TMI Tax Updates - e-Newsletter
February 13, 2015

Case Laws in this Newsletter:

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

TMI SMS

• 100% EOU done detailed engineering & as per the specification & drawings, actual manufacture was outsourced -exemption u/s 10B allowed -HC

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• Levy of Fee for default in furnishing TDS return u/s 234E of the Income Tax Act, 1961 is not ultra-virus to the Constitution of India - HC

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• Provision for FCNR fluctuation loss not allowed as the liability has neither been ascertained nor crystallised as on Balance Sheet date -Tri

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Articles

1. RELEVANCE OF PERSON IN SERVICE TAX

   By: Dr. Sanjiv Agarwal

2. Value of free supply of material by service recipient is not required to be included in the gross amount for chargeability of Service tax

   By: Bimal jain

3. BUDGET 2015 : STEPPING STONE TO SIMPLIFICATION?

   By: Pradeep Jain

News

1. FICCI-PRE-BUDGET-MEMORANDUM-2015-16

2. Indirect Taxes - Pre-budget Memorandum - 2015 by ICAI

3. Shift in the Focus of the Income Tax Department (ITD) from Civil Consequences to Criminal Consequences in Serious Cases of Tax Evasion;

4. RBI Reference Rate for US $

Circulars / Instructions / Orders

FEMA

1. 76 - dated 12-2-2015

Foreign Exchange Management Act, 1999 – Import of Goods into India

2. 77 - dated 12-2-2015

Foreign Direct Investment –Reporting under FDI Scheme on the e-Biz platform

3. 75 - dated 11-2-2015

Exim Bank's Line of Credit of USD 22.50 million to the Government of the Republic of Gambia

Customs

4. 06/2015 - dated 11-2-2015

Amendments to certain All Industry Rates of Duty Drawback - Reg.

Highlights / Catch Notes

Income Tax

• High Court Affirms Tax Exemption for 100% Export Oriented Unit u/s 10B for Outsourced Manufacturing Work.

  Case-Laws - HC : Entitlement u/s 10B - 100% EOU - The assessee had undertaken detailed engineering drawings and as per the specification and drawings, the actual manufacture and production work was outsourced - exemption allowed - HC
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• High Court Upholds Constitutionality of Section 234E Fee for Late TDS Returns, Deems It Within Legal Authority.

  Case-Laws - HC : Validity of levy of Fee for default in furnishing TDS return/statements - Section 234E of the Income Tax Act, 1961 does not violate any provision of the Constitution and is therefore intra vires, Constitution of India. - HC
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• Tribunal Can't Decide Appeals on Merits After Dismissing Case for Delay Without Fair Hearing for Appellant.

  Case-Laws - HC : Tribunal having decided not to proceed with the matter on the ground of condonation of delay, cannot unilaterally decide the appeals on merits, more so when the appellant/assessee was not given proper opportunity to contest the matter in the main appeals on merits - HC
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• FCNR fluctuation loss deduction denied due to unascertained liability by Balance Sheet date.

  Case-Laws - AT : Accrual of income or loss - Provision for FCNR fluctuation loss - The liability has neither been ascertained nor crystallised as on the Balance Sheet date - deduction not allowed - AT
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• FCNR Fluctuation Losses Deemed Notional, Deduction Claims Disallowed Under Income Tax Rules.

  Case-Laws - AT : Provision for FCNR fluctuation loss - the losses shown are notional in character and therefore the provision for loss claimed as a deduction is liable to be disallowed. - AT
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• Auditor's Remark on Non-Deduction of TDS u/s 194C is Not Conclusive; No Adverse Inference Allowed.

  Case-Laws - AT : Non deduction of TDS u/s 194C - no adverse inference can be derived from auditors remark as it is only statement of fact about wages and in any case auditors vague remarks cannot be construed as a conclusive statement. - AT
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• Sheds on leasehold land classified as revenue expenditure due to lack of renovation or improvement on existing structures.

  Case-Laws - AT : Sheds constructed on lease-hold land - there was no building or any structure in existence on the land in relation to which any renovation or extension or improvement or any similar work was carried out by the assessee - allowed as revenue expenditure - AT
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• No TDS on Living Allowances for Russian Experts; Section 40(a)(ia) Disallowance Not Applicable.

  Case-Laws - AT : When the Commissioner of Income Tax (TDS) is of the view that no TDS need be made on these living allowances paid to the Russian experts, the question of sustaining, the disallowance u/s 40(a)(ia) does not arise. - AT
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• Income from letting a building under Software Technology Parks Scheme can still claim deduction u/s 80-IA(4)(iii).

  Case-Laws - AT : Deduction u/s 80-IA(4)(iii) - Mere fact that income from letting of entire building under the Software Technology Parks Scheme is taxable as House Property income, would not dis-entitle the assessee from claiming deduction u/s 80IA - AT
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• Income from Leasing Building to Software Tech Park Tenants Classified as Taxable House Property Income.

  Case-Laws - AT : Nature of income - entire building was leased to tenants registered under the Software Technology Parks Scheme - Various Amenities / services were also provided - taxable as Income from House property - AT
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• Vessel Management Income in India Taxable u/s 44BB Only If PE Exists and Contract is Connected to PE.

  Case-Laws - AT : Providing services of vessel management services in India - income of assessees engaged in such activities can be taxed u/s 44BB only if the two conditions are fulfilled. - One of the conditions is existence of PE in India and second is regarding effective connection of such contract with the PE in India - AT
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Customs

• Penalty Reduced for Mis-declaration Errors in Import Case, No Fraud Intent Found by Staff on Bill of Entry.

  Case-Laws - AT : Mis-declaration of value as well as quantity of import goods - No intent to defraud the Revenue is forthcoming. There is a mistake in describing the quantity on the part of the staff handling file of Bill of Entry - demand of duty confirmed - penalty reduced to ₹ 10000/- - AT
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• Appellant's Late VAT Payment Resolved; SAD Refund Request Premature but Not Rejected.

  Case-Laws - AT : Refund SAD - appellant had not discharged VAT liability timely but paid the same within one year as delayed - refund could at best be considered as a premature claim but not liable to be rejected - AT
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• SEEPZ Unit Violates DTA Sale Entitlement; Tribunal Unable to Correct Duty Demand Error as Revenue Didn't Appeal.

  Case-Laws - AT : SEEPZ unit - Violation of DTA sale entitlement - Adjudicating authority has computed the duty demand wrongly - Since the Revenue has not come in appeal against the said order, tribunal found itself helpless - AT
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Service Tax

• Revenue's Claim Dismissed: Tribunal's Decision Stands as ST-3 Return Error Not Cited in Order or Notice.

  Case-Laws - AT : Rectification of mistake - ST-3 return having been filed on 28/03/2007 is neither mentioned in the order nor in the show cause notice. If that be so, Revenue cannot allege that this Tribunal has committed an error - AT
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Central Excise

• Court Clarifies: "Manufactured and Packed by S.V.S. & Sons" Isn't a Brand Name Under Central Excise Rules.

  Case-Laws - HC : Brand name - the goods bear a superscription ‘manufactured and packed by S.V.S. & Sons’, which is not a brand name or trade name. - There is a clear distinction between the brand name used and the superscription as found in the packaging - HC
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• Export Units Entitled to Suo Moto Re-Credit in Cenvat Account After Rebate Claim Cancellation.

  Case-Laws - AT : Availment of Suo moto re-credit on cancellation of rebate claim - Export of goods - 100% EOU - appellants are eligible for re-credit of the amount in their cenvat account - AT
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• Sales Tax Retained by Appellant May Be Included in Assessable Value, Preliminary Judgment Unfavorable to Assessee.

  Case-Laws - AT : Valuation of goods - whether the amount of sales tax collected by the appellant from the customers and retained with them is includible in the assessable value or not - prima facie case is against the assessee - AT
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VAT

• Court Upholds Tax Assessment on Ink and Processing Materials in Printing Press Under VAT and Sales Tax Laws.

  Case-Laws - HC : Works contract - Printing press - tax assessed by the assessing authority on the value of ink and processing material as normal chemical is justified. - HC
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• All Motor Vehicles, Including Excavators, Subject to Entry Tax Under Entry 13 of the Schedule.

  Case-Laws - HC : Entry Tax - The mere fact that the general goods are not being transported by Excavator would make no difference for the reason that legislature has used the term "motor vehicles" in a very wide manner by providing that all kinds of motor vehicles would be governed by Entry 13 of the Schedule - HC
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Case Laws:

• Income Tax

• 2015 (2) TMI 413
  Entitlement to benefit under Section 10B - 100% EOU - outsourcing of manufacturing process - assessee was engaged in manufacture or production of an article or thing - Held that:- Section 10B of the Act is beneficial provision and has been enacted to give tax concession or exemption to 100% export oriented units engaged in manufacture or production of articles, things or computer software. The exemption is only granted if the assessee has been declared as an 100% export oriented undertaking which means an undertaking approved by the Board appointed in this behalf under the Industries (Development and Regulation) Act, 1951. It is an undisputed and a factual position recorded by the Tribunal that the respondent assessee had an export oriented unit in Noida Export Processing Zone, which was duly approved. The Tribunal has also recorded that the Development Commissioner, Noida Export Process Zone, had extended all facilities and privileges admissible to the said unit under the Export-Import Policy 1997-2002. One of the conditions, for establishment of an undertaking in the said zone was that the undertaking should be manufacturing engineering products and the entire production should be exported, after excluding the rejects and permissible sales in the domestic tariff area. The respondent has entered into an agreement with the said authority for carrying on the said business. The fact that the respondent assessee had assembled the entire plant outside India from the goods supplied and manufactured in India would include the expenditure incurred for commissioning and providing technical services outside India, after excluding expenses in form of payment made in foreign exchange for technical services provided outside India. It is not the case of the Revenue that the respondent assessee had made payment in foreign exchange for technical services provided outside India. It is apparent that the respondent assessee did not self-manufacture or produce most of the articles or things which were exported and used for setting up the plant. The assessee had undertaken detailed engineering drawings and as per the specification and drawings, the actual manufacture and production work was outsourced. Throughout the said process, inspection was carried out and only after approval, the goods were dispatched. The goods were re-inspected, checked, assembled and disassembled, before they were exported out of India. Only upon satisfactory performance and ensuring that there was perfect matching, the goods were exported. We are in agreement with the findings recorded by the Tribunal that the aforesaid activities qualify and should be treated as manufacture or production of goods by the assessee himself. Decided favour of the respondent-assessee

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• 2015 (2) TMI 412
  Constitutional validity of section 234E challenged - Fee for default in furnishing TDS return/statements - as per assesse fee is known in the commercial and legal world to be a recompense of some service or some special service performed, and it cannot be collected for any dis-service or default - Held that:- Substantial number of deductors were not furnishing their TDS retun/statements within the prescribed time frame which was absolutely essential. This led to an additional work burden upon the Department due to the fault of the deductor by not furnishing the information in time and which he was statutorily bound to furnish. It is in this light, and to compensate for the additional work burden forced upon the Department, that a fee was sought to be levied under section 234E of the Act. Looking at this from this perspective, we are clearly of the view that section 234E of the Act is not punitive in nature but a fee which is a fixed charge for the extra service which the Department has to provide due to the late filing of the TDS statements. Late filing of the TDS return/statements is regularised upon payment of the fee as set out in section 234E. This is nothing but a privilege and a special service to the deductor allowing him to file the TDS return/statements beyond the time prescribed by the Act and/or the Rules. We therefore cannot agree with the argument of the Petitioners that the fee that is sought to be collected under section 234E of the Act is really nothing but a collection in the guise of a tax. Fee sought to be levied under section 234E of the Income Tax Act, 1961 is not in the guise of a tax that is sought to be levied on the deductor. We also do not find the provisions of section 234E as being onerous on the ground that the section does not empower the Assessing Officer to condone the delay in late filing of the TDS return/statements, or that no appeal is provided for from an arbitrary order passed under section 234E. It must be noted that a right of appeal is not a matter of right but is a creature of the statute, and if the Legislature deems it fit not to provide a remedy of appeal, so be it. Even in such a scenario it is not as if the aggrieved party is left remediless. Such aggrieved person can always approach this Court in its extra ordinary equitable jurisdiction under Article 226 / 227 of the Constitution of India, as the case may be. We therefore cannot agree with the argument of the Petitioners that simply because no remedy of appeal is provided for, the provisions of section 234E are onerous. Similarly, on the same parity of reasoning, we find the argument regarding condonation of delay also to be wholly without any merit. Thus Section 234E of the Income Tax Act, 1961 does not violate any provision of the Constitution and is therefore intra vires, Constitution of India. - Decided against assessee.

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• 2015 (2) TMI 411
  Revision u/s 263 - surrendered amount had not been disclosed over and above normal income and the surrendered stock was not accounted for properly, in addition to other existing discrepancies - ITAT quashed the order of Commissioner passed u/s 263 - Held that:- Whilst a consistent behaviour, of disclosing a pattern, might justify a conclusion which warrants rejection of the books of accounts, the explanation of the assessee that but for such sales, the stocks would have been inaccessible for an inordinately long period of time, thus considerably risking its business, as against which it chose to liquidate its stocks, cannot be characterized as unreasonable. Therefore, to seize upon this or the circumstance that a 60% discount was offered ipso facto was insufficient to take a different view. The various authorities of the Supreme Court in Malabar Industrial Co. Ltd. v. CIT [2000 (2) TMI 10 - SUPREME Court] has highlighted that the power under Section 263 cannot be invoked to correct a mere error of an AO, based upon an incorrect assumption of fact. There has to be something more to hold that the determination is both erroneous and prejudicial to the interests of the Revenue. Case of Sunbeam (2009 (9) TMI 633 - Delhi High Court) cited by the assessee also notices the same aspect. Considering the totality of the circumstances, no substantial question of law arises. The ITAT merely applied the prevailing law on the subject. - Decided in favour of assessee.

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• 2015 (2) TMI 410
  Reopening of assessment - whether ITAT possessed jurisdiction to return a finding on whether the AO s order was a nullity, and can give the verdict that such adjudication cannot go into the merits of such of the proceedings? - Held that:- In the present case, there is no dispute that the reassessment notice was issued by the AO on 22.03.2010; upon its receipt, the assessee reiterated its earlier return on 21.04.2010. Since its response led to objections as to the jurisdiction, it lost the capacity to urge the ground by virtue of the provision under Section 124(3)(a). This condition has been obviously overlooked by the ITAT which proceeded to set aside the assessment and completed the reassessment proceedings. The impugned order is consequently set aside; the question of law urged by the Revenue is answered in its favour. The matter is remitted for consideration on the merits of the appeal concerning the additions made in the reassessment proceedings.

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• 2015 (2) TMI 409
  Reduction of penalty levied under section 140A(3) - Tribunal restored the assessee s exigibility to penalty, but while doing so, has reduced the quantum of penalty to Rs. 10 lacs for each financial year - Held that:- Tribunal reduced the quantum of penalty to Rs. 10 lacs for each financial year without assigning any reason other than holding that “the ends of justice” and a “liberal interpretation” require that the penalty be reduced. The mere use of the words “the ends of justice” and “a liberal interpretation” while reducing penalty from Rs. 66 lacs to Rs. 10 lacs each, particularly when the Tribunal had accepted that the assessee has not discharged onus to explain its default, are insufficient to infer a legal exercise of discretion to determine the quantum of penalty. The impugned order, therefore, does not meet the parameters of a judicial, much less a quasi judicial determination. The appeals are, therefore, partly allowed, the assessee s exigibility to penalty is affirmed but the quantum of penalty determined by the Tribunal is set aside and the appeals are restored to the Tribunal for adjudication afresh and in accordance with law so as to determine the quantum of penalty to be imposed upon the appellants.

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• 2015 (2) TMI 408
  Block assessment - unexplained source of income from investment in construction, long term capital gains and the one from house property - Tribunal took the view that the appellant is entitled for the benefit of Section 158BB(c)(B) - Held that:- The assessee has shown the house property income for assessment year 1987-88 till date of survey on 10.10.1996 which are below taxable limit. While relying on the decisions of CIT Versus MM Thomas [2003 (3) TMI 37 - KERALA High Court ] we direct to exclude the income in a block assessment years which is below taxable limit, the rental income is on records of the Revenue. Since the effect of the decision (2001 (12) TMI 53 - KERALA High Court ) is nullified by amendment in introducing Section 158BB(1)(c)(B) to the Act. This observation should have led to a conclusion that the refusal on the part of the Assessing Officer to take into account the facts and figures mentioned with reference to the block period cannot be sustained in law and the order of assessment ought to have been set aside or at least modified. However, the appeal was dismissed as a whole. - Decided in favour of assessee.

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• 2015 (2) TMI 407
  Transfer pricing adjustment - determining the arms length price - ITAT held that the Resale Price Method (RPM) was the most appropriate method - Held that:- Tribunal did not commit any error of law apparent on the face of the record nor can the findings can be said to be perverse. The Tribunal has found that the TPO has passed an order earlier accepting this method. The Tribunal has noted that the order under challenge that this method is one of the standard method and the OECD (Organization of Economic Commercial Development) guidelines also state in case of distribution or marketing activities when the goods are purchased from associated entities and there are sales effected to unrelated parties without any further processing, then, this method can be adopted. The findings of fact are based on the materials which have been produced before the Commissioner as also the Tribunal. Further, it was highlighted before the Commissioner as also the Tribunal that the RPM has been accepted by the TPO in the preceding as well as succeeding assessment years. That is in respect of distribution segment activity of the Assessee. In such circumstances, and when no distinguishing features were noted by the Tribunal, it did not commit any error in allowing the Assessee s Appeal. - Decided in favour of assessee.

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• 2015 (2) TMI 406
  Condonation of 2053 days in filing the appeals - entitlement to claim deduction under Section 40(b) - Held that:- The procedure adopted by the Tribunal is highly prejudicial to the interest of the appellant/assessee inasmuch as the Tribunal having decided not to proceed with the matter on the ground of condonation of delay, cannot unilaterally decide the appeals on merits, more so when the appellant/assessee was not given proper opportunity to contest the matter in the main appeals on merits. The order of the Tribunal is also not in consonance with Section 253 (5) of the Income Tax Act. Section 253 (5) of the Income Tax Act mandates that an appeal should be admitted before ever an order is passed on merits. Once the appeal itself is not entertained, the question of going into the merits of the matter does not arise. We, therefore, find that the order of the Tribunal deciding the appeals of the assessee on merits, after dismissing the appeal itself on the question of delay, is an error apparent on the face of the record and that the order passed is without jurisdiction since, when there is no appeal, there is no question of deciding the issue raised in the appeal on merits. See Williamson Financial Services Ltd. Versus Commissioner of Income-Tax And Another. - Decided in favour of assessee by way of remand to the Tribunal for reconsideration.

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• 2015 (2) TMI 405
  Disallowance of deduction u/S. 10B and 80IB - AO discarded the books of accounts of the assessee and concluded that production shown by the assessee is exceeding the sanction limit and the production data are inflated - ITAT allowed claim - Held that:- The Tribunal found that the production data are not found doubtful by any other regulatory authority. The Tribunal has relied upon the fact that the books of accounts which were duly audited. Thus if the Tribunal has recorded ultimate finding of fact that the discarding of books of accounts was not justified, and consequently the working out of the revise claim for deduction by AO, we find that such finding of fact would be outside the scope of judicial scrutiny, more particularly, when nothing is satisfactorily demonstrated before the Court that such finding of fact by the Tribunal can be said as perverse to the record. - Decided in favour of assessee.

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• 2015 (2) TMI 404
  Condonation of delay - non satisfactory reasons to explain delay - review application that a different view ought to have been taken and the appeal should have been decided on the merits of the case - Held that:- The scope of review by this Court is limited and the scope is not to re-hear the appeal and take a different view especially with regard to the condonation of delay. The Division Bench after considering the order of the Tribunal arrived at the finding and this court cannot take a different view on the grounds which are urged by learned counsel for the petitioner. The judgment cannot be reviewed relying on the judgments of Apex Court. There cannot be any dispute on the proposition as held by the Apex Court. The question whether there is sufficient cause to condone delay is to be considered in the facts of each case and the Division Bench of this Court has affirmed that finding refusing to accept the cause shown for condonation of delay. Hence there cannot be any ground to review the judgment. The review petition is hence dismissed.

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• 2015 (2) TMI 403
  Unexplained credit - addition to income - for AY 2004-05 - Held that:- As can be seen, in the sworn affidavit dt. 18/02/2011, the creditor Shri L. Giri Babu has stated that the amount of Rs. 1.00 lakh was advanced to assessee through cheque No. 603464 dated 11/03/04 drawn on ICICI Bank, Tirupathi. It has further been stated in the said affidavit the said amount was out of his earning while he was working in Deutsche Bank, Singapore. However, on a perusal of the passport, it is very much evident that the same was issued on 16/12/09. Therefore, it is not understood how it proves the fact that the said creditor was working in Singapore in 2004 and from the income earned therein, the said creditor advanced the amount of Rs. 1 lakh. Moreover, it is a fact on record that assessee has not produced relevant bank statement to correlate the receipt of loan from the said creditor. In these circumstances, we cannot record a conclusive finding holding the loan transaction to be genuine. Remit the issue back to the file of AO to examine it afresh - Decided in favour of assessee for statistical purposes. Unaccounted cash credit for AY 2004-05 - Held that:- matter requires re-examination by AO. Though it is a fact that the loan creditor has confirmed of advancing the loan and to some extent it is also proved that the loan creditor was having income from agricultural activities, but, it requires to be examined whether the creditor was having creditworthiness to advance loan of Rs. 29.70 lakhs. Further, genuineness of the transaction also requires to be proved. In this context, ld. AR submitted before us that loan transaction was through banking channel, but, it appears from the orders of the departmental authorities, assessee never brought such fact to their notice.- Decided in favour of assessee for statistical purposes. Peak amount of the cash flow in the seized material - CIT(A) deleted addition of Rs. 4,30,22,313 - Held that:- nfirmity in the order of ld. CIT(A) while deleting the addition. On a perusal of seized material which also form part of the ld. CIT(A)’s order, it is very much clear that from such notings, it cannot be deduced whether they are receipt or payments nor it can be concluded whether they are in relation to any particular transaction as no names have been mentioned. In these circumstances, no addition can be made on the basis of such a dumb document. - Decided in favour of assessee. Undisclosed investment - purchased a land in his wife’s name - CIT(A) deleted addition - Held that:- On a perusal of return of income filed by assessee originally as well as in pursuance to notice u/s 153A of the Act,it is very much clear that assessee has disclosed the investment made in purchase of land. Similarly, his wife has also disclosed the investment made by her in the return filed. Therefore, when the investment made by assessee and his wife have been disclosed to the department prior to the search and is from explainable sources, there is no reason to treat it as undisclosed investment. Accordingly, we do not find any infirmity in the order of ld. CIT(A) in deleting the same.- Decided in favour of assessee. Unaccounted cash credit for AY 2007-08 - Held that:- Matter requires re-examination by AO. Though, it is a fact that the loan creditor has confirmed of having advanced the loan and he may be having land holding, but, whether he has the capacity to advance loan of Rs. 4,24,000 requires to be verified by examining the creditor, which has not been done. Further, assessee’s claim that the loan was received through regular banking channel also needs examination. If assessee can establish the creditworthiness of the creditor, then, the loan cannot be treated as unexplained credit. With the aforesaid observations, we remit the issue back to the file of AO. For loan amount of Rs. 9 lakhs treated as unexplained cash credit by AO and confirmed by ld. CIT(A) assessee has not been able to prove the aforesaid loan amount by bringing any evidence on record. Even a confirmation letter has not be obtained from the creditor. As assessee has failed to establish the three ingredients i.e., identity of the creditor, creditworthiness and genuineness of the transaction by furnishing any evidence, the addition made is confirmed. - Decided partly in favour of assessee for statistical purposes. Unexplained investment in purchase of plots - Held that:- Seized material except mentioning certain f igures does not reveal whether they are receipts nor payments nor any name is mentioned. It is also neither in the name of assessee nor bears his signature. The AO has not brought on record any other corroborat ive evidence to substant iate the allegation that notings in seized material represent undisclosed investment of assessee. In these circumstances, conclusion of ld. CIT(A) that it is merely a dumb document and no addition can be made on the basis of such dumb document, in our view, is totally justif ied and cannot be interfered with. - Decided in favour of assessee. Undisclosed investment in gold ornaments - Held that:- Assessee has not properly explained the contents of the seized material. As can be seen, while before the AO, he has completely disowned the seized material, before the first appellate authority, he has stated that the seized material is only an estimate. In these circumstances, we do not find any infirmity in the order of ld. CIT(A) in confirming the addition - Decided against assessee. Unaccounted loan - Grievance of the department that evidences were produced for the first time before ld. CIT(A) and without giving an opportunity to AO to verify the same, ld. CIT(A) has deleted the addition on the basis of those evidences - Held that:- As can be seen, assessee has not produced any evidence before AO to prove the credits. Whereas before ld. CIT(A) assessee has produced returns of income, bank statement, P&L account, balance sheet, etc. of Sri M.V. Ramana and Smt. Radhika to prove genuineness of the loan. Similarly in case of rental advance received from the tenants, assessee has submitted the lease agreement. Ld. CIT(A) without calling for a remand report from AO, on the evidences submitted by assessee has accepted assessee’s claim and deleted the addition. Therefore, to that extent there is violation of rule 46A. Remit the issue to the file of AO to verify evidences produced by assessee and take a decision in the matter. - Decided in favour of revenue for statistical purposes.

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• 2015 (2) TMI 402
  Unexplained credit under section 68 - Held that:- A majority of the creditors have also appeared either in person or through their Authorised Representatives before the A.O. and have confirmed of having advanced the loan to the assessee. It is also evident that all the loan transactions were through regular banking channel. Many of the creditors are also income tax assessee’s and not only their income tax particulars but the income tax returns filed by them along with balance sheets etc., were also submitted before the A.O. either by assessee or directly by those persons. It also appears from the facts on record that in case of many of the creditors, the assessee has subsequently repaid the loan, also through regular banking channel. It also appears that during the currency of the loans assessee also credited interest to the concerned loan creditors through banking channel. Under these circumstances, when the entire transaction is through regular banking channel, the loan received by the assessee cannot be treated as unexplained credit merely on the assumption that the creditworthiness of the creditors are not proved. When the loan transaction is through banking channel to prove that it is not genuine, the A.O. has to make proper enquiry and establish it on record by bringing sufficient evidence that it is the assessee’s money which has been routed back to him through the creditors. Unless this fact is proved through proper enquiry, it will not be proper to treat the loan transaction as not genuine on conjecture and surmises.Therefore, on overall consideration of facts and materials on record, we are of the view that the entire issue relating to the loan transactions representing the 78 creditors requires re-examination. More so, considering the specific grievance of the assessee that adequate opportunity to explain was not given to him. Having held that issue relating to loan transactions requires re-examination, it is necessary also to decide whether A.O. or CIT(A) will be the appropriate authority to decide it afresh. In this context, it needs to be observed each of the loan transaction has to be examined independently in the context of the evidences produced relating to it along with the explanation of the assessee for determining the genuineness. Since the A.O., in our view, has not undertaken such exercise in respect of each of the loan transaction and rather has come to his conclusion by making general observations, we are inclined to remit the matter back to him for fresh examination. - Decided in favour of assessee for statistical purposes.

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• 2015 (2) TMI 401
  Accrual of income or loss - Provision for FCNR fluctuation loss - Applicability of Accounting Standards 11 ( AS-11 ) - Held that:- The liability has neither been ascertained nor crystallised as on the Balance Sheet date. Further, the transaction in question is not related to monetary items, as the underlying exposure behind the transaction is only foreign exchange. In this view of the matter, we are in agreement with the decision of the learned CIT (Appeals) that the decision of the Hon ble Apex Court in the case of Woodward Governor India (P.) Ltd. (2009 (4) TMI 4 - SUPREME COURT) does not apply to the facts of the case on hand. Transactions entered into by the assessee were not hedging transactions, but the same were speculative and therefore the assessee s case is not covered by proviso (a) to section 43(5) of the Act. The transactions in question in the case on hand are speculative transactions and therefore, the learned CIT (Appeals) was right in upholding the decision of the Assessing Officer that the transaction entered into by the assessee is speculative in nature; the losses shown are notional in character and therefore the provision for loss claimed as a deduction is liable to be disallowed. As regards the alternate contention of the assessee that if the transaction in question is held to be speculative in nature, then the provision for loss should be allowed as a deduction from the gains reported from such transactions, we are unable to agree with the contention of the assessee in this regard. It is nobody s case that the assessee is engaged in the business of speculation. It has also been held that the loss shown is a notional loss only and such notional loss is not liable to be adjusted against the profit actually earned by the assessee. The stage for adjustment arises only when the loss/liability actually crystallises. - Decided against assessee.

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• 2015 (2) TMI 400
  Non deduction of TDS u/s 194 C - violation of sec. 40 a (ia) - assessee hired subcontractors to complete the work - Held that:- From the facts mentioned it clearly emerges that by main contract with Principal Next Retail India assessee was barred by hiring any subcontractor. We are unable to subscribe to the AOs view that as the labourers were orally employed or the salaries were disbursed through senior workman constitute adverse facts to lead to a conclusion that assessee hired subcontractors to complete the work. Similarly no adverse inference can be derived from auditors remark as it is only statement of fact about wages and in any case auditors vague remarks cannot be construed as a conclusive statement. This is the job of AO to peruse the facts, circumstances and material in entirety and not to resort to piece meal observations. In view of the above, we find no infirmity in the order of CIT(A) holding that assessee was not liable to deduct TDS u/s 194 C, his order on merits is upheld. Since we hold that there is no liability u/s 194C there is no violation of sec. 40 a (ia), there is no need to adjudicate about the Merylin shipping issue [2012 (4) TMI 290 - ITAT VISAKHAPATNAM]. - Decided against the revenue.

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• 2015 (2) TMI 399
  Sheds constructed on lease-hold land - Capital expenditure v/s revenue expenditure - whether case of assessee falls within the ambit of Explanation-1 to Section 32(1) of the Income Tax Act, 1961? - Held that:- Perusal of the records show that the assessee was allotted four yards for storage i.e., open space without shed. The assessee contributed for construction of sheds on the space provided by the Tamil Nadu Foodgrains Marketing Yard Ltd. Thus, there was no building or any structure in existence on the land in relation to which any renovation or extension or improvement or any similar work was carried out by the assessee. The Hon ble Madras High Court in the case of CIT Vs. TVS Lean Logistics Ltd., (2007 (6) TMI 44 - HIGH COURT, MADRAS ) has held that Explanation-1 will not apply where there is no building. In the present case, the facts as emanating from records show that the assessee has not taken any building on lease. Further, the assessee has stated that with the contribution for construction of sheds, the assessee shall be entitled for lower monthly lease rents. This fact has not been disputed by the Revenue. The payment of lease rentals is a revenue expenditure. Thus, the contribution made by assessee initially would save revenue expenditure in later years. Thus, in the light of the judgments discussed above, it can be safely construed that the expenditure incurred towards construction of sheds by the assessee is revenue in nature. - Decided in favour of assessee.

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• 2015 (2) TMI 398
  Penalty u/s 271(1)(c) - disallowance of Rs. 22,79,123/- being compensation paid to M/s Hyderabad Industries Ltd. pursuant to the settlement between the parties - Held that:- This is an issue where the question is the year of allowability of the particular claim of the assessee. There is a genuine difference of opinion on this issue which is debatable. Just because the assessee has made the claim during the current financial year and this claim has been disallowed, in our view penalty cannot be imposed on the ground of furnishing of inaccurate particulars of income. Thus cancel the order of the Ld. CIT(A) confirming the penalty levied u/s 271(1)(c) - Decided in favour of assessee. Disallowing of living allowance paid to Russian expats by invoking the provisions of Section 40(1))(ia) - Held that:- When the Commissioner of Income Tax (TDS) is of the view that no TDS need be made on these living allowances paid to the Russian experts, the question of sustaining, the disallowance u/s 40(a)(ia) does not arise. The contention of the Ld. DR that the order of the first Ld. CIT(TDS) is for certain other assessment years and hence cannot be applied to this assessment year is devoid of merits on the issue involved is the same. In the result we delete the disallowance u/s 40(a)(ia)- Decided in favour of assessee.

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• 2015 (2) TMI 397
  Assessment of the rental income - ‘income from house property’ OR business income - entire building was leased to tenants registered under the Software Technology Parks Scheme. Amenities/services by way of standby power (DG set), air conditioning, water storage and supply (both for drinking and general purposes), fire fighting, lifts, cables for communication and CCTV, were also provided by the assessee - Held that:- The same being essentially rental income from a house property, the fact of it being carried on in an organized manner, by an entity which is incorporated, and perhaps for that purpose, would by itself be of no moment; the said activity or business being categorized as a separate source of income, i.e., from house property, under the Act. The ratio of the decision in the case of CIT vs. Shambhu Investments P. Ltd. [2001 (3) TMI 77 - CALCUTTA High Court], since upheld by the apex court in [2003 (1) TMI 99 - SUPREME Court] would squarely apply in the facts and circumstances of the present case. The impugned income, thus, in our view is assessable u/s.22 of the Act. - Decided against the assessee. Eligibility of the said income u/s.80-IA(4)(iii) - Held that:- assuming its maintainability, the location of the building, as pointed out by the ld. CIT(A), would be of little relevance in determining the nature of the income there-from, or its assessability under the Act, so that the fact of its location in a notified industrial park, or being let to entities falling in a particular class or industry/s, is by itself largely irrelevant and of little moment. At this stage, however, the ld. AR would inform us that it is not the case of the assessee owning a building, but of the said building itself being a notified park, toward which deduction u/s.80-IA(4)(iii) stands provided for by the statute, drawing our attention to the said Notification (No. 191/2006 dated 24.07.2006) issued by the CBDT u/s.80-IA(4)(iii) to the assessee (PB pgs. 1-3), and the letter by the CBDT to the assessee company conveying the said Notification (PB pgs. 4-8) as well as the communications in its respect to the assessee dated December 5 and 20, 2006. If the assessee’s building is itself a notified park, which it is operating and maintaining, as claimed, the matter would have to be necessarily examined in that light. There having been no such examination, which has all through been considered as a case of building located in a software park let to software units, i.e., providing IT and IT enabled services, we only consider it fit and proper that the matter is restored back to the file of the ld. CIT(A) for re-adjudication in light of the facts being now exhibited before us. - Decided in favour of assessee for statistical purposes.

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• 2015 (2) TMI 396
  Computation of income u/s 44BB - providing services of vessel management services in India - Held that:- Hon ble Delhi High Court in PGS Geophysical AS Versus Additioanal Director of Income Tax [2014 (7) TMI 723 - DELHI HIGH COURT] vide para 20 has held that income of assessees engaged in such activities can be taxed u/s 44BB only if the two conditions are fulfilled. One of the conditions is existence of PE in India and second is regarding effective connection of such contract with the PE in India - Decided in favor of assessee. Interest u/s 234B - Held that:- Not to charge interest u/s 234B in respect of all contracts entered into by the assessee with various organizations in India except with respect of the contracts entered into with HOEC and ONGC. As far as income taxable u/s 44BB in respect of various contracts are concerned, the assessee itself has accepted the liability from the very beginning and, therefore it cannot be inferred that assessee would have made any representation which would have influenced the deductor companies for not deducting the tax. However, as far as contract with HOEC and ONGC are concerned, as we have held that income arose in India, therefore, the interest u/s 234B is leviable. Therefore, following the above, we hold that interest was not chargeable u/s 234B of the Act. - Decided in favour of assessee.

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• 2015 (2) TMI 395
  Ex gratia amount received by the assessee - CIT(A) deleted the addition - Held that:- Although the issue of Exit Option Scheme of SBI was considered by the Tribunal Ahmedabad (2010 (1) TMI 961 - ITAT AHMEDABAD) but one has to examine the scheme under question under which this assessee has opted the VRS in the light of decision cited. There is one more fact brought to our notice that one of the Board s instruction dated 6.10.2009 were not considered by learned CIT(A). Therefore, one has to examine the VRS under which the assessee was granted the ex gratia payment whether in any manner discussed in the said CBDT instruction dated 6.10.2009. For these two reasons, we deem it proper to restore this issue back to the file of learned CIT(A) with the direction that the issue is required to be readjudicated in the light of the order of Hon ble ITAT B Bench Ahmedabad or any other order of the Tribunal as also the CBDT instructions. - Decided in favour of revenue for statistical purposes.

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• 2015 (2) TMI 394
  Depreciation @ 60% on UPS treating it as part of computers - Held that:- Following the order of the Chennai Bench of the Tribunal in the case Sundaram Asset Management vs. DCIT [2014 (2) TMI 224 - ITAT CHENNAI], we hereby hold that UPS is to be treated as part of the computer and the depreciation is to be allowed accordingly, thereby we confirm the order of the Ld. CIT (A) - Decided in favour of assessee. Applicability of Sec.40 (a)(i) with respect to reimbursement of communication expenses paid to non-residents and expenditure on managing sales affairs outside India - Held that:- As there is no income earned by Respondentassessee which is subject to tax but is only a reimbursement of communication expenses paid to non-residents, no dis-allowance warranted. See DIT(IT)-1 V. WNS Global Services (UK) Ltd [2013 (10) TMI 215 - BOMBAY HIGH COURT]. - Decided in favour of assessee. For expenditure on managing sales affairs outside India the assessee paid certain amounts to overseas agents for procurement of export orders. The agents have not provided any managerial/technical services. The payments received by the nonresident Indian are not taxable in India, thus Sec.195 have no application to assessee’s case. See ACIT V. Farida Shoes (P) Ltd [2013 (11) TMI 907 - ITAT CHENNAI] - Decided in favour of assessee.

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• Customs

• 2015 (2) TMI 437
  Maintainability of appeal - Alternate remedy - Held that:- A perusal of the impugned order would show that as against the order made in original, an appeal would lie to the Commissioner (Appeal) within 60 days under Section 128 of the Customs Act, 1962. It is repeatedly held by this Court on very many occasions that when a statutory remedy of appeal is available, more particularly, in fiscal matters, question of approaching this Court under Article 226 does not arise for seeking the relief or challenging the order passed by the adjudication authorities - Present petition not maintainable - Decided against assessee.

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• 2015 (2) TMI 420
  Waiver of pre deposit - Imposition of Penalty u/s 114 - Misdeclaration of goods - Held that:- It is clear case of mis-declaration in the shipping bill No.64 dated 9.5.2011 for export of handicraft/furniture not used after manufacture. The shipping bill under claim of drawback was filed by him on his own as it is the work of CHA where it was not in the knowledge of the exporter. The goods were found to be old and used and purchased from the open market and claim of drawback was later on withdrawn by the exporter. This clearly brings out that without knowledge of the exporter, the appellant has been made claim of drawback by mis-declaring the handicraft/furniture as antique. All these facts clearly pointed out mens-rea leading to fraudulent intent to avail drawback. The Commissioner (Appeals) has taken a liberal view and reduced penalty. - No ground to reduce penalty for the pre-deposit - Partial stay granted.

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• 2015 (2) TMI 419
  Mis-declaration of value as well as quantity of import goods - huge difference - Confiscation of goods - Imposition of penalty - Held that:- Commissioner (appeal) after going through the facts of the case has clearly discussed out in last two paras of his Order and held that since under section 46 (4) of the Customs Act, 1962 importer was required to file invoice in support of the declaration and such document being mandatorily available to the assessing officer, no misdeclaration could be imputed as there was no finding on record that appellant did not file the invoice to the assessing officer or that invoice contained misdeclaration relating to quantity as well as well value. - No intent to defraud the Revenue is forthcoming. There is a mistake in describing the quantity on the part of the staff handling file of Bill of Entry which was accompanied by the documents indicating the correct quantity and value of the consignment. As such no case for import of excess and consequent demand of differential duty on account of malafide is made. In this regard, I agree with the finding of the Commissioner (appeal). - Commissioner agreed with the submissions that the clerk of the appellants CHA made the mistake and wrongly interpreted the quantity involved invoices 33.38 square meter instead of quantity of 33,378 square meter due to misunderstanding of the connotation. Commissioner (appeal)s findings and my findings regarding imposition of penalty, I uphold the order of Commissioner (appeal) as far as it relates to demand of duty and imposition of penalty. However, order is modified to the extent that penalty of Rs. 10,000/- is imposed on them for wrong declaration in bill of entry. - Decided partly in favour of Revenue.

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• 2015 (2) TMI 418
  Denial of refund claim of SAD - allegation that appellant had not fulfilled the condition of payment of VAT and hence the said amount is not eligible for refund - Held that:- The refund of SAD paid on payment of VAT on subsequent sale is governed by the provisions of Notification No. 102/2007-Cus dated 14/09/2007. The conditions stipulated therein are that the goods sold in the domestic market on payment of Sales Tax/VAT and the documents evidencing payment of SAD and payment of appropriate sales tax should be produced and the claim should be made within a period of one year from the date of payment of SAD. It is not in dispute that any of these conditions have been violated. In other words, the appellant has complied with all the substantive conditions which make him eligible for refund of SAD paid. The argument that at the time of filing of the refund as on 20/11/2009, the appellant had not discharged VAT liability to the extent of Rs. 55,673/-, which could at best be considered as a premature claim, but the facts remains that the appellant had paid this amount on 14/12/2009, that is, within a period of one year. Therefore, rejection of refund claim on a technical ground is not sustainable in law. Accordingly I set aside the impugned order - Decided in favour of assessee.

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• 2015 (2) TMI 417
  SEEPZ unit - Violation of DTA sale entitlement -non-realisation of export proceeds - use of foreign brand computer systems - Violation of Export-Import Policy - The charge against the appellant is that M/s EPL imported complete computer system by mis-declaring them as parts and components of computers so as to avail ineligible duty exemption under notification 227/79-cus and 133/94-Cus. - Whether the importer appellants violated the provisions of the Export-Import Policy and the terms and conditions of the exemption notifications 227/79-Cus dated 30/11/1979 and 133/94-Cus dated 22/06/1994. Held that:- Evidences available on record revealed that M/s Microland Ltd. had placed orders directly on Compaq Asia, Singapore for complete computer systems of various Compaq brand models with instructions to bill and ship the said goods to M/s EPL, SEEPZ; Mumbai. Against the purchase orders of Microland, M/s Compaq, Singapore issued invoices to EPZ units quoting Microland s purchase orders. In the invoices so issued, M/s Compaq, Singapore described the goods supplied as computer parts and peripherals with specific reference to respective model nos. and complete assembly nos. of the computers ordered by M/s Microland Ltd. From the statements of the various officials of the appellant firm, it is clear that M/s. EPL and other Tandon Group of Companies imported complete computer systems without having any licence for the same thereby violation the EXIM policy. They did not have any manufacturing facility for manufacture of computers from the parts and components and the oly activity undertaken by them was insertion of FDD and HDD into the system and conducting certain tests to ensure that the computer systems work properly. From the evidence unearthed by the investigation, it is clear that, as against the requirement of value addition of 20% the value addition actually achieved was only 10.8%, 6.8%, 10.25% and 6.30% during 1990-91, 1991-92, 1992-93 and 1993-94 and these figures have not been disputed at all by the appellant. It is also on record that the value addition norms were required to be fulfilled not only in respect of the exports made by the appellant but also in respect of the DTA sales effected as the permission to sell in DTA was subject to fulfilling the requirement of value addition in terms of para 102(b) of the EXIM Policy 1992-97. From the evidence available on record these requirements of the EXIM Policy were not at all complied with by the appellants. - It is also on record that the appellant sold computers having foreign brand names in the DTA which was also not permissible. It is further seen that the appellant failed to repatriate the export proceeds to the extent of Rs. 15.76 crores, which is yet to be realized as evidenced from RBI s letter dated 10/03/1994. It is absolutely clear that the appellant hatched a conspiracy with the foreign suppliers as well as the domestic purchasers of the goods to import restricted items without having any licence and, therefore, sold the same in the DTA, the sale of which was prohibited, inasmuch as the goods sold bore the brand names of the foreign manufacturers. It is also evident that fully built computer systems were purchased which were dismantled before export of India and brought to India under the guise of parts and components. The action of the appellant is a fraud played on the exchequer. Fully manufactured computer systems were restricted for imports as per the EXIM Policy as applicable at the relevant time and the appellants did not have the requisite licence for import of the same. These are all admitted positions and there are no disputes whatsoever about these facts. If that be so, the appellant was certainly not entitled to claim the benefit of the exemptions under these notifications. Both the customs notifications and the EXIM policy form an integrated code and violation of the exim policy is also a violation of the condition of customs exemption and we hold accordingly. Adjudicating authority has sought to demand duty only in respect of the SKD assemblies/functional units of the computer systems sold in the DTA without achieving the necessary value addition and also for violating the provisions relating to the brand name. Therefore, the duty demand made in this regard is completely justified and cannot be faulted. The adjustment of excise duty paid on the goods sold in the DTA by the adjudicating authority was not really warranted and in our view an error committed by the adjudicating authority. Since the Revenue has not come in appeal against the said order of the adjudicating authority nor agitated the matter before us, we do not go into this issue. However, the balance of duty demanded is clearly sustainable in law inasmuch as the goods have been imported by mis-declaring them as parts/components and the goods needed a licence for importation which the appellant did not have. Thus the goods are liable to confiscation under Sections 111 (d). For non-achievement of the value addition norms and selling the goods in DTA under foreign brand names, the goods become liable to confiscation under 111 (o) of the Customs Act, 1962 and we hold accordingly. Consequently the appellants are liable to penalty. As regards the penalties imposed on the various officials of the appellant-company, their role is clearly evident and they have undertaken all these activities fully knowing that they are contravening the provisions of the EXIM Policy and the Customs Notifications and, therefore, imposition of penalty on the officials of the appellants except Shri Raghavendran, who passed away during the proceedings, deserve to be upheld and we do so. Similarly, the penalty imposed on M/s. Microland Ltd. is also sustainable as it aided and abetted the evasion of Customs duty by the appellants and, therefore penalties imposed under Section 112(a)/(b) of the Customs Act, 1962 is justified and sustainable in law. - Dcided against Appellants.

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• 2015 (2) TMI 416
  Admissibility of appeal - Discretion of Tribunal to admit appeal - Held that:- Discretion of the appellate Tribunal to admit the appeal is provided only in respect of the appeals filed against order specified under clause (b), (c) and (d) and not in respect of order specified under clause (a) of sub-section (1) of section 129A of Customs Act, 1962. - The present appeal is admittedly filed against order of the Commissioner which is covered under clause (a) therefore there is no discretion of this Tribunal whether not to admit the appeal. Therefore, the appellant has statutory right of appeal against order passed by the Commissioner, irrespective of any amount involved - Decided in favour of assessee.

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• FEMA

• 2015 (2) TMI 415
  Contravention of the provisions of Section 9(1)(b), 9(1)(d) and Section 64(2) r/w Section 9(1)(d) of Foreign Exchange Regulation Act, 1973 - Imposition of personal penalty - violation under Section 51 of FERA, 1973 - whether the adjudicating authority has given the appellant an opportunity of cross-examining the mahazar witnesses and the person who recorded the voluntary statement of the appellant - Held that:- Sh. Kiran S. Javali, Counsel for the appellant chose not to pursue the cross-examination but preferred the case to be decided on the written submission he proposed to make and requested the Adjudicating Authority to conduct the proceedings on the basis of facts and evidence on record. Sh. Kiran S. Javali, Counsel for the appellant filed his written submission on 19-10-2010 which is taken into record. Therefore, I am of the view that appellant by choosing not to proceed with cross-examination of witnesses has himself given a go by to the direction of the Hon’ble High Court. Even his written submission is bereft of the demand of cross-examination and, it appears, he had no dispute at all about the issue of cross-examination of witnesses. For the reasons stated herein, the question of cross-examination does not arise and the adjudication order now is not vitiated for want of opportunity to cross-examine the witnesses. Whether the Adjudicating Authority is justified in re-adjudicating the case to the extent that was already decided by this Tribunal by Order dated 19-7-2002. - Held that:- remitting back the case to the Adjudicating Authority by the Hon’ble High Court of Karnataka was for conducting a fresh enquiry into the allegation as made in the SCN and adjudicating the case according to law. The word “fresh enquiry” in this case means conducting the adjudicating proceedings over again setting aside the earlier Adjudication Order. When the fresh enquiry led to passing of the present Adjudication Order which replaced the earlier Adjudication Order, this Tribunal’s Order dated 19-7-2002 passed in Appeal No. 779/1993 against earlier Adjudication Order is non-existent in the eyes of law. Therefore, exoneration of the appellant of charges under Section 9(1)(b) & (d) of FERA, 1973 under this Tribunal’s earlier Order dated 19-7-2002 stands disallowed at the threshold and that Order no more subsists. Appellant’s dispute was only with the drawal of Panchnama in the office of the DRI consequent to the search of the appellant and his scooter. The appellant was apprehended at about 2115 hours of 6-1-1989 near Sawarkar Baba Pai Petrol Pump, Mangalore. It is evident from a bare perusal of the Panchnama and cross-examination of Sh. Gangadharan, Assistant Enforcement Officer that there was a prior intelligence on the movement of the appellant on or about 2100 hrs. at the spot where he was apprehended and he would be having at his person certain amounts which was meant for distribution in violation of the provisions of the Act. Since it was very late in the night, considering the safety and security of the appellant he was taken to the office of DRI for the search of his person and the scooter for which witnesses were called to the office and a thorough search resulted in seizure of Rs. 8.50 lacs wrapped in newspaper sheets kept in gunny bag in the leg space of his scooter and of documents in 2 sheets recovery of which has not been disputed by the appellant. Therefore, I also concur with the finding of the ld. Adjudicating Authority that the conduct of the search at the office of DRI at Mangalore by the officers of Enforcement Directorate and DRI does not impair the adjudication proceedings. Appellant miserably failed to prove the source of Rs. 8.50 lacs when he claims that the amount of Rs. 8.5 lacs alleged to have been seized from him actually belongs to him. He has not produced any document to prove the source of income. I find that the statement is only an explanation to the seizure of Rs. 8.5 lacs and documents. Sheet No. 1 lists date wise receipts of the amount of Rs. 57,00,000/- in 14 occasions whereas Sheet No. 2 shows payments of Rs. 48.50 lacs made to Sh. Abdul Basith Kadli in 13 occasions. The entire case against the appellant is made out from the explanation contained in the statement to the seizure. The fact of receiving and making payments as evident from the recovery and seizure has not been disputed by the appellant. As regards the criminal complaint initiated by the respondent under Section 56 of FERA, 1973, the appellant submitted that the complaint was supported with the same set of evidence that have been relied upon in the adjudication proceedings. Since the complaint was discharged exonerating the appellant of criminal prosecution and the respondent had not challenged the Order of exoneration, the impugned order passed in pursuance of the SCN supported by the same set of evidence is liable to be quashed and set aside. As regards the penalty, the Adjudicating authority is vested with power to impose penalties under Section 50 not exceeding five times the amount or value involved in any contravention. I am, therefore, of the view that the penalties imposed on the appellant are commensurate with the quantum of amounts involved in the contravention. - Reason to interfere in the impugned order in so far as it relates to the levy of penalties of Rs. 5,70,000/-, Rs. 4,80,000/- & Rs. 8,50,000/- on the appellant respectively for contravention of Section 9(1)(b), 9(1)(d) & 9(1)(d) r/w Section 64(2) of FERA, 1973 and also to the confiscation of Rs. 8.50 lacs under Section 63 of the Act. - Decided against assessee.

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• Service Tax

• 2015 (2) TMI 438
  Denial of CENVAT Credit - Invoices issued prior to registration - whether Cenvat Credit of Service Tax paid on input service can be denied to the appellant on the ground that invoices on the basis of which credit was taken are issued prior to registration of the appellants on 11/10/2004 - Held that:- Sutham Polyesters Limited vs. CCE, Coimbatore - [2005 (6) TMI 346 - CESTAT, CHENNAI], Well known Polyesters Limited vs. CCE, Vapi [2011 (1) TMI 664 - CESTAT, AHMEDABAD], Amar Remedies vs. CCE, Surat - [2010 (7) TMI 333 - CESTAT, AHMEDABAD] and CCE, Ahmd vs. Fine Care Bio-systems - [2009 (7) TMI 142 - CESTAT, AHMEDABAD] - Since the issue is covered in favour of the appellant by the precedent decisions of this Tribunal, respectfully following the same - Decided in favour of assessee.

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• 2015 (2) TMI 436
  Non maintenance of separate accounts - CENVAT Credit - Held that:- As regards the period prior to 1.4.2008 there was a cap of 20% of the credit taken with respect to utilization in case the credit pertains to both taxable as well as exempted services. There was no requirement that the utilization should be within the limit of 20% every month as held by this Tribunal in the case of Vijayanand Roadlines Ltd vs CCE, Belgaum - reported in [2006 (12) TMI 56 - CESTAT,BANGALORE] and Idea Cellular Ltd vs CCE, Rohtak reported in [2009 (2) TMI 91 - CESTAT NEW DELHI]. Thus for the period prior to April 2008, if the appellant had taken credit and the appellant had not utilized that credit in excess of the 20% of the credit taken there will not be any liability to reverse only excess credit taken. For the period 2008-09 to 2010-11, the appellant s contention is that they have maintained separate accounts and the ineligible credit taken by them would be only Rs. 5.81 lakhs. This is a question of fact and needs to be verified by the department. - Matter remanded back conditionally - Application disposed of.

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• 2015 (2) TMI 435
  Clearing and Forwarding Service - Demand u/s 73 - Held that:- Following decision of Commissioner of Central Excise, Aurangabad Versus M/s. Shetkari SSK Ltd. & Others [2011 (7) TMI 739 - CESTAT, MUMBAI] - impugned order is set aside - Decided in favour of assessee.

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• 2015 (2) TMI 434
  Waiver of pre deposit - Airport services - Sale of tickets for visitors at IGI Airport - AAI allowed collection of service tax w.e.f. 02.03.2005 - Held that:- Prima facie, we are of the view that as per the decision of the Tribunal in the case of P.C. Paulose, [2007 (12) TMI 128 - CESTAT, BANGALORE] the activity of sale of tickets for visitors is not leviable to service tax. Therefore as there are contrary views in that case, allegation and suppression cannot be alleged against the applicants. In these circumstances, extended period of limitation is not invokable. Therefore, prima facie, the applicant has made out a good case for complete waiver of pre-deposit. Accordingly, we waive the pre-deposit and stay the recovery of impugned adjudicated liability during the pendency of the appeal. - Stay granted.

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• 2015 (2) TMI 433
  Admissibility of CENVAT credit on the courier services - Held that:- Following decision of CCE vs. Ambalal Sarabhai Enterprises Limited [2014 (1) TMI 118 - GUJARAT HIGH COURT] - CENVAT credit of service tax paid on Courier Services is admissible to the appellant. - Decided in favour of assessee.

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• 2015 (2) TMI 432
  Rectification of mistake - Delay in filing ST-3 returns - Held that:- It is seen that neither in the show cause notice nor in the impugned order the fact of filing of the return by the appellant on 28/03/2007 has been recorded anywhere. Therefore, we requested the Ld. A.R appearing for the Revenue to show us in which part of the order appealed against, this fact has been recorded or in which part of the show cause notice this fact is recorded. The ld. A.R fairly conceded that the fact of the ST-3 return having been filed on 28/03/2007 is neither mentioned in the order nor in the show cause notice. If that be so, Revenue cannot allege that this Tribunal has committed an error. Thus, this ground mentioned in the application of the rectification of the mistake is a new ground, which cannot be considered at this stage. Accordingly, we do not find any merit in the ROM application filed by the Revenue - Decided against Revenue.

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• Central Excise

• 2015 (2) TMI 429
  CENVAT Credit - Maintainability of appeal - Jurisdiction of authority - Violation of principle of natural justice - Held that:- It is an admitted fact that the disputed transactions have been taken place within the jurisdiction of the authority who passed the impugned order. If that being the factual position, it cannot be contended that the authority who passed the impugned order does not have jurisdiction. Further, it is seen that before passing the impugned order, the petitioner was issued with a show cause notice and they also filed their reply to the same. Thereafter, personal hearing was also given to the petitioner which was attended through their Counsel. Therefore, it is clear that there is no violation of principles of natural justice as contended by the petitioner. It can not be said that the authority has passed the order without jurisdiction. Further it is to be noted at this juncture, that the petitioner on receipt of show cause notice, filed their reply to the show cause notice; participated in the adjudication proceedings and finally suffered with the order passed on merits. Therefore, the petitioner cannot now contended that the third respondent is not having jurisdiction. Moreover, it is well settled that in cases involving fiscal nature, availing of statutory appellate remedy has to be first exhausted and the party cannot come directly to this Court and file a petition under Article 226 of the Constitution of India. When an alternative remedy is available, more particularly, in the cases of fiscal nature, invoking of the jurisdiction under Article 226 of the Constitution of India, is not permissible. - Following decision of Radha's case [2015 (2) TMI 437 - MADRAS HIGH COURT] - writ petition is not maintainable - Decided against assessee.

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• 2015 (2) TMI 428
  Clearance of refined groundnut oil, sunflower oil and palm oil using the logo ‘S.V.S. & SONS’. - benefit of Notification No.6/2002 dated 1.3.02 - Benefit of 'nil' duty - Held that:- It is evident from the record that all the three authorities have uniformly taken the view that the goods cleared by the 2nd respondent/assessee bear a superscription ‘manufactured and packed by S.V.S. & Sons’, which is not a brand name or trade name. There is a clear distinction between the brand name used and the superscription as found in the packaging. On this finding of fact, all the three authorities have held that the 2nd respondent/assessee is entitled to the benefit of Notification 06/02 dated 1.3.02. In the light of such a concurrent finding, this Court is of the considered view that said concurrent finding of fact does not need to be interfered with, as there is no error or infirmity in the finding arrived at by the lower authorities. Accordingly, this Court is not inclined to entertain the appeal as there is no question of law that arise for consideration. - Decided against Revenue.

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• 2015 (2) TMI 427
  Denial of CENVAT Credit - GTA service - Invoices issued in the name of other unit - Held that:- So far as, the denial of Cenvat credit of Rs. 1,87,577/- is concerned, this credit had been taken on the basis of GAR-7 dated 05/10/07 under which this amount of service tax on GTA service received had been paid. On going through the GAR-7 it is seen that while the name of the appellant and address is correctly mentioned and the mistake is only the Central excise registration which is of the Khandsa road unit. I hold that just for this mistake the denial of Cenvat credit is not correct. As regards Cenvat credit of Rs. 59,876/-, though the invoices on the basis of which this credit had been taken are bear the address of Khandsa road unit, I find that subsequently the service providers had issued letters making corrections in these invoices. Moreover, it is not the departments allegation that on the basis of which these invoices Khandsa road unit has also taken the Cenvat credit and in this regard the other unit has also given an undertaking. In view of these facts, I am of the view that denial of Cenvat credit of Rs. 59,876/- is also not sustainable. - appellant is entitled to take the Cenvat Credit. Therefore, I set aside the impugned order - Decided in favour of assessee.

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• 2015 (2) TMI 426
  Availment of Suo moto re-credit on cancellation of rebate claim - Export of goods - 100% EOU - they have filed rebate claim - Thereafter the appellants requested the Department to cancel the rebate claim. - Since no reply received from the department, they have availed suo motto re-credit in their cenvat account. - Held that:- appellants are eligible to avail cenvat credit on the inputs. In the present case, once the appellants rebate claim is cancelled they are entitled to take re-credit in their cenvat account. Accordingly, I hold that the appellants are eligible for re-credit of the amount in their cenvat account. The penalty imposed on the appellants is set aside. Accordingly, the impugned order is set aside - Following decision of assessee s own previous case - Decided in favour of assessee.

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• 2015 (2) TMI 425
  Waiver of pre deposit - Exemption under Notification no. 49 & 50/2003-CE - Held that:- in view the offer of the appellant for pre-deposit of Rs. 7 Lakh, we direct the appellant to deposit this amount within a period of 4 weeks from the date of this order. On deposit of this amount within the stipulated period, the requirement of pre-deposit of balance amount of duty demand, interest and penalty would stand waived and recovery thereof stayed. - Partial stay granted.

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• 2015 (2) TMI 424
  Waiver of pre deposit - Demand u/s 11D - Held that:- Appellant is directed to make deposit of the entire demand which has been collected by the appellant for which adjudication has been made under Section 11D of the Central Excise Act, 1944 within 4 weeks and compliance shall be made on 7.2.2015. Upon compliance, there shall be waiver of pre-deposit of balance demand in question and stay of recovery thereof during pendency of the appeal. - Partial stay granted.

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• 2015 (2) TMI 423
  Valuation of goods - whether the amount of sales tax collected by the appellant from the customers and retained with them is includible in the assessable value or not - Held that:- Appellant during the period of dispute were collecting full amount of sales tax from the customers and were paying only 50% of the same to the State Government and were retaining 50% of the tax as per the State Governments Scheme in lieu of capital subsidy. - Though, the reasoning given by the Commissioner in the impugned order for confirming the demand is confusing, the fact remains that this issue now stands decided against the appellant by the Apex Court Judgment in the case of Super Synotex (India) Ltd (2014 (3) TMI 42 - SUPREME COURT). However since on this very issue there were a series of the judgment of the Tribunal which were in the favour of the assessee, the invoking of longer limitation period under proviso to Section 11(A)(1) would not be justified, in view of Apex Court Judgment in the case of continental joint venture vs. CCE, reported in 2007 (216) ELT 177 (SC) the Ld. Counsel for the appellant states that out of the total duty demand of Rs. 72,23,683/-, the duty demand of about Rs. 32 Lakhs is within time. In view this the appellant are directed to deposit an amount of 32 Lakhs (Thirty Two Lakhs) within a period of 8 weeks - Partial stay granted.

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• 2015 (2) TMI 422
  Denial of CENVAT Credit - items used as supporting structures for machinery - Held that:- The MS angles, channels, plates, beams etc., falling under chapter 73 of the tariff are not covered by the definition of capital goods as given in Rule 2(a) of the Cenvat Credit Rules, 2004, and hence, the same would not be eligible for cenvat credit as capital goods. These, items would be eligible for Cenvat credit only as input, as the definition of input, as given in Rule 2(k) also covers the goods used for manufacture of capital goods which are used in the factory for production. However, the items which are used as foundation or supporting structures of the machinery are excluded from the definition of input. The Departments contention is that the entire disputed quantity of structural steel items has been used as foundation or as supporting structures of the machinery, while, the appellants contention, supported by the Chartered Engineers Certificate, is that the entire quantity of MS Angles, channels, beams, plates etc. has been used for fabrication of various items of capital goods and hence, would be eligible for Cenvat credit. However, on going through the chartered engineers certificate, we find out that it simply lists out the various items of plant and machinery which have been fabricated, but the drawings of the items fabricated and the quantity used is not indicated. There is merit in the appellants plea regarding limitation, as during the period of dispute, there were conflicting judgments of the Tribunal on the issue of admissibility of Cenvat credit of the iron & steel items used in fabrication of supporting structure or foundation of the machinery, till the issue was finally decided in favour of the Revenue by larger bench judgment of the Tribunal in the case of Vandana Global Ltd.(2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)) and, therefore, longer limitation period under proviso to section 11A cannot be applied. According to the appellant the Cenvat credit demand of only Rs. 28 Lakh would be within time, even if, the Departments allegation regarding the usage of the iron and steel items for foundation or supporting structure of the machinery is accepted in toto and the Cenvat credit in respect of the same is held as inadmissible. - Partial stay granted.

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• 2015 (2) TMI 421
  Waiver of pre deposit - Non complaince of pre deposit - Appeal dismissed for non prosecution - Held that:- A plain reading of the Section 35 makes it abundantly clear that the Tribunal or Commissioner shall not entertain any appeal under Section 35 unless the appellant has made pre-deposit of applicable amount mentioned in the said provision. Therefore, in terms of the amended Section 35F of CEA,1944 w.e.f. 06th August, 2014, this Tribunal is barred from entertaining any appeal unless pre-deposit as mentioned in Section 35F is complied with. It is a cardinal principle of statutory interpretation that while incorporating a statute or a provision into the existing statute, the Legislatures are fully aware of the position of law as was prevailing on the date of new legislation or bringing the change into the existing legislation. We find the law i.e. amended Sec.35F of CEA,1944 is very clear and unambiguous and the intention of the legislature is also loudly made clear about its applicability. co-ordinate Bench at Mumbai in M/s Bhatia Global Trading Ltd. Vs. Commissioner Customs(Preventive),Mumbai(2015 (1) TMI 326 - CESTAT MUMBAI) has dismissed the Appeals filed after 06.08.2014 for non-compliance with the statutory requirement of pre-deposit - Decided against assessee.

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• CST, VAT & Sales Tax

• 2015 (2) TMI 431
  Works contract - Printing press - Held that:- Questions are squarely answered by the decision of this Court in the case Commissioner, Trade Tax, U.P. Lucknow Vs. M/s. Aristo Printers Pvt. Ltd. Ghaziabad [2010 (12) TMI 1095 - ALLAHABAD HIGH COURT] wherein this Court has come to the conclusion that printing work is in the nature of works contract relying on the Apex Court decision in the case of State of Maharashtra vs. M/s Sarvodya Printing Press Fine Art Printer reported in [1994 (3) TMI 363 - BOMBAY HIGH COURT]. Undoubtedly, ink is passed on to the customers as is apparent from the ultimate printed material. The tax assessed by the assessing authority on the value of ink and processing material as normal chemical is, therefore, justified. - Decided against assessee.

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• 2015 (2) TMI 430
  Classification - whether "Hydraulic Excavator" is a machine under Entry 2 or a motor vehicle under Entry 13 of the Schedule attached to Uttar Pradesh Tax on Entry of Goods into Local Areas Act, 2007 - Held that:- The definition of a particular term in a particular statute is not to be used mechanically for the purpose of another statute unless it is applicable by necessary implication or otherwise some relevance is shown. In the judgment in Bose Abraham Etc. Vs. State of Kerala (2001 (2) TMI 890 - SUPREME COURT OF INDIA) the term "motor vehicle" was defined in the Kerala Act by stating that the motor vehicle would mean the same definition as is provided under Act, 1988. It is in that context of the matter, Court held, that "Excavators" and "Road Rollers" are governed by the wider definition of motor vehicle under Act, 1988 and, therefore, would be motor vehicle for the purpose of Kerala Act. - The term "machinery" is a wider term. It derives its meaning no doubt from the term "machine" but its scope is wider than the term "machine". The word "machine" itself has been taken from the Latin word "Machina" which in turn has been derived from the Greek word "Mekhane" a derivation from "means, expedient, remedy". One can say that earlier the concept of "machines" was confined to the mechanized equipments but with the innovative ideas, discoveries and inventions, the concept of machines has undergone a huge but consistent change. Today, besides the traditional kind of machines, we have gone to the extent of having molecular machine, which is a concept designed in bio-technology. The present day Scientist and Researchers term these machines and equipments as part of "nano-technology". - the term "machinery" is a genus and "motor vehicle" is a species. The motor vehicles in wider sense may specify the term "machine" and "machinery" but when a special entry is provided in the same statute differently than the items which would specify the definition of "motor vehicle" will have governed by that entry and not by "machine" and "machinery". In that context now it would be necessary to examine, whether "Hydraulic Excavator" can be said to be within the ambit of term "motor vehicle" and if so it will stand excluded from the term "machine" and "machinery" and will be governed by the entry "motor vehicle". It is governed by Entry 13 of the Schedule for the reason that the legislature has provided that motor vehicle of all kinds are included therein excluding specifically only a Tractor otherwise even a Tractor would have been included in the aforesaid term. The mere fact that excavator in question works with hydraulic system would not change its very nature of being a excavator. The Tribunal, therefore, has rightly held that in wider sense a, "Excavator" or "Hydraulic Excavator" may be said to be a "machinery" but when a specific entry is there, i.e., "motor vehicles of all kinds", an excavator satisfying aforesaid entry will be governed by the same and cannot be taxed by treating it as a machinery only. The mere fact that the general goods are not being transported by Excavator would make no difference for the reason that legislature has used the term "motor vehicles" in a very wide manner by providing that all kinds of motor vehicles would be governed by Entry 13 of the Schedule attached to Act, 2007. - Decided against Revenue.

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• Indian Laws

• 2015 (2) TMI 414
  Jurisdiction of Tribunal - Question raised before Tribunal based on information sought under RTI Act - Held that:- It needs to be noted that Section 23 of the Right to Information Act, 2005 only bars the jurisdiction of Courts other than Administrative Tribunal in the matters which could be the subject matter of challenge in issuing the information under the Right to Information Act, 2005. It does not bar a challenge to the contents of a communication obtained under the Right to Information Act, 2005. The jurisdiction under Section 19 of the Central Administrative Act is no to be confined only to a challenge to a formal order in service matters. In fact the definition of service matters under Section 3(q) of the Central Administrative Act, 1985 is very wide and is not dependent upon formal orders. To illustrate, when a person is superseded by his juniors, the person concerned can challenge his supersession even in the absence of a formal order. Hence, there would not be any specific order of the employer for a Senior Employee to challenge his supersession at the time of the promotion of a Junior employee. The information supplied to the petitioners under Right to Information Act, 2005 explains why the applicants request for deemed date of promotion as Jr. Engineer Grade II with effect from 2003 has not been accepted. Therefore, it can be a subject matter of challenge before the Tribunal. The employees would therefore, be well within their right to challenge such decision which is received as information under Right to Information Act, 2005. We therefore, allow these petitions and direct the Central Administrative Tribunal to entertain the petitioners applications in so far as they seek to challenge the decision of the concerned employer as conveyed in a reply dated 25 September, 2013 under Right to Information Act, 2005. - Decided in favour of appellant.

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