TMI Tax Updates - e-Newsletter
February 6, 2018

Case Laws in this Newsletter:

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

TMI SMS

• Presumptive income u/s 44AE - heavy goods vehicle (more than 12MT gross vehicle weight) - Substantial increase in deemed income

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• Interest income on KVP, NSC & SB A/c to be taxed on accrual basis in the hands of salaried employee as no method of accounting is followed

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Articles

1. Farmer Exporter or Exported from Registered Farm.

   By: Kishan Barai

2. FB - SALARY - IS THERE MISTAKE IN CLAUSES vis a vis Budget Speech and memorandum?

   By: DEVKUMAR KOTHARI

3. FB 2018 - Capital gains in case of item of inventory converted into capital asset.

   By: DEVKUMAR KOTHARI

4. LTCG Bonds –S.54EC benefit to be restricted from assessment year 2019-20 and lock-in-period will increase from 01.04.2018

   By: DEVKUMAR KOTHARI

5. FB 2018 Proposal to increased penalty under section 271FA to ensure compliance.

   By: DEVKUMAR KOTHARI

6. FB 2018 – S.253 Appeal before Tribunal-proposed amendment should be w.e.f. 01.04.2017 the day when S.271J became effective empowering CIT(A) to impose penalty

   By: DEVKUMAR KOTHARI

7. FB 2018- Exemption for Long-term capital gains with STT book LTCG before 31st March, 2018 by selling and delivery well in time before 31.03.18 taking care of Holiday.

   By: DEVKUMAR KOTHARI

News

1. Appeal against penalty imposed by Commissioner (Appeals) under section 271J

2. Amendments to the structure of Authority for Advance Rulings

3. Penalty for failure to furnish statement of financial transaction or reportable account

4. Exemption to specified income of class of body, authority, Board, Trust or Commission in certain cases

5. Tax deduction at source on 7.75% GOI Savings (Taxable) Bonds, 2018

6. Amendments in relation to notified Income Computation and Disclosure Standards.

7. Rationalisation of the provisions of section 115BBE

8. Rationalization of the provisions of section 54EC

9. Tax neutral transfers

10. Rationalisation of provision relating to conversion of stock-in-trade into Capital Asset

11. Rationalization of section 43CA, section 50C and section 56.

12. Deductions in respect of certain incomes not to be allowed unless return is filed by the due date

13. Extending the benefit of tax-free withdrawal from NPS to non-employee subscribers

14. Rationalisation of provision of section 115BA relating to certain domestic companies

15. Rationalisation of provisions relating to Country-by-Country Report

16. Rationalisation of prima-facie adjustments during processing of return of income

17. Frequently Asked Questions (FAQs) regarding taxation of long-term capital gains proposed in Finance Bill, 2018-reg.

18. Rationalisation of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

19. Rationalisation of section 276CC relating to prosecution for failure to furnish return

20. Rationalisation of the provisions relating to Commodity Transaction Tax

21. New scheme for scrutiny assessment

22. Benefit of carry forward and set off of losses

23. Relief from liability of Minimum Alternate Tax (MAT)

24. Royalty and FTS payment by NTRO to a non-resident to be tax-exempt

25. Exemption of income of Foreign Company from sale of leftover stock of crude oil on termination of agreement or arrangement

26. Tax treatment of transactions in respect of trading in agricultural commodity derivatives

27. Incentive for employment generation

28. Meassures to promote International Financial Services Centre (IFSC)

29. Meassures to promote start-ups

30. Deduction in respect of income of Farm Producer Companies

31. Deduction in respect of interest income to senior citizen

32. Enhanced deduction to senior citizens for medical treatment of specified diseases

33. Deductions available to senior citizens in respect of health insurance premium and medical treatment

34. Presumptive income under section 44AE in case of goods carriage

35. Taxability of compensation in connection to business or employment

36. “Business connection” to include “Significant Economic presence”

37. Aligning the scope of “business connection” with modified PE Rule as per Multilateral Instrument (MLI).

38. Tax deduction at source and manner of payment in respect of certain exempt entities

39. Taxation of long-term capital gains in the case of Foreign Institutional Investor

40. Dividend distribution tax on dividend payouts to unit holders in an equity oriented fund

41. New regime for taxation of long-term capital gains on sale of equity shares etc.

42. Application of Dividend Distribution Tax to Deemed Dividend

43. Widening of scope of Accumulated profits for the purposes of Dividend

44. Entities to apply for Permanent Account Number in certain cases

45. Rates of income-tax in respect of income liable to tax for the assessment year 2018-19

46. Issuance of Frequently Asked Questions (FAQs) regarding taxation of long-term capital gains proposed in Finance Bill, 2018

47. Commerce Minister Suresh Prabhu kicks off consultations on the New Industrial Policy

48. The Union Minister of Finance and Corporate Affairs, Shri ArunJaitley stresses on the importance of procedural fairness in public procurement and award of contracts ;States that this can be ensured through transparency and fairness that enable a State to act in the best interest for its citizens in terms of price, quality and service delivery and help avoid elements of nepotism and corruption in public procurement;The Finance Minister, Shri Jaitleyinaugurates the Fifth South Asia Region Public Procurement Conference in national capital

49. RBI Reference Rate for US $

Notifications

DGFT

1. 49/2015-2020 - dated 5-2-2018 - FTP

Updation in Para 4 (A) of General Notes Regarding Import Policy of ITC (HS), 2017, Schedule — I (Import Policy)

Highlights / Catch Notes

Income Tax

• Finance Bill, 2018 Introduces 10% Tax on Long-Term Capital Gains Over Threshold; Grandfathering Clause for Pre-2018 Gains.

  News : Frequently Asked Questions (FAQs) regarding taxation of long-term capital gains proposed in Finance Bill, 2018-reg.
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• Dividend Distribution Tax Applies to Deemed Dividends: Understanding Tax Obligations to Prevent Avoidance and Ensure Compliance.

  News : Application of Dividend Distribution Tax to Deemed Dividend
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• New Income Tax Scrutiny Scheme launched to streamline assessments, enhance transparency, and reduce litigation using data-driven case selection.

  News : New scheme for scrutiny assessment
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• Deemed Income Increase for Heavy Goods Vehicles Over 12 Metric Tons u/s 44AE Affects Tax Calculations.

  News : Presumptive income u/s 44AE - heavy goods vehicle (more than 12MT gross vehicle weight) - Substantial increase in deemed income
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• "Business Connection" Aligned with Modified PE Rule Under MLI to Address Digital Tax Challenges and Base Erosion.

  News : Aligning the scope of “business connection” with modified PE Rule as per Multilateral Instrument (MLI).
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• Co-op Society Payments to Developer for Land Development Not Subject to TDS u/s 194C of Income Tax Act.

  Case-Laws - AT : TDS u/s 194C - payments made to developer by the co-operative society - activity of identifying suitable lands and forming a residential layout for allotment of residential sites to its members - No tds liability - - AT
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• Fee Imposed u/s 234E for TDS Statement Filed in 2014 Is Now Unrectifiable Due to Missed Deadline.

  Case-Laws - AT : Levy of fee u/s 234E - the related TDS statement was filed on 14th October, 2014, such a levy could only have been made at best within 15th October, 2015. That time has already elapsed and the defect is thus not curable even at this stage. - AT
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• Court Rules Interest Income from KVP, NSC, and Savings Accounts Taxable Due to Inconsistent Accounting Method by Assessee.

  Case-Laws - AT : Interest income Interest income on KVP, NSC and Savings Bank Account - accrual basis or receipt basis - The claim of the assessee that it is following receipt basis and hence cannot be taxed during the current year, is not accepted for the reason that, no method of accounting is followed by the assessee, who is only a salaried employee. - AT
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• Assessee Company in Logistics Training Secures Section 12AA Registration and Section 80G Approval for Public Benefit Initiatives.

  Case-Laws - AT : Asassessee company registered u/s 25 of the Companies Act is carrying out its activities with specific aims and objects of imparting training in logistics, warehousing management and courier management for the benefit of the public at large being a public private partnership having affiliation of NSDC under the Ministry of Skill Development and Entrepreneurship as its vocational training partner and as such, is entitled to be registered u/s 12AA and consequent approval u/s 80G - AT
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Customs

• Import Case Dismissed: No Specific Color Requirement for Base Paper Under DEEC Exemption License.

  Case-Laws - AT : Import of base paper by availing DEEC exemption - the licence does not qualify the base paper with any particular colour. Hence the contention in the SCN that the noticee should have imported a particular colour of base paper only, does not appear to be legally sustainable - demand set aside - AT
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• Imported Goods Valuation Shows 27% Discrepancy Due to Feature Differences and Time Gap; Demand Set Aside.

  Case-Laws - AT : Valuation of imported goods - the difference between the declared value and enhanced value is around 27% which could be ascribed not only on account of differences in the features between the two machines but also on account of the five months interregnum period between the two imports - demand set aside - AT
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• Water Dispensers with Mini Fridge Feature Classified as Dispensers, Not Refrigerators, per Case Law and Customs Highlights.

  Case-Laws - AT : Classification of Brand water dispensers - The principal function of the goods is that of a dispenser of hot and cold water with an added feature of a mini refrigerator - the impugned items are required to be classified as water dispenser and not as a refrigerator - AT
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Service Tax

• Bus Service by Kilometer Not a Rent-a-Cab Operator Service; No Individual Rent Agreement Involved.

  Case-Laws - AT : Rent-a-cab operator service - There is no person involved as a recipient of a Rent-a-Cab service to whom the buses is handed over under a rent agreement - in this fact arrangement of providing the buses for a particular journey on KM basis does not fall under the category of Rent-a-Cab Operator Service. - AT
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• Non-Profit Company Faces Dispute Over Service Tax Classification Under Business Auxiliary Service Category.

  Case-Laws - AT : Business Auxiliary Service - failure to discharge service tax - appellant company is a registered under Section 25 of the Companies Act as a non-profit organization and therefore cannot be considered as commercial concern. - AT
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• Refund Claim Denied for Property Used as Hotel; Renting Activities Classified as Business Use Under Relevant Rules.

  Case-Laws - AT : Refund claim - Renting of Immovable Property Services - for residential / accommodation purpose or otherwise - the Scheduled Property is rented out for running of Hotel, Lodging House and allied/related activities. The Restaurant, Coffee Shop etc., are facilities attached to the business of renting of Hotel - refund not allowed - AT
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• Refund Allowed for Extra Payment Mistakenly Made as Penalty in Service Tax Case.

  Case-Laws - AT : Refund of penalty - there was no need to pay penalty - the said amount was suo moto deposited by the respondent while discharging the service tax and interest, which in my view, cannot be designated or termed as penalty. At best, it could be considered as an extra payment made - refund allowed - AT
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Central Excise

• Court Grants Tax Exemption for Intravenous Drugs Under Notification No. 6/2002-CE Despite Revenue Authorities' Objections.

  Case-Laws - AT : Benefit of exemption - I.V. Fluids viz., Ofloxacin I.V. Infusion Revenue entertained a view that when the drugs manufactured by the respondents are administered intravenously, the same will not qualify for exemption as the said exemption is available only to I.V. Fluids used for Sugar, Electrolyte or Fluid replenishment - Contention of the revenue rejected - Benefit of N/N. 6/2002-CE allowed - AT
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Case Laws:

• Income Tax

• 2018 (2) TMI 272
  TDS u/s 194C - payments made to developer by the co-operative society - activity of identifying suitable lands and forming a residential layout for allotment of residential sites to its members - tds liability - Held that:- From the agreement/MOU’s it is seen that the assessee society has entrusted the procurement of 100 acres of land at Adigare Kallahalli Village, Sarjapur, Anekal Taluk and development of residential layout thereon with the conditions to execute civil works such as roads, common amenities, drainage, electrification, plan approval, conversion of lands from agriculture to non-agriculture status, etc., to the developer. However, the fact remains that the agreements essentially and basically relate to the purchase of land development and purchase of residential sites from the developer/contractors. Respectfully following the ratio of the decision of the Hon’ble Karnataka High Court in the case of Karnataka State Judicial Departmental Employees House Building Society Ltd. [2010 (3) TMI 1211 - KARNATAKA HIGH COURT] it is held that there was no requirement for deduction of tax at source u/s 194C - Decided in favour of assessee

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• 2018 (2) TMI 271
  Disallowance made u/s 40A(3) - Held that:- Assessee’s case falls under the exceptions provided in Rule 6DD(b) and (k) of the Rules and accordingly, no disallowance u/s 40A(3) of the Act could be made and accordingly we direct the ld AO to delete the same. Accordingly the grounds raised by the revenue are dismissed. See Ramnagar Pachai & C.S. Shop vs ITO [2017 (2) TMI 400 - ITAT KOLKATA] - Decided in favour of assessee

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• 2018 (2) TMI 270
  Validity of assessment u/s. 153A - incriminating material or evidence found - Held that:- No incriminating material or evidence had been found during the course of search so as to doubt the transactions. It was noted that in the entire assessment order, the AO has not referred to any seized material or other material for the year under consideration having being found during the course of search in the case of assessee, leave alone the question of any incriminating material for the year under appeal. Therefore, the action of the AO is based upon conjectures and surmises and hence, the additions made is not sustainable in the eyes of law, because this issue in dispute is now no more res-integra, in view of the decision in the case Commissioner of Income Tax vs. Kabul Chawla reported (2015 (9) TMI 80 - DELHI HIGH COURT) - Decided in favour of assessee.

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• 2018 (2) TMI 269
  Rejection of books of accounts - N.P. rate determination - Held that:- Assessee did not produce bills and vouchers in support of the books of account, therefore, same was rejected under section 145(3) of the I.T. Act which is also not in challenge before the Tribunal. Further, the assessee has made statement before A.O. that instead of proposed NP rate of 5%, NP rate of 2.50% may be applied for making the addition. It is well settled Law that addition made on admission of the assessee would not be subject to challenge in appeal. Since assessee agreed for addition by applying net profit rate of 2.50% as is applied in the case of her husband, therefore, there is nothing wrong in the orders of the authorities below in making and confirming the addition. Ground of appeal of assessee is dismissed. Unexplained deposit in the bank account - Addition on account of FDRs and interest on the said FDRs - Held that:- Detailed information should have been obtained from the Bank as to who has opened this Bank Account with all the documents and all the documents should be confronted to the assessee. The statement of the Bank Manager should be recorded for verification of the facts along with KYC details available with the Bank. Similarly, as regards FDRs, the assessee explained that there may be a wrong information mentioning the name of Shri Ranjit Kumar Proprietor of M/s. Computer Junction because FDRs have been purchased out of cash available in the books of account of the assessee. The assessee obtained FDRs of Rs. 70 lakhs which includes Rs. 12.50 lakhs, which has also shown in the books of account of the assessee. Therefore, this fact should be verified from the cash book maintained by the assessee. In view of these facts, the matter requires reconsideration at the level of the A.O.

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• 2018 (2) TMI 268
  Addition on account of long term capital gain - whether the land sold by the appellant was a capital asset within the meaning of section 2(14) - sale of agricultural land - Held that:- The land in question is treated as agricultural land and the capital gains arising out of sale of agricultural land is entitled for exemption u/s.2(14) of the Act. Accordingly, we set aside the orders of the CIT(A) and direct the AO to delete the addition and allow the grounds of appeal in favour of the assessee.

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• 2018 (2) TMI 267
  Reopening of assessment - granting set off of unabsorbed depreciation brought forward from the AY 1997-98 in the present assessment year - Held that:- Unabsorbed depreciation of the AY 1995-96 and 1996-97 would become deprecation of the AY 2002-03 after amendment, because 8 years have not expired upto the AY 2002-03. This amount will become deprecation of AY 2002-03, and thereafter it would be carried forward for subsequent years and will be set off against profit and gains of subsequent years without any limitation of alleged 8 years. We have extracted the finding of the AO where the ld.AO has applied this limitation of 8 years from the AY 1997-98 and held that it will expire in AY 2004-05. AO has committed an error by taking the limit in this manner. He has to compute 8 years upto the AY 02-03, and thereafter it would become current unabsorbed depreciation in the AY 2002-03 which will be available for set off in subsequent year without any restriction of limitation of years. Thus, the issue is squarely covered in favour of the assessee. We do not find any error in the order of the ld.CIT(A) as far as second fold of contention is concerned. We find that notice under section 148 was issued on 13.2.2012 i.e. after expiry of 4 years from the end of the assessment year. There was a scrutiny assessment under section 143(3) of the Act. Proviso appended to section 147 puts a restriction on the powers of AO to reopen the assessment by issuance of notice under section 148 in the cases where 4 years have expired and scrutiny assessment under section 143(3) was made. The income of the assessee has escaped from the assessment on account of failure of the assessee to disclose all material facts fully and truly, no notice under section 148 could be issued. All these facts were also in the knowledge of the AO when he passed the assessment under section 143(3). There is no failure at the end of the assessee. - Decided against revenue

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• 2018 (2) TMI 266
  Reopening of assessment - addition made u/s. 69C towards unexplained expenditure for an alleged bogus purchases - Held that:- It is pertinent to mention that the Revenue has originally processed return of income u/s. 143(1) of the Act and no scrutiny assessment u/s. 143(3) was framed by the Revenue . The Ld. DR did not objected to dismissal of the grounds of appeal being ground no.1 and 2 raised by the assessee challenged the reopening of the assessment u/s. 147 of the Act. Thus, keeping in view the factual matrix of the case we are inclined to dismiss the ground raised by the assessee being ground no. 1 and 2 challenging the reopening of the concluded assessment u/s. 147 of the Act. The possibility of assessee buying the material actually from grey market at lower rates and obtaining corresponding bills from the said parties namely AVI Export and Rajeev Impex to reconcile the quantitative records and books of accounts cannot be ruled out . Under these circumstances , we are inclined to confirm aforesaid well reasoned appellate order of the Ld. CIT-A which aimed to make additions to the income by estimating profits embedded in the said alleged bogus purchases which profits the assessee gained by obtaining material from grey market at lower rate while obtaining bills from these parties namely AVI Exports and Rajiv Impex to reconcile records and books of accounts. The profits estimated by the learned CIT(A) appears to be reasonable keeping in view factual matrix of the case and in such type of cases, fair estimation of profits is required to be made which requires some guess work and in our considered view, the estimation made by learned CIT(A) is reasonable and fair as it could not be said to be arbitrary or excessive to call for interference by us and more-so estimation made by learned CIT-A is backed by judicial precedence as is found mentioned in learned CIT(A) appellate order. CIT(A) has rightly relied upon the orders of the Hon’ble Courts as is contained in his appellate orders wherein estimation of embedded profits in the case of alleged bogus purchases were upheld by Hon’ble Courts.

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• 2018 (2) TMI 265
  Penalty u/s 271D and penalty u/s 271E - accepting loans in cash and payment in cash of the loans received - Held that:- There is no dispute with the reference to amounts offered as income which are supported by letter written by Assessee to the Addl.CIT dated 28-09-2010 and subsequent filing of return on 05-08-2011. An amount of Rs. 13.50 lakhs has been admitted as income out of the amount received in cash. Payments made to Mr. D Raju and Mr. D Srinu to an extent of Rs. 6 lakhs are part of the amounts offered as income. Consequently, the repayment in cash does not arise. Accordingly levy of penalty u/s 271E of the Act becomes infructuous, in the light of the facts that borrowed amount was treated as income of the assessee. The repayment in cash does not violate the provisions of Sec. 269I, therefore levy of penalty u/s 271E is not warranted. Therefore the levy of penalty u/s 271E is cancelled and is accordingly allowed. Levy of penalty u/s 271D out of the borrowed amounts, there cannot be any penalty u/s 271D, therefore Rs. 13.50 lakhs admitted by Assessee should not have been considered for levy of penalty. Coming to the balance amount, it is the Assessee’s contentions that these are advances received for sale of apartments. The statement recorded in the course of survey do indicate that Assessee has taken over certain flats being constructed by the firm for individual trading / construction business, but assessee admitted in the course of survey that these are borrowed on promissory notes. Subsequently Assessee retracted statement to submit that these were advances received and relied on copies of the agreement of sale impounded along with promissory notes. During the course of present hearing, it was pointed out that there are only three promissory notes involving Sri Polisetty Venkateswarlu (Rs. 5 lakhs) Konda Venkateswalu (Rs. 2.50) lakhs and T. Harshavardhan (Rs. 3 lakhs) and for the balance of amounts, there were no promissory notes at all. A.O did not examine these aspects and relied on the statement alone holding that all the amounts were received by way of promissory notes. This aspect require examination by A.O. Thus set aside the order of the A.O U/s 271Dand restore the entire issue to the file of the A.O for examination of facts and decide the issue whether the amounts are received by way of agreement of sale or not and if so to, what extent.

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• 2018 (2) TMI 264
  Levy of fee u/s 234E while processing the statement furnished by the assessee u/s 200A - intimation in form No. 35 presumed to be the order passed U/S 234E - Held that:- Adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A before 01/06/2015. The issue is whether such a levy could be effected in the course of intimation under section 200A. The answer is clearly in negative. No other provision enabling a demand in respect of this levy has been pointed out to us by the Ld. DR and it is thus settled law that in the absence of the enabling provision under section 200A, no such levy could be effected. As intimation under section 200A, raising a demand or directing a refund to the tax deductor, can only be passed within one year from the end of the financial year within which the related TDS statement is filed, and as the related TDS statement was filed on 14th October, 2014, such a levy could only have been made at best within 15th October, 2015. That time has already elapsed and the defect is thus not curable even at this stage. In view of these discussions, bearing in mind entirety the facts of the case, the impugned levy of fees under section 234E is unsustainable in law. - Decided in favour of assessee.

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• 2018 (2) TMI 263
  Applicability of Section 43D - non applicability in case of the assessee bank as it is not a scheduled bank as classified to this effect by the Reserve Bank of India - Held that:- We find no merit in Revenue’s instant argument. Learned AR quotes before us judgment of PCIT vs. Shri Mahila Seva Sahakari Bank Ltd. (2016 (8) TMI 377 - GUJARAT HIGH COURT) upholding that once the assessee bank had not recognized any income as per RBI guidelines issued u/s.45Q of the Reserve Bank of India Act, 1934, provisions of Chapter III thereof would have an overriding effect over all other laws including the Income Tax Act, 1961. Hon’ble jurisdictional high court therefore has rejected Revenue’s twin identical arguments therein (supra) as adopted by the Assessing Officer whilst making the impugned addition in the instant case. We make it clear that the Revenue has not drawn any distinction on facts or law qua the above hon’ble jurisdictional high court’s judgment. We therefore see no reason to interfere with the learned CIT(A)’s order deleting the impugned addition. - Decided in favour of assessee

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• 2018 (2) TMI 262
  Addition being investment in KVP, which is in the name of Smt. Kajal Ghosh, wife of the assessee - Held that:- Assessment order passed in the case of Smt. Kajal Ghosh, was a substantive assessment. Even the interest on this investment was adder in her assessment. As already stated Smt. Kajal Ghosh is a Doctor by profession, working with the Government of West Bengal and she has explained the direct source of investment. In case there were some discrepancies, the issue can be only considered in the hands of Dr. Smt. Kajal Ghosh and not in the hands of the assessee. These investments and the interest income thereon, has been considered in the assessment of Dr. Smt. Kajal Ghosh, in a substantive manner, the same addition cannot be made in the hands of the assessee as this would tantamount to double taxation of the same income. Hence, deleted this addition and allow this Ground of the assessee. In the result, appeal of the assessee is allowed. Benamidars - Held that:- Assessing Officer has failed to discharge the burden of proof that lay on him to prove that the wife, father-in-law, mother-in-law and sons of the assessee were benamidars of the assessee. In the result, this ground of the assessee is allowed. Addition being interest on KVP, NSC and Savings Bank Account - Held that:- There was a joint account in the name of the assessee’s wife as the first holder along with the assessee as the second holder. The opening balance on 01/04/2003, was Rs. 49,298/- and the closing balance was Rs. 1,00,080/-. Smt. Kajal Ghosh, has accepted that this account belongs to her and it was considered in the assessment of Smt. Kajal Ghosh. Under these circumstances, the addition of Rs. 1,609/-, being interest in her Savings Bank Account, cannot be added in the hands of the assessee. Accordingly the same is deleted and this ground of the assessee is allowed. Addition of interest on KVP and NSC - Held that:- This addition is rightly made by the Assessing Officer and sustained by the ld. CIT(A) as interest has accrued to the assessee on these two investments, which admittedly belonged to the assessee. The claim of the assessee that it is following receipt basis and hence cannot be taxed during the current year, is not accepted for the reason that, no method of accounting is followed by the assessee, who is only a salaried employee. Hence, we set aside this issue to the file of the Assessing Officer to calculate the interest accrued during this year only and bring it to tax. In the result, this ground of the assessee is allowed in part. Addition of unexplained investments - Held that:- No addition is called for under the facts and circumstances of the case. When a person receives salary in cash, his claim that the investments were made from such salary, cannot be brushed aside. Thus, this addition is deleted and Ground No. 3 of the assessee is allowed. Addition on account that the assessee has shown low drawings - Held that:- Quantum of expenditure disclosed by the assessee towards drawing for household expenses is reasonable. The addition made by the Assessing Officer is on ad-hoc basis. Hence, deleted the same on the ground that this is devoid of merit. Addition being an amount of deposit in Bank Account No. 5178, belonging to Smt. Abha Naug, mother-in-law (of the assessee) - Held that:- Smt. Abha Naugh received rental income every month. I find that there is no deposit of Rs. 27,294/- on 28/01/2014 as alleged by the Assessing Officer. The balance is a continuous rental deposit of Rs. 4,200/- p.m. Smt. Abha Naugh passed away on 30th August, 2002 and her husband Shri P K Naug and Smt. Kajal Ghosh, declared 50 per cent each of this income in their return’s of income. On these facts, which could not be controverted by the ld. D/R, this addition is of Rs. 74,029/- is hereby deleted Unexplained investments made by the assessee in the name of his son, Sri Abhishek Ghosh - Held that:- Smt. Kajal Ghosh, owned up these deposits and has shown the source of the deposits in the assessment year as Smt. Kajal Ghosh’s. The said bank account in the name of Sri Abhishek Ghosh, and interest income thereon was considered in her return of income. Sri Abhishek Ghosh, is a major son and has independent sources of income. Under these circumstances, as the deposits in the bank account and the interest income thereon are considered in the assessment of Smt. Kajal Ghosh, making an addition again in the case of the assessee would tantamount to double taxation of the same amount. Thus, this addition is hereby deleted Unexplained investments made in the name of the minor son, Sri Anirban Ghosh - Held that:- It was explained that the sources of deposit made by Sri Anirban Ghosh, was out of maturity of fixed deposits. Smt. Kajal Ghosh, as also accounted for this amount. Thus, this addition cannot be made in the name of the assessee for this assessment year, as the sources has been explained as out of maturity of fixed deposits from earlier years. Thus, this ground of the assessee is allowed. Unexplained cash transactions based on two cash memos - Held that:- Addition cannot be made in the name of the assessee as Smt. Kajal Ghosh, is a separate assessee and this expenditure incurred by her should be considered in her assessment

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• 2018 (2) TMI 261
  Disallowance of Advertisement Expenses incurred - Held that:- Expenditure should be allowed as the assessee has discharged the burden of proof that lay on it. It is not a case of the Assessing Officer that he had evidence to prove that the expenditure was not incurred for the purpose of business. The amount of Rs. 80,000/- was paid to the Hotel for holding a dealers’ conference. The conclusion drawn by the revenue authorities on facts were based on conjectures. This expenditure has to be allowed. Travelling Expenses allowability - Held that:- Though the assessee has produced evidences of having undertaken purchase of spices in Kerala during that period, the entire expenditure cannot be allowed, as what was paid for was for a package tour. Hence 50% of this expenditure may be disallowed. Attending a dealers’ conference, which was organized in Novatel Hotel at Hyderabad. The assessee has produced evidence to prove that there was a dealers’ conference in Novatel Hotel, Hyderabad. A confirmation from Novatel Hotel was also enclosed as evidence. In view of these evidences, the expenditure is directed to be allowed. Payment made to Vinayak Leisure Tours - Held that:- Assessee has produced certain correspondences with parties in Thailand, in support of his contention that they had certain business meetings therein. The assessee had also produced copy of export invoice and bill of lading in support of its claim. Both of these are dt. 14/06/2012 and 07/08/2012, respectively, which is before 26/10/2012. The Assessing Officer and the ld. CIT(A) disallowed this claim on the ground that the expenditure is not for the purpose of business. In my view the assessee has produced cogent evidence of having business meetings in Thailand. There was trade links with Thailand. The assessee produced a certificate of registration as an exporter. Thus, this expenditure has to be allowed. Drawing foreign exchange for travel to Thailand - Held that:- In view of my decision in the case of allowability of Rs. 1,38,849/- being travel expense to Thailand, I allow this claim of the assessee as this expense is also incurred for this foreign travel. In the result, this disallowance is hereby deleted. Supervisory expenses claimed - Held that:- The claim of the assessee that these three persons were looking after sale of three outlets of M/s. J.K. Lifestores, was disbelieved as they were related parties. The assessee claims that they had rendered services and payments were made to them through account payee cheques in lieu of the services rendered. The Assessing Officer issued notice u/s 133(6) of the Act, to these three persons. This was complied with by these three persons who filed the details sought for. The assessee also filed details of the service rendered by these persons. T.D.S. was deducted on these payments. Income was duly declared by the recipients in their return of income. This disallowance is not called for. Disallowance of sales promotion expenses claimed by the assessee as having been incurred for a dealers’ conferences at Hotel Hyatt Regency as well as at Hotel Novatel & Resorts, Hyderabad - Held that:- Assessing Officer does not have any evidence to contradict the claim of the assessee. Hence, direct that the above expenditure be allowed.

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• 2018 (2) TMI 260
  Rejection of assessee’s books u/s.145 - Held that:- Learned counsel however fails to rebut both the lower authorities’ multiple reasoning supporting rejection of assessee’s books u/s.145 of the Act after quoting various shortages forming hallmark of ship breaking business. We therefore see no reason to accept assessee’s instant substantive grievance that both the lower authorities have erred in law as well as on facts in rejecting its books. The assessee’s instant first substantive ground is therefore declined. Unaccounted sales of machineries/DG sets, engines addition - Held that:- We find no substance in the instant appeal for the reason that profit element in account and unaccounted sales figures may not be uniform on presumption basis. We therefore direct the Assessing Officer to compute the impugned addition by taking NP @4.5% qua the addition amount of Rs. 55lacs. The assessee gets part relief in its second substantive ground. Unaccounted sales of oil addition - Assessing Officer admittedly made the impugned addition after holding that the assessee had sold oil in ship’s engines after they were taken to its ship breaking yard - Held that:- We find at this stage that neither the assessee has discharged its onus that none of the ships concerned had oil in its fuel tank nor Revenue has proved the exact quantity thereof since the Assessing Officer chose to make the impugned addition on estimation basis. We accordingly see no reason to interfere with learned CIT(A)’s conclusion restricting the impugned addition to a lump sum amount of Rs. 1lac only.

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• 2018 (2) TMI 259
  Revision u/s 263 - disallowing interest of total interest claimed u/s 24(b) - Held that:- Funds were totally explained by the assessee during the assessment proceedings before the Assessing Officer and the same fact was stated before the CIT as well as while giving objection to 263 notice. The order passed by the Commissioner in capacity of Section 263 is merely a second opinion and does not fall in the category of prejudicial to the interest of Revenue. The assessee has already offered tax on the rental income. Assessing Officer has properly verified all the facts. Though on the surface the Assessing Officer’s order may look short of lines but it is passed with due diligence and there is no need to invoking Section 263 power by the Commissioner. Assessing Officer has taken cognizance of all the material provided by the Assessee during the Assessment Proceedings and after verifying the same has passed just and proper order. Therefore, in light of the above findings, the order of the Commissioner u/s 263 of the Act is set aside. - Decided against revenue

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• 2018 (2) TMI 258
  Claim of deduction u/s 80IC - entitlement of the deduction at the rate of 100% of the eligible profit to new units on undertaking substantial expansion - Held that:- The contention of the Ld.DR of restoring the issue to the AO for verification of the fact of having undertaken substantial expansion has also been dealt by the ITAT in its decision in the case of one of the assessees, M/s Security products Pvt. Ltd.(2018 (2) TMI 163 - ITAT CHANDIGARH) rejecting the contention on account of the specific finding of the Jurisdictional High Court while deciding the issue in favour of the assessee in the case of Stove Craft (2017 (12) TMI 69 - HIMACHAL PRADESH HIGH COURT) that the Revenue has not disputed this fact and which in the case of the present assessee is evident from the assessment orders also. We therefore reject this contention of the ld. DR. Thus the order of the ld. CIT(A) is set aside and the Assessing Officer is directed to grant the assessee's deduction of 100% of its eligible profit. - Decided in favour of assessee

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• 2018 (2) TMI 257
  Long term capital gain arising from sale of land was treated by the AO as short term capital gain - Held that:- When agreement to sale in respect of immoveable property is executed a right in personae is created in favour of the vendee and thereby the vendor is restrain from selling the property to someone else because the vendee gets the legitimate right to enforce specific performance of the agreement. In view of the above facts and circumstances of the case as well as the decision Hon’ble Supreme Court in case of Sanjay Lal vs. CIT [2014 (7) TMI 99 - SUPREME COURT] we hold that the transfer of the land in question would be regarded as on the date of agreement to sale dated 11.04.2007. The order of the authorities below qua this issue are set aside. Fair market value adopted by the AO as per Section 50C - determination by DVO - Held that:- It is pertinent to note that there are various factors which effect the fair market value of land in question including the land use, the restriction of built up area, subsequent circular issued by the Government prescribing the rates for the stamp duty authority in respect of the farm house as per the size of the farm house but have not been considered by DVO. Therefore, these aspects are required to be taken into consideration while determining the fair market value of the land in question. We find that the DVO has not given a due waitage to these factors while determining the valuation, therefore, the same is not sustainable. We set aside this issue to the record of the AO/DVO for determination of fair market value after considering all the relevant factors such as the land use, restriction of built up area, the circular dated 14.07.2014 specifying as per rates for the farm house land in accordance with the area of the land and acquisition by Government. The circular dated 14.07.2014 is a useful and relevant guidance for determining the fair market value. Disallowance of cost of improvement - Held that:- Since, this issue of date of acquisition of the land in question has been decided by us by holding that the assessee has acquired the land vide agreement dated 11.04.2007 and therefore, the expenditure incurred for improvement of the land after the said date of acquisition is an allowable claim as per section 48 of the Income Tax Act. Even otherwise if an expenditure is incurred by the assessee for improvement of the land after the agreement to sale dated 11.04.2007 and prior to the sale deed dated 13.04.2010 the fact remains that the expenditure was incurred for improvement of land by the assessee and acquired by the assessee. Therefore we are of the considered view that the expenditure incurred cannot be disallowed when the purchase consideration paid by the assessee prior to the sale deed was accepted and therefore, the expenditure incurred by the assessee prior to the sale deed is also allowable claim. Accordingly, we decide this issue in favour of the assessee.

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• 2018 (2) TMI 256
  Addition in respect of unsecured loans under Section 68 - Held that:- Once the assessee discharges its initial onus of identity, genuineness of transaction and creditworthiness then the AO is precluded from going to question the source in view of the decision of the Hon'ble Supreme Court in the case of CIT vs. Lovely Exports (2008 (1) TMI 575 - SUPREME COURT OF INDIA) wherein it was held that the names and address of the persons from whom the loan were taken have been furnished to the AO, then the AO is free to reopen the individual assessment in accordance with law but the additions cannot be regarded as undisclosed income u/s 68 of the Act. Cessation of liability - Held that:- The issues need to be re-examined by the AO in the light of the additional evidences filed by the assessee. Hence, we set aside the issue of disallowance of interest expenses, disallowance of consultancy expenses, disallowance of deduction claimed under Section 80C/80D, disallowance of addition based on loose papers, deletion of addition made by the AO towards unproved sundry creditors under Section 41(1)(a), deletion of addition made towards unsecured loans under Section 68 of the Act, deletion of unexplained credit card expenses under Section 69C, deletion of unexplained jewellery and deletion of unexplained purchase of Ipod. The AO is directed to reconsider the issues in the light of the additional evidences filed by the assessee after affording reasonable opportunity of hearing.

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• 2018 (2) TMI 255
  Registration u/s 12AA and approval u/s 80G rejected - denial of claim on the ground that the activities of the assessee company does not fall within the ambit of section 2(15) being merely into the promotion of transport business - Held that:- When we examine the aims and objects of the assessee company in the light of the aforesaid definition of charitable purpose imparting skill education in logistics, warehousing management and courier management, it would certainly lead to fulfilling the object of general public utility. Furthermore, by imparting skill development in logistics industry, warehouse and courier management, to be deployed in the logistics industry, would certainly serve the object of general public utility as driving vehicles by the untrained drivers on the roads are also leading to numerous road accidents in our country. Asassessee company registered u/s 25 of the Companies Act is carrying out its activities with specific aims and objects of imparting training in logistics, warehousing management and courier management for the benefit of the public at large being a public private partnership having affiliation of NSDC under the Ministry of Skill Development and Entrepreneurship as its vocational training partner and as such, is entitled to be registered u/s 12AA and consequent approval u/s 80G of the Act. So, the impugned orders passed by the CIT (Exemption), Chandigarh are not sustainable in the eyes of law, hence the ld. CIT is directed to grant registration u/s 12AA to the assessee company forthwith, with approval u/s 80G of the Act. Consequently, both the appeals filed by the assessee company are allowed.

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• 2018 (2) TMI 254
  Addition of interest on NPA accounts u/s. 43D - Held that:- This issue is now well settled in favour of the assessee and against the revenue by the judgment the case of Shri Mahila Sewa Sahkari Bank Ltd. [2016 (8) TMI 377 - GUJARAT HIGH COURT].

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• 2018 (2) TMI 253
  Transaction in 'currency derivatives' - treated as ‘marked to market’ transactions - whether liable to be held as 'speculative' within meaning of section 43(5) - CIT-A considered the transactions entered into by the assessee, to be speculative transactions and loss incurred by the assessee not been allowed to be set off against other business income of the assessee - Held that:- As rightly contended, not only were the losses incurred by the assessee entitled to be held as non-speculative, but also the whole of the loss sustained by him was entitled to be allowed to be set off with other income and no part of such loss could be disallowed by holding it to be a 'notional loss'. The facts of the case for assessment year 2014 -15 are in pari materia with those of assessment year 2013-14, except for the fact that there was, undisputedly, no outstanding position as on 31.03.2014 and hence, the observations with regard to assessment year 2013-14 would, mutatis mutandis, apply to assessment year 2014-15 also. DR has sought to place reliance on the Foreign Exchange Management (Foreign Exchange Derivatives Contracts Regulations), 2000 and the Foreign Exchange Control Manual, Chapter -3 Securities Service Contracts (Regulation) Act, 1956. However, neither the aforesaid Regulations, nor the Manual were the subject matter of consideration before the Authorities below. The transactions in currency derivatives as entered into by the assessee, were not speculative transactions. There were no derivative contracts outstanding on 31.03.2014, which could be termed as a notional loss. Accordingly, the loss sustained by the assessee in trading of currency derivatives, amounting to Rs. 17,09,121/- for A.Y. 2013-14 and Rs. 11,84,370/- for A.Y. 2014- 15 are allowed to be set off against the other business income of the assessee. So far as regards A.Y. 2013-14, the assessee has contended that alternatively there were only transactions concerning 1200 currency derivatives sold by the assessee for Rs. 6,55,55,211/-. Thus, on account of being ‘marked-to-market’, resulted into a loss of Rs. 51,789/- against a total loss of Rs. 17,09,120.61. In this regard, the assessee has placed on record, at APB 238 to 245, stock results in the books of account of the assessee, in respect of the currency derivatives. These documents are stated to have been filed before the AO as well. Accordingly, as per the assessee it is only this loss of Rs. 51,789/-, which could have been disallowed. However, since the transactions have, as above, been held to be not speculative transactions, this alternative argument of the assessee is not required to be gone into

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• 2018 (2) TMI 252
  Disallowance under section 14A - Held that:- The legal position is fairly well settled that in the absence of any tax exempt income, disallowance under Section 14A cannot be made. Hon’ble jurisdictional High Court in the case of Corrtech Energy (P.) Ltd. (2014 (3) TMI 856 - GUJARAT HIGH COURT) has upheld this approach. In the case of Ambalal Sarabhai Enterprises Ltd. (2017 (3) TMI 1526 - GUJARAT HIGH COURT), the Hon’ble jurisdictional High Court has once again upheld this proposition and observed that “it cannot be said that the learned Tribunal has committed any error in deleting the addition made by the Assessing Officer on disallowance under Section 14A of the Act”, in a situation in which the assessee did not have any tax exempt income. In view of these discussions, as also bearing in mind entirety of the case, we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned disallowance - Decided in favour of assessee.

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• 2018 (2) TMI 251
  Addition to capital account of partners made u/s 68 - assessee failed to provide the evidence to substantiate the source of capital introduced - Held that:- From CIT(A)'s finding, we find that he has passed a speaking and detailed order whereby he has discussed the explanations and evidences in respect of them with respect to various persons. The learned CIT(A) has made a finding of fact that the creditors had advanced money to the assessee on interest @12% per annum and all the depositors were having PAN & had filed confirmation and therefore, has rightly arrived at the conclusion that the additions were not sustainable and therefore, we do not find any infirmity in the order of CIT(A). In view of the above, ground No. 3 is also rejected. Disallowance of interest on term loan - allowable busniss expenses - Held that:- We find that CIT(A) has made a finding of fact that the assessee was already running a unit and it had installed a new machinery and interest was paid for the loan taken for the new plant & machinery installed in already running unit and therefore, it was not a new business which had come into existence and therefore, proportionate interest relating to the period before start of machinery was an allowable expense. Addition on account of sundry creditors consisting of three parties - Held that:- Assessing Officer during remand proceedings had accepted the explanation in respect of two creditors for which necessary confirmations were filed and in respect of one creditor amounting to Rs. 1,61,885/- he has not accepted the same as the necessary confirmation was not filed and therefore, he had recommended the addition to the extent of Rs. 1,61,885/- only. However, learned CIT(A) has deleted the same also by relying on certain case laws which states that addition of sundry creditors cannot be made u/s 68 of the Act. Revenue appeal dismissed.

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• 2018 (2) TMI 250
  Disallowance on account of purchases - party has denied any transaction with the assessee company - CIT-A deleted the addition - Held that:- Since the impugned disallowance is based only on the findings in the order of assessment for A.Y.2009-10 and since the said disallowance has now been deleted we are of the view that CIT(A) was fully justified in deleting similar addition made in A.Y.2010-11. We find no ground to interfere with the order of CIT(A). Disallowance u/s 14A r.w.s. 8D - Held that:- AO has not brought any material on record to show that the claim made by the assessee regarding disallowance u/s 14A of the Act was incorrect. It is mandatory on the part of the AO to first reject on an objective basis the claim of the assessee with regard to expenses incurred to earn exempt income before resorting to his own basis of expenses to be disallowed u/s 14A of the Act. Without doing so the AO is not entitled to apply the provision of Rule 8D to make disallowance of expenses u/s 14A Depreciation on advertisement hoardings - as per AO hoardings have to be regarded as plant and machinery on which allowable depreciation as per Rules was only 15% - CIT(A) directed the AO to allow the claim of the assessee for depreciation at 100% on hoardings - Held that:- Tribunal has already taken a view in favour of the assessee in the past assessment referred to in the earlier part of this order. It cannot be argued by the ld. DR at this stage that in none of these decisions the question whether the hoardings were temporary or permanent structure was considered by the Tribunal. Going by the principle of consistency we are of the view that it would be just and proper not to take a view different from the view which has already been taken in assessee’s own case in the past. Disallowance of the claim of deduction u/s.80IA - Whether Foot Over-bridges as well as Bus Shelters are not "Road" the revenue from which is eligible for deduction u/s. 80IA - Held that:- We find that identical issue has been considered and decided in assessee’s own case [2015 (6) TMI 593 - ITAT KOLKATA ] wherein confirmed the assessee’s entitlement for deduction u/s 80IA for foot over bridges and bus shelters TDS u/s 194I OR 194C - addition u/s 40(a)(ia)- payment for renting of hoarding space - tds liability - Held that:- Section 40(a)(ia) of the Act cannot be invoked where there is a short deduction and can be invoked only when there is non-deduction. - Revenue appeal dismissed.

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• 2018 (2) TMI 249
  Reopening of assessment u/s 147 - reasons to believe - Held that:- In the absence of any tangible material establishing escapement of income in the hands of assessee, the AO has erred in exercise of jurisdiction under section 147 of the Act by reopening assessment after recording reasons. The reasons to believe of escapement of income should have a live link with the tangible material and even if the assessment order was passed u/s 143(1) the requirement is for the AO to come to a finding on the basis of tangible material to establish his case of reason to believe of escapement of income; in the absence of which, re-assessment proceedings are both invalid and bad in law. Accordingly, we hold so and cancel the re-assessment proceedings initiated in the case of assessee, the consequent order passed under section 143(3) r.w.s. 147 of the Act does not stand. Thus, the ground of appeal No.1 raised by the assessee is allowed.

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• Customs

• 2018 (2) TMI 248
  Condonation of delay of 82 days in filing Appeal - Held that: - the order in original is dated 08.03.2016 which was received by hand delivery by the Advocate of the petitioner on 22.06.2016. The Appeal was required to be filed on 22.09.2016, whereas the same is inwarded on 13.12.2016. It has come on record that the petitioner was arrested on 22.06.2016 and was enlarged on bail on 24.08.2016. The Court finds that such an explanation was very much on the record of CESTAT in the form of Affidavits - delay condoned - petition allowed.

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• 2018 (2) TMI 247
  Import of base paper by availing DEEC exemption - It was alleged that no nexus in the imported goods and exported goods - demand only on the ground that material use for export was white base paper whereas the material imported the paper was having design/colour - Held that: - Circular No. 39/97-Cus. dated 16.09.1997 clearly prescribed that it is not necessary that the goods imported should match exactly those used in the export product provided that the inputs are commercially known to be useable in the product exported. The adjudicating authority has held that the requirement of nexus is limited to the extent it is appearing in the relevant licence. In the subject case the licence does not qualify the base paper with any particular colour. Hence the contention in the SCN that the noticee should have imported a particular colour of base paper only, does not appear to be legally sustainable. Demand set aside - appeal allowed.

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• 2018 (2) TMI 246
  Refund of export duty - change in Rate of tax vide Notification - As per N/N. 66/2008-Cus dated 10.5.2008, the effective rate of export duty was 10%. The exports were taken place on 23.5.2008 and 26.5.2008. The said 10% rate of duty was become NIL vide N/N. 77/2008-Cus dated 13.6.2008 - Held that: - merely by interpretation, the duty cannot become NIL, which was prevailing as per the statute. If at all, there is any intention of the Govt. not to levy duty during the said intervening period, right course of action is that the Govt. should have issued the retrospective amendment Notification by exercising the power vested under Section 28A of the Customs Act, 1962 - In present case, the Section 28A was not exercised by the Govt. and as per the law prevailing in terms of N/N. 66/2008-Cus, the duty of export on Iron & Steel pipes/tubes was very much chargeable @10%. Appeal dismissed - decided against appellant.

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• 2018 (2) TMI 245
  Violation of import conditions - import of goods like rubber pads, slates and support plates etc., without payment of duty - Revenue held a view that the condition of value addition cannot be achieved if significant portion of manufacture involves indigenous items - N/N. 32/97-Cus. dated 01.04.1997 - Held that: - Relying on the decision of the Tribunal in the case of Saptagiri Leathers Vs. CC, Chennai [2002 (12) TMI 338 - CEGAT, CHENNAI], the Commissioner (Appeals) held that there is no violation of the import conditions by the respondent - there is no violation of the conditions of concessional import by the respondents - appeal dismissed - decided against Revenue.

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• 2018 (2) TMI 244
  Goods found short in the duty free shop - demand of duty - Charge of clearing of duty free goods and unaccounted goods from duty free stores of this appellant - Held that: - the 1st Appellate Authority has correctly held against the appellant and findings are very relevant and in detail - it was held that the evidence on record in the form of oral evidence of the employees which have been elaborately discussed in the earlier Order-in-Original dated 25.04.2012 as well as the impugned order clearly show that there was concerted manipulation of accounts, stock-registers etc., which resulted in excess and/or shortage of goods which were detected by DRI. Such commission of offence cannot but be punished appropriately under law as provided in Section 112 of the Customs Act, 1962. In the facts of the case, it has to be held that the employer has been irresponsible for ensuring proper conduct by employees and employer has been irresponsible for ensuring proper conduct by employees and cannot absolve himself of the liability - the factual findings of the 1st Appellate are not controverted in any manner. Appeal dismissed - decided against appellant.

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• 2018 (2) TMI 243
  Classification of imported goods - coal - the appellants were importing coal from different countries, especially from Indonesia classifying as steam coal falling under CTH 2701 1290. The steam coal attracted nil rate of duty whereas the bituminous coal falling under CTH 2701 1200 attracted 5% duty as per Notification No.12/2012-Cus. dated 17.3.2012. Held that: - in view of the conflicting decisions, the matter was referred to the Larger Bench and vide order dated 16.1.2017, the issue was taken up for consideration by the Larger Bench. On such date, taking note of the fact that the decision rendered by the Bangalore Bench in the case of M/s. Maruti Ispat and Energy Pvt. Ltd. was appealed before the Hon’ble Apex Court, vide Civil Appeal Nos. 28937/2014 and 9725/2014, the Larger Bench directed that the matter being subjudice before the Hon’ble Apex Court, the assessees were granted opportunity to come again before the Tribunal after the verdict from the Hon’ble Apex Court - The CESTAT, Hyderabad has remanded the matter directing the adjudicating authorities to conduct denovo proceedings after the outcome of the decision of the Hon’ble Apex Court. The appeals require to be remanded to the adjudicating authority for denovo consideration basing upon the outcome of the decision of the Hon’ble Apex Court in Maruti Ispat and Energy Pvt. Ltd., as laid down by the Larger Bench of the Tribunal - appeal allowed by way of remand.

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• 2018 (2) TMI 242
  Valuation of imported goods - Barudan Multi Head Computerized Embroidery machine Model BED XH-YNB 20 head, 9 colour - similar goods - basis of enhancement of value was a purported identical model imported by different importer vide their Bill of Entry No.731210 dt. 20.12.2004 wherein the import price was Rs. 39,85,800/- - Held that: - appellant had produced catalogue, explanation of the supplier for the price variation and also outlined the differences between the two models. They had also produced the proforma invoice from the foreign supplier which matched the final commercial invoice. Copy of the insurance policy for the goods imported has also been produced. The lower authorities have however not addressed these evidences nor have they distinguished or demolished the same - in any case, the difference between the declared value and enhanced value is around 27% which could be ascribed not only on account of differences in the features between the two machines but also on account of the five months interregnum period between the two imports. Reliance is placed on the ratio of the Apex Court judgment in Basant Industries Vs Addl. Collector of Customs, Bombay [1995 (1) TMI 89 - SUPREME COURT OF INDIA] wherein it has been laid down that mere comparison of invoices received by the importer with the invoices of imports of same goods by other importer is not conclusive for determination of undervaluation. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 241
  Import of restricted item - iron steel plates which were secondary hot rolled sheets in different sizes and thickness - Department took the view that the goods being seconds, they cannot be imported through Tuticorin port in view of the restrictions in para-4 of the Import Licensing Notes to Chapter 72 of ITC (HS). - Held that: - In a situation, where importers themselves have admitted, not only before the adjudicating authority, but also before the lower appellate authority, that the imported goods are nothing but seconds, it also means that they are in agreement with the outcome of examination of the goods conducted by the department. In such a situation, where the nature of the goods as imported, is not being contested by the importer, there may not be any requirement of getting the goods tested. Viewed in this light, the appellant cannot now argue that the goods were actually prime, or for that matter, that the goods have not been proved to be seconds by the department by way of test etc. - the goods held as seconds and duty liability thereon upheld. Redemption fine - penalty - Held that: - appellants have been fair in admitting before both the lower authorities that the goods are seconds. They have also conveyed that what has arrived is seconds because of mistake of despatch and they have only ordered for primary goods - the quantum of redemption fine and penalty reduced. Appeal allowed in part.

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• 2018 (2) TMI 240
  Classification of imported goods - “Shriram” Brand water dispensers model YLRS1-5K/B-20 - whether classified under CTH 84186920 as refrigerator or otherwise? - N/N. 14/2008-CE(NT) dated 01.03.2008 - Held that: - Indubitably, the impugned goods are composite goods, and hence, the component which provides the machine its essential character will be determined the factor for classification. The principal function of the goods is that of a dispenser of hot and cold water with an added feature of a mini refrigerator. Hence, the lower appellate authority is spot on in his conclusion that the impugned items are required to be classified as water dispenser and not as a refrigerator - appeal dismissed - decided against Revenue.

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• PMLA

• 2018 (2) TMI 239
  Bail application - offence under PMLA - Held that:- The involvement of the Applicant accused with regard to the alleged offence under the PML Act and there may be further scrutiny of the material by the Respondent agency, the fact remains that most of the material has been seized and collected and the severity of the punishment, which has been emphasized by learned Senior Counsel Shri S.V.Raju, clearly suggest that it is punishable up to 7 years, meaning thereby, it is not punishable with life imprisonment or death. The consideration of the present application for bail even in light of the submissions and the prima facie case suggesting the involvement of the Applicant accused for the alleged offence would not dis-entitle the Applicant accused from bail having regard to the broad guidelines regarding grant of bail. However, in order to protect the interest of the Respondent or the public interest, suitable stringent conditions can be imposed particularly when learned Assistant Solicitor General Shri Devang Vyas has voiced an apprehension that even though the Applicant accused is in jail, there is no cooperation by his family members for the investigation and further details. Therefore the present application deserves to be allowed and accordingly stands allowed. The Applicant – JIGNESH KISHOREBHAI BHAJIAWALA is ordered to be released on bail in connection with ECIR/01/STSZO/2016 registered with Directorate of Enforcement, Surat converted into PMLA Case No.5 of 2017 pending before the Hon’ble Designated Special Court under PMLA, 2002 on his executing a bond of Rs. 50,000/- (Rupees Fifty Thousand Only), with one solvent surety of the like amount to the satisfaction of the lower Court

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• Service Tax

• 2018 (2) TMI 237
  Rent-a-cab operator service - activity of providing buses on hire/rent on casual contract basis - case of the department is that this activity of the appellant was allegedly covered by the definition of taxable service, namely, Rent-a-Cab Operator Service as defined under Section 65(105)(o) of Finance Act, 1994 - Held that: - it is observed that the appellant M/s MSRTC is not handing over the buses on long time running agreement whereas the ownership of buses is retained by the appellant and they are providing the buses on KM basis for a particular destination as per the choice of the passengers. There is no person involved as a recipient of a Rent-a-Cab service to whom the buses is handed over under a rent agreement. Therefore, in this fact arrangement of providing the buses for a particular journey on KM basis does not fall under the category of Rent-a-Cab Operator Service. The issue is squarely covered by the decision in the case of Shree Gayatri Tourist Bus Service Vs. Commissioner of Central Excise, Vadodara [2012 (5) TMI 126 - CESTAT, AHMEDABAD [LB]], where it was held that the services rendered by the assessee cannot fall under the category of Rent-a-Cab services, as per the definition enshrined in Section 65(91) of the Finance Act, 1994. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 236
  Intellectual Property Service - transactions of transfer of right to use trade mark or brand name - liability of VAT or service tax? Held that: - there are no universal tests for testing of levy of Sales Tax or Service Tax and each contract is to be examined with respect to its own terms. It is apparent from the agreement that, (i) No exclusive right to use the trade mark Swastik has been given to M/s New Sahyadri Industries Ltd. The appellants are free to give this trade mark to other even in the same territory. (ii) M/s New Sahyadri Industries Ltd. are not free to permit use of the trade mark to anybody else i.e. they cannot sub-license. If M/s New Sahyadri Industries Ltd. wish to permit to any other support for use then they have to seek permission of the appellant. The trade mark cannot be assigned to anybody by M/s New Sahyadri Industries Ltd. While the agreement is for a period of 10 years, both parties have option to terminate the agreement by giving the notice of three months - The agreement in the instant case is an agreement of permissive use of the trade mark Swastik and no transfer of right to use of the said trade mark - the said transaction is liable to Service Tax under Finance Act, 1994. Extended period of limitation - Held that: - It is a fact that in their Service Tax-3 returns for the relevant period, the Appellant had willfully mis-stated that they have received zero amount towards provision of this service - willful mis-statement on the part of the appellant stands established and thus extended period has been correctly invoked. Penalty - Held that: - the elements for imposing the penalty are identical to those necessary to invoke the extended period of limitation. In these circumstances, no separate specific findings are needed for imposition of penalty under Section 78 of the Finance Act, 1994 - penalty upheld. Appeal dismissed - decided against appellant.

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• 2018 (2) TMI 235
  Liability of service tax - sponsorship agreement - consideration received for providing stands / boxes inside the stadium - Held that: - appellants have not granted any right to the sponsors to display their products on the boxes / stands. So also there is no right given in the sponsorship agreement to display any advertisement. The sponsor has only right to display his name on the stand / box. Further, they are also given exclusive priority booking rights. The definition of sponsorship reveals that the activity carried out by the appellant by entering such sponsorship agreements are more akin to sponsorship service which are taxable only with effect from 1.5.2006. Further, these sponsorship services are in relation to sports events and are not taxable services as laid down under section 65(105)(zzzn) of the Finance Act, 1994 - the amount received as per sponsorship agreements for boxes and stands are not leviable to tax under Sale of Space for Advertisement and requires to be set aside. Penalty - Held that: - the issue was interpretational and there was sufficient cause for not discharging the service tax liability - penalty set aside. The demand in respect of sponsorship services needs to be verified and segregated from the total demand confirmed by the adjudicating authority - appeal allowed by way of remand.

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• 2018 (2) TMI 234
  Penalty u/s 78 - cleaning services - grievance of the department is that the Commissioner did not impose penalty (Rs.3,53,35,047/-) equal to that of the service tax demand - Held that: - it is seen that the respondent had raised strong contentions explaining for failure to discharge the service tax within due time. It was submitted by them that they could not make timely payment due to financial hardship as they had to first make payment to their employees. This was not considered by the adjudicating authority as a reasonable cause for invoking Section 80 of the Finance Act, 1994. From the counter filed by the respondent, it is seen that they had already paid the balance of demand of Rs. 7,25,444/- as well as the penalty imposed under Section 77. It is their case that they have not been given the option of reduced penalty in terms of proviso to Section 78 of the Finance Act, 1994. It is correct that the Commissioner has not given the benefit of reduced penalty (25% of the demand of service tax) to the respondent. The penalty imposed under Section 78 needs to be reconsidered for which we deem it fit to remand the matter to the Commissioner - appeal allowed by way of remand.

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• 2018 (2) TMI 233
  Business Auxiliary Service - failure to discharge service tax - charitable concern - Held that: - it is seen prior to 1.5.2006, the services rendered to a client by a commercial concern would only qualify as BAS. The services rendered to any person did not fall within the ambit of 'Business Auxiliary Service'. It is brought out from the records that appellant company is a registered under Section 25 of the Companies Act as a non-profit organization and therefore cannot be considered as commercial concern. The Tribunal in the case of Raja Charity Trust [2017 (2) TMI 387 - CESTAT CHENNAI] had an occasion to analyze a similar issue and has taken the view that in cases where the assessee is not a commercial concern would not be covered by definition of 'Business Auxiliary Service' during the relevant period. Demand not sustainable - appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 232
  Refund claim of service tax paid - Renting of Immovable Property Services - for residential / accommodation purpose or otherwise - rejection on the ground that building that comprises of a lodging house also has a restaurant, banquet hall etc., and, therefore, would not fall within the meaning of hotel - whether appellants are eligible for the refund of service tax paid under the category of “Renting of Immovable Property Service? - Held that: - On perusal of the Lease Deed, we see that parts of the building have been specifically let out for payment of rent separately - It is seen that the Scheduled Property is rented out for running of Hotel, Lodging House and allied/related activities. The Restaurant, Coffee Shop etc., are facilities attached to the business of renting of Hotel. The Lease Deed reveals that rent for each part of the building or in other words, the Rent for Restaurant, Coffee Shop, Permit Room, Bar etc., are fixed separately. Only that part of the building which is used for accommodations would fall within the exclusion part of the definition. It is not the case that the restaurant coffee shop, permit room/banquet hall etc., are fully available only for the exclusive use of the lodgers, who stay in the hotel. It is also not the contention that these facilities are not open for use by those who do not stay in the hotel or for that matter that the hotel does not rent out including hall etc., for functions hosted by non-lodgers. Refund has been rightly rejected - appeal dismissed - decided against appellant.

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• 2018 (2) TMI 231
  100% EOU - Refund of unutilized CENVAT credit - various input services - management consultant service - photography service - interior decoration service - supply of tangible goods services - renting of immovable property service - denial on the ground of nexus - Held that: - The services except insurance services and transport of goods by road services are covered by various decisions holding that such services can be considered to have nexus with the output services provided by the assessee. Further, the definition of ‘input service’ with regard to output service merely states that input services means any service used by a provider of output services for providing output service. The department has not been able to produce any evidence to show that the subject services have not been used by the assessee. The definition does not qualify the use of input services by a service provider by the words 'directly or indirectly, in or in relation to output service'. Thus, the services would qualify as an input service if it is used by a provider of output service for providing the output service. Refund is also disallowed for Rs. 7,338/- alleging that the appellant has availed credit on debit notes instead of invoices - Held that: - In Ad-Manum Packagings Pvt. Ltd. Vs. Commissioner of Central Excise, Indore [2017 (4) TMI 209 - CESTAT NEW DELHI], similar issue came for consideration wherein the Tribunal held that debit notes are valid documents for availing credit - the issue whether credit is admissible on debit notes has to be relooked by the adjudicating authority - matter on remand. Another ground for rejection of refund is that there is difference in the amount shown in ST3 returns and the refund claim with respect to total credit availed by the appellant - Held that: - It is explained by the Id. consultant that the appellant could not revise the ST-3 returns after coming to know that the credit availed is shown incorrectly in the ST-3 returns filed. This aspect also requires verification as to whether the appellant has correctly calculated the total credit for which the refund claim has been filed - matter on remand. CENVAT credit - air travel agency service - Held that: - In the impugned order dated 1.9.2016, the Commissioner (Appeals) has observed that the said services were availed in connection with the business activity of providing output services by the employees. Therefore, I do not find any ground to interfere with the order passed by the Commissioner (Appeals) and the appeal filed by the department is dismissed. Appeal allowed in part and part matter on remand.

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• 2018 (2) TMI 230
  Consultancy service - sub-contract - whether the Appellant herein is required to discharge the service tax liability during the period April 2008 to September 2008 (actually November 2005 to August 2007) or otherwise? - Held that: - if the main contractor has paid the service tax on the entire contract value which also include the value of the contract as given to sub-contractor, there is no necessity to pay the service tax by the sub-contractor - M/s Louis Berger was awarded a contract for civil work of Mumbai Urban Transport Project Road Network; it is undisputed that M/s Louis Berger has discharged the applicable service tax liability on the amount of contract awarded to them - demand set aside - appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 229
  Classification of services - activity of installation of wired line and cables - whether classified under Commissioning and Installation Service or otherwise? - Held that: - The basic activity of the appellant is installation of wiring and wire line, broad band and cables. The activities undertaken pursuant to the agreement dated 1.4.2003 will not fall under the category of “installation of land, machinery, equipment as contained in the definition under Section 65(39a) of Finance Act, 1994 - Since the activity of the appellant cannot be categorised under simple installation of equipment, and more precisely falls under installation of wiring or fittings as contained in the amended definition with effect from 16.6.2005, the classification should be appropriately made under the amended definition effective from 16.6.2005. Circular No. B-I/6/2005-TRU, dated 27.7.2005, clarifies that scope of the taxable service has been expanded by including specified services therein. Since the scope of the taxable service was expanded and in view of the fact that the activity undertaken by the appellant is more specific to wirings or fittings of the equipment, such taxable service should be covered under the amended provisions of erection, commissioning and installation service with effect from 16.6.2005. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 228
  Refund claim - Commercial or Industrial Construction Services - activity/service of “Flash Butt Welding of Railway Joint of Pipes/Railway Line on Railway Contract - Held that: - whatever Service Tax has been paid by the respondent and the same has been borne by the respondent only - it is an admitted fact that no Service Tax is payable on the service provided to the railways. In that circumstance, whatever Service Tax paid by the respondent, is not a Service Tax and the same is refundable to the respondent - refund allowed - appeal dismissed - decided against Revenue.

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• 2018 (2) TMI 227
  Rectification of mistake - the penalties under Section 76 and 78 were distinguished but this fact was not brought to the notice of the Tribunal - Held that: - It may be mentioned that nobody can take advantage of own wrongs as per the maxim COMMODUM EX INJURIA SUA MEMO HABERE DEBET - when it is adverse to the interest of the Counsel only RoM has been filed which is not desirable - ROM application dismissed.

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• 2018 (2) TMI 226
  Liability of service tax - total value of extended warranty coupon, sold by the appellant to the car owners - Revenue considered this as a part of their taxable activity under the heading “Authorized Service Station” of Motor Cars - Held that: - the appellant is not providing service of authorized station to Maruti, as a customer. Services by authorized service station is always to a customer who brings in his vehicle for any service or repair in any manner. It is apparent that it is not Maruti who is bringing in any vehicle any service or repair as a customer, so that the activity can be brought under Section 65(105) (zo). The services, if any, rendered by the appellant to Maruti as a client in the present arrangement cannot be covered in the above mentioned tax entry - appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 225
  Refund of penalty - applicability of Section 11B of the CEA, 1944 - Held that: - The penalty is crystallized only after an order is passed by the appropriate authority imposing penalty for failure to pay service taxobserving the reason for failure in discharging the service tax and role of the appellant - In the present case, the said amount was suo moto deposited by the respondent while discharging the service tax and interest, which in my view, cannot be designated or termed as penalty. At best, it could be considered as an extra payment made at the time of discharging the service tax liability with interest - appeal dismissed - decided against Revenue.

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• 2018 (2) TMI 224
  Cargo Handling Service - demand of tax with interest and penalties - Held that: - the scope of work mentioned threin relates to transportation of the goods - In view of the fact that the scope of work as per the agreement is only confined to transportation of goods and there is no element of Cargo Handling Service, the activities undertaken by the appellant will not be covered under the scope and ambit of Cargo Handling Service - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2018 (2) TMI 223
  Valuation - section 4 or 4A - switch gears weighing more than 25 kg. each cleared to dealers - the decision in the case of M/s HPL electric & Power Limited Versus CCE, New Delhi [2017 (11) TMI 17 - CESTAT NEW DELHI] contested, where it was held that The activity of packing/ repacking, labelling etc. on the impugned goods in their factory amounts to manufacture and are liable to duty in terms of Section 4A - Held that: - the decision in the above case upheld - appeal dismissed.

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• 2018 (2) TMI 222
  Maintainability of Rectification of mistake application - rejection on the ground of interpretation of Section 74 of the Finance Act, 1994 - it was construed that the ROM applications could be entertained and decided only by the same CEO, who passed the original orders, and that as such officer was no longer available in the office, his successor, i.e. the Principal Commissioner, has no authority to entertain and pass orders on the ROM applications. Held that: - If we literally construe the words Central Excise Officer who passed any order it may lead to an anomalous situation - the words Central Excise Officer who passed any order must be construed as the jurisdictional Central Excise Officer and not the individual Central Excise Officer. Evidently, to confer the power of rectification on the particular class of officers who passed the order, the words Central Excise Officer who passed any Order have been used in Section 74 of the Act. Any other construction would render Section 74 of the Act otiose. The respondent has committed a serious error in rejecting the applications as not maintainable - petition allowed.

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• 2018 (2) TMI 221
  CENVAT credit - capital goods - storage system installed in factory - Mobile Compactor Bin Storage System - FRP Ladder Trays - Elbows - Tunneller - Structrual Steel Rolled/ Structurals - Impeller Spares - Switch Board - Held that: - in respect of storage system installed in factory, It is seen that the appellants have not countered the legal argument in the impugned order that the said goods did not fall under the definition of capital good/ inputs appearing in the Cenvat Credit Rules. While theoretically it can be considered the storage system Mezzanine floor would be capital goods but for the purpose of Cenvat Credit Rules the definition is very clear and the said goods do not fall under the definition of input/ capital goods - credit not allowed. Mobile Compactor Bin Storage System - Held that: - In normal parlance, the storage bin would be considered as capital goods but for cenvat credit goods have to fall under the definition of capital goods as it appears in the Cenvat Credit Rules 2004. The instant case is classifiable under chapter 94 and is thus clearly not covered under the definition of capital goods. Since the appellants have not countered the regarding the goods not fall under the said definition of the Cenvat Credit Rules the credit of the same cannot be allowed. FRP Ladder Trays - Held that: - the same are used for laying electric cable in the refinery. Most of the equipment of the refinery would be classifiable under chapter 84 and 85 of CET and thus would be covered under the definition of capital goods. The electric system would definitely be covered as components of such refinery machinery - credit allowed. Elbows - Held that: - tube pipes are specifically covered under the definition of capital goods. The credit of the elbows therefore cannot be denied. Tunneller - Held that: - Tunneller is used to connect the tanks to the distributed control system and control room to monitor the activity in the tank. It provides an easy reliable and secure way to networked computers. The said goods would fall under the accessories to the control system. Thus the credit of the same cannot be denied. Structurals used for repair and maintenance of tanks of the refinery - Held that: - the definition of capital goods specifically includes storage tanks. However, the items used for construction of tanks are not covered under the definition of capital goods. Tank and refinery being immovable property the credit of the structural steel for repair for tank also cannot therefore be allowed as inputs. Impeller spares, switch board - Held that: - both fall under chapter 84 and 85 of CET and thus are covered in the definition of capital goods. The credit of same cannot be denied. Penalty - Held that: - the issue under dispute are in the nature of credits on which the appellants could have had bonafide belief. In view of above, penalty under Section 11AC is not justified. The issue regarding the recovery of interest is remanded to the original adjudicating authority to determine after examining the facts regarding utilisation of the said disputed credit or otherwise. Decided partly in favor of assessee, partly against assessee and part matter on remand.

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• 2018 (2) TMI 220
  Benefit of N/N. 83/94 CE dt. 11.04.94 - Wrapping and packaging paper falling under chapter 48.05 of the Central Excise Tariff Act - demand has been made against the Appellant on the ground that they have wrongly claimed the benefit of exemption notification no. 83/94 by showing that they have done jobwork activity of manufacture of kraft paper on raw material supplied by the principal manufacturer - Held that: - while determining the duty, the cum duty benefits should be extended to the assessee. We also find that the adjudicating authority have not examined the fact whether there is a suppression of facts or otherwise. Accordingly, the issue of limitation was also not considered properly - it is fit to remand back the case to the adjudicating authority to consider the case afresh after granting the opportunity of cross examining the persons who were not made available for cross examination as well as examining the record and accounts of the Appellant as to how the alleged jobwork activity has been considered in their books - appeal allowed by way of remand.

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• 2018 (2) TMI 219
  CENVAT credit - denial on the ground that the credit wrongly availed on goods utilised in a process that did not amount to manufacture - penalty u/r 5 of the CCR 2004 read with section 11AC of the CEA 1944 - Held that: - identical issue decided in the case of MAHINDRA & MAHINDRA LTD. Versus COMMISSIONER OF C. EX., MUMBAI-V [2015 (9) TMI 403 - BOMBAY HIGH COURT], where it was held that Though the aggregates are exempted from duty, the assessees are paying duty on the aggregates used for manufacture of tractors cleared for export. They are paying this duty and, then, claiming drawback though the duty is not chargeable at all on the aggregates. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 218
  Demand of interest - cenvat credit wrongly taken and reversed by them - Held that: - reliance placed in the case of The Commissioner of Central Excise, Pune-I Versus M/s GL & V. India Pvt Ltd [2015 (5) TMI 375 - BOMBAY HIGH COURT], where it was held that where CENVAT credit has been taken and utilized wrongly, interest should be payable from the date the CENVAT credit has been utilized wrongly for the reason that the CENVAT credit has been wrongly taken as such availment by itself does not create any liability of payment of excise duty - demand upheld - appeal dismissed - decided against appellant.

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• 2018 (2) TMI 217
  Re-opening of assessment under section 11A - Valuation - the revenue is demanding duty on the basis of transaction value whereas the Respondent has resorted to valuation of goods for the purpose of paying basic custom duty on the basis of FOB value of the like goods being exported by them. Held that: - The Transaction value as per Rule 4 of the Customs Valuation Rules, 1988 is the price of imported goods actually paid or payable for the goods when sold for exports to India adjusted in accordance with Rule 9 of Custom Valuation Rules. However we find that no documents have been relied upon in the show cause notice that the price charged or paid was more than FOB Value. The Respondent has also pointed out that the whole of the details of clearance and prices was submitted by them to the department, however the same has not been relied upon and instead the basis of demand is MRP which nowhere finds favour as basis for demand under Valuation Rules. Further it is not forthcoming from the SCN that the dealer price on which the duty was demanded was the price that was charged by the Respondent from their customers or the customers price was equal to dealers price. Hence we are of the view that since the basis of demand itself is without any basis, the demand is not sustainable. In various judgments, Tribunal and the Apex Court has rejected the price by an EOU to DTA as transaction value and held that the FOB value of exports would be basis for valuation of goods cleared into DTA - thus, the demands against the respondent are not sustainable. Appeal dismissed - decided against appellant-Revenue.

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• 2018 (2) TMI 216
  100% EOU - Valuation - SCN alleged that during the period 14.11.2005 to 31.03.2006 they had cleared the goods into DTA in excess of 50% FOB value of exports made during the financial year. That the DTA sale should not exceed the 50% of the FOB value of the exports made during the year in which such DTA Sales is made - benefit of N/N. 23/2003 CE dt 31.03.2003 - Held that: - N/N. 23/2003-CE at Sr.No.2 prescribes concessional rate of duty of 50% of the duty of excise payable under Section 3, subject to fulfillment of the conditions as mentioned at Sr.No.2 to Annexure thereto - the EOU is entitled for DTA sales on quarterly, half yearly or yearly basis subject to permission from the Development Commissioner and the Application for permission is made through bond officer and subject to his verification. On the said basis the permission is granted by the Development Commissioner. The permission is valid for three years from the date of grant of permission. The assessee EOU Unit is thus entitled for DTA sales without having any relation to different DTA Sale permissions which may be different for each quarter or half year or on yearly basis. Thus there is no co-relation between the DTA Sales permissions granted from time to time and actual DTA Sales since it is not mandated in FTP. Once the benefit of DTA Sale has been extended by the Competent Authority i.e Development Commissioner then said benefit cannot be withdrawn. The N/N. 23/2003 CE has been structured so as to ensure the implementation of FTP Policy in its correct prospective. The same cannot be read as to make it contrary to the provisions of the FTP. The permission to DTA sale has accrued to the Appellant Unit based upon its past export performance. If the export of the subsequent year after allowing such DTA Sale is applied in order to restrict this benefit this would lead to situation that the permission for DTA Sale by the Development Commissioner would become redundant. In case where the EOU Unit has become entitled for DTA sale in next year and in said next year it does not export its goods, the DTA sale allowed to him cannot be refused or withdrawn. Once the Development Commissioner has given permission to sell the goods in DTA upto certain value the revenue cannot dispute the same. The goods manufactured by the Appellant from indigenous raw material are eligible for the exemption in terms of Serial no.3 of the notification and the excess demand is not sustainable. Time limitation - Held that: - it cannot be said that the Appellant had any intention to suppress the clearances figures of DTA. There is no implicit or intentional act on the part of the Appellant to suppress the DTA sales figures. It is coupled with the fact that earlier the Appellant were issued SCN on inclusion of cotton waste in 50% FOB value - the demand raised by invoking extended period and the penalty u/s 11AC is not sustainable against the Appellant. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 215
  CENVAT credit - non-existent firms - credit denied on the premise that the dealer M/s S.K. Garg & Sons who has supplied the goods to the appellant is non-existence and he has merely issued invoices not the goods - Held that: - in the matter in hand no investigation conducted at the end of manufacturer/supplier or the transporter to reveal the truth whether manufacturer/supplier has supplied the goods in question to M/s S.K. Garg & Songs or the transporter has transported the goods to the premises of the appellants which is vital evidence to reveal the truth. Further, M/s S.K. Garg & Sons was registered dealer during the impugned period and all the ST-3 returns were filed by M/s S.K. Garg & Sons which were accepted by the department. Therefore, in the absence of any corroborative evidence to show that the appellants have not received the goods, it cannot be alleged against the appellant that they have received the invoices and not the goods. In the absence of any investigation at the end of manufacturer supplier or the transporter, the cenvat credit cannot be denied to the appellants - appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 214
  Constitutional validity of Rule 8(3A) of Central Excise Rules, 2002 - utilisation of cenvat credit and default in payment of duty - whether the provisions of Rule 8(3A) of the Central Excise Rules 2002, are invocable in the facts of the case or not? - Held that: - The said issue has been decided by the Hon’ble High court of Gujarat in the case of Indsur Global Ltd. [2014 (12) TMI 585 - GUJARAT HIGH COURT] wherein it has been held that the provisions of Rule 8(3A) of the Central Excise Rules, are ultra virus - the demand is under Rule 8(3A) of Central Excise Rules, 2002 is not sustainable against the appellant - appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 213
  CENVAT credit - whether the appellant is eligible for credit on the pipelines laid outside the factory which is issued for drawing water from Cauvery river? - Held that: - The issue stands covered in the case of Pepsico India Holdings Ltd. [2000 (10) TMI 122 - CEGAT, CHENNAI], where it was held that the pipline can be considered in the factory in this case, it would be covered by the definition of the word 'factory' under Section 2(e) of the Central Excise Act, 1944, and credit is allowed - denial of credit is unjustified - appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 212
  CENVAT credit - GTA Services for outward transportation services - whether credit is admissible on outward transportation services upto buyer’s premises when delivered on F.O.R. basis? - Held that: - the issue has been settled by the decision in the case of Commissioner Versus Ellora Time Ltd. [2014 (3) TMI 567 - GUJARAT HIGH COURT], where it was held that outward transportation would be an input service as covered in the expression ‘means’ part of the definition, it would be difficult to exclude such service on the basis of any interpretation that may be offered of the later portion of the definition which is couched in the expression ‘includes’. However, the documents requires reconsideration by the adjudicating authority to verify whether the said decision is applicable - appeal allowed by way of remand.

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• 2018 (2) TMI 211
  Recovery of amount by the appellant - Revenue entertained a view that the appellants have collected an amount representing Central Excise duty and the said amount should be deposited with the Government in terms of Section 11 D of the Central Excise Act, 1944 - appellant's case is that they have recovered the amount reversed in terms of Rule 6 (3) (b) from the buyer. This cannot be considered as recovery of amount representing Central Excise duty attracting the provisions of Section 11 D. Held that: - though the clearance documents mentions the amount as CENVAT (BED), it is clearly endorsed that the amount is towards amount payable on exempted products steam in terms of Rule 6 (3) (b). This makes it clear that the appellant passed on the burden of their reversal of the amount in terms of CCR, 2002 to the buyers - The amount of 8% already reversed as per the CENVAT Credit Rules cannot be demanded under Section 11 D, even if the same is collected from the buyers, as per the invoices. Appeal allowed.

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• 2018 (2) TMI 210
  Benefit of N/N. 6/2002-CE, dated 01.03.2002, Sl. No.56 - I.V. Fluids viz., Ofloxacin I.V. Infusion - 100 ml., Metronidazone Injection - 100 ml., Ciprofloxacin Injection - 100 ml., and Mannitol Injection - 100/350 ml - Revenue entertained a view that when the drugs manufactured by the respondents are administered intravenously, the same will not qualify for exemption in the above entry as the said exemption is available only to I.V. Fluids used for Sugar, Electrolyte or Fluid replenishment. Held that: - it is nobody's case that I.V. Fluids that are purely used for replenishment purposes are similar to I.V. Fluids used for therapeutic as well as replenishment purposes. Apparently, both are for different medical purposes and application. They are not interchangeable - in M/s Venus Remedies Ltd. Versus Commissioner of Central Excise [2011 (8) TMI 688 - PUNJAB AND HARYANA HIGH COURT], it was held that exemption shall not be available in case Schedule ‘H' drugs are added in I.V. Fluids. The impugned orders with reference to eligibility of the respondents for the exemption set aside. Appeal allowed - decided in favor of Revenue.

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• 2018 (2) TMI 209
  Benefit of N/N. 67/95-CE dated 16.03.1995 - intermediate goods (captive consumption) - electrical relays used in further manufacture of control panels - Revenue held a view that since the final product did not suffer duty, the exemption for captive consumption shall not apply - Held that: - the eligibility of the appellant-assessee for exemption under N/N. 67/1995 cannot be disputed. They have followed the provisions and complied with the provisions of Rule 6 and all the connected requirements of the N/N. 67/1995 - similar issue decided in the case of Bharat Aluminium Co. Ltd. Vs. CCE, Raipur [2017 (4) TMI 276 - CESTAT NEW DELHI], where it was held that the exclusion made under sub-clause (vii) of sub-rule (6) of Rule 6 of CCR, 2004 read with proviso to N/N. 67/95 makes it clear that the exemption for captive consumption of intermediate products has been correctly claimed by the appellant - appeal allowed - decided in favor of appellant-assessee.

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• 2018 (2) TMI 208
  CENVAT credit - capital goods directly sent to the job worker - Held that: - The provisions of Cenvat Credit Rules which are in dispute are very clear. No doubt, there is beneficial provision available which allows for input or input services to be received directly by the job worker and credit thereof to be taken by the manufacturer of the final product / provider of output service. However, the law does not allow for taking such credit when the capital goods are similarly received directly at the job worker's end - The permission accorded under Rule 4 (5) (a) or for that matter, the permission to operate under N/N. 214/86-CE is only to facilitate movement of capital goods to the job worker for manufacture of intermediate / final products - the order of recovery of cenvat credit amount Rs. 93,04,021/- along with interest thereon. Penalty - Held that: - the entire manner of job work got done by the appellant was within the knowledge of the department - there is also no allegation that the goods, though received directly at the job worker's end, were not used for the purpose they were intended, or for that matter, that they were not returned back to the appellant etc. - penalty set aside. Appeal allowed in part.

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• 2018 (2) TMI 207
  Extended period of limitation - suppression of facts - SSI Exemption - Held that: - As per the provisions of small-scale exemption notification the same is not available in case the goods are manufactured with the brand name of others. In the present case, the appellants never disclosed this fact to the Revenue. The Hon'ble High Court of Bombay in the case of Commissioner of Central Excise, Raigad Vs M/s. Rampty (India) Ltd [2009 (6) TMI 483 - HIGH COURT OF BOMBAY] has dealt with an identical situation where the brand name belonging to another person was being used with simultaneous availment of SSI exemption. Tribunal granted the benefit on the point of limitation by observing that though the fact of use of others brand name was not disclosed in the classification list but inasmuch as the issue was of interpretation and contentious, no malafide would be attributed to the assessee. Accordingly, relief was granted by the Tribunal on the point of time bar. We find favour with the appellant's plea of, re-quantification of the demand by extending the benefit of cum-duty and direct the lower authorities to re-quantify the demand accordingly. If the demand is quantified on the lower aside, penalty would also get reduced to that amount - appeal allowed by way of remand.

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• 2018 (2) TMI 206
  Benefit of N/N. 67/95-CE, dated 16.03.1995 - During the process of conversion of raw sugar into white sugar, molasses emerge - denial of benefit on the ground that captive consumption notification is not available to them inasmuch as, they are not the owners of molasses - Held that: - Notification No.67/95-CE, nowhere lays down the condition of ownership of the goods used captively. In the absence of the same in the notification, it is not permissible to the Revenue to introduce the said condition in the notification and to deny the benefit on the said ground. Extended period of limitation - Held that: - the demand having been raised, beyond the normal period of limitation is barred by limitation, inasmuch as, the Revenue has not been able to establish any suppression, mis-statement etc., on the part of the assessee, with a malafide intention to evade payment of duty. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 205
  CENVAT credit - inputs - appellant cleared certain inputs “as such” during the period November 2011 to December 2013 and instead of reversing the credit availed on inputs, removed as such, they paid duty on transaction value for the inputs cleared as such - Held that: - The Show Cause Notice has been issued alleging that by such payment of duty they passed on ineligible credit - It is apparent that such excess duty was paid only due to wrong interpretation of law or wrong method of calculation of the amount to be paid when the inputs are removed as such. Therefore, the penalty imposed is unwarranted - appeal allowed.

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• 2018 (2) TMI 204
  Benefit of N/N. 67/95-CE - intermediate goods namely HDPE / PP tapes or strips used in manufacture of final products, PP woven socks / fabrics - denial on the ground that appellants have availed exemption from payment of duty from whole of excise duty under N/N. 8/2003-CE for clearance of their final products? - Held that: - issue covered by the decision in the case of Parvenu Industries Ltd. [2017 (5) TMI 135 - CESTAT CHENNAI], wherein it was held that final products are neither exempt nor subject to Nil rate of duty by virtue of the appellant’s status as SSI, whose clearances were otherwise dutiable, accordingly they would not be hit by barring clauses of N/N. 67/95-CE for the intermediate products in question. The strips of plastics etc. (inputs) cleared for captive consumption in the manufacture of final products in all these cases would then be eligible for the benefit of exemption provided under N/N. 67/95-CE since the final products are otherwise dutiable but did not suffer duty only account of value based exemption for SSI unit. Appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 203
  Extended period of limitation - Valuation - includibility - royalty, bank and LC opening charges - Rule 8 of Central Excise Valuation Rules, 2000 read with Section 4 (1) (b) of Central Excise Act, 1944 - Held that: - it is evident that the matter had been flagged by the Range Superintendent as early as in November 2001 and again on November 2003 for which detailed replies had been submitted by the appellant. From the replies it emerges that appellant had been contesting addition of these two cost elements. This being so, it cannot be said that they were suppressing any vital information from the department or for that matter, that they were giving misstatement on the same. The department has lingered too long, after their doubts on the issue had cropped up. When the elements justifying invocation of extended period are not available in this case, the delay in issue of SCN proceedings are therefore hit by limitation and will have to be set aside - appeal allowed.

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• 2018 (2) TMI 202
  Clandestine removal - MS ingots - Held that: - in case the duty liability in respect of these consignments, though undoubtedly removed clandestinely without discharging duty liability, such liability has been discharged during investigation stage itself by the buyers, it would be not just and fair to demand the very same amount again from the appellants - To verify this claim of the appellant, it would be proper, in our view, to remand the matter to the original authority only for the limited purpose of ascertaining the exact quantum that has been discharged by the buyers and which will then have the effect of reducing the net duty liability to be demanded from the appellant. CENVAT credit - receipts of MS scrap from M/s. Salem Automec, a dealer of BHEL - Held that: - to benefit from the facility, appellant will necessarily have to produce the dealers invoice with proper endorsement from M/s. Salem Automec. This definitely has not been done. The appellants are falling back on the ledger account of the said Salem Automec, which by any stretch of imagination cannot take the place of the document evidencing payment of duty - credit not allowed. Sale of scrap as reflected in their balance sheet - Held that: - it appears that the appellant did not produce any evidence in support of their claim before the lower appellate authority. However, before this forum, one more opportunity was sought to corroborate the contentions. In the interest of justice, we accept this plea - matter on remand. Appeal allowed by way of remand.

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• 2018 (2) TMI 201
  Validity of second SCN - Benefit of N/N. 83/1994-CE dt. 11.4.1994 - job-work - Held that: - proceedings on the very same dispute had been initiated by the Department in earlier show cause notice dated 04.0.2005, involving the very same period, which however had been set aside by the Tribunal on the ground of jurisdiction - it is evident that the second SCN also sought to cover the very same issue, the very same period of dispute, and the very same apparent duty liability that was initiated in the earlier SCN dated 04.07.2005. The proceedings initiated by the second SCN dated 26.03.2007, which culminated in the impugned order, cannot sustain and will necessarily have to be set aside - appeal allowed - decided in favor of appellant.

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• 2018 (2) TMI 200
  Bubble or independent unit - Revenue alleged that SIL and appellant being one and same, there cannot be grant of capital goods credit to SIL - Held that: - The story of Revenue could not be established without leading any evidence. Mere funding is not decisive to say that unit was not in existence when Revenue grated Central Excise registration and manufacture was established - it cannot be said that appellant was not an independent unit - appeal allowed.

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• CST, VAT & Sales Tax

• 2018 (2) TMI 199
  Reversal of Input tax credit - TNVAT Act - Held that: - Honble Division Bench of this Court, in Sri Vinayaga Agencies v. Assistant Commissioner (CT), Vadapalani-1, Assessment Circle, Chennai and another [2013 (4) TMI 215 - MADRAS HIGH COURT], where it was held that All the revision orders revising the input tax credit on the admitted case of tax having been paid to the selling dealer, therefore, are found to be totally incorrect, erroneous and contrary to the provisions of the TNVAT Act and Rules - the revision petitioner, has not made out a case for reversal - revision dismissed.

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• 2018 (2) TMI 198
  Penalty - Whether in the facts and circumstances of the case, the Tribunal in having confirming the order of the lower appellate authority by deleting the penalty is legally correct even after amendment carried out to Section 12(3) of the Tamil Nadu General Sales Tax Act 1959 by Tamilnadu Act 22 of 2002? Held that: - In TVl. Apollo Saline Pharmaceuticals Private Limited Vs. Commercial Tax Officer (Fac) and Others [2001 (10) TMI 1100 - MADRAS HIGH COURT], a Hon'ble Division Bench of this Court has held that The assessments for the assessment years 1993-94 and 1994-95 which were assessments made on the basis of the accounts, and not based on any other material and were not estimates, have therefore, to be regarded as assessments made under Section 12(1) to which the penal provisions of Section 12(3) are not attracted. The levy of penalty for those two assessment years is set aside. Thus, penalty levied by disallowing the claim of exemption are deleted. Revision dismissed - decided against Revenue.

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• 2018 (2) TMI 197
  Revision of assessment - rate of tax - tools & hardware - Whether on the facts and in the circumstances of the case the Tribunal was right in law in setting aside the assessment made by the Assessing Officer on the turnover at 4% when the dealer has not exercised their option as per the amendment Act? - Held that: - The appellant had filed their return in form K and paid tax u/s 3(4) of the Act from 2006-07 i.e. from the introduction of the Tamil Nadu Value Added Tax Act 2006. At the time of introduction of the Act there is no provision to exercise their option to pay tax u/s 3(4) in each year. Hence, the appellant had filed his option for the year 2006-07. In the absence of such provision as each yearthe appellant had paid the tax u/s 3(4) for the year 2008-09 also further the Act amended in the middle of the year is not aware by the appellant. If an amendment made in the Act the Assessing Officer has to issue notice to the dealer who has paid compounding tax to file their option immediately. It is not done by the Assessing Officer - Further the amendment made in December 2008 will not attract with effect for 01.04.2008 - the order passed by the Assessing Officer is set aside - appeal allowed. Whether on the facts and in the circumstances of the case the Tribunal was right in law holding that mere filing of returns in Form K is enough and filing of fresh option within 30 days from the amendment for the year 2008-09 does not arise? - Held that: - the option should be given on or before 30th April of that year of the taxable turnover is below Rs. 50 lakhs in the previous year. But this Amendment came into effect from 18.06.2008 only. Even before and after the Amendment the dealer has filed return in Form-K issued under Section 3 (4) of the Act and not Form-I issued under Section 3(2) of the Act. So the filing of fresh option within 30 days from the Amendment for the year 2008-09 does not arise in our case - the re-assessment order of Assessing Officer is not correct and the order of Appellate Deputy Commissioner set asiding the order of Assessing Officer is correct and no Interference is warranted. Revision dismissed - decided against Revenue.

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• Indian Laws

• 2018 (2) TMI 238
  Notice of accusation for offence under Section 138 of the Negotiable Instruments Act - cheque presented for encashment but the same was dishonored - Held that: - The accused has failed to prove that he owned any tractor and complainant was running spare part shop for that he had purchased any spare part from the complainant. As a matter of fact, no receipt regarding purchase of spare part from the shop of the complainant had been produced evidence - appeal dismissed.

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