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TMI Tax Updates - e-Newsletter
December 2, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Some of the important issues to be considered while framing scrutiny assessments pertaining to filing of revised/belated returns by assessees, post-demonetisation.
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Scope of limited scrutiny - Assessing Officers should abide by the instructions of CBDT while completing limited scrutiny assessments and should be scrupulous about maintenance of note sheets in assessment folders
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Validity of penalty orders u/s 271AAB - penalty notice issued under Section 274 read with Section 271 - penalty where the search has been initiated - levy of penalty sustained - HC
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The conclusion arrived at by all the authorities below, that new industrial Units cannot carry out substantial expansion to claim benefits envisaged under Section 80 IC is perverse and not sustainable in law - HC
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Refusal to waive interest u/s 234A, 234B and 234C - disallowance for want of deduction of tax at source u/s 40(a)(ia) - interest cannot be waived - HC
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Difference and discrepancy in the stock - inflated statement of stock with the bankers - there is no discrepancy in the stock statements as appearing from the physical verification and that apparent from the books of account emerged - no additions - HC
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Interest received from the bank was income in assessee's hands - amount paid by the assessee as interest on the loan that he took from the bank did not reduce his income by way of interest on the fixed deposit by him in the bank - HC
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Inclusion of AY in which search was conducted into the period of 6 assessment years - recording of satisfaction during the next year - assessment for assessment year 2008-09 should have been completed u/s 153A read with 153C and not as regular assessment u/s 143(3), by treating the A.Y. 2008-09 as year of search. - AT
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Validity of assessment u/s 153A - In case the AOwanted to vary the returned of income filed u/s 139. It is trite proposition of law that if no notice has been issued in accordance to provisions of section 143(2), then no addition over and above the returned income can be made - AT
Service Tax
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Levy of service tax - brokerage received from the RBI for the sale of Government bonds - the lending or borrowing of money by the Government is a sovereign function and on such functions there cannot be any tax liability - AT
Central Excise
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Refund claim - cash refund of cenvat credit - whether the appellant are entitled to refund of Cenvat Credit amount in cash when the credit was reversed on the insistence of the DGCI Officers as their factory has now been closed? - Refund allowed - AT
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Dismissal of the appeal, on the sole ground that there is a huge pendency involving crores of rupees of revenue and adjudication of lis involving a minor demand of duty of ₹ 7,42,297/- would not be productive, is a failure to exercise the jurisdiction conferred on CESTAT, Madras, both of facts and law. - HC
Case Laws:
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Income Tax
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2017 (12) TMI 70
Validity of penalty orders u/s 271AAB - penalty notice issued under Section 274 read with Section 271 - penalty where the search has been initiated - Held that:- Since admittedly, no proceeding under Section 271(1)(c) are initiated by the assessing authority during the course of the assessment proceeding under Section 143(3), the impugned penalty proceedings under Section 271AAB are fully justified and are initiated in accordance with law. We find that the order of the ITAT cannot sustain, therefore, the same is set aside and the penalty orders under Section 271AAB passed by the assessing authority, confirmed by the CIT (Appeals), are affirmed and are restored. - Decided in favour of revenue.
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2017 (12) TMI 69
Entitlement to deduction under Section 80-IC - whether an “undertaking or an enterprise” (Unit) established after 7th January, 2003, carrying out “substantial expansion” within the specified window period, i.e. between 7.1.2003 and 1.4.2012, would be entitled to deduction on profits @ 100%, under Section 80-IC? - Held that:- Both the authorities have misconstrued the definition of “Initial Assessment Year”. The Assessment Officer as well as the Appellate Authority have held that there cannot be two “Initial Assessment Years” between 07.01.2003 and 01.04.2012, which conclusion, in our considered view, is totally perverse. We reiterate that Sub clause (v) of Sub section (8) of Section 80 IC itself contemplates more than one “Initial Assessment Years”. The said Clause envisages that for a “Unit”, which begins to manufacture or produce any article or things or commences operation, the Initial Assessment Year means Assessment Year relevant to the previous year, in which, it begins to manufacture and produce article or thing or commences operation and for a “Unit”, which completes substantial expansion, Initial Assessment Year means Assessment Year relevant to the previous year, in which it completes substantial expansion. This very important aspect of the matter has been completely overlooked by the Assessment Officer as well as the Appellate Authority. Therefore, the conclusion arrived at by all the authorities below, that new industrial Units cannot carry out substantial expansion to claim benefits envisaged under Section 80 IC is perverse and not sustainable in law. Thus held (a) Such of those undertakings or enterprises which were established, became operational and functional prior to 7.1.2003 and have undertaken substantial expansion between 7.1.2003 upto 1.4.2012, should be entitled to benefit of Section 80-IC of the Act, for the period for which they were not entitled to the benefit of deduction under Section 80-IB. (b) Such of those units which have commenced production after 7.1.2003 and carried out substantial expansion prior to 1.4.2012, would also be entitled to benefit of deduction at different rates of percentage stipulated under Section 80-IC. (c) Substantial expansion cannot be confined to one expansion. As long as requirement of Section 80-IC(8)(ix) is met, there can be number of multiple substantial expansions. (d) Correspondingly, there can be more than one initial Assessment Years. (e) Within the window period of 7.1.20013 upto 1.4.2012, an undertaking or an enterprise can be entitled to deduction @ 100% for a period of more than five years. (f) All this, of course, is subject to a cap of ten years. [Section 80-IC(6)]. (g) Units claiming deduction under Section 80-IC shall not be entitled to deduction under any other Section, contained in Chapter VI-A or Section 10A or 10B of the Act [Section 80- IB(5)].
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2017 (12) TMI 68
Reopening of assessment - additions made holding that the amounts brought to tax could not have been legitimately claimed as deduction under Section 80HHb - ITAT allowed the assessee’s contentions - Held that:- This Court is of the opinion that the conclusion recorded by the ITAT does not call any interference. The regular assessment was completed, in this case, on 31.03.2003. The regular assessment for AY 1998-99 was completed on 27.03.2001. In these circumstances, the assessee could not be faulted for having accepted the additions made for the previous assessment year (AY 1998-99); though later, given that the returns were filed on 29.11.2000 for the assessment year (AY 2000-01) in the present case. - Decided against revenue
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2017 (12) TMI 67
Validity of assessment - notice under Section 143(2) not issued - Held that:- So far as the findings with respect to notice under Section 143(2) is concerned, the ITAT has considered the entire record afresh and clearly rendered a finding that on 15.09.2008, the assessment framed in this case, nowhere reflected that notice under Section 143(2) was issued. Para 10 of the impugned order, pointed out with respect to this aspect and having regard to all the factual material in these circumstances –compelled the ITAT to follow the reasoning of the Supreme Court in “Additional Commissioner of Income Tax Vs. Hotel Blue Moon (2010 (2) TMI 1 - SUPREME COURT OF INDIA )”. In this case, the impugned order does not call any interference. No substantial question of law
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2017 (12) TMI 66
Difference and discrepancy in the stock - Held that:- The assessee – sole proprietor of M/s Deshraj Ashutosh involved in the business of sale and purchase of foodgrains on commission basis, was saddled with petitioner’s liability on account of difference and discrepancy in the stock. The AO was of the opinion that an addition of ₹ 8,67,87,925/- was justified on account of the discrepancy. The Appellate Commissioner was satisfied with the assessee’s explanation with respect to inflated statement of stock with the bankers and noted that no discrepancy in the stock statements as appearing from the physical verification and that apparent from the books of account emerged. The amount was, therefore, deleted. The ITAT upheld the findings of the CIT(A). No substantial question of law
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2017 (12) TMI 65
Search and seizure proceedings under Section 132 - whether the statements made in the course of the search and seizure operations, having regard to Section 132(4), could not be binding upon it? - Held that:- CIT(A) view that the statement under Section 132(4) could not bind the assessee is, in the opinion of this Court, correct. The text of Section 132(4), clarifies that the presumption arises in the case of the searched party. In case the statements by the party whose premises are searched, or to be attributed to a third party – as in the case of the assessee, there has to be a connect or corroboration. Clearly, there was none in the present case. On this score, the addition made by the AO was unsustainable; the CIT(A) correctly directed the cancellation. The other factual detail is that no incriminating material was found from the assessee’s premises. In the circumstances, the ruling in Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT) squarely applies. - Decided against revenue
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2017 (12) TMI 64
Reopening of assessment - Addition u/s 68 - reasons to believe - Held that:- In this case, the Assessing Officer (A.O.) appears to have completely ignored the earlier re-assessment order – framed under Section 148/143(3) on 31.12.2007. The first re-assessment order noticed all the relevant facts and accepted the net income at ₹ 1,03,890/- . The assessment made in the course of assessment proceeding, in the present case, does not refer to any subsequent material other than the Directorate of Enforcement’s letter of 28.03.2006; instead the A.O. appears to have just made a Chart as the basis even while acknowledging that the earlier re-assessment proceedings were concluded on 31.12.2007, clearly stated that “perusal in assessment records reveals that the remittances received are not considered in the return of income filed by the Assessee and in the course of the assessment proceedings for the Assessment Years 2003-2004 & 2006-2007”. That clearly shows that the A.O. ignored that the material, which led the Revenue to re-open the Assessment, in the first instance, was the same that he sought to resuscitate in order to make substantial additions. - Decide against revenue.
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2017 (12) TMI 63
Addition u/s 69 - assessee required to prove source of source - whether the assessee appellant had not sufficiently discharged the primary onus casted upon him? - Held that:- Tribunal has committed a serious error inasmuch as in view of the exemption which has been shown as a demand draft was taken on behalf of those persons which has come on record and it clearly established it was a business arrangement which was made. The A.O. has considered it to be as an investment but the amount which was deposited, was not either going to be deposited in terms of the investment or is going to get any interest on it. In that view of the matter under Sec. 69, it will be open for the department to assess those four persons independently as it could not be established the income of the assessee. In that view of the matter, both the issues are answered in favour of the assessee
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2017 (12) TMI 62
Income from property held for charitable or religious purposes - Held that:- Assessee being a religious and charitable society, the expenses incurred by it relating to both religious as well as charitable activities were for the purpose for which the society was established and, therefore, the expenses incurred for religious purposes could not be disallowed for the purpose of exemption u/s 11 - Decided in favour of assessee.
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2017 (12) TMI 61
Deemed dividend as defined u/s 2(22)(e) - Held that:- There is concurrent finding of fact by the CIT(A) and Tribunal that the provision does not stand attracted. Even otherwise the point is covered in favour of the assessee and no substantial question of law is involved in this appeal. He drew our attention to an earlier decision of this Court by a coordinate Bench in the case of CIT Vs. M/s. Baljit Securities Pvt. Ltd. (2013 (6) TMI 793 - CALCUTTA HIGH COURT) wherein held that there are common shareholders who held shares both in Respondent Assessee Company and M/s Rajrani Exports Private Limited [lender company]. While the four shareholders named above each held 13.54% shares in M/s Rajrani Exports Private Limited, none of the shareholders held 20% shares in the Respondent Assessee Company. - Decided in favour of assessee
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2017 (12) TMI 60
Disallwoance u/s 14A - Held that:- Assessee's own funds and other non-interest bearing funds were more than the investment in the tax-free securities. This factual position is not one that is disputed. In the present case, undisputedly the Assessee's capital, profit reserves, surplus and current account deposits were higher than the investment in the tax-free securities. In view of this factual position, as per the judgment of this Court in the case of Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT), it would have to be presumed that the investment made by the Assessee would be out of the interest-free funds available with the Assessee - Decided in favour of assessee.
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2017 (12) TMI 59
Refusal to waive interest under Sections 234A, 234B and 234C - disallowance for want of deduction of tax at source under Section 40(a)(ia) - Held that:- This Court is of the opinion that there is no error in the impugned order passed by the respondent – Chief Commissioner of Income-tax. It is clearly and categorically held that he has no discretion under the CBDT Instructions or Circular dated 26.6.2006 inasmuch as the petitioner during the contemporary period itself very well knew that non- deduction/remittance would be disallowable for want of deduction of tax at source under Section 40(a)(ia) of the IT Act. Therefore, such additions to the returned income cannot be said to have arisen or accrued after the due date of payment of first or subsequent instalment of advance tax which was neither anticipated nor was in contemplation of the assessee and therefore in such circumstances, levy of interest under Sections 234A, 234B and 234C was automatic and the same cannot be waived. - Decided against assessee.
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2017 (12) TMI 58
Rejection of books of account - Trading addition - G.P. determination - CIT(A) has applied the gross profit rate 10.28% instead of 21.96% - Held that:- There is no dispute that the auditor as appointed by the CAG had pointed out various discrepancies in their audit report in respect of the stock, inventory as well as non reconciliation of bank account of the assessee. The auditor specifically taken the note of the unverified stock with the weavers as well as stock shown by the assessee in the books of accounts. Though assessee has pointed out that these discrepancies are carried forward from the earlier years however, even if the discrepancies are carrying forward from earlier year when it is part of the books of accounts of the year and the assessee has failed to reconcile and verify the same, then this very fact that these discrepancies has not been removed by the assessee for the years certainly would lead to the inference that there are defects in the books of account. Therefore, the books do not reflect the correct picture of the state of affairs of the assessee. Cross objection of the assessee to the extent of the rejection of books of account are dismissed. It is pertinent to note that when the G.P. rate declared by the assessee for the A.Y. 2007-08 was not accepted by the AO and has not attained finality then the said G.P. rate cannot be applied for the purpose of working out the average rate for estimation of income of current year. Accordingly, we direct the AO to adopt the average of the G.P. rate declared by the assessee which was accepted by the AO and the G.P. rate adopted by the Assessing Officer which has attained the finality. According, we set aside the matter to the record of the Assessing Officer for limited purpose of computing the income based on the average G.P. rate on the basis of the declared G.P. by the assessee as accepted by the AO as well as the G.P. rate for the years which attained finality.
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2017 (12) TMI 57
Transfer of cases u/s 127 - reasons for consolidating and transfer of all the assessment proceedings of the said Assessee Group at Belagavi - Held that:- Principal Commissioner has not assigned any cogent and over- riding reasons to transfer the cases of assessees from Bengaluru to Belagavi and consolidated all the 15 assessments at Belgavi. Obviously the convenience of the petitioners-assessees group for getting these assessments centralized at Bengaluru is apparent, not only because more number of assessees of the said group were already being assessed at Bengaluru, but the assessees’ desire and administrative convenience to transfer all cases to Bengaluru has not been controverted in any manner by the Department. The reason in the impugned order as quoted above namely “for effective and co-ordinated investigation and completion of assessments”, can be met even at Bengaluru also and it is not necessary that the assessee should be put to inconvenience for the said reason specially when there is no contrary strong reason given in the impugned order to transfer all the cases to Belagavi. The respondent-Department comprises of Public Servants and they have their Offices and Officers at Bengaluru, who can undertake the assessments work for all the 15 assessments of this group at any of these two places. Therefore, the comparative convenience of assessees should be given the preference.
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2017 (12) TMI 56
Disallowing the interest paid on bank loan, utilised for advancing laon from the interest received on the said advance - whether set off could not be allowed on the ground that the interest on the O/D loan could not remain unadjusted? - Held that:- We are of the view that the law declared by the Apex Court in Gopinathan's case [2001 (2) TMI 10 - SUPREME Court] wherein held interest received from the bank was income in assessee's hands - amount paid by the assessee as interest on the loan that he took from the bank did not reduce his income by way of interest on the fixed deposit by him in the bank was correctly applied by the assessing authority/appellate authority/Tribunal to the case in hand and no distinction has been made out by the appellant assessee to take a different view. We answer the substantial question as to the scope and applicability of Section 57(iii) in the instant case against the appellant assessee and in favour of the Revenue
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2017 (12) TMI 55
Applicability of provisions of section 50C - ITAT held that the provisions of Section 50C are applicable only in those cases of sale of property where the deed of sale had been got registered?”Held that:- Before proceeding with the matter, it will not be out of place to mention here that those transactions which are shown as transaction under Section 50C [Explanation-2], even if taken into consideration, the transaction which take place as short term capital gain was in total consideration of the payment after sale and it cannot be assessed. Therefore, both the authorities have committed no error in reaching the conclusion. In that view of the matter, the issue is answered in favour of the assessee and against the department
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2017 (12) TMI 54
Validity of reassessment made u/s 147 - non communicating the reasons recorded for reopening - Held that:- AO cannot proceed to make the reassessment without communicating the reasons and the assessment order framed u/s 147 without communicating the reasons required to be quashed. Accordingly, the assessment order made u/s 143(3) r.w.s. 147 is hereby quashed. See CIT Vs. Videsh Sanchar Nigam Ltd. [2011 (7) TMI 715 - Bombay High Court] - Decided in favour of assessee.
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2017 (12) TMI 53
Penalty u/s 271(1)(c) - Claim under 80IB - Held that:- Assessee followed the ratio laid down by Hon’ble Delhi High Court in the case of CIT vs. Elteck SGS Pvt. Ltd.(2008 (2) TMI 17 - DELHI HIGH COURT). Even for the previous year 2007-08 assessee’s claim under 80IB was allowed by this Tribunal against which appeal of revenue before Hon’ble Delhi High Court was dismissed. These facts has not been disputed by the authorities below in any manner whatsoever. Under these circumstances we are of the considered opinion that mere making of claims which is not sustainable in law subsequently will not amount to furnishing of inaccurate particulars regarding the income of assessee as observed by Hon’ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt.Ltd [2010 (3) TMI 80 - SUPREME COURT]. - Appeal filed by the assessee stands allowed.
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2017 (12) TMI 52
Bogus purchases - CIT(A) restricted the additions to the tune of 3% of alleged bogus purchases - Held that:- The purchases are appearing in the books of the assessee and the assessee is seeking benefit of deduction of these purchases against its income, hence primary onus is on the assessee to prove that purchases are genuine and that too in the midst of incriminating statements of Sh Bhanwarlal Jain as well investigations conducted by DGIT(Inv.). We have also gone through the replies dated 25-03-2015 submitted by the assessee before the AO (page 29-303/pb) wherein the assessee has claimed to have submitted affidavits, tax returns including audited accounts , confirmations etc of these parties and these documents need verification and examination by the AO. Thus we are inclined to set aside the matter back to the file of the A.O for denovo determination of the issue on merits in accordance with law after conducting such enquiries and verifications as are necessary for completing the assessment in de-novo proceedings . If the department wants to rely on statement of Sh. Bhanwarlal Jain or of any other party which is recorded at the back of the assessee incriminating assessee or any other incriminating material to prejudice assessee, the copies of such statements and /or material shall be made available by the AO to the assessee before prejudicing assessee and an opportunity of rebuttal shall by provided by Revenue to the assessee including cross examination in accordance with principles of natural justice. The matter is set aside and restored to the file of the A.O for denovo determination of the issue on merits in accordance with law.
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2017 (12) TMI 51
Deemed dividend u/s. 2(22)(e) - Held that:- It is not in the nature of advance or loan within the meaning of section 2(22)(e) of the Act. However, it is an advance given by the company to the assessee against purchase of property being industrial land at Khasra NO. 84/1 100/1, Village Rethani, Meerut, measuring 4185 sq.mtrs., which is evident from page no. 13-27 of PB a copy of purchase deed showing ownership of proty to assessee, page no 10 of PB copy of Board Resolution dated 10.5.2011 by the Company, Page no. 7 to 9 of PB a copy of agreement to sale dated 10.5.2011. But the said agreement got terminated vide termination agreement dated 11.11.2011 and the nature of said payments are not simplicitor loan or advance but it is a trade advance for business purposes, which is outside the purview of section 2(22)(e). We further note that in this case, the position was rather reverse i.e. the assessee being a Director and share holder of the company, was providing frequent advances to the company for its business requirements and the company was having credit balance of the assessee in its books, the op. cr. bal. in this year was ₹ 7,82,149/- the cl. cr. bal. was ₹ 2,37,47,149/- (Page No. 1 of PB). The assessee never charged any interest from the company. The Co. in its books, opened the consolidate ledger a/c. of assessee for loan taken and for advance given against purchase of property, however during proceedings, bifurcated loan a/c and advance against property alc was furnished (Page no. 2 PB). Thus it is a case of advance given for purchase of property. Hence, the addition in dispute made by the AO and confirmed by the ld. CIT(A) is untenable and therefore, we delete the same. Our aforesaid view is fortified by the CBDT Circular No. 19/2017 dated 12.6.2017 relating to settled view on Section 2(22)(e) of the Income Tax Act, trade advances reg. wherein it is stipulated that trade advances, which are in the nature of commercial transactions would not fall within the ambit of the word advance in section 2(22)(e) of the Act - Decided in favour of assessee.
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2017 (12) TMI 50
Addition of agriculture income as income from other sources - AR submitted that the necessary evidence regarding agriculture income were never demanded by the either AO or by the ld. CIT(A) - Held that:- As necessary evidence submitted now in form of copy of jamabandi and proof of agriculture income and the same may kindly be admitted. The ld DR fairly submitted that the matter may be remanded to the AO for verification. In light of the same, the evidence in support of agriculture income is admitted and the matter is remanded back to the file of the AO to examine the same a fresh after providing reasonable opportunity to the assessee. The ground is thus allowed for statistical purposes. Considering the interest income as income from other sources - AR has submitted that interest income was already declared while calculating business income, Net profit and disclosed in audited profit and loss account and same may be deleted - Held that:- From perusal of assessment order, we noted that the AO has brought to tax income from other sources as per return of income amounting to ₹ 90,256. However, there is no finding that said figures includes the figure of ₹ 48,231. Hence, the matter is remanded back to the file of the AO to examine the same and where it is found that the figure of ₹ 90,256 already includes the figure of ₹ 48,231, allow the necessary relief to the assessee as the same income cannot be brought to tax twice. In the result, the ground of appeal is allowed for statistical purposes. Disallowance of deduction u/s 80C - CIT(A) observed that no documents or supporting evidences have been furnished either in assessment proceedings or in the appellate proceedings - AR submitted that evidence regarding investment eligible for deduction u/s 80C were never demanded by AO or ld. CIT(A) and the addition evidence regarding said investment in form of LIC receipt and tuition fees has now being submitted and the same may kindly be admitted - Held that:- In light of the same, the evidence in support of deduction under section 80C is admitted and the matter is remanded back to the file of the AO to examine the same a fresh after providing reasonable opportunity to the assessee. The ground is thus allowed for statistical purposes.
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2017 (12) TMI 49
Validity of assessment u/s 153A - Issue beyond the scope of assessment framed u/s 143(3) - Inclusion of AY in which search was conducted into the period of 6 assessment years - recording of satisfaction during the next year - Held that:- In such a situation, assessment for assessment year 2008-09 should have been completed in terms of section 153C read with 153A and not as a regular assessment under section 143(3). The reason being entire concept of abated; unabated as laid down in 2nd proviso to section 153A(1) and other issue of limitation as contained section 153 B has to be seen with reference to such reference date which has different consequences. Like for instance in section 153 B the period of limitation for completion of regular assessment for the year of search and for the assessment falling in each of the six assessment years are different. Thus, in our humble opinion, assessment for assessment year 2008-09 should have been completed under section 153A read with 153C and not as regular assessment under section 143(3), by treating the A.Y. 2008-09 as year of search. Here in this case, return was filed on 27/9/2008 and time limit in terms of proviso to section 143(2) was on or before 30/9/2009, up to which notice under section 143(2) was mandatorily required to be served upon the assessee, in case the Assessing Officer wanted to vary the returned of income filed under section 139. It is trite proposition of law that if no notice has been issued in accordance to provisions of section 143(2), then no addition over and above the returned income can be made and this law has been well settled by various judgments including that of Hon'ble Supreme Court in the case of ACIT vs. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] . We hold that addition made by the Assessing Officer in the impugned order is unsustainable being beyond the scope of assessment framed under section 143(3). Thus, on legal grounds, the appeal of the assessee is allowed
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2017 (12) TMI 48
Transfer pricing addition in respect of international transaction of payment of Royalty - ALP - deductibility or otherwise of such a payment in terms of section 37(1) - Held that:- TPO proposed the transfer pricing adjustment equal to the stated value of transaction of royalty payment with Nil ALP by holding that no benefit etc. was received by the assessee because of the intra-group services received by it and hence no payment on this account was warranted. The AO in his draft order has taken ALP of this international transaction at Nil on the basis of recommendation of the TPO without carrying out any independent investigation as to the deductibility or otherwise of such a payment in terms of section 37(1) of the Act. This addition has been made by the AO in his final assessment order giving effect to the direction given by the DRP and not by invoking section 37(1) of the Act. As the TPO in the instant case initially determined Nil ALP by holding that no benefit etc. accrued to the assessee because of Royalty payment and the AO made the addition without examining the applicability of section 37(1) of the Act, we find the actions of the AO/TPO running in contradiction to the ratio laid down in Cushman & Wakefield (2014 (5) TMI 897 - DELHI HIGH COURT ). Respectfully following the precedent, we set aside the impugned order and remit the matter to the file of AO/TPO for deciding this issue - Decided in favour of assessee for statistical purposes.
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2017 (12) TMI 47
Disallowance u/s 14A - Held that:- The assessee has invested its own interest free funds for making investments. There is no infirmity in the appellate order of learned CIT(A) deleting the addition u/r 8D(2)(ii) r.w.s. 14A, keeping in view factual matrix of the case as firstly the funds were borrowed from bank by the assessee for export credit limits on which interest was paid and hence interest on borrowings have direct nexus with export credit facilities granted by the bank, secondly own interest free funds available with the assessee are much higher than investments and hence presumption will apply. The Revenue fails on this ground. We order accordingly. Disallowance of administrative and other expenses u/r 8D(2)(iii) r.w.s. 14A - Held that:- We find merit in the contention of the assessee but the claim raised by the assessee need verification and the matter is restored to the file of the AO to verify the HO expenses incurred which are to be taken cognisance for making disallowance u/r 8D(2)(iii). The AO shall also verify the contention of the assessee that only HO is involved in making investments and other divisions/factories have no role to play in making, controlling, managing and/or monitoring investments. The onus is on the assessee to prove its contentions to get relief. We order accordingly. Only those investments should be considered for inclusion for computing average investments for computing disallowance u/s 14A r.w.r. 8D(2)(iii) which have actually yielded exempt income during year under consideration - Held that:- We direct the AO to decide this issue in the light of decision of Special Bench in the case of Vireet Investment Private Limited (2017 (6) TMI 1124 - ITAT DELHI) wherein only those instruments/securities which yielded exempt income during the previous year relevant to the impugned assessment year shall be considered for computing disallowance u/s 14A r.w.r. 8D. The Special Bench in para 11.16 held that only those investments are to be considered for computing average value of investment which yielded exempt income during the year. We are bound by decision of Special Bench and Respectfully following the same, we direct the AO to compute disallowance u/s 14A r.w.r. 8D(2)(iii) in accordance with the ratio of law laid down by Special Bench – ITAT, Delhi in the case of Vireet Investment Private Limited(supra). We order accordingly. Whether the disallowance u/s 14A can fall below disallowance suo motu voluntarily made by the assessee in the return of income filed with the Revenue? - Held that:- The mandate of the 1961 Act is to tax real income and not an income which was never the income chargeable to tax in the hands of the assesseee but was declared under a wrong belief or notion . The mandate of the 1961 Act is to tax real income and tax can only be levied under the authority of law. Thus, if after verifications and following the ratio of law decided by the tribunal in the instant case, if the disallowance falls below the disallowance u/s 14A offered by the assessee in return of income, be it may the Revenue cannot charge tax on income which never was the income of the assessee chargeable to tax within the mandate and provisions of the 1961 Act as the tax can only be levied by the authority of law.
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2017 (12) TMI 46
Revision u/s 263 - AO's order erroneous as well as prejudicial to the interests of the Revenue - undisclosed capital introduced - Held that:- We noted that in this case, the assessee vide its letter dated 28.01.2014 has given complete details of the capital introduced during the impugned assessment year. Not only this, it is apparent from page 17 of the paper-book wherein the assessee has given details of ₹ 76 lacs towards capital introduced. Out of ₹ 76 lacs, ₹ 20 lacs was given to the firm M/s. Dev Steel vide cheque dated 30.03.2007. The assessee has also filed copy of balance sheet of M/s. Dev Steel in which the assessee capital accounts and current account is duly reflected. Capital account shows ₹ 20 lacs, copy of which is placed at pages 22 and 23 of the paper-book. Thus, we find that the assessee has filed all these before the Assessing Officer. IT is apparent that it is not a case where the Assessing Officer has not made due inquiry in respect of capital introduced by the assessee in the firm. Rather the Assessing Officer has made inquiry and in reply thereto the assessee has submitted copies of the details A perusal of the order passed by the CIT indicated that the assessment order passed by the Assessing Officer was cancelled on the ground that the Assessing Officer has not made proper enquiry and verification in respect of the issues. This, in our considered opinion, cannot be sufficient ground for cancelling the assessment. While making the assessment order, it is the satisfaction of the Assessing Officer who made the enquiry and it should be touchstone of assessment order passed by him. No cogent material or evidence was brought to our knowledge by the Ld. DR which may prove that view taken by the Assessing Officer in the case of the assessee was unsustainable in law. Therefore, we are of the view that the order passed by the CIT is illegal and without jurisdiction. If the order passed by the CIT is sustained then this will permit the illegality to continue and the subsequent action is carried out on the illegal order is also illegal per se. - Decided in favour of assessee.
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2017 (12) TMI 45
Depreciation on leased out assets - Held that:- As decided in assesee's own case the assessee is entitled for the claim of depreciation under all the three circumstance i.e. Sale lease back, genuineness of transaction and asset having being put to use. We, therefore, allow ground of the assessee’s appeal Broken period interest - whether not a part of the cost of securities and should not have been allowed as deduction - Held that:- As in assessee’s own case, we find that the issue stands covered in favour of the assessee following the decision of the jurisdictional High Court rendered in the case of American Express International Banking Corporation [2002 (9) TMI 96 - BOMBAY High Court ] wherein held that the assessee's method of accounting does not result in loss of tax/revenue for the Department Addition u/s 14A - Held that:- AO has not recorded the satisfaction as to how the claim of the assessee is wrong with reference to the books of account of the assessee. We are therefore convinced with the submissions of the assessee on this score and are in agreement with the arguments of the ld.AR that for the invocation of provisions of section 14A r.w. rule 8D is not mandatory unless and until the AO has recorded his satisfaction. The case of the assessee finds support from the decision of the Honb’le High Court rendered in Godrej and Boyce (2010 (8) TMI 77 - BOMBAY HIGH COURT ), wherein it has been held that for invocation of provisions of section 14A, the AO has to record satisfaction. We, therefore, direct the AO to delete the addition. Resultantly, the appeal of the assessee stands allowed.
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2017 (12) TMI 44
Validity of proceedings u/s 153C - proof of any incriminating material found in search - Held that:- Hon’ble Apex Court in the case of CIT v. Sinhagad Technical Education Society [2017 (8) TMI 1298 - SUPREME COURT OF INDIA] has held that section 153C can be invoked only when incriminating materials assessment year-wise are recorded in satisfaction note which is missing here. Therefore, the proceedings drawn u/s 143(3) as against 153C are invalid for want of any incriminating material found for the impugned assessment year. In view of the above, the additional grounds raised by the assessee in the case of M/s Pavitra Realcon Pvt. Ltd. and M/s Delicate Real Estate Pvt. Ltd. are accepted. Since the assessee succeeds on this legal ground, we refrain ourselves from adjudicating the issue on merit as far as these two cases are concerned. Coming to Design Infracon (P) Ltd., we find from the material available on record that there is brazen violation of principles of natural justice inasmuch as neither the statement of Mr. Jain recorded at the time of search nor his cross-examination was provided to the assessee by both the lower authorities despite specific and repeated requests made by the assessee in this regard. We find in the present case both the Assessing Officer and the CIT (A) are looking for proof beyond doubt which is not possible and they are basing their decision on an element of suspicion. It has been held in various decisions that presumptions and surmises, however strong may be, cannot be the basis for any addition. In view of our above discussion, we are of the considered opinion the ld. CIT (A) was not justified in confirming the addition made by the Assessing Officer. Therefore, the order of the CIT (A) is set-aside and the Assessing Officer is directed to delete the addition made in the hands of Design Infrcon Pvt. Ltd. The grounds raised by the assessee are accordingly allowed. - Appeal of assessee allowed.
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2017 (12) TMI 43
Limitation period for issuance of statutory notice under section 143(2) - ITO jurisdiction of issuing notice - transfer of file to ACIT - Held that:- Notice under section 143(2) of the Act was issued on September 6, 2013 by the Income-tax Officer, Ward-1, Haldia when he did not have the pecuniary jurisdiction to assume jurisdiction and issue notice. Admittedly, when the Income-tax Officer realised that he did not had the pecuniary jurisdiction to issue notice he duly transferred the file to the Assistant Commissioner of Income-tax, Circle-27, Haldia on September 24, 2014 when the Assistant Commissioner of Income-tax issued statutory notice which was beyond the time limit prescribed for issuance of notice under section 143(2) of the Act. We note that the Assistant Commissioner of Income-tax by assuming the jurisdiction after the time prescribed for issuance of notice under section 143(2) of the Act notice became qoarum non judice after the limitation prescribed by the statute was crossed by him. Therefore, the issuance of notice by the Assistant Commissioner of Income-tax, Circle-27, Haldia after the limitation period for issuance of statutory notice under section 143(2) of the Act has set in, goes to the root of the case and makes the notice bad in the eyes of law - Decided in favour of assessee.
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2017 (12) TMI 42
Accrual of income / real income - Non payment of lease rental by lessee to assessee - lessee asked the assessee to adjust the excess lease rentals paid by it till March, 2008 towards the other months - dispute - Held that:- Where there is a dispute, the income would accrue and would not crystallise till the dispute is settled and therefore, the same cannot be brought to tax even under the mercantile system of accounting. - Decided in favour of assessee Disallowance of interest paid by the assessee on late deposit of EPF and ESI payments - CIT-A held that these are compensatory in nature and therefore, allowable under section 37(1)- Held that:- The interest is paid by the assessee for late payment of PF and ESI to the Government account and therefore, is only compensatory in nature and attains the nature of the payment on which the interest is paid. In fact, the hon'ble Supreme Court in the case of Prakash Cotton Mills (P.) Ltd. (1993 (4) TMI 3 - SUPREME Court ) has clearly held that no disallowance under section 37(1) can be made without examining the scheme of provisions of the relevant statute. Therefore, we see no reason to interfere with the order of the Commissioner of Income-tax (Appeals) on this issue also.- Decided in favour of assessee
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2017 (12) TMI 41
Addition u/s 69 - unexplained jewellery found from the employees of the assessee - Held that:- We find that since the excess gold was found from the employees of the assessee and the assessee could not furnish the satisfactory explanations, the addition under section 69 is called for and we therefore find no infirmity in the order of the Commissioner of Income-tax (Appeals) restricting the addition for the excess gold ornaments of 4.148 kgs. valuing at 87,10,800. But while confirming this addition, the Commissioner of Income-tax (Appeals) has approved the action of the Assessing Officer for making the addition of ₹ 1,96,42,564 which is not called for. The observation of the Commissioner of Income-tax (Appeals) appear to us to be correct to the extent of addition for the excess gold jewellery of 4148.689 gms. Thus we modify the order of the Commissioner of Income-tax (Appeals) and confirm the addition of ₹ 87,10,800 for the gold jewellery weighing at 4148.689 gms. which were not duly explained by the assessee-firm. Since the addition in the hands of the firm is confirmed, the order of the Commissioner of Income-tax (Appeals) deleting the additions in the hands of the individuals is also approved as there cannot be double additions. Accordingly, appeals of the Revenue stand dismissed and that of the assessee is partly allowed
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2017 (12) TMI 40
Loss on account of breach of contract - treated as a speculation loss - Held that:- On perusal of the clause of contract it appears that timely compliance with the required documents and acceptance of the goods is the essence of the letter of understanding entered into between the buyer and the seller. As assessee has deemed to have breached the contract by not accepting the deliveries of the goods within the agreed period, the seller has the right to claim all losses and damages from the buyer at the prevailing market price. There is a categorical finding by Hon’ble High Court that the fact of loss being genuine was not in dispute. In the facts of the present case, assessing officer himself is recording that assessee made payments to these parties for indemnifying damages caused due to cancellation of contract. As the sale has not taken place at all it cannot be considered as speculative transaction. Accordingly, ground raised by revenue stands dismissed.
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Customs
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2017 (12) TMI 39
Classification of coal imported by the appellant/assessee - classified as steam coal falling under CTH 2701 1290 or as bituminous coal falling under CTH 2701 1200? - Held that: - taking note of the fact that the decision rendered by the Bangalore Bench in the case of M/s. Maruti Ispat and Energy Pvt. Ltd. [2014 (10) TMI 944 - SUPREME COURT OF INDIA] was appealed before the Hon'ble Apex Court, vide Civil Appeal Nos.28937/2014 and 9725/2014, the Larger Bench directed that the matter being subjudice before the Hon'ble Apex Court, the assessees were granted opportunity to come again before the Tribunal after the verdict from the Hon'ble Apex Court - the present appeal will also require to be remanded to the adjudicating authority for denovo consideration, basing upon the outcome of the decision of the Hon'ble Apex Court in Maruti Ispat and Energy Pvt. Ltd., as laid down by the Larger Bench of the Tribunal - appeal allowed by way of remand.
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2017 (12) TMI 38
Condonation of delay of 555 days in filing appeal before Tribunal - parties to proceedings - Section 129 A of the Customs Act 1962 - Held that: - right to appeal before the Tribunal is for an aggrieved persons against an order passed by the Authority - In the case in hand the impugned Order-in-Appeal No.HYD-CUS-000-APP-162 & 163-15-16 dated 29.02.2016 is indicating that appellant before 1st Appellate Authority is Smt Elete Susheela and not the applicant in this application. Application filed by applicant to condone the delay in filing the appeal, is devoid of merits, as appeal of Shri E. Ram Reddy itself is not maintainable before the Tribunal - application for COD dismissed.
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2017 (12) TMI 37
Penalty - smuggling - The importer had declared 13 types of ‘Wanli’ brand radial car tyres conforming to BIS standards and each bearing MRP, whereas, intelligence suggested that cargo contained branded tyres, without marking of MRP / BIS certification as required under law, for motor vehicles without declaring them with their correct value with the intent to evade customs duty - Held that: - Shri Inderjeet Singh was found actively involved in arranging an official address for Shivani Industries. He was also found to be the defacto importer arranging for CHA clearance, handling correspondence with shipping line, arranging forged indemnity bond, etc. The KYC documents were submitted to CHA by Inderjeet Singh. The above evidences clearly substantiate the role played by Shri Inderjeet Singh in the smuggling of goods - penalty on Shri Inderjeet upheld. Penalty on H.S. Chadda - Held that: - The investigation by the Department has established that Shri H S Chadha was the mastermind behind the smuggling of goods. He was administratively and financially controlling and supervising the whole scheme of things right from obtaining the IEC in the name of Shivani Industries through Inderjeet Singh. He was found to be closely monitoring all developments in the act of smuggling. He also mislead the department by providing false credentials of the supplier firm in Dubai From the fact that the details of all smuggled goods were found in Shri Chadha’s computer seized by the officials and also the fact that photos of the smuggled goods were taken with his mobile phone clearly proves that he was actively involved in the outright smuggling of goods for which Shivani Industries was the front - penalty upheld. Appeal dismissed - decided against appellant.
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2017 (12) TMI 36
Penalty u/s 114AA of CA, 1962 - The case of the Revenue is that the goods were declared with highly inflated value in order to claim ineligible draw back and the appellant’s role, attracted penal provisions - Held that: - The only reason for imposing penalty under Section 114 AA of the Act as could be seen from the original order is that the appellant was in regular contact with Shri Jamuna Prasad and in fact provided him G. Card details. This by itself will not establish the role of abetting in the shipment of consignment in question. The shipping bills were not filed by the appellant and hence, there is no evidence to show that he is part of shipment, which was apparently initiated and processed by Shri Jamuna Prasad. There is no justification to impose penalty in absence of substantive evidence of abetting in shipment of improper consignment - penalty set aside - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 35
Non-fixation of MRP - goods covered by live bill of entry - Held that: - Admittedly the consignment is yet to be examined and assessed and there is a request by the importer for a first check, before assessment. The fact that the goods which are subjected on MRP basis assessment can be affixed with the MRP labels in the custody of the customs is prevailing practice and the same are done at the request of the importers in many cases. As such, the duty demands and finding of violation on such consignment is premature and cannot be sustained. Goods found and seized in the godown premises - claim of the appellant is that no correlation has been made with specific import consignment of the appellant and also their claim regarding local purchase has not been verified - Held that: - the duty demand is made based on the inference of higher MRP evidenced in certain sales in Kerala. Admittedly, the good which were found in the godown were without MRP and possibility of that goods likely to have been sold higher MRP cannot be the reasons for sustaining the demand for differential duty. In any case there is force in the claim of the appellant that even if the Revenue contends that these consignments were imported by the appellants apparently they will be part of the other total demand of ₹ 91,86,981/- which covers the period 2014-15 - demand withheld. Valuation - charge on appellant is that appellant having sold the goods on much higher MRP after changing the MRP label - Held that: - Admittedly, for the goods sold through retailers in Kerala, the MRP was more than double in certain cases. This apparently is clear violation calling for demand of differential duty as well as penal action. However, the quantification of such differential duty has been made in a summary manner based on certain illustrative evidences - the invoices submitted by the appellants required detailed verification so that the differential duty in respect of goods which were sold with much higher MRP can be arrived at on such verification - For this limited purpose, we remand the matter to the original authority for re-quantification of duty. Appeal partly allowed - part matter on remand.
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2017 (12) TMI 34
N/N. 21/2002-CUS dated 01/03/2002 - Revenue held a view that the imported car was cleared with mis-declaration of its nature and value. It was alleged that the car was not a new one and, as such, the concession available to the new cars should not have been extended to the same - Held that: - on perusal of order passed by the lower authority, no evidence is coming out to hold this vehicle is a used one. Admittedly vehicle is imported into UK on 15/01/2009. There is no evidence that the prior to that date the vehicle has been used. The same is shipped to India on 27/01/2009 i.e. within two weeks of its importation into UK. In a similar situation, we note that Hon’ble Delhi High Court in the case of Directorate of Revenue Intelligence Vs. Jay Polychem India Ltd. [2016 (6) TMI 433 - DELHI HIGH COURT] held that considering the proximity of the dates involved in the shipment of the vehicle, the same cannot be considered as “second hand” at the time of import - in the present case there is no evidence of actual usage of the vehicle except an inference that the same has been registered only on 15/01/2009 when the manufacture in Japan is in August 2008. Valuation - rejection of value - similar/identical goods - Held that: - In the present case the appellant is said to have sold the car with much higher price in India. This was given as one of the main reason for rejecting the declared value. The import value cannot be inferred or determined based on sale value, if any, in India. Admittedly, similar/identical goods have been imported during the period of dispute and were subjected to assessment by the customs authorities - we direct the Original Authority to re-determine the value, in case the rejection of transaction value is justified, by fresh consideration of the facts. Appeal allowed by way of remand.
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2017 (12) TMI 33
Import of restricted item - used computer parts and components - specific licence for the goods imported as per para 2.17 of the Foreign Trade Policy 2004-2009 - confiscation - redemption fine - penalty - Held that: - Notwithstanding the protestations of the ld. Advocate that the goods have come without intimation and that Bill of Entry has not been filed by them, the fact remains that they have owned the import and also participated in subsequent proceedings before the customs authorities and the adjudicating authority - It is also not disputed that they themselves submitted by their letter that the goods have been imported for test - confiscation upheld - quantum of redemption fine and penalty reduced - appeal allowed in part.
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2017 (12) TMI 32
Import of restricted item or not? - Used Monitors and used Computer parts - requirement of import license - confiscation - redemption fine - penalty - Held that: - the items are not restricted items - since the declared value has been enhanced it is establishing that there is mis-description of the goods. In such circumstances, the redemption fine and penalty would sustain but that imposed by the authorities below is on the higher side - quantum of redemption fine and penalty reduced - appeal allowed in part.
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2017 (12) TMI 31
Import of restricted item - rusted M.S. Pipes - requirement of valid import licence - Held that: - In as much as the nature of the imported goods viz., used rusted pipes, there is no dispute. This being so, the allegations of goods requiring specific import licence, but not produced, is sustainable. Valuation - enhancement of value - case of appellant is that the import was a bulk purchase under quantity import hence enjoyed discount - Held that: - the appellants have not produced any evidence in support of their claim that the declared price was correct transaction value, before any of the lower authorities - both exporter and consignee are identical, aspect which would definitely raised doubt about correctness of the declared imported value - rejection of declared value upheld. Appeal dismissed - decided against appellant.
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Service Tax
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2017 (12) TMI 30
Adjustment of excess service tax amount paid in discharging their liability - Rule 6(4A) and 6(4B) of Service Tax Rules, 1994 - Held that: - the issue of adjustment of excess amount of service tax paid during particular period and its adjustment in subsequent quarters has been considered by this Tribunal in Plantech Consultants Pvt. Ltd. s case, [2015 (11) TMI 1356 - CESTAT MUMBAI], where it was held that amount which was paid in excess, is neither the service tax nor an amount which was payable by the appellant, therefore in any case the said amount cannot be permitted to be retained by the government, adjustment to be allowed. There is no dispute of the fact that the Appellant had paid the excess amount of service tax during the period April 2008 to March 2009 by debiting twice for the same amount of service tax liability in their books of accounts - there is no merit in the contention that not following the procedures laid down in the said Rules would debar the Appellant from adjusting the excess service tax paid, in subsequent quarters, towards their service tax liability. Appeal allowed - decided in favor of appellant.
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2017 (12) TMI 29
CENVAT credit - transfer of capital goods to their sister unit - Rule 3(5) of Cenvat Credit Rules, 2004 - whether in terms of Rule 3(5) of Cenvat Credit Rules, 2004 the capital goods are required to be physically removed or mere transfer can be said that goods have been removed? - Held that: - appellant is not required to reverse the Cenvat credit as the goods have not been physically removed from their premises to their sister unit - reliance placed in the case of Commissioner Versus Ultra Tech Cement Ltd. [2015 (10) TMI 660 - KARNATAKA HIGH COURT], where it was held that no liability arises to reverse Cenvat credit availed by the CESTAT since there was no physical removal of such goods. As the goods have been transferred to their sister unit, in that circumstance, it is a Revenue neutrality situation. In that circumstance also, the appellant is not required to reverse the Cenvat credit. Extended period of limitation - Held that: - As there were divergent views of various High Courts during the relevant period, in that circumstance, the show cause notice cannot be issued by invoking the extended period of limitation. Appeal allowed - decided in favor of appellant.
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2017 (12) TMI 28
Refund claim - the case of Revenue is that the respondent has not filed the relevant documents for entertaining the refund claims - Held that: - the respondent has filed all the relevant documents for entertaining their refund claims. But while filing the appeals by the Revenue, the show cause notice issued to the respondent has not been examined and the appeals were filed without considering the relevant documents before them. It shows that instead of ending, the departmental officers are increasing the litigation with the assesses. The said act of the officer is not appreciable - On such flimsy grounds, the appeal is not required to be filed - appeal dismissed - decided against Revenue.
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2017 (12) TMI 27
CENVAT credit - trading activities - The case of the appellant is that trading cannot be considered as exempted service - Held that: - A deemed fiction is apparently created by naming ‘trading’ as an exempted service by way of explanation in Rule 2 of Cenvat Credit Rule w.e.f. 01.04.2011. Prior to creation of such fiction, there is no scope at all even to consider the trading activity to be covered under the credit scheme. After the explanation, the position is more clear to the effect that the trading activity can be considered as an exempted service for the operation of scheme under Cenvat Credit Rules - the appellants should not have availed credit for common input services which are used for taxable output service as well as trading activity, as it is imperative to identify and reverse that amount of credit attributable to the trading activity - decided against assessee. Time limitation - penalty - Held that: - the trading is not at all an activity or a service covered by the Cenvat scheme prior to the introduction of clarificatory explanation - appellants have no reason to avail credit on services which they are fully aware were being used for trading activity also - there is no ground for such belief. Trading activity not being covered by the credit scheme itself during the material period, the appellants having availed the credit on such input services cannot contest the demand on limitation - penalty also upheld. Appeal dismissed - decided against appellant.
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2017 (12) TMI 26
Refund claim - price variation clause - denial on the ground of time bar - Held that: - The Board, which was constituted under the Petroleum and National Gas Regulatory Board Act, 2006 is entrusted with fixing the tariff, determination the actual tariff, which are to be followed by the gas companies. In such situation, it is apparent that the service tax payment is on a provisional value. The tariff is managed by statutory Authority as per law passed by Parliament. Regarding the evidence of payment of service tax to the Government, the appellant claimed that the provider of service has given a certificate to this effect. These are Public Sector Undertakings and have categorically stated that about the payment of service tax. We note that, if need be, such payment can be cross- verified by the Original Authority with jurisdictional officer in order to satisfy the correctness of the claim. Appeal allowed by way of remand.
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2017 (12) TMI 25
Non-payment of service tax - Site Formation and Clearance, Excavation and Earth Moving and Demolition service - appellant pleaded that they could not present their case before the original authority, as by the time they have got Central Excise Registration and did not get the due intimation of the proceedings before the lower authorities, they also claim that they have paid service tax - Held that: - Considering that the liability is not contested on merit, we direct the original authority to verify the payment details alongwith liability as raised in the demand proceedings to confirm the full discharge of liability alongwith interest, if any, applicable to the present case. Penalty - Held that: - When the dispute regarding the Service Tax liability was raised, it would appear that they had consulted their clients for reimbursement to pay the tax, which was remitted to the Government on receipt from the client. In such situation, we are of the opinion that there is a reasonable cause for non-payment of tax, in time - penalty set aside. Appeal allowed in part and part matter on remand.
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2017 (12) TMI 24
Valuation of services - advertising service - reimbursement charges - includibility - claim of the appellant that these were reimbursed on actual basis and are to be excluded from taxable value in terms of Section 67 read with N/N. 12/2003-ST dated 20.06.2003 was not accepted by the Revenue - Held that: - valuation of taxable service in terms of Section 67 can be with reference to service, if there were purchase and sale of goods as evidenced by the documents, the same cannot form part of taxable value for service. The situation is covered by N/N. 12/2003 dated 20.06.2003. We note that in para 10 of the original order, the factual position, as examined by original authority has not been countered in the impugned order. It is clear that the original authority has examined purchase bills / invoices for reimbursement raised to the client Recording that there are clear distinctions between invoices raised for services and invoices raised for reimbursements. Section 67 can bring the valuation of taxable service only with reference to service. In the evidence available in the present appeal that these were reimbursements, which are on actual basis in terms of agreement with the clients and are known to the parties, the same are not to be brought in for taxable purpose under Section 67. Appeal allowed - decided in favor of appellant.
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2017 (12) TMI 23
Business Auxiliary Service - sale of space or time - advertising agency service - programme producer service - Held that: - the said contractual arrangement is not connected to the sale transaction of banners made to M/s. Prabhakar Advertising Agency, Bhopal. The invoice clearly shows that the consideration is for sale of banners - tax liability on such sale transaction is not sustainable. There is no service provider service recipient relationship in such activity carried out by the Public Health Authorities as part of the Government function. There is no payment or arrangement with individual service recipient for any service. There can be no promotion of such service by the appellant to attract tax liability under “Business Auxiliary Service” - the service tax liability cannot be sustained on such activity carried out by the appellant with reference to arrangement with Public Health Authorities of the State. The demand of ₹ 17,44,951/- was made for the period 1.4.2006 to 31.03.2007 - Held that: - Though the calculation might have been based on the documents submitted by the appellant, the basis of quantification with reference to specific invoices are to be made known to the appellant so that they can explain their side of the case. It is also seen that in respect of the sale of space or time, for the services rendered prior to 1.5.2006, also the demands have been made. This is not sustainable. Matter remanded for de novo consideration - appeal allowed by way of remand.
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2017 (12) TMI 22
Extended period of limitation - Valuation - appellants discharged service tax only on the service charges received from the client organisations and have not included the salary of the guards and other amounts received for the said service - demand dated 15.5.2013 - Held that: - the said demand is the third time demand and on same subject. Two other earlier demands have already been issued to the appellants. It is a settled principle that the demand on the same set of facts cannot invoke the extended period. The demand dated 20.6.2008 has been issued within normal period. Hence there is no dispute on limitation. Demand dated 12.10.2007 which is the first demand was issued invoking extended period. Considering that the appellants got registered only in 2004 and discharged service tax only on part of consideration, we find that the demand for differential service tax is sustainable for the whole of the period as confirmed by the lower authorities - it is a fit case for invoking the provisions of Section 80 to waive the penalties imposed on the appellants. The demand raised by notice dated 15.5.2013 is hit by limitation - demand raised in other two notices and confirmed by the lower authorities are upheld - penalties waived - appeal allowed in part.
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2017 (12) TMI 21
Extended period of limitation - non-payment of service tax - Held that: - the appellant had no intention to defraud the govt. revenue and also there is no element of suppression, mis-statement etc. in payment of service tax by it. Therefore, the demand should be confined to the normal period of limitation under Section 73(1) of the Finance Act, 1994 - the matter should go back to the adjudicating authority for quantification of the service tax demand payable by the appellant within the normal period of limitation - appeal allowed by way of remand.
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2017 (12) TMI 20
Business Auxiliary Service - gas has been sold by IGL to IOCL on principal to principal basis - Held that: - identical issue decided in the case of BHARAT PETROLEUM CORPN. LTD AND HINDUSTAN PETROLEUM CORPN. LTD Versus COMMISSIONER OF SERVICE TAX [2014 (7) TMI 159 - CESTAT MUMBAI], where it was held that service tax cannot be demanded under the category of “Business Auxiliary Service” as the gas has been sold by IGL to IOCL on principal to principal basis. The demands against the appellants are not sustainable under the category of “Business Auxiliary Service” for the amount received by the appellant as commission as all the transactions have been done between the appellant and IGL on principal to principal basis - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 19
Restoration of appeal - non-compliance of pre-deposit - Held that: - the Tribunal becomes functus officio when the appeal is dismissed for non-compliance of pre-deposit since the same being an order disposing the appeal finally - appeal cannot be restored - application dismissed.
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2017 (12) TMI 18
Levy of tax - brokerage received from the Reserve Bank of India for the sale of Government bonds for the period July, 2001 to June, 2003 - whether taxable under the category of Banking and Other Financial Services? - Held that: - It is not disputed that the appellants have been acting as an agent of the Reserve Bank of India, while selling such Government bonds - similar issue decided in the case of Enam Securities Pvt. Ltd. Vs Commissioner of Service Tax, Mumbai [2014 (11) TMI 585 - CESTAT MUMBAI], where it was held that the lending or borrowing of money by the Government is a sovereign function and on such functions there cannot be any tax liability whether by way of direct tax or by way of indirect tax - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 17
Rectification of error - case of appellant is that the Tribunal proceeded on the incorrect understanding of the fact that the appellant followed the procedure under Rule 6(2) and also Rule 6(3) of Cenvat Credit Rules, 2004 for common input services - Held that: - there is no apparent error pointed out in the said miscellaneous application. The error should be such that the same should be discernible on first look and not involve any drawn out arguments or appraisal of factual or legal position in detail. Rule 6(2) will apply only in cases, where the appellant is having both the taxable as well as exempted services and for input services used for such services. They have maintained accounts in order to exclusively identify the input services, which are used for taxable output services - It cannot be said that following procedure under Rule 6(2) is not maintenance of separate account of common input services. Rule 6(2) specifically covers only such situation. Non-existence of provision for lapsing or reversal of credit, which was taken as per the provision of Cenvat Credit Rules, 2004 - Held that: - When the credit itself is not eligible because of this legal provision, the question of legal provision for lapsing or denial is of no consequence. We are fully aware of the statutory powers of the Tribunal as per section 86(7) of the Finance Act, 1994 read with section 35(C)(2) of the Central Excise Act, 1944. These powers cannot be used for review of any orders which are passed after due application of mind. There is no discernible mistake apparent from the record warranting interference in pursuance of this miscellaneous application. ROM application dismissed.
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2017 (12) TMI 16
Business Auxiliary Service - Revenue held a view that the appellants are facilitating the business of Insurance Companies/Financial Institutions to canvass their services by using the appellant's premises - liability of service tax - Held that: - the earlier arrangement of receiving part of the consideration from M/s. MUL was later changed and the appellants started receiving consideration directly from the companies. In any case, in the absence of justification recorded in the impugned order for upholding the invocation of extended period, we find no justification for the same. While already paid tax dues are not contested by the appellants, we find they are right in contesting the penalty and also the invocation of extended period. Appeal allowed in part.
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2017 (12) TMI 15
Business Auxiliary Services - case of appellant is that arrangement is on principal to principal basis for which they receive consideration - Held that: - the company whose accounts were verified by the appellant as part of sub-contracted work has no arrangement with the appellant. Further, even M/s. DHS have no arrangement with such company to enable the appellant to render any service on behalf of DHS - There is some element of confusion in the original authority's finding to identify the actual client itself. The appellants are providing service to M/s.DHS and DHS are their client. The company whose books are audited are not the client of the appellant. While they are clients of DHS and appellant did not render any service to the company on behalf of DHS. Demand set aside - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 14
Business auxiliary services (BAS) - activity of intermediary between Bank and their prospective clients who required a loan for the purchase of a motor vehicle - Held that: - the issue stands covered by the decision of the Tribunal in the case of Car World Autoline Vs. Commissioner of Central Excise [2016 (10) TMI 460 - CESTAT BANGALORE], where it was held that the appellant is entitled to the benefit of N/N. 25/2004 and eligible for both (d) as well as (e) Clause and they were not liable to pay service tax prior to 10.09.2004 - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 13
Classification of services - whether hiring of the foreign vessels for transportation of petroleum product imported by the respondent, on time chatters basis, falls under the taxable category of “Supply of Tangible Goods for Use”? - Held that: - the issue is held in favor of the respondent by the Tribunal in the case of PETRONET LNG LTD Versus COMMISSIONER OF SERVICE TAX [2013 (11) TMI 1011 - CESTAT NEW DELHI], holding that those transactions fall within the ambit of the exclusionary clause of Section 65 (105)(zzzzj) of the Finance Act, and are therefore, immune to the liability of service tax - however, In view of the fact that the order dated 24.10.2013 passed by this Tribunal in earlier occasion in respect of the same dispute in the case of the respondent has not been stayed or over-ruled, contrary view cannot be taken by the Tribunal in deciding the present appeal and the Principles decided therein can be adopted for deciding the issue in hand. The transactions made by the respondent will not fall under the scope and ambit of “Supply of Tangible Goods for use” service - appeal dismissed - decided against Revenue.
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Central Excise
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2017 (12) TMI 12
Validity of tribunal order - CESTAT dismissed the appeal of the appellant / assessee on monetary ground - Section 35 (c) of the Central Excise Act, 1944 - Whether the second respondent is right in depriving the appellant the statutory right as provided under Section 35 (c) of the Central Excise Act, 1944? - Held that: - On more than one occasion, the Hon'ble Supreme Court and this Court, held that the reasons are the heart beat of any decision. Dismissal of the appeal, without adverting to the facts, grounds of appeal is also not appreciated by the Hon'ble Supreme Court. Whether the second respondent is right in dismissing the appeal filed by the appellant by issuing an order mentioning that they do not consider it productive to invest time by the Tribunal while there is huge pendency involving crores of rupees and revenue and therefore, this appeal with minor demand of duty levied? - Held that: - Dismissal of the appeal, on the sole ground that there is a huge pendency involving crores of rupees of revenue and adjudication of lis involving a minor demand of duty of ₹ 7,42,297/- would not be productive, is a failure to exercise the jurisdiction conferred on CESTAT, Madras, both of facts and law. In terms of Section 35 b of the Central Excise Act, the appellant is certainly an aggrieved person by the orders impugned before CESTAT, Madras. Dismissal of appeal cannot be approved - matter restored - decided in favor of assessee.
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2017 (12) TMI 11
Monetary limit involved in appeal - maintainability of appeal - Held that: - Material on record discloses that apart from duty and interest, a sum of ₹ 9 lakhs has been ordered to be paid towards redemption penalty. A sum of ₹ 2,23,605/- (including cess) has been ordered as penalty under Rule 25 of the Central Excise Rules and ₹ 5,000/- under Rule 27 of the Central Excise Rules, for the delayed payment of Central Excise duty - Penalty imposed in the case on hand, is within the monetary limit - In the light of the policy decision, there is no need for adjudication of the substantial question of law raised in the instant Civil Miscellaneous Appeal - appeal disposed off.
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2017 (12) TMI 10
Refund claim - cash refund of cenvat credit - whether the appellant are entitled to refund of Cenvat Credit amount in cash when the credit was reversed on the insistence of the DGCI Officers as their factory has now been closed? - Held that: - it has been held in similar circumstances by the Larger Bench of this Tribunal in the case of Steep Strips vs CCE Ludhiana [2011 (5) TMI 111 - CESTAT, NEW DELHI] that cash refund cannot be allowed in absence of express provision in the statute for allowing such refund - appeal dismissed - decided against appellant.
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2017 (12) TMI 9
Clandestine manufacture and removal - Dispersing Agents - denial of cross-examination of witnesses - principles of natural justice - Held that: - the witnesses, namely the excise in-charge and the Director of the company, not only they had accepted the existence of the seized records namely, A/24, A/25 and A/26 retrieved from their factory premises but also explained how the said records had been maintained in the factory premises and names of the consignees were entered for accounting purpose only and the total quantity cleared on a single day was recorded in the seized records, vehicle number against the name of the consignee mentioned at the end of the day. Therefore, these evidences cannot be outrightly discarded merely because one of the panch witnesses became hostile. Cross-examination of witnesses - natural justice - Held that: - It is settled principle of law that cross-examination of the witness whose statement is relied upon becomes necessary so as to bring out the truth of the fact alleged and denial of cross-examination of the witness is violation of principle of natural justice and such Order cannot be sustained - the matter needs to be remanded to the adjudicating authority with the direction to allow cross-examination of the witnesses as was sought by the Respondent and not allowed during the adjudication proceeding, so as to ascertain the correctness of the allegation of clandestine removal of goods based on such evidences - appeal allowed by way of remand.
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2017 (12) TMI 8
Refund claim - quantitative discount offered by appellant to their purchasers of the goods - unjust enrichment - Held that: - an identical issue was adjudged in the case of Sirpur Paper Mills [2017 (9) TMI 1490 - CESTAT HYDERABAD], where it was held that sanction of refund to respondents do not amount to unjust enrichment, cannot be sustained - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 7
Clandestine manufacture and removal - TMT Bars - duplication of demand - Held that: - we are satisfied that the Department have wrongly read the account of the appellant in the books of KIL. It is evident that both the transaction on the debit column and the credit column have been added, arriving at erroneous conclusion. Thus, we hold that the show cause notice with respect to the demand of ₹ 16,00,60,335/- is erroneous and not sustainable. Accordingly, we set aside the demand of ₹ 16,00,60,335/- in respect of royalty payments by appellant to KIL, and remand the matter to the learned Commissioner for re-verification of the mistake in calculation, apparent on the face of record. Stock verification - case of appellant is that no actual stock taking was done by the officers and the statements recorded during search and investigation were under pressure, is not correct - Held that: - regarding Physical verification of stock we observe that such exercise was challenged by the appellant immediately after search, the Pancha witness Shri Daulat Ram during cross examination confirms not undertaking of stock taking exercise. During subsequent statements the Appellant or its directors were never again confronted on the aspect of retractions and from this we find force in the appellants arguments that no such stocktaking was actually done - Ld. Commissioner’s finding that each test recorded in the diary of chemist is one heat and calculating total production by an arithmetic calculation is not sustainable in view of the specific statement of the director during investigation and not recording of the any statement of the chemist who had made entries in the said diary. Further, it is a legally settled position that no demand for clandestine manufacture can be sustained based on theoretical and uncorroborated calculations. Clandestine removal based on register of vehicles booking maintained by New Vikas Transport Company - Held that: - we find force in the appellants arguments that these are not record of vehicles actually transported but only a memoranda record of bookings recorded by transporter for approximate vehicles to be supplied to the appellant. This is very clear from the record of cross examination of the transporter Moin Khan, which leaves no room for any other interpretation and therefore any such demand is not sustainable. This also applies to the demand based on loose GRs. A perusal of ledger resumed from Kamdhenu Ispat Ltd Shows separate column for Debit and credit amount whereas Revenue has put the amount of debit column as well as credit column in one single Column and then totaled it, which is nearly doubled because of wrong merging of the Debit side and credit side column. In our view any confirmation of demand based on such doubling of amount(s) cannot be sustained. There is no plausible reasoning given by Revenue in support of totaling of debit amount and credit amount, while calculating demand of duty because of difference in royalty. Further, not recording of statement of Kamdhenu Ispat Ltd, on such resumed ledger account, also shows that there is no substance in the finding of the Revenue that alleged difference in royalty leads to clandestine clearances. Appeal allowed in part and part matter on remand.
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2017 (12) TMI 6
Benefit of N/N. 67/95 - intermediate product - captive consumption - denial on the ground that the final products are cleared without payment of duty by availing SSI exemption benefit - Held that: - similar issue came up for decision in the case of M/s. Parvenu Industries Ltd. Versus CCE, Tirunelveli [2017 (5) TMI 135 - CESTAT CHENNAI], where it was held that the input was thereby an intermediate manufactured in the factory of the appellant and was not at all covered by the barring clauses contained in (i), (ii) and (iii) and (iv) of Col.2 of the Table appended to the N/N. 67/95-CE dated 16.03.1995 - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 5
Excisability/marketibility - parts of ophthalmic equipments - Held that: - considering the ultimate use of the product which are specifically designed for eye surgery, it is found that the product cleared by the appellant cannot be considered as excisable goods fit for marketing or use and as such cannot be brought to excise levy - The products cleared by the appellants are of semi-finished nature - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 4
Extended period of limitation - denial of benefit of N/N. 41/99-CE dated 26.11.99, 13/2003 dated 01.03.2003 and 43/2003 dated 14.05.2003 on the ground that the condition of procurement of tea leaves from small growers not fulfilled - Held that: - the respondent had intimated all the details regarding the availment of Notification to the department in terms of N/N. 41/99, the department has not been able to establish the suppression of facts with intention to evade payment of duty. Therefore, the extended period is not invokable. The Commissioner (Appeals) had relied upon the case of HAVUKAL TEA & PRODUCE CO. (P) LTD. Versus COMMISSIONER OF C. EX., SALEM [2008 (7) TMI 685 - CESTAT, CHENNAI]. That the department had filed appeal before the Hon’ble High Court of Madras against the said decision of the Tribunal - The main ground taken by the department is that the said decision has been appealed before the Hon’ble jurisdictional High Court. However as fairly conceded by the Ld. AR, Hon’ble High Court of Madras has dismissed the appeal thereby upholding the decision of the Tribunal. Appeal dismissed - decided against Revenue.
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CST, VAT & Sales Tax
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2017 (12) TMI 3
Reversal of input tax credit - TNVAT Act - computation of taxable turnover - liability of interest - Held that: - it is the endeavour of the petitioner to state that the respondent committed a serious error in clubbing turnover under the CST Act and to draw the inference that the taxable turnover has exceeded ₹ 200 Crores and therefore, returns filed by them are belated and the petitioner is liable for payment of interest - with regard to Rule 7 of the TNVAT Rules, 2007, which states that every dealer shall file their return for each month in Form I on or before 20th of the succeeding month. Sub-Rule 8 of Rule 7, is sought to be invoked by the respondent by stating that if the taxable turnover in the previous year is ₹ 200 Crores and above, the returns should be filed on or before 14th of the succeeding month. This having not been done, the petitioner is liable for payment of interest. Whether at all the turnover under the CST Act could be clubbed with the turnover of the TNVAT Act, is an important question to be decided. However, the respondent having not considered these issues, this Court is of the view that the matter requires to be remanded to the assessing officer for fresh consideration, on the above factual and legal issues, after affording an opportunity of personal hearing. Petition allowed by way of remand.
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2017 (12) TMI 2
Rate of tax - purchase turnover - TNGST Act - purchases of raw materials, availing concessional rate of tax, under Section 3(3) of the TNGST Act, 1959, by issue of Form XVII declaration and used them in the manufacture of goods and effected export sales - taxable under Section 3(3) of the TNGST Act, 1959 or under Section 3(4) of the TNGST Act, 1959? - Held that: - In State of Tamil Nadu v. Essar Inc., [2014 (8) TMI 935 - MADRAS HIGH COURT], while considering the very identical substantial questions of law, stated supra and following the decision in Tube Investment of India Ltd.,'s case [2010 (10) TMI 938 - MADRAS HIGH COURT], a Hon'ble Division Bench of this Court, dismissed the appeal filed by the State Government. Having regard to the dismissal of the Special Leave Petitions, filed against the decision of this Court made in Tube Investment of India Ltd.,'s case and following the above decisions made in State of Tamil Nadu v. Essar Inc., this Court is inclined to dismiss this tax case revision petition, as no question of law, much less substantial question of law, arises for consideration in the present revision. Tax revision dismissed.
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2017 (12) TMI 1
Sale of capital goods - car used as a demo car - exemption from tax - Section 6 (3) of the DVAT Act - the decision in the case of Triumph Motors (A Unit of Khushi Traders Pvt Ltd) Versus Commissioner Of Value Added Tax [2017 (8) TMI 299 - DELHI HIGH COURT] contested - Held that: - delay condoned - notice to be issued on the prayer for interim relief.
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