TMI Tax Updates - e-Newsletter
December 21, 2015

Case Laws in this Newsletter:

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

TMI SMS

• Omnibus approval for related party transactions on annual basis - Companies (Meetings of Board and its Powers) Amendment Rules, 2015.

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Articles

1. Eligibility of Cenvat credit on Catering services

   By: Ravi Bihani

2. Cenvat credit on input services availed prior to initiation of manufacturing activity is admissible

   By: Bimal jain

3. Refund claim cannot be denied when excess duty has been returned through debit/credit Notes, and, the said amount is accounted as ‘receivable’ in the Balance Sheet - sufficient evidence that incidence of duty has not been passed on

   By: Bimal jain

4. ISSUE OF ADDITIONAL (ENTRY TAX) IN PROPOSED GST

   By: Dr. Sanjiv Agarwal

News

1. Proposed Return Process - GST

2. Proposed Payment Process

3. Refund Process in GST Regime - GST

4. Year End Review: Highlights of the Achievements of the Ministry of Finance

5. Date for payment of Central Excise duty and Service Tax for November 2015 in the Union Territory of Puducherry (except Mahe & Yanam) extended to 20th December 2015 while the date of filing of the Central Excise return for November 2015 extended to 31st December 2015.

6. Finance Minister: India economy has witnessed significant improvement in the macroeconomic stability in terms of low levels of inflation, Fiscal Deficit (FD) and Current Account Deficit (CAD); This robust outcome was made possible by the slew of policy measures and structural reforms undertaken by the present Government in last 19 months to address the critical problems of stimulating and stabilizing the economy

Circulars / Instructions / Orders

Income Tax

1. 22/2015 - dated 17-12-2015

Allowability of employer's contribution to funds for the welfare of employees in terms of section 43B(b) of the Income Tax Act

Highlights / Catch Notes

Income Tax

• Timely Payment of Employer Contributions Essential for Tax Deductions Under Income Tax Act Section 43B(b.

  Circulars : Allowability of employer's contribution to funds for the welfare of employees in terms of section 43B(b) of the Income Tax Act - Circular
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• Court to Decide if Costs for Building on Leasehold Land Are Capital or Revenue Expenditure; Depreciation at Stake.

  Case-Laws - HC : Amount expended for putting up multi-storied structures on leasehold land and refurbishing leasehold buildings - capital or revenue expenditure - entitlement to depreciation - Matter referred to larger bench - HC
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• Section 234E Fee Levy Invalid u/s 200A: One-Year Time Limit for Rectification Has Expired.

  Case-Laws - AT : Levy of fee u/s 234E in the order u/s 200A - That time limit of one year has already elapsed and the defect is thus not curable even at this stage - the impugned levy of fees under section 234 E is unsustainable in law. - AT
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• Taxation of ESOPs u/s 115WB(1)(d) Depends on Date of Stock Allotment or Transfer.

  Case-Laws - AT : Taxation of Employees Stock Option Plan under fringe benefit tax - Section .115WB(1)(d) - the date of actual allotment or transfer of Employees Stock Option is crucial for determination of the issue arises for consideration. - AT
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• Penalty Imposed u/ss 274 & 271(1)(c) for Undisclosed Income and Incorrect Deduction Claim u/s 54.

  Case-Laws - AT : Penalty u/s 274 r.w.s. 271(1)(c) - undisclosed income - wrong claim of deduction u/s 54 - assessee is exigible to levy of penalty on such income which was detected during the course of search and seizure operation, which in turn has been offered by the assessee in return of income filed pursuant to notice issued u/s 153A - AT
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• Taxpayer's Trading Activity Qualifies as a Service for Deduction u/s 10AA, SEZ Act Definition Prevails.

  Case-Laws - AT : Exemption u/s 10AA - Trading done by the assessee is a service and, therefore, deduction under Section 10AA is allowable - the definition of service given in the SEZ Act, 2005, which overrides the word 'service' accruing in Section 10AA by virtue of Section 51 of the SEZ Act. - AT
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• Interest from Business Advances with Sister Concerns Classified as Business Income, Not Income from Other Sources.

  Case-Laws - AT : The ‘interest income’ earned on business advances kept with the sister concerns should be treated as ‘business income’ instead of ‘income from other sources’ - AT
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• Taxpayer's Receipt Discrepancies in TDS Certificates vs. Profit & Loss Account Deemed Unacceptable by Authorities.

  Case-Laws - AT : Reconciliation of the difference between receipts as per TDS Certificates (26AS) and receipts disclosed by the assessee - the explanation put forth by the assessee in an attempt to reconcile the difference in the receipts / turnover declared in the profit and loss account vis-à-vis the receipts/turnover in the TDS Certificates, is unacceptable - AT
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• Deduction for Pre-Business Recruitment Expenses Allowed u/s 37(1) Due to Necessity of Skilled Personnel.

  Case-Laws - AT : Disallowance of the claim for deduction u/s. 37((1) - recruitment of employees before commencement of business - Undisputedly, this line of business requires expertise who have proficiency in understanding the carats of diamonds and related jewellery, without such recruitment, it would be a futile exercise to commence the business. - expenses allowed - AT
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• LTCG exemption u/s 10(38) requires substantial evidence, not suspicion, for claims of broker-appellant collusion.

  Case-Laws - AT : LTCG - Claim of exemption u/s 10(38) - It is a settled law that assessment cannot be made on the basis of suspicion or surmise. The AO has not brought any material on record to support his finding that there has been collusion/connivance between the broker and the appellant for the introduction of its unaccounted money. - AT
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Customs

• Court Rules FIR Insufficient for Fulfilling Export Obligations; Requires Documentation for Compliance Under Advance License.

  Case-Laws - HC : Fulfillment of export obligation - advance license - By merely stating that the FIR was lodged for lost documents, petitioner cannot substitute the requirement of production of documents demonstrating export obligation. - HC
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• Customs Fabric Classification Depends on "Cut" or "Uncut" Warp Pile, Velvet Fabric Misclassification Rejected.

  Case-Laws - AT : Confiscation - The crucial words are “warp pile fabrics, cut” (58012710) & other (5801 2720). Thus more important in the classification of a fabric under 5801 3711/19 and 5801 3720 will be the “cut” or “uncut” nature of “warp pile”. - the stand of the revenue that all categories of “velvet” fabrics will invariably fall under 5801 3711, is not correct and is rejected. - AT
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• CHA License Suspension Challenged: Revocation Process Lacked Show Cause Notice, Violated Natural Justice Principles Under Customs Act.

  Case-Laws - AT : Suspension of CHA license - We failed to understand the reasons for initiating revocation of CHA licence based on the alleged contravention of lending of IE code when no SCN was issued under Customs Act. - SCN itself is premeditated one and violated principles of natural justice. - AT
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• Paddle Wheel Aerators Classified Under Chapter 8436 as Agricultural Machines, Not Chapter 8479, Customs Tariff Decision.

  Case-Laws - AT : Classification - whether the paddle wheel aerators and its parts imported and cleared are classifiable under Chapter 8436 as other agricultural, horticultural machines or under Chapter 8479 as machines having individual functions not elsewhere specified - classifiable under chapter heading 8436 of the CTH - AT
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Corporate Law

• Section 314(1)(b) of Companies Act, 1956: Relatives of directors in non-remunerative roles don't breach employment prohibitions.

  Case-Laws - HC : Exclusive employment of the company - prohibition contained in Section 314(1)(b) of the 1956 - relative of a Director of a company - The statutory mandate is that being a Director in a non-remunerative and non-executive position in other companies does not amount to being in employment of those companies or holding a place of profit in those companies. - HC
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Service Tax

• Government Salary Disbursements to Teachers Not Classified as Business Auxiliary Service for Service Tax.

  Case-Laws - AT : Banking and other Financial Services - an amount received as a consideration for disbursement of salaries to the Govt. teachers on direction of Zillha Parishad can never be an activity covered under the definition of Business Auxiliary Service - AT
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Central Excise

• ISD Can Avail CENVAT Credit for Services Before Registration; Demand Set Aside Due to Revenue's Prior Knowledge.

  Case-Laws - AT : CENVAT Credit - the ISD can avail credit of service tax paid on input services received prior to registration and moreover, in this case there is only one manufacturing unit of the appellant and the Revenue was well aware of this fact from the very beginning - demand set aside - AT
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• Appellants Granted Exemption for Supplying Radar to Indian Navy Under Notification No. 64/1995-CE with Competent Authority Certificate.

  Case-Laws - AT : Denial of exemption under the Notification No. 64/1995-CE - appellants have supplied the radar and its parts to Indian navy, which is supported by the certificate issued by the competent authority. Therefore, the appellant has rightly claimed the excise duty paid on the goods supplied to the Indian Navy and they are eligible for exemption - AT
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• Appellant EOU cleared goods duty-free under Notification No. 43/2001 for export by HLL; no duty demand justified.

  Case-Laws - AT : 100% EOU - Job work - Appellant EOU cleared the goods under Notification No. 43/2001 which was issued under Rule 19 of the Central Excise Rules and the goods were ultimately exported by HLL. Therefore, the question of demanding duty on the instant coffee powder ultimately exported does not arise - AT
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Case Laws:

• Income Tax

• 2015 (12) TMI 1033
  Penalty under Section 271(1)(c) - Held that:- The return filed by the assessee was a non est return. Even no explanation was furnished by the assessee to substantiate the claim of not filing the return voluntarily. The Tribunal observed that the case of the assessee fell under main provisions of Section 271(1)(c) of the Act as there was definite concealment in the facts and circumstances and, therefore, reference to Explanation 3 to Section 271(1)(c) of the Act for deleting the penalty under Section 271(1)(c) of the Act by the CIT was unjustified. The Tribunal had rightly concluded that there was clear concealment of income under the main provisions of Section 271(1)(c) of the Act and reference to Explanation 3 to Section 271(1)(c) of the Act by the CIT(A) was unwarranted. Learned counsel for the assessee was unable to demonstrate that either the approach of the Tribunal was erroneous or perverse in any manner or that the findings of concealment recorded by the Tribunal are based on misreading or misappreciation of evidence or material on record which may warrant interference by this Court. - Decided against assessee

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• 2015 (12) TMI 1032
  Refund of TDS in respect of the amount received on account of interest awarded under Section 28 on acquisition of the agricultural land - Held that:- On enhanced amount of compensation in respect of the acquired land falls for taxation under Section 56 of the Act as "income from other sources" and is exigible to tax in the year of receipt under cash system of accountancy. It had also been observed that where the assessee is not maintaining books of accounts by adopting any specific method, it shall be treated to be cash system of accountancy. In the present case, the interest received by the petitioner was on account of delay in making the payment of enhanced compensation and, therefore, would fall under Section 28 of the 1894 Act. Such payment could not par-take the character of compensation for acquisition of agricultural land and, thus, was not exempt under the Act. Once that was so, the tax at source had been rightly deducted by the payer. See Sarti v. Haryana State Industrial and Infrastructure Development Corporation Ltd. and others [2011 (5) TMI 939 - PUNJAB AND HARYANA HIGH COURT] In view of the above, the tax at source has been rightly deducted and the petitioners can claim the refund, if any, admissible to them by filing the income tax returns in accordance with law. - Decided against assessee

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• 2015 (12) TMI 1031
  Amount expended for putting up multi-storied structures on leasehold land and refurbishing leasehold buildings - capital or revenue expenditure - entitlement to depreciation - ITAT held the amount expended as capital expenditure, rejecting the claim of the appellant for treating the same as revenue expenditure and, therefore, deductible under section 32(1) and Explanation 1 of the Income-tax Act - Held that:- On a reading of Explanation it is categoric and clear that so far as the expenditure incurred as contemplated in the Explanation is concerned, a legal fiction is created, by which the assessee, enjoying a leasehold right on a building is treated as the owner of the building. So according to us, the question to be considered in such a case is whether the assessee has acquired any enduring benefit by putting the refurbished building to use over a period of time in accordance with the agreement entered into between the assessee and the building owner. So far as the question regarding the expenditure incurred by the assessee for refurbishing the building taken on lease is concerned, we are of the considered opinion that, after the introduction of Explanation 1 to section 32(1) of the Act, there is no scope left out at all for any interpretation since by a legal fiction, the assessee is treated as the owner of the building for the period of his occupation. This means that by refurbishing, decorating or by doing interior work in the building an enduring benefit was derived by the assessee for the period of occupation and, therefore, is a capital expenditure and not revenue expenditure. So also, as contended by the senior counsel for the Revenue the criteria that is to be adopted for identifying the enduring benefit is the nature of enhancement and advantage that the assessee has derived by putting the building to use for business purposes. According to us, by adding Explanation 1 to section 32(1), Parliament has manifested its legislative intention to treat the expenditure incurred by the assessee on leasehold building as capital expenditure and, therefore, Explanation 1 to section 32(1) cannot be subjected to any other interpretation Further, the language of Explanation 1 is very plain and clear and there was no scope for providing a different meaning for the words used and, hence, we are bound to consider the question by giving the literal meaning to the expressions and phraseologies by the Legislature applied. In the aforesaid reasons, we are of the opinion that the law laid down by the Division Bench of this court in Joy Alukkas India Pvt. Ltd. [2014 (6) TMI 80 - KERALA HIGH COURT] requires reconsideration. Matter referred to larger bench

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• 2015 (12) TMI 1030
  Deduction claimed under section 80HHC - whether the supporting manufacturer is entitled to seek the benefit of cash assistance (export incentive) granted by the Government exclusively to the export house or trading house in terms of sub-section (3) of section 80HHC of the Income-tax Act and if such incentive is passed on by the export house or trading house to the supporting manufacturer, whether such amount would be hit by the provisions of sub-section (3) of section 80HHC of the Income-tax Act? - Held that:- If the trading house is agreed to and in terms of the said agreement, they have passed on the additional price-export incentive, supported by the certificate in terms of sub-section (4A) of section 80HHC, then the requirement under sub-section (1A) of section 80HHC is satisfied by the supporting manufacturer. The incentives stated in section 28(iiia), (iiib) and (iiic) of the Income-tax Act, no doubt, would accrue only to the export trading house. But once the said amount stands transferred to the supporting manufacturer by the export house or trading house, it takes the colour of additional price and that is in relation to the agreement between the parties subject to issuance of certificate in terms of sub-section (4A) of section 80HHC of the Income-tax Act. In the instant case, the assessee had directly exported the goods to the foreign constituents and received the export incentives directly from the Government based on the agreement between the export house and the assessee, as a supporting manufacturer. So long as the export trading house transfers the export incentive accrued to its export turnover in the form of additional price to the supporting manufacturer pursuant to an agreement entered into between them, supported by sub-section (4A) of section 80HHC of the Income-tax Act, the Department cannot deny the benefit of deduction claimed under section 80HHC(1A) of the Income-tax Act. In the light of the above, we answer the question of law in favour of the assessee and against the Revenue.

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• 2015 (12) TMI 1029
  Disallowance under S.40(a)(ia) - Held that:- The principle which emerges is that if the expenditure claimed was paid within the relevant previous year, no disallowance can be made under S.40(a)(ia). However, in the present case, assessee has to establish that the expenditure claimed was paid during the relevant previous year and nothing remained payable at the end of the year. We therefore, set aside the impugned orders of the lower authorities on this issue, and direct the Assessing Officer to verify this fact and allow the expenditure if it is found that the entire expenditure claimed has been paid within the relevant previous year and nothing remains payable/outstanding at the end of the year. The assessee must be given reasonable opportunity of being heard on the issue. - Decided in favour of assessee for statistical purposes.

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• 2015 (12) TMI 1028
  Reopening of assessment - Long Term Capital Gains computation - Held that:- The Assessing Officer has issued notice u/s 147 after having credible information on record during the course of survey regarding the quantum of Long Term Capital Gains. Recalling the facts, the order of the CIT(A) for the Asst. Year 2008-09 was not regarding the quantum of Long Term Capital Gains, but was regarding the Asst. Year in which the Long Term Capital Gains is to be brought to tax. Hence, it cannot be held as the review on the basis of change of opinion. The issue in the appeal for the Asst. Year 2008-09 and also for the Asst. Year 2006- 07 was regarding the year in which the Long Term Capital Gains was to be brought to tax. The issue in the appeal was never regarding the quantum of Long Term Capital Gains. Hence the submissions of the learned Authorized Representative in this regard do not support the case of the appellant that the Assessing Officer has no jurisdiction u/s 147 of the Income Tax Act, 1961. There is no change of opinion considering the facts of the case. Hence the decision relied on by the Authorized Representative are not relevant to the facts of the case. The submissions of the learned Authorized Representative regarding change of opinion are rejected and the 148 proceedings are upheld - Decided against assessee

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• 2015 (12) TMI 1027
  Levy of fee u/s 234E in the order u/s 200A - Held that:- The adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A. This intimation is an appealable order under section 246A(a), and, therefore, the CIT(A) ought to have examined legality of the adjustment made under this intimation in the light of the scope of the section 200A. Learned CIT(A) has not done so. He has justified the levy of fees on the basis of the provisions of Section 234E. That is not the issue here. The issue is whether such a levy could be effected in the course of intimation under section 200A. The answer is clearly in negative. No other provision enabling a demand in respect of this levy has been pointed out to us and it is thus an admitted position that in the absence of the enabling provision under section 200A, no such levy could be effected. As intimation under section 200A, raising a demand or directing a refund to the tax deductor, can only be passed within one year from the end of the financial year within which the related TDS statement is filed, and as the related TDS statement was filed on 19th February 2014, such a levy could only have been made at best within 31st March 2015. That time has already elapsed and the defect is thus not curable even at this stage. In view of these discussions, as also bearing in mind entirety of the case, the impugned levy of fees under section 234 E is unsustainable in law. We, therefore, uphold the grievance of the assessee and delete the impugned levy of fee under section 234E of the Act. See Lions Club of North Surat Charitable Trust Versus Income Tax Officer TDS-2, Surat (New). [ 2015 (9) TMI 1231 - ITAT AHMEDABAD ] - Decided in favour of assessee

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• 2015 (12) TMI 1026
  Taxation of Employees Stock Option Plan under fringe benefit tax - Held that:- When the CBDT clarified that with a view to bring stock options within the purview of fringe benefit tax, Finance Act, 2007 has inserted a new clause (d) in sub-section (1) of sec. 115WB of the Act, this Tribunal is of the considered opinion that the Employees Stock Option Plan cannot be brought under any other sub clauses before introduction of clause(d) to sec. 115WB(1) by Finance Act, 2007. Therefore, this Tribunal is of the considered opinion that in case the Employees Stock Option was allotted or transferred on or after 1.4.2007, the same is liable for fringe benefit tax. From the material available on record, it is not clear the date on which the Employees Stock Option was allotted or transferred. There is no reference about the date of such allotment in the assessment order also. The CIT(A), without referring to the date of the actual allotment, has proceeded on the footing that sec.115WB(1)(d) is applicable in respect of Employees Stock Option allotted or transferred on or after 1.4.2007. Therefore, this Tribunal is of the considered opinion that the date of actual allotment or transfer of Employees Stock Option is crucial for determination of the issue arises for consideration. In the absence of any material, this Tribunal is of the considered opinion that the actual date of allotment or transfer needs to be verified by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the entire issue raised by the assessee is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the issue afresh and bring on record the date of actual allotment or transfer of Employees Stock Option and thereafter decide the issue as indicated above by this Tribunal. - Decided in favour of assessee for statistical purposes.

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• 2015 (12) TMI 1025
  Penalty levied under section 274 r.w.s. 271(1)(c) - Held that:- We hold that the income offered by the assessee pertaining to the cash seized from the assessee and the declaration of the assessee that the said cash relates to the unaccounted cash received vide the sale transaction entered into by the assessee, which in turn, was declared by the assessee in the return of income filed pursuant to issue of notice under section 153A of the Act, is the income detected during the course of search and seizure operation. The case of the assessee is squarely covered by the provisions of Explanation 5A to section 271(1)(c) of the Act and the assessee is exigible to levy of penalty on such income which was detected during the course of search and seizure operation, which in turn has been offered by the assessee in return of income filed pursuant to notice issued under section 153A of the Act. The assessee having made a wrong claim in the return of income i.e. by way of claim of deduction under section 54 on account of investment in two properties and in respect of capital gains account with bank not having been made by the assessee, tantamount to furnishing of inaccurate particulars of income and justifiably, penalty under section 271(1)(c) of the Act is leviable on such furnishing of inaccurate particulars of income. The learned Authorized Representative for the assessee in a written Note had furnished the break-up of income on which penalty was levied. We uphold the order of CIT(A) in confirming the levy of penalty on the above said two accounts. - Decided against assessee

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• 2015 (12) TMI 1024
  Disallowance u/s 43B on account of VAT collected but not paid - VAT was not claimed as expenditure in the profit and loss account - Held that:- In the facts of the present case, admittedly, the assessee had collected VAT amount of Rs. 22,68,716/- and had paid Rs.Rs.8,21,505/- against the said amount due during the accounting period, the balance amount of Rs. 14,47,211/- was not paid by the assessee before the close of year or before the date of audit report. However, under the provisions of section 43B of the Act, in case the said amount is paid by the assessee before the due date of filing the return of income as prescribed under section 139(1) of the Act, the assessee is entitled to the claim of deduction under section 43B of the Act. The necessary details in this regard are not available on record. Accordingly, we direct the Assessing Officer to verify whether the assessee has deposited the said amount before the due date of filing the return of income under section 139(1) of the Act and allow the claim in accordance with law.

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• 2015 (12) TMI 1023
  Penalty imposed under section 271(1)(c) - addition of deemed dividend under section 2(22)(e) - Held that:- There is a credit balance in respect of M/s. Emmar Diamonds Ltd., appearing in the books of the assessee during the relevant financial year. It is also a fact that the assessee is a shareholder in M/s. Emaar Diamonds Ltd. It is also a fact on record that the credit balance appearing in the name of M/s. Emaar Diamonds Ltd. has been treated as a deemed dividend under section 2(22)(e) of the Act and in the quantum of appeal before the Tribunal, the assessee has accepted the addition by not pressing the ground raised. However, these facts alone would not be sufficient to conclude that assessee has either furnished inaccurate particulars of income or concealed the particulars of income so as to impose penalty under section 271(1)(c). It is well known that assessment proceedings and proceedings for imposition of penalty under section 271(1)(c) are two distinct and separate proceedings. In the facts of the present case, on a reference to the statement of account of loan transaction with M/s. Emaar Diamonds Ltd., a copy of which has been submitted at Page-8 of the paper book, it is very much clear that the assessee had an opening balance of loan to M/s. Emaar Diamonds Ltd. amounting to Rs. 2,32,26,000. During the year, the assessee has also received payment against the aforesaid loan to M/s. Emaar Diamonds Ltd., on different dates starting from 2nd August 2004. As it appears on 23rd September 2004, the assessee received an amount of Rs. 1.50 crores from M/s. Emaar Diamonds Ltd., as a result of which there was a credit balance in favour of the said party. It is the contention of the assessee that M/s. Emaar Diamonds Ltd. per mistake repaid in excess. However, immediately after such mistake came to the notice the assessee on 28th September 2004, paid back an amount of Rs. 50 lakh to M/s. Emaar Diamonds Ltd. On a perusal of the statement of account the explanation of the assessee appears to be correct. It is seen from the statement of account that the assessee is regularly advancing loan to M/s. Emaar Diamonds Ltd., therefore, the claim of the assessee that on 23rd September 2004, M/s. Emaar Diamonds Ltd., while making repayment has paid back excess amount per mistake is quite plausible. Considering the aforesaid facts, we are of the view that the assessee cannot be accrued of furnishing inaccurate particulars of income or concealing particulars of income. Therefore, imposition of penalty under section 271(1)(c) in the present case, in our view, is not justified. Accordingly, we delete the penalty imposed. - Decided in favour of assessee.

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• 2015 (12) TMI 1022
  Benefit of deduction u/s 10AA - Held that:- Trading done by the assessee is a service and, therefore, deduction under Section 10AA is allowable. We further noted that on similar facts in case of Goenka Diamonds and Jewellery Limited (2012 (3) TMI 258 - ITAT JAIPUR), the Jaipur Bench of the Tribunal has discussed the issue in detail. The provisions of Section 51 of SEZ Act were also considered. The decision of the Hon'ble Supreme Court in the case of Tax Recovery Officer Vs. Custodian Appointed Under The Special Court, (2007 (8) TMI 343 - SUPREME Court) and the decision CIT Vs. Vasisth Chay Vyapar Ltd., (2010 (11) TMI 88 - Delhi High Court), were also taken into consideration and thereafter it was concluded that in view of the Instruction No.1 of 2006, dated 24-3-2006 as modified by Instruction No.4 of 2006, dated 24- 5-2006 issued by the Ministry of Commerce & Industry, Government of India and the definition of service given in the SEZ Act, 2005, which overrides the word 'service' accruing in Section 10AA by virtue of Section 51 of the SEZ Act. The assessee engaged in trading in nature of re-export of imported goods and for the same the assessee was entitled deduction under Section 10AA of the Act. - Decided in favour of assessee.

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• 2015 (12) TMI 1021
  Disallowance made u/s 14A r.w. Rule 8D(2)(ii) - CIT(A) had directed the AO to re-compute disallowance - Held that:- A look at the balance sheet of the assesee placed show that its share capital of Rs. 21,19,01,000/- and reserves and surplus of Rs. 17,81,28,688/- totaling to Rs. 39,00,29,688/-. Its investments as on 31-03-2011 were only Rs. 13,01,27,472/-. Obviously, assessee had more than enough own funds with it for justifying the investment. Further, it is not disputed that the assessee had made a suo-motu disallowance of Rs. 56,55,867/- as the interest expenditure attributable to the loan fund utilized for the investment. At no place the AO expressed any dissatisfaction with regard to the correctness of the claim of the assessee with regard to expenditure incurred for earning exempt income. Assessee had all along argued that the loans which were used were only for the purpose of its business. The loans which were used for the purpose of placing investments resulting in tax free income were also furnished by the assessee and this totalled only to Rs. 18,90,931/-. The CIT(A) directed the AO to confine the disallowance under Rule 8D(2)(ii) of the IT Act, 1961 to such amount which is justified - Decided against revenue

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• 2015 (12) TMI 1020
  Penalty u/s. 271(1)(c) - disallowance of Exhibitor Promotion expenses - Held that:- Assessing Officer had given a specific show cause notice and examined the relevant invoices for Exhibit Promotion expenses and thereafter found that invoices for Euro 36993.45 were actually meant for Chinese exhibitions and as such were not related to the exhibition/fairs organized by the assessee. The disallowance was accordingly made to the equivalent amount in Rupees amounting to Rs. 24,96,318/-. This is not a case where disallowance originated due to difference of opinion as tried to be convinced by the assessee. The explanation of the assessee was that by mistake invoice to that extent relating to exhibition in India were sent by the parent company to China and that way tired to explain that the expenses debited in the Profit & Loss Account were actually incurred and there was no concealment and assessee had not furnished any incorrect particulars of income. If that was so, then the assessee had ample opportunity to get those invoices from its counterpart and/or could have obtained copy thereof from the parent company itself and submitted to the Assessing Officer at least during the penalty proceedings. Unfortunately, no such evidence was filed neither before the Assessing Officer nor even before the CIT(A) in the appellate proceedings. In view of the above the CIT(A) was justified in upholding the order of the Assessing Officer wherein he has held that the assessee has concealed its income by filing inaccurate particulars. Therefore he rightly imposed penalty under section 271(1)(c). - Decided against assessee.

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• 2015 (12) TMI 1019
  Reopening of assessment - Held that:- The order of the A.O, no where speaks about having a new material or any tangible material to reopen the case. The Learned CIT(A) has recorded a finding that the assessing officer has called for relevant details during the course of original assessment proceedings. Hence it is quite clear that the reopening was done on the basis of change of opinion. It is well settled proposition that reopening cannot be done on the basis of change of opinion. - Decided in favour of assessee. Consideration of sale price - substitution of sale value - Held that:- The assessee sold 7,99,800 shares to Rainbow Agri Industries at the face value at Rs. 1/-. The A.O. determined fair market value at Rs. 3.50/- without bringing any material on record to show that the assessee received more than the agreed consideration. In the above said judgments of K.P.Varghese Vs. ITO (1981 (9) TMI 1 - SUPREME Court) and Rupee Finance & Management (P) Ltd. Vs. ACIT 7(2), Mumbai (2007 (2) TMI 240 - ITAT BOMBAY-J) it has been held that the fair market value and sale value is clearly distinguishable. Therefore, we are of the view that, without any supporting material, the A.O. cannot substitute market value. Therefore, order of the CIT(A) under challenge is not required to be interfered with on any ground. - Decided in favour of assessee.

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• 2015 (12) TMI 1018
  Interest income earned on business advances kept with the sister concerns - treated as ‘business income’ OR ‘income from other sources’ - Held that:- On perusal of the said Tribunal’s order in the case of ACIT vs. M/s. Piem Hotels Ltd, assessee’s sister concerns case we have no hesitation to come to a conclusion that the ‘interest income’ earned on business advances kept with the sister concerns should be treated as ‘business income’ instead of ‘income from other sources’. Considering the same, we find no infirmity in the order of the CIT (A) and upheld the decision taken by him. - Decided in favour of assessee.

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• 2015 (12) TMI 1017
  Penalty u/s. 271(1)(c) - addition u/s. 68 - Held that:- In the present case the assessee had disclosed the material facts before the AO. When the assessee has made a particular claim in the return of income and has also furnished all the material facts relevant thereto, the disallowance of such claim cannot automatically lead to the conclusion that there was concealment of particulars of his income by the assessee or furnishing inaccurate particulars thereof. It is a settled legal position that penalty proceedings are different from assessment proceedings and the findings given in the assessment though it may constitute good evidence but same is not conclusive in the penalty proceedings Further, merely because Assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself will not be sufficient for the authorities either to initiate penalty proceedings or impose penalty. In the present case, we are of the view that in the absence of complete and convincing corroborative evidence, the Revenue may justify addition, but in the matter of penalty proceedings, the onus lies heavily on the Revenue to prove that the assessee had concealed its income or has filed inaccurate particulars of its income. No penalty is leviable u/s 271(1)(c) and therefore direct its deletion. Decided in favour of assessee.

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• 2015 (12) TMI 1016
  Reconciliation of the difference between receipts as per TDS Certificates and receipts disclosed by the assessee - Held that:- On an appreciation of the facts on record we do not find the arguments and claims put forward by the assessee to be factually tenable. As per the business agreement dt.10.10.2003 and the letter dt.4.11.2003 supplementing the aforesaid agreement, the assessee's principal, M/s. Oyzterbay Pvt. Ltd. was to grant the assessee rentals of Rs. 36,000 per month in lieu of rents paid to the landlord; which works out to Rs. 4,32,000 per annum (viz. Rs. 36,000 x 12). This, in our considered view, certainly does not account for the difference of Rs. 8,91,075 between the receipts ofRs.43,94,366 as per the TDS Certificates and receipts of Rs. 35,03,291 declared by the assessee. In this view of the matter, we concur with and uphold the finding of the learned CIT (Appeals) that the explanation put forth by the assessee in an attempt to reconcile the difference in the receipts / turnover declared in the profit and loss account vis-à-vis the receipts/turnover in the TDS Certificates, is unacceptable as it does not controvert the findings of the learned CIT (Appeals) in the impugned order. - Decided against assessee

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• 2015 (12) TMI 1015
  Disallowance of the claim for deduction u/s. 37((1) - recruitment of employees before commencement of business - Held that:- The undisputed fact is that the assessee has recruited employees for the purpose of its business and as per the details exhibited at page-10 of the Paper Book about 16 employees are for the job of quality assurance. The assessee is in the business of Merchandising of diamonds/gold/jewelleries. Undisputedly, this line of business requires expertise who have proficiency in understanding the carats of diamonds and related jewellery, without such recruitment, it would be a futile exercise to commence the business. Therefore in our understanding of the law, the claim of the expenditure is allowable. We, accordingly, set aside the order of the Ld. CIT(A) and direct the AO to allow the claim of expenditure - Decided in favour of assessee.

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• 2015 (12) TMI 1014
  Eligibility to claim long term capital gains on sale of shares at a concessional rate of 10% during Asst Years 2001-02 to 2004-05 - exemption u/s 10(38) for Asst Year 2005-06 in respect of sale transactions routed through recognized stock exchange - Held that:- When purchase and sale of shares were supported by proper Contract Notes, deliveries of shares were received through demat accounts maintained with various agencies, the shares were purchased and sold through recognised broker and the sale considerations were received by Account Payee Cheques, the transactions cannot be treated as bogus and the income so disclosed was assessable as LTCG. In the assessment orders under consideration the AO has not considered any of these facts. He has treated the transactions as bogus only on the basis of the suspicion that the difference in purchase and sale price of these shares are unusually high. It is a settled law that assessment cannot be made on the basis of suspicion or surmise. The AO has not brought any material on record to support his finding that there has been collusion/connivance between the broker and the appellant for the introduction of its unaccounted money. In view of the decisions of Sri Anil Kr. Khemka (husband of the appellant) thus hold that the AO is not justified in treating the long term capital gain as bogus. Direct the AO to treat the long term capital gain as claimed by the appellant and tax them at the rates applicable for assessment years 2001-02 to 2003-04 and for assessment year 2005-06 exemption u/s. 10(38) should be allowed - Decided in favour of assessee

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• Customs

• 2015 (12) TMI 1001
  Fulfillment of export obligation - advance license - petitioner had imported certain consumables without payment of duty with an export obligation of granite tiles - failure to produce such evidence, show cause notice was issued asking the firm to submit the documents showing export obligation fulfillment - Held that:- When the petitioner failed to produce any documents whatsoever of having discharged the export obligation, we see no infirmity in the orders passed by the authorities below. By merely stating that the FIR was lodged for lost documents, petitioner cannot substitute the requirement of production of documents demonstrating export obligation. We may recall even this reaction from the petitioner came long after the period for filing relevant documents before the authorities had lapsed. The firm, in the meantime, was already declared defaulter for being unable to fulfill export obligation. It was only in response to show cause notice issued by the authorities that for the first time, the petitioner took the stand that the documents could not be produced since they were lost - Decided against assessee.

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• 2015 (12) TMI 1000
  Confiscation of imported goods being warp cut pile fabrics - velvet effect - Denial of the benefit of Notification No.30/2004-CX dated 09.07.2004 - Classification under under CTH 58013711 or CTH 50079090 - Imposition of redemption fine and penalty - Held that:- If the appellant had been aware of the intelligence received by DRI then amendment should have been sought exactly for the description as per the details found during examination of the goods. The amendment was sought only as per the e-mail dated 03.11.2014 received from the supplier of the goods which was not the actual description found on examination. Accordingly we are of the view that oral request for amendment was made on 03.11.2014 and appellant was not aware of the exact description of goods at the time of filing the bill of entry that a part of the goods will be fabrics of CTH 5801. Appellant also asked for 100% examination of the imported goods and there was an option from the seller of the goods to return the same. However, as the amendments sought was not for the correct description of goods, therefore, the same could not have been allowed by the Adjudicating authority. However, reasoning of Adjudicating authority for rejection, that amendment application was filed after receipt of DRI intelligence, is not correct as appellant has not sought the exact description of goods in the written amendment application dated 10.11.2014. It is accordingly held that request for amendment was not influenced by the intelligence received by DRI. Goods imported by the main appellant are warp cut pile fabrics whereas velvet effect can be obtained both by “uncut pile” as well as “warp cut fabrics”. As per above distinctions available an “uncut pile fabrics” will be classifiable under CTH 58013711 and 58013719 but all such uncut pile fabrics need not be known as velvets. On the other hand warp pile fabrics (including cut velvet) will be classifiable under CTH 58013720. Scientific literature furnished by the appellant do indicate that there are categories of uncut pile fabrics in the market which are also known as velvets (Epingle & Terry Velvet). Corresponding entries under Customs Tariff for Cotton Velvet fabrics are 5801 2710 & 5801 2720 but the word “velvet” has not been mentioned in these classification at all. The crucial words are “warp pile fabrics, cut” (58012710) & other (5801 2720). Thus more important in the classification of a fabric under 5801 3711/19 and 5801 3720 will be the “cut” or “uncut” nature of “warp pile”. Accordingly we are of the considered opinion that stand of the Adjudicating authority and the learned A.R., that all categories of “velvet” fabrics will invariably fall under 5801 3711, is not correct and is rejected. So far as exemption from CVD under Notification No.30/2004-CE dated 09.07.2004 is concerned, the case of the appellant is that no CENVAT Credit used in the manufacture of imported goods could have been taken as the same were not manufactured in India - appellant are entitled to CVD exemption under Notification No.30/2004 dated 09.07.2004. Appellant came to know about the discrepancy and mix up in some of the imported goods as per e-mail dated 03.11.2014 from the supplier and appellant made a bill of entry amendment request as per the changed description given by the supplier of the goods. Existence of such an e-mail and its receipt by the appellant is not disputed. If the appellants had come to know of the investigation being conducted by DRI then they could have given the exact description of the goods found during physical examination. There is no evidence on record that appellants had prior knowledge of the exact description of goods and we hold that the conclusions drawn by Adjudicating authority are based on presumptions and surmises. Under the existing factual matrix orders regarding confiscation of goods and imposition of penalties upon the appellants and confiscation of goods under Section 111(m) and Section 119 of the Customs Act, 1962 are not justified and are set aside - Decided against Revenue.

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• 2015 (12) TMI 999
  Suspension of CHA license - Misdeclaration of country of origin - Held that:- Suspension of CHA licence and revocation of licence originated on account of investigations initiated by DRI based on the intelligence on the alleged import of PVC flex banners in respect of seven IEC holders i.e. including Jeyam Impex and 7 others who filed various Bills of Entries for import of PVC flex banners. It is alleged that IE codes of these firms were lent to persons to import the goods who in turn misdeclared the country of origin as Malaysia to evade anti-dumping duty as the said goods are actually originated from China and not from Malaysia. During the investigation proceedings, the appellant's CHA licence was suspended on 18.11.2013 and the same was continued vide another order dt. 12.12.2013. On perusal of the findings in the order, we find that the appellant failed to inform the department of filing of IE code who are not IEC holders and also failed to verify KYC norms. Even though the investigation was completed in the year Nov 2013, till date no proceedings initiated nor any SCN issued to importers and other persons for the alleged misdeclaration of goods for evasion of anti-dumping duty. Only after issuance of SCN under Customs Act where the charges are brought out only, then authority can allege whether IE code belongs to another person and who is actual importer etc. and the role played by appellant leading to evasion of ADD can be taken as ground for taking any action under CHALR. We failed to understand the reasons for initiating revocation of CHA licence based on the alleged contravention of lending of IE code when no SCN was issued under Customs Act. - SCN itself is premeditated one and violated principles of natural justice. In view of the High Court's order on this account also, the impugned order is liable to be set aside. - Decided in favour of appellant.

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• 2015 (12) TMI 998
  Classification of goods - whether the paddle wheel aerators and its parts imported and cleared are classifiable under Chapter 8436 as other agricultural, horticultural machines or under Chapter 8479 as machines having individual functions not elsewhere specified as held by the department - Held that:- Appellant had imported paddle wheel aerators under Bills of Entry mentioned above and classified under chapter 87368090. It is not disputed that the paddle wheel aerators are used in aquaculture and its activities are part of aquaculture. Aquaculture is also known as aqua farming, ie., farming of aquatic organisms such as fish, crustaceans, molluses and aquatic plants - paddle wheel aerators are used for fisheries/aqua culture and are classifiable under chapter heading 8436 of the CTH. Accordingly, the impugned order is set aside - Decided in favour of assessee.

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• 2015 (12) TMI 997
  Duty demand - Misdeclaration of goods - Imposition of interest and penalty - Held that:- There is no dispute that the mis-declared goods have been imported under the name of the proprietorship firm of Shri Bipin J Shah. He has also filed Bill of Entry and pre-deposited Rs. 25 lacs towards differential duty for all the 11 consignments of the impugned goods during investigation. Therefore, we find that Shri Bipin J Shah cannot escape from the mischief of importation of mis-declared goods. Therefore, the duty of Rs. 17,51,707/- demanded from his proprietorship firm, under the impugned Order in Original, alongwith interest as applicable, is upheld. Penalty on co-appellants are upheld - Decided against Assessee.

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• 2015 (12) TMI 996
  Claim of interest on refund of the redemption fine, penalty and differential duty - delayed refund - Held that:- Commissioner (Appeals) has followed the provisions of Section 27A and allowed refund from the expiry of three months from the date of application under Section 27 (1). This is what the Section 27A prescribes. Refund has to be allowed as per provisions as it existed at the time when refund arose as a consequence of Tribunal order. Further more I find that the learned Counsel has failed to point out any authority which allows interest on the refund of fine and penalty. The Section 27A clearly covers only the payment of interest on duty. Since there is no such provision in law, the same cannot be allowed. - Decided against Assessee.

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• Corporate Laws

• 2015 (12) TMI 992
  Exclusive employment of the company - prohibition contained in Section 314(1)(b) of the 1956 - relative of a Director of a company - whether on account of the petitioner no.2 being a Director in other companies can be said to be not in the exclusive employment of the petitioner no.1 Company or holding a place of profit in the other companies - Held that:- A Director cannot be said to hold any office or place of profit if he should receive the remuneration to which he is entitled as such Director; on the other hand he will be said to hold an office or place of profit only when, besides the remuneration to which he is entitled as such Director, he obtains from the company a remuneration such as salary, fees, commission, perquisites. It thus follows that the petitioner no.2, from the factum simplicitor of serving at Board level in other companies could not have been held to be in the employment of those companies, for it to be said that he could not be in the exclusive employment of the petitioner no.1 Company and could not have been on this ground refused appointment in the petitioner no.1 Company. Similarly, without the petitioner no.2 receiving any other emoluments from other companies in which he was/is a Director, it could not be said that he was/is holding any office of profit therein. though the impugned order reasons that the provisions of Section 314 cannot be got around by serving a non-executive/non-remunerative position in other companies but does not state that any other inquiry was done by the respondent or it was found that the petitioner no.2 though stated to be serving in non-executive and non-remunerative position in other companies but was devoting his time and energy thereto. Thus, though the reasoning may be correct if supported by the facts but de hors a factual finding is contrary to the statutory mandate. The statutory mandate is that being a Director in a non-remunerative and non-executive position in other companies does not amount to being in employment of those companies or holding a place of profit in those companies.

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• Service Tax

• 2015 (12) TMI 1013
  Waiver of pre deposit - Commercial or Industrial Construction service - Held that:- Appellant is a sub-contractor to M/s L & T Limited for construction of transport terminal for M/s Reliance Industries Ltd. Apart from appreciating the fact that definition of 'Commercial or Industrial Construction' does not include the service provided in respect of transport terminal, we also find that demands were raised against the main contractor i.e. M/s L & T Ltd. and were confirmed to the extent of about Rs. 28 crores. M/s L & T Ltd. filed an appeal along with stay petition which was disposed of vide stay order No. 1746/2009 dated 11.12.2009 directing them to deposit an amount of Rs. 6 crores. Inasmuch the present demand relates to a part of the main contract provided to M/s L & T Ltd. and inasmuch as the demand in respect of the entire contract stands raised against M/s L & T Ltd., the present demand of sub-contract get included in the main appellant. By appreciating the fact, we grant waiver of pre-deposit and allow the stay petition unconditionally. - Stay granted.

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• 2015 (12) TMI 1012
  Waiver of pre deposit - C & F Agent service and CHA service - Business Support Service - Held that:- Appellant has made out a case in respect of this demand since the amount collected for the same service for two periods has been classified under two categories of service and in respect of CHA service, there is already a precedent decision in favour of the appellant. As regards the earlier period, we take note of the fact that the activity undertaken by the appellant is only organizing the transportation and in the absence of any evidence to show that no tax has been paid on the transportation activity, it may not be proper to levy tax on the appellant especially in the absence to show that appellant was a C & F agent of any of the customers in respect of these transactions. As regards the demand for 'Business Support Service', the appellant has only identified the transporter and mode of transportation for the customers and the department's view is that appellant has lent logistical support to the customer. The logistical support involves many types of activities and not mere transportation. From the facts as submitted during the discussions, what we see is that for levy of service tax there is much more than freight element involved. - Stay granted.

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• 2015 (12) TMI 1011
  Waiver of pre deposit - foreign expenses (misc. foreign exchange) on account of advertising services/ICC payment - Held that:- Appellant had not paid service tax on foreign exchange expenses amounting to Rs. 22,78,90,146/- shown as advertising services/ICC payment and that the appellant failed to provide satisfactory answer to the audit which raised the objections. The impugned order does not identify as to what was the taxable service provided. Though at one place it discusses the scope of sponsorship service, it nowhere discusses the scope of advertising agency service and as to how the impugned expenses were related to advertising agency service - it was incumbent upon the adjudicating authority to analyse as to how the impugned expenses related to services which fell in the scope of advertising agency service. No such analysis is noticed in the impugned order. It is not sustainable to presume that the impugned expenses related to advertising agency service (even if the appellant failed to give satisfactory reply in the opinion of the adjudicating authority) because the onus to sustain the allegation is on Revenue. There is not even a whisper in the Show Cause Notice also as to how the impugned foreign exchange expenses related to which taxable services. On the other hand the appellant on its own stated that the said expenses were incurred for purposes which were not taxable - appellant has made out a case for waiver of pre-deposit - Stay granted.

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• 2015 (12) TMI 1010
  Refund claim - Information Technology Software Service(ITSS), Business Auxiliary Service(BAS) and Business Support Services(BSS) - nexus between the input and output services - Held that:- The bar imposed for availing credit would clearly show that the treatment of the service received as output service is only for the purpose of payment of service tax by the receiver and no other purpose. In view of the above, I find that the submissions by the appellants relating to calculation of turnover for the purpose of calculating admissible refund are correct. - As regards nexus in respect of different services, the learned counsel relied upon several decisions to submit that appellant is eligible. Since the matter has to be remanded in any case to the original authority, the Tribunal need not deal with the same but to leave it to the original authority - impugned orders are set aside and the matters are remanded to the original adjudicating authority - Decided in favour of assessee.

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• 2015 (12) TMI 1009
  Classification - distribution of salary by bank - Banking and other Financial Services or business auxiliary service - Held that:- Lower authorities were in error in holding that appellant would fall under the category of commission agent and the amount received by them from the Government of Maharashtra through Zilha Parishad as service charges for disbursement of salaries of Govt. teachers cannot be considered as commission received, though it may be entered in the records of the appellant as commission received. - It may be seen from the reproduced definition the commission agent is defined as a person who while acting on behalf of other person undertakes the activity as mentioned herein above paras (a) to (d). None of the activities as indicated herein above is undertaken by the appellant as disbursement of salaries to the Govt. teachers would not fall in any of the activity, sale or purchase of goods or service. In our considered view, an amount received as a consideration for disbursement of salaries to the Govt. teachers on direction of Zillha Parishad can never be an activity covered under the definition of Business Auxiliary Service and more so it cannot be termed as an amount received by the appellant as commission agent. In view of the facts and circumstances of this case, we hold that the impugned order is unsustainable and liable to be set aside - Decided in favour of assessee.

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• 2015 (12) TMI 1008
  Demand of service tax - Commercial or Industrial Construction/Works Contract service - Held that:- It is settled law that while exercising the powers of revision under Section 84 of the act, the Commissioner cannot review or revise the discretionary powers exercised by the original adjudicating authority under Section 80 of the act. He relies upon the decision of the Hon'ble High Court of Karnataka in the case of CCE, Bangalore II Vs. Sunitha Shetty [2004 (9) TMI 1 - KARNATAKA HIGH COURT] and in the case of CST, Bangalore Vs. Handimann Services Ltd. [2011 (9) TMI 690 - KARNATAKA HIGH COURT ] and the decision of this Tribunal in the case of Sneha Minerals Vs. CCE, Belgaum [2010 (7) TMI 387 - CESTAT, BANGALORE ]. After going through the said decisions, I find that in the case of Sneha Minerals, this Tribunal had taken a clear view that a revisionary authority under Section 84 cannot substitute his discretion for that of the original authority. Since the decision of this Tribunal was made by a division bench, the judicial discipline requires that it should be followed. - Decided in favour of assessee.

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• Central Excise

• 2015 (12) TMI 1007
  Exemption of duty under Notification No. 6/2002-CE dated 01/03/2002 - Held that:- Tribunal is specifically covered the components and parts whereas the entry in the current case does not cover the components and parts specifically - decision of Pushpam Forgings is not applicable to the current case. The motor is by definition, a device that conversion of electric energy into mechanical energy. It does not convert agricultural, forestry, agro-industrial, industrial, Municipal & Urban waste into energy. It is not a energy producing device by any stretch of imagination. Thus, it would not be covered under sl. No. 16 of list no. 9 of notification no. 6/2002-CE. - Decided against assessee.

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• 2015 (12) TMI 1006
  CENVAT Credit - credit on invoices issued by their head office as Input Service Distributor - Held that:- Cenvat Credit Rules, 2004 do not prescribe any time limit for taking the credit. If the credit is admissible and the documents for availing the credit are available, credit can be taken at any time. The Cenvat Credit Rules do not prohibit availment of cenvat credit in respect of inputs/input services which have been received prior to registration. The Cenvat Credit Rules contain no express restriction on distribution of credit earned prior to taking the registration by the ISD also. Hence the ISD can avail credit of service tax paid on input services received prior to registration and moreover, in this case there is only one manufacturing unit of the appellant and the Revenue was well aware of this fact from the very beginning - Decided in favour of assessee.

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• 2015 (12) TMI 1005
  Denial of exemption under the Notification No. 64/1995-CE on the ground that the goods cannot be treated as ship stores - Held that:- Apex Court’s decision [2014 (6) TMI 345 - SUPREME COURT] is squarely applicable as there is no dispute on facts that appellants have supplied the radar and its parts to Indian navy, which is supported by the certificate issued by the competent authority. Therefore, the appellant has rightly claimed the excise duty paid on the goods supplied to the Indian Navy and they are eligible for exemption under Notification No. 64/1995-CE dated 16.03.1995. - By respectfully following the ratio delivered in the above judgment of the Hon ble Supreme Court of India, we hold that the respondent/assessee are eligible for exemption under Notification No.64/1995-CE (Sl.No.3) dated 16.3.1995 as amended by Notification No.25/2002-CE dated 11.04.2002 - No infirmity in impugned order - Decided against Revenue.

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• 2015 (12) TMI 1004
  Demand of equal amount of credit availed on the duty paid goods returned under Rule 16 (2) o Central Excise Rules - Denial of refund claim - Held that:- There is no dispute on the facts that certain quantities of finished goods were rejected and returned by the customers for various reasons and the cenvat credit of duty paid was taken by the appellants under Rule 16(1) and subsequently the rejected goods were sold in auction as such and cleared on payment of duty on the transaction value in terms of second leg of sub-rule (2) of Rule 16. - Whereas, the assessees contended that they have correctly paid the excise duty while removing the said goods and stated that they are covered under the second part of sub-rule (2) of Rule 16 under the term used “any other case” stated in the said sub-rule. We find that both sides sought to interpret the provisions of Rule 16 in their own way. The period of dispute is from 01.07.2001 to 30.06.2005 in the assessee s appeal and from July, 2007 to March, 2010 in the Revenue s appeals. It is established beyond doubt that no process has been carried out on the returned goods. Therefore, on the question of whether first part of sub-rule or the second part of sub-rule of Rule 16 is applicable, we find on the very same issue has been dealt in detail by the Tribunal’s co-ordinate Bench, Mumbai in the case of M/s. Apollo Tyres Ltd. Vs. CCE, Pune-II (2010 (2) TMI 846 - CESTAT, MUMBAI) allowed the appeal. - issues are identical and the duty paid goods are rejected and returned to the factory of the assessee and without doing any processes the said goods were sold by auction to third party “as is where is basis” and cleared on payment of excise duty on the transaction value as per Section 4 of the Central Excise Act. - appellants are not liable to pay the amount equal to cenvat availed on the returned goods. Accordingly, the demand is set aside in the assessee s appeal. Consequently, they are not liable for any penalty and the same is also set aside. - Decided in favour of assessee.

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• 2015 (12) TMI 1003
  Demand of duty - duty on the quantity of 886.65 kiloliters of intermingled/ interface quantity of MS & SKO and downgraded to HSD - Held that:- Appellants are discharging duty from the warehouse on petroleum products as per the practice followed during the relevant period. They received non-duty paid goods through pipelines and stored it in the storage tanks at the warehouse. It is seen from the records that when the petroleum products sent through the pipelines from Kochin, Coimbatore, Karur pipelines, in specific sequence of SKO, MS, SKO, HSD, SKO, MS and the product is changed in the pipeline at regular interval and there will be intermix of two products. In the present case it is SKO & MS. We also find from the order of the adjudicating authority in respect of two of the intermingled/ interfaced quantity, the appellants have already upgraded it. Whereas, in the case of 886.65 kiloliters of interfaced quantity, wherein 50% of MS and 50% of SKO are intermixed, either downgraded or upgraded by the appellants based on the test report of the samples drawn from the intermingled products. It is tested in their own laboratory. On receipt of the test reports, the intermixed product is transferred to the respective main tank containing HSD or MS oil. We also find that the interface quantity is received separately and stored in slop tanks only after the testing and depending upon the report, these goods are transferred to the respective main tank and thereafter cleared on payment of excise duty. There is no dispute on the fact that the interface/intermingle quantity has to be cleared as HSD or MS or SKO. Therefore, higher products MS & SKO once it is intermixed it loses its originality and therefore it cannot be cleared to a consumer as MS or SKO, if it doesn’t meet specification. Therefore, as per the BIS standards and as per the test report, the product if it is higher quality, it is upgraded and if it is lower quality, it is downgraded. It is the general practice followed for all the petroleum products cleared through pipeline where the intermingled/interface quantity emerges and stored separately and subsequently upgraded or downgraded. - there is no dispute on the fact that the interface/intermingle quantity has to be cleared as HSD or MS or SKO. Therefore, higher products MS & SKO once it is intermixed it loses its originality and therefore it cannot be cleared to a consumer as MS or SKO, if it doesn’t meet specification. Therefore, as per the BIS standards and as per the test report, the product if it is higher quality, it is upgraded and if it is lower quality, it is downgraded. It is the general practice followed for all the petroleum products cleared through pipeline where the intermingled/interface quantity emerges and stored separately and subsequently upgraded or downgraded. - Decided in favour of assessee.

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• 2015 (12) TMI 1002
  100% EOU - Job work - goods were ultimately exported by HLL - allegation that "Instant Coffee Powder" cleared to DTA by wrongly availing the benefit of Notification No.43/2001-CE (NT) dt. 26.6.2001 - Imposition of interest and equivalent penalty under Rule 25 of Central Excise Rules,2002 - Held that:- Appellant have chosen to supply to special category of buyers covered under Rule 19 (2) of the Central Excise Rules. Duty shall be payable only if the clearances are made to general category of buyers. We agree with the submission of the learned Advocate that Rule 19 does not exclude the clearances from 100% EOU from its purview. We find that Notification No. 43/2001-CE dated 26.06.2001 was issued under Rule 19 of Central Excise Rules. As per clause 2(ii) of the notification, exemption is allowed subject to fulfilment of the condition that provisions of the Central Excise (Removal of Goods at Concessional Rate of Duty for manufacture of Excisable Goods) Rules, 2001, shall be followed mutatis mutandis. We also find that the goods were cleared under ARE-3 procedure to M/s. Blend Pack and receipt of the goods were accounted for by M/s. Blend Pack and intimation was sent to jurisdictional Commissioner of appellant s unit. Blend Pack is a job worker of Hindustan Level Ltd., (HLL) for further repacking and the goods were ultimately exported by HLL, which is not in dispute. Appellant EOU cleared the goods under Notification No. 43/2001 which was issued under Rule 19 of the Central Excise Rules and the goods were ultimately exported by HLL. Therefore, the question of demanding duty on the instant coffee powder ultimately exported does not arise and the demand is liable to be set aside. Consequently, no penalty is imposable. - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2015 (12) TMI 995
  Validity of SCN - Bar of limitation - Held that:- Petitioner on receipt of the notice, had filed the writ petition in this Court challenging the same to be without jurisdiction. The petitioner had neither filed any objection/reply to the said notice nor raised the pleas as have been raised in the instant writ petition before the competent authority. - we do not find any justifiable reason to interfere with the notice under challenge. However, we clarify that the proper course of action for the noticee is to file detailed and comprehensive objection/reply and to raise all the pleas as have been raised in the writ petition. In case any objection/reply is filed by the petitioner within a period of two weeks from the date of receipt of the certified copy of the order, the revisional authority shall decide the same within a period of six weeks from the date of receipt of the objection/reply in accordance with law after affording an opportunity of hearing to the petitioner and by passing a speaking order before proceeding further in the matter. - Petition disposed of.

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• 2015 (12) TMI 994
  TNVAT - Suppression - Assessee's request to grant sufficient time to collect documents and filing if final reply not considered - Held that:- At the time of inspection conducted by the Enforcement Wing, the petitioner had produced certain documents and also filed a preliminary reply dated 28.08.2014, which is not denied by the respondents. But, the said documents and reply filed by the petitioner were not considered by the 1st respondent before passing the impugned orders dated 21.07.2015. Failure on the part the respondent in considering the reply as well as documents filed by the petitioner results in violation of principles of natural justice. Further, as the entire assessments are related to the consumption such as petrol, diesel, electrodes and cables for the use of the petitioner, necessary documents are to be verified by the 1st respondent. Despite the production of documents even before the Inspecting Officers, the same lost sight. In view of the same, the impugned orders are liable to be set aside. It is brought to the notice of this Court by the learned counsel for the petitioner that subsequent to the impugned orders, the Bank Account of the petitioner was attached. Since the assessment orders have been set aside now, the attachment of the petitioner's bank account shall be lifted forthwith. Matter remanded back - Decided in favour of assessee.

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• 2015 (12) TMI 993
  Recovery of duty - Extension of stay order - Held that:- Stay order dated 12.01.2015 continued and remained in force until the expiry of 180 days therefrom, and not extended in view of the second proviso to Section 14(4) of the 'Act', but for the reasons having bearing on the default of the first respondent in not placing the assessment records for speedy disposal of the appeal within 180 days from 12.01.2015 the date of stay order, resulting in the applicability of the second proviso of sub section (4) of Section 14 of the Act. - Since no default or improper acts can be attributed to the petitioner, it is needless to state that ends of justice would be met by continuing the interim order until the disposal of appeal, and a direction to the first respondent to place the assessment records before the KAT as expeditiously as possible. - Appeal disposed of.

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• Indian Laws

• 2015 (12) TMI 991
  Contravention of Rule 6 of the Packaged Commodities Rules - compoundable on payment of compounding fees of Rs. 25,000/- as prescribed under the Packaged Commodities Rules made by the Central Government or on payment of Rs. 2,500/- as prescribed under the State Rules? - Held that:- It is no doubt true that Schedule XI of the Delhi Legal Metrology (Regulation) Rules, 2011 includes the offence of non-compliance of declaration in respect of pre-packaged commodity by manufacturer or dealer under Section 18(1) of the Act. However, in the absence of any provision in the said Rules providing for such declaration on pre-packaged commodity and non-compliance thereof, the said Rules cannot be made applicable for compounding the offences of contravention of Packaged Commodities Rules, particularly after insertion of a specific provision for compounding under Rule 32(3) of the Packaged Commodities Rules. Apparently, sub-section (3) Section 52 of the Act provides for fine but not the compounding fees, whereas the impugned Rule 32(3) of the Packaged Commodities Rules provides for compounding amount. In fact, the upper limit of the compounding fees has been provided by Section 48 of the Act itself inasmuch as the proviso states that the compounding amount shall not in any case exceed the maximum amount of the fine which may be imposed under the Act for the offence so compounded. Under Section 36 of the Act, the fine prescribed for the first offence is Rs. 25,000/-, for the second offence Rs. 50,000/- and for the subsequent offence not less than Rs. 50,000/- which may extend to Rs. 1,00,000/- or with imprisonment for a term which may extend to one year or with both. The compounding fees prescribed as Rs. 25,000/- under Rule 32(3) of the Packaged Commodities Rules is thus in conformity with the Act. Thus, Rule 32(3) of the Packaged Commodities Rules is not in conflict with the parent Act. The conflict, as being contented by the petitioner, is purely imaginary and non-existent and appears to be result of misreading of the provisions. For the aforesaid reasons, the writ petition is devoid of any merit and the same is accordingly dismissed.

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• 2015 (12) TMI 990
  Grant of leave against the judgment of acquittal - The accused-respondent has been acquitted for offence punishable under Section 138 of the Negotiable Instruments Act (for short 'NI Act') - Held that:- On perusal of statement of the complainant, it has come on record that in his cross-examination, he has admitted that he is income tax payee and from the last six years, he has furnished ITR but he has not shown the amount of cheque in dispute in Income Tax Return. He has stated that he has borrowed this amount from his father as his father retired in December 2013 from Agricultural Department. Neither he has received anything in writing from his father nor there was any document to show that the amount was borrowed from him. It has also not been proved on record that he maintained any accounts. Moreover, he has also not produced any account statement to show that he has taken amount from his father. As per statement of complainant, his father retired in December 2013 from Agricultural Department and the amount in question was given to the accused in February 2012 much prior to his retirement. The accused has placed on record three documents Ex.D1 to Ex.D3. Ex.D1 is copy of complaint filed by brother of the complainant in the year 2010 and two cheques amounting to Rs. 55,000/- have also been mentioned. Said cheques were returned due to insufficiency of funds and thereafter, complaint was filed. No doubt, the complaint was dismissed as withdrawn but it shows that the cheque in dispute is also of the same series on the basis of which, earlier complaint was filed, which was dismissed as withdrawn. It has specifically been mentioned by the trial Court that it cannot be ruled out that the cheque in dispute was not misused as taken as a defence by the accused. The complainant has failed to prove as to in which capacity, he had paid such a huge amount without any document. The complainant has also failed to prove his case and the presumption goes against him. The trial Court considered the submissions and by considering the evidence on record, no case was made out against the accused and he was acquitted of the charge. Learned counsel for the applicant is not able to prove as to how the finding recorded by the trial Court is contrary to the evidence or law. Hence, the present application for grant of leave to appeal against judgment of acquittal is dismissed.

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