Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 3, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
TMI Short Notes
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Bill:
Restriction on payment Specified persons u/s 40A(2) - specified domestic transaction which were subject to TPA was allowed as deduction if it was at "Arms Length Price" - Now this benefit withdrawn - such transaction shall be allowed subject to the Provisions of Section 40A(2) - Budget 2017-18 w.e.f. AY 2017-18 (Retrospective)
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Bill:
Restriction on payment of expenditure in Cash u/s 40A(3) - Cash payment in excess of ₹ 10,000 in a single day to a person shall not be allowed - Budget 2017-18 w.e.f. AY 2018-19
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Bill:
Provision for Bad and Doubtful Debts in case of banks - limit of 7.5% enhanced to 8.5% - Budget 2017-18 w.e.f. AY 2018-19
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Bill:
Deduction in respect of expenditure on specified business u/s 35AD - Cash payment in excess of ₹ 10,000 in a single day to a person shall not be allowed - Budget 2017-18 w.e.f. AY 2018-19
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Bill:
Relief from taxation of Notional (presumptive) Rental Income upto one year from the date of completion - in case of Builder / Developer -stockin- trade and the property or any part of the property is not let during the whole or any part of the previous year- Budget 2017-18 w.e.f. AY 2018-19
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Bill:
Exemption to Political Parties - Amendment to Section 13A - Fixing Limit of ₹ 2000 for receipt of donation in Cash - Furnishing Return u/s 139 made mandatory - provisions for Electoral Bond - Budget 2017-18 w.e.f. AY 2018-19
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Bill:
Conditions u/s 12A for Claiming Exemption u/s 11 & 12 - Filing of Return of income u/s 139 made mandatory within the time allowed - Budget 2017-18 w.e.f. AY 2018-19
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Bill:
Conditions u/s 12A for Claiming Exemption u/s 11 & 12 - In case of amendments in the objects after registration - Fresh registration is required u/s 12AA - Budget 2017-18 w.e.f. AY 2018-19
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Bill:
Exemption u/s 11 - Restriction in respect of any amount credited or paid, out of income being contributions with a specific direction that they shall form part of the corpus of the trust or institution shall not be treated as application of such contribution to charitable or religious purposes. - Budget 2017-18 w.e.f. AY 2018-19
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Bill:
SEZ units - method of computation of an amount of deduction u/s 10AA - Budget 2017-18 w.e.f. AY 2018-19
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Bill:
New exemption - any income accruing or arising to a foreign company on account of sale of leftover stock of crude oil, if any, from the facility in India after the expiry of the agreement or the arrangement - Budget 2017-18 w.e.f. AY 2018-19
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Bill:
Restriction on exemption u/s 10(38) - transfer of a long term capital asset, being an equity share - No Exemption if STT is not paid - Budget 2017-18 w.e.f. 1.10.2004 (Retrospective)
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Bill:
Exemption from Capital Gains - transfer of land under the Land Pooling Scheme covered under the Andhra Pradesh Capital City Land Pooling Scheme (Formulation and Implementation) Rules, 2015 - Budget 2017-18 w.e.f. AY 2015-16 (Retrospective)
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Bill:
Restriction in respect of any amount credited or paid out of income, being voluntary contributions with specific direction that they shall form part of the corpus, to any trust or institution - Such contribution not to be treated as application of income- Budget 2017-18 w.e.f. AY 2018-19
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Bill:
New exemption to the Chief Minister's Relief Fund or the Lieutenant Governor's Relief Fund - Budget 2017-18 w.e.f. AY 1998-99 (Retrospective)
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Bill:
Exemption on partial withdrawal in amount from National Pension System (NPS) Trust in the hands of employees - to the extent it does not exceed twenty-five per cent- Budget 2017-18 w.e.f. AY 2018-19
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Bill:
Exempted income - Correct definition of the expression "person resident outside India" - clarificatory amendment - Budget 2017-18 w.e.f. 1.4.2013 (Retrospective)
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Bill:
No Business connection in India - conditions to be fulfilled for being an eligible investment fund - provisions of the clause (j) of Section 9A(3) shall not be applicable to a fund which has been wound up in the previous year. - Budget 2017-18 w.e.f. AY 2016-17 (Retrospective)
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Bill:
Income deemed to accrue or arise in India - New Explanation 5A to the Section 9 - asset or capital asset being any share or interest in a company or entity registered or incorporated outside India - Existing explanation 5 not to apply in certain situations - Budget 2017-18 w.e.f. AY 2012-13 (Retrospective)
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Bill:
Capital asset Short term or long term - period of holding in case of a unit or units, the period for which the the unit or units in the consolidating plan of the mutual fund scheme were held by the assessee in a Certain Case - Budget 2017-18 w.e.f. AY 2018-19
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Bill:
Capital asset Short term or long term - period of holding in case of equity shares in a company, the period for which the preference shares were held by the assessee in a Certain Case - Budget 2017-18 w.e.f. AY 2018-19
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Bill:
Long Term Capital Assets - Reduced from 3 years to 2 years (36 months to 24 months) - Budget 2017-18 w.e.f. AY 2018-19
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Bill:
Rate of income-tax in case of companies - Budget 2017-18 - Income Tax Rates - For the Assessment Year 2018-19
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Bill:
Rate of income-tax in case of every local authority - Budget 2017-18 - Income Tax Rates - For the Assessment Year 2018-19
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Bill:
Rate of income-tax in the case of ever firm (partnership firm) - Budget 2017-18 - Income Tax Rates - For the Assessment Year 2018-19
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Bill:
Rate of Tax in case of co-operative society - Budget 2017-18 - Income Tax Rates - For the Assessment Year 2018-19
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Bill:
Income Tax Rates - For the Assessment Year 2018-19 and Rates for deduction of tax at source from "Salaries", computation of "advance tax" and charging of income-tax in special cases during the financial year 2017-2018 - Budget 2017-18
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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To hold the transactions as mere accommodation entries and not real purchases is quite different from saying that the sources of expenditure for the purchases from the 7 parties in question have not been explained in the context of Sec. 69C - No addition - AT
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Disallowance made by AO u/s.40A(3)- The assessee has declared more than 10% of net profit of its gross turn over, therefore, there is no justification for coming to the conclusion that by purchasing in cash, assessee has earned extra profit - No additions - AT
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Validity of assessment u/s 144 without issuing notice - best judgment assessment - the assessment was patently illegal - HC
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Assessee had incurred the said expenditure only to preserve and maintain the existing asset and that the expenditure was not of a nature which brought into being a new asset or created a new advantage of an enduring nature - the expenditure is revenue in nature - AT
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Levy of surcharge and education cess on TDS - Absence of PAN - No contrary provision mandating the levy of surcharge and education cess on the rate of 20% u/s 206AA(1)(iii) has been brought on record by the Revenue - the action of the AO in levying the surcharge and education cess on the amount of TDS u/s 206AA(1)((iii) is incorrect - AT
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Refund of TDS - Rate of Withholding tax (TDS) - assessee deducting tax at 20% instead of 15% u/s 195 - - assessee’s claim for refund of tax deducted at source @ 5% on payments made to its parent company is devoid of any merits. - AT
Customs
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Conversion of shipping bill from duty drawback scheme to Advance Authorization Scheme - export of white refined sugar / raw sugar - conversion of shipping bill from one scheme to another scheme beyond three months from the date of Let Export Order (LEO) - since goods are not available for verification, conversion denied - HC
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Classification - valuation - import of old and used tyres - classified under CTH 40122090 or CTH 40122010? - importer cannot be forced to do repairs or retreading on the same - right classification would be under CTH No. 40122090 - AT
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Confiscation of goods - export of finished leather - one of the export consignments not meeting the requisite standards cannot be attributed to intentional or obvious reasons on the part of the exporter. It could have very well been due to mistake or some negligence on their part - This being the case, there is case for reduction in redemption fine and penalty. - AT
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Claiming benefit of exemption on import of Disposable Solution Infusion sets - Exemption under N/N. 208/1981-Cus. - It was only disposable and non-disposable cannulae that was the subject matter of exemption - “sets of the intravenous cannulae and tubing” are not meant for exemption.- AT
Bill
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SEZ units - method of computation of an amount of deduction u/s 10AA - Budget 2017-18 w.e.f. AY 2018-19
Service Tax
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Bundle of services - Unless the show cause notice exhibits the activity carried out, and the service which has essential character to embrace the cluster of service to its fold, it is difficult to comprehend to classify such services under an appropriate taxing entry - Demand set aside - AT
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Services provided to M/s GWSSB, in lying down pipelines for supply of drinking water is not leviable to service tax under the said category of Commercial or Industrial Construction Service - AT
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Appreciating that the services taxes have been paid before issue of show cause notice, there shall be no penalty - AT
Central Excise
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Reversal of Cenvat Credit - Write off of certain slow and non-moving stock of raw materials and finished goods - Only after 1.3.2011, payment has been required in respect of both partial write off or full write off. - AT
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Valuation - MRP based valuation - inclusion of value of accessories of Kenstar Food Processors cleared separately in separate packages to the purchasers - revenue directed to take opinion from the Metrology Department regarding requirement of affixing MRP on the retail package - AT
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Valuation - trade discount versus commission for after sale service - appellant raises invoice on the sales agent indicating trade discount 10% to 20% - any amounts paid for after sale services cannot be included in the assessable value either pre or post 01.07.2000 - AT
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100% EOU - CENVAT credit - the appellants are entitled to CENVAT credit of service tax paid on rent of Mumbai premises as the said premises is directly related to the manufacturing activity - AT
VAT
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Refund - provisional refund cannot be rejected merely on the ground that the return and the revised return contain the error - limiting the amount of refund, allegedly “in interest of revenue” would be arbitrary and not reasonable - HC
Case Laws:
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Income Tax
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2017 (2) TMI 76
Interest disallowed - CIT(A) allowed clam on the basis of additional evidence/documents - Held that:- CIT(A) allowed the assessee relief on the basis of additional evidence/documents filed for the first time before him in appellate proceedings, which was never placed before the AO, and without giving the AO adequate opportunity of being heard in the matter as required for the purposes laid in Rule 46A(3) of the Rules. This has led to a gross violation of the principles of natural justice. In this view of the matter, we set aside the order of the learned CIT(A) on the issue of interest disallowance raised by Revenue (supra) and restore the matter to the file of the learned CIT(A) for de novo consideration and adjudication, after affording the AO adequate opportunities of being heard in terms of Rule 46A(3) of the Rules for examination, verification and rebuttal of the said additional evidence put forth by the assessee. We hold and direct accordingly. - Decided in favour of revenue for statistical purposes.
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2017 (2) TMI 75
Unexplained expenditure u/s 69C - Held that:- Assessee had enclosed copies of account of the said parties appearing in his account books, copies of purchase invoices, copies of bank statement for payment to the parties, etc. At the time of hearing, the learned representative for the assessee has also referred to the Paper Book, wherein the relevant documents have also been placed. Under these circumstances, having regard to the material on record, it is not possible to uphold the charge of Assessing Officer that the purchases from the 7 parties in question are bogus. In the present case, the Assessing Officer has invoked Sec. 69C to treat the expenditure on purchases of ₹ 37,45,965/- as unexplained. So however, the assessee has demonstrated that the payments for such purchases have been made through account payee cheques for which there is no repudiation by the Assessing Officer thereby implying that the source of expenditure stands explained. In fact, the case of Assessing Officer is that the purchase transactions are “only accommodation entries and not really purchases”, thereby implying that as per the Assessing Officer assessee has not incurred such expenditure. To hold the transactions as mere accommodation entries and not real purchases is quite different from saying that the sources of expenditure for the purchases from the 7 parties in question have not been explained in the context of Sec. 69C of the Act. Therefore, invoking of Sec. 69C of the Act in the present case to treat the purchases of ₹ 37,45,965/- stated to have been made from the 7 parties in question is on a wrong footing. Thus, on this aspect also, assessee deserves to succeed.
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2017 (2) TMI 74
Disallowance made by AO u/s.40A(3) - necessity of business exigencies - Held that:- The payments in cash were necessitated due to business exigencies, to enable regular supplies from these vendors. The peculiarities of the business are such that certain brands are in greater demand as compared to others. To ensure regular supply of these high demand items, it is necessary that payments are made across the table to these parties and enable timely supply of stock of such items. The detailed submissions in respect of the necessity to make these payments were explained to the learned AO in the course of assessment proceedings and the same have been reproduced by the learned AO in his order. The transactions entered into by the assessee were also confirmed by the vendors ‘respectively, as also by their respective AOs in the course of proceedings under section 133 (6) of the Act. Therefore, the bonafide nature of the transaction is already established by account confirmations from the respective parties. I also found that all these payments were made on Saturday and Sunday when the banks were closed. Merely because entry in the books were shown in the next date, fact of payment having been made on Saturday and Sunday when the banks remain closed, cannot be denied. The Allahabad High Court in the case of CIT vs Raja Pal Automobiles (2009 (6) TMI 565 - ALLAHABAD HIGH COURT) had held that in case the nature of business, which indicates that it cannot be done solely by crossed cheque or bank draft and the payment is proven from bills and cash memos, exceptional circumstances could be inferred, when it could be entertained under the Rules, where it is genuine and the payee is identified. The assessee has declared more than 10% of net profit of its gross turn over, therefore, there is no justification for coming to the conclusion that by purchasing in cash, assessee has earned extra profit. In view of the peculiarity of the business and the genuineness of the payments, as decided by various judicial authorities, the additions under Section 40A(3) of the Act, is directed to be deleted. - Decided n favour of assessee
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2017 (2) TMI 73
Validity of assessment u/s 144 without issuing notice - best judgment assessment - Held that:- Revenue accepted findings of CIT(A) with regard to requirement of notice and did not challenge that. Once requirement of notice was held mandatory and this was surrendered by Revenue by not challenging the same before Tribunal, assessment made without giving notice under Section 142(1) of Act, 1961, was patently illegal. It could not have been assailed by Revenue before Tribunal in absence of any challenge to this findings of CIT(A) on ground no. 5. Tribunal has erred in law in not considering this aspect of the matter. We, therefore, answer question 1 in favour of Assessee and against Revenue
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2017 (2) TMI 72
Estimation of profit of 15% on the total alleged bogus purchases - seller parties were found to be Hawala Operators/ bogus bill providers - Held that:- Even it is presumed that the purchases are bogus and the assessee was not in a position to prove the existence of the suppliers admittedly, without purchases of the material, there cannot be any sale. Even otherwise, the Assessing Officer has not examined the aspect of sale. Even as per the provision of section 44AD of the Act, which is a special provision for computing profit & gains on business on presumptive basis, the profit is to be computed equal to 8% of the total turnover or gross receipt of the assessee. In the present appeal, the Ld. Commissioner of Income Tax (Appeal) has directed to adopt the profit at 15% of the alleged bogus purchases and no appeal has been filed by the assessee by accepting the order of the Ld. Commissioner of Income Tax (Appeal), therefore, in our view, the First Appellate Authority is quite justified to safeguard the interest of the Revenue, consequently, we find no infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal), his stand is affirmed, resulting into dismissal of appeals of the Revenue.
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2017 (2) TMI 71
TDS u/s 194C OR 194J - deductibility of the tax at source by the assessee to the payments made to M/s DBM Geotechnics Construction Private Limited - payments to contractors v/s payment in the nature of professional or technical services - Held that:- The assessee has placed on record Form 26A to contend that the amount received has been duly considered in the return of income filed by M/s DBM Geotechnics Construction Pvt. Ltd. and all taxes were duly paid by the said M/s DBM Geotechnics Construction Pvt. Ltd. to the Revenue . This contention of the assessee needs verification by the authorities below and we are inclined to set aside this issue to the file of the AO for verification and if the contention of the assesee are found to be correct, the AO shall grant relief keeping in view ratio of decision of Hon’ble Supreme Court in the case of Hindustan Coca-Cola Beverages Private Limited (2007 (8) TMI 12 - SUPREME COURT OF INDIA ). The assessee is directed to appear before the AO and file necessary evidences to support its contentions, as per our above direction
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2017 (2) TMI 70
Addition on account of expenditure of repair and renovations - revenue OR capital expenditure - Held that:- The authorities below had acted on the presumption that a part of the building had been demolished and that the items had actually been used for erection of a new structure. However, we find from the records of the case that for this conclusion, the Department could not bring on record any evidence to justify the stand that the expenditure was actually for erection of a new building or asset. We find that the contention of the assessee that it had undertaken major repairs to put the dilapidated columns, beams, roofs, etc., in its original position, which had become dangerous and unsafe for the workmen and hindered the normal operation of the business, was not controverted by the Departmental representative nor had any evidence to the contrary been produced before the Tribunal or the authorities below. Accordingly, we are of the view that the assessee had incurred the said expenditure only to preserve and maintain the existing asset and that the expenditure was not of a nature which brought into being a new asset or created a new advantage of an enduring nature. Consequently, the expenditure is revenue in nature and has to allow as deduction. We allow the claim and reverse the orders of the lower authorities. - Decided in favour of assessee
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2017 (2) TMI 69
Applicability of section 10A - disallowance holding that section 10A would apply only to the income that has been brought into India by way of convertible Foreign Exchange as no Foreign Exchange had been brought into India no deduction was granted under section 10A - Commissioner (Appeals) concluded that no additional fact have been brought on record by the assessee during appellate stage thus he had no reason to deviate from the finding of the Assessing Officer - Held that:- We are of the considered view that no material had been placed on record by ld AR for assessee much the less a working in support of its claim toward claim of deduction u/s 10A, pursuant to disallowance carried out by AO under section 41(1) of the Act. Still further no concrete material had been placed on record by ld AR to support the averments so raised, we therefore in all fairness restored the matter to the file of AO for fresh adjudication on this issue with regard to the entitlement of assessee under section 10A of the Act as per law. Needless to say during the course of setaside proceedings the AO shall afford reasonable opportunity to the assessee to produce all necessary documentary evidence in support of its claim under section 10 A. Thus this ground of appeal raised by assessee is allowed for statistical purposes.
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2017 (2) TMI 68
Refund of TDS - Rate of Withholding tax (TDS) - assessee deducting tax at 20% instead of 15% - payment of royalty - contention of the ld. AR for refunding 5% to the assessee-deductor (difference between 20% and 15%) - Held that:- The assessee has suo motu deducted tax at source on behalf of the payee and the payee, in turn, is entitled to claim credit for such tax deduction at source in its return of income. Ergo, it is manifest that Article 265 of the Constitution does not come into play in the circumstances as are extantly prevailing before us inasmuch as we are not determining the rightful amount of tax due on the income of the payee. The instant proceedings are in the hands of the deductor-payer and are not in any manner going to affect the tax liability of the payee as has been specifically provided for under section 190(2) of the Act that that deduction of tax at source does not prejudice the charge of tax on such income. In view of the foregoing discussion, we are of the considered opinion that the assessee’s claim for refund of tax deducted at source @ 5% on payments made to its parent company is devoid of any merits. The same is hereby jettisoned. Levy of surcharge and education cess - Held that:- In the context of compulsory requirement to furnish PAN of employees u/s 206AA, it becomes crystal clear that the CBDT has provided that: ‘Education cess @ 2% and secondary and higher education cess @1% is not to be deducted in case the tax is deducted at 20% u/s 206AA of the Act.’ Albeit, this part of the Circular is not relevant for the purposes of deduction of tax at source in terms of section 195, yet it throws some guidance on the non-levy of education cess and surcharge etc. in case tax is deducted in terms of section 206AA on the payments made to nonresidents. No contrary provision mandating the levy of surcharge and education cess on the rate of 20% u/s 206AA(1)(iii) has been brought to our notice by the ld. DR. In view of the foregoing discussion, we are satisfied that the ld. CIT(A) was not justified in upholding the action of the AO in levying the surcharge and education cess on the amount of tax deducted at source u/s 206AA(1)((iii) of the Act. The same is, therefore, directed to be deleted.
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2017 (2) TMI 67
Addition on account of flat sold in Balaji Avenues - AO rejected method of accounting on the ground that profit from one of its projects is not offered to tax in the year under consideration by observing that project was completed in the Assessment Year 2011-2012 only. - Held that:- From the record, we found that the possession of all flat owners of Balaji Avenue was not handed over by the assessee in the year under consideration and actual possession was handed over in financial year 2011-12 relevant to the assessment year 2012-2013. Corresponding income has also been offered by AO in the Assessment Year 2012-13. A clear finding to this effect has also been recorded by CIT(A). In view of this finding, CIT(A) was justified in deleting the addition of ₹ 58,97,073/- on account of flat sold in Balaji Avenues. Addition on account of large variation in the rates of sale of flats - Held that:- AO has made detailed working to find out cash component of sale price not accounted for. The AO has drawn Annexure-II and Annexure-III to find out sale price on the basis of date of booking of flat, flat number, area, agreement value, booking date, advance received etc., However, without controverting all these findings of the AO, CIT(A) after giving general observation deleted the addition. We do not find any merit in the order of CIT(A). Accordingly, the same is set aside and matter is restored back to him for deciding afresh after controverting the findings recorded by AO as discussed above.
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2017 (2) TMI 66
Disallowance of claim of deduction u/s. 80IB(10) - assessee has not completed the entire project before stipulated date i.e. 31st March, 2008, and the assessee has not produced completion certificate from the competent local authority - Held that:- As decided in assessee's own case for earlier AY assessee should not suffer for any administrative change with regard to applicability of building bye laws in particular area. The problem arose with regard to completion certificate by PMC by virtue of the fact that area of the land in question was excluded from PMC limits at relevant point of time as discussed above. In such peculiar conditions, the benefit bestowed on assessee should not be denied for no fault of the assessee. Such liberal interpretation should be used in favour of assessee when he is incapacitated in complying certain provisions for the reasons beyond his control. In case before us, problem arose due to the change of jurisdiction with regard to confusion of applicability of building bye laws because of change of jurisdiction by virtue of exclusion of land in question from PMC limits. The assessee should not suffer for the same. Under such circumstances, liberal interpretation should be used in favour of the assessee. It is settled legal position that law always gives remedy and law does wrong to no one. We are aware that provisions of section 80IB(10) suggest about only completion of construction and no adjective should be used alongwith word ‘completion’. This strict interpretation should be given in normal circumstances but facts before us are peculiar because of change of jurisdiction of land for the purpose of applicability of building bye laws. Assessee was incapacitated to obtain completion certificate from PMC because of exclusion of land in question from PMC limits which is beyond the control of the assessee. Assessee should not suffer for the same. - Decided in favour of assessee.
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Customs
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2017 (2) TMI 52
Maintainability of appeal - imposition of penalty on appellant and exporter - appeal dismissed on the pecuniary jurisdiction on the ground that penalty is only for a small amount of ₹ 25,000/- - Held that: - when payment of penalty has a bearing on the renewal of licence, the second respondent ought to have entertained the appeal and disposed it of on merits - the matter is remitted to the second respondent for fresh consideration. The second respondent is directed to entertain the appeal and dispose of the same on merits and in accordance with law - appeal restored - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 51
Enhancement of redemption fine and penalty - non-declaration of MRP on the packaged goods - importer claim that since there was no mala fide intention on the part of the appellant/importer to evade duty and since there is no revenue loss to the Government, redemption fine and penalty should be reduced - Held that: - The display of MRP on the packaged carton is for the knowledge of the public so that they are not taken for a ride by charging exorbitant amounts and cheated by unscrupulous elements. Therefore, there is no question of revenue loss to the Government, but it is only for the better knowledge of the public at large so that they are abreast of the price which they would be required to pay on purchase of a product. Therefore, the reasoning given by the Commissioner of Customs (Appeals) for reducing the redemption fine and penalty is not justifiable - The Tribunal had followed the rule of law in fixing the reasonable fine and penalty, which would be a deterrent for persons, who indulge in exploiting people - enhancement of fine and penalty justified.
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2017 (2) TMI 50
Conversion of shipping bill from duty drawback scheme to Advance Authorization Scheme - export of white refined sugar / raw sugar - conversion of shipping bill from one scheme to another scheme beyond three months from the date of Let Export Order (LEO) - amendment in the shipping bill to correct the mistake - It is submitted that at the time of execution of goods materials given in declaration will be verified. It is submitted that in the present case it was not verified since shipping bill was not filed under DEEC scheme and now the verification is not possible as the materials are not available. Making above submissions and relying upon the above decisions, it is requested to dismiss the present petition. Held that: - it is the case of the petitioner that though they imported the goods under the shipping bill under the Advance Authorization Scheme, through oversight and by mistake it was punched as duty drawback. Therefore, it is the case on behalf of the petitioner that subsequently when they requested to amend the bill of entry, the case would fall under Section 149 of the Custom Act, which does not provide any limitation to make application to amend the shipping bill and therefore, the authorities are not justified in rejecting the application on the ground that the same is not within the period of three months, relying upon board Circular No. 36 of 2010. For enabling an exporter to draw the benefits of any scheme, not only physical verification of the documents would be required but also verification of the goods of export as also their examination by the Customs was necessarily required to be done. It is required to be noted that what is considered at the time of DECC, the appropriate inquiry would be limited to the extent to satisfy the authority whether raw material which was imported has been used in manufacturing final product or not. So far as Advance Authorization Scheme is concerned, the appropriate authority is required to consider after holding appropriate inquiry that the raw material which was imported has only been used in the manufacture of final product and that final product has been actually exported. It cannot be said that the respondents have committed any error and / or illegality in rejecting the application of the petitioner considering the Board Circular No. 36 of 2010 - petition dismissed.
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2017 (2) TMI 49
Classification - valuation - import of old and used tyres - classified under CTH 40122090 or CTH 40122010? - whether the repairs made after clearance would effect the classification of goods? - Held that: - we are not concerned that after the clearance, the importers would make repairs on the tyres or get them retreaded. We cannot force the importers to do repairs or retreading on the same; therefore, the right classification for the remaining category of tyres, which cannot be used as such on the vehicles/autovehicles considering their current condition, would be under CTH No. 40122090, which is in the category of Other - there is no requirement of any import license for their import. The Customs (Revenue), therefore, cannot have Import Policy Objection for their clearance for home consumption. Valuation - rejection of transaction value - the goods have been purchased aboard, mainly as scrap - Held that: - where these goods are usable as such, there is clear-cut contravention of Import Policy issued by DGFT, Ministry of Commerce, Government Of India, but where the goods are non usable as such and finding classification in the category of Other under CTH No. 40122090, they do not contravene the Import Policy and are allowed import freely. However, both categories of these goods have been imported in all respective consignments, so these factors are to be given due weightage when the valuation is to be decided by the original adjudicating authority, as the matter deserves to be remanded to the original adjudicating authority for this purpose - matter on remand. Imposition of penalty - Held that: - the adjudicating authority has to keep the objective in mind that quantum of penalties and fines are imposed to such an extent so that in future such imports are strictly and seriously discouraged - separate penalties on partners or authorised signatories are not warranted, when penalties have been imposed on the appellant partnership/proprietor firms. In this regard, the original adjudicating authority is to decide on the quantum of penalties on the partners and authorised signatories after giving due consideration to the facts on record. Appeal allowed by way of remand.
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2017 (2) TMI 48
Confiscation of goods - imposition of redemption fine and penalty - “finished leather” - non-satisfaction of norms and conditions laid down in Public Notice No.21/2009-14 as to the type of finished leather as declared - misdeclaration - Held that: - the impugned order setting aside confiscation of goods and imposition of redemption fine and penalty only on the basis of apparent contradiction found by lower appellate authority between the two reports of CLRI is misconceived and an error-finding - At the same time, one of the export consignments not meeting the requisite standards cannot be attributed to intentional or obvious reasons on the part of the exporter. It could have very well been due to mistake or some negligence on their part - This being the case, there is case for reduction in redemption fine and penalty. Confiscation of the goods ordered by the original authority is restored - redemption fine imposed u/s 125 of the Customs Act, 1962 is reduced to ₹ 1,50,000/- and penalty of ₹ 2,50,000/- imposed on the appellant u/s 114 (ii) is also reduced to ₹ 1,00,000/-. Appeal disposed off - decided partly in favor of appellant.
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2017 (2) TMI 47
Imposition of penalty on CHA u/s 117 of the CA, 1962 - smuggling of red sanders, attempt to export - Held that: - the appellant made contacts with the members of the racket for a consideration of ₹ 10,000/- to attempt export of red sanders. It cannot be said that the appellant was not aware of the contents of the container and what the goods to be exported. He has no answer when the IE Code was found to be of some other person and there was mis-declaration in the exporting documents. Custom was defrauded - It may be noted that a person working in customs area is never an innocent since customs area is a sensitive place and they are responsible for each and every act they do in that area. Whether penalty should have been imposed u/s 114 of CA, 1962? - Held that: - active role of appellant in the attempted export is on record and that could not be ruled out by appellant demolishing fraudulent document filed by appellant using IE code of another. The penalty under Section 117 is stricter than Section 114 penalty. Any dereliction in duty by the CHA calls for penalty under the residuary provisions of Section 117 of Customs Act, 1962 - conscious involvement of the appellant with the smuggling racket is proved. Therefore there is no need to interfere with the order passed by learned adjudicating authority. Otherwise, that shall send a message to the society that infringement of law is rewarded with a bonus of waiver of penalty or a lesser penalty to perpetuate fraud. Appeal dismissed - decided against appellant-CHA.
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2017 (2) TMI 46
Exemption under N/N. 208/1981-Cus. dated 22.9.1981 - Disposable Solution Infusion sets - whether the goods are covered under Sl. No. 42 of Part B of the Notification? - Held that: - When the Bill of Entry is looked into that shows that the goods imported were lifesaving equipment namely intravenous cannulae and tubing for long time use - Disposable Solution Infusion sets. But Entry 42 (Part - B) deals with only disposable and non-disposable cannulae - The lifesaving equipment that was imported is totally out of scope of Entry 42 of Part B to the notification for the reason that there was no set of equipment intended to enjoy the exemption. It was only disposable and non-disposable cannulae that was the subject matter of exemption - “sets of the intravenous cannulae and tubing” are not meant for exemption. Burden of proof - Held that: - burden of proving eligibility to the exemption lies totally on the claimant - In absence of discharge of burden of proof by the appellant there is no scope to consider its claim of to the exemption. Appeal dismissed - decided against appellant.
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2017 (2) TMI 45
Imposition of joint and several duty liability and penalty on 8 appellants - Natural justice - rejection of declared value - whether the imposition of Duty liability on a group of persons jointly and severally, is justified? - Held that: - The CESTAT Delhi in the case of M/s Golden Tobacco Ltd.[2014 (3) TMI 983 - CESTAT NEW DELHI], hold that the demands cannot be confirmed severally and jointly against the assessee. Principles of natural justice demand that the noticee appellants have to be provided with the relevant documents/evidences, so that they could get the opportunity to give their explanation and defence themselves. Appeal allowed by way of remand.
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Corporate Laws
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2017 (2) TMI 41
Scheme of arrangement - Held that:- Upon considering the approval accorded by the members and creditors of the Petitioner Companies to the proposed Scheme, and the affidavits filed by the Regional Director, Northern Region, Ministry of Corporate Affairs and the Official Liquidator attached to this Court, whereby no objections have been raised to the proposed Scheme, there appears to be no impediment to the grant of sanction to the Scheme. Consequently, sanction is hereby granted to the Scheme under sections 391 and 394 of the Act. The Petitioner Companies will however, comply with the statutory requirements, in accordance with law. A certified copy of this order, sanctioning the Scheme, be filed with the ROC, within thirty (30) days of its receipt. Resultantly, it is hereby directed that the Petitioner Companies will comply with all provisions of the Scheme and, in particular, those which are referred to hereinabove. In any event, notwithstanding what has been stated on behalf of the Petitioner Companies hereinabove, the Transferee Company will file an undertaking with this Court, within two weeks from today, stating therein, that it will take over and defray all liabilities of the Transferor Company. It is also made clear, that the concerned Statutory Authority will be entitled to proceed against the Transferee Company qua any liability which it would have fastened onto the Transferor Company for the relevant period, and that, which may arise on account of the Scheme being sanctioned. The Transferor Company shall stand dissolved without being wound up.
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2017 (2) TMI 40
Scheme of arrangement - Held that:- Upon considering the approval accorded by the members and creditors of the Petitioners to the proposed Scheme, and the affidavits filed by the Regional Director, Northern Region, Ministry of Corporate Affairs and the Official Liquidator attached to this High Court, whereby no objections have been raised to the proposed Scheme, there appears to be no impediment to the grant of sanction to the Scheme. Consequently, sanction is hereby granted to the Scheme under section 391 and 394 of the Companies Act, 1956. The Petitioners will however, comply with the statutory requirements in accordance with law. A certified copy of the order, sanctioning the scheme, be filed with the ROC, within thirty (30) days of its receipt. Resultantly, it is hereby directed that the petitioners will comply with all provisions of the scheme and, in particular, those which are referred to hereinabove. Notwithstanding the above, if there is any deficiency found or, violation committed qua any enactment, statutory rule or regulation, the sanction granted by this court to the scheme will not come in the way of action being taken, albeit, in accordance with law, against the concerned persons, directors and officials of the petitioners. The transferor company shall stand dissolved without being wound up.
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Service Tax
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2017 (2) TMI 65
Scope of Management consultancy service - bringing a bundle of services under the head - section 65(65) of the Finance Act, 1994 - Held that: - When the provision of section 65A of the Finance Act, 1994 is looked into, it deals with the cluster of services to be compressed under one taxing entry having characteristics of that entry to attract all services of the cluster into its fold - Sub-clause (b) under sub-section (1) of section 65A provides classification of cluster of services under a specific taxing entry which gives the essential character of the services. Such an exercise was not carried out by the adjudicating authority and also there is no whisper in the show cause notice in this regard. Such legal infirmity in the show cause notice is incurable at the appellate stage. Unless the show cause notice exhibits the activity carried out, and the service which has essential character to embrace the cluster of service to its fold, it is difficult to comprehend to classify such services under an appropriate taxing entry. Reliance was placed in the appellant's own case CMS (I) OPERATIONS & MAINTENANCE CO. P. LTD. Versus C. CE, PONDICHERRY [2007 (5) TMI 74 - CESTAT, CHENNAI] - to bring a bundle of services under a service having essential character thereof, such essentiality requires critical examination under law. The essential character of service should also satisfy the condition of law - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 64
Construction contract - laying down long distance pipelines for transfer of drinking water in the State of Gujarat to a contract awarded to them by M/s Gujarat Water Supply and Sewerage Board (GWSSB) - whether taxable under the category of Commercial or Industrial Construction Services or not? - Held that: - this Tribunal in the cases of Larsen & Toubro Ltd. [2011 (1) TMI 188 - CESTAT, AHMEDABAD], and Dinesh Chandra Agarwal Infracon P. Ltd [2010 (8) TMI 54 - CESTAT, AHMEDABAD], considering the fact of lying down long distance pipelines for transfer drinking water in the State of Gujarat has held that services provided to M/s GWSSB, in lying down pipelines for supply of drinking water is not leviable to service tax under the said category of Commercial or Industrial Construction Service - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 63
Misconceived SCN - There was no security service at all provided by the appellant to BSNL. But Revenue issued a show cause notice alleging such service provided by the appellant - Held that: - When the show cause notice is read that gives an impression that Revenue has not at all enquired as to what was the service provided by appellant in terms of aforesaid work orders issued by BSNL. It was under mistake of facts - Had there been proper enquiry by Revenue as to the nature of the service provided by appellant, it could have resolved the dispute without issuing a misconceived SCN. Appreciating that the taxes have been paid before issue of show cause notice, there shall be no penalty - appeal allowed - decided in favor of appellant.
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Central Excise
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2017 (2) TMI 62
Restoration of Penalty - whether the penalty waived by the Ld. Commissioner (Appeals) on the ground that the duty along with interest was paid before the issuance of SCN, is justified? Held that: - from the various judgments of the Hon'ble Supreme Court and the High Court, it was ruled that only because duty and interest paid before issuance of show cause notice, penalty of Section 11AC cannot be waived - Ld. Commissioner (Appeals) has not examined whether there is revenue neutrality or there is any suppression of fact on the part of the appellant. Therefore the matter needs to be reconsidered by the Commissioner (Appeals) - appeal allowed by way of remand.
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2017 (2) TMI 61
Neither the adjudication order nor the appellate order makes any head or tail of the issue. Therefore, matter is remanded to the appellate authority to bring the issue precisely to the public record and order passed in accordance with law - the law expects the appellate authority to discharge his duty in the manner required by law. The said expectation of law is embodied in section 35A(4) of Central Excise Act, 1944. Law is well settled that public authority should pass public order publicly for the judicial scrutiny. The present order failing to meet judicial scrutiny for its legal infirmity, deserves to be remanded for rehearing and passing appropriate order in accordance with law - appeal is remanded to appellate authority.
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2017 (2) TMI 60
Reversal of Cenvat Credit - Write off of certain slow and non-moving stock of raw materials and finished goods - recovery of credit involved on these goods on the ground that when such value of inputs or capital goods, on which cenvat credit has been taken, have been written off from the books of accounts fully or partially, then an amount equal to the cenvat credit in respect of such goods is required to be paid by the appellant - demand of interest and penalty - Held that: - It is not disputed that period of dispute is prior to 1.3.2011. It is also seen that balance sheet entries clearly indicate provision has been made for slow moving items, doubtful items and not as items fully written off. This being the case, the entry in question will have to be considered as partial write off only and not as an entry for full write off. For the period prior to 1.3.2011, provision has been made for payment of equal amount of cenvat credit of value of inputs or capital goods only pertaining to those which were written off fully. Only after 1.3.2011, payment has been required in respect of both partial write off or full write off. Recovery of appropriate interest is restricted to ₹ 8,70,183/- only. Penalty imposed under Section 15 of CCR 2004 read with Section 11AC ibid is set aside - appeal disposed off - decided partially in favor of assessee.
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2017 (2) TMI 59
Valuation - MRP based valuation - inclusion of value of accessories of Kenstar Food Processors cleared separately in separate packages to the purchasers - It is contention that what they have cleared as Kenstar Food Processors is a self-contained electric motor having the functions of mixer grinder with additional facility of food processor along with attachments, hence subjected to MRP based assessment. But, when Kenstar Food Processors accessories are cleared, in a separate package, it is without any self-contained electric motor, hence, the same is subjected to assessment under Section 4 of CEA, 1944 - Rule 26 of Central Excise Rules,1944 - Circular No.625/16/02-CX dated 28.2.202 Held that: - On a plain reading of the aforesaid provision it reveals that Section 4A would be applicable to manufactured goods chargeable to ad valorem rate of duty and the main condition necessary for attracting the said provision is that the goods specified thereunder, is required under the provisions of Standards of Weights and Measurement Act, 1976 or Rules made there under to declare on the package thereof, the retail sale price of such goods - We are of the view that the requirement of affixing MRP on the retail package of Kenstar Food Processors Accessories be referred to Metrology Department seeking their opinion as to whether the appellants are required to affix MRP on the package containing Kenstar Foods Processors Accessories when the Kenstar Food Processors and the Accessories are cleared in separate packages. In the result, the impugned Order is set aside and the appeals are remanded to the ld. Commissioner for deciding the issue afresh after obtaining the necessary opinion from the Legal Metrology Department in this regard.
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2017 (2) TMI 58
Reversal of Cenvat credit - Notification No.10/1997 dated 01.03.1997 - Held that: - There is no dispute about the fact that University of Horticulture Sciences is covered by the said expression and thus the good supplied to the said university would get covered by the Notification in question - When the issue was only limited to the entitlement of exemption available to the appellant – assessee or not, the Tribunal ought to have limited its judicial scrutin y to that extent only. The Tribunal Could have examined the aspects only in two contingencies. (1) if there was any cross appeal by the Department, which was not there; and (2) such aspects was also examined by the first authority, which had issued the show cause notice - In our view, the observations of the Tribunal were beyond the subject matter of the appeal and could be said as exceeding the power of the Tribunal, more particularly, when there was no cross appeal by the Department. It further appears that the Tribunal did not only relegate the authority to examine the said aspects but has made a concluding observations that as a consequence of the exemption available, the assessee would not be entitled to the cenvat credit of duty paid on various inputs used in the manufacture of DG Sets - If the matter is to be examined limited to the question formulated, it can be said that the aforesaid observations made by the Tribunal are exceeding the scope of the appeal - Decided in favor of the assessee.
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2017 (2) TMI 57
Refund claim - time bar - Whether, on the facts and circumstances of the case, the Appellate Tribunal is right in allowing the refund of duty which was not paid under protest, but paid voluntarily, by the respondent after issuance of show-cause notice by the department? - Held that: - the duty has been refunded at the appellate stage. Thus, the date of claim would have to partake to the original date and not from the subsequent date. Thus, the view that the claim is a time barred one is not correct, insofar as the claim should be taken to the original date and not to the subsequent date. In this view of the matter, the refund has been correctly granted and we confirm the order of the Tribunal, but on a different aspect - appeal dismissed - decided against Revenue.
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2017 (2) TMI 56
Valuation - deduction of trade discount from the invoices issued to the sale agent - Adjudicating authority disallowed discount given by the appellant to the sales agent is nothing but commission - Held that: - even if these discounts offered by the appellant to the sales agent in a transaction on sale of principal to principal basis is towards rendering of certain services which at the most can be called as after sale services - reliance placed in the case of TVS Motors Co. Ltd. [2015 (12) TMI 874 - SUPREME COURT], where it was held that any amounts paid for after sale services cannot be included in the assessable value either pre or post 01.07.2000 as per the provisions of Section 4 of Central Excise Act, 1944. In the case in hand there is no dispute as to the fact that the appellant raises invoice on the sales agent indicating trade discount 10% to 20% and discharges the duty liability. There is nothing on record to show that the sales agents in respect of 2nd set of transactions has paid any further amount in respect of these transactions to appellant. In the absence of any evidence, each and every sales invoices raised by the appellant could be a separate transaction and Central Excise duty is payable on the amounts received for such invoices. The demand of duty as raised by the various impugned orders are unsustainable and liable to be set aside - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 55
100% EOU - CENVAT credit - renting of immovable property located at Mumbai - denial on the ground that the service tax paid pertains to the rental charges of immovable property situated at Mumbai, housing the corporate office of the assessee. These premises are not connected to the manufacturing activity and clearance of the finished goods - Held that: - the appellants are entitled to CENVAT credit of service tax paid on rent of Mumbai premises as the said premises is directly related to the manufacturing activity - denial of CENVAT credit in respect of service tax paid on renting of immovable property located in Mumbai is wrong - appeal allowed - decided in favor of assessee.
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2017 (2) TMI 54
100% EOU - refund claim - input services or not? - Business Support Service - Information Technology service - Management, Maintenance and Repair service - legal consultancy service - Management Consultancy service - denial on the ground of nexus - Held that: - all the disputed services fall in the definition of input service as contained in Rule 2(l) of CCR, 2004 - the impugned orders are set aside by allowing the appeals of the appellant subject to verification of the document by the adjudicating authority before sanctioning the refund - appeal allowed - matter on remand for limited purpose of verification of document.
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2017 (2) TMI 53
100% EOU - rejection of refund claim - time bar - the learned Commissioner (A) has remanded the case back to the original authority for re-quantification and the original authority has not quantified or shown the actual amount of refund which is liable for rejection on account of time bar - Held that: - this case needs to be remanded back to the original authority to re-compute the amount of refund relating to the period which is hit by limitation of time i.e., from 1.10.2009 to 28.10.2009 - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2017 (2) TMI 44
Refund claim - revision of assessment - natural justice - Held that: - reliance placed in the case of SRC Projects Private Limited Versus Commissioner of Commercial Taxes, Chennai and another [2008 (9) TMI 914 - MADRAS HIGH COURT], where it was held that the impugned order by way of revision of assessment should not have been passed without giving the assessee an opportunity of personal hearing. The respondent should have given an opportunity of being heard to the petitioner before passing the revision of assessment order and in absence of the same, this Court has no hesitation to hold that the order impugned is not a sustainable one and hence the impugned order is quashed and the matter is remanded back to the respondent for reassessment - appeal allowed by way of remand.
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2017 (2) TMI 43
Rectification of mistake - whether the provisional refund can be rejected merely on the ground that the return and the revised return contain the error? - Held that: - Although the impugned order computes the refund at ₹ 85,56,547/-, we have refrained from passing a mandatory order directing the respondents to refund the balance amount also at the provisional stage in the event of there being any other circumstances which prevents the petitioner from being paid the entire amount towards provisional refund. It is clarified that the mere fact that the return and the revised return contain the alleged error would not be a ground for rejecting the same - limiting the amount of refund under sub section (3) of Section 20 of the Haryana Value Added Tax Act, 2003, allegedly “in interest of revenue” would be arbitrary and not reasonable. There are no reasons for this ground “in interest of revenue” - the respondent shall pass a fresh order for provisional refund - petition allowed by way of remand.
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2017 (2) TMI 42
Exemption in luxury and sales tax as granted by the Government Resolution dated 8th July, 1999 - the petitioner holds, controls and manages a tourism unit in 'B' class category - whether the petitioner would be classified under 'B' class category or 'A' class category? Held that: - The units were categorized on the basis of their investment and that is how the ceiling limit in regard to exemption was fixed. There has to be, therefore, a correlation as between the location, the investment and other factors peculiar as far as the petitioner is concerned. The petitioner was under TIS, 1999, but its investment was under TIS 1993. The new Tourism Policy was thus the triggering point and that is how the State decided to notify its Package Scheme of Incentives. The petitioner's request for conversion also cannot be considered as these two schemes are separate and their features are not identical. Similar is the position with regard to their application - when there is a valid explanation placed on record for the classification or distinction that is made and it entirely being a policy decision, we see no reason to grant any relief to the petitioner - petition dismissed - decided against petitioner.
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