that:- The AO did not produce the relevant bills and vouchers as to the above sales and administrative expenses. Hence, the AO disallowed 20% of total expenses of ₹ 13,78,700/- which comes to ₹ 2,75,740/-. Before the ld. CIT(A), the issue was raised who observed that the expenses are not fully verifiable but some disallowances were considered by him justified and the ld. CIT(A) thus disallowed the expenses to the extent of ₹ 1,37,870/- . Hence in view of the above facts and circumstances, we concur with the finding of the ld. CIT(A) on this issue Addition u/s 69B - without making any reference to the Valuation Officer’s valuation report - Held that:- The AO has made this addition on the ground that the assessee was required to furnish the details of expenditure incurred for building construction during the year under consideration. The AO observed that the case of the assessee has been referred to the Valuation Cell in the preceding year. The Valuation Officer for the year under consideration has determined the value at ₹ 8,44,645/- as against ₹ 6,00,000/- declared by the assessee. We find that the order of the ld. CIT(A) is cryptic and non-speaking. Therefore, the order of the ld. CIT(A) is set aside and the finding of the AO is upheld. - Decided in favour of revenue Addition on account of unexplained cash deposit into the bank - Held that:- DR insisted that findings of the ld. CIT(A) may be modified to the extent of that the AO would be at liberty to verify claim of the assessee in relevant assessment year. We therefore, modify the findings of the ld. CIT(A) to the extent that the AO would be at liberty to verify the claim of the assessee in the relevant assessment year. Addition on sales tax refund - AO treated the same as income from other sources - Held that:- The contention of the assessee is that once books are rejected ad profit is estimated then no separate addition in respect of sales tax refund ought to have been made. In our considered view, this issue needs reconsideration at the end of AO. Hence, this issue is restored to AO’s file for decision afresh.

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• 2016 (12) TMI 612
  Addition on account of disallowance of commission payment - Held that:- As the assessee has proved the genuineness of the commission paid to the above persons i.e. 08 persons amounting to ₹ 22,57,462/- indicating therein the PAN on the sales achieved by them. Thus, it appears from the record available before the Bench that the assessee has rightly paid the commission payment to the respective persons. - Decided in favour of assessee.

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• 2016 (12) TMI 611
  Capital gain computation - transfer - computation of value of the plot - addition made with aid of section 50C - Held that:- Validity of unregistered agreement has not been denied for the purpose of adducing it as evidence for obtaining the benefit flowing from such contract. But for the purpose of protecting the possession, un-registered contract could not be enforced. The “transfer” within the meaning of section 2(47) of the Income Tax Act would complete, if possession is protected. Therefore,no merit in the first fold of submissions raised by the ld.counsel for the assessee. Right to obtain sale deed executed was accrued in favour of the vendee. The rates applicable on 7.5.2007 ought to be applied for determining the value of the property for the purpose of computing capital gain. It has been brought to my notice that ld.DVO has adopted rates as applicable on 20.10.2010. I accepted this fold of contentions and directed the AO to compute the value of the property by adopting the rate at ₹ 75/- per sq.meter. If this value exceeds the value declared by the assessee in the sale deed, and adopted for computing the capital gain, then, the AO would take this value, otherwise, capital gain would be computed on sale consideration disclosed by the assessee in his computation. The ld.AO shall carry out this exercise after providing opportunity of hearing to the assessee.

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• 2016 (12) TMI 610
  Gain on sale of land - nature of land - agricultural land or capital asset within the meaning of Section 2(14)(iii) - measurement of distance - Held that:- The position in law is clear that section 2(14)(iii)(b) of the Act covers the situation where the subject land is not only located within the distance of 8 kms from the local limits, which is covered by Clause (a) to section 2(14)(iii) of the Act, but also requires the fulfillment of the condition that the Central Government has issued a notification under this Clause for the purpose of including the area up to 8 kms, from the municipal limits, to render the land as a "Capital Asset.There is no amendment or withdrawal of the said notification except the amendment brought in the statute by the Finance Act 2013 whereby the requirement of said notification has been dispensed with. The amendment by the Finance Act 2013 is with effect from 01-04-2014 and therefore, applies prospectively in relation to the assessment year 2014-15 and subsequent assessment years. For the year under consideration, the distance has to be measured by the approach road. The amendment brought in by the Finance Act, 2013 to measure the distance aerially is effective from 01- 04-2014 and therefore, applies prospectively in relation to the assessment year 2014-15 and subsequent assessment years. we find that the matter require fresh examination taking into consideration the above legal proposition. We accordingly, set-aside the matter to the file of AO to examine the matter a fresh after giving reasonable opportunity to the assessee. - Decided in favour of assessee for statistical purposes only.

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• 2016 (12) TMI 609
  Revision u/s 263 - Held that:- In pursuance of S 263, when the CIT passed an order directing the AO to redo the assessment in accordance with law and before coming to any conclusion to afford a reasonable opportunity of being heard to the assessee etc, such an order could not have been contended as detrimental to the interest of the assessee, as it was always open to it to justify its claim as held in ase of CIT V Infosys Technologies [2012 (1) TMI 76 - KARNATAKA HIGH COURT] - Decided against assessee.

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• 2016 (12) TMI 608
  Addition on account of Undisclosed debtors - application of prime credit theory - Held that:- From perusal of the various entries found recorded in the seized documents and the cash flow statements prepared by the assessee, it is observed that in terms of amount advanced to various debtors, repayment thereof to the assessee, amount received from the creditors and its repayment by the assessee, the assessee has tried to establish the necessary linkage in terms of outflow and inflow of funds. It is also not the case of the Revenue that inflow of funds through various credit entries was applied elsewhere by the assessee other than his money lending business. Also, where necessary linkage in terms of inflow and outflow of funds are established, it is immaterial whether these transactions are happening in physical form or routed through the banking channel. Accordingly, we do not see any infirmity in applying the peak credit theory in the facts of the present case. Thus we set aside the matter to the file of the AO to apply the peak credit theory after taking into consideration both the debtors and creditors entries found recorded in the seized documents. - Decided in favour of assessee for statistical purposes. Addition on account of undisclosed/unexplained house hold expenses - assessee has contended that the household expenditure has been incurred out of his salary withdrawals - Held that:- As except for AY 2009-10 in respect of which documents were found during the course of search, no documents are found in respect of any of the other years and the AO has only made an estimation without any underlying documents. The basis of estimation which ranges from ₹ 50,000 to ₹ 2,50,000 is also not clear from the records. Though both AO and ld CIT(A) has taken cognizance of the said contentions of the assessee, however no credit/setoff has been given. As against the total addition of ₹ 8,00,000 made by the AO towards undisclosed household expenditure, the assessee has reported in his return of income, an amount of ₹ 8,92,000 as salary income for all the respective years taken together, besides income from other sources. We therefore find force in the said contention of the ld AR and are of the view that necessary credit should be available in respect of salary income already offered to tax and no addition is thus called for in respect of undisclosed household expenditure. The entire addition in the hands of the assessee on account of undisclosed household expenditure for AY 2005-06 and all subsequent years under appeal are hereby deleted.- Decided in favour of assessee

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• 2016 (12) TMI 607
  Penalty u/s 271(1)(c) - adhoc disallowance of expenses - Held that:- In the present case, the income of the assessee was assessed after rejection of books of accounts and 10% of certain expenses have been disallowed on estimate basis. What is relevant is finding of fact or bringing on record any evidence supporting the estimate. If there is none, it is only a matter of one’s person estimate against the other. In the instant case, there is no positive evidence as to why only 10% of the expenses have been disallowed. The AO has stated that since these expenses are not verifiable, he disallows 10% of these expenses and also made the basis for levy of penalty. This rather shows that the AO has not disputed the very incurrence or genuineness of the expenses at the first place. The non-verifiability of the expenses can be the basis for disallowance of expenses but the same cannot form the basis for levy of penalty without bringing on record any concrete evidence of furnishing inaccurate particulars of income or concealment of income. Further, the estimation done by the AO have been partially confirmed by ITAT by taking a macro view in terms of N. P rate instead of individual expenses and is again an estimation and nothing more. The Hon’ble Rajasthan High Court in case of CIT vs. Mahendra Singh Khedla (2012 (3) TMI 568 - RAJASTHAN HIGH COURT) has held that the additions have been sustained by the Tribunal only on estimation and a fact or allegation based on estimation cannot be said to be correct only, it can be incorrect also. Therefore, penalty was wrongly levied by the AO. - Decided in favour of assessee.

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• 2016 (12) TMI 606
  Disallowance of compensation received on termination of agreement of legal services claimed as capital receipts - Held that:- As decided in Khanna and Annadhanam vs. CIT [2013 (1) TMI 681 - DELHI HIGH COURT] when that source was unexpectedly terminated, it amounted to the impairment of the profit making structure or apparatus of the assessee firm. It is for that loss of the source of income that the compensation was calculated and paid to the assessee. The compensation was thus a substitute for the source. In opinion, the Tribunal was wrong in treating the receipt as being Revenue in nature. As in the present case as per the Resolution, ₹ 35 lacs was the amount of compensation paid to the assessee for termination of his services in accordance with the clause 5 of the agreement dated 14-06-2001 made between the assessee and Marut Nandan Educational Society and ₹ 15.00 lacs was paid towards arrears of his emoluments plus interest thereon. It is noted that the assessee had shown ₹ 15 lacs as professional income and paid due tax thereon and ₹ 35 lacs received on account of termination of employment as per clause 7 of the agreement was shown by the assessee as exempt being a capital receipt - Decided in favour of assessee.

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• 2016 (12) TMI 561
  Computing the deduction u/s 80P(2)(a)(i) - Proportionate disallowance made u/s 43B - Held that:- The Tribunal noted that the taxable income of about ₹ 94 lacs was mainly from capital gain, but that there were no facts available to ascertain how much money was borrowed for the purpose of acquiring the capital assets. It is, therefore, not possible to separately work out the amount of interest payable under Section 43B of the Act in respect of the income eligible for deduction under Section 80P(2)(a)(i) and income not so eligible. It is not that the authorities have refused the appellant the proportionate benefit of a deduction under Section 80P(2)(a)(i). What is done is that the Assessing Officer has been directed to restrict the disallowance of interest payable under Section 43B on a proportionate basis. The deduction is only to the extent specified in sub section (2) thereof.The order of remand in this regard cannot be faulted. It does not raise a substantial question of law. Income from sale of property - income from business and profession or capital gain - Held that:- CIT (Appeals) and the Tribunal rightly upheld the assessment order for more than one reason. The appellant’s objects, inter alia, are to grant loans to its members for constructing houses as well as to build housing complexes and to sell the units therein. All the authorities under the Act have found as a question of fact that the appellant had claimed expenses in respect of these projects which were later sold. The conclusion, therefore, that they constitute business assets cannot be said to be perverse or absurd. The Tribunal, therefore, rightly came to the conclusion that the appellant being in the business of construction and sale of properties income from selling the houses that were constructed must be treated to be income from business and profession.

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• 2016 (12) TMI 560
  Entitlement to the benefit of Section 80P(2)(a)(i) - interest received from employees - Held that:- Questions of law are decided in favour of the assessee but only on the basis that the assessee is engaged in carrying on the business of providing credit facilities to its members. The Tribunal shall decide the appeal afresh only on the question as to whether the assessee is also engaged in carrying on the business of banking. In the event of the finding being against the assessee, it would not be entitled to succeed on the issues before us, in any event. However, in the event of the Tribunal finding that the assessee is engaged in carrying on the business of banking, the Tribunal shall decide as to whether on that basis the assessee is entitled to the benefit of Section 80P(2)(a)(i) or under any other provision in respect of the claims that are the subject matter of this appeal. Disallowance on provision of non-performing assets - Held that:- As it is admitted that the assessee would be entitled to the same only in the event of it being found that it is also engaged in carrying on the business of banking. It does not arise under Section 80P(2)(a)(i) on account of the business of providing credit facilities to the assessee's members. Question is, therefore, answered against the assessee insofar as the claim is based only on the assessee being engaged in carrying on the business of providing credit facilities to its members.

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• Customs

• 2016 (12) TMI 625
  Merchant Overtime Fee (MOT) - Legality of directive contained in the circular dated 07.04.2003 issued by the Central Board of Excise and Customs - ultra vires the Regulation 3 of the Customs (Fees for Rendering Services by Customs Officers) Regulations, 1998 - Whether, in the facts and circumstances of the case, the Tribunal is right in concluding that the Circular No.31/2003, dated 7.4.2003 is not enforceable in law as it is ultra vires Regulation (3) of the Customs (Fees for Rendering Services by Customs Officers) Regulations, 1998? - Held that: - the issue also arose for consideration before the High Court of Delhi in Commissioner of Central Excise v. Sigma Corporation India Pvt. Ltd. [2013 (4) TMI 649 - DELHI HIGH COURT] where it was held that It is an admitted position that stuffing work was done in the factory of respondent under the supervision of jurisdictional Central Range Officer during working hours only. The place of working/supervision was at the factory of the respondent which is at Mayapuri. Respondent has pointed out that as per Notification No.14/2002-CE(NT) dated 08.03.2002 as amended by Notification No.22/2002-CE(NT) dated 04.06.2002, the jurisdiction of Delhi II, Range 26 of Central Excise division-V includes Mayapuri Indl. Area Ph.-II where the factory of respondent is located, the services were rendered by the officer within his range only. The same fell within the jurisdiction of the Central Excise Range Officer who supervised the work. Chapter 13 of the CBEC's Customs Manual deals with “Merchant Overtime Fee” wherein it is provided that if services are rendered by the Customs Officer at a place which is not his normal place of work or a place beyond the Customs area, overtime is levied even during the normal working hours - the substantial question of law is answered in negative against the appellant. Appeal dismissed - decided against assessee.

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• 2016 (12) TMI 576
  Valuation - misdeclaration - mavish - black raisins - description of the goods - Held that: - So far as the description of the goods is concerned, the character of the goods was 'raisin' only when the laboratory could not opine properly. Also, we find that there was a leading question put to the laboratory to opine in favour of Revenue. Department should have only asked the laboratory to state the nature and character of the goods and done classification according to law. Whereas the department framed the question to the laboratory stating that whether the goods under import are "Black Bhokri" or not. The opinion of the laboratory when remained doubtful, that is not acceptable to law. So far as the valuation issue is concerned, there is no material shown to us to disturb the transaction value declared by the appellant. It is rule of law that to reject the transaction value, the department should state the reason why the transaction value declared is not correct. In the present case, the imports being of 2002, Customs Valuation Rules, 1998 applies. To proceed with a best judgement assessment, Rule 10A requires record of reasoning in case the transaction value declared by importer is disbelieved. There is no such reason recorded since nothing was brought to our notice while provisional release was allowed. There is nothing on record to suggest that the contemporaneous value adopted by the department had the basis to compare the goods of the appellant in a rational manner. When the requirement of law is examined, it appears that to doubt the truth or accuracy of the value declared, the officer concerned has to intimate the importer in writing the grounds of his doubt. There was no such intimation of doubt in writing issued by the authority to the importer. Before proceeding further, against the importer, the officer shall follow the course of natural justice as has been embedded into Rule 10A. That was not followed. The intimation intended by law is to provide an opportunity to the importer of being heard on the controversy. Revenue explains that issuance of SCN is sufficient compliance of Rule 10A. We do not understand how a citizen can be dealt to the detriment of Justice without following the procedure known to law. Codified procedure of law is enacted to serve public interest and an order to be passed publicly by a public authority. That was a failure by the department not acting in accordance with law - appeals allowed.

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• 2016 (12) TMI 575
  Valuation - mis-declaration of value of goods - heavy melting scrap - high-seas sale - provisional release of goods - Held that: - I find that the conditions imposed for “provisional release” are excessive and accordingly I modify the same as i) The first condition of payment of duty of the differential duty in full is waived; ii) The second condition to furnish a bond for the full value as re-determined is retained; iii) The third condition of providing the bank guarantee is modified and it is ordered to provide the bank guarantee for an amount of ₹ 5.00 lakhs only. Subject to fulfillment of above aforementioned modified conditions, the goods shall be released forthwith to the appellant after retaining samples, if any, required for the purpose of testing and adjudication. The appeal is allowed in part with further direction to the concerned Customs Authority to release the goods within three days on fulfillment of the modified conditions of the provisional release.

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• 2016 (12) TMI 574
  Classification of goods - old and used tyres - classified under CTH 40122020 or under schedule III Part B- List of Hazardous Wastes Applicable for Import & Export of Hazardous Waste (Management, Handling & Transboundary Movement) Rules, 2008 at Basel No. B-3140 with description as Waste of Pneumatic Tyres which can be imported with the permission of Ministry of Environment and Forest - The Original Authority, therefore, ordered confiscation of the goods imported under Section 111(d) & (o) of the Customs Act, 1962 and gave an option to redeem the goods on payment of redemption fine of ₹ 2,75,000/- under Section 125 of the Customs Act, 1962 and ordered re-export of the same goods and also imposed penalty of ₹ 1,35,000/- on appellant under Section 112 (a) of Customs Act, 1962. Held that: - I find that ordering of confiscation and again ordering re-export of confiscated goods is contrary to each other. On absolute confiscation, the goods became property of Government of India and appellant does not have any authority to export the same - confiscation of goods upheld with imposition of redemption fine of 15% of assessable value - imposition of penalty upheld to 10% of assessable value - the applicable duty on the assessable value shall be payable if the goods are taken/released on payment of Customs duty, redemption fine and penalty. The goods shall be released by completing customs formality within two weeks of payment of customs duty, redemption fine and penalty - appeal allowed - decided partly in favor of appellant.

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• 2016 (12) TMI 573
  Imposition of penalty u/s 112(b) of the Customs Act 1962 - Valuation of imported goods - second hand superbike - the appellant purchased second hand superbike from one Shri Rishi Sood, who had imported the same under Bill of Entry number 184720 dated 21.11.2005. The said superbike was purchased by the appellant in August 2007 against a consideration of ₹ 8 lakhs paid vide cheque dated 07.08.2007 i.e. after almost a period of more than 2 years from the date of import of the goods. The same was also registered in the appellant’s name by the transportation authority - Held that: - the appellate authority has come to a clear finding that there is no role played by the present appellant for the under valuation adopted by the importer at the time of import of the goods. But still he has gone ahead in imposing of penalty upon the importer. Otherwise also I find that the import was two years prior to sale of the bike in question, in which case the appellant, in the absence of any evidence to the contrary cannot be held to be the party to the illegal import so as to impose penalty upon him. In view of the findings of the Commissioner (A) himself, there is no justifiable reason to impose penalty - penalty set aside - appeal allowed - decided in favor of appellant-assessee.

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• 2016 (12) TMI 572
  Import of undyed and unprinted silk fabrics - Exemption from CVD subject to not availing Cenvat Credit on inputs - Benefit under Notification No.30/2004 dated 09.07.2004 - Held that: - I find that the issue is no more res-integra in view of the decision of the case of M/s SRF Ltd., M/s ITC Ltd Versus Commissioner of Customs, Chennai, Commissioner of Customs (Import And General), New Delhi [2015 (4) TMI 561 - SUPREME COURT], where it was held that when the credit under the CENVAT Rules is not admissible to the appellant, question of fulfilling the aforesaid condition does not arise - the CEGAT found that only those conditions could be satisfied which were possible of satisfaction and the condition which was not possible of satisfaction had to be treated as not satisfied. Appeal dismissed - decided against Revenue.

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• 2016 (12) TMI 571
  Revocation of CHA licence - the appellant's Customs Brokers licence was suspended vide order dated 15.03.2016 and confirmation of the suspension was done vide the impugned order dated 13.04.2016. Regulation 20 of Customs Brokers Licencing Regulation, 2013 (CBLR) specifically says that Revenue (Principal Commissioner/ Commissioner) shall issue a notice in writing to the Customs Broker within a period of 90 days from the date of receipt of offence report stating the grounds on which it is proposed to revoke the licence or impose penalty. Held that: - In the present case, the suspension was confirmed against the appellant vide impugned order dated 13.04.2016 and period of 90 days from the date of impugned order also expires on 12.07.2016. However, even by 12.07.2016 the revenue has not issued any show cause notice in this regard to the appellant, thus, not adhering to the provisions of Regulation 20(1) of CBLR, 2013 - In effect the Revenue by non-issue of show cause notice to the appellant custom broker within the period of 90 days from the date of receipt of offence report (which is factually 29.02.2016, when Joint Commissioner of SIIB, Air Cargo Import Commissionerate, New Delhi informed Commissioner regarding the violation of Rules and Regulation contained in CBLR 2013 by the respective staff of the appellant as mentioned in para 2 of the impugned order), has violated the provisions of Regulation 20(1) of CBLR, 2013. Thus, when within 90 days of this date i.e. 29.02.2016 (date of receipt of offence report), which happens to be over on 28.05.2016, Revenue did not issue show cause notice to appellant, it violated the provisions of Regulation 20(1) of CBLR, 2013. Though suspension order was issued on 13.03.2016 and confirmation of the same was done by the impugned order dated 13.04.2016, the inaction of Revenue by non issuance of show cause notice as per Regulation 20(1) of CBLR, 2013 makes continuing suspension invalid in the eyes of law. The result is that the appellant's right to carry on his profession and to earn livelihood has been affected without following the proper procedure prescribed under relevant provisions of CBLR, 2013. Suspension of licence set aside - appeal allowed - decided in favor of appellant - CHA assessee.

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• 2016 (12) TMI 570
  Import of undyed and unprinted silk fabrics - Exemption from CVD subject to not availing Cenvat Credit on inputs - Benefit under Notification No.30/2004 dated 09.07.2004 - Held that: - I find that the issue is no more res-integra in view of the decision of the case of M/s SRF Ltd., M/s ITC Ltd Versus Commissioner of Customs, Chennai, Commissioner of Customs (Import And General), New Delhi [2015 (4) TMI 561 - SUPREME COURT], where it was held that when the credit under the CENVAT Rules is not admissible to the appellant, question of fulfilling the aforesaid condition does not arise - the CEGAT found that only those conditions could be satisfied which were possible of satisfaction and the condition which was not possible of satisfaction had to be treated as not satisfied. Appeal dismissed - decided against Revenue.

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• 2016 (12) TMI 569
  Pre-deposit - Section 129E of the Customs Act, 1962 - interpretation of statute - Held that: - On plain reading of the provisions of SECTION 129E, we find that the wordings employed there in are as clear as daylight. In clause (iii) it is unambiguously prescribed that any person aggrieved by a decision or order referred to Clause (b) of sub- Section (1) of Sec129E of Customs Act, unless deposits 10% of the duty/penalty or duty and penalty, as the case may be, the appeal shall not be entertained - I do not find any reason to read the said provision in any other manner, so as to come to the conclusion that the Appellant is required to deposit 2.5% and not 10% as prescribed under the said provision in view of the settled principle of statutory interpretation. I do not find substance in the argument that the amount paid under clause(i) of Sec.129E, which was paid at the time of filing Appeal before the first Appellate Authority can be adjusted against the amount of deposit required to be made under clause(iii) while filing the Appeal before this forum - appeal dismissed - decided against appellant-assessee.

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• 2016 (12) TMI 568
  Import of medical equipment - fulfillment of export obligation - Exemption under Notification No.64/88-Cus dated 01/03/1998 - Held that: - We find that in the case of Mediwell Hospital and Health Care Pvt. Ltd.[1996 (12) TMI 51 - SUPREME COURT OF INDIA], it was held that The competent authority, therefore, should continue to be vigilant and check whether the undertakings given by the applicants are being duly complied with after getting the benefit of the exemption notification and importing the equipment without payment of customs duty and if on such enquiry the authorities are satisfied that the continuing obligation are not being carried out then it would be fully open to the authority to ask the person who have availed of the benefit of exemption to pay the duty payable in respect of the equipments which have been imported without payment of customs duty. As regards redemption fine - Held that: - the Hon’ble Apex Court in the case of Fortis Hospital [2015 (4) TMI 348 - SUPREME COURT], has held that on a plain reading of the said provision, we are of the view that such a provision would not apply in case where option to pay fine in lieu of confiscation is not exercised by the importer. Trigger point is the exercise of a positive option to pay the fine and redeem the confiscated goods - imposition of fine upheld. Confiscation and imposition of redemption fine is upheld. However, the recovery of duty under Section 125 (2) or payment of redemption fine are subject to the appellant exercising their option to redeem - the penalty imposed in the original adjudication order was ₹ 10,000/-. However, in the second time a penalty of ₹ 25,000/- has been imposed. We find that the appellants have failed to fulfill the conditions of the notification and in view of facts of the case penalty of ₹ 10,000/- is sufficient - appeal disposed off - decided against appellant-assessee.

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• 2016 (12) TMI 567
  Rejection of declared value - re-determination of value based on NIDB data - Sodium Saccharin - Held that: - Transaction-value cannot be enhanced merely based on NIDB data and on the contents of a Proforma Invoice issued for the goods of Chinese origin, which is different from the origin of the subject goods, unless NIDB data is for contemporary imports of all comparable goods only. The Proforma Invoice of Chinese Company is also of not much significance as origin of present goods is Taiwan and not China. The revenue has also not given any evidence that there has been payment of extra money to the supplier to compensate for the alleged under-valuation by the appellant importer. Thus, there are not enough evidences for rejection of transaction value for the present imports. In this regard CESTAT Delhi in case of Commissioner of Customs v/s Modern Overseas [2005 (2) TMI 202 - CESTAT, NEW DELHI] has held that the transaction value can be rejected on the basis of reasonable and cogent evidence of contemporaneous import of identical/similar goods. The comparable goods need to have same country of origin and has to be at same commercial level. The enhancement of the value which was done mainly based on NIDB data and Profoma Invoice of the Chinese manufacturer cannot be sustained - appeal allowed - decided against Revenue-respondent.

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• Service Tax

• 2016 (12) TMI 605
  Valuation - “expenses” reimbursed by the hotel to the Appellant towards the actual expenses incurred - whether such reimbursable expenses can be subjected to service tax under Section 67 of the Finance Act, by treating the same as part of the ‘gross amount’ charged by the service provider ‘for services provided’ by him? - Held that: - the issue is now dealt with and settled by the judgment of a Division Bench of the Hon’ble High Court of Delhi, in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. vs. UOI [2012 (12) TMI 150 - DELHI HIGH COURT], where it was held that reimbursable expenses cannot form part of the gross value of the services being provided by the service provider. In as much as in the present case the salary of the employees being sent by the appellant to their hotels is being paid by the appellant directly to the employee and the same is being reimbursed by the hotel without any markup. As such in terms of the law declared by the High Court of Delhi such reimbursable expenses collected by the services provider from the service recipient cannot be held to be a part of the value of the services being provided by the appellant - tax not leviable. Extended period of limitation - Held that: - The issue involved is a bonafide issue of interpretation of legal points which were the subject matter of various decisions. As such it cannot be said that there was any suppression or misstatement with any malafide intention to evade duty on the part of the appellant, thus justifying invocation of longer period of limitation - In as much as entire demand is beyond the normal period of limitation we set aside the demand along with penalties imposed on the appellant and set aside the impugned order and allow the appeal on this account also. Appeal allowed - decided in favor of appellant-assessee.

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• 2016 (12) TMI 604
  Business auxiliary services - preparation of ID cards for fresh and renewed bus passes on behalf of the APSRTC to their customers and collecting amounts for the above items on their behalf - Held that: - Para 16 of the agreement mandates that the software should not be utilized, sold or handled by any other individual, outsider agency etc. except APSRTC during the period of contract. From a perusal of these aspects, it clearly shows that the appellant is very much in the activity of developing and maintenance of computer software for APSRTC. This being so, their activity clearly falls within the ambit of Explanation to definition of BAS under Section 65(19) as it existed during the period of dispute. For these reasons, we are of the considered opinion that the activity carried out by the appellant is definitely in the nature of IT services and hence will have to be necessarily excluded from quantification under category of BAS. The impugned order is therefore not sustainable and is therefore set aside - appeal allowed - decided in favor of assessee.

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• 2016 (12) TMI 603
  Demand of ₹ 9,84,842/- - services rendered to an advertising agency - for the period 1997-98 to 2000-01 - Held that: - we find considerable merit in the submissions of the learned counsel. The Department has clarified the matter to the Advertising Associations in Bangalore and Chennai. In the event, the demand of ₹ 9,84,842/- involving service tax on the amounts billed by the appellants, not to the final clients, but only to the advertising agency is required to be set aside, which we hereby do. Demand of ₹ 2,63,977/- - for the period 1997-98 to 2000-01 - incorrect calculation of the tax liability worked out from gross receipts as per Income Tax return and P & L account of amounts received by the appellant from ultimate clients who have been directly billed by the appellant - Held that: - it is felt proper to remand the matter back to the original authority, only for the limited purpose of examining the assessee's/appellant's contention that the amount constitutes gross receipts including service tax paid thereon by the clients and secondly that they have already discharged the tax liability accrued to them on the billed amounts. Appeal allowed by way of remand.

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• 2016 (12) TMI 602
  Pre-deposit - Maintenance of ships - Annual Maintenance Contract - Materials supplied for rendering Services to Naval ships - Works Contract Service - Held that: - Taking into account the facts and circumstances of the matter, we feel that an amount of ₹ 25 lakhs, including the amount of ₹ 4,51,492/- already paid up by the appellant, would meet the ends of justice. The said amount should be paid up within a period of four weeks from today failing which the appeal is liable for dismissal for non-compliance of provisions of Section 35F. Report for compliance on 08/12/2016 - stay granted partly.

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• 2016 (12) TMI 601
  Refund claim - commercial or industrial construction services - construction of complex services - unjust enrichment - time bar - Held that: - In the impugned order, the Commissioner (Appeals) has taken the view that the service rendered by the assessee is rightly classifiable under the category of works contract service, since the service rendered was in the nature of a composite contract involving supply of goods as well as rendering of service. We are in agreement with the findings of the Id. Commissioner (Appeals). This view finds support in the decision of the Hon'ble Supreme Court in the case of CCE vs. Larsen & Toubro Ltd, [2015 (8) TMI 749 - SUPREME COURT]. Since the disputed period is prior to the date of introduction of works contract services, no service tax will be payable by the assessee. Consequently, the refund claim is admissible on merits. Time bar - Held that: - The original adjudicating authority has taken the view that an amount of ₹ 3,26,770/- has been deposited by the assessee on 21.11.2005. The refund claim stands filed on 12.3.2007. Therefore, the claim will be hit by time bar as per Section 11B (i) of the Central Excise Act, 1944, since the period is beyond one year. Consequently, we uphold this portion of the order of the Commissioner (Appeals). Unjust enrichment - Held that: - the amount deposited is in the nature of service tax. Consequently, the refund will be governed by the provisions of Section 11B. Inasmuch as the assessee has not submitted any proof to the effect that the burden of tax has not been passed on to the customers, the refund, which otherwise merits sanction, will need to be credited to the Consumer Welfare Fund. Appeal disposed off - decided in favor of Revenue partly.

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• 2016 (12) TMI 600
  Works contract activity - demand of service tax for the period prior to 01.06.2007 - Held that: - Works Contract as a species have been included in the statute book for the purposes of levy of service tax with effect from 01.06.2007. The demands raised in the present case are prior to 01.06.2007 and have been made by vivisecting the contracts into various activities comprised therein. The Hon'ble Supreme Court in the case of CCE, Kerala Vs. Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] has categorically held that Works Contracts involving supply of goods as well as provision of services cannot be subjected to service tax for the period upto 31.05.2007. Since the entire demand in the present case is prior to 01.06.2007, the demand is not sustainable, as has been held in the impugned order - appeal rejected - decided against Revenue-appellant.

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• 2016 (12) TMI 599
  Unjust enrichment - refund claim - refund on account of service tax paid on full value of freight on GTA service, whereas the appellant was liable to pay only 25% of the same - Held that: - I find that the appellant had initially paid the excess service tax and took the credit of the same. An assessee is entitled to take the credit of service tax so paid by it and it is not understood as to why the said cenvat credit so availed was held inadmissible to the assessee and whey the assessee was directed to reverse the same. As regards, unjust enrichment, it is the fact that the documents placed before the original adjudicating authority were not considered and scrutinized by him. The appellant has also placed reliance on cost accounting standard issued by Institute of Cost & Works Accountants of India and have made references to the circular F.No.137/29/2000/16 as also various decisions of the Tribunal. The said factors, as regards unjust enrichment are required to be examined by the original adjudicating authority, for which purpose, I set aside the impugned order and remand the matter for doing the needful. The appellant’s claim of availability of cenvat credit of the excess service tax paid by them would also be reconsidered - appeal allowed by way of remand.

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• 2016 (12) TMI 598
  Denial of CENVAT credit utilisation - benefit of abatement under N/N. 1/2006-ST dated 1.3.2006 was availed - Held that: - I find that identical issue has been decided by the Tribunal in the case of Archivista Engineering Projects Pvt. Ltd. [2015 (7) TMI 466 - CESTAT MUMBAI], where it was held that Appellant have rightly taken credit for the input services received and availed admittedly prior to 01.03.2006 although credit for the same have been taken on 01.04.2006, subsequent to coming into force of N/N.1/06, following the ruling of the Hon'ble High Court of Bombay in the case of Tata Engineering & Locomotive Company Ltd. (2003 (1) TMI 124 - HIGH COURT OF JUDICATURE AT BOMBAY). The intention of the Government is also express, that it is not to disallow the CENVAT Credit for the previous period as there is no such specific bar in the subsequent N/n. 1/2006. This view is further fortified by the view taken by CBEC Circular with respect to brought forward CENVAT Credit under Rule 6 sub Rule 3 when the disability of utilisation of 20% was removed. CENVAT credit utilisation justified - appeal allowed - decided in favor of appellant-assessee.

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• 2016 (12) TMI 597
  Levy of tax - works contract - whether the roads and park are a part of a residential complex or not? - Held that: - This issue is settled by the various decisions of the Tribunal, High Court as also by the Apex Court. Accordingly, considering the subsequent rulings of the Hon’ble Supreme Court, particularly in the case of L & T and others Vs. CCE [2015 (8) TMI 749 - SUPREME COURT]. We set aside the impugned order and remand the matter to the adjudicating authority for de novo adjudication, the appellant is also directed to appear before the adjudicating authority within 45 days of receipt of this order and seek opportunity of hearing - appeal allowed by way of remand.

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• 2016 (12) TMI 596
  Nature of activity - classification of services as BAS or C & F Services - Held that: - In view of the admitted facts that the appellant is not involved in clearing of the goods from the factories of their principal but only receives and stores such goods when delivered to them and thereafter forward the same by way of sale or otherwise as per direction of the principal. They do not provide any services of clearing. Accordingly, we hold that the services provided by the appellant are not classifiable under the classification of clearing and forwarding agent under Section 65(25) read with Section 65(105) of the Finance Act, 1994. Accordingly, we allow the appeal filed by the appellant-assessee - decided against Revenue.

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• Central Excise

• 2016 (12) TMI 595
  Evasion of duty - confiscation of goods - dummy unit - SSI Exemption - Held that: - the factual position has been examined in detail in the impugned order before arriving at the conclusion. The Commissioner (Appeals) also observes that the Department has not carried out any investigation to get supportive evidence on the allegation that M/s Gulshan Metal Works was a non-existing dummy firm without manufacturing facility. He relied upon the documentary evidence submitted by M/s Gulshan Metal Works to support their independent existence and also of the manufacturing activity. The impugned order elaborately dealt with the same - confiscation lacks merit - appeal dismissed - decided against Revenue.

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• 2016 (12) TMI 594
  Manufacture - fabrication of roof structure - suppression of facts - Held that: - Submission of the appellants is that they were basically manufacturers of the described goods as depicted at the outset. That is apparent from SCN dated 24.4.90. It is noticeable that till 1996, that industry was under the impression that the structural fabricated by them for their own use shall not amount to manufacture and not liable to duty. Only after 19 years of the Tribunal’s LB decision in the case of Mahendra & Mahendra, [1995 (3) TMI 88 - SUPREME COURT OF INDIA] the position of law was made clear to them as to the exciseability of the structural fabricated for their own use. Accordingly the allegation of suppression shall not subsist following the ratio laid down by the apex court in the judgement in the case of Continental Foundation Jt. Venture Vs. CCE, Chandigarh [2007 (8) TMI 11 - SUPREME COURT OF INDIA ]. Suppression with intention to cause evasion only invites extended period. Finding that the confusion in law has only caused difficulties to both sides, it is not possible to hold that it is the case of suppression of fact with intention to cause evasion, to invoke extended period. Accordingly, the adjudications suffer from limitation for which that is unsustainable. Appeal disposed off - decided partly in favor of appellant.

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• 2016 (12) TMI 593
  Denial of CENVAT credit - forged bills of entry, on the basis of which credit was taken - Held that: - I find that the appellant has availed the cenvat credit on the basis of Bills of Entry under which M/s. Micro Lab Ltd. (their supplier) have imported the goods. The claim of the appellant is that the cenvat credit has been availed in respect of inputs supplied by M/s. Micro Lab Ltd. The inputs were imported by M/s. Micro Lab Ltd. and in turn transferred to the appellant for manufacture of formulations. However, the appellant could not produce the relevant Bills of Entry duly endorsed in favour of the appellant. It has been submitted that after loss of the original Bills of Entry, the supplier has obtained certified photo copies of the Bills of Entry, but the same has not been accepted as proper documents for availing the cenvat credit by the authorities below. I note that the goods have been imported by M/s. Micro Labs Ltd. and obviously the Bills of Entry have been filed by them. In normal course, if the goods have reached the factory of M/s. Micro Labs Ltd. they would have been in a position to avail the cenvat credit. It is claimed that the goods covered by the Bills of Entry stand supplied to the appellant for further manufacture. This is not supported by any documentary evidence. The Customs attested copies of Bills of Entry can only be considered as proof of import by M/s. Micro Lab Ltd. There is nothing on record to rule out the fact that no cenvat credit has been taken by the original importer. The Dy. Commissioner under Rule 9(2) of the Cenvat Credit Rules, 2004 has been vested with the powers to satisfy himself and allow the cenvat credit as long as the documents accompanying the inputs contained all the particulars required as per cenvat credit rules. I find that the cenvat credit in the present can be allowed only if it is established that such cenvat credits have not been availed by the supplier or anyone else on the strength of these original Bills of Entry. I remand the matter to the original adjudicating authority with the direction to carry out the verification under Rule 2 of the Cenvat Credit Rules, 2004 and allow the credits after satisfying himself that the cenvat credit covered by the Bills of Entry have not been availed by M/s. Micro Lab Ltd. or any other person - appeal allowed by way of remand.

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• 2016 (12) TMI 592
  Job-work - clearance of fabric as starched - whether desizing activity carried out by appellant shall amount to "scouring"? - Held that: - To resolve the controversy, whether scouring amounts to 'desizing' or vice versa, Revenue has not brought out any evidence from any expert to suggest that it did not carry out scouring activity. Further, Revenue has no material to state that padding activity was not carried out. Ld. counsel explains that when starch was applied to the grey fabric received that ultimately resulted in finished goods. Therefore according to the mandate of the notification, if any one or more of the processes enumerated under Sl.No.46 is carried out, that grants the benefit of the notification to the manufacturer - In absence of any expert's opinion that the activity carried out by the appellant was not 'desizing' and does not amount to 'scouring', Revenue failed to discharge its burden of proof and fails in its contention - no penalty in any case is imposable for no deliberate breach of law since interpretation of law was involved - appeal allowed - decided in favor of appellant.

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• 2016 (12) TMI 591
  Disallowance of Cenvat credit - outward transport of finished goods - Held that: - I find that the appellant is satisfying all the three conditions as prescribed under Circular dated 23/8/2007 and accordingly, place of removal shall be the premises of the buyers. Accordingly, the appellant appears to be entitled to cenvat credit on the output transport expenses, wherein the appellant paid the freight charges and service tax on the same, as the recipient of service. Accordingly, I remand the matter back to the adjudicating authority for verification of the facts as the documents being GR notes or lorry receipts and invoices are claimed to be filed before this Tribunal for the first time. The ld. Adjudicating Authority shall verify the claim from the documents and/or books of account as may be deemed fit and if it is found that the facts are as stated before this Tribunal, the authority shall pass the consequential order accordingly - appeal allowed by way of remand.

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• 2016 (12) TMI 590
  CENVAT credit - manufacture of sponge iron - M.S. Angles, Channels, Plates, CTD Bars, Joists, Beams, Welding Electrodes, etc - The period involved is November, 2004 to March, 2009 - Held that: - We find that the question of eligibility of various steel items for cenvat credit in such situation has been a subject matter of decision by the Tribunal, various High Courts and the Supreme Court. We find that there are a larger number of decisions holding that M.S. Angles, Channels, Plates, etc. used in fabrication of structures are eligible for credit as long as they are shown to have been used in Connection with any of the capital goods inside the factory. Though these M.S. Plates and Angles fall under Genera Statutory Items Chapter 72 or 73 of the Central Excise Tariff Act, the purpose of their end use determines their eligibility. The Hon'ble Supreme Court in Rajasthan Spg. & Wvg. Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT OF INDIA] allowed the credit on steel plates and M.S. Angles, channels used in the fabrication of chimney for diesel generating sets. CENVAT credit allowed - appeal allowed - decided in favor of assessee.

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• 2016 (12) TMI 589
  Invocation of extended period of limitation - suppression of facts - procurement of inputs from 100% EOU - Held that: - I hold that the appellant had made appropriate disclosures in the returns filed with the Revenue and as such, no case of suppression or contumacious conduct is made out against the appellant. Accordingly, I hold that the extended period of limitation is not attracted. Accordingly, I set aside the demand and penalty retained by the Commissioner (Appeals). So far the Commissioner (Appeals) has deleted the demand and penalty to that extent, there is no interference by this Tribunal. Thus, the appeal is allowed with consequential benefits - decided in favor of assessee.

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• 2016 (12) TMI 588
  Reversal of CENVAT credit - Wether the appellant Paam Eatables Ltd (PEL for short) a manufacturer of Maggi 2 minute Noodles etc on job work basis, and cleared on payment of duty, whether are liable to reverse input credit under Rule 57CC of Central Excise Rules, 1944 read with rule 6 (1) of the CENVAT Credit Rules, 2004, for removal of broken noodles (waste product) exempt under Notification No. 3/2005-CE? - Held that: - the appellant is not required to reverse CENVAT credit on clearance of waste (floor sweeping and rejected Noodles). Further, held that the provisions of Rule 6 (3) of CCR, 2004, will not be attracted in the case of clearance of waste and by-product arising on the manufacturer of taxable final product. Under the facts & circumstances we also hold that the extended period of limitation is not attracted in this case. Accordingly, we allow the appeals with consequential benefits - reversal of credit not justified - appeal allowed - decided in favor of appellant-assessee.

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• 2016 (12) TMI 587
  Valuation - Compact Fluorescent Lamps - bulk sale - valued as per Section 4 of the Central Excise Act, 1944, or Section 4A? - Held that: - the issue is no longer res Integra, as held by the Honourable Supreme Court in the case of Liberty Shoes Ltd [2015 (12) TMI 1159 - SUPREME COURT] and accordingly we hold that there being no dispute that CFL was an item specified under Section 4A of the Act (which is covered under the Packaged Commodities Rules) and further MRP was affixed on the products supplied, as such the same would not exempted under Rule 34 of the Rules, read with the provisions of Section 4A of the Central Excise Act, 1944. Further we find that the finding of Id. Commissioner (Appeals is based on mistake of fact, the impugned order is fit to be set aside. Further we hold that under the facts and circumstances no case of contumacious conduct or suppression is made out and as such extended period of limitation is not available to Revenue. We allowed the appeal and set aside the impugned order with consequential benefits to the appellant - decided in favor of appellant-assessee.

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• 2016 (12) TMI 586
  MODVAT credit - Whether under the facts and circumstances where capital goods were acquired prior to the scheme of modvat was implemented and such capital goods after use of about more than 10 years have been disposed of during the Financial Years 2006-07. Whether the respondent-assessee is required to pay duty on removal or clearance of the same under the Rule 3(5A) of CCR, 2004? - Held that: - I find that it is a undisputed fact that the appellants have not taken any Cenvat or Modvat credit on the plant machinery in question. Further there is no scope of any presumption of having taken credit when the assets were acquired prior to launch of Modvat Scheme w.e.f. 1/3/1994, with respect to capital goods. I further find that Rule 3(5) of CCR has provided for a condition precedent which is, that the assessee must have taken Cenvat Credit on the capital goods which are subsequently removed and accordingly under such circumstances the assessee is liable to pay duty on removal of capital goods, subject to allowance of depreciation under the said Rule. It is also an admitted fact that the respondent-assessee in the present case have held the assets for more than 10 years and as such is entitled 100% depreciation of Cenvat Credit, if any, taken at the time of acquisition. Under these observations, I find that the impugned order is correct and requires no interference - appeal dismissed - decided against Revenue-appellant.

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• 2016 (12) TMI 585
  Valuation - durable and returnable packing includible in the assessable value or not? - Held that: - Prior to 01.07.2000, the amount recovered on durable and returnable packing was deductable from value. Therefore, we modify the Order-in-Appeal dated 28.11.2005 to the extent that on reconsideration, original Authority shall not impose any penalty and Original authority shall allow the deduction of amount recovered by the appellant towards durable and returnable packing for the period upto 01.07.2000 and as directed by first appellate authority also examine the issue of extending the benefits of SSI exemption and re-determine the duty payable by the appellant - appeal allowed - decided in favor of appellant.

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• 2016 (12) TMI 584
  Disallowance of Cenvat credit - manufacture of sugar and molasses - security service - expenses incurred for safe keeping the sugar Cane purchased (input), situated outside the factory of production (Cane Collection Centre) - Held that: - I find that the security services utilizing at the Cane Collection Centre, located outside the factory of production squarely falls in the inclusive part of the definition of input service, which specifically provides for services used in relation to procurement of inputs under Rule 2 (i) of Cenvat credit Rules, 2004. I find that the ruling relied upon by the Revenue is distinguishable and not in the facts of the present case In the case of the Deepak Fertilizers & Petrochemicals Corpn. Ltd. [2013 (1) TMI 165 - CESTAT, MUMBAI] the input service was utilized in installation of the storage tank outside the factory. Whereas in the present case input services have been utilizing for procurement of inputs, that is sugar Cane, required for manufacture of excisable goods, being sugar and molasses. Accordingly the appeal is allowed - decided in favor of appellant-assessee.

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• 2016 (12) TMI 583
  Pre-deposit - compliance of Section 35F of the Central Excise Act,1944 - interpretation of statutes - Held that: - I find that the wordings employed in Section 35F are as clear as daylight. In clause (iii) it is unambiguously prescribed that any person aggrieved by a decision or order referred to Clause (b) of sub- Section (1) of Sec. 35B of Central Excise Act, unless deposits 10% of the duty/penalty or duty and penalty, as the case may be, the appeal shall not be entertained. I do not find any reason to read the said provision in any other manner, so as to come to the conclusion that the Appellant is required to deposit 2.5% and not 10% as prescribed under the said provision, in view of the settled principle of statutory interpretation - I do not find substance in the argument that the amount paid under Clause (i) of Sec. 35F which was paid at the time of filing Appeal before the first Appellate Authority can be adjusted against the amount of deposit required to be made under clause (iii) while filing the Appeal before this forum - appeal dismissed - decided against appellant.

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• 2016 (12) TMI 582
  Chargeability of the interest on wrong availment of Cenvat Credit amounting to ₹ 35,14,493/- - Held that: - there is direct ruling on this issue by the Hon’ble Supreme Court in the case of Union of India vs. Ind-Swift Laboratories Ltd.[2011 (2) TMI 6 - Supreme Court], where it has been held that where Cenvat Credit is taken OR utilized wrongly, the same along with the interest is to be recovered from manufacturer or the provider of the output service. The Hon’ble Supreme Court in the said case specifically lays down that even when the Cenvat Credit has not been utilized, though taken wrongly the liability of interest would arise for the period when it was lying in the account of the assessee - appeal disposed off - decided against assessee.

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• 2016 (12) TMI 581
  CENVAT credit - clandestine removal - job-work - denial of credit on the ground that the goods never received in the factory of the appellant - Held that: - the facts that the goods have been sent directly to the job worker on the instruction of the appellant by the supplier or to the job worker s premises from the port on account of the appellant and job worked goods have been received by the appellant after processing are not in dispute, therefore, we are of the view that as the goods have been received by the appellant after processing on job work, the cenvat credit cannot be denied to the appellant in the light of the decision of this Tribunal in the case of Bharat Heavy Electricals Limited vs. CCE, Bhopal [2011 (7) TMI 974 - CESTAT, NEW DELHI] wherein this Tribunal held that The fact that the job worker has processed the material and sent the intermediate goods manufactured using the inputs following Notification No. 214/86 has not been refuted. In the given facts and circumstances of the case, the transport of material directly to the job worker’s premises to avoid payment of extra period and same time, cannot lead to denial of credit. It has not been disputed that job work goods received by the appellant, the cenvat credit cannot be denied to the appellant - CENVAT credit allowed - appeal allowed - decided in favor of appellant-assessee.

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• 2016 (12) TMI 580
  Classification of goods - commutators - classified under the head 8501, 8502, 8503 or 8548? - Held that: - commutators is a part connecting rotating armature to the stationary terminals. It can be the part either motor or generator depending on the intended use. Such motors can be used and is in fact are used in all industries, like railway, automobiles, etc. The function of commutators is directly related to providing current to a motor or to draw electric current from a generator. The said motor can be used as a component of any other equipment like starter motor or mixer or washing machine or railway engines, etc. In the process, the commutators does not become part of electric appliances or locomotive. The commutators remain a part of motor, which in turn is used as a component of other machine. In view of the above, the correct classification of commutators is 85.03 - the appellants are entitled to calculation of demand cum duty basis. Appeal allowed - decided partly in favor of appellant.

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• 2016 (12) TMI 579
  Levy of penalty - reversal of credit on being pointed out - Held that: - on perusal of provisions of Section 11A(2B) and the judgments of this Tribunal in the case of CCE vs. COMMISSIONER OF C. EX., PUNE Versus VICKERS SYSTEM INTERNATIONAL LTD. [2007 (10) TMI 107 - CESTAT, MUMBAI] where it was held that Ineligible credit availed on the inputs which were received short – Debit notes for inputs received short were produced by assessee to audit party shows there was no malafide intention – Moreover credit has been reversed along with interest – Genuine mistake, so penalty u/s 11AC not imposable. I am of the view that in this case the imposition of penalty under Section 11AC read with Rule 15(2) is not justified. Hence, I set aside the penalty by setting aside the impugned order with consequential relief, if any, to the appellants - appeal allowed - decided in favor of appellant.

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• 2016 (12) TMI 578
  CENVAT credit - Levy of penalty - reversal of credit with interest before issuance of SCN - input services - repair and maintenance service of their motor vehicles - forged invoices - Held that: - the entire demand in the show-cause notice is hit by limitation because there is no suppression of fact or fraud alleged in the show-cause notice. He further submitted that the appellant deposited CENVAT credit along with interest even before the issue of show-cause notice, therefore, the respondent should not have issued the show-cause notice. Forged invoices - I find that the impugned order is not sustainable in law with regard to disallowing the CENVAT credit of ₹ 1,490/- on the ground that on invoices the address of Head Office is mentioned. This is also not a very valid objection for denying the CENVAT credit more so when the defect has also been cured by the appellant. The penalty under Section 11AC also not justified. Therefore, I set aside the impugned order with consequential relief - appeal allowed - decided in favor of assessee.

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• 2016 (12) TMI 577
  SSI Exemption - determination of turnover - Valuation - job-work - T.V. cabinets - Held that: - No value or duty liability can be fixed based on the previous year data and applying proportionality. The finding is devoid of legal basis. Even while considering the value of the clearances, for the year 1982-83, the Original Authority recorded that the Managing Director in his statement indicated that the turnover for 1982-83 was more than ₹ 40 lakhs and hence, the appellant’s plea that it is only ₹ 39.44 lakhs was not accepted. We find that the determination of value of clearance has to be based on the recorded evidence and not by a statement of any person even if it is a Managing Director. This is so because even the statement has not stated as to what is exact amount of the turnover. When in appeal, the appellant pleads that their turnover is only ₹ 39.44 lakhs based on the certain calculations, it is necessary for the Original Authority to give a clear finding instead of rejecting the same based on the general statements given by the Managing Director at the time of investigation. We also noticed that in the multiple proceedings initiated against the appellants, there were over-lapping findings resulting in improper imposition of penalties. This was observed in the remand order of the Tribunal also. In normal course, in order to find out the correct factual position and to arrive at the correct legal conclusion thereafter, we could have referred the matter again to the Original Authority. However, in the present case, no useful purpose will be served in such remand as the matter is more than 30 years old and all the relevant documents are not apparently available. In this factual position, we are left with no alternative except to set aside the impugned order for the various reasons discussed above. The appeal is accordingly allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2016 (12) TMI 566
  Prosecution proceedings for Evasion of tax - business of purchase and sale of iron scrap - Quashing of First Information Report being C.R. No.II 382/2008 lodged before Bhavnagar “A” Division Police Station, Bhavnagar - Section 85(2) of the VAT Act, 2003 - Section 409 of Indian Penal Code - Section 482 of Code of Criminal Procedure - exercise of jurisdiction - Held that: - the Court is of the opinion that this is not a fit case to exercise inherent jurisdiction and in view of consistent propositions of law on exercise of inherent jurisdiction, the Court is declining to interfere at this stage of the proceedings and therefore, without examining merit or demerit at length of the allegation in the present stage of the proceeding, the petition being devoid of merit, does not call for any interference and accordingly the same is dismissed, at this stage. Rule is discharged.

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• 2016 (12) TMI 565
  Detention of goods - non-submissions of forms - Online Form KK - Transporter Form MM - Transporter L.R. - Held that: - the respondent, while passing the impugned order, invoked Section 72(1)(a) of the Tamil Nadu Value Added Tax Act, 2006 (hereinafter referred to as "TNVAT Act") and demanded double the amount of tax as if, there is an evasion of tax. There is no finding in the compounding notice that the petitioner evaded payment of tax. The only reason for detention of the goods is the petitioner had produced a manual Form KK instead of a computed generated Form KK. The petitioner's explanation, vide representation, dated 20.11.2016 has not been considered nor referred to by the respondent, though it has been acknowledged by the respondent as could be seen from the signature appended to the representation, dated 20.11.2016. That apart in terms of Section 68 of the TNVAT Act, the owner or person in charge of the goods should carry with them, a Bill of sale or delivery note or such other documents as may be prescribed and Log book relating to the goods transported. Assuming that Form KK cannot be accepted, the other documents which are all import documents could have been considered by the respondent. Therefore, this Court has no hesitation to hold the computation done by the respondent in the compounding notice, dated 18.11.2016 is not tenable - the petitioner is directed to pay a sum of ₹ 50,000/- , the tax calculated by applying the rate of tax under the Central Sales Tax Act at 2% and this Court has fixed the amount of ₹ 50,000/-, which is approximately 2% of the value of the goods, viz., ₹ 20,77,467/-. On payment of the said amount, the vehicle and goods shall be forthwith released - petition disposed off - decided partly in favor of assessee.

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• 2016 (12) TMI 564
  Validity of assessment order - input tax credit - acceptance of C Forms - principles of natural justice - Held that: - a notice dated 19.08.2016 was issued to the petitioner proposing to reverse the Input Tax Credit as per Section 19(5)(c) of the Tamil Nadu Value Added Tax Act, 2006. The reason for making such proposal is that the petitioner has not filed the declaration in Form 'C', for a period of three months. The petitioner received the Show-Cause Notice on 06.10.2016. The Show-Cause Notice grants 15 days time to the petitioner to file their objections. However, well before the expiry of 15 days period, the impugned assessment order has been passed on 30.09.2016. It is admitted by the learned Additional Government Pleader that the impugned assessment order has been passed well before the expiry of 15 days period. This is sufficient to set-aside the impugned order. One more ground on which the impugned order has to be held bad is on the ground that impugned order proceeds to reverse the Input Tax Credit, on other grounds as well, other than the ground pointed out in the Show Cause Notice, dated 19.08.2016. Therefore, in respect of those issues which are pointed out in the impugned order, the petitioner did not have adequate opportunity. Thus, the impugned order having been passed in total violation of principles of natural justice, calls for interference. The impugned order is set-aside and the respondent is directed to issue fresh Show-Cause Notice to the petitioner, clearly setting out as to what is the proposal being made against the petitioner. Before doing so, the respondent shall accept the 'C' Forms and verify the same - petition allowed - decided in favor of petitioner-assessee.

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• 2016 (12) TMI 563
  Detention of goods - compounding of offences - stock transfer - Form LL - whether the petitioner has complied with the provisions of Section 70(2)(b) of the said Act, which states that the seller or consignor or transferor or clearing and forwarding agent of the goods shall deliver or cause to be delivered within the prescribed period, the transit pass to the officer in-charge of the last check post or barrier, before the exit of the goods vehicle from the State? - Held that: - It is not in dispute that the transit pass has been delivered to the officer in charge of the last check post namely Puzhal Out Check Post. It is only thereafter the vehicle has not left the State of Tamil Nadu. Since no untoward incident had taken place in the meantime and since it is admitted that the vehicle was moving with full load as per the invoice, there is no justifiable ground for detaining the vehicle. The respondent is directed to release the vehicle as well as the goods forthwith and ensure that the vehicle crosses Tamil Nadu border immediately - petition allowed - decided in favor of petitioner-assessee.

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• Indian Laws

• 2016 (12) TMI 562
  Possession notice issued by the respondent Bank under Section 13(4) of the Securtization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 challenged - Held that:- The proper course was to relegate the petitioner to avail the remedy. The alternative remedy has to be adhered to steadfast, instead of allowing the petitioner to straightway approach the High Court in a writ jurisdiction No case is made out for interference under the writ jurisdiction on the ground of availability of alternative remedy. Accordingly, this petition is not entertained and the same is dismissed.

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