Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 1, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified
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Stakeholder consultation/comments are invited by 8th March, 2017 on the proposal to amend Customs Valuation (Determination of Price of Imported Goods) Rules, 2007 on email ID [email protected]
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India and ADB sign $375 million in loans and grants for first phase of 2,500–kilometer long East Coast Economic Corridor
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India signs Financing Agreement with World Bank for US$ 63 Million for Tejaswini: Socio-Economic Empowerment of Adolescent Girls and Young Women Project
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RBI Reference Rate for US $
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Commerce Minister says trade initiatives to develop strong India-CLMV vertical within the ASEAN market at the 4th India – CLMV Business Conclave
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Disallowance of capital gains - AO was wrong in treating this transaction as ‘income from other sources’ and making disallowance u/s 68, instead of capital gains as offered by the assessee - AT
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Un-recorded and un-reconciled traded transaction entered by the assessee as per certificate from BSE vis-à-vis books of accounts maintained by the assessee - net profit ratio of 0.59% on recorded transactions accepted - AT
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Penalty u/s 271(1)(c) - estimation was not made on the basis of unverifiable transactions but the estimation of income was based on specific transactions carried out fraudulently and proved as bogus with supporting material evidences found in the case of assessee - levy of penalty confirmed - AT
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When actual rent received is more than the fair rent the actual rent would be the annual value and therefore the notional interest would not form part of actual rent received or receivable u/s 23(1)(b) - AT
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Revision u/s 263 - AO has allowed the claim of the assessee u/s 10(38) without examining whether the security transaction tax (STT) has been paid on the sale of the shares or not - the order of the Ld. CIT in assuming his jurisdiction under section 263 is correct - AT
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Revision u/s 263 - the action of the AO accepting the capital gain declared by the assessee as such cannot be faulted per se. The view of the AO on the issue is clearly a plausible view which in our view cannot be toppled and substituted by the opinion of the CIT in this regard - AT
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Revision u/s 263 - claim of exemption u/s 54 - the purchases of land do not entitle the assessee for the exemption u/s 54 - Therefore, we fail to understand when the land was purchased earlier to the start of construction how this can trigger the provisions of Section 263 - AT
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Second round of litigation - Once Assessing Officer holds that the sale gives rise to taxability u/s 48 as long term capital gains, the matter ends there. It was no longer open to him to examine the details about cost of acquisition and cost of improvement which were examined and accepted in the first round. - AT
Customs
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Levy of Anti Dumping Duty (ADD) - If the DA has formed a opinion regarding correctness of the claim made by the party about confidentiality then he is within his rights to withhold such information and make available only the general non-confidential summary relevant for investigation - AT
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Valuation of imported items - disposable cap and Halogen Lamps - there is no legal justification to conduct a market enquiry especially in the presence of comparable data authenticated in NIDB for identical goods for material period - AT
Service Tax
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Classification of service - Business Auxiliary Service or not? - Sharing of revenue and expenses - a common pool of resources required for running and maintaining the facilities of IHC successfully was attempted in terms of the agreement - activity is not taxable as BAS - AT
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Printing and preparation of flex boards and subsequent delivery and mounting it in the required premises - whether the activity amounts to taxable activity under the category of advertising agency service or not? - Held No - AT
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Classification of service - the appellants do not have work order for any mining of coal. The terms of the contract are clear to the effect that they make the site fit and ready for coal mining. Coal extraction is not the work given to the appellant - demand of service tax sustained - AT
Central Excise
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The appellant under the bonafide impression did not reverse the credit after due intimation of removal of the capital goods to the Dept. In these circumstances, penalty u/s 11AC of CEA,1944 read with Rule 15 of CCR,2004 is not attracted - AT
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Manufacture - drawing of wire whether amounts to manufacture or not? - recovery u/s 11D - even if any excise duty the assessee collected from the buyers of the goods and if the same has been paid to the Government's account, Section 11D has no application - AT
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Extended period of limitation - reliance upon the earlier circular subsequent to the amendment in the notification - when the very language is kept intact and there is only addition in the number of units, it cannot be said that the clarification of the Central Board of Customs & Central Excise dated 27.06.1992 referred to herein above shall be wiped off or nullified - No demand - HC
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Valuation - Job work - merely because the appellant has manufactured medicaments on loan license basis, the valuation principle cannot be discarded - AT
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CENVAT credit - denial on the ground that the activity of drawing of wire from thicker to thinner gauge does not amount to manufacture - they have taken credit on the duty paid on wire rodes and after the process of drawing they have paid duty determined on clearances on the transaction value - Cenvat Credit is legally admissible. - AT
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Limitation does not apply in case of recovery of interest. Section 11AA provides for charging the interest - the demand of interest upheld. - AT
Case Laws:
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Income Tax
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2017 (2) TMI 1197
Penalty under Section 271(1)(c) - claiming the deduction under Section 10A - Held that:- For the assessment year under consideration, the assessee had shown the date of commencement of production in Form 56F, as 01.06.1999. The assessee had not concealed the date of production or had not made any mistake in pointing out the same. The authorities, therefore, rightly held that the assessee had not concealed anything and not stated any incorrect particulars of income in the years under consideration. The assessee had claimed the benefit under Section 10A of the Act under a bonafide belief that since the deduction was not claimed under the said provisions for the three assessment years i.e. 2006-07, 2009-10 and 2010-11, the claim for deduction in the year 2010-11, being the 9th or the 10 year, could be claimed. Both the authorities have concurrently found that claiming the deduction under Section 10A of the Act by the assesses was a bonafide mistake and the assessee had not concealed any material facts as the assessee had clearly pointed out the date of commencement of the production in Form No. 56F, as 01.06.1999. The authorities had found that since the mistake committed by the assessee was brought to the assessee's notice, the assessee unconditionally withdrew the said claim and offered the said amount as income of the relevant year and paid the tax on the same. In the present case, the assessee has tendered an explanation which he was able to substantiate and prove to be bona fide before the Commissioner of Income Tax (Appeals). - Decided in favour of assessee.
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2017 (2) TMI 1196
Additional depreciation in respect of wind mills - assessee made his claim in revised computation of income filed before the completion of the assessment proceeding - Held that:- Admittedly, the assessee had missed the bus in the opportunity provided to him by the statute by filing the revised return within the time limit prescribed u/s 139(5) of the Act. However, that does not prevent the assessee from making its legitimate claims and its doors are not completely shut. The decision in the case of Goetze India Limited [2006 (3) TMI 75 - SUPREME Court ] clearly states that consideration of the valid claim of the assessee other than by way of a valid return can be entertained by the appellate authorities and more so the ITAT. The Hon’ble Supreme Court in the case of CIT vs Kanpur Coal Syndicate reported in (1964 (4) TMI 18 - SUPREME Court ) had held that the powers of CIT(A) is co-terminus with that of the AO; that the First Appellate Authority has wider powers, in that “he can do what the ITO can do and can also direct him to do what he failed to do. No substantial question of law involved
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2017 (2) TMI 1195
Assessment u/s 153A - Held that:- In the present case, the AO virtually reappreciated the materials and documents that were part of the record filed by the assessee. A plain reading of the assessment order would show that no attempt was made by the AO to connect the fresh material and how it pointed out to any concealed income or led to any concealed income. The entire reliance upon the existing documents that were disclosed only reinforced that Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT ) and its reasoning was appropriately applied. For these reasons, the Court is of the opinion that the ITAT’s reasons are sound on the question of applicability of Kabul Chawla (supra) and the additions made in these circumstances could not have been sustained. - Decided in favour of assessee
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2017 (2) TMI 1194
Assessment u/s 153A - addition u/s 68 - Bogus gift received - unabated assessments - search activities - Held that:- We find from the record that the return of income was filed on 29.10.2004 whereas the search was conducted on 17.1.2008 meaning thereby the assessee for the assessment year 2004-05 had attained finality on the date of search. In terms of section 153A of the Act, the already finalised assessment can only be disturbed if the search team has found some incriminating documents or material and which was relied upon by the AO at the time of framing the assessment or the addition is made in the order passed under section 143(3) r.w.s.153A of the Act by referring to seized material and not otherwise. As in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015 (5) TMI 656 - BOMBAY HIGH COURT ) held that where the assessments have abated upon the issuing the notice u/s 153A of the Act the AO has original jurisdiction as well as jurisdiction under section 153A so far as assessments for six assessment years are concerned. The Hon’ble High Court further held that no addition can be made in respect of unabated assessments which have become final if no incriminating material is found during search. The facts of the assessee are identical to one as has decided by the co-ordinate Bench of the Tribunal in assessee’s husband case [2015 (1) TMI 658 - ITAT MUMBAI] where the search was conducted simultaneously and the fact are identical. We, therefore, respectfully following the decision of the Co-ordinate Bench of the Tribunal and set aside the order of ld.CIT(A) and direct the AO to delete the addition made u/s 68 of the Act. - Decided in favour of the assessee
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2017 (2) TMI 1193
Disallowance of capital gains - additions u/s 68 - Held that:- To bring any sum to tax u/s 68, a sum has to be credited, for such sum it is well settled law that in order to discharge the onus, the assessee must prove the identity of the creditor, capacity of the creditor and genuineness of the transaction. In the given case, the AO has brought to tax the capital gain, which is not the sum credited in the books of the assessee, secondly, the assessee has already brought on record the identity of the parties and capacities of the parties. With regard to genuineness of the transaction, assessee has brought on record the transactions as investment in another company i.e. M/s SRGEPL. All these shares were recorded in the books of account as investment. AO has not brought on record anything to suggest any suspicion on the commercial transaction in this case. The payments were made through banking channel and received sale proceeds were also through bank. When the bench asked the AR to submit the receipt of sale proceeds in the bank, the AR had submitted a copy of the bank statement and ledger copy of transactions by letter dated 29/12/2016 and it proves the genuineness of the transactions. Thus on both counts, i.e. commercial decision of the assessee as well as genuineness of the transaction, we hold that the AO was wrong in treating this transaction as ‘income from other sources’ and making disallowance u/s 68 of the Act, instead of capital gains as offered by the assessee. We have no hesitation to uphold the findings of the CIT(A) on this issue and accordingly dismiss the ground raised by the revenue. - Decided in favour of assessee Disallowance of salaries and recruitment expenditure - non setup of business - Held that:- The assessee has set up its business the moment it had acquired the property on lease to run the business with effect from 01/04/2007 and started recruiting the people for the suitable positions, in our view, the assessee has already set up its business and any expenditure in the nature of establishment, administrative, etc. are admissible business expenditure. Considering the nature of expenditure incurred by the assessee during the year we are inclined to agree with the findings of the CIT(A) and accordingly we uphold the order of the CIT(A) in deleting the disallowance made by the AO and dismiss the ground raised by the revenue. Treatment to interest received - as capital receipt or revenue receipt - Held that:- We are in agreement with the findings of the CIT(A). the case laws relied upon by the assessee are prior to set up of the business and are earned during construction period. Whereas in the given case, assessee had already set up the business and on one hand claiming expenditure as revenue and on the other another hand claiming the income as capital in nature cannot be accepted. Therefore, the CO raised by the assessee is hereby rejected.
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2017 (2) TMI 1192
Bogus purchases addition - Held that:- The information received from the sales tax authorities was a good starting point for making further investigation and to take it to logical end. But, he stopped at that juncture and did not collect further evidences. While making the disallowance of entire purchases, he did not doubt the sales made by the assessee. As per the established principles of tax jurisprudence no sales can be affected without purchases. Therefore, in our opinion there was no justification in disallowing the entire purchases. By producing the bank statement and stock statement, the assessee has discharged the burden cast upon her. We find that in all the cases, relied upon by the assessee, the Tribunal has held that where the AO accepts the sale made by the assessee, he cannot reject the entire purchases. It is true that the FAA has rejected the books, but, he has not given any reason for the rejection of the same. We would also like to mention that the FAA had without assigning any reason had disturbed the profit rates shown by the assessee. He should have called for an explanation of the assessee about fall in the GP for the year under consideration. There can be several reasons for variation in profit rates, so, only on that basis results of audited book should not be disturbed. - Decided in favour of the assessee.
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2017 (2) TMI 1191
Disallowance of salary expenses - increase in salary is manyfold, but there is decrease in turnover during the year - Held that:- CIT (Appeals) considering the submissions of the assessee and the findings of the assessing officer deleted the addition observing that assessing officer has not doubted the fact of payment of salary and that there was no allegation that these employees are relatives of assessee or they are covered under 40A(2)(b) of the Act, the assessing officer has only disallowed these expenses observing that there was no commensurate increase in turnover. Before the ld. CIT (Appeals), the assessee relied on the decision of Supreme Court in the case of CIT Vs. Walchand and Co.(P) Ltd. [1967 (3) TMI 2 - SUPREME Court] as held that the rule that increased remuneration can only be justified if there is corresponding increase in the profits of the employer was erroneous. It is the finding of the ld. CIT (Appeals) that the assessee has demonstrated that these expenses were actually incurred which are evidenced from the bank statement and the confirmations from the employees and even the assessing officer has not doubted the fact of incurring of expenses. In the circumstances, we do not see any valid reason to disallow the said expenses. We agree with the view of the ld. CIT (Appeals).- Decided against revenue Assessability of rental income - income from letting out of the properties - income from house property OR income from other sources - Held that:- The issue has been considered by the tribunal in the assessment year 2008-09 and it was held that lease rent in respect of the property situated in Village Kolkhe, Taluk Panvel, District Raigad (within the limits of gram panchayat Kolkhe) should be assessed under the head Income from House Property. Thus we direct the assessing officer to assess the rental income in respect of the said properties under the head Income from House Property. The grounds raised by the revenue on this issue are rejected. Restricting the notional income from house properties on the unoccupied house properties - Held that:- From the perusal of the assessment order, we find that the assessing officer said to have estimated the rental values for the vacant properties looking at the location and area of the property. However, assessing officer did not cite any instances of similar properties deriving rent where the rental income is similar to the estimated value in respect of the properties of the assessee. We find that the ld. CIT (Appeals) has estimated the rental value of the current assessment year based on actual rent received by the assessee during the assessment year 2015-16. The ld. CIT (Appeals) has taken similar values of rental income of the assessment year 2015-16 for the current assessment year i.e.2010-11 and arrived at the rental value at ₹ 7,79,658/- which in our opinion is reasonable and has some basis. Therefore, we sustain the valuation arrived at by the ld. CIT(Appeals). The grounds raised by the revenue on this issue are rejected. Notional interest from security deposit while computing the rental income - Held that:- Hon’ble Bombay High Court in the case of JK Investors (2000 (6) TMI 9 - BOMBAY High Court ) held that section 23(1)(b) of the I.T. Act provides that when actual rent received is more than the fair rent the actual rent would be the annual value and therefore the notional interest would not form part of actual rent received or receivable under section 23(1)(b) of I.T.Act. Therefore respectfully following the decision of the jurisdictional High Court we hold that notional interest should not form part of annual value. This ground of the revenue is rejected.
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2017 (2) TMI 1190
Un-recorded and un-reconciled traded transaction entered by the assessee as per certificate from BSE vis-à-vis books of accounts maintained by the assessee - addition made based upon AIR information - Held that:- We in principle agree with the reasoning given by the learned CIT(A) in his appellate order dated 26.12.2011 while sustaining the assessment order dated 15.12.2010 passed by the AO u/s 143(3) of the Act that AIR information cannot be simply brushed aside and onus is on the assessee to have reconciled the same instead of merely denying the same. It was incumbent on the assessee herself to have taken-up with BSE directly to clarify as to how un-recorded transaction of ₹ 7,52,65,347/- was reflected against her name in BSE portal . No such efforts seems to have been made by the assessee which is brought on record except simple denial by the assessee which is not sufficient to discharge the burden cast on the assessee. At the same time, we have also observed that the assessee has earned net profit of 0.59% on the undisputed traded transactions recorded in the books of accounts maintained by the assessee, which net profit ratio of 0.59% on recorded transactions was accepted by Revenue while framing assessment order dated 15.12.2010 passed by the AO u/s 143(3) of the Act of 1961. In our view the end of substantial and complete justice will be met in the instant appeal keeping in view peculiar facts of the case, if un-recorded transaction in the books of accounts which is reported by BSE to have been entered by the assessee to the tune of ₹ 7,52,65,347/- is also brought to tax by estimating net profit @ 0.59% on ₹ 7,52,65,347/-, wherein income is sustained/confirmed in the hands of the assessee to the tune of ₹ 4,44,066/- and rest of the addition stand deleted. We order accordingly.
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2017 (2) TMI 1189
Disallowance of expenses as not verifiable - Held that:- CIT(A) rightly held that the AO on estimation of 5% disallowance is not back by any logical reasoning or comparable cases. CIT(A) has also given a findings that the assessee has maintained and submitted the details of the husk puyrchaed during the year in terms of weighment slip details of farmers etc. At the same time given that certain purchases are not being properly supported with the required additional evidences he restricted the disallowance to ₹ 10,00,000/- being 26% of the total disallowance made by the AO. Similar disallowances have been made in the A.Y. 2011-12 where by following the same reasoning, AO has disallowed 5% of the expenses which were restricted to ₹ 7 lacs by the ld. CIT(A)and the revenue is apparently not in appeal against the said order of the Ld. CIT(A) and the same has attained finality. In the facts and circumstances of the case given that the addition have been made purely on adhoc basis. At the same time given the fact that some of the expenses are not supported by proper evidences. The Ld. CIT(A) has restricted the disallowance to a reasonable level. Disallowance of 5% of the Hammali expenses - Held that:- The addition has been made against on purely adhoc basis without highlighting as a specific defect in the claim of the case, we do not see any infirmity in the order of Ld. CIT(A) who has restricted a disallowance to ₹ 1 lac. Hence we hereby confirmed the order of the Ld. CIT(A). Disallowance of 5% of the loading vehicle expenses - Held that:- As in the preceding year, in the assessee’s own case have decided the same in favour of the assessee. Since it is seen that no independent verification was carried out by the AO to justify his action and his estimation is not backed by either any logical reasoning or factual verifications, the addition of the amount of ₹ 37,172/- is accordingly directed to be deleted. This ground of appeal is treated as allowed. Addition u/s 36(1)(va) on account of late payment of employees contribution to P.F. - Held that:- The decision of Hon’ble Rajasthan High court in the case of CIT vs. Udaipur Dugdh Udpadak Sahkari Sangh Ltd. [2014 (8) TMI 677 - RAJASTHAN HIGH COURT] has held that since the assessee has paid employees contribution towards PF before the due date of filing of the return the same is allowable u/s 43B of the IT Act. The Hon’ble High Court has held in its decision that whether employee and employees contribution are paid before the due date of filing of the return of income u/s 133(9) no disallowance can be made u/s 43B or u/s 36(1)(va). In the instant case it is not in dispute that the subject payments have been made before 30.09.2012 being the due date of filing of the return of income u/a 139 of the Act. Thus no disallowance could be made - Decided in favour of assessee
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2017 (2) TMI 1188
Addition made on account of disallowance of electricity expenses - Held that:- After heating both the sides and perusal of materials on record, we observed that the assessee has made payment by cheque to the torrent power company limited towards the power bills and we have also noted the finding of the learned CIT appeal stating that assessing officer has not made any adverse remarks over the submission of the assessee made during the appellant proceedings before the learned CIT appeal. In view of these facts , we do not find any reason to interfere in the finding of the learned CIT appeal. - Decided against revenue Addition u/s 68 - Held that:- After perusal of the above information and findings of the ld. CIT(A), that identity, creditworthiness and genuineness of all the four parties have been established by the assessee, we do not find any reason to interfere in the findings of the ld. CIT(A). The appeal of the revenue is dismissed.
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2017 (2) TMI 1187
Deduction u/s 80IB(10) - Held that:- The reasons assigned by the Assessing Officer and noticed in this order have not been approved by the Hon’ble High Court’s in the case of Radhe Developers (2011 (12) TMI 248 - GUJARAT HIGH COURT) for denying the benefit on ground that the assesse did not develop the project as developer rather worked as a contractor. It can be inferred from the material available on record and discussed by the Ld. first Appellant authority, that assessee has developed the project as developer. - Decided against revenue
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2017 (2) TMI 1186
Computing exemption profit u/s. 10B - Held that:- On identical issue hon’ble high court of Karnataka in the CIT vs. Tata Elexi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT] held that while computing deduction u/s. 10A if export turnover numerator is to be arrived at after excluding certain expenses, such expenses are also to be excluded in computing export turnover as a component of total turnover in denominator. The components of the export turnover in the numerator and the denominator cannot be different. After considering the legal findings supra, we find that on principle of parity if export freight excluded from export turn-over and the same also ought to be excluded from total turnover while computing exempted profit u/s. 10B of the act therefore, we allow the appeal of the assessee.
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2017 (2) TMI 1185
Revision u/s 263 - Lack of inquiry - Held that:- On the issue of provisions of section 50C applicability AO has apparently not applied his mind to the applicability of the provisions of section 50 C of the income tax act to the sale consideration shown by the assessee when the sale deed was also available before him where the fair market value of the property was shown as 58.75 lakhs. In view of this we are of the opinion that Ld. assessing officer has not conducted any Inquiry on this aspect of the computation of capital gain and therefore the order of the Ld. assessing officer is erroneous and prejudicial to the interest of the revenue on this count. With respect to the claim of the long-term capital loss shown by the assessee on per usual of query letter dated 13/07/2009 issued by the Ld. assessing officer he has asked the details of loss of ₹ 36.75 lakhs claimed by the assessee while computing the long term capital gains. Further there is no evidence on record that the Ld. assessing officer before allowing the set-off has considered whether the loss shown by the assessee in assessment year 2006 2007 is allowable as set-off during the year or not. The Ld. CIT has further stated that only on 02/06/2008 the principal Corporation of Google was constituted and further the certificate obtained by the assessee dated 7 07/04/2015 also shows that during the course of original assessment proceedings for assessment year 2007 – 08 the issue was not at all examined whether the impugned land sold in assessment year 2006 – 07 was situated within 8 km or beyond 8 km of the limits of the municipal corporation. Therefore, according to us the assessing officer has allowed the set-off of the loss to the assessee without examining the facts at all. With respect to the capital gain on sale of shares of a company assessing officer has allowed the claim of the assessee under section 10 (38) of the income tax act without examining whether the security transaction tax has been paid on the sale of the shares or not. The query letter as relied upon by AR only shows that the assessing officer has enquired about the details about acquisition of those source and mode of payment for acquisition of the same as well as evidence for sale of shares and mode of receipt of sale proceeds. According to us these are not the necessary enquiries to be made for the purpose of exemption to be granted to the assessee under section 10 (38) of the income tax act. In view of this the order of the Ld. assessing officer is erroneous and prejudicial to the interest of the revenue to that extent. In the present case the assessment proceedings conducted by the Ld. assessing officer clearly falls within the parameters of “Lack of inquiry.” Therefore there cannot be any fault found with the order of the Ld. CIT in assuming his jurisdiction under section 263 of the income tax act. In view of our above finding we dismiss the appeal of the assessee challenging the order of Ld. CIT under section 263 of the income tax act. - Decided against assessee
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2017 (2) TMI 1184
Penalty u/s 271(1)(c) - addition made on specific issue pertaining to bogus purchases made by the assessee - Held that:- We find that the substantive addition made in this case was not on estimated basis but was made specifically on the indulgence of mal-practices and bogus purchases committed by the assessee. We do not inclined with the submission of the assessee that the penalty was levied on the estimated additions. The assessee failed to substantiate and justify its explanation as per the obligation cast upon it by the Explanation 1 of section 271(1)(c). Keeping in view the concrete findings as elaborated supra which elucidate that assessee was indeed indulged in bogus purchases and availed the CENVAT benefit fraudulently. This estimation was not made on the basis of unverifiable transactions but the estimation of income was based on specific transactions carried out fraudulently and proved as bogus with supporting material evidences found in the case of assessee. These facts clearly establish that the assessee has concealed particulars of in income, therefore, in view of the above mentioned facts and findings, we disincline to interfere in the findings of the Ld. CIT(A). - Decided against assessee
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2017 (2) TMI 1183
Revision u/s 263 - whether the order of the AO is open to attack as erroneous in so far as prejudicial to the interests of the Revenue in terms of section 263 of the Act when the STCGs returned by the assessee has been accepted by the AO in the given facts? - Held that:- AO has noted that necessary details and evidences thereof have been furnished by the assessee. In the circumstances, it is difficult to accept the allegation that the action of the AO was without requisite enquiry and application of mind on facts. Possibly, the CIT is not happy with the quality of the outcome on the enquiry. However, this by itself would not give occasion to the CIT to pass order under s.263 of the Act. On facts, we note from the order of the CIT itself that the assessee has maintained separate records whereby intention to hold certain shares as capital assets as compared to other class of trading assets of similar nature can be deciphered. This act of the assessee by itself is a strong indicator of the declaration of the underlying intention of the assessee. We also take note of the fact that Circular No.4 of 2007 dated 15/06/2007 issued by the CBDT clearly lays down that it is possible for a taxpayer to have two types of portfolios simultaneously, i.e. an investment and trading portfolio. We simultaneously note that substantial majority of the transactions giving rise to the capital gains are mere resale of shares acquired in the initial public offer for allotment of shares by companies. Thus, shares were acquired in the primary market and sold in the secondary market after obtaining delivery thereof. The transactions involving purchase and sales are limited in number and does not indicate any continuous and systematic course of activity or conduct with set purpose. We observe that the manner in which the books of accounts are kept is an important piece of evidence for determination of the factual issue in hand. The shares held at the end of the year towards investment has also not been shown to be valued at cost or market price whichever is lower. We also notice that the investments giving rise to the capital gains are not driven primarily by the borrowed funds which were claimed to be not obtained on commercial basis. In these facts, the action of the AO accepting the capital gain declared by the assessee as such cannot be faulted per se. The view of the AO on the issue is clearly a plausible view which in our view cannot be toppled and substituted by the opinion of the CIT in this regard.- Decided in favour of assessee.
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2017 (2) TMI 1182
Claim of long term capital gain - examining cost of acquisition, cost of improvement - treatment to sale as giving rise to short term capital gain under section 50A - Held that:- As evident from the observations made by the Assessing Officer in the first round of proceedings, the Assessing Officer had accepted the expenses shown by the assessee and there were no disputes in this regard. The short point on which the matter was sent to the file of the Assessing Officer was with respect to verification about depreciation and whether sale in question is to give rise to taxability under section 50A or section 48. Once Assessing Officer holds that the sale gives rise to taxability under section 48 as long term capital gains, the matter ends there. It was no longer open to him to examine the details about cost of acquisition and cost of improvement which were examined and accepted in the first round. In considered view, the Assessing Officer exceeded his brief in this i.e. second round of proceedings. In view of the above discussions, vacate the Assessing Officer’s order on these points and, therefore, delete the impugned addition. The assessee gets the relief accordingly.
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2017 (2) TMI 1181
Addition of undisclosed income - non granting an opportunity to the assessee to cross – examine Held that:- We find that the assessee in response to the show cause notice issued by the AO has submitted that he has given the address of the parties earlier and the AO may confirm with the parties by using the power vested in the Act. This has been 7 mentioned by the AO at para 9.3 (page 4-5) of the assessment order. It is also found that the assessee vide written submission dated 29.04.2014 has submitted before the learned CIT(A) that the name and address of the flat buyers were given to the AO as required and at the repeated request of the assessee, the AO did not confront with the flat buyers that they had paid cash to the assessee, over and above the agreement value. Before us, the learned counsel of the assessee submitted that specific request was made to the AO to issue summons to the purchasers. In State of Kerala vs. K.T. Shaduli Grocery Dealer [1977 (3) TMI 160 - SUPREME COURT ] SC recognised the importance of oral evidence by holding that the opportunity to prove the correctness or completeness of the return necessarily carry with it the right to examine the witnesses and that includes equally the right to cross – examine witnesses. The contentious issues in the instant appeal can be resolved by examining the flat buyers and granting an opportunity to the assessee to cross – examine them. Therefore, we set aside the order of the learned CIT(A) and restore the same to the file of the AO to make a fresh 8 assessment as per the provisions of the Act after examining the flat buyers and granting an opportunity to the assessee to cross – examine them - Decided n favour of assessee for statistical purpose.
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2017 (2) TMI 1180
Revision u/s 263 - capital gain account shown by the assessee is actually saving bank account and the assessee could not have deposited the amount in a savings bank account - Held that:- This proposition of the ld. Principal CIT is incorrect as per the Capitals Gains Accounts Scheme 1988 vide Notification No. G.S.R. 724 (E), dated 22nd June, 1988. Thus it is clear that the deposit shall be in the form of savings deposit, therefore, the proposition of the ld. Principal CIT do not test the CBDT notification. No proof of payment made for acquiring land is on records - Held that:- Though the expenses relate to the construction of a house property. In our considered opinion to claim the exemption u/s.54 of the Act, the assessee has to construct a house property within the stipulated period of time. Obviously, the purchase of land will be either antecedent to the construction or simultaneous to the construction. In any case, the purchases of land do not entitle the assessee for the exemption u/s. 54 of the Act. Therefore, we fail to understand when the land was purchased earlier to the start of construction how this can trigger the provisions of Section 263 of the Act. No merit in the order of the ld. Principal CIT made u/s. 263 - Decided in favour of assessee
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2017 (2) TMI 1179
Unexplained cash deposit in the bank account - Held that:- In the present case there is no doubt about the identity of the person who has given a gift of ₹ 1720000/– to the assessee but the creditworthiness of the mother of the assessee and genuineness of the transaction is not established by the assessee. Furthermore, as per the statement of the assessee. Thus, total sale price of the jewellery allegedly sold by his mother for assessment year 2007 – 08 is ₹ 17,20,000/- then neither the Ld. CIT appeal nor the assessing officer has examined the wealth tax aspect in the hands of the mother of the assessee. This is also required to be examined specifically with respect to the fact that assessee is a salaried employee and drawing a meager salary of ₹ 110000/-and has entered into a transaction of depositing and withdrawal in cash from his bank account and receiving used gift from his mother. Moreover with respect to deposit of cash in the bank account out of withdrawal in cash in past, in absence of verification of cash book along with reasons of withdrawal and holding cash on hand in the hands of salaried person, these facts are required to be brought on record. Thus in the interest of justice we set aside the order of the Ld. CIT appeal and restore the matter back to the file of the Ld. assessing officer to examine the cash deposited by the assessee by withdrawing in cash with the cash book with reasons for such huge withdrawal and deposits and also the fact of sale of gold by the mother of the assessee to the private parties by examining those private parties with respect to the date of sale, quantity of gold sold, rates at which it is sold as well as the fact of cash payment made by them.
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2017 (2) TMI 1178
Addition u/s 14A - Held that:- The assessee has made a disallowance on its own by filing return of income in response to notice under section 148 of the act of a sum of ₹ 2 Lacs. The Ld. assessing officer has not recorded any satisfaction that how the estimate made by assessee is incorrect. In view of this we also disapprove the action of the Ld. assessing officer that without recording any satisfaction about the correctness of the claim of the assessee he has straightway proceeded to apply rule 8D of the income tax rules 1962 which is a mandatory requirement. On that count also appeal of the revenue fails.
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Customs
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2017 (2) TMI 1159
Levy of ADD - Plain Medium Density Fibre Board having thickness of 6 mm and above - import from Indonesia and Vietnam - Held that: - the DA arrived at the ex-works export price and thereafter dumping margin. The grievance of the appellant is that full particulars of the document verification have not been made available to them. We note that the DA cannot make available sensitive cost data of the exporting company. The same is protected by the provision of Rule 7 of AD Rules. If the DA has formed a opinion regarding correctness of the claim made by the party about confidentiality then he is within his rights to withhold such information and make available only the general non-confidential summary relevant for investigation. We find no infirmity in the proceedings by the DA in arriving at the quantum of definitive anti dumping duty on subject goods. Escaping from the condition of period of limitation by filing cross appeal - Held that:- Section 9C (5) of Customs Tariff Act, provides for constitution of special Bench of three Members headed by the president, to decide the case of anti dumping duty. Whereas appeal u/s 129A of Customs Act is heard by a single or a division Bench. The court fee applicable for the appeal under Customs Act as well as under Customs Tariff Act for anti dumping duty are different. The appeal against determination of anti dumping duty is clearly provided u/s 9C of the Customs Tariff Act. An appeal u/s 9C of Customs Tariff Act is required to be filed within the time prescribed to challenge the determination or imposition of anti dumping duty. There is no provision of filing cross objection to be treated as a separate appeal under the said section. The provisions of Section 9A (8) only applies "as far as may apply". When there is a specific provision under Customs Tariff Act for filing appeal against anti dumping duty, the provisions of said section should only apply. Appeal dismissed - decided against appellant.
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2017 (2) TMI 1158
Valuation of imported items - disposable cap and Halogen Lamps - Held that: - The material data of comparable goods as per the information NIDB data base is available with the authorities for assessment. The same has not been contested also by the appellant. The value declared by the appellant is lesser than NIDB data by only a small margin. Re-determination of value as per NIDB data is not contested by the appellant. We find there is no legal justification to conduct a market enquiry especially in the presence of comparable data authenticated in NIDB for identical goods for material period. Even otherwise the details of market enquiry should have been made available to the appellant for his response so that a due decision can be arrived at. The same has not been done - The value of imported goods shall be determined in terms of data recorded in the impugned order based on NIDB. Import of undeclared items - prohibited items - measuring tapes having dual markings - Held that: - The appellant cannot totally escape the responsibility for such import of undeclared item. However, considering the type of items imported and there being ordered to be absolutely confiscated, the penalty may be reduced to ₹ 2,00,000/-. Appeal disposed off - decided partly in favor of appellants.
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2017 (2) TMI 1157
Valuation of imported item - ladies shoes, men's shoes, bags etc - related party transaction - whether the importer and the Foreign Supplier are related persons in terms of Rule 2(2) of the Valuation Rules 2007, and whether the transaction is influenced by the relationship? - Held that: - looking into the agreement between the appellant and the related foreign supplier, original adjudicating authority, came to the conclusion that the transaction value may be accepted. He has also given reasons for such conclusion - appeal was filed before Commissioner (Appeals), who, was of the the original authority should call for additional information/data/document from the importer and remanded the matter to the original authority for passing denovo orders - matter allowed by way of remand.
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Service Tax
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2017 (2) TMI 1177
Valuation - Benefits of N/N. 15/2004-S.T., dated 10-9-2004 - denial of benefits on the ground that the appellants have not included the value of the pipes and other materials provided by the service recipient - Apex Court admitted the appeal against the decision of the tribunal (2015 (9) TMI 1533 - CESTAT AHMEDABAD) after condoning the delay
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2017 (2) TMI 1176
Classification of service - Business Auxiliary Service or not? - Customer Care Services (inclusive of pantry, maintenance, security, housekeeping, hospitality, etc) to the occupants of the premises on behalf of their client, IHC - Sharing of revenue and expenses - The Gross Operating Receipt (GOR) obtained from the facilities are to be shared between the contracting parties viz. the appellant and IHC, in a fixed percentage - agreement lists out expenses to be reimbursed by IHC subject to a ceiling of 10% of GOR. Held that: - such arrangement is not liable to service tax under BAS. The overall scope of the agreement indicates that it is not for rendering of service by one to another. Rather a common pool of resources required for running and maintaining the facilities of IHC successfully was attempted in terms of the agreement and the gross revenue is also shared showing the common intent. For such situation, we do not find a service provider service recipient relationship liable to service tax. Looking at it in another angle, it can be seen that even if there is promotion of business of facilities of IHC, as already noted, the increased income is always shared by both the parties. In such situation, it will involve self service also. Admittedly, any promotion or marketing of IHC facilities will directly benefit the appellant as GOR is shared. Mandap keeper service - benefit of abatement - Held that: - the appellant is eligible for abated rate of duty as they have reversed the cenvat credit availed during the material time, fully. As such, the bar on claiming on such exemption is no more applicable. Appeal allowed - decided in favor of appellant.
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2017 (2) TMI 1175
Cargo handling services - Held that: - The nature of work indicates that the cargo is to be unloaded from the truck or loaded into the truck for inward or outward movement apart from bags to be handled for internal movement, stacking and storage. Such nature of work is covered by the tax entry cargo handling service - the scope of the work as listed in the schedule to the agreement brings it within the ambit of cargo handling service - appeal dismissed - decided against appellant.
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2017 (2) TMI 1174
Printing and preparation of flex boards and subsequent delivery and mounting it in the required premises - whether the activity amounts to taxable activity under the category of advertising agency service or not? - Held that: - printing of flex boards based on the contents supplied by the customer will not be covered by the scope of advertising agency service - the respondent at no stage is involved with work of conceptualizing, visualizing and creating advertisement which is essential and basic ingredient to cover the activity under advertising agency service for tax liability - appeal dismissed - decided against Revenue.
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2017 (2) TMI 1173
Services of site formation for the coal mines - whether fall within the category of site formation category or mining services? - Held that: - the appellants are involved in services of site formation for the coal mines of South Eastern Coal Fields Ltd. - the appellants do not have work order for any mining of coal. The terms of the contract are clear to the effect that they make the site fit and ready for coal mining. Coal extraction is not the work given to the appellant - service tax with interest upheld. Penalty - Held that: - non-payment of service tax in time is due to the fact that service recipient not paying the amount as per contractual arrangement with large number of such contractors - the appellant took up the matter with the service recipient, along with various other contractors involved in same type of work, regarding service tax liability - it is fit case in revoking provisions of Section 80 for waiver of penalties imposed on the appellant - penalties waived. Appeal allowed - decided partly in favor of assessee.
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Central Excise
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2017 (2) TMI 1172
Time limitation - party intended to avail inadmissible credit, suppressed the facts from the Department - is extended period of limitation invokable? - Held that: - Tribunal has not at all looked into the question, whether it was a case of extended period of limitation in respect whereto a finding was already recorded by Commissioner against Assessee - Matter is remanded to Tribunal to consider the question, whether there was a suppression of material fact by Assessee - appeal allowed by way of remand.
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2017 (2) TMI 1171
Extended period of limitation - reliance upon the earlier circular subsequent to the amendment in the notification - Evasion of duty - Notification No.10/97-CE dt.01/03/1997 - Held that: - If the matter is to rest on the ultimate fact finding conclusion for which the Tribunal is the final fact finding authority, there would not be any question of law which may arise for consideration, since the present appeal has to be limited to question of law only and not on the question of fact, unless there is any perversity in the finding of fact recorded by the Tribunal. In our view, if there was change in the language of the Notification dated 16.03.1995, possibly the matter may stand on a different footing and different consideration. But when the very language is kept intact and there is only addition in the number of units, it cannot be said that the clarification of the Central Board of Customs & Central Excise dated 27.06.1992 referred to herein above shall be wiped off or nullified by the Notification dated 16.03.1995. In view of the above, if the language in the earlier Exemption Notification dated 01.03.1986 and the Exemption Notification dated 16.03.1995 were the same and the instructions issued by the Central Board of Customs & Central Excise would also co-relate. In any case, it cannot be said that there was any suppression or that there was any intention to evade the duty - Appeal dismissed - Decided against the revenue.
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2017 (2) TMI 1170
CENVAT credit - penalty on the ground that the appellant had wrongly reversed 8%/10% on the value of intermediate exempted product i.e. Ether Solvent Tech and not on the value final exempted product i.e. Ether Anaesthetics IP/BP - whether penalty of ₹ 1,00,000/- confirmed under Rule 15 of CCR 2004 is justified when the amount has already been paid and not disputed - Held that: - in absence of any suppression mis-declaration, misstatements, etc. when penalty u/s 11AC of CEA,1944 on the appellant is set aside, and no sub-rule u/r 15 of CCR, 2004 is specified in confirming penalty, penalty imposed under the said Rule cannot be sustained - Further, in absence of any other penal provision invoked in the SCN and imposed on the appellant in the impugned Orders, penalty cannot be imposed on the appellant. Appeal allowed - decided in favor of appellant.
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2017 (2) TMI 1169
Manufacture - drawing of wire whether amounts to manufacture or not? - recovery u/s 11D - Held that: - From the plain reading of the Section 11D, the amount u/s 11D can be recovered only in a case where the assessee collected any amount in excess of duty assessed or determined and paid on any excisable goods from the buyer of such goods, in any manner, as regards duty of excise. Therefore, even if any excise duty the assessee collected from the buyers of the goods and if the same has been paid to the Government's account, Section 11D has no application - In the present case, the duty was assessed by the respondent and the same was paid to the Govt. account. Therefore, no amount remained to be paid to attract Section 11D - appeal dismissed - decided against Revenue.
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2017 (2) TMI 1168
Valuation - Job work - The Revenue tried to apply the same price of the principal on the clearance of goods from the job-worker i.e. appellant, for the reason that the appellant has manufactured the goods on loan license basis - Held that: - there is no different law for the manufacture of the medicaments and manufacture of other goods as regard valuation of the goods. Therefore, merely because the appellant has manufactured medicaments on loan license basis, the valuation principle cannot be discarded - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 1167
Interest u/s 11AA - whether the interest under Section 11AA was recoverable particularly when in the earlier show-cause notice, the same interest was demanded under Section 11AB and the same was dropped for a part period as Section 11AB was not existing prior to 28.9.1996? Held that: - before 28.9.1996, the interest was chargeable u/s 11AA. Though initially it was proposed u/s 11AB but subsequently by issuance of fresh SCN, the interest was demanded u/s 11AA. There is no restriction that as regards recovery of interest once the SCN was issued, another SCN cannot be issued. Limitation does not apply in case of recovery of interest. Section 11AA provides for charging the interest - the demand of interest upheld. Imposition of penalty u/r 25(1) of the CER, 2002 - Held that: - appellant had the bona fide belief that the interest is not chargeable once the proceedings for the interest for the same period has been dropped in the earlier proceedings - the imposition of penalty of ₹ 20,000/- is not correct. Appeal disposed off - decided partly in favor of appellant.
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2017 (2) TMI 1166
Valuation - Bromadiolone Cake - clearing in bulk quantity to their service division - valued as per Rule 6(b)(ii) of Central Excise Valuation Rules, 1975 or not? - Held that: - the goods supplied to service division and the goods sold in the market, there is clear distinction depending upon the packing. One product i.e. Bromadiolone Cake - 0.005% is in the same packing, therefore, the price of comparable goods is available. However, the respondent had admittedly paid the duty on the said product - the demand of duty paid on the product namely, Bromadiolone Cake-0.005% upheld. As regards other goods, since no comparable package of the goods which was supplied in the service division are available, therefore, the valuation of the goods was correctly done by the respondent under Rule 6(b)(ii) of Central Excise Valuation Rules, 1975. Appeal disposed off - decided partly in favor of Revenue.
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2017 (2) TMI 1165
100% EOU - Refund claim - Rule 5 of CCR - job-work - the tax was raised against the assessee by way of debit notes instead of invoice, whether the credit should be denied on this basis? - Held that: - the identical question was the subject matter of the Tribunal's decision in the case of Shree Cement Ltd. Vs. CCE Jaipur [2013 (3) TMI 79 - CESTAT NEW DELHI], Wherein it was observed that substance is more important that the format and the denial of credit on the basis of the debit notes, instead of invoices, cannot be appreciated and Upheld - Appeal allowed - decided in favor of appellant.
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2017 (2) TMI 1164
Sugar export quota - it appears that the said assessee had not exported the quantity of sugar quota allotted to them but had diverted the same for home consumption i.e. sold in India - Held that: - similar issue came up before this Tribunal in respect of others in the order dated 30/07/2015, the assessees appeals were allowed and demands were set aside - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 1163
Manufacture - whether the the respondent's activity of cutting, stamping and packing from coil to the pieces amounts to manufacture? - Held that: - the activity is confined to cutting of wire from coil form. Even though it is stamped and packed the activity does not amounts to manufacture. Mere straightening of stainless steel wire and cutting into required sizes does not amount to manufacture - In the present case also the similar activity have been carried out by the respondents - demand not sustainable. Appeal dismissed - decided against Revenue.
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2017 (2) TMI 1162
CENVAT credit - denial on the ground that the activity of drawing of wire from thicker to thinner gauge does not amount to manufacture - Held that: - the assessee is permitted to avail the Cenvat credit on the duty paid goods for carrying out remaking, refining, reconditioning or for any other reason and after any of the said process even if not amounting to manufacture when the goods is cleared then the duty has to be paid equal to Cenvat Credit availed on receipt of duty paid input - the respondents have taken credit on the duty paid on wire rodes and after the process of drawing they have paid duty determined on clearances on the transaction value - Cenvat Credit is legally admissible. Appeal dismissed - decided against Revenue.
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2017 (2) TMI 1161
Imposition of penalty u/s 11AC of CEA, 1944 - the issue of payment of duty was in doubt - Held that: - The Hon'ble Supreme Court in the case of Devans Modern Breweries Ltd. Vs. Commissioner of Central Excise, Chandigarh [2006 (8) TMI 15 - SUPREME COURT OF INDIA] holds that penalty u/s 11AC of CEA, 1944 is imposable if non-payment of duty involves fraud, collusion, willful misstatement or suppression of facts with 'intent to evade' - there are no malafides involved and the issue of liability of duty on the subject goods during the relevant period was not free form doubt - penalty set aside. Interest - Held that: - when the duty has not been paid on time, the interest is payable for the period till the duty is paid. Consequently there cannot be any relief admissible to both the appellants for non-payment of interest. Appeal disposed off - decided partly in favor of appellant.
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2017 (2) TMI 1160
CENVAT credit - the appellant had shifted/transferred used capital goods from their Lambha factory to their another factory at Odhav, without reversal of the credit at their Lambha unit - Held that: - Appellant fairly accepts to reverse the credit at Lambha Unit and avail at Odhav and regularize the procedural lapse. The Appellant is accordingly directed to do so and intimate the department accordingly - demand upheld for normal period. Penalty u/s 11AC of CEA,1944 read with Rule 15 of CCR,2004 - Held that: - the appellant under the bonafide impression did not reverse the credit after due intimation of removal of the capital goods to the Dept. In these circumstances, penalty u/s 11AC of CEA,1944 read with Rule 15 of CCR,2004 is not attracted. Appeal disposed off - decided partly in favor of appellant.
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CST, VAT & Sales Tax
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2017 (2) TMI 1156
ITC - Penalty - Rectification Petition - Held that: - the petitioner indicated that other material, in the form of original tax invoices issued by the dealers and ledger extract of the suppliers, were available, to substantiate its claim, notwithstanding the fact that the commodity code had not been mentioned. In so far as the tax imposed qua sale of tangible assets was concerned, it was indicated that the assets worth ₹ 5,78,98,000/- were disposed of by its registered office in Bangalore (now Bengaluru) and, therefore, the applicable tax had been paid under Karnataka Value Added Tax Act. As regards the sale made to SEZ Units/developers was concerned, it was claimed that exemption was sought under G.O.Ms.No.193 dated 30.12.2006. The petitioner attempted to dispel the impression gathered by respondent No.1 that the petitioner was seeking to take benefit under Section 18 of the 2006 Act. There was an apparent error made with respect to the adjustment of TDS, the impugned order needed to be recalled and, accordingly, an opportunity could have been given to the petitioner to place the relevant material on record qua other issues as well - Matter remanded back to redo the assessment.
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2017 (2) TMI 1155
Detention of goods - local sale - detention on the ground that the subject goods were not accompanied by on-line Form JJ - whether the respondent could have detained the goods for want of on-line form JJ, when goods were being ferried for local sale? - Section 67-A of the 2006 Act - Held that: - The goods in issue were the notified goods, they were not entering the state from a place outside the state - Section 67-A of the 2006 Act had no application, and therefore, the petitioner could not have been called upon to produce on-line Form JJ, which is, the Form prescribed for advance inward way bill - petition allowed - decided in favor of petitioner.
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Indian Laws
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2017 (2) TMI 1154
Auction sale - Notification of incumbrances on the property sold - Held that:- When rules permit sale, with encumbrance and without, contention of the learned counsel for the appellant that the sale should be free from encumbrance, cannot be accepted. On the facts and circumstances of the instant case, what is required to be considered by us, is whether the Bank has notified the encumbrances on the property sold. In the light of the above we are unable to accept the contentions of the bank that by imposing a condition, "as is where is" and "as is what is", the Bank has no obligation to mention in the auction notice, the encumbrance of the property, sought to be sold and it is suffice to contend that in the auction notice, the Bank has clearly stated that the property sold was in "as is where is" and "as is what is" condition and that the same would satisfy the requirements of Rule 8(6) of the Security Interest (Enforcement) Rules, 2002, which states that the authorised officer shall state the description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor. In Jai Logistics's case (2010 (7) TMI 1118 - MADRAS HIGH COURT ), defence of the Bank that the encumbrance was not known to them, and hence, could not be published on the sale notice, to sustain the order of forfeiture, was not accepted by this Court. On the facts and circumstances of the case, the Bank may be right in contending that physical possession need not be taken before bringing the mortgaged property for auction, but they cannot shirk their duty to hand over possession to the auction purchaser. If the bank was not in a position to take physical possession, before sale, then recourse ought to have been taken under Section 14 of the Act and under the scheme of the Act, the Bank cannot be permitted to contend that there is no statutory obligation, on its part, to put the auction purchaser in possession. Ordinarily, a sale is completed, on receipt of the entire sale consideration and handing over possession. But if encumbrance is specifically mentioned in the sale notice and if the auction purchaser with eyes open, had purchased the property, then there could be a cause to contend that it is the purchaser, who had taken the risk. While issuing a sale notice, it is the duty of the Bank to mention all the encumbrances in the property. The condition, "as is where is" or "as is what is" may indicate that when the property is sold, everything is not clear. But at the same time, the purchaser cannot be expected to know that the property sold was already mortgaged to another bank, viz., Nedungadi Bank and that there was a decree in O.S.No.328 of 1999, dated 10.07.2000, on the file of Subordinate Judge, Poonamallee. Though the appellant has taken a demand draft dated 02.09.2009 in favour of Punjab National Bank, the respondent herein and also sent a telegram that he was ready to hand over the draft, subject to the bank handing over vacant possession of the property and time for remittance was granted up to 22.02.2009, bank has stuck to its stand of 'as is where is' or 'as is what is' condition and not committed to hand over physical and vacant possession of the auctioned property, which in our view is contrary to the scheme of the Act. In the light of the above discussion and decisions, forfeiture of the amount is erroneous. Appellant has made out a case for interference. In the result, order made in W.P. is set aside. The respondent bank is directed to refund, a sum of ₹ 3,30,000/- to the appellant, with interest at the rate of 9% per annum, within a period of four weeks, from the date of receipt of a copy of this order.
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