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TMI Tax Updates - e-Newsletter
December 20, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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TDS - Section 194J is not a residuary clause. In other words, it is not that if a contract does not fall within the ambit of Section 194C, it must be deemed to fall within the ambit of Section 194J. Sections 194C and 194J are independent provisions. - HC
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Penalty u/s 271B - it is a technical breach on the part of the assessee as the audit report could not upload on account of site/ server problem of the system - this is first time when assessee was required to e-file the audit report - No penalty - AT
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TDS u/s 192 - secondment agreement - Addition of payment/reimbursement of amount on account of salary, relocation and other related costs of expatriate employees - TDS liability confirmed - AT
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Levy of penalty u/s 271(1)(b) - non attendance of the assessee - that this was a case of search and seizure on a big group. Four days time to submit details in such a case is not at all reasonable from any stretch of imagination - AT
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Addition on foreign exchange gain - restatement of liability - contingent gain - it would only result in Revenue trying to blow hot and cold simultaneously. - no additions - AT
Customs
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Levy of anti dumping duty (ADD) - Soda Ash - challenging the procedure undertaken by the designated authority - Jurisdiction of HC to writ entertain petition - the contention that entire exercise carried out by the designated authority is without taking into consideration that the domestic injury was operating under a protected regime - Interim relief granted - HC
Service Tax
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Classification of services - activity of Data Processing - The activity of the appellant falls under the category of BAS as it is not allege in the show cause notice to demand the service tax under the category of BAS the demand of service tax cannot be confirmed - AT
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Classification of service - examination of the garments at various stages - When the outcome of the examination / inspection carried out does not result into some certification, the subject services cannot be covered by the services under the category of “technical inspection and certification”. - AT
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Refund claimed of the amount paid twice, due to non-receipt of challans - whether refund claim justified? - Refund allowed - AT
Central Excise
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When there is no short fall in payment of duty after adjusting excess payment on other products, interest liability will not arise. - AT
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Cenvat Credit - sales commission/sales promotion expenses incurred by the appellant is expenditure or input service incurred or received prior to the removal of their final product - credit allowed - AT
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Manufacture - In view of the provisions of Rule 16 of the Rule, in our considered view the appellant’s act of availing the Cenvat Credit in respect of bought out items i.e. Cable Jointing Kits is clearly admissible. - AT
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Valuation - rejection of transaction value - Provision of rule 9 also suggests that merely because buyer is interconnected undertaking that alone is not sufficient for holding as related person. - AT
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CENVAT credit - Outward transportation - if the contention is accepted, the appellant would end up availing undue privilege of credit balance by paying tax lower than that envisaged by the sovereign legislature. It would also constitute retention of the tax recovered from customer which is not the intent of the CENVAT Credit Rules. - AT
VAT
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Validity of assessment order - whether the AO can make additions solely relying upon the third party statement and without any further corroborative evidence - Held No - HC
Case Laws:
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Income Tax
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2016 (12) TMI 955
TDS u/s 194C or 194J - amounts paid under the contracts - whether treated as fees for professional or technical services attracting Section 194J or whether they constitute payments to contractors attracting the provisions of Section 194C - Held that:- The contract entered into between the respondent and each of the contractors, therefore, did not involve the supply of professional or technical services at least within the meaning of Section 194J. The consideration paid under the contracts, therefore, was not for the professional or technical services rendered by the contractors to the respondent. Section 194J is, therefore, not applicable to the present case. Section 194J is not a residuary clause. In other words, it is not that if a contract does not fall within the ambit of Section 194C, it must be deemed to fall within the ambit of Section 194J. Sections 194C and 194J are independent provisions. In view of our finding that the contract does not fall within Section 194J, the dismissal of the appeal would follow in any event. The respondent has not denied that the present case falls under Section 194C. Had the respondent contended that Section 194C is also not applicable, it would have been necessary to consider whether the contract falls within the ambit of Section 194C. As the respondent has accepted that it falls within Section 194C and has complied with its obligations thereunder, we refrain from deciding the issue as to whether it falls within Section 194C.
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2016 (12) TMI 954
Allowance of exemption u/s. 54 - disallowance of claim in respect of flat purchased by the assessee from her daughter on the ground that the house was not registered in the name of the assessee - Held that:- Section 54 of the Act requires that the house should be purchased. It is also a settled law that it is not necessary that the house should be registered in the name of the assessee. In our view everybody is entitled to arrange his affairs within the parameters of law, even if it results into the reduction of total tax liability. Our aforesaid view is fully supported by the Hon’ble Supreme Court decision in the case of Union of India vs. Azadi Bachao Andolan (2003 (10) TMI 5 - SUPREME Court ). In view of the above, we allow the claim of the assessee under section 54 - Decided in favour of assessee Disallowance on account of setting off of long term capital loss against long term capital gain on sale of property at Hauz Khas on its transfer - Held that:- We find that Ld. CIT(A) has given factual finding that husband of the assessee has purchased 60% share in Hauz Khas property and got the deed registered and that such transaction was legal transaction as per the Transfer of Property Act, and the payment of ₹ 1.20 crores was made as per the circle rate and stamp duty has been paid and that though assessee and her husband are staying together but they are not on good terms. Therefore, Ld. CIT(A) has rightly observed that AO cannot deny the legality of the transaction between the assessee and her husband Dr. Charanjit Chanana, whereby, the assessee has sold 60% of her share in her Hauz Khas property to her husband and accordingly, the AO has no option but to allow the resultant Long Term Capital Loss to the assessee. We also allowed the claim of the assessee under section 54 in assessee’s appeal, as aforesaid. In view of the above, the Ld. CIT(A)’s action of allowing the set off loss against long term capital gain does not need any interference on my part, hence, we uphold the same and dismiss the ground no. 1 raised by the Revenue. Allowing cost of additions /improvements - Held that:- We find that the complete details of the expenses incurred was provided to the AO in the receipt issued by the contractor. The expenses were incurred around twenty years back in F.Y. 1992-93. Under these facts and circumstances and in the light of the fact that the Completion Certificate was issued by Noida Authority on 21.05.1994, Ld. CIT(A) was of the opinion that the AO should not have restricted the cost of additions/improvements to ₹ 10 lacs on estimate basis as he was not technically competent to do so and he had done this by giving a vague argument saying that “It would not be feasible to allow such a huge expense on the basis of such casual receipts. In view of above, Ld. CIT(A) has rightly directed the AO to allow indexation on full amount of ₹ 17,40,000/- which does not need any interference on my part, hence, we uphold the same and dismiss the ground raised by the revenue.
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2016 (12) TMI 953
Disallowance being loss on foreign exchange incurred on trading liabilities - Held that:- We find that the assessee has, albeit, filed copy of account of Foreign exchange loss, but, the same does not indicate the nature of transactions on which such foreign exchange loss was incurred. There is no discussion in the assessment order about the nature of loss. Since such details were also not available before the ld. CIT(A) enabling him to categorize the foreign exchange loss in respect of trading items and loan taken for acquiring capital assets, and the same are absent before us as well, we set aside the impugned order and remit the matter to the file of AO for ascertaining the nature of foreign exchange loss. To the extent such foreign exchange loss/gain relates to trading transactions, the same should be taken as a revenue item and hence deductible/chargeable to tax. The other part relating to acquisition of capital asset should be taken as a capital expenditure, not eligible for deduction. Needless to say, the assessee will be allowed an opportunity of hearing in such fresh proceedings. Addition being the payments made towards Employees and Employer’s Provident Fund contribution - delay ranging between one to four/six days in depositing the amounts - Held that:- Both the employer’s and employees’ contribution are allowable as deduction if the amount of provident fund etc., though belatedly, but is paid before the due date of filing of return u/s 139(1) of the Act. Adverting to the facts of the instant case, it is seen as an admitted position that the assessee deposited its and employees’ share in EPF etc. before the due date u/s 139(1) of the Act. Thus we order for the deletion of the addition. See CIT v. Alom Extrusions Limited [2009 (11) TMI 27 - SUPREME COURT ] and CIT v. Aimil Limited [2009 (12) TMI 38 - DELHI HIGH COURT Non deduction of tds - Held that:- On a query about the details and evidence for such deduction of tax at source by customers, the ld. AR failed to furnish the same and corroborate the version of tax deducted at source by the customers without furnishing any TDS certificates. In the absence of the foundation of the deduction of tax at source by customers, we are unable to accept the assessee’s contention for allowing deduction. Disallowance being tax paid on salaries of employees under protest - Held that:- The assessee was made liable to pay a sum of ₹ 1,50,000/- on account of TDS which the assessee deposited under protest. It is obvious that the amount of TDS paid by the assessee is in respect of services rendered by the employees on which tax was not deducted, is a sort of perquisite, which if paid so would have been deductible as revenue expenditure. As such, the amount of ₹ 1,50,000/- has to be allowed as deduction if it was paid and not refunded to the assessee. On a pertinent query, both the sides did not have an idea about the order passed by the Tribunal, if any, against the order u/s 201(1) creating demand of ₹ 1,50,000/-. We, therefore, direct the AO to allow deduction for ₹ 1,50,000/- in the year. If such demand has been erased by the Tribunal in subsequent proceedings, then, the amount so refunded should be charged to tax in the relevant year. Addition being excess deposit of TDS amount on salaries to employees - Held that:- We find that the assessee has set up a case that a sum of ₹ 37,431/- was paid in excess of the liability and no TDS certificates were issued to any of the deductee employees. Suppose salary of ₹ 100 is due to an employee on which tax liability is ₹ 15, the employer will deduct and deposit ₹ 15 with the exchequer and pay ₹ 85 to the employer. If, by mistake, the employer deducts ₹ 20 instead of ₹ 15, ordinarily, the TDS certificate should be given for ₹ 20/- and the remaining sum of ₹ 80/- should be paid to the employee. What the assessee is contending before us is that it paid ₹ 85/- to its employees, but, deducted and paid TDS of ₹ 20/- to the exchequer. This position, if correct, calls for allowing deduction in respect of ₹ 5 (Rs.20-Rs.15), being an amount incurred during the course of business. However, if the employee is paid ₹ 80/- after deduction of ₹ 20/- as TDS, as against the correct liability of ₹ 15, then, of course, there can be no deduction for the remaining sum of ₹ 5/-. As the facts are not borne out from the record or impugned order, we, therefore, set aside the impugned order and remit the matter to the file of the AO for deciding it in accordance with our above observations As regards the excess amount being payment of Provident Fund in excess of the actual liability, the same has to be allowed as deduction being an expenditure incurred in carrying on the business.
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2016 (12) TMI 952
Penalty u/s 271B - failure on part of the auditor in uploading the audit report as introduced and required first time - Held that:- As noticed from the records that the assessee had filed the return of income for the assessment year 2013-14 on 21-06-2013 electronically and the assessee got her accounts audited on 12-06-2013. It is also noticed from the records that copy of ITR Forms, acknowledgement and tax audit report dated 12-06-2013 were furnished to the AO. The CA of the assessee could not upload the audit report because of technical problem in the server/ site of the Department. The assessee was under bona fide belief that the report is already uploaded. However, the assessee had filed the tax audit report dated 12-06-2013 before the AO. It is also noticed that the assessee being low educated and she was not aware of the e-filing system particularly uploading of audit report on internet as it was first time introduced by the Department to upload the same. It appears that it is a technical breach on the part of the assessee as the audit report could not upload on account of site/ server problem of the system As decided in the case of ACIT & Anr vs. Dr. K. Satish Shetty (2009 (2) TMI 207 - KARNATAKA HIGH COURT ) this is first time when assessee was required to e-file the audit report and prior to that no such reports were being furnished. Hence, the penalty should not be levied. - Decided in favour of assessee
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2016 (12) TMI 951
Revision u/s 263 - sale of land - AO treated sale as business receipt - The records shows that the assessee had purchased the land measuring 61,500 Sq. meter. The magnitude was so much that it cannot be for capital investment. The assessee got the land use conversion from agriculture to residential and paid the necessary fee to the concerned authorities. Since the acquisition of the said land and converting the same into residential was shown in the accounts as stock in trade which is evident from the financial statements available in the paper book as submitted before the AO. Further it is seen that ld. Pr.CIT- 1 has also observed the fact that as on 1-4-2009 the land was disclosed as opening stock for F.Y. 2009-10 i.e. relevant to AY 2010-11. The issue before us is for AY 2011-12. Thus in the previous year relevant to the assessment year before us the subject land was business asset of the assessee. The ld. Pr.CIT-1 has also ignored this fact. This issue has been examined by the AO and assessee had made submission during the course of assessment proceedings. These details are available in the paper book. The AO after examining these details and after going through these financial statements proceeded to complete the assessment by accepting the business profit declared by the assessee. The assessee has been able to demonstrate that the land sold during the assessment year was the business asset (stock in trade) in the financial statements and duly appearing in the return of income filed. The AO accepted the contentions of the assessee and adopted a view. Now Pr. CIT does not agree with the view adopted by the AO then the law does not permit him to replace the view. Thus in our considered view the ld. Pr.CIT-1 is not justified to set aside the order of the AO. Date of conversion of the investment in the subject land to the stock in trade - Held that:- As established that there was no loss to revenue if the provisions of section 45(2) are applied and deemed capital gains as on the date of conversion of investment into stock in trade was computed. Further business profit is computed in the impugned year when actual sale takes place by taking the fair market value as on the date of such conversion as cost of acquisition. This view is duly supported by the order of the Hon’ble Apex court in the case of CIT v. Max India Ltd.,(2007 (11) TMI 12 - Supreme Court of India ) wherein it has been held that ‘every loss of revenue cannot be said to be prejudicial to the interests of revenue’. As observed above in the present case , there has been no loss to the revenue and it cannot be said that the order passed by the AO was prejudicial to the interest of revenue - Decided in favour of assessee
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2016 (12) TMI 950
Addition of Long term capital gain - sale of plot - determination of price - fair market value of the property - Held that:- It is observed that in the Master Development Plan - 2011 of the JDA, this plot was shown for residential purposes. The registered document also mentions that the plot was only for residential purpose. JDA Patta and Site Plan also show that plot was for residential purpose. However, spot inspection report shows that this plot was of capable of being exploited for commercial purposes as surrounding properties were being used for commercial purposes. The stamp Valuation authority has adopted the commercial rate for valuation of the Plot. The assessee's request to convert the land to commercial was declined by JDA. Thus the location of the plot was capable to be utilized for commercial purposes but legally the plot was not commercial. This is also a fact that there is a difference in market value of the authorized commercial property and illegally used for commercial purposes. This fact has not been taken into consideration while arriving at the fair market value of the plot on the date of transfer for the purpose of provisions of Section 50C of the Act. Therefore, in the interest of justice and equity, the issue is restored to the file of the AO to decide it afresh after ascertaining the fair market value of the property with due weightage given to the fact that plot was not a commercial plot but capable to be illegally exploited for commercial purposes. Thus the appeal of the assessee is allowed for statistical purposes.
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2016 (12) TMI 949
Rectification of mistake - reduce the deduction allowable under section 80HHC - Held that:- Ostensibly, section 154 permits the Assessing Officer to rectify any mistake apparent from the record by amending an order. Quite clearly, in the present case, the issue revolves around the amount of interest which is liable to be excluded from the profits of the business in terms of clause(1) of Explanation (baa) to section 80HHC of the Act. As per the assessee, what is excludible is ‘net interest’ and for that matter he has also referred to the judgment of the Hon’ble Supreme Court in the ACG Associated Capsules Pvt. Ltd v. CIT ,(2012 (2) TMI 101 - SUPREME COURT OF INDIA). Be that as it may, what is relevant is that the impugned decision could not have been taken by the Assessing Officer in a summary manner so as to suggest that there is a mistake apparent from record. Notably, a mistake apparent from record is one which is patent and obvious, on which no two views are possible. Therefore, the action of the Assessing Officer is beyond the scope and ambit of section 154 of the Act and the same is hereby set-aside and assessee succeeds.
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2016 (12) TMI 948
Non deduction of TDS on the interest payments to the loan creditors - Section 197 - rejection of Form 15G - Disallowance made under section 40(a)(ia) - Held that:- The assessee has submitted Form 15G before the Assessing Officer during the course of hearing. However, the Assessing Officer has rejected Form 15G filed by the assessee since the Assessing Officer was not an authority to accept the same. During the course of appellate proceedings, when the ld. CIT(A) has specifically asked the assessee to produce copy of Form 15G/15H, the assessee could not produce the same, for which, the ld. Counsel for the assessee has not assigned any reason before us. Under these circumstances, in the interest justice, we direct the assessee to file copy of Form 15G/15H before the ld. CIT(A) and the ld. CIT(A) is also directed to verify the same and decide the issue afresh in accordance with law after allowing an opportunity of hearing to the assessee. Thus, the ground raised by the assessee is allowed for statistical purposes.
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2016 (12) TMI 947
Assessment u/s 153A - Undisclosed investment made in acquisition of immovable property - Held that:- This is a fact Shri Naresh Kumar Choudhary is a son of the assessee had filed the return of income and in his premises search operation was carried out. In response to notice issued u/s 153A of the Act, the amount invested in agricultural land in the name of the assessee has been offered for taxation. This is evident from the cash flow statement placed at page 4 of the paper book. In case the addition is sustained in the case of the assessee then it will amount to double taxation on the same amount. The return of income of Shri Naresh Kumar Choudhary for the assessment year 2008-09 has been scrutinized and then the same had been accepted which includes the investment in the agricultural land in the name of the assessee. Agricultural income - Held that:- It is noted from the records that the assessee had purchased the agricultural land on 14-05-2007 at Sri Ganganagar which indicates that the assessee was having agricultural income from Rabi and Kharif crops. The assessee had shown the agricultural income of ₹ 1.06 lacs and the same had also been shown in the return of income. The AO did not accept this amount of ₹ 1.06 lacs as agricultural income of the assessee as the assessee had not produced the bills and vouchers for sale of crops and the same had also been confirmed by the ld. CIT(A). It is also noted from the records that the assessee had submitted the copies of girdawari records establishing the growing of crops from the lands owned by the assessee. It is noted that the assessee had good piece of land i.e. 23 bigha and 3 biswas on which crops are grown by the assessee. It may be taken into consideration that the agricultural income is exempt from tax and there is no need to maintain books of account or bills/ vouchers. Looking to the facts and circumstances of the case, direct to delete the addition of ₹ 1.06 lacs made by the AO.
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2016 (12) TMI 946
Addition made on account of Bad and Doubtful Debts and miscellaneous losses written off - Held that:- We observe that assessee has not provided necessary information and explanation along with relevant copies of accounts or documentary evidences before the lower authorities in order to exhibit the opening balance of bad debts provisions transferred to the books of account of assessee, details of bad debts of consumer dues as well as provisions made for consumers for dues of doubtful debts. We are of the view that in the given facts and circumstances the issue needs to be restored back to the Assessing Officer for verification of assessee's claim. Both the assessee and the Revenue have no objection if the issue is restored back to the Assessing Officer. Treatment to capital grant - disallowance of depreciation observing that capital subsidy and grant received are to be reduced from fixed asset and depreciation to be allowed on the remaining balance - Held that:- In the light of proviso to Explanation-10 to section 43(1) of the Act we find it justified to restore the issue back to the file of Assessing Officer to adjudicate afresh after verifying the apportioned amount of grant relating to different assets and calculate the depreciation at the rates applicable to such assets. Needless to mention that all necessary details will be provided by the assessee to the Assessing Officer in order to calculate the correct amount of depreciation, Ld. Assessing Officer to provide proper opportunity of being heard should be given to the assessee. Disallowance under the head small and low value items written off - Held that:- Looking to the overall business exposures of the company and from the perspective of business and practical approach we are of the view that expenditure is relating to carrying on and conducting of the business which has not been disputed by the Revenue, therefore, the assessee needs to be allowed the claim of expenditure being value of small and low value items. Disallowance of prior period expenses - Held that:- Apart from the bifurcation of prior period expenses as referred and general submission of assessee that the amount has been received pursuant to transfer of running business undertaking and no other documentary evidence has been placed on record in order to prove that the liability for the expenditure crystallized during the year. It is true that the books of account of assessee are audited and no major defect has been pointed out by the Assessing Authority and they have been accepted. However, during the course of assessment proceedings ld. Assessing Officer picked up certain items for the purpose of verification. During this course necessary details were called for relating to prior period expenses which involved expenditure prior to 1.4.2005. In such situation it is incumbent on the assessee to prove with necessary details to satisfy the query raised by the Assessing Authority. In such situation we find that the assessee has been miserably failed to substantiate its claim with necessary evidences and documents. We have no reason to allow this ground of the assessee. MAT computation - Treatment of deferred tax in the computation of income - Held that:- When we move to see the effect of tax expenditure in the computation of income we find that assessee has rightly added provisions for wealth tax, provisions for income-tax and fringe benefit tax to the net profit as per profit and loss account of ₹ 174131929 (net profit after tax at ₹ 171794810 + net prior period credit at ₹ 2337119). Further assessee has rightly deducted deferred tax asset from the net profit for the purpose of calculating business income. To this extent assessee has made no mistake in calculating the business income and has rightly deducted deferred tax asset. Had it been deferred tax liability, it would have been added to the net profit. We are, therefore, of the view that ld. CIT(A) has erred in confirming the disallowance of deduction of deferred tax asset at ₹ 6,40,52,414/- while computing business income/loss for the year. Claim of revising its book profit by reducing it by deferred tax asset - Held that:- It is not the case that Revenue authorities have to accept whatever stated in the return of income computing the income mechanically. As per provisions of section 143(1) of the Act is concerned the Revenue has to examine whether any claim as made by the assessee is correct or not. This includes under statement and over statement of the income. If Revenue authorities fail to take note of incorrect claim with regard to total income of the assessee, such failure would necessarily mean mistake apparent from the record. Respectfully following the decision of the Co-ordinate Bench referred above and in the given facts and circumstances of the case, we are of the view that assessee was eligible for deduction of deferred tax asset of ₹ 6,40,52,414/- from the net profit as per audited profit and loss account for the purpose of calculating business income as well as book profit u/s. 115JB of the Act. Further we direct the Assessing Officer to allow the assessee to claim deduction of deferred tax from book profit so as to arrive at the correct tax u/s. 115JB of the Act. Suo motu added service tax payable to the profits as profit and loss account u/s. 43B - Held that:- Assessee has been unable to place on record any detail to prove that service tax payable of ₹ 13,56,000/- was in relation to those services on which service tax are payable only when the due amount from customers is received and the particular provisions of service tax is applicable to assessee for the year under appeal. Assessee came away with the mere plea that it is a collecting agent and service tax is not reflected in the profit and loss account so as to keep service tax payable out of the ambit of provisions of section 43B sub-sec. (a) of the Act. In absence of necessary details and in the given facts and circumstances of the case, we are of the view that service tax payable at ₹ 13.56 lacs is covered under the provisions of section 43B sub-sec. (a) of the Act and if assessee has not deposited the service tax payable before the due date of filing of return of income then the amount needs to be added to the net profit of assessee which in this case has been rightly done so by the assessee at the time of filing return of income. Accordingly, we allow the Cross Objection filed by the Revenue.
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2016 (12) TMI 945
Deemed dividend addition workout u/s 2(22) - Held that:- Assessee has neither placed on record the dates of receipt nor the accumulated profit of the company on the date of receipt of money. In fact, no details - except the accumulated profit as on 31-03- 2002- were furnished to the AO. AO seems to have made a mistake of arriving at the accumulated profit at ₹ 9,72,990/- as the same amount could not be verified either from the Balance Sheet or from any other details placed on record. We are unable to determine how this amount of ₹ 9,72,990/- has been arrived at by the AO. As seen from the Balance Sheet, the amount of accumulated profit as on 31-03-2002 was only ₹ 3,26,333/-. The depreciation claimed in the P&L A/c was at ₹ 7,77,416/-. Since there are already judicial pronouncements that the accumulated profits are to be arrived at on the basis of IT computation, the depreciation allowable under IT Act at ₹ 9,31,388/- has to be reduced. Thus, the accumulated profit for the year works out to ₹ 1,72,362/-. The Co-ordinate Bench in the case of Bagamane Leasing and Finance Pvt. Ltd.,(2010 (11) TMI 662 - ITAT, Bangalore) has held that Explanation-2 to Section 2(22)(e) does not have the effect of inclusion of current year’s business profits. It followed the principles laid down in the case of M.V. Murugappan [1965 (11) TMI 144 - MADRAS HIGH COURT], which these assessees have relied on and submitted before the AO. In view of that, in the absence of any working given by assessee and due to non-co-operation by assessee before the CIT(A) also, we have no option than to determine the accumulated profits as per the Balance Sheet of M/s. Eye Ads Pvt. Ltd., as stated above. AO is directed to re-workout the deemed dividend in each of assessees’ hands at the same ratio i.e., 73:27, considering the accumulated profit on ₹ 1,72,362/- only
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2016 (12) TMI 944
TDS u/s 194C or 194J - Non-deduction of TDS from the expenditure incurred for Effluent Treatment - short deduction of tds - Held that:- In deciding appeal in the case of Vapi Waste & Effluent Management Company Ltd. (VWEMCL), the ld.CIT(A) held that the said entity does not qualify for the concept of mutuality and thereby the profits earned by the company is subject to tax. In view of this, the contention of the ld.AR is rejected and the action of the AO is confirmed by the ld.CIT(A). TDS u/s 194A - interest and bill discount expenses - Held that:- There is a force in the submissions made by the ld.AR. Sec. 194A of the IT Act is not applicable in the case of Banking Company to which the Banking Regulation Act 1949 applies. Thus, the ld.CIT(A) held that the tax and interest levied in this connection merits deletion and allowed the ground raised by the assessee TDS u/s 194J - legal & professional charges - Held that:- AO stated that the appellant had debited Legal & Professional Charges of ₹ 7,22,275/- for which the appellant had deducted TDS @ 2.06% by applying sec. 194C instead of at the rate 10.33% as prescribed in sec.194J. The ld.CIT(A) held that the action of the AO cannot be faulted because the provisions u/s.194J is very clear to this effect. Thus assessee’s ground of appeal is dismissed by the ld.CIT(A). TDS u/s 194I - TDS on hiring expenses - Held that:- The assessee-company has already deducted and paid TDS u/s.194C of the Act. The A.O. in the order has stated that the assessee had agreed for this charge of levy TDS and interest thereon, the contest before the appellate authority became infructuous and the ground raised by the assessee was dismissed by the ld.CIT(A).
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2016 (12) TMI 943
TDS u/s 192 - secondment agreement - Addition of payment/reimbursement of amount on account of salary, relocation and other related costs of expatriate employees - Held that:- Hon'ble Delhi High Court in the case of Centrica India Pvt. Ltd. Vs. CIT (2014 (5) TMI 154 - DELHI HIGH COURT ) as well as the decision of the co-ordinate bench of this Tribunal in the case of Foodworld Supermarkets Ltd. Vs. DCIT (2015 (11) TMI 271 - ITAT BANGALORE) is applicable to the facts of the case on hand. The decisions relied upon by the ld. AR are on the point of double deduction of tax at source under Section 192 and further under Section 195 of the Act whereas the issue in the case of the assessee is taxability of the income in the regular assessment and not in the proceedings under Section 201(1) & 201(1A) of the Act. Therefore the TDS deducted by the ITIPL would not change the nature of the payment and chargeability of the same to tax in India. In view of the above facts and circumstances, the decisions of the Hon'ble Delhi High Court as well as co-ordinate bench of this Tribunal, we do not find any error or illegality in the order of authorities below. Receipt on account of transfer of assets assessed as royalty - Held that:- Some of the assets are only power supply equipment of Vanguard and testers. Similarly the servers of IBM and HP are not assessee's own products for captive use but these are products available in the market. Therefore these used products transferred by the assessee to the subsidiary would not constitute transfer of any technology or know how or any other process to bring the same under the definition of royalty as per the provisions of section 9(1)(vii) or as per the provisions of Article XII of the DTAA. There is nothing in the transaction like transfer of any information – technical, industrial, commercialor scientific knowledge or use or right to use any industrial, commercial or scientific equipments but it is only the used assets / computer equipments were transferred by the assessee to ITIPL. It is not the case of the Assessing Officer that these equipments / servers have been specifically programmed by the assessee and not available in the market. Therefore in the facts and circumstances of the case, we are of the considered view that the action of the Assessing Officer in treating the payment as royalty is contrary to the facts as well as the provisions of the Act and the DTAA. Accordingly, we delete the addition made by the Assessing Officer on this count. Transfer of testing boards - Held that:- These testing boards are not the equipments developed by the assessee but these are third party products therefore there is no transfer of any right or right to use in respect of any process or technology know how along with these testing boards. Accordingly in view of our finding on the issue of receipt on transfer of other assets like servers the addition made by the Assessing Officer is deleted. Miscellaneous receipts - Held that:- We find that the Assessing Officer specifically asked the assessee to file the details of receipts in question. In response the assessee submitted that these are reimbursement of expenses. However there was no supporting evidence or complete details regarding the amount in question claimed as miscellaneous reimbursement of expenses. The assessee has not filed any details in support of the claim. In the absence of the requisite details or supportive evidence, we do not find any reason to interfere with the orders of the authorities below. Accordingly, this ground is dismissed.
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2016 (12) TMI 942
TPA - whether the Comparable Uncontrolled Price (CUP) method is the most appropriate method as compared to Transactional Net Margin Method (TNMM) - Held that:- The assessee bears lesser business risk than independent comparable enterprises due to the nature of its revenue model. It is beyond any doubt that the project receipts are from KMRCL which is a Government body and hence the margins earned by the assessee is bound to be comparatively lower to reflect the lower level of business risk involved. Moreover, the comparables selected for the analysis also include companies that performs additional functions while being engaged in providing comparable services. Further the risk profiles of independent companies differ from that of assessee. The impact of these functional and risk differences definitely require to be factored while determining the ALP. We find that in the interest of justice and fair play, we deem it fit and appropriate to set aside this issue to the file of the Learned TPO / AO with a direction to adopt CUP method as the Most Appropriate Method for determination of ALP for international transactions. The assessee is also directed to furnish the comparables based on independent TP study for adoption of CUP method and produce such other evidences and documents before the Learned TPO / AO to ensure quick disposal of this set aside proceedings. We also direct the Learned TPO / AO to permit the assessee to use multiple year data and adopt the weighted average data of the financial information of the comparables and use the same for determination of ALP of the international transactions of the assessee.
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2016 (12) TMI 941
Disallowance of expenses under the head "provision for development expenses" - Held that:- It is useful to note that the assessee has used the percentage completion method. When an assessee follows the percentage completion method then at the completion of the project, the assessee has to make up the accounts. At that relevant time, the assessee can offer surpluses from the provisions or may claim the deficit in case the actual expenditure is more than the provisions. Hence, the revenue is not without any remedy in case the provision is excessive. See Shree Salasar Overseas (Pvt.) Ltd. vs. ACIT [2014 (3) TMI 1055 - ITAT JAIPUR] - Decided in favour of assessee
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2016 (12) TMI 940
Levy of penalty u/s 271(1)(b) - non attendance of the assessee - Held that:- The facts emanating from the orders of the authorities below the assessee was given notice which was served on 11-01-2013 by which the assessee was requested to attend and submit the details on 15-01-2013. It was this non attendance of the assessee against which penalty u/s 271(1)(b) was levied. On 15-02-2013 a show cause letter was issued which was served on 18-02-2013 in response to which the assessee submitted a reply. Thereafter assessment order u/s 143(3) was passed. Now perusal of the facts clearly indicate that this was a case of search and seizure on a big group. Four days time to submit details in such a case is not at all reasonable from any stretch of imagination. Further more the assessee did reply to the subsequent show cause notice and assessment was framed u/s 143(3) of the I.T. Act. This has also to be looked into on the anvil of assessee's submission that the AO has refused the assessee recording of attendance on the specified date and for which the assessee has petitioned to higher authorities.In these circumstances, in our opinion, there was a reasonable cause for non attendance of the assessee. Hence on the anvil of section 273B penalty is not leviable. As the above fact clearly indicates it is a technical breach and in such circumstances, as held by Hon'ble Apex Court in the case of Hindustan Steel Ltd. vs. State of Orissa [1969 (8) TMI 31 - SUPREME Court] penalty need not be levied. Hence in the background of aforesaid discussion and precedent have no hesitation in deleting the levy of penalty. - Decided in favour of assessee
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2016 (12) TMI 939
Addition on foreign exchange gain - restatement of liability - contingent gain - Held that:- As has been pointed out by ld DR that once the utilization of borrowings are held to be on revenue account and mercantile system followed, then the resultant exchange gain or loss at the end of the year due to restatement of foreign currency loan would automatically take the revenue receipt/expenditure as the case may be. Accordingly, we allow the appeal filed by the Revenue on this issue. However, we find in the order of the ld CIT (A) that the assessee had incurred exchange loss for the assessment year 2005-06 but not claimed as deduction treating it notional in nature in line with the consistent stand taken by the assessee. In this regard, we deem it fit and appropriate in the interest of justice, to give direction to the Learned AO to grant deduction of exchange loss in the subsequent assessment years to be in consonance with our findings hereinabove. Otherwise, it would only result in Revenue trying to blow hot and cold simultaneously. Accordingly, the ground raised by the Revenue is allowed subject to the direction given above. Disallowance of interest on borrowings - Held that:- As the assessee company is engaged in the business of investment and finance, therefore the interest paid by the company on the amount borrowed for the purpose of business should be allowed as revenue expenditure under section 36(1) (iii)/ 37(1) of the Act. Thus it would be fair and proper to allow the interest expenses on loan as revenue expenditure. Accordingly, we allow the appeal filed by the assessee. Non-taxability of income from service fees - Held that:- CIT(A) pointed out that in case of put option it is contingent and based of future uncertain events, there is no transfer and there is no capital asset accruing to the assessee, therefore the consideration of put option is not a capital asset. Besides, we have already allowed in this appeal the interest on borrowed capital,( to acquire the fixed investments), as revenue in nature. Considering the above cited factual position, we dismiss the said ground of the assessee.
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2016 (12) TMI 938
TDS u/s 194J - non deducted TDS on payment made on account of VSAT charges/BOLT & Ethernet charges to Stock Exchange - Held that:- There is no requirement to deduct tax at source from the payments made to NSE/BSE towards VSAT charges and Lease line charges. See Centrum Broking Ltd Versus Asstt. Commissioner of Income Tax [2015 (6) TMI 751 - ITAT MUMBAI] - Decided in favour of assessee
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2016 (12) TMI 937
Denial of depreciation - non continuation of manufacturing activity of the company - Held that:- Assets have already entered into the block of assets, therefore, following the decision in the case of CIT Vs. G.R. Shipping (2009 (7) TMI 1169 - BOMBAY HIGH COURT ) hold that the assessee is entitled to depreciation on the plant and machinery which have entered into block of assets and are kept ready for use but not used during the year. It has also been held in various decisions that where the plant and machinery were kept ready for production, the assessee would be entitled to claim depreciation even though such plant and machinery were not actually put to use by the assessee during the year (CIT Vs. Nahar Exports Ltd. [2007 (5) TMI 171 - PUNJAB AND HARYANA HIGH COURT ] and CIT Vs. Shahbad Cooperative Sugar Mills Ltd. reported in [2011 (2) TMI 453 - PUNJAB AND HARYANA HIGH COURT ]). Also the submission of the Ld. Counsel for the assessee that the AO in the subsequent years has allowed depreciation on the plant and machinery could not be controverted by the Ld. Departmental Representative. - Decided in favour of assessee
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2016 (12) TMI 936
TPA - determining the arm’s length price of the international transactions - payment of royalty - Held that:- Payment of royalty by the assessee to its associated enterprise, Dow Netherlands @ 5% on domestic sales and 8% on export sales is liable to be considered as at an arm’s length rate in view of the Circular No.5 dated 21/7/2003. Therefore, the addition made by the Assessing Officer on this count is unsustainable. In the ultimate analysis, we uphold the action of the CIT(A) in deleting the addition, albeit, on a different ground.
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2016 (12) TMI 935
Penalty u/s 271(1)(c) - addition of TP adjustment - whether the acceptance of enhanced mark-up as decided by the ITAT leading to the addition can it be claimed in view of the deeming provision of Explanation 7 of section 271(1)(c), that the computation of price charged or paid by the assessee in the international transaction as defined in section 92B was computed in accordance with the provisions contained in section 92C in good faith and with due diligence? Held that:- In the absence of any argument on facts demonstrating that the computation in the TP study placed on record is in violation of the requirements of Section 92C of the Act and the said exercise was neither done in good faith nor with due diligence, the departmental action fails Nothing has been placed on record by the Revenue to show that the choice so exercised by the tax payer to accept the enhanced mark-up in the peculiar facts and circumstances of the case can constitute acts of suppressio veri or suppressio falsi lacking good faith and in violation of due diligence requirement. We find that all primary facts required to be disclosed have been found to be correctly made available in regard to the international transaction and the international transaction disclosed has been computed as per the provisions of section 92C in good faith and with due diligence. In view of the above detailed reasons on facts and law the impugned order is set aside and the penalty order is quashed. - Decided in favour of assessee
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Customs
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2016 (12) TMI 899
Levy of anti dumping duty (ADD) - Soda Ash - challenging the procedure undertaken by the designated authority - Jurisdiction of HC to writ entertain petition - the contention that entire exercise carried out by the designated authority is without taking into consideration that the domestic injury was operating under a protected regime - import from Peoples’ Republic of China, European Union, Kenya, Pakistan, Iran, Ukraine, USA - mid-term review - principles of natural justice - Held that: - the Supreme Court, in the facts of the said case, while vacating the interim relief, has held that the in the event of the Central Government forming an opinion to do so, all steps including the imposition of anti-dumping duty would be subject to the result of the petition pending before the High Court and that the High Court has the power to grant interim relief at any stage of the proceedings subject to a case in that regard being made out - the petitioners have been able to establish that the case falls within the well settled parameters for exercise of judicial review under Article 226 of the Constitution as discussed hereinabove. In that view of the matter, the contention that the petition ought not to be entertained as being premature, also does not merit acceptance. Grant of interim relief - Held that: - the interim relief as granted earlier cannot be continued as the same may result in the lapse of the statutory period and render the proceedings infructuous. That, however, does not mean that the petitioners are not entitled to any interim relief - the court is of the view that the interests of all the parties could be balanced if the Central Government is permitted to proceed further pursuant to the final findings, if it so deems fit. If the Central Government decides not to revoke the anti-dumping duty, the present petitions may not survive. However, in case a notification revoking the anti-dumping duty is published in the Official Gazette, the interests of the petitioners can be taken care of by providing that in such an eventuality, such notification shall not be acted upon till the final hearing of the petitions. This would also take care of the interests of the private respondents who have stated that their right to get refund of the duty paid during the interregnum would arise only upon a notification under rule 18 of the rules being published. The Central Government is permitted to proceed further pursuant to the final findings submitted by the designated authority. However, in case, pursuant to the impugned final findings recorded by the designated authority, the Central Government publishes a notification in the Official Gazette under rule 18 of the rules, the same shall not be acted upon till the final disposal of these petitions.
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2016 (12) TMI 898
Classification of imported goods - two tunnel boring machines - since they were of huge dimensions, the same were dismantled in convenient assemblies to suit the manner of packing of handling and packing for transporting to India, hence they were imported in knocked down condition in two consignments - revenue is of claim that what was imported was parts and components of second hand machine, which require special licence - whether the goods which were imported were machinery in knocked down condition or the parts and components of machinery? Held that: - revenue has not adduced any additional evidence in respect of the consignment imported in order to come to a different conclusion - the first appellate authority has made out a finding that As per the respondents what has been imported is two set of second hand tunnel boring machine/equipment in knocked down conditions, most of which are allowed under O.G.L, and for eight second hand diesel locomotives they have produce & specific import licence no.0350000151/3/00/01, dated 17.10.2002, which was assessed on merit under Bill of Entry No. 724487/08.03.02. The same is not a point of dispute. It is not the case in appeal that Tunneling & boring machines are not capital goods. For the goods which are not capital goods i.e, diesel locomotives, the respondents have already submitted licence at the time of clearance. Hence the said contention of the Deptt. is not correct Accordingly, I do not find any reason to interfere with the order of the lower authority, and the appeal stands rejected. Appeal rejected - decided against Revenue.
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2016 (12) TMI 897
Valuation of imported goods - Speakers of Kenwood make of different wattage, Dual Cone Speakers of Pioneer make, Dual Cone Speakers of Sony make, Stereo Power Amplifier of Sony make, Hella - Halogen Map lamp made in Germany, Carino Air Freshner liquid type made in Japan, Auto Lighters made in Japan - the appellant already accepted the enhancement of the value in the first assessment after examination, again the value was proposed to be enhanced further - is the second time enhancement of value justified? - Held that: - A mere perusal of the description of goods which are supposed to be contained in the consignment, indicates that few items are having no brand and some are made in Japan and Germany and imported from supplier who was a trader. The declared value of the appellant which is claimed as transaction value was rejected and the value was enhanced by the assessing officer. Appellant accepted the enhanced value and discharged the customs duty as per the enhanced value. On the perusal of the consignment details, we find that the case of the main appellant needs to be accepted as the speakers and other spares of car audio accessories did indicate that consignment is of mixed lot. Since the appellant has already accepted the enhancement of the value in the first assessment after examination, we do not find any reason to further enhance the value as has been held by the adjudicating authority. Reliance placed on the case of Eicher Tractors Ltd. [2000 (11) TMI 139 - SUPREME COURT OF INDIA] wherein the apex court has specifically stated the price list of the foreign supplier manufacturer is not a proof of the manufacturing value and existence of the price list cannot be the sole reason for rejecting the transaction value. In the case in hand, revenue’s contest on the value of the goods which are imported in the consignment is not based on the finding that these were mixed lot and manufactured by different manufacturers. Impugned order is set aside and the appeal is allowed upholding the value which has been accepted for assessment and discharge of duty in the first instance - decided partly in favor of assessee.
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2016 (12) TMI 896
Indian currency - smuggling - carrying of Indian currency within Indian Territory, whether an offence or not - absolute confiscation of currency with imposition of penalty - Whether absolute confiscation of ₹ 59,41,550/- Indian currency has been correctly made by the Adjudicating authority under Sec 113 of the Customs Act 1962, by rejecting the claim of the appellant? - Held that: - As Indian currency has not been notified as specified goods under Sec 11 H (e) or notified under Sec 123 of the Customs Act 1962, it cannot be said that bringing of goods into a specified area are liable to confiscation - There is no evidence on record at all in the show cause notice as well as in the Adjudicating order as to how seized currency is liable to confiscation under Sec 113 of the Customs Act 1962. No subsection of Sec 113 has been specified in the show cause notice under which Indian currency seized is charged to be liable to confiscation. Under the circumstances confiscation of seized India currency is not justified and order to that extent passed by the Adjudicating authority is liable to be set aside. Ownership claim of appellant - appellant has claimed the ownership of seized Indian currency, though belatedly, alongwith the source of licit acquisition of the same - Held that: - In the light of legal proposition of law & absence of any other claimant it is held that appellant is the rightful owner of the seized Indian currency. There is no evidence on record that seized currency was meant to be exported out of India - It is not established by the department that documents produced by appellant are forged & fabricated when the persons giving these evidences have confirmed the authentically of the documents by giving Sec 108 statements before the investigation. Further, there is no evidence on record that seized Indian currency was attempted to be exported out of India by the appellant. Accordingly absolute confiscation of the seized currency of ₹ 59, 41,550/ is set aside and is ordered to be released to the appellant. Imposition of penalty u/s 114 AA of the Customs Act 1962 - Held that: - there is no evidence of forged nature of documents produced by the appellant except the analysis made by the Adjudicating authority. Customs Act 1962 is not an enactment to penalise a person for forgery, if any. Secondly, it is already held above that claim of the appellant was not false in the absence of any other claimant - also found that allegation of forging of documents was not at all made in the show cause notice and Adjudicating authority has gone beyond the scope of show cause notice - penalty set aside. Appeal allowed - decided in favor of appellant.
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2016 (12) TMI 895
Imposition of penalty u/s 112 - appellant was carrying out the delivery of courier packages without any legal permission from the Customs to act as handler and also he was suspected to deliver the goods at the location which did not conform to the address mentioned in the importing firms - offending goods were confiscated while courier packages were in customs custody. Held that: - Considering that the packages in question were not ripe for delivery at the stage of seizure, such a finding appears to be without any basis. It is also said that the appellant acted as a service provider or a business aid/business associate for other courier; such outsourcing a portion of the business of courier does not fall within the ambit of Courier (Import & Export) Clearance Regulations 1998 which places the entire responsibility for clearance, as well as delivery upon the courier. For the above reasons I find no merit in the impugned order and set aside the penalty imposed on the appellant - appeal allowed - decided in favor of appellant.
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2016 (12) TMI 894
Recovery of 4879.90 gms of gold jewellery concealed in 'metal sheet design cutting die' and 'bottle hydraulic jack' which was confiscated - the courier company failed to maintain due diligence and violated regulation 13(a),(c) of Courier (Imports and Exports) Clearance Regulations, 1988 - Held that: - It is observed that the beneficiaries of the illicit import of gold jewellery are the shipper and the consignee. Courier companies typically book packages which are then transported to the destination airport where the local associate of overseas courier completes customs formalities and undertakes delivery of the consignments. Failure to deliver at the correct address is can, at least, be a dispute of civil nature between the shipper and the courier company. The appellant is a local associate of the overseas courier company; there is no client in India nor is any payment received from the consignee. The duty liability, if any, is also discharged before the courier packages are removed from the custody of the Customs. The utilisation of a sub-contractor for undertaking local delivery is a business decision which is beyond the scope of Courier (Imports and Exports) Clearance Regulations. In the present instance the goods were still under Customs custody when the investigation was conducted and there is no scope for an allegation that the appellant had, at any stage, abetted in the import of the contravening goods. For the above reason the impugned order has failed to discharge its obligation to render a finding with sufficient evidence. Appeal allowed - penalty set aside - decided in favor of appellant.
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2016 (12) TMI 893
Imposition of penalty u/s Sec 114 (i) of the Customs Act 1962 - violation of provisions of Sec 113 - It is the case of the appellant that his client has not done any of the irregularities mentioned in Sec 113 of the Customs Act 1962 to invite confiscation & penalty. That his client is also not the abettor for imposing penalty under Sec 114 (i) of the Customs Act 1962 and also that appellant has been charged as on exporter. Held that: - Relied upon case law of Apex Court CC Lucknow Vs G.P. Jaiswal [2015 (4) TMI 279 - SUPREME COURT] was decided by the Apex Court where issue was overinvoicing of goods. In this context Apex Court observed that a person supervising stuffing of goods may not be aware of over invoicing of goods. Observations of Apex Court also clearly convey that knowledge of the wrong deeds should exist before a person can be visited with penalty - In the present case, appellant had clear knowledge of prohibited nature of Red Sanders Wood for export but continued to assist the unknown exporters till the dispatch of containers out of India. Penalty is imposable upon the appellant u/s 114(i) of the Customs Act 1962. However in the interest of justice penalty of ₹ 10 lakh imposed upon the appellant is reduced to ₹ 5 lakh as the value of contraband Red Sanders Wood has been assessed at ₹ 27.12 lakh. Appeal disposed off - decided partly in favor of appellant.
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2016 (12) TMI 892
Confiscation - fine and penalty - Validity of licence to export goods - Held that: - I find that the ITC HS Policy was amended on 06.02.2015, Providing for obtaining the licence for importation of the subject goods. It is an admitted fact that both the Customs Department and the importers were in doubt regarding importation of goods under a valid licence. Thus, Malafides cannot be attributed in the case of the present appellant, However, since the goods were imported improperly, the same are liable for confiscation as per the mandates of the Customs Statute - penalty rightly imposed - However, considering the gravity of the case, the quantum of fine and penalty reduced in the interest of justice. Therefore, the impugned order is modified to the extent of reducing the quantum of redemption fine to ₹ 20,000/- and penalty to ₹ 10,000/- Appeal disposed off - decided partly in favor of appellant.
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2016 (12) TMI 891
Imposition of penalty u/s 112 of the Customs Act, 1962 - carrying of foreign marked gold biscuits - Held that: - A penalty of ₹ 2.5 lakhs has been imposed upon the appellant under Section 112 of the Customs Act, 1962 for carrying foreign marked gold biscuits. During interception on 27.12.2006 appellant could not produce any receipt/document showing legal acquisition of such gold of foreign origin. As per section 123 of the Customs Act, 1962 onus was on the appellant to establish legal acquisition of foreign marked gold. In his statements recorded on 27.12.2006 and 28.12.2006 appellant admitted that he was carrying gold of foreign origin from Imphal and had the knowledge of its foreign origin. It is also observed from his reply to the show cause notice that said gold of foreign origin was carried in a concealed manner. Further appellant is a repeated offender and has earlier been penalized for smuggling of gold which has also been upheld by the Apex Court in the earlier proceedings. Based on the above observations appellant does not have a case for waiver of penalty which is correctly imposed under Section 112 of the Customs Act, 1962. Appeal filed by the appellant is required to be dismissed - appeal dismissed - decided against appellant.
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2016 (12) TMI 890
Time bar - Regulation 22(1) of CHALR, 2004 - The law prescribes that within 90 days of receipt of the offence report, the jurisdictional authority has to issue show cause notice - Held that: - The time limit prescribed by law is mandatory and the appellant is not permitted to suffer in view of the decisions of the Tribunal. It may be appreciated that the Hon’ble High Court of Madras in the case of Saro International Freight Systems Vs. Commissioner of Customs, Chennai [2015 (12) TMI 1432 - MADRAS HIGH COURT], held that the impugned show cause notice issued by the respondent is without jurisdiction, as it has been issued beyond the period prescribed in the regulations, which have statutory force and hence, not sustainable. In view of the fragrant violation of the provision of the law, the impugned order is liable to be set aside - appeal allowed.
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2016 (12) TMI 889
Time bar - Regulation 22(1) of CHALR, 2004 - The law prescribes that within 90 days of receipt of the offence report, the jurisdictional authority has to issue show cause notice - Held that: - The time limit prescribed by law is mandatory and the appellant is not permitted to suffer in view of the decisions of the Tribunal. It may be appreciated that the Hon’ble High Court of Madras in the case of Saro International Freight Systems Vs. Commissioner of Customs, Chennai [2015 (12) TMI 1432 - MADRAS HIGH COURT], held that the impugned show cause notice issued by the respondent is without jurisdiction, as it has been issued beyond the period prescribed in the regulations, which have statutory force and hence, not sustainable. In view of the fragrant violation of the provision of the law, the impugned order is liable to be set aside - appeal allowed.
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2016 (12) TMI 888
Pre-deposit - smuggling racket - opportunity of being heard not provided - Held that: - We have passed above order being guided by the ratio of the Apex Court in the case of Benera Valves Ltd. Vs. Commr. of Central Excise [2006 (11) TMI 6 - SUPREME COURT OF INDIA] and also appreciating that Revenue deserves protection. We expect that no undue hardship shall be caused to appellants by this order when gravity of the matter as above is looked into - Compliance is directed for 6th of October, 2016.
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2016 (12) TMI 887
Confiscation - Determination of DEPB credit - Held that: - It would appear that the goods were not available for confiscation at the time of availability of the impugned order. The appellant had already remitted the redemption fine and penalties before export of the goods. Impliedly the goods were allowed to be exported by the proper officer after having complied with the terms of the impugned order. The actual date of receipt of the impugned order by the appellant, relevant only for determining the maintainability of the appeal, is not germane to the present proceedings. Had the goods not been in the custody of the customs authorities, the appellant would not have exercised the option to redeem them on payment of fine. Therefore, there is no miscarriage of justice in confiscating the offending goods - Penalty is imposed as a deterrent to prevent mis-declaration of this nature in future. Considering those circumstances and the value of the goods there is no reason to interfere with the impugned order - appeal dismissed - decided against appellant.
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Corporate Laws
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2016 (12) TMI 882
Reconstruction in nature of ‘Slump Sale’ and amalgamation of the Residual Undertaking - Held that:- Considering the above facts and circumstances and taking into account all the contentions raised by the affidavits and reply affidavits, and the undertakings provided vide the additional affidavit dated 14th December 2016, and submissions made at the time of hearing, this Court is satisfied that the observations made by the Regional Director, Ministry of Corporate Affairs, have been satisfactorily addressed. Hence, they no longer survive. This Court is of the view that the present Scheme of Arrangement appears to be in the interest of its shareholders and creditors as well as in the public interest. It, therefore, deserves to be sanctioned. Considering the above, the Scheme is hereby sanctioned.
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Service Tax
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2016 (12) TMI 934
ROM filed by assessee - typographical error - error rectified. ROM filed by Revenue - reversal of final order on the question of revenue neutrality - Held that: - the error which is sought to be rectified is not an error apparent on the face of the records. The arguments put forth by the learned Commissioner needs elaborate discussion which is not the mandate of the provisions of Section 35C of the Central Excise Act, 1944, for rectification of mistake in the orders - no merit in application filed by Revenue, dismissed.
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2016 (12) TMI 933
Classification of services - activity of Data Processing - fall under the head Management Consultancy Services or under the head Business Auxiliary Service - scope of SCN - Held that: - we find that the show cause notice was issued to demand the service tax under the category of Management Consultancy service, therefore, the scope of the show cause notice on this point. In the impugned order, the learned Commissioner (Appeals) opined beyond the scope of show cause notice. The activity of the appellant falls under the category of BAS as it is not allege in the show cause notice to demand the service tax under the category of BAS the demand of service tax cannot be confirmed against the appellant under the said category - appeal allowed - decided in favor of appellant-assessee.
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2016 (12) TMI 932
Mandap keeper service - appellant provided temporary occupation of their etc. and catering services to their members for a consideration on the occasion of official, social or business functions exclusively hosted by their members - Held that: - The primary condition for the services to be termed as “Mandap Keeper” services as per the definition of “Mandap Keeper” in section 56(90) of the Act is the existence of a client which is absent in the instant case. Mutuality of interest exists between the appellant and their members and no commercial transaction takes place while temporarily providing property to their members or their guests, as the property belongs to the members collectively who formed the club to serve them mutually which acts as their agent. The members pay for use of the property and the receipt and expenditure of the club is incurred by the members alone and not by any third person - the appellant were not rendering taxable services of “Mandap Keeper” in terms of the section 65 of the Act at the material time and therefore, cannot be charged to service tax - appeal dismissed - decided against Revenue.
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2016 (12) TMI 931
Imposition of penalty - section 80 of the act - Held that: - we find that in fact the issue on merits is also no more res integra and stands decided by the Hon’ble Supreme Court's decision in the case of CCE Kerala Vs. Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] laying down that works contract were not taxable prior to 1.6.2007. The fact of settling the issue at the apex Court level itself reflects upon the fact that the issue was not clear and attained finality only recently. The appellant having not contested the service tax liability and having deposited the same even prior to the issuance of the show cause notice, we are of the view that invocation of Section 80 of the Finance Act by Commissioner was justified - appeal rejected - decided against Revenue.
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2016 (12) TMI 930
Waiver of penalty u/s 80 - Banking and Financial services received from the banks located outside India in relation to External Commercial Borrowings (ECB) - Held that: - The appellant has paid the entire liability of service tax along with interest before the receipt of Show Cause Notice though in this regard a small amount of ₹ 24,732/- along with interest was paid by the appellant on 14.09.2010, for which the reason cited is the different rates of service tax as taken into account for calculation of tax liability for certain period. Further, the Department has not given any evidence that there were any mala fides regarding non-payment of service tax on the part of the appellant. The appellant also cites the provisions of Section 80 of the Finance Act, 1994 stating that there was reasonable cause for non-payment of service tax in the matter. The facts of the present case are similar to the Tribunal’s decision in the case of Bharat Forge Ltd. Vs. CCE, Pune [2016 (1) TMI 260 - CESTAT MUMBAI], wherein it was held that The prompt payment of service tax even before the issue of show cause notice shows the genuineness of the appellant. It is a case of bonafide belief of the appellant that service tax was not payable. Even the interest was paid soon after the passing of the adjudication order. Most importantly, it is seen that whatever tax is paid by the appellant is available to them as Cenvat credit. In such a situation, being a big company, we are of the view that the appellant had no intention to avoid payment of service tax which would have been available to them as Cenvat credit and non payment would not result in any financial benefit. The appellant has given the plea of revenue neutrality also saying that no mens rea or mala fide on their part, therefore no penalty is imposable on them. The penalty imposed under Section 78 of the Act is hereby set aside. The impugned order is modified to the above extent - decided partly in favor of assessee.
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2016 (12) TMI 929
Classification of service - examination of the garments at various stages - Business Support Services or technical inspection and certification - Held that: - Here the appellant is randomly examining the garments at various stages like fabric stage, stitching stage and packing stage, but they are not giving any kind of certification with respect to pre determined standards / characteristics or parameters. When the outcome of the examination / inspection carried out does not result into some certification, the subject services cannot be covered by the services under the category of “technical inspection and certification”. Further, the department has failed to indicate any standards or characteristics or parameters relying on which, if any, certification is being issued by the appellant. The appellant is only giving reports along with their recommendations after making examination of the garments at various stages. So these reports and recommendations which are the outcomes of services rendered by the appellant do not lead to any certification and cannot be covered by the technical inspection and certification services covered under section 65(108) of the Finance Act 1994. Appeal allowed - demand set aside - decided in favor of appellant-assessee.
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2016 (12) TMI 928
Maintainability of appeal - forum to file appeal - whether the appeal lies before this Tribunal or Revision Application is to be filed before the Revisionary Authority under Section 35EE of Central Excise Act, 1944? - Held that: - similar issue decided in the case of Vodafone Mobile Services [2016 (12) TMI 913 - CESTAT MUMBAI], wherein it was decided that the appeals involve rebate of service tax paid on export of service and therefore the appeal lies before this Tribunal in terms of second proviso to Section 86 of the Finance Act, 1994 - appeal maintainable.
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2016 (12) TMI 927
Refund claim - Business Auxiliary Service - refund claimed of the amount paid twice, due to non-receipt of challans - whether refund claim justified? - Held that:- the circumstances under which the accountant made double payment erroneously is not doubted. This is an human error and the appellant should not be put to unending harassment and difficulty for no fault on his part. I also find from the records that the appellant had approached the Service Tax authorities on 29/12/2009 by filing a refund claim. At this stage, it is the authorities who could have guided him to treat the excess payment as advance payment towards the liability of the subsequent month/quarter which is allowed regularly by the Department on an intimation being filed by the assesse. Since much time has elapsed and this option is not now available to the appellant assesse, the only option left is to refund the excess amount lying with the Department - matter remanded to the adjudicating authority to grant refund of the excess amount of ₹ 1,54,540/- lying with the Department by virtue of double payment by the appellant.
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2016 (12) TMI 926
Imposition of penalty - Commercial Training or Coaching Services - service were brought under the service tax net w.e.f. 1/7/2003 - period of dispute is 1/7/2003 to 31/3/2004 - whether penalty is imposable when the amount of service tax and interest was paid much before the issuance of show cause notice and whether show cause notice can be issued when the details of payment of amount of service tax and interest was intimated to the Jurisdictional Superintendent in view of Section 73 (3) of the Finance Act, 1994 - Held that: - Commercial Training or Coaching services were brought under the service tax net w.e.f. 1/7/2003 only. I find that the appellant got himself registered and started making statutory compliances by depositing the taxes and filing the ST-3 Returns. The only issue in dispute was regarding the amount of fees collected/received for the period prior to 1st July, 2003 for which services were to be provided at a later date. The said advance fees were collected prior to 01/07/2003. It is seen that initially, there was a Board’s circular to the effect that such collection of fees prior to 01/07/2003, though for the services to be rendered after the said date would not get included in the value of the services. Subsequently, the Board issued another circular dated 05/11/2003, clarifying that since services were provided after 01/07/2003, any amount collected towards such service before the said date would be leviable to service tax. It appears that the appellant did not make any attempt to evade payment of service tax. The said services were made leviable to tax w.e.f. 01/07/2003 and such collection of fees amount at the start of the year, when the services were not taxable, cannot effect upon any malafide on the part of the appellant - issues being purely interpretative in nature with no malafides, penalty is set aside - appeal allowed - decided in favor of appellant.
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Central Excise
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2016 (12) TMI 925
Condonation of delay - Whether on the facts and in the circumstances of the case, CESTAT was justified in rejecting the application preferred on behalf of the appellant for condonation of delay and consequently, dismissing the appeal as barred by limitation? Held that: - It is settled law that when the substantial justice and technical considerations are pitted against each other, the cause of substantial justice has to be preferred. As laid down by the Hon'ble Supreme Court in “Collector, Land Acquisition, Anantnag & Anr. vs. Mst. Katiji & Ors.”,[1987 (2) TMI 61 - SUPREME Court], the court should adopt liberal approach in the matter of condonation of delay. The appellant had furnished the explanation that some time was spent in obtaining legal opinion from the Chartered Accountant, which was supported by various communications available on official record - Thus, the explanation furnished on behalf of the appellant explaining the delay in filing the appeal remains uncontroverted, which cannot be said to be unsatisfactory. The delay in filing the appeal stands sufficiently explained by the appellant and thus, CESTAT has erred in refusing to condone the delay and dismissing the appeal as barred by limitation - appeal allowed - delay condoned - decided in favor of appellant.
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2016 (12) TMI 924
Recovery - shortage of stock - Held that: - it is seen that appellant had been procuring scrap from the local market. There is an admission of stock shortage as well as correctness of stock ascertainment by estimate in most of the types of goods manufactured. The circular no.52/79-CX6 dated 26th October 1979 referred to provides for tolerance of shortage in the normal course of ascertainment during annual stock-taking; here, the shortage was not denied at the time of check in the course of investigation. Reliance placed on the decision of the case of Goyal Ispat Ltd v. CESTAT, Chennai [2015 (3) TMI 866 - MADRAS HIGH COURT], where it was held that the non-recording of the correct quantity of goods in the statutory record, viz., RG.1 register maintained by the assessee establishes the case for demand of duty, more so in a case of statement accepting Central Excise violation. Demand sustained - appeal dismissed - decided against appellant.
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2016 (12) TMI 923
Liability of interest - there is no net short fall in payment of duty after adjusting the excess payment of duty paid on the other products - Held that: - I find that the matter has been squarely covered by the ratio laid down by Hon’ble Karnataka in the case of Toyota Kirloskar Auto Parts Pvt. Ltd. [2011 (10) TMI 201 - KARNATAKA HIGH COURT], where it was held that after the final assessment order is passed if the duty paid in the entire scheme of Rule 7, there is no indication that when an asseseee is permitted to pay duty in pursuance of a provisional assessment order, if he is dealing with more than one goods, such assessee has to be treated separately. When there is no short fall in payment of duty after adjusting excess payment on other products, interest liability will not arise. In the circumstances, appeal is allowed in toto - decided in favor of assessee.
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2016 (12) TMI 922
Cenvat credit - Penalty - amount which was paid in excess on removal of inputs as such under Rule 57F(3) of Central Excise Rules, 1944 - Held that: - it is very clear that the show cause notice can be issued only in respect of duty short-paid or not paid - This is not a case where there is any short-payment or non-payment of duty. Therefore, excess paid duty cannot be again recovered under the provisions of Section 11A - Appeal allowed - decided in favor of the assessee.
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2016 (12) TMI 921
Imposition of penalty - shortage of stock - 95MTs of MS scrap found short on physical verification of their factory stock - clandestine removal - Held that: - reliance placed on the decision of the case of Goyal Ispat v. CESTAT, Chennai [2015 (3) TMI 866 - MADRAS HIGH COURT], where it was held that the order of the Tribunal is not on the basis of visual inspection, but based on mahazar records recording the shortage of goods, which has been done in the presence of the independent witnesses and such shortage was supported by the unretracted statement of Mr. Balaji, Manager of the assessee company. In this view of the matter, the non-recording of the correct quantity of goods in the statutory record, viz., RG.1 register maintained by the assessee establishes the case for demand of duty, more so in a case of statement accepting Central Excise violation - appeal dismissed - decided against appellant.
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2016 (12) TMI 920
Sanctioned rebate claim to be reversed - recovery - export of goods under Rule 18 of Central Excise Rules - Held that: - the realization of export proceeds is governed by the Foreign Exchange Management Act, 1999, whereas the rebate of duty on goods which are exported is governed by the provisions of Central Excise Act and Rules thereunder. In the present case, the goods have been exported under bond and the bond stands discharged on production of proof of export. The fact that the export proceeds have not been received is a development subsequent to the export and cannot be the condition for recovery of duty. In particular, it is noted that the goods exported have not been re-imported back into India. There is also no allegation of any deviation of the export goods. Under these circumstances, there is no justification for demand of duty applicable on the goods which stands exported - appeal allowed - decided in favor of appellant.
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2016 (12) TMI 919
Classification - Whether the machine named as computerized pattern maker manufactured by the appellant is computerized or mechanical? - Use of software in the machine - principles of natural justice - Exemption from payment of duty under Notification No.-6/2002 dated 01.03.2002 - Held that: - we are of the view that the appellant has not been allowed cross examination of the persons whose statements/opinions were relied upon to sustain the charges made in the respective Show Cause Notices. The said denial of cross examination is violation of the principles of natural justice. The Hon’ble Supreme Court in the case of Andaman Timber Industries vs. CCE [2015 (10) TMI 442 - SUPREME COURT] on this issue has observed that, According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. - Matter remanded back.
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2016 (12) TMI 918
Cement - clandestine removal - Held that: - We find that there are enough corroborative evidences on record sustaining the charges of clandestine removal against the appellants. These corroborative evidences can be cited as follows :- (i)Cash Books resumed; (ii)Parallel invoices resumed; (iii)Weighment slips resumed; (iv)Registers of parties resumed. We find that findings given in the impugned order are based on clear cut evidences and, therefore, there is no scope of interference with the findings given in the impugned order - impugned order upheld. Appeal dismissed - demand sustained - decided against appellant-assessee.
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2016 (12) TMI 917
Clandestine production - balance sheet does not match with the electricity consumption. Further, there is recovery of certain parallel invoices and production slips - Held that: - we are in agreement with the findings given in the impugned order passed by the Commissioner (Appeals), which are on based on the ratio laid down by Supreme Court in the cases of Oudh Sugar Mills Ltd. [1962 (3) TMI 75 - SUPREME COURT OF INDIA], where it was held that Not because an error due to carelessness in maintaining the registers properly as required by Rule 83 does not amount to a contravention of that rule; the only reason why we mention this is that in a factory where the turnover of sugar is so considerable and the operations conducted in which the human element plays a significant part it would not be right to base calculations on the surmise that over filling of the tanks was being practised systematically. No doubt, during the test, the tanks were slightly over filled on nine out of ten occasions as pointed out by the Assistant Chemical Examiner. But this could be attributed to a slight failure of the human element resulting from the fact that a special operation was being conducted by the operators in the presence of a Government official. We would, however, make it clear that these observations are just incidental and are not the basis of our decision. Appeal dismissed - decided against Department.
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2016 (12) TMI 916
CENVAT credit - availing fraudulent credit by issuing CENVATable invoices without delivery of goods - clandestine removal - Held that: - One important aspect that has to be looked into is that when department alleges that no raw material was supplied by KMC and AAL to M/s. BDCPL and that only invoices were issued, the department has to prove how M/s. BDCPL could manufacture finished products on which they have paid excise duty during the relevant period. On conduct of inspection the stocks and statutory register of M/s. BDCPL did not show any discrepancy. In the absence of any evidence that M/s. BDCPL has procured raw material from any other source other than KMC/ AAL, and used the same to manufacture finished products, the allegation that KMC/AAL did not supply any goods but only issued invoices is not tenable. It is also to be noted that the Commissioner(Appeals) in the case of M/s. Khaitan Electrical Ltd., and KMC vide Order-in-Appeal No. 99/2009 dated 04.12.2009 and vide another Order-in-Appeal No. 26,27 and 28/2010 dated 26.02.2010 has set aside the demand interest and penalty raised against M/s. Prism Airtech and in the same order also set aside the penalty imposed against KMC who was a co-noticee - it was found that the overall evidences were similar in all the appeals. I am of the view, that department has failed to establish that appellants are guilty of indulging in activities of fraudulent availment of CENVAT credit as alleged in the notices, as the overall evidences were similar - appeal allowed - decided against Department.
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2016 (12) TMI 915
Cenvat Credit -Whether the respondent assessee is entitled to Cenvat credit on sales promotion expenses incurred by them during the period 2009-10 to 2013-14? - extended period of limitation - Held that: - it is evident that there can be no removal of the final products unless the assessee has sales orders in their hands. Thus, I hold that the sales commission/sales promotion expenses incurred by the appellant is expenditure or input service incurred or received prior to the removal of their final product. Accordingly, the said expenditure is allowable as an input service. Accordingly, I also hold in view of the sales promotion expenses duly recorded in the Books of Accounts maintained in the ordinary course of business, as found by the Revenue, the extended period of limitation is not applicable. Appeal dismissed - decided against Revenue-appellant.
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2016 (12) TMI 914
Whether they are entitled to Cenvat credit on the cement used in the foundation of machineries erected which have been further used for manufacture of taxable or dutiable products? - reliance placed in the case of Union of India Versus Hindustan Zinc Limited [2007 (8) TMI 127 - HIGH COURT, RAJASTHAN] by ld. Commissioner (Appeals), where it was held that Revenue plea that the cement being a building material used the purpose of building construction can’t be said as input used for manufacturing of final product and that no Cenvat credit is available so far as cement as concerned - Held that: - I find that the ld. Commissioner (Appeals) have erred in relying on the ruling of Hon’ble Rajasthan High Court in the case of Union of India Versus Hindustan Zinc Limited as the said ruling was in respect of Cenvat Credit Rules, 2002 which have been replaced by Cenvat Credit Rules, 2004. Under the new rules the scope of input have been enlarged. That Cement and Iron & Steel used in supporting structure for erection of plant & machinery are eligible as inputs. It is further held that inputs are not necessarily to be used in the manufacture of final products. An input may be used even in relation to manufacture of final product. In the facts and circumstances of this case, cement has been admittedly used in the erection of capital goods, being machinery, without which manufacture of dutiable goods is not possible. Accordingly, both the appeals are allowed with consequential benefits, if any, in accordance with law. The impugned orders are set aside - appeal allowed - decided in favor of appellant-assessee.
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2016 (12) TMI 912
Whether the respondent assessee is entitled to Cenvat credit on capital goods received, prior to 25/12/2005, when the trial production was started and thereafter commercial production started from 04/01/2006? - Held that: - I find that in the facts of the present case, it is an admitted fact that the Asbestos Cement Sheets, for which the respondent assessee registered with Revenue, falling under Chapter Heading No.68114010 of Central Excise Tariff Act, 1985 is dutiable. The appellant had only availed a conditional exemption for a short period which under the facts had been applied for and availed subsequent to the receipt of capital goods. Even, on the basis of Larger Bench of this Tribunal, in the case of Spenta International Ltd.[2007 (8) TMI 25 - CESTAT, MUMBAI], the products of the appellant, being Asbestos Cement Sheets was taxable under Chapter Heading No.68114010 of Central Excise Tariff Act, 1985. Accordingly, the credit eligibility is determined in favor of respondent with reference to the dutiability of final product on the date of receipt of capital goods. I also placed reliance on the decision of Superior Judicial Forum of this Tribunal, West Zonal Bench, Ahmedabad in the case of Commissioner of Central Excise Versus Gujarat Propack [2008 (9) TMI 170 - GUJARAT HIGH COURT], wherein the capital goods received for manufacture of Granules out of waste arising in manufacture in assessee's unit, which was cleared under exemption. Since as per the assessee s claim, they were not of requisite quality, gradually assessee refined manufacturing process to obtain Granules of requisite quality and most of which quantity is used in the manufacture of film. There was no intention to produce Granules to be cleared on exemption, but to produce Granules for use in the manufacture of film. But in the trial period they could not produce Granules of requisite quality and had to clear them under exemption and that the use of the machine is to be seen with regard to its working life and not utilization in a short specific period. Appeal dismissed - decided against Revenue.
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2016 (12) TMI 911
Demand - 100% EOU - manufacture of pharmaceutical medicines - clean room panels - Held that: - We note that the duty free procurement of these items have been approved by the Development Commissioner who in his LoP dated 28.04.2006 elaborately listed these items for concession. When the competent authority approved these items for concession denial of the same is not correct. The Tribunal in Ginni International Limited vs. CCE, Jaipur [2001 (9) TMI 165 - CEGAT, COURT NO. IV, NEW DELHI] held that the Revenue cannot go beyond the permission granted by the competent authority administering the Foreign Trade Policy - appeal allowed - decided in favor of appellant-assessee.
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2016 (12) TMI 910
Period of limitation - Held that: - when the appellant is an independent person(notice) in case, how the order served on some other person can be treated as service of order to the appellant - We fail to understand when the appellant is an independent person(notice) in case, how the order served on some other person can be treated as service of order to the appellant - appeal allowed by way of remand.
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2016 (12) TMI 909
Manufacture - bought-out items like tubings, FRP Rods, Adhesive, Mastic tapes etc. are cleared as insulating fittings under sub-heading 8547.00 - period involved in the present case is July 2003 to March 2004 - whether the activity of bought out items cleared as cable jointing kits is a manufactured goods, and if not whether the Cenvat Credit on the bought out items is admissible for non manufacturing activity? - Held that: - On the plain reading of Rule 16 of the Central Excise Rules, it can be seen that on the bought-out items credit can be availed and if the activity is not amount to manufacture on the clearance of the same duty is required to be paid equal to the cenvat credit availed on such bought out items. In view of the above Rule even though if it is admitted that the activity of the appellants is not amount to manufacture, as regard the clearance of cable jointing kits the cenvat credit availed by the appellants is not incorrect - In view of the provisions of Rule 16 of the Rule, in our considered view the appellant’s act of availing the Cenvat Credit in respect of bought out items i.e. Cable Jointing Kits is clearly admissible. The impugned order is set aside - appeal allowed - decided in favor of appellant.
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2016 (12) TMI 908
Valuation - rejection of transaction value - related party transaction - interconnected undertaking - Section 4 of the Central Excise Act - Held that: - From rule 9 it is very clear that only in cases where goods are sold through the person as specified under clause (ii), (iii) or (iv) of clause (b) of Section 4 the transaction value at which the goods are sold by the said person shall apply and not the sale price at which goods are sold to these three category of person are made. Provision of rule 9 also suggests that merely because buyer is interconnected undertaking that alone is not sufficient for holding as related person. The show cause notice or original order have not brought any material to establish that the relationship between respondent and buyers company are one of the relationship as prescribed under sub clause (ii), (iii) or (iv) of Section 4(3)(b) of Central Excise Act therefore in our considered view even if it is accepted that the buyers company are interconnected undertaking of the appellant company it can not be treated as related person in terms of Section 4(3)(b). In absence of relationship as specified under sub clause (ii), (iii) or (iv) of Section 4 (3) (b). In this position, the transaction value of the goods between respondent and the so called interconnected undertaking is correct valuation and the same can not be disturbed, therefore value as provided under Rule 8 is not applicable in the present case - appeal rejected - decided against Revenue.
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2016 (12) TMI 907
Imposition of penalty u/r 209A of the Act - clandestine removal - forged cenvatable invoices - the appellants are involved in issuance of fake gate passes and on the basis of which the fraudulent modvat credit was passed on for such offence whether the appellants are liable for penalty under Rule 209A of the Rules? - Held that: - From the plain reading of the above Rule 209, the person can be liable for penalty only when he acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these Rues. In the facts of the present case fake gate passes were issued but no goods were supplied therefore the dealing of the goods, in particular excisable goods is not involved. The appellants have not involved in the act as mentioned under Rule 209A such as transporting, removing, depositing, keeping, concealing, etc. of any excisable goods which are liable for confiscation. Since no goods were involved the question of dealing with the goods and the confiscation thereof is not involved. Under Rule 209A penalty cannot be imposed on the appellant for the offence committed. We observe that in the new Central Excise Rules 2002, Rule 26 is pari materia to Rule 209A, when it was realized by the Government that offence of the similar nature of the present case are also occurring for extending the fraudulent benefit by way of fake documents, the legislators have conciously inserted Sub-rule (2) in Rule 26 to bring the present offence under the ambit of penal provision. Since the provision similar to Sub-Rule (2) of Rule 26 was neither existing in Rule 26(1) nor in Rule 209A of Central Excise Rules 1944, the provision of Sub-Rule (2) cannot be made applicable prior to 1.3.2007 when Sub-Rule (2) was inserted. The penalty imposed under Rule 209A on the appellants are not sustainable, therefore the penalties are set aside - appeal allowed - decided in favor of appellant.
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2016 (12) TMI 906
Duty demand u/r 57F(1)(ii) of the Central Excise Rules - removal of input as such - Held that: - We observed that matter was taken up by five members' larger bench of this Tribunal in case of Commissioner of C. Ex., Vadodara Versus Asia Brown Boveri Ltd. [2000 (7) TMI 110 - CEGAT, NEW DELHI], wherein judgment of American Auto Service[1995 (6) TMI 33 - CEGAT, MADRAS] has been approved and accordingly, it was held that the debit of the Cenvat credit should be at the same rate at which assessee had taken the credit therefore proposal in the Revenue's proceedings is absolutely contrary to the view taken by three member judgment in the case of American auto, which was approved by the judgment of five members larger bench in Asia Brown boveri Ltd. As per above decision, we find that demand made in the order-in-Original and upheld by the commissioner(Appeals) is absolutely incorrect and illegal therefore the same is set aside - Appeal is allowed - decided in favor of appellant.
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2016 (12) TMI 905
Cenvat credit - Notification No.30/2012/ST- dated 20.06.2012 - Held that: - It is an admitted fact on record that the service provider is registered with the service tax department and has discharged the service tax liability on the entire value of taxable service, instead of 45% as prescribed under Notification No.30/2012/ST- dated 20.06.2012 - Since the appellant herein has taken the service tax paid by the service provider on the basis of invoices raised by him - appeal allowed - decided in favor of appellant.
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2016 (12) TMI 904
CENVAT credit - Outward transportation - tax discharged in connection with activity beyond the place of removal - Held that: - The quantum of credit available is linked to the ingredients that constitute the value for tax liability. This is amply clear from the special treatment accorded to output goods and services that are exempt and goods or services that are exported. Appellant has admitted that freight on outward transportation was not included in the assessable value of goods on which the duty liability is discharged by recourse to CENVAT credit. If the contention of appellant that the value of the service claimed to be an ‘input service’ is not to be included in the assessable value of output goods is accepted, the appellant would end up availing undue privilege of credit balance by paying tax lower than that envisaged by the sovereign legislature. It would also constitute retention of the tax recovered from customer which is not the intent of the CENVAT Credit Rules. Relying on the decision of the Tribunal in Maharashtra Scooters Ltd v. Commissioner of Central Excise, Pune -II [2015 (9) TMI 1161 - CESTAT MUMBAI], that tax paid on outward freight is not available for offset of the duty liability on output goods, the appeal is rejected - decided against appellant.
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2016 (12) TMI 903
Invocation of extended period of limiatation - Denial of cenvat credit - structural steel items such as MS Joists, MS Channels, Steel Plates, CTD Bars, MS Angles, MS Flat, MS Beam falling under chapter 72 of the Central Excise Tariff Act, 1985 - SCN issued by department beyond 1 year - Held that: - It is an admitted fact on record that the SCNs were issued by the Department beyond the period of one year from the relevant date. The proviso to Section 11A has been invoked for recovery of the amount in question. Since the appellant had intimated the Central Excise Department regarding taking of cenvat credit on the disputed goods in its monthly ER-1 return, the allegation of suppression, misstatement, etc. cannot be leveled against the appellant, justifying invocation of extended period of limitation. Rule 12 of the Central Excise Rules, 2002 cast the responsibility on the proper officer to scrutinize the correctness of the information furnished in the periodical return and to call for any additional document from the assessee for necessary verification. In the present case, since the Jurisdictional Central Excise authorities have not raised any objection that the return filed by the appellant are not proper or correct, the SCN, in such an eventuality, should be confined to the period of one year from the date of filing of such return by the appellant. Thus, in absence of any specific findings regarding the involvement of the appellant in any fraudulent activities concerning fraud, collusion, suppression of fact, etc., I am of the considered opinion that longer period of limitation cannot be invoked for confirmation of demand. Demand not sustainable - appeal allowed - decided in favor of appellant-assessee.
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2016 (12) TMI 902
Demand - the appellant cleared the input as such to a 100% EOU M/s Tarus India Ltd. of Bhiwadi on the basis of CT-3 certificate issued by the Superintendent of Central Excise, Bhiwadi. But the appellant did not reverse/debit the cenvat credit amounting to ₹ 4,61,809/- availed on such inputs - Held that: - I find that the issue is no more res integra in view of the decisions of the Tribunal in the case of Commissioner of Central Excise, Customs & Service Tax, Hyderabad-I vs Matrix Laboratories Ltd., [2014 (6) TMI 685 - CESTAT BANGALORE], where it was held that Notification No. 22/2003-C.E. provides for clearance of the goods without payment of duty to 100% EOUs based on CT-1 certificate. In this case also as submitted by the learned counsel and evidenced by one of the CT-1 certificates produced, clearances were based on CT-1 certificates issued by the receiving unit - In my opinion, whether it is capital goods or inputs, the treatment as regards clearance of the same would be similar. Appeal allowed - decided in favor of appellant-assessee.
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2016 (12) TMI 901
Demand - Interest - Penalty - Rule 3 (5A) of CCR, 2004 read with Section 11 A of the Act - Period of limitation - Held that: - plant and machinery in question has been held for more than 10 years and as such under Rule 3(5) are entitled to 100% depreciation of the credit taken, if any - no case of suppression or contumaciously conduct is made out against the respondent-assessee - appeal dismissed - decided against Revenue.
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2016 (12) TMI 900
Rejection of refund claim - unjust enrichment - Held that: - I find from the grounds of appeal that the appellant have specifically mentioned that they have raised total bill amounts as per the Invoices for the period in question amounting to ₹ 31,11,678/against which their buyer only paid an amount of ₹ 29,33,866/-. Thus there a apparent difference of amount not received ₹ 1,77,812/- which is the amount claimed as refund. In view of the arithmetical data given by the appellant, it appears that there are been failure by the courts below to examine the evidence, that is the books of account and ledgers of the appellant Accordingly for the extending substantial justice to the appellant, I set aside the impugned order and remit the matter back to the Adjudicating Authority with direction to call for and examine the Ledger and Books of Accounts f including the Balance Sheets, along with Certificate from Chartered Accountant. If the amount is still lying outstanding and or receivable in the books of accounts, in that case it cannot be said that the appellant have received the amount from its buyers, attracting the provisions of unjust enrichment. The Appellant is also directed to appear before the adjudicating authority within a period of 60 days from the date of receipt of a copy of this order and seek an opportunity of hearing - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2016 (12) TMI 886
Restoration of registration - Held that: - It is required to be noted that as such the learned Tribunal has not discussed anything with respect to finding recorded by the First Revisional Authority on the genuineness of the transactions of sale and purchase by the respondent and the finding recorded by the First Revisional Authority that the respondent had indulged into billing activities only. No reasons whatsoever have been assigned by the learned Tribunal on the findings recorded by the First Revisional Authority. While passing the impugned order, the learned Tribunal has stated that considering the entire circumstances, the documents and the payment the applicant has made as per our direction, the Tribunal is of the view that the registration of the original applicant is to be restored. The aforesaid can hardly be said to have been given cogent reasons. Even subsequent payment of ITC wrongly claimed and that too before the Tribunal can hardly be a ground to restore the registration. Having found that the assessee / trader has indulged into billing activities only and has wrongly claimed the ITC and thereafter the registration is cancelled, and thereafter before the Tribunal the assessee / trader agrees to deposit the amount of ITC wrongly claimed, the same can hardly be a ground to restore the registration. Necessary consequences of wrong availment of ITC i.e. cancellation of registration shall follow - it is required to be noted that in the present case the respondent had specifically admitted that it was not entitled to ITC of ₹ 4,45,645/and that he wrongly claimed / availed the ITC of ₹ 4,45,645/ - It is required to be noted that the learned Tribunal has not given any specific finding that the Tribunal does not agree with the finding recorded by the First Revisional Authority on the genuineness of the transactions of sale and purchase by the respondent and that the respondent had indulged into billing activities only. Without giving such finding, the learned Tribunal is not justified in directing to restore the registration - Petition allowed - decided against respondent-assessee.
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2016 (12) TMI 885
Release of attached bank property - return of books of account and other documents seized under Section 67(4) of the Gujarat VAT Act, 2003 - Held that: - Affidavit-in-reply is filed on behalf of the respondents pointing out that by efflux of time the order of freezing the Bank Account under Section 45 of the VAT Act has expired - In that case of the matter, the cause so far as challenge to freezing of the Bank Account does not survive. Return of the books of account and other documents - petitioner's request that if for the purpose of filing reply in the assessment proceedings the petitioner’s representative is permitted to inspect the said documents / books of account, the petitioner will be satisfied - Held that: - the request of petitioner in this regard accepted - if the representative of the petitioner approaches the concerned Officer for inspection of the books of account and other documents seized, the the account same shall be considered and the representative of the petitioner shall be given inspection of the books of account and other documents seized. Petition disposed off - decided partly in favor of petitioner.
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2016 (12) TMI 884
Validity of assessment order - whether the AO can make additions solely relying upon the third party statement and without any further corroborative evidence - Held that: - solely on the basis of information gathered by another officer on the basis of visit made outside the State in the premise of T.R.Somani & Sons and Bhavna Trade Agencies, in which, there is reference of sale by them to appellant-assessee, the addition is made - Identical question came to be considered by this Court in the case of Kantibhai Revidas Patel [2013 (11) TMI 972 - GUJARAT HIGH COURT], where the Assessing Officer made the additions on the basis of statement of third party and on the basis of other documents recovered from the third party premises. The learned CIT(A) deleted the the said additions by stating that in the absence of any other corroborative evidence, the said addition cannot be made on the basis of presumption and on the basis of statement of any third party and particularly when seized document was recovered from the third party premises. In the present case, there is no other corroborative evidence collected by the AO justifying the addition in exercise of powers on reassessment, more particularly, with respect to sale of the goods by T.R.Somani & Sons and Bhavna Trade Agencies alleged to have been made to the appellant. Without giving any opportunity of being heard to the appellant to confront the said material and / or without giving any opportunity to cross examine them, straightway and solely relying upon the same, in exercise of powers of reassessment, the AO has made addition, which in the facts and circumstances of the case, cannot be sustained. The impugned judgment and order passed by the learned Tribunal is hereby quashed and set aside and it is held that AO could not have made additions solely relying upon the third party statement and without any further corroborative evidence - decided in favor of assessee.
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2016 (12) TMI 883
Whether the impugned order of assessment dated 27.04.2016 could be said as in breach of principles of natural justice or not? - Held that: - It is hardly required to be stated that it is true that by way of self-imposed restriction when the alternative remedies are available, this Court in exercise of the power in Article 226 of the Constitution may decline to entertain the petition but such bar of self- imposed restriction may not apply if there is ex facie breach of principles of natural justice. In the present case as observed by us hereinabove, the impugned order at Annexure ‘D’ can be said to be in breach of principles of natural justice and hence it would be in appropriate case to interfere with the order and to set aside the same, since it is in breach of the principles of natural justice in as much as that the so-called re vised notice dated 11.03.2016 which has been taken into consideration by the assessing authority has not been served nor the appellant has been given any opportunity to meet with the same. The order passed by the learned Single Judge as well as the impugned order for assessment dated 27.04.2016 Annexure ‘D’ are set aside with the further observation that the matter shall stand restored to the file of the office of the Deputy Commissioner, for re-assessment - appeal allowed by way of remand.
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