TMI Tax Updates - e-Newsletter
February 25, 2017

Case Laws in this Newsletter:

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

TMI SMS

• Tribunal erred in reducing the amount of penalty - failed to consider the law declared in the case of Dharamendra Textile Processors - SC

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Articles

1. SERVICES UNDER GST REGIME (PART-III) (Supply, Valuation & Input Credit)

   By: Dr. Sanjiv Agarwal

News

1. Suggestions on All Industry Rates (AIRs) of duty drawback under the GST framework

2. BEL OFS got an enthusiastic participation both from retail and the non-retail investors including domestic institutional investors and foreign institutional investors; BEL Issue got over-subscribed by 367 % in Retail Category and 234% in Non-retail Category; Government of India is likely to get the receipt of ₹ 1670 crore (approx.) from BEL OFS issue

Notifications

Companies Law

1. F. No. 05/05/2014-IEPF - S.O. 554 (E) - dated 20-2-2017 - Co. Law

Central Government extends the period of tenure of Shri Amardeep Singh Bhatia, as Chief Executive Officer (Additional Charge) in the Investor Education and Protection Fund Authority

SEZ

2. S.O. 562(E) - dated 16-2-2017 - SEZ

Central Government rescinds Notification Number S.O. 2123 (E) dated 12th December, 2007

3. S.O. 561(E) - dated 14-2-2017 - SEZ

Central Government de-notifies an area of 3.24 hectares, making resultant area as 7.26 hectares at Bahadurpally Village, Ranga Reddy District, Hyderabad in the State of Andhra Pradesh

VAT - Delhi

4. F. 3 (11)/Fin (T&E)/2009-10/DSVI/62 - dated 16-2-2017 - DVAT

Appointment of Additional Commissioner

Circulars / Instructions / Orders

Income Tax

1. 8/2017 - dated 23-2-2017

Clarification for determination of Place of Effective Management (POEM) of a company, other than an Indian company-reg

Companies Law

2. 01/2017 - dated 22-2-2017

Section 391 (2) closure of place of business by a Foreign Company. — req.

Highlights / Catch Notes

Income Tax

• Receipts from trust dissolution not taxable u/s 56(2)(vi) of Income Tax Act; received with consideration.

  Case-Laws - AT : Addition on account of the receipts on dissolution of trusts - receipt in the capacity of beneficiaries - the addition cannot be upheld on the applicability of section 56(2)(vi) as the money received by the assessee is not "without consideration" - AT
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• TPO Adjusts Transfer Pricing Using 23% OP/OC Ratio; 3% Allowance for Delays and Services in Non-AE Business.

  Case-Laws - AT : Transfer pricing adjustment - TPO made an adjustment taking in to consideration the OP/OC for AE segment at 23% [26%(-)3%,an allowance for delay in receivables and after sales services and other efforts made under the non-AE business] - some reasonable comparables should be selected after considering the FAR analysis of such comparable and only then exercise of determining ALP should be completed - AT
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• Section 68 Cash Credit: Court Finds CCPS Transaction Explanation Adequate, Supports Company's Position on Investment Genuineness.

  Case-Laws - AT : Addition of unexplained cash credit u/s 68 - whether nature and genuineness of the transaction of investment of Compulsorily Convertible Preference Shares ("CCPS") in the assessee Company is explained - Held Yes - AT
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• Cinema Business Payment Not Subject to TDS u/s 194I; Agreement Seen as Business Conduct, Not Lease.

  Case-Laws - HC : Non-deduction of tax (TDS) u/s 194I - Natur of payment - The cinema was exclusively owned and managed by the cinema owner and the assessee was having no interference with selecting the films, exhibiting the films, issuing tickets, paying tax, maintaining statutory Compliances Whatsoever. Thus the agreement was not of letting out but was for conduct of business - HC
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• Assessment Order Invalidated Due to Procedural Lapse: Draft Order Not Properly Issued u/ss 143(3) & 144C.

  Case-Laws - AT : Validity of assessment order u/s 143(3) r.w.s. 92C(4) and 144C - non passing draft assessment order - Assessing Officer had issued covering letter where it says that it is draft assessment order but in spirit, it had finalized the assessment, wherein the demand was crystallized and demand notice was issued to the assessee - Order is invalid in law - AT
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• Consultancy Fees for TDS System Design Disallowed; Classified as Revenue Expenditure Under Review.

  Case-Laws - AT : Disallowance of consultancy charges incurred on designing and implementation of TDS and other systems - nature of expenditure - it is quite clear that it is revenue expenditure - AT
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• Assessing Officer to Calculate Capital Gain on Tenancy Rights with Indexation as per Section 48, IT Act.

  Case-Laws - AT : CIT(A) has rightly directed the A.O. to work out capital gain on surrender of tenancy rights after taking into account the cost of acquisition of tenancy right as worked out by the registered approved valuer and allow the benefit of indexation of the cost of acquisition as per the provisions of section 48 - AT
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• Section 271(1)(c) Penalty Order: Notice Validity Upheld Despite Unmarked 'Inaccurate Particulars' or 'Concealment of Income'.

  Case-Laws - AT : Penalty order u/s 271(1)(c) - validity of notice issued u/s 274 - non-striking off of ‘inaccurate particular’ or marking on ‘concealment of income’ portion - mere not striking off specific limb cannot by itself invalidate notice issued u/s 274 - AT
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Customs

• License Fee Must Be Included in Assessable Value for Imported Cineprints, Court Rules.

  Case-Laws - AT : Valuation - import of cineprints - whether the amount of license fee remitted by the appellant to the supplier of cine prints needs to be included in the Assessable Value? - Held Yes - AT
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• Cameo Carving Classified as Free Import Under CTH 9601 9090; No Confiscation or Penalty for Worked Coral.

  Case-Laws - AT : Classification - import of Cameo Carving - classified under CTH 9601 9090 or not? - the Carved Shell Articles i.e. Worked Coral has been declared as Free imports, and hence nothing survives in the order passed by the lower authorities - confiscation and penalty set aside - AT
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• Court Vacates Confiscation Order: Mis-declared Heavy Melting Scrap Import Included Restricted, Rusted War Materials.

  Case-Laws - AT : Mis-declaration of imported goods - Heavy Melting Scrap - presence of restricted goods in the import - the war material as was found was used and rusted and totally discharged - confiscation order vacated - AT
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Service Tax

• Penalty u/s 78 Invalid Without Demand Raised and Determined u/s 73(1) by Adjudicating Authority.

  Case-Laws - AT : Penalty u/s 78 - Without the raising of the demand u/s 73(1) ibid and its determination by the adjudicating authority, the penalty u/s 78 of the Act is not sustainable. - AT
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Central Excise

• CENVAT Credit on Furnace Oil Use Unclear; Records Insufficient to Prove Use for Fixed Structures.

  Case-Laws - AT : CENVAT credit - use of Furnace Oil - On basis of merely information indicated in the books of accounts of the respondents, it can not be conclusively said that cenvatable Furnace oil has been utilized for setting up of fixed immovable structures - AT
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• Tribunal Erred by Reducing Penalty Without Following Dharamendra Textile Precedent in Central Excise Case.

  Case-Laws - SC : Quantum of penalty - Tribunal erred in reducing the amount of penalty - Tribunal, failed to take into consideration the law laid down in the case of Dharamendra Textile Processors - SC
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• Department Challenges Captive Consumption Benefit Under Notification 67/95-CE; Duty Payable Upon Invoice, Not Removal.

  Case-Laws - AT : Benefit of N/N. 67/95-CE dt. 16.03.1995 - captive consumption - Department's claim that once invoice is raised to the customer, they were supposed to pay duty even if the goods were not removed from the factory - Since the goods have been sold by the appellants, the N/N. 67/95-CE, is not applicable. - AT
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Case Laws:

• Income Tax

• 2017 (2) TMI 1018
  Penalty u/s.271(1)(c) - addition u/s 68 and 41(1) - Held that:- The assessee could not file even a single relevant particular of its creditor so far as Section 68 addition is concerned so as to form even a prima facie case to claim genuineness thereof. Even in the instant penalty file does not contain any such particulars much less to talk about quantum proceedings. It is thus clear that the assessee raised the impugned sundry credits claim without any evidence at all. We accordingly find no reason to disturb learned CIT(A)’s finding as extracted in the preceding paragraph that the abovestated Section 68 addition amount is an instance of furnishing of inaccurate particulars of income. For addition u/Section 41(1) both the authorities below hold that the assessee did not file any details of the relevant creditor in order to prove its liability by way of verification. Shri Madhusudan (learned Senior Departmental Representative) strongly argues that the assessee failed to discharge even its prima facie onus alike Section 68 addition so as to claim its sundry credit liability. We find no force in this plea as the assessing authority invoked Section 41(1) of the Act thereby treating assessee’s liability to have been ceased to exist as the same was more than a year old. We observe in these peculiar facts that the said liability claim already stood accepted earlier since Section 41(1) pre-supposes existence of a liability in order to treat the same to have been ceased to exist. We accordingly conclude that the authorities below have erred in treating the assessee’s liability as both bogus as well as ceased to exist u/s.41(1). We thus accept assessee’s challenge to the impugned penalty pertaining to this latter component. Assessee’s appeal is partly allowed.

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• 2017 (2) TMI 1017
  Gain on sale of rights in immovable property - LTCG or STCG - selection of date - Held that:- CIT(A) in question on this issue is wrong against law and facts because the CIT(A) has considered the date of the execution of the sale deed for the purpose of assessing the Long / Short Term Capital Gain. Accordingly, specifically in view of the above mentioned law, we set aside the finding of the CIT(A) on this issue and direct the Assessing Officer to reconsider the claim of the assessee on the basis of the allotment letter for the purpose of assessing the Long / Short Term Capital Gain in accordance with law.

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• 2017 (2) TMI 1016
  Disallowance of depreciation on brands u/s 32(1)(ii) - Held that:- We find that in the case of assessee for the A.Y. 2005-06 [2016 (4) TMI 1193 - ITAT MUMBAI] held that brand name is an intellectual property right similar to knowhow, patents, trademarks and therefore the same is eligible for depreciation under section 32(1)(ii). - Decided in favour of assessee Disallowance u/s 14A r.w.r. 8D - Held that:- We find that the assessee has not filed the relevant documents to prove his points that the amount invested in mutual funds are not from the overdraft / cash credit account which have been used towards working capital requirements. The learned counsel has also not filed the relevant documents to prove his points that no expenses has been incurred to earn the exempt income. Even a copy of the balance sheet has not been filed by him before the Tribunal to establish his argument. We also find that the learned CIT(A) has noted that the assessee had not given any details to work out the direct nexus of the interest expenditure related to the exempt income which was not included in the taxable income. Further it is found that during the A.Y. 2007-08, the AO had made addition on similar ground which was deleted by the learned CIT(A) and the ITAT in favour of the assessee. However, Rule 8D was notified by the IT (Fifth Amdt.) Rules, 2008 w.e.f. 24-03-2008. The Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. vs. Dy. CIT (2010 (8) TMI 77 - BOMBAY HIGH COURT) has held that Rule 8D is applicable w.e.f. 2008-2009. We are concerned here with the A.Y. 2009-10 and 2010-11. Thus we set aside the order of the learned CIT(A) on disallowance made u/s 14A r.w.r. 8D and restore the same to the file of the AO to make a fresh assessment as per the provisions of the Act

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• 2017 (2) TMI 1015
  Claim of deduction u/s 80P(2)(a)(i) - Held that:- The issue is now covered by the decision in favour of the assessee in the case of CIT Vs. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot [2015 (1) TMI 821 - KARNATAKA HIGH COURT] as held that a co-operative society registered as co-operative society, providing credit facilities to its members and not registered with the RBI cannot be denied the exemption under section 80P(1) of the IT Act. Respectfully following the same, we uphold that the assessee is a cooperative society and not a cooperative bank and, therefore, entitled to deduction under sec. 80P of the Act - Decided in favour of assessee

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• 2017 (2) TMI 1014
  Addition u/s 14A - Held that:- The assessee had made investments of shares from earlier years and assessee had shares of his sister concern and that is statistical investment. Therefore no expenditure was incurred. Moreover assessee had not exempted income during the year under consideration. Therefore when assessee has not earned any dividend from exempted income and when the tribunal has allowed the claim of the assessee in earlier orders for A.Y. 2009-10 wherein held no disallowance u/s. 14A can be made in a year in which no exempt income has been earned or received by the assessee. We allow the claim of the assessee. Addition towards debit balance written off - Held that:- The assessee submitted that the write-off amount is business loss carried in course of business. Therefore we are of the view that when the tribunal has restored this file to A.O, we respectfully following the same we restore this file as per the decision of in the assessee own case in A.Y.2009-10 wherein the tribunal has held assessee is directed to demonstrate that the impugned creditors have been written back in the subsequent years to the satisfaction of the Assessing Officer and the Assessing Officer is directed to verify the same and if the claim of the assessee is found correct the additions should not be made.

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• 2017 (2) TMI 1013
  Addition on account of the receipts on dissolution of trusts under section 56(2)(vi) as income from other sources - Held that:- The facts and circumstances are exactly identical in assessee’s husband case. Respectfully following and taking consistent view as taken by coordinate Bench in assessee’s husband Shri Ashok C Pratap case (2012 (7) TMI 701 - ITAT MUMBAI) wherein held The assessee has received this amount on dissolution of trust in the capacity of beneficiaries as already been accepted by the Commissioner (Appeals),therefore, the amount received by the trust is in pursuance of dissolution of trust. The amount received in pursuance of dissolution of trust cannot be termed to be an amount received by the beneficiaries "without consideration". The fact that the trust had borne the tax at maximum marginal rate on its income has also not been controverted. Therefore the addition cannot be upheld on the applicability of clause (vi) of sub-section (2) of section 56 as the money received by the assessee is not "without consideration", we confirm the order of CIT(A) deleting the addition. - Decided against revenue

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• 2017 (2) TMI 1012
  Transfer pricing adjustment - TPO made an adjustment taking in to consideration the OP/OC for AE segment at 23% [26%(-)3%,an allowance for delay in receivables and after sales services and other efforts made under the non-AE business] - Held that:- Fairness demands that the assessee as well as the revenue authorities should avoid arbitrariness, while determining ALP of an IT. Both should use some reasonable data to prove that IT is above board. Adhoc adjustments, in our opinion, goes against the basic concept of TP. In the case under consideration 3% and 8% allowance was given by the TPO and the DRP. But,how they arrived at those figures is not known. The reasons for adopting a certain percentage does not find place in their orders. They have not discussed as to what was the material that gave them the basis for allowing 3% and 8% adjustment on account of ‘delay in receivables and after sales services’ and considering the factors like‘bulk manufacturing orders received from AE.s and geographical locations’. But, both the authorities have not cited the instances where an independent assessee,in similar circumstances,had claimed that adjust -ment on account ‘delay in receivables’ ‘geographical factors’ etc. was approximately 3% or 8%. No judicial forum has adopted the said percentage on account of delay in receivables/ bulk manufacturing/ geographical location. Even if they had some material supporting their stand,same has not been brought on record. Thus, the order passed by them is a non-speaking order and it falls under the category of an order passed without assigning reasons. Such orders cannot be endorsed. A comparable cannot and should not be rejected only on the basis of loss suffered by it for a particular year. A persistent loss making comparable can be excluded. But, in the case under consideration,the comparable had not suffered loss year after year. After admitting that internal TNMM could not have been applied straight away, the DRP should have deliberated upon the issue of determination of ALP in a more rational manner. But,it just adopted the easiest route- an ad hoc allowance. It is a fact that more than 60% of the sales turnover of the assessee is with non- AE.s and the profit ratios of non-AE.s and AE.s cannot be same. Besides, the assessee had entered in to an agreement with its AE for supply of goods and working capital adjustment is required to be made. All these factors would affect the ALP of the transactions. Considering all we are of the opinion that the matter needs further verification and investigation thus we are restoring the matter to the file of the TPO/AO to decide the issue afresh. While determining the ALP, he should consider the data of the companies who are engaged in such activities that are similar or closer to the activities of the assessee and the turnover with the AE.s and Non-AE.s should be of similar volumes. In short,some reasonable comparables should be selected after considering the FAR analysis of such comparable and only then exercise of determining ALP should be completed. Effective ground of appeal is decided in favour of the assessee in part.

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• 2017 (2) TMI 1011
  Validity of proceedings u/s. 148 - Held that:- It is apparent that original assessment was framed u/s. 143(3). The reasons referred to some proceedings related to the original assessment and alleged that some details were not filed by the assessee at that time. However, at the same time it is seen that no addition was made by the learned AO. There is merit in the contention of the learned DR that the original assessment order is very short and does not refer to agricultural income of the assessee, which indicates non-disclosure Be that as it may, learned CIT(A) in the interest of justice should have called for assessment record and verified the proceeding sheet and correspondence between the AO and the assessee and considered the objections raised on the validity of section 147. It appears that this issue has been decided by the learned CIT(A) without verifying these aspects, which are relevant to decide ground no.1 In the entirety of facts and circumstances, interest of justice will be served if appeal is set aside and restored to the file of the CIT(A) to decide the same afresh after giving the assessee adequate opportunity of being heard on this aspect.- Decided in favour of assessee for statistical purposes

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• 2017 (2) TMI 1010
  Deduction for bad debts u/s.36(1)(vii) - deduction was never claimed nor allowed in earlier year - CIT-A allowed claim - Held that:- According to the entries, the assessee was found eligible for deduction of bad debts invoking of provision u/s.36(1)(vii) of the Act. According to the provision of 36(1)(vii) of the Act the P&L A/c. has been debited and the debtors account credit that amount of bad debts written off. The CIT(A) also find support of law support by the Hon’ble Delhi Tribunal in the case of Jain Co-op. Bank Ltd. in which it is specifically held that the provision created prior to A.Y.2007-08, not claimed as a deduction, could not be taxed when written back. Therefore, the assessee has rightly reduced the said amount in its computation of income. The CIT(A) has passed the order in view of the above mentioned case. No contrary law of any kind was produced before us to distinguish the facts of the case on record. In view of the said circumstances, we are of the view that the CIT(A) has passed the order judiciously and correctly which is not require to be interfere with at this appellate stage. - Decided against revenue

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• 2017 (2) TMI 1009
  Deduction under Section 80HHC - computation of total turnover of the business carried on by the assessee - Held that:- By necessary implication, the total turnover of business would only mean total turnover of business of goods to which the section applies. Inclusion of turnover of goods to which the section does not apply, would be doing violence to the language of Sub-section (3)(b). Sub-section (3) is inserted only to determine the deductible profits out of the total profits of business which can be attributed to the export business. We are in respectful agreement with the rationale adopted by the Madras High Court in Madras Motors Ltd. (2002 (3) TMI 10 - MADRAS High Court ). As a matter of fact, there could be a circumstance where one unit is completely engaged in export and not partially as was the case in Madras Motors Ltd. (supra). In those circumstances, there would be no occasion for disallowing a portion of the export earnings by adopting formula provided in Section 80HHC of the Income Tax Act. Interpretation of the term “indirect costs” - Explanation (e) which defines “indirect costs” has to be read in conjunction with sub-section (3)(c)(ii) of Section 80HHC, which provides that the profits shall be reduced by the “direct and indirect costs attributable to export of such trading goods.” Since the word “attributable” has been used, it is clear that the indirect costs also must be attributable to the export of such goods; in other words, there must be some nexus that the “indirect costs” have to the export turnover of the assessee. Au contraire, if the term “indirect costs” is interpreted to also include such costs which are not attributable to the export of trading goods, then that would go against the language of the provision, as clarified by the Supreme Court. That being the position, in view of the declaration of the law in Hero Exports (2007 (11) TMI 13 - Supreme Court of India ), “indirect costs” computed must have some nexus (or in other words must be “attributable”) to the export of trading goods. The decision of the ITAT on this question is therefore reversed. Written back amounts would constitute “independent income” having no relation to the export profits of the assessee. They have to be excluded by virtue of Explanation (baa), to avoid distortion in the computation of export profits under Section 80HHC.

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• 2017 (2) TMI 1008
  Disallowance of deduction u/s 80IB - proof of manufacturing activity - Held that:- The facts emerge, the Audit Report/From No.10CCB issued by the CA is unsigned and undated. There is no other evidence placed by the assessee on the paper-book to corroborate the fact that the manufacturing activity of the assessee concern commenced from 28.03.2004. Besides, according to survey reports, the assessee could not demonstrate any manufacturing activity. Due to unsigned and unverified 10CCB certificate of CA, the verification of schedule ‘D’ of fixed asset also could not be made. The survey statement has not been filed by the assessee in the paper-book. Therefore, it could not be ascertained as to whether the assessee or its employees narrated any facts at the time of survey. Unless the facts of the case are properly verified, the ratio of ITAT judgment in the case of M/s. Subhalachal Print & Pack [2009 (12) TMI 961 - ITAT AHMEDABAD] wherein held activity of slitting itself involves different processes by which the character of the material is transformed into a different nature. The fact that the assessee is outsourcing certain processing activities does not disqualify the assessee to be placed in the status of a manufacturer, cannot be applied. In considered view, the facts of the case have not been properly appreciated which needs to be verified in order to arrive at proper finding of facts. Set aside the Revenue appeals back to the file of the ld. CIT(A) to decide the same afresh after verifying the relevant facts, survey material and statements, if any.

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• 2017 (2) TMI 1007
  Addition of unexplained cash credit u/s 68 - whether nature and genuineness of the transaction of investment of Compulsorily Convertible Preference Shares ("CCPS") in the assessee Company is explained in the given facts and circumstances of the case - Held that:- The ld. Counsel for the assessee brought to our notice the audited financial statements of Biometrix which is on record to prove that only one credit entry is found in the books of Biometrix proving the fact only once money entered Biometrix in the form of loan from ICICI Bank and the same borrowed money stands invested in the CCPS issued by the assessee. In our considered view, the bank statement of the assessee and the foreign inward remittance certificate issued by HDFC Bank, Mumbai showing the receipt of money from Biometrix is on record. What is not on record is the bank statement of Biometrix. However, the other materials on record viz., the swift messages and audited financial statements of Biometrix clearly prove that Biometrix borrowed from ICICI Bank and invested the same money in the CCPS issued by the assessee. We are convinced from the materials available on record that Biometrix borrowed from ICICI Bank and invested the same in the CCPS invested by the assessee. As assessee able to prove conclusively that the CCPS issued by it to Biometrix is directly financed by ICICI Bank, Singapore. In view of these facts and circumstance and precedents cited above, we are of the considered view that the Assessing Officer has made this addition of unexplained cash credit without any basis and CIT (A) has rightly deleted the same on the basis of evidences and facts. We confirm the order of CIT(A) and the appeal of Revenue is dismissed.we hold that on review of the materials available on record, we are satisfied that the requirements of section 68 of the Act viz., nature, source and genuineness of the transaction including the identity and the creditworthiness of the investor, are fulfilled. - Decided in favour of assessee

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• 2017 (2) TMI 1006
  Commencement of business - wrong to uphold the contention of Revenue that only on completion of work of entire Canal, the assessee’s business can be said to have been set up. Allowability of interest expenditure u/s.57 against the interest income HC ref case - [2016 (6) TMI 597 - GUJARAT HIGH COURT]

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• 2017 (2) TMI 1005
  Addition on 14A - Tribunal setting aside the issue of 'interest expenses' to the file of the Assessing Officer and deleting the 'other expenses' towards earning exempt income - Held that:- No fault can be found with the impugned order of the Tribunal holding that the Assessing Officer should show fallacies in the computation of disallowance done by the respondent assessee. Thus, there is no reason to discard the disallowance done by the respondent assessee. Nevertheless, the impugned order of the Tribunal has restored the issue of disallowance of interest to the Assessing Officer to determine the extent of its tax free investments out of own funds and out of borrowed funds. So far as the claim with regard to the disallowance made in respect of the other expenditure (other than interest which has been restored to the Assessing Officer to find out the source of funds in the investment made), the impugned order has held it to be reasonable and calling for no further disallowance. This finding of the Tribunal is a finding of fact and the same has not been shown to us to be perverse in any manner. In the above view, the question as proposed does not give rise to any substantial question of law. Thus, not entertained. Appeal is admitted on question nos. (i), (ii), (iv) and (v). (i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the sales tax exemption benefit for the A.Y. 2008-09 is a capital receipt not liable to income tax? (ii) Whether the respondent assessee is eligible for deduction under Section 80IA of the Income Tax Act by urging that the Rail system is not a profit center but a cost saving exercise undertaken in terms of subsection (4) of Section 80IA? (iv) Whether on the facts and circumstances of the case, the Tribunal was justified correct in law, in setting aside the issue of allowability of ESOP expenses to the file of the Assessing Officer for fresh consideration in the light of the findings of the Special Bench of the Hon'ble Tribunal in the case of Biocon Ltd. Vs. DCIT [2014 (12) TMI 838 - ITAT BANGALORE ] ? (v) Whether on the facts and circumstances of the case, the Tribunal was correct in law, in holding that the receipt from Certified Emission Reduction (CER) generated out of capital projects registered with United Nations Framework Conversation of Climate Change (UNFCCC), amounting to Rs. 7.64 crore, was a capital receipt ?

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• 2017 (2) TMI 1004
  Violation of provisions of section 127 and 129 - non issuing a notice to the assessee on change of jurisdiction of the assessee - Held that:- Assessee has admittedly received notices from the new incumbent Officer and therefore, there is no violation of section 127 of the Act. However, as regards the contentions that the notices were received only on the date scheduled for hearing and therefore, the assessee was not given an opportunity of representing, we find that the assessments were completed exparte the assessee. Therefore, we accept the contentions that the assessee was prevented by reasonable cause from nonappearance on the dates fixed by the new AO. Therefore, though the ground of cross objection is not sustainable, we are of the opinion that the assessees’ should have been given sufficient opportunity of presenting their case. As regards the merits of the disallowances, we find that the assessees have filed the detailed submissions before the CIT (A), but we find that the CIT (A) (without even calling for a remand report from the AO except in the case of Lingam Tulasi Prasad) has given relief to the assessee on the basis of the material, which has not been verified by the AO and also not even considering the remand report in the case of Tulasi Prasad. Therefore, we deem it fit and proper to set aside the assessments and direct the AO to complete the assessments de novo in accordance with law.

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• 2017 (2) TMI 1003
  Non-deduction of tax (TDS) u/s 194I - payment is not towards rental expenses as per ITAT - Held that:- Board’s Circular No. 1294 Where by the Board has clarified that the provisions of section 194-I to the sharing of proceedings of film between film distributors and film exhibitor owning a cinema theatre, are not attracted to such payment. We find that the above said circular squarely applicable to the facts and circumstances of the case. In fact, in the present case assured and guaranteed return by the assessee was given to the cinema owner is case of exhibiting of films by the cinema owner. There is no letting out of the cinema hall, plant and machinery, furniture and fixture for exhibition of films. We feel that the dominant and prime intention of the parties entered into agreement to conduct business and to give comfort level by the assessee to the cinema owner. The day to day maintenance and running of commercial activities remained with the owner of the cinema owner and the assessee had no control or interference whatsoever. The cinema was exclusively owned and managed by the cinema owner and the assessee was having no interference with selecting the films, exhibiting the films, issuing tickets, paying tax, maintaining statutory Compliances Whatsoever. Thus the agreement was not of letting out but was for conduct of business. - Decided against revenue

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• 2017 (2) TMI 1002
  Penalty u/s 271(1)(c) - Whether under Section 271(1)(c) as it stood prior to the insertion of Explanation 5, levy of penalty is automatic if return filed by the assessee under Section 153A of the Act discloses higher income than in the return filed under Section 139(1)? - Held that:- Once the assessee files a revised return under Section 153A, for all other provisions of the Act, the revised return will be treated as the original return filed under Section 139. See KIRIT DAHYABHAI PATEL Versus ASSISTANT COMMISSIONER OF INCOME TAX [2015 (1) TMI 201 - GUJARAT HIGH COURT ] When the A.O. has accepted the revised return filed by the assessee under Section 153A, no occasion arises to refer to the previous return filed under Section 139 of the Act. For all purposes, including for the purpose of levying penalty under Section 271(1)(c) of the Act, the return that has to be looked at is the one filed under Section 153A. Section 153A is in the nature of a second chance given to the assessee, which incidentally gives him an opportunity to make good omission, if any, in the original return. Once the A.O. accepts the revised return filed under Section 153A, the original return under Section 139 abates and becomes non-est. Now, it is trite to say that the “concealment” has to be seen with reference to the return that it is filed by the assessee. Thus, for the purpose of levying penalty under Section 271(1)(c), what has to be seen is whether there is any concealment in the return filed by the assessee under Section 153A, and not vis-a vis the original return under Section 139. Interpretation and application of Explanation-5 to Section 271(1)(c) - whether it is attracted in the facts of this case? - Held that:- Explanation-5 cannot assist the claim of the revenue in the present case for the relevant assessment years under consideration before this Court for the simple reason that for the relevant assessment years, 2005-06 & 2006-07, no material was recovered during the search. Rather, the assessee added Rs. 21,65,932/- in the return filed pursuant to notice under section 153A. That amount was not relatable to any sum recovered or article seized. Therefore, the question of adding or not adding amounts after the search and falling within the mischief of Explanation 5 to Section 271 (1) (c) cannot arise in the facts and circumstances of this case. Thus no illegality in the order of the learned ITAT in the present case. Question of law involved is thus answered in favour of the assessee.

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• 2017 (2) TMI 1001
  Validity of assessment order u/s 143(3) r.w.s. 92C(4) and 144C - non passing draft assessment order - DRP jurisdiction - Held that:- We find no merit in the plea of learned Departmental Representative for the Revenue. The Assessing Officer passed the order on 28.02.2014 along with which it also issued the demand notice and show cause notice for levy of penalty. In other words, the Assessing Officer has crystallized the demand in the case of assessee. Whereas, as per the provisions of the Act where the Assessing Officer proposes to vary the income in the hands of assessee, there was requirement to issue show cause notice to the assessee to the said additions, by way of draft assessment order. The demand does not get crystallized in draft assessment order. Undoubtedly, the Assessing Officer had issued covering letter where it says that it is draft assessment order but in spirit, it had finalized the assessment, wherein the demand was crystallized and demand notice was issued to the assessee. The Assessing Officer has not followed the correct procedure as provided in the Statute and has passed final assessment order without passing draft assessment order which is against the provisions of the Act and hence, the same is invalid in law - Decided in favour of assessee

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• 2017 (2) TMI 1000
  Disallowance of consultancy charges incurred on designing and implementation of TDS and other systems - nature of expenditure - Held that:- Keeping in view of the argument advanced by the parties and by going through the record carefully, it came into the notice that the assessee is in the business of manufacturing, purchasing, processing and refining crop protection goods etc. The expenditure was incurred for the improving and rationalizing of system such as TDS and Works Contract Tax System, Security Deposit Management System, Excel Vouchers upload systems, inferface of auto-booking of excise / CENVAT to BayMAP system, sales tax administration – sales, sales tax administration – purchases, maintaining capital work in progress, forex payable and leased assets etc. In view of the said facts and circumstances, it is quite clear that it is revenue expenditure and the case of the assessee is fairly covered by the law settled in Commissioner of Income Tax Vs. Raychem RPG Ltd. [2011 (7) TMI 953 - Bombay High Court ] - Decided in favour of assessee Disallowance u/s.14A to the extent of 10% of the total exempted income - Held that:- From the facts and figures mentioned above, it noticed that own fund is more than the investment, therefore in the said circumstances no expenditure is required to be deducted in view of the law settled in Hon’ble Bombay High Court in the case of Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT ), accordingly, we delete the expenditure assessed by the CIT(A) in view of the provision u/s.14A of the Act. Accordingly, this issue is decided in favour of the assessee

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• 2017 (2) TMI 999
  Disallowance of 20% of the purchases and 10% of labour charges - assessee has not produced books of accounts, cash book, bills, vouchers, stock register etc though specifically called for - CIT (Appeals) restricted the gross profit to 10% and no separate additions were made towards purchases and labour charges on account of non production of details - Held that:- No infirmity in estimating the gross profit by the Ld. CIT (Appeals) concluding that there is short disclosure of profit to the extent of Rs. 11,38,320/- which is liable to be assessed in the hands of the assessee on account of low GP, non production of books of accounts and absence of verification of purchase bills and vouchers of labour expenditure. Since the GP percentage have been applied which takes care of direct cost on purchases as well as labour expenses, no separate adhoc addition for purchases and labour expenses are required. As we observe that there is a wide gap in gross profit percentage declared by the assessee during the assessment years 2006-07 and 2009-10, therefore, the average gross profit rate arrived by the Ld. CIT (Appeals) at 12% and further reduction of 2% granted for fall in profits due to competitive prices for increasing the turnover may not be sufficient. Therefore, we are of the view that a further reduction of 2% should be allowed to the assessee. Therefore, we direct the assessing officer to estimate the gross profit at 8% on the turnover and recompute the income accordingly. We make it clear that there should not be any adhoc disallowance towards purchases and labour charges separately. - Decided party in favour of assessee

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• 2017 (2) TMI 998
  Scope of Rectification of application - while computing capital gains deduction may be given for cost of acquisition the tenancy rights by adopting fair market value of tenancy right as on 01/04/1981 - entitlement to deduct index cost of acquisition of tenancy rights - Held that:- CIT(A) has rightly pointed out that the A.O has not given correct appeal effect to the order of the ITAT. The Ld. CIT(A) has further pointed out that the A.O has been committing legal mistake again and again by applying the provisions of section 55(2)(a)(ii) instead of the provisions of section 55(2)(a)(i) of the Act because appellant firm had purchased the cloth business along with the tenancy rights vide deed of assignment dated 21/11/1950 for Rs. 9,500/- This amount of Rs. 9,500/- paid for acquiring ongoing concern also included amount paid by the appellate firm for acquiring the tenancy rights. We also agree with the Ld. CIT(A) that the A.O has not given correct effect to the order of the Tribunal. It is apparent form the deed of assignment that a sum of Rs. 9,500/- was paid by the appellant firm in 1950 towards the acquisition of business including tenancy rights. We further noticed that copies of Agreement dated 19/09/1950, Letter dated 21/11/1950 indicting therein transfer of business along with benefit of tenancy right, Power of Attorney dated 21/11/1950 given by Assignor, Mr. Dhansing Netram referring to Deed of Assignment dated 21/11/1950 to carry on correspondence with Landlord, etc., Letter dated 17/10/1950 addressed to Bombay Samachar and Government Gazzette for Public Notice, Public notice dated 19/09/1950, Suit filed by landlord for eviction of the premises and Consent terms and order of the small causes court in regard to surrender of premises by the appellant firm etc. were made available by the assessee to the AO during assessment proceedings. On the basis of the said documents the AO could have safely concluded that the assessee firm had paid Rs. 9,500/- in 1950 towards acquisition of business including tenancy rights. Hence, in our considered view the AO has wrongly treated the cost of acquisition of tenancy as NIL. CIT(A) has rightly directed the A.O. to work out capital gain on surrender of tenancy rights after taking into account the cost of acquisition of tenancy right as worked out by the registered approved valuer and allow the benefit of indexation of the cost of acquisition as per the provisions of section 48 of the Act.

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• 2017 (2) TMI 997
  Validity of reopening of assessment - sanction of ld. CIT was obtained instead of JCIT as provided u/s 151 - Held that:- There was no new material before the AO for re-opening of the concluded assessment. The re-opening was made beyond the four year from the end of relevant assessment year. Moreover, there was no proper sanction from the competent authority for issue of notice as provided u/s 151 of the Act. Thus, in view of the above discussion, the re-opening of assessment u/s 147 is bad-in-law. - Decided in favour of assessee.

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• 2017 (2) TMI 996
  Addition on undisclosed income u/s 68 - Held that:- Before making addition u/s 68 the AO has neither gave any finding on the identity of the person, source of share capital. The AO straightway came to the conclusion about the non- genuinenity without bringing any material on record against the assessee. The AO has not given any wattage to the evidences furnished by the assessee. In these circumstances we deem it appropriate to restore the case to the file of AO to reconsider the case of assessee and give fresh finding by speaking order on the evidences furnished by assessee, after considering the above referred decision of Hon’ble Bombay High Court in Mukesh Ratilal Marolia (2011 (9) TMI 919 - BOMBAY HIGH COURT) and Lovely Exports (P) Limited (2008 (1) TMI 575 - SUPREME COURT OF INDIA ). - Decided in favour of assessee for statistical purposes.

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• 2017 (2) TMI 995
  Penalty order u/s 271(1)(c) - unexplained expenditure under Section 69C addition - non striking off of inaccurate particular or concealed income in the notice - Held that:- No explanation was offered by assessee for not reflecting such expenditure in books of accounts. Thus, it is a clear case of concealment of income. It was not a case that any legal claim of expanses was made and the same was disallowed during the assessment proceedings. The material was seized during the survey under section 133A, despite the evidence in possession of revenue the assessee has not shown the cash expanses in its books of account. In the explanation the assessee contended that there was no intention to hide or suppress anything. In our considered opinion the explanation offered by assessee is not satisfactory. The issuance of notice is an administrative device for informing the assessee about the proposal of levy of penalty in order to enable him to explain why it should not be levied against him. If it is taken for the sake of argument that mere mistake in the language in the notice for non-striking off of ‘inaccurate particular’ or marking on ‘concealment of income’ portion cannot by itself invalidate the notice. Entire facts and backgrounds thereof are to be kept in mind. Every concealment of fact may ultimately result in filing of or furnishing inaccurate particular. As decided in CIT Vs Smt. Kaushalya (1995 (1) TMI 25 - BOMBAY High Court) while considering similar contention with regards to not striking off of inaccurate particular or concealed income in the notice, held, that mere not striking off specific limb cannot by itself invalidate notice issued under section 274 of the Act - Decided against assessee

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• 2017 (2) TMI 994
  Rectification of mistake - claim of ‘funded interest paid’ under the provisions of Section 43B, invoking Explanation 3C - Held that:- We are unable to understand why and how this does not fall under the category of mistake apparent from record. Assessee has indeed made a claim after amendment of the Act. Consequently, to that extent, one has to consider that the claim was properly made. The Board Circular No. 68 dt. 17-11-1971 clarifies that where an assessee moves an application u/s. 154 pointing out that a mistake had occurred in any of the completed assessments. Keeping that in mind the application could have acted upon, provided the same has been filed within the time and is otherwise in order. Even when application was originally rejected, the said circular allows a fresh application to consider. Like-wise, Circular No. 73 dt. 17-01-1972 empowers the officer that in all cases where a valid application under clause B of sub-section 2 of Section 154 had been filed by assessee within the statutory limit but was not disposed-off within the time limit specified under sub-section 7 of Section 154, it may be disposedoff by that authority even after expiry of the statutory time limit on merits and in accordance with law. Keeping the above circulars in view, we are of the opinion that assessee’s claim is an allowable claim, if the claim for rectification was made as per the time limits prescribed in Section 154. AO made a reference to company’s letter dt. 04-03-2010 in the order u/s. 154. The order also does not mention when the return was processed u/s. 143(1). Moreover, the enclosures to the appeal indicate that application u/s. 154 has been filed on 25-02-2009. If this date is taken, the application may be well within the statutory period. However, neither the AO nor the CIT(A) has examined whether the application was made within the statutory period of four years from the date of order sought to be amended, as per Section 154(7). The CIT(A) stated that application was made after six years. How the period was counted was not specified. The starting point should be the order, which is sought to be amended. Since there is no clarity on this point, we direct the AO to examine the record and if the application is made within the statutory period then, assessee’s claim should be allowed u/s 154 of the Act. - Decided in favour of assessee for statistical purposes

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• Customs

• 2017 (2) TMI 1027
  Valuation - import of cineprints - whether the amount of license fee remitted by the appellant to the supplier of cine prints needs to be included in the Assessable Value? - The appellants sought valuation u/r 8, whereas the Revenue sought to apply the Customs Valuation Rules and loaded the declared value furnished by the appellants - Held that: - It can be seen that the agreement is between the two foreign entities wherein one entity grants the other entity the sole and exclusive right to distribute license theatres to exhibit throughout the territory consisting of 4 countries. From the said clause of the agreement, it is obvious that the said rights are granted subject to the terms of the agreement. In other words, if the terms of the agreement are not agreed and adhered to, the said imports cannot be made or the said rights cannot be exercised. The fact is that in terms of Rule 8 the said amounts need to be included in the assessable value. Appeal dismissed - decided against appellant.

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• 2017 (2) TMI 1026
  Power of Tribunal - Section 129E of the Customs Act, 1962 - whether the Tribunal has power to reduce or enhance the amount, as a condition to hear the appeals? - Held that: - On a plain reading of the provision of Section 129E, it is crystal clear that the Tribunal has no discretion to vary the amount of pre-deposit prescribed under the said provision in any manner - the applicants directed to deposit 71/2 % of duty confirmed in each of the Appeals - appeal dismissed - decided against appellant.

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• 2017 (2) TMI 1025
  Classification of imported goods - Cameo Carving - classified under CTH 9601 9090 or not? - whether the goods are restricted item? - Held that: - The item which is imported Carved Shell Articles is sought to be confiscated as the same being restricted under CTH 9601. It is noticed that the WCCB authority on examination of consignment, categorically recorded that imported goods are not covered under Wild Life (Protection) Act, 1972; also that Ministry of Commerce vide notification dated 26th February 2009 covered the item Worked Coral under Free imports category. It is not in dispute that imported goods are Worked Coral - It is undisputed that the Carved Shell Articles i.e. Worked Coral has been declared as Free imports, and hence nothing survives in the order passed by the lower authorities - confiscation and penalty set aside - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 1024
  Valuation of imported goods - loading of goods based on contemporaneous import - Held that: - appellant has not produced any evidence for loading of the value on their consignment which is contradictory to the actual position as the value was loaded by the group on the basis of the investigation carried out by the SIIB unit of this Custom House which shows that after throught investigation and on the basis of contemporaneous invoices available in the said SIIB unit they prepared the chart of the said item thickness-wise and forwarded the same to the concerned group with the direction to load the value on the basis of the chart prepared and evidence available with them in their file - the appellant had not visited the matter on merits as is evident from the grounds of appeal. We do not find any reason to interfere in the impugned order - appeal rejected - decided against appellant.

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• 2017 (2) TMI 1023
  Mis-declaration of imported goods - Heavy Melting Scrap - High Seas Sale - presence of restricted goods in the import - whether the appellant BPIL and VRC mis-declared the goods? - Held that: - VRC placed an order of Heavy Melting Scrap and contract specifically records that order is for approximately 100 tons, the bill of lading issued by the foreign supplier also indicates Heavy Melting Scrap, load port inspection certificate issued by authorities also indicates the same. After perusal of the documents as produced, I find that the lower authorities have erred in confiscating the goods - the appellant BPIL acted on the certificate intimating that consignment does not contain any live war material. In the case in hand, in fact the war material as was found was used and rusted and totally discharged - appeal allowed - decided in favor of appellant.

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• Service Tax

• 2017 (2) TMI 1563
  Leasing of capital goods - whether the transaction between the appellants and the joint venture company for leasing out the capital goods would fall under the category of supply of tangible goods for use service? - Held that: - the capital goods are in the possession of the lessee and is being used by him for the intended purpose without any interference or hurdle from the appellants. On going through the clauses of agreement, it is found that the appellants had handed over the capital goods possession to the lessee as also the right to use. These two important factors that determine the requirement as to whether the service is a taxable service or otherwise under supply of tangible goods for use services - demand set aside - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 1048
  Outdoor catering service - failure to file service tax return by due date - Penalty u/s 77 and 78 - Held that: - the returns were not filed by the appellants for the period 06.01.2010 to 31.03.2010 and for 01.04.2010 to 30.09.2010. Hence, the order of Commissioner (Appeals), in so far as the imposition of penalty u/s 77 of the Act is concerned, is liable to be sustained. Penalty u/s 78 - Held that: - the penalty u/s 78 requires that first the demand should be determined under sub-section (2) of Section 73 of the Act ibid - the determination of the demand of service tax u/s 73(2) ibid has not taken place in this case - Without the raising of the demand u/s 73(1) ibid and its determination by the adjudicating authority, the penalty u/s 78 of the Act is not sustainable. Appeal disposed off - decided partly in favor of appellant.

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• 2017 (2) TMI 1047
  Refund claim - N/N. 5/2006-CE dated 14.3.2006 read with Rule 5 of CCR, 2004 - export of services - denial on the ground that the assessee is not registered - Held that: - the issue is no more res integra in view of the judgment of the Hon’ble Karnataka High Court in the case of mPortal Wireless Solutions Pvt. Ltd. vs. CST [2011 (9) TMI 450 - KARNATAKA HIGH COURT], where it was held that Registration not compulsory for refund - refund allowed - appeal dismissed - decided against Revenue.

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• 2017 (2) TMI 1046
  Commission paid to C&F Agents - demand on the ground that the respondent has discharged service tax in the normal course only in respect of a part of the commission paid to the C & F Agent, M/s. BPL - condonation of delay - Held that: - in the initial stages of levy of service tax on C & F Agent service, there was occasion for a lot of uncertainty. Under the circumstances, it is difficult to hold that the respondent did not pay the service tax, as a result of wilful suppression to evade payment of service tax - the invocation of extended period under the proviso to section 73 is not justified in the present case - Since the SCN in the present case has been issued on 13.6.2001 covering the demand for the period 16.7.1997 to 31.3.1998, the demand is time barred - appeal dismissed - decided against Revenue.

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• 2017 (2) TMI 1045
  Imposition of penalty u/s 78 - Banking & Financial Services received from the overseas service provider - tax was paid on being pointed out, appellant was under bonafide belief that tax was not required to be paid - Held that: - the circumstances which tilts in favor of the Appellant is that there has been continuous litigation/disputes on the liability to discharge service tax liability on receipt of the services from overseas service provider - this is a fit case for invoking Section 80 of the FA, 1994 - penalty set aside - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2017 (2) TMI 1044
  SSI Exemption - clubbing of clearances - Held that: - though the Ld. Commissioner (Appeals) recorded the objection of the Ld. Advocate for the Appellant at the time of personal hearing on the issue of clubbing of the clearances of both the units, but, she has not recorded any finding on the said issue whether it could be maintainable before her or otherwise - Therefore, the matter needs to be remitted the ld. Commissioner (Appeals) to record a finding whether the appellant could be allowed to raise the said point of clubbing of both units on merit - appeal allowed by way of remand.

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• 2017 (2) TMI 1043
  CENVAT credit - denial on the ground that the said quantity of Furnace Oil had been used in the fabrication of fixed assets - Held that: - As per Accounting standard, for any new project whatever expenses are incurred are to be capitalized and shown in the balance sheet as fixed assets. On basis of merely information indicated in the books of accounts of the respondents, it can not be conclusively said that cenvatable Furnace oil has been utilized for setting up of fixed immovable structures - appeal rejected - decided against Revenue.

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• 2017 (2) TMI 1042
  100% EOU - CENVAT credit - duty paying documents - appellant had availed Cenvat Credit on Bills of Entry importing capital goods and raw materials, which were in the name and address of their 100% EOU adjacent to the DTA unit - Held that: - since these GRNs were system generated do not bear signature of the persons concerned - Further, it is supported by the fact that all the GRNs reflect these lorry receipts which needs to be co-related. Thus, to ascertain the facts of co-relation between the transport challans and GRNs, so as to arrive at conclusion that the goods are received in the factory or otherwise, the matter is to be remanded to the Adjudicating Authority for process of verification - appeal allowed by way of remand.

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• 2017 (2) TMI 1041
  Quantum of penalty - the respondent manufactured copper coils from the copper strips and used them capatively in the up-gradation of smoothing reactors. The respondent, however, neither paid any duty on the copper coil used by them capatively in their modification activity undertaken at the relevant period nor did they submit the requisite declaration u/r 173-C of the CER, 1944 - Held that: - the Tribunal erred in reducing the amount of penalty from Rs. 2,06,000/- to Rs. 50,000/-. Indeed, the Tribunal, failed to take into consideration the law laid down in the case of Dharamendra Textile Processors [2008 (9) TMI 52 - SUPREME COURT] which the Tribunal was bound to take while deciding the appeal and instead the Tribunal wrongly placed reliance on its own decision in the case of Escorts JCB Ltd. vs CCE [1999 (8) TMI 141 - CEGAT, NEW DELHI] - the Tribunal also gave no justifiable legal reasons for reducing the penalty amount. Appeal allowed - decided in favor of appellant-Revenue.

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• 2017 (2) TMI 1040
  Clandestine Removal - Tobacco - clearance of 39,44,21.52 Kilograms of Gutkha or 1,97,21,05,260 number of pouches of 2 Grams each - Whether, in the facts and circumstance of the case, in the absence of any tangible of evidence about manufacture and and removal of the goods the department could draw the inference about clandestine manufactured and removal merely on the basis of presumptions and assumptions? - Held that: - there is cogent, clear and clinching evidence for clandestine manufacture of tobacco product - the Tribunal based upon the evidence has rightly passed the impugned order and in respect of substantial question of law, the answer is that there was sufficient evidence about the manufacture and removal of goods and the Department has rightly drawn inference about clandestine manufacture and removal. Whether, in the facts and circumstances of the case, the Tribunal is justified in coming to the conclusion that the appellants have clandestinely manufactured Gutkha and cleared the same without payment of excise duty merely on the basis of LRs when there is no proof of actual delivery of the raw materials said to have been transported under the LRs. to the appellant and the persons said to have accompanied the trucks could not be identified? - Held that: - The Tribunal was justified to coming to conclusion that appellant was involved in clandestine manufacture of the goods and clearing of the same without payment of Excise Duty. Whether, the alleged receipt of one of the raw materials viz. scented tobacco by itself was sufficient to hold that there was corresponding manufacture and clandestine clearance of “Gutkha” (pan masala) when there is no evidence of purchase of other major ingredients like supari, katha, lime, menthol and kimam and there is also no evidence regarding manufacture of “Gutkha” as also in respect of clearance and financial transactions the same? - Held that: - The receipt of raw material coupled with other evidence as discussed by this Court and by the Tribunal, the Tribunal was justified in holding that there was corresponding manufacture and clandestine clearance of Gutkha by the appellant. Appeal dismissed - decided against Appellant.

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• 2017 (2) TMI 1039
  Benefit of N/N. 67/95-CE dated 16.03.1995 - denial on the ground that the motor vehicle cleared by the Respondent did not suffer any duty - Held that: - in the instant case M/s Swaraj Mazda Ltd. paid duty on body built motor vehicles and there is no loss of the revenue when the duty has been paid - appeal dismissed - decided against Revenue.

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• 2017 (2) TMI 1038
  Interest - whether the appellants are liable to pay interest from 07.09.1998 to 10.10.2000 on the amount of Rs. 2.50 lacs deposited by them pursuant to the amendment in Rule 57 F(17) in the Finance Act, 1999? Held that: - Clause 132 (2) (C) of the Finance Act, 1999 clearly says that in the event of non-payment of such Cenvat Credit within a period of thirty days of the receipt of assent of the President to the Finance Act, 1999, interest at a rate of 36% would be payable. Since the law is clear about the date of application of the interest as well as the rate of interest, charging the interest with effect from 07.09.1998 is contrary to the provisions of the Finance Act, 1999. The interest would be payable from 11.06.1999 to 10.10.2000 at the rate of 36% per annum. The appellants plea that the interest should be at the rate of 18% is not tenable because interest is being charged under clause 132 (2) (C) of Finance Act, 1999 read with Section 11AB of the Central Excise Act, 1944. Appeal disposed of - decided partly in favor of appellants.

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• 2017 (2) TMI 1037
  CENVAT credit - duty paying documents - whether TR-6 Challan evidencing the payment of service tax by goods Transport Agency can be considered a valid document for taking cenvat credit as per Rule 9(1) of the CCR, 2004 during the period 01.01.2005 to 15.06.2005? Held that: - the issue involved in this appeal is no longer res integra. In the case of CCE, Goa vs. Essel Pro Pack Ltd. [2015 (5) TMI 529 - BOMBAY HIGH COURT], it was held that If no documents have been mentioned, TR-6 Challan has to be considered as a proper document, reflecting payment of such tax - the Revenue has not disputed the payment of service tax or entitlement to the cenvat credit. The above judgment of Hon’ble Bombay High Court is therefore squarely applicable to the facts of the present case - appeal dismissed - decided against Revenue.

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• 2017 (2) TMI 1036
  Benefit of N/N. 67/95-CE dt. 16.03.1995 - captive consumption - Department's claim that once invoice is raised to the customer, they were supposed to pay duty even if the goods were not removed from the factory - Held that: - Benefit of N/N. 67/95-CE is available for capital goods when they are produced and used within the factory of production - In the instant case, the goods have been sold to M/s Ashok Leyland Ltd. and M/s Volvo India Pvt. Ltd. Since the goods have been sold by the appellants, the N/N. 67/95-CE, is not applicable. Extended period of limitation - Held that: - there is positive act on the part of the assessee in form of raising debit notes, recovery of sales tax and raising self invoices without discharging duty thereon. These actions have never been disclosed to the Revenue Authorities. Hence, there is definitive element of suppression - the extended period has rightly being invoked for demanding the Central Excise Duty. Penalty - Held that: - Since there was suppression of vital facts and filing of incorrect declaration under Rule 173B for wrongly availing the benefit of exemption 67/95-CE, the penalty under Section 11AC has been correctly imposed - As for the penalty under Rule 9(2) and Rule 173Q of Central Excise Rules, 1944 and Rule 25 of the Central Excise Rules, 2000, we find force in the contention of the appellants that two sets of penalties should not be imposed for the same contraventions. Appeal disposed off - decided partly in favor of appellant.

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• 2017 (2) TMI 1035
  N/N. 6/2002-CE dated 01.03.2002 - supply of weighing machines and conveyors - Whether the appellant is entitled for benefit of exemption N/N. 6/2002-CE dated 01.03.2002 at Serial No. 237 read with list no. 9 item 21 for supply of weighing machines and conveyors to M/s Non-Conventional Energy Development Corporation of Andhra Pradesh for setting up a Bio Gas Combustion Co-generation Power Project or not? Held that: - As there are contrary decisions of this Tribunal Ron the issue, therefore, the matter be placed before the Hon'ble President for constitute the Larger Bench to decide the issue.

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• 2017 (2) TMI 1034
  SSI Exemption - Benefit of N/N. 8/03-CE dated 1.3.2003 - denial on the ground that inasmuch as the debit of all credit lying with them was not complete prior to 1.4.2007, they would not be entitled to avail the benefit of N/N. 8/03-CE - Held that: - Though on scrutiny of the purchase invoice placed on record, we find merit in the assessee’s stand inasmuch as the documents were not verified by the lower authorities, we deem it fit to remand the matter to the original adjudicating authority. In respect of the demand of duty on the clearance of the capital goods, the assessee’s stand has to be appreciated and examined in the light of the chartered accountant’s certificate. Appeal allowed by way of remand.

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• 2017 (2) TMI 1033
  Interest - penalty - the appellant has availed the credit on capital goods which was reversed on pointing out - Held that: - As the appellant has availed the credit wrongly and the same has not been utilized, in that circumstance, relying on the decision of the Bill Forge Ltd. [2011 (4) TMI 969 - KARNATAKA HIGH COURT], where it was held that once the entry was reversed, it is as if that the Cenvat credit was not available, we hold that the appellant is not liable to pay interest. The malafide intention is missing in that circumstance, the penalty is not imposable on the appellant. Interest and penalty set aside - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 1032
  SSI Exemption - clubbing of clearances - brand name of others - whether Tractor parts supplied to OEMs, on which stickers had been affixed, cleared by the respondents are branded goods or not? - Held that: - Ld. Commissioner (Appeals) has heavily relied upon the ratio decidendi in the Hon’ble Supreme Court judgment in the case of Kohinoor Elastics Pvt. Ltd. [2005 (8) TMI 115 - SUPREME COURT OF INDIA]. Since the Revenue’s grounds of appeal are based on non-applicability of the judgment of Kohinoor Elastics Pvt. Ltd. and the Board Circular dated 27.10.1994 and in view of the subsequent Board Circular accepting the said judgment and superseding the Circular dated 27.10.1994, we find that Revenue has no grounds to contest the impugned order - appeal dismissed - decided against Revenue.

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• 2017 (2) TMI 1031
  Refund claim - rejection on the ground of bar of unjust enrichment - Held that: - it is evident that the appellant has not received the excess duty from the DOT. Moreover, to pass the bar of unjust enrichment, it is to be seen from the facts of the case, whether the assessee has passed the duty component on the buyer and the buyer has paid the same to the assessee. In this case, the appellant has been able to succeed to prove that the appellant has not received any amount over and above after reducing the price which is evident from the earlier order of this Tribunal and the same has been accepted by both sides - the appellant has been able to pass the bar of unjust enrichment - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 1030
  Clandestine removal - wrong availment of cenvat credit - penalty u/s 11AC of the Act - Held that: - The amount of duty has already been paid by the appellants before issuance of the SCN. Therefore, the appellant was required to be given an option to pay 25% of the duty as penalty, as per the proviso of section 11AC of the Act - As the penalty against the main appellant has been reduced to 25% of the duty confirmed as per the proviso of section 11AC of the CEA, therefore, considering the gravity of reduction of penalty, the penalty on Sh. Arvinder Pal Singh, Director of the M/s S.K. Sacks is also reduced to the tune of Rs. 35,000/- - appeal disposed off - decided partly in favor of appellants.

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• 2017 (2) TMI 1029
  Imposition of penalty u/s 11 AC of the Act - respondent, a declarant unit, were availing SSI exemption in respect of their own goods and simultaneously were manufacturing and clearing branded goods of another person without payment of Central Excise duty - Held that: - there is no allegation of any contumacious conduct or deliberate defiance of the provisions of law on the part of the respondent-assessee, in availing the SSI exemption - the Ld. Commissioner (Appeals) is correct in deleting the penalty u/s 11 AC of the Act holding that there is no case of deliberate defiance of law and further the assessee have paid the tax on being so pointed out by the Revenue - appeal dismissed - decided against Revenue.

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• 2017 (2) TMI 1028
  Clandestine removal - suppression of production - The Commissioner while adjudicating the matter, has found that the appellant is not having the capacity to produce 50.89 crores of pouches with a short span time of 20 days. He held that only 30.06 crores of pouches could have been manufactured during the said period - Whether the Commissioner is correct in demanding duty on the basis of production capacity which is not alleged in the SCN? - Held that: - the impugned order lacks demanding duty on the basis of production capacity as the same is beyond the scope of show cause notice as held by the Hon'ble Apex Court in the case of Sun Pharmaceuticals [2015 (12) TMI 670 - SUPREME COURT], wherein it was held that the reasons given by the CESTAT in support of its view clearly reveals that CESTAT has gone beyond the show cause notice inasmuch as this was not even the case set up by the Department in the SCN - decided against Revenue. Whether the Commissioner is correct in demanding duty under the compounded levy scheme as per Masala Packing Machines (Capacity Determination & Collection of Duty) Rules, 2008 or not? - Held that: - As the Pan Masala Packing Machines (Capacity Determination & Collection of Duty) Rules, 2008 were not in existence during the relevant time. Moreover, these rules have not been made effective retrospectively, in that circumstance, the duty cannot be demanded under Pan Masala Packing Machines (Capacity Determination & Collection of Duty) Rules, 2008 - method of calculation of demand set aside. Whether the documents resumed from the residence of Sh. Manoj Rajouria can be relied upon to demand duty from M/s. Som? - Whether in the absence of any evidence on record except the documents record from the residence of Sh. Manoj Rajouria, the duty can be demanded or not? - Held that: - the department has clubbed together several railway receipts, sometimes of different dates to correspond with the quantity of Gutkha shown as transported in the resumed documents. It is not correct that there are several gutkha manufacturers in and around Delhi who transported their goods through railways but no efforts have been made to ascertain whether the gutkha has been sent by M/s. Som - Therefore, the duty cannot be demanded on the basis of the documents recovered from Shri Manoj Rajouria and the documents recovered from Shri Manoj Rajouria cannot be taken as evidence. Appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2017 (2) TMI 1022
  Reversal of input tax credit - denial on the ground that there was a mismatch between the information available on the website of the Department, as against that which is contained in the returns filed by the petitioner - penalty u/s 27(3) of the TNVAT Act, 2006 - Held that: - the respondent are directed to redo the assessment in a time bound manner, the needful would be done - appeal allowed by way of remand.

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• 2017 (2) TMI 1021
  Valuation - discount - whether the turnover discount, target discount, additional discount, special discount etc are allowable deductions from sale price or purchase price as the case may be provided the value of goods paid by buyer is the amount less such discount? - whether 5th proviso to Section 11(3) have any bearing on the factual issues arising in the case? Held that: - Prior to amendment, there was no ambiguity to the above provision in so far as it was made clear that input tax credit shall not be available in respect of tax paid on the turnover subsequently allowed as discount. But it is relevant to note that though the statute had incorporated an amendment to proviso to Section 11(3) as per Finance Act, 2008, it has not touched on the issue regarding the turnover to be considered as far as the liability to pay tax is concerned. The amendment by the Finance Act, 2008 only clarifies the fact that the amount covered under credit notes issued by a supplier that do not affect the input tax credit already availed shall not be reckoned for the purpose of assessment under the Act. This provision according to me cannot be extended to the assessment of turnover for the purpose of payment of tax. Of course, it could be said that there is some ambiguity to the provision. But in so far as the liability to pay tax is on the turnover and discount given is part of the turnover, I do not think that a different view is possible to be taken in the matter. Petition dismissed - decided against petitioner.

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• 2017 (2) TMI 1020
  Anticipatory bail - offence punishable u/s 465, 467, 468 and 471 of the IPC and u/s 85(1) (J) of the GVAT - Government is defrauded in the matter of Value Added Tax by forging the Challans used for payment of tax - Held that: - the complicity of the applicant and other persons like the brother of the applicant Narsinhbhai Patel prima-facie appear, as per the allegations made in the FIR in the matter of defrauding the State to the extent of approx Rs. 15,40,910/- - the police might require custodial interrogation of the applicant and therefore the applicant could not be made entitle to benefit of anticipatory bail u/s 438 of the Code in connection with the FIR - application rejected.

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• Indian Laws

• 2017 (2) TMI 1019
  Conviction and sentence imposed for the offence under Sec.138 of the Negotiable Instruments Act - Held that:- the revision petitioner has not disclosed any grounds so as to come to the conclusion that those concurrent findings of fact arrived at by both the courts below are tainted by gross perversity or unreasonableness. No crucial or relevant evidentiary aspects have been shut out by both the courts below. Therefore, the impugned finding of conviction is not liable to be interfered with in these revisional proceedings. As regards the question of sentence, the trial court had sentenced the accused to undergo simple imprisonment for one year and the accused shall pay compensation of Rs. 2.4 lakhs, failing which the accused shall suffer simple imprisonment for a further period of six months etc, However, while affirming the conviction, the appellate court has carefully assessed the matter and found that the sentence imposed by the trial court is slightly excessive and had accordingly ordered that the substantive sentence of one year imposed on the petitioner will stand modified and reduced as imprisonment till rising of the court and to pay compensation of Rs. 2.4 lakhs. The cheque amount in question comes to Rs. 1,97,900/-. Ext.P-2 cheque is dated 2.8.2002. The Apex Court has in various judgments held that fine amount or compensation amount as the case may be in prosecution under Sec. 138 of the Negotiable Instruments Act could be the cheque amount + 9% interest from the date of cheque upto date of realisation. Thus it cannot be said that the compensation amount of Rs. 2.4 lakhs is any way excessive or disproportionate. The cheque was issued as early as on 2.8.2002. The revision petition was filed early as on 17.5.2005 and thereafter, the petitioner has not even bothered to move the revision petition. Ordinarily, for this long lapse of time, the complainant can certainly ask for interest. In these circumstances, this Court is of the view that the compensation amount fixed by both the courts below would not require any revisional interference now. Thus neither the conviction nor the sentence deserves to be interfered with.

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