Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 6, 2015
Case Laws in this Newsletter:
Income Tax
Customs
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
TMI SMS
Articles
News
Highlights / Catch Notes
Income Tax
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Provision for payment made on behalf of subsidiary company claimed as expense - Even if the version of the CIT(A) taken as correct, then also, the loss being crystallized on 3.3.1997, the same was in the AY 1997-98 and not during the assessment year under consideration i.e. AY 1998-99 - AT
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Disallowance of interest - Holding subsidiary companies - If interest so paid is allowed, then it would be indirect benefit given by the assessee company to the FOPL and the same amounts to diversion of income of the assessee company which is not permissible - AT
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Non deduction of TDS u/s 194J - Whether certificate issued by the CAs would be sufficient compliance for the purpose of taxes paid by the deductees - Revenue tries to make a distinction between an auditor and a C.A. which is not correct - AT
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Non deduction of TDS u/s 194J - payments made to various policy holders, as well as to various hospitals on behalf of the insurance companies - no element of profit embedded in the amount in question - TDS not required - AT
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Renting of terrace for installation of mobile antenna - taxable as income from House Property - deduction of 30% u/s 24(a) allowed - AT
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Method of computation of interest u/s 244A - AO directed to calculate interest due to the assessee without reducing the interest u/s 244A, which is part of the refund earlier granted from the refund due - AT
Customs
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Valuation of goods - The television programmes have been aired from Singapore - from whatever angle one may look at the transaction, there is nothing on record to show that the remittance made to the foreign entity had anything to do with the goods supplied. - AT
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Valuation of goods - Enhancement in value of goods - adjudicating authority mis-directed himself in including the value of a taxable service rendered in India in the value of the goods imported. - AT
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Import of hospital equipments - import by third party - In any case it is not the case of the Revenue that the equipments imported have not been used by the Government hospitals and conditions of end use have been followed in any manner - benefit of exemption allowed - AT
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Denial of “deemed export” benefit - Department having clarified and interpreted its policy for the first time in March 2011, it could not have relied upon such clarification to reopen the concluded cases or review them as attempted. - HC
Service Tax
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Issuance of wrong registration certificate ST-2 as service provider instead of Input Service Distributor (ISD) - demand of duty and levy of penalty - matter remanded back to reconsider the facts and evidences - AT
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Supply of tangible goods - applicant acquired the aircraft on the basis of the lease agreement, which is the legal possession. - as long as the transaction is treated as deemed same, service cannot be levied - stay granted - AT
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Cenvat Credit - Denial of input service credit in the hands of Job worker who is availing the benefit of exemption notification no. 8/2005 ST and 214/86 CE and did not pay Central Excise duty and service tax on the job work goods - credit allowed - AT
Central Excise
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Cenvat / MODVAT Credit - All this would indicate as to how the makers and framers of the Rule did not intend to deny MODVAT credit simply because the inputs were not received after processing or job work within 180 days. The period of 180 days cannot be held to be mandatory. - HC
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Waiver of pre deposit - Extension of stay order - The waiver of pre-deposit. to the extent directed by CESTAT, will be valid until the final disposal of the appeal - HC
Case Laws:
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Income Tax
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2015 (2) TMI 171
Assessment on substantive basis - Bharat Trust was a specific trust - ITAT held that share income of the assessee as a beneficiary from M/s. Bharat Trust / Navbharat Trust, Norma Trust should be assessed on substantive basis ? - Held that:- In similar matter, this Court, in The CIT vs. Santokben Kanjibhai Patel [2008 (9) TMI 917 - GUJARAT HIGH COURT] has held that the Tribunal was not right in law and on facts in holding that the share income of the assessee as beneficiary from Bharat Trust/Navbharat Trust, Norma Trust should be assessed on substantive basis and it was submitted that the matter be remanded to the Tribunal to reconsider the issue in light of the decision of this Court. - Decided in favour of revenue for statistical purposes.
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2015 (2) TMI 170
Revision u/s 263 - car expenses where the Assessing Officer had disallowed expenses varying 40% to 80% - Held that:- The Assessing Officer has made the aforesaid additions after referring to the facts in each of the assessment years involved and even considered the acquisition of new cars in each of the assessment years and thereafter, worked out the disallowance. The Assessing Officer also called for the details from the assessee i.e. log book maintained and also to justify whether the expenditure had been incurred for the purposes of business. In the absence of any evidence furnished by the assessee, the Assessing Officer made the disallowance on proportionate basis. Such disallowance made by the Assessing Officer cannot be invalid as the carwise details were not available, the Assessing Officer had no recourse but to resort to estimation to disallow the expenses, which were not relatable to carrying out of the business of the assessee Trust. - Decided in favour of assessee. Car expenses was the acquisition of cars from year to year - Held that:- Where the Commissioner on the perusal of the record, was of the opinion that the estimate made by the Assessing Officer was on the lower side and should have been estimated at a figure higher than the one determined by the Assessing Officer, does not empower the Commissioner to re-examine the accounts and re-determine the estimation in the hands of the assessee, where the Assessing Officer during assessment proceedings had made estimated disallowance.- Decided in favour of assessee. Allowance of depreciation - Held that:- Perusal of the assessment order reflects that the Assessing Officer has not allowed the claim of depreciation to the assessee and had reworked out the depreciation on the assets in the hands of the assessee, as per the special audit report. In view thereof, where the Assessing Officer had not allowed the claim of the assessee on account of depreciation on assets, we find no merit in the order of Commissioner in exercising the jurisdiction under section 263 of the Act.- Decided in favour of assessee. Depreciation on hospital building - Held that:- Assessee had claimed depreciation on building valued at ₹ 21.29 crores, whereas the Assessing Officer had allowed the depreciation only on the value of ₹ 18.89 crores. The un-vouched expenses, if any, had been considered by the Assessing Officer and accordingly, we find no merit in the order of Commissioner in holding the assessment order to be prejudicial to the interest of Revenue.- Decided in favour of assessee. Unsecured loans raised by the assessee and interest thereon - Held that:- AO had disallowed the loans relating to certain persons. However, interest paid on such loans was not disallowed by the Assessing Officer. This aspect of non-disallowance of interest relatable to loans, which had not been allowed by the Assessing Officer makes the order of Assessing Officer prejudicial to the interest of Revenue. We uphold the exercise of jurisdiction under section 263 of the Act by the Commissioner on this aspect.- Decided against assessee. Registration under section 12A - benefits of sections 11 and 12 denied - Held that:- Once the Assessing Officer had come to a finding that the assessee was not entitled to the exemptions under sections 11 and 12 of the Act as it had no registration under section 12A of the Act, the violation of provisions of section 13 of the Act becomes immaterial as the said provisions of the Act are not applicable while computing income in normal course of business. Accordingly, we find no merit in the observations of the Commissioner in holding the assessment order to be prejudicial to the interest of Revenue and we reverse the same.- Decided in favour of assessee. Unvouched revenue and capital expenditure disallowed - Held that:- The Commissioner was of the view that the Assessing Officer should have made proper enquiries to prove or link the cheque by means of which the payment was made for the expenses while exercising the power under section 263 of the Act. The Commissioner cannot step into the shows of Assessing Officer, who while conducting the assessment proceedings, had made certain enquiries and had come to the finding that the said expenses were to be disallowed. Once the expenses were disallowed by the Assessing Officer, we find no merit in the order of Commissioner in holding the same to be erroneous and prejudicial to the interest of Revenue - Decided in favour of assessee. Payment of advertisement expenses and telephone expenses of the Trustees and their relations - Held that:- The Commissioner having failed to come to the conclusion as to how the disallowance made by the Assessing Officer makes the order prejudicial to the interest of Revenue and merely setting aside the matter to the Assessing Officer for making further enquiries had exceeded his jurisdiction in exercise of the powers under section 263 of the Act. Where the Commissioner has failed to record reasons for holding the order to be erroneous, then the exercise of such powers by the Commissioner are un-sustainable in law. - Decided in favour of assessee.
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2015 (2) TMI 169
Addition on account of disallowance of vehicle expenses - Held that:- In assessment year 2008-09, the issue of disallowance of vehicle expenses was not in dispute and Ld. CIT(A) in its order dated 21.03.2012 has not adjudicated on this issue. Therefore, reliance made by Ld. CIT(A) in his order for Assessment Year 2008-09 is misplaced. However, we find that during assessment proceedings, the assessee had furnished complete information regarding vehicle expenses as noted by A.O. in para 3 and A.O. did not find any discrepancy in the same. He just disallowed 10% of expenses on ad-hoc basis which is not as per law as A.O. had not made any adverse comments on the details of expenses. - Decided Against revenue Addition on account of difference in balances - Held that:- CIT(A) has partly allowed the relief out of addition u/s 41(1) of the Act in view of balance confirmations filed by assessee relating to amount of ₹ 66,02,696/-. Since the addition u/s 41(1) was made only on the basis of non filing of balance confirmations, the relief allowed by Ld. CIT(A) on account of receipt of balance confirmation is justified and we are in agreement with the findings of Ld. CIT(A). - Decided Against revenue Balance confirmation - Addition confirmed by Ld. CIT(A) for an amount of ₹ 10,94,714/- - Held that:- CIT(A) had made the confirmation of addition on the basis of remand report of A.O. wherein he had alleged that the explanation of assessee was after thought. A.O. did not furnish any adverse comments on the explanation of assessee. Ld. A.R. had argued that reporting of lower profits in Assessment Year 2009-10 by an amount of ₹ 9,88,887/- has been compensated in Assessment Year 2010-2011 by an equal amount and since the tax rates in both yeas were same, there is no tax loss to the Revenue. W find that assessee has though filed copy of accounts of said party showing reversal of such entry but has not filed any evidence to demonstrate that the contra entry has been reduced from purchases in succeeding year. Thus this ground of assessee’s appeal needs to be readjudicated by A.O. - Decided in favour of assessee for statistical purposes. Addition on account of sundry creditors u/s 41(1) - Addition u/s 41(1) on account of unsecured loan - Held that:- The case laws relied by A.O. for making additions u/s 41(1) are distinguishable on the facts and circumstances. In the case of T V Sundram Iiyengar & Sons [1996 (9) TMI 1 - SUPREME Court], the assessee itself had credited to its p & L account. The unclaimed receipts which is not the case in the present appeal. Similarly in Phoenix Miles Ltd. [2002 (2) TMI 1313 - ITAT MUMBAI] the assessee had credited to its P & L account unclaimed outstanding balances therefore, this case law is also wrongly relied upon by A.O. Therefore, keeping in view all facts and circumstances’ and keeping in view the judicial precedents relied upon by Ld. A.R., the addition u/s 41(1) is not warranted.- Decided in favour of assessee
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2015 (2) TMI 168
Income from house property - inclusion of notional interest on the interest free security deposit received from the licencee of the house property, for the purpose of computing the ALV of the said property - Held that:- It is a settled proposition of law by virtue of the judgment in the case of J.K. Investors [2000 (6) TMI 9 - BOMBAY High Court] and Tip Top Typography [2014 (8) TMI 356 - BOMBAY HIGH COURT] that the notional interest should not be included while computing the income from house property under section 23(1)(a) and (b) of the Act. It is also a settled proposition that actual rent received or receivable by the land lord constitutes a reliable evidence to ascertain the properties’ capacity to earn the rent in open market. The forms should be accepted unless the Assessing Officer has contrary evidence to suggest the deflation of rental income by extraneous consideration. Also when the interest income earned by the assessee on the said security deposits deposited with the banks the same is offered to tax, the inclusion of such interest on the said deposits for the purpose of ALV amounts to double taxation. - Decided in favour of the assessee. Deduction representing the maintenance expenses paid to the societies - Held that:- On perusal of the decision of the Tribunal in the case of Aloo Bejan Daver (2011 (4) TMI 1277 - ITAT MUMBAI) we find it is categorically mentioned that the "maintenance charges" are to be deducted from the gross rent to arrive at the ALV of the property. For this proposition, the Tribunal relied on the decision of the Coordinate Bench in the case of Varma Family Trust ( 1983 (10) TMI 79 - ITAT BOMBAY-A) as well as the decision of the ITAT in the case of Sharmilla Tagore vs. JCIT (2004 (6) TMI 591 - ITAT MUMBAI). This order of the Tribunal has referred to the jurisdictional High Court judgment in the case of J.K. Investors (Bombay) Ltd [ 2000 (6) TMI 9 - BOMBAY High Court]. The said judgment of Hon’ble High Court is relevant for exclusion of outgoings, being liabilities of the assessee in view of section 23(1)(b) of the Act. -Decided in faaour of assessee. Applicability of the provisions of section 145A to the unutilized MODVAT - Held that:- The word "inventory" shall include opening stock as well as closing stock. ssue was decided in favour of the assessee and the Assessing Officer was directed by the ITATto recomputed the profits after making adjustments with reference to opening stock, purchases as well as the sales. - Decided in favour of assessee for statistical purposes. Disallowance of lease rentals - Held that:- despite few adjustments to the leased agreement relevant for the AY under consideration, the essential facts relating to the ownership of the vehicle i.e., the ownership remains the lessor and therefore, the lease in question constitutes operating lease. Therefore, the lease rentals paid by the assessee constitutes an allowable expenditure.- Decided in favour of assessee. Disallowance with regard to the employees contribution to PF and ESIC - claim allowed by CIT(A) - Held that:- It is a settled position of the issue that the payments made by the assessee towards PF and ESIC are eligible for deduction if the same have been made on or before the due date of filing of return of income. As well the due date includes the grace period. Undisputed fact is that the assessee made the payments within the said grace period prior to the due date filing of the return of income. Therefore, we find no infirmity in the decision of the CIT (A) in allowing the assessee’s appeal. - Decided against revenue.
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2015 (2) TMI 167
Provision for payment made on behalf of subsidiary company claimed as expense - assessee had a fully owned subsidiary company styled as “Gujarat Narmada Auto Limited” which was engaged in the manufacture of two/ three wheelers - CIT(A) allowed the claim - Held that:- Even if the version of the CIT(A) taken as correct, then also, the loss being crystallized on 3.3.1997, the same was in the Asstt.Year 1997-98 and not during the assessment year under consideration i.e. Asstt.Year 1998-99. Therefore, the CIT(A) was not justified in deleting the disallowance on the above count. Further, no material was brought on before us to show that the assessee’s liability to make payment of ₹ 3.50 crores was crystallized during the under consideration and that no part of the payments were also made during the year under consideration. Therefore, in our considered view, the CIT(A) was not justified in deleting the disallowance made by the AO. We, therefore, set aside the order of the CIT(A) in respect of the issue under consideration and restore back the order of the AO. - Decided in favour of revenue. Disallowance of interest on interest free loans / advances given by the assessee to its subsidiaries and associate concerns - Held that:- AO has disallowed interest expenditure on advances given to the sister concern on the ground that the borrowed funds were utilized for business purpose by the assessee by advancing the interest free advance to the sister concerns. On appeal the CIT(A) had deleted the disallowance by following his order for Asstt.Year 2007-08. We find that the order of the CIT(A) for Asstt.Year 1997-98 was appealed by the Revenue, and the Tribunal confirmed the order of the CIT(A) deleting the disallowance of interest expenditure. No distinguishing features could be pointed out by the DR. It is also observed that in the years under appeal also, advances were given to the same parties. Thus, the facts being identical, respectfully following the precedents, we confirm the order of the CIT(A), and the grounds of the appeal of the Revenue in all the years under appeal are dismissed. - Decided in favour of assessee.
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2015 (2) TMI 166
Turnover estimation - Held that:- Assessee has not disputed the fact that one more outlet was opened during the year under consideration as well as distributorship was given for Kalol and Gandhinagar during the year under consideration. The assessee could not give any cogent reason as to why its sales were lesser than the sales of the preceding year, when one more outlets was opened and two franchisees were added by the assessee. Further, the CIT(A) has estimated the sales only on the basis of the sales of the preceding year without considering the change of the fact of the year under consideration to the extent of opening of one more outlets and giving two distributorship - one at Kalol and other at Gandhinagar. In the above facts and circumstances of the case, in our considered view, the AO is fully justified in estimating the turnover of the assessee at ₹ 5.00 crores (Rupees Five Crores). We, therefore, set aside the order of the CIT(A) on this issue and restore the order of the AO on this issue. - Decided in favour of revenue. Disallowance u/s.40(a)(ia) - non-deduction of TDS on the payment made for packing material - Held that:- The purchases on account of plastic trays, cups, spoons and plastic dishes etc. which did not carry the logo of the assessee and were in the nature of purchases. The purchases were of standardized material available in market. These submissions of the assessee could not be controverted by the Revenue by bringing any material evidence on record. We are, therefore, of the view that the purchases made by the assessee from the aforesaid three parties cannot be considered as being a case of contract which would require deduction of TDS u/s 194C of the Act and, therefore, no disallowance u/s 40(a) (ia) of the Act is called for. -Decided in fvaour of assessee. Late remittance of employees contribution to PF - disallowance confirmed - Held that:- ssue now stands covered against the assessee by the decision of the Hon’ble Gujarat High Court in the case of Commissioner of Income-tax-II Vs. Gujarat State Road Transport Corporation, (2014 (1) TMI 502 - GUJARAT HIGH COURT) wherein it was held that employees’ contribution to provident fund and/or state insurance fund not credited by the assessee to the accounts of the employees in relevant funds within the due dates as specified in section 36(1)(va) of the Act, the amounts are not deductible. - Decided against assessee. G.P. Estimation - Held that:- No distinguishing facts have been pointed out during the year by the DR, we, respectfully following the order of the Tribunal for Asstt.Year 2006- 07, estimate the GP of the assessee at 29% - Decided against revenue. Addition being prior period sales-tax expenses - CIT(A) deleted the disallowance - Held that:- DR could not point out any specific error in the findings of the CIT(A). He also could not controvert the findings of the CIT(A) by bringing any positive material on record to show that the liability for sales tax had not crystallized during the year under consideration. We, therefore, do not find any good reason to interfere with the order of the CIT(A) on this issue - Decided against revenue. Depreciation on motor vehicle - CIT(A) deleted the disallowance - Held that:- CIT(A) in allowing depreciation on vehicles purchased in the name of director was confirmed in appeal by the Tribunal in the Asstt.Year 2006-07 - Decided against revenue. Disallowance u/s.40A(3) - CIT(A) deleted the disallowance - Held that:- CIT(A) deleted the disallowance by observing that as the book results of the assessee was rejected, and the AO estimated the sales and GP ratio, no separate addition was warranted. The CIT(A) further observed that the assessee has furnished evidence that at the first instance, the payments were made through account payee cheques, which were dishonoured and to avoid disconnection of the electricity, which would have resulted in huge losses in view of nature of business of the assessee, i.e. the business of manufacturing of food items and sweets, which require continuous flow of electricity, as any failure of power supply or disconnection thereof would result in contamination of food and sweets in absence of proper refrigeration, the assessee was compelled to take the payment of the bills immediately in cash to avoid disconnection by the electricity company. Therefore, the assessee had reasonable cause for making the payment of electricity bills in cash. - Decided against revenue.
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2015 (2) TMI 165
Disallowance on account of interest paid to M/s Fab India Overseas Private Limited - Holding subsidiary companies - assessee is subsidiary of FabIndia Overseas Pvt. Ltd.[FOPL] - CIT(A) confirmed disallowance - Held that:- Admittedly the assessee company received loan of ₹ 2,52,89,149 from FOPL and at the same time FOPL was a debtor of ₹ 5,26,61,151 as per balance sheet of the assessee submitted before the AO. Although the assessee company has explained that the unsecured loan was necessary for the smooth operation of the assessee company which was also taken on lower rate of interest, but when the amount of sales is more than double of unsecured loan, then the transaction of unsecured loan and transaction of sale with the same company may be seen by the intention of the parties but ultimate purchaser of the product of the company is a debtor to the extent of ₹ 5.26 crore as against the loan amount of ₹ 5.52 crore, then interest on such loan cannot be allowed. We are in agreement with the conclusion of the CIT(A) that even after adjusting the loan amount against the sundry debtor, the assessee company is still to receive ₹ 2,73,72,010 from FOPL, therefore, interest on such loan cannot be allowed and expenditure claimed by the assessee company on interest is not allowable. If interest so paid is allowed, then it would be indirect benefit given by the assessee company to the FOPL and the same amounts to diversion of income of the assessee company which is not permissible. In view of above and on the basis of foregoing discussion, we uphold the action of the AO and we are unable to see any ambiguity, perversity or any other valid reason to interfere with the findings of the CIT(A) on the impugned addition on this point. - Decided against assessee. Disallowance of rent paid to M/s Fabindia Overseas Pvt. Ltd. - CIT(A) deleted disallowance - Held that:- AO made disallowance of 2/3 amount of rent by holding that the assessee do not have documentary evidence to prove that the premises was even hired on rent from the owner of the buildings or from its own group company M/s Fabindia Overseas Pvt. Ltd. The CIT(A) granted relief by observing and noticing certain facts revealed from certain documents. At the same time we also note that theses documents require proper examination and verification at the end of the AO to evaluate the issue as to whether the assessee incurred expenditure on rent wholly and exclusively for the purpose of its business . Hence we deem it just and proper to restore the matter to the file of the AO with this direction that the AO shall adjudicate the issue afresh by affording due opportunity of hearing for the assessee. -Decided in fvaour of revenue for statistical purposes. Disallowance of professional charges - CIT(A) deleted disallowance - Held that:- The AO is obviously empowered to examine and verify the claim of the assessee but without bringing out any adverse material, it would he held that the claim of the assessee was not incurred or professional charges to AMFPL were not paid wholly and exclusively for the purpose of business of the assessee. We are unable to see any infirmity, perversity or any other valid reason to interfere with the impugned order which granted relief for the assessee on the issue. On the basis of foregoing discussion, we reach to a conclusion that the AO made disallowance of professional charges without any basis which was rightly deleted by the CIT(A) on justified and cogent reasons and we uphold the impugned order on this issue. - Decided against revenue.
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2015 (2) TMI 164
Non deduction of TDS u/s 194J - payments made to various policy holders, as well as to various hospitals on behalf of the insurance companies - Held that:- It is nobody’s case that a patient or a policy holder would be covered within the term “business or profession”. A policy holder has not received the payment for rendering services in the course of carrying on medical profession or other professions. The patient is the receiver of the service but not a professional service provider. Be it as it may, what is paid to the patient or a policy holder is reimbursement of the cost incurred. Hence there is no element of profit embedded in the amount in question. Under those circumstances, when there is no income element in the sum of payment the question of Tax being deducted at source does not arise. Whether certificate issued by the CAs would be sufficient compliance for the purpose of taxes paid by the deductees. - Form No.26A of the IT Rules specify that the certificate should be given by a CA - Held that:- The Revenue tries to make a distinction between an auditor and a C.A. Form no.26A, which is a form for furnishing Accountants Certificate under the First Proviso to Sub Section of S.201 of the Act refers to a C.A. within the meaning of the Chartered Accountants Act, 1949. The Circular nowhere specify that the Certificate should be given by the statutory auditor of the payee hospitals. The purpose is to verify whether the payee has paid the tax or not. In our view such interpretation sought to be placed by the revenue is unwarranted. On facts, the AO has not found any defect during the verifications of these Certificates given by the C.A. of the payee hospitals/nursing homes. There is no finding given by the AO that these CAS are not the auditors of the payees or nursing homes, nor that this is not sufficient evidence for the purpose of reducing the demand. In fact he reduced the demand after verification. In our view such ground is unnecessary and hence we dismiss the same. - Decided in favour of assessee.
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2015 (2) TMI 163
Income recognition - method of computation of income followed from the inception of the society - reopening of assessment - CIT(A) deleting the income of the assessee brought to tax as profit of its business of manufacture and sale of salt - Held that:- CIT(A) has categorically discussed every points raised by the Assessing Officer and also the submissions of the assessee in the impugned order. Also going through the written submissions filed by the assessee wherein, in different bye laws, the objectives of the society are mentioned, we find that the clauses mentioned in the bye laws of the society are supplementary and complimentary to clauses 4(a) & 4(q). In fact clause 4(i) stipulates that the society pays on behalf of the members the assessment and malign rent. This also shows that the society is only managing the whole activity on behalf of the members to maximize the profits in the most beneficial way to the members. This activity is carried on for last several years and even before the operation of the present IT Act, which is IT Act 1962. The submissions of the assessee that earlier society was for the limited purpose of selling the products manufactured by the members in a profitable way by taking advantage of cooperative methods and the present society is acting on similar lines, therefore, denial of the same is not legally correct by taking different plea by the AO. It is a fact that the bye laws cannot be segregated and read to hold the income generated as income of the assessee. We have gone through the case laws cited by the assessee, which are also supporting the case of the assessee. In view of this, we reject grounds of appeal taken by the revenue. - Decided in favour of assessee.
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2015 (2) TMI 162
G.P. addition - CIT(A) directing to calculate G. P. @29% on estimated sale of ₹ 3,75 crores instead of 32% on sales of ₹ 5 crores - Held that:- CIT(A) had thus estimated the sales to be at ₹ 3.75 Crores as against sales of ₹ 3.50 Crores disclosed by the assessee which considering the totality of the facts appears to be reasonable and we, therefore, feel no reason to interfere with the order of the learned CIT(A) in estimating the sales at ₹ 3.75 Crores. As far as estimation of gross profit is concerned, ITAT estimated the gross profit at 30% for all the assessment years from 2001-02 to 2004-05. The learned CIT(A) after considering the factual position of the closure of Food Court for two months and due to increase in wages and salaries had considered the gross profit rate at 29% as against 26.21% worked out by the AO. We, therefore, feel no reason to interfere with his order as the learned DR could not controvert the findings of the learned CIT(A). - Decided against revenue. Disallowance on depreciation on vehicle - CIT(A) allowed the claim - Held that:- CIT(A) following the decisions of his predecessors in the assessee’s own case for earlier years 2004-05 to 2005-06 deleted the addition. As the assessee company had made payment for the vehicles and it is also reflected in the books of the company. Further, the vehicles were used for the purpose of the business of the assessee company, no reason to interfere with the order of the learned CIT(A).- Decided against revenue. Disallowance made u/s 40(a)(ia) - Non deduction of tds before making the payment for packing materials - Held that:- The purchases on account of plastic trays, cups, spoons and plastic dishes etc. which did not carry the logo of the assessee and were in the nature of purchases. The purchases were of standardized material available in market. These submissions of the assessee could not be controverted by the Revenue by bringing any material evidence on record. We are, therefore, of the view that the purchases made by the assessee from the aforesaid three parties cannot be considered as being a case of contract which would require deduction of TDS u/s 194C of the Act and, therefore, no disallowance u/s 40(a) (ia) of the Act is called for. We, therefore, direct the AO to delete the addition made on this count. - Decided in fvaour of assessee.
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2015 (2) TMI 161
Rectification of mistake - computation of the Income at higher amount ₹ 15,58,379/- as against the return total Income of Rs. Nil - argument of assessee that there is no accumulation of income u/s 11 - Held that:- If there is any calculation mistake in the relief allowed by the A.O. in his order /s 154, the same can be challenged by the assessee by filing appeal against this order passed by the Assessing Officer u/s 154 of the Act but in the present appeal, the assessee is not raising any issue about the computation of the amounts done by the Assessing Officer in the impugned order. The case of the assessee is that no such addition is called for because there is no accumulation of income by the assessee. In our considered opinion, this issue can be raised in appeal against the assessment order passed by the Assessing Officer u/s 143(3) of the Act dated 30/03/2013 and not in appeal filed by the assessee against the order passed by the Assessing Officer u/s 154 on 17/05/2013. Therefore, we do not find any merit in this contention raised by Learned A.R. of the assessee and we also do not find any merit in the various grounds of the assessee because the same do not arise out of the order passed by the Assessing Officer u/s 154 of the Act. In proceedings u/s 154, the scope is very limited i.e. an apparent mistake can be rectified in an order passed u/s 154. Since the issue involved here is this that there is accumulation of income or not, it is not an apparent mistake in the assessment order and hence, the same cannot be disputed and decided in the proceedings u/s 154. - Decided against assessee.
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2015 (2) TMI 160
Validity of assessment framed u/s 153C - Held that:- The documents seized during the course of search and seizure proceedings from the Rajdarbar Group have been referred as relating to the assessee, in the satisfaction note recorded by the AO while initiating the proceedings u/s 153C of the Act against the assessee. Finding a reference in the satisfaction note recorded by the AO for initiation of proceedings u/s 153C of the Act against the assessee are certificate of incorporation, e-filing receipt, Form No.-18, Form No.-35 In view of the ratio laid down in the above discussed decisions of Hon ble High Court in the cases of Pepsico India Holdings Pvt. Ltd. (2014 (8) TMI 898 - DELHI HIGH COURT) and Pepsi Foods Pvt. Ltd. (2014 (8) TMI 425 - DELHI HIGH COURT) the satisfaction of the AO that the said documents belong to the assessee is condition precedent to initiate proceedings u/s 153C of the Act. In absence of such finding by the AO, the notice issued u/s 153C in the present case is held invalid. Besides there was no incriminating material found during the course of search and the assessment was not pending or abated to justify the assessment framed u/s 153A r.w.s 153C as well as section 143(3) of the Act against the assessee. The assessment in the question framed in furtherance to the said invalid notice and in absence of incriminating material is thus held as void and the same is quashed as such. - Decided in favour of the assessee.
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2015 (2) TMI 159
Computation of annual value to be taxed under the head “income from house property” - AO rejected this claim for deduction on the ground that, “income regarding installation of antenna” was taxable under the head “income from other sources” - whether or not deduction under section 24(a) @ 30% of the annual value is available in respect of computation of income under the head ‘income from house property’ in respect of income from renting of terrace for installation of mobile antenna? - Held that:- As the rent received by the assessee for use of space, by Bharti Airtel Limited and Idea Cellular Limited, in a building, or part thereof, owned by the assessee, in our considered view, the rent so received must be taken into account in computation of annual value to be taxed under the head “income from house property”. Accordingly, as learned counsel for the assessee rightly contends, the deduction under section 24(a) is admissible on the facts of the present case. We, therefore, reverse the stand of the authorities below and uphold the stand of the assessee. The Assessing Officer is, accordingly, directed to delete the impugned disallowance. - Decided in favour of assessee.
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2015 (2) TMI 158
Reopening of assessment - addition u/s 68 - claim of the assessee that no notice u/s 143(2) was issued - Held that:- This issue, though not raised before the Income Tax Authorities can be raised before the appellate forum, since it is a pure legal issue without bring on record any fresh documentary evidence. The relevant assessment year records are not available and therefore, we cannot examine the veracity of the claim made by the assessee/Representative. Moreover, we find that the additional evidence, which goes to the root of the matter has been filed before us and in the interest of justice and equity, the same need to be taken on record, for a proper adjudication of the issue. Therefore, the issue of whether there is a service of the notice u/s 143(2) of the Act, shall be examined by AO for the first time after perusal of material on record. As regards the issue on merit (additions u/s 68 of the Act), the AO shall decide the matter afresh after examining additional evidence filed before us. The assessee shall be given reasonable opportunity of being heard before the assessment is reframed. Needless to state, the assessee’s legal Representative shall cooperate with the Assessing Officer for expeditious disposal of the matter. It is ordered accordingly. -Decided in fvaour of assessee for statistical purposes.
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2015 (2) TMI 157
Unaccounted cash credit - Held that:- No addition can be made on the basis of such dumb documents. There is no evidence that assessee is in the money lending activity. The document does not contain any date so that the same can be taxed in the year under consideration. Moreover, Mr. Navin Chand is not available to verify. Department also did not take any steps to trace out the details from the cheque impounded like the Bank account details and further whereabouts of Mr. Navin Chand. In the absence of any corroborative evidence, the statement made by assessee has to be accepted. The documents can only be termed as dumb documents. Hence, the addition cannot be sustained on the basis of same. - Decided in favour of assessee. Payment to a political party disallowed - Held that:- No clear explanation was offered by the appellant either at the stage of the survey proceedings or post survey proceedings. During the assessment proceedings, it was briefly explained that the amounts were paid subsequently and recorded in the cash book. However, no cash book was furnished before the AO and as such the same was treated as unexplained investment in the hands of the appellant. During the appellate proceedings, the appellant did not elaborate on the issue, except referring to the statement of the fact where in it was merely mentioned that payments were denied. No further explanation was offered as regards to the payments if the same, to a political party. In the absence of a clear explanation with required evidence, the argument of the appellant is not acceptable. - Decided against assessee. Deletion of investment in house - Non production of books of accounts - Held that:- After perusing the detailed order of Ld. CIT(A) and submission by learned D.R. and A.R., we are of the opinion that Ld. CIT(A) should have deleted the additions himself without directing the A.O. to examine and allow. If A.O. refuses to examine/consider the evidence furnished by assessee when matter was remanded by CIT(A), there is no point in directing the A.O. again. Be that as it may, we do not find any merit in Revenue contentions. Assessee has placed on record the consequential order passed by A.O. wherein A.O. accepted the investments. Therefore, on facts there is no merit in Revenue contentions. - Decided in favour of assessee.
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2015 (2) TMI 156
Penalty u/s 271(1)(c) - whether penalty survives when the addition has become debatable? - Held that:- The penalty was imposed on the basis of addition so made, therefore, when the addition on the basis of which the penalty was imposed has become doubtful/debatable, therefore, penalty imposed u/s 271(1)(c) of the Act cannot survive. Decided in favour of assesse.
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2015 (2) TMI 155
Disallowance of interest - loans advanced by the assessee to the employee’s welfare trust - Held that:- The ld DR contention that this aspect of the matter requires verification as it is not clear that the same loan given by the assessee company to the employees welfare trust for A.Y 2008-09 is continued in both the years under consideration and since the ld Counsel for the assessee also has no objection for getting this aspect verified from the AO, we restore this issue to the file of the AO for the limited purpose of verifying as to whether same loan given by the assessee company to its employees welfare trust is continued even during the year under consideration. If this factual position is found to be correct on such verification, the AO shall delete the disallowance made on account of interest for both the years under consideration. - Decided in favour of assessee for statistical purposes.
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2015 (2) TMI 154
Unexplained / unproved gifts - CIT(A) deleted addition - Held that:- Finding considerable force in the conclusion drawn by the Ld. CIT(A) that assessee has sufficiently discharged the onus that lay on her in terms of provision of Section 68 and it cannot be said that the receipts in her hands are in any way unexplained. The unilateral view entertained by the AO was more based on unfounded presumptions without converting them into evidences and the evidences filed by the assessee have remained unaddressed and unrebutted. Accordingly, the Ld. CIT(A) has rightly deleted the addition of ₹ 5,00,000/-, which does not need any interference on our part, hence, we uphold the same. - Decided in favour of assessee. Unexplained unsecured loans - CIT(A) deleted addition - Held that:- We find considerable force in the conclusion drawn by the Ld. CIT(A) that in view of the principles laid down by the Hon’ble Supreme Court in the case of CIT vs. Orissa Corp. Pvt. Ltd. [1986 (3) TMI 3 - SUPREME Court] and Hon’ble Gauhati High Court in the case of Nemi Chand Kothari vs. CIT [2003 (9) TMI 62 - GAUHATI High Court] the assessee is not required to prove the source of source from which the creditor had advanced to the assessee. Therefore, we find Ld. CIT(A) was not agreed with the finding of the AO and accordingly rightly deleted the addition of ₹ 11,80,000/-, which does not need any interference on our part, hence, we uphold the same. - Decided in favour of assessee. Disallowance of travelling and conveyance expenses - CIT(A) deleted addition - Held that:- AS Under the head of Travelling expenses no discrepancy has been noticed by the AO. Therefore, the addition made of ₹ 7,000/- is correctly deleted - Decided in favour of assessee.
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2015 (2) TMI 153
Disallowance of expenses - no business activity carried on by assessee - Held that:- Claim of the assessee has never been rejected on the ground that the assessee had not carried out any business activity. Even, if we presume that no business activity was carried out during the year, even in that stage, because of the temporary lull due to certain circumstances, the claim of expenditure which was necessary for the continuity of the business, cannot be disallowed. However, we find that the AO has not applied his mind as to the genuineness of the expenses. Hence, we restore this issue to the AO for the limited purposes of the verification of the incurring of expenses and thereafter to allow the expenses found actually incurred by the assessee for business purpose. - Decided in favour of assessee for statistical purposes. Hire charges - income received from ‘other sources’ OR ‘business income’ - Held that:- As furniture and fixtures were rented by the assessee temporarily and the same have already been disposed off during the next financial year. Hence, keeping in view the principle of consistency, we direct that the hire income from furniture and fixtures etc. be treated as ‘business income’. - Decided in favour of assessee. Interest income from FDRs - income received from ‘other sources’ OR ‘business income’ - Held that:- the interest income from FDRs can not be treated as ‘business income’. Merely because, the assessee company is engaged in business, that itself, does not mean that every income earned by the assessee should be treated as ‘business income’. We do not find any infirmity in the orders of the lower authorities in treating the interest income as income from ‘other sources’- Decided against assessee. Disallowance under section 14A - Held that:- Perusal of the assessment order reveals that the AO has not followed the guidelines of objective satisfaction as laid down by the hon’ble Bombay high Court in the case of Godrej & Boyce ( 2010 (8) TMI 77 - BOMBAY HIGH COURT) while making the disallowance . He without recording any reasoning for his dissatisfaction with regard to the working/claim of the assessee, straightway applied Rule 8D against the mandate of the provisions of section 14A of the Income Tax Act. The Ld. CIT(A) also ignored the mandate of the provisions of section 14 A, while confirming the disallowance. Thus estore this issue back to the file of the AO with a direction that the AO will give opportunity to the assessee to place on record all the relevant facts including its accounts and then examine the computation/ calculation made in this regard by the assessee having regard to the accounts of the assessee. - Decided in favour of assessee for statistical purposes.
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2015 (2) TMI 152
Interest on refunds - Method of computation of interest u/s 244A - CIT(A) upheld the method adopted by the AO by reducing the total refund granted (including the interest under section 244A already granted) from the tax refund due to the appellant and computing interest on the remaining amount - Held that:- CIT(A) has not gone into the question of correctness of method adopted by the AO but decided the issue on the ground that the method adopted by the AO is being consistently followed in respect of the assessee. Therefore, the impugned order of the CIT(A) qua this issue is not sustainable in law and liable to be set aside as interest determined by the AO is lower than the amount the assessee is entitled for. We accordingly restore the matter to the AO with a direction to calculate interest due to the assessee without reducing the interest u/s 244A, which is part of the refund earlier granted from the refund due. - Decided in favour of assessee for statistical purposes.
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Customs
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2015 (2) TMI 179
Valuation of goods - Enhancement in value of goods - inclusion of value of a taxable service rendered in India - The television programmes have been aired from Singapore - Held that:- Distribution fees was for acquiring non-exclusive rights for satellite delivered, advertiser supported, television service. Thus the payment was made for the rights to distribute a service and has nothing to do with the goods imported by the appellant from the foreign entity. The letter dated 28-12-2007 addressed to the Standard Chartered Bank also make it clear that the amount of ₹ 19,76,02,857/- remitted was towards the distribution fees required to be remitted in terms of the Distribution Agreement. The Chartered Accountant's certificate dated 28-12-2007 for remittance under section 195 pf the Income Tax Act also confirms this factual position. Thus, there is no evidence, whatsoever, adduced by the Revenue to show that the said remittance was towards the royalty/licence fee paid for the contents of the digi-beta tape imported by the appellant so as to form a part of the taxable value of the goods imported. From the Service Tax Returns filed by the appellant with the Service Tax Authorities, it is seen that the appellant is registered under the taxable category of "Broadcasting Services" and the distribution fees collected has been declared to the department for the purposes of payment of service tax thereon. This also makes the position clear that the distribution fees pertained to services rendered in India, part of which was remitted to the foreign television channel. Therefore, the question of including consideration for the service rendered in the value of the goods imported does not arise at all. Thus it appears that the adjudicating authority mis-directed himself in including the value of a taxable service rendered in India in the value of the goods imported. The television programmes have been aired from Singapore and the tapes were not required for broadcasting the programmes. The requirement of the tapes was for the limited purpose of obtaining certification from CBFC and technical quality checks and has nothing to do with the distribution activity. Therefore, from whatever angle one may look at the transaction, there is nothing on record to show that the remittance made to the foreign entity had anything to do with the goods supplied. Therefore, the impugned order enhancing the value of the goods to the extent of remittance of distribution fees and demanding customs duty thereon under CVR is clearly unsustainable in law. Accordingly we set aside the impugned order - Decided in favour of assessee.
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2015 (2) TMI 178
Refund claim - SAD - Commissioner (Appeals) in her order rejected the appeal surprisingly altogether on a different ground assuming that differential amount of SAD for which the appellant is seeking refund was debited through DEPB script, therefore the refund is not admissible - appellant filed before the Commissioner (Appeals) only prayed that the refund was filed for the total quantity of the goods imported and sold, whereas in the application only part of the SAD was mentioned and part amount of ₹ 14,06,203.88 which was paid in cash through separate TR 6 Challan could not be mentioned through oversight, therefore their prayer before the Commissioner (Appeals) was that such mistake may be allowed to be corrected under section 154 of Customs Act, 1962 Held that:- the Commissioner (Appeals) has gravely erred in deciding the appeal altogether a different issue of DEPB, which was never into existence. From the submission, it is clear that the amount of ₹ 14,06,203.88 SAD claimed as a refund by the appellant was admittedly paid in cash against bill of entry No. 94335 dated 13/4/2010. Thus, there was a mistake occurred on the part of appellant that instead of both the aforesaid amount, they mistakenly mentioned only amount of ₹ 5,39,837.20 and ₹ 14,06,203.88 was left to be mentioned in the refund application. Consequently, it was skipped by the Asst. Commissioner also that against the total SAD payment of ₹ 19,46,041.08 towards total quantity of 2023.70 MT only SAD of ₹ 5,39,836.20 was sanctioned. In this fact I agree that the appellant, is, in principle, entitled for the refund of left over amount of ₹ 14,06,203,88 also but the same can be decided only after rectification of the mistake in the refund. I also agree that there is apparent mistake in refund and same can be rectified under Section 154 of Customs Act, 1962. Mistake occurred in the present case by which the appellant suffered non sanction of refund of SAD of ₹ 14,06,203.88 can be rectified under Section 154 of Customs Act, 1962. Therefore, the matter limited to refund of amount of ₹ 14,06,203.88 is remanded to adjudicating authority with liberty to the appellant to make an application under Section 154 of Customs Act, 1962. The adjudicating authority is directed to dispose of such application, if filed by the appellant under section 154 of Customs Act, 1962 in accordance with law. - Appeal disposed of.
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2015 (2) TMI 177
Import of hospital equipments - import by third party - Denial of benefit of Customs Notification No. 21/2002 as amended vide Sl. No. 362 read with Condition No. 77 - Held that:- The grounds taken by the Revenue is that only hospitals which are listed in Sl. No. (a) could have imported the equipment but not a third party. For this purpose other notifications have been compared wherein end use conditions have been prescribed and it has been stated that in the absence of end use conditions and in view of the clauses (a) and (c) of Condition No. 17, third party import was not permissible and therefore the assessment order issued by the original authority is sustainable. However we find ourselves unable to agree with this submission in view of the fact that if the import was to be made only by hospital or the Government the word ‘importer’ would not have been used in clause (b). In fact clause (b) was not required at all if third party import was not permissible. In our opinion the manner in which the notification has been worded and the conditions have been stated is quite clear and there cannot be another interpretation possible other than the one reached by the learned Commissioner (Appeals) in the impugned order. In any case it is not the case of the Revenue that the equipments imported have not been used by the Government hospitals and conditions of end use have been followed in any manner. - Decided against Revenue.
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2015 (2) TMI 176
Confiscation of goods - Imposition of penalty - abatement of the illegal export of foreign currency - Held that:- Three passengers, namely, S/Shri Fayaz Gulam Godil, Mukhtar Gulam, Farhan Shekhani, proceeded to Hong Kong on 22-5-2010 carrying foreign currency amounting to US $ 1,24,100 without declaring the same before Customs authorities. However, they were not allowed entry into Hong Kong and were deported back and they arrived in India on 24-5-2010; therefore, it was not a case of successful export of foreign currency but an attempt to take out the foreign currency from India, which failed. It is also on record that the currency was concealed and was never declared to the Customs authorities. As per the provisions of Foreign Exchange Management Act, 1999 read with Foreign Exchange Management (Current Account Transaction) Rules, 2000, “no person shall draw foreign exchange (a) exceeding US $ 10,000 or its equivalent in one calendar year for one or more private visits to any country (Except Nepal and Bhutan) (b) exceeding US $ 25,000 for business travel”. Currency seized is in excess of these limits and therefore, the foreign currency seized are prohibited goods in terms of Section 2(33) of the Customs Act which define prohibited goods as “any goods, the import or export of which is subject to any prohibition under this Act or any other law”. In the case of prohibited goods, as per Section 125, it is the discretion of the adjudicating authority to allow redemption or to resort to absolute confiscation. Therefore, there is no right of redemption provided in respect of prohibited goods. A Larger Bench of this Tribunal had examined the issue at length in Peringatil Hamza case (2014 (8) TMI 247 - CESTAT MUMBAI (LB)) and after examining the various provisions of the Foreign Management Act and Rules made thereunder and the decisions of the Hon’ble Apex Court in the case of Sheikh Mohd. Omer v. CC, Calcutta & Others - [1970 (9) TMI 36 - SUPREME COURT OF INDIA] came to the conclusion that in the case of prohibited goods, the same can be absolutely confiscated and it is the discretion of the proper officer to allow redemption on payment of fine. It is an admitted position that the currency was illegally exported from India by concealing it in the baggage and considering the substantial quantum of currency seized, the adjudicating authority has come to the conclusion that this is not a case where discretion has to be exercised by allowing redemption of confiscated currency. The penalty of ₹ 5 lakhs imposed on Shri Fayaz Gulam Godil under Section 114 is justified. As regards the imposition of penalty, on Shri Mustafa Kantawala, from the statements of Shri Fayaz Gulam Godil and the SMS message received by Shri Farhan Shekhani, it is clear that he had directed Shri Fayaz Gulam Godil to smuggle out the currency from India. Therefore, his abetment in smuggling out of foreign currency is clearly established. Therefore, imposition of penalty on him under Section 114 is justified. The penalty imposed of ₹ 10 lakhs cannot be said to be excessive when the total value of the currency sought to be illegally exported is of the order of ₹ 56 lakhs and the penalty imposed is less than 20% of the value of the currency. - Decided against assessee.
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2015 (2) TMI 175
Wrong classification of goods - Mis declaratio of goods - Imposition of penalty - Held that:- According to Note 2(b) of Section XVI of Customs Tariff Act, 1975, parts, if suitable for use solely or principally with a particular kind of machine, or with a number of machines of the same heading, they are to be classified under the heading of the same machines. However, in this case, many of the items were found to be of general use and not found suitable for use solely or principally with the machines manufactured and sold by the appellants. The learned counsel fairly agreed that the investigating officers had considered this aspect and had omitted several items while issuing show cause notice which were actually solely or principally used with the machines manufactured by them. Under these circumstances, the appellants clearly have no case on merits at all. Further the observations of the Commissioner reproduced above and not contested by the learned counsel or by the appellants at any stage and coupled with the description of the inputs and Bills of Entry would clearly show that there was a misdeclaration of the goods in the classification. If the appellants were not to mention the machine number/machine description with the items imported which amounted to stating that they were proposed to be used or useful solely or principally with the machine manufactured by them, if the items were of general use, this claim clearly is a misdeclaration. Provisions of Section 28 which provides for non-issue of show cause notice wherein the importer pays the entire amount of duty with interest would not be applicable to the appellants at all. Therefore, this claim of the appellant’s counsel that no proceedings should have been initiated cannot be accepted and is denied. Similarly the duty demand and the interest thereon also has to be upheld as not contested. - Since the misdeclaration has been established and appellant is not eligible for the benefit claimed by them, it is clearly a case of misstatement of facts and as a result appellant is liable to penalty under Section 114A of the Customs Act, 1962 and therefore, penalty imposed is upheld. - there is no allegation of any activity covered by Section 114AA which is actually not covered by Section 114A. Therefore, in our opinion, under the facts and circumstances of this case, penalty under Section 114AA need not be imposed. - penalty under Section 114AA is set aside and in respect of all other issues, appeal is rejected - Decided partly in favour of assessee.
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2015 (2) TMI 173
Denial of “deemed export” benefit - refund/return/pay back the benefit of deemed export - Held that:- The Petitioner’s case is not referred to at all in the paragraph shown by the Respondents. In fact, what has been stated is that on 9th September 2011 in a meeting of the Policy Interpretation Committee under the Chairmanship of the Director General of Foreign Trade, various issues relating to deemed exports, were considered and as per the deliberation in the said meeting, clarifications were issued. The minutes of the meeting of the Policy Interpretation Committee held on 15th March 2011 are at page 132 of the paper-book and it is submitted that the deliberations were held in a meeting convened by the DGFT of representatives of the Department of the Revenue, Department of Economic Affairs and Ministry of Power. The Regional Authorities were advised that in case any payment has been made which is contrary to the clarification issued in the meeting dated 15th March 2011 that all such cases should be reviewed and recovery be made. The Petitioner cannot rely upon the communication dated 5th December 2000, since it was preceded by Policy Circular No. 32, dated 20th August 1998 issued to all Licensing Authorities. Therefore, the Recovery Notices were issued to the Petitioner for surrender of export deemed benefit availed. Since they failed to respond, the Respondents issued the show cause notices as per the Foreign Trade (Development and Regulation) Act, 1992. The affidavit thus contains a justification as to why show cause notices have been issued. We find in the entire affidavit that the Respondents have not explained as to why they decided to recover the benefits earlier granted and from parties like the Petitioners, why the Petitioners were not entitled to the benefits in terms of the earlier policy and specifically is not explained. All that we find is that the deemed exports were for certain categories. In that regard, what we find is that the interpretation which was placed on the provisions of the Foreign Trade policy and particularly Chapter 8 by the Committee in its meeting dated 15th March 2011 is extensively referred to. The denial of duty drawback for excise duty paid on High Speed Diesel, Steel, Cement has been correctly done as per this interpretation. A bare perusal of clarification shows that the meeting of the Policy Interpretation Committee was held. A Zonal Joint Director and some of the Regional Authorities were invited to obtain response from them and particularly their experience in processing export goods. In paragraph 2 of the minutes which has been stated that these authorities pointed out their inability to settle the deemed export claims due to inadequate budgetary provisions. These difficulties are noted in paragraph 2 further and there is a reference to Public Notice issued on 1st March 2011. In paragraph 3 of the minutes, the issue of claiming deemed export benefits issued by the project authority was discussed. After detailed deliberations, it was decided that if the bill of entry is in the name of Project Authority, the deemed export benefit would not be available. Department having clarified and interpreted its policy for the first time in March 2011, it could not have relied upon such clarification to reopen the concluded cases or review them as attempted. This is a clear case of afterthought. If the Policy was earlier applied and to cases including that of the Petitioner, as pointed out in the petition itself, then, that having not been reopened at any time, reliance on such clarification or interpretation cannot take the case of the Department any further. The Department may have been called upon to interpret the Policy in the light of the several difficulties and particularly the objectionable provision but that should not have been the basis for reopening the case of the present Petitioner or review it merely on the strength of the policy or the interpretation placed thereon. The Petitioner could not have been called upon to refund the amount duly paid and disbursed to them. - decision taken by the Policy Interpretation Committee in its meeting on 15th March 2011 cannot be applied to the Petitioner’s case and which has been concluded prior thereto. Rule is made absolute in the above terms with no order as to costs. - Decided in favour of appellants.
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FEMA
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2015 (2) TMI 174
Violations of Sections 9 (1) (a), 19 (1) (d) as well as 29 (1) (b) read with Section 68 FERA - Held that:- although the AO was passed on 15th October 1990, the order passed by the AT staying recovery of the penalty amount was not passed till 26th May 1995. Then again admittedly the stay order was not formally communicated to the parties. Although the ED appears to have not taken steps to recover the penalties during this entire period, it woke up on 27th December 1999 i.e. more than 9 years after the AO sanctioned the recovery of the penalty amount. At this time, the Petitioners were under a bona fide belief that the recovery of penalties had been stayed by the AT on 26th May 1995. This was also conveyed to the ED. If despite adjudication order attaining finality no payment is made of the penalty amount then certainly it could be said that Section 57 FERA is attracted. Here, however, with there being definitely a clear stay order passed on 8th July 2002, there was no justification for the learned ACMM to have proceeded to frame notice on 17th May 2003 against the Petitioners for the offence under Section 57 FERA. It is possible that on the date of taking cognizance of the offence on 23rd April 2002, the ACMM may have been justified in proceeding with the order since the formal order of stay was not yet passed but certainly once that order was passed further proceedings ought not to have been continued. In any event, with the subsequent developments there appears to be no purpose served in keeping the proceedings under Section 57 FERA alive. It is urged by learned counsel for the Respondents that the matters could be sent back to the learned ACMM for appropriate orders to be passed in light of the subsequent developments. The Court sees no purpose being served in doing that except that it would delay the proceedings even further. - there is no ground made out for continuing the proceedings under Section 57 FERA qua the Petitioners. - Decided in favour of assessee.
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Service Tax
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2015 (2) TMI 194
Denial of refund claim - CENVAT Credit - refund claim of unutilized Cenvat Credit accumulated in their Cenvat Credit account under Rule 5 of the Cenvat Credit Rules 2004 - refund claims were denied on account of the fact that services rendered by the appellant do not qualify under Rule 3 (1) (iii) read with Rule 3(1) (ii) of the Export of Service Rules 2005 and for the period April 2010 to March 2011, Certain services are not qualified as input services on which Cenvat Credit has been availed by the appellant as per Rule 2(l) of the Cenvat Credit Rules, 2004 and for certain services the appellant has failed to provide invoices to take Cenvat Credit - held that:- Cenvat Credit during the period April 2010 to March 2011 has been denied for want of invoices which have been verified by us and found to be proper. Therefore, we hold that appellants are entitled for the said Cenvat Credit. We further find as contended by the Ld. AR that the adjudicating authority has not considered the issue that input service on which the Cenvat Credit has been availed by the appellant do qualify as input service as per Rule 2(l) of the Cenvat Credit Rules, 2004. Therefore, for the limited purpose we remand the matter to the adjudicating authority to ascertain the fact whether the input services on which Cenvat Credit has availed by the appellant do qualify as input service as per Rule 2(l) of the Cenvat Credit 2004, in the light of the decision of the Hon'ble High Court of Bombay in the case of Ultratech Cement (2010 (10) TMI 13 - BOMBAY HIGH COURT). The adjudicating authority shall examine the documents to ascertain the admissibility of the Cenvat Credit on input services as discussed above within 60 days of the production of all records and thereafter shall sanction the admissible of refund claim of the appellants - matter remanded back - Decided in favour of assessee.
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2015 (2) TMI 193
Banking & Financial Service - issuance of wrong registration certificate ST-2 as service provider instead of Input Service Distributor (ISD) - assessee contended that instead of owning the fault created by their official, blame has been put on appellant that the appellant has failed to register as ISD leading to issue of demand for service tax and imposition of penalty without any fault of their. - Held that:- Commissioner (Appeals) has not appreciated these facts and has confirmed the demand against Punjab National Bank Ghaziabad and have upheld imposition of equal penalty. I find that appellant have been able to make a point that Commissioner (Appeals) has failed to appreciate all evidences available on records. - it is a fit case for remand back to original Adjudicating Authority for reconsideration of grounds and evidence of records. Adjudicating authority is directed to call all records and peruse those in denovo adjudication. - Decided in favour of assessee.
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2015 (2) TMI 192
Waiver of pre deposit - Supply of tangible goods - Held that:- Clause 27 (b) provides the lessee (applicant) certifies that lessee is responsible for operational control of the aircraft under this lease during the term hereof. Lessee further certifies that lessee understands its responsibility for compliance with applicable Federal Aviation Regulations. Prima facie, it is noted that the maintenance of the aircraft lies with the applicant except change of engine as contended by the Ld. AR. The definition of supply of tangible goods provides that to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use without transferring right of possession and effective control of such machinery, equipment and appliances. The adjudicating authority observed that the applicant had availed aircraft on lease basis only without any legal possession. Prima facie, we find that the applicant acquired the aircraft on the basis of the lease agreement, which is the legal possession. Clause 14 of the agreement would be invoked in the event of default, that the right accrues with the owner. On the other hand the Ld. AR also contended that the maintenance is also on the applicant except replacement of the engine. The Commissioner has also accepted that the maintenance is provided by the applicant. The adjudicating authority emphasized that there is no sale in this case - appellants has a good prima facie case in its favour. - we dispense with the condition of pre-deposit of service tax confirmed against the applicants and penalties imposed upon them - Stay granted.
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2015 (2) TMI 191
Denial of refund claim - Non fulfillment of condition of Notification 41/2007 - Held that:- In the invoice produced by the CHA there is a description of the goods, therefore, the appellant has fulfilled the condition of Notification 41/07. Further, it is not in dispute that the appellant has not exported the goods and not received the consideration for the same. Therefore, as held by the Tribunal in the case of Indoworth (India) Ltd. (2011 (6) TMI 311 - CESTAT, MUMBAI) the refund claim cannot be denied on the sole ground that agreement between the foreign buyer and the appellant has not been produced. - appellant is entitled for refund claim - Decided in favour of assessee.
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2015 (2) TMI 190
Cenvat Credit - Denial of input service credit in the hands of Job worker who is availing the benefit of exemption notification no. 8/2005 ST and 214/86 CE and did not pay Central Excise duty and service tax on the job work goods cleared by them to the principal manufacturer who suffered duty on the final product - Held that:- In this case the appellant is a job worker and the final product which they supplied to the principal manufacturer has suffered duty. Therefore, the issue is to be examined in the scenario whether the final product has suffered duty or not. As per Notification 214/86 the job worker can receive the goods from the principal manufacturer without payment of duty and also procure the inputs on payment of duty and can avail the credit. He is also entitled to clear the goods without payment of duty to the principal manufacturer who cleared the final goods on payment of duty. The same treatment has been given by the Notification 8/2005 (ibid). In these circumstances, as it is an admitted fact that the final products which have been processed by the appellant have suffered duty, therefore, appellants are entitled to take the credit of the input service. - Decided in favour of assessee.
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2015 (2) TMI 189
Waiver of pre deposit - Held that:- appellant is registered commercial coaching and training service provider and conducts orientation programme for grant of pre-engineering coaching. I find that inasmuch as the orientation is a part of the coaching, the services used for conducting the same have to be held as cenvatable inputs service. Accordingly by observing that the appellant has a good prima facie case, I dispense with the condition of pre-deposit of dues - Stay granted.
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Central Excise
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2015 (2) TMI 195
Recovery of dues - Freezing of accounts - the appellant has complied with the mandatory requirement of depositing of 7.5% of the total duty liability - Held that:- In our considered view and as also statutorily once mandatory deposit of 7.5% has been made, there is no reason for recovery of any further amount from the appellant and the action of the Dy. Director, DGCEI seems to be beyond the scope of law. In our view, there is no need to freeze the account of the appellant as long as the appeal is pending before this Bench. Accordingly, we direct the lower authorities, specially the Dy. Director, DGCEI, Goa to defreeze the account forthwith by issuing appropriate instructions to the appellant's bankers. - Decided in favour of appellant.
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2015 (2) TMI 187
Imposition of penalty - Whether the Tribunal is correct in holding that the penalty imposed on the assessee under Rule 25 is not sustainable on the ground of violation of Rules 4 and 6 under the facts and circumstances where the manufacturer of excisable goods has removed the goods on payment of only a portion of duty leviable or payable in terms of Rules 4 and 6 of the Central Excise Rules, 2002 - Held that:- it is evident that the Tribunal held that on self-assessment, the duty was paid and the goods were removed as required under Rules 4 and 6. The only question that needs to be decided is whether there was justification for invocation of Rule 25. The Tribunal came to hold that when there is no violation of Rules 4 and 6, penalty cannot be imposed under Rule 25. On a reading of Rules 4, 6 and 25, it is clear that once it is found that there is no violation of Rules 4 and 6, penalty cannot be imposed under Rule 25 and, therefore, the finding of the Tribunal on that aspect of the matter has to be sustained. - no reason to differ with the findings as the said decision of the Tribunal is in accordance with the provisions of the said Rules. This Court is of the considered view that a perusal of the grounds of appeal would also reveal that there is no serious error or infirmity in the said finding of the Tribunal - Decided against Revenue.
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2015 (2) TMI 186
Cenvat / MODVAT Credit - Non receipt of goods from Job Worker within 180 days - Whether Rule 57F (4) of the Central Excise Rules is mandatory or directory - Held that:- Inputs on which credit has been taken may be used in or in relation to the manufacture of final products. The inputs may be removed for home consumption or for export under bond. By sub-Rule (3) all removals of inputs for home consumption shall be made on payment of duty equal to the amount of credit availed in respect of such inputs and under the cover of invoice prescribed under Rule 52A - By Rule 57F (4) the inputs are permitted to be removed or after they have been partially processed by the manufacturer of the final products to a place outside his factory under the cover of a challan specified in this behalf by the Central Board of Excise and Customs, for the purposes of test, repair, refining, re-conditioning or carrying out any other operation necessary for the manufacture of the final products or for manufacture of intermediate products necessary for the manufacture of final products and return the same to the factory within 180 days for further use in the manufacture of the final product or removing after payment of duty for home consumption or for removing the same without payment of duty to a unit in a free trade zone or to a hundred per cent export oriented undertaking. They could also be removed under bond for export. By sub-rule (12), (13) and (14) there are further stipulations and upto sub-rule (21), if all these sub-rules are read together and harmoniously as has been done by the Tribunal, then, no other view of the matter is possible. It is not a mandate flowing from the Rules that if the inputs or partially processed inputs are not received within 180 days in the factory of the manufacturer, then, he be disallowed the Cenvat credit and in totality. The Rules provide for situations under which, if the goods are not received back within 180 days, the credit can be adjusted. The proportionate credit can be denied and by calling upon the manufacturer to debit the account. All this would indicate as to how the makers and framers of the Rule did not intend to deny MODVAT credit simply because the inputs were not received after processing or job work within 180 days. The period of 180 days cannot be held to be mandatory. In the given facts and circumstances and going by the language of the Rule, both Commissioner (Appeals) and the Tribunal were right in concluding that the period is not mandatory. The Tribunal's reasoning at page 55of the paper book is in consonance with the language of the Rule and the sub-rules. In these circumstances, the demand made could not have been sustained. - Decided against Revenue.
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2015 (2) TMI 185
Availment of CENVAT Credit - Fraudulant availment - appellant allegedly purchased CC copper rods from M/s R.K. Enterprises through its proprietor Shri R.K.Gupta - The premises of Shri R.K.Gupta were raided - R.K. Gupta made a statement on 16.01.2001 that he had not delivered goods but had only facilitated parties in obtaining fraudulent modvat/cenvat credit - Held that:- A perusal of the show cause notice and the order in original reveals that the adjudicating authority, while holding the appellant liable, has placed sole reliance upon the statement made by Shri R.K.Gupta that transport companies mentioned in GR books are fictitious, the description of goods in the invoices differs from purchase invoices and in some invoices the mode of transport is different from the purchase invoices, without referring to that part of the statement that exonerates the appellant or referring to invoices and documents relating to the appellant. The statement by Shri R.K.Gupta has to be read in its entirety, including the portion exonerating the appellant alongwith a detailed reference to the bills, invoices, receipts, cheques and various forms and declarations etc. filed by the appellant before the department but unfortunately have not received due consideration. An allegation of fraud must necessarily be proved by the person who levels such an allegation. Where, however, the department succeeds in prima-facie proving its allegation of fraud, the onus would shift to the assessee to prove the genuineness of the transaction. The department relies upon the statement made by Shri R.K. Gupta, the cheque signed by the appellant company recovered from the premises of Shri R.K.Gupta, the alleged discrepancies in description of goods in invoices and purchase invoices, the different mode of transport mentioned in purchase invoices, various documents i.e. fraudulent GR books/receipts, rubber stamps etc. recovered from the office of Shri R.K.Gupta but without a detailed reference to the appellant's transactions, part of the statement by Shri R.K.Gupta exonerating the appellant and without examining for RG 23-A part I, RG 23-A part II, details in cenvat return filed under Rule 57 A(c) of the Central Excise Rules, 1944 and RG 12 submitted to the Central Excise Department, Faridabad. The mere fact that the appellant purchased goods from Shri R.K.Gupta, would not by itself raise an inference of culpability or wrong doing. - Impugned order is set aside - Decided in favour of assessee.
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2015 (2) TMI 184
Waiver of pre deposit - Extension of stay order - Whether the Hon'ble CESTAT was right in law in allowing the Miscellaneous Application filed by respondents, overlooking the insertion of third proviso in Section 35C(2A) of the Central Excise Act, 1944 vide Finance Act, 2013 and thereafter by wrongly applying the decision of Hon'ble Supreme Court pronounced in the case of Commissioner of Customs Central Excise, Ahmedabad vs. Kumar Cotton Mills Pvt. Ltd., reported in [2005 (1) TMI 114 - SUPREME COURT OF INDIA], vide which the Interim Stay as granted vide Stay Order No.ST/1737-1738 of 2012 dated 09.10.2012 has been ordered to be continued until further orders - Held that:- A request was made by learned counsel appearing for the assessees that the Court may issue direction to establish more number of Benches and for establishment of Circuit Benches to visit the States to decide the matters. They have relied upon a judgment in Metlife India Insurance Co. Ltd. Vs. Union of India, [2013 (4) TMI 78 - KARNATAKA HIGH COURT], in which an observation was made that the Union of India has failed to set up large number of Tribunals such as CESTAT and if this is done, then there would be no cause for complaint over the non-consideration of the applications for stay, in appeals, by only one Tribunal, presently functioning at Bengalore. Only two Benches and one single member is looking after stay matters and hearing of the appeals, arising out of eight States, namely Jammu & Kashmir, Rajasthan, Punjab, Uttar Pradesh, Jharkhand, Chhatisgarh, Delhi and Madhya Pradesh. They have also relied upon para 252 of the speech of Minister of Finance in Lok Sabha, dated July 10, 2014, in which it was stated that to expedite the process of disposal of appeals, amendments have been proposed in the Customs and Central Excise Acts with a view to freeing appellate authorities from hearing stay applications and to take up regular appeals for final disposal. Consequently, the Act was amended with effect from 01.10.2014, omitting Section 35C(2A), with a deposit of 7.5% of the demand for first appeal, and 10% for second appeal. Considering the facts and circumstances of the case and the pendency of the appeals in the CESTAT, New Delhi, we dispose of the present writ petitions as well as the Excise Appeals, in accordance with the view taken by the Allahabad High Court in Commissioner, Customs And Central Excise Versus M/s JP. Transformers [2013 (10) TMI 1194 - ALLAHABAD HIGH COURT], with directions to the CESTAT, New Delhi, to decide the appeals as expeditiously as possible, and preferably within a period of six months from today. The waiver of pre-deposit. to the extent directed by CESTAT, will be valid until the final disposal of the appeal. This order has been passed with an understanding that the assessees will not seek any unavoidable adjournment. - Appeal disposed of.
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2015 (2) TMI 183
Waiver of pre deposit - Financial hardhip - Held that:- On merits, there is no serious plea with regard to the compliance of the order of pre-deposit. The only ground raised now, as has been raised before the Tribunal, is financial hardship. On that score alone, we are not inclined to entertain this appeal for modification of the order of the Tribunal ordering pre-deposit of ₹ 3.00 lakhs as against the demand of ₹ 7,92,877/-. However, taking note of the nature of financial difficulty pleaded by the appellant, we grant time for compliance of the pre-deposit till 27.2.2015 - Decided partly in favour of assessee.
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2015 (2) TMI 182
Manufacture - Whether activity carried out by the appellant amounts to manufacture which gave rise to the finished goods which was liable to excise duty - Held that:- By an apparent look, the raw material suggests that without undertaking processing thereof no finished goods can be produced since finished goods exhibits altogether a different look quite distinct from raw material which is visible to naked eye. It may be stated that there was structural change by touch when finished goods derived from the raw material is examined. It is also established that the appellant did not prefer to sell the raw material but sold finished goods undertaking process to make the raw material marketable in a different form to fetch better price and to make that useful for the purpose that is meant. - raw material shown to us today gave rise to finished goods with distinct identity and marketability. Finished goods having been covered by Chapter 84 it is difficult to agree with the appellant that there was no manufacture done - Decided against assessee.
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2015 (2) TMI 181
Supplies to SEZ from DTA - Clearance to be treated as “dutiable goods” or “exempted goods” - whether in respect of supplies made by DTA unit to SEZ developer prior to 13-12-2008 has to be treated as exempted clearances as per CENVAT Credit Rules and consequently provisions of Rule 6(3) of CCR, 2004 applies or not - Held that:- after enactment of Special Economic Zones Act, 2005 w.e.f. 10-2-2006, supplies to SEZ from DTA are treated as export of dutiable goods and entitled to benefits as such, including that of exception in Rule 6(6) of CENVAT Credit Rules, 2004, of not requiring separate accounts of dutiable and non-dutiable inputs/services to be maintained - Following decision of Sujana Metal Products Ltd. [2011 (9) TMI 724 - CESTAT, BANGALORE] - Decided in favour of assessee.
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2015 (2) TMI 180
Waiver of pre deposit - Denial of input service credit - applicant did not have a storage capacity of the furnace oil at the particular point of time, having more stock than the storage capacity. - Held that:- applicant are having necessary storage tank before audit and additional storage tank was dismantled before audit. They are also receiving the furnace oil in barrels which was kept in their factory, therefore the storage capacity cannot be based for denial of credit on the furnace oil. - applicant has made out a case for 100% waiver of pre-deposit. Accordingly, I waive the recovery of duty, interest and penalty and stay recovery thereof during the pendency of the appeal. - Stay granted.
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CST, VAT & Sales Tax
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2015 (2) TMI 188
Waiver of pre deposit - Levy of tax on bitumen imported - whether bitumen imported into local area for use in BOT (built, operate and transfer) project is taxable under the Maharashtra Tax on the Entry of Goods into Local Areas Act, 2002 - Held that:- Petitioners in the six petitions have already deposited an amount of ₹ 1.60 crores in the aggregate out of the total tax liability of ₹ 14.99 crores (excluding the penalty amount). We find that the Tribunal has while directing the petitioner to deposit 30 per cent of the amounts due has not excluded the penalty amount. In cases where the issue is debatable and warrants a stay, then in such cases normally the penalty amount should not be taken into account for the purposes of deciding the amounts to be deposited. In case while granting stay of the order appealed against the appellate authority is of the view that some amount of penalty should also be deposited, then the order directing deposit must indicate strong reasons prima facie warranting the deposit of penalty at the stage of stay application. Moreover in this case, the Tribunal has not considered the issue of financial hardship pleaded by the petitioner before directing a deposit of 30 per cent of the amount due for staying the order appealed against before the Tribunal. According to us, both these issues are germane to decide the quantum of deposit required to be made by the petitioner for grant of stay of the order impugned before the Tribunal. - Order of Tribunal set aside - Matter remanded back - Decided in favour of assesse.
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Wealth tax
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2015 (2) TMI 172
Deletion of wealth tax - Land an urban land or not - Whether CWT(A), Panaji has erred in treating the company plot of urban land, which is liable for Wealth Tax is outside the purview of definition of assets u/s. 2(ea)(v) of the Wealth Tax Act - Held that:- as per the documentary evidence the land at Survey No.15,16,17,18,20, 21 and 22 is located within jurisdiction of village Panchayat Siridao Goa is not urban land as per definition contained in explanation 1(b)(i) of Section 2(ea). - distance has to be measured by the road and the distance cannot be the aerial distance. - From the definition there is an amendment in Section-2(14) w.e.f 1.4.2014 that the distance has to be measured aerially. The amendment clearly states that amended provisions will be applicable for assessment year 2014-15 and subsequent assessment years. Since the present case pertains to A.Y. 2005-06, the pre amended position would not prevail and as stated earlier the judgments have clearly ruled that distance has to be measured by the road and the distance cannot be taken by aerial distance. "Net wealth" means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on the date under this Act, is in excess of the aggregate value of all the debts owned by the assessee on the date of value which have been incurred in relation to the said assets. The net wealth is chargeable to tax. In the assessee’s case the net wealth tax that a land situated in any area which is comprised within jurisdiction of a Municipality or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the valuation date and land situated within 8 kms from the local limits of such municipalities or cantonment as the Central Government may specify. In the case of assessee the valuation date is 31st March, 2005 and the last census preceding this date is that in 2001. The land containing Survey Nos.15,16,17,18,20,21 and 22 is situated in Village Panchayat Siridao, Goa. As per certificate the population of the village is 2872 which is less than 10000. The population is confirmed by the certificate obtained from Census Department. Thus, the land situated at Survey Nos.15,16,17,18,20,21 and 22 located within jurisdiction of Survey Nos.15,16,17,18,20,21 and 22 Village Panchayat Siridao-Goa is not urban land. The village Panchayat of Siridao-Goa nearest Municipalities Corporation is the Panaji Municipal Corporation. As per the certificate the Village Panchayat of Siridao-Goa is more than 8 kms. Therefore, we are of the view that the land of Siridao-Goa of the assessee Survey Nos.15,16,17,18,20,21 and 22 is not urban land as per Section 2(ea), therefore, it is not an asset. - appeal of the Department is not decided on merit and Cross Objection is allowed.
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