TMI Tax Updates - e-Newsletter
December 23, 2015

Case Laws in this Newsletter:

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

TMI SMS

• Service tax - deduction can't be allowed for want of evidence to establish exact amount of reimbursement of expenses from the gross amount

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• ST-3 return - There is no provision where the amount payable for service can be set off against amount receivable for the services provided

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Articles

• GST NETWORK (GSTN) TO IMPLEMENT GST
• PUBLIC INTEREST
• Assessable value would be the transaction value where it isn’t influenced by the relationship between the buyer and the seller

News

• Union Government’s Annual Accounts for 2014-15 along with the Audit Report of CAG presented in Parliament; An Analytical Report titled ‘Accounts at a Glance 2014-15’ giving a macro level overview of the financial position of the Government also circulated among the Members of the Parliament

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• Exports: No Cause for Panic Excluding Petroleum and Gems and Jewellery, no Significant Decline in India’s Exports

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• RBI Reference Rate for US $

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Highlights / Catch Notes

Income Tax

• Validity of notice issued u/s 131 - The observation of the learned Single Judge that the authorized officer has trespassed into the house of the assessee and it deserves to be prosecuted before the competent criminal court, has no legal basis - HC
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• Treatment of rental receipts for the purpose of Income-tax - Possession of the property was not taken by the tenant. Hence, the monies received by the assesses will not take the character of rentals - No additions - AT
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• Rebate u/s 88E of the STT paid while working out the tax under the provisions of Minimum Alternate Tax (MAT) as specified u/s 115JB - rebate u/s 88E had to be allowed even when total income is computed u/s. 115JB - AT
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• Validity of assessment u/s 153C - it is necessary that the satisfaction must be recorded by the AO of the searched person and thereafter the documents are to be handed over to the AO of other person and this position will not alter even if the AO for the searched person and the other person i.e. the assessee is the same - AT
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Customs

• Smuggling of goods - export of the smuggled zirconia into India from Malaysia by a premeditated design - Authority failed to conduct overseas enquiry against the racket and no thorough investigation was made into the affairs of CHA, freight forwarder as well as the consignee and there was only pretence to justice by investigation following an empty formality to pass a superfluous adjudication order - AT
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• Levy of Penalty u/s 112 for wrong filing of Bill of entry on the employee of CHA - Revocation of ID Card - Adjudicating Authority was not justified in revoking the Identity card of the appellant for which no show cause notice was issued - AT
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• 100% EOU - appellants failed to install Secondhand Textile Machinery (capital goods) within the stipulated time of one year, or within the extended period - Confiscation of goods - demand of duty with interest confirmed - AT
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• Imposition of penalty on Director - Penalty being imposable on the basis of mens rea, it should be on a personnel of the Managing Director but not on his designation. Therefore, the Corrigendum which has no force in the eyes of law does not become enforceable - AT
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Service Tax

• Levy of penalty for delayed filing of ST-3 return - This penalty of ₹ 4000/- imposed under Section 70 of the Finance Act, 1994 on the appellant assessee does not deserve to be set aside - AT
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• Refund claim made by the recipient of services - service tax was paid wrongly by the service provider - refund allowed - AT
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• Classification of service - The radiographic testing services rendered by the appellants does not fall under the category of photographic services during the relevant period - AT
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• Valuation - Inclusion of reimbursement of expenses - it does not have any evidence as to what was the actual amount of such reimbursements and therefore as the appellant is not in a position to claim such deduction for want of evidence to establish the exact amount of such reimbursements - AT
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• CENVAT credit - input services viz. advertisement, DVD film production, campaigning in electronic and print media etc. which were used for collecting capital through IPO by the appellant - credit allowed - AT
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• Demand of service tax - best judgement assessment - wrong filing of ST-3 return - appellants have adjusted the payables against receivables in the figures given in the return - demand confirmed - extended period of limitation invoked - AT
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Central Excise

• Recovery of dues of the company from the Director - the action of the respondents in compelling the petitioner to clear the dues of the company cannot be sustained. - HC
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• Due to shortage of space, the appellant kept the imported materials partly adjacent to the factory premises - demand of cenvat credit would arise if the manufacturer fails to establish that the input in question was not used in the manufacture of final products. - AT
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• CENVAT Credit - Since, the assessee is not a service provider and is only a manufacturer, the credit on the services, when they relate to motor vehicles, are not available to them. - they cannot take credit of service tax paid on insurance in respect of their employees - AT
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• Manufacture - whether Aluminium wire Rods /Aluminium wires (30 in number) when twisted with a core of steel wires (7 in number) amounts to manufacture of a different manufactured product - Held Yes - AT
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• CENVAT Credit - Use of capital goods for Job Work - duty of excise paid on debonding of 100% EOU on capital goods claimed as credit - clearance of the goods by a job worker if exempt from duty that does not disentitle the job worker to the CENVAT credit. - AT
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• Denial of exemption claim - yarn waste - there is no irregularity in the clearance of yarn waste free of duty - Benefit of Notification No.30/2004-CE, dt.09.07.2004. allowed - AT
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VAT

• DVAT - it is only the Commissioner who can pass an order under Section 36A(8) unless and until the power of the Commissioner has been delegated under Section 68 of the said Act to the VATO. - But that has, admittedly, not been done. - order set aside - HC
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Case Laws:

• Income Tax

• 2015 (12) TMI 1131
  Disallowance u/s 40(a)(ia) - TDS not deducted by assessee - ship management work - Tribunal deleted disallowance confirmed by HC [2013 (7) TMI 622 - ALLAHABAD HIGH COURT] - Apex Court dismissed the appeal after condoning the delay. Tribunal has held that, for disallowing expenses from business and profession on the ground that TDS has not been deducted, the amount should be payable and not which has been paid by the end of the year

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• 2015 (12) TMI 1130
  Computation of ALP - whether international transactions the AO/TPO is precluded from taking into consideration transactions with Non Associate Enterprises, while arriving at the ALP using the Net Transactional Margin Method (TNMM); whereas Rule 10B(1)(e) mandates the consideration of profit margins with unrelated enterprises? - Held that:- The question as proposed by the revenue does not seems to arise from the impugned order of the Tribunal nor is the method of determination of ALP on application of TNMM arriving at the margin of 4.79% is disputed before Tribunal or before us. We are unable to understand the grievance of the revenue as formulated in the proposed question. The respondentassessee has not challenged the application of TNMM and arriving at the margin of 4.79% arrived at by the TPO to determine ALP. The grievance of the respondentassessee before the Tribunal is only with the margin of 4.79% being applied in respect of all it's sales and not restricted to the international transactions entered into by the respondentassessee with it's AEs. It is evident from the provisions of Chapter X of the Act that the adjustment which has to be done to arrive at ALP is only in respect of the transaction with it's AEs. Thus no fault can be found with the order of the Tribunal. Revenue is unable to point out how the aforesaid finding of the Tribunal is incorrect in law in the face of the clear provisions in Chapter X of the Act. The question as framed by the revenue to our mind do not arise from the impugned order of the Tribunal as the issue raised in the proposed question is not disputed. - Decided against revenue

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• 2015 (12) TMI 1129
  Unexplained cash credit u/s 68 - gifts received from NRI - ITAT reversing the order of CIT (A) of deleting the addition - Held that:- It is not possible to state that the impugned order passed by the Tribunal is based on conjectures or surmises. The Tribunal, on the contrary, has considered all the relevant material and based its conclusions on the findings recorded by it after appreciating the material on record. From the findings recorded by the Tribunal, there is nothing to indicate that it has considered any irrelevant material or that any relevant material has been ignored, nor can it be said that the conclusions arrived at by the Tribunal are in any manner unreasonable or perverse to the record of the case, so as to warrant interference. Tribunal, after duly appreciating the material on record, has recorded findings of fact for the purpose of coming to the conclusion that the gifts in question are not genuine. In the present case, the returns of income filed by the Indian donors have been placed on record, which clearly reveal that the donors did not have the financial capacity to gift such huge sums of money. Clearly therefore, the assessee has failed to prove the creditworthiness of the donors. Even the donors who appeared before the Assessing Officer clearly did not have the capacity to make such gifts. In relation to the gifts received from the NRI donors, except for the fact that such amount was received from banking channel and their confirmations were filed, no other supporting material had been produced by the assessee to prove the identity of the donors, the genuineness of the gifts and the creditworthiness of the parties Insofar as the submission advanced by the learned counsel for the assessee that in the light of the finding recorded by the Tribunal that the original passports of the NRI donors had not been produced, the matter is required to be restored to the file of the Tribunal, in the opinion of this court, in the absence of any cogent material having been brought on record by the assessee to prove the financial capacity of the NRI donors or the genuineness of the gifts, no case has been made out for restoring the matter to the file of the Tribunal. - Decided in favour of the revenue and against the assessee

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• 2015 (12) TMI 1128
  Sale of part of land - business income or agricultural income - Held that:- Under the provisions of section 2(14)(iii)(a)/ (b), the assessee's land can be held as agricultural land situated beyond 8 kms outside the Gurgaon Municipal limits and that the area population of residents of the village Fazilpur Jharsa being below 10000, the assessee's asset is outside the purview of capital asset. The AO is not justified in rejecting the assessee's alternative claim of exemption under section 54F as it has made investment worth ₹ 7.18 crores more than the sale consideration within a short period of six months by acquiring a residential property at New Delhi. Therefore, the AO was not justified in making addition treating assessee's agricultural income as business income. The same has rightly been deleted by learned CIT(A) and confimed by ITAT As regards treatment of agricultural income as undisclosed income, the assessee had furnished a copy of Girdawri pertaining to the earlier financial years 2005-06 and 2006-07 that crop of sarson was grown and cultivated in the assessee's land holdings and out of the said sarson crops, some crop was retained to be used as sarson seeds in the next years. Ex Sarpanch of Gram Panchayat of Village Fazilpur Jharsa, Form J No.III dated 15.3.2008 duly verified by Shri Jasmeet Singh on 13.12.2010. As per these documentary evidences, the assessee had discharged its onus. These evidences cannot be brushed aside by the AO. The assessee had been using the neighbourer's tube well for water purposes. The statement of original seller for development of land does not hold any significant and evidentiary value against the assessee. Therefore, as per copy of Girdawri and certificate issued by the Sarpanch, the AO was not justified in rejecting assessee's contention with regard to the said agricultural income. In view of the above discussions, we find no infirmity in the order of the learned CIT(A) who has rightly deleted the addition so made by the AO aNd confimed by ITAT. - Deleted against revenue.

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• 2015 (12) TMI 1127
  Disallowance of depreciation at the rate of 15% on fee paid to Registrar of Companies for expansion of capital base - Held that:- Viewed from any angle, it is concluded that the claim of the assessee cannot be declined. Since the fees paid to Registrar of Companies for enhancing the authorized share capital for expansion of the business had been capitalized against plant and machinery, the assessee would be entitled to depreciation at the rate of 15% on ₹ 10,00,000/- and the benefit of Section 35D(2)(c)(iv) of the Act would not be available to the assessee. - Decided in favour of assessee

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• 2015 (12) TMI 1126
  Concealment of income – imposition of penalty - Held that:- Tribunal has set aside the imposition of penalty following a judgment of this Court passed in the case of Commissioner of Income-Tax & another Vs. Manjunatha Cotton and Ginning Factory in (2013 (7) TMI 620 - KARNATAKA HIGH COURT ) Therefore, we do not see any justification to interfere with the impugned order and allow this appeal. However, it is submitted that the Revenue has preferred an appeal before the Hob’ble Supreme Court against the said judgment of this Court and it is still pending. In the event of the Revenue succeeding in the appeal, liberty is reserved to the revenue to revive this appeal. - Decided against revenue

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• 2015 (12) TMI 1125
  Validity of notice issued under Section 131 - Single Judge held that the Income Tax Officer is not vested with the power to have a camp office at the residence of the assessee and get his attendance in connection with the proceedings under the Income Tax Act and therefore the notice issued as per Annexure-A is one without authority of law and setting aside of the said notice - Held that:- In the instant case, the authorized officer went to the house of the assessee, the respondent herein, served notice on him to depose. In the said notice, as he should be notified whether he would be examined, it is mentioned that: "you are hereby required personally to attend my camp at your residence". Nothing could be read out of that phrase "camp at your residence". All that it means is, as he has already entered the premises of the residence, in order to comply with the legal requirement, he has served summons on him calling upon him to depose. To show the place where he should depose, the phrase, "camp at your residence" is mentioned. In that view of the matter, the learned Single Judge was not justified in his view that the authorized officer has no right to enter the premises of the residence. The observation of the learned Single Judge that the authorized officer has trespassed into the house of the assessee and it deserves to be prosecuted before the competent criminal court, has no legal basis. In fact, the learned Single Judge has not interfered with the search and seizure of cash of ₹ 40 lakhs from the premises of the assessee and the panchanama drawn on that day. Under these circumstances, the observations made by the learned Single Judge at paragraphs 8 and 10 of the order is unsustainable and are hereby set aside. Even the interpretation sought to be placed by the learned Single Judge on Section 131 and Section 132(1) of the Act, is also contrary to law and is hereby set aside. However the learned Single Judge has not interfered with the search and seizure of cash. Hence, that portion of the order is not interfered with. - Decided partly in favour of revenue

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• 2015 (12) TMI 1124
  Taxability of development rights - Held that:- Tribunal was of the opinion that when development rights are transferred it has a cost and when the receipt is taxed and the corresponding cost has to be allowed as expenditure. This view is in conformity with the fundamental principle in taxation that the gross receipt cannot be brought to tax, and only the profits can be which means that the cost has to be allowed as deduction. Given this situation, the Tribunal noticed that the AO had accepted the value of the closing stock and that deduction may be allowed as expenditure but in the application of such principle had faltered. Since in the present case the figures provided by the assessee as to the nature of the expenditure i.e. proportionate value of the land at the time of acquisition, the licence fee paid etc. are verifiable and do not appear to be disputed, and in the absence of any alternative method, this Court is of the opinion that the ITAT’s approach in this case cannot be faulted. - Decided against revenue.

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• 2015 (12) TMI 1123
  Nature of interest received by the landowner-assessee - enhanced compensation - whether the interest which is received by the assessee-landowner partakes the character of income or not and, in such a situation is it taxable under the provisions of the Act? - Held that:- The award of interest under Section 28 of the 1894 Act applies when the amount originally awarded has been paid or deposited and when the Court awards excess amount. In such cases interest on that excess alone is payable. Section 28 empowers the Court to award interest on the excess amount of compensation awarded by it over the amount awarded by the Collector. The compensation awarded by the Court includes the additional compensation awarded under Section 23(1A) and the solatium under Section 23(2) of the said Act. Section 28 is applicable only in respect of the excess amount, which is determined by the Court after a reference under Section 18 of the 1894 Act. Under Section 34 of the 1894 Act, the Collector awards interest on the compensation offered at the rate of 9% per annum for a period of one year from the date of taking possession and thereafter at the rate of 15% per annum from the date of expiry of one year on the amount of compensation or part thereof which remains unpaid or deposited before the date of such expiry. A plain reading of Sections 23(1A), 23(2) as also Section 28 of the 1894 Act clearly spells out that additional benefits are available on the market value of the acquired lands under Section 23(1A) and 23(2) whereas Section 28 is available in respect of the entire compensation

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• 2015 (12) TMI 1122
  Disallowance of 25% of the unverifiable purchases - Held that:- The issue under consideration relates to taxability of unverifiable purchases of precious and semi precious stones used in jewellery manufacturing. The Coordinate Bench of ITAT in a bunch of appeals, on similar issue, by consolidated order in the case of Anuj Kumar Varshney & Others vs. ITO (2015 (4) TMI 533 - ITAT JAIPUR) has held that 15% of unverifiable purchases shall be held to be income of the assessee from undisclosed sources in the relevant years. It is also brought to our notice that both Revenue and assessee have gone in appeal before Hon’ble Rajasthan High Court against this bunch of orders. In similar cases, to avoid multiplicity of appeals, this Bench has set aside the impugned issues raised in such appeals, to the file of the AO to decide the same afresh after the judgment of Hon’ble Rajasthan High Court in the case of Anuj Kumar Varshney & others (supra) is delivered. Therefore, following our earlier orders on the same lines, the issue raised in subject appeal is also accordingly set aside to the file of the AO to decide afresh - Decided in favour of revenue for for statistical purposes. G.P. addition - CIT(A) reducing the G.P. rate on reduced sale by giving weighted average price, not following AS-2 and giving telescoping benefit to the assessee - Held that:- Regarding the net profit decided by the Assessing Officer and partly confirmed by the ld CIT(A), the ld Assessing Officer made valuation of sale on approval memos on the basis of average method. However, the assessee chose to apply weighted average price method, it is a fact that in jewellery business, particularly diamonds are sold on the basis of colour, cut, clarity and carat, therefore, the ld Assessing Officer was not right to apply simple average method of valuation of sale made on approval memos. The assessee’s calculation of sale on the basis of approval memos is more scientific than the Assessing Officer. The ld CIT(A) had applied G.P. rate @ 20%. The assessee has shown G.P. rate on the basis of regular books of account @ 18.44% as mentioned by the Assessing Officer on page 2 of the assessment order. Therefore, the GP applied by the ld CIT(A) is also reasonable. Further the ld CIT(A) has allowed the set off against the excess stock found during the course of search, which is also reasonable on the ground that there is no evidence found during the course of survey that either firm or partner of the firm has taken out the income upon unaccounted sale and made expenditure or made investment outside the book. Therefore, she rightly allowed the set off unaccounted income estimated by applying G.P. rate on sale made through approval memo. - Decided against revneue

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• 2015 (12) TMI 1121
  TDS u/s 194H on the credit and swap charges paid to the bankers - CIT(A) deleted the addition - Held that:- In assessee’s case, the assessee had sold the goods to the customer and payment received through credit care and swap charges at the time of crediting the sale amount in the account of the assessee and service charges were charges by the banks for providing the facility of credit card. The findings given by the ld CIT(A) are not controverted by the ld DR. Therefore, we uphold the order of the ld CIT(A). See Dy. Commissioner of Income tax Versus M/s. Vah Magna Retail (P) Ltd. [2013 (8) TMI 299 - ITAT HYDERABAD] - Decided against revenue

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• 2015 (12) TMI 1120
  Treatment of rental receipts for the purpose of Income-tax - Held that:- Possession of the property was not taken by the tenant. Hence, the monies received by the assesses will not take the character of rentals and this is further strengthened by the relevant clause of the modified tenancy agreement herein. The monies received shall get converted as an advance and repayable by the assesses. Hence, it does not take the character of income.The assessees have received the monies subject to fulfillment of certain conditions on its part. These conditions ( i.e. completion of the building construction) are not satisfied by the assesses and hence the subject mentioned receipt changes its colour and character and accordingly gets converted into advance till the date of completion of the construction of building. We also find from the remand report that the ld.AO in his remand report had not objected to the contents mentioned in the modified tenancy agreement, correspondences exchanged between the assesses and the tenant. The said modified tenancy agreement has been cancelled by the tenant due to failure on the part of the assesses to complete the construction in time. In these circumstances, we find no infirmity in the order of the ld.CIT(A) deleting the addition of ‘rental receipts’ as ‘Income from Other Sources’ - Decided against revenue Fresh share capital received by the assesses - unexplained cash credit u/s 68 - Held that:- AO had clearly stated in his remand report dated 4.5.2012 that from the documents and papers filed and subsequent enquiries conducted by him in remand proceedings, the receipt of share application money by issue of further shares stand explained. In these circumstances, we hold that there is no reason for the revenue to be aggrieved as the Learned AO himself had given a categorical finding that the receipt of share capital stands explained pursuant to his independent verification. We have already held in the previous ground in favour of the assessee that there is no violation of Rule 46A of the IT Rules by the Learned CITA in as much as the remand report has been called for by the Learned CITA only after admission of additional evidences by him and Learned AO had been given due opportunity on the additional evidences. Hence we hold that the receipt of share capital stands clearly explained in all the cases before us and there is no need to make an addition u/s 68 - Decided against revenue

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• 2015 (12) TMI 1119
  Bogus long term capital gains in shares - whether long term capital gains could be treated as unexplained cash credit u/s 68 - Held that:- The action u/s 68 of the Act has been taken merely on the basis of the statement of the third party. We find that the assessees have duly proved the identity, creditworthiness and genuineness of the broker from whom the sale proceeds of shares were received by the assesses and hence the resultant long term capital gains thereon cannot be doubted with. Hence there is no scope for making any addition u/s 68 of the Act in the facts and circumstances of the case. Thus we have no hesitation in directing the Learned AO to delete the addition made u/s 68 - Decided in favour of assessee Disallowance u/s 14A read with Rule 8D - Held that:- We find that though the provisions of Section 14A of the Act which provides for disallowance of expenditure incurred by the assessee for the purpose of earning an income which do not form part of the total income is brought in the statute book by the Finance Act 2001 with retrospective effect from 1.4.1962, the computation of disallowance is provided in Rule 8D of the IT Rules. Rule 8D of the Rules came into effect from 24.3.2008. We find that the Hon ble Bombay High Court in the case of Godrej Boyce Manufacturing case reported in (2010 (8) TMI 77 - BOMBAY HIGH COURT ) had held that provisions of Rule 8D could be made applicable only from Asst Year 2008-09. The assessment year under appeal for all the assesses before us is Asst Year 2005-06 and hence the Learned AO erred in invoking Rule 8D of the Rules for making disallowance u/s 14A of the Act. - Decided in favour of assessee

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• 2015 (12) TMI 1118
  Penalty u/s 271(1)(c ) - income offered after the search but in the return filed u/s 153A / 153C - Held that:- The assessee has cumulatively satisfied all the conditions stipulated in Clause 2 of Explanation 5 to Section 271(1)( c) of the Act and hence entitled for immunity from levy of penalty for all the assessment years under appeal. The assessee had made voluntary disclosure during the course of search assessment proceedings after filing the return u/s 153A of the Act but before any detection by the department and the same is considered only as a revision of the disclosure made u/s 132(4) followed by filing of returns u/s 153A of the Act. The expression ‘to be furnished’ mentioned in Clause 2 of Explanation 5 to Section 271(1)(c ) has to be construed as ‘required to be furnished u/s 153A of the Act - Decided in favour of assessee

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• 2015 (12) TMI 1117
  Loss on account of non-speculation transaction as speculation - Held that:- The trading of derivatives for the entire assessment 2006-07 is out of the definition of speculation business if it is carried out in the recognized stock exchange. The assessee has done the trading in the recognized stock exchange. So it is clear that loss on account of derivative transaction or very much covered in clause (d) of the proviso Section 43(5) of the Act. In view of such amendment under the Act, the income/loss arrived on derivative shall be treated as non-speculative loss. - Decided against revenue. Allowing relief of interest payment relying loss on trading of derivatives prior to 25.01.2006 as non-speculation business - Held that:- AO disallowed the interest paid by assessee up-to 25.01.2006 on the ground that it pertains to speculation business. Therefore, it should not be allowed. However, we find that Ld. CIT(A) has allowed the claim of interest expense by treating the loss from the derivative transactions as non- speculative business. We find that this ground relates to the first ground of Revenue’s appeal regarding treating the transaction of derivative as speculative business up to 25.01.2006. In the first ground of appeal, we have held the business of the assessee as nonspeculative. Accordingly, the interest disallowed by AO is allowable expense against the non-speculative business of the assessee. In our considered view, this ground of Revenue’s appeal is dismissed.- Decided against revenue. Disallowance u/s. 14A - Held that:- There was no applicability of Rule 8D in the instant case as this Rule 8D came in force w.e.f. 24.03.2008. In view of above, we find no reason to interfere in the order of Ld. CIT(A) and this ground raised by Revenue is dismissed.- Decided against revenue. Allowance for the expense of Security Transaction Tax (STT for short) - Held that:- STT was duly shown under the head ‘current asset’ in Schedule-7 for an amount of ₹ 1,38,26,870/-. Ld. AR further drew our attention on page 7 of the financial statement, wherein ‘transaction, Demat & share transfer stamp charges’ under the head of “Administrative charges” were written. Hence the ld. AR claimed that no expense for STT has been debited in the profit and loss account of the assessee. From the aforesaid discussion, we find that assessee has not debited any amount of STT in its profit and loss account in the year under consideration but AO misunderstood from the financial statement submitted by assessee, where transaction/demat and share transfer stamp charges were debited. Therefore we do not find any reason to interfere in the order of Ld. CIT(A) and this ground raised by Revenue is dismissed.- Decided against revenue. Rebate u/s 88E of the STT paid while working out the tax under the provisions of Minimum Alternate Tax (MAT) as specified u/s 115JB - Held that:- Rebate u/s 88E of the Act was to be allowed from the tax computed as per provisions of Sec.115JB of the Act to find out whether after set off of rebate u/s.88E of the Act, any tax liability remained or not. Admittedly, the tax liability as per MAT provisions was less and rebate admissible u/s.88E of the Act was more. Therefore, rebate u/s 88E had to be allowed even when total income is computed u/s. 115JB of the Act. Resultantly, the ground taken by Revenue is dismissed.- Decided against revenue.

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• 2015 (12) TMI 1116
  Disallowance of accumulated deficit - assessee failed to furnish the year-wise accumulation of deposit and no return was filed before A.Y. 2002-03 - CIT(A) delted the addition - Held that:- It is a fact that the Assessee did not file return of income before AY 2002-03. It is not the case of the Assessee that the accumulated deficit was determined in assessments completed after AY 2002-03 when from the Assessee started filing return of income. The accumulated deficit is claimed on the basis of Balance Sheet as on 31.3.1996 in which loans and advances received in cash or kind is shown at ₹ 9,29,50,000/-. As to what is the opening balance as on 1.4.1995 is also not found in this Balance Sheet. The accumulated deficit as per this balance sheet is shown at ₹ 8,63,10,133/-. The accumulated deficit is thereafter carried forward from AY 96-97 to AY 2004-05 and stands reduced to ₹ 8,54,16,519 as on 31.3.2005 which is sought to be set off against the income of AY 2005-06. It is also pertinent to note that the aforesaid claim was not made in the return of income filed by the Assessee nor in the proceedings before the AO. The claim was made for the first time before CIT(A). The CIT(A)’s findings on this aspect have already been given in the earlier part of this order. The evidence referred to in the findings of CIT(A) are relevant only with regard to the claim of the Assessee that ₹ 4,54,11,300/- was repayment of loans which had been taken by the Assessee in the earlier AYs and used for charitable purpose and repaid during the PY. There is no material on record to substantiate the claim of the Assessee that a sum of ₹ 8,54,26,519/- was accumulated deficit. Admittedly such accumulated deficit has not been determined in any assessment proceedings and therefore the claim of the Assessee in this regard was wrongly allowed by the CIT(A). - Decided against assessee Genuity of Repayments of loans - Held that:- The loans were stated to be availed between the year 1980 to June, 2003 when the Assessee did not have funds to carry out charitable activities. In the year in which the loans were availed, there was no scrutiny assessment. In fact the Assessee has started filing returns of income only after AY 2002-03. Therefore the factum of borrowing and the utilization of the funds borrowed were never subjected to scrutiny in the past. There is no evidence filed by the Assessee in this regard. The CIT(A) has referred to the following evidence in upholding the claim of the Assessee viz., (a) details of expenses along with evidence; (b) Loan confirmation; (c) balance sheet for last eight years; (d) Bank statements; ( e) list of repayment of loan, (f) write-up on purpose for acquiring loans. As already stated the Assessee has clearly admitted before the CIT(A) on its inability to produce evidence to prove borrowing and that the loans borrowed were spent for charitable activities and nature of those charitable activities. The mere assertion of the Assessee in this regard without evidence cannot be the basis to uphold the claim of the Assessee in this regard. We therefore do not agree with the conclusions of the CIT(A) in this regard. We therefore reverse the order of the CIT(A) and restore the order of the AO in this regard.- Decided against assessee Disallowance of charity and donation and administrative expenses - neither books of accounts nor the bills & vouchers were produced - Held that:- AO did not allow the claim of the Assessee for the reason that only a list of payments had been filed which was neither supported by any bills and vouchers nor any books of accounts sowing the actual expenditure. The bills and vouchers had been filed before the AO. A specific ground had been raised by the Assessee before CIT(A) in this regard. The CIT(A) has also held that the bills and vouchers evidencing expenses were filed before the AO. The details of charity and donations and the supporting vouchers are at page 75 to 91 of Assessee’s paper book. The details of administrative expenses are placed at page-92 of the paper book and the payments in question were made by cheques. The expenditure in question is reasonable and deserves to be accepted. We are of the view that the CIT(A) rightly deleted the addition made by the AO - Decided in favour of assessee.

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• 2015 (12) TMI 1115
  Validity of assessment u/s 153C - Held that:- No satisfaction has been recorded in the case of searched person and the satisfaction, if any, recorded in the case of other person will not cure the defect because it is necessary that the satisfaction must be recorded by the AO of the searched person and thereafter the documents are to be handed over to the AO of other person and this position will not alter even if the AO for the searched person and the other person i.e. the assessee is the same. Thus we quash the assessment framed by the AO. As the assessment itself is quashed, no findings have been given on other issues raised by the assessee on merit. - Decided in favour of assessee

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• 2015 (12) TMI 1114
  Penalty on account of Explanation 5 to Section 271(1)(c ) - income offered after the search but in the return filed u/s 153A of the Act - Held that:- The CIT(A) rightly held that it is not relevant whether any return of income was filed by the assessee prior to the date of search and whether any income was undisclosed in that return of income. In view of specific provision of Section 153A of the I.T.Act, the return of income filed in response to notice under section 153A of the I.T.A Act is to be considered as return filed under section 139 of the Act, as the Assessing Officer has made assessment on the said return and therefore, the return is to be considered for the purpose of penalty under section 271(1)(c ) of the I.T.Act and the penalty is to be levied on the income assessed over and above the income returned under section 153A, if any. Further, in the present case, it appears from the record that the assesses had satisfied all the conditions which are required for claiming immunity from payment of penalty under section 271(1)(c )of the Act. The provsion does not specify any time limit during which the aforesaid amount i.e the amount of penalty with interest has to be paid. Admittedly when the assessee herein have paid the entire amount with interest, the Assessing Officer ought to have granted them immunity available under Section 271(1)(c ) of the Income Tax Act. For the foregoing reaons, the present appeals stand allowed. The order of the Tribunal is quashed and set aside. Consequently, the order of the CIT(A) is restored. The question of law involved in this appeals is answered in favour of the assesee and against the revenue. - Decided against revenue

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• 2015 (12) TMI 1113
  Reopening of assessment - Whether DCIT, Circle 11(1), New Delhi had no jurisdiction to issue notice u/s 147 of the Act? - Held that:- Revenue has not disputed the finding of CIT(A) that assessee had informed change in registered office from New Delhi to Bangalore on 20/10/2005. It is also not disputed that assessments for assessment years 2005-06 and 2006-07 were done by ACIT, Circle 11(4), Bangalore on 6/12/2007 and 29/9/2008 prior to the impugned assessment done by the DCIT, Circle 11(1), New Delhi on 5/12/2008 for assessment year 2003-04. It was also pointed out before AO at New Delhi that its registered office having been shifted, jurisdiction over it vests with the Bangalore income-tax office. Ld.AO, if he was not in agreement with the assessee, ought to have made a determination of the issue of jurisdiction, when assessee had questioned it, in the manner laid down in section 124(4) of the Act, which apparently was not done. This being the factual position, we are of the opinion that DCIT, Circle- 11(1), New Delhi had no jurisdiction on 5/12/2008 to pass reassessment on assessee. We uphold the order of the CIT(A) in this regard.

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• 2015 (12) TMI 1112
  Revision u/s 263 - determination of book profits u/s.115JB - Held that:- We are of the view that in the order u/s. 263 of the Act the issue that was considered was the question of reserve u/s.115VT of the Act. It had nothing to do with the determination of book profits u/s.115JB of the Act. The directions in the order u/s. 263 of the Act had the effect of obliterating the order of the AO dated 26.12.2007 only to the extent of determination of book profits u/s.115JB of the Act and not the entire order dated 26.12.2007. In other words the order dated 26.12.2007 remained intact in respect of all other matters not considered either in the appeal before CIT(A) or in the proceedings u/s.263 of the Act. Those aspects which remained intact were capable of being rectified provided the other conditions for exercise of power u/s.154 of the Act are satisfied. We find that the CIT(A) has not expressed any opinion on the other question whether in the facts and circumstances of the case jurisdiction u/s.154 of the Act could have been exercised. We are of the view that the conclusion of the CIT(A) in the impugned order that the order of assessment dated 26.12.2007 was set aside in entirety in the order u/s.263 of the Act is not correct and accordingly the order of the CIT(A) is set aside. The other issues with regard to the other objections raised by the assessee with regard to exercise of power u/s.154 of the Act in the facts and circumstances of the case, are remanded to the CIT(A) for fresh consideration, as the CIT(A) has not considered those aspects in the impugned order. - Decided in favour of revenue for statistical purposes.

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• Customs

• 2015 (12) TMI 1094
  Liability to pay interest on the differential duty of the customs - Delay of 103 days in making duty deposit - no show-cause notice issued by the Revenue in terms of Section 28 - Difference of opinion. Whether the appeal filed by the Revenue has to be allowed, as held by the Member (Technical) or the same has to be rejected as held by the Member (Judicial).

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• 2015 (12) TMI 1093
  Smuggling of goods - export of the smuggled zirconia into India from Malaysia by a premeditated design - Confiscation of goods - undeclared goods - Held that:- It is surprising that show cause notice does not reveal any incriminating evidence against M/s. Carvel Shipping Services Pvt. Ltd. Therefore, in absence of justifiable ground by Revenue in its appeal, it is very difficult at this stage to implead M/s. Carvel Shipping Services Pvt. Ltd. as respondent. Therefore, Revenue s appeal against M/s. Carvel Shipping Services Pvt. Ltd. is dismissed. But it does not mean to say that there was no smuggling racket operated to occasion export of the smuggled zirconia into India from Malaysia by a premeditated design. - there was a smuggling racket operated to bring cubic zirconium into India. It is also shocking to note that there was a total failure of investigation to conduct proper investigation in India and overseas. Spirit and intent of section 11 of the Customs Act, 1962 was burried causing prejudice to the interest of customs without bringing the members of smuggling racket to the fold of law. When the investigating authority as well as adjudicating authority failed in their duty to bring necessary parties to the fold of law, it is not possible at appellate stage to implead them and press them to undergo trial. M/s. Caravel Shipping Services Pte. Ltd. was neither issued show cause notice nor was adjudicated. There appears lapse on the part of adjudicating authority to keep this concern out of purview of adjudication. No efforts were made by investigation to identify the members of the smuggling racket. Authority failed to conduct overseas enquiry against the racket and no thorough investigation was made into the affairs of CHA, freight forwarder as well as the consignee and there was only pretence to justice by investigation following an empty formality to pass a superfluous adjudication order. - No doubt there was confiscation. But that is merely a consolation to this country when the racket and mastermind behind that remained in mystery and unidentified. Facts and circumstances of the cases suggest that there was premeditated design to cause subterfuge to Revenue. It is high time to arrest smuggling, without encouraging that to perpetuate. - Decided against Revenue.

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• 2015 (12) TMI 1092
  Demand of differential duty - Held that:- Revenue has not referred to any provisions of law under which it seeks stay of the order. We find that w.e.f. 6/8/2014 Section 129 E of the Customs Act was amended. Prior to this date Section 129 E provided that where in particular case the appellate Tribunal is of opinion that the deposit of duty, penalty, etc. would cause undue hardship to a person, the appellate Tribunal cannot dispense with such deposit under condition to be satisfied. However, from 6/8/2014 there is no provision under new Section 129 E that provides for stay by the Tribunal against order of the Commissioner or Commissioner(Appeals) - Decided against Revenue.

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• 2015 (12) TMI 1091
  Levy of Penalty u/s 112 for wrong filing of Bill of entry on the employee of CHA - Revocation of ID Card - Held that:- So for imposition of penalty upon the appellant is concerned , it is observed from the case records that he was not authorized by his employee M/s. Lee & Muirhead Pvt Ltd to make entries in the registers on behalf of another CHA. Appellant not only produced a forged test report from CFL but also filed a bill of entry No. 2697 dt 21/07/2006 without filing of IGM. These facts and contraventions have been clearly reflected in Para- 25 of the show cause notice dt 16/10/2006 issued to the appellant. imposition of penalty ₹ 1 lakh upon the appellant ordered by the Adjudicating authority under Sec 112 of the Customs Act 1962 and the same is upheld Revocation of ID Card - no show cause notice has been issued by the appropriate authority issuing such card, to revoke the card. On verification of the show cause notice dt 16/10/2006, issued interalia, to the appellant we find it so. It is also observed that there is no provision in the Customs Act 1962 to revoke an identity card issued to the appellant. Accordingly we hold Adjudicating Authority was not justified in revoking the Identity card of the appellant for which no show cause notice was issued. Order passed by the Adjudication authority regarding revoking Identity card No. 113/CA/LC is set aside - Decided partly in favour of appellant.

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• 2015 (12) TMI 1090
  100% EOU - appellants failed to install Secondhand Textile Machinery (capital goods) within the stipulated time of one year, or within the extended period - Confiscation of goods - exemption under Notification No. 53/1997-Cus dated 03.6.1997 as amended by Notification No. 52/2003-Cus dated 31.3.2003 - Imposition of redemption fine and penalty - Held that:- The goods were allowed to be imported and the duty on the same was exempted for a specific purpose, as per the conditions of the exemption notification (supra) and the appellant was bound by the conditions. On failure to comply with those conditions, the goods are not eligible for the exemption provided by the said notification and they are liable to pay applicable customs duty. In Macmillan India Limited (2007 (10) TMI 186 - CESTAT, BANGALOR), the goods related to Information Technology and export obligations were already met. In Paras Fab International (2010 (6) TMI 184 - CESTAT, NEW DELHI), the issue was whether the entire premises of 100% EOU should be treated as warehouse, and whether for captive consumption within the bonded premises, ex-bond bill of entry has to be filed and duty paid. The issue in Gemini Metal Works (1984 (12) TMI 314 - MADRAS HIGH COURT) related to cancelation of license and is not relevant in the instant case. On the other hand, we find our views are fortified by the decisions of this very Bench of the Tribunal in the case of M/s. Siddeshar Spinning Pvt. Limited vs. CCE, Bhavnagar [2013 (9) TMI 585 - CESTAT AHMEDABAD], which had also followed the earlier decisions of the Tribunal in the case of Nava Bharat Enterprises Limited - [2009 (12) TMI 396 - CESTAT, BANGALORE], Philips India Limited vs. Commissioner of Customs, Mumbai - [2000 (12) TMI 195 - CEGAT, MUMBAI] and Taurus Novelties Limited vs. Commissioner of Customs, Bangalore - [2004 (7) TMI 162 - CESTAT, BANGALORE]. The demand of duty with interest would suffice the cause of justice in the instant case and confiscation of the goods and penalty on the appellant are not warranted. - Decided partly in favour of assessee.

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• 2015 (12) TMI 1089
  Imposition of penalty on Director - Held that:- Commissioner was of the opinion that penalty shall be imposable on the Managing Director, he did not finally impose. But to rectify his mistake, he issued a Corrigendum on 4.3.2004 imposing a penalty of ₹ 25,000/- on the Managing Director. Penalty being imposable on the basis of mens rea, it should be on a personnel of the Managing Director but not on his designation. Therefore, the Corrigendum which has no force in the eyes of law does not become enforceable - Decided in favour of appellant.

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• Corporate Laws

• 2015 (12) TMI 1085
  Scheme of amalgamation - Held that:- Court has no objection to sanction the scheme for amalgamation of Buragohain Tea Company (Transferor Company) with B & A Ltd. (Transferee Company). However, having regard to the litigation history in the Transferee Company involving the Objector and other related developments and also having regard to the financial status of the Transferor Company as discussed above, objection raised by the Objector and by the Central Govt. through the Regional Director regarding the exchange ratio of shares between the two companies cannot be brushed aside. The exchange ratio of 786 fully paid up equity shares of ₹ 10.00 each of the Transferee Company to be issued and allotted for every one equity share of ₹ 1,000.00 held in the Transferor Company does not appear to be fair and justified. Accordingly, Court directs the Registrar of Companies, Shillong to work out the exchange ratio in a fair manner through independent experts keeping in view the discussions made above and submit the same to the Court in two months time.Thereafter Court may sanction the scheme with modification(s).

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• PMLA

• 2015 (12) TMI 1083
  Property representing the proceeds of crime - attachment of the properties - Held that:- In the present case, the respondent failed to prove that the appellants did not have sufficient financial capacity to buy the property or that the money paid by them as sale consideration was not legitimate money derived by agricultural activities. No material was produced to show that the appellants are close relatives of person, who involved in criminal activities and the person, who sent monies to purchase the property did not possess financial capacity to provide such huge amounts and that they are not genuine purchasers of agricultural products of appellants. The respondent has not made any such investigation and has not produced any such material. Further, the Appellate Authority in fact considered the additional documents produced before it, but rejected the same on the ground that Appellants have not given any valid reasons for not filing the same before the Adjudicating Authority . Having considered the Additional documents, the appellate authority failed to give any finding on merits after verifying with the concerned Bank. In view of these facts, the judgment in Radha Mohan lakhotia's case [2010 (8) TMI 947 - BOMBAY HIGH COURT ]is in favour of the appellants as they have rebutted the presumption that the property in question is proceeds of crime.

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• Service Tax

• 2015 (12) TMI 1111
  Denial of CENVAT Credit - Input services used for Commercial Industrial Construction Service (CICS) - Renting of Immoveable Property Service (RIPS) - whether appellant is not eligible for credit as input services have resulted in an immovable property which is neither excisable nor any service tax is payable on the same - penalty under Rule 15(3) of the Cenvat Credit Rules read with Section 78 of the Finance Act, 1994 - Held that:- In 2011 the appellant declared their intention of availing Cenvat Credit on input services for discharging the service tax liability on the output service namely Renting of Immovable Property Service. There is no hiding the fact that these services were received over a period of 5 years from 2007 to 2011. And it was only when the construction was ready for renting out they took centralized registration in 2011. In the centralized registration the input service as well as the services to be provided were declared. We find that as held by the Hon'ble High Court of Karnataka in the case of mPortal India Wireless Solutions Pvt. Ltd., there is no provision in the Cenvat Credit Rules which imposes a restriction on availment of credit on input services procured before registration is taken. On the apprehension raised of Revenue as to how the verification could have been done in respect of services procured during the previous five years, we find that the appellant had submitted all documents including invoices before issue of show cause notice which enabled the department to make such verification. We may further go on to say that in the show cause notice no doubt has been expressed regarding the actual receipt of the services. As regards the verification of actual use of the input services, we find that the Annexure "A" to the show cause notice gives details of Cenvat credit availed on inputs and capital goods for the period 1.6.2007 to 31.3.2011 implying that department has conceded that the Cenvat credit was availed for the construction of mall and Renting of Immovable Property Service. Almost the entire credit has been availed on input services which have been used for providing the output service that is Renting of Immoveable Property Service for which there was no restriction under the clause (l) of the definition of ‘input service'. The inclusive part of the definition of input service allowed services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service etc. The words "setting up" were deleted only from 1.4.2011. Therefore the appellant are eligible for the credit in terms of the definition of input service. - credit is held to be admissible and recovery of the same is set aside - Decided in favour of assessee.

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• 2015 (12) TMI 1110
  Levy of penalty for delayed filing of ST-3 return - Levy Penalty u/s 77 & 78 for default in payment of service tax - Manpower supply service - Held that:- In respect of the appellant assessee, where service of supply of manpower had come under the tax net about three months back and where the service recipient was a 100% EOU registered with Cochin Special Economic Zone leading them to believe that liability of service tax was not payable by them and considering the case laws quoted above by the appellant, I am of the considered view that the appellant assessee deserves relief in case of penalties imposed on them under Sections 77 and 78 of the Finance Act, 1994 and the same are hereby set aside - However provisions of Section 80 of Finance Act, 1994 gives relief from imposition of penalty in case of penalties imposed under Sections 77 & 78 of the Finance Act, 1994 only. Here the appellant has been penalized under Section 70 also, when they had delayed the filing of their half-yearly return contravening the relevant provisions of law of Service Tax. This penalty of ₹ 4000/- imposed under Section 70 of the Finance Act, 1994 on the appellant assessee does not deserve to be set aside - Decided in favour of assessee.

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• 2015 (12) TMI 1109
  Refund claim made by the recipient of services - service tax was paid wrongly by the service provider - Service Tax invoice issued by M/s. IDSPL is in the name of M/s. Fujitsu, New Delhi - Held that:- M/s. IDSPL has paid the service tax on ‘Business Transfer Fees' which was admitted that Service Tax on the said transaction is not payable. The Business Transfer Fees alongwith service tax was paid by the respondent to M/s. IDSPL and the same was accounted for in the books of respondent. In view of this there is no dispute regarding payment of service tax and incidence of the same was borne by the respondent. As regard the invoice raised by the M/s. IDSPL in favour of respondent at Delhi address, it does not make any difference for processing the refund claim for the reason that Delhi office of the Respondent is their registered office and the same is not different entity, it is integral part and parcel of the one company of the respondent. The respondent having centralized registration at Pune, have correctly lodged their claim at Pune, particularly when the Service Tax by M/s. IDSPL was also paid in Pune only. - respondent's Pune office has right to claim at Pune only, therefore the claim is not without the Jurisdiction. It is also not the case of the Revenue that the same refund either claimed by the respondent's Delhi office or by another person. Since the service tax was erroneously paid the same has to be refunded and M/s. IDSPL has given the disclaimer, only right to claim the refund is with respondent only. - infirmity therein. Accordingly, the impugned order has to be sustained - Decided against Revenue.

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• 2015 (12) TMI 1108
  Classification of service - Radiographic testing services or photographic services - Held that:- The period involved in this case is 16.07.2001 to 17.06.2003. In perusal of OIO and OIA, we find that the nature of service has been explained by the adjudicating authority elaborately. We find that the appellants are not rendering any photographic services but carrying out radiographic testing on industrial castings so as to identify any defects on the castings by using X-ray film through Radiography testing. On perusal of the film, we find that the x-ray strip of castings No. ABG2927 L4-L5 shows defects (cavity). It is very clear that the appellants are rendered radiographic testing of castings by using the x-ray films, which is commonly employed by any metallurgical industry and automobile industry, where high precision moulds and castings is of auto components are x-ray tested for quality so as to avoid risk and damage of automobiles. Lower appellate authority in his findings held that the Board’s Circular is not applicable to the present case on the ground that the said clarification is only applicable to medical field. However, we find that there is no such mention in the Board's Circular that it is applicable only in the medical field. Further we find that the new service “Testing and Technical service” was specifically introduced under Section 65(105)zzi of the Finance Act. The radiographic testing services rendered by the appellants does not fall under the category of photographic services during the relevant period - Decided in favour of assessee.

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• 2015 (12) TMI 1107
  Demand of service tax - Business Auxiliary Service - Valuation - Inclusion of reimbursement towards shortage fuel stock diesel consumed in generator, electricity bills, telephone bills and bank charges - Held that:- Service of sale of goods produced or provided by or belonging to the client is clearly covered under limb (i) of the definition of Business Auxiliary Service. The contention of the appellant is that it should be treated as rendering man power recruitment or supply agency service. However, the reimbursement was made for the entire gamut of services rendered by the appellant and the labour required therefor has been taken into account only for the purpose of arriving at the quantum of payment for the services rendered. The labour employed remained employees of the appellant who had total control and supervision over them. M/s.HPCL had no supervision or control over the manpower employed by the appellant. Thus it is evident that the appellant did not provide any man power to M/s.HPCL and engaged the labour to render service to HPCL. Thus the appellant was not a supplier of man power to the service recipient and therefore the contention of the appellant in this regard is found to be untenable Reimbursement towards shortage fuel stock diesel consumed in generator, electricity bills, telephone bills and bank charges on a close scrutiny may not be includible in the assessable value. However, as has been conceded by the learned Advocate, it does not have any evidence as to what was the actual amount of such reimbursements and therefore as the appellant is not in a position to claim such deduction for want of evidence to establish the exact amount of such reimbursements, we are unable to give benefit in this regard. - there is no such infirmity in the impugned order as to warrant appellate intervention - Decided against assessee.

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• 2015 (12) TMI 1106
  Denial of CENVAT credit for the input services viz. advertisement, DVD film production, campaigning in electronic and print media etc. which were used for collecting capital through IPO by the appellant - IPO to collect capital for expansion of manufacturing facilities of their products - Held that:- Impugned order, when it has denied the CENVAT credit available to the appellant, has not talked about the new unit or the old unit. The learned advocate for the appellant however says that they would like to claim CENVAT credit in case of the new unit of the appellant company. Considering this averment of the appellant, there cannot be any dispute now whether credit should go to the old unit or the new unit; and if as claimed by the learned AR appearing for the respondent, that old unit is not entitled to claim the CENVAT credit, it is not an issue now when the appellant's pleading to claim CENVAT credit only in respect of new unit. - appellant is entitled to the CENVAT credit which was denied by the impugned order. When the appellant has been found to be entitled to the CENVAT credit, there cannot be any question of imposition of penalty. Consequently, the impugned order is set aside - Decided in favour of assessee.

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• 2015 (12) TMI 1105
  Demand of service tax - best judgement assessment - wrong filing of ST-3 return - appellants have adjusted the payables against receivables in the figures given in the return - Classification of service tax - Business Support service or courier service - Taxability of network fee - Export of Service - Bar of limitation - Imposition of penalty - Cum Tax benefit - Held that:- DHLI are the service receivers and they have hired the appellants for the job. The entire operation takes place within India. - The nature of services in BSS is totally different from the services provided by the appellant. The Section 65A deals with the classification of services - The activity being carried out by the appellants is ‘transportation of time-sensitive documents, goods or articles utilising the services of a person, either directly or indirectly, to carry or accompany such documents, goods or articles' from DHLI office to consignor's premises or from consignee's premises to DHLI premises. Since this is a more specific classification available it has to be preferred over a more general classification. Thus it is a clear case of courier service provided by the appellants to DHLI. It has been admitted that the network fee is only in respect of the Billed shipments as a compensation for funding the network costs. In fact the appellants receive services of the DHLI only for billed shipments. For Unbilled shipments no services are provided by DHLI to appellants. In respect of the Unbilled shipments it is the appellants who provide services to the DHLI. However since a single consolidated account is maintained the amounts payable by appellant to DHLI and those payable by DHLI to appellant get adjusted against each other. While doing so they are maintaining a consolidated account of amounts to be paid and only net transaction are made on monthly basis. From above it is apparent that as a result of the setting off of amounts payable against receivables there has been a undervaluation of not only assessable value in respect of courier service provided by the appellants but also of the courier service received by the appellants. Appellants are recouping their compensation i.e. costs as well as an arm' length margin (costs plus 10%), from the billed shipments contracted by them. In other words the consideration for the services provided by the appellant are adjusted against the money payable to DHLI for the services received in respect of billed shipments. Appellants are getting a consideration from the DHLI on the costs plus basis. The figures for the Network fee are arrived on net basis after deducting the appellant's consideration, not only of billed consignments in respect of which they receive some services from DHLI, but also of Unbilled consignments in respect of which no services are provided by DHLI to appellants and other costs. Thus it is held that adjustment of the receivables for service provided against the amounts payable for the service received, or incentives and costs, is incorrect. The service tax in each case has to be paid on the Gross value of each service separately. Circumstances prescribed in the said section do not exist in the instant case to enable the Commissioner to adopt the best judgment method. They claimed that they have indeed filed the returns and have assessed their liability correctly. The appellants have filed the returns but have, according to the Order, failed to assess the tax in accordance with the provisions of the Act or rules made thereunder. They have not paid tax on the ‘Unbilled transactions in respect of provision of service to the DHLI. Thus it is possible to determine the assessable value on the best judgement method by virtue of clause (b) of the section 72 of the Act. It is seen that the service provide by the appellants is courier service specified under clause 105(f) of section 65 of the Act. This falls under the category under clause (ii) of sub-rule (1) of rule 3 of the Export of Services Rules, 2005. In respect of this category the place of performance is critical in determining the factum of export. In the instant case the entire courier service provide by appellants to DHLI was performed in India. The documents to be couriered are delivered in India and the same are received in India. It is immaterial if the payment of the same is received in Foreign Currency. The law is very clear that gross amount charges is to be declared in the returns and service tax is to be paid on the same. There is no ambiguity in the law in this regard. There is no provision where the amount payable for a service can be set off against amount receivable for the services provided to arrive at assessable value. There is no case for invoking Section 80. The demand in respect of services received by appellant and where service tax has been demanded on reverse charge basis is set aside for the period beyond the normal period of limitation. - For the demand in respect of services provided by appellant to DHLI in respect of Unbilled consignments the benefit of calculation of tax on cum duty basis is allowed. - The penalty under Section 78 is reduced correspondingly to the revised amount of demand worked out after allowing cum duty benefit and limitation worked out - Penalty under Section 77 is upheld - Petition disposed of.

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• 2015 (12) TMI 1088
  Refund of the CENVAT credit of duty availed on various raw materials and input services in terms of the provisions of Rule 5 of CENVAT Credit Rules 2004 - Held that:- There is a direct decision of the Tribunal in the assessees own case reported as CC & ST Vs Bioplus Life Sciences Pvt Ltd., [2014 (11) TMI 954 - CESTAT BANGALORE]. In the said decision, identical input services were involved which were held as cenvatable input services by the lower authorities and the appeal filed by the Revenue stands rejected. Inasmuch as the issue stands decided in favour of the assessee, we deem it fit to set aside the impugned orders and remand the matters to the original adjudicating authority for processing the appellants refund claim - Appeal disposed of.

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• Central Excise

• 2015 (12) TMI 1104
  Recovery of dues of the company from the Director - Duty demand - Clandestine removal of goods - Held that:- It is well settled that in the absence of any specific provision in the statute, the duty/penalty liability of the company cannot be recovered from the assets of its director. The Director is not personally liable towards liability of the company. This court while delving into an identical issue in Subhash Goyal vs. State of Haryana and others, held that in the absence of taking any specific recourse to proceedings under Section 18 of the Central Sales Tax Act, 1956 and any valid order for effecting recovery of arrears of sales tax from the directors of a private limited company in liquidation, the proceedings relating to recovery of arrears of tax from the petitioner being a director were not permissible in law. - Thus, the action of the respondents in compelling the petitioner to clear the dues of the company cannot be sustained. However, the respondents shall be at liberty to proceed against the company for clearance of its dues in accordance with law. - Petition disposed of.

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• 2015 (12) TMI 1103
  Denial of concessional rate of duty - Due to shortage of space, the appellant kept the imported materials partly adjacent to the factory premises - demand of cenvat credit alongwith interest and imposed penalty of equal amount - Held that:- Adjudicating Authority had observed that there was a procedural lapse of not applying to the Dy. Commissioner under Rules 8 of Cenvat Credit Rules 2004 for keeping waste paper in the go-down adjacent to the factory. It is further observed that, it is not a procedural lapse but, clear violation of the said Rules. The appellant is a Limited company in organized sector and they should have obtained proper permission to store the imported waste i.e., inputs, outside the factory premises - assessee is entitled to storage of inputs outside the factory of the manufacturer, subject to the permission from the Dy. Commissioner, Central Excise or the Asstt. Commissioner, Central Excise as the case may be, having jurisdiction over the factory of the manufacturer. The proviso to Rule 8 states that, if such input is not used in the manner specified in the rules, the manufacturer of the final products shall pay an amount equal to the credit availed therein. In my considered view, the demand of cenvat credit would arise if the manufacturer fails to establish that the input in question was not used in the manufacture of final products. - impugned order is modified to the extent that the demand of Central Excise duty of ₹ 8,99,996/- alongwith interest is upheld. The Adjudicating authority is directed to re-examine the balance amount of demand of ₹ 6,03,392/- alongwith interest and imposition of penalty - Appeal disposed of.

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• 2015 (12) TMI 1102
  CENVAT Credit - Various input service - Held that:- In terms of Rule 2(1) (B) of the Cenvat Credit Rules, 2004, credit of service tax paid on General Insurance Services (Section 65(105) (d), renting of a cab (Section 65(105) (o), motor vehicle related service (repair, reconditioning or restoration of motor vehicles, in any manner)(Section 65(105)(zo) and supply of tangible goods (Section 65(105)(zzzzj), if these services relate to motor vehicles, is not allowed. Further, in terms of Rule 2(1)(B) of Cenvat Credit Rules, 2004, these credits can be taken only if these services are used for providing taxable services for which credit on motor vehicle is available as capital goods. In other words these credits are available to them only if they are a service provider providing services such as courier service. Tour operator service, rent-a-cab operator service, providing Goods Transport Agency service. Outdoor caterer service etc. Since, the assessee is not a service provider and is only a manufacturer, the credit on the above mentioned services, when they relate to motor vehicles, are not available to them. Hence, it appears that the assessee is not eligible to take credit of these services in respect of two wheelers, four wheelers used in their factory or office. - Assessee cannot take credit of service tax paid on insurance in respect of their employees - No merit in appeal - Decided against Assessee.

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• 2015 (12) TMI 1101
  Duty demand - Manufacture - whether Aluminium wire Rods /Aluminium wires (30 in number) when twisted with a core of steel wires (7 in number) amounts to manufacture of a different manufactured product - Held that:- Plaited wire bands and the like of Aluminium with a steel core fall under CETA 76.04 and have a different name, character and use. The certificate given by a Chief Engineer of Govt. of Mizoram cannot be considered as an authority that there is no change in the raw material and the finished product, when there is a change in the classification of the finished goods to 76.14. Criteria laid down by Hon’ble Apex Court in the case of U.O.I. Vs. Delhi Cloth & Mills Co. Ltd. [1962 (10) TMI 1 - SUPREME COURT OF INDIA], regarding change in the name, character and use of the resultant product are fulfilled - activities undertaken by the appellants amount to manufacture of finished goods falling under CETA 76.14. Extended period of limitation - appellants never filed any declaration with the Department indicating the processes undertaken by them. When no intimation of the activities is filed with the department, it cannot have any knowledge of the activities being undertaken. Under the circumstances we agree with the view of the Adjudicating authority that extended period of five years is invokable in these proceedings - Matter remanded back - Decided in favour of assessee by way of remand only .

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• 2015 (12) TMI 1100
  Demand of CENVAT Credit - Penalty under Rule 15 of the Cenvat Credit Rules 1994 read with Section 11AC - Held that:- Appellant had wrongly and prematurely availed and utilized the Cenvat Credit during the period from Sept. 2006 to March 2007. The main contention of the Learned Advocate is that they have reversed credit alongwith interest. I find that it was a regular practice of the appellant for 6 months of excess availment of the Cenvat Credit, even which was reversed with interest, the appellant is liable to pay penalty for contravention of the Rules. It is noted that the Adjudicating Authority imposed penalty under Rule 15 of the Rules read with Section 11AC of the Act which was modified to ₹ 5,00,000/-. The Revenue has not filed any appeal against such modification. Thus, it is clear that there is no suppression of fact with the intent to evade payment of duty - Decided partly against assessee.

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• 2015 (12) TMI 1099
  CENVAT Credit - whether the services of storage and warehousing and insurance services would qualify to be input services within the meaning of the definition input services given under Rule 2(l) of the Cenvat Credit Rules - Held that:- Tribunal in appellants own case in appeal Nos. E/125, 1384/11 and E/85723/13 for the different period, has categorically held that storage and warehousing charges as well as insurance premium are eligible as input services. This Tribunal while holding the storage and warehousing services as input services relied upon the Honble High Court of Andhra Pradesh in the case of CCE vs. Sai Sahmita Storages P. Ltd. reported in [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT] wherein the Honble High Court has held that storage and warehousing charges are eligible input services as defined in Rule 2(l) of the Cenvat Credit Rules, 2004. - Decided in favour of assessee.

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• 2015 (12) TMI 1098
  Valuation - Under valuation of goods - Clearance of goods to sister units - Invocation of extended period of limitation - Held that:- it is a case of inter unit transfer of the goods. The Hon'ble Gujarat High Court in the case of CCE Vadodara-II Vs Vs Indeos ABS Ltd - [2010 (3) TMI 656 - GUJARAT HIGH COURT] dismissed the appeal filed by the Revenue - there is no dispute that the sister unit would avail the CENVAT Credit and cleared the final product on payment of duty. Hence, the decision of Hon'ble Gujajrat High Court is squarely applicable in this case - there is no material available of suppression of fact with intent to evade payment of duty. It is a case of inter-unit transfer and the other unit cleared the goods on payment of duty. So, the Commissioner (Appeals) rightly set aside the demand, holding that the extended period of limitation cannot be invoked. Hence, there is no infirmity in the impugned order - Decided against Revenue.

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• 2015 (12) TMI 1097
  CENVAT Credit - Use of capital goods for Job Work - duty of excise paid on debonding of 100% EOU on capital goods claimed as credit - Held that:- So far as material facts placed by learned counsel is concerned, that remained undisputed by Revenue. Further added fact that came to record is that the principal manufacturer who assigned the job work to the appellant was an EOU. Part of the goods manufactured by the appellant were processed and exported by that EOU. The rest of the goods were domestically cleared making payment of duty. Honble High Court of Madras in the case cited (2015 (9) TMI 119 - MADRAS HIGH COURT) has held that clearance of the goods by a job worker if exempt from duty that does not disentitle the job worker to the CENVAT credit. Appellant says that it had not made clearance under Notification No. 30/2004 dated 9.7.2004 but made clearances to an EOU - capital goods of the appellant were used to manufacture dutiable intermediary for the EOU which suffered duty partly on the value addition thereto by the principal manufacturer when cleared in DTA. Therefore, denial of capital goods credit to the appellant is unwarranted - Decided in favour of assessee.

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• 2015 (12) TMI 1096
  Denial of exemption claim - yarn waste - whether the Appellant is eligible for duty free clearance of “yarn waste” which is produced during the manufacture of final product, “Polyester Dyed Yarn” - Held that:- Appellants are not eligible for duty exemption for yarn waste, under Notification No.89/95-CE, dt.18.05.1995 as contended by the Revenue. However, this does not preclude the Appellants from availing the benefit of Notification No.30/2004-CE, dt.09.07.2004, which is altogether a separate and independent notification. Not eligible for the benefit of one notification, does not mean that the party is not eligible for the benefit provided under another notification, as far as they fulfill the provisions of the said notification. Therefore, we do not find any irregularity in the clearance of yarn waste free of duty by the Appellant in accordance with Sr.No.8 of the Table of the Notification No.30/2004-CE, dt.09.07.2004. Hence, the Order-in-Appeal setting aside the demand of duty, interest and imposition of penalty is correct - Decided against Revenue.

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• 2015 (12) TMI 1095
  Restoration of appeal - Appeal dismissed for non prosecution - Held that:- It is seen from the order dated 06.07.2010 of the Tribunal that the matter was adjourned in several occasions at the request of the appellant and nobody turned up on behalf of the appellant. It is noted that in the month of July 2012, the appellant received the copy of the order of the Tribunal from the Registry, but, no application was filed by the applicant till 23.01.2015. It is noted that the appellant is a private limited company. There is a long delay of about 5 years. On the identical situation, the Hon’ble High Court in the case of L. J. Synthetics Mills (2010 (3) TMI 833 - GUJARAT HIGH COURT ) rejected the appeal filed by the assessee. - Revenue already acted upon the Final Order dated 06.07.2010 of the Tribunal. In our considered view, when the Revenue had taken steps to implement to the Final Order of the Tribunal, there is no scope to recall the order dated 06.07.2010. Hence, we do not find any force in the submission of the Learned Advocate on merit. In view of the above discussions, we do not find any reason to recall the order dated 06.07.2010 - Restoration denied.

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• CST, VAT & Sales Tax

• 2015 (12) TMI 1087
  Delegation of the Commissioner’s powers u/s 68 of DVAT - validity of order passed u/s 36A - Held that:- An order under Section 36A(8) has to be passed by the Commissioner in writing. Section 66(3) specifically provides that the Commissioner and the Value Added Tax Authorities shall exercise such powers, as may be conferred upon them, and perform such duties, as may be required by or under this Act. In other words, it is only the Commissioner who can pass an order under Section 36A(8) unless and until the power of the Commissioner has been delegated under Section 68 of the said Act to the VATO. - it is evident that an order under Section 36A(8) has to be passed by the Commissioner in writing. Section 66(3) specifically provides that the Commissioner and the Value Added Tax Authorities shall exercise such powers, as may be conferred upon them, and perform such duties, as may be required by or under this Act. In other words, it is only the Commissioner who can pass an order under Section 36A(8) unless and until the power of the Commissioner has been delegated under Section 68 of the said Act to the VATO. - We could have understood if this power of the Commissioner had been delegated by the Commissioner in terms of Section 68 of the said Act to the VATO. But that has, admittedly, not been done. As such, the impugned order dated 07.08.2013 is liable to be quashed as the VATO did not have the jurisdiction to pass such an order. The impugned order is quashed. - Decided in favour of assessee.

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• 2015 (12) TMI 1086
  Revision petition - Whether on the facts and circumstances of the case, the learned Commercial Tax Tribunal was justified in law in confirming the order passed by the assessing authority holding that the revisionist is liable to pay the tax inspite of finding recorded that the first sale is effected by the respondent no.2 - Whether on the facts and circumstances of the case, the authority below was justified in law in holding that the assessee revisionist is liable to pay tax inspite of recording a finding of fact that the sale order was with the name of Dehradun Club and the sale consideration is received by Dehradun Club through its employee - substantial questions of law are answered against the revisionist - Decided against Assessee.

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• Indian Laws

• 2015 (12) TMI 1084
  Enlargement on bail in FIR of NDPS Act, 420,467,468,471 IPC at Police State Fatehgarh Sahib - Held that:- Whether or not the petitioner deserves the concession of bail, it appears to us that even in a case where two views are possible, the judicial discretion should tilt towards the liberty of a suspect not only because of the ‘bail as a rule or jail as an exception’ but also in view of Article 21 of the Constitution which guarantees the one’s liberty. Keeping such preface behind, we are of the considered view that the petitioner deserves the concession of bail for the reasons that – (i) the petitioner is neither found involved in any other case under the NDPS Act nor has he a track record of involvement under other penal laws; (ii) there is no likelihood of his tampering with the prosecution evidence as the two witnesses of his disclosure statement are police officials only; (iii) the mere recovery of a controlled substance would fall short of attracting Section 37(1)(b)(ii) unless a definite chain to link the culmination of such controlled substance into conversion of a synthetic drug of ‘commercial quantity’ is established; (iv) the applicability of rigors of the aforesaid provision in the instant case is thus a debatable issue; (v) the allegation of the petitioner as a conduit of ‘international cartel’ of drug racketeers is truly serious and cannot be overlooked save that the prosecution is able to lay its hands to any such evidence; (vi) no sooner such evidence is recovered, the prosecution would be well within its right to seek the cancellation of bail keeping in view the enormity of the offence; (vii) the petitioner is incarcerated from last about 2 years; (viii) the petitioner’s name surfaced only in the alleged confessional statement of Jagdish Singh @ Bhola. The veracity of that statement is yet to be tested by the Special Court; (ix) the trial period is also unpredictable due to involvement of several persons. For the reasons afore-stated and without expressing any views on merits, we allow this petition and direct to release the petitioner on bail subject to his furnishing bail bonds to the satisfaction of CJM concerned where the petitioner is presently lodged.

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