Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 5, 2016
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Tax Deduction at Source (TDS) on payments by broadcasters or television channels to production houses for production of content or programme for telecasting - Circular
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Tax Deduction at Source (TDS) on payments by television channels and publishing houses to advertisement companies for procuring or canvassing for advertisements - Circular
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Issue of taxability of surplus on sale of shares and securities - Capital Gains or Business Income - Instructions in order to reduce litigation - Circular
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Reducing the subsidy for the purpose of calculation of depreciation - When the statute does not contemplate computation of actual cost of assets after it becomes part of a block of assets, Explanation 10 to Subsection (1) of Section 43 of the Act cannot be made applicable to assets of which the actual cost has been determined and forms part of a block of assets. - AT
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TDS u/s 195 - Transaction in question would not fall under the category of colourable device. If an assessee enters into a deal which does not violate any provision of the Act of applicable to a particular AY. the deal cannot be termed a colourable device, if it result in non-payment or lesser payment of taxes in that year - AT
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Transfer pricing adjustment - adjustment made on account of sharing of software expenses with the AE - no reason why adjustment should be made on account of sharing of software expenses with the AE. The TPO has also not given any reason to treat the subscription value as nil. - AT
Bill
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Scheme not to apply to certain persons - THE INCOME DECLARATION SCHEME, 2016 - specific circumstances where the proceeding have been initiated or pending under specified provisions, the benefit of this scheme will not be available.
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Applicability of certain provisions of Income-tax Act and of Chapter V of Wealth-tax Act - THE INCOME DECLARATION SCHEME, 2016 - The provisions relating to liability in respect of assessment in special cases shall, so far as may be, apply in relation to proceedings under this Scheme as they apply in relation to proceedings under the Income-tax Act or, as the case may be, the Wealth-tax Act, 1957.
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Exemption from wealth-tax in respect of assets specified in declaration - THE INCOME DECLARATION SCHEME, 2016
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Declaration by misrepresentation of facts to be void - THE INCOME DECLARATION SCHEME, 2016 - where a declaration has been made by misrepresentation or suppression of facts, such declaration shall be void and shall be deemed never to have been made under this Scheme.
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Declaration not admissible in evidence against declarant - THE INCOME DECLARATION SCHEME, 2016 - Notwithstanding anything contained in any other law for the time being in force, nothing contained in any declaration made under section 180 shall be admissible in evidence against the declarant for the purpose of any proceeding relating to imposition of penalty, other than the penalty leviable under section 182, or for the purposes of prosecution under the Income-tax Act or the Wealth-tax Act, 1957 (27 of 1957).
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Tax in respect of voluntarily disclosed income not refundable - THE INCOME DECLARATION SCHEME, 2016 - Any amount of tax and surcharge paid under section 181 or penalty paid under section 182 in pursuance of a declaration made under section 180 shall not be refundable.
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Undisclosed income declared not to be treated as benami transaction in certain cases - THE INCOME DECLARATION SCHEME, 2016 - The provisions of the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) shall not apply in respect of the declaration of undisclosed income made in the form of investment in any asset, if the asset existing in the name of a benamidar is transferred to the declarant, being the person who provides the consideration for such asset, or his legal representative, within the period notified by the Central Government.
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Undisclosed income declared not to affect finality of completed assessments - THE INCOME DECLARATION SCHEME, 2016 - A declarant under this Scheme shall not be entitled, in respect of undisclosed income declared or any amount of tax and surcharge paid thereon, to re-open any assessment or reassessment made under the Income-tax Act or the Wealth-tax Act, 1957(27 of 1957), or claim any set off or relief in any appeal, reference or other proceeding in relation to any such assessment or reassessment.
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Undisclosed income declared not to be included in total income - THE INCOME DECLARATION SCHEME, 2016 - The amount of undisclosed income declared in accordance with section 180 shall not be included in the total income of the declarant for any assessment year under the Income-tax Act, if the declarant makes the payment of tax and surcharge referred to in section 181 and the penalty referred to in section 182, by the date specified under sub-section (1) of section 184.
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Time for payment of tax - THE INCOME DECLARATION SCHEME, 2016 - If the declarant fails to pay the tax, surcharge and penalty in respect of the declaration made under section 180 on or before the date specified under sub-section (1), the declaration filed by him shall be deemed never to have been made under this Scheme.
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Penalty - THE INCOME DECLARATION SCHEME, 2016 - penalty at the rate of twenty-five per cent. of tax will be levied
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Charge of tax and surcharge - THE INCOME DECLARATION SCHEME, 2016 - tax of thirty per cent. on the undisclosed income declared in the scheme, a surcharge at the rate of twenty-five per cent. of such tax as Krishi Kalyan Cess of tax will be levied
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Declaration of undisclosed income - THE INCOME DECLARATION SCHEME, 2016 - When the declaration can be filed - Determination of fair market value - No deduction in respect of any expenditure or allowance shall be allowed against the income in respect of which declaration under this section is made.
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THE INCOME DECLARATION SCHEME, 2016 - Meaning of various terms defined.
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THE INCOME DECLARATION SCHEME, 2016 - Clauses 178 to 196 of the Bill seeks to insert a new Chapter IX relating to Income Declaration Scheme, 2016. The said Scheme, inter alia, provides for declaration of undisclosed income by any person. The scheme shall be in operation from the 1st day of June, 2016 till a date to be notified by the Central Government in the Official Gazette.
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Collection and recovery of equalisation levy - Clause 163 of the Bill provides for collection and recovery of equalisation levy by a person, being a resident and carrying on business or profession or a non-resident having a permanent establishment in India (assessee) by way of deduction from the amount paid or payable to the non-resident in respect of specified services. The amount of equalisation levy so deducted by the payer has to be paid to the credit of the Government by 7th day of the month following the month in which the equalisation levy is collected.
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Charge of equalisation levy - Clause 162 of Bill provides for charge of equalisation levy at the rate of six per cent. of the amount of consideration for any specified service received or receivable by a person, being a nonresident from the persons referred therein.
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EQUALISATION LEVY - Definitions given for various terms
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EQUALISATION LEVY - Chapter VIII of the Bill seeks to insert a new Chapter in the Finance Bill, 2016 which deals with equalisation levy, collection and recovery of such levy. - Clause 160 of the Bill provides that the said chapter shall come into force on such date as Central Government may, by notification in the Official Gazette, appoint.
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Infrastructure Cess - An Infrastructure Cess, as a duty of excise, imposed on motor vehicles falling under heading 8703. - By virtue of declaration under the Provisional Collection of Taxes Act, 1931, this Cess will come into force with effect from 1.3.2016. - The effective rates of the Infrastructure Cess prescribed vide notification No. 1/2016-Infrastructure Cess dated 1st March, 2016
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Krishi Kalyan Cess - Krishi Kalyan Cess is proposed to be levied with effect from 1st June, 2016 on any or all the taxable services at the rate of 0.5% on the value of such taxable services. - Credit of Krishi Kalyan Cess paid on input services shall be allowed to be used for payment of the proposed Cess on the service provided by a service provider.
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Amendment of notification issued under section 93A of Finance Act, 1994 - Service Tax - Retrospective - media with recorded Information Technology Software which is not required to bear RSP, is being exempted from so much of the Central Excise duty/CVD as is equivalent to the duty payable on the portion of the value of such Information Technology Software recorded on the said media, which is leviable to service tax - Consequently retrospective exempted granted from 1st day of July, 2012 to 2nd February, 2016 (both days inclusive).
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Insertion of new sections 103 - service tax - Retrospective Exemption from Service Tax on services by way of construction, erection, etc. of original works pertaining to an airport, port was withdrawn with effect from 1.4.2015. - where the contract had been entered into prior to 01.03.2015. The exemption is being restored till 31.03.2020.
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Insertion of new sections 102 - service tax - retrospective exemption from Service Tax on services provided to the Government, a local authority or a governmental authority by way of construction, erection, etc. of -(i) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; (ii) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment; (iii) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65B of the said Act; - Exemption restored w.e.f 1.4.2015 where a contract which had been entered into prior to 01.03.2015 and on which appropriate stamp duty, where applicable, had been paid prior to that date.
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Insertion of new sections 101 - service tax - retrospective exemption from services provided by way of construction, erection, maintenance, or alteration etc. of canal, dam or other irrigation works provided to entities set up by Government but not necessarily by an Act of Parliament or a State Legislature. - The benefit of exemption is proposed to be extended to the said services provided during the period from the 1st July, 2012 to 29.01.2014.
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Amendment of section 93A - service tax - Section 93A of the Finance Act,1994 is being amended so as to enable allowing of rebate by way of notification as well as rules.
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Amendment of section 91 - service tax - The power to arrest in service tax law is proposed to be restricted only to situations where the tax payer has collected the tax but not deposited it with the exchequer, and amount of such tax collected but not paid is above the threshold of ₹ 2 crore.
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Amendment of section 90 - service tax - The power to arrest in service tax law is proposed to be restricted only to situations where the tax payer has collected the tax but not deposited it with the exchequer, and amount of such tax collected but not paid is above the threshold of ₹ 2 crore.
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Amendment of section 89 - service tax - The monetary limit for filing complaints for punishable offences is proposed to be enhanced to ₹ 2 crore. (Existing 50 lakh rupees)
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Amendment of section 78A - service tax - penalty proceedings under section 78A shall be deemed to be closed in cases where the main demand and penalty proceedings have been closed under section 76 or section 78.
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Amendment of section 75 - service tax - a higher rate of interest would apply to a person who has collected the amount of service tax from the service recipient but not deposited the same with the Central Government.
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Amendment of section 73 - Service Tax - The limitation period for recovery of service tax not levied or paid or short- levied or short paid or erroneously refunded, for cases not involving fraud, collusion, suppression etc. is proposed to be enhanced by one year, that is, from eighteen months to thirty months - Normal period of limitation for demand extended from 18 months to 30 months (2.5 years).
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Amendment of section 67A - Service Tax - Section 67A is proposed to be amended to obtain specific rule making powers in respect of Point of Taxation Rules, 2011
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Amendment of section 66E - Service Tax - New Declared service - Assignment by the Government of the right to use the radio-frequency spectrum and subsequent transfers thereof is proposed to be declared as a service under section 66E of the Finance Act, 1994 so as to make it clear that assignment by Government of the right to use the spectrum as well as subsequent transfers of assignment of such right to use is a service leviable to service tax and not sale of intangible goods.
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Amendment of section 66D - service tax - transportation of goods by an aircraft or a vessel from a place outside India up to the customs station of clearance - these services will be omitted from the Negative List - However such services by an aircraft will continue to be exempted by way of exemption notification [Not. No. 25/2012-ST, as amended by notification No. 09/2016-ST dated 1st March, 2016 refers]. The domestic shipping lines registered in India will pay service tax under forward charge while the services availed from foreign shipping line by a business entity located in India will get taxed under reverse charge at the hands of the business entity
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Amendment of section 66D - service tax - service of transportation of passengers - these services will be omitted from the Negative List - These services become taxable with effect from 1.06.2016. subject to abatement - However, such services by a non-air-conditioned contract carriage will continue to be exempted by way of exemption notification [Notification No. 25/2012-ST, as amended by notification No. 09/2016-ST, dated 1st March, 2016 refers].
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Amendment of section 66D - service tax - specified educational services - These services are proposed to be omitted from the Negative List but the service tax exemption on them is being continued by incorporating them in the general exemption notification (Notification No. 25/2012-ST as amended by notification No. 09/2016-ST, dated 1st March, 2016 refers)
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Amendment of section 65B - Service Tax - Explanation 2 in section 65B(44) is proposed to be amended to clarify that activity carried out by a lottery distributor or selling agents of the State Government under the provisions of the Lotteries (Regulation) Act, 1998 (17 of 1998), is leviable to service tax.’
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Amendment of section 65B - Service Tax - Omission of Meaning of Approved Vocational Education Course - Since the relevant entry moved from Negative list to Mega Exemption Notification
Service Tax
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Disallowance of Cenvat credit in excess of 20% - The appellants have reversed input of service credit taken on all common services and There is no other evidence to show certain other services were also common for which the appellants have not reversed the credit - Demand set aside - AT
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Demand of service tax prior to 1.6.2007 - Works contract for Delhi Metro Rail (DMRC) - the reasoning and conclusion by the ld. Adjudicating authority that only works contracts pertaining to constructing of railway lines for railways is excluded is clearly erroneous and amounts to legislation rather than adjudication on a true , fair and good faith of interpretation of the provision - AT
Central Excise
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Refund claim - the learned Commissioner (Appeals) is in error in rejecting the refund, holding that once duty is shown in invoice, it is deemed to be passed on, as the presumption is rebuttable. Thus, the appeal is allowed. The assessee, is held, entitled to refund - AT
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Denial of Cenvat credit on moulds - whether moulds are in possession of the appellant? - Since, moulds, in this case, have not been removed from the factory by the appellant; denial of cenvat benefit by the authorities below is not justified. Further, ownership or control of capital goods by the assessee is not a decisive factor for determination of eligibility to Cenvat credit. - AT
Case Laws:
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Income Tax
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2016 (3) TMI 120
Reducing the subsidy for the purpose of calculation of depreciation - Held that:- Section 43(6)(c) of the Act, the WDV of an asset can be computed only in the manner provided thereunder namely by adding the actual cost of any asset falling within that block acquired during the previous year or by deducting the money payable in respect of any asset within the block, which is sold, discarded or demolished or destroyed during the previous year together with the amount of scrap value. It has further held that the statute does not contemplate any other category for computing the WDV of a block of assets and that Section 43(6)(c) of the Act does not permit reducing the WDV of the block of assets by the amount of subsidy received in relation to some of the assets forming part of the block of assets. When the statute does not contemplate computation of actual cost of assets after it becomes part of a block of assets, Explanation 10 to Subsection (1) of Section 43 of the Act cannot be made applicable to assets of which the actual cost has been determined and forms part of a block of assets. Before us, Revenue has not brought any contrary binding decision in its support nor has pointed out as to why the ratio of the decision rendered by Hon’ble Gujarat High Court in the case of Banco Products (supra) would not be applicable to the present facts of the case. In such a situation, we are of the view that the ground of assessee deserved to be allowed in favour of assessee. Adjustment of bad and doubtful debts for computing book profit u/s.115JB - Held that:- Assessing Officer was not justified in adding the provision for bad and doubtful debts to the net profits for the purpose of Section 115JB. We thus set aside the addition made by Assessing Officer - Decided in favour of assessee Disallowance u/s deduction u/s.80IA - Held that:- We find that Assessing Officer has summarily dismissed the claim of assessee whereas it is assessee’s contention that it is eligible for claim of deduction u/s.80IA(4). After placing reliance on the aforesaid decision in case of CIT vs. Mitesh Impex reported in (2014 (4) TMI 484 - GUJARAT HIGH COURT ) in the present facts of the case, we are of the view that in the interest of justice, the ground needs to be restored to the file of Assessing Officer to decide the claim of assessee of deduction afresh in accordance with law. Needless to state that AO shall grant adequate opportunity of hearing to the assessee. Assessee is also directed to co-operate by promptly filing all the required details called for by the Assessing Officer. - Decided in favour of assessee for statistical purposes.
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2016 (3) TMI 119
Undisclosed sales - gap between the stamp value and the actual sales consideration - buyer of the property categorically denied having paid any such amount to the appellant - addition on bases of loose papers - Held that:- It is difficult to accept the case of the AO that for a property whose sale deed has already been duly registered with the concerned authorities on 23.9.2005, the cash component, if involved any, would be paid as late as on 15.5.2006. It is further noted by us that the stamp value assessed by the stamp valuation authority for the adjoining flats has been varying between ₹ 38.5 lakhs to ₹ 42.20 lakhs during the period when the impugned sale deed was registered, whereas these properties were sold between ₹ 15 lakhs to ₹ 19 lakhs. Thus, there was clearly a gap between the stamp value and the actual sales consideration. Thus, no conclusive inference could be drawn that merely because the stamp value was more, there was exchange of cash between the parties, unless some more cogent contrary material is brought on record. Lastly, we find force in another argument of the ld. Counsel that even if, although denied by the assessee, it is assumed that cash was received by the assessee, the same could not have been brought to tax in the year under consideration since the entire sales consideration of impugned property sold by the assessee has been received and booked by the assessee in its books of accounts in F.Y 2005-06. On the basis of perusal of the profit and loss account it is noted that the sale value of the entire project has been booked in F.Y 2005-06. It is also an admitted case that the assessee is following ‘project completion method’. Thus, if at all some addition is required to be made, that could have been made only during F.Y 2005-06, although we have already held on the basis of evidences brought before us that it could not be concluded that the assessee had received any cash amount. Thus we find that the addition made by the AO is not sustainable as per law and facts, and therefore, the same is directed to be deleted. - Decided in favour of assessee
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2016 (3) TMI 118
TDS u/s 195 - remittance of amount to a non-resident representing its income by way of dividend - 'assessee in default' - assessee argued that a transaction of buy back of shares referred to section2(22) (iv) of the Act was different from a transaction of capital reduction dealt by section 2(22)(d) of the Act, that the transaction in question was one of buy back of shares and not a case of capital reduction - colourable device - Held that:- There is no ambiguity about the provisions that would govern the buyback of shares. Section 2(22)(d)(iv)r. w. s. 46A of the Act would be applicable to the buyback scheme. Accordingly, the transaction cannot be treated deemed dividend. Article 13 of the said DTAA provides that capital gains would not be taxable in the hands of GS-M. We also find force in the alternate argument raised by the assessee. Even if the payment to GSM is considered as dividend u/s. 2(22)(d) of the Act, then the taxes on the same have to be charged by way of DDT as per section 115-O of the Act. As per section 10(34) of the Act, any income by way of dividend referred to in section 115-O of the Act does not form part of total income in the hands of the recipient and company declaring dividend will be in default as per section 115Q. So, the provisions of TDs would not be applicable for dividend covered under section 2(22)(d) of the Act. Transaction in question would not fall under the category of colourable device. If an assessee enters into a deal which does not violate any provision of the Act of applicable to a particular AY. the deal cannot be termed a colourable device, if it result in non-payment or lesser payment of taxes in that year. The whole exercise should not lead to tax evasion. Non-payment of taxes by an assessee in given circumstances could be a moral or ethical issue. But, for that the assessee cannot be penalised. In light of the above discussion, we are reversing the decision of the FAA and deciding the effective ground of appeal in favour of the assessee.
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2016 (3) TMI 117
Section 44 BBB applicability to the remittance made to Atomstroyexport(ASE) - whether all the payments were in the nature of 'fees for technical services' that same were liable to tax in India? - Intergovernmental- Agreement - Held that:- Income-tax proceedings the doctrine of res judicata is not applicable but consistency and definiteness has to be maintained unless there is a manifest distinguishable feature. We find that the FAA, while passing orders in subsequent proceedings, brought any distinguishable feature on record. We are unable to endorse the view of the FAA that Intergovernmental Agreement should not be considered for deciding the issue. The Intergovermental Agreement was source of all subsequent agreements and it was entered in to by two Sovereign Countries. It cannot be brushed aside. If all the agreements are considered jointly it becomes clear that the orders of his predecessors were in accordance with the provisions of law. Similarly, the argument of the FAA with regard to introduction of section 44BB is not at all convincing. International transactions are governed by the DTAA. s. and Inter-govermental Agreements. Considering the above discussion, we are of the opinion that the appeals filed by the assessee have to be allowed. Therefore, revising the orders of the FAA, we decide the effective grounds of appeal in favour of the assessee.
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2016 (3) TMI 116
Addition on cessation of liability u/s 41 - Held that:- The assessee had claimed to sold PP/HDPE sacks to M/s. A One Chemicals, Ankleshwar and M/s. Anmol Chemicals, Gandhinagar through M/s. Dharini Packaging which aggregated to ₹ 2,15,994/-. These parties had not cleared the dues on the ground that the money had been paid to M/s. Dharini Packaging. The assessee was thus not required to pay anything to M/s. Dharini Packaging and therefore, the liability actually ceased to exist and the same was rightly added to the income by resorting to the provisions of section 41(1) of the Act. Same is the situation in the case of M/s. Swiss Polyplast in whose case the outstanding amount was ₹ 61,410/- and these purchases were made through M/s. Dharini Packaging and this amount was also must have been adjusted by M/s. Dharini Packaging against its outstanding and nothing was payable to M/s. Dharini Packaging to this extent. In this case also no proof of purchase or the amount paid was given by the assessee and therefore, the Assessing Officer was justified in disallowing the liability and adding the same u/s. 41(1) of the Act. - Decided against assessee Addition of cash credit u/s 68 - Held that:- There was no evidence of personal saving of ₹ 17,000/- made by withdrawal of earlier years. This amount was also clearly unexplained. There was no justification for the cash gifts of ₹ 25,000/- from maternal uncle Shri Suresh K. Doshi, ₹ 75,000/- from mother Smt Rita Rajendra Shah, ₹ 75,000/- from sister Ruchi and ₹ 50,000/- from maternal uncle Shri Dilip K. Doshi. Therefore, the CIT(A) held that the assessee could not establish the identity of the donors, the genuineness of the transactions and the creditworthiness of the donors. The CIT(A) also found that no confirmation for the gifted amount was furnished either before the Assessing Officer or before him. He accordingly held that so called gifted amount of cash of ₹ 25,000/-, ₹ 75,000/-, ₹ 75,000/- and ₹ 50,000/- were thus correctly treated as unexplained cash introduced in the books of account and the Assessing Officer was justified in treating the same as unexplained cash creditors. The CIT(A) also rejected the claim of assessee with regard to the amount of ₹ 30,000/- deposited in the bank account on the ground that the same was an altogether new story cooked up which was not before the Assessing Officer; and accordingly, treated the same as unexplained cash credit. Accordingly, the CIT(A) held that the assessee could not establish the genuineness of the above referred cash credits and thus the Assessing Officer was justified in making the addition of ₹ 2,73,874/- u/s. 68 - Decided against assessee Ad-hoc disallowance of expenditure - Held that:- Assessing Officer made ad-hoc disallowance of 20% out of telephone, vehicle, depreciation on vehicle, travelling and conveyance expenses, amounting to ₹ 96,253/-, which works out to ₹ 19,250/-. On appeal, CIT(A) restricted the same to 10%, i.e. ₹ 9,625/-. Considering all the facts and circumstances, it is of the view that the disallowance seems to be on higher side and therefore, the same is restricted to ₹ 5000/-.- Decided partly in favour of assessee
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2016 (3) TMI 115
Addition with respect to unutilized balance of MODVAT credits - inclusion of excise duty to the value of closing stock - Scope of section 145A - Held that:- Merely because the Central Government has not notified in the Official Gazette “accounting standards” to be followed by any class of assessees or in respect of any class of income, it cannot be stated that the Accounting Standards prescribed by the Institute of Chartered Accountants of India or the Accounting Standards reflected in the “guidance note” cannot be adopted as an accounting method by an Assessee. It further held that notwithstanding the fact that the opinion of the Chartered Accountants of India was expressed in the ‘guidance note”, which had not attend a mandatory status, would not be a ground to discard the books of accounts of the Assessee or the method of accounting followed. As relying on ACIT vs. M/s. Kiran Industries Pvt. Ltd. [(12) TMI 41 - ITAT AHMEDABAD] no addition on account of unutilized MODVAT credit is called for in the present case - Decided in favour of assessee
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2016 (3) TMI 114
Validity of service of notice - modes of service of notice - assessee submitted that the notice alleged to be sent by the speed post at the address of the assessee, was not served - Held that:- The onus to communicate the correct address or change of address to the Department either applying through prescribed form for making correction in permanent account number (PAN) database or communication to the Assessing Officer was on the assessee, which the assesses failed to do so. The notice u/s 143(2) of the Act for selection of case under scrutiny in the case of assessee has been generated through the income tax department application software, in which address has been picked up from PAN database and the notice was sent by the Income Tax Officer before the limitation of service of notice i.e. more than two months prior to the limitation. In the present case, the fact of change of address by the assessee has not been highlighted and therefore, the facts of the present case are different from the facts of the cases cited by the assessee. In view of change of place, the assessee himself is responsible, if at all the notice was not received by him at the old address. In the circumstances, the assessee failed to rebut the presumption of valid service. The assessee has failed to rebut the presumption that was raised against him about the due service of the notice u/s 143(2) of the Act. Hence, we hold that the Assessing Officer has complied the requirement of service of notice under Section 143(2) of the Act and notice dated 21.07.2008 was served validly. - Decided against assessee Jurisdiction of Income Tax Officer to issue notice - Held that:- Income Tax Officer was in addition to the income or class of income specified in schedule was also authorized in respect of all income or class of income. In view of clear position of the authority of the Income Tax Officer in issuing notice, the claim of the assessee that the Income Tax Officer was not having jurisdiction is without proper appreciation of the facts and thus the ratio of the case law relied upon by the assessee is not applicable over the facts of the case in hand, hence, this grounds of the assessee is dismissed. - Decided against assessee Transfer of case - whether no order under Section 127 of the Act transferring the case to the Addl. Commissioner of Income Tax in exercise of the concurrent jurisdiction vested in her? -Held that:- DR has submitted that the Addl. Commissioner of Income Tax was provided concurrent jurisdiction over the cases through the order of the Commissioner of Income-tax and, therefore, no separate order under section 127 of the Act was required to be passed by the Commissioner of Income-tax. However, no such order of the Commissioner of income-tax conferring the concurrent jurisdiction to the Addl. Commissioner of Income-tax over the cases of the Income-tax Officer is either available on assessment record, or was produced before us by the Revenue. Thus, in absence of any such order, it can’t be established that said assessment order passed was within the jurisdiction of the Addl. Commissioner of Income-Tax. Thus, we hold that the assessment completed by the Additional Commissioner of Income-tax in the case being without jurisdiction, is void ab initio - Decided in favour of assessee
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2016 (3) TMI 113
Unexplained investments in jewellery - addition on account of variation in description of jewellery disclosed in the reports filed with the Revenue authorities - Held that:- As submitted that the assessee her husband and their daughter-in-law have been possessing jewellary in the preceding and subsequent years and have been always assessed to wealth tax. The fact remains that the jewellary found was much less than the jewellary disclosed in the wealth tax returns accepted by the Department and hence no addition can be made in the hands of the assessee. In the present case, the ld. CIT(A) sustained the addition on account of making charges of the jewellary without bringing any cogent material on record. The ld. CIT(A) presumed that all the jewellary was remade and sustained the addition to the extent of 10% of the value of jewellary without any basis which in our opinion is not sustainable. Even otherwise, addition made on the basis of suspicion alone is not sustainable. Suspicion however strong it may be, cannot take place of evidence - Decided in favour of assessee
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2016 (3) TMI 112
Penalty under Section 271(1)(c) - Concealment of income - Held that:- Show cause notice issued by the Assessing Officer for levy of penalty under Section 274 r.w.s. 271 is defective as the Assessing Officer has not specified the grounds on which the penalty sought to be levied. See CIT Vs. Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT ] - Decided in favour of assessee
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2016 (3) TMI 111
Transfer pricing adjustment - adjustment made on account of sharing of software expenses with the AE - Held that:- Provided that data relating to a period not being more than two years prior to [the current year] may also be considered if such data reveals facts which could have an influence on the determination of transfer prices in relation to the transactions being compared: [Provided further that the first proviso shall not apply while analysing the comparability of an uncontrolled transaction with an international transaction or a specified domestic transaction, entered into on or after the 1st day of April, 2014]. The assessee is a research organization engaged in undertaking research and development in the area of wireless broadband technology. This component was provided to the assessee on a sporadic basis for undertaking research work. The component purchased was purely provided to the assessee for non-commercial use and thus the market price of the same cannot be as ascertained. The cost certificates provided by the AEs certify that the said equipment was sold on a cost to cost basis. As regards the purchase of software and subscription fee the software was purchased by the AE for the entire group i.e., Alcatel Lucent group. These softwares were purchased from third parties based on “combined global requirement” of the group. It is a common practice that when there is a bulk purchase or for multiple number of users the negotiated rates will be cheaper than the isolated purchases. The cost of this software was shared by the Indian entity. The assessee had given the details of comparison of the software purchased. The TPO in her remand report has also not raised any objection to the submission of the assessee except stating that “the claim of the assessee appears to be verifiable. In view of this, we see no reason why adjustment should be made on account of sharing of software expenses with the AE. The TPO has also not given any reason to treat the subscription value as nil. Therefore, in the absence of any reason to hold otherwise, the subscription paid should not be disallowed. We accordingly, do not find any infirmity in the findings of the ld. CIT(A) while directing the AO to delete the addition made under these heads - Decided against revenue
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Corporate Laws
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2016 (3) TMI 93
Penalty under section 15A(b) of SEBI Act - failure to make disclosure to the stock exchanges as contemplated under regulation 7(1A) read with regulation 7(2) of Securities and Exchange Board of India Takeover Regulations, 1997 - whether the obligation to make disclosure under regulation 7(1A) read with regulation 7(2) of the Takeover Regulations, relates to purchase or sale of shares or voting rights aggregating 2% or more of the share capital of the target company effected by an acquirer individually or by the individual acquirer together with the persons acting in concert with that acquirer? - Held that:- Under regulation 7(1A) of the Takeover Regulations, 1997, an acquirer who, together with persons acting in concert with him has acquired 15% or more but less than 55% shares of the target company when purchases or sells shares of the target company together with the persons acting in concert with the acquirer, aggregating 2% or more of the share capital of the target company, then the said acquirer is required to make disclosure of such purchase or sale within two days of purchase or sale under regulation 7(1A) read with regulation 7(2) of the Takeover Regulations, 1997. Disclosure obligation under regulation 7(1A) has to be discharged in accordance with regulation 7(1A) read with regulation 7(2). Since regulation 7(2) does not contemplate for disclosure relating to sale of shares in excess of the limits set out under regulation 7(1A), appellants herein cannot be said to have failed to comply with regulation 7(1A) within the time stipulated under regulation 7(1A) read with regulation 7(2). Consequently penalty imposed on the appellants cannot be sustained.
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Service Tax
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2016 (3) TMI 110
Classification of commission - Whether under Clearing and Forwarding Agents or Business Auxiliary Service - Respondents as per agreement were appointed as agents to assist procuring at best possible price and identifying vendors for medical equipment products for which they received commission - as per the agreement, respondents were appointed as agents exclusively for assisting in procuring the specified products at most attractive prices, by identifying suitable vendors for which a commission at the rate of 8% of the purchase amount was agreed. Therefore, such activity clearly falls within the definition of BAS. But BAS services provided by Commission agents were outside the purview of levy of service tax till 8.7.2009. So, no demand can be raised as barred by limitation also. - Decided against the revenue
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2016 (3) TMI 109
Seeking time for submission of Reconciliation Statement - Contravention of Rule 3(5) of Cenvat Credit Rules, 2004 - Appellant did not provide information to the tribunal after so much of adjournments - Held that: BSNL availed Cenvat credit on capital goods as has been described in para 2 of the review order. The revisionary authority noticed that when the capital goods were acquired by the BSNL for installation at the customers’ premises to provide output service that did not come back to its premises within the stipulated period of 180 days. That resulted in contravention of Rule 3(5) of Cenvat Credit Rules, 2004. Also BSNL did not seek permission for extension of time beyond 180 days. Therefore, no further time is provided. - Decided against the appellant
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2016 (3) TMI 108
Waiver of penalty under Section 77 of the Finance Act, 1994 - Default of registration of Business Auxiliary Service in its registration certificate - Appellant providing the service of goods transport agency for which registered on 1.3.2005 - Received new business activity from abroad on which service tax liability discharged but fails to amend registration certificate - Held that: no doubt registration is a paraphernalia to bring the assessee into the fold of law but the assessee was already brought into the fold of law from 1-3-2005. So it cannot be said that it is an unregistered assessee. Only there was an absence of endorsement of the new activity in the registration certificate. That does not amount to default when the assessee consciously discharged tax liability. It does not appear from the conduct of the assessee that it is required to be dealt with coercively under law for the non-endorsement of the different activity which was carried out subsequently. Therefore, penalty imposed under Section 77 is waived off. - Decided in favour of appellant
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2016 (3) TMI 107
Demand of Service Tax along with interest and penalty - Invokation of extended period - vValue of service declared in the periodical returns, i.e., ₹ 83,27,454/- was more than the value shown in the show cause notice, i.e., ₹ 82,48,726/- - The appellant placed copies of ST-3 returns on record which reflect the value of services provided - Held that: as there was no fraud or suppression of facts or contravention of any provisions of Service Tax law with intent to evade payment of service tax, the extended period under Section 73(1) is not applicable. Also, there was the genuine omission to pay tax @ 10.2% instead of @ 8% which is a bona fide act, this is because of which extended time period under Section 73 cannot be invoked. Therefore, the demand for the period 2004-05 to 2006-07 is time-barred and the interest and penalty under Section 78 cannot be demanded. - Decided in favour of appellant
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2016 (3) TMI 106
Refund of service tax on exempted services covered by Notification No.41/2007-ST - Denied as paid prior to export - Held that: As per law if refund is not given in one quarter that shall be given in the next quarter. Therefore, embargo by the procedure would be a barrier to get the export incentive through refund of the service tax paid. Also denial of refund shall be a hurdle to the export as there being no one-to-one relationship prescribed by the notification between the input service and export. Furthermore, grant of refund is object of the notification but exemption is nomenclature. Therefore, denial of refund is contrary to law for the reason that taxes are not to be exported but only goods are to be exported. So, if the refund is denied, such denial shall make the goods costlier and will be a burden to the export which may make that in-competitive in the global trade. - Decided in favour of appellant
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2016 (3) TMI 105
Disallowance of Cenvat credit in excess of 20% - Common Input services - Appellants were providing taxable services as well as some exempted services - Separate accounts in respect of credits attributable to taxable as well as exempted services not maintained - Held that: the service tax paid on input service other than common services like MTNL Telephone, Chartered Accountant Service, Equipment Hiring etc. is solely attributable to and used in providing taxable services rendered by the appellant. There is no prescribed proforma for maintenance of separate accounts. It will be sufficient if from the records of the appellant/assessee it can be clearly established that the accounts maintained will indicate the utilization of input services credit on which is availed are attributable directly to taxable services only; then such accounts will satisfy the requirement of separate account. The appellants have reversed input of service credit taken on all common services and There is no other evidence to show certain other services were also common for which the appellants have not reversed the credit. - Decided in favour of appellant with consequential relief
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2016 (3) TMI 104
Demand of service tax prior to 1.6.2007 - Works contract - Appellant providing services for design, manufacture, supply, installation, testing and commissioning of environmental control systems and tunnel ventilation system to DMRC - Held that: as per the decision of the Supreme Court in C.C.E. & Cus., Kerala vs. Larsen & Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT, composite works contracts involving rendition of services coupled with deemed supply of goods by accretion are not taxable services prior to 1.6.2007, either under commercial or industrial construction service, construction of complex service, or erection, commissioning or installation service. Works contract is defined and enumerated to be a taxable service with effect from 1.6.2007 by insertion of Section 65(105(zzzza) of the Finance Act, 1994.This service was defined as a service provided or to be provided to any person , by any other person in relation to the execution of a works contract, excluding works contract in respect of railways. However, since the works contract in respect of railways is excluded by the specific and unambiguous exclusionary clause in Section 65(105) (zzzza) of the Act, the reasoning and conclusion by the ld. Adjudicating authority that only works contracts pertaining to constructing of railway lines for railways is excluded is clearly erroneous and amounts to legislation rather than adjudication on a true , fair and good faith of interpretation of the provision. Therefore, as the appellant had provided an excluded species of works contract service to DMRC, service tax is not leviable. - Decided in favour of appellant
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2016 (3) TMI 100
Benefit of exemption Notification No. 18/2009-ST dated 07.07.2009 denied - service tax remittances incurred on receipt of Goods Transport Agency services utilised for transportation of exported goods from appellant's factory to the port of export - Held that:- Since there was no dispute that the GTA services were used in the export of goods and therefore claim was filed by the appellant, there cannot be said to be a malafide intention in seeking the benefit of exemption, therefore imposition of penalty under Section 76 by the primary authority was unsustainable. Consequently, the penalty imposed under Section 76 by the primary Authority, was set-aside. Though, the rejection concurrently by the authorities below was also on the ground that GTA services were utilised on to and fro basis for the empty containers which is outside the purview of the exemption Notification in terms of Section 65(105)(zzb), this conclusion is seen to be contrary to the decision of this Tribunal in CCE, Madurai vs. Tata Coffee Limited [2010 (11) TMI 364 - CESTAT, CHENNAI]. However, since the concurrent findings on the bar of limitation aspect, are impeccable, no case is made out for appellate interference by us. - Decided in favour of assessee.
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Central Excise
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2016 (3) TMI 103
CENVAT credit on inputs and capital goods denied - commissioner allowed the claim - Held that:- Tribunal in the case of Star Paper Mills Limited. Vs. Collector of Central Excise, Meerut (1998 (10) TMI 197 - CEGAT, NEW DELHI ) held that the bold rolled coil in plate form used in the manufacture of storage and processing tanks which in turn are used as capital goods in the manufacture of paper, eligible for CENVAT credit. The Hon’ble Karnataka High Court in the case of Commissioner of Central Excise, Mysore vs ICL Sugars Limited )2011 (4) TMI 1065 - KARNATAKA HIGH COURT ) held that tank in factory premises for storing by product, subsequently sold as finished product, raw materials used in manufacture of tank viz. plates/bottom of plates/roof plates etc., eligible for MODVAT credit. The Tribunal in the case of Commissioner of Central Excise, Meerut-II vs. DSM Sugar (2012 (9) TMI 494 - CESTAT, NEW DELHI ) held that Paint, varnish, thinner etc., used in the manufacture of sugar is eligible for MODVAT credit. The Hon’ble Supreme Court in the case of Commissioner of Central Excise, Jaipur vs Rajasthan Spinning & Weaving Mills Limited (2010 (7) TMI 12 - SUPREME COURT OF INDIA ) held that the iron & steel items are required for fabrication for chimney as integral part of the generator set, as eligible for MODVAT credit. I find that there is no dispute these items were used in or in relation to the manufacture of final products as inputs or as capital goods. - Decided against revenue
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2016 (3) TMI 102
Refund of amount paid as 8% of value of exempted goods - eligibility to get back the amount already paid by them in terms of Rule 57CC of erstwhile Central Excise Rules, 1944/Rule 6 of Cenvat Credit Rules, 2002 - Held that:- For sulphuric acid the provisions of Rule 57CC cannot be made applicable in the facts and circumstances of the appellant s case. As such, no amount is payable by the appellant on this ground. It follows that the amount already paid has to be refunded to them. Both the sides agree that provisions of Section 11B will not apply as the payment under Rule 57CC is not as Excise duty. It is only an amount equivalent to certain percentage of exempted goods cleared by the appellant. We note that the appellants have paid the amount earlier, under protest, and the matter has been decided in their favour by the Hon’ble Supreme Court. The lower Authorities have not given any finding on merit on the claims filed by the appellants. Considering the above position, even if the amount paid by the appellants are to be considered as not an Excise duty, the same has to be returned to the appellants. Such amount already paid in terms of Rule 57CC, even if not considered as Excise duty, will be in the nature of a deposit which the Government cannot retain without legal sanction. Thus find that the appellants are rightly eligible for return of the amount already paid by them under the above said Rules. The Jurisdictional Original Authority is directed to take necessary action for returning the said amount at the earliest. The appeals filed by the appellants are disposed of in the above terms.
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2016 (3) TMI 101
Refund claim of accumulated Cenvat Credit - Rule 5 of Cenvat Credit Rules 2004 read with notification no. 27/2012-CE (NT) Dated 18/06/2012 in respect of un-utilized Cenvat Credit lying in balance in respect of duty paid inputs used in or in relation to the manufacture of find products and exported to SEZ unit - Held that:- After perusal of the Board Circular no. 1001/8/2015-CX 8 dated 28/04/2015 and recent decisions of Tribunal in Commissioner of Central Excise and Customs Vs. NBM Industries [2011 (9) TMI 360 - GUJARAT HIGH COURT] it is clearly held that supply of goods from DTA to SEZ has to be treated as export and entitled to refund of accumulated Cenvat Credit under Rule 5 of Rules, 2004.
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2016 (3) TMI 99
Liability to pay an amount equal to 10% of the value of tractors of engine capacity below 1800 CC when they have availed Cenvat credit of educational cess on common inputs without maintaining separate records - Held that:- The Original Authority observed that industrial cess and education cess being paid are in the nature of excise duty only. The appellants have to maintain separate accounts for receipt and consumption of the inputs which are common for different type of tractors. Since the appellants failed to do so they are liable to pay 10% of the total price of exempted final products. First of all, we noticed that in the present case there is no credit of Central Excise duty availed by the appellants on the common inputs. The only credit availed is education cess paid on such common inputs. The final products are of two categories tractors with engine capacity of above 1800 CC or below 1800 CC. Industrial cess is leviable on the tractors with capacity of above 1800 CC. Education cess is payable on such industrial cess. The appellants utilized the credit of education cess availed on inputs to discharge education cess on tractors of above 1800 CC. There is no industrial cess or education cess on the tractors of below 1800 CC. Accordingly they calculated the proportionate credit of education cess availed on common inputs and reversed the same. We find there is no dispute on the fact of such reversal which has been admitted in the show cause notice itself. In spite of such reversal, the appellants were called upon to pay an amount equal to 10% of the total price of exempted tractors invoking Rule 6 (3) (b) of the Cenvat Credit Rules, 2004. We find such a demand is not legally sustainable as already held in various decisions of this Tribunal and as affirmed by the Hon’ble Supreme Court. - Decided in favour of assessee
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2016 (3) TMI 98
Clandestine removal of goods - Held that:- Unaccounted goods found packed and ready for dispatch in factory premises does not by itself constitute sufficient evidence to show that the goods are meant for clandestine clearance. The same view has been taken by this Hon’ble Tribunal in the recent judgments in the cases of Karnawat International Pvt. Ltd., and Shubh Metals (2015 (12) TMI 1139 - CESTAT NEW DELHI ). Also see M.B. Laminators case [2013 (8) TMI 426 - CESTAT AHMEDABAD ] In view of the above analysis, it is held that there is no sufficient evidence in the present case to establish intention to remove goods in a clandestine manner and to evade duty. Hence, the OIO and the impugned OIA are set aside. Consequently, redemption fine and penalty are also set aside. - Decided in favour of assessee
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2016 (3) TMI 97
Refund claim - non collection of amount of duty from the buyer - whether once duty is shown in invoice, it is deemed to be passed on? - Held that:- There is no dispute about the fact that the appellant have not collected the amount of duty from their buyer, which they are seeking as refund in the facts and circumstances. Accordingly, I hold that the appellant have discharged the presumption of unjust enrichment as required for the purpose of getting refund. The appellant have produced a copy of their Ledger account as well as certificate of C.A. and the same have not been disputed by the Revenue. Thus, hold that the learned Commissioner (Appeals) is in error in rejecting the refund, holding that once duty is shown in invoice, it is deemed to be passed on, as the presumption is rebuttable. Thus, the appeal is allowed. The assessee, is held, entitled to refund. - Decided in favour of assessee
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2016 (3) TMI 96
Denial of CENVAT credit - Cenvat Credit on the basis of the invoices issued by M/s. R. K. Enterprises - Held that:- In this case, it is no doubt, case has been booked on the statement of Shri R. K. Gupta proprietor of M/s. R. K. Enterprises who initially stated that he has merely issued the cenvitable invoices, on the basis of which respondent has taken the credit. In fact the respondent used to give payment of these invoices through cheques and equivalent amount of cash has been returned. It is also a fact on record an investigation was conducted at the end of the respondent also wherein nothing incrimatory was found. Further, from the proceedings it is revealed that the respondent sought cross examination of Shri R. K. Gupta as well as transporters of the goods but Adjudicating Authority inspite of giving cross examination has gave its finding that charges has been alleged on the basis of corroborative evidence, therefore, no cross examination is to be given. In fact, the statement of Shri R. K. Gupta has been retracted on the first available opportunity before chief metropolitan Magistrate. These things have not been considered by the adjudicating authority while adjudicating the matter. As one of the transporter states that he is having three tempos and when these tempos used to transport the goods either he personally drives the tempos or he will be accompanying the driver of the tempo. No prudent men can drive three tempos at a moment. Moreover, he cannot be present in three tempos at a time. This statement has been relied upon by the Adjudicating Authority in support his case of non receipt of the goods by the respondent. As no cross examination has been awarded to the respondent the Ld. Commissioner (A) has rightly set aside the proceedings initiated in the show cause notice impugned. - Decided against revenue
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2016 (3) TMI 95
Denial of Cenvat credit on moulds - whether moulds are in possession of the appellant? - Held that:- As upon verification of the documents and after visiting of the factory of the appellant, the Chartered Engineer has certified that the moulds in question are in possession of the appellant and that the said moulds are running in good working condition. The said certificate proves beyond any shadow of doubt that the moulds on which cenvat credit taken by the appellant had been installed in the factory for use, in or in relation to manufacture of the final product. In view of the fact that the said moulds have not been removed from the factory, the requirements of Rule 3 (5) of the Cenvat Credit Rules will have no application. The said rule provides payment of equal amount of cenvat credit, when the Cenvat availed inputs or capital goods are removed as such from the factory. Since, moulds, in this case, have not been removed from the factory by the appellant; denial of cenvat benefit by the authorities below is not justified. Further, ownership or control of capital goods by the assessee is not a decisive factor for determination of eligibility to Cenvat credit. As per the statutory provisions, an assessee is entitled to avail Cenvat credit on the inputs or capital goods, upon fulfilment of the condition that those goods have suffered duty and received in the factory of manufacture of final product. In the present case, since the requirement of the Cenvat statute has been duly complied with by the appellant, denial of Cenvat credit on moulds is not proper and justified. - Decided in favour of assessee
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2016 (3) TMI 94
Admissibility of concessional rate of duty under Notification No. 9/2001- C.E., dated 1-3-2001 and Notification No. 9/2003 C.E., dated 1-3-2003 - whether village Atun in which the factory premises of appellants is situated falls in rural area or urban area for admissibility of concessional rate of duty? - Held that:- There is nothing in the order which states that village Atun is notified as an urban area. The order only gives a direction to the authority to conduct a civic survey for preparation of a master plan. The appellants do not have a case that master plan has been prepared including Atun in urban area. It is crystal clear that the original authority had wrongly interpreted the order dated 3-7-1981 as an order notifying village Atun being included in urban area. The view taken by the Commissioner (Appeals) is correct and we do not find any ground for interference. Further the decisions cited by the respondents also apply to the issue under consideration. In view of the above, we hold that respondents are entitled to the benefit of the Notification No. 9/2001-C.E., dated 1-3-2001 and Notification No. 9/2003-C.E., dated 1-3-2003. - Decided in favour of assessee
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