TMI Tax Updates - e-Newsletter
February 10, 2017

Case Laws in this Newsletter:

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

TMI SMS

• HC allowed the expenditure of interest paid on funds raised to subscribe to the rights issue and for retaining control of 28% of its holding

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• Levy of entry tax - State cannot levy / charge Entry Tax on Tractors beyond Value Added Tax under the VAT Act i.e. beyond 5% - HC

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Articles

1. SERVICE OF NOTICE UNDER MODEL GST ACT

   By: DR.MARIAPPAN GOVINDARAJAN

2. INSERTION OF NEW SECTIONS IN INCOME TAX ACT, 1961 - PROPOSED BY FINANCE BILL, 2017

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. No decision yet on imposing tax on cash transactions: Das

2. Interest rates for Small Savings Schemes

3. RBI Reference Rate for US $

4. Cabinet approves 'Pradhan Mantri Gramin Digital Saksharta Abhiyan’ for covering 6 crore rural households

Notifications

Companies Law

1. F. No. 1/5/2001-CL-V (Part VI) - dated 8-2-2017 - Co. Law

Substitution of RBI nominee

Customs

2. 10/2017 - dated 8-2-2017 - Cus (NT)

Central Board of Excise and Customs invests in the Customs Officer

Circulars / Instructions / Orders

SEZ

1. F. 1/12/2007-SEZ - dated 1-2-2017

Clarification on the definition of 'Special Economic Zone in an existing port or airport'

2. G-3/1/2016 - dated 31-1-2017

Clarification on the issue of process of achieving NFE by FTWZ units

Customs

3. Instruction No. 01/2017 - dated 8-2-2017

Passing of order under Section 110 of the Customs Act, 1962 - reg.

Highlights / Catch Notes

Income Tax

• Stock Mark-to-Market Loss Excluded from Unascertained Liabilities for Book Profit u/s 115JB.

  Case-Laws - AT : MAT - Book adjustment u/s 115JB - marked–to–market loss on stock in trade cannot be considered as unascertained liability Explanation 1(c) to section 115JB makes it clear that only unascertained liability can be considered for computation of book profit - AT
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• Assessee's Slitting and Printing Process Qualifies as Manufacturing, Eligible for Section 80IC Deduction.

  Case-Laws - AT : Since the process carried out by the assessee of slitting the Rolls and printing thereon has been held by the Tribunal to be a manufacturing process in the case of assessee itself, therefore, the assessee is eligible for the deduction under section 80IC - AT
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• Clear Source of Investment Valid Despite Payment Delay, Alternative Interpretations Not Applicable.

  Case-Laws - AT : Unexplained investment - Once the assessee demonstrates the sources clearly, there is no room for other views. There may be some delay in making the payment but the sources are clear, it has to be considered - AT
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• Company Shareholders Must Not Bear On-Money Land Purchase Costs; Misconceived Tax Treatment Highlighted.

  Case-Laws - AT : Disallowance of Payment of on-money for purchase of land - It is misconceived idea to charge payment of ‘on money’ to the shareholders of the company, in which company entered in the transaction - AT
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• High Court Affirms Company's Right to Deduct Interest Charges for Maintaining 28% Holding Under Income Tax Act Sections 37 & 57(3.

  Case-Laws - HC : Entitlement to deduction of interest/service charges paid on funds raised to subscribe to the rights issue and for retaining control of 28% of its holding - Since this expenditure does not pertain to the stream of income covered by Section 37 and is not excluded by Section 57 (3), it had to be and was correctly allowed - HC
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• Court Quashes Property Attachment Order; Tax Recovery Officer Can Sell Property to Recover Original Assessee's Dues.

  Case-Laws - HC : Order of attachment of the property - permissible for the Tax Recovery Officer to sell the property in question for the dues of the original assessee - order of attachment quashed and set aside - HC
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Customs

• Minimal Penalties Recommended for Non-Production of Homologation Certificate in India for Non-Commercial Imported Cars.

  Case-Laws - AT : Non-production of Homologation certificate of the imported cars - since the car is used by the company in India and there is no commercial consideration attached or involved in the matter, the imposition of fine and penalty has to be minimal - AT
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• Section 114A Penalty Valid Without Naming Importer under Customs Act, 1962. Importer Name Not Required for Imposing Penalty.

  Case-Laws - AT : Imposition of penalty u/s 114A of Customs Act, 1962 - failure to specify the name of the firm or individual on whom the penalty u/s 114A of CA, 1962 was fastened - There is no requirement for a specific mention of the importer to validate the penalty under section 114A of Customs Act, 1962. - AT
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• EPCG Scheme permits import of magnetic mixers and parts in SKD condition; no restrictions on separate component entries.

  Case-Laws - AT : EPCG Scheme - import of Magnetic Mixers/agitators with mixing head, drive unit and accessories in SKD position - there was no bar on importing the individual components in different bill of entries so long as the total number of sets imported is within the limit prescribed in the EPCG licence - AT
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Service Tax

• Charitable Institution Not Considered Commercial Concern Before April 2006; Service Tax Demand Set Aside.

  Case-Laws - AT : Charitable institution - Business Auxiliary services - commission agency - The appellant was not a commercial concern before 30.04.2006 under the law - demand set aside - AT
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Central Excise

• Adjudication Orders Cannot Be Split; 2005 Order Invalid Due to Final 2002 Order Without Appeal.

  Case-Laws - AT : Whether an adjudication order can, in the manner natural to protozoa, split into two? - The Commissioner who issued the order in 2005 was well aware of the existence of the order of 2002 and that it had, by lack of any appeal thereto, attained finality. Another order re-determining the value of the goods covered in the earlier order is, therefore, without sanction of law - AT
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• Manufactured Shapes and Sections classified under tariff heading 7216.20, not 7308.90, per Central Excise guidelines.

  Case-Laws - AT : Classification of manufactured product - Shapes and Sections - these goods cannot be considered as prepared for use in structurals. Consequently, they merit classification under 7216.20 and not under 7308.90 - AT
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• Transportation Charges Reimbursed by Customers Excluded from Assessable Value for Tax Purposes.

  Case-Laws - AT : Valuation - whether transportation charges paid by the appellant for clearances of their final product and subsequently taken reimbursement from the customers is required to be included in the assessable value? - Held No - AT
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• Oil Sale Prices Reviewed; No Collusion Found Between Buyer and Seller, Undervaluation Deemed Impossible.

  Case-Laws - AT : Valuation - sale price charged to oil marketing companies - In absence of any evidence to show that the buyer and seller were mutually interested to make gain at the cost of Revenue, undervaluation of clearances is inconceivable - AT
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• Sales Tax Already Paid on Car Component Cannot Be Reclaimed or Included in Value Again.

  Case-Laws - AT : Valuation - There is no allegation that amount of sales tax that was collected on this component of value of the car has not been deposited in the state treasury or has been collected back - once tax/duty liability has been discharged, the same cannot be included in the value - AT
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• CENVAT Credit Approved for Unhooked Hangers; Considered Inputs as Completion Requires Hooking Process.

  Case-Laws - AT : CENVAT credit - Unhooked hanger imported and used for hooking the same was input since only upon hooking, the hanger becomes a complete hanger - credit allowed - AT
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VAT

• Gujarat Cannot Impose Entry Tax on Tractors Exceeding 5% VAT Limit Under VAT Act.

  Case-Laws - HC : Levy of entry tax - entry / import of Tractors into the State of Gujarat - State cannot levy / charge Entry Tax on Tractors beyond Value Added Tax under the VAT Act i.e. beyond 5% - HC
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Case Laws:

• Income Tax

• 2017 (2) TMI 411
  Penalty u/s 271(1)(c) - estimated trading additions - Held that:- Books of accounts have been rejected and thereafter, the Assessing Officer has estimated a GP rate of 42.36% as against declared GP rate of 38.45% which has finally been sustained by the Coordinate Bench at 40.40%. This GP rate 40.40% has been applied by the CIT(A) following the GP rate of 40.34% in the immediately preceding A.Y. 2006-07 and considered the unusual business conditions prevalent during the subject matter in terms of profit margins getting effected by increase in cost of raw material, introduction of new products in the market and fact that some of the assessee’s customers did not place orders during the year resulting in fall of the turnover and the view of the Ld. CIT(A) was held to be fair and reasonable which has factored in the business environment as well as guided by the assessee’s past history. In the light of the findings of fact in the quantum proceeding, we do not see any linkage in terms of basis of rejection of the books of accounts and the estimation of GP rate by the Assessing Office at 42.36% which has been finally brought down to 40.40%. The additions have thus been confirmed on a pure estimation basis taken into consideration the prevalent business environment and the past history of the assessee and the same cannot be basis for levy of penalty. - Decided in favour of assessee

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• 2017 (2) TMI 410
  Addition towards legal and professional charges - Held that:- The assessee has neither submitted any evidence in support of proof of services rendered, nor any evidence in support of professional competency or experience of Sh. Rajkumar Jain in the field of coordination for getting refunds from the custom Department.In view of above discussion, we are of the considered opinion that the disallowance sustained by the learned Commissioner of Income-tax (Appeals) out of legal and professional expenses is reasonable and justified. - Decided against assessee Disallowance of 1/3 rd expenses out of travelling expenses - Held that:- From the evidence filed by the assessee, it cannot be established that the expenses incurred, were wholly and exclusively for the purpose of business. The assessee has not filed any evidence from the importers that the persons travelled on behalf of the assessee company went to the respective country in business connection. The assessee has not filed any copy of Visa applications, which could explain whether the Visa was for business or tourist purpose. The assessee has also not filed any evidence in support of use of foreign currency taken by the persons during foreign travel and in such a situation , personal expenses on foreign travels by the persons travelled, cannot be denied. - Decided against assessee Disallowance of commission expenses - Held that:- The assessee has neither furnished any evidence in support of services rendered by the persons to whom commission is paid, nor any evidence in support of professional competence of those persons. It was the onus of the assessee to submit the evidences which could justify that any such services were rendered by those persons and justify such high percentage of commission paid to those persons. The assessee has failed to discharge this onus. We have already discussed in earlier para that in the circumstances where no evidence in respect of services rendered by the parties is furnished, the ratio of the decision of the Hon’ble Supreme Court in the case of Hero Cycles Private Limited (2015 (11) TMI 1314 - SUPREME COURT OF INDIA) is not applicable. - Decided against assessee Addition against household withdrawals - Held that:- Commissioner of Income-tax (Appeals) has already analyzed the drawing Ledger account of the assessee and found that withdrawal from M/s. Fame Impax have been incurred through cheque which was utilized towards school fees, electricity, water charges, medical claim, telephone bills etc. and only cash withdrawal of Rs. 15,000/-has been made from this account. In respect of income of wife of the assessee, no evidence had been produced either before us or the lower authorities to substantiate that income was earned and utilized towards household withdrawals of the family. In view of above circumstances, we are of the opinion that the addition sustained by the learned Commissioner of Income-tax (Appeals) on the issue in dispute is reasonable - Decided against assessee

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• 2017 (2) TMI 409
  Addition of marked–to–market loss - AO disallowed claim on open equity stock future contracts primarily for the reason that they are in the nature of contingent liability - Held that:- As the loss due to a fall in price below cost is allowed even if such loss has not been actually realized. The derivatives have been treated as stock-in-trade then there is nothing unusual in the assessee valuing each derivative by applying the rule cost or market whichever is lower. ICAI in its guidelines have also approved of the rule of prudence which really means that while anticipated losses can be taken note of while valuing the closing stock, anticipated profits cannot be recognized. The anticipated loss cannot be treated as a contingent liability. See Edelweiss Capital Ltd. [2012 (10) TMI 223 - ITAT, MUMBAI] - Decided in favour of assessee As far as loss claimed on valuation of closing stock–in–trade, undisputedly, it is the actual stock–in–trade of the assessee which as per the accounting principles has to be valued at the year end at market rate or actual cost whichever is lower. The Hon'ble Supreme Court in United Commercial Bank v/s CIT [1999 (9) TMI 4 - SUPREME Court ], approved the aforesaid accounting method followed by the assessee. That being the case, the loss claimed by the assessee cannot be considered as contingent liability. As far as loss on account of provisions for interest rate swap the same is also covered by the decisions of the Tribunal in case of ABN Amro Securities (2011 (8) TMI 1257 - ITAT MUMBAI), wherein, the Tribunal deleted the disallowance made with the observation that allowability of deduction in the current year is subject to verification of corresponding adjustment in the year in which the non–settlement date falls. In view of the aforesaid, we delete the addition with similar observation. Addition made under section 14A r/w rule 8D(2)(ii) and (iii) - Held that:- Provisions of section 14A r/w rule 8D will not be applicable to investment in shares and securities held as stock–in–trade. See Commissioner of Income Tax-9 Versus India Advantage Securities Ltd. [2015 (3) TMI 1239 - BOMBAY HIGH COURT] MAT - marked–to–market loss in stock–in–trade for computing book profit under section 115JB - Held that:- While deciding ground no.2, of the Department in earlier part of the order, we have held that marked–to–market loss on stock in trade cannot be considered as unascertained liability Explanation 1(c) to section 115JB makes it clear that only unascertained liability can be considered for computation of book profit. That being the case, we agree with the decision of the learned Commissioner (Appeals) in deleting the addition while computing book profit of the assessee. Disallowance under section 14A r/w rule 8D - Held that:- As per the decision of Four Dimensions Securities India Ltd. v/s ACIT [2013 (6) TMI 806 - ITAT MUMBAI] for computing disallowance under rule 8D, only the net interest has to be considered which in the present case, is in the negative as the assessee has a positive interest income. Therefore, considering the aforesaid facts, we are of the opinion that no disallowance of interest expenditure under rule 8D(2)(ii) can be made. Therefore, only disallowance which can be made is under rule 8D(iii), i.e., 0.5% of the average value of investment. In this regard, we must make it clear that the shares held as stock–in–trade have to be excluded from the average value of investment while computing the disallowance under rule 8D(2)(iii). We direct the Assessing Officer to compute the disallowance accordingly

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• 2017 (2) TMI 408
  Depreciation @ of 25% on insurance claim received during the year against DG set - Held that:- The assessee has incurred expenditure on breakdown of DG set amounting to Rs. 12,43,508/- in assessment years 2000-01 and 2001-02 and said expenses were claimed as revenue expenditure in those years. The assessee lodged its claim of Rs. 12,43,08/- with insurance company and credited the amount of claim in profit and loss account in those years. In the year under consideration, the assessee received claim of Rs. 2,68,386/- and the balance amount of claim was, therefore written off. We find that the claim received by the assessee is against the expenses claimed as revenue expenditure towards repair of the DG set, and it is not towards meeting any cost of the DG set and, therefore, provisions of section 43(1) of the Act are not attracted. The Assessing Officer in earlier year has already allowed claim of the expenditure towards DG set as revenue expenditure, and then reimbursement of the same by the insurance company cannot be held as towards cost of the DG set. Accordingly, we delete the disallowance of Rs. 67,096/- confirmed by the learned Commissioner of Income-tax (Appeals) out of the depreciation claimed on DG set. Disallowance of professional fees - Held that:- We find that the main agreement between the assessee company and M/s. “ARBEITEN” is not clear, whether it was for revival of the assessee company or for targeting companies in the line of the business of the assessee or another lines of business, but in supplementary agreement. Part of the agreement indicates that the consultancy expenses were for the purpose of establishing a new venture and not for running of the existing business. Further, the Assessing Officer has already pointed out main agreement was not witnessed by any person. On perusal of copy of collaborator’s profile we find that it is not signed by the second party. We find that the assessee has not been able to substantiate that expenses, were in respect of the existing business. In view of above facts, we are of considered opinion that the order of learned Commissioner of Income-tax (Appeals) on the issue in dispute is well reasoned . Disallowance on account of bad debts written off - Held that:- It is evident from the annual report that assessee has made only provision for doubtful debt and debt has not been written off as bad in its books of accounts. Further, in note 8 of the Notes to Account, which is available on page 28 of the annual report provision for doubtful debts for current year and previous year are mentioned. In view of the facts mentioned in the annual report of the assessee, the claim of the assessee need further verification. In our opinion, it is appropriate to restore the matter back to the file of the Assessing Officer for verification of facts whether the assessee has written off the bad debts in books of accounts of the assessee. Accordingly, the ground of the appeal is allowed for statistical purpose.

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• 2017 (2) TMI 407
  Revision u/s 263 - process of printing was not in the category of Manufacturing as required under section 80IC(2) therefore AO has allowed the deduction wrongly - Held that:- Since the process carried out by the assessee of slitting the Rolls and printing thereon has been held by the Tribunal to be a manufacturing process in the case of assessee itself, therefore, the assessee is eligible for the deduction under section 80IC of the Act and in such circumstances allowing deduction by the Assessing Officer cannot be said as erroneous. Since the facts and circumstances of the case in the year under consideration are identical to the facts in assessment year 2008-09, respectfully following the above decision of the Tribunal, we are of the opinion that that the assessment order passed by the Assessing Officer under section 143(3) of the Act cannot be said to be erroneous so as to be prejudicial to the interest of the Revenue. We accordingly hold the order passed by the learned Commissioner of Income Tax as an invalid order and the same is quashed. - Decided in favour of assessee

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• 2017 (2) TMI 406
  Revision u/s 263 - addition of performance bonus of the earlier years - Held that:- we find that it was only by the end of July, 2010 the assessee company could quantify the performance bonus, and could pay it only alongwith the salary for the Month of August, 2010 payable in the month of September, as such by no stretch of imagination could we say that the assessee could have crystallized the liability during the FY 2009-10 itself or before the due date of filing of return. Addition of advertisement expenses Held that:- AR submission that arm's length price has to be considered, and the Ld. Pr. CIT compared the figures of 2010-11 with the figures of 2007-08 which does not reflect the correct state of affairs is very much acceptable. Further, Ld. AR invited our attention to pages 151 and 153 of the paper book wherein the assessee clearly submitted his contentions in respect of advertisement and selling expenses. Having considered the same, the AO took a probable view that such expenses are allowable as deductions. When we considered this fact in the light of the contemporaneous advertisement charges incurred by several players in the market or by the assessee in successive years, we find that the AO's allowing the same as deduction was not without enquiry or consideration of such facts, as such, the substitution of the opinion of the Ld. Pr. CIT is not justified for revision of the same u/s. 263 of the Act. Addition of service tax - Held that:- Merely because the practical wisdom dawned over the head of the assessee or his Ld. AR at a later point of time, the same cannot become unworthy of consideration or should be looked with suspicion. Ld. Pr. CIT is under a statutory obligation to verify the liability of service tax components in the hands of the assessee and in the hands of the landlord and since the landlord is under a statutory obligation to remit it to the government, section 43B of the Act is applicable only in respect of landlord. Ld. Pr. CIT should have taken the view that in the hands of the assessee such a liability assumes the character of contractual liability as such, sec. 43B of the Act has no application. Thus we are convinced that such a course taken by the Ld. Pr. CIT is beyond the scope of section 263 of the Act and it is for the Ld. Pr. CIT to pursue his basis to initiate proceedings vide show cause notice dated 17.02.2016 to their logical conclusion. His observation that there was no proper or adequate enquiry by the AO on these aspects is a clear shift of stand which is not permissible under law. - Decided in favour of assessee

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• 2017 (2) TMI 405
  Unexplained investment - Held that:- The assessee had clearly explained the source of Rs. 50 lakhs, from the loan taken by her, her spouse and her son. It was not brought on record any other utilisation for the loan taken by her and her family. Her son withdrew cash of Rs. 20 lakhs on July 21, 2008 and the same was utilised to pay on October 22, 2008. There is no other diversion or utilisation of Rs. 20 lakhs was brought on record. Considering the above discussion, in our view, the assessee has clearly explained the sources for the investment. The Revenue disputes on Rs. 12.50 lakhs payment for which there is clear evidence that her husband withdrew Rs. 5 lakhs and her son withdrew Rs. 7.50 lakhs from their respective bank account. Once the assessee demonstrates the sources clearly, there is no room for other views. There may be some delay in making the payment but the sources are clear, it has to be considered - Decided in favour of assessee Unexplained investment in house property - Held that:- The assessee has shown that the amount of Rs. 13.40 lakhs was received from her son, which was taken as loan by her son from Reliance capital. The Assessing Officer in his remand report rejected this source based on the fact that her son has not indicated that this amount was given to her. The assessee and her family has not invested the amount taken on loan or at least it was not brought on record by the Assessing Officer that they utilised the amount taken on loan for making any other investment other than the investment of construction of house, we cannot deny the benefit of accepting their contention. The family has no other source to make the investment. Hence, we accept the submission of the assessee and accordingly ground raised by the assessee is allowed. Unexplained credits - Held that:- From the record, the Assessing Officer has not brought on record any other material to show that the assessee has other source of income. The assessee is earning only rental income. The assessee has claimed that she has income from agriculture also, we are not sure whether the same was declared in return of income, it was not placed on record. Even otherwise, as claimed, the assessee is not depended on the income to run the family. She is earning rental income of Rs. 26,000 per month. This itself is enough to make the above deposits in the bank. In the absence of any cogent material found by the Revenue, we give benefit of doubt in favour of the assessee and accordingly we delete the addition.- Decided in favour of assessee

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• 2017 (2) TMI 404
  G.P. rate determination - CIT-A reduced rate 20.78% from the gross profit rate of 25% applied by AO - Held that:- Rate of 25% applied by the Assessing Officer was without any comparable case, whereas the learned Commissioner of Income-tax (Appeals) has applied the gross profit rate shown by the assessee in the immediately preceding assessment year. We find that learned Senior Departmental Representative could not controvert the fact that there is no material change in the business activity of the assessee in the year under consideration as compared to the immediately preceding year. As regard to the arguments of learned Authorized Representative of the assessee, we find that the assessee has neither filed any cross objection or appeal contesting the issue of rejection of books of accounts and not taken any additional ground in this respect and therefore the arguments of learned Authorized Representative, not to reject the books of accounts, cannot be considered. The findings of the learned Commissioner of Income-tax (Appeals) on the issue in dispute are well reasoned. Addition u/s 41(1) - cessation/remission of liability in respect of two creditors - Held that:- Trading liability of both the parties, i.e, M/s. Fastech Telecommunication Private Limited and M/s Scientech Technology Private Limited are appearing as opening balance in the Ledger accounts of the parties in the books of accounts the assessee irrespective of the fact that in the books of accounts of the parties the balances of the assessee are shown as nil. Thus, it is clear that in books of account of the assessee, liability has not been remitted or ceased to exist. Secondly, from the nil opening balances in ledger accounts of the assessee in the books of accounts of those parties, it manifests that the liability has been either paid or waived in earlier years and not in the year under consideration. Thus, it is evident that the liabilities of both the parties have not been remitted by the assessee in its books of accounts at least in the year under consideration and no benefit has been obtained in respect of the trading liabilities, therefore, the provisions of section 41(1) of the Act are not applicable in the facts of the assessee in the year under consideration.

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• 2017 (2) TMI 403
  Penalty u/s 271(1)(c) - Held that:- In the light of the decision of the Co-ordinate Bench in the quantum appeal, as the quantum addition relating to disallowance of gratuity has been deleted by the Co-ordinate Bench, we are of the view that penalty u/s 271(1)(c) of the Act on disallowance of gratuity payment has been rightly deleted by ld. CIT(A). As regards disallowance on depreciation on investment the matter had been set aside to the file of ld. CIT(A), we are of the view that penalty u/s 271(1)(c) of the Act is not called for at this juncture. however, after the fresh decision of ld. CIT(A) on this issue as directed by the Co-ordinate Bench if the disallowance on depreciation on investment is sustained then the Revenue will be at liberty to again impose the penalty u/s 271(1)(c) of the Act on the addition sustained.

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• 2017 (2) TMI 402
  Disallowance of Payment of on-money for purchase of land - Held that:- As during the survey an agreement of sale was found in the business premises of the assessee, as per which, M/s OMDPL proposed to buy land from 11 vendors. In the above company, the assessee is holding 35% of shares. In a separate search proceedings in Delhi, similar agreement of sale was found in the premises of M/s Shiv-vani group, which is having interest in M/s Metro Management Services Pvt. Ltd. (MMSPL). M/s MMSPL is holding 65% shares in M/s OMDPL. The AO brought to tax the on money payment which was made by M/s OMDPL to the land owners based on the shareholders in M/s OMDPL. AO failed to appreciate that company is an independent entity and distinct person. The action of the company will not have any bearing on the shareholders. AO has no jurisdiction to charge anything in the case of assessee over the dealings of any other person. It is brought on record that on money was paid in the dealings by M/s OMDPL towards the purchase of land, if at all any addition can be made, it can be in the hands of M/s OMDPL and not in the hands of the assessee. It is misconceived idea to charge payment of ‘on money’ to the shareholders of the company, in which company entered in the transaction. We cannot accept and appreciate the action of the AO. - Decided against revenue Unexplained expenditure - Held that:- AO has not brought any cogent material to prove that assessee has actually incurred these expenses except finding loose sheet in the premises in which such details were recorded. We are inclined to accept the findings of ld. CIT(A). Accordingly ground raised by the revenue is dismissed. - Decided against revenue Disallowance u/s 14A - Held that:- As per the P&L account and balance sheet submitted before us, the assessee had not earned any exempt income. The provisions of section 14A will be applied to find the expenditure relating to exempt income. In the absence of such exempt income, no expenditure can be disallowed in relation to exempt income. Accordingly, we uphold the decision of CIT(A) and dismiss the ground raised by the revenue.- Decided against revenue

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• 2017 (2) TMI 401
  Disallowance of claim of bad debt - Held that:- The assessee is an urban co-operative bank eligible for deduction for bad debts on account of provision for bad and doubtful debts under section 36(1)(viia). It was informed that since the assessee was not having any rural advances, it was not eligible for the benefit of deduction under section 36(1)(viia). Under these circumstances, the assessee made claim on account of bad debts under section 36(1)(vii) as normal assessee, i.e. an assessee other than a bank. But, the Assessing Officer denied the benefit of deduction, firstly for the reason that the assessee cannot claim double deduction. However, this objection was rightly removed by the learned Commissioner of Income-tax (Appeals) by observing that in case the assessee has not made claim under section 36(1)(viia), then the assessee was entitled to claim deduction under section 36(1)(vii). The bad debt has been written off in the account in the year before us as is evident from the fact that when the amount was credited in the respective debtors' account, the debtors were reduced to that extent. Further, the profit and loss account has already been debited with the corresponding amount as per the accounting procedure followed by the assessee as narrated above. Thus, both the conditions stand fulfilled. The second condition was fulfilled in the year before us. Thus, in our view, the assessee became eligible to claim deduction on account of bad debts in the year before us. Under these circumstances, we find that the assessee is principally eligible to claim bad debts in the year before us.

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• 2017 (2) TMI 400
  Disallowance made u/s 40A(3) - Held that:- Assessee’s case falls under the exceptions provided in Rule 6DD(b) and (k) of the Rules and accordingly, no disallowance u/s 40A(3) of the Act could be made in the facts and circumstances of the case to the tune of Rs. 29,73,086/-. Accordingly, the ground raised in this regard is allowed. However, with regard to another cash payment to the tune of Rs. 3,48,392/- made to M/s United Spirits Ltd towards purchase of beer, as fairly conceded by the ld AR , the same is in violation of section 40A(3) of the Act and hence the ground raised in this regard is dismissed.

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• 2017 (2) TMI 399
  Assessment of income on the non-performing assets - accrual of income - Held that:- The assessee was systematically following the accounting method with regard to the non-performing asset. When the advances are classified as non-performing assets, the assessee was continuously following a practice of recognising the interest on receipt basis. This method of accounting continuously followed by the assessee is not in dispute. When the advances were classified as non-performing assets and the assessee shifting to the cash system of accounting in respect of such advances which are classified as non-performing assets, this Tribunal is of the considered opinion that when the recovery of principal amount itself was doubtful, it cannot be said that the interest on such amount accrued to the assessee. Therefore, as per the system of accounting continuously followed by the assessee, the interest income on non-performing assets cannot be taken as income of the assessee. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. - Decided against revenue

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• 2017 (2) TMI 398
  TDS u/s 194C - payments made to a sister concern - Held that:- Since the amounts received by the payee, i.e., M/s Aakriti Creation Pvt. Ltd. were reported by it in the regular course of assessments, the disallowance of the entire amounts, under Section 40(a)(ia) of the Act in effect would render one payment which constitutes a transaction liable to income tax, twice over. Considering that Parliament remedied the law by amendment through insertion of the second proviso, in cases such as the present one, where the AO can have easy access to the returns of the payee, in the larger interest of the assessee and the Revenue, it would be appropriate that the A.O. examines the figures with relation to the exact claim of payments toward the raw materials. The AO would examine, if necessary, the returns and relative documents pertaining to the payee M/s Aakriti Creation Pvt. Ltd. With these observations, the matter is remanded for reconsideration; in the event the A.O. is satisfied that the claim towards the payment does not include any income component but in fact constitutes reimbursement, the question of application of Section 40(a)(ia) would not arise.

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• 2017 (2) TMI 397
  Entitlement to deduction of interest/service charges paid on funds raised to subscribe to the rights issue and for retaining control of 28% of its holding - Held that:- Consequently and more fundamentally the interest expenditure in the present case is not of the kind that went into capital stream. The expenditure clearly is not towards acquisition of the capital nor is it an integral part of it, it is only the service alone. It is of a similar kind that would otherwise have been permitted under Section 37 of the Income Tax Act. Since this expenditure does not pertain to the stream of income covered by Section 37 and is not excluded by Section 57 (3), it had to be and was correctly allowed. - Decided in favour of the assessee.

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• 2017 (2) TMI 396
  Validity of reopening of assessment - information received from the DDIT (Investigation) - over invoicing of the goods - Held that:- From the material on record, it appears that it is not in dispute that on the basis of the information supplied /given by DRI who issued the show cause notice with respect to six consignments of the imported rough diamonds, more particularly, with respect to over invoicing of the goods original assessment was taken under scrutiny assessment. The Assessing Officer as such issued questionare to the petitioner – assessee and thereafter considered the aforesaid and made some additions, and therefore, the entire issue with respect to the aforesaid six imported consignments of rough diamonds was in fact gone into by the Assessing Officer and considered in detail and thereafter the Assessing Officer framed the scrutiny assessment under Section 143(3) of the Act, and therefore, subsequent reassessment proceedings and /or reopening of the assessment on the very issue, more particularly, with respect to the consignment of the imported six rough diamonds can be said to be mere change of opinion. Considering the decision in the case of Kelvinator of India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA ) merely on the basis of the change of opinion by the subsequent Assessing Officer / Assessing Officer reopening of the assessment is not permissible. - Decided in favour of assessee

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• 2017 (2) TMI 395
  Order of attachment of the property - permissible for the Tax Recovery Officer to sell the property in question for the dues of the original assessee - Held that:- Even in a case where the property is already sold by the department in an auction for the dues of the original assessee, in that case also, defaulter, or the person interested in the property can submit an appropriate application to set aside the sale on payment of entire amount due and payable by the assessee / defaulter along with other amount as mentioned in Rule 60. At this stage, it is required to be noted that as such no further proceedings were initiated by the department and the property was not even put to auction and before that, the entire amount due and payable under the Certificate for which the property was attached, has been paid along with interest under section 220(2) of the Act. Under the circumstances, when the entire amount due and payable under the Certificate for which the property was attached under Rule 48, has been paid along with interest under section 220(2) of the Act, the impugned order declaring the transaction in favour of the petitioner as null and void deserves to be quashed and set aside. The order of attachment under Rule 48 can be issued only with respect to the Certificate issued for the amount due and payable by the original assessee. Therefore, the contention on behalf of the revenue that the impugned attachment order dated 4/1/2005 can be said to be continued with respect to amount due and payable under penalty order dated 17/3/2006, has no substance and the same cannot be accepted. It is required to be noted that when the order of attachment was passed on 4/1/2005, the penalty order was not even in existence, as the same has been passed subsequently on 17/3/2006 i.e. after a period of more than one year. However, still it will be open for the revenue to initiate appropriate proceedings to recover the amount due and payable under penalty order dated 17/3/2006 and may be from the very property in question, if permissible under the law. However, on the aforesaid ground, the impugned order cannot be continued, as the amount due and payable under the Certificate has been paid by the original assessee with interest is 220(2) of the Income Tax Act.

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• 2017 (2) TMI 394
  Delay in filing application for registration under section 12A - reasons for delay - Held that:- Initial application filed by the society did not make any request for condonation of delay and no justification was given. In the subsequent application filed seeking condonation of delay, the only reason given is that the society was not aware that instead of getting separate individual educational institutions registered, society itself should have got registration. This explanation has not been found satisfactory by the Commissioner of Income-tax since society admittedly had assistance of well qualified chartered accountants, etc. and it is not the case that registration granted to two educational institutions separately was illegal or impermissible. The Tribunal has discussed several law, applicable for considering the question of condonation of delay under the Limitation Act, 1963 but looking to the language of the statute in the case in hand, we do not find that the respondents have given any such explanation, what to say of satisfactory, and the Tribunal has read much more therein which has not been stated at all. The registration of the individual institutions have been cancelled with the consent prospectively and simultaneously, society as a whole, has been granted registration. Therefore, in our view, the Tribunal in condoning delay and granting registration to society with effect from April 1, 1973, has erred in law and the aforesaid judgment and order cannot be sustained.

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• 2017 (2) TMI 393
  Taxation of entire deposits in the bank - peak surrendered by assessee - Held that:- Admittedly, neither any other source of income has been pointed out by AO nor any investment out of withdrawals from bank has been shown. Under such circumstances, assessee’s explanation that both the bank accounts were in relation to its business, cannot be doubted. In our opinion, the peak surrendered by assessee should have been accepted by lower revenue authorities, in the absence of books of a/c. - Hansraj vs. ITO, Faridabad [2017 (2) TMI 291 - ITAT DELHI] 1702857 - Decided in favour of assessee.

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• 2017 (2) TMI 392
  Penalty u/s 271(1)(c) - concealment of income or for furnishing in accurate particulars of income - Held that:- In the penalty order it nowhere mentions that it is for concealment of income or for furnishing in accurate particulars of income. Penalty notice dated 25.3.2013 mentions both the alleged charges without clearly specifying as to whether it is for concealment or for inaccurate particulars. As in the next penalty notice dated 26.8.2013 is also on the similar lines as per notice dated 25.3.2013. Therefore, the notice for penalty was ambiguous and vague in as much as it is stated both concealment of particulars of income or furnishing of inaccurate particulars. No proper or reasonable opportunity was given by the AO to meet the charge. The charge itself was stated to be nebulously. The penalty notice contains both ingredients of penalty without satisfying the particular contravention for which the proceedings have been initiated. In such circumstances, the penalty as levied by the AO in terms of his order dated 30.9.2013 in ab initio invalid, illegal and must be quashed. - Decided in favour of assessee

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• 2017 (2) TMI 391
  Validity of reopening of assessment - reopening based on borrowed satisfaction - Held that:- It is notable that the present proceedings u/s. 147/148 have been initiated merely on the basis of information, inferences and enquiries made by other Assessing Officer, i.e., ITO 2(1) Meerut having jurisdiction over Nikhil Gupta, that too with respect to A.Y. 2005-06. The reasons recorded contain only the reference of the inferences drawn by other ITO as communicated vide letter dated 03.03.2007 whereas the assessment order for A.Y. 2005-06, on the basis of which such inferences were drawn by the said ITO, was passed on subsequent date on 30.03.2007. The reasons recorded do not contain even the date of its recording. The AO in the instant case has acted solely on the satisfaction of other Assessing Officer without recording his own satisfaction or without having any independent material to form a belief of escapement of income. Therefore, the initiation of proceedings u/s. 147/148 are vitiated, being based on borrowed satisfaction which is not sustainable in the eye of law. It is further notable that even the material on the basis of which the other Assessing Officer drew inferences against the assessee and communicated to the assessee’s Assessing Officer, were not confronted to the assessee for rebuttal despite the assessee made specific request for the same. - Decided in favour of assessee

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• 2017 (2) TMI 390
  Deduction u/s. 80IB(1)- whether housing project 'Brahma Avenue' approved on 06.10.2000 which was still incomplete by 31.03.2008 in violation of section 80IB(10)(a)(i) of the Act? - Held that:- Tribunal hold that Brahma Avenue project is a different and independent project from the project of Brahma Estate. This finding of fact is not shown to be perverse in any manner. On the basis of above facts, the impugned order placed reliance inter alia upon decision of this Court in CIT vs. Vandana Properties [2012 (4) TMI 54 - BOMBAY HIGH COURT ] to hold that Brahma Avenue being a separate and different project is independent of project Brahma Estate and it cannot be considered to be part of Brahma Estate project. - Decided against the Revenue

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• 2017 (2) TMI 389
  Unexplained cash credit - credit worthiness of 56 shareholders have not been proved - proof of identity, genuineness and credit worthiness of the subscribers - Held that:- We find that the Appellate Authority found that along with the affidavit the shareholders had produced the share application form, the share certificate and other supporting documents to show purchase of the share by them in the assessee's Company and the aforesaid was corroborated by the evidence. AO did not call for the account book, balance sheet and other documents from the Assessee Company and only because the shareholders were not produced, disbelieve their contention. The Tribunal has discussed the affidavit of each of the 60 persons and has given reason as to why there are material in the affidavit to show that these were creditworthy shareholders who had invested in amount of Rs. 2,55,60,000/- and by placing reliance on various judgments has recorded a finding to say that if the Assessing Officer had any apprehension with regard to the creditworthiness of the shareholders a proper enquiry should have been conducted by the Assessing Officer and the Assessing Officer having not done so, it is seen that the Commissioner, Appeals and the Tribunal conducted the exercise, examine the genuineness of the affidavit and by recording reason in para 25 has decided the issue. The finding recorded by the Tribunal is a finding of fact based on due assessment of the material that came and we find no substantial question of law warranting reconsideration.

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• 2017 (2) TMI 388
  Repayment of loan - whether was a capital receipt and not subject to tax as deemed income under Section 41? - Held that:- The benefit on account of premature payment of deferred sales tax being on Capital Account and cannot be considered as income under Section 41(1) of the Act stands concluded in favour of the respondent – assessee. See Commissioner of Income Tax Vs. Sulzer India Ltd. and Others [2014 (12) TMI 267 - BOMBAY HIGH COURT].

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• 2017 (2) TMI 346
  Assessments made by TPO/AO set aside after the search and seizure proceedings, culminating in a proceeding under Section 153A - Held that:- This Court has considered the record. It is quite evident that the scrutiny assessments concluded earlier were based upon queries. The assessee had disclosed all the materials which came to be reviewed subsequently in Section 153A proceedings. Thus, having regard to the the decision in Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] in the absence of seizure of any incriminating material, the ITAT, in this Court’s opinion, did not fall into error in quashing the proceedings

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• Customs

• 2017 (2) TMI 359
  Classification of goods - Applicability of circular with retrospective effect - Benefit of N/N. 11/97 - import of insole sheets for leather footwear - denial on the ground of non-fulfillment of condition of notification - Held that: - the products imported by the appellant are specifically mentioned in serial No.3 in list 3(A). It is to be noticed that there is no other condition has been put in the notification for extending the benefit of the said concessional rate of duty - the imports in this case being prior to the date of circular having been issued, the actual user condition cannot be imposed on the appellant to deny the benefit of concessional rate of duty - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 358
  Imposition of redemption fine - penalty - non-production of Homologation certificate of the imported cars - Held that: - identical issue was before this bench in the case of Fulford India [2015 (12) TMI 853 - CESTAT MUMBAI], where it was held that since the car is used by the company in India and there is no commercial consideration attached or involved in the matter, the imposition of fine and penalty has to be minimal - the cars which are imported herein being similar as is imported in the case of Fulford India; respectfully following the ratio in the case of Fulford India, it is held that redemption fine which is imposed on all these appeals should be 10% of the value of the car and penalty should be 5% of the value of the car - appeal disposed off - decided partly in favor of appellant.

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• 2017 (2) TMI 357
  Restoration of CHA licence - time limitation - violation of time limit prescribed under Regulation 19 and 20 of CBLR, as the confirmation of suspension of the licence in the case in hand took place on 20.1.2016 and as on date i.e. 1.12.2016, there is no notice of revocation of the licence - Held that: - the enquiry proceedings against the appellant may not be over 270 days from the date of confirmation of the suspension of licence - Since there is no issue of notice for revocation of the licence which should have been issued within 90 days of the receipt of the Offence Report, the further actions as regarding the enquiry and submission of enquiry report and the order of revocation within 90 days of each issue seems to be impossibility - the lower authorities may not be able to complete the proceedings within the stipulated period of 270 days, the impugned order is unsustainable only on the ground that the lower authorities have not issued any show cause notice till date from the date of confirmation of suspension of licence - licence restored - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 356
  Fake and spurious goods imported - breach of law relating to Intellectual Property - Commissioner (Appeals) has directed destruction of the goods - There being a claimant-importer, the cost of destruction shall be at his cost. Revenue is at liberty to realize respective penalties as has been ordered in the adjudication order. Such realization shall be a message to the society that breach of law is not rewarded with bonus but that shall face penal consequence of law.

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• 2017 (2) TMI 355
  Classification of goods - Rotavapor R-220 - Held that: - Finding that the goods is of specific description under CTH 8419, classification under this heading confirmed. Valuation - Held that: - it is common sense that with the change in the classification, the valuation is bound to be disturbed - the goods valued at Rs. 27,09,723/- and considering 10% value thereof as normal profit, he imposed a redemption fine of Rs. 2,70,000/- under Section 125 of the Customs Act, 1962. That also does not warrant any interference. Imposition of penalty - Held that: - when the confiscation remained untouched, Section 112(a) penalty is bound to flow. Considering the value of the goods and extent of Revenue loss made by the appellant, penalty is also confirmed. Appeal dismissed - decided against appellant.

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• 2017 (2) TMI 354
  Imposition of penalty u/s 114A of Customs Act, 1962 - failure to specify the name of the firm or individual on whom the penalty u/s 114A of CA, 1962 was fastened - Held that: - penalty u/s 114A is liable to be imposed on the person liable to pay duty as determined in proceedings under section 28 - The importer in the present matter has been identified in the impugned order as ‘noticee’ and has been fastened with differential duty on the enhanced value. Doubtlessly, it is the same entity that is liable to be penalised. There is no requirement for a specific mention of the importer to validate the penalty under section 114A of Customs Act, 1962. The order is not invalidated on that count - imposition of penalty justified. Penalty u/s 112 of CA, 1962 - Held that: - While one penalty has been imposed u/s 114A, the penalty of Rs. 14,61,000/- is without reference to any provision, let alone section 112 as presumed by the appellant. Even if such penalty was imposed u/s 112 of Customs Act, 1962, this is a consequence of holding the goods liable for confiscation u/s 111(m) and the adjudicating Commissioner has rendered a finding for doing so - imposition of penalty presumed to be u/s 112, cannot also be faulted. Imposition of penalty both u/s 114A and u/s 112 of Customs Act, 1962 is not improper - revenue dismissed - decided against revenue.

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• 2017 (2) TMI 353
  EPCG Scheme - benefit of exemption - import of Magnetic Mixers/agitators with mixing head, drive unit and accessories in SKD position - denial on the ground that the goods imported was not covered by the EPCG Licence - whether it is permitted to import individual components in different bill of entries? - Held that: - the three components have always been imported in sets and are assembled on the vessel independently. There is no bar on importing the sets as individual components and therefore the argument of the Revenue that components have been imported and the same are not covered by EPCG Licence does not hold any weight. From the table in first para of this order, it is seen that the quantity imported has always been within the limit prescribed in the EPCG Licence and therefore Notification No.49/2000 dt. 27.4.2000 cannot be denied to the appellants - the EPCG Licence covered the goods and there was no bar on importing the individual components in different bill of entries so long as the total number of sets imported is within the limit prescribed in the EPCG licence - duty demand set aside. Confiscation - misdeclaration of the quantity of goods imported - Held that: - the quantity declared in the bill of entry is less than the actual quantity imported and Section 111(l) has rightly invoked. Further it is seen that the quantity and value declared in the bill of entry does not match with the actual quantity found and the consignment thus Section 111(m) has also rightly been invoked. Imposition of redemption fine - Held that: - the redemption fine in respect of imports made vide bill of entry No. 3054 is revised to Rs. 3 lakhs only. In respect of imports made vide bill of entry No. 2658 redemption fine of Rs. 2lakhs has been imposed, the same is upheld. Imposition of penalty - Held that: - there was a error in the bill of entry No. 3054 when the same was filed before Customs on 17.6.2002 still no efforts were made to correct the declaration. Infact the subsequent bill of entry was also filed that wrong details. In these circumstances, the penalty of Rs. 1 lakh imposed u/s 112(a) is reasonable. Appeal disposed off - decided partly in favor of appellant.

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• 2017 (2) TMI 352
  Natural justice - imposition of penalty u/s 112(a) and / or 112(b) of the Customs Act, 1962 - The impugned Order is undisputedly an ex-parte Order so far as the appellant is concerned. Neither Show Cause notice dated 5.4.2001, nor the personal hearing intimations were received by the Appellant or his son Shri Nitesh Sadarangani - Held that: - Although there is a reference to the appellant in this gist of statement dated 19.10.2000, however as per this gist of statement the appellant was only present in the Warehouse at Vashi, when the container was destuffed. There is however no role attributed to the appellant which can be sufficient for imposition of penalty indicating any knowledge or mens rea - it would be in the interest of justice if the matter is remanded back for de-novo adjudication after complying with the principles of natural justice - appeal allowed by way of remand.

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• 2017 (2) TMI 351
  Revocation of CHA licence - smuggling of red sanders - time limit prescribed under Regulation 19 and 20 of CBLR - Held that: - the notices for revocation of the licence or appointing the enquiry officer for enquiry into the violation of the regulations, is not yet undertaken. In the absence of any such activity on the part of the lower authorities, we agree with learned counsel that the enquiry proceedings against the appellant may not be over 270 days from the date of confirmation of the suspension of licence. Although the lower authorities may not be able to complete the proceedings within the stipulated period of 270 days, the impugned order is unsustainable only on the ground that the lower authorities have not issued any SCN till date from the date of confirmation of suspension of licence. Appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2017 (2) TMI 347
  Penalty under Section 15A(b) of SEBI Act - acquired and sold shares in excess of the limits - SECURITIES APPELLATE TRIBUNAL MUMBAI(2017 (2) TMI 288 - SECURITIES APPELLATE TRIBUNAL MUMBAI)confirmed penalty - Held that:- Issue notice to show cause as to why the appeal should not be admitted. There shall be stay of implementation of the impugned order passed by the Securities Appellate Tribunbal, Mumbai, until further orders.

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• Service Tax

• 2017 (2) TMI 387
  Charitable institution - Business Auxiliary services - commission agency - Held that: - The intention of the taxing entry as appeared in law prior to 30.04.2006 and as suggested by the ld. Counsel was that commercial concerns were brought to the ambit of tax under the taxing entry BAS. Appellant came to existence in terms of a trust deed as charitable institution without being a commercial concern. It is noticed that when law was amended bringing any person including a commercial concern to the ambit of tax w.e.f. 01.05.2006, appellant has paid service tax from 01.05.2006. The appellant was not a commercial concern before 30.04.2006 under the law - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 386
  Imposition of penalty u/s 76 and 78 of the FA, 1994 - appellant's claim that on the demise of managing director of the company, filing the ST-3 Returns and discharge of Tax could not be complied on the schedule time as prescribed - whether imposition of penalty justified? - Held that: - I do not see any intention by way of suppression or mis-statement of facts resulting into non payment of service tax in time by the appellant. Therefore, penalty u/s 78 is unwarranted and unsustainable of law. However, it is also not contradicted that the amount has been collected from their customers but not paid to the Govt. in time. Thus, penalty u/s 76 is attracted. Appeal disposed off - decided partly in favor of assessee.

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• 2017 (2) TMI 385
  CENVAT Credit - inputs - angles, channels and beams etc., used to erect the towers and pre-fabricated buildings on which transmission equipments were installed - Held that: - the matter is already been decided against the appellant by Hon'ble High Court of Bombay in the case of Bharti Airtel Ltd., Vs CCE, Pune-III [2014 (9) TMI 38 - BOMBAY HIGH COURT], where on similar inputs, it was held that the subject items are neither capital goods u/r 2(a) nor inputs u/r 2(k) of the Credit Rules - the appellant-assessee will not be eligible to avail the cenvat credit on angles, channels and beams etc. used to erect the impugned towers. Imposition of penalty - Held that: - the issue is interpretational in nature. Concerning the eligibility of credit on the parts used in the towers, there has been sufficient confusion in the matter. It is also not disputed that there was more than one view in the matter - penalty set aside - extended period of limitation also set aside. Appeal disposed off - decided partly in favor of assessee.

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• 2017 (2) TMI 384
  No-speaking order - refund - limitation - refund claim rejected based upon judicial pronouncements in the case of Swagat Synthetics and STI India Ltd [2008 (10) TMI 246 - HIGH COURT OF MADHYA PRADESH AT INDORE] - Held that: - the impugned orders of the first appellate authority are not speaking order having not recorded any reasoning for upholding the adjudication order. In the interest of justice, we deem it fit to remand the matter back to the first appellate authority to reconsider the issue afresh in the light of N/N. 5/2006-CE(NT) as amended as also the relevant case laws - appeal allowed by way of remand.

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• 2017 (2) TMI 383
  100% EOU - Refund claim - Rule 5 of CCR read with N/N. 27/2012-CE dated 18.6.2012 - Time bar - Held that: - the relevant period of one year starts from the end of the quarter for which the export realization has taken place - the refund claims are filed in respect of exports pertaining to quarter January 2013 to March 2013 on 13.2.2014 - refund claim filed within the relevant period of one year - refund allowed - appeal dismissed - decided against Revenue.

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• 2017 (2) TMI 382
  Classification of services - services related to godown premises of GPI in relation to handling of Tobacco & Non-tobacco materials and transportation of the same from godown to factory, supply of trained forklift operators at factory and godown, carrying out bright scrap (tobacco leaf) activity including opening of bales, crushing and transferring the bright scrap into bags, weighment and closing of filled bags, etc - whether services classified under cargo handling services or not? - demand of tax, interest and penalty. Held that: - the classification accepted by the appellant has been contested in the said SCN but the said SCN did not give the opportunity to the appellant to putforth his argument on proposed classification of services provided by him. Revenue has prejudged the issue and unilaterally decided the classification which is against the principle of natural justice. Further, the SCN has admitted to demand the Service tax on that component of the assessable value on which Service tax was already paid by service recipient. Therefore, we find that the said SCN is unsustainable - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2017 (2) TMI 381
  Whether an adjudication order can, in the manner natural to protozoa, split into two? - Held that: - The Commissioner who issued the order in 2005 was well aware of the existence of the order of 2002 and that it had, by lack of any appeal thereto, attained finality. Another order re-determining the value of the goods covered in the earlier order is, therefore, without sanction of law Doubtlessly, it was the Tribunal that did order the second de novo proceedings, but it occurred after conclusion of the first and without nullifying that de novo order - The adjudicating authority, fully aware that their own appeal was, as yet, pending for disposal in the Tribunal, should have awaited disposal of that appeal before taking up the adjudication. Even when the second order was in possession of the adjudicating authority, and being cognizant of the first de novo order, appropriate clarification should have been sought from the Tribunal. Not having taken corrective steps, the consequences must follow, as surely as night follows day. The impugned order is rendered a nullity and the merits in a null order is beyond the scope of consideration in this appeal - appeal disposed off.

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• 2017 (2) TMI 380
  Demand of interest - section 11A of the Central Excise Act, 1944 - duty demand is confirmed, whether the charging of interest is justified? - Held that: - when the duty is determined under Section 11A(2), the interest will be invariably chargeable. As per, impugned order the duty was undisputedly determination under Section 11A, hence the demand of interest is absolutely in accordance with law, which does not require any interference - appeal dismissed - decided against appellant.

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• 2017 (2) TMI 379
  CENVAT credit for the period 2002-03 - denial on the ground that CCR, 2004 came into effect from 10-9-2004 vide N/N. 23/04-CE(N.T.) dated 10-9-2004 - Held that: - under CCR, 2004 the assessee is allowed to take credit of service tax paid only on such services which was received by the manufacturer on or after 10-9-2004 - In the present case the services admittedly provider by the provider and received by the appellant before 10-9-2004 therefore in terms of Rule 3(i) of CCR, 2004 credit is not admissible - credit is not admissible even as per transitional provisions under Rule 11 of Cenvat Credit Rules, 2004 - appeal dismissed - decided against assessee.

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• 2017 (2) TMI 378
  Classification - Synthetic Rubber Aprons and Cots - whether the product is classifiable under Chapter 4009.99 attracting nil rate of duty as claimed by the appellant or classifiable under Chapter `Heading 4016.99 attracting duty at the rate of 15%? - Held that: - the classification of goods in question is to be decided under Chapter heading between 4009.99 or 4016.99. Since both the lower authorities have decided the classification under 8448.00, they have not considered the possibility of classifying the goods under 4009.99 or 4016.99. Since classification is based on the facts of nature of goods, it will be appropriate in the interest of justice that the matter be reconsidered by the adjudicating authority - appeal allowed by way of remand.

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• 2017 (2) TMI 377
  Exemption N/N. 35/95-CE. - embroidery thread - Held that: - the yarn falling under chapter 51,52,54 or 55 is exempted except sewing thread subject to condition No. 5 - Since the product is admittedly embroidery thread it is other than the sewing thread therefore it is clearly eligible for exemption notification. The circular No. 26/95 of the Commissioner Bombay also supports the claim of the appellants wherein it was clarified that even when the embroidery yarn is used on the manufactured fabrics, it was considered as used in the Embroidery fabrics, therefore the exemption N/N. 35/95-CE dt. 16.3.95 was extended to the embroidery yarn. Appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 376
  Jurisdiction - Benefit of N/N. 214/86-CE dated 25th March 1986 - job-work - Held that: - this aspect was brought to the notice of the first appellate authority who was disinclined to accept that plea on the ground that ‘comity of courts’ suffices to confer jurisdiction on the adjudicating authority by relying on the decision of the Tribunal in Pushpit Steels Pvt Ltd v. Commissioner of Customs, Kochi [2000 (8) TMI 553 - CEGAT, CHENNAI] - The interpretation placed by the first appellate authority on this observation without benefit of the context led him to conclude that the authority that chooses to act first acquires primary jurisdiction to the exclusion of others. It is, in reality, to the contrary. The demand of duty from, and imposition of penalty upon, the appellant is beyond jurisdiction and must fail - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 375
  Exemption N/N. 6/2002-CE dated 1-3-2002 - Insulated Wires and Cables - Held that: - it is absolutely clear that under the provision of Consessional Duty Rules, 2000 the recovery of duty shall be made only from the user manufacturer and not by the supplier manufacturer, therefore taking into consideration the provisions of Rule 6 and the obligation of the buyer for execution of the bond, we are of the clear view that if at all exemption is not available duty can be recovered from buyer and not from the supplier - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 374
  Classification of manufactured product - Shapes and Sections - whether it is to be classified under Heading No. 7216.20 or 7308.90? - Held that: - these goods cannot be considered as prepared for use in structurals. Consequently, they merit classification under 7216.20 and not under 7308.90 - appeal rejected - decided against Revenue.

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• 2017 (2) TMI 373
  Refund claim - unjust enrichment - denial on the ground that the appellant could not produce documentary evidence to show that the incidence of differential duty paid in excess by the appellant has not been passed on to the customer - Held that: - the excise duty paid by the appellant over and above the 18% that at the rate of 30% was not paid by the customer i.e. CPWD to the appellant - some of the documents were submitted along with their reply to the adjudicating authority. With these evidence there is no doubt that the incidence of duty was not passed on by the appellant to the customer or to any other person - refund allowed - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 372
  Valuation - inclusion of notional interest on advances in the assessable value - Held that: - We find that no evidence of any influence on the assessable value on account of such advances should have been produced by the Revenue - reliance placed in the case of ISPL Industries Ltd. [2003 (4) TMI 99 - SUPREME COURT OF INDIA] to assert that in absence of any evidence of influence on the assessable value on account of such advances, the notional interest cannot be added to the assessable value - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 371
  CENVAT credit - Bars and Rods of non alloy steel - denial on the ground that the goods manufactured by the Respondent being notified goods in terms of Section 3A of Central Excise Act, 1944, the respondent should pay duty under Section 3A of Central Excise Act,1944 and not entitle for modvat credit - Held that: - the respondent’s payment of duty under section 3 is in order and provision of Section 3A is not applicable - reliance placed in the case of SHREE VENKATESH STEEL LTD. Versus COMMISSIONER OF CENTRAL EXCISE, RAIGAD [2005 (12) TMI 404 - CESTAT, MUMBAI] where it was held that since the respondent is producing predominantly non notified goods, they are entitled to discharge duty liability for the entire quantity of goods under the normal procedure under Section 3 of the Central Excise Act, 1944 and they are also eligible to take Modvat credit on the inputs used. The respondent is entitled for Modvat credit as well as job work N/N. 214/86-C.E. - appeal dismissed - decided against Revenue.

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• 2017 (2) TMI 370
  Classification of imported goods - ‘Solubor’ which is Sodium Borate classified under chapter heading 3105 of the Central Excise Tariff Act, 1985 - classifiable under 2840 or under 3105? - Held that: - only because the Customs has classified the goods under Chapter heading 3105 it will not be binding on the Central Excise classification. The classification of the Central Excise has to be decided by taking into consideration the actual nature of the goods - the Ld. Commissioner (Appeals) is supposed to decide the classification of Solubor under Central Excise Tariff Act without getting influenced by the classification decided by the Customs authority in case of import of the goods - appeal allowed by way of remand.

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• 2017 (2) TMI 369
  SSI exemption - clubbing of clearances - M/s. Protective board does not have manufacturing facility, hence it was contended that whatever sale was made by M/s. Protective Board, it is manufacture of M/s. Protective Packaging Industries - Held that: - Shri. Sejpal taken us various job work challans and bills of various job worker from which it prima facie appears that M/s. Protective Board was getting job work done from various manufacturer, however these documents were not verified by the Adjudicating authority. The Commissioner(Appeals) also not given any heed to these evidence therefore this is a fit case for remand to the Original adjudicating authority as the Original adjudicating authority has not verified all these documents and also to ensure that the M/s. Protective Board was engaged in getting job done from job worker as claimed by the appellant - appeal allowed by way of remand.

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• 2017 (2) TMI 368
  Valuation - whether transportation charges paid by the appellant for clearances of their final product and subsequently taken reimbursement from the customers is required to be included in the assessable value or otherwise for the period July 2001 to March 2002? Held that: - the goods sold by the appellant is at factory gate, the transportation is freight, which was paid by the appellant to the transporter and subsequently taken reimbursement from the customers - From the definition of place of removal prevailing at the relevant time, it is observed that in case of factory gate sale, the factory gate is place of removal. Therefore, the transportation beyond the place of removal is not includable in the assessable value in terms of Rule 5 of Central Excise Valuation Rules. Reliance placed in the case of Commissioner of Customs And Central Excise, Nagpur Versus M/s Ispat Industries Ltd. [2015 (10) TMI 613 - SUPREME COURT], where it was held that the transportation charges in case of ex-factory sale is not includible in the assessable value. Appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 367
  Cenvat Credit - Job Work - Diethyl Phthalate - demand on the ground that this goods is final product, the same cannot be removed without payment of duty under Rule 4(5) (a) of Cenvat Credit Rules, 2002 - Held that: - whether it is initial input or intermediate goods but if it is used in the manufacture of final product at both the stages the goods will be treated as input therefore removal of Diethyl Phthalate is correctly covered under the provisions of Rule 4(5) (a) of Cenvat Credit Rules, 2002 - the duty cannot be demanded on the said goods which was removed only for job work purpose and subsequently returned back to the appellants factory. There is no dispute that the final product in which said Diethyl Phthalate was used has been cleared by the appellants on payment of appropriate excise duty - demand not sustainable - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 366
  Benefit of N/N. 214/86-C.E. - evasion of central excise duty - appellant is supplier of raw materials and moulds to their job workers for the manufacture of the final products - Held that: - the liability to discharge Central Excise duty on the articles of plastic manufactured is on clearance from the job worker’s premises. When there is no dispute that the job worker has manufactured the articles of plastic, and there being no declaration from the appellant under N/N. 214/86, obviously the job worker is the manufacturer of the final products as he converts the raw material into finished products - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 365
  Clandestine removal - on going through various statements, many of them were found to be not legible, nor typed copies have been enclosed along with the hand written copies. In these circumstances, it is difficult to proceed with the matter even after spending of one hour of hearing - Held that: - Since the incident of alleged removal refers to the year 1998 and the appellants are in the second round of litigation before this forum and the appeal has been listed several times, there is no justification to adjourn the matter on this issue - the appeals are dismissed as non-maintainable - decided against appellant.

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• 2017 (2) TMI 364
  Valuation - sale price charged to oil marketing companies - Section 4(1)(b) of the Central Excise Act, 1944 read with provisions of Section 4(3)(b) - related party transaction or not? - Held that: - there is nothing on record to establish that the marketing companies whether in any way related to the appellant satisfying any of the elements of Section 4(3)(b) of the Central Excise Act, 1944 - In absence of any evidence to show that the buyer and seller were mutually interested to make gain at the cost of Revenue, undervaluation of clearances is inconceivable - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 363
  Eligibility for N/N. 76/1986-CE dtd. 10th Feb 1986 - handicrafts - Revenue contends that the goods that were subject to duty in the order of original authority were non-handicraft items because the statements recorded during investigation indicated use of motors by job-workers who undertook embroidery and painting on the garments - circular no. 773/6/CX dated 28th January 2004 by Central Board of Excise & Customs - Held that: - the said circular does permit some tolerance to the use of machinery in the production of ‘handicrafts’. We also notice a total absence of finding in the order of the original authority that the goods are not ‘handicrafts’ - it has not been established that the goods produced by assessee are covered within the ambit of circular of Central Board of Excise & Customs - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 362
  Valuation - inclusion of sales tax element in the amount paid by the customers of motor vehicles sold by the dealers of the appellant which was, excluded from the assessable value for discharge of liability of central excise duty - Held that: - The appellant is eligible for refund/credit of the special excise duty that has also been collected and remitted after grant of reimbursement of this amount to the ultimate consumer. There is no allegation that amount of sales tax that was collected on this component of value of the car has not been deposited in the state treasury or has been collected back - once tax/duty liability has been discharged, eligibility to credit cannot be varied for any reason whatsoever - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 361
  CENVAT credit - hanger without hook imported from abroad has undergone the process of manufacture fixing the hook thereto, in India - whether the process amounts to manufacture and credit is to be allowed on the above goods? - Held that: - Unhooked hanger imported and used for hooking the same was input since only upon hooking, the hanger becomes a complete hanger - the impugned order denying Cenvat credit of the duty paid is liable to be set aside - credit allowed - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 360
  Natural justice - mis-declaration of value - grey fabrics - no evidence of the said allegation has been given by the Revenue to the appellants despite specific request for the same - imposition of penalty - Held that: - in absence of any invoice-wise correlation between the purchase price of the grey fabrics and the value adopted for the purpose of Central Excise cannot be accepted. The statement given by the merchant manufacturer was changed during the cross examination. The Revenue could have countered that retraction by producing some records. However, Revenue has not done the same and, therefore, failed to substantiate the evidence relied upon in the show-cause notice - penalty set aside - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2017 (2) TMI 350
  Levy of entry tax - entry / import of Tractors into the State of Gujarat - the levy is discriminatory, in violation of Article 304(a) of the Constitution of India and contrary to the objects and purpose of enactment of Entry Tax Act under which Entry Tax is levied - Held that: - the entire legislative history of the Entry Tax Act as well as object and reasons behind the introduction as well as amendments of the Entry Tax Act establish that Entry Tax was always sought to be levied at the rates prescribed for such goods under the Sales Tax Act / VAT Act. In other words, there is a nexus between the Entry Tax rates and local Sales Tax / VAT rates on similar goods. Thus only those motor vehicles which were covered under Entry 128 of Schedule-IIA to the sSles Tax Act and which are now covered under residuary Entry 87 of Schedule-II to the VAT Act which attract 15% tax under the VAT Act would be covered under the entry of motor vehicles under the Entry Tax Act. Levy of entry tax at the rate of 15% on Tractors by treating them as falling under Entry for motor vehicles even though Tractors have always been covered by separate entry under the Sales Tax Act and the VAT Act and for which rate of tax under the VAT Act is 5%, therefore is dehors the scheme of the Entry Tax Act as countenanced by the legislative history as well as objects of the Entry Tax Act. To levy Entry Tax at 15% on import of Tractors into the State of Gujarat by treating them as “motor vehicles” even though local VAT Tax on Tractors is 5%, would be contrary to the object and scheme of the Entry Tax Act, State of Gujarat has come out with a notification dated 12/5/2016 by which levy of entry tax on Tractor in excess of 5% has been exempted. However, once levy of entry tax on Tractors beyond / above 5% is held to be illegal, discriminatory and violative of Article 304(a) of the Constitution of India and contrary to the object and purpose of enactment of Entry Tax Act, there is no question of exemption. Once levy itself is held to be illegal, unconstitutional and/or contrary to the objects and purpose of Entry Tax Act, there is no question of first to pay such a tax and thereafter to get refund by way of Input Tax Credit. Why should importers be forced to first pay Entry Tax which otherwise is illegal and/or discriminatory and thereafter to go for refund by way of input Tax Credit. The respondents – State cannot levy / charge Entry Tax on Tractors beyond Value Added Tax under the VAT Act i.e. beyond 5% - petition allowed - decided in favor of petitioner.

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• 2017 (2) TMI 349
  Compounding of offences - detention of goods only on the ground that online Form 'JJ' and the transporter's Form 'MM' were not submitted - Held that: - it is quite clear that the respondent has mis-directed himself in law. A plain reading of Section 69 of the Tamil Nadu Value Added Tax Act, 2006 and Rule 15 would show that a sale bill ought to have sufficed - subject goods released - petition allowed.

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• 2017 (2) TMI 348
  Jurisdiction - inter-state sale - one time tax - Held that: - The concerned authority will apply the requisite rate of tax to the said value and upon the tax so quantified, in accordance with the relevant provisions of law, shall be communicated to the petitioner - goods released on payment of one time tax - petition disposed off.

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