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TMI Tax Updates - e-Newsletter February 17, 2015 Case Laws in this Newsletter: Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax Indian Laws TMI SMS Customs Duty was paid in excess to what was required to pay - no need to challenge the assessment of the Bill of Entry - Refund allowed -Tri HC uphold the constitutional validity of circular stating that works contracts executed for SEZ units cannot have the benefit of zero rating Articles RATES OF SERVICE TAX AT GLANCE SC upholds levy of Sales tax on processing and supplying of photographs - reiterates power to levy tax retrospectively News RBI Reference Rate for US $ Notifications Income Tax 13/2015 - dated 10-2-2015 - IT Commodities Transaction Tax (First Amendment) Rules, 2014 Highlights / Catch Notes Income Tax Computation of MAT - Book profit - amounts appropriated u/s 45-IC of the RBI Act to special reserve and Debt Redemption Reserve was not on account of specific or known liability to repay. It is not the case of charge on profits - additions confirmed - HC Visit to Get Source Validity of notice under Section 143(2) - regular assessment - the notice issued after the period of limitation could not be held against the assessee - HC Visit to Get Source Diversion of Listing fee - transfer to Investor Protection Reserve, etc. - the accounting treatment adopted by the assessee to transfer the amount directly from listing fee receipts would not make the same as diversion of income by overriding title at the source - addition confirmed - AT Visit to Get Source Re-computation of the ALP - idle capacity - PO used the TNMM as the most appropriate method for calculating the ALP - assessee could not point out that the utilization of employees by the comparable companies was less than the assessee - please of assessee rejected - AT Visit to Get Source Interest income from temporary advancement of funds - interest received by the assessee cannot be treated as income from business and it has to be treated as income from other sources - AT Visit to Get Source Customs Customs Duty was paid in excess to what was required to pay - There is no need to challenge the assessment of the Bill of Entry - The refund of excess paid duty is admissible - AT Visit to Get Source Denial of refund claim - the date of deposit i.e. 10/12/2008 shall be excluded and six months shall be reckoned from 11/12/2008 and therefore the appellant's refund claim was filed on last day of completing the six months period i.e. 10/6/2009, accordingly the refund claim is not time bar - AT Visit to Get Source Service Tax Valuation - diesel consumption is not required for providing such service but diesel consumption is required for generating electricity - prima faice value of diesel not includible in the value of taxable services - AT Visit to Get Source Levy of tax on interest income - Hypothecation - Interest being a consideration for the liquidity forgone by the Bank due to lending of the fund, that is not brought within the purview of the Finance Act, 1994 for taxation - AT Visit to Get Source Central Excise Supplies made to UNICEF for their official use - notf. No. 108/95 dated 28.8.1995 - It is immaterial that the certificate in question did not mention exemption from Excise duty - exemption allowed - AT Visit to Get Source CENVAT Credit - Discrepancy in the description of the goods - credit cannot be denied at the end of the recipients of the said goods on the premise that higher duty has been paid by the manufacturer. - AT Visit to Get Source Time limit for filing of stay application before commissioner (appeals) - even if a stay application has not been filed, before rejecting the appeal the appellant should be given an opportunity to file such an application and consider the same rather than rejecting the appeal. - AT Visit to Get Source VAT HC uphold the constitutional validity of circular stating that works contracts executed for SEZ units cannot have the benefit of zero rating, since goods transferred by a contractor are neither exported as such or used in the manufacture of other goods which are exported. Visit to Get Source Hire purchase agreement - applicant argued that hire purchase transactions are essentially financial services and are not subject to sales tax - argument rejected - HC Visit to Get Source Case Laws: Income Tax 2015 (2) TMI 571 Registration u/s 12AA cancelled - disallowance of exemption u/s 11 - Held that:- No material has been brought on record to show that the assessee solely exists for profit motive. The department has not been able to discharge its onus of showing as to how the conditions for grant of registration have been breached by the assessee. The registration has been granted to the society for many years in the past under the same facts and there is no change in the facts or in the activities of the society in the present year. It has also not been demonstrated by the Department as to how the object of the assessee has turned into a commercial one. The predominant object of the assessee is and remains to carry out charitable purpose of advancement of education and not to earn profit. In fact no profit has been established to have been earned by the assessee. The DIT has failed to specify as to how profit earning is the predominant activity of the assessee and the society has been pursuing its object of imparting education to students. Therefore, the assessee society cannot be deprived off of the benefit of registration granted by the DIT(E) u/s 11 of the Act. Being so, in our opinion, registration granted u/s 12AA of the Act cannot be cancelled. However, the aforesaid findings given by us are nothing to do with the allowability of exemption u/s 11 of the Act. In case any discrepancy or irregularity with regard to the allowability of exemption u/s 11 is noticed by the AO, he can make an independent enquiry/examination at the time of assessment for each assessment year and decide in accordance with law. - Decided in favour of assessee. 2015 (2) TMI 570 Revision u/s. 263 - setting aside the deduction u/s 10A as the assessee company did not produce the permission from the competent authority i.e., RBI for bringing the foreign exchange into India beyond 6 months from the date of export but within 12 months - Held that:- In the present case, the assessee-company has submitted a letter to the learned A.O. from HDFC Bank being the authorized dealer which clearly stated that they are authorized by RBI under sub section (1) of section 10 Foreign Exchange Management Act, 1999 (FEMA) as authorised person. Confirmation was provided by the authorized dealer i.e., HDFC Bank that the realisation and repatriation of the remittances of ₹ 15 crores was permitted by RBI under notification No.FEMA/25/2000-RB dated 3.5.2000 to be brought into India within 12 months from the date of export. The proceeds have been brought into India within extended time stipulated by RBI and hence, the issue is squarely covered by the decision of HCL EAI Services Ltd. vs. DCIT [2013 (11) TMI 772 - ITAT BANGALORE]. Further, as seen from the record the assessee has received the amount within the permitted period by the competent authority. Accordingly, the Order of Assessing Officer is not prejudicial to the interests of Revenue nor is erroneous. Therefore, the opinion expressed by the CIT is not correct and accordingly, the CIT does not have jurisdiction to initiate proceedings under section 263 - Decided in favour of assessee. 2015 (2) TMI 548 Validity of reopening of assessment - assessee has offered capital gain from the sale of immovable property in the assessment year 2008-09 - Held that:- Since the assessee has not filed any return of income for the assessment year under consideration despite having entered into sale agreement for the flat in question, therefore, we are of the view that the Assessing Officer had valid and cogent reason and tangible material to believe that the income chargeable to tax has escaped assessment by reasons of failure on the part of the assessee to furnish truly and fully all material facts necessary for assessment. Accordingly, we do not find any merit or substance in the objection of the assessee against the validity of reopening of assessment Capital asset in relation to the flat to be constructed in the Roshni Co-operative Housing Society - short-term capital gain v/s long-term capital gain - whether transfer by the assessee was vide agreement dated October 21, 2004, or completed only on completion of construction and handing over the possession of the said flat to the purchaser and receipt of balance sale consideration? - Held that:- The assessee acquired the flat in the society on September 8, 2003 and transferred all rights in the said flat including the right to acquire the newly constructed flat vide agreement dated October 21, 2004, therefore, the capital asset has been transferred by the assessee within the period of 36 months from the date of purchase and hence the profit/gain on said asset will be short-term capital gain and not long-term capital gain. The deferment in payment of sale consideration for the reason of enforcement of the terms and conditions of the agreement and right of the parties is not material when there was no subsequent transfer of title either intended or actually taken place. In view of the above discussion and facts and circumstances of the case we hold that the transaction of transfer of capital asset in question was completed vide agreement dated October 21, 2004. It is not the case where in the case of the brother of the assessee was examined for the assessment year 2005-06 and accepted the claim that no capital gain arose in the said assessment year. In fact, there was no return of income filed by the assessee as well as no order of assessment in the case of the brother of the assessee, therefore, mere offering of the capital gain for the assessment year 2008-09 by the brother of the assessee will have no bearing or impact on the assessment in the case of the assessee for the assessment year 2005-06. The learned authorised representative has relied upon the various decisions on the point of deemed transfer under section 2(47)(v), we find that those decisions are not applicable in the peculiar facts of the case in hand. Therefore, we uphold the order of the authorities below on this issue. Applicability of section 50C - Held that:- When the agreement itself is subjected to stamp duty and valuation of the capital asset being transfer then the value determined by the DVO at the request of the assessee is justified at ₹ 1.59 crores. Section 50C is applicable in the case because the agreement itself is subjected to valuation under stamp duty valuation authority. Accordingly, we do not find any merit in the objection of the assessee regarding applicability of section 50C. Levy of interest under sections 234A and 234B is mandatory and consequential and no separate finding in this regard is required. - Appeal decided against assessee. 2015 (2) TMI 547 Non-deduction oF TDS u/s 40(a)(ia) - ECB interest and royalty payment - Held that:- Merely because, accounts are closed on that date and the computation of profit and loss is to be judged with reference to such date, does not mean that whether an amount is payable or not must be ascertained on the strength of the position emerging on March 31. This Tribunal is of the considered opinion that the Commissioner of Income-tax (Appeals) has rightly confirmed the disallowance since the assessee has not admittedly deducted tax at the time of making payment. Coming to the alternative contention of learned counsel for the assessee that it has to be allowed in the year in which the tax was paid, this Tribunal is of the considered opinion that in view of provisos to section 40(a)(ia) and 40(a)(i) the deduction claimed by the assessee has to be allowed in the year in which the tax was actually paid by the assessee. The learned Departmental representative also has no objection to allow the claim of the assessee in the year in which the tax was actually paid by the assessee. In view of the above, the Assessing Officer shall verify the actual payment of tax by the assessee on the expenditure claimed and thereafter allow the claim in the year in which the tax was actually paid. - Decided partly in favour of assessee. 2015 (2) TMI 546 Unaccounted cash credit - share call advance money and unsecured loans from two creditor companies - CIT(A) deleted the addition - Held that:- The assessee has furnished various evidences to establish the identity of the creditor companies as extracted by the Commissioner of Income Tax (Appeals) in his order. We also find that directors were appeared before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) directed them to file bank details of which concerns they are directors. The information required by the Commissioner of Income Tax (Appeals) were also furnished. The Commissioner of Income Tax (Appeals) on examining all these details concluded that evidences conclusively proved that two creditor companies M/s. Top Grain Vyapar (P) Ltd. and M/s. Umang Commo Trade P. Ltd. do exist at the addresses given by them and therefore deleted the addition made by the Assessing Officer in respect of share call advance money and unsecured loans with the said creditor companies. None of the findings of the Commissioner of Income Tax (Appeals) were rebutted with any evidence by the Revenue. Thus uphold the order of the Commissioner of Income Tax (Appeals) in deleting the addition and reject the grounds raised by the Revenue. - Decided in favour of assessee. 2015 (2) TMI 545 Depreciation at the higher rate of 30% - motor vehicles given on lease - Held that:- We do not think that the order of remand was required to be passed as it is an accepted and admitted position that motor vehicles in question were given on lease and, therefore, motor vehicles have to be treated as given on hire. Accordingly, the appellant-assessee was entitled to higher rate of depreciation.- Decided in favour of the assessee. Computation of MAT - Book profit - Addition of amount credited to special reserve account - transfer by overriding title - held that:- Tribunal confirming the addition of sum transferred to the special reserve pursuant to the provisions of Section 45-IC of the Reserve Bank of India Act, 1934 under Clause (b) of the Explanation to Section 115JB and to the debt redemption reserve - Held that:- Considering language of clause (b) to Explanation (1) to Section 115JB of the Act, the appellant-assessee had adopted a different line of argument relying upon the decision of the Supreme Court in the case of National Rayon Corporation (1997 (7) TMI 113 - SUPREME Court) and Vazir Sultan Tobacco Company Ltd. (1981 (9) TMI 105 - SUPREME Court) and argued that the amounts appropriated‖ under Section 45-IC of the Reserve Bank of India Act, 1934 are not a reserve. We record and express our inability to agree with the said contention for the reasons set out below. Computation of MAT - Book profit - Addition of amount credited to redemption reserve account - transfer by overriding title - Held that:- In respect of Debt Redemption Reserve of ₹ 18,66,00,000/-, no specific explanation was given; on what account and why the said reserve was created. Nothing has been shown or pointed out to us to show why the said reserve was created. The reserve, which is required to be created under Section 45-IC, is out of the profits earned by a non-banking financial institution. It is not an amount diverted at source by overriding title. The Reserve Bank of India Act, 1934 can permit appropriation in respect of the said reserve. The assessee can also ask for specific directions from the Central Government subject to proviso to sub-section (3) of the said Section. The special reserve under Section 40IC of the Reserve Bank of India Act, 1934 of ₹ 9,80,00,000/- and ₹ 16,00,000/- relating to Assessment Years 2006-07 and 2007-09, respectively was not on account of specific or known liability to repay. It is not the case of charge on profits. It was only appropriation of profits after they had been earned. It is not an expense. To reiterate, a reserve is below the line of allocation of profits. The amount mentioned in the reserve does not get reflected in the Profit and Loss account. Further, the amount mentioned in the reserve is not to be kept in a designated bank account, but would get reflected in the form of assets under the heading assets, etc. - Decided in favour of revenue. 2015 (2) TMI 544 Validity of notice under Section 143(2) - whether served within the period of limitation so as to validate the assessment proceedings of assessment year (AY) 2006-07? - Held that:- This Court had directed the revenue to produce the original record of the assessment. Carbon copies of notice are on record and such notices were alleged to have been sent to the assessee before 31.7.2007, yet there is no material to show that they were dispatched. Another important aspect is that the notice was not sent through registered post nor affixed at the assessee’s address known to the revenue so as to allow presumption enacted under Section 7 of the General Clauses Act to operate. In these circumstances the notice issued after the period of limitation could not be held against the assessee as done by the CIT(Appeals) which rejected the appeal. Consequently, following the previous rulings of this Court, [i.e. Shyam Gopal Charitable Trust V. Director of Income Tax (2006 (11) TMI 149 - DELHI High Court ); BHPE KINHILL Joint Venture V. Addl. DIT (2007 (12) TMI 244 - ITAT DELHI-F) ; World wide Exports P. Ltd. Vs ITO (2004 (6) TMI 287 - ITAT DELHI-J )], it is held that the revenue did not discharge the burden of proving due service of notice which was caused by law upon it. Consequently, the findings of the ITAT and as well as CIT(Appeals) cannot be sustained. - Decided in favour of the appellant. 2015 (2) TMI 543 Unrecorded purchases - ITAT confirmed deletion of addition done by CIT(A) - Held that:- Both the authorities were guided by the peculiar nature of the transactions involved where the assessee purchased raw and semi-finished products and thereafter sent them for embroidery and other work before the finished products were made available to it for sale. No fresh ground has been made out in the present appeal to show why the ITAT’s reasoning, is unsustainable in law. The ITAT confirmed the view of the CIT(Appeals) after an elaborate discussion, based on its own appreciation as is evident from the above extracts. - Decided against revenue. Addition of own recorded sales - rejection of books of accounts - Held that:- The GP disclosed by assessee having been accepted; no specific instances of deficiency of sale or purchase in a/c books; no proof of unrecorded purchases or sales having been brought on record, we see no justification for rejection of books of the assessee. The rejection of books by lower authorities is only on surmises and not supported by any cogent or objective reasons. Consequently, we delete the additions in respect of rejection of books, estimation of sales/purchases and consequent estimation of GP in the result assessee's ground in this respect succeeds - Decided against revenue. 2015 (2) TMI 542 Penalty u/s 271(1)(c) - Tax evasion - application for settlement offering undisclosed income - grant immunity to the petitioner from penalty and prosecution denied - Held that:- This is a case where the assessee has acted bona-fide and has concealed nothing, which evident from the fact that the Settlement Commission has also accepted the income offered by the assessee for settlement. In this view of the matter, we cancel the penalty levied. CIT Vs. Harkaran Das v. Ved Pal [See 2008 (11) TMI 47 - HIGH COURT DELHI] Since in the assessment proceedings, the penalty levied against the petitioner, has been set aside by the Income Tax Appellate Tribunal, continuation of criminal proceedings against the petitioner in relation to the same proceedings, would be nothing but an abuse of process of law.- Decided in favour of assessee. 2015 (2) TMI 541 Deduction under section 80-IA - Held that:- The facts in the present case are that all the business undertakings are wind mills and they have claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment years in question and for the subsequent years as well. Having exercised their option and their losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. In the decision Velayudhaswamy Spinning Mills V. Asst. CIT( 2010 (3) TMI 860 - Madras High Court ) there appears to be no distinction on facts. - Decided in favour of the assessee 2015 (2) TMI 540 Penalty u/s 27 1(1)(c) - disbelieving the agricultural holding - Held that:- AO himself has accepted the extent of land holding both in the immediately preceding year (AY 2007-08) and in the immediately succeeding year (AY 2009-10). Hence, the very basis on which the agricultural income was reduced in AY 2008-09 is proved to be wrong by the above said facts. Thus, it is seen that the agricultural income has been estimated at a lower figure in AY 2008-09 on the basis of mere presumption about the extent of land holding, which is proved to be wrong. The Assessing Officer has also failed to furnish the basis in adopting a round sum amount of ₹ 5.00 lakhs. Thus, the agricultural income determined by the Assessing Officer turns out to be a mere estimate. Under these set of facts, we are of the view that the assessee cannot be found fault with, with the charge of concealment of particulars of income. Accordingly, we set aside the order of Ld CIT(A) in AY 2008-09 and direct the assessing officer to delete the penalty levied u/s 271(1)(c) of the Act for that year. In AY 2009-10 the assessing officer has simply forced the assessee to scale down the agricultural income by making lower estimates. The AO has examined the extent of land holding and was also satisfied with the same. However, in one of the agricultural record, the area of cultivation was shown at a lower level and hence the assessing officer has considered the same to be a case of furnishing of inaccurate particulars of income. Thus, it is seen that there is contradiction in the stand of the assessing officer also. In any case, it is seen that the assessing officer has substituted the agricultural income declared by the assessee with another estimate only. In our view, such kind of substitution of income on estimated basis cannot be considered to be a case of concealment of particulars of income and hence the same would not give rise to any penalty u/s 271(1)(c) of the Act. - Decided in favour of assessee. 2015 (2) TMI 539 Accrual of listing fee income - transfer to Investor Protection Reserve, etc. - accounting treatment - Held that:- the assessee should furnish the company wise details relating to ₹ 1.34 crores and also demonstrate the existence of “Uncertainty” over its collection. In the absence of the explanations of the assessee as to how the element of uncertainty exists in respect of listing fee receivable from each of the company, it may not be possible for the Tribunal to adjudicate this issue. Accordingly, this issue requires fresh examination at the end of the assessing officer. - matter remanded back - Decided in favour of revenue for statistical purposes. Diversion of listing fee by overriding title - Addition to transfer to Investor Protection Reserve, etc.- CIT(Appeals) deleted the additions - Held that:- In the instant case, as already noticed that the assessee was required to carry out the activities like facilitating investors, educating them, protecting them etc. in the ordinary course of its activities. In our considered opinion, by issuing the direction (referred above), the SEBI has only prescribed the minimum amount that should be spent for such purposes. The direction issued by SEBI nowhere states that the amount should be appropriated out of listing fees or it should be kept in separate account disabling the assessee from using it. The direction no where states that the SEBI would spend the money towards the specific purposes and recover the same from the assessee, if the assessee fails to spend the same. the assessee has only appropriated the listing fees after it reached its hands and the purpose of such transfer was only to earmark the income for spending the same for specific purposes. Hence the same should be considered as mere appropriation of income of the assessee. Hence, we are of the view that the accounting treatment adopted by the assessee to transfer the amount directly from listing fee receipts would not make the same as diversion of income by overriding title at the source. Accordingly AO was justified in assessing the income so appropriate to investors reserve account etc., as income of the assessee. - Decided against assessee. A.R submition that the amount so transferred to Investors reserve account etc., if not considered as diversion of income at source, then the expenditure incurred from out of such reserve accounts should be allowed as deduction is acceptable - restore this matter to the file of the assessing officer with the direction to examine the alternative claim of the assessee and take appropriate decision in accordance with the law. 2015 (2) TMI 538 Revision u/s 263 - non-invoking of section 40(a)(ia) by the Assessing Officer - Held that:- It is a well-settled proposition that a Commissioner is denuded from exercising his revisionary power u/s 263 of the Act unless he is able to establish that the order under revision is erroneous as well as prejudicial to the interests of the Revenue. The absence of either of the two conditions would not justify invoking section 263 of the Act by the Commissioner. In the present case, the action of the Commissioner to direct the Assessing Officer to disallow ₹ 1,32,83,963/- u/s 40(a)(ia) of the Act does not establish any loss of tax for the Department in the face of assessee’s assertions that such income is exempt u/s 10A of the Act, which is in line with the judgement of the Hon’ble Bombay High Court in the case of Gem Plus Jewellery ( 2010 (6) TMI 65 - BOMBAY HIGH COURT ). Therefore, in the absence of fulfillment of one of the condition of the order being prejudicial to the interest of the Revenue, the impugned action of the Commissioner is not tenable. The order of the Commissioner qua the disallowance u/s 40(a)(ia) of the Act is hereby set aside. - Decided in favour of assessee. 2015 (2) TMI 537 Agricultural Income - absence of reliable books - CIT(A) accepting the entire income declared as Agricultural Income - DR submitted that the additions were made on the basis of documents which were found at the time of survey operations - Held that:- Except for the order of the CIT(A) wherein he mentions about the partners, nowhere it is find as to what is the constitution of the firm. Also do not find from any record as to which partner of the firm owned how much land. We also do not find as to when the agricultural land was purchased and what was there in the sale agreement. All these documents are important and primary, without which it would be difficult to proceed. Revenue authorities have independently proceeded to pass the orders without reference and elaboration of these primary facts. In the light of the above, we deem it fit that the orders of both the revenue authorities be set aside and direct the AO to pass fresh order after taking into consideration all the material as mentioned here above - Decided in favour of revenue for statistical purposes. 2015 (2) TMI 536 Disallowance u/s 14A in respect of exempt income - CIT(A) deleted the addition also confirmed by ITAT - Held that:- A perusal of stated bundle of facts relating to this case reveals that the issue relating to disallowance u/s 14A of the Income Tax Act has already been settled with the decision of this Tribunal vide order dated 8.12.2010. The Deptt. did not raise this issue in its appeal before the Hon’ble High Court. This issue thus has become final. When an issue is finally settled by the Higher/appellate authority judicial authorities and the findings have become final, the Assessing Officer (hereinafter referred to as the AO) has to mandatorily give effect to the order of the appellate authority by the decision of which, the issue has been finally settled. The refusal or failure to comply the order of the higher/appellate authority by the lower authority amounts to contempt of court which may invite penal action under the Contempt of courts Act as well under the other relevant provisions of Code of Criminal Procedure. Apart from which such a conduct shows the unwillingness of the lower rank officer to comply the directions of his superiors which may invite departmental action. - Decided against revenue. 2015 (2) TMI 535 Re-computation of the ALP - assessee seeked suitable reduction in the operating costs by the disallowed amount of depreciation and the resultant increase in its operating profit margin - reassessment was initiated on the ground that the assessee claimed excess depreciation against the ‘Business income’ - Held that:- A conjoint reading of the existing and the earlier provisions of sub-section (4) makes it overt that whereas the TPO’s report determining the ALP was earlier not binding on the AO, who could change the computation of ALP as per his wisdom, but now with the substitution of sub-section (4), the AO has become functus officio as regards the ALP determined by the TPO. Now, the AO is obliged to compute the total income of the assessee in conformity with and not having regard to the ALP determined by the TPO. Now, the AO cannot tinker with such determination done by the TPO. As the instant assessment order has been passed by the AO u/s 143(3) read with section 147 on 28.12.2011, the case falls for consideration under the substituted provision presently existing on the statute, forbidding the AO fromaltering the TPO’s determination of ALP in any manner. As such, we hold that the AO was incompetent to accept the assessee’s claim for reducing the operating costs with the amount of depreciation for the purpose of calculating the ALP of its international transaction, in making the extant assessment u/s 147. The final conclusion drawn by the authorities below in this regard is, therefore, upheld. However, we make it clear that it is open to the assessee to seek any legal remedy, if available, as per law for getting the needful done in this regard. - Decided against assessee. Addition on account of transfer pricing adjustment - exclusion of transactions with branch office seeked by assessee - Held that:- Merely because the assessee took an inadvertent appreciation of the transactions with self as international transactions, that cannot prevent it from claiming before the authorities that the correct legal position should prevail. In view of the fact that the assessee’s office in Canada is its branch office, the transactions between the head office and the branch office, under the provisions of the Act, cannot be considered as international transactions. We, therefore, hold that the TPO was not justified in determining the ALP of the international transaction of ‘Software Product Development/Software Consultancy Services’ by applying the average operating profit margin of the comparables to the cost base of transactions with its AE and also with the branch office in Canada. Such cost base is directed to be considered as exclusive of transactions with the Canada branch. We, therefore, set aside the impugned order on this issue and direct the AO/TPO to recompute the ALP in the light of our above directions. - Decided in favour of assessee. Disallowance of adjustment on account of idle capacity - PO used the TNMM as the most appropriate method for calculating the ALP - Held that:- The assessee’s contention that its operating costs should be reduced to the extent its employees remained idle is, ergo, incapable of acceptance. The adjustment, if any, could have been allowed, if the assessee had demonstrated that the comparable companies had more under-utilization of their labour force vis-à-vis the assessee. The onus to prove such under-utilization of employees of the comparables, for claiming adjustment, squarely lies on the assessee. On a specific query, the ld. AR could not point out that the utilization of employees by the comparable companies was less than the assessee. Under such circumstances, we are of the considered opinion that no such adjustment can be granted. We, therefore, approve the view taken by the authorities on this issue. - Decided against assessee. 2015 (2) TMI 534 Penalty u/s 271(1)(c) - assessee had claimed STT in its profit and loss account and has thereby reduced its income by concealing the particulars of income - disallowance made on account of section 94(7) and u/s 14A - Held that:- Held that:- There is no reason to doubt the bonafide of the assessee in making the claim as there was no gain to the assesee as STT could not be utilized as rebate and secondly there was no tax sought to be evaded. In both the situation i.e tax payable on return income and tax position in the assessed income, the tax liability was Nil. So far as other addition / disallowance made on account of section 94(7) and u/s 14A there is no reason to doubt the explanation of the assessee. Besides, the additions/disallowances on which penalty in question has been levied, have been made undisputedly on the basis of disclosure made by the assessee available on record. Hence it cannot be said beyond doubt in the present case that there was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assesee to attract penal action u/s 271(1)(c) of the Act on the disallowances / additions as discussed above. Nor is it the case of the revenue that the assessee has failed to disclose fully and truly all the material facts relating to particulars of income, the only mistake committed by the assessee was that while computing the payable income and an amount which should have been disallowed due to provisions of section 40(a) (ib) of the Act was not disallowed or added back by the assessee. The reasons behind the other additions / disallowances has also been explained by the assesee on which there is no reason to doubt its bonafide. No penalty u/s 271 (1) (c) can be levied on the disallowances/additions made by the AO which were based on the disclosure of the related facts by the assesee only. - Decided in favour of assessee. 2015 (2) TMI 533 Unexplained cash credit u/s. 68 - accommodation entries - CIT(A) deleted addition - Held that:- no interference is called for in the well reasoned order passed by the Ld. CIT(A), because the Ld. CIT(A) has decided the issue in dispute in favor of the assessee after appreciating the evidence filed by the assessee as well as various decisions rendered by the Hon’ble Supreme Court as well as Hon’ble High Court and the decisions of the ITAT Benches. We are of the view that the share application money received in the hands of the assessee company is properly explained by the assessee during the course of assessment proceedings as well as before the Ld. CIT(A) and even before us. Therefore, we find no infirmity in the impugned order passed by the Ld. CIT(A) and we uphold the same by dismissing the appeal filed by the Revenue. - Decided in favour of assessee. 2015 (2) TMI 532 Disallowance u/s 40(a)(ia) - payments for purchase of activation card from TV channels attract TDS provisions u/s 194C - Held that:- AO has noted that the assessee has paid an amount of ₹ 36.15 lakhs to various TV channels. If that is the case, then nothing remains payable by the assessee by the end of the relevant financial year. Accordingly the ratio laid down by the ITAT Visakhapatnam Special Bench in the case of Merillyn Shipping & Transport vs. Add CIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ) squarely applies to the facts of assessee’s case. We direct AO allow the expenditure of ₹ 35,69,715/-, if it is found to have been paid within the relevant financial year - Decided in favour of assessee by way of remand. 2015 (2) TMI 531 Interest income from temporary advancement of funds - income from Other Sources OR Profits & Gains of Business or Profession - business activity had not yet started - Held that:- CIT(A) correctly concluded that though the borrowing was made for the purpose of business but the amount was advanced and interest earned for the period prior to commencement of business in the instant case and hence interest paid by assessee cannot be allowed as business expenditure. Decision of the Apex Court in the case of Tuticorin Alkalies Chemicals & Fertilizers Ltd. [1997 (7) TMI 4 - SUPREME Court] and observed, on identical facts, that the interest received by the assessee cannot be treated as income from business and it has to be treated as income from other sources. Similarly the interest expenditure has to be capitalised. - Decided against assessee. 2015 (2) TMI 530 Unexplained cash deposits in bank account - CIT(A) allowed part claim - Held that:- Considering order of the learned CIT(A), who had analysed the cash deposited in the bank account and withdrawal made on various dates in the both the accounts i.e. in Axix Bank and Malviya Urban Cooperative Bank, Jaipur, there is no material on record from either side to controvert the finding of the learned CIT(A), therefore, we uphold the order of the learned CIT(A). - Decided partly in favour of assessee. Ad hoc disallowances @ 20% out of expenses - Held that:- The learned CIT(A) had examined all the aspects of expenses claimed by the assessee with evidence and books of account. The appellant had not controverted the finding give by the Assessing Officer before the learned CIT(A). Therefore, we also uphold the order of the learned CIT(A) who had confirmed the addition by observing that the assessee had been provided sufficient opportunity to produce the books of account before the Assessing Officer but he failed to produce the same and had not established the genuineness of the expenses. - Decided against assessee. 2015 (2) TMI 529 Unexplained cash credit - CIT(A) deleted the addition - Held that:- The appellant had furnished the detailed list before the Assessing Officer with amount and some affidavits during the assessment proceedings. In remand report proceedings, the learned Assessing Officer had not doubted the genuineness and creditworthiness of the farmers. The learned Assessing Officer should have issued the 131 summons to all the farmers for appearance before him. In set aside proceedings, out of 23 farmers selected for verification. 11 farmers were examined by the learned Assessing Officer and were also cross examined by the assessee/respondent. One had died, one had brain hemorrhage, one had paralysis, four couldn't come due to harvest season and four were already examined in the set-aside proceedings. All the farmers who came-up had accepted that they are having long term dealing with the assessee/respondent and that they used to collect their sale consideration after 1-2 months, which is general practice in the line of farming and selling in the mandis. The appellant also furnished the details of land holdings of all the farmers, which shows that they belonged to farming community. The case laws relied upon by the assessee are squarely applicable on the case of the assessee, therefore, we uphold the order of the learned CIT(A). - Decided in favour of assessee. 2015 (2) TMI 527 Deduction u/s 54EC - investment of Short Term Capital Gain arising from the sale of depreciable asset - CIT(A) allowed the claim - Held that:- Section 50 and Section 54EC are independent provisions. Section 54E does not make any distinction between depreciable asset and non-depreciable asset, therefore, exemption available to depreciable asset u/s 54E cannot be denied by referring to fiction created u/s 50 of the Act. In the present facts, we note that the assessee has fulfilled the conditions set out in section 54E of the Act to avail exemption which was denied by the Assessing Officer, in view of fiction created u/s 50. Section 54E of the Act specifically provide that where capital gain arising on transfer of long term capital asset is invested or deposited in the manner prescribed by the Government at the relevant time in the specified asset, the assessee shall not be charged to capital gain tax. Our view is squarely covered by the decision from Hon’ble jurisdictional High Court in the case of ACE Builders (P.) Ltd. (2005 (3) TMI 36 - BOMBAY High Court). - Decided against revenue. Disallowance on account restricted exemption available to only ₹ 50 lakh u/s 54EC - Held that:-Section 54EC (1) of the Act restrict the time limit for the period of investment after the property was sold to six month and there was no cap on the investment to be made in bonds, meaning thereby, as per the mandate of section 54EC(1) of the Act, the time limit for investment is six month and the benefit that flows from the first proviso is that if the assessee makes the investment of ₹ 50 lakh in any financial year, it would have benefit of section 54EC (1) of the Act. However, the ambiguity, if any, was removed by the legislature with effect from 01/04/2015. Thus, the Assessing Officer is directed to examine the claim of the assessee and allow the exemption up to ₹ 1 crore if the investment is found to be made within six month in two different financial years - Cross objection of the assessee is allowed for statistical purposes. 2015 (2) TMI 526 Estimation of the net profit - results as reflected in the accounts which had been subjected to tax audit u/s 44AB ignored - rejection of books of accounts - Held that:- The assessee’s income from operational activities and other income have been estimated by the AO as well as Ld.CIT(A), after rejecting the book results on the ground that statutory audit has not been completed. The reasons given by the assessee was that, the audit was to be carried out by the Comptroller & Auditor General of India and such an audit was completed only up to A.Y. 2004-05 at the time of assessment. There is no other authority who can carry out statutory audit in case of assessee. The assessee has appointed his own chartered accountants for obtaining tax audit u/s 44AB and provisional balance sheet & P&L Account, which were filed before the AO. Now that the statutory audit report is available for the relevant financial year, we are of the opinion that such an evidence is to be admitted and this issue should be restored back to the file of the AO to be consider the statutory audit report and complete the assessment afresh taking into account such report. - Decided in favour of assessee for statistical purposes. Taxability of interest - Held that:- Ld. Counsel has filed on office memorandum dated 04.01.2014, issued by the Government of Maharashtra clarifying that interest on the utilized grant is to be characterized as part of grant-in-aid only. Such a letter/memorandum has a vital bearing on the issue involved, therefore, we admit the said additional ground and remit the matter back to the assessing officer to take cognizance of such an evidence - Decided in favour of assessee for statistical purposes. Customs 2015 (2) TMI 554 Refund of excess duty paid – appellant paid excess CVD @ 10% instead of effective rate of 4% in terms of unconditional exemption Notification No. 4/2006-CE - Held that:- At the material time of import the effective rate of CVD was 4% by notification No. 4/2006-CE and the appellant has paid excess duty of 10% by oversight. Even though the Revenue has not disputed that the effective rate of duty was 4%, this fact clearly established that there is no dispute between the appellant and the Revenue as regards the effective rate of CVD. The lower appellate authority has rejected the claim, applying the ratio of Flock India [2000 (8) TMI 88 - SUPREME COURT OF INDIA] and Priya Blue Industries case (2004 (9) TMI 105 - SUPREME COURT OF INDIA). However, both these Apex Court judgements have been distinguished in Aman Medical Products Ltd. case [2009 (9) TMI 41 - DELHI HIGH COURT] by Hon'ble High Court of Delhi. - There is no dispute that the duty was paid in excess to what was required to pay. There is no need to challenge the assessment of the Bill of Entry. The refund of excess paid duty is admissible. - appellant is rightly entitled for refund of excess paid CVD. The order of the lower appellate authority is set aside - Following decision of Bennet Coleman & Co. Ltd. [2008 (7) TMI 204 - CESTAT BANGLORE] - Decided in favour of assessee. 2015 (2) TMI 553 Duty demand u/s 28 - Difference in value declared to the Customs in the invoices submitted to the Customs at the time of import vis-`-vis the values stated in the documents available in the appellant's file - Imposition of penalty - Difference of opinion - matter may be referred to the President to nominate a 3rd Member to resolve the following issues:- 1. Whether in the facts and circumstances of the case appellants can at this belated stage raise the issue that they are neither importer nor person claimed themselves to be the owner of goods and hence no duty can be confirmed against them as allowed by Member (Judicial). Or In view of the facts that the goods belongs to the appellant or their associate and sent at their instance, the appellant admitted the duty liability at the time of investigation thereby stopping further investigation and the fact that during the first round of litigation that is before the adjudicating authority or before this Tribunal, the appellant did not dispute the duty liability and the matter was remanded by this Tribunal for the limited purpose of quantification of the duty amount keeping in view that the applicability of duty exemption notifications prescribing effective rate of duty and the penalty under Section 112 and 114A to be separately specified, appellant cannot be allowed to raise the issue that they were not importer or person chargeable to duty at this stage as held by Member (Technical). 2. Whether the appellant can be permitted to raise the issue that the goods are ship stores, meant for use beyond the territorial waters of India and thereafter to be re-exported back and hence no duty can be charged as allowed by Member (Judicial) Or The goods imported are not ship stores as per the definition under Section 2(38) of the Customs Act particularly in view of the fact that the appellants are only providing wireline testing, measurement while drilling etc., service to ONGC and spare parts imported are used in the equipments for providing the said service and are not part/fitment of the oil rigs. Moreover, no catalogue, literature or supporting evidence is produced at any stage for the said claim. No details have been provided how and where the goods are used. The provisions of Customs Act are not only applicable to the territorial waters of India but also to Exclusive Economic Zone. Further no details have been provided when the goods were taken on oil rigs, when received back and when re-exported back and no procedure has been followed as prescribed under any Sections of the Customs Act and under the circumstances the appellants cannot claim the benefit as ship stores or that the goods were immediately re-exported back. Even the Tribunal has not remanded the matter to examine this issue. Hence, this issue cannot be raised at this stage, and benefit of ship stores, re-export etc. cannot be extended as held by Member (Technical). 3. Whether in the case of imports through courier, since Bill of Entry is filed by the Courier Agency therefore the courier is the importer and not the appellant as held by Member (Judicial) Or Courier agency acts as an agent of the appellant consignee, while filing a consolidated Bill of Entry for all consignees, and appellant consignee is the importer and person chargeable to duty in respect of his consignments as held by Member (Technical). 4. In case of hand baggage, the passenger who brought the baggage is the importer and hence duty cannot be demanded from appellant as held by Member (Judicial) Or In the case of hand baggage also duty is chargeable from the appellant as goods were brought by appellant s employees without declaring or declaring but under-declaring the value, goods were owned by the appellant or their associate, were taken from appellant s offices abroad and after passing through Customs in India again handed over to the appellant, which in turn were used by appellant in connection with providing service to ONGC as held by Member (Technical). 5. Whether in case the imports were made through sea, ONGC has to file bill of entry as importer as held by Member (Judicial) Or Appellant has admitted duty liability in respect of 4 consignments of spare parts imported by sea/air, and no evidence is produced that bill of entry was filed by ONGC. Moreover, goods were shipped by appellant, received by appellant and used by appellant for providing the service to ONGC under the circumstance appellant is to be held person chargeable to customs duty as held by Member (Technical). 6. Keeping in view the facts and circumstances, no duty chargeable from the appellant as held by the Member(Judicial) Or Keeping in view the facts and circumstances of the case, duty is chargeable and collectable from the appellant as held by Member(Technical). 7. No penalty is imposed by the Member (Judicial) in view of the fact that the appellants are not liable to pay duty but as they are not contesting the confirmation of duty against them. Or Penalty is imposable under Section 112 of the Customs Act in the facts and circumstances of the case on both the appellants irrespective of contesting or not contesting duty liability as held by the Member (Technical). 2015 (2) TMI 552 Excess import of goods against advance licence - Pencillin-G which was imported free of Customs duty - Confiscation of goods - Notification No. 94/2004-Cus dated 10.09.2004 - According to the Revenue, imported raw materials should have been used in the manufacture and thereafter export of goods for fulfilment of export obligation and before fulfilling the export obligation, the goods so produced could not have been cleared to the domestic market - During search operation on 30.08.2007, neither pencillin-G nor the final products (bulk drugs) were found in the manufacturing units even though export obligations were yet to be fulfilled. Held that:- During the hearing the learned advocate for the appellant did not press for this issue and stated that they have already paid duty alongwith interest, hence there cannot be any penalty on the appellants. There is no dispute that the raw material imported was far in excess of that required by the appellant. This fact was not brought to the notice of the licensing authorities so that they could have issued the licence as per the actual requirement. Even after duty free importation, the appellants have neither made additional exports, nor paid the Customs duty. These details were suppressed and came to light during investigation. Accordingly, we hold that there is a violation of the provisions of Handbook read with Foreign Trade Policy and since the exemption is granted to raw materials imported against Advance Authorisation issued in terms of Foreign Trade Policy, the exemption is subject to limitation as provided in the Notification, Foreign Trade Policy/Handbook of Procedures. Appellant No. 1 has paid substantial amount to appellant No. 2 in respect of goods purchased from appellant No. 2 on high-sea sale basis. As per Section 14 of the Customs Act, 1962 it is the transaction value which is relevant for determining the assessable value. In the present case, the transaction value will include the amount so debited or paid after the clearance of the goods. In view of this position, we hold that the additional amount paid will be subject to duty. Goods are confiscated both under Section 111 (d) and Section 111 (o) of the Customs Act, 1962. We do not find any force in the argument of learned advocate for the appellant that goods are freely importable and hence there is no restriction for imports and Section 111 (d) is applicable only when the imported goods are prohibited. It may be true that goods are freely importable. However, in that situation full Customs duty is chargeable. Moreover, appellants have not imported the goods under the said provision of free importability. Appellants have imported the goods under Advance Authorisation which have its own benefits and obligations, restriction and prohibitions. Both benefits and obligations, restrictions and prohibitions are interlinked. Appellants cannot be permitted to avail the benefits and when it comes to obligations, restrictions and prohibition to say that goods are freely importable. We therefore hold that confiscation under Section 111 (d) is correct. As far as confiscation under Section 111 (o) is concerned, we find that imported duty free material were meant for manufacture of the resultant product and export, thereby contravening the provisions of relevant notifications and condition of the Advance Advance Authorisation. Confiscation under Section 111 (d) and Section 111 (o) of the Customs Act, 1962 is correct and redemption fine is also correctly imposed. In addition, Section 111 (m) will be applicable in case of undervalued Pencillin-G and is accordingly upheld. Appellants who were directly responsible for evasion of duty are to penalty and the same is upheld against them. However, the appellants who did not have direct connection are liable for reduced penalty - and the rest of the appellants who did not have any connection are not liable for penalty - Decided partly in favour of appellants. 2015 (2) TMI 551 Revocation of CHA License - Clearance of Mis-declared of goods - Charge under Regulations 13(a), 13(d) and 19(8) of the CHALR, 2004 - Difference of opinion - matter may be referred to the President to nominate a 3rd Member to resolve the following issues:- 1. Whether in the facts and circumstances of the case the charges leveled against the appellant under Regulations 13(a), 13(d) and 19(8) of the CHALR, 2004 are stands proved or not. 2. If the charges are proved, in that case, the punishment suffered by the appellant is sufficient in the facts and circumstances of the case. 2015 (2) TMI 550 Denial of refund claim - Bar of limitation - delay of one day - Held that:- it is mandated that while computing the period of limitation, first day from which such period to be reckoned shall be excluded. In the present case, the first date is 10/12/2008 and last date is 10/6/2009. If in accordance with the above statutory provisions the first date i.e. 10/12/2008 is excluded, then the period of six months shall be reckoned from 11/12/2008, accordingly six months will complete on 10/6/2009. The appellant has filed the refund claim on 10/6/2009, this clearly shows that the appellant has filed their refund claim within stipulated time of six months. - it is crystal clear that in the present case, the date of deposit i.e. 10/12/2008 shall be excluded and six months shall be reckoned from 11/12/2008 and therefore the appellant's refund claim was filed on last day of completing the six months period i.e. 10/6/2009, accordingly the refund claim is not time bar - Decided in favour of assessee. Service Tax 2015 (2) TMI 569 Waiver of pre deposit - Valuation of taxable services - inclusion of supply of diesel - Held that:- As per the contract the appellants are required to keep the mobile towers in perfectly operational and ready condition (uptime 99.95%). Ensuring readiness for functionality is different from actual functioning. Readiness for functionality (i.e. uptime) only requires that the systems including generating set are found to be ready to function whenever required. Thus diesel consumption is not required for providing such service but diesel consumption is required for generating electricity. We find that electricity is "goods" and "diesel" is clearly an input for producing electricity by generating sets. Also we find that as per the contract the appellants were required to procure diesel from designated outlets and of specified quality and they were to raise periodical and separate bills for the reimbursement of the cost of diesel which was filled. Thus in a sense it was arguably a case of diesel being supplied by the service recipient. As regards the contention of the ld. AR, with reference to the judgment of Supreme Court in the case of Idea Mobile Communications (2011 (8) TMI 3 - SUPREME COURT OF INDIA) it is seen that the judgement was predicated on the value of SIM cards being insignificant and sales tax department having given up their claim to charge sale tax thereon. Property in goods (diesel) was transferred to the service recipient before it was consumed for producing electricity and therefore, on that count also, its value was not liable to service tax. We find that in the case of Xerox Modicorp Ltd. vs. State of Karnataka - Manu/SC/0505/ 2005 Hon'ble Supreme Court held that in case of operation of Xerox machines transfer of property in the form of tones/developer take place as the property passes the moment the goods are put in the machine because at that stage they are not consumed but are tangible goods which can pass; they are consumed only after they are put in the machines. - value of diesel is not includible in the assessable value of the impugned service. Accordingly we waive the pre-deposit and stay recovery of the impugned liability during pendency of the appeal - Stay granted. 2015 (2) TMI 568 Modification of order - modification of this order on the ground that the appellant has a strong case and further nobody else is paying tax on tours organized for Hajj purpose. It was also submitted by the learned counsel that on 24.2.2014, it was the 7th death anniversary of counsels mother and because of this reason an adjournment application was faxed to the Tribunal. It was also submitted that the case was not figuring in the website of CESTAT and they presumed that there was no sitting on 24.2.2014. On these grounds the modification of the stay order is sought. - Held that:- It is settled law that this Tribunal has no power of review. Modification can be made only if there is an apparent error on the face of the order. In this case, no such error on the part of the Tribunal has been pointed out. Under the circumstances, the miscellaneous applications for modification of the order cannot be considered favourably and accordingly, the miscellaneous applications are rejected. - Modification denied. 2015 (2) TMI 567 Denial of refund claim - Benefit of CENVAT Credit - Held that:- Ground taken by Commissioner (Appeals) in denying the benefit to the appellant is not based on consideration of totality of facts and verification of the Assistant Commissioner of records. It is noted that the company is contributing service tax amounting to ₹ 4 Crore duty and Central Excise Duty amounting to ₹ 70 Crore. No mens rea could be imputed. Further no intention to evade is manifested. It is only a technical error for which substantial right could not be disallowed. Appellant has made a case for refund subject to legal proceedings. - Decided in favour of assessee. 2015 (2) TMI 566 GTA Service - Benefit of Abatement - Held that:- Assessee submits that if the abatement benefit is extended, there is no liability on the appellant at all and he also agrees to deposit the interest payable within 12 weeks if the matter is remanded to the original adjudicating authority for fresh consideration of all the issues based on the evidences / documents / records that may be produced by them. We consider that this is to be a fair request. Accordingly, the appellant is directed to deposit an amount of ₹ 10 lakhs within twelve weeks and report compliance before the Commissioner. The Commissioner is requested to adjudicate the matter afresh after noting compliance with the above requirement and after giving reasonable opportunity to the appellant to present their case. - Decided in favour of assessee. 2015 (2) TMI 565 Reverse charge liability under GTA Service - Penalty u/s 77 & 78 - Held that:- The judgments cited by the Ld. Consultant are not applicable to the facts of this case. The first judgement of Prince Thermal India Pvt. Ltd. (2010 (7) TMI 248 - CESTAT, MUMBAI) concerned a small tax payer. Judgements in the case of Ruhit Shukla & Associated (2007 (3) TMI 164 - CESTAT, KOLKATA) and Singh Industries Ltd. (2009 (7) TMI 513 - CESTAT, AHMEDABAD) related to initial periods when the levy had just been introduced. Therefore, in these cases a lenient view was taken. However, I do agree with the Ld. Consultant that because cenvat credit of duty paid, in any case have been available to them, their mala fide intention is not established. In this view of the matter the appeal is allowed to the extent that penalty under Section 78 is waived. However, penalty under Section 77 is payable - Appeal disposed of. Central Excise 2015 (2) TMI 562 Wrongful availment of Cenvat credit - penalty under Section 11AC of the Central Excise Act and Rule 173Q - Whether the CESTAT is correct in setting aside the penalty imposed under section 11AC of the Central Excise Act, 1944 and Rule 173Q of the Central Excise Rules, 1944 in the case of clandestine removal of goods contravening the provisions of the Central Excise Law - Held that:- Section 11AC of the Central Excise Act was introduced by Finance (No.2) Act, 1996 with effect from 28.9.1996. Section 11AC of the Central Excise Act gets attracted where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty. The person who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined. With regard to the issue that once Penalty is imposed under Rule 173Q of the Central Excise Rules, no penalty could be imposed under Section 11AC of the Central Excise Act, when Section 11AC was introduced by Finance (No.2) Act, 1996 with effect from 28.9.1996, there is no bar in Section 11AC of the Central Excise Act to impose of penalty under Rule 173Q of the Central Excise Rules. Nevertheless, when Finance (No.2) Act 1996 brought in amendment by way of introduction of Section 11AC and other provisions, there was no corresponding amendment to Rule 173Q holding that if penalty is leviable under Section 11AC, no penalty could be levied under Rule 173Q of the Central Excise Rules. Penalty under Rule 173Q of the Central Excise Rules is consequent to confiscation of goods, whereas penalty under Section 11AC of the Central Excise Act is equivalent to the duty determined. Therefore, there appears to be no mutual exclusion in relation to levy of penalty under Rule 173Q and Section 11AC. - following the decision of the Supreme Court [1999 (8) TMI 142 - SUPREME COURT OF INDIA] and the decision of this Court [2014 (12) TMI 654 - MADRAS HIGH COURT] - Decided in favour of Revenue. 2015 (2) TMI 560 Supplies made to UNICEF for their official use - Denial of the benefit of notf. No. 108/95 dated 28.8.1995 - Imposition of interest and penalty - Held that:- It is evident from the notification that in case the goods are for official use by UNICEF (which is admittedly a U.N. Body), only a certificate from the U.N. body to that effect is sufficient to grant the said exemption and no approval by Govt. of India is stipulated for that purpose. It is immaterial that the certificate in question did not mention exemption from Excise duty (even if it did mention sales tax/ octroi etc.) because for the benefit of notf. 108/95-CE what is required is a certificate to the effect that the goods are meant for their official use which the certificate in question in effect duly certifies and in any case that the goods were for official use of UNICEF is not in question in the present case. - appellants are entitled to the benefit under notif. No. 108/95 dated 28.8.1995 in respect of supplies made to UNICEF for their official use as certified by them (i.e. UNICEF) and therefore set aside the impugned order and remand the case to the Commissioner for denovo adjudication in terms of CESTAT order No. 675-676/04-NB-A dated 2.7.2004 after allowing the benefit of Notf. No. 108/95-CE dated28.08.95 in respect of such supplies made to UNICEF. - Decided in favour of assesee. 2015 (2) TMI 559 Denial of deemed credit - clearance of processed fabrics for home consumption during the period from August, 2001 to March, 2004 under the provisions of para 6 of Notification No. 6/2002-CE (NT) dated 01.03.2002 - Held that:- Mainly for the reasons that after the processing is over the fabrics were inspected by the customers, certain aspects were noticed and in order to rectify the defects, they undertook additional processing such as rotary, peaching or zero zero etc. and job charges for these processing carried out and went unnoticed by the dealing clerk. Which mean that the job charges were not included in the assessable value due to mistake and there was no intention to suppress the facts or intention to evade payment of duty. Therefore it cannot be said that in the facts and circumstances of the case that the appellants were having any intention of fraud, wilfull mis-statement or suppression of facts and have intention to evade payment of duty in contravention to the provisions of the Central Excise Act/Rules. Moreover as already ordered by Tribunal, excess payments on account of loading by 15% were to be adjusted against short payments. Therefore, we hold that in this case the extended period is also not invokable. In this case, we find that for the period 15.8.2001 to 31.3.2003, show cause notice has been issued by invoking extended period of limitation on 23.8.2006, as we hold that the extended period of limitation is not invokable. Therefore, we hold that all the demands in this case are barred by limitation. Appellants are paying duty on job charges plus 15% towards notional profit as per the Trade Notice No. 20/2001 dated 24/03/2001 which was not required to be paid. If the 15% notional profit is excluded then the appellant have paid excess duty which is required to be adjusted against the charges of additional processing such as rotary peaching or zero zero etc.. Then the duty demand would not be there; accordingly the appellant would be entitled to take deemed credit as per notification No. 6/2002 CE(NT) dated 1/3/2002. In these terms when there is no demand of duty against the appellant they are entitle for availing deemed credit as per notification no. 6/2002. In the case of goods cleared for home consumption deemed credit cannot be denied on inputs when duty is paid on final products and provisions of para 6 of notification No. 6/2002 do not get attracted. More so when the excess payment of duty on manufactured products on account of 15% notional credit has not been adjusted. The adjustment has also not been done in case of exports and it cannot be held that export consignments were over-valued. In these circumstances, as extended period of limitation is not invokable consequently demand of duty is not sustainable. Therefore, the appellant has availed deemed credit correctly. - Impugned order is set aside - Decided in favour of assessee. 2015 (2) TMI 558 Discharge of duty on molasses - whether excise duty is demandable on molasses removed and stored in earthen pits/masonry tanks. - Held that:- There is no dispute on the excisability on the molasses manufactured by the appellant. Once the goods are manufactured, the levy of Central Excise duty cast on the said goods. While manufacturing excisable commodity, it is settled fact that the excisable goods has to be stored only in the approved premises and the storage of goods in the factory varies from commodity to commodity. In case of molasses, it has to be stored only on the steel tanks and not any other places. We find that the Board vide circular dt.1.8.99 has withdrawn permission to store molasses in earthen pits and it has been allowed to store only after payment of duty by following Rule 173H. We find that Rule 49 stipulates that any excisable goods should be kept in a store-room or other place of storage approved by the Commissioner under Rule 47. Excisable goods have been stored not in a manner which is approved by the department. It is also seen that appellants requested for permission to store molasses in earthen pits and masonry tanks and the request has been denied by the jurisdictional authorities. Once the permission has been denied, any deviation/violation by the appellant results in demand of excise duty in terms of Rule 49. The appellant has relied on Tribunal's decision in the case of U.P. State Sugar Corporation Ltd. (1998 (11) TMI 170 - CEGAT, NEW DELHI) whereas the Revenue has relied on the Patna High Court's judgement [2000 (4) TMI 49 - HIGH COURT OF PATNA]. When there are decisions by the Tribunal as well as by the Hon'ble High Court, the Hon'ble High Court order will prevail over the Tribunal's decision. - judgement of the Patna High Court has been affirmed by the Hon'ble Supreme Court reported in [2001 (1) TMI 960 - SUPREME COURT]. In view of the fact that Hon'ble Supreme Court has upheld the Hon'ble High Court's order, the issue has attained finality. By respectfully following the Hon'ble Supreme Court judgement in Harinagar Sugar Mills Ltd (supra), we hold that appellants are liable to pay excise duty on molasses stored in the earthen pits/masonry tanks. - Decided against assessee. 2015 (2) TMI 557 Valuation of goods - Determination of assessable value - Non inclusion of notional profit @ 10/15% of the manufacturing cost in terms of Rule 8 of the Central Excise Valuation Rules, 2000 read with Section 4 of the Central Excise Act - Held that:- Adjudicating authority have travelled beyond the show-cause notice by adopting comparable value method for confirmation of the demand alongwith penalty. Further, from the documents on record, it is seen that the appellant communicated the declared assessable value, vide declaration filed under Rule 26, from time to time in respect of job work on behalf of HLL. This declaration has been filed on the basis of communication received from the principal manufacturer. Further the assessable value declared varied only marginally, which is evident from the cost certificate issued by the Chartered Accountant. Further, the appellant had suo motu paid the differential duty alongwith interest, much before the issue of show-cause notice. The show-cause notice does not allege any contumacious conduct or active disregard to provisions of law or concealment on part of the appellant. The only ground taken in show-cause notice is wrong and misconceived. Thus, the impugned order is not sustainable. Thus, the appeal is allowed and the impugned order of the Commissioner (Appeals) as well as the Order-in-Original dated 18.11.2005 is set aside. The appeal is allowed with consequential relief if any. It is informed by the ld. Counsel that during the pendency of appeal, Revenue has collected the impugned demand by way of adjustment of refund. The Revenue is hereby directed to refund the impugned amount collected forthwith, not exceeding 30 days from receipt of the order, alongwith interest as per Rules. - Decided in favour of assessee. 2015 (2) TMI 556 CENVAT Credit - Discrepancy in the description of the goods - The price at which the scrap was sold by M/s Bajaj Auto Ltd. Pune/Aurangabad and M/s Telco, Pimpri to the 1st stage dealers was excessively higher than the price at which dealer sold such goods to the respondent - Held that:- On perusal of the statements of the dealers as well as manufacturer of the scrap it clearly reveals that the scrap manufacturer sells the scrap at a certain price and the said scrap is segregated wherein the scrap which can be used for manufacturing of components directly is sold at higher price and the scrap which either cannot be used or sold for use of melting under the cover of invoices at a lower price. Therefore, the appeal filed by the Revenue on two grounds i.e. description of goods does not tally and the price at which the manufacturer sold the scrap much higher price at which the main respondent procured the scrap, are not sustainable. During the course of investigation it was also found that there are incidence of substitution of scrap with respect to supply of MS Off cuts by M/s Steelcom against invoice of M/s Shaima Traders which was in the process of being offloaded in the premises of the main respondent but the said goods were not accepted by the main respondent. The CENVAT Credit to the respondent was also denied by the learned Commissioner in the impugned order. However, an option was given to redeem the same to M/s Steelcom and there is no allegation that the main respondent had any idea or inclination whatsoever of substitution of the scrap by M/s Steelcom. No other incident of the said type has been noticed by the Revenue during the course of investigation. - although there is an admission by Shri Naim Choudhary they used to purchase scrap from the open market and supply the same along with modvatable invoices but the Revenue has not produced any evidence on record that any scrap sold by M/s Shaima Iron & Scrap Traders is procured from the open market and the same has been covered under the modvatable invoices to the main respondent. In these circumstances, the allegation, in the absence of such a correlation being established, the fact of substitution of scrap is not sustainable. During the period 1996-97, M/s Bajaj Auto Ltd. was clearing the MS scrap by reversing the CENVAT credit availed on MS Sheets (inputs). In that case, the Revenue cannot dispute reversal of credit by Bajaj Auto Ltd., at the end of the recipients of the said goods as credit is taken on the duty paid by Bajaj Auto Ltd., on the said goods. The issue has been settled by the judgement of the Hon ble Supreme Court in the case of MDS Switchgear Pvt. Ltd. [2008 (8) TMI 37 - SUPREME COURT] wherein it was held that credit cannot be denied at the end of the recipients of the said goods on the premise that higher duty has been paid by the manufacturer. In these circumstances, after examining the impugned order, I do not find any infirmity with the impugned order. Therefore, the impugned order is upheld. - Decided against Revenue. 2015 (2) TMI 555 Time limit for filing of stay application - Application filed belatedly - Availment of CENVAT Credit - Held that:- Contrary to the observations of the learned Commissioner about the legal position being settled, the settled legal position is that even if a stay application has not been filed, before rejecting the appeal the appellant should be given an opportunity to file such an application and consider the same rather than rejecting the appeal. In this case the application for waiver of pre-deposit filed has been rejected on the ground of delay without citing any legal provisions to support the observation of the Commissioner. In the absence of any legal provision prescribing the time limit for filing stay application and having regard to the fact that appellant had filed application for waiver of pre-deposit before the appeal was being considered and personal hearing was granted, I consider that the Commissioner's decision to reject the appeal as not maintainable cannot be sustained. Accordingly the impugned order is set aside and the matter is remanded to the learned Commissioner to consider the application for waiver of pre-deposit in accordance with law. - Matter remanded back - Decided in favour of assessee. CST, VAT & Sales Tax 2015 (2) TMI 564 Execution of works contract in SEZ - Zero rate tax or not - challenge to circular issued by the Commissioner in Circular No.9 of 2013, dated 24.07.2013 - Reversal of Input tax credit - interpretation of Section 18 of the TNVAT Act. - Factory located in Special Economic Zones (SEZ). The petitioner was awarded contracts for construction of their factory building and related infrastructure in the SEZ. According to the petitioner in terms of Section 18 (1)(ii) of the TNVAT Act, any sale effected to a unit which will include a deemed sale in line with the definition of sale contained under Section 2(33) of the TNVAT Act, in terms of Article 366(29A)(b) of the Constitution of India. However, the Commissioner issued the impugned circular stating that works contracts executed for SEZ units cannot have the benefit of zero rating, since goods transferred by a contractor are neither exported as such or used in the manufacture of other goods which are exported. Held that:- To be considered as a zero rated sale and to be eligible for input tax credit or refund the sale should fall within one of the three categories mentioned above. Sub-Section (2) has to be read along with sub-section (1) of Section 18, and cannot be divested or segregated to be read only with clauses (i) & (iii) of sub-section 18(1), the statute does not made any such distinction between the transactions mentioned in clauses (i) (ii) & (iii) in Section 18(1) all being classified as a zero rated transactions. Therefore, to state that sub-section (2) of Section 18 will not apply to clause (ii) of Section 18(1) amounts to inserting a new provision to the statute when the statute does not contemplate of such situation/contingency. In terms of Rule 22 of the CSEZ Rules 2006, grant of exemption, drawbacks and concession to the entrepreneur or Developer shall be subject to conditions contained therein. Therefore, the scheme of the CSEZ Act, TNSEZ Act and the Rules make the position clear that benefit is intended to the SEZ unit for the authorised operations which essentially is the export activity for which approval has been granted. Hence, the contention raised by the petitioners is not tenable. Provisions of Section 21 of the Gujarat SEZ Act had primacy and purchase tax cannot be demanded. At the outset, it has to be pointed out that Section 21 of Gujarat SEZ Act and Section 12 of TNSEZ Act are not pari materia and the Revenue herein does not admit the position that the petitioners herein are not liable to pay tax, but would seriously dispute the same. Further, the petitioners herein claim ITC on the sales effected to SEZ's or its developers. That apart, there is marked and material difference with regard to zero rated sale as per under Section 5A in the Gujarat VAT Act with that of Section 18 of the TNVAT Act. The provisions are not pari materia. Furthermore, the factual background of the case was entirely different and therefore, the decision does not render support to the case of the petitioners. The interpretation of the petitioners, if accepted, it would render the statue futile. The intention of the legislation is clear from the language of Section 18 of TNVAT Act specifies the benefit for zero rated transactions. It is to be once again pointed out that the plea raised by the petitioner seeking for exemption by relying on notifications issued under Section 17 of the TNGST Act is of little avail and if according to the petitioners, the sales are exempt then they have to seek umbrage under Section 15 of the TNVAT Act, and placing reliance on Section 18 and interpreting that Section 18 has to be read in a truncated manner does not merit acceptance. It is beneficial to refer to the decision of the Hon'ble Supreme Court in the case of Kerala State Cooperative Marketing Federation vs. CIT, reported in [1998 (5) TMI 6 - SUPREME Court], wherein the Hon'ble Supreme Court pointed out that that it is a clear rule of statutory construction that, in trying to interpret a statutory provision, attention should be given to the setting in which the provision occurs and regard must be had to the language of an entire group of connected provisions which may form an integral whole. It is a settled rule of interpretation that in a taxing statue one has to look merely what is clearly stated, there is no room for any intendment, there is no equity about tax, there is no presumption as to tax, nothing is to be read in, nothing is to be implied and one can only look fairly to the language used. stand set aside. The impugned circular No.9 of 2013, dated 24.07.2013, is held to be valid and not contrary or ultra vires to the provisions of the Tamil Nadu Value Added Tax Act and it is not violative of Article 14 of the Constitution of India or irrational. - The proposal to levy penalty in the impugned pre-revision notices are set aside. - Petition disposed of. 2015 (2) TMI 563 Hire purchase agreement - Resale - applicant argued that hire purchase transactions are essentially financial services and are not subject to sales tax - Levy of tax u/s 8 of the BST Act - Applicants were holders of trade mark - Deemed sale - the sale of purchased goods is by a seller who holds a trade mark or a patent or is entitled to use the trade mark or patent in respect thereof - the concept of exhaustion of rights - Held that:- A bare perusal of Section 28 would indicate as to how the exclusive right to use of a trade mark given under subsection (1) of section 28 shall be subjected to any conditions and limitations to which the registration is subject. What is infringement of a registered trade mark is dealt with by section 29 and by subsection (1), it is stated as to how the mark being used not by a registered proprietor or a person permitted to use it in the course of its trade uses, a mark which is identical with or deceptively similar to the trade mark in relation to goods or services, in respect of which it is registered and in such manner as to render the use of mark likely to be taken as being used as a trade mark would constitute infringement. - The preceding Chapter III deals with procedure for and duration of registration and the prior provisions enabling registration of trade marks would indicate that so long as the parameters in the legislation are fulfilled, the protection by virtue of registration can be claimed. The registration itself is subjected to renewal, removal and restoration. By section 30, it is clarified that even if the registered trade mark has a limited effect, one cannot, by resorting to section 29 and by virtue of the registration, prevent the use of the registered trade mark by any person for the purpose of identical goods or services as those of the proprietor, provided, Clauses (a), (b), (c), (d) and (e) are satisfied. An action for infringement of registered trade marks may succeed in the event the limitations on effect of registered trade marks set out in section 30(2) of the Trade Marks Act, 1999 are not attracted. By sections 32 and 33, the protection of registration on ground of distinctiveness in certain cases is granted and the law also deals with effect of acquiescence. However, vested rights are saved and such right may vest with any person other than the proprietor or registered user of a registered trade mark. The Act has thus provisions which take care of the rights of those who may be of the category indicated hereinabove. There is a provision enabling rectification and correction of the Register. In all this, one does not find the absolute exhaustion of the trade mark as claimed by Mr. Sridharan. If the Act is read as a whole and the provisions thereof are construed harmoniously, it would be clear that the protection guaranteed by registration of the Trade Mark may have some limitations. However, they affect the enjoyment of the rights conferred by registration. The registered Trade Mark is thus not exhausted as the rights therein are protected so long as the registration is in effect and valid. The rights therein are somewhat diluted and their enjoyment curtailed but we cannot infer from the statute the result that Mr. Sridharan reads in it. It is only the limitations or restrictions on the rights, which have been conferred upon registration that are spelt out. Those may include the restrictive provisions when the goods enter the market. The goods entering the market and dealings in such goods entering the market are cases which are specifically dealt with and some savings and restrictions have been enacted in the legislation pertaining to trade marks. However, the theory and principle which is relied upon by Mr. Sridharan by itself and without anything more cannot assist the Applicant. Such principle or theory ought to find place in the scheme of the Indian legislation. That having not been detected or to be found that we conclude that Mr. Sridharan's contentions based on the above principle have no merit. In the case of Jay Bharat Credit and Investment Co.(2000 (8) TMI 1013 - SUPREME COURT OF INDIA), the Hon'ble Supreme Court was considering as to whether transfer of goods on hire purchase can be included in the definition of the term “sale” under section 2(g) of the Bengal Finance (Sales Tax) Act, 1941 as extended to the Union Territory of Delhi. There, the issue was whether the Respondents, namely, the Commissioner of Sales Tax was justified in holding that the hire purchase transaction entered into by the Appellant (Jay Bharat Credit and Investment Co. Ltd.) was liable to imposition of Sales Tax on the consolidated proceeds. The Hon'ble Supreme Court dealt with the Judgment delivered by it in the case of K. L. Johar and Co. vs. Deputy Commercial Tax Officer [1964 (11) TMI 58 - SUPREME COURT OF INDIA]. It is after distinguishing it that the Hon'ble Supreme Court arrived at the conclusion that the hire purchase transaction can be brought within the purview of the term “sale”. Similarly, in the Assessee's own case, the High Court of Jharkhand dealt with identical controversy. - Decided against assessee. 2015 (2) TMI 561 Jurisdiction of Judicial Magistrate - Seizure of vehicle - commission of offence punishable under Section 34(2) of the Chhattisgarh Excise Act, 1915 - Whether the Court having jurisdiction to try offences covered by clause (a) or (b) of sub-Section (1) of Section 34 will have the jurisdiction to grant custody of the vehicle seized, after it has received information from the Collector under clause (a) of sub-Section (3) of Section 47A of the Chhattisgarh Excise Act, 1915 about the initiation of the proceedings for confiscation of seized vehicle. Held that:- Petitioner’s vehicle was found involved in the commission of the excise offences under Section 34 of the Act, 1915 and the Collector having initiated proceedings for confiscation of the said vehicle under Section 47- A of the Act, 1915 and intimated to the trial Court having jurisdiction to try the offences under clause (a) of sub-Section 3 of Section 47-A of the Act, 1915 about the initiation of the proceedings for confiscation of the seized vehicle and, as such, the provisions of Section 47-D of the Act, 1915 squarely attracts expressly barring the jurisdiction of the trial Magistrate to grant interim custody under Section 457 of the Code, the trial Magistrate ceased to have jurisdiction to make order from the date when he received intimation in the preset case i.e. 28.8.2014 to make any order about the disposal of the said vehicle and, as such, the trial Magistrate has rightly held that the Court has no jurisdiction to grant custody after initiation and intimation of the said confiscation proceedings to the Court having jurisdiction; and the learned Additional Sessions Judge is absolutely justified in affirming the order passed by the trial Magistrate refusing to interfere with the said order, as such, order passed by the learned Magistrate and duly affirmed by the revisional Court is based on the material available on record, which does not call for any interference by this Court in exercise of inherent power under Section 482 of the Code of Criminal Procedure. Further, the judgment relied upon by Mr. Pradhan passed by this Court in [Sujeet Kumar Khandekar 2015 (2) TMI 779 - CHHATTISGARH HIGH COURT] has not considered the express bar of Section 47-D of the Act, 1915, therefore, that judgment is clearly distinguishable. - petition is held to be devoid of merit - Judicial Magistrate has no jurisdiction to grant custody of the vehicle seized for excise offence in view of Section 47-D of the Act of 1915. - Decided against Petitioner. Indian Laws 2015 (2) TMI 549 Denial of information sought under RTI Act - Exemption from disclosure of Rule 8(1)(d) of RTI Rules - Held that:- Rule 8(1)(d), which exempts certain information from disclosure. The same relates to information including commercial confidence, trade secrets or intellectual property, the disclosure of which would harm the competitive position of a third party, unless the competent authority is satisfied that larger public interest warrants the disclosure of such information. - The information sought in the present appeal does not fall under the category information against the said Section Rule 8(1)(d) (sic). As the Tribunal order has been published, the providing of order-in-original and the Show Cause Notice involved in the said appeal will not cause any prejudice to any person. As such, I am of the view the same should be provided. - Decided in favour of appellant.
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