Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 11, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Articles
News
Highlights / Catch Notes
Income Tax
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Validity of exercising jurisdiction u/s.263 - Application of the principle of diversion of income by overriding title - transfer of capital asset inherited - The line of difference between ss. 263 and 264 is that while the former can be invoked to remove the prejudice caused to the State the latter can be invoked to remove the prejudice caused to the assessee. - AT
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Penalty u/s 271B - Tax Audit - The assessee was under the bonafide belief that the provisions of Section 44AB of the Act were not applicable to a Club, while supplying beverages, liquor etc., to its members as it was not engaged in any business, but only a mutuality. - No penalty - HC
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Qualification for exemption u/s 10(5) - LTC paid to the employees involving foreign travel - TDS on the payment of LTC to the employees - Revenue has rightly held the assessee to be in default, as the assessee has not deducted TDS intentionally on the reimbursement of expenditure incurred on LTC/LFC. - AT
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TDS u/s 195 - the assessee can not be said to have paid the consideration for use of or the right to use copyright but has simply purchased the copyrighted work embedded in the CD- ROM which can be said to be sale of ‘good’ by the owner. The consideration paid by the assessee thus as per the clauses of DTAA can not be said to be royalty - AT
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Non service of notice u/s 143(2) - Apparently, the notice was sent on the wrong address as the assessee has categorically given his address in the relevant return of income - Presumption can only be raised against the assessee for service of notice u/s 143(2) when the notice was sent on the correct address. - AT
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Rejection of books of accounts - denial of natural justice - Assessing Officer has not provided sufficient opportunity of being heard to the assessee rather rejected the books of accounts arbitrarily and declared the bills filed by the assessee as bogus unilaterally. - Matter remanded back - AT
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Revision u/s 263 - AO has to consider the provisions applicable under Rule 8D effective from assessment year 2008-09. But the AO made disallowance by following Co-ordinate Bench decision for earlier assessment year. It is apparent from facts and circumstances the order of the Assessing Officer is erroneous and prejudicial to the interest of Revenue - Revision proceedings are correct - AT
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Penalty u/s 271(1)(c) - the money has been appropriated by ICICI Bank after collection and the assessee has claimed the deficiency in realization as Bad debts. The income of 2% was not considered in profit and loss account by assessee. - The explanations given by the assessee cannot be considered as bonafide and assessee tried to conceal the income by misrepresenting the case - penalty confirmed - AT
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Eligibility of deduction u/s 80IC on freezing charges - freezing charges earned by the assessee is an integral part of the processing of vegetables and therefore is eligible for deduction u/s 80IC of the Act - AT
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Capital gains - calculation of number of trees - The evidence filed by the assessee in terms of certificate of Tehsildar or that of a retired IAS officer is of no evidentiary value, specially in the presence of Jamabandi, which is an actual proof of land holding and cultivation thereon. - AT
Customs
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Valuation - as the Supply Agreement is consistent with the Technology Transfer Agreement, and the supplier had the right to terminate the supplies in case of non-payment of royalties, the payment of royalty is a condition of sale and includible in the assessable value - AT
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Invokation of Rule 9(1)(c) - Royalty and Technical know-how fee paid on domestic sale - Whether includible or not in the value of goods imported - Held that: Not to be included - AT
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Contravention of provisions of Regulation 13(e) and 13(o) of CHA Licensing Regulation, 2004. - CHA has not even claimed that it had ever verified the existence of the importer at the given address which means the appellant has failed to fulfil the requirement of Regulation 13(o) ibid. - Action against CHA sustained - AT
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Entitlement - Benefit of Notification No. 12/2012-Cus, - beyond doubt that 'bulk drugs' are also 'drugs' - benefit of exemption allowed - AT
Service Tax
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ST-3 return form amended to insert the columns related to Swachh Bharat Cess - Service Tax (Second Amendment) Rules, 2016 - Notification
Central Excise
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Extended period of limitation - When the material facts are disclosed, a particular classification followed by the appellant will not make a case for suppression - the appeal in so far as it relates to extended period is allowed. - AT
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SSI Exemption - Manufacture and clearing dutiable goods with the brand name or trade name of another person - for denial of exemption the brand name or trade name has a wider connotation, registration being not mandatory - AT
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Demand of duty for clearance of waste and scrap - the transparency in the appellant's dispatch of waste and scrap and receiving the granules back cannot be questioned only on the ground that the Notification 214/86-CE is not applicable to waste and scrap. - AT
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Liability to pay the excise duty - consignee does not sent the certificate of re-warehousing within the period of 90 days - department cannot ask the appellant to pay the duty as the department cannot recover the duty twice for the same consignment and moreover as per the sub-clause (3) of Rule 20 it is the responsibility of the buyer to pay the duty - AT
Case Laws:
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Income Tax
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2016 (3) TMI 289
Validity of exercising jurisdiction u/s.263 - transfer of capital asset inherited - Held that:- In this case before us, the assessment order passed by the AO lacks judicial strength to stand. It is not a case where the order is short but is not supported by judicial strength. It is in this view of the matter that we feel that the learned CIT has correctly exercised his revisional jurisdiction under s. 263. The line of difference between ss. 263 and 264 is that while the former can be invoked to remove the prejudice caused to the State the latter can be invoked to remove the prejudice caused to the assessee. The provisions of s. 263 would lose significance if they were to be interpreted in a manner that prevented the CIT from revising the erroneous order passed by the AO, which was prejudicial to the interest of the Revenue. In fact, such a course would be counter-productive as it would have the effect of promoting arbitrariness in the decisions of the AOs and thus destroy the very fabric of sound tax discipline. If erroneous orders, which are prejudicial to the interest of the Revenue, are allowed to stand, the consequences would be disastrous in that the honest taxpayers would be required to pay more than others to compensate for the loss caused by such erroneous orders. For this reason also, we are of the view that the orders passed on an incorrect assumption of facts or incorrect application of law or without applying the principles of natural justice or without application of mind or without making requisite inquiries will satisfy the requirement of the order being erroneous and prejudicial to the interest of the Revenue within the meaning of s. 263. Thus the order passed by Assessing Officer is prejudicial to the interest of the Revenue. Thus, the Ld. CIT is justified in exercising the jurisdiction provided to him u/s.263 of the Act. Accordingly, the legal issue raised by the regarding validity of exercising jurisdiction u/s.263 by CIT is rejected.- Decided against assessee Application of the principle of diversion of income by overriding title - expenditure claimed on transfer of property inherited from the father - cost incurred on acquisition by the successor - Held that:- The true test for the application of the rule of diversion of income by an overriding charge is whether the amount sought to be deducted in truth never reached the assessee as his income. Further, obligations, no doubt, there are in every case, but it is the nature of the obligation which is the decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow; it is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one's own income, which has been received and is since applied. In our view, therefore, the exclusion of the payment made by the assessee, in this case, by applying the principle of diversion of income by overriding title cannot be allowed. However, in our opinion the entailing a cost to the legatee/s if only the cost to the previous owner that would stand to be considered as the cost of acquisition , and there is no scope for adding thereto the cost, if any, incurred on acquisition by the successor, which would be in fact his cost. The same could not be considered as a cost of improvement so as to qualify, for deduction U/s.48 of the Act. Even there is no evidence with regard to expenses like professional fees paid to Shri M.S.Narayanan ₹ 3,20,000/-, Commission paid to Shri N.D.Basavaraja ₹ 4,00,000/- and other expenses ₹ 32,500/-. Hence, these expenses cannot be allowed as a cost to transfer the capital asset. - Decided against assessee
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2016 (3) TMI 288
Computation of deduction under S.10A - Interpretation of Total Turnover - whether communication charges are to be excluded from the total turnover for the purpose of computing deduction under S.10A - Held that:- The communication charges having been excluded from the export turnover, it should also be excluded from the total turnover for the purpose of computation of deduction under S.10A of the Act. Since the view taken by the CIT(A) is in conformity with the view taken in the aforesaid decisions, we do not find any infirmity in the order passed by the learned CIT(A). See CIT V/s. Tata Elxsi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT ),CIT V/s. Gem Plus Jewellery India Ltd. (2010 (6) TMI 65 - BOMBAY HIGH COURT ) as well as Sak Soft Ltd. [2009 (3) TMI 243 - ITAT MADRAS-D ] - Decided against revenue
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2016 (3) TMI 287
Revise return - jurisdiction of AO to ignore the revised return and proceed on the basis of original return - CIT(A) held that AO had no jurisdiction to proceed with the original assessment.AO did not have jurisdiction in view of the revised return in which the disclosed income was shown as ₹ 41,31,510/- which was more than ₹ 10 lakhs, the monetary limit placed by the Central Board of Direct Taxes ("CBDT"). Held that:- Revenue's Appeal was defective since the finding of the CIT(A) on the lack of jurisdiction was not challenged by it.
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2016 (3) TMI 286
Penalty under Section 271B - Tax Audit - Applicability of provision of Section 44AB on appellant Club - Held that:- The assessee was under the bonafide belief that the provisions of Section 44AB of the Act were not applicable to a Club, while supplying beverages, liquor etc., to its members as it was not engaged in any business, but only a mutuality. The authorities and the Tribunal failed to appreciate the vital aspect of the explanation offered by the appellant in a right perspective and as such, in our considered opinion, the order passed by the Tribunal confirming the order of penalty is unsustainable. - Decided in favour of the assessee
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2016 (3) TMI 285
Non deduction of tds - challenge to the notices / summonses issued u/s 201 - period of limitation for passing an order u/s 201 - Limitation under section 201(3)(i) - whether notices initiating assessment proceedings were without jurisdiction as being barred by limitation? - Held that:- Present case relates to financial year 2008-2009. The petitioner had filed statements as required under section 200 of the Act. The limitation for initiating proceedings under section 201(1) of the Act would, therefore, be governed by section 201(3)(i) of the Act as it stood at the relevant time which provided for a period of limitation of two years from the end of the financial year in which statement was filed in a case where the statement referred to in section 200 has been filed. The limitation for initiating action under section 201(1) of the Act, therefore, elapsed on 31st March, 2012 whereas the amendment in section 201 of the Act as amended by Finance Act No.2 of 2014 came into force with effect from 28th May, 2012. The impugned notice, therefore, is clearly barred by limitation and, therefore, cannot be sustained. See Tata Teleservices v. Union of India (2016 (2) TMI 414 - GUJARAT HIGH COURT ) - Decided in favour of assessee
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2016 (3) TMI 284
Deemed dividend addition made u/s 2(22)(e) - Held that:- The effect of clause (e) of section 2(22) is to broaden the ambit of the expression 'dividend' by including certain payments which the company has made by way of a loan or advance or payments made on behalf of or for the individual benefit of a shareholder. The definition does not alter the legal position that dividend has to be taxed in the hands of the shareholder. Consequently, in the present case the payment, even assuming that it was a dividend, would have to be taxed not in the hands of the assessee but in the hands of the shareholder. The payment could not be taxed in the hands of the assessee. See Universal Medicare Pvt.Ltd [2010 (3) TMI 323 - BOMBAY HIGH COURT ] - Decided in favour of assessee Addition on Business income on security deposit received by the Respondent - transfer of rights of ownership by way of irrevocable covenant - Held that:- when the possession of land by way of license was given to M/s. Skyline Mansion Pvt. Ltd. The Tribunal has in the impugned order rendered a finding of fact that when the security deposit was received under the joint development agreement dated 4th April 2008, no sale took place as no conveyance was executed. Further, the land and rights in respect thereof being stock in trade and not capital assets of the Respondent Assessee, no sale under the Transfer of Property Act also took place in the subject Assessment Year. The impugned order holds that in terms of the joint development agreement dated 4th April, 2008, only after all the requisite permissions are obtained, would the obligation to issue a license to M/s. Skyline Mansions Pvt. Ltd. to enter upon the Respondent – Assessee's land would be granted. It is on the above date 25th April, 2011 i.e. the date when the license was granted to M/s. Skyline Mansion Pvt. Ltd. that income can be said to have accrued. Therefore, on the date when the security deposit was received, in view of the findings of fact rendered by the Tribunal, there is no income earned by the Respondent – Assessee in respect of its security deposit of ₹ 54.68 crores. - Decided in favour of assessee
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2016 (3) TMI 283
Validity of assessment - period of limitation - Held that:- In the absence of dispatch date made available to the Court from the records, to prove that the order is issued within the prescribed period, order passed by Assessing Officer is barred by limitation. See Government Wood Works vs. State of Kerala [1987 (1) TMI 451 - KERALA HIGH COURT ] We have noticed certain over writings in the order sheet as regards date of passing of the order by the Assessing Officer and moreover, a particular page of the order sheet is maintained on a rough sheet (in an unusual manner) different from other pages of the order sheet. Besides this flaw in the records, learned Counsel for the revenue is neither able to point out from the records that the Assessment Orders were dispatched on 27.04.2007 nor produced the dispatch register to establish that the orders are complete and effective i.e., it is issued, so as to be beyond the control of the authority concerned within the period of limitation i.e., 29.04.2007. Admittedly, the assessment orders were served on the assessee on 30.04.2007. Hence, we are of the considered opinion that the assessment orders passed are barred by limitation. - Decided in favour of assessee
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2016 (3) TMI 282
Qualification for exemption u/s 10(5) - LTC paid to the employees involving foreign travel - TDS on the payment of LTC to the employees - Held that:- As per provisions of section 10(5) of the Act, only that reimbursement of travel concession or assistance to an employee is exempted which was incurred for travel of the individual employee or his family members to any place in India. Nowhere in this clause it has been stated that even if the employee travels to foreign countries, exemption would be limited to the expenditure incurred to the last destination in India In the instant case the employees of the assessee have travelled outside India in different foreign countries and raised claim of their expenditure incurred therein. No doubt, the assessee may not be aware with the ultimate plan of travel of its employees, but at the time of settlement of the LTC/LFC bills, complete facts are available before the assessee as to where the employees have travelled, for which he has raised the claim; meaning thereby the assessee was aware of the fact that its employees have travelled in foreign countries, for which he is not entitled for exemption under section 10(5) of the Act. Thus, the payment made to its employees is chargeable to tax and in that situation, the assessee is under obligation to deduct TDS on such payment, but the assessee did not do so for the reasons best known to it. We have also carefully examined the Circular placed by the ld. counsel for the assessee during the course of hearing, in which a reference was made to the interim order of the Hon’ble Madras High Court dated 16.2.2015. Through the interim order, the Hon’ble Madras High Court has permitted the bankers not to deduct TDS on or after 16.2.2015 on the amount paid/reimbursed to the employees of the bank in respect of LTC/HTC availed where the employee has visited a foreign city/country, irrespective of the fact whether the LFC bills were submitted and paid prior to 16.2.2015; meaning thereby this Circular was passed consequent to the interim order of the Hon’ble Madras High Court. But in the present case, the journey was undertaken in the year 2012 and the bills were settled during that year; meaning thereby at the relevant point of time when the bills were settled, there was no order of the Hon’ble Madras High Court and the assessee was under obligation to deduct TDS on the reimbursement of expenditure incurred by the assessee on foreign travel. In the light of these facts, we are of the considered opinion that the Revenue has rightly held the assessee to be in default, as the assessee has not deducted TDS intentionally on the reimbursement of expenditure incurred on LTC/LFC. Moreover, the ld. CIT(A) has directed the Assessing Officer to recalculate the liability of TDS at 10%. - Decided against assessee
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2016 (3) TMI 281
TCS demands - tax liability of the buyer of the scrap - Held that:- TDS demands raised under section 201, TCS demands raised under section 206C are in the nature of vicarious liabilities which survive only as long as principal liability of the taxpayer remains in existence. When the principal tax liability itself is extinguished, the very reason of the demand raised under section 206C ceases to hold good in law. The details furnished by the assessee before the Assessing Officer and the verifications by the Assessing Officer are intended to ensure that the buyer of the goods has duly discharged his tax liability in respect of the income earned in respect of goods in question. Once that satisfaction is arrived at, there cannot be any justification of recovering the tax collectible at source which is, in any event, adjustable against the tax liability of the buyer of the scrap. The relief granted by the Assessing Officer is in accordance with the law laid down by the binding judicial precedents. In view of these discussions the CIT(A), in the second round, was indeed justified in granting the impugned relief. As for the appeals filed by the assessee against the order passed by the CIT(A) in the first round, these appeals are now infructuous as the relief is granted to the assessee by the AO while giving effect to the directions of the CIT(A) in the second round which now stands confirmed and approved by us.
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2016 (3) TMI 280
Transfer pricing adjustment - selection of comparable - Held that:- Direct the AO to exclude Vishal International Technology Ltd. and Mold-Tek Technologies Ltd. while determining the arm's length price of the assessee relating to the transactions with its AEs. Disallowance of club entrance fees - the assessee has made a claim that the special membership would help in building better relationship with clients - Held that:- Hon’ble Punjab & Haryana High Court in the case of “CIT vs. Groz Beckert Asia Ltd.” reported as (2013 (2) TMI 375 - PUNJAB & HARYANA HIGH COURT ), wherein held that no capital asset is created or comes into existence on account of obtaining corporate membership. The corporate membership obtained was for a limited period and it was obtained for running the business with a view to produce profit and the said corporate membership fee paid to the club was to be treated as revenue expenditure. Relying on the said the Full Bench decision of the Hon’ble Punjab & Haryana High Court, this ground is decided in favour of the assessee. Disallowance of tax credit of branch profit tax paid in USA - Held that:- The scope of Article II relating to “Taxes Covered” has been explained in the said guide/technical explanation. It has been specifically provided that the taxes covered in the case of US, as indicated in paragraph 1(a) of Article II, are the Federal income taxes imposed by the Code, together with the excise tax imposed on insurance premiums paid to foreign insurers (Code section 4371). The Article specifies that the Convention does not apply to the accumulated earning tax (Code section 531), the personal holding company tax (Code section 541) or the social security taxes (Code sections 1401, 3101 and 3111). State and local taxes in the United States are also not covered by the Convention. A perusal of the Article II of the ‘DTAA’ read with the ‘technical explanation to the convention’ reveals beyond doubt that the taxes which have been excluded from the purview of the DTAA have been specifically mentioned therein. Further, as observed above, the accumulated earning tax, which has been provided under section 531 of the Internal Revenue Code of the US, is different from ‘branch profit tax’ which is dealt with under separate section 884. The ‘section 884’ dealing with branch profit tax has not been specifically excluded from the DTAA and thus being a part of the Internal Revenue Code is covered by the US treaty. This issue is accordingly decided in favour of the assessee. TDS u/s 195 - disallowance of expenditure incurred for purchase of “off the shelf” software from ‘QAD Singapore Pvt. Ltd.’ under section 40(a)(i) for non tds - whether the term ‘literary work’ as mentioned in the definition of royalty in the treaty would include ‘software’ or not? - Infringement of Copyright - Held that:- Contention of the Ld. D.R. that the definition of royalty as under the Income Tax Act is in paramateria as under the DTAA can not be accepted as it is apparent that the definition under the DTAA is short and restrictive whereas the definition under the Income Tax Act is wide, inclusive and extended. Since the definition provided under the royalty in the DTAA is more beneficial to the assessee, hence as per the provisions of section 90, the definition of royalty as provided under DTAA is to be taken. DRP has given a specific finding of fact that what the assessee in the present case has purchased is the shrink wrapped /off the shelf software. It has also been discussed in detail in paras above that the definition of ‘royalty’ given in the treaty is more beneficial to the assessee as compared to the provisions of section 9 of the Income Tax Act and the assessee has opted for the definition that is provided under the DTAA, thus as per section 90 of the Income Tax Act, definition of ‘royalty’ as provided in the DTAA will prevail as over the general definition of ‘royalty’ provided under the Income Tax Act. Hence, without expressing our opinion or any view in relation to the definition of ‘royalty’ vis-à-vis ‘computer software’ as provided under the Income Tax Act, we have given our findings only in respect of the scope of ‘royality’ under the DTAA. In view of our detailed discussion made above, the assessee can not be said to have paid the consideration for use of or the right to use copyright but has simply purchased the copyrighted work embedded in the CD- ROM which can be said to be sale of ‘good’ by the owner. The consideration paid by the assessee thus as per the clauses of DTAA can not be said to be royalty and the same will be outside the scope of the definition of ‘royalty’ as provided in DTAA and would be taxable as business income of the recipient. The assessee is entitled to the fair use of the work/product including making copies for temporary purpose for protection against damage or loss even without a license provided by the owner in this respect and the same would not constitute infringement of any copyright of the owner of the work even as per the provisions of section 52 of the Copyright Act,1957. - Decided in favour of assessee
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2016 (3) TMI 279
Transfer pricing adjustment - TP provisions applicable to capital transactions due to the absence of the income element therein - recharacterisation of investment into loan - Held that:- In the absence of provisions/Rules for re-characterization of investment in share capital into loan and vice-versa, we are of the considered view that the re-characterization of the impugned capital transaction into a loan as sought for by the Transfer Pricing Officer/CIT(A) is not tenable in law in view of the decision of the Hon’ble Bombay High Court in the case of Besix Kier Dabhol SA (2012 (10) TMI 817 - BOMBAY HIGH COURT ), which was followed by the Co-ordinate Bench of this Tribunal in the case of Aegis Ltd.,(2015 (7) TMI 1051 - ITAT MUMBAI) to which one of us is party. In the light of the facts and circumstances of the case as discussed above, we delete (i) the addition made by the Transfer Pricing Officer/CIT(A) on account for alleged excess consideration paid and (ii) addition on account of notional interest computed @15% on the aforesaid sum sought to be re-characterized as a loan. In this view of the matter, the alternate plea of the assessee to reconsider the LIBOR rate for the purpose of computing the addition on account of notional interest becomes academic.
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2016 (3) TMI 278
Non service of notice u/s 143(2) - Held that:- Apparently, the notice was sent on the wrong address as the assessee has categorically given his address in the relevant return of income for the Assessment Year 2006-07, which was subjected to scrutiny, the issuance of notice in a mechanical manner does not mean that service of notice on the assessee has been effected. Presumption can only be raised against the assessee for service of notice u/s 143(2) when the notice was sent on the correct address. The revenue is also silent if the alleged notice sent through registered cover was received back undelivered or has never been received back within the stipulated period to raise the presumption against the assessee. The entire record of the Assessing Officer is silent and as such, the Assessing Officer cannot be allowed to raise the presumption for service of notice on assessee. So, we are of the considered view that service of notice u/s 143(2) is essential and assessment made without service of such a notice is invalid. So, when the assessee has categorically proved that the change of address has already been intimated to the Revenue by incorporating the same in the relevant return of income for the Assessment Year 2006-07, the assessment order due to non service of notice u/s 143(2), is not sustainable. Assessment order passed in this case by the Assessing Officer without getting service of notice on the assessee on his new address duly intimated to the revenue is not sustainable in the eyes of law. Hence, we hereby set aside the impugned order passed by Ld. CIT(A). - Decided in favour of assessee
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2016 (3) TMI 277
Rejection of books of accounts - denial of natural justice - Held that:- In view of the cryptic findings returned by the Assessing Officer rejecting the books of accounts and finding returned by Ld. CIT(A) referred to above, we are of the considered view that the opportunity of being heard has not been granted to the assessee by the Assessing Officer before rejecting the books of accounts. Even otherwise, the bills submitted by the assessee during assessment proceedings have been declared as bogus without calling the parties who have issued the bills in question. Moreover, the Assessing Officer at the one hand has accepted the P & L account statement and on the other hand, he has rejected the books of accounts of the assessee. So, we are of the considered view that Ld. CIT(A) has erred in quashing the action taken by the Assessing Officer to invoke provisions contained u/s 145(2) of the Act without taking into account the admitted fact that the Assessing Officer has not provided sufficient opportunity of being heard to the assessee rather rejected the books of accounts arbitrarily and declared the bills filed by the assessee as bogus unilaterally. So, the impugned order passed by Ld. CIT(A) is not sustainable in the eyes of law and without entering into the merits of the case, the file is ordered to be restored to the Assessing Officer to decide afresh after providing opportunity of being heard to the assessee.
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2016 (3) TMI 276
Validity of assumption of jurisdiction under section 153C - additions made u/s 153C for want of any corresponding material/incriminating material unearthed during search operations - disallowance of cash purchases - Held that:- In the absence of any incriminating material, the concluded assessments could not be interfered under Section 153A of the Act and further held that the documents seized has no reference to the income of the assessee for relevant assessment year and, thus, the Assessing Officer has no jurisdiction to make the re-assessment under Section 153A of the Act. In view of the above findings, we hold that the no addition can be sustained and thus this ground of appeal is allowed. Also the income declared was more than the net profit rate under Section 44AF of the Act as well as the net profit rate declared in respect of preceding years which have been accepted by the Tribunal. We hold that addition can’t be sustained on merit of the case also. - Decided in favour of assessee
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2016 (3) TMI 275
Additions towards interest on NPA - Held that:- Interest on NPA, whose recovery is doubtful and which was not recovered by the assessee bank, but has been kept in a suspense account and has not been credited into the Profit & loss account, cannot be included in the income of the assessee for the year under consideration. The CIT(A), rightly deleted the additions made by the A.O. towards interest on NPAs. There is no error or infirmity in the order passed by the CIT(A). Therefore, we direct the A.O. to delete the additions towards interest on NPA. - Decided in favour of assessee.
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2016 (3) TMI 274
Transfer pricing adjustment - whether international transaction being royalty payment of the assessee to its associated enterprises is held to be within the arms length price - A.O. was of the opinion that the assessee has not proved the necessity of Royalty payment - Held that:- We do not see any merits in the contention of the A.O. for the reason that, the assessee has furnished copies of invoices and bank remittance challans. The payment was made through banking channel and which was supported by bills and agreements. The TPO as well as AO has accepted the payment of Royalty as genuine and not sham transaction in the previous assessment year. The fact remains same for the assessment year under consideration. The revenue has failed to substantiate its arguments with any evidences to show that the royalty payment is not genuine. Therefore, we are of the opinion that the A.O. was not right in disallowing the Royalty payment. The CIT(A) has rightly deleted the additions and his order does not require any interference. Hence, we inclined to upheld the order of the CIT(A) and reject the ground raised by the revenue. - Decided in favour of assessee Disallowance of royalty payment u/s 40(a)(i) - non deduction of TDS on royalty payment as per section 195 - Held that:- A careful study of the provisions of section 40(a)(i) of the Act, it was clear that any payments referred to in the said section, which is payable outside India or in India to a non-resident on which tax is deductible under chapter XVIIB and such tax is not deducted or, after deduction has not been paid within the due dates under sec. 200(1) of the Act, then such payment is not allowed in computing the income from Business or Profession. In the present case on hand, though assessee deducted tax at source, it has deducted tax in subsequent year, but failed to deposit the same within the due date specified under sec. 200(1) of the Act. Therefore, we are of the opinion that the A.O. has rightly disallowed the Royalty payment under sec. 40(a)(i) of the Act. Eligibility for deduction towards Royalty - Held that:- A careful study of provisions of section 40(a)(i) of the Act and proviso provided therein, it is clear that where in respect of any such sum, tax has been deducted in any subsequent year or has been deducted in the previous year but paid in any subsequent year after the expiry of the time prescribed under sub section 1 of section 200, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. In the present case on hand, the assessee has deducted TDS on royalty payment and paid the amount into the Government account in the financial year 2007-08, relevant to the assessment year 2008-09. Therefore, we are of the opinion that the assessee is eligible for deduction towards Royalty payment, in the year in which the TDS is deducted and remitted into to the Govt. account, i.e. for the assessment year 2008-09. Accordingly, we direct the A.O. to allow the deduction for the assessment year 2008-09.
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2016 (3) TMI 273
Revision u/s 263 - failure to apply provisions of Sec.14A of Rule 8D by AO - Assessee has raised additional grounds that the matter is a subject matter of appeal before CIT and that the CIT cannot exercise jurisdiction u/s.263 - Held that:- Though Rule 8D came into effect from 24.03.2008 and non applicability of provisions is erroneous and omitted by the Assessing Officer and it is prejudicial to the interest of the Revenue and we do not find any merits in the argument of the ld. Authorised Representative as order under Sec.263 is bad in law. We are of the opinion that the argument of the ld. Authorised Representative is not correct where the notice u/s.263 was issued with reference to Rule 8D further doctrine of merger cannot be applied on this issue as the issue before CIT is with regard to disallowance u/s.14A and not relating to Rule 8D which is applicable from 2008- 2009 onwards. Further CIT can suo-motU initiated proceedings were Assessing Officer takes a wrong decision without considering the material on record or he takes a decision without making a enquiry into matters, where such enquiry prime facie warranted. In the present case, the Assessing Officer has to consider the provisions applicable under Rule 8D effective from assessment year 2008-09. But the Assessing Officer made disallowance by following Co-ordinate Bench decision for earlier assessment year. It is apparent from facts and circumstances the order of the Assessing Officer is erroneous and prejudicial to the interest of Revenue and accordingly we uphold the order of CIT - Decided against assessee
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2016 (3) TMI 272
Penalty u/s 271(1)(c) - addition on account of cash collateral offered to ICICI Bank - whether assessee’s claim on the amount kept in cash collateral is not permissible as it is mere diversion of income by overriding title - Held that:- Assessee company claims that its case falls in capacity of contractor and the money is retained for a certain period and retention money shall not be taxable until the retention period is over and the assessee relied on the decisions but amount kept in cash collected is not a prudent practice and it should be subjected to tax. In this case the money has been appropriated by ICICI Bank after collection and the assessee has claimed the deficiency in realization as Bad debts. The income of 2% was not considered in profit and loss account by assessee. We are of the opinion that these are incorrect treatment given by the assessee company and have no sanction of law and also not supported by any Accounting standard. The assessee claim is nothing but false claim and furnishing inaccurate particulars of income. The explanations given by the assessee cannot be considered as bonafide and assessee tried to conceal the income by misrepresenting the case by not bringing true income to the books of accounts. We rely on the decision of DCIT vs. Rattha Cidadines Boulevard Chennai (P) Ltd (2015 (11) TMI 991 - ITAT CHENNAI) where it observed that Auditor’s report cannot override provisions of act and, thus, merely because assessee’s false claim for deduction is supported by Chartered Accountant’s opinion, this fact per se cannot absolve assessee from penalty under section 271(1)(c) of the Act. Accordingly, we set aside the order of the Commissioner of Income Tax (Appeals) and restore the order of Assessing Officer confirming penalty - Decided against assessee.
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2016 (3) TMI 271
Reopening of assessment - disallowance of deduction u/s 80- IA - Held that:- Perusal of reassessment order passed by the Assessing Officer goes to prove inter alia that he has reopened the assessment to examine the issue as to the admissibility of deduction claimed by the assessee u/s 80- IA which issue has been squarely decided by the Assessing Officer in original assessment vide order dated 31.05.2005 u/s 143(3) of the Act; that after reassessment, the Assessing Officer has withdrew the deduction earlier made available to the assessee u/s 80-IA on the ground that deductions are available under clause (ii) of sub-section (4) of Section 80- IA to the person who is in the business of generation and distribution of power despite the fact that the assessee made a categorical submission that the power plant was set up for demonstration and the primary reason for installation of WEGs was to promote the basic business and to convince the prospective buyers for purchasing the windmills manufactured by the assessee; that the Assessing Officer came to the conclusion that since the windmill was set up for display and not for power generation, the assessee is not entitled for deduction u/s 80-IA of the Act. Following the law laid down by Hon'ble Supreme Court in the judgement cited as Kelvinator of India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA ), no doubt the Assessing Officer has the powers of reassessment after having reason to believe that the income has escaped assessment but it does not confer powers upon him to reopen the assessment on mere change of opinion. The Assessing Officer has powers to reopen an assessment only on the basis of tangible material sufficient to hold that there has been escapement of income from the assessment. But in the case at hand, the Assessing Officer has apparently exercised the powers to review under the garb of reopening of the issue as to the deduction u/s 80-IA of the Act already decided by him in the original assessment order passed u/s 143(3), which is not permissible u/s 147 of the Act. - Decided in favour of assessee
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2016 (3) TMI 270
Eligibility of deduction u/s 80IC on freezing charges - Held that:- AO is required to verify whether that the nature of such income is derived from the eligible undertaking or not. If the answer found to that question is yes then the deduction should have been allowed to the assessee on this income. In our view this income forms part of the composite activity of processing of vegetables and certainly eligible for deduction u/s 80IC of the Act. The ld. AR also aptly relied on the Britannica Encyclopedia, Wikipedia where freezing is considered as one of the process of the processing of vegetables etc. It is not the case of the AO that freezing charges does not form part of the processing of vegetables and it is altogether different source of income or different business activity of the assessee. Only reason advanced by AO is that receipt in income is storage charges. Therefore, we do not have any hesitation in in holding that freezing charges earned by the assessee are part of the composite activity of processing of peas. The decision relied upon by the ld. DR of Hon‟ble Supreme Court in case of Liberty India Vs. CIT [2009 (8) TMI 63 - SUPREME COURT ] does not apply to the facts of this case as in that case held that the DEPB/ duty Drawback which has received from the Govt. of India to support the assessee are not income derived from the industrial undertaking. Here in this case freezing activity, which is carried out by the assessee is part of the composite activity of processing of vegetables. It is not the case of the revenue that freezing activity are not at all required to carry out-processing of vegetable performed by the assessee of Mother Dairy Food Pvt. Ltd. Therefore, we confirm the order of the learned Commissioner of Income tax (Appeals) and held that freezing charges earned by the assessee is an integral part of the processing of vegetables and therefore is eligible for deduction u/s 80IC of the Act. - Decided in favour of assessee
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2016 (3) TMI 269
Capital gains - calculation of number of trees - Held that:- On going through copies of jamabandi the Assessing Officer has noticed that khasra No.494 & khasra No.573/1 measuring 0-10-98 & 0- 53-00 are reflected as bagicha i.e. apple orchard and remaining khasra Nos.496, 499 & 500 are either banjar kadim or under agriculture crops. We are in agreement with this finding of the Assessing Officer, which he has arrived after a totally scientific method applied on the basis of revenue records. As regards number of apple trees to be grown per bighas, the Assessing Officer has applied 25 number of apple trees per bigha on the basis of consultation from revenue/horticultural authority, which even the assessee has not objected to. On this basis, the Assessing Officer has arrived at 99 number of trees. We do not find any fault in this. The evidence filed by the assessee in terms of certificate of Tehsildar or that of a retired IAS officer is of no evidentiary value, specially in the presence of Jamabandi, which is an actual proof of land holding and cultivation thereon. In this view, we confirm the order of the learned CIT (Appeals) to the extent of number of trees to be 99 as against 142 claimed by the assessee. - Decided against assessee Computation of cost of acquisition and improvement to be taken for computing capital gain - Held that:- The cost of improvement, in case of a tree can only be those expenses which are incurred either to enhance the life span of the trees or to enhance the fruit bearing capacity of such trees. These further expenses are not of such nature and are incurred only for the upkeep of the orchard or for the maintenance of the trees only. Therefore, we uphold the action of the Assessing Officer in not treating these expenses as part of cost of acquisition or cost of improvement. We further uphold the action of the Assessing Officer in not allowing the Net Present Value as computed by the assessee for the loss of likely earning. As we have earlier mentioned that this approach may be appropriate for estimating the amount of compensation, but for the purpose of computing the capital gains, this is not the right approach. In view of the above, we uphold the order of the Assessing Officer. - Decided against assessee
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Customs
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2016 (3) TMI 257
Classification - Polished Steel Balls - Whether to be classified under Chapter Heading 9608 or under Chapter Heading 73.26 - Held that: by relying on the decision of the case of Collector of Customs, Bombay Vs. Sanghvi Swiss Refills Pvt. Ltd [1997 (6) TMI 152 - CEGAT, NEW DELHI] as the products are the similar one the products imported by the appellant is held to be classifiable under Chapter 73, Heading 73.26. - Decided against the appellant
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2016 (3) TMI 256
Valuation - Technology Transfer Agreement - Whether royalty paid in terms, is a condition of sale includible in the assessable value - Rule 9(1)(c) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 2008 - Held that: as per Technology Transfer Agreement, the appellant was to pay royalty within such 7 days of the end of the quarterly period to the foreign suppliers and in case of failure to do so, the foreign suppliers had the right to “terminate all of the foreign suppliers” obligation hereunder.” Therefore, as the Supply Agreement is consistent with the Technology Transfer Agreement, and the supplier had the right to terminate the supplies in case of non-payment of royalties, the payment of royalty is a condition of sale and includible in the assessable value. - Decided in favour of Revenue
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2016 (3) TMI 255
Valuation - Invokation of Rule 9(1)(c) - Royalty and Technical know-how fee paid on domestic sale - Whether includible or not in the value of goods imported - Held that: by relying on the judgment of Apex Court in the case of Commissioner of Customs vs. Ferodo India Pvt. Ltd. [2008 (2) TMI 12 - Supreme Court], the transaction value cannot be loaded as technical know-how. - Decided in favour of appellant
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2016 (3) TMI 254
Contravention of provisions of Regulation 13(e) and 13(o) of CHA Licensing Regulation, 2004. - Impart of wrong information - Held that: there was no question of the appellant being in a position to impart any wrong information to the client as the same was found non-existent. Also the weight of the container for which it filed bill of entry was in excess by 7.280 tonnes over the declared weight (5.051 tonnes) which should have come to the appellant’s notice at the time of due diligence exercised. Therefore, allegation of violation of Regulation 13(e) ibid sustained. The appellant was required to inter alia verify present and permanent address in full, complete and correct which the appellant did not do. The Custom House Agent is obligated to inter alia verify antecedent, correctness of Importer Exporter Code, identity of the importer and functioning of his client at the declared address by using reliable, independent, authentic documents, data or information but the appellant has not even claimed that it had ever verified the existence of the importer at the given address which means the appellant has failed to fulfil the requirement of Regulation 13(o) ibid. Violation of Regulation 22 of CHALR, 2004 - Held that: the appellant had not taken the point of time bar before the High Court and therefore by the doctrine of constructive res judicata is prevented from raising this point in respect of the current proceedings which are in compliance of the direction of the Hon’ble High Court. Therefore, the appellant has not violated the time limit prescribed in Regulation 22 ibid.- Decided against the appellant
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2016 (3) TMI 253
Entitlement - Benefit of Notification No. 12/2012-Cus, dated 17.03.2012 - Import of Drugs claiming benefit of above notification denied by the department - Held that:- beyond doubt that 'bulk drugs' are also 'drugs'. - by relying on the decision taken by the Tribunal in the case of Cipla Ltd., Vs. CC [2007 (8) TMI 131 - CESTAT, CHENNAI], the appellant is entitled to take benefit of the above said notification. - Decided against the revenue
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2016 (3) TMI 252
Classification - LCD Panel - Whether to be classified under Tariff Item 9013 8010 of the Customs Tariff Act and is entitled for the benefit of BCD exemption under Notification No. 24/2005 or under Tariff Item 8529 9090 - Held that: based on HSN which has described LCD and from the fact that the wordings contained in CTH 9013 8010 are different from other entries dealing with LCD Technology. Also Tariff Heading 9013 covers LCD not constituting Article provided for more specifically in other headings. Explanatory Notes to the Heading 9013 also provide similarly and the panel under dispute are not described more specifically in any other heading. Therefore, the specific mention of LCD in Tariff Item 9013 8010 is more specific. Relied on the judgment of Tribunal in the appellant's own case M/s Samsung India Electronics Pvt Ltd, M/s Moser Baer India Ltd Versus Commissioner of Customs, Noida 2015 (10) TMI 2258 - CESTAT NEW DELHI, where the LCD's are more specifically covered under 9013 80 10 vis-`-vis their general coverage under CTH 8529. - Decided in favour of appellant with consequential relief
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Service Tax
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2016 (3) TMI 268
Demand of service tax on GTA service - Revenue appeal against the decision of tribunal in [2004 (11) TMI 577 - CESTAT CHENNAI] dismissed on the ground of low tax effect - even otherwise the present matters are covered by the order dated 15th July, 2015 passed by this Court [2016 (3) TMI 267 - SUPREME COURT] - these civil appeals are dismissed.
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2016 (3) TMI 267
GTA service - In these cases, CESTAT, in the impugned judgment and final order, has relied upon its earlier judgment in the case of L.H. Sugar Factories Ltd. v. CCE [2004 (1) TMI 111 - CESTAT, NEW DELHI] and the appeal thereagainst, preferred by the Department has also since been dismissed [2005 (7) TMI 106 - SUPREME COURT OF INDIA]. - In view of the above, the appeal filed by the revenue is dismissed and the appeals filed by the assessee are allowed.
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Central Excise
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2016 (3) TMI 266
Extended period of limitation - Availability of exemption under notification 29/2004-CE - re-classify the product under heading 7019 and to deny the exemption - sustainability to demand for extended period - Held that:- The original authority clearly indicated in the order that the appellant has declared in their ER-1 returns that they are engaged in the manufacture of clearance of dust collection bags manufactured out of cotton fabric, poly fabric and woven glass fabrics. However, the Original Authority proceeds further to state that the Chapter heading was not mentioned in respect of woven glass fabrics and this will amount to deliberate suppression of facts. We are not able to agree with such conclusion. It is an admitted fact that the appellant has declared the nature of raw material and the nature of final product. They had in their assessment and clearance documents mentioned the classification as was done for many years. In the matter of classifying the product, the assessee followed their understanding. When the material facts are disclosed, a particular classification followed by the appellant will not make a case for suppression. The Hon’ble Supreme Court in the case of [Desons Pultretaknik (2003 (1) TMI 115 - SUPREME COURT OF INDIA )] held that merely claiming a classification under a particular heading cannot be a willful misstatement or a suppression of facts. The Tribunal in the case of [AB Mauri India Pvt. Ltd. 2010 (8) TMI 348 - CESTAT, MUMBAI] held that in the case of bonafide belief of a particular classification, it cannot be said that the appellant suppressed any material fact before the Department with intend to evade payment of duty. After careful consideration of the facts of the case, we find the demand for extended period is not sustainable, and accordingly, the appeal in so far as it relates to extended period is allowed. The penalty imposed on the appellant is also set aside. The demand due to reclassification as confirmed by the Original Authority with applicable interest will be restricted to the normal period of limitation. The appeal is disposed of in these terms. - Decided in favour of assesseee
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2016 (3) TMI 265
Lack of jurisdiction by the Assistant Commissioner - order set aside for want of jurisdiction. - Determination of duty and imposition of penalty - Held that:- In the present case is the issue is on valuation and re-determination of duty and imposition of penalty. Therefore the impugned order setting aside the original order on the jurisdiction is not justified. Accordingly, we set aside the impugned order and direct the Commissioner (Appeals) to decide the issue on merits. See PAHWA CHEMICALS PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, DELHI [2005 (2) TMI 136 - SUPREME COURT OF INDIA] held that the order cannot be set aside for want of jurisdiction We direct the Commissioner (Appeals) after following the principle of natural justice to decide the appeal within a period of 3 months from the date of the receipt of the order.
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2016 (3) TMI 264
SSI Exemption - Manufacture and clearing dutiable goods with the brand name or trade name of another person - denial of exemption under Notification No. 1/1993-CE (NT) dated 28/3/1993, as amended - Held that:- The Managing Director of the appellant company had confirmed that they have been clearing hubs and drums which is further confirmed from the balance sheet for the relevant period. The fact has been confirmed further by the statement of the Production Supervisor. These were corroborated by the customers who purchased these finished branded goods. The affidavits of retraction filed after almost 1= years are clearly an afterthought. The case of the Revenue is not only based on the statements. There were physical seizure and independent corroboration including statements of the customers and the bills which covered the clearances. The impugned order examined all these issues in detail. The learned Commissioner examined all the evidences and came to the conclusion that the appellants have cleared during the impugned period goods with brand name which was not owned by them and as such are liable to Central Excise duty as SSI exemption will not be available to them. We find in the present appeal, the appellant is not able to bring in any point for consideration to interfere with the impugned order. Regarding the communication received from Trade Marks Registry, it is to be noted that the same is regarding the application of Section 9 of the Trade Marks Act, 1999 for the purpose of registration. As mentioned above, for denial of exemption the brand name or trade name has a wider connotation, registration being not mandatory. We find no merit in the present appeal and as such dismiss the same.
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2016 (3) TMI 263
Eligibility for exemption under Notification No. 50/2003-CE denied - area based exemption to the appellant/assessee was denied on the ground that the product they made in their unit is falling under Tariff Heading 4809.10 Carbon Paper of width exceeding 36 cms - Held that:- It is the appellant’s plea that they have added cutting machine during the course of expansion. This was admitted in the impugned order. The appellant/assessee cuts the Carbon Paper having width of 69 cms. to make Carbon Paper of less than 36 cms., packs them accordingly and clears the same. The Department has not brought forward any evidence to the effect that even after expansion the appellant/assessee is clearing only Carbon Papers of width exceeding 36 cms. The learned Commissioner (Appeals) in his impugned order dated 26/12/2006 recorded that at first Carbon Paper with normal width exceeding 36 cms. is manufactured by the unit and subsequently after printing and coating the same can be converted/sized to Carbon Paper of less width and length by dividing and cutting machine as per the requirement of the market. Having recorded so, the learned Commissioner (Appeals) proceed to conclude that cutting Carbon Paper of broader width to smaller size will amount to manufacture and hence duty has to be discharged on the larger Carbon Paper which is manufactured by the assessee, later further manufactured into smaller Carbon Paper by them. We find that the above finding of the Commissioner (Appeals) is misconceived and contrary to the decision of the Hon’ble Supreme Court in the case of CCE, New Delhi - I vs. S.R. Tissues Pvt. Ltd. reported in (2005 (8) TMI 111 - SUPREME COURT OF INDIA ). held that slitting and cutting of jumbo rolls of tissue papers or aluminium foils into various shapes and sizes will not amount to manufacture merely because the jumbo roll exceeding 36 cms. fell under one entry and the toilet paper of width not exceeding 36 cms. fell in a different entry. The impugned order itself mentions that after printing and coating the Carbon Paper of larger size is converted or sized into Carbon Paper of smaller size. There is no allegation or factual evidence in the proceedings before the lower Authorities for finding to the non-application of the Hon’ble Supreme Court’s decision in the case of CCE, New Delhi - I vs. S.R. Tissues Pvt. Ltd. (supra). We find the decision of the Hon’ble Supreme Court is applicable to the present case and as such we find the impugned orders unsustainable. The two main grounds namely absence of substantial expansion and manufacturing process in between, to deny the exemption to the appellant/ assessee cannot be upheld - Decided in favour of assessee
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2016 (3) TMI 262
SSI exemption benefit under Notification No. 8/2002-CE dated 01.3.2002 denied - demand of duty alongwith interest and imposed penalty of equal amount of duty on the assessee and also imposed penalty of ₹ 5 Lakh on the partner of the assessee, amongst others - Held that:- The partner of the assessee, in various statements, had categorically stated that they had charged invoice value to the customers including the duty and other taxes. It is seen that the customers, in their statements had also admitted that the value is inclusive of excise duty. Hence, while computing the value of clearances for the purpose of exemption notification, it should be determined after extending cum-duty benefit. We find that the Tribunal in the case of Meghdoot Gramoudyog Sewa Sansthan vs. CCE, Noida (2010 (11) TMI 911 - CESTAT NEW DELHI ) held that the assessee being found ineligible for exemption, the sale price has to be treated as including excise duty and assessable value determined after abating it. Thus it is clear that the invoices mentioned in Annexure ‘C’ of the Show Cause Notice has already been included in the Annexure ‘A’ while computing the value of clearances. Therefore, the demand of duty as shown in Annexure ‘C’, as included in Annexure ‘A’, cannot be sustained. We find that the demand of Central Excise duty on the partnership firm was confirmed and the penalty was imposed under Section 11AC of the Central Excise Act, 1944. It is noticed that the partnership firm has already paid the duty alongwith interest and penalty to the extent of 25% of the duty, as per Section 11AC of the Act. Therefore, in the facts and circumstances of the case, imposition of separate penalty on the Partner of the firm (i.e. Appellant No.2) is not justified. Demand of duty alongwith interest and penalty with the option to pay 25% of duty under Section 11AC of the Central Excise Act, 1944, on the assessee are upheld; subject to, the value of clearances for the purpose of determining exemption benefit, the cum-duty benefit would be extended and the demand of duty on the basis of Annexure ‘C’ to the Show Cause Notice alongwith interest and penalty is set-aside. The adjudicating authority is directed to re-determine and re-quantify the demand of duty, interest and penalty as per above directions.
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2016 (3) TMI 261
Demand of duty for clearance of waste and scrap - case of the assesse that they had cleared the waste and scrap under the provisions of Notification 214/86-CE and received back the granules which are used for manufacturing process - Held that:- Both the lower authorities have given concurrent findings as to the demand being unsustainable. Both the lower authorities have recorded a factual findings that the plastic waste and scrap generated during the manufacture is sent to manufacturer for converting the same in to granules and receiving the same back for further use in the manufacture of finished goods. Both the lower authorities have come to this conclusion after considering all the records of the case before them. Revenue's claim that benefit of Notification 214/86-CE cannot be made applicable to ‘waste' is incorrect as the said Notification applies for the goods manufactured by a job-worker on job-work basis and to be used in or in relation to the manufacture of final products on which duty of excise is leviable whether in whole or in part. In the case in hand, it is undisputed that the plastic waste and scrap which gets generated during the manufacture of final products are sent to job-worker and received back as granules which are further consumed in the manufacture of final products. On the face of such factual matrix, in our view, both the lower authorities were correct in holding that no liability arise on the respondent-assessee. Further, the benefit of Notification 214/86 should be applicable to the inputs on which cenvat credit is availed but at the same time the assessee kept the department informed by following the procedure to indicate that that they are clearing the waste and scrap to the job-worker and received the same back as granules. This transparency in the appellant's dispatch of waste and scrap and receiving the granules back cannot be questioned only on the ground that the Notification 214/86-CE is not applicable to waste and scrap. Factually also, it is not in dispute that the waste and scrap which is sent to job-worker is received back as granules, nothing survives in the appeal. - Decided in favour of assessee
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2016 (3) TMI 260
Clearance of goods without payment of duty on the strength of C.T. 2 certificate issued by the authorities in-charge of cold storage - remission of duty under Chapter X of Central Excise Rules - Held that:- As it is not in dispute that the appellant had cleared the finished goods to various consumers without payment of duty on C.T.2 certificate produced by such consumers. On perusal of the said C.T. 2 certificate, annexed in the appeal memo, I find that the certificate has been issued to the appellant after considering the factual position. I find strong force in the contentions raised by the learned Counsel that the C.T. 2 certificate cannot be equated with the exemption is law settled by the Apex Court in the case of SRF Ltd. (supra). This Tribunal in the case of SRF Ltd. (2003 (11) TMI 5 - CESTAT NEW DELHI ) has held that the clearances made under Chapter X procedure or under bond is not same thing as clearances of goods wholly exempt or goods chargeable to nil rate of duty hence provisions of Rule 57C of Central Excise Rules, 1944 are not applicable holding such view, held in favour of the assessee that he need not to reverse 8% / 10% of the value of the goods cleared by them by following Ch. 10 procedure. - Decided in favour of assessee
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2016 (3) TMI 259
Liability to pay the excise duty - consignee does not sent the certificate of re-warehousing within the period of 90 days - appellant are liable to pay the duty involved in the final product cleared to M/s. CFC India Services P. Ltd. on the ground that the appellant did not receive the duplicate copy of the certificate duly endorsed by the consignee - Held that:- It is a fact that with regard to the same consignee the Asst. Commissioner of Customs issued a letter to M/s. CFC India Services P. Ltd. demanding the duty and interest for violation of the conditions of notification 22/03 and the appellant's customer M/s. CFC India Services P. Ltd. has paid the entire duty of excise along with interest to the department and thereafter with regard to the same consignment the department cannot ask the appellant to pay the duty as the department cannot recover the duty twice for the same consignment and moreover as per the sub-clause (3) of Rule 20 it is the responsibility of the buyer to pay the duty and in the absence of non-payment, recovery proceedings can be initiated against the buyer. In this case the said duty was recovered. Therefore, find that the appellant is not liable to pay duty. Therefore, the entire demand is time barred as the show-cause notice has been issued beyond one year, which is the normal period of limitation and the Revenue has failed to prove suppression of facts with intend to evade payment of duty. - Decided in favour of assessee
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2016 (3) TMI 258
Remission under Rule 21 of Central Excise Rules, 2002 - Liability on broken bottles - assessee had enjoyed CENVAT credit in the past - Held that:- When Rule 21 of Central Excise Rules, 2002 is read that deals with the cleared goods. Bottles in this case are used as packing commodity but not cleared as such. The bottles were used as a filler of the aerated water. When the contents were cleared those were liable to duty and that has suffered duty. At the time of clearance, the duty having been suffered on the aerated water it cannot be conceived that Rule 21 is applicable to the bottles which were not cleared but were cleared as container containing the contents. The appellant's claim is also that it is governed by the Circular. All the conditions of the circular are satisfied by the appellant. Its loss of glass bottles are within the permissible limit of 0.5% and from to time the losses were recorded in the statutory record and known to the department. Therefore, following the decision of the Hon'ble High Court of Allahabad in the case of Hindustan Coca-Cola Beverages Pvt. Ltd. Vs. Union of India [2013 (4) TMI 83 - ALLAHABAD HIGH] also the circular, the appeal is allowed in favour of assessee
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