Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 9, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
TMI SMS
Articles
News
Notifications
Customs
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7/2016 - dated
8-3-2016
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ADD
Seeks to levy definitive anti-dumping duty on Polypropylene, originating in, or exported from Singapore, for a period of five years
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6/2016 - dated
8-3-2016
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ADD
Seeks to levy definitive anti-dumping duty on Phenol, originating in, or exported from the European Union, Singapore and Korea RP, for a period of five years
Income Tax
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12/2016 - dated
2-3-2016
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IT
Exemption u/s 10(46) of the Income-tax Act, 1961 – State Load Despatch Centre Unscheduled Interchange Fund–West Bengal State Electricity Transmission Company Limited (PAN AAIAS0980J), a trust constituted under the Electricity Act, 2003 (36 of 2003) in respect of the specified income arising to that trust
Service Tax
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20/2016 - dated
8-3-2016
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ST
Service Tax (Second Amendment) Rules, 2016
VAT - Delhi
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F 3(619)/Policy/VAT/2016/1610-1623 - dated
7-3-2016
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DVAT
Regarding Form GE-II
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Transfer pricing adjustment - determining ALP - Assessing Officer was thus in error not only in resorting to an unscientific and unrecognized method ascertaining the arm’s length price of the services rendered by the assessee but also in rejecting bonafide quotations as a valid input for ascertaining the arm’s length price by the assessee. - AT
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Transfer pricing adjustment - determining ALP - whether hypothetical price which would have been charged under comparable uncontrolled conditions can be taken into account for computing the arm’s length price? - Held No - AT
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TDS u/s 194J or 194C - payments made to various TV channels - section 194J is attracted to the facts of the instant case. Merely because in earlier years this issue was not examined and the assessee’s contention got accepted without verification, cannot give license to it claim in the later years that the correctly applicable section be put under carpet. - AT
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TDS - granting of any license to use the software amounts to ‘royalty’ and the provisions of sec.9(1)(vi) are applicable - assessee is in default u/s.201(1)/201(1A) for non-deduction of TDS - AT
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Principals of mutuality - Contribution by the members of a Group Housing Society - work is done by the society for and on behalf of that member - there is no question of any income - Not taxable - AT
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Revision u/s 263 - Directions of the Ld.CIT given to the AO to verify the unsecured creditors, unsecured loans, the AO in his fresh assessment order passed u/s 143(3) r.w.s.263 of the Act, did not draw any adverse inference. This direction of the Ld.CIT was in the nature of directing rowing enquiries. - Revision is bad in law - AT
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TDS u/s 195 - Addition u/s 40(a)(ia) - no liability for deduction of tax at source arose under Section 195 in the case of mobilization and demobilization costs reimbursed to a non-resident, not being taxable in India, hence disallowance under Section 40(a)(ia) did not arise. - AT
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Addition u/s 68 - Notice u/s 133(6) is issued by the AO could not be served on the share applicants and Inspector’s report also shows that this companies do not exists at the given address, we are of the view that no fault can be found against the assessee for this - AT
Customs
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Issue of Indian Currency Note - Foreign going vessels - CBEC withdraws its earlier circular since RBI has not prescribed any restriction on denomination of Indian currency, carried by an Indian traveller or Captain of a Ship.
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Classification - Consumer Electronics PC with additional components of audio, video, multimedia etc. - the goods are to be classified under CTH 8471 because in order to classify an item under 8479 as per the said Chapter Note 7, the principal function of the machine is for more than one purpose which is not the case here. - AT
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Period of limitation - Mere dispatch of show cause notice within a period of 6 months is not sufficient but should be served on the assessee/importer is the law - AT
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Refund claim - Loading of transaction value at 12.5% in terms of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 on import of branded watches under a Distributorship Agreement from the foreign supplier is not correct - AT
Indian Laws
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Tax Administration Reforms Commission
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Issue of clarification on contentious TDS issues on payments made by Television channels, Broadcasters and Newspapers
Service Tax
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Refund claim - As the service was rendered to self and service tax was paid thereon, burden can only passed on to self and passing on the burden to self is not tantamount to passing it to any other person. Therefore, the appellant is not hit by the doctrine of unjust enrichment - AT
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Refund of Cenvat credit - input services - When the premises was occupied by the appellant and day-to-day repairs and maintenance are carried out in that premises then obviously, the said services i.e. repair, maintenance, electricity are received and used by the tenant only i.e. the appellant and not by the landlord - refund allowed - AT
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Cenvat Credit - Amount towards Exempted service wrongly shown in ST-3 return - In the absence of identification of the exempted service provided by the appellant and in the wake of the assertion of the appellant that it had not provided any exempted services during the relevant period, the demand cannot be sustained - AT
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Whether services of cutting, drilling, punching, bending and notching of material on job work basis, in the factory of the principal, provided by the respondent falls under the category of Manpower Recruitment or Supply Agency Services - Held No - AT
Central Excise
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Cenvat Credit - Non maintaining of separate accounts - extended period of limitation invoked - As there is no fraud or suppression of fact involved in this case as the department was all along kept informed of the respondent's activity and therefore there is no reason for justification of invoking the extended period of limitation. - AT
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Classification of PVC Doors and Windows - The process involved before fixing the windows or doors is a simple assembly at site as the profiles beadings and other items required are as per the specific dimensions of various windows or doors. We find that applying the Rule 2 (a) of the interpretation Rules, it is clear that the unassembled windows and doors, even incomplete or unfinished are to be classified with reference to goods which are complete or finished - under heading 3925.20 - AT
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Penalty under section 11AC - clearance against the dummy challan - clandestine removal - Penalty was not confirmed under any other provision nor also invoked in the show cause notice. Accordingly, confirmation of penalty cannot be sustained. - AT
Case Laws:
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Income Tax
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2016 (3) TMI 216
Transfer pricing adjustment - determining ALP - whether hypothetical price which would have been charged under comparable uncontrolled conditions can be taken into account for computing the arm’s length price? - Held that:- In this view of the matter, it would indeed seem that a bonafide quotation, as referred to and relied upon by the assessee in this case- and particularly bearing in mind limited scale of operations of the assessee and the smallness of amount involved, could indeed be a valid input under the residuary method set out in rule 10AB read with rule 10B(1)(a). In our considered view, in the light of insertion rule 10AB, the rigour of rule 10B(1)(a) stands relaxed to the extent that not only the actual price of transactions under comparable uncontrolled conditions but also hypothetical price which would have been charged under comparable uncontrolled conditions can be taken into account for computing the arm’s length price. The Assessing Officer was thus in error not only in resorting to an unscientific and unrecognized method ascertaining the arm’s length price of the services rendered by the assessee but also in rejecting bonafide quotations as a valid input for ascertaining the arm’s length price by the assessee. In view of the above we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned arm’s length price addition - Decided in favour of assessee
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2016 (3) TMI 215
Transfer pricing adjustment - most appropriate method - method of ascertaining the ALP - Held that:- What the TPO has done is to reject the benchmarking done by the assessee and make adhoc ALP additions in the value of international transactions. Such a course of action is not permissible under the scheme of transfer pricing law. Even when a method of ascertaining the ALP is, for good and sufficient reasons, rejected by the TPO, he has to select the most appropriate method, out of the recognised methods under rule 10AB and 10B, and then apply the same. Such an exercise has not been carried out on the facts of this case. The Transfer Pricing Officer has simply made adhoc adjustments, but then, as we have stated earlier, such adhoc adjustments are not permissible. Not only the Transfer Pricing Officer wrongly rejected the ascertainment of arm’s length price by the assessee, the Transfer Pricing Officer ended up deciding the arm’s length price on the basis of a method, method if it can be said to be, not recognized under the scheme of transfer pricing envisaged by the statute. Learned CIT(A) was in error in not reversing the action of the Transfer Officer. In view of the above discussions, and bearing in mind entirety of the case, we vacate the orders of the authorities below on this point, and direct the Assessing Officer to delete the impugned ALP adjustments - Decided in favour of assessee Addition of interest @14% p.a computed on the delayed realization of amounts of trade debts receivable on account of services rendered from various associated enterprises - Held that:- Once the assessee has contended that the interest is not being charged from anyone, including, of course, the non AEs, and that contention is not disputed to be factually incorrect, it cannot be open to the TPO to make adjustment in the case of delays in realization from the AEs. The treatment being accorded to the AEs and non AEs is the same, and, in such a situation, ALP adjustment cannot be made for delay in realization of monies from the AE. The consideration as to how the assessee would have received interest if money was given to an outsider is irrelevant because it is not a case of extending loan or placing deposit, rather it is a case of amount becoming due as a result of commercial transaction. In any event, when international transactions have been benchmarked on the basis of TNMM, and interest on delay in realization of amounts is only incidental to such transactions rather than a standalone transaction, such an adjustment cannot be made independently. Additions deleted - Decided in favour of assessee Addition of expenditure incurred towards software charges - revenue v/s capital expenditure - Held that:- Since it is an annual payment by the assessee and since the benefit of this payment does not go beyond the year, it is inherently a revenue expense in nature, and allowable, as such, to the assessee. The question of software expenses being in the nature of capital asset is relevant only when the payment is for acquiring the software. That is not the case here. It is a payment for the annual licence fees, and not the software itself. The expense is, therefore, clearly revenue in nature. We, accordingly, delete the impugned disallowance. As the relief has been allowed as revenue expenditure, the assessee will not be entitled to any depreciation on software - Decided in favour of assessee
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2016 (3) TMI 214
TDS u/s 194J or 194C - payments made to various TV channels - assessee, Dish TV India Limited, is an Indian company engaged in the business of distribution of channels from its DTH (Direct to Home) network - Held that:- Revenue has taken similar stand in the succeeding years by holding the magnetizing of the provisions of section 194J to the similar payments, for which the matter is sub judice. Be that as it may, the rule of res judicata is not applicable in fiscal statutes like income-tax. The contention of the ld. AR about the applicability of the `rule of consistency’, in our considered opinion cannot be allowed to dethrone the rule of `no estoppel against the statute’. After making an elaborate analysis, we have hereinabove held that section 194J is attracted to the facts of the instant case. Merely because in earlier years this issue was not examined and the assessee’s contention got accepted without verification, cannot give license to it claim in the later years that the correctly applicable section be put under carpet. Since the statute requires such an amount to be considered u/s 194J, we cannot permit a wrong provision of section 194C to be applied in the garb of consistency. This contention is therefore, jettisoned. The payment made by the assessee to the TV channels is covered u/s 9(1)(vi) and, as such, deduction of tax at source was required u/s 194J of the Act as has been rightly held by the authorities below. Obligation of the assessee u/s 201(1) - Held that:- Any person who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid/credited to a resident shall not be deemed to be an assessee in default in respect of such tax if such resident (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect. In view of the judgment in Hindustan Coca Cola Beverages Pvt. Ltd. (2007 (8) TMI 12 - SUPREME COURT OF INDIA ), we hold that the ld. CIT(A) was fully justified in reducing the obligation of the assessee u/s 201(1) to this extent. Proviso to sub-section (1A) of section 201 provides in unambiguous terms that in case any person fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident but is not deemed to be an assessee in default under the first proviso of subsection (1), the interest under clause (i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such resident. This proviso reaffirms the liability of the assessee towards interest irrespective of the deletion of liability u/s 201(1) on the score of payees including receipts from the person responsible in their respective income. On a pertinent query, the ld. AR was fair enough to accept that the calculation of ₹ 2.25 crore as made by the AO in his final order u/s 201(1)/(1A) is otherwise correct if the provisions of section 194J are held to be attracted. - Decided against assessee
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2016 (3) TMI 213
Assessee in default u/s.201(1) and 201/(1A)- non deduction of tds on software licence - whether the provisions of sec.9(1)(vi) of the Act, is applicable to the payment made to the software license by treating the same as ‘royalty’ concluding that the assessee is liable for deduction of tax u/s.195? - Held that:- It is necessary to make a distinction between the cases where consideration is paid to acquire the right to use a patent or a copyright and cases where payment is made to acquire patented or a copyrighted product/material. In cases, where payments are made to acquire products which are patented or copyrighted, the consideration paid would have to be treated as a payment for purchase of the product rather than consideration for use of the patent or copyright. In the present case, what was transferred is copyright and the right to use the copyright give rise to ‘royalty’ payment. Being so, in our opinion, the finding of the CIT(Appeals) in observing that granting of any license to use the software amounts to ‘royalty’ and the provisions of sec.9(1)(vi) are applicable. Accordingly, we are of the opinion that the authorities are justified in holding that the assessee is in default u/s.201(1)/201(1A) of the Act for non-deduction of T.D.S. on the impugned payment. - Decided against assessee Nonpayment of TDS on bandwidth charges - Held that:- As decided in Verizon Communications Singapore Pte. Ltd. v. ITO(International Taxation) [2013 (11) TMI 1058 - MADRAS HIGH COURT] the receipts are liable to be treated as 'royalty' for the use of IPLC under Section 9(1)(vi) read with Explanation 2(iva) and correspondingly Article 12(3) of DTAA between India and Singapore. We also agree that even if the payment is not treated as one for the use of the equipment, the use of the process was provided by the assessee, whereby through the assured bandwidth the customer is guaranteed the transmission of the data and voice. The fact that the bandwidth is shared with others, however, has to be seen in the light of the technology governing the operation of the process and this by itself does not take the assessee out of the scope of royalty. Thus the consideration being for the use and the right to use of the process, it is 'royalty' within the meaning of Clause (iii) of Explanation 2 to Section 9(1)(vi) of the Income Tax Act. and thus the authorities are justified in holding that the assessee is in default u/s.201(1)/201(1A) of the Act for non-deduction of T.D.S. on the impugned payment. - Decided against assessee Reimbursement of expenses - AO classified “reimbursement of Expenses” under the head ‘business development commission and bandwidth charges - Held that:- There was nothing on record to indicate as to how such reimbursement could be termed as business income of the assessee. The reimbursements were made in the process of executing the agreement. The expenditure being part and parcel of the process of advice of technical character, the payment on account of reimbursement also attracted the provisions of section 195(2) of the Act. - Decided against assessee
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2016 (3) TMI 212
Rectification of mistake - claim of bad debts written off disallowed - assessee written off the said amount out of the total provision made during the assessment year 2004-05 and claimed the same while computing income of the assessee - CIT(A) accepted the explanation of the assessee and allowed the claim of the assessee in respect of the said amount. It was also observed that this issue cannot be examined in proceedings u/s 154. Held that:- Assessee has duly explained that during the financial year 2003-04 relevant to assessment year 2004-05, assessee-company made a provision for bad and doubtful debts of ₹ 1,32,94,600/- and debited same to the profit and loss account but the assessee did not claim said amount in the return of income at the time of computation of income and the entire provision made for bad and doubtful debts debited to profit and loss account was added to the income shown in the profit and loss account in the computation of income. The AO has not disputed this fact while passing the impugned order u/s 154. Even before us, revenue has not disputed these facts explained by the assessee. During the year under consideration, the assessee has written off a sum of ₹ 98,00,327/- out of the total provision made for bad and doubtful debts of ₹ 1,32,94,610/-. Thus, in the books of account, the assessee has reversed provision to the extent of said amount which was not recoverable and passed entries by debiting provision for bad and doubtful debts and credited to the profit and loss account. This treatment of reversing provision in the books of account cannot effect the allowability of the claim of the assessee in respect of bad debts written off during the year. The AO has disallowed the claim of the assessee on the ground that the submissions are not supported by contemporary evidence. It is pertinent to note that the entire record was available with the AO and particularly the ledger accounts of the debtors wherein entries for bad debts written off has been carried out by the assessee along with provision for bad and doubtful debts made during the financial year 2003-04 relevant to assessment year 2004-05. Therefore, as per provisions of sec.36(1)(vi), the assessee is not required to establish that debts actually gone bad once the assessee has written off the amounts in the books of account. The CIT(A) has allowed the claim of the assessee by taking note of the fact that in the books of account, assessee has made entries in respect of reversal of provision for bad and doubtful debts made in the assessment year 2004-05. Therefore, in view of the above facts and circumstances of the case, we do not find any error or illegality in the impugned order of the CIT(A). - Decided against revenue
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2016 (3) TMI 211
Addition u/s 14A - MAT computation - Held that:- In the present case, the finally assessed income of the assessee has been computed in terms of section 115JB of the Act. The disallowance under section 14A of the Act under the normal provisions of the Act was determined at ₹ 65,76,251/-, wherein income by way of long term and short term capital gains and dividend was exempt. On the contrary, in the context of computing income under section 115JB of the Act, the income on account of long term and short term capital gain was includable and only dividend income was excludable or exempt. In such a situation, proportion of the amount disallowable under section 14A of the Act vis-à-vis the income treated as exempt under the MAT provisions (i.e. 115JB of the Act) would vary. As per the calculation furnished by the assessee at the time of hearing, such disallowance works out to ₹ 7,58,633/- as against suo-moto disallowance of ₹ 6,07,845/- made by the assessee in the return of income. Therefore, in our view though the action of the CIT(A) is accepted in principle, the entire amount disallowed by the Assessing Officer could not have been deleted. As a consequence, it is directed that the total disallowance be fixed at ₹ 7,58,633/- (inclusive of suomoto disallowance of ₹ 6,07,845/- made by the assessee). - Decided partly in favour of revenue
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2016 (3) TMI 210
Denial of deduction u/s. 80IB(10) by reopening the assessment u/s. 147 - Held that:- The commencement certificate issued on 13.11.1996 in the name of Sunil Builders got expired on 12.11.1997 and the assessee on entering into development agreement with Sunil Builders applied for commencement certificate on 13.5.1999 and got certificate dated 5.8.1999 and the project was commenced by the assessee pursuant to the certificate dated 5.8.1999 and since the project was commenced after 1.10.1998, assessee is entitled for deduction u/s. 80IB(10) of the Act - Decided in favour of assessee.
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2016 (3) TMI 209
Principals of mutuality - Contribution by the members of a Group Housing Society - voluntary contribution by one of its member in lieu of transferring right to the exclusive use of the facilities by the society - Held that:- As decided in assessee's own case for previous years the society has incurred expenditure in expanding the facilities and in carrying out eh repair works. There was shortage of funds that shortage was made good by the member. So that is only a question of reimbursement or compensating the expenditure. Therefore as far as the assessee society is concerned. It has not earned anything. So there is no question of any income at all. The society by itself does not have its own income. The expenditures are met by the contribution made by the members or member. Even if the member wants to have some extra facilities and the demand is supported by the remaining members the additional facilities can be erected only through the medium of co-operative society. A member of a housing society cannot incur any expenditure directly even though the expenditure was incurred for this personal benefit. The work has to be carried out through the office of the society. The society alone can undertake such work. Therefore, in fact even in a case where a personal benefit is given to amber by doing some work. The same work is done by the society for and on behalf of that member. Therefore, on this ground also there is no question of any income - Decided in favour of assessee
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2016 (3) TMI 208
Revision u/s 263 - Held that:- As regards the directions of the Ld.CIT to AO to verify details of the claims of depreciation made by the assessee, the AO in the fresh assessment proceedings held that, the assessee made no claim for depreciation. Thus this observation of the Ld.CIT, Meerut is factually in correct. There is neither an error in the original order of the AO passed u/s 143(3) of the Act on 16.12.2010, nor there is any prejudice caused to the Revenue. Hence this ground of revision is devoid of merit. Directions of the Ld.CIT given to the AO to verify the unsecured creditors, unsecured loans, the AO in his fresh assessment order passed u/s 143(3) r.w.s.263 of the Act, did not draw any adverse inference. This direction of the Ld.CIT was in the nature of directing rowing enquiries. No specific finding was arrived at by the Ld.CIT that there was prejudice caused to the Revenue or that there was an error in the original order of the AO passed u/s 143(3) of the Act. Thus this ground of revision is bad in law. On non maintenance of books of accounts finding of the Ld.CIT is wrong. Maintenance of records and books as prescribed u/s 44 (GG)(AA) r.w.s. 6F(3) of the Act is applicable to only professionals. The assessee being a limited company, cannot be said to be carrying on any profession. The assessee company has maintained books of accounts as required under law. Thus the foundation on which the Ld.CIT, Meerut came to a conclusion that the books of accounts of the assessee have to be rejected by invoking the provisions of S.145(3) is not legally tenable. This is a case where Ld.CIT has rejected the books of accounts, without even examining the same. The turnover as well as profits are estimated on surmises and conjectures. This cannot be sustained as it is totally arbitrary and illegal. - Decided in favour of assessee
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2016 (3) TMI 207
TDS u/s 195 - Addition u/s 40(a)(ia) - amount reimbursed to M/s Aakriti Creations Pvt. Ltd - whether these are genuine reimbursement of expenses and there was no profit element and hence no income liable to tax was contained therein ? - Held that:- Hon’ble Delhi High Court in case of Van Oord ACZ India (P) Ltd. vs. Commissioner of Income Tax [2010 (3) TMI 167 - DELHI HIGH COURT] held that liability to deduct at source arises only when the sum is paid to the non-resident was chargeable to tax. Once that was chargeable to tax, it was not for the assessee to find out how much amount of the receipts was chargeable to tax, but it was the obligation of the assessee to deduct the tax at source on the entire sum paid by the assessee to the recipient. Under Section 195, the obligation to deduct tax at source was attracted only when the payment was chargeable to tax in India. Thus as pointed out by the CIT(A) in the order the Hon’ble Delhi High Court held that no liability for deduction of tax at source arose under Section 195 in the case of mobilization and demobilization costs reimbursed to a non-resident, not being taxable in India, hence disallowance under Section 40(a)(ia) did not arise. Recently, in case of CIT vs. Ansal Land Mark Township (P) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] it was held that what is common to both proviso to Section 40(a)(ia) and Section 210(1) of the Act is that as long as the payee/resident has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the assessee would not be treated as a person in default. As far as the present case is concerned, it is not disputed by the Revenue that the payee has filed returns and offered the sum received to tax. In view of this the order of the CIT(A) is upheld. - Decided in favour of assessee
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2016 (3) TMI 206
Addition u/s 68 on account of share application money received by the assessee - issue of notice u/s 133(6) came back un-served - Held that:- Notice u/s 133(6) is issued by the AO could not be served on the share applicants and Inspector’s report also shows that this companies do not exists at the given address, we are of the view that no fault can be found against the assessee for this. Instead of the assessee has persuaded these companies to file confirmation independently along with all the requisite details and those parties have responded submitting independent information before the AO. The AO instead of making any further enquiry with respect to those details has tried to analyze information contained in those submissions. According to us he should have proceeded to make inquiries with the assessing officers of those share applicant companies and should also have used extensive powers granted to him u/s 131 of the Act when there was an information available that these companies are dubious. Instead, Ld AO walked on the path shown by the assessee to issue notice u/s 133(6) of the Act. Ld AO found there is meager balance in the bank account of that company after issue of the cheques of share application to the assessee. It is not the case of the AO that money that has been deposited with the assessee company which is not properly explained. We failed to understand how the remaining meager bank balance in the bank account of share applicants can affect the transaction entered into by the share applicants with the assessee company. Further the late allotment of shares made by assessee to the share applicant may result in to some contravention of the Companies Act 1956 however that cannot be used for making an addition u/s 68 of the act as same is irrelevant. The ld DR could not controvert any of the findings given by the learned Commissioner of Income-tax (Appeals) and no infirmity was pointed out. In view of the above we confirm the order of the learned Commissioner of Income-tax (Appeals) for deleting the addition made u/s 68 of the Act - Decided in favour of assessee
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Customs
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2016 (3) TMI 193
Classification - Consumer Electronics PC with additional components of audio, video, multimedia etc. - Respondent imported the said goods classifiable under CTH 8471 3010 and claimed benefit under Notification No. 76/2004 but the revenue contended that is to be classified under CTH 8479 - Held that: the goods are to be classified under CTH 8471 because in order to classify an item under 8479 as per the said Chapter Note 7, the principal function of the machine is for more than one purpose which is not the case here. - Decided against the revenue
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2016 (3) TMI 192
Setting aside of Redemption fine and penalty - Appellant imported CR coils but it appears that shipper have wrongly dispatched galvanised coils - But revenue made it a case of misdeclaration and revalued the goods and also held the goods liable for confiscation redeemable by paying redemption fine and penalty under Section 112 of the Customs Act, 1962 - Held that: the appellant have filed the bill of entry as per the documents, that is bill of lading, packing list, etc. and the appellants stand that they had ordered for CR coils whereas the shipper, as the ordered goods were not available dispatched galvanised coils, have not been found to be untrue. There was some mischief or consensus between the shipper and the importer, the paper slips found on the imported goods that the goods are galvanised coils. There is no case of deliberate misdeclaration of facts and circumstances, therefore, the redemption fine and penalty are set aside. - Decided in favour of appellant with consequential relief
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2016 (3) TMI 191
Denial of refund - Period of limitation - Whether to be applied or not when Notification No.102/2007-Cus. dated 14.9.2007 grants refund of the additional duty of customs to counterbalance the sufferings of the importer - Held that: limitation shall be examined at the time of examination of the result of the enquiry. Denial of refund - Subject to fulfillment of the conditions of the Notification - Sale through consignment agent - Held that: the original authority is directed to cause enquiry whether the consignment agent has sold the goods of the appellant through the invoices concerned. If so, the appellant cannot be denied of the refund subject to fulfillment of the conditions of the Notification. - Matter remanded back to complete re-adjudication
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2016 (3) TMI 190
Rejection of refund claim of duty of customs - Bar of Unjust Enrichment - passing of CVD as Cenvat Credit - Held that: If the said amount pertained to the Bill of Entry in dispute then it should have appear as amount recoverable in the Balance-sheet of 2005-06 and it should have been shown as amount recoverable as on 31.3.2006. Furthermore, a perusal of the invoice produced by the appellant shows that the appellant has indeed passed on the burden of duty to the buyers. The appellant importer is also a registered dealer, registered with Central Excise. The invoice being issued by him are under the Central Excise Rules, the invoice clearly show the amount of duty is being passed on. The invoices are required to show in the format prescribed under the law in respect of each consignment the amount of duty passed on. In fact, the appellant being a registered dealer is legally required to take credit of the duty paid and in each invoices pass on proportionate credit to the buyers. The invoices produced by the appellant show that he has done so. Not only he has taken credit but also passed on the same to the buyers. Therefore, as the appellant has passed on the credit to the buyers and also passed on burden of duty to the buyers, no refund can be sanctioned. - Decided against the appellant
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2016 (3) TMI 189
Rejection of refund claim of SAD - Additional duty of customs in terms of Notification No. 102/2007-Cus dated 14.09.2007 - Appellant imported goods on 21.04.2013 and filed Bill of Entry on 23.04.2013 which was released by the Customs on 26.04.2013. The refund was rejected as the imported goods were shown as sold 5 days before on release by the Customs but appellant submitted that the delivery was made as per delivery challan on 29.04.2013 which is after the date of bill of entry - Held that: the appellant has submitted delivery challan and the other evidence along with the terms of agreement which establish that the issue of invoice 5 days before the release of the goods by the Customs by itself does not prove that the goods have been sold and delivered to the buyers. It is also seen that the appellant has filed reconciliation certificate with calculation sheet certified by a Chartered Accountant containing details of Bills of Entry and sale invoices and payment of VAT/CST. Therefoer, refund claim can not be rejected. - Decided in favour of appellant
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2016 (3) TMI 188
Period of limitation - Date of issue of SCN or Date of Service of SCN is relevant - Demand of differential duty - Department issued less charge demand on 12.5.1997 to the appellant's Madhya Pradesh unit which was redirected to his Kankroli unit Rajasthan (unit in question) after a period of 6 months which became time-barred as per appellant - Held that: any demand that needs to be raised on the importer has to be issued and received by him within the period of limitation. Mere dispatch of show cause notice within a period of 6 months is not sufficient but should be served on the assessee/importer is the law, upheld by the Hon'ble High Court of Madras in the case of SHA Moolchand Praopchandji Gandhi 2003 (11) TMI 84 - HIGH COURT OF JUDICATURE AT MADRAS. - Decided in favour of appellant with consequential relief
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2016 (3) TMI 187
Refund claim - Loading of transaction value at 12.5% in terms of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - Appellant imported branded watches under a Distributorship Agreement from the foreign supplier which are related parties in terms of Rule 2(2) ibid, therefore the goods are assessed by the Special Valuation Branch (SVB) which rejected the transaction value and determined loading of transaction value at 12.5% in terms of the Customs Valuation Rules - Held that: loading of 12.5% do not sustain under Rule 4 of Customs Valuation Rules, 2007. - Decided in favour of the appellant
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Service Tax
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2016 (3) TMI 205
Refund claim - Service tax paid on royalty by the transferee company M/s Usha International Ltd. (UIL) to transferer company M/s Jay Engineering Works Ltd. (JEW) on the basis of the High Court order dated 26.5.2008 approving merger of the erstwhile UIL and M/s Shree Ram Fuel Injections Ltd. (SRFIL) with JEW with effect from 1.4.2007 - Registrar of Companies, National Capital Territory of Delhi & Haryana, Ministry of Company Affairs, approved its change of name of JEW to Usha International Ltd. from 20.6.2008 - Revenue contended that M/s JEW worked as an independent company up to 20.6.2008 and therefore service tax was payable and correctly paid by it - Held that: the appointed date as per amalgamation scheme i.e. 1.4.2007 is required to be the date of amalgamation/merger and not the date on which entire formalities were completed. Therefore, the service rendered during the period 1.4.2007 to 31.3.2008 became service to self and consequently service tax paid during the said period became eligible for refund. Refund claim - Doctrine of Unjust Enrichment - Appellant contended that it was neither a manufacturer of goods nor was it providing any service (which utilized the impugned service) during the relevant period and no Cenvat credit was taken of the service tax, the refund of which was sought and therefore the presumption contained under Section 12B of the Central Excise Act made applicable to Service Tax Act do not apply - Held that: every refund has to be tested on the yardstick of the doctrine of unjust enrichment in terms of Section 11B of Central Excise Act read with Section 83 of the Finance Act, 1994. Here as per Section 12B ibid the appellant do not cover within the scope of this section. The refund in this case is arising on account of the fact that the effective date of merger/amalgamation is to be treated as 1.4.2007 making service rendered during the relevant period for which royalty was paid as service to self. As the service was rendered to self and service tax was paid thereon, burden can only passed on to self and passing on the burden to self is not tantamount to passing it to any other person. Therefore, the appellant is not hit by the doctrine of unjust enrichment. - Decided in favour of appellant
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2016 (3) TMI 204
Refund claim - Service tax credit on the input services used for providing output services - Services were rendered to the respondent's chennai branch before the registration and registration was granted subsequently - Held that: By relying on the decision taken by the same tribunal in the case of J.P. Morgan Services India Pvt. Ltd. 2015 (2) TMI 467 - CESTAT MUMBAI, refund claim is granted as registration is not a pre-requisite for availment of CENVAT credit. Refund claim - Service tax credit on the input services used for providing output services - Services like rent-a-cab service, interior design service, rentals paid for the office premises, professional fees paid to C.A., purchase of foreign currency for the staff travelling abroad were rendered by the respondent but contended that these services do not qualify as input services they do not play any role in providing output service - By relying on the decision of division bench in the case of Morgan Stanley Advantage Services 2014 (12) TMI 330 - CESTAT MUMBAI, the services provided by respondent qualify as input service and therefore refund claim is granted. - Decided in favour of revenue
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2016 (3) TMI 203
Refund of Cenvat credit under Rule 5 of Cenvat Credit Rules 2004 read with notification No. 5/2006-CX(NT) - Inclusion of services in the definition of input services - Appellant is BPO Outfit providing Health Club and Fitness Center, Transport Goods by Road and Electricity Expenses services to its client but commissioner disallowed the Cenvat Credit in respect these services on the ground of not falling under the definition of input service and not having nexus with the export of service - Held that: In the BPO services the major involvement is manpower who are required to perform their duties on 24x7 basis when the manpower work in odd times during the 24 hours it adversely affects the health of the employee which directly affects the performance of the services. So, in the BPO companies the health and fitness of the employees is very essential factor in order to run the function of a BPO company. Therefore, health and fitness services availed by the company for their employee is a necessity for providing the better quality of output service and included in the definition of input services. The transportation was used for the various activities of the appellant such as transportation of equipment like computers etc. and there is no evidence available as per show cause notice that transport service was used for transporting the household goods of employees. Therefore, these services are input services even as per the inclusion clause of the definition of input service. When the premises was occupied by the appellant and day-to-day repairs and maintenance are carried out in that premises then obviously, the said services are received and used by the tenant only i.e. the appellant and not by the landlord. The services like repair, maintenance, electricity are directly used by the BPO service provider in order to carry out their day-to-day business activity. Therefore, included in the definition of input services. As all the three services are input services, the Cenvat credit is allowed and are entitled for the refund of Service tax. - Decided in favour of appellant
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2016 (3) TMI 202
Cenvat Credit - Exempted service - Appellant contended that it had not provided any exempted service and by mistake that ₹ 94,953/- was shown in the column meant for exempted service in ST-3 return and this mistake happened because the accountant thought that as this amount had not been received from the service recipient but when subsequently received the tax was paid - Held that: In the absence of identification of the exempted service provided by the appellant and in the wake of the assertion of the appellant that it had not provided any exempted services during the relevant period, the demand cannot be sustained. - decided in favour of appellant
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2016 (3) TMI 201
Liability of Service Tax - Manpower Recruitment or Supply Agency Services - Whether services of cutting, drilling, punching, bending and notching of material on job work basis in the factory of M/s. Amitasha Enterprises Pvt. Ltd., Nagpur provided by the respondent falls under the category of Manpower Recruitment or Supply Agency Services - Held that: the identical issue of M/s. Yogesh Fabricators was decided [2015 (8) TMI 1013 - CESTAT MUMBAI] in the case of the work undertaken in the same premises of Amitasha Enterprises Pvt. Ltd. So, by relying on the same, the services provided by the appellant do not fall under category of Manpower Recruitment or Supply Agency Services. Therefore, not liable to pay service tax. - Decided against the revenue
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Central Excise
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2016 (3) TMI 200
Cenvat credit for discharging duty on the inputs procured without payment of duty - revenue contended that, the duty on the fibre procured without payment of duty, but not used for the intended purpose, cannot be discharged for availing cenvat credit and also such duty discharged cannot be further availed as a credit by the appellant. - Held that:- Regarding the analysis of Rule 3 of Cenvat Credit Rules by Lower Authorities, we find reliance has been placed by the Revenue on Rule 3(4)(b), which states that an amount equal to cenvat credit taken on inputs, such inputs are removed as such or after being partially processed. As admitted by the lower authorities, in the present case, first of all, there is no clearance of inputs as such and hence the above said provisions have no application. The admitted fact is that the inputs have been procured without payment of duty and on failure of use of the same for the intended purpose, duty has to be discharged. Here, the duty has to be discharged by the appellant as a recipient of goods. In case if they procured the said inputs on payment of duty (without availing the exemption) then they would have discharged the duty and availed credit of the same based on duty paid document of the seller. Since the payment of duty on the inputs has to be discharged by appellant in the present case, in the absence of any specific bar, the appellants have utilized the cenvat credit available in the records for this purpose. We find no infirmity in such payment. The inputs having been used for the intended purpose of manufacture and clearance of dutiable final products, the credit of such payment is again available to the appellants. In view of the above analysis and also following the precedent decisions of the Tribunal, we set aside the impugned order and allow the appeals in favour of assessee
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2016 (3) TMI 199
Eligibility for benefit of duty under Notification No. 1/95 and 53/97 dated 13.6.1997 - Excisable goods liable duty - whether the goods cleared from the factory of the appellant are semi-finished goods sent for job-work and they are not goods produced or manufactured in a 100% EOU as contemplated under proviso to Section 3(1) read with Section 2(f) of the Central Excise Act, 1944? - Held that:- The importer is required to use all goods imported for the purpose of manufacture of goods to be exported. Any articles (including rejects, waste and scrap raw material) if they are not excisable then they are required to payment of customs duty on imported goods used for the purpose of manufacture the said article in an amount to equal to customs duty leviable as for import as such. In the instant case, they had cleared fabrics, which they claimed to be semi-finished goods, for the purpose of job-work and the same were not returned. They are hit by clause (7) of the Notification Notification No. 1/95 and 53/97 dated 13.6.1997 read with erstwhile Rule 173M of Central Excise Rules, 1944 and as a result, duty is chargeable on the material cleared for job-work in terms of such clause. The order of Commissioner (Appeals) to that extent is according to the provisions of such Notification as he has ordered the matter to be remanded for determination of duty, if any involved in the semi-finished fabrics cleared to the job-workers - Decided against assessee
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2016 (3) TMI 198
Cenvat Credit - Non maintaining of separate accounts - extended period of limitation invoked - inputs used in the manufacture of finished goods cleared on payment of duty and for inputs used in the manufacture of exempted finished goods as required under Rule 6(2) of the Cenvat Credit Rules - Held that:- Assessee has attached various correspondence along with their written submissions which show that the respondent has been maintaining separate records with respect to the input which is used for manufacture of excisable goods as well as inputs which are used for manufacture of exempted goods. They have also annexed the copy of the cenvat credit account registers. Further find that the learned adjudicating authority has found that though the respondent has maintained the separate accounts but not as per the requirement of the law. In fact no specific form has been prescribed in which separate accounts have to be maintained whereas the respondent has shown by production of their registers and documents that they have been separately maintaining records with regard to most of the inputs. Further, the demand pertains to the period May 2004 to September 2005 and the show cause notice was issued on 1.7.2008 i.e. after a period of four years, wherein the respondent in a number of letters exchanged between them and the department, clearly stated regarding the availment of exemption and maintenance of accounts and furnishing of the required return. As there is no fraud or suppression of fact involved in this case as the department was all along kept informed of the respondent's activity and therefore there is no reason for justification of invoking the extended period of limitation. - Decided against revenue
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2016 (3) TMI 197
Eligibility of CENVAT credit - credit of service tax paid on various services viz., Clearing and forwarding, repair contract, labour contract and professional charges etc., during the period August, 2010 to December, 2011 - whether the services do not qualify as input services as defined under Rule 2 (l) of, 2004 - demand along with interest and penalty - Held that:- Without the machineries the manufacturing activity cannot take place and for proper and efficient running of the machineries it is necessary to repair the machineries whenever needed. Replacement of worn out parts also required for the machineries to run effectively. If it is factually proven that the services were used for repair of the machineries, without doubt, the appellants are eligible for credit. The matter is remitted to the original authority on the above terms. With regard to Clearing and Forwarding service, the contention of the appellant is that, they send the manufactured lamps to their JV partner M/s. Koito Mfg. Co. Ltd., Japan, for testing purpose. Only on obtaining the approval/satisfaction as to the quality, specifications etc. of the product, the lamps are manufactured by the appellant. The appellants cannot proceed to manufacture goods unless they get the approval from the JV located abroad. In anticipation of the correctness of the goods without carrying out the testing abroad, no manufacturer would waste his capital and produce the goods and store the same in his factory. The appellants have stated this with evidences which according to the Ld.AR were not furnished to the lower authorities. This being the circumstance, the original authority is directed to verify the documents and pass appropriate orders on merits. With regard to Professional charges service, that the subject service has been incurred for engaging the services of specialists, technocrats and other professional agencies which is in relation to the business activity of the appellants - fit case to remand to the adjudicating authority to re-examine the claim of the appellant - Decided in favour of assessee by way of remand
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2016 (3) TMI 196
Classification of PVC Doors and Windows - Tariff sub-Heading 3925.20 which covers doors, windows and their frames and thresholds for doors OR Tariff sub-Heading 3925.99 covering other builders’ ware of plastics, not elsewhere specified or included - Held that:- The invoices indicate clearance of PVC doors and windows indicating specific type (grey, red mate, rose wood and teak etc.), length and number of pieces of such length. The calculation attached to the clearance challan gives the length, breadth and area of the profile for calculation. There are clearances of beadings alongwith the profiles to be fixed in the customer’s premises. Perusal and close scrutiny of submissions and evidences on behalf of the appellants clearly show that the appellants are clearing various channels and profiles of specific dimensions in unassembled condition which are to be used in the pre-determined premises of the clients. The process involved before fixing the windows or doors is a simple assembly at site as the profiles beadings and other items required are as per the specific dimensions of various windows or doors. We find that applying the Rule 2 (a) of the interpretation Rules, it is clear that the unassembled windows and doors, even incomplete or unfinished are to be classified with reference to goods which are complete or finished. The scope of this interpretation rule further explained by the Explanatory notes of HSN makes it clear the classification of the impugned goods shall be under 3925.20 - Decided in favour of assessee
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2016 (3) TMI 195
Penalty under section 11AC - clearance against the dummy challan - clandestine removal - Held that:- The appellant though required to pay the duty/CENVAT Credit which they have already paid, they are not liable to be visited with harsh penalty under section 11AC of Central Excise Act, 1944. In the case of alleged clearance against the dummy challan dated 17.01.2007, find force in the contention of the appellant that in absence of any evidence to the effect that the goods mentioned in the said challan were cleared, the duty mentioned therein cannot be fastened on them. Serious lapse in the investigation undertaken by the officers in making necessary enquiry about the said dummy challan, so as to ascertain whether the goods mentioned in the said challan were in fact cleared to the consignee mentioned in the said challan or otherwise. Also, from the statements recorded, find that nowhere the said question was asked to the Manager or the Director by the investigating officer. In these premises, it is difficult to hold that the goods mentioned in the said challan dated 17.01.2007 were cleared clandestinely without payment of duty. Further, find that penalty was imposed under section 11AC of Central Excise Act, 1944 by the adjudicating authority and confirmed by the Ld. Commissioner (Appeals). Penalty was not confirmed under any other provision nor also invoked in the show cause notice. Accordingly, confirmation of penalty cannot be sustained. The Revenue s Appeal is thus partly allowed to the extent of confirmation of duty on the shortages in the stock of finished goods and raw materials amounting to ₹ 13,38,012/- and the impugned order is modified accordingly. - Decided in favour of revenue in part
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2016 (3) TMI 194
Stock discrepancy warranted enhancement of demand plea of the appellant that stock taking was done in dark is false when there was thread bare examination of the evidence made - Held that:- Adjudicating authority shall first deal with the outcome of the physical inventory,and outcome of the hard disk of the computer. Secondly,the outcome of the loose slips shall be examined in detail to arrive at the proper duty demand if any, to serve the interest of justice. Thirdly, he shall examine the contents of the notebook and evaluate the evidence thereofto arrive at the duty demand, if any. It may so happen that all the three materials and evidence may corroborate with each other.That aspect may be specifically dealt. Revenue is not required to lay evidence with mathematical precision.Preponderance of probability comes to itsrescue.It may use primary, corroborative and probable evidence to examine the allegations and considering defence plea shall determine dutiability if any. Therefore, the authority shall independently apply his mind without being guided by the appellate finding of lower appellate authoritywho made partial remand of the matter. So far as the second show-cause notice is concerned, if that is different from the first show-cause notice, the authority shall properly deal with that independently or in combination with the first show-cause notice. He has to clearly bring out the status of each show-cause notice and allegation made therein dealt thoroughly in his reasoned and speaking order.
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