TMI Tax Updates - e-Newsletter
December 6, 2017

Case Laws in this Newsletter:

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

TMI SMS

• Revised and updated Foreign Trade Policy (FTP), 2015-2020 - Notification

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• Revised edition of the Handbook of Procedures of Foreign Trade Policy, 2015-2020 - Public Notice

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• No Penalty can be levied merely by stating in the assessment order that, penalty proceedings u/s. 271(1)(c) is being initiated separately.

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Articles

1. A FINAL ORDER PASSED ON MERITS CANNOT BE RECALLED

   By: DR.MARIAPPAN GOVINDARAJAN

2. DOCUMENTS, ACCOUNTS & RECORDS IN GST (PART-III)

   By: Dr. Sanjiv Agarwal

News

1. The Union Finance Minister Shri Arun Jaitley starts his Pre-Budget Consultations with stakeholders; Holds his First Pre-Budget Consultation Meeting with the representatives of different Agriculture Groups; Stresses on the need to conserve water, incentivize agro processing and promote balanced use of fertilizers in order to ensure higher agriculture productivity.

2. Foreign Trade Statement

3. The Government of India releases Quarterly Report on Public Debt Management for the Second Quarter (July-September 2017) (Q 2 FY 18).

4. FM: Ask the officers of the Directorate of Revenue Intelligence (DRI) to keep pace with technology and use the latest technological tools such as data analytics in fighting the menace of smuggling of sensitive contraband items such as gold and narcotics among others.

5. Auction for Sale (Re-Issue) of Government Stocks

Notifications

Companies Law

1. S.O. 3804(E) - dated 4-12-2017 - Co. Law

Jurisdiction as Special Court.

DGFT

2. 41/2015-2020 - dated 5-12-2017 - FTP

Revised and updated FTP, 2015-2020

Circulars / Instructions / Orders

Income Tax

1. 683/CIT (A&J)/2015 - dated 12-10-2017

Disposal of high tax effect cases having tax effect more than ₹ 50 cr. reg.

DGFT

2. 44/2015-2020 - dated 5-12-2017

Amendments to Appendix 3B Foreign Trade Policy 2015-20.

3. 45/2015-2020 - dated 5-12-2017

Services Exports from India Scheme (SEIS) - Schedule under Appendix 3D as annexure to the Public Notice No. 3/2015-20 dated 1st April, 2015 – Eligible period extended up to 31.3.2018 with amendments.

4. 43/2015-2020 - dated 5-12-2017

Revised edition of the Handbook of Procedures of Foreign Trade Policy, 2015-2020

5. 46/2015-2020 - dated 5-12-2017

Services Exports from India Scheme (SEIS) —Amendment to Appendix 3E.

Highlights / Catch Notes

Income Tax

• High Court: Insurance Companies Can't Deduct Tax on Interest from Motor Accident Claims u/s 194A.

  Case-Laws - HC : TDS u/s 194A on interest accrued on awarded amount - Motor Accident Claims - Insurance Company is not justified in deducting at source - it is for the Insurance Company to approach the Income Tax Department for refund and not the original claimants. - HC
  Visit to Get Source

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• AO's Failure to Record Satisfaction Invalidates Penalty Proceedings u/s 271(1)(c) for Inaccurate Income Reporting.

  Case-Laws - AT : AO did not record his satisfaction for initiation of penalty proceedings, because while passing the assessment order passed u/s. 143(3)(ii), the AO has stated that “….. Penalty proceedings u/s. 271(1)(c)is being initiated separately for furnishing inaccurate particulars of income / concealment income……………….”, which is not sufficient - AT
  Visit to Get Source

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• High Court Upholds Assessing Officer's Jurisdiction for Reopening Assessment Due to Suspected Accommodation Entries.

  Case-Laws - HC : Reopening of assessment - Prima facie there is both material as also a reason to believe that the said entries are accommodation entries - the jurisdiction appears to have been validly exercised by the Assessing Officer. - HC
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Customs

• Penalty Imposed for Abetting Customs Duty Evasion with Forged Signatures; Awareness of Exemptions and Ministry's Role Noted.

  Case-Laws - AT : Levy of penalty for abetting the evasion of customs duty - forgery of signatures - Their protestations of being the victims of cross-fire may not find many takers as the exemption notifications claimed by them cannot but have been within their knowledge and the crucial role of Line Ministry is unambiguously clear. - AT
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• Customs cannot deny exemption if FPS licenses are valid; licensing authority must handle misrepresentation issues.

  Case-Laws - AT : FPS licence - As long as the licences are valid, the customs authorities cannot refuse exemption on the allegation that there was misrepresentation. It is for the licensing authority to take up the question of misrepresentation. - AT
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DGFT

• Revised Foreign Trade Policy Handbook 2015-2020: Key Updates on DGFT Notices, Compliance, and Trade Regulations for Stakeholders.

  Circulars : Revised edition of the Handbook of Procedures of Foreign Trade Policy, 2015-2020 - Public Notice
  Visit to Get Source

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• Revised Foreign Trade Policy 2015-2020 Enhances Export Competitiveness, Simplifies Procedures, and Expands Market Access for Indian Products.

  Notifications : Revised and updated Foreign Trade Policy (FTP), 2015-2020 - Notification
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Service Tax

• Services Consumed in India Qualify as Export Under Destination-Based Tax Rules.

  Case-Laws - AT : Export of services - services were actually consumed and utilized in India - the Service Tax being destination based consumption tax, the present case will cover the requirements for export of services. - AT
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Central Excise

• Authorized Signatories Not Penalized u/r 26 for Non-Clandestine Removal or Improper Records; Main Appellants Penalized u/r 25.

  Case-Laws - AT : Penalty on authorized signatory cannot be imposed under Rule 26 on the ground that the goods were not removed outside the factory premises in clandestine manner and also for non maintenance of proper records, the main appellants have already been penalized under Rule 25 - AT
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Case Laws:

• Income Tax

• 2017 (12) TMI 261
  TDS u/s 194A - Motor Accident Claims paid by the respondent Insurance Company after deducting @ 20% TDS as the pancard of the applicant was not available - refund of such amount from the Income Tax DepartmentHeld that:- In the present case, the petitioner – Insurance Company deducted TDS amount from the interest accrued on awarded amount and deposited the TDS amount with Income Tax Department. The claimant – respondent No.1 filed Execution Application before the Tribunal wherein the learned Tribunal issued attachment warrant against the Insurance Company. In the present case, the petitioner – Insurance Company is not justified in deducting at source in view of the guideline issued in Hansaguri’s case(2006 (10) TMI 383 - GUJARAT HIGH COURT). Therefore, it is of the view that it is for the Insurance Company to approach the Income Tax Department for refund and not the original claimants.

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• 2017 (12) TMI 260
  Capital gain - reassessment u/s 147 - transfer through development rights agreement - admission of additional ground - new legal ground in view of the clarificatory amendment brought in by Finance Act of 2017, by way of insertion of sub-section (5A) to section 45 of the I.T. Act, 1961 w.e.f. 1.4.2017 - Held that:- By virtue of amendment, the Legislature intends to confer a benefit which was hitherto not available and hence it is applicable prospectively. The Legislature, was very clear that this provision is applicable w.e.f. 1.4.2018. While, inserting subsection (5A) to section 45, the consequent amendment to section 49 was also made by inserting sub-section (7) thereto w.e.f. 1.4.2018 and section 194IC was also inserted for tax deductions at source at the time of payment, applicable w.e.f. 1.4.17. Thus, the Legislature was aware of the consequences of the amendments and intended to confer the benefit only from 1.4.2018. Therefore, we are of the opinion that this ground, though is a legal ground cannot be admitted at this stage as no useful purpose would be served in remanding the issue to the file of the AO as the sub-section itself is not applicable for the relevant A.Y. The additional ground of appeal raised by the assessee under Rule 11 of the ITAT Rules is accordingly rejected. As regards the validity of the re-assessment proceedings, we find that the assessee has filed the return of income but has not offered the capital gains arising out of the development agreement in her return of income for the relevant A.Y. Therefore, the AO had the material to form a reasonable belief that the income of the assessee has escaped assessment. Therefore, we uphold the validity of the re-assessment proceedings. As regards the year of the taxability, we find that this issue is now covered in favour of the Revenue by the decision of the Hon'ble jurisdictional High Court in the case of Shri Potla Nageswara Rao vs. DCIT [2014 (8) TMI 636 - ANDHRA PRADESH HIGH COURT]. Therefore, the assessee’s grounds of appeal on the year of taxability are rejected. Computation of the short term capital gains - estimated value of the property adopted by the parties to the development agreement - Held that:- As regards the enhancement of the income by the CIT (A), we find that the AO has adopted the SRO value of the land on the date of transfer for the purpose of computing the short term capital gains, while, the CIT (A) has adopted the estimated value of the property adopted by the parties to the development agreement, for registering the development agreement. In the development agreement, the estimated value of the property is mentioned as Rs. 8.80 crores. In our opinion, the CIT (A) has clearly erred in adopting this value for computation of the short term capital gains. At the time of development agreement, what is transferred by the assessee is only her share of the land and not the entire super structure along with the land. The estimated value of the property as mentioned in the development agreement is clearly for the land as well as the super structure to be built up on such land which is given for development. Though the development agreement does mention the period of completion of the project, it certainly remain uncertain as to whether the construction would be completed within the stipulated period. The market condition and the market rate when the constructed area is handed over to the assessee may also vary and it may be more or less than the estimated value of the property. Therefore, the same cannot be adopted for the computation of the capital gains. In our view, the value adopted by the AO i.e. Rs. 2200 per sft being the SRO value of the land on the date of transfer is reasonable and correct. We, therefore, uphold the order of the AO on the computation of the short term capital gains. As regards the allowability of the expenditure of Rs. 80.00 lakhs which she claimed to have paid to one Shri Gnaneshwar for arranging the development agreement, the assessee has not been able to produce any evidence of making the payment during the relevant previous year even before the Tribunal in support of her contention. Therefore, we are constrained to confirm the disallowance of the same. Penalty u/s 271(1)(c) - Held that:- Having regard to the rival contentions and the material on record, we find, that the return of income for the A.Y 2006-07 was filed on 29.09.2006, while the decision of the Hon'ble jurisdictional High Court in the case of Potla Nageswara Rao was delivered in 2014. Till such time, there were decisions of the Tribunal both in favour of and against the assessee. Therefore, it was a debatable issue. It is not the case of the assessee not offering the capital gains to tax at all but it is the case where she has offered it in the year of receipt of possession of the property. Therefore, it cannot be said that the assessee had not offered the capital gains to tax with an intention to evade the tax. Therefore, we are of the opinion that it is not a fit case for levy of penalty u/s 271(1)(c).

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• 2017 (12) TMI 259
  Transfer Pricing adjustment - interest on the advances paid - Held that:- As the issue under consideration is materially identical to that of AY 2011-12, following the decision of the coordinate bench in that year considering that the assessee has already received 6.37% interest which is more than the Singapore prime lending rate of 5.38%. We delete the addition made on this count. At the same time, the DRP has confirmed the addition simply because the assessee has not submitted information before AO. It was represented before DRP, DRP has to find out the real transaction & appropriate ALP adjustment based on the information available at their disposal. In case it is not, then, they can call for remand report from TPO. It is not proper to confirm the ALP adjustment without proper verification. In the same breath, we also condemn the action of the assessee in not properly submitting the required information to lower authorities. In case of inability to submit the information before lower authorities, they could have recorded the same before the authorities instead of maintaining silence. Transfer pricing adjustment towards corporate guarantee - Held that:- As the issue under consideration is materially identical to that of AY 2011-12, following the decision therein, we direct the AO/TPO to fix the fees at 0.27% as guarantee commission on the amount involved. Accordingly, the grounds raised by the assessee are partly allowed. Adjustment in respect of international transaction of interest on mobilization advances - Held that:- As the issue under consideration is materially identical to that of AY 2011-12, following the decision therein, we allow the grounds raised by the assessee on this issue and accordingly interest charged on mobilization advances are deleted. As in previous year held that when the whole work contract is considered within the ALP, we are of the opinion that the advances given in the course of contract does not call for special adjustment. Moreover, these business advances cannot be categorized as ‘loans and advances’ so as to consider them for adjustment. Relying on the various case law relied upon by the Ld. Counsel, we are of the opinion that since assessee-company is not charging any interest from the AEs and non-AEs and also not paying any interest on the amounts received by it from the main contractor, this adjustment is not warranted. TPA - selection of JEP Holdings as comparables - Held that:- As this comparable company is consistently making losses over the periods stated above, as held in the case of Bobst India Pvt. Ltd., (supra), the coordinate bench of Pune held that the company making persistent loss for the past three years is not good comparable. So, the same should be excluded for computing operating margin of comparable companies for arriving at ALP in relation to international transaction. Accordingly, we direct the TPO to eliminate this comparable and determine the ALP afresh. The fresh result may be considered for ALP adjustment by removing the above from comparables, in case the final ALP is within the +/- 5% range, claim of the assessee may be accepted. Addition on account of sub-contract expenses - Held that:- As the issue under consideration is materially identical to that of AY 2011-12, following the decision therein, AO is directed to accept the sub contract payments, as assessee received the corresponding amounts from main contractor and offered the same for taxation. following the principles laid down by the Coordinate benches, AO is directed to disallow only a certain percentage of the above amount, if necessary. The addition made is accordingly deleted and the issue of examination of impugned sub contract payments is restored to AO to consider afresh as directed Disallowance of loss on account of foreign exchange fluctuation - Held that:- We remit this issue back to the file of AO to consider the submissions of the assessee and allow the claim on the basis of I.T. provisions.

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• 2017 (12) TMI 258
  Penalty u/s 271(1)(c) - assessee awareness of the charge as framed by the AO in the assessment order dated 20-02-2014 framed u/s 143(3) - Held that:- Penalty must be initiated for specific charge has been confirmed. AO while initiating penalty proceedings during the course of assessment does not specify any particular ground for initiating penalty proceedings. Even while issuing notice also he did not specify for which charge the assessee is to be penalised as both the charges, concealment of particulars of income or furnishing of inaccurate particulars of income are different although the consequence of both the charges may be concealed income. - Decided in favour of assessee.

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• 2017 (12) TMI 257
  Penalty u/s 271(1)(c) - Held that:- AO did not record his satisfaction for initiation of penalty proceedings, because while passing the assessment order dated 30.12.2011 passed u/s. 143(3)(ii) of the Act, the AO has stated that “….. Penalty proceedings u/s. 271(1)(c)is being initiated separately for furnishing inaccurate particulars of income / concealment income……………….”, which is not sufficient and therefore, the penalty proceedings cannot be said to be validly initiated under such circumstances. However, nowhere in the assessment order states the specific charge of alleged concealment and / or furnishing of inaccurate particulars of income. Therefore, the entire penalty proceedings stand vitiated, because it is not in accordance with law - Decided in favour of assessee.

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• 2017 (12) TMI 256
  Reopening of assessment - no payment was made by the assessee-company during the previous year - loose sheet obtained in the residential premises - Held that:- The loose sheet was obtained in the residential premises of Shri D.V. Naidu which does not indicate that the assessee-company made a payment of Rs. 1 Cr. In fact in the same sheet another sum of Rs. 10 lakhs was shown to have been paid to the seller, but it was offered to tax in the hands of Shri D. Srinivas and neither any comment was made by the Assessing Officer in that regard nor added in the hands of the assessee-company, which is an indication that the figures mentioned in the loose sheet need not automatically be treated as undisclosed income of the assessee. In other words, it cannot be treated as an incriminating material so as to initiate proceedings u/s 148 of the Act in the hands of the assessee, as rightly pointed by the Hon’ble Gujarat High Court in the case of Varshaben Sanatbhai Patel vs. ITO (2015 (11) TMI 934 - GUJARAT HIGH COURT ) - Decided in favour of assessee.

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• 2017 (12) TMI 255
  TPA - comparable selection criteria - Held that:- Assessee provides IT abled services in infrastructure development and testing, system and performance operations management and support etc. ,thus companies functionally dissimilar with that of assessee need to be deselected from final list of comparable.

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• 2017 (12) TMI 254
  Reopening of assessment - accommodation entry - validity of jurisdiction to initiate reassessment proceeding against the petitioner - Held that:- The information received by the petitioner's Assessing Officer is specific, both as to the amount as also to the character of it being an accommodation entry. Not only that the information states that the entries are accommodation entries but that information further states that the person who is shown as a creditor in books of account of the assessee has himself denied the genuineness of that entry. Prima facie, therefore, there is both material as also a reason to believe that the said entries are accommodation entries. In that view of the matter, we find that the jurisdiction appears to have been validly exercised by the Assessing Officer. - Decided against assessee.

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• 2017 (12) TMI 253
  Addition on account of undisclosed franchisee commission and addition on account of suppression of income from the self controlled outlets - Held that:- Addition on account of undisclosed franchisee commission and addition on account of suppression of income from the self controlled outlets are concerned, the previous decision for another assessment year, in the assessee’s case; reported as “Principal Commissioner of Income Tax Vs. Meeta Gutgutia Prop. M/s Ferns “N” Petals” (2017 (5) TMI 1224 - DELHI HIGH COURT) cover the same, no question of law arises. Additions made as non refundable security - as held by the CIT(A) and ITAT to be not taxable - Held that:- The MOU was merely a draft and not signed by the parties and they were accompanied by the corroborative evidence. Addition of Rs. 45,74,503/- on account of unexplained investment in stock under Section 69, which was deleted by CIT(A) and upheld by the ITAT, the Court is of the opinion that no question of law arises as these are only finding of facts.

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• 2017 (12) TMI 252
  Addition u/s 41 - cessation of liability - Held that:- To attract the provisions of sub-section (1) of section 41 of the Act, the revenue has to either show that such liability has in fact ceased to exist or that the assessee has written off such liability in his accounts. In the facts of the present case the assessee continues to acknowledge the liability in his accounts and there is nothing to show that on account of lapse of time the liability has ceased to exist. Under the circumstances, the Tribunal was wholly justified in holding that it cannot be said that the liability has ceased and deleting the addition ADMIT. The following substantial questions of law arise for consideration. (1) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in deleting the addition of Rs. 23,04,369/- by considering the same to be service tax? (2) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in deleting the addition of Rs. 53,600/- made under section 40(a)(ia) of the Income Tax Act, 1961? (3) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in deleting the addition of Rs,1,95,250/- on account of addition made under section 40A(3) of the Income Tax Act, 1961?

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• 2017 (12) TMI 251
  Reopening of assessment u/s 148 - Petitioner, being a non-resident company, filed the return of income u/s 44BB(1) - as per revenue income earned by the assessee was covered u/s 9(1)(vi) and not u/s 44BB - Held that:- The income of the assessee was to be taxed at the rate of 10% instead 4.23 % of the gross revenue. The objections raised by the petitioner have been duly considered by the respondent no.3. It is not the case of mere change of opinion, as argued by Mr. P.R. Mullick, Advocate for the petitioner. It is a case based on surfacing of ‘tangible evidence’. The Assessing Officer has not taken any conscious decision on the facts. The Assessing Officer has not applied his mind whether the petitioner was to be taxed u/s 9(1)(vi) of the Act at all for providing of rental of fishing tools/equipments etc. Section 292(B) of the Act was not applicable in the present case. Moreover, Section 292(B) only provides for the return of income to be invalid by reason of any mistake defect or omission in such return of income. Thus, according to the reasons assigned, there was tangible material for formation of belief by the Assessing Officer to reopen the assessment. It is in these circumstances, the notice u/s 148 of the Act was issued to the petitioner company. The objections raised by the petitioner company to the reasons assigned for reopening of case have been discussed in length by the respondent no.1. The Assessing Officer is required to consider all possible angles of controversy. In the instant case, the tax has escaped assessment on account of failure of assessee to disclose true facts before the authority concerned. Not the change of opinion but the reassessment has been ordered on the basis of the tangible material placed on record necessitating the reassessment. Sufficient reasons have been assigned for reopening of the assessment. The objections raised by the petitioner company have been specifically dealt with by the respondent no.3. Impugned order passed by the respondent no.3 is detailed and reasoned - Decided in favour of revenue

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• 2017 (12) TMI 250
  Reopening of assessment - petitioner company is incorporated in the United Kingdom which is engaged in the business of providing services and facilities in connection with exploration and extraction and production of mineral oils - 'reason to believe' - Held that:- In the present case, the Assessment Officer while assessing the income of petitioner company, has ignored the transactions made by it with its Associate Enterprises. He has also overlooked whether Section 3CEB was to be referred to the TPO. It is thus, not the change of opinion but the reassessment has been ordered on the basis of the tangible material placed on record necessitating the reassessment. Sufficient reasons have been assigned for reopening of the assessment. The objections raised by the petitioner company have been specifically dealt with by the respondent no.1. Impugned order dated 12.12.2011 passed by the respondent no.1 is detailed and reasoned. - Decided in favour of assessee.

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• 2017 (12) TMI 249
  Validity of assessment - non-issuance of notice u/s. 143(2) - Held that:- Appellant could not get notice u/s. 143(2)/142(1) of the I.T. Act, because there was no compliance by the Assessee and addition were made in the order u/s. 144 of the Act meaning thereby that Ld. CIT(A) himself admitted that no notice u/s. 143(2)/142(1) of the I.T. Act has been served upon the assessee and the AO completed the assessment by making the addition in dispute in the case of the assessee and the Ld. CIT(A) has upheld the order of the AO without appreciating the non-service of notice to the Assessee u/s. 143(2) of the I.T. Act. Under the circumstances, the exparte assessment order is void ab initio for want of mandatory service of jurisdictional notice u/s. 143(2) of the I.T. Act, 1961 and hence, not sustainable in the eyes of law, in view of the decision of the Hon’ble Supreme Court of India in the case of ACIT & Anr. Vs. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] wherein the Hon’ble Supreme Court has held that the issue of notice u/s. 143(2) of the I.T. Act is mandatory and not procedural. - Decided in favour of assessee.

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• 2017 (12) TMI 248
  Nature of income - agricultural income - Held that:- The assessee is the owner of agricultural land and has claimed to have grown similar crops, we are inclined to direct the AO to accept Rs. 10,000 per acre as agricultural income. This issue is also treated as partly allowed. Disallowance of the assessee’s claim of deduction u/s 80C - Held that:- As gone through the certificate issued by the Bank of India and find that the loan is given for purchase of a flat. The nature of the said flat purchased by the assessee, is not mentioned in the certificate. It could be a residential flat also. In view of the same, we deem it fit and proper to remand this issue to the file of the AO with a direction to verify the nature of the property, and if it is found to be a residential property purchased by the assessee against which the assessee has been given loan by the Bank of India, then irrespective of the use of the building, the claim of deduction u/s 80C of the Act shall be allowed in respect of the repayment of the principal amount, of course subject to the maximum limit. Thus, the grounds of appeal for all the A.Ys on this issue are treated as allowed for statistical purposes. Enhancement of income as accretion to capital - Held that:- The assessee has not been maintaining any books of account prior to the date of search and has prepared the capital a/c and statement of affairs only from the A.Y 2005-06 onwards. It is seen that from the A.Y 2005-06 onwards, the assessee has shown opening capital and there is increase in capital year after year. The source is also explained as income from chit fund business and past savings. We therefore, deem it fit and proper to remand this issue in both the A.Ys to the file of the AO for verification of the above sources for increase in the capital. Addition made as unexplained investment based on the documents other than relating to chits, found during the course of search - Held that:- We find that the documents now filed by the assessee are only bank statements and the encumbrance certificates which are issued by the bank authorities and the govt. agencies respectively. In our opinion, these documents, being third party records, can be admitted. Similarly, for the A.Y 2011-12 also, the assessee has filed the additional evidence being the Bank A/c copy and the encumbrance certificate for the very same property. Therefore, we are inclined to admit the additional evidence filed by the assessee and remit the same to the file of the AO for verification and we direct the AO to consider the allowability of the assessee’s claim in accordance with the law. In the result, assessee’s ground of appeal for the A.Ys 2010-11 & 2011-12 against these additions are treated as allowed for statistical purposes.

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• 2017 (12) TMI 247
  Non disclosure of profit from sale of land - parting of share of the profit in favour of SIDCPL - whether is only an application of income and not diversion of income by overriding title? - Held that:- There is only an application of income by virtue of subsequent agreement by assessee and there is no obligation or diversion by overriding title attached to the property, particularly in view of the fact that assessee has agreed only to share the profits but not the losses and this agreement was subsequently entered, which cannot be considered as an obligation on the source itself. In view of that, we set aside the order of CIT(A) and restore the order of AO for both the assessment years. - Decided in favour of revenue

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• Customs

• 2017 (12) TMI 246
  Exemption from additional duty u/s 3 of CTA - N/N. 30/2004-CE dated 09.07.2004 - case of Revenue is that appeals have been dismissed as not maintainable on the ground that the assessments were self-assessment and the petitioner has to only file refund claims before the third respondent - Held that: - If a Court or Quasi Judicial authority comes to a conclusion that a petition or an appeal is not maintainable, then the concerned Court or Quasi Judicial Authority has to safeguard the interest of the applicant by not foreclosing the remedy available to the applicant. The situation would have been different, if the Commissioner had declined to entertain the appeal in the year 2012 itself for the reason now assigned in the impugned order. This could have very well been done, since the Commissioner is referring to the decision of M/s.Suryalaxmi Cotton Mills Ltd. Vs. CCE, Nagpur, prior to which the amended Section 27 came into force, i.e., on 08.04.2011. Thus, the Commissioner having entertained the appeals and kept the appeals pending for four long years, cannot dismiss by holding that the appeals are not maintainable, but should have protected the petitioner by issuing appropriate consequential direction. This is more so because a party who comes to Court or before Quasi-Judicial Authority cannot be left without a remedy. The period during which the appeals were pending before the first respondent has to be necessarily excluded, because the first respondent has held the appeals to be not maintainable and in other words, the petitioner was prosecuting the claim before a wrong forum. This is all the more reason to issue appropriate directions to enable the petitioner to file a refund claim, which is required to be processed in accordance with law - petition disposed off.

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• 2017 (12) TMI 245
  FPS licence - it was alleged that the license was obtained by forging Telegraphic Release Advice (TRA) issued by customs authorities - whether the FPS License was valid or not? - Held that: - The facts of the case that the appellants obtained a bonafide valid licence issued by the Competent Authority is not in dispute - similar issue decided in the case of M/s Deep Exports Versus CC, New Delhi [2016 (4) TMI 99 - CESTAT NEW DELHI], where it was held that the REP licences transferred were genuine documents issued by the competent authority. Even if the appellants had made any enquiry with the DGFT themselves as the issuing authority at the time of purchase or utilisation for import of gold, there is no way the validity of REP licence could have been put to question. As long as the licences are valid, the customs authorities cannot refuse exemption on the allegation that there was misrepresentation. It is for the licensing authority to take up the question of misrepresentation. This has not been done in the facts of the present case. The licences were still valid and had not been cancelled by the licensing authority and the licences have not been questioned at all by the licensing authority. No duty demand can be made on such import made on the basis of valid and subsisting licence at the relevant time - appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 244
  Recovery of duty u/s 28 of CA, 1962 - levy of penalties for abetment of customs duty - forgery of certificates prescribed for availing concessional rate of duty - With the finding that the certificates issued by Line Ministry were not in existence at the time of presentation of bills of entry, the adjudicating authority fastened duty liability and imposed penalties on the appellant for failure to comply with the condition in the notification requiring the production of the prescribed certificate - time limitation. Held that: - the eligibility being contingent upon essentiality of the goods for the project and approval of the Government of India which can be evidenced only by the countersignature of the designated official and such being non-existent in the impugned imports, the eligibility does not exist even till today - The failure of the Government of India in the Department of Economic Affairs, Ministry of Finance to nominate a Line Ministry for the project at the time of import does not waive the requirement of compliance with the condition in the notification to evidence essentiality and approval. Neither does it condone the production of a forged certificate to accord it a sanctity that it fails to possess ab initio. The role of Shri Rakesh Yadav in the fabrication of the certificates has been sufficiently established. That M/s ICICI Bank and M/s Jindal Steel & Power Ltd have a major financial stake in the execution of the project is axiomatic. Any delay in obtaining the countersignature of the designated officer in the certificate issued by M/s ICICI Bank would have repercussions for both that would motivate them to collaborate in submission of a certificate that was not in accord with the prescriptions in the notification. Indeed, they stood to derive the benefits emanating from the fabrication of the documents - Their protestations of being the victims of cross-fire may not find many takers as the exemption notifications claimed by them cannot but have been within their knowledge and the crucial role of Line Ministry is unambiguously clear. The definition of Line Ministry i.e. offers no scope for any doubt that the Line Ministry may have been the Department of Economic Affairs in Ministry of Finance as that Department was enjoined to nominate one and, that too, for each project. Their failure to press for the nomination of such Line Ministry and their acquiescence in the ingenuity of a personage of that Department to fill the void, albeit without authority, is not easily obliterated. Jurisdiction - validity of the notice leading to the impugned order - Held that: - the decision in the case of Mangali Impex vs. Union of India [2016 (5) TMI 225 - DELHI HIGH COURT] relied upon - matter on remand. It would be appropriate to remand the matter to the adjudication authority - appeal allowed by way of remand.

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• 2017 (12) TMI 243
  Failure to file the Bill of Entry - Board circular No.15/2005-Cus. dated 11.3.2005 - whether there was any fault in the computer system or not? - Held that: - We are not provided information by revenue as to whether the computer system was working on the date of approach for ICEGATE system of submission of Bill of Entry - The IGM copy is also not before us - all the three appeals should go back to the learned adjudicating authority who shall examine whether there was any fault of ICEGATE system and day to day steps taken by appellant to prove its bona fides of presentation of Bill of Entry before 21.8.2006 - appeal allowed by way of remand.

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• Corporate Laws

• 2017 (12) TMI 242
  Winding up petition - Held that:- Having gone through the contents of the report with the certificate of the Chartered Accountant stating that as on 06.10.2017, there is Nil balance in cash, in Bank and in FDR in the name of the company and having considered that the Registrar of the company has given No Objection Certificate for finally winding up of the company, finds that the company having no assets / properties and left with no fund, there is no need for the Official Liquidator to further proceed with winding up of the company. In view of the above, the company (in liquidation) is required to be dissolved under Section 481 of the Act and the Official Liquidator is required to be discharged and relieved as Liquidator of the company.

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• 2017 (12) TMI 241
  Winding up petition - dissolution - Held that:- As stated in the report since there are no assets left with the company and there are no funds with the company, there is now no need for the Official Liquidator to further proceed with winding up of the company. The company, therefore, could be dissolved under Section 481 of the Act and the Liquidator could be relieved and discharged from his duty for winding up of the company. In view of the above, the company M/s. Mahendra Syntex Pvt. Ltd. (in liquidation) is ordered to be dissolved under Section 481 of the Act. The Official Liquidator is discharged and relieved from his duty for winding up of the company. The Official Liquidator shall forward the copy of the present order to the Registrar of the company within 30 days from today. The report stands disposed of accordingly.

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• 2017 (12) TMI 240
  Winding up petition - Held that:- As stated in the report since there are no assets left with the company and except the balance of Rs. 14,953/-, there are no funds with the company, there is now no need for the Official Liquidator to further proceed with winding up of the company. The company, therefore, could be dissolved under Section 481 of the Act and the Liquidator could be relieved and discharged from his duty for winding up of the company. At the same time, Ex-directors could be directed to give undertaking that if any liability in future arises in connection with the company (in liquidation), they shall be responsible for such liabilities. In view of the above, M/s. Ashmi Financial Consultancy Private Limited - the company (in liquidation) is ordered to be dissolved under Section 481 of the Act. The Official Liquidator is discharged and relieved from his duty for winding up of the company. The Official Liquidator shall forward the copy of the present order to the Registrar of the company within 30 days from today.

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• 2017 (12) TMI 238
  Eligibility of EoGM - Whether the EoGM purportedly held on 27.07.2015 is in accordance with the law and legally tenable? - non service of notice - removal from directorship - Held that:- Respondent Nos. 2 to 11 stated in the counter that the Petitioner has issued notice dated 01.07.2015 to call for the Board Meeting on 27.07.2015 at 10.30 A.M. But, the Petitioner left for Dubai on 26.06.2015 and returned to India only on 02.07.2015, this fact has been proved by showing the entries of his travel in his passport during argument. Further, the shareholders have not received notice of EoGM purportedly held on 27.07.2015 as the 1st Respondent Company has received 76 complaints from the shareholders stating that they did not receive any notice of said EoGM. Moreover, the Respondent failed to produce the proof of service of notice dated 01.07.2015 on 344 shareholders pertaining to the EoGM purportedly held on 27.07.2015. Therefore, the defence taken by the Respondent Nos. 2 to 11 is highly improbable and full of fallacy. Besides the above, no material has been shown to demonstrate the fulfilment of the requirements of Section 284(1) and (2) of the Companies Act, 1956, before removing the Petitioners and the Respondent No. 12 from the Directorship of the 1st Respondent Company by the Respondent Nos. 2 to 11. The Respondent Nos. 2 to 11 failed to produce the copy of the 'special notice' containing the agenda for removal of the Petitioners and the Respondent No. 12 as Directors of the 1st Respondent Company. The omission to serve a 'special notice' to the Directors sought to be removed constitutes denial of their statutory right of the reply, and in the absence of the notice to the Directors, any resolution for their removal is vitiated by such gross omission, and the same is neither bona fide nor in the interests of the 1st Respondent Company. Thus, the Respondent Nos. 2 to 11 seem to have made efforts to usurp the office of the Directors and to gain the control over the Board of Directors of the 1st Respondent Company. Therefore, the removal of the Petitioners and R12 from the office of the Directors of the 1st Respondent Company in the EoGM purportedly held on 27.07.2015 amounts to acts of oppression by the Respondent Nos. 2 to 11. Moreover, it is on record that the appointment of Respondent Nos. 4 to 11 as Directors of 1st Respondent Company was made by a single resolution which is in violation of the provisions of Section 162 of the Companies Act, 2013. Such election per se is void ab initio. Forfeiture of shares - Held that:- Assuming that the Respondent Nos. 2 to 11 were Directors at the time of forfeiture of the said shares on 27.07.2015, and were authorised to cancel the shares. But legally, the Directors of the Company cannot utilise their fiduciary powers over the shares purely for the purpose of cancellation of the shares of the minority shareholders to improve their voting power. The court cannot allow to exercise such powers which might have been delegated by the company to the Board of Directors. Therefore, there was no authority with Respondent Nos. 2 to 11 to forfeit the shares of the Petitioner Nos. 1, 2 and 5 including 73 shareholders. The whole action is patently illegal, perverse and is declared as null and void.

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• Insolvency & Bankruptcy

• 2017 (12) TMI 239
  Corporate insolvency resolution process - Held that:- The financial creditor has produced sufficient evidence of default which is rather not in dispute. The Interim Resolution Professional has been proposed and written communication in Form No.2 has already been furnished by the proposed Interim Resolution Professional and as already observed, the same is in order. Necessary declaration has been given in the application form by the authorised representative to the effect that to the best of his knowledge the proposed IRP is fully qualified and permitted to act as a Resolution Professional in accordance with the provisions of the Code read with Rules and Regulations framed thereunder. Sub-section (4) of Section 7 of the Code requires the adjudicating authority to ascertain the existence of a default from the records of information utility or on the basis of other evidences. There is no dispute about the fulfilment of the aforesaid requirement by the financial creditor. Apart from the statement of accounts maintained by the Bank, the CIBIL report (Annexure-80) has also been obtained by the Bank with regard to the default. In view of the aforesaid discussion, the default having occurred and the application being complete, the instant application deserves to be admitted. The petition is, therefore, admitted declaring the moratorium prohibiting all of the following as provided in section 14(1) of the Code

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• Service Tax

• 2017 (12) TMI 237
  Business Auxiliary services - business promotional activities - POPOS Rules - various obligations on the part of the appellant which included the promotion of the brand and business of VISA and Master Card - export of services or not? - Held that: - the fact that the service recipients, with whom the appellants entered into agreements are located outside India is not in dispute as can be seen from the proposals of the show case notice itself - Even the Commissioner in his order while admitting this aspect of agreement, however, held that these services were actually consumed and utilized in India. We are not in agreement with such conclusion - Admittedly, the other parties to the agreement with the appellants have received the services. The Service Tax being destination based consumption tax, the present case will cover the requirements for export of services. The decision in the case of Verizon Communication India Pvt. Ltd. Versus Assistant Commissioner, Service Tax, Delhi III, Division-XIV & Anr. [2017 (9) TMI 632 - DELHI HIGH COURT] referred, where it was held that When the Master Supply Agreement between Verizon India and Verizon US is examined, it is plain that the recipient of the service is Verizon US and it is Verizon US that is obliged to pay for the services provided by Verizon India. Appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 236
  Business Auxiliary Service - transaction in Electronic Recharge Coupons (ERCs) - commission/discount earned by the respondent on such transaction in ERC - Held that: - There was no relationship of agent and principal between the respondent and the telecom operators - similar issue decided in the case of Chotey Lal Radhey Shyam [2015 (11) TMI 979 - CESTAT ALLAHABAD], where the Tribunal held that when the telecom operators paid service tax on the full MRP of such ERCs/SIM cards, there is no liability on the appellant, who are involved in sale of such ERC/SIM cards to the subscribers. The telecom operators have paid service tax on the full MRP of ERC, which was further sold by the respondent, service tax not attracted - appeal dismissed - decided against Revenue.

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• 2017 (12) TMI 235
  Time limitation - late payment of tax - whether the time limit provided under Section 73 ibid is applicable for issuance of show cause notice, in case of confirmation of interest demand for late payment of the amount of service tax? - Held that: - Section 73 ibid mandates that SCN in the case of normal period should be issued within one year and for the extended period, same should be issued within 5 years from the relevant date. No such recovery provisions exist separately in the Service Tax statute, in context with the demand of interest amount for delayed payment of Service Tax. Admittedly, the SCN was issued beyond the period of 5 years from the date of payment of Service Tax and filing of periodical returns by the appellant. Therefore, as per the principle laid down by the Hon’ble Supreme Court in M/s. T.V.S. Whirpool Ltd. [1999 (10) TMI 701 - SUPREME COURT OF INDIA], such show cause notice issued by the Department, seeking recovery of the interest amount and for imposition of penalty will not stand for judicial scrutiny. Application allowed - decided in favor of applicant.

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• 2017 (12) TMI 234
  Short payment of service tax - works contract - Held that: - the law is well settled by the Hon’ble Supreme Court in the case of CCE, Kerala Vs. Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] that composite contract involving execution of job and for supply of material on payment of VAT should be classifiable under the works contract service w.e.f 01.06.2007. Thus, in view of the settled position of law, the appellant is not liable to pay service tax upto 01.06.2007 - the appellant has provided the computation sheet showing its liability of service tax for the period from 01.06.2007 to 29.02.2008 as Rs. 2,99,200/-. Since this particular aspect has not been dealt with by the adjudication authority, the matter should go back to the original authority for verification of such computation sheet and for the determination of the exact service tax liability to be paid by the appellant for period 01.06.2007 to 29.02.2008. Valuation - includibility - free supply material in the gross value - Held that: - this Tribunal in the case of Yadav Fabricator & Contactor [2017 (4) TMI 562 - CESTAT NEW DELHI] has held that free supply items from the recipient of service to the provider of service is not to be considered for calculation of the gross amount for payment of service tax. Thus, free supply items will not be included for computation of the gross amount for the purpose of levy of service tax - since the original authority has not recorded any specific findings with regard to actual free supply materials involved in execution of works contract, we are of the view that the matter should be remanded to him for consideration of the value of free supply material received by the appellant from the service receiver for execution of the works contract. Appeal allowed by way of remand.

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• Central Excise

• 2017 (12) TMI 233
  Liability of central excise duty - delivery charges of liquid gas - CENVAT credit availed on ISD invoices - Held that: - After the return of the tanker from the customer premises, the provisional entry made at the time of initial clearance, was adjusted and the duty was actually paid as per the actual quantity. Since the buyer pays only for the quantity of gases delivered at their premise and the burden of transit loss and any other loss was on the appellant, it was held that the sale of goods takes place only at the buyer’s premises - the facts of the present case require re-examination by the original authority with reference to purchase order, terms of sale, etc. - matter on remand. CENVAT credit availed on ISD invoices - Held that: - the original authority has denied the credit without any examination of the nature of services and also the various submissions made by the appellant in their defence - the appellant that the original authority has failed to give reasoned findings before denying the credit - matter requires de novo examination. Appeal allowed by way of remand.

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• 2017 (12) TMI 232
  CENVAT credit - GTA Services - Revenue disputed the credit availablility to the appellant on the ground that the said services are not to be taxed under GTA services, rather the tax liability will arise only under the category of mining services introduced w.e.f. 01/06/2007 - classification of services - Held that: - the admitted facts are that the appellant did avail services for transport of goods. They did pay service tax on such services under GTA services. On these admitted fact, a denial of credit on the ground that the tax liability will arise on some other heading is not a tenable proposition. What is paid as a tax on an admitted input service is eligible credit to the appellant. The denial of credit is only on the ground that the Department felt that the classification of service may be more appropriate under mining services introduced w.e.f. 01/06/2007 - Without commenting on the merits of such claim, we note that the credit of tax paid on the input service irrespective of the classification cannot be denied as no provision of Cenvat Credit Rules is invoked in the original order to substantiate such denial. Appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 231
  Valuation - goods sold through depot - The appellants had wide variety of final products and were facing difficulty in paying Central Excise duty at the time of clearance from the factory for sale through depot as they could not ascertain the sale price of identical goods at or about the time cleared on sale from depot - Rule 7 of Central Excise Valuation Rules - the Original Authority did not give any acceptable reason for not accepting the verification report and the details available in ER-1 returns supported by certificate of Chartered Accountant submitted by the appellant - there is no reason to selectively reject the verification report. Since, the claim of the appellant is that they have deposited higher duty than what is demanded, we are not going into the other aspects regarding the applicability of specific rule for valuation etc. Here, we have to note that the appellants did follow a procedure for discharging duty by tracking each consignment and indicating the differential payment in their statutory returns - the question of issue demand for extended period requires/examination by the Original Authority who, as already noted has been directed to examine the quantification with reference to claim of the appellant of duty demand already made. Appeal allowed by way of remand.

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• 2017 (12) TMI 230
  Non-accountal of goods in the statutory records - Confiscation u/r 25 in conformity or not? - redemption fine - penalty - Held that: - for non-accountal of goods in the statutory records, the same were confiscated by the department under Rule 25 ibid. Since confiscation of un-accounted for finished goods in the factory is in-conformity with Rule 25 ibid, imposition of redemption fine and penalties on the appellant M/s Girraj Jee Office Systems, is proper and justified. Penalty u/r 26 on appellant Shri Rajesh Kumar - Held that: - penalty imposed on the appellant Shri Rajesh Kumar under Rule 26 ibid is not sustainable inasmuch as he is no way concerned or connected with the activities of Shri Girraj Jee Office Systems inasmuch he is the Director of Alka Furnishers (P) Ltd., which is a different company - penalty set aside. Appeal allowed in part.

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• 2017 (12) TMI 229
  SSI exemption - clubbing of clearances - three units were run by the assessee-Appellants and the fourth unit, M/s Krishna Udyog (India), working in the adjacent premises, also belongs to their family members but no duty demand has been made from them - Held that: - The Sales Tax Department’s certificate pertaining to the working of the two units from Bawana Industrial Area was not considered by the lower authorities which was rejected by merely mentioning as afterthought. But the fact remains that this certificate was issued by the Sales Tax Department of the Delhi Government - also, no cross-examination was provided pertaining to Shri Rajesh Tiwari, Supervisor. The matter needs fresh examination - appeal allowed by way of remand.

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• 2017 (12) TMI 228
  Clandestine removal - shortages of inputs - Held that: the Show Cause Notice has not established that the alleged quantity of clandestinely cleared goods valued at Rs. 4.25 Crores was in addition to the clearance of goods valued Rs. 43,84,58,438.26/- as reflected in the record - Further value of alleged clandestinely cleared goods was based on such records of third party which are not covered by any accounting standards. Revenue did not ascertain the value of clearance from the statutory record and the information in the books of account maintained by the M/s Surya in the normal course of business to establish that the statutory records and books of account are not reliable. In respect of inputs found short, no evidence has been produced to establish that they were used in the manufacture of goods clandestinely manufactured goods and its clandestine clearance. The present SCN is presumptive in nature - appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 227
  Extended period of limitation - Manufacture - whether cold rolling of CRSS products and reducing the size of the same and during the process increasing in the hardness, amounts to manufacture? - Held that: - the SCN was issued on 14.06.2000 and the period covered was 30.09.1995 to 11.04.2000. During the relevant period normal period of show cause notice was 6 months - Further, u/s 11A of Central Excise Act, 1944 as it existed during material period when the extended period is invoked then in the wording of the Section the words are substituted for 5 years. The word 6 months does not continue to remain. Therefore, once the extended period is invoked, the normal period is not available for invocation - the SCN dated 14.06.2000 is hit by limitation - appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 226
  SSI exemption - clubbing of clearances - dummy units - allegations raised is that M/s. Airflow was not registered with Central Excise Department and was wrongly availing SSI benefit under the notification by suppressing its value of clearances by clearing goods through another unit M/s. Bala - Held that: - Admittedly M/s. Bala has a separate sales tax registration and is a separate income tax assessee. Thus it is a separate unit before all public authorities for compliance of various laws - Shri G. Dakshina Moorthy the father of Sh. D. Ventakesh who is managing director of M/s. Airflow, is the proprietor of M/s. Bala. It is settled law that merely because the directors are related to the proprietor/partners of the other unit, such unit cannot be said to be a dummy unit - Undisputedly, M/s. Bala has a separate electricity connection. M/s. Bala has been paying sales tax and also tax on their income. Only because Sh. D. Venkatesan was helping to manage the affairs of the proprietorship concern run by his father, that will not by itself make the unit a dummy unit. The appellant has strongly contended that there was no flow back of money or sharing of profit. They have also submitted that the illustrations of fund transfer shown in show cause notice were only temporary funds paid by M/s. Airflow to M/s. Bala and the same was paid back. The department has mainly relied on these few illustrations and has not taken or considered the entire transactions. On perusal of record this argument is not without substance - matter requires reconsideration. The matter is remanded to the adjudicating authority for denovo adjudication - appeal allowed by way of remand.

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• 2017 (12) TMI 225
  Valuation - Compounded Levy Scheme - section 3A of the Central Excise Act - annual production capacity - case of Revenue is that the petitioners had initially applied for being covered by annual production capacity regime and had availed all the notifications issued under the said scheme - Held that: - Section 3A of the Central Excise Act introduced with effect from 16.12.1998 pertained to the power of Central Government to charge excise duty on the basis of capacity of production in respect of notified goods. Under subsection( 1) of section 3A, notwithstanding anything contained in section 3, the Central Government would have the power to notify certain goods to safeguard the interest of revenue on which duty would be leviable in accordance with the provisions of the said section - when the petitioners applied to the Commissioner on 24.4.1999 to enable them to pay the duty on actual production and not on ACP, prospectively, the Commissioner had to decide such applications and ordinarily, we see no reason why such applications had to be rejected. The Commissioner erred in not deciding such applications as well as in concluding that the petitioners and other manufactures did not have any such option. Order of the Commissioner therefore, must be set aside. The proceedings remanded to the Commissioner for considering such applications of the petitioners and thereafter, passing consequential orders - appeal allowed by way of remand.

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• 2017 (12) TMI 224
  Clandestine removal - corroborative evidences - retraction of statements on which reliance was placed upon - Held that: - no search was conducted at the business premises of the assessee-Appellants. The Department had not taken into account the consumption of raw material in the appellants’ factory. So, it is very difficult to say that the raw material was supplied by the assessee-Appellants. For want of evidence, all the statements which were recorded, were retracted later - no demand can be raised on the basis of statements which were retracted, especially when no corroborative evidence was collected by the Department to substantiate the allegation of clandestine removal. Clandestine removal is very serious charge which requires corroborative evidence and in the instant case, no corroborative evidence was collected by the Department - appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 223
  Manufacture - process amounting to manufacture or not? - appellants were manufacturing and clearing the complete electronic weighbridges comprising digitizer, load cells, girders of specific size & end use, ground plates and C.I.plates of specific size & end use, joists of specific size & end use, platform of specific size and end use, from their factory premises and were clearing the same by showing the description as Fully Electronics Weighbridge or steel structure or load cells or Batteries or UPS or Digitizer etc - appellants were procuring the orders for complete weighbridge and clearing the same in unassembled/ disassembled condition. Held that: - Some parts are manufactured by the appellants, some parts are imported and some parts are taken to site for erection and commissioning of the same in terms of the order placed upon the appellants by different customers. Moreover, some activities namely, cutting, punching, welding drilling and bending are undertaken by the job worker on steel items - the activity of cutting, drilling, punching and welding of channels and angles does not amount to manufacture. The electronic weighbridge cannot be treated as goods which is capable of being brought to the market as bought and sold as such, therefore, the appellants are not liable to pay duty on weighbridges as whole - the appellants are paying duty on parts and activity of erection and commissioning at site of the buyer undertaken by the job worker therefore, we hold that the appellants are not manufacturing complete weighbridge. The issue has been decided in the case of M/s. Ashbee Systems Pvt. Limited Shri Ashish Bhutani, Director Versus Commissioner of Central Excise & S.T., Delhi [2017 (3) TMI 1131 - CESTAT NEW DELHI], where it was held that the appellants are paying duty on the parts cleared by them and are doing erection and commissioning at the site of the buyer. Therefore, appellants are not liable to pay duty on complete weigh bridge. Appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 222
  SSI Exemption - N/N. 9/2001-CE dated 1.3.2001 as amended - corrugated boxes - allegation of the department is that the clearances made by M/s. Packers India for the period till it was taken over by the appellant-company as well as the clearances of M/s. AGK Packers, another partnership firm is to be clubbed with the clearances of the appellant-company and to be treated as one unit so as to deny SSI exemption as the turnover after clubbing exceeded the prescribed limits - Held that: - On scrutiny of records of M/s. AGK Packers and the appellants, it was revealed that the partners of M/s. AGK Packers ShriT. Kumararaj and Shri T. Asokan were also directors of the appellant company - the appellant company was incorporated in the year 1989 and has later taken over the assets and liabilities of M/s. Packers India with effect from 1.10.2003. After such takeover of the assets and liabilities, M/s. Packers India, in our view, does not have any individual existence. So the contention of the department that the clearances made by M/s. Packers India upto 1.10.2003 has to be clubbed with that of the appellant company does not make legal sense. As already mentioned, the corrugated boxes became leviable to central excise duty only with effect from 1.3.2001. Clubbing of clearances of clearances of M/s. AGK Packers - dummy units - Held that: - When M/s. Packers India was taken over by the appellant company, which is a company registered under the Companies Act, the said unit could no longer be considered as a separate unit so as to club the clearances of the unit alleging it to be a dummy unit of the appellant company - Merely because Shri T. Kumararaj and Shri T. Asokan are active partners in M/s. AGK Packers and also the appellant company, it cannot be said that M/s. AGK Packers is a dummy unit of the appellant-company. Validity of SCN - separate notice has not been issued to M/s. AGK Packers and M/s. Packers India, though the department alleges that these are dummy units - Held that: - The Tribunal in various cases has taken a consistent view that the dummy unit has also to be put into notice for clubbing the clearances with another unit especially when the element of their independent existence is denied - non issuance of SCN to the alleged dummy unit would vitiate the proceedings. CBEC Circular No. 6/92 dated 29.5.1992 clarifies that the clearances of a partnership firm cannot be clubbed with that of a company even though they may be having common partners / directors - In the present case, the department has been carried away by the fact that Shri T. Kumararaj and Shri T. Asokan who are partners in M/s. AGK Packers is also the Directors in the appellant-company. This alone cannot be a ground for clubbing the clearances. Appeal dismissed - decided against Revenue.

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• 2017 (12) TMI 221
  Value based exemption - CENVAT credit - Section 11D of Central Excise Act, 1944 - Held that: - it is an admitted fact that the duty was paid along with interest before the issue of show-cause notice - the proportionate cevnat credit on stock of inputs, semi finished goods and finished goods amounting to Rs. 96,087/- was also paid after being pointed out by the Department. In view of these facts, I do not find any infirmity in the impugned order. Penalty u/s 11AC - Held that: - The imposition of penalty of Rs. 6,99,041/- u/s 11AC of the Act is not legal and proper and the actual duty liability under Section 11A of the Act comes to Rs. 5,70,113/- and not Rs. 6,99,041/- because the amount of Rs. 1,28,928/- was not duty assessed under Section 11A but the amount liable to be collected under Section 11D of the Act. In view of this legal position, I reduce the penalty to the extent of Rs. 5,70,113/- from Rs. 6,99,041/-. Penalty on Managing Director - Held that: - As far as penalty on the Managing Director is concerned, since equal penalty has been imposed on the company, therefore I do not think it proper to impose the penalty on the Managing Director as the Department has not brought any material to show that Managing Director was directly responsible for non-payment of duty - penalty set aside. Appeal allowed in part.

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• 2017 (12) TMI 220
  Clandestine removal - shortages and excesses of goods - installed capacity of production of the machines - Held that: - the Department has not produced any other evidence to show that the appellant had the motive or intention to remove the excess found stock without payment of duty. Therefore, non-maintenance of record under the facts and circumstances of the case, cannot lead to the conclusion that the same are liable for confiscation - the question of duty payment arises only on removal of the finished goods, which in the present case, has not been removed from the factory by the appellant. The original authority has directed the appellant to make necessary entries in the RG-I Register for the excess goods found in stock. Since the issue involved in the present case relates to confiscation of excess found finished goods and the same, is not proper and justified. Appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 219
  Clandestine removal - principles of natural justice - Held that: - Since the Central Excise Department never visited the factory of the appellant for further investigation and the specific request for cross-examination of the concerned persons/witnesses were turned down, though specifically prayed for in the reply to show cause notice, the principle of natural justice have been violated in this case - this is a fit case for remand to the original authority for providing the opportunity to the appellant to properly defend its case - appeal allowed by way of remand.

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• 2017 (12) TMI 218
  Non-maintenance of statutory records in respect of availability of the said goods in the factory premises - confiscation u/r 25 of CER - Held that: - Since, Rule 25 ibid has been invoked for confiscation of the seized goods and for imposition of penalty on the appellant, it is to be ascertained, whether the said statutory provisions are applicable under the facts and circumstances of the case for confiscation of the said seized goods. On perusal of Rule 25 ibid, it reveals that raw material is neither covered in clause (a) (b) and (c) of sub-rule (1) of Rule 25 and also not appearing in clause (d) of the said sub-rule. Since Rule 25 only deals with the excisable goods manufactured by the person and admittedly other than chewing tobacco, the appellants are not manufacturing any other products in their factory, excepting chewing tobacco i.e. finished product of the appellant, other goods cannot be confiscated under Rule 25 ibid. Out of 8 items seized and confiscated by the department, only the finished product viz. chewing tobacco of “Panna” brand valued at Rs. 3,94,400/- is liable for confiscation and redemption fine can be imposed for redeeming the said goods only. Since, the option was given to the appellant to redeem all the seized goods on payment of redemption fine of Rs. 2,50,000/-, redemption fine can be reduced to Rs. One lakh. Penalty u/r 26 imposed on Shri Bhavesh Chaplot, the authorized signatory of M/s Nirmal Products - Held that: - penalty cannot be imposed under Rule 26 ibid on the ground that the goods were not removed outside the factory premises in clandestine manner and also for non maintenance of proper records, the main appellants have already been penalized under Rule 25 ibid - penalty set aside. Appeal allowed in part.

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• 2017 (12) TMI 217
  Clandestine removal - formula prescribed by Shriram Institute for Industrial Research regarding the increasing of the weight - the Commissioner opined that in the process, the water is added to the lime so the weight has increased and appellant has not accounted for the increased weight - Held that: - it appears that for the period under consideration, the Commissioner has relied on the formula prescribed by Shriram Institute for Industrial Research regarding the increasing of the weight by adding the water in the lime for manufacturing khaini - matter remanded to the Commissioner to re-determine the quantity for the increased weight as per the formula prescribed by the Settlement Commission, but by providing an opportunity of hearing to the appellant, as per law - appeal allowed by way of remand.

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• 2017 (12) TMI 216
  Clandestine removal - it was alleged that the machines not reflected in the RG-1 Register were removed clandestinely without payment of Central Excise duty - Held that: - On perusal of the progress report and the RG-1 Register for the period 1997-98 to 1999-2000, it is found that the 36 Nos. of semi-finished machines were reflected as finished machines by the appellant in the RG-1 Register during the relevant period. Thus, there is no mis-match between the figures reflected in the progress report and the quantity shown in the RG-1 Register - there is also no mis-match between the machines and the model sold during the month of December and March, were different having different assessable value. Accordingly, the appellant had maintained two set of RG-1 Register for different models of machines manufactured by it. Thus, there is no overlapping of the date or figure in the RG-I Register as claimed by the authorities below. In absence of any substantiation of the fact of clandestine removal of goods by the appellant, the charges levelled against it in support of confirmation the adjudged demand cannot be sustained - appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 215
  Remission of duty - molasses stored in tank was burnt due to explosion - Held that: - there was a fire and molasses was burnt. But no supporting evidence has been given regarding the availability of the molasses of 1400 MTs in the said tank - also there is a delay on the part of the appellant in taking the necessary steps like information to the Police, Central Excise department and insurance companies - keeping in mind the doctrine of equity, justice and good conscious, the claim of the appellant for remission of duty is confined to only Rs. 5 lakhs - penalties set aside - appeal allowed in part.

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• 2017 (12) TMI 214
  Refund claim - unjust enrichment - Section 11B of the Excise Act - Held that: - Any claim filed for refund of Central Excise duty is to be processed and dealt with only in terms of Section 11B of the Central Excise Act 1944 - Only if it is established that the incidence of such duty has not been passed on, can the refund be paid in cash to the claimant - In the instant case there is no dispute that the duty has been paid in excess and that the refund is admissible on merit. However, on the question of unjust enrichment, there is dispute. In terms of the clear provisions of Section 11B, the refund cannot be paid to the appellant. An agreement to pass on the duty if refunded, cannot come to the aid to of the appellant - appeal dismissed - decided against appellant.

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• 2017 (12) TMI 213
  Benefit under N/N. 6/2002-CE dated 01.03.2002 - certificates produced by the appellant from the District Collector to avail the above exemption notification - clandestine removal - Held that: - The benefit of the notification cannot be denied only for the reason that the certificates are not in the proper format - In those cases where the appellant has failed to produce the certificate from the District Collector, the duty will have to be paid along with interest - matter requires reexamination. Clandestine removal - Department noticed that in the internal payment slips found in the appellants records, lower payment was shown as compared to the rate mentioned in the corresponding invoices - Held that: - the invoiced quantity have been found to be more than the quantities recorded in the internal payment slips. Hence we are inclined to accept the appellant’s argument that more duty has been paid in those cases. In any case the Department has not placed on record any evidence to substantiate the charge of clandestine clearance - demand set aside. Penalty u/r 26 on Sh. J.D. Gupta, MD - Held that: - there is no specific allegation has been made out in the SCN against the MD - there is no justification on imposing penalty against appellant - penalty set aside. Appeal allowed in part and part matter on remand.

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• 2017 (12) TMI 212
  CENVAT credit - finished goods which are exported - Held that: - The appellant has procured the inputs on payment of duty and has availed Cenvat Credit thereon. However, it is not in dispute that finished products have been cleared for export for payment of duty. In the process of payment of duty the Cenvat Credit availed on inputs already stands paid back - there is no justification for demanding repayment of Cenvat Credit all over again by taking the view that the credit availed was irregular - appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 211
  Valuation - includibility - bought out items supplied along with plastic jars - whether the value of the bought out item i.e. cap which is also supplied along with the plastic jars manufactured in the appellant’s factory is to be included in the transactional value of the jar for payment of excise duty? - Held that: - It is a matter of common sense that the plastic bottle becomes complete only with the addition of the cap. Instead of saying that the bought out items have been supplied with the manufactured goods, it will be more appropriate to say that complete plastic bottles were supplied by the appellant to their sister units. In terms of section 4 of the Central Excise Act, duty is required to be paid on the value of the goods supplied. The plastic bottle is of no use without the cap. Hence the cap is not an optional accessory but an essential part of the plastic container - In the case of Sidhartha Tubes Ltd., [2005 (12) TMI 91 - SUPREME COURT OF INDIA], the Hon’ble Apex Court has taken the view, that the value of sockets which were essential for functioning of pipes as it joins the pipes to each other will be includible in the assessable value of pipes. Appeal dismissed - decided against appellant.

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• 2017 (12) TMI 210
  Clandestine removal - demand on the ground of speed of the machines - M/s M.R. Tobacco Pvt. Ltd. has declared the speed of the machines as 60-70 pouches per machine per minute in compliance with the Board’s Circular - Held that: - allegation of the Department is that the speed of the machines was too high perhaps in the range of 110 pouches per minute per machine, but the fact remains that the speed was never measured by an expert. This was merely a guess work. No expert opinion was sought with regard to the speed of machines. So, in the absence of any technical expert’s opinion, this allegation was dismissed in the impugned order. Shortage of raw material - Held that: - The Department failed to point out any basis that the electricity consumed in the factory was not in consonance with the production. There were five machines in the factory, but the rawmaterial was calculated on the basis of only two machines - the Department has not verified, in the course of investigation, the production capacity of the Company. The Department could not find any irregularity in the electricity consumption nor evidence was collected with regard to the alleged clandestine clearance of the finished goods for the period prior to the investigation and after search of the Company upto 30.06.2008. Penalty on Shri Chander Kumar Gupta - Held that: - Shri Chander Kumar Gupta (assessee-Appellant) ceased to be a Director w.e.f. 15.07.2009 and has nothing to do with the Company. The reason for his resignation from the Company was his illness. The Hon’ble High Court has also reduced the penalty on the ground of his illness - The penalty has already been paid as per the direction of the Hon’ble High Court. When it is so, then we find no reason to interfere with the impugned order whereby the penalty imposed has already been paid. Penalty on Montage Enterprises Pvt. Ltd. - Held that: - no penalty can be imposed on corporate entity under Rule 26 of the Central Excise Rules, 2002 - penalty set aside. Appeal dismissed - decided against Revenue.

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• 2017 (12) TMI 209
  Abatement - closure of factory - manufacture of pan masala - manufacturing unit/machines were closed and sealed for continuous period of 15 days or more - violation of proviso to Rule 10 - the appellants cleared notified goods even after 2 days of sealing of the machines - Held that: - The facts of the case that the machines were sealed by the Jurisdictional officers as per the request of the appellant and they remained sealed during the impugned periods is not in dispute. It is also not the case of the Revenue that any notified goods were manufactured during these periods. In terms of proviso to Rule 10 they should have cleared already manufactured notified goods within two days of sealing of their machines. In view of the admitted fact that the appellants did not produce any notified goods during the period of closure/sealing of the machines and there being no allegation of any manufacturing during the said period, the abatement claim cannot be rejected. The non-adherence of the condition regarding clearance of already manufactured goods in stock within two days of closure will attract, if at all, the provisions of Rule 17 of 2008 Rules or Rule 18 of the Chewing Tobacco Rules, 2010, for penalty. Appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 208
  Clandestine manufacture and removal - pan masala - alleged cracking or tempering of the seal put on the machine on 31.08.2014 by the officers as per the request of the respondent - Held that: - the Jurisdictional Assistant Commissioner made a physical inspection of the premises and the machine involved in the present proceedings. His report of inspection was produced in full in the impugned order. It is clear that based on that report, the original authority categorically recorded that possibility of the machine having been operated without removing the bottle seal and metal strip is remote. The Revenue also alleged that the case for un-accounted clearance being supported by the availability of certain packing materials and finished goods - Held that: - Even if there were certain discrepancies in the recital of evidence, a case for clandestine removal of pan masala with the duty liability of Rs. 59.60,000/- can not be made without any basic evidence of actual manufacture and clearance of the impugned goods - the incidental stock, circumstantial evidence of availability of small quantity of raw material/goods was the only evidence on which such substantial demand was sought to be confirmed by the Revenue - the original authority has correctly examined the evidences and concluded that no case against the respondent could be established. Appeal dismissed - decided against Revenue.

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• 2017 (12) TMI 207
  Penalty u/r 25 - N/N. 108/95 dated 28.08.1995 - wires and cables - Held that: - the project is for Indian Railways. The certificate is issued only by Chief of Project Manager in the Indian Railways. It is not coming out clearly in the impugned order, whether there is any other Line Ministry supervising this project which is a railway project. In any case, without further examining the merits of the case, there is no sustainable ground to invoke fraud, suppression or wilful mis-statement in the facts of the present case. The clearance of goods is without payment of duty claiming N/N. 108/95 has been reflected in the monthly statutory return and the clearance is based on the certificate issued by the Railway authorities - appeal allowed - decided in favor of appellant.

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• 2017 (12) TMI 206
  Penalty - clandestine removal - charges against the appellants are that two of the units (M/s Shri Girraj and M/s Alka Furnishures) do not have independent existence and their turnover has to be considered in the name of M/s Shri Girraj Jee Office Systems as no facility exist with M/s Alka Furnishures for manufacture of the furniture - Held that: - Admittedly, the units are located in the same building owned by one of the family members. No rental arrangement or separation is on record. In the absence of manufacturing facility and record to support the claim that such manufacture is done by others including M/s Shri Girraj Jee Office Systems on job work basis, we have no reason to interfere with the order passed by the lower authorities. Unaccounted clearance of excisable items - Held that: - large number of kachha parchies have been recorded during the search operation conducted by the officer in August, 2010 - the goods are excisable but duty on them was not paid. These aspects have been examined by the original authority who held on duty liability based on evidences gathered / recorded during investigation. The evidence recovered from the appellant during the course of investigation the lower authorities concluded that in the absence of admissible categorical evidence of such trading they will go by the explanation regarding turnover of excisable goods by the responsible person. We have no reason to deviate from such finding. Appeal dismissed - decided against appellant.

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• CST, VAT & Sales Tax

• 2017 (12) TMI 205
  Waiver of assessment procedure - fire accident occurred in the business premises of the petitioner on 11.01.2002 - petitioner's case is that on account of the fire accident, entire records, books of accounts, etc. which were kept in the office premises were gutted down and are not available with the petitioner for production before the Assessing Officer and therefore, requested for waiver of the assessment procedure - Held that: - nothing appears to have been done by the Assessing Officer from 1995 onwards and for the first time action was initiated in the year 2003. Since the fire accident had occurred on 11.01.2002 and the records were gutted as soon as pre-assessment notices were received, the petitioner moved the first respondent through proper channel - to state that the petitioner is guilty of non-production of records at the appropriate time is an incorrect statement since there is no record to show that despite summons being issued to produce the records and books of accounts, the petitioner failed to do so. More importantly, the respondent did not dispute the fire accident and the same is admitted. In such circumstances, every step should be taken by the Assessing Officer as well as other respondents to complete the assessment at an earliest point of time. There is a statutory duty on the part of the third respondent to call upon the petitioner to produce the books of accounts and then finalize the assessment. For reasons best known, this never happened till 2003 and the matter was in limbo from 1995 onwards. Therefore, the petitioner cannot be solely blamed for the situation. The matter is remanded to the third respondent, the Assessing Officer who is directed to waive the assessment procedure as contemplated under Section 12 of the TNGST Act r/w Section 9(2) of the CST Act and complete the assessment for all the assessment years - appeal allowed byway of remand.

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• 2017 (12) TMI 204
  Jurisdiction - time limitation - whether the first respondent, in exercise of his powers under Section 32 of the TNGST Act, while purporting to pass orders of assessment could do so, beyond the period of limitation stipulated under Section 16 of the TNGST Act, 1959? - Held that: - the issue involved in this writ petition is squarely covered by the decision of this Court in the case of Salem Steel Suppliers and others vs. The Deputy Commissioner and another [2017 (9) TMI 946 - MADRAS HIGH COURT], where it was held that The power under Section 16(1) is wide enough and cannot be said to be limited to assessment of assessable turnover under that sub-section by the Assessing Authority only. It is to be invoked in all cases, where, a statutory functionary under the Act assumes jurisdiction to assess the escaped turnover. Therefore, it was held that, in passing an original order of assessment, the Board exceeded its powers under Section 34, and that the order was also passed beyond time. Therefore, the order was held to be unenforceable in law. Petition allowed - decided in favor of petitioner.

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• 2017 (12) TMI 203
  Penalty on entry tax - Section 15 of the Entry Tax Act - Held that: - Section 15(1) of the Entry Tax Act could be invoked only when a person, who is liable to pay tax under the Entry Tax Act, fails to comply with any of the provisions of the Entry Tax Act, and if he fails to do so, he is liable to pay penalty not exceeding finalised amount of tax - On a reading of the impugned assessment order, it is not clear as to how the respondent imposed penalty u/s 15(1) of the Entry Tax Act, and as to how the petitioner, who is liable to pay tax under the Entry Tax Act, failed to comply with the provisions of the Act. Admittedly, the entry tax has been paid, assessment has been completed and there is no tax liability pending. Therefore, to invoke Section 15(1) of the Entry Tax Act, the respondent should bring out as to how there is failure to comply with the provisions of the Act. The records show that nothing was retained by the petitioner and therefore, the question of invoking Section 15(1) of the Entry Tax Act, does not arise, as there is no contravention of the provisions of the Act as has been pointed out in the impugned order. Petition allowed - decided in favor of petitioner.

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