Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 5, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Eligibility for exemption u/s 11 & 12 - assessee is eligible for exemption u/s 11 & 12 of the Income Tax Act as assessee is not engaged in any trade, commerce or business and its dominant and prime objective is charitable in nature in accordance with section 2 (15 ) of The Income Tax Act - AT
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Addition u/s 68 - Having regard to the modus operandi of accommodation entry providers, the practice of taking cash and receiving cheques in the guise of subscription and share capital consideration in the form of commission, the assessee company had not discharged its initial onus lying upon it - AT
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Validity of assessment completed u/s 144 - absence of notice - Since the notices were not received back “unserved” within thirty days of its issuance, there would be presumption under the law that notice had been duly served upon the assessee. The assessee received the Show Cause Notice u/s. 271(1)(b) dated 18.06.2008. Thus, the Assessment order u/s 144 is proper. - AT
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Accrual of income - termination of contract - method of accounting - if there is uncertainty with regard to the collection of amount then recognition of said amount should be deferred in the books of account.
- AT
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Service of notice, summons, requisition, order and other communication - CBDT makes the Rules for determination of Address including Electronic Address (e-mails) for sending the communication
Service Tax
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Demand of service tax - Management consultancy service - activity of running, operating and managing the entire hotel business - As both Members have a difference of opinion, matter referred to larger bench - AT
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They were collecting the service tax from their customers but instead of depositing the same with the Revenue, were retaining it with them. - it is not a fit case for dispensing with the condition of pre-deposit of the entire penalty amount - AT
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Refund claim - Business Auxiliary Services - Export of services - Products support services shall include phone, e-mail, web based and onsite support for all MSFT products. It cannot be said that services have been used in India - AT
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Denial of refund claim - There is no time limit prescribed in the law for issue of show-cause notice to reject a refund claim nor to sanction a refund claim. In the absence of any time limit prescribed under the law, even at this stage, the original adjudicating authority can issue a fresh show-cause notice and consider the refund claim. - AT
Central Excise
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Ex-parte order without service of any notice - Issuance of a fresh notice not only flows from Article 14 of the Constitution but also from the provisions of the Central Excise Act. In our opinion the stand adopted by the Commissioner is nothing else but an after thought in trying to justify her action in passing an ex parte order - HC
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Recredit of CENVAT Credit previously reversed - Disallowance of credit on LDO/furnace oil - SCN issued for recredit without proper authoriation - If the authority had any objection they should have immediately asked the appellant for further clarifications, which in the instant case was not done - recredit allowed - HC
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Denial of refund claim - Duty paid under protest - Tribunal committed a manifest error in non-suiting the appellant's claim on the sole ground that the appellant was only a buyer and, therefore, was not entitled to claim a refund of the duty. This finding is patently perverse. Section 11-B of the Act provides that any person can make an application for refund of duty - HC
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SSI exemption - Since the appellant has another factory, which is manufacturing an excisable commodity, its clearances have to be added while considering the exemption notification - HC
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Scope of the term Manufacture - deemed manufacture - the argument that putting a tag is not labelling or there is absence of container, etc., in our view, will defeat the purpose of definition given in Section 2(f)(iii). In view of the said position, we hold that even putting the tag on the unpacked parts will amount to manufacture and will be covered under Section 2(f)(iii) - AT
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Manufacture - scope of the term automobile - activity of packing/re-packing, labelling/re-labelling and fixing of MRP on automobile parts amounts to manufacture - Classification - Demand of duty confirmed - AT
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Denial of SSI Exemption - Clubbing of clearances - the Limited Co. being separate entity and distinct from shareholders, it cannot be said that Shri Venkatesh having 90% of shares in ICPL by virtue of being proprietor of Venky & Co., the clearances could be clubbed. - AT
VAT
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Disaollowance of Input tax credit - Assessing Officer was not justified in declining the benefit of input tax credit only on the ground that the tax invoices did not contain the name of the buyer and also its TIN number. No doubt, non mentioning of the name and the TIN number can be a circumstance, but it cannot be held to be conclusively against the purchaser. - HC
Case Laws:
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Income Tax
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2015 (12) TMI 202
Undisclosed income - the petitioner sought staying of the criminal proceedings against him on the ground that against the Assessment Order (‘AO’), the petitioner had already filed an appeal, which is pending for adjudication - Held that:- Proceedings once initiated in a warrant trial case, there is no provision under the Code of Criminal Procedure, 1973, except U/s 258 Cr.P.C., where the proceedings of the case can be stayed by the Magistrate suo moto or upon the application filed on behalf of the accused, however, Section 258 Cr.P.C. relates only to summons trial cases. Moreover, the application filed by the petitioner did not mention under which provision of Act it is filed. Thus, the learned Trial Court has rightly dismissed the application filed by the petitioner. From the above noted facts, it is crystal clear that the petitioner had admitted to have bank accounts outside India only after the investigation by the Income Tax Department. The said foreign account was the undisclosed account and the deposits therein relates to his undisclosed income and the same needs to be examined. Therefore, there is no illegality, infirmity or perversity in the order dated 19.02.2015 passed by the learned Trial Court that pendency of appellate proceedings has no bearing in initiation of prosecution under the Income Tax Act. Thus, finding no merit in the instant petition, the same is hereby dismissed.
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2015 (12) TMI 201
Extension of time for deposit of the arrears of tax - Held that:- Undisputedly, order under Section 245D(4) of the Act was passed by the Income Tax Settlement Commission on 12.12.2014 asking the petitioner to pay the amount of tax together with interest in four monthly equal instalments with the last instalment payable by 31.3.2015. It was also directed that in case of failure to make the payment within the prescribed period, the immunity granted under the provisions of Section 245H(1) of the Act shall be withdrawn. The petitioner had made a request vide letters dated 28.3.2015 and 31.3.2015 before the Settlement Commission for further extension of time of 14 months for payment of tax. However, by that time, he had already defaulted the three instalments. Vide order dated 23.4.2015, the Settlement Commission disposed of the said applications directing the petitioner to pay the amount on or before 10.5.2015 and to pay the final instalment by 31.7.2015. The petitioner could not make the payment by the due date. Instead he filed the present petition in this Court. The petitioner has already been given sufficient opportunity to deposit the amount. Even some part of the amount has been realised from the sale of the jewellery of the petitioner. The impugned order has been passed by the Settlement Commission after considering the overall facts and circumstances of the case. Learned counsel for the petitioner has not been able to show any error in the said order, warranting interference by this Court. Consequently, finding no merit in the petition, the same is hereby dismissed. - Decided against assessee.
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2015 (12) TMI 200
Allowable interest to the assessee - Held that:- The authorities below on appreciation of material on record have concurrently recorded that the assessee was entitled to 1/4th deduction, i.e. 25% of the entire interest. Learned counsel for the assessee was not able to demonstrate that the approach of the authorities below was erroneous or perverse or that the findings of fact recorded were based on misreading or misappreciation of evidence on record. The view of the Assessing Officer, the CIT(A) and the Tribunal is a plausible view based on material on record which warrant no interference by this Court. - Decided against assessee.
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2015 (12) TMI 199
Time barred appeal - non serving of notice as submitted by assessee - Held that:- It has been categorically recorded by the Tribunal in its order that notice under section 143(2) of the Act was served on the assessee on 31.7.2006. The assessee did not appear. He left the premises without giving further address to the department. Thereafter, for further proceedings before the Assessing officer, notices were served through affixture at the last known address in the presence of two witnesses of the same locality. Still the appellant did not appear. Ex parte assessment order and demand notice were also affixed on the last known address. The appeal preferred before the CIT(A) was held to be time barred. As assessee has not explained as to why the assessee did not make any effort before the Assessing Officer to represent the case for filing the appeal on time before the learned CIT(Appeals). No material is produced before us to substantiate any contention raised before us - Decided against assessee.
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2015 (12) TMI 198
Reopening of assessment - disallowance of a portion of the claim under section 80IB(10) - Held that:- While considering the claim for deduction under section 80IB(10) of the Act, the Assessing Officer has called for details of the land in question which was brought as capital of Shri Babubhai Desai, the amount of land brought as capital and the value considered, the detailed working of profit/gain offered for income-tax when land was brought as capital asset, as well as copy of the return of income with computation of income of Shri Babubhai Desai for financial years 2006-07 and 2007-08. In response thereto, the petitioner has submitted copies of the revenue record pertaining to the lands in question, the purchase deed of the land, copy of the capital account of Shri Babubhai Desai for financial years 2006-07 and 2007-08, supplementary deed and copy of the capital account of Shri Babubhai Desai and his income tax return for the above years which clearly showed that capital gain on such lands amounting to ₹ 1,08,60,381/- was offered for tax in assessment year 2007-08. Thus, the Assessing Officer, after calling for the above material, did not deem it fit to assess capital gain under section 45(2) of the Act nor has the aspect of capital gains been discussed in the assessment order. Therefore, it is evident that while examining the claim under section 80IB(10) of the Act, the Assessing Officer has also called for material relating to the lands in question and as to whether profit/gain was offered for income tax when the land was brought as capital, but has not assessed capital gain under section 45(2) of the Act in relation to conversion of the capital assets to stock in trade, under the circumstances, the reopening of assessment for the purpose of examining such issue is clearly based on a change of opinion. - Decided in favour of assessee.
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2015 (12) TMI 197
Disallowance u/s 14A - Held that:- Commissioner (Appeals) has restricted the disallowance under section 14A to 0.5% of value of investments. The Tribunal has concurred with the above findings of fact recorded by the Commissioner (Appeals). Evidently, therefore, the conclusion arrived at by the Tribunal is based upon concurrent findings of fact recorded by it upon appreciation of the material on record. On behalf of the revenue, nothing contrary has been brought to the notice of the court to dislodge the concurrent findings of fact recorded by the Tribunal. Under the circumstances, in the absence of any perversity in the findings of fact recorded by the Tribunal, it is not possible to state that the impugned order of the Tribunal gives rise to any question of law - Decided against revenue Disallowance of expenditure covered under section 40A(2)(a) - Held that:- Having heard the learned counsel for the appellant, the court is of the view that the matter requires consideration. Hence, ADMIT. The following substantial question of law arises for consideration: "Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in upholding the order passed by the Commissioner of Income Tax (Appeals) deleting the disallowance of expenditure of ₹ 30,73,341/- covered under section 40A(2)(a) of the Income Tax Act, 1961?"
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2015 (12) TMI 196
Eligibility for exemption u/s 11 & 12 - Held that:- Amendment made in section 2 (15) of the act with effect from 1.4.2016 by substituting the first proviso and second proviso by a single proviso, which would now exempt the business income, where the activity “is undertaken in the course of actual carrying out of such advancement of any other object of general public utility”, so that it recognizes all the activities consistent with the objects, where the objects are not prompted by profit motive, from the purview of liability bringing the law to conform The Constitution which was challenged before Honourabel Delhi High court in Indian Trade promotion Organization V DGIT ( Exemption) (2015 (1) TMI 928 - DELHI HIGH COURT) . The effect of this provision would bring those trusts and institutions, like assessee, with the object of general public utility on par with those with the other three objects in respect of the treatment for income from business, if it is incidental to the objects as provided under section 11(4A) of the Act, subject to certain limitation. In view of above we reverse the order of CIT (A) and hold that assessee is eligible for exemption u/s 11 & 12 of the Income Tax Act as assessee is not engaged in any trade, commerce or business and its dominant and prime objective is charitable in nature in accordance with section 2 (15 ) of The Income Tax Act. - Decided in favour of assessee.
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2015 (12) TMI 195
Disallowance of claim of expenditure of premium paid on SLR investments - Held that:- We are of the view that amortization of premium is allowable in accounting practice. As per RBI’s guidelines, amortization of premium in case of assets treated as HTM (Held to Maturity) (Investments) is to be amortized divided equally over the period which is remaining for their maturity. Same has been done by assessee. Amortization of expenses has been recognized in similar circumstances in case of premium of debentures, which was also held as investments in different judgements including that of Hon’ble Supreme Court in case of Madras Industrial Investment Corp.Ltd. Vs. CIT(A) (1997 (4) TMI 5 - SUPREME Court ) - Decided in favour of assessee.
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2015 (12) TMI 194
Denial of deduction claimed u/s 80P(2)(a)(i) on the interest income earned on the deposits with Karnataka Bank Limited - Held that:- Since the facts in the present case before us is identical to that of the case which is decided by for the assessment year 2009-10, which follows the decision of the Hon’ble High Court of Karnataka in the case of CIT Vs Grain Merchants Co-operative Bank Ltd., [2003 (10) TMI 21 - KARNATAKA High Court] and Tumkur Merchants Souharda Credit Co-operative Ltd., Vs ITO (2015 (2) TMI 995 - KARNATAKA HIGH COURT ) and we hold that the learned CIT(A) was not correct in denying the assessee’s claim of deduction u/s 80P(2)(a)(i) and hold the assessee is entitled to deduction under section 80P(2)(a)(i) of the Act, in respect of interest income earned on fixed deposits, as well as that the said interest income forms art of the business income earned by the assessee and the same is not to be taxed under the head “Other Sources” - Decided in favour of assessee.
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2015 (12) TMI 193
Disallowance of sampling expenses - CIT(A) allowed claim - Held that:- The Assessing Officer was not convinced with the level of sampling expense incurred vis-a-vis the amount incurred in the preceding assessment year. In our considered opinion, the variation in the level of expenses, vis-a-vis an earlier year can be a ground to further investigate the matter, but the same by itself cannot be a ground to disallow any expenditure, specially, without bringing on record any infirmity or falsity in the claim made by the assessee. In the present case, in our view, the CIT(A) made no mistake in deleting the disallowance made by the Assessing Officer , which was essentially an adhoc disallowance bereft of any factual support. Thus, on this aspect we affirm the order of CIT(A) and Revenue fails. - Decided in favour of assessee. Disallowance on account of interest expenditure under section 36(1)(iii) - CIT(A) allowed claim - Held that:- The Annual Financial statements of the assessee, clearly bring out the nature of the advances to the sister concerns, being trade advances. The assessee company had pointed out before the CIT(A) that the amount advanced to M/s. Premier Knit Processors Pvt. Ltd. was for purchasing yarn of requisite quality and getting garments manufactured at various factories at Tirupur for supplying to the assessee. It was also pointed out that the said concern was providing dyeing services to the assessee. It was pointed out that due to such arrangement, assessee’s job orders got priority from M/s. Premier Knit Processors Pvt. Ltd. and, therefore, there was a measure of commercial expediency in making such advances. Further, with regard to the advance of ₹ 83,41,385/- to M/s. Kaytee Apex Ltd., it was explained that the amount was advanced for setting-up stitching facility at Tirupur, which was exclusively provided to the assessee. Therefore, such loan was for the ultimate advancement of the assessee’s business operations as it facilitated timely delivery and quality of products, which was crucial for meeting the export obligations. These aspects have been appreciated by the CIT(A), and in our view, there is no cogent material before us, which would require us to distract from ultimate finding of the CIT(A).- Decided in favour of assessee. Unexplained investment in shares - CIT(A) allowed claim - Held that:- The assessee explained that all investments except to the extent of ₹ 50,000/-, were made in the past years and there was no disallowance out of interest expenditure in the past years. On this aspect also, we find no reason to interfere with the decision of the CIT(A) in deleting the disallowance, as no nexus can be established between the interest bearing funds and the investment in shares. - Decided in favour of assessee.
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2015 (12) TMI 192
Additions on account of capitalization of pre-commencement of expenses pertaining to a project under consideration - CIT(A) deleted the addition - Held that:- ACIT vs. Ashima Syntex Ltd.(2008 (10) TMI 298 - ITAT AHMEDABAD-B) has held that so far as corporate advertisement expenses, computer software expenses, public relation expenses quota expenses, sales promotion expenses, fixed deposit expenses and exhibition expenses are concerned, those expenses should be allowed in the year in which they are incurred. In the case in hand, the assessee has claimed expenditure in the year those were incurred. The AO disallowed on the ground that the expenditure related to the pre-commencement of the business. However, the ld.CIT(A) deleted the disallowance. In the light of the judgement of the Hon'ble Apex Court rendered in the case of Taparia Tools Ltd. vs. Jt.CIT (2015 (3) TMI 853 - SUPREME COURT) and decision of the Coordinate Bench in the case of ACIT vs. Ashima Syntex Ltd.(supra), we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. - Decided against revenue Disallowance u/s.40(a)(ia) - CIT(A) deleted the addition - Held that:- We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the judgement relied upon by the parties. There is no dispute with regard to the fact that there was no finding for treating the assessee to be in default by the concerned AO. Therefore, in view of the judgement of the Hon'ble High Court of Delhi in the case of CIT vs. Ansal Land Mark Township(P) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. - Decided against revenue
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2015 (12) TMI 191
Addition on account of undisclosed receipts - Held that:- In the present case the AO has not doubted the books of accounts as he has not rejected the same. Secondly, he has compared two audit reports and taken the higher figures from both the accounts accompanying the audit reports. The AO, first of all, has not given any finding which is the correct state of accounts as audited by two Chartered Accountants despite the fact that he has examined both the Chartered Accountants. It is also a fact that the assessee has produced complete address of the party SWDL and TDS certificates issued by that party clearly reveals that the total receipts are at ₹ 2,14,70,195/- as against the total receipt adopted by AO ₹ 2,93,30,087/-. The assessee has produced complete bills issued by SWDL and payments are received by cheque through bank accounts. The assessee filed before the authorities concerned all the books of account reflecting the receipts from SWDL and in that case it was the duty of the authorities to definitely come to one conclusion or the other in regard to the reliability of everyone of the relevant account filed by the assessee. In the absence of any such finding, it was not open to them to pick and chose one receipt or the other, which are more favourable to the revenue. They could accept the assessee's explanation or reject them or they could check the entries therein with reference to the books of account. But they have not done none of these things. Accordingly, the assessee's audit report as filed along with the return of income as audited by M/s. Anurag Mathur & Co. is the correct accounts for the reason that the receipts disclosed therein are matching with the TDS certificates issued by SWDL and also with the bills raised. Accordingly, we delete the addition - Decided in favour of assessee. Disallowance of commission - Held that:- In the immediate preceding year i.e., assessment year 2003-04, the assessee was engaged in the same business and also taken services from the said parties and paid commission to them and no disallowance was made by the AO originally, but again case was reopened by issuing notice u/s. 148 read with section 147 of the Act on the basis of information that one of the parties Umang Credit Capital Ltd., the transaction had not been reflected in its Trading & P&L Account and transaction had been denied by this party. Accordingly, commission paid to these parties were disallowed but CIT(A) vide his appellate order dated 20.11.2012 considered all the aspects and acknowledged the services rendered by these parties and allowed the payment of commission except in the case of M/s. Dave Commercial Co. In view of these facts and circumstances of the case, we are of the view that that, since there is no change in the facts in the present case for the relevant assessment year in comparison to earlier AY 2003-04, as far as this issue is concerned and hence, the revenue should not have taken different conclusion than allowing the payments except in the case of M/s. Dave Commercial Co. We direct the AO to restrict the disallowance to the extent of this party i.e., M/s. Dave Commercial Co. only. We direct the AO accordingly. - Decided partly in favor of assessee. Disallowance of business promotion expenses - Held that:- We find that exactly similar expenses on account of business promotion was allowed in immediately preceding assessment year 2003-04 by the AO himself. The AO in the immediately preceding year has clearly held that these are business expenses relatable to the business of the assessee for the reason that the assessee being the sale coordinator for supplies to Canteen Stores Department (of Military Wing) from SWDL and such expenditure is allowable as business expenditure. Thus hese expenses are allowable expenditure, first on the principles of consistency and even otherwise the CIT(A) has admitted the expenses to be business in nature but disallowed 50% on the basis of estimate. That cannot be the basis for disallowance. Accordingly, we delete the disallowance - Decided in favour of assessee.
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2015 (12) TMI 190
Disallowance on unpaid leave encashment provisions applying provision of section 43B (f) - Held that:- Leave encashment is not a scheme where employer and employee contributes but is a provision to be made according to accrual method of accounting where payment due to employees on their retirement or otherwise for their accrued leave for the tenure of the service. Further it is not for the welfare of the employees but it is wages due to the employees for the services rendered by them according to the terms of employment. It is also not a statutory payment but a contractual payment. Further finance Act 2001 has introduced section 43B (f) wherein leave encashment provision were covered, therefore it is apparent that earlier to that it was allowed on accrual basis irrespective of the year of payment. - Decided against revenue
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2015 (12) TMI 189
Addition u/s 68 on account of alleged bogus accommodation entries - CIT(A) deleted the additions - whether the assessee company had discharged its onus that is lying upon it in terms of the provisions of Section 68 or not? - Held that:- A perusal of the assessment, reveals that the assessee company failed to discharge the initial onus that was lying upon it in terms of the provisions of Section 68 of the Act as he failed to furnish the identity, creditworthiness and genuineness of the transaction of share application money received of ₹ 20,02,030/-. The ld. CIT(A) had deleted the addition solely on the ground that there were no credit in the nature of M/s Garg Finvest Pvt. Ltd. and Shekhawati Finance Pvt. Ltd. In our opinion, the ld. CIT(A) fell in error by holding that the provisions of Section 68 are not applicable to the facts of the present case. Having regard to the modus operandi of accommodation entry providers, the practice of taking cash and receiving cheques in the guise of subscription and share capital consideration in the form of commission, the assessee company had not discharged its initial onus lying upon it, nor rebutted the report of Investigation Wing. Further, we find from the order of the CIT(A) that certain additional evidences/details were filed by way of paper book and there is nothing on record to show that the requirements of the provisions of Section 46A of the Income Tax Rules, 1962 had been complied with by the ld. CIT(A). In the circumstances, we are of the considered opinion that the interest of justice would be served, if the matter is restored to the file of the Assessing Officer for de-novo assessment - Decided in favour of revenue by way of remand. Validity of reassessment proceedings - Held that:- The information received from the Investigation Wing of the Department enabled the Assessing Officer to form an opinion that the income chargeable to tax had escaped assessment. It is trite law that at the stage of initiation of the reassessment proceedings, there need not be conclusive finding on fact against the assessee, only requirement is reasonable belief of the Assessing Officer. See Sowdagar Ahmed Khan Vs. ITO, (1967 (11) TMI 10 - SUPREME Court); Brij Mohan Aggarwal Vs. ACIT (2004 (4) TMI 61 - ALLAHABAD High Court); & Praful Chunila Patel: Vasant Chunilal Patel Vs. Asstt. CIT, (1998 (2) TMI 538 - GUJARAT High Court ). - Decided against assessee
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2015 (12) TMI 188
Validity of assessment completed u/s 144 without - valid service of notice u/s 142(1) questioned - addition on account of cash deposited in bank - Held that:- The notice u/s. 142(1) dated 05.11.2007 was issued by ITO ward 41(4), New Delhi to the assessee through speed post to direct the assessee to furnish his return of income for A.Y. 2005-06. The said notice was not received back undelivered. The second show cause notice under Section 142(1) dated 07.12.2007 was issued and the same was also not received back undelivered. Since the notices were not received back “unserved” within thirty days of its issuance, there would be presumption under the law that notice had been duly served upon the assessee. The assessee received the Show Cause Notice u/s. 271(1)(b) of the Income Tax Act, 1961 dated 18.06.2008. Thus, the Assessment order under Section 144 of the Income Tax Act, 1961 is proper. As relates to addition made on account of cash deposited in bank, additional evidence should have been allowed by the Ld. CIT(A) after giving opportunity to the Assessing Officer under Rule 46A(3) of the Income Tax Rules, 1962. Though the AR submitted that there was more than 8 months given to the Assessing Officer to send his remand report, in the interest of justice it will be proper to give time to look into the specific books of accounts including inter alia cash book of the assessee and fresh opportunity should have been given to the Assessing Officer while coming to the conclusion. In this respect the matter is remitted back to the Assessing Officer to look upon the additions made on account of cash deposits in bank. - Decided in favour of revenue for statistical purpose.
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2015 (12) TMI 187
Addition made by AO on account of low gross profit rate - CIT(A) deleted the addition - Held that:- AO has estimated the gross profit @ 6.46% on sales of spare being the same rates of profit shown by the assessee in the immediately preceding assessment year. The AO has examined the books of account including the stock register but could not point out any defect as is evident from the above that the assessee has maintained complete books of account including the stock register and complete details of purchase of spare parts were filed before the AO and none of the purchase and sales or opening or closing stock have been doubted or disputed. Another notable feature is that the AO has missed out to note that the three free services have to be provided to the customers after purchase of car with free spare parts. This fact has not been recognized by the AO above all. The AO has not rejected the books of account and without rejection of books of account no disturbance in the profit rate can be made by AO and hence, the issue is squarely covered in favour of assessee Addition of deemed dividend - CIT(A) deleted the addition - whether the transaction is commercial in nature and even otherwise the lender company is not a shareholder in the assessee company - Held that:- We find that the assessee has taken loan on interest from MTPL and paid interest to the tune of ₹ 9,55,288/- and the lender company's business is that of money lending. MTPL is not shareholder in assessee company although it is a sister concern. Only common feature is that one of the directors Shri M. D. Jindal is holding common shareholding of the assessee company at 50.25% and in MTPL at 64.16%. But admittedly, assessee is not a shareholder in MTPL nor MTPL is a shareholder in assessee company not holding 10% or more shares or voting powers. We find that the assessee has paid interest on the above loans and this is purely a commercial transaction. Once this is the position, the issue is covered by the judgment of Hon'ble Calcutta High Court in the case of Pradip Kr. Malhotra, [2011 (8) TMI 16 - CALCUTTA HIGH COURT] wherein it is held the authorities below erred in law in treating the advance given by the company to the assessee by way of compensation to the assessee for keeping his property as mortgage on behalf of the company to reap the benefit of loan as deemed dividend within the meaning of section 2(22)(e) of the Act. Also as none of the company i.e. neither lender nor the assessee company is registered shareholder in each other to the extent of 10% as mandated in the provision of section 2(22)(e) of the Act for charging deemed dividend. This issue is also covered by the order of Hon'ble Special bench of this Tribunal in the case of ACIT Vs. Bhaumick Colour Pvt. Ltd. (2008 (11) TMI 273 - ITAT BOMBAY-E ) wherein held deemed dividend could be assessed only in the hands of the person, who is a shareholder of the lender company and not in the hands of a person other than a shareholder, i.e., the concern. - Decided in favour of assessee.
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2015 (12) TMI 186
Penalty under Section 271(1)(c) - CIT(A) deleted the levy - Held that:- A perusal of the penalty order shows that the penalty has been levied for alleged offence of concealing the particular of income but we find that the Assessing Officer had not given a finding in the penalty order as to how and in what manner the respondent assessee company had furnished inaccurate particulars of income resulting in addition to the returned income except making the bald charge against the respondent assessee company that it had furnished inaccurate particulars of income. In the absence of such finding, the penalty order is liable to be quashed. Mere additions to the returned income would not per se tantamount to furnishing of inaccurate particulars of income so as to attract the penalty under Section 271(1)(c) of the Act. - Decided in favour of assessee
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2015 (12) TMI 185
Penalty under section 272A (1) (c) - non-compliance of the notice u/s 131 - Held that:- Even if a minimum penalty is prescribed, the authority competent to impose penalty will be justified in refusing to impose penalty where there is a technical or venial breach of the provisions of the taxing statute. In the present case, when the assessee is able to establish that the account books were produced during assessment proceedings, however with some delay, then it is a technical/venial breach of the provisions of the Act and penalty cannot be held as correct and justified. It is also relevant to note that undisputedly Shri Mahendra Nahata, Chairman of the appellant company in his statement recorded on 13.12.2007 stated that "The company keeps back up data, which will be compiled to prepare the accounts for the years for which the department is unable to a access the accounts in the server." This also shows cooperation and obedience on the part of the assessee company. Hence, penalty can be imposed upon the assessee on the allegation of non-compliance of the notice u/s 131 of the Act and the Assessing Officer was not correct in passing penalty order imposing penalty of ₹ 10,000 u/s 272A(1)(c) of the Act. In this situation, we are inclined to hold that the CIT(A) was not justified in confirming the penalty and hence impugned first appellate order cannot be held as sustainable and thus we demolish the same. - Decided in favour of assessee.
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2015 (12) TMI 184
Short deduction of tax at source on interest paid - demand raised under section 201 and levy of interest under section 201(1A) - Held that:- From the confirmation letter of Tata Motors Ltd., submitted before the first appellate authority, it is very much clear that the deductee has admitted that interest payment of ₹ 1,87,33,461, received from the assessee bank was offered to tax in the return of income filed for the assessment year 2008–09. In the said confirmation, Tata Motors Ltd., also furnished their assessment particulars. Thus, from the confirmation letter of the deductee, it is very much clear that the interest payment on which short deduction was alleged was declared as income by deductee in its return of income filed for the assessment year 2008–09. Thus, it pre–supposes that tax due on such income returned must also have been paid by the deductee. Therefore, the learned Commissioner (Appeals), in our view, was not justified in rejecting assessee's claim on the observation that whether tax paid on such income by the deductee was not mentioned. When the income tax assessment particulars of Tata Motors Ltd. was furnished in the confirmation letter, if the learned Commissioner (Appeals) had any doubt with regard to payment of tax by Tata Motors Ltd., he could have verified from the Departmental Authorities. We have no hesitation in holding that the assessee cannot be treated as assessee in default for the purpose of raising demand under section 201(1) of the Act in respect of interest payment to Tata Motors Ltd. As far as charging of interest under section 201(1A) is concerned, we are unable to accept assessee's contention, because the decision of the Hon'ble Gujarat High Court in Rishikesh Apartment Co- operative Society Ltd. (2001 (6) TMI 17 - GUJARAT High Court ) is prior to the decision of the Hon'ble Supreme Court in Hindustan Cocacola Beverages Pvt. Ltd. (2007 (8) TMI 12 - SUPREME COURT OF INDIA), wherein upheld the applicability of circular no.275/201/95–IT(V) dated 29th January 1997, issued by the CBDT stating that liability to charge interest under section 201(1A) of the Act till the date of payment of tax by the deductee would remain. We, therefore, while deleting the demand under section 201(1) of the Act, direct the Assessing Officer to compute interest under section 201(1A) of the Act till the date of payment of tax by the deductee. - Decided partly in favour of assessee.
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2015 (12) TMI 183
Accrual of income - termination of contract - method of accounting - Held that:- There is no dispute to the fact that there was termination of contract and full uncertainty was there with respect to recoverability of the amount invoiced. In fact, the assessee has rightly followed the accounting principle by not recording the said impugned amount in the books of account. As per Accounting Standard ('AS') - 9 i.e. Revenue recognition, if there is uncertainty with regard to the collection of amount then recognition of said amount should be deferred in the books of account. The fact that the Assessee never recorded the impugned amount in its book of accounts shows that the Assessee never considered the said amount as accrued income. The raising of invoice is initial process of recovery after which the assessee realized that there is uncertainty with respect to receipt of impugned amount and terminated the contract. If assessee had given up its claim then it would not have received even ₹ 7,30 crores, which is merely 8.58 percent of total claim after a long legal fight. The fact that (i) the Assessee recovered only 8.58% of the total claim, and that too after a period of 4 years and that (ii) the addition confirmed by CIT(A) in this year had been allowed as a deduction by the AO in AY 2006-07 clearly shows that the said amount could not be said to have accrued in favour of assessee in the relevant assessment year under consideration. However, the AO is directed to bring to tax net the amount received in future in the year of actual receipt.- Decided partly in favour of assessee
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Customs
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2015 (12) TMI 230
Suspension of CHA License - Regulation 19(2) of the Customs Brokers Licensing Regulations, 2013 - violation of the principles of natural justice - Held that:- Since the statutory period in this case has expired and the enquiry has not yet been completed, the suspension of licence should not be continued. Suspension should not be continued if the enquiry proceedings are not completed within the prescribed time limit of nine months. The appellant s licence was suspended since 14.10.2014 and the same continued to remain under suspension by the impugned order dated 9.12.2014. CBLR, 2013 itself has prescribed an overall time limit of nine months to complete the proceedings against the CHA right from the initiation of the proceedings to its final disposal. None of the time limit has been adhered to by the Customs authorities in this case. In these circumstances, it will be in the interest of justice, equity and fair play to set aside the suspension and allow the appellant to function as CHA, pending completion of enquiry by the Customs authorities. - Petition disposed of.
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2015 (12) TMI 229
Suspension of CHA license - forfeiture of security deposit - imposition of penalty - Held that:- There is no clarity about receipt of an offence report or the date of such receipt hence even if it is assumed that the date of order of immediate suspension is taken for reckoning the time limit for issue of show cause notice, the notice issued on 27.08.2014 is issued almost five months after the due date. Similarly, the inquiry report by the Deputy/ Assistant Commissioner is to be made within ninety days of issue of show cause notice. In the present case, there is a delay of three months after the time limit prescribed under the said Regulation. There is also a delay in issuing the impugned order of revocation which is beyond ninety days of submission of inquiry report. - impugned order of the original authority is issued in violation of the provisions of CHALR, 2004 /CBLR, 2013 and is not legally sustainable. The same is to be set-aside - Decided in favour of appellant.
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2015 (12) TMI 228
Denial of Exemption of duty - Held that:- Respondent no.1 Tribunal, while rejecting the petitioner's application for exemption from paying the custom duty at the time of filing the appeal, has not taken into account the fact that the assets of the petitioner have been taken over and sold under the provisions of the SARFASI Act and that the machine in question was taken into custody by the receiver under order of the Mumbai High Court and was sold by the receiver. - this relevant factor, has been taken into consideration by the Tribunal while deciding the application under Section 129E of the Act, for the purposes of arriving at a conclusion as to whether insistence on pre-deposit of the custom duty would have caused undue hardship to the petitioner. It is also observed that the respondents have not filed any document nor have they controverted the assertion of the petitioner. - Decided partly in favour of assessee.
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2015 (12) TMI 227
Stay application - Payment of 5% EDD - Held that:- Considering the plea made by appellant, and also seeing the letter BE No.8455205 dt. 21/07/2015 issued by Asst. Commissioner of Customs (RMS-PCA), Chennai wherein the assessing authority directed the appellant to pay 5% of EDD, we grant ad-interim stay against the payment of 5% of EDD ordered - Stay granted.
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Service Tax
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2015 (12) TMI 222
Demand of service tax - Management consultancy service - activity of running, operating and managing the entire hotel business - Bar of limitation - Penalty u/s 76 & 77 - Difference of opinion - As both Members have a difference of opinion, therefore, Registry is directed to place the file before the Hon'ble President to refer the matter to the Third Member for deciding the following issues:- a) Whether in the facts and circumstances of the case, the activity of running, operating and managing the entire hotel business of M/s. Taj Lands End Ltd., Bandra under a 'License Agreement', from the date of agreements up to completion of final purchase of the hotel, would be covered under 'Management Consultancy Service' and service tax would be payable on the quantum of Gross Operation Profits earned/retained by the Appellants or not. b) Whether in the facts and circumstances of the case the demand is barred by limitation or not. c) Whether in the facts and circumstances of the case penalties under Section 76 & 77 of the Finance Act, 1994 are imposable on the appellant or not.
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2015 (12) TMI 220
Waiver of pre deposit - Business Support service - whether the appellant has to discharge service tax on charges made by them on STP units for certification of exports on the basis of SOFTEX forms submitted by the exporters and various other functions performed in exercise of the powers conferred to them under Foreign Trade Policy such as increase in value of capital goods, capacity enhancement, permit for broad-banding, authorize change in name, permit change of location, extend validity of LOP, permit mergers, issue of green card, cancellation of LOP, etc - Held that:- Prima facie the issue is debatable and we also find that there could be some merits in the claim of the appellant that they are performing statutory functions and the same cannot be considered as business support activities. Certification of SOFTEX forms in terms of statutory requirement which is recognized by other Departments can be considered as Business Support Service or not is a very debatable point. Moreover, there is some merit in the claim that Business Support Service definition needs to be considered in greater detail and their activity is not covered by the same. Recognizing the fact that appellant is an autonomous society and established by Government of India, managed by Government of India and is performing several statutory functions, prima facie, we consider that appeal can be heard without insisting on pre-deposit. Accordingly, we waive the requirement of pre-deposit and grant stay against recovery during the pendency of appeal. - Stay granted.
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2015 (12) TMI 219
Waiver of pre deposit - levy of penalty - they were collecting the service tax from their customers but instead of depositing the same with the Revenue, were retaining it with them. - Mining and Site Formation Services - Recovery u/s Section 73 - Held that:- Appellant is not disputing that they were collecting the service tax from their customers but instead of depositing the same with the Revenue, were retaining it with them. We really fail to appreciate the appellant s contention that the amount was being retained on account of financial difficulties to deposit the same. The service tax was not required to be deposited from the appellant s own pocket but the amount collected by him was to be only deposited with the Revenue, in which case there can be no question of any financial difficulty. As rightly submitted by the learned DR, an assessee, when directed by the Revenue, has no choice but to deposit the amounts in question. As such the deposit of the same before the issuance of the show-cause notice along with deposit of the interest, at the intervention of the department, shall not get covered by the provisions of sub-section (3) of Section 73. Sub-section (4) of the said Section clearly mandates that the provision of sub-section (3) shall not be applicable in case there is a malafide on the part of the assessee. - it is not a fit case for dispensing with the condition of pre-deposit of the entire penalty amount - Partial stay granted.
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2015 (12) TMI 218
Demand of service tax - Composition scheme - Works Contract Service - Held that:- There is no violation of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. Rule 3 of the Rules require that the option to pay tax under composition scheme should be exercised before payment of Service Tax. It is seen that the registration under Works Contract Service was taken on 29.06.2007 and the Service Tax was paid on 5th/6th July, 2007. In view of this fact as well as the fact that under Rule 4 of Service Tax Rules the registration may be applied for within 30 days of commencement of business, the show-cause notice has no basis. The adjudicating authority proceeded to pass the Order on a completely fresh ground and therefore the order is liable to be set aside on this ground alone. The Commissioner correctly placed reliance on various judgements such as Godrej Industries Ltd. Vs. CCE, Mumbai [2008 (7) TMI 83 - SUPREME COURT ] and Tribunal decision in the case of Dhampur Sugarmills Ltd. Vs. CCE, Meerut [2010 (8) TMI 365 - CESTAT, NEW DELHI]. On the other hand the reliance placed by Revenue in case of CCE, Jaipur Vs. Ashoka Industries [2011 (1) TMI 414 - CESTAT, NEW DELHI] is out of context. In the case of Ashoka Industries the dispute was regarding production of a certificate to avail the benefit of Notification No. 108/95 CE. In that context it was held that as the basic issue is discussed in the show-cause notice, the order cannot be caused on some minor point. But in the present case the issue in the show-cause notice and the Order are different. Revenue has not even cited the details of the old contract and the new contract and compared the two to come to the conclusion that they were same and the change of contract was not a bonafide act. - Decided in favour of assessee.
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2015 (12) TMI 217
Refund claim - Business Auxiliary Services - non furnishing of the documentary evidences - Unutilized CENVAT Credit - Export of services - Held that:- Refund claim could have been clearly identified as relatable to the consideration received as a result of product support service agreement. The appellants have produced some sample invoices and from one of the invoices, we clearly find that the invoice not only shows that appellant had billed for product support service fee but had also mentioned the agreement dated 1st July, 2002 in the invoice also. In spite of this, it is not known how the learned Commissioner (A) has come to the conclusion that “territory shall mean the region of India as stipulated in the agreement”. We find that in product support services agreement, it is clearly provided that ‘territory’ shall mean worldwide. When according to the agreement both the parties have to understand that ‘territory’ means ‘worldwide’ how an inference could be drawn that territory means region of India could not be understood. - appellants are providing product support service from India and according to the agreement the product support services shall include standard MSFT product support services for products which are generally made available to end-users in the territory and shall include requests for support originating from within the territory. Products support services shall include phone, e-mail, web based and onsite support for all MSFT products. It cannot be said that services have been used in India. - Decided in favour of assessee.
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2015 (12) TMI 216
Denial of refund claim - CENVAT Credit - adjustment towards payment of Service Tax/duty - Held that:- After examining each service and the usage thereof and considered in the light of precedent decisions, in respect of these services, appellants have been able to show nexus and therefore refund is admissible. - As regards the refund claim prior to 14-3-2006 when the Notification was issued under Rule 5 of CENVAT Credit Rules, 2004 for sanction of refund of input services, the issue is covered by a decision in the Interim Order [2015 (3) TMI 346 - CESTAT BANGALORE]. In view of the above, we find that the appellant is eligible for refund - Decided in favour of assessee.
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2015 (12) TMI 215
Distribution of input services of Banking and financial services - Passing of credit - Held that:- zonal office was not registered as ISD at the material time, they were not eligible to pass on credit to their respective branches - credit could be taken on the basis of laid down procedure. Once Bank was not registered as ISD, they were not authorized to pass on any credit. Revenue also pointed out that the decision of the Tribunal in the case of Khaitan Electricals Ltd. v. CCE, Kolkata-VI - [2010 (11) TMI 79 - CESTAT, KOLKATA] wherein the depot was not registered as an input service distributor, the appellants were not entitled for credit at Kolkata unit which was in respect of service received by the depot at Jaipur. - Decided in favour of Revenue.
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2015 (12) TMI 214
Denial of refund claim - Notification No. 11/2002 CE (NT) dated 1.3.2002 - refund of credit only in respect of inputs and not input services - Held that:- refund claim was rejected without issue of show-cause notice and there was violation of principles of justice. It was submitted that the question of re-adjudication could not have arisen since there was no show-cause notice in the first place and without issuing a show-cause notice there cannot be any question of re-adjudication at any stage and nor can a fresh show-cause notice be issued. It was submitted that this is an incurable defect. We are unable to agree with this submission. There is no time limit prescribed in the law for issue of show-cause notice to reject a refund claim nor to sanction a refund claim. In the absence of any time limit prescribed under the law, even at this stage, the original adjudicating authority can issue a fresh show-cause notice and consider the refund claim. Accordingly since the principles of natural justice have not been observed, the impugned order as regards the third refund claim is set aside and the matter is remanded to the original adjudicating authority for considering the refund claim afresh in accordance with law. - Decided in favour of assessee.
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2015 (12) TMI 213
Waiver of pre deposit - commercial or industrial construction service - Service Tax paid on the rents for hired warehouses outside the factory for storage or raw material as well as finished goods - Held that:- As regards the credit taken in respect of Commercial or industrial construction service, it is not disputed that the said service was utilized for setting up the factory and therefore it was covered under the definition input services prior 1-4-2011 as is evident from the definition of input service contained in Rule 2(l) of Cenvat Credit Rules, 2004 - entire credit relating to commercial or industrial construction service is clearly admissible. - As regards Cenvat credit of Service Tax paid for rental service the appellants have stated that they owned, and were responsible for, the goods upto the warehouse from where the finished goods were cleared/sold and therefore in terms of Section 4(3)(c)(iii) of Central Excise Act, 1944 such a warehouse was the “place of removal.” As per the above definition, input services used for “storage up to the place of removal” continued to be covered under the definition of input service. Therefore, the Service Tax paid on rent is also available as credit. - Decided in favour of assessee.
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2015 (12) TMI 212
Disallowance of CENVAT Credit - Maintenance or Repair Service and Video Tape production services - Imposition of penalty - Held that:- Regarding eligibility of credit on video tap production based on satellite services received from various locations by the service receiver, it is observed that there is no ground to deny the credit merely on the ground that service has been received from different location. Once there is no contest relating to provision of service and subsequent receipt, input service credit is admissible and credit amounting to ₹ 2,39,146/- is allowed. - appellants have accepted the wrong availment of Cenvat credit of ₹ 60,066/-. However credit of ₹ 2,39,146/- has been found to be admissible - imposition of penalty of ₹ 30,000/- requires to be modified. It is reduced ₹ 15,000/-. However penalty under Section 77 is not interfered with - Decided partly in favour fo assessee.
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2015 (12) TMI 211
Denial of refund claim - Construction of residential complex service - appellant had not submitted the NOC from the builder and also in view of the letter of the builder requesting the Revenue not to refund the amount to the appellant in view of some pending case between builder and appellant before the Consumer Disputes Redressal Commission for the same matter - Held that:- As per the report dated 19.5.2014 received through the learned AR from the Assistant Commissioner (Refund), I find that the rejection of the refund claim vide order dated 7.7.2010 is bad in law and on fact and accordingly, I allow the interest to the appellant from the date on which the Revenue received the amount i.e. 18.6.2009 to the date of disbursement i.e. 8.7.2013 at such rate notified under the Rules. Such refund shall be disbursed to the appellant within a period of four weeks from the receipt of the order without waiting for any formal application for refund from the appellant. - Decided in favour of assessee.
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2015 (12) TMI 210
Waiver of pre deposit - Real Estate Agent services - consideration received by way of administrative charges under clause 15 - Held that:- Appellant is the owner of the premises where flats are being constructed. Till the sale is completed in favour of the initial allottee by execution of a written sale deed which is registered under provisions of the Registration Act, there is no sale and therefore no transfer of ownership in favour of the allottee. Till such time the title in the property continues with the appellant. “Real Estate Agent” Service is defined to mean a person engaged in rendering any service in relation to sale, purchase, leasing or renting of any real estate and includes a real estate consultant. The enumerated taxable service is any service provided or to be provided to a client by a real estate agent in relation to real estate. In terms of the definition real estate agent must act as the agent of the owner of real estate and thus the owner of the property cannot be a real estate agent. In terms of clause 15, since administrative charges are collected only prior to a concluded sale by the appellant in favour of third parties, the appellant continues to be owner of the real estate and therefore could not be considered an agent of his own property. - classification of the petitioner is a “Real Estate Agent” and levy and demand of service tax on administrative charges collected, appears fundamentally misconceived - Decided in favour of assessee.
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2015 (12) TMI 209
Maintainability of appeal - communication proposing disallowance of CENVAT Credit - Held that:- appeal is not maintainable as in terms of Section 86 of the Finance Act, 1994 only when an assessee is aggrieved by an order passed by the Commissioner of Central Excise under Section 73 or Section 83A or an order passed by the Commissioner of Central Excise (Appeals) under Section 85, he can file an appeal before the Tribunal. Since the present order of the Commissioner is not in order passed by Sections 73 or 83A, the appeal is not maintainable. - Decided against assessee.
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2015 (12) TMI 208
Waiver of pre deposit - Held that:- In confirmation of demand of more than ₹ 16.06 crores, in respect of the substantial portion, the submissions made by the appellants have not been considered in detail and in a proper prospective. Therefore, we are constrained to remand the matter at this stage so that the issues are considered afresh and submissions made are discussed and conclusions arrived in accordance with law. After going through the various demands that have been confirmed, we find that prima facie, the appellants did not have a case in respect of an amount of ₹ 3.6 lakhs - Appeal disposed of.
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2015 (12) TMI 207
Denial of CENVAT Credit - maintenance and repair service - consultancy service - no nexus with the manufacturing activities - services on which the credit has been denied by the original authority are not related either directly or indirectly to the manufacture of final products - Held that:- Repair and Maintenance Service has been utilised by the appellant for the residential complex provided to its employees, which is situated outside the factory premises. Further, the services in relation to consultancy has been availed by the appellant not for its manufacturing unit, but for its another unit, which is located outside the factory of manufacture of excisable goods. The Cenvat Credit Rules permit the manufacturer to take Cenvat credit of the service tax paid on the input services, which have direct/indirect nexus with the manufacture of the final product. In the present case, it is an admitted fact that the disputed services have not been used by the appellant for the intended purpose, i.e., in or in relation to manufacture of final product and also not related to the business activity of the appellant. Thus, I am of the considered view that the said services will not qualify as “input service” for the purpose of taking Cenvat credit. - Decided against assessee.
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2015 (12) TMI 206
CENVAT Credit - whether the wharfage charges paid by the appellant and service tax paid thereon is admissible to be claimed as Cenvat credit, while there is no dispute as to the availing of such services for providing output service - Held that:- The wharfage charges being integrally connected with output service of export, there should not be any dispute to grant Cenvat credit on the service tax paid in respect of the said services since eligibility to the claim was only in question - Decided in favour of assessee.
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2015 (12) TMI 205
Waiver of pre deposit - Benefit of Notification No. 6/2005-ST - Held that:- Appellant has paid an amount of ₹ 2,15,732/- and also deposited penalty of ₹ 1,43,522/- and also that the amount of ₹ 1,91,194/- is being disputed as the appellant is claiming to be eligible for SSI exemption under Notification No. 6/2005-ST - appellant has made out a good case for waiver of any further pre-deposit and we order accordingly staying recovery of the impugned liability during the pendency of the appeal. - Stay granted.
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2015 (12) TMI 204
Waiver of penalty - Validity of Commissioner's order - Held that:- assessee had entrusted the amount of tax, to the Consultant one Mr. Deepak Joshi, who pocketed the amount and gave forged challans, showing deposit in bank to the assessee. On investigation, the Revenue has not found any complicity on the part of the assessee. Thus, the findings of Commissioner (Appeals) are correct - Decided against Revenue.
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Central Excise
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2015 (12) TMI 235
Ex-parte order without service of any notice - Clandestine removal of final product from two different units – Joint liability - Violation of principle of natural justice - Held that:- Commissioner in her affidavit has admitted that the impugned order was passed without service of any notice thereby meaning no opportunity of hearing was granted to the petitioner. The tribunal directed the Commisioner to provide opportunity of cross examination of the witnesses, which has been denied by the Commissioner in paragraph no.107 of the impugned order. The justification given by the officer in paragraph no.3 of her affidavit is that the petitioners were under an obligation to appear before the authority concerned pursuant to the order of the tribunal and that it was incumbent upon the petitioner to approach the adjudicating authority for a decision afresh. - Adjudication proceedings is initiated on the basis of a show cause notice issued by the department and denovo proceedings has to be started, if any, by the department itself. Issuance of a fresh notice not only flows from Article 14 of the Constitution but also from the provisions of the Central Excise Act. In our opinion the stand adopted by the Commissioner is nothing else but an after thought in trying to justify her action in passing an ex parte order. - Impugned order is set aside - Decided in favour of assessee.
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2015 (12) TMI 234
Recredit of CENVAT Credit previously reversed - Disallowance of credit on LDO/furnace oil - SCN issued for recredit without proper authoriation - Held that:- appellant had claimed Cenvat credit and had filed the proper invoice bills. The authority was satisfied and credit was allowed for which there is no dispute. However, for whatever reasons, the appellant reversed these Cenvat credit entries and debited the said amount in its books but subsequently, realised that they were eligible for Cenvat credit, inasmuch as furnace oil was an input as defined under the Rules, based on which, the assessee issued a letter dated 25th April, 2005 indicating its intention to again make the reversal of its Cenvat credit entries and also enclosing the original invoice bills. - show cause notice was wrongly issued on a wrong premise that no permission was taken or that original documents were not filed. In fact, we find that the appellant had not only intimated the department about its intention but also had filed the necessary documents. The letter indicated the details of the description of the goods, the invoice bills and the credit to be taken. This was in consonance with the provisions of Rule 9. If the authority had any objection they should have immediately asked the appellant for further clarifications, which in the instant case was not done. - Consequently, the reversal of entry made by the appellant was justified in the given facts and circumstances of the case. - Decided in favour of assessee.
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2015 (12) TMI 233
Denial of refund claim - Duty paid under protest - Concessional rate of duty - Bar of limitation - Held that:- First appellate authority has given a categorical finding that the duty was paid under protest. We also affirm this finding upon a perusal of the letter dated 21.01.1998 which has been considered by the first appellate authority as well as the letter dated 10.02.1998 and the challan dated 04.02.1998 through which the duty was deposited. - finding of the first appellate authority has not been challenged by the Department in any further appeal and, therefore, this finding is binding upon them. We are also of the opinion that when the appellant filed an appeal against the duty levied, it means that the deposit was made under protest. Once the deposit of duty was made under protest, the second proviso of Section 11-B of the Act comes into operation, namely, that the period of limitation of six months would not apply to a claim of refund. Consequently, the finding of all the authorities that the application of the appellant was barred by limitation, is patently erroneous. - judgment of the Tribunal was delivered on 22.01.1999. The application was filed on 31.08.1999 within a period of seven months which, in our opinion, is a reasonable period. The application for refund does not become barred by time. Tribunal committed a manifest error in non-suiting the appellant's claim on the sole ground that the appellant was only a buyer and, therefore, was not entitled to claim a refund of the duty. This finding is patently perverse. Section 11-B of the Act provides that any person can make an application for refund of duty. Further, in the instant case, the appellant is not only a purchaser but is also a manufacturer of fertilizer and was entitled to purchase Naphtha under the notification issued under the Central Excise Act, 1944 at a concessional rate of duty. Since, the appellant was denied the requisite forms/ certificate and deposited the duty under protest, he was entitled to claim a refund. - Impugned order is set aside - Decided in favour of assessee.
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2015 (12) TMI 232
SSI exemption - Availment of concessional rate as per Notification No.7/97-CE dated 1st March, 1997, Notification No.38/97-CE dated 27th June, 1997, Notification 9/98-CE dated 2nd June, 1998 and Notification No.9/99-CE dated 28th February, 1999 - Clubbing of clearances - Held that:- Manufacturer is entitled for exemption if the aggregate value of clearances of all excisable goods for home consumption from one or more factories or from a factory by one or more manufacturers does not exceed ₹ 3 crores in the preceding financial year - The fact that the two factories are of one manufacturer is clear from the fact that common balance sheet is being filed. It, is therefore irrelevant to contend that the two factories have separate entrances managing staff or central excise registration. What is relevant is that a manufacturer, if he has one or more factories, would be entitled for exemption at concessional rate of duty if the aggregate value of clearances of all excisable goods does not exceed ₹ 3 crores. Since the appellant has another factory, which is manufacturing an excisable commodity, its clearances have to be added while considering the exemption notification. Since the aggregate clearances exceeded the limit of ₹ 3 crores, the appellant was not entitled for exemption. The adjudicating authority rightly issued the show cause notice and quantified the demand. - Decided against assessee.
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2015 (12) TMI 231
Valuation of goods - inclusion of actual fabrication cost by the processor or only the fabrication charges received on the material supplied - Captive consumption - Held that:- CESTAT' has held that Rule 6(b) (i) of the Valuation Rules is not applicable when the goods are produced on job work basis and returned to the raw material supplier. In coming to this conclusion, the CESTAT has relied upon the judgment of this Court in 'Collector v. Kandivali Metal Works [1997 (12) TMI 641 - SUPREME COURT]. We may note that this legal position has been reiterated by this very Bench in 'Commissioner of Central Excise, Pune v. Mahindra Ugine Steel Co. Ltd. [2015 (4) TMI 351 - SUPREME COURT]. - No merit in appeal - Decided against Revenue.
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2015 (12) TMI 224
Manufacture - scope of the term automobile - activity of packing/re-packing, labelling/re-labelling and fixing of MRP on automobile parts amounts to manufacture - Classification - Valuation of goods u/s 4 or 4A - MRP based valuation or transaction value - Confiscation of goods - Redemption fine - Held that:- Just because such automobiles have machinery aspect which helps them use in the construction and mining industry, will not take them away from the term automobile. The assistance provided by the Commissioner (AR) is of great help and fully supports the conclusions already drawn by this Tribunal in the case of JCB India Ltd (2014 (2) TMI 632 - CESTAT MUMBAI) - whether the equipment is made of rubber tyre or crawler type/steel drum wheel mounted will not make any difference. The judgment of the hon'ble Supreme Court in the case of Ratan Melting Wire Industries (2008 (10) TMI 5 - SUPREME COURT OF INDIA) further strengthens the decision taken by this Tribunal relating to the circulars. We also note that the purpose of judicial scrutiny in taxation matter is to reach to the truth of the matter and in reaching to the truth, incorrect interpretation taken by some authority cannot supersede the judicial decision on the issue. We also agree with the Commissioner (AR) that even the circular of 2008 was not binding circular and it would be seen from the circular that it is only suggestive and is not a conclusive or directive circular. We also note that large number of such parts, components and assemblies are interchangeable in different road vehicles including construction equipment vehicles. Thus wider meaning to the term automobile is to be given. Scope of the term Manufacture - deemed manufacture - Held that:- the argument that putting a tag is not labelling or there is absence of container, etc., in our view, will defeat the purpose of definition given in Section 2(f)(iii). In view of the said position, we hold that even putting the tag on the unpacked parts will amount to manufacture and will be covered under Section 2(f)(iii). For determining whether a particular process amounts to manufacture it is not relevant whether the inputs are locally produced or imported. What is important is the end product and whether the manufacturing process amounts to manufacture or not. In the present case, there is no dispute that the activity undertaken by the appellant amounts to manufacture under Section 2(f)(iii). The fact that inputs were imported is immaterial and hence the submission made by the learned senior counsel is rejected. Extended period of limitation - Held that:- Appellant were aware of the fact that the goods are covered under Section 4A. The ratio of JCB India Ltd. case (supra) as far as invocation of limitation and penalty, is therefore, not applicable. In that case, M/s. JCB India Ltd. has started paying duty from April 2010. In the present case, even that was not done. Extended period of limitation as also imposition of penalty under Section 11AC is upheld. Valuation - As per the said explanation to section 4, in the facts of the present case, the appellant would be entitled to cum-duty benefit. We accordingly extend the same and set aside the impugned order as far as the benefit of cum-duty is concerned. Cenvat Credit - Keeping in view these facts and the fact that the matter was not examined by the Commissioner we remand the matter for the limited purpose of examining these documents regarding admissibility of CENVAT credit as per law and in case the appellant is eligible for CENVAT credit the same should be extended. Decided substantially against the assessee.
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2015 (12) TMI 223
Waiver of pre deposit - Clandestine clearances through commission agent - documentary evidence as well as electronic data discovered from the possession and premises of the commission agent - Held that:- Prima facie, record revealed that Investigation brought out cogent evident suggesting involvement of the parties in the above evasive practice. Not only book records but also computer printout recovered from M/s. Gopal Steel unerringly brought out the quantum of loss of duty committed by the appellant manufacturers evading duty liability thereon through unaccounted clearances. Those were transacted through the commission agent M/s. Gopal Steel and his record identified buyers of offending goods. They are tabulated in the adjudication order. - Violation of natural justice and no examination of the consignees and manufacturers were raised as defence plea in the course of hearing. But adjudication order primafacie does not bring deprivation of the appellant manufacturers from the course of natural justice. All details of the evidence of the manufacturers and commission agent were threadbare examined granting reasonable opportunity of hearing to them. Since appellants filed their reply to show cause notice that shows that the first course of justice delivery system was followed. None of the appellant disowned the entries recorded in the books of M/s.Gopal Steel speaking against them. They also did not rule out their dealing through the said commission agent. Keeping in view the financial difficulties pleaded by some of the appellants, primafacie case against them, balance of convenience in favour of Revenue, magnitude of evasion done and loss of duty found in adjudication and also following the ratio laid down in the case of Banara Valves Ltd. Vs. Commr. Reported in [2006 (11) TMI 6 - SUPREME COURT OF INDIA], it would be proper to direct pre-deposit of the amounts - partial stay granted.
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2015 (12) TMI 221
Denial of CENVAT Credit - Bill of Entry is not in the name of the appellant - services do not qualify as input service as per Rule 2 (l) of the Cenvat Credit Rules - Held that:- payment towards the said capital goods have been paid by the appellant only and the capital goods is physically available in the premises of the appellant. Therefore, merely wrong mention of the name in the Bill of Entry Cenvat Credit cannot be denied to the appellant Various input services i.e. Business Chamber Association Services, Horticulture Services, after Sale Services (commission paid to the services), Outward Goods Transportation Agency Services are the services in the nature of the services availed by the appellant in the course of business of manufacturing - Credit allowed. Cenvat Credit on outward goods transportation agency services - Claim of the appellant that the goods have been sold on FOR basis is correct. Therefore, Cenvat Credit on outward transportation services is entitled to the appellant. - appellant has taken Cenvat Credit correctly. Therefore, impugned demands i.e. duty and interest are not sustainable - Decided in favour of assessee.
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2015 (12) TMI 203
Denial of SSI Exemption - Clubbing of clearances by the proprietorship firm holding 90% in the Limited Company - Whether own brand name assigned to others and SSI unit cannot claim the exemption - Held that:- Board has specifically stated and clarified that Limited Companies whether public or private are separate entities and partnership firm is separate entity than the Ltd. Company. In the case in hand, the Limited Co. being separate entity and distinct from shareholders, it cannot be said that Shri Venkatesh having 90% of shares in ICPL by virtue of being proprietor of Venky & Co., the clearances could be clubbed. In our view Revenue is arguing against their own Circuar which is incorrect. This view was taken by the Hon’ble High Court of Madras in the case of Campion Plastic Industries Ltd - [1996 (2) TMI 146 - HIGH COURT JUDICATURE AT MADRAS]. Accordingly, we hold that the clearances effected by the sole proprietorship firm Vinky & Co. and ICPL cannot be clubbed for arriving at the total clearances of ICPL. Brand name “Irony” was registered with the authorities in the name of Venky & Co. and from the deed of assignment it could be deduced that the said Brand name was assigned to the appellant ICPL in this case. Nothing is brought on record to show that even after assigning the Brand “Irony”, Venky & Co. were using and clearing the products with the said Brand name. In the absence of any such evidence we have to hold that by virtue of being Brand assigned to them, ICPL is entitled to avail the benefit of small scale exemption. - clearances effected by ICPL under the Brand “Irony” are eligible for exemption while the clearances effected on the Brand “Terminator” are not eligible for exemption and the appellant is required to discharge duty liability on the goods cleared with Brand name “Terminator” and interest thereof. The lower authorities are directed to quantify the amount of duty to the appellant. Reason to interfere with the impugned order as the adjudicating authority has given an option to redeem the same on payment of fine of ₹ 50,000/- which, in facts of this case is seems to be reasonable - appellant could have entertained a bonafide belief and the issue being interpretation of Notification the penalties imposed on the appellants are harsh and needs to be set aside - Decided partly in favor of assessee.
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CST, VAT & Sales Tax
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2015 (12) TMI 226
Denial of exemption claim under Section 41 - whether the goods sold namely Electronic Control Panel were classifiable under Schedule Entry No. C-II-135 or as claimed in the appellate order by the dealer - Held that:- It was reassessed for the period from 2000-2001 by the Assistant Commissioner of Sales Tax, Worli, Mumbai. The dealer is a manufacturer of Engineering goods covered by Schedule Entry C-II 123. The claim of the dealer was that it has sold this Electronic Control Panel against the declaration in Form-A to M/s Sun Earth Chemicals Ltd. However, that claim was disallowed on the ground that the Notification Entry A-88 is applicable to the goods covered by the Schedule Entry C-II-135. That was challenged and the Deputy Commissioner of Sales Tax allowed the dealer's appeal and set aside reassessment order. - The claim of the dealer is therefore covered by the Division Bench judgment of this Court in the case of MRF Limited(2010 (2) TMI 1090 - BOMBAY HIGH COURT). Once the Revenue concedes to this position, particularly on the facts of this case and the issue raised is covered by the Division Bench judgment of this Court, then, no question of law arises for our consideration and opinion. The Tribunal is right in rejecting the Reference Application by holding that the factual matter is sought to be reagitated by the Revenue - Decided against Revenue.
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2015 (12) TMI 225
Benefit of input tax credit under section 8 of HVAT Act, 2003 - Held that:- Assessing Officer was not justified in declining the benefit of input tax credit only on the ground that the tax invoices did not contain the name of the buyer and also its TIN number. No doubt, non mentioning of the name and the TIN number can be a circumstance, but it cannot be held to be conclusively against the purchaser. The judgment cited by learned counsel for the State in Babu Verghese's case [1999 (3) TMI 628 - SUPREME COURT]. was different. The question involved therein was validity of extension granted by the Bar Council of India to existing members of Kerala Bar Council (KBC) under proviso to Section 8 of the Advocates Act, 1961 and consequent validity of elections held by KBC during the extended term. - matter remanded back - Decision in M/s New Devi Grit Udyog, Raiseena, Gurgaon's case (2015 (12) TMI 182 - PUNJAB & HARYANA HIGH COURT)followed - Decided in favour of assessee.
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2015 (12) TMI 182
Disaollowance of Input tax credit - appellant failed to produce original purchase invoices and VAT C4 certificates before the respondent during the assessment proceedings. The invoices in possession of the appellant did not have its name, TIN number mentioned by the seller on them at the time of issue which is mandatory requirement under Rule 54 of the Haryana Value Added Tax Rules, 2003 - Held that:- The non mentioning of the buyer's name or TIN number as it is issued by the seller cannot be taken to be fatal against the buyer and benefit of input tax credit declined to the buyer on that basis alone. The purpose of incorporating Rule 54(3) of he HVAT Rules is to safeguard the interest of the revenue from non-genuine transactions. It is procedural in nature and does not confer any substantive right. In the event of non-mentioning of the name and TIN No. of the buyer, a heavy onus is cast on the said dealer to produce material to discharge the said onus by producing other sufficient evidence to show that the transaction was genuine and it had made payment of VAT to the seller. Moreover, it is not within the control of the purchaser to ensure that the tax invoice contains his name and TIN No. as it is issued by the seller. Unless a mandatory duty is cast on the seller to issue tax invoice with such particulars, the purchasers cannot be penalized for no fault of theirs. Assessing Officer was not justified in declining the benefit of input tax credit only on the ground that the tax invoices did not contain the name of the buyer and also its TIN number. No doubt, non mentioning of the name and the TIN number can be a circumstance, but it cannot be held to be conclusively against the purchaser. The judgment cited by learned counsel for the State in Babu Verghese's case (1999 (3) TMI 628 - SUPREME COURT) was different. The question involved therein was validity of extension granted by the Bar Council of India to existing members of Kerala Bar Council (KBC) under proviso to Section 8 of the Advocates Act, 1961 and consequent validity of elections held by KBC during the extended term. - Matter remanded back - Decided in favour of assessee.
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