Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 7, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Reopening of assessment - the legal requirement that "the reason to believe must be predicated on tangible material or information" and that "the belief must be rational and bear a direct nexus to the material on which such a belief is based" was not fulfilled in the present case - HC
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MAT applicability - The provisions of section 115JB of the act are not applicable in the case of the Banks and the amendment brought in section 115JB of the Act read with Explanation 3 thereon by the Finance Act 2012 is applicable only with effect from Asst Year 2013-14- AT
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Depreciation is allowable in the hands of the company, even if it is registered in the name of its director provided that the vehicle is used for the purpose of business of company and income derived there from was shown as income of the company - AT
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Re-computation of the arm’s length price - whatever margin has been determined for the 96% of the transactions, same margin should be determined for the remaining 4% transactions as well. It is worth noting that, even before us, no distinction in facts or nature of transactions has been brought out on record - AT
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As the provisions accepting levy of late filing fees under section 234E have indeed been brought to the statute w.e.f. 1st June, 2015 and the impugned order was passed much before that date we hereby delete the levy of late filing fees under section 234E - AT
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Disallowance of assessee’s claim in respect of its liquidated damages - Revenue argument that these liquidated damages are only in the nature of a provision is unacceptable - allowed as expenditure - AT
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Warehousing charges paid to C&F agents - whether were in the nature of commission liable for deduction of tax @ 10% u/s 194H or as ‘rent’ liable for deduction of tax @ 20% u/s 194I? - rightly held to be subject to deduction of tax at source u/s 194H of the Act at the rate of 10% - AT
Customs
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Classification of Vitamin E-50 powder (Feed Grade) - whether Vitamin E-50 is classifiable under Chapter 2309.00 as “Prawn Feed” and therefore eligible for the benefit of partial exemption from duty under Notification No. 20/99 dated 28.02.1999. - referred to larger bench - SC
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Validity of circular No.450/176/2014-Cus-IV dated 7/11/2014 - restriction on the petitioner from importing Alloy Steel Deformed Bars falling under Chapter Heading 7228 of the CTA - Circular cannot be applied retrospectively to the consignment of the petitioner - HC
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Levy of anti dumping duty - Interested party - right to participate in the proceedings - The appellant did not file any information before the Authority to demonstrate that it was an importer of the article under investigation and hence could not be treated as an interested party. - AT
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Demand of recovery of consequential refund sanctioned consequent to the Hon'ble High Court of Madras orders which attained finality - LAA has no power to go beyond the High Court's order to set aside the refund sanctioned by L.A. - AT
Service Tax
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Discrepancy in issuing Show Cause Notice - Order-in-Review also does not quantify the value of service or the amount of service tax nor does it quantify the amount of penalty. Certainty is a non negotiable requirement in the tax proceedings - demand set aside - AT
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Demand of service tax - Denial of CENVAT Credit - If the Revenue is of the view that the service provider has not deposited the service tax collected by him from his customers, the remedy lies at the end of the service provider and not at the end of the service recipient. - AT
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Sponsorship service - merely because they had booked expenses in their accounts under the head of sponsorship service would not be sufficient to hold them liable to Service Tax in the absence of any evidence that they actually received the sponsorship service - AT
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Denial of CENVAT Credit - whether Cenvat credit can be denied to the recipient of the inputs with respect to duty not paid by the service provider - It is not the case of the Revenue that the service provider does not exist - credit allowed - AT
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Renting of immovable property service - only the premium amount charged was held to be not liable to tax. In the present case, there is no such premium amount involved. - appellants have not been able to make out a prima-facie case in their favour on merit - AT
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Only those IPRs procured under Indian laws are to be covered under IPR services and those IPRs not covered by the Indian Laws would not be covered under taxable under IPR Services. In view of clarification issued by C.B.E. & C. appellant has made out a prima facie case for complete waiver - AT
Central Excise
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Jurisdiction of court - Territorial jurisdiction - mere fact that the Commissioner of Central Excise and Customs, Vapi also exercises jurisdiction over the Union Territory of Dadra and Nagar Haveli would not mean that the matter ceases to relate to the Union Territory of Dadra and Nagar Haveli.
- HC
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Valuation of goods - the inspection charges received as reimbursement by the appellant on third party inspection charges at the instance of the buyer is not includable in the assessable value of the products cleared by them - AT
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CENVAT Credit - Captive consumption - whether the assessee have availed CENVAT credit correctly or otherwise when the activity undertaken by them on the inputs according to revenue does not amount to manufacture - credit allowed - AT
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Job Work activity for the principal availing area based exemption - Manufacture of copper ignots - Assessee contend that they are liable for service tax not excise duty - Prima facie case against the assessee - AT
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Though the return for April 2007 to June 2007 quarter was required to be filed on 10.07.2007 but the return was actually filed on 14.08.2007 and, therefore, prima facie, it is 14.08.2007 which would have to be treated as the relevant date- AT
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Loss and stock of the waste paper in a fire - whether indigenous goods or imported goods - it is clear that the entire goods lost in fire is indeed imported material and when it is so, demand of entire custom duty, excise duty is sustainable in toto. - AT
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Duty demand - Clandestine removal of goods - Shortage of goods - as the stocktaking in the factory had been done during monsoon period in the month of June, 2000 when there is no question of yarn losing weight. - AT
VAT
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Rate of VAT - TNVAT - the trade mark registration is meant for the restaurant as well as the products manufactured by it and when the activity of service for providing food and drink is considered as a trade mark - the food items also are to be considered as ‘branded items’ - levy of tax on such branded food and drink items would be at 14.5% - HC
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Rate of VAT on cell phone battery charger - Charger is sold as composite package along with cell phone - mobile/cell phone charger is an accessory to cell phone and is not a part of the cell phone - HC
Case Laws:
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Income Tax
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2015 (12) TMI 306
Income derived from commercial properties – Business income or income from house property - The assessee company is deriving rental income from letting out a commercial complex apart from income from other sources – Held that:- The Special Leave Petitions are dismissed. HC decision upheld [2014 (11) TMI 633 - MADRAS HIGH COURT] High Court [2014 (11) TMI 633 - MADRAS HIGH COURT] has held that:- The assessee had given its premises for rent and did not engage in any business activity at all – the AO computed the income under the head 'income from house property' - in East India Housing and Land Development Trust Ltd Vs. CIT [1960 (11) TMI 7 - SUPREME Court] the similar matter has been decided - If the income from a source falls within a specific head set out in S.6 the fact that it may indirectly be covered by another head will not make the income taxable under the latter head - The income derived by the company from shops and stalls is income received from property and falls under the specific head described in S.9 - even if the assessee's business was in real estate, the income on letting out of the property was to be assessed as "income from house property - the rental income would not have been realised, but for the letting out of the machinery, plant or furniture along with such building and therefore, the rental received for the building had to be assessed under the head "Income from other sources" - where the owner of the property exploited the property by leasing out the same and realised income by way of rent, the same was to be assessed under the head "Income from house property" and not as "business income" – the order of the Tribunal is upheld – decided against assessee.
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2015 (12) TMI 305
Reopening of assessment - genuineness of the loss in respect of shares held as stock-in-trade is perverse and accordingly cannot be sustained - Held that:- Interestingly nearly two years prior to the issuance of the notice, the AO had issued a notice on 26th March 2000 under Section 148 of the Act for re-opening of the assessment for AY 1996-97 on account of unexplained credits from two firms but that ended in an order of re-assessment dated 27th March 2002 referring to the unexplained share loss. Therefore, when the AO issued the notice on 26th March 2002 under Section 148 proposing to reopen the assessment for 1995-96, there was no fresh material to enable him to form reasons to believe that income on account of share loss had escaped assessment. Importantly, despite the fact that the reopening was sought to be made after the expiry of four years after the end of the AY 1995-96, no mention was made by the AO of the failure by the Assessee to make a full and true disclosure of all material facts in the original assessment. This is significant in the context of the AO noting in the original order of assessment under Section 143(3) of the Act, passed by the AO on 10th July 1997, that the Assessee had produced the books of accounts which had been checked by the AO. The AO also noted that the Assessee was dealing in shares and securities. The fact that Mr. R.R. Modi, the Director of the Assessee was also the person who floated PPL, could not by itself have constituted 'tangible material' for forming 'reasons to believe' when viewed in the context of the fact that the value of the closing stock of shares had been computed on the basis of the quotation in the Gauhati Stock Exchange which was at ₹ 2 per share. Further, both the CIT (A) and the ITAT have concurrently found as a fact that the Assessee had consistently followed the said method of valuation of shares at cost or at market price whichever is lower and that this method had been accepted by the Revenue for the earlier AYs. Clearly, therefore, the legal requirement that "the reason to believe must be predicated on tangible material or information" and that "the belief must be rational and bear a direct nexus to the material on which such a belief is based" was not fulfilled in the present case. - Decided in favour of assessee.
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2015 (12) TMI 304
Validity for assessment u/s 153A - Notice u/s 153C - Held that:- The documents in question could not be said to belonging to the Assessee. In Pepsico India Holdings Pvt. Ltd. (2014 (8) TMI 898 - DELHI HIGH COURT), this Court has explained that the expression ‘belongs to’ must not be confused with the expression ‘relates to’. As an illustration, this Court has referred to a registered sale deed which, although, registered by the vendor would belong to the purchaser of the property and could not be considered to be belonging to the vendor only because the vendor’s name was mentioned in the documents. In the present case, although the photocopies of the documents handed over to SVP Builders India Ltd. may be copies of the original documents that belong to the assessee, the said photocopies would belong to SVP Builders India Ltd. as the same were handed over to it in connection with the investment made by the Assessee. Similarly, a certified copy of the Assessee’s resolution signed by its Directors, would also belong to the SVP Builders India Ltd. even though the minutes of the Board meeting form a part of the record of the Assessee. We find no infirmity with the view taken by the ITAT in this regard. Thus, notwithstanding the controversy whether the assessing officer of the searched persons had recorded his satisfaction that the specified seized documents belonged to the Assessee, the initiation of proceedings under section 153C of the Act, in respect of the Assessee would be without jurisdiction. - Decided in favour of assessee.
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2015 (12) TMI 303
Entitlement for concessional benefit u/s 44BB - Held that:- Tribunal has found that the amounts in question are covered by Section 44BB of the Income Tax Act, i.e. the amounts represent works like drilling of exploration wells, etc. There is no dispute that there is a judgment of Oil & Natural Gas Corporation Limited vs. Commissioner of Income Tax & another (2015 (7) TMI 91 - SUPREME COURT). In the light of the same, since the amounts received for the works are liable to be reckoned under Section 44BB - Decided against the appellant / revenue.
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2015 (12) TMI 302
Disallowance u/s 14A - CIT(A) has enhanced the disallowance u/s 14A to ₹ 3,25,89,130/- as against the disallowance made by the AO at ₹ 9,98,374/- - Held that:- The formula adopted by the Ld. CIT(A) for making the disallowance u/s 14A is quite akin to formula laid down in Rule 8D which admittedly cannot be held to be applicable at all in the AY 2004-05. What could be the reasonable basis for disallowance has to be worked out from the nature of expenses debited and overall accounts of the assessee. So far as disallowance of interest expenditure is concerned, in the case of the assessee it is an admitted fact, permeating from the earlier years that the investments which have yielded exempt income were out of assessee's own funds and no interest bearing funds were diverted for making the investments. Once that is so, then in view of the ratio laid down by the Hon'ble jurisdictional High Court in the case of CIT vs HDFC Bank (2014 (8) TMI 119 - BOMBAY HIGH COURT ), we hold that no disallowance on account of interest can be made in this case. As regards direct expenses are concerned, the AO, has given a categorical finding which has not been rebutted before us, that Demat charges of ₹ 8,25,010/- were directly related to investment made in shares. Accordingly, so far as disallowance of ₹ 8,25,010/- on account of demat charges made by the AO, the same stands confirmed. Regarding balance disallowance, we find that 5% of the exempt income appears to be quite reasonable having regard to the nature of expenses and accounts of the assessee. Accordingly, we uphold the disallowance to the extent of ₹ 9,98,374/- which was made by the AO. - Decided partly in favour of assessee. Disallowance of professional fees paid to 'Majumdar and Co.' for registration of copy rights of designs and engines - revenue v/s capital expenditure - Held that:- It is an undisputed fact that payment has been made for getting the engine designs patented, which the assessee produces/manufactures. Such a copyright and patent will only go to enhance the cost of such an intangible asset and accordingly, it has been rightly disallowed as capital expenditure by the Ld. AO and CIT(A). However, we agree with the alternate contention of the Ld. Counsel that if it is treated as capital expenditure for a capital asset then, depreciation has to be allowed on such an intangible asset, which specifically finds mention in section 32(1)(ii). Accordingly, we direct the AO to allow depreciation as per relevant rules provisions on such a capital expenditure. - Decided partly in favour of assessee. Addition on account of contribution to employees welfare fund - Held that:- Following the earlier years' precedence wherein held not been able to produce any evidence in the form of the copy of agreement with the workers' union to support and substantiate her stand taken on this issue and in the absence of the same, we find no justifiable reason to interfere with the impugned order of the learned CIT(Appeals) confirming the disallowance made by the AO on this issue by invoking the provisions of section 40A(9). - Decided against assessee. Disallowance of various payments on the ground of infraction of law - Held that:- so far as late payment of fee to Chennai Municipal Corporation is concerned it is on account of late payment of Health License, it is not for any kind of penalty or infraction of law. Accordingly, the payment made to Chennai Municipal Corporation is treated as business expenditure. As regards the payment on account of sales tax, it was due to technical error wherein assessee has stated that the destination of consignee as Indore despite the fact that name of consignee, destination and address were correctly written. This again cannot held to be in the nature of penalty or infraction of law. Next, amount of charges of ₹ 32,000/- for compliance of Weights and Measures is not for any violation which can be suggestive of any infringement of law, hence it cannot be held to be punitive in nature and accordingly, the same is held to be allowable. Lastly, as regard the amount paid to the High Court for sum of ₹ 10,00,000/-, this was on account of direction given by the High Court for granting Stay of demand on Company's Stay Petition in respect of appeal filed before the High Court. The said direction for depositing the amount was to be allowed in the year where it will get adjusted against the demand. Accordingly, this payment cannot be held to be for any infraction of law or penalty. Accordingly, the same is treated as allowed. - Decided in favour of assessee. Disallowance of claim of deduction of R & D expenses - Held that:- assessee has taken a plea that it had incurred expenditure on research and development for developing a world class multipurpose engine for which it has embarked on "Avatar Project", which got completed in AY 2007-08 and sample products were also tested. Since AO and CIT(A) have solely gone by the fact that that in the tax audit the amount under R & D has not been qualified therefore, in the interest of justice, we are of the opinion that this matter should go back to the file of the AO to verify the details of expenses incurred by the assessee and if the same are for R&D purpose, as claimed by the assessee, then the same should be allowed as deduction u/s 35(1)(iv).- Decided in favour of assessee for statistical purposes. Addition on account of unutilized CENVAT credit - Held that:- CIT(A) has rightly directed the AO to make corresponding adjustment of CENVAT credit in the opening stock. However, the Ld. CIT(A) has not referred to purchases made during the year as similar treatment has to be given for the purchases also. Accordingly, we direct the AO to give effect of adjustment in the purchases made during the year and work out the relief.- Decided partly in favour of assessee for statistical purposes. Exemption u/s 41(1) for the waiver of interest - Held that:- when certificate is issued by the CBDT then corresponding effect should be given to the assessee for not taxing the interest amount which has been waived. Accordingly, this matter is restored back to the file of the AO so as to give effect to the CBDT's certificate if it has been or would be issued by the CBDT. Needless to say that if such certificate is not produced by the assessee, then AO can draw adverse inference - Decided in favour of assessee for statistical purposes. Addition on account of transfer pricing adjustment - import made from AEs, based on internal comparable transaction with another AE - Held that:- Since the TPO as well as CIT(A) has not carried out any comparability analysis vis-à-vis these external comparables, therefore, in the interest of justice, we are of the opinion this matter should be restored back to the file of the TPO/AO for examining the three external comparables and complete gross profit margin for benchmarking the assessee's gross profit margin in the import transaction carried out by the assessee with its AE. - Decided in favour of assessee for statistical purposes. Computation of long-term-capital-gain on sale of flat held for more than 3 years challenged - Held that:- The deeming provisions as contained in section 50 is to be restricted only to the computation of capital gain, as held by Hon'ble Bombay High Court in the case of Ace Builders Pvt Ltd. (2005 (3) TMI 36 - BOMBAY High Court ) wherein held that, for the purpose of computation of capital gain, the flat has to be treated a short term capital gain u/s 50 of the IT Act, but for the purpose of applicability of tax rate it has to be treated as long term capital gain if held for more than three years. We accordingly direct the AO to compute the capital gain from the sale of flat and apply the appropriate tax rate after necessary verification in the light of observations made in this order. Accordingly, on similar line we direct the AO to compute the capital gain from sale of flat and apply appropriate tax rate. - Decided in favour of assessee. Addition to the book profit on account of extra ordinary items - Held that:- The assessee before us has now filed a computation of paper book containing additional and petition for admission of such additional evidences which are in the form of lease agreement dated 06.11.2003 and sale agreement dated 30th June 2004, both pertaining to RPRL Unit which was available on the date of the Balance Sheet for the relevant previous year. These additional evidence go to the very root of the issue involved and therefore, we are of the opinion that same should be admitted and this entire matter should be restored back to the file of the AO to examine these additional evidence and decide this issue afresh and in accordance with the provisions of the law.- Decided in favour of assessee for statistical purposes. Addition on account of revaluation of reserve made in the book profits - Held that:- Depreciation of ₹ 16,10,62,604/- has been reduced by the amount transferred from revaluation reserve and only the net depreciation has been debited i.e. ₹ 6,80,317/- and accordingly, this net depreciation which has been transferred and reduced from revaluation reserve credited to the P&L account, ought to be excluded. Accordingly, AO is directed to reduce the net amount of ₹ 6,80,317/- on account of depreciation from the book profit in view of Explanation (i) to section 115JB(2).- Decided in favour of assessee. Deduction u/s 80HHC should be allowed in the working of MAT and the export profit as per the books to be reduced - Held that:- Now the decision of the Hon'ble Supreme Court in the case of Ajanta Pharma, reported in [2010 (9) TMI 8 - SUPREME COURT] , clinches this issue in favour of the assessee categorically held that for computing the book profit u/s 115JB, the relief will be computed u/s 80HHC(3)/3A subject to conditions under sub-clauses (4) and (4A) of that section. Thus, this issue is squarely covered by the decision of Hon'ble Supreme Court - Decided in favour of assessee. MAT assessment - Direction by CIT(A) to AO to deduct book profit carried forward on loss or unabsorbed depreciation, whichever is less - Held that:- We agree with the contention of the Ld. Counsel that the loss or depreciation should be adjusted as per the earlier/past MAT assessment i.e. the book profit determined by the AO in the earlier years and not as per the book figures. The assessee has given the working. Accordingly, the AO is directed to verify the working and give deduction of carried forward losses and unabsorbed depreciation on the basis of assessment completed by the AO under MAT in the earlier years - Decided in favour of assessee.
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2015 (12) TMI 301
Disallowance of liability on account of leave encashment crystallized although has not fallen due for payment as on 31st March, 1996 - Held that:- The fact in the instant case is similar to the case of Bharat Earth Movers (2000 (8) TMI 4 - SUPREME Court). Now from the above facts, it is clear that liability towards leave encashment is a definite liability which has accrued and arisen during the year ending on March of this year. However, payment of the same does not fall during the relevant previous year but under the mercantile system of accounting this expenditure requires recognition in the books of accounts. - Decided in favour of assessee. Disallowance of liability of Voluntary Retirement Scheme (VRS) - Held that:- Once the agreement for severance has been signed by the employee the liability for the VRS amount become crystallized in the year of signing the agreement. Hence the timing of payment for the VRS amount is not relevant. So the liability for the same has to be recognized for the same and assessee prayed for the allowabilty of the VRS amount. As during the year 735 employees had opted for VRS as per the scheme of the assessee. Accordingly the expense to be made towards VRS to those staff has become definite expense. Although the payment of VRS was due in future date. Therefore the AO has disallowed the expenditure and same was confirmed by Ld. CIT(A) as it was not due for payment in the year under consideration. However, we find that this Tribunal has decided in assessee's own case where the expenses for VRS was allowed and keeping a consistent view we reverse the orders of authorities below. - Decided in favour of assessee. Disallowance of excessive depreciation - CIT(A) deleted the addition - Held that:- For determining the capital gain, from the full value of the consideration received or accruing as a result of transfer of capital asset, cost of acquisition of asset as well as cost of any improvement of such asset is to be reduced/. If cost of improvement of a particular asset cannot be ascertained than capital gain cannot be computed. While taking this view, we derive support from the decision of Hon'ble Apex Court in the case of B.C. Srinivasa Setty 1981 (2) TMI 1 - SUPREME Court ) relied upon by the Ld. Counsel for the assessee. The ITAT Hyderabad Bench in the case of Coromandel Fertilisers Ltd. (2003 (11) TMI 303 - ITAT HYDERABAD-B ) held that it is not possible to determine the cost of improvement of an undertaking, specially when undertaking has so many intangible asset, like trade mark, licence, goodwill etc. We entirely agree with the above conclusion of the ITAT, Hyderabad bench. In view of above, we respectfully following the decision of Hyderabad Bench in the case of Coromandel Fertilisers Ltd. (supra) uphold the order of the Ld. CIT(A) and dismiss the revenue's appeal - Decided in favour of assessee. Treatment to deemed recovery as the actual recovery by CIT(A) - Held that:- Recovery from the employees for the use of guest house was allowed in its own case by this Tribunal. Respectfully, following the decision of this Tribunal we decide this issue in favour of assessee Up-gradation cost on account of millennium up-gradation cost - whether treated as revenue expenditure and allowable deduction u/s. 37(1) - Held that:- Business of assessee is located in different place of the country and most of the expenditure incurred on making the computer Y2K compliant was in the nature of travelling and no enduring benefit is arising from making of existing computers of Y2K compliant only some small chips are required to upgrade the system. From the above discussion, we find that the major expenses were incurred on travelling to make the computer system of assessee Y2K compliant and no new fixed asset was purchased by assessee. Therefore, we treat the expenses incurred to make computer system Y2K as revenue expenditure - Decided in favour of assessee
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2015 (12) TMI 300
MAT applicability - Whether the provisions of Sec. 115JB of the Income Tax Act, 1961 could be made applicable to a bank when their profit and loss account is not prepared in accordance with Part II & Schedule VI to Companies Act, 1956? - Held that:- The provisions of section 115JB of the act are not applicable in the case of the assessee and the amendment brought in section 115JB of the Act read with Explanation 3 thereon by the Finance Act 2012 is applicable only with effect from Asst Year 2013-14 onwards in line with the Notes to Clauses of Finance Act 2012 - Decided in favour of assessee.
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2015 (12) TMI 299
Penalty under section 271(1)(c) - Held that:- The assessee has furnished all the details relating to the earning of dividend income. So it cannot be said that the assessee had concealed income or furnished inaccurate particulars of income. The only basis of levying the penalty u/s 271(1) (c) of the Act was that the claim of the assessee for the disallowance u/s 14A of the Act was not accepted by the AO, so it can at the most be a ground for making the addition but was not sufficient to levy the penalty u/s 271(1)(c) of the Act. So we find merit in the appeal of the assessee and direct deletion of penalty levied against the assessee - Decided in favour of assessee
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2015 (12) TMI 298
Adjustment made by the TPO with respect to payment of royalty - CIT(A) deleted the addition - Held that:- Once the assessee clearly demonstrates that the effective royalty pay out was less than earlier years then there was no reason to make any adjustment in the royalty pay out. Moreover, we find that the decision of Hon’ble Delhi High Court in assesse’s own case is also applicable to the present case. In the current assessment year the overall profit margin of distribution segment (23.3%) is much more than those of comparables (2.2%). Ld. TPO has not brought on record any comparable case of royalty payment so as to resort to the provision of sec. 92C. Therefore, the touch stone, on which the royalty payment was to be considered, was whether the payment was made wholly and exclusively for the purpose of business or not. This aspect has not been disputed because ld. TPO has allowed the royalty payment albeit @ 30% of actual sales.Further, in AY 2006-07 the ld. DRP has accepted the payment of royalty @ 56% of actual sales. No reason to interfere with the order of ld. CIT(A) on the issue in question.- Decided against revenue Disallowance of prior period expenses - CIT(A) deleted the addition - Held that:- No reason to interfere with the order of ld. CIT(A) on the issue in question because vide letter dated 1-8-2006 the assessee had filed a revised computation and pointed out that during the audit of the immediately succeeding financial year i.e. FY 2004-05 prior period income of ₹ 92,84,552/- on ₹ 2,27,43,899/- were noted and the effect of the same in the revised tax computation was to be given. Ld. CIT(A) has, in principle, accepted that the Bangalore unit was eligible for deduction u/s 10A but has directed the AO to verify the claim of the assessee on the basis of form 56F. Accordingly, he will be required to examine whether the amounts were received in time or not. We, therefore, do not find any reason to interfere with the order of ld. CIT(A) on this issue and we uphold the same.- Decided against revenue Eligibility for tax holiday u/s 10A - CIT(A) allowed claim - Held that:- The issue is covered in favour of the assessee by the order of the ITAT in assessee’s own case for AY 1998-99 dismissing revenue’s appeal allowing the said exemption to the assessee by following the rule of consistency as the material facts relevant to this issue as involved in the year under consideration are admittedly similar.- Decided against revenue
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2015 (12) TMI 297
Disallowance of incentive paid to directors u/s 40A(2)(a) - Held that:- All the directors are in charge of the entire operations of the assessee company and the financial/operational results of the company are growing every year. Hence, on that count alone, the salary and incentive paid to the directors could be justified and could not be found fault with, without bringing the fair market value of services. In our view, the financial and operational results, justify the payments made to the directors. The income declared by all the three directors show that the incentive received by them in respective years has suffered tax at the higher rate of taxation, i.e., equivalent to the tax rate applicable to the assessee company. Hence there is merit in the contentions of the assessee that there was no attempt to evade tax. Hence, in our view, the decision rendered by the Hon’ble Bombay High Court in the case of Indo Saudi Services (Travel) (P) Ltd (2008 (8) TMI 208 - BOMBAY HIGH COURT) squarely applies to the facts of the instant case. Hence, on this count the disallowance made u/s 40A(2)(a) is liable to the deleted in all the three years. In view of the foregoing discussions, we are of the view that there is no justification on the part of Ld CIT(A) in confirming the disallowance made u/s 40A(2)(a) of the Act. - Decided in favour of assessee. Disallowance of depreciation - Held that:- Hon’ble Gujarat High Court has considered identical issue in the case of Aravali finlease Ltd (2011 (8) TMI 814 - Gujarat High Court ) and has taken the decision that the depreciation is allowable in the hands of the company, even if it is registered in the name of its director provided that the vehicle is used for the purpose of business of company and income derived there from was shown as income of the company. In the instant case there is no dispute with regard to the fact that the vehicles are used for the purpose of business of the assessee company. In the case of Basti Sugar Mills Co. Ltd (2002 (5) TMI 27 - DELHI High Court), the Hon’ble Delhi High Court approved the decision of the Tribunal in holding that, since vehicle is a movable asset, the registration as required in the case of transfer of immovable property is not a condition precedent for legal ownership. In the instant case, the funds for purchase of vehicles have been provided by the assessee company and they have been shown as assets of the assessee company. Hence, in our view, the assessee company should be considered as owner for all practical purposes and hence it is entitled for depreciation - Decided in favour of assessee.
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2015 (12) TMI 296
Re-computation of the arm’s length price of the assessee’s international transaction in respect of Information Technology Enables Services (‘ITES’) - main argument of the Ld. Counsel was that since the mark-up MAP has concluded the Arm’s Length mark-up at 14.38% for 96% of the total transactions done with the AE’s, then without prejudice to the other submissions, for remaining transactions of 4% also same treatment should be given, same bench marking should be done, and ALP mark-up of 14.38% should be applied, more particularly, because of the fact that the AO or DRP have not made any distinction between the ‘US’ entities and ‘non-US’ entities - Held that:- letter dated 9th April 2015 in Fno. 480/13/2010-FTD-1 has been issued in the case of the assessee company under MAP proceedings for A.Y.2006-07 to 2010-111 by the DCIT(OSD), APA-I on behalf of the Foreign Tax and Tax Research Division -I, Central Board of Direct Taxes, New Delhi wherein it has been confirmed that for A.Y.2006-07, for US related transactions, the margin has been determined at 14.38% as against margin of 21.58%, as was determined by the Transfer pricing officer (TPO). It has been further clarified by way of note in the said letter that apportionment between ‘US’ and ‘non-US’ ALP and TP adjustment had been margined out by the APA section (of FT and TR Division) on the basis of ‘US’ and ‘non-US’ revenue. It is further noted from the perusal of the annual accounts of the assessee company that aggregate turnover has been shown at ₹ 47,30,521/-, and no distinction has been made between the ‘US’ and ‘non-US’ transactions. Similarly in the orders passed by the lower authorities also no such distinction as ever been made by any of the authorities. Under these circumstances, in our considered view, whatever margin has been determined for the 96% of the transactions, same margin should be determined for the remaining 4% transactions as well. It is worth noting that, even before us, no distinction in facts or nature of transactions has been brought out on record. Therefore, in our considerate view, mark-up of 14.38% should be determined for the remaining 4% transactions pertaining to ‘non-US’ entities as well. Exemption u/s 10A - lower authorities held that unabsorbed depreciation has emanated from exempt unit and accordingly exemption u/s 10A of the Act should be computed after setting off of the unabsorbed depreciation - Held that:- Respectfully following the judgment of coordinate Bench in assessee’s own case we direct the AO to allow deduction u/s 10A before setting off of the brought forward unabsorbed depreciation. Interest income on deposits with banks - chargeable to income tax under the head ‘Income from other Sources’ as against the assessee’s claim that such interest income is chargeable to tax under the head “profit and gains of business of profession” - Held that:- Respectfully following orders of coordinate bench of earlier years in assesee’s own case, we hold that interest income, would be assessable under the head income from business. Since the income from interest has been treated as part of business income, it shall be included for determining the amount of total turnover of the business and accordingly the benefit of deduction u/s 10A shall be provided on the amount of interest income proportionately, in terms of mechanism provided in subsection (4). In other words the amount of profit eligible for deduction u/s 10A shall be the amount which bears to the profits of the business of undertaking, the same proportion as export turnover bears to the total turnover the business of the undertaking of the assessee. The AO is directed to grant the benefit of deduction u/s 10A by re-computing the same in terms of our directions as given above. MAT calculation - assessee’s claim rejected that book profit u/s 115JB has to be computed inter alia by reducing the amount of interest income on deposits of ₹ 2,05,03,390/- credited to profit and loss account, to which provisions of section 10A apply, in terms of clause (ii) to Explanation 1 to Section 11JB - Held that:- Respectfully following the judgment of Coordinate Bench in assessee’s own case, we hold that for the purpose of computing to profit u/s 115JB of the Act, income has to be computed as per the schedule VI of the Companies Act and not on the basis of provisions of Income Tax Act.
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2015 (12) TMI 295
Addition on account of business loss of security including premium written off treating it as a long term capital loss - CIT(A) deleted the addition - Held that:- Assessee has sold government securities and met net loss of ₹ 3,28,78,600/- after adjustment of profit of ₹ 5,35,800/- and premium on purchase of securities of ₹ 11,01,000/- total amounting to ₹ 3,39,79,600/-. As per RBI guidelines securities purchased by the primary urban co-op. banks can be classified under three heads - i) Held to Maturity (HTM), ii) Available for Sale (AFS) and iii) Held for Trading (HFT) The loss incurred by the assessee of ₹ 3,39,79,600/- is from sale of securities held for “Available for Sale (AFS) and the detailed working of the same has been provided by the ld. AR of the assessee in the Paper Book. These securities which are available for sale which are held by the assessee as per the RBI guidelines to keep apart some of the assets in the specified mode at certain percentage which are inter alia known as CLR and SLR and the profit/loss on sale of such securities (AFS) cannot be treated as capital gain/loss. As decided in Yes Bank Ltd. vs. Dy.CIT [2015 (1) TMI 1012 - ITAT MUMBAI ] Decision of the Hon'ble Bombay High Court in the case of CIT v. HDFC Bank (2014 (7) TMI 724 - BOMBAY HIGH COURT) and that of the Bangalore bench of the Tribunal in the case of State Bank of Mysore (2009 (5) TMI 610 - ITAT BANGALORE) are in support of assessee’s claim of provision for re-valuation in respect of securities transferred from HTM to AFS category should be allowed as a deduction. - Decided in favour of assessee.
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2015 (12) TMI 294
Disallowance of bad debts written off - Held that:- The transactions involved were true and genuine. They had also held that the advances had been made during the course of the business and they had become irrecoverable as bad debts and hence the assessee was entitled to the benefit under section 36(1). The question as to whether a debt had become bad or not was a pure question of fact and, therefore, it could not be construed as a question of Law. - Decided in favour of assessee. Disallowance of commission paid u/s. 40(a)(ia) - CIT(A) deleted addition - Held that:- AO had an opportunity in the remand proceedings to verify the entire veracity of the claim made by the assessee in the additional ground before the Learned CITA with regard to allowability of deduction of commission to the extent of ₹ 46,56,333/- . We find that the assessee had duly remitted the TDS on 8.9.2009 which is before the due date of filing the return of income u/s 139(1) of the Act and accordingly is entitled for deduction for the same in the previous year itself. No adverse remarks were rendered by the Learned AO in this regard in the remand report. Hence it has to be presumed that the Learned AO had accepted the same in the remand proceedings. Having done so, we hold that the revenue ought not to have come on appeal before us on the alleged ground of violation of Rule 46A of the Income Tax Rules - Decided in favour of assessee. Applicability of provisions of section 40(a)(ia) read with section 194C - Held that:- Learned CIT(A) appreciated the fact that the assessee’s case falls only under contract for sale and not contract for work and relied on the CBDT Circular No. 13/6 dated 13.12.2006 wherein it was categorically stated that the provisions of section 194C would not apply to contracts for sale of goods and further clarifies that where the property in the article or thing so fabricated passes from the fabricator contractor to the assessee only after such article or thing is delivered to the assessee, such contract would be a contract for sale and so outside the purview of section 194C - Decided in favour of assessee.
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2015 (12) TMI 293
Rejection of claim for deduction u/s 10B - tax authorities have come to the conclusion that the assessee has not carried on any manufacturing activity - Held that:- The assessee has imported diamonds, purchased gold locally and exported the jewellery. Thus, the articles purchased and the articles exported are two different articles. The export of jewellery cannot be carried out without manufacturing the same. The assessee has also explained about its manufacturing process. Even though the conversion of gold into mountings is carried out through outsourcing, final shaping of jewellery and fitting of diamonds were carried out at the place of the assessee. Hence, in our view, the activities carried on by the assessee should be considered as manufacturing activity only and hence it is eligible to claim deduction u/s 10B of the Act.- Decided in favour of assessee.
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2015 (12) TMI 292
Addition on account of investment depreciation account - CIT(A) deleted the addition - as per revenue notional depreciation of Government of India securities as on 31.3.2008 which were held by the bank as investment and not as stock - Held that:- After going through the guidelines of RBI and CBDT Circular loss invoice the facts of the assessee that as per audited balance sheet of the assessee investment in Central and State Government Securities its book value was valued at ₹ 109 crores out of which permanent category securities were ₹ 101.50 crores and current category securities were of ₹ 7.5 crores and as per the submissions made by the ld. AR these investments of ₹ 109 crores are investments held as stock-in-trade and for valuing closing stock at the end of the year the value prevailing on the last date of the year is relevant and assessee has, therefore, claimed 1,47,66,239/- as investment depreciation. Similar facts were examined in assessee’s own case by the Tribunal for AY 2007-08 allowing the claim of assessee as relying on United Commercial Bank vs. CIT [1999 (9) TMI 4 - SUPREME Court] - Decided in favour of assessee.
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2015 (12) TMI 291
Eligibility of deduction u/s 80P - Held that:- Assessee society in the interest of its members as well as in the interest of the object of the society as well as a safety measure minimum liquid funds and convenience of fund movements, the appellant society has kept its surplus liquid funds with different nationalized banks and relying on the judgment of Hon’ble Karnataka High Court in Tumkur Merchants Souharda Credit Co-op. Ltd. vs. ITO [2015 (2) TMI 995 - KARNATAKA HIGH COURT] we hereby hold that the interest income is eligible for deduction under section 80P(2)(a)(i) of the Act. - Decided in favour of assessee. Addition adopting electricity collection charges - Held that:- CIT(A) has already granted relief to the assessee by directing the AO to delete the addition as held the appellant has been providing the collection and payment of electricity bill service to its members for which a commission is earned to meet expenses. Because the service is provided to all its members, such activities formed part of the business of the appellant and the income if any out of such service will be exempted. Thus, AO is directed to delete the addition made in this ground. - Decided in favour of assessee.
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2015 (12) TMI 290
Levy of late filing fees under section 234E - intimation issued under section 200A in respect of processing of TDS - Held that:- As the provisions accepting levy of late filing fees under section 234E have indeed been brought to the statute w.e.f. 1st June, 2015 and the impugned order was passed much before that date we hereby delete the levy of late filing fees under section 234E of the Act by way of impugned intimation issued. See Indian Overseas Bank Vs. DCIT [2015 (9) TMI 1290 - ITAT AHMEDABAD ] - Decided in favour of assessee
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2015 (12) TMI 289
Disallowance of assessee’s claim in respect of its liquidated damages - CIT(A) deleted the addition - Held that:- A coordinate bench in assessee’s appeal [2011 (2) TMI 1351 - ITAT AHMEDABAD] directed the Assessing Officer to allow the assessee’s claim on actual basis and that wherever the other party had claimed liquidated damages in current assessment year, it would be allowed. It was further of the view that the assessee has to submit individual account of its customers as per law. The assessee has succeeded in the previous round of proceedings. Thus, the Revenue’s argument on the issue of revised return according fails. A perusal of the case file reveals that the assessee filed all details of liquidated damages in question in the shape of individual ledger accounts from 01- 04-2002 to 31-03-2003. The same contain certification as per rules to have been filed in the course of assessment. The Assessing Officer still quoted lack of evidence and held that this claim was only in the nature of a provision. This voluminous evidence was nowhere even adverted to. The Revenue’s second argument quoting lack of evidence also stands rejected because of the sufficient supportive material regarding the impugned claim of liquidated damages. Revenue argument that these liquidated damages are only in the nature of a provision is unacceptable as we find that the CIT(A) on this issue has followed similar orders passed in earlier assessment year in assessee’s own case on the very issue. It has come on record that these claims have arisen from late delivery of goods beyond the specified period in the relevant previous year. The assessee passed these amounts in the books after ascertaining the claim in case of each customer. We find that the Assessing Officer himself in a consequential order dated 26-03-2003 for assessment year 1990-91 has followed a similar course of action. Various orders of the tribunal in assessee’s own case in assessment year 1984-85, 86-87, 89-90,90-91 have already decided the very issue in assessee’s favour. The Revenue fails to point out any distinction on facts. - Decided in favour of assessee.
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2015 (12) TMI 288
Reopening of assessment - whether advance was not a trading liability - cessation of liability - Held that:- Assessing officer did not invoke the provision of section 41(1) in the original assessment proceedings after being fully satisfied with the reply filed by the asseessee. Therefore, on the basis of same facts, without having any fresh tangible material, solely on the basis of audit objection, the invocation of provision of section 147 was not justified and was solely on the basis of change of opinion. As decided in DCIT & Anr. –vs.- Vikas Sharma reported in (2015 (3) TMI 600 - ITAT CHANDIGARH) Reasons recorded are based on same facts/information as was available on record, when the original assessment proceedings were conducted, that too after enquiry, since complete facts were available with the department and no new facts came into existence, reopening of assessment on identical facts is clearly a case of change of opinion and not sustainable. - Decided in favour of assessee.
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2015 (12) TMI 287
Eligibility for deduction u/s 80P(2)(a)(i) - interest income earned on the deposits kept with banks - whether is liable to be assessed as income from other sources? - Held that:- Consistent with the view taken in the case of M/s Jaoli Taluka ahakari Patpedhi Maryadit (2015 (9) TMI 170 - ITAT MUMBAI ) hold that the interest income is assessable as profit and gains of business in the hands of the assessee and accordingly, it is liable for deduction u/s 80P(2)(a)(i) of the Act. Accordingly, set aside the order of the ld. CIT(A) on this issue and direct the AO to allow deduction u/s 80P - Decided in favour of assessee
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2015 (12) TMI 286
Penalty u/s 271(1)(c) - deceleration of additional income in reply to notice u/s 153A - Held that:- So far as, the first addition is concerned, the money belonged to partnership firm M/s Silver Arch Builders and Promoters. Before the settlement commission, applicants made prayer for capitalization of their income following application method, which was allowed by the ld. Settlement Commission. As decided in ACIT vs Haresh N Mehta [2013 (11) TMI 1582 - ITAT MUMBAI] assessee has explained the source of obtaining the alleged bogus loan, being the amount received from the firm, which has been offered by the firm to tax and subject to the proceedings before the Settlement Commission. Thus, it was held that double addition cannot be made of the amount which is already subjected to tax in the hands of the firm. Thus in the present case also penalty cannot survive So far as, the second addition is concerned there is no positive material on record imposing penalty and addition is based upon interpretation of facts. Therefore, at least, it is not a fit case for levying penalty, because, the assessee disclosed the material facts/details and even the ld. Commissioner of Income Tax (Appeals) affirmed the addition only to the extent of ₹ 9,92,800/- out of the addition of 28,60,000/-. That too is based upon appreciation of facts. It may or may not be a good case for sustaining part addition but not sustaining the penalty, because, for penalty either there should be concealment of income or furnishing of inaccurate particulars of such income. Even otherwise, if a claim is made which is not sustainable in law, penalty is not automatic, as was held by Hon’ble Apex Court in CIT vs Reliance Petro products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT ], thus, the penalty cannot survive. - Decided in favour of assessee
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2015 (12) TMI 285
Income recognition - CIT(A) considering foreign income at average exchange rate of conversion during the year when credit for tax deducted at source is given based on the actual exchange rate prevailing on the date of transaction - Held that:- CIT(A) had given directions to adopt the exchange rate prevailing on the date of payment of taxes for the purpose of granting foreign tax credit and whereas for the purpose of assessing the foreign income, he had adopted a different view of adopting the average exchange rate of conversion during the year. We hold that the provisions of Rule 26 and Rule 115 of Income Tax Rules provide computation mechanism for conversion of foreign currency into Indian currency in respect of each source of income. Hence we deem it fit and appropriate in the interest of justice and fair play to set aside this issue to the file of the Learned AO to determine the foreign income in accordance with Rule 26 and Rule 115 of Income Tax Rules depending upon the nature of income. We also direct that in case the assessee is able to produce any other fresh evidence to determine the foreign income based on exchange rate prevailing on the date of income, the same need to be considered by the Learned AO while framing the set aside assessment. - Decided in favour of revenue for statistical purposes. Determination of presumptive profit u/s 44AD - Held that:- The action of the lower authorities in adopting the presumptive rate of taxation u/s 44AD in the facts and circumstances of the case is not appreciated and accordingly the cross objection of the assessee is allowed. Non consideration of effect of Double Taxation Avoidance Agreement (DTAA) between India and Oman for the purpose of assessment of foreign income of the assessee - Held that:- We find lot of force in the cross objection raised by the assessee in this regard. Accordingly, we direct the Learned AO to consider the relevant article of DTAA with regard to the foreign income depending upon the nature of income and assess the foreign income in accordance with the provisions of section 90 of the Act. Cross objection of the assessee is allowed for statistical purposes.
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2015 (12) TMI 284
Warehousing charges paid to C&F agents - whether were in the nature of commission liable for deduction of tax @ 10% u/s 194H or as ‘rent’ liable for deduction of tax @ 20% u/s 194I? - disallowance u/s 40(a)(ia) - Held that:- CIT(A) has appropriately considered the issue and held that the payments made to the C&F agents are in the nature of ‘Commission’, which fall for consideration under section 194H of the Act, though in the account books, the terminology used is ‘Warehousing Charges’. The case of the Assessing Officer is primarily based on the nomenclature of ‘warehousing charges’ used by the assessee to describe the payments made to C&F agents. The CIT(A) has noted the terms and conditions of the agreement with C&F agents as also the mechanics of the business of assessee. Assessee had explained that for the purpose of marketing its products, it appoints C&F agents at different places for clearing and forwarding of assessee’s goods. As per the assessee, the agreement with C&F agents, shows that there is a principal and agent relationship and it was not an agreement for taking the warehouse on rent. The factual findings arrived at by the CIT(A), which we have extracted above, clearly establishes that the services rendered by C&F agent are compensated by way of ‘Commission’ which is related to the sales made and, therefore, the payments have been rightly held to be subject to deduction of tax at source u/s 194H of the Act at the rate of 10%. The Revenue has not lead any material/evidence before us to establish any error in the finding of the CIT(A), which we hereby affirm. - Decided against revenue.
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2015 (12) TMI 283
Penalty u/s 271(1)(c) - whether penalty could not be levied where income has been enhanced merely on estimates as submitted by assessee - Held that:- The objections of the A.O. were that assessee had produced the books of account and various vouchers but the assessee has made petty cash payment against various expenses and primary vouchers for supporting the claim were not produced. There was one more objection of the AO that day to day stock inventory of raw material and other consumable item was not maintained. On the basis of these general objections, the AO made addition by adopting higher G.P. rate of 18.50% as against 18.02% declared by the assessee. Therefore, it is seen that in the present case, the A.O. has made the impugned addition without reference to any evidence/material being on record. Hence, by respectfully following this judgment of the Hon’ble Allahabad High Court in Sushil Kumar Sharad Kumar [1997 (9) TMI 76 - ALLAHABAD High Court] we hold that in the facts of the present case, levy of penalty on estimated addition is not justified and therefore, we delete the penalty. - Decided in favour of assessee.
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2015 (12) TMI 282
Penalty u/s 271(1)(c) - failure to substantiate the claim of expenditure on account of commission payment - Held that:- The entire conspectus of facts emerging from record does establish that the assessee fail. So however, in order to hold the assessee guilty of “furnishing inaccurate particulars” within the meaning of section 271(1)(c) of the Act, it is imperative to demonstrate that assessee is found to have made an erroneous or a false claim. Clearly, failure to substantiate a claim cannot be equated to a case of making of a false or an erroneous claim. In fact, the mere making of a claim, which is not found sustainable by the Assessing Officer does not ipso facto justify furnishing of inaccurate particulars of income within the meaning of section 271(1)(c) of the Act, as held by the Hon’ble Supreme Court in the case of CIT vs. Reliance Petro Products Ltd., ( 2010 (3) TMI 80 - SUPREME COURT). In the present case, ostensibly, the payment of commission expenditure has been made by cheques and the requisite tax has also been deducted at source. The recipient has also confirmed receiving of commission payment from the assessee. The assertion of the appellant–assessee that similar payments made in the past have been allowed, is also not disputed by the Revenue. The aforesaid features of the claim do not establish that the claim made in the return of income was not a bonafide claim. While there may be justifiable reasons for disallowing the claim of expenditure, so however, that by itself cannot be a ground for levy of penalty under section 271(1)(c) of the Act. It is a well settled proposition that the assessment proceedings and the penalty proceedings are independent proceedings and the finding in the assessment proceedings are not conclusive so as to govern the penalty proceedings, though such findings in the assessment proceedings may be a relevant criteria. Notably, in the present case, the entire case set-up by the Assessing Officer to levy penalty is based on the disallowance effected during the assessment proceedings, where the only failure of the assessee was non-substantiation of the claim for expenditure. In our view, merely because the expenditure on account of commission payment has been found to be unsubstantiated and disallowed in assessment proceedings, the same ipso facto does not justify levy of penalty under section 271(1)(c) of the Act. - Decided in favour of assessee.
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2015 (12) TMI 281
Addition made on account of annual listing fees received from its member on accrual basis - CIT(A) deleted the addition - Held that:- As decided in assesse's own case for A.Y. 2007-08 Hon'ble Delhi High Court in the case of CIT Vs. Consultng Engg. Services (India) Ltd, [2001 (1) TMI 48 - DELHI High Court ] has held that the method of accounting consistently followed by assessee will be most relevant in the accrual system of accounting and it is not open to AO to disturb the same. In this background it is further noticed that consistently the appellant stock exchange is following same method of accounting regarding accounting of such listing fee income and under similar circumstances, the said system was accepted by assessing Officer while passing orders u/s 145(3) of I.T. Act and no addition has been made. It is further noticed that even in the case of Delhi Stock Exchange Ltd, the listing fee is recognized only from those companies where income is not over due for more than one year and in that case also as per copy of assessment order u/s 145(3) dated 4-12-2008 for assessment year 2006-07 on this account no addition has been made and contrary to this case in the present case the appellant stock exchange is recognizing the listing fee as income where income is not over due for more than 3 years. With this discussion AO was not justified in making said addition which is hereby deleted - Decided in favour of assessee.
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2015 (12) TMI 280
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. - Decided against assessee.
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Customs
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2015 (12) TMI 247
Classification of Vitamin E-50 powder (Feed Grade) - whether Vitamin E-50 is classifiable under Chapter 2309.00 as Prawn Feed and therefore eligible for the benefit of partial exemption from duty under Notification No. 20/99 dated 28.02.1999. - Held that:- Shri Yashank Adhyaru, learned senior counsel appearing on behalf of the Revenue, relied upon a later two Judges Bench judgment of this Court in 'Collector of Central Excise, Guntur v. Surendra Cotton Oil Mills Fert.Co. [2000 (12) TMI 103 - SUPREME COURT OF INDIA] in which the earlier three Judge Bench judgment in Sun Export Corporation's case [1997 (7) TMI 117 - SUPREME COURT OF INDIA] was referred to and distinguished. - it was held that it dealt with 'animal feed' which was large enough to include 'animal feed supplements' whereas the facts of Surendra Cotton Oil Mills's case showed that ingredients of animal feed could not be held to be included in 'animal feed'. Further, in a judgment of three Judges' Bench in Collector of Central Excise, Bangalore v. Tetragon Chemie (P) Ltd. [2001 (7) TMI 127 - SUPREME COURT OF INDIA]. In this judgment, the question that arose for consideration again relates to vitamins that were mixed with animal feed as animal feed supplements. Faced with an entry which spoke of preparation of a kind used in animal feeding including dog and cat food, this Court came to the conclusion that animal feed supplements were rightly includable in such entry as they were obviously preparations of a kind used in animal feed. We may only add that we have referred to this judgment for the sake of completeness. We feel that this judgment does not have direct relevance to the facts of this case as the entry that this Court was concerned with in that case was large enough to take within its ken animal feed supplements. This being the unsatisfactory state of the law as it stands today, we feel that this matter should be placed before Hon'ble the Chief Justice of India to constitute an appropriate Bench to resolve the doubts pointed out by us in the body of this Order.
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2015 (12) TMI 246
Duty demand - Import of Cocoa powder in the name of flour - Held that:- in spite of particular conclusion which was arrived at by the Tribunal that “Cocoa Powder” was ‘Flour’ and covered under the description of the license, the Department did not choose to challenge this finding by filing any further appeal, therefore, at least inter se between the parties, the said issue attained finality and this finding was binding on the Commissioner and, therefore, it was not open to the Commissioner to re-visit the issue all over again and come to a contrary finding. - Decided against Revenue.
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2015 (12) TMI 245
Condonation of delay - Inordinate delay of 928 days - No information of disposal of appeal - Held that:- Once the order, which was followed, has not attained finality and a batch of 107 appeals are already entertained by this Court and are pending as on date, the applicants are justified in filing the appeal against the order of the learned Single Judge and the delay, though is abnormal, is properly explained by stating that the learned counsel engaged, or his office, never informed the fact about the final order passed in the writ petition and after receiving notice on caveat, the applicants immediately approached the counsel for applying for the certified copy which was also not applied and thereafter through another counsel certified copy was applied and after receiving the same, appeal papers were made ready and the same was filed. The said explanation shows sufficient cause to condone the delay. As rightly contended by learned counsel for the applicants, by condoning the delay, the right of the respondent will not be affected as the order in its favour was passed by following an earlier order, which is in appeal as on date. - Delay condoned conditionally.
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2015 (12) TMI 244
Validity of circular No.450/176/2014-Cus-IV dated 7/11/2014 - restriction on the petitioner from importing Alloy Steel Deformed Bars falling under Chapter Heading 7228 of the CTA - Held that:- By the Circular dated 07/11/2014, issued by Govt. of India, Ministry of Finance, New Delhi the relevant factor to be considered in determining the applicability of BIS standard would be the description of the product in the Indian Standard and not the one indicated by the ITC (HS) Code. To put it simply; the import of the said Alloy Steel should be covered by the description of the product in the Indian Standard would require BIS certification and Counsel for the respondent submitted that the impugned certificate has received confirmation from both Ministry of Steel and Bureau of Indian Standards and hence it is applicable to the petitioner. I however find that such is not the present case. Explanation to the amended schedule indicates that any case falling under the ITC (HS) Codes notified under the Order shall not be restricted if they are not corresponding BIS Standard in Column and the explanation can not be read to mean Steel Quality Control order shall be applicable to goods for which no ITC (HS) Code have been notified at all. Similarly, the issuance of the Steel Quality Control order Alloy Steel Products not covered by the headings and sub-heading of the ITC (HS) mentioned in the order have been allowed clearance at various ports all over India. And in this light it would be necessary to consider that the question is yet to be decided by the appropriate Appellate Authority whether the Alloy Grade Bars and high strength Deformed Steel Bars are not covered by the mandatory certification.- Similarly, on considering the question of applicability of the impugned Circular dated 07.11.2014 bearing No.450/176/2014-Cus-IV and the fact that agreement is dated 24.06.2014 regarding the petitioner's goods have been received at the port in consequence of commercial invoice dated 04th September 2014, I find that the Circular cannot be applied retrospectively to the consignment of the petitioner and hence in this light also the petition needs to be partly allowed. - Decided partly in favour of assessee.
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2015 (12) TMI 243
Levy of anti dumping duty - Interested party - right to participate in the proceedings - Held that:- Unless a party demonstrates to the Authority that it is an importer / exporter of the subject article, it does not acquire the right to participate in the proceedings as an interested party. In respect of exporters, who have not filed the response to the Exporter Questionnaire, the Authority has considered them to be non-cooperating. This principle would apply equally to the importers. It was, therefore, incumbent on the importer to establish that it was an interested party by furnishing the information as required in the importer questionnaire in the course of the investigations. Failure to do so would be fatal to its claim as an interested party. The appellant did not file any information before the Authority to demonstrate that it was an importer of the article under investigation and hence could not be treated as an interested party. Authority has extensively and analytically dealt with the issue and has correctly held that the imported product is in commercial competition with the domestic product and its import would cause injury to the Domestic Industry. Appellant came to know of the investigations and filed written submissions, which have been dealt with on merits in the Final Findings. On the contention relating to improper maintenance of Public File, while ld. Counsel for Designated Authority stated that there was no deficiency in the maintenance of Public File, we are surprised that the appellant did not raise any objection on this aspect immediately after it inspected the Public File for the first time. The appellant is also unable to give the dates on which it inspected the Public File. In these circumstances, we are of the view that the appellant has not been able to make even a prima facie case that the Public File was not properly maintained. As regards the appellant’s contention relating to excessive confidentiality, we find that no such grievance was raised before the Authority during the course of investigations. Even otherwise, the appellant has not been able to bring out the specific information which was not provided to it and how that had the effect of disabling him in exercising its right of defence. Exclusion of the imports from Robin Resources would not have any impact on the economic factors and indices mentioned in Para (iv) above. Further, as stated earlier, the magnitude of margin of dumping would only increase after exclusion of imports from Robin Resources which would accentuate the extent of injury. Therefore, we do not agree that the exclusion of imports from Robin Resources would have altered the injury assessment to the advantage of the appellant. As regards the return on investment adopted for the determination of NIP, we find that apart from being consistent with the practice followed by the Authority, it was based on a claim made by Domestic Industry. That claim was not controverted with evidence at any stage nor was there any ground/reason to suspect any manipulation on the part of Domestic Industry in that regard. - No merit in appeal - Decided against appellant.
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2015 (12) TMI 242
Demand of recovery of consequential refund sanctioned consequent to the Hon'ble High Court of Madras orders which attained finality - Denial of exemption under Notification No.133/85 - Department disputed the appellant’s claim on the ground as per the amended Notification vide Notfn No.306/86, the power project shall mean ‘such project whose output or end product is power but shall not include captive power plant set up by the units engaged in activities other than power generation’ - High Court declared the Explanation under Notification No.306/86 to Notification No.133/85, dated 19.04.1985 is unconstitutional, void and ultra vires and also directed refund in excess of 25%. Held that:- Revenue having failed in both writ appeal as well as in review application vide the High Court's orders dt. 17.7.2000 and 8.10.2009 respectively, the Hon'ble High Court's order dt. 2.3.1995 has attained finality and binding on the department as far as this appellant is concerned. Therefore, we do not see any error in the adjudicating authority’s order who diligently complied the Hon ble High Court’s Order. The adjudicating authority while sanctioning the refund had clearly brought out in his order dt. 8.4.2011, all aspects including the Hon'ble Supreme Court judgment by relied by Revenue in the case of Union of India Vs Indian Charge Chrome (1999 (8) TMI 69 - SUPREME COURT OF INDIA). - Revenue has power to review any order of the lower authority under Section 129B of Customs Act whereas in the present case the adjudicating authority had sanctioned the consequential refund as per the Hon'ble High Court order which attained finality. In this scenario, the Revenue has no valid grounds to say that the adjudicating authority has erred in sanctioning the refund both on merits as well as on unjust enrichment. Further, the LAA has no power to go beyond the High Court's order to set aside the refund sanctioned by L.A. The jurisdictional High Court Order is binding on the Revenue and the LAA and the appellant. - Decided in favour of assessee.
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2015 (12) TMI 241
Validity of notice for demanding of differential duty - Finalization of provisional assessment - Penalty u/s 18(2) - Undervaluation of goods - Held that:- As revealed from letter dated 13.10.2015 the assessment of two Shipping Bills in each cases, were finalised at the time of exportation of the goods. So, the proposal of finalisation of provisional assessment and consequent demand of duty alongwith interest in the show cause notices and confirmation of demand of duty and imposition of penalty by the adjudicating authority cannot be sustained. In the present case the issuance of show cause notice is prescribed by the law as a condition precedent to the commencement of proceedings and it must be addressed correctly, otherwise it will be treated as an invalid one. In Commissioner of Income Tax, Gujarat vs. Kurban Hussain Ibrahimji Mithiborwala [1971 (9) TMI 9 - SUPREME Court], a notice under Section 34 of the Indian Income Tax Act, 1922 was found by the Supreme Court to be invalid as referring to a wrong year and the entire proceedings were held to be void for want of jurisdiction. It is significant to note that the statutory notice is notice made by legislative enactment. Valuation - Demand of duty on additional amount of US$ 10 PDMT as commission to their overseas agents cannot be levied mainly on the basis of statement, without examining documents. In our considered view, the appellant should be given an opportunity to place the documents before the adjudicating authority in respect of actual freight and commission on their agents, in the interest of justice. However, the demand of FOB price as cum-duty price for determination of export duty, as held by the Tribunal in the case of Sesa Goa Limited (2014 (4) TMI 658 - CESTAT KOLKATA), is liable to be upheld. - issue of FOB price treating as cum-duty price was decided by the Tribunal and the appeal is pending before the Hon ble Supreme Court. The appellant Company is entitled to the benefit of actual freight. Further, the part of the demand of duty alongwith interest and penalty cannot be sustained. In such situation, imposition of penalty on the Director of the appellant Companies is not justified. - Appeal disposed of.
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Service Tax
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2015 (12) TMI 279
Demand of service tax - Mining Services - Imposition of penalty - Benefit of Section 80 - Held that:- Statements of the partner of the appellant was recorded on 2nd February 2010, wherein the partner has specifically recorded that since they were located at remote Village, they were not aware about the legal provisions and that they being farmers, and the Mining activity having been undertaken for the first time by them, they failed to discharge the service tax liability; that the service tax liability has been discharged subsequently and had sought leniency in non imposing the penalties. We find that there is no dispute as to the facts as the appellant are partnership firm of farmers and are situated in remote area in Ratnagiri district and may not have had access to the legal opinion as to taxability of the services rendered by them. This can be deduced from the statements recorded by the lower authorities. In our considered view, appellant had made out a case for setting aside the penalties, by invoking the provisions of section 80 of the Finance Act 1994. - However, Demand of service tax is upheld - Decided partly in favour of assessee.
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2015 (12) TMI 278
Waiver of pre deposit - Construction service - Held that:- Service tax demanded under various categories for construction of both commercial as well as residential and other construction activities. Out of total demand, T-Sunami construction, construction of indoor stadium where the appellants have already been granted stay by this Tribunal in similar cases and construction carried out at Srilanka, residential staff quarters etc., may not be liable for service tax. After excluding the value of above services, prima facie, we find that the appellants have not made out a case for total waiver of pre-deposit of service tax on other construction activities. By following the decision of the Hon'ble High Court of Rajasthan in the case of Arjun Industries Ltd. Vs. CC, Jaipur - [2015 (6) TMI 110 - RAJASTHAN HIGH COURT], and after excluding the value of services which are disputable as claimed by the appellants, we direct the applicants to make pre-deposit in both the appeals - Partial stay granted.
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2015 (12) TMI 277
Waiver of pre deposit - Eligibility of cenvat credit - Held that:- credit on input services alleged to have been used in one factory, but utilized at another factory, which rests on appreciation of evidences and also interpretation of various provisions of law, which would be considered at the time of final disposal of appeals. Keeping in view the interest of Revenue and also in the interest of justice, it would be appropriate to direct the Applicant No.(i) to deposit ₹ 47.00 lakhs. - Partial stay granted.
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2015 (12) TMI 276
Waiver of pre deposit - appellant had not paid 6%/8% of the value of the exempted service while they had taken Cenvat credit without maintaining of separate accounts of input service credit in respect of taxable as well as exempted output services - Held that:- restaurant and short term accommodation services were not taxable during the relevant period and in the absence of definition of "service" it is hard to say that these were "services" on which no service tax was leviable under Section 66 of the Finance Act because Section 66 of the Finance Act levied service tax on taxable services enumerated in Section 65 (105) and as the valuation provisions in Section 67 only provided mechanism for valuation of taxable services the levy of service tax under Section 66 other than taxable services would prima facie fail in the absence of valuation provisions (refer the Supreme Court judgement in the case of CIT, Bangalore Vs. B.C. Srinivasa Setty [1981 (2) TMI 1 - SUPREME Court]. - pre-deposit of the amount of Cenvat credit taken towards so-called "non-taxable output service" along with proportionate interest would meet the requirement of Section 35F of Central Excise Act, 1944. - Partial stay granted.
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2015 (12) TMI 275
Demand of service tax - Construction of commercial and industrial construction services, site formation services, excavation and earthmoving and demolition service - Held that:- Taxability of the services rendered by the appellant is not in question. The learned Counsel submitted that demand as per the show-cause notice is ₹ 17,36,852/- and after giving adjustments for cum tax and various other deductions, the first appellate authority has confirmed the demand of ₹ 14,81,918/-. It is his submission that the service tax liability, which has been worked out by the lower authorities on the free supply of materials by the customers needs to be excluded is correct as the Larger Bench of this Tribunal in the case of Bhayana Builders (P) Ltd. Vs. CCE [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] is holding a view that value of free supply of materials cannot be included in gross value for the discharge of service tax liability. - service tax liability which has been confirmed by the first appellate authority should be re-worked out taking into consideration the free supply of materials. According to the learned Counsel, the net service tax that would be payable after extending benefit of Larger Bench decision would be ₹ 4,06,343/-. - Matter remanded back - Decided in favour of assessee.
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2015 (12) TMI 274
Discrepancy in issuing Show Cause Notice - Business Auxiliary Service to its customers on behalf of "Mobile Company" - Buying and selling of goods - Held that:- Primary adjudicating authority had dropped the proceeding initiated vide show cause notice dated 7.6.2005 on the ground that the appellant was engaged in buying and selling the Mobile Company's products and there was no material evidence available on record of providing taxable service and no amount of service charges or service tax has been quantified in the show cause notice. We find that the Order-in-Review also does not quantify the value of service or the amount of service tax nor does it quantify the amount of penalty. Certainty is a non negotiable requirement in the tax proceedings and in the absence of any quantification of the value of service, the amount of service tax or penalty the order is to be treated as bad in law and hence non sustainable. Therefore, we refrain from analyzing whether the service rendered by the appellant actually falls under Business Auxiliary Service in the wake the appellant's of contention that what was done was sale/purchase of recharge coupons and there was no service rendered. - Impugned order is unsustainable - Decided in favour of assessee.
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2015 (12) TMI 273
Discharge of service tax liability - Business Auxiliary Service - Held that:- amount received by the appellant has been recorded as an income under the category of commission; hence, service tax liability arises under the “Business Auxiliary Service”. The lower authorities have rejected the contention raised by the appellant that no service tax liability arises on this amount on the ground that once the appellants received commission, they are liable to discharge the service tax liability. - appellant is transporting sugarcane from the farmers fields to the sugar factory and the ratio of the Tribunal decision in the case of Dnyaneshwar Trust (2014 (1) TMI 90 - CESTAT MUMBAI) will directly apply. Accordingly, the impugned order is set aside - Decided in favour of assessee.
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2015 (12) TMI 272
Eligibility to Cenvat credit of the service tax paid - Maintenance of garden - Held that:- When the material fact is planting of trees that cannot be equated with maintenance of garden. So considering that a cement factory requires planting of the trees and maintenance thereof to prevent pollution, claim of the respondent as to the service tax paid for such maintenance to make it eligible is undeniable. - Decided against Revenue.
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2015 (12) TMI 271
Waiver of pre-deposit - maintenance or repair services - Held that:- scope of the work is repair and overhauling of pumps only. Ongoing through the scope of the work we find that the applicant is not engaged in the activity of repair or maintenance of immovable property, therefore, the contention of the ld. Counsel for the applicant is not acceptable. We further find that the Counsel for the applicant M/s King Technical Traders, submits that the applicant have paid sale tax on some of the parts and the said amount is deducted from the service tax. - applicants have failed to make out a complete waiver of pre-deposit - Partial stay granted.
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2015 (12) TMI 270
Demand of service tax - Denial of CENVAT Credit - landlord had taken the registration subsequently - Held that:- An assessee who has paid the service tax to the service provider, is entitled to avail the credit of the same, without finding whether such service tax paid by him to the service provider stands further deposited by him to the exchequer. It is neither possible nor practicable for any service recipient to verify the fact of payment of service tax by the service provider. If the Revenue is of the view that the service provider has not deposited the service tax collected by him from his customers, the remedy lies at the end of the service provider and not at the end of the service recipient. Apart from that, I find that in the present case, the Revenue has not made any verifications at the end of the service provider to find out as to whether the service tax has actually been deposited by them or not. There is neither any allegation much less any evidence to that effect. - no justifiable reasons to deny the credit of the service tax to the appellant. Accordingly, the impugned order is set aside - Decided in favour of assessee.
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2015 (12) TMI 269
Business auxiliary services - benefit of Notification No. 6/2005-S.T., dated 1-3-2005 - SSI Exemption - Held that:- Respondents are entitled for the benefit under Notification No. 6/2005, as they are not providing services to the independent person under the brand name of some other person. In fact, in this case, the respondent is providing services to the brand name owner (i.e. the service recipient). Therefore, we hold that respondents are entitled for benefit of exemption under Notification No. 6/2005. In these circumstances, we do not find any infirmity in the impugned order, same is upheld. - Decided against Revenue.
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2015 (12) TMI 268
Waiver of pre deposit - Demand of service tax - Sponsorship service - Held that:- Adjudication order or in the appellate order, the contention of the appellants does not seem to have been rebutted and merely because they had booked expenses in their accounts under the head of sponsorship service would not be sufficient to hold them liable to Service Tax in the absence of any evidence that they actually received the sponsorship service. The appellants have stated that no events were sponsored and no logo or trade name of the appellants were displayed. They only provided financial support in the form of donation or gifts for which they did not get anything in return. Prima facie such donations are outside the purview of the definition of sponsorship given in Section 65(99a) of Finance Act, 1994 which specifically excludes such donations/gifts. We have also seen some of the documents relating to such payments which prima facie support their contention; for example the payment of ₹ 1,39,500/- has been made in favour of Bhagwan Mahaveer Viklang Sahayata Samiti, Indore which is for defraying the expenses on artificial foot, crèches, sticks, etc. - appellants have been able to make out fairly a good case for waiver of pre-deposit. We order accordingly and stay recovery of the adjudicated liabilities during pendency of the appeal. - Stay granted.
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2015 (12) TMI 267
Denial of benefit of exemption Notification No. 3/2014-S.T., dated 3-2-2014 - Held that:- M/s. Geojit Financial Services Ltd. as a broker registered with National Stock Exchange and Bombay Stock Exchange offers a trading platform for the investing customers either directly or indirectly through business associates while M/s. Geojit Commodity Services Ltd. offers the same option in relation to future trading on a recognized commodity exchange with which it is registered as a member. The demands in this case on the appellant have arisen on the ground that the appellants have acted as sub-brokers for commodity trading. Notification No. 3/2014-S.T. exempts service tax payable on the services provided by an authorized person or sub-broker to the member of a recognized association or a registered association in relation to a forward contract during the period from 10-9-2004 to 30-6-2012. - Decided in favour of assessee.
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2015 (12) TMI 266
Denial of CENVAT Credit - whether Cenvat credit can be denied to the recipient of the inputs with respect to duty not paid by the service provider - Held that:- it has to be established by the Revenue for denial of such credit that appellant was aware of non-payment of tax before taking the credit. In the present case, there is no evidence on record that appellant was aware of non-payment of Service Tax before taking Cenvat credit. A service recipient will only see the cenvatable document under which service tax paid/ payable has been indicated. It is not the case of the Revenue that the service provider does not exist. Under the present facts and circumstances Cenvat credit is not deniable to the appellant and has been correctly availed. - Decided in favour of assessee.
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2015 (12) TMI 265
Demand of service tax - sale of space or time for advertisement and renting of immovable property services - Held that:- Section 99 was introduced into Finance Act, 1994 by the Finance Act, 2013 with effect from dated 10-5-2013, providing immunity from the levy and collection of service tax in respect of all taxable services provided by the Indian Railways during the period prior to 1-10-2012; so, however that no service tax in respect of taxable service provided by the Railway during the said period prior to 1-10-2012 need be refunded. The rendition of the services by the appellant was during the period covered by the provisions of Section 99 and no service tax was remitted. - since the authority for levy and collection of service tax from the Indian Railways stands eclipsed by legislative edict, the appeal is allowed and orders of the primary and appellate authorities (impugned herein) are set aside - Decided in favour of assessee.
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2015 (12) TMI 264
Waiver of pre deposit - Renting of immovable property service - Recover of lease rent and development charges - Held that:- It is seen from the lease agreement that RIICO acquired the land on 99 year lease. When they themselves acquired the land on lease, their contention that they had sold the plots to various persons is clearly untenable because when they themselves were lessee, they had no power to sell. Indeed, the lease agreement between RIICO and plot holders clearly mentions that the plots are being leased for 99 years. When the plots have been leased, the amount recovered as per lease agreement howsoever named becomes liable to service tax so long as the amount recovered is in relation to and for leasing those plots. The appellants cited the judgment of CESTAT in the case of NOIDA vs. CCE, NOIDA (2014 (1) TMI 1203 - CESTAT NEW DELHI) which is not applicable, as in that judgment only the premium amount charged was held to be not liable to tax. In the present case, there is no such premium amount involved. - appellants have not been able to make out a prima-facie case in their favour on merit - Partial stay granted.
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2015 (12) TMI 263
Admissibility of Cenvat credit - Port services - Held that:- While delivering the decision in the case of Shreeji Shipping v. CCE & ST, Rajkot (2014 (4) TMI 445 - CESTAT AHMEDABAD), the amendment carried out by Finance Ministry with effect from 1-7-2010, in the definition of ‘Port Services’ was clearly brought out by this Bench the order in the case of Shreeji Shipping (supra). Reliance placed by the Revenue on the judgment of Gujarat High Court in the case of Kandla Shipchandlers & Others v. UOI (2012 (9) TMI 850 - Gujarat High Court) is misplaced in view of the facts of that case and the facts involved in the present case. In the case before Gujarat High Court the services under consideration were ‘Repair of Vessels’ and ‘Supply of goods to Ships’ and not ‘Stevedoring Services’. Further the amendment carried out in the definition of ‘Port Services’ with effect from 1-7-2010 was also not brought to the notice of Hon’ble High Court. In view of the above the present case is distinguished and is squarely covered by the decision of this Bench in the case of Shreeji Shipping v. CCE & ST, Rajkot (supra) - Decided against Revenue.
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2015 (12) TMI 262
Denial of CENVAT Credit - GTA service - Held that:- As per Rule 3(1) of the Cenvat Credit Rules, 2004 a manufacturer of dutiable excisable goods can take credit of input services received by him. In the present facts, freight is paid by M/s. Parle Products Pvt. Limited and not by the appellant. The Service Tax paid under the challans on reverse charge basis has thus, to be considered as Service Tax paid by M/s. Parle Products, Pvt. Limited and not by the appellant. Cenvat credit of such Service Tax paid is not admissible to the appellant. - Decided in favour fo Revenue.
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2015 (12) TMI 261
Demand of service tax - renting of immovable property service - Held that:- Even though appellant can be faulted for non-payment of tax collected by them, yet when the legislature in its wisdom does not differentiate between the person who has collected the tax and did not pay it to the Govt. and the person who has not collected the tax at all, it would not be appropriate for us to read such a provision into the Section enacted by the Parliament. Therefore, we find that benefit of Section 80(2) is available to the appellant - there is no other issue to be considered and no facts or law is required to be gone into and therefore, the final decision need not be postponed to a later date. We find that the amount of Service Tax plus interest deposited in their entirety within six months from the date, the Finance Bill receiving assent of the President is in accordance with law - Decided in favour of assessee.
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2015 (12) TMI 260
Waiver of pre depposit - Intellectual Property Rights Services - Held that:- Agreement between appellant and M/s. Eugenex Biotechnologies that appellant has received certain patent rights and technology rights from M/s. Eugenex Biotechnologies registered at a place outside India. As per clause 4.2 of the contract appellant has certain rights to carry out modifications in the technology other than making any changes in the clone. Further as per the clause 3.1 of this agreement certain fixed cost has to be paid by the appellant to M/s. Eugenex Biotechnologies. As per clause 5.4 of the agreement, periodical royalties have also to be paid on regional basis by the appellant to M/s. Eugenex Biotechnologies for a period of 7½ years. Prima facie, it appears that transfer of patent right and technology are not permanently transferred to the appellants. However, appellant has relied upon C.B.E.& C. Circular No. 80/10/2004-S.T., dated 17-9-2004 to argue that IPR Services are not attracted to an IPR registered outside India - only those IPRs procured under Indian laws are to be covered under IPR services and those IPRs not covered by the Indian Laws would not be covered under taxable under IPR Services. In view of clarification issued by C.B.E. & C. appellant has made out a prima facie case for complete waiver of the confirmed demands and penalties - Stay granted.
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Central Excise
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2015 (12) TMI 259
Jurisdiction of court - Territorial jurisdiction - whether this court has the jurisdiction to entertain and decide the appeal preferred by the respondent against the order passed by the Tribunal in a case where the assessee whose manufacturing unit from which the dispute arises is situated at Silvassa in the Union Territory of Dadra and Nagar Haveli, and where the Order-in-Original had been passed by the Commissioner of Central Excise and Customs, Vapi and the appeal against the said order has been decided by the Tribunal at Ahmedabad - Held that:- manufacturing unit of the respondent assessee in relation to which the dispute arises, is situated at Silvassa within the jurisdiction of the central excise authorities who are located at Silvassa namely, the Deputy Commissioner/Assistant Commissioner, Central Excise and Service Tax, Silvassa and the Superintendent, Central Excise and Service Tax at Silvassa. For administrative purposes, the Central Excise authorities who are situated at Silvassa have been conferred jurisdiction to decide cases upto a particular pecuniary limit and beyond such limit such jurisdiction has been conferred on the Commissioner of Central Excise and Customs, Vapi. The present case being beyond the pecuniary limits of the authorities situated at Silvassa, it is the Commissioner of Customs, Vapi, who has exercised jurisdiction and issued the show-cause notice and has adjudicated the same. Nonetheless, insofar as the respondent assessee is concerned, it falls within the jurisdiction of the central excise authorities at Silvassa. In the opinion of this court, the mere fact that the Commissioner of Central Excise and Customs, Vapi also exercises jurisdiction over the Union Territory of Dadra and Nagar Haveli would not mean that the matter ceases to relate to the Union Territory of Dadra and Nagar Haveli. Since the matter arises in relation to the Union Territory of Dadra Nagar and Haveli, under the provisions of section 35G(1) read with section 36(b)(iii) of the Act, it is the High Court at Bombay which would be the High Court having jurisdiction to entertain and decide an appeal against the order passed by the Tribunal. - Decided in favour of revenue.
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2015 (12) TMI 258
Restoration of appeal - pre deposit made - Availment of CENVAT Credit - Capital goods - Held that:- CWP No.16013 of 2011 had been earlier filed by the petitioner seeking similar relief. The said writ petition was dismissed by this Court vide order dated 30.8.2011. The petitioner has concealed this fact while filing the present writ petition. In the writ petition, the petitioner has stated that no such similar Civil Writ Petition has previously been filed by it before this court or the Supreme Court of India. - Court while dismissing earlier CWP No.16013 of 2011 on 30.8.2011 had extended the time by one month for depositing the amount. The said order also remained uncomplied with as the petitioner never deposited any amount in pursuance to the order dated 30.8.2011 extending the time. The appeal was dismissed by the Tribunal on 30.9.2011. Besides concealment of factum of filing of CWP No.16013 of 2011 is there on the part of the petitioner disentitling it to any discretionary relief under Articles 226/227 of the Constitution, the present writ also suffers from delay and laches as well. - Decided against assessee.
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2015 (12) TMI 257
Restoration of appeal - Non compliance with pre deposit order - Exparte order - Held that:- Commissioner (Appeals) should not have decided exparte stay application. Moreover, the order passed in the stay application has also not yet been served upon the petitioner nor it is annexed with the counter affidavit. As there is violation of principles of natural justice in deciding the stay application which is for waiver of the deposition of the amount, we hereby revive the appeal as well as the stay application preferred by the petitioner - Matter remanded back - Decided in favour of assessee.
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2015 (12) TMI 256
Valuation of goods - whether the additional amount received by appellant towards the third party inspection charges undertaken at the instance of the buyer is includable in the transaction value or otherwise and whether the duty liability arises or not - Held that:- We notice from the purchase orders placed that the said orders are given by the Government authorities to the appellant and one of the order of the Thermal Power Station specifically talks about the material should be despatched after inspection by the representative of Thermal Power Station while the South Eastern Coalfields Ltd. purchase order talks about the inspection of the goods by third party inspectors as per the instructions of South Eastern Coalfields Ltd. We see from the orders that the said orders are specific inasmuch as their cables have to meet standards of ISI which according to the appellant is done so by their in-house laboratory and undisputed by the Revenue. - it is very clear that the inspection charges received as reimbursement by the appellant on third party inspection charges at the instance of the buyer is not includable in the assessable value of the products cleared by them. - impugned order is not sustainable and liable to be set aside - Decided in favour of assessee.
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2015 (12) TMI 255
Clandestine removal of goods - Shortage of goods found - Held that:- Records attached to the Panchnama and statements of the factory manager, clearly indicate that the weighment and shortage of raw materials as ascertained was based upon eye estimation. The statement of factory manager clearly indicates that said weighment done by the officers of 1242 Metric Tunes of MS scrap, will be time consuming and the entire exercise is based on eye estimation. I also find that there is nothing on the record to show that weighment was done by the officers systematically. - show cause notice indicates that the demand of the duty is on the presumptive manufacturing of Ms ingots out of the shortage of MS scrap noticed by the officers during the course of panchnama on 17.03.2007, both the lower authorities have not recorded any evidence to come to such a conclusion that the appellant had manufactured such ingots and cleared the same clandestinely. - Decision in the case of Aum Aluminium P. Ltd. (2012 (4) TMI 557 - CESTAT AHMEDABAD) followed - Decided in favour of assessee.
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2015 (12) TMI 254
CENVAT Credit - Captive consumption - whether the assessee have availed CENVAT credit correctly or otherwise when the activity undertaken by them on the inputs according to revenue does not amount to manufacture - Held that:- During the period post 24.06.2010, assessee had cleared the products as manufactured products on payment of appropriate duty, which was more than the CENVAT credit availed by them on the inputs which were used. The ratio of the Hon ble High Court’s judgement in the case of Ajinkya Enterprises (2012 (7) TMI 141 - BOMBAY HIGH COURT) would be applicable in the case in hand as in that case also the issue was regarding oiling and pickling, cutting and slitting of H.R./C.R. Coils is the same. - Tribunal in the case of R.B Steel Services (2015 (1) TMI 292 - CESTAT NEW DELHI) were also considering an identical issue in respect of process of conversion of black bars/rods into bright bars and availment of CENVAT credit on the inputs. The Tribunal after considering the issue and the case law, relied upon the judgement of the Hon’ble High Court of Bombay in the case of Ajinkya Enterprises (supra) stated that the issue is no more res integra. - Impugned order is set aside - Decided in favour of assessee.
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2015 (12) TMI 253
Waiver of pre deposit - Duty demand - Denial of CENVAT Credit - Fraudulent credit - Bogus invoices - under reported the production of copper rods by inflating the power consumption - Held that:- Tribunal in respect of the case against M/s V.K. Metal Works has vide stay order has waived the requirement of pre-deposit of the duty demand, interest and penalty and had stayed its recovery by taking a prima facie view that the above-mentioned allegation against them by issuing bogus invoices for copper ingots without manufacturing any activity prima facie is not sustainable. - appellant have prima facie case in respect of the Cenvat credit demand of ₹ 5,50,50,489/- and hence in respect of this Cenvat credit demand unconditional stay has to be granted. Appellant had given the reasons for this fluctuation and according to them this fluctuation is due to power break down or fluctuation in electric voltage resulting in breakdown of manufacturing process resulting in cooling of furnace which requires more consumption of power for re-heating. Prima facie, we find that these factors have not been considered and the Commissioner has arbitrarily adopted the power consumption figure of 346 units per MT as the norm for the entire period. In our prima facie view estimating production on this basis would not be correct when there is absolutely no evidence of unaccounted purchase of raw material. - Stay granted.
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2015 (12) TMI 252
Waiver of pre deposit - Job Work activity for the principal availing area based exemption - Manufacture of copper ignots - Assessee contend that they are liable for service tax not excise duty - Held that:- Activity of Namo is manufacture,not service and the same would attract Central Excise duty and Namo would not be eligible for duty exemption under Notification No. 214/86-CE as Havells the principal manufacturer, were availing full duty exemption under Notification No. 50/03-CE in respect of the finished products manufactured and cleared by them. As regards the question of limitation there is no explanation as to why during period from January 2007 to January 2008 no duty was paid. In respect of period from February 2008 onward the appellant’s explanation is that they exercised the bonafide belief that their activity is service and they paid service tax on the job charges, but in respect of period prior to February 2008 there is no explanation for non-payment of duty. In any case the question of limitation is a mixed question of facts and law which has to be examined at the stage of final hearing. Therefore, so far as the duty demand of ₹ 22,83,289/- against Namo is concerned, we are of the view that this is not the case for total waiver - Partial stay granted.
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2015 (12) TMI 251
Waiver of pre deposit - period of limitation - relevant date - Availment of CENVAT Credit - SSI exemption under notification no. 8/03-CE - Held that:- As per the provisions of Rule 11(2) of the Cenvat Credit Rules, 2004, when a manufacturer opts for exemption from the whole of duty of excise leviable on the goods manufactured by him, under a notification based on value or quantity of clearances in a financial year and who has been taking cenvat credit on the inputs or input services before such option is exercised, he shall be required to pay an amount equivalent to Cenvat Credit if any, allowed to him in respect of inputs lying in stock or in process or contained in final product lying in stock on the date when such option is exercised and after deducting the such amount from the cenvat credit balance if any, lying in his credit, the cenvat credit balance if any, is still remaining, shall lapse and shall not be allowed to be utilized for payment of duty on any excisable goods whether cleared for home consumption or for export. - appellant do not have prima facie case in their favour. In terms of section 11A(3)(ii) the relevant date in case of excisable goods on which duty of excise has not been levied or paid, short levied or short paid, where under the Rules made under this Act, a periodical return showing particulars of duty paid on excisable goods during period to which the said return relates is to be filed by a manufacturer or producer, the date on which such return is so filed is to be treated as the relevant date. Only in the case where no periodical return has been filed though, it was required to be filed, the last date on which such return is to be filed under the said rules would be treated as relevant date. In this case, though the return for April 2007 to June 2007 quarter was required to be filed on 10.07.2007 but the return was actually filed on 14.08.2007 and, therefore, prima facie, it is 14.08.2007 which would have to be treated as the relevant date. - judgment of Delhi High Court in the case of Super Tyres (P) Ltd. vs UOI (2005 (1) TMI 119 - HIGH COURT OF DELHI) is not applicable to the facts of this case. We are, therefore, of the prima facie view that this is not a case for total waiver - Partial stay granted.
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2015 (12) TMI 250
Loss and stock of the waste paper in a fire - whether indigenous goods or imported goods - Bexemption under notification No. 21/2008-Cus dated 1/3/2008 - demand of custom duty as well as denial of Cenvat Credit availed in respect of CVD - Held that:- Applicants were given sufficient opportunity to justify their claim that goods lost in fire is indigenous goods. However, applicant neither submitted any record nor explained their claim before the adjudicating authority during the denovo adjudication. Moreover there was serious manipulation appearing on records that the applicants were maintaining two parallel Form IV register and the stock shown in both the register and entries of imported goods were also wrongly made. In the remand matter this Tribunal has categorically stated to follow the FIFO principle, however applicant has not done anything to comply with the direction of the Tribunal. In view of this position it is clear that the entire goods lost in fire is indeed imported material and when it is so, demand of entire custom duty, excise duty is sustainable in toto. - Decided against assessee.
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2015 (12) TMI 249
Availment of CENVAT Credit - Trading activity - Held that:- Explanation added to the Rule 2(e) w.e.f. 1.4.2011 has to be read with Explanation I (c) added to sub-rule 3(d) of the Rule 6 and these provisions, which adversely affect an assessee, cannot be given retrospective effect. The finding of the Commissioner in the impugned order that while the amendment to the definition of exempted service in Rule 2(e) w.e.f. 1.4.2011, by adding an explanation to it, is of clarificatory nature and, therefore, is applicable retrospectively but the provision regarding value of the trading service in Explanation (I)(c ) to sub-rule (3D) of Rule 6, also introduced w.e.f. 01.04.2011, cannot be given retrospective effect and is applicable prospectively and accordingly during the period prior to 01.04.2011, the value of the trading services would be the value of the goods traded on the sale price of the goods is absurd - when the goods traded are the cenvated inputs in respect of which cenvat credit availed, has been reversed as per the provisions of Rule 3(5) of the Cenvat Credit Rules, 2004, no reversal of the cenvat credit in respect of the input services like GTA service and transit insurance service availed at the time of receipt of the goods is required in view of the judgment of the Punjab High Court in the case of Punjab Steels (2010 (7) TMI 252 - PUNJAB AND HARYANA HIGH COURT) and also the judgment of the Tribunal in the case of Chitrakoot Steel & Power Pvt. Ltd. reported in [2007 (11) TMI 135 - CESTAT, CHENNAI]. Some cenvated services received may be those which are not connected with receipt of inputs and these services like security, telephone services, sales promotion etc. may have been commonly used for manufacturing as well as trading activity and to the extent some cenvated services were used for trading activities, the cenvat credit would not be admissible. But the amount of cenvat credit to be reversed in proportion to the volume of trading activity has not been quantified by the Department - pre-deposit of ₹ 7 lakhs in addition to the amount already paid would be sufficient for hearing of the appeal - Partial stay granted.
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2015 (12) TMI 248
Duty demand - Clandestine removal of goods - Shortage of goods - Held that:- While in the factory of UL shortage of 73.904 MTs. had been found, in the factory of UTL there was excess stock of 73.904 MTs. of mixed woollen yarn and as such, we are of the view that the alleged shortage in the factory of UL matches with the excess found in the factory of UTL. We also take note of the fact that the appellant under their letter dated 5.4.2000 addressed to the Asstt. Commissioner had intimated that they have identified about 75 MTs. of moth and mildew affected wool yarn and have decided to store it separately so that the other yarn do not get affected and that they intend to shift the same to other 100% EOU. UTL which is adjacent to premises of UL. This letter bears the stamp of the office of the Asstt. Commissioner and the receipt of this letter as such is not disputed. It is also seen that on 16.06.2000, the statement of Shri D.K. Kothari, General Manager had been recorded under Section 14 of the Central Excise Act, 1944 and on being questioned about shortage, had stated that this yarn has been shifted to another godown, as the yarn was damaged and moth eaten and as such, it is not the shortage. As regards the shortage of 1.603 MTs. of wool waste, this shortage is not denied and the explanation given by the appellant is that the same may be due to wrong recording of weight of the wood waste, as the wool being hygroscopic in nature tends to gain weight on account of absorption of moisture. But in our view, this explanation does not explain the shortage, as the stocktaking in the factory had been done during monsoon period in the month of June, 2000 when there is no question of yarn losing weight. In view of this, the duty demand of ₹ 12,564/- on the shortage of 1.603 MTs. of wool waste is upheld. - Decided partly in favour of assessee.
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CST, VAT & Sales Tax
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2015 (12) TMI 240
Assessment of turnover tax - petitioner got trade mark registration and the sale of branded food is taxable at 14.5% and since the petitioner paid 2% on the total taxable turnover - Held that:- provisions of the Trade Marks Act, 1999 as well as Rules thereof would apply to the petitioner. The Fourth Schedule of the Trade Marks Rules, 2002 envisages Classification of Goods and Services-Name of the Classes , wherein, though Item Nos.29 and 30 would refer to food items, however, they are not prepared and served in the restaurants. Item 35 to 45 would refer services , which, as per the Act, they are trademark services and Item 43 specifically mentioned as Services for providing food and drink; temporary accommodation .Therefore, as rightly contended by the learned counsel for the respondent, the trade mark registration is meant for the restaurant as well as the products manufactured by it and when the activity of service for providing food and drink is considered as a trade mark under the Act, the food items also are to be considered as branded items and therefore, levy of tax on such branded food and drink items would be at 14.5% as prescribed under Section 7(1)(a) of the TNVAT Act, 2006 and the respondent has rightly passed the impugned assessment order. It is brought to the notice of this Court that by mistake, the above said provision has been wrongly mentioned, however, in the notice, dated 3.12.2014, the respondent has mentioned that it was proposed to revise the assessment under Section 25(1) of the TNVAT Act, 2006, as per which, the authority is empowered to determine the tax payable by the dealer to the best of its judgment.Therefore, as per Section 3(2) of the TNVAT Act, 2006, the petitioner is liable to pay tax at 14.5%. - No illegality or irregularity in the impugned order, dated 5.1.2015 passed by the respondent in order to interfere with the same - Decided against assessee.
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2015 (12) TMI 239
Rate of VAT on cell phone battery charger - Charger is sold as composite package along with cell phone - Punjab Value Added Tax Act, 2005 (PVAT) - Held that:- issue has already been decided against the petitioner by the Apex Court in Nokia India Pvt. Limited's case (2014 (12) TMI 836 - SUPREME COURT) - petitioner was unable to distinguish the judgment passed by the Apex Court. Further, the issue with regard to the vires of Section 29(4) of the Act stands concluded against the petitioner by judgment of this court dated 7.8.2015 rendered in M/s Amrit Banaspati Company Limited's case (2015 (8) TMI 742 - PUNJAB AND HARYANA HIGH COURT). Mobile/cell phone charger is an accessory to cell phone and is not a part of the cell phone. No ground for interference is made out with the impugned order. Consequently, finding no merit in the petition - Decided against assessee.
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2015 (12) TMI 238
Claim of concessional rate of tax - Refund claim - pre deposit - Held that:- Petitioner herein has also paid the mandatory pre-deposit amount, however, stating that the appeal is barred by limitation, the same was rejected. The pre-deposit amount was not refunded to the petitioner - 1st respondent may be directed to issue fresh notice and on receipt of the same, the petitioner may be directed to file their objections and on receipt of the same, the 1st respondent may be directed to consider the objections and pass appropriate orders within a time frame. - Impugned order is set aside - Matter remanded back - Decided in favour of assessee.
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2015 (12) TMI 237
Levy of tax on difference between the re-sale price and the purchase price and the surcharge component collected on the sale price - Held that:- Earlier assessment orders and demand notice passed were set aside by the Supreme Court with a direction for de novo assessments and after de novo assessment it is found that there is Nil demand for the assessment years. Therefore, the question of payment of interest for the Nil demand does not arise. - Accordingly the impugned orders are quashed - It is not clear whether there was any tax liability preceding the demand notices, whether the difference of liability is more than 10 per cent. between the returns and demand notice. In this regard, the Superintendent of Taxes is directed to verify and pass fresh orders in accordance with law under section 22 of the Assam General Sales Tax Act. - Decided in favour of assessee.
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2015 (12) TMI 236
Rejection of an application under the Maharashtra Value Added Tax Act, 2002 - they applied for issuance of the certificate, which would certify that the contract under reference is not a works contract and therefore no deduction of taxes at source is called for from the payment - Held that:- Impugned order fails to make any reference to the transaction and the contract, the terms and conditions thereof and whether the petitioner could be said to be executing any works under the works contract agreement as claimed by it. The only reason which has been assigned in the conclusion is that the agreement dated April 2, 2004 is a works contract. In other words, it involves works contract. However, for the purposes of recording a conclusion of this nature, it was necessary and imperative for the Joint Commissioner of Sales Tax, to have referred to not only the agreement dated April 2, 2014, but other agreements under which the works have been sub-contracted. - Impugned order is set aside - Matter remanded back - Decided in favour of assessee.
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