Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 9, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Receipt on account of sale of Shrink-wrap software is not in the nature of royalty hence is not liable in India in view of the provision of section 9(1)(iv) of the Act as well as Article 12(3) of the Double Taxation Avoidance Agreement between India and U.S.A - AT
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TDS u/s 194I - non-deduction of tax at source on the hotel expenses - the rooms were hired on as and when available basis at the regular tariff rates subject to the discounts as agreed at the time of booking of rooms - TDS u/s 194I not required - AT
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Addition on account of advances written off - whether allowable u/s. 37 - the advances were given in the course of business and accordingly the same is eligible for deduction - AT
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Unexplained cash credit - AO has wrongly treated the share application money as income of the assessee. If any amount is to be added it should be added in the hand of Directors because only they can take the entry by giving the cash from their pockets - AT
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Exemption u/s 10A - Human Resources Services under Information Technology Enabled Products are eligible for the said exemption. - AT
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Addition on account of profit on pre-payment of deferred sales tax loan liability - claimed by the assessee as capital receipt - It is capital receipt and is not taxable u/s. 41(1) - AT
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Registration u/s 12AA - proof of charitable activities u/s 2(15) - The imparting of training in Correctional Administration to all officials of prison/police/judicial department would ultimately benefit the prisoners to change their attitude and behaviour so that they can be re-habilitated in society on completion of their sentence - registration allowed - AT
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MAT computation - adding back Rent equalisation reserve to the book profits - AS 19 is not applicable to lease of immovable property. - AO rightly added back the rent equalization reserve debited to Profit & Loss Account while computing the book profit for the purposes of section 115JB - AT
Customs
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The lifesaving equipment that was imported is totally out of scope of either entry 19, 42 or 44 of Part B to the notification 208/81 for the reason that there was no set of equipment intended to enjoy the exemption - AT
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Refund claim - additional duty of Customs paid u/s 3(5) of the CTA, 1975 - N/N. 102/2007-Cus dated 14.09.2007 - it is well settled that the substantial benefit granted by law cannot be taken away by a circular - AT
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Continued imposition of ADD - import of Viscose Staple Fibre excluding bamboo fibre from Hongkong - It has been clearly recorded that cessation of existing anti dumping duty on the subject goods is likely to result in recurrence of dumping and injury to the DI - continuation of ADD upheld - AT
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Import of Bakery Shortening from Sri Lanka - import prior to withdrawal of exemption - it is reflected that much before 2.6.2006, the goods have been imported under letter of credit prior to the aforesaid date and thus the tribunal had rightly allowed the relief to the assessee - HC
Service Tax
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Refund claim - purchase of flats from builder - whether the appellants who are purchasers of an apartment/flat/residence from a builder or a developer is entitled to claim refund of service tax paid by him to the builder on the ground that service tax was not taxable before 1.7.2010? - refund to be allowed subject to verification - AT
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SEZ unit - Refund claim - reversal of Modvat credit amounts to non-taking of credit on the inputs. Hence the benefit has to be given of the notification granting exemption/rate of duty on the final product since the reversal of the credit on the input was done at the Tribunal’s stage. - AT
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Self / suo-moto adjustment of excess service tax paid - The only irregularity raised is that they did not intimate before adjustment - The facts do not reveal any suppression of facts with intent to evade payment of duty - demand is time barred - AT
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Business Auxiliary Services - receipt of commission - deposit of service tax by the recipient of services i.e. MUL - the petitioner’s contention that MUL/MSIL had paid for the transaction so as to absolve it of its liability to satisfy the demands is clearly unfounded. - HC
Central Excise
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Scope for collecting duty - Additional Duties of Excise - whether the said duty being a surcharge leviable on duty, which itself being ‘nil’, would exclude the intermediate goods from levy under the Additional Duties of Excise? - Held Yes - AT
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CENVAT credit - appellant is liable to pay 10% of the value of e-bikes at the time of their clearance and the cenvat credit lying in their cenvat account shall not lapse wholly but the cenvat credit lying in their cenvat account attributable to inputs, work in progress and finished e-bikes shall lapse - provisions of Rule 11(3) of the Cenvat Credit Rules are not applicable - AT
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Valuation - manufacture of motor vehicles parts and clearance to own other unit - even though duty is payable and the recipient unit is part of the same entity and is eligible for MODVAT/CENVAT credit paying duty from PLA also then it is a revenue neutral exercise. For this reason demand of duty cannot be recovered - AT
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Classification of waste - cotton waste is predominates by weight over acrylic fibre in the facts and circumstances of the case, therefore, the same is to be classified under chapter 52 of the Central Excise Tariff Act, 1985 which exempts from payment of duty - AT
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Clandestine removal - the income surrendered before the income tax department cannot be presumed as profit of manufactured goods without any cogent evidence that the said income is out of manufacturing activity of the assessee - AT
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No doubt, the railway yard was definitely used for handling coal which is essential to the manufacturing process, nonetheless as, the same is outside the factory premises, it cannot come within the ambit of eligible "capital goods" for the purpose of Rule 2 (1A) of Cenvat Credit Rules, 2004. - AT
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CENVAT credit - Refund claim of the credit restored after reversal / restoration of disallowed credit - unjust enrichmen - to even conceive that restoration of CENVAT credit is to be prevented as a matter of course is not in accordance with the fundamentals that motivated the incorporation of ‘value added’ in indirect taxation. - AT
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CENVAT credit - denial on the ground that invoices issued by service provider do not contain STP code of the service provider - the availment of the said credit on the strength of computer generated service issued by the bank is very much in order - AT
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Refund claim - accumulated CENVAT credit availed on input services - clearances to 100% EOU - the clearances to an EOU is to be treated as export and refund of unutilized credit is allowed to the assessee - AT
Case Laws:
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Income Tax
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2017 (3) TMI 334
Incentive from property broker on original booking of a residential flat in a Developers project - Nature of receipt - revenue or capital - Held that:- We find considerable cogency in the case law cited by the Ld. Counsel of the assessee of the Hon’ble Supreme Court of India in the case of CIT vs. Saurashtra Cement Ltd.(2010 (7) TMI 11 - SUPREME COURT ), has held that any receipt directly and intimately linked with the procurement of capital asset is in the nature of capital receipt and not a revenue receipt. - Decided in favour of assessee
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2017 (3) TMI 333
TDS u/s 192 or 194J - remuneration paid to six professionals engaged by the company - Held that:- Nothing has been shown to prove that Shri Chawla was not engaged on full time basis or he was working on part time basis with the company as an independent professional and he was free to take up other assignments. No cogent reason could be given before us as to why the designation of Production Manager was assigned if he was acting simply as an independent professional. Thus, in our considered opinion, the facts and the evidences brought before us duly establish that there existed an ‘employeremployee’ relationship between the assessee company and Shri Chawla. Similarly in the case of other persons, it is noted that all the terms and conditions are identical. Ms. Sushma Chitnis designated as ‘Executive Assistant to the Chairman’, Shri Blesson Oomen has been designated as ‘Manager Cum Accounts & Finance’, Shri Amitabh Shukla designated as ‘Avid Incharge’, Shri Vishal Punjabi designated as ‘Production Executive’, and Shri Rajesh Wanmali designated as ‘Production Assistant’. The remaining terms and conditions in the case of all these persons were same. Thus, the facts and the evidences brought before us clearly establish that there existed an employer-employee relationship between these persons and the assessee and thus, the assessee was liable to deduct TDS u/s 192 because the remuneration paid to them constituted ‘salary’. TDS u/s 194C OR 194J - expenses incurred as part of post production activities - Held that:- The impugned expenses incurred by the assessee are in the nature of post production activities. Therefore, the assessee was obliged to deduct TDS u/s 194C only and not u/s 194J. TDS u/s 194C OR 194J - nature of professional fee - DTAA - PE in India - Held that:- In the facts of the case before us, VHQ has carried out post production job. In this process, no technology or skill has been made available to the assessee. In case assessee would need similar job again, then he will have to go back to VHQ to get this job done. No replication or repetition is possible at the end of the assessee at its own. Thus, the requisite mandatory condition of ‘make available’ of technical knowledge or know-how or skill is missing in this case. Therefore, in our considered opinion, this amount cannot e brought to tax as FTS under India-Singapore DTAA. The judgments relied upon by the Ld. Counsel in his submissions have taken similar view. It is also noted that as per provisions of section 90(2) of the Act, most beneficial provision shall be available to the assessee between provisions of the Act and the provisions of the DTAA. Therefore, we find that this amount was not taxable in the hands of VHQ in India. Therefore, assessee was not obliged to deduct tax at source on the payment made to VHQ. As a result, these grounds are allowed. TDS u/s 194C or 194J - amount paid by the assessee to M/s KWB, UK for providing dancers, who had rendered services in India for advertisement films used in India - Held that:- the contention of the Ld. Counsel that amount was paid for production of a programme for broadcast is factually correct. Therefore, TDS was required to be deducted u/s 194C in view of the specific provision contained in section 194C in this regard. Therefore, it is held that TDS should have been deducted u/s 194C and not u/s 194J. TDS u/s 194I - non-deduction of tax at source on the hotel expenses - Held that:- As on the basis of bills of hotels and other evidences. It is noted that nothing has been brought before us to show that assessee had entered into any prior contract with the hotels for any specific room or rooms for any specific rates or rooms for any specific period. The rooms were hired on as and when available basis at the regular tariff rates subject to the discounts as agreed at the time of booking of rooms. Under these circumstances, the assessee deserves to be given the benefit of the circular issued by the Board providing that under these circumstances, TDS will not be required to be made u/s 194I. Therefore, it is held that no TDS was required to be made in this case.
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2017 (3) TMI 332
Addition on account of advances written off - whether allowable u/s. 37 - Held that:- We find that the amount given to MCRBCM was written off by the assessee in the year under consideration but the same was disallowed by the AO by observing that the purpose of the advances given to MCRBCM has not been given. However, on perusal of records, we find that all the necessary details were furnished before appellate stage with the nature and purpose of transaction. The assessee acquired leased asset from the MCRBCM but later the company went into liquidation. Subsequently the Hon’ble jurisdictional High Court ordered to the assessee for the payment of the aforesaid sum which later became irrecoverable. From the above, it gets established that the advances were given in the course of business and accordingly the same is eligible for deduction. - Decided in favour of assessee Addition on account of loose tools written off - Held that:- On perusal of the details of the stores and loose tools written off furnished at the time of assessment, we find that the necessary supporting evidence were duly submitted by the assessee before the AO at the time of assessment. Before us ld. DR has also not brought anything on record contrary to the findings of ld. CIT(A) in deleting the addition made by the AO. - Decided in favour of assessee Addition on account of corporate advances written off - Held that:- On perusal of the record, we find that all the necessary details of the impugned advances given to the parties were furnished by the assessee at the time of assessment and the relevant details are enclosed at pages 79 of the paper book. The advances represent the money given in relation to business contracts of the assessee with Nevyeli Lignite Corporation. On further perusal, we find that the advances written off were also approved in the minutes of Board meeting held on 30th March, 2004. The necessary details of the parties were duly furnished at the time of assessment. CIT(A) did not erred in deleting the addition as relying on case of Ashoka Marketing Limited Vs CIT [2001 (8) TMI 74 - CALCUTTA High Court] wherein held possibility for recovery of loan in case unsecured creditors found that the entire amount went to the secured creditors and nothing remains to be paid for unsecured creditors, there is no justification to deny the claim of the assessee. - Decided in favour of assessee Addition on account of WIP written off - application of AS 7 - Held that:- On the perusal of AS-7, we find that where the expected contract costs exceeds total contract revenue, then the probable loss should be recognized in the books immediately. Loss could be recognized irrespective of the stage of completion of contract and method of accounting followed. Hence, loss is permissible to be accounted for even in the period in which the contract is signed or when the legal or constructive obligation has been assumed. Assessee has determined the loss on the basis of the cost that can be attributed to a contract in accordance with AS-7. Actual expenditure incurred in the first year is in excess of amount written off in the first year of contract. Such write off have been made to comply with the provisions of Accounting Standard 7 as prescribed by the lCAI. The fact that assessee has made a correct estimate of the loss is further supported by the fact that actual loss borne by the assessee in every contract referred above is higher than the amount written off in the first year of contract. Hence, the contention of the A.O that such loss is a contingent loss and does not have any basis does not hold good. Foreseeable losses written off in accordance with Accounting Standard 7- "Construction Contracts" is an allowable loss. Para 13 of Accounting Standard 7- "Construction Contracts" as prescribed by lCAl mandates an entity to make a provision for losses irrespective of the method of accounting followed and percentage of contract completed. CIT(A) has given very clear finding that all the details were submitted before the AO and accordingly the finding of the AO is wrong that the assessee failed to file necessary details of the expenditure and work completed at the time of assessment. loss was adjusted against the revaluation reserve in terms of the Hon’ble Jurisdictional High Order in the own case of the assessee. In fact there was amalgamation which was sanctioned by the Hon’ble Jurisdictional High Court and accordingly the aforesaid loss was claimed against the revaluation reserve. However in our view the loss was genuine as no defect has been pointed out by the AO. Simply the loss was not written in the profit & loss account but adjusted against the revaluation reserve does not mean that the assessee is not entitled. Thus addition need to be deleted - Decided in favour of assessee Addition on account of payment made to sub-contractor - Held that:- On perusal of the record, we find that all the necessary details of sub-contractor charges paid to M/s Lakshmi Enterprises were duly submitted before the AO. In our considered view, the assessee has filed the necessary details, which are sufficient enough to prove the identity of the party. Non-service of notice issued u/s.133(6) of the Act cannot be the sole reason for treating the payment as in-genuine. In rejoinder, Ld. DR has not brought anything on record contrary to the finding of ld. CIT(A) - Decided in favour of assessee
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2017 (3) TMI 331
Royalty receipt - receipt from the sale of software products to clients in India through its distributor / reseller - P.E. in India - taxability in India - Held that:- The present case has been decided in view of the latest law settled by the Hon’ble Delhi High Court in case of Ericsson AV (2011 (12) TMI 91 - Delhi High Court). As decided in assessee's own case in previous year receipt on account of sale of Shrink-wrap software is not in the nature of royalty hence is not liable in India in view of the provision of section 9(1)(iv) of the Act as well as Article 12(3) of the Double Taxation Avoidance Agreement between India and U.S.A. In view of the said circumstances, we are of the view that the case of the assessee is fully covered by the above mentioned decisions and the finding of the Assessing Officer is based upon the DRP direction is wrong against law and facts and is hereby ordered to be set aside on this issue. It is therefore held that receipt on account of the receipt for sale of shrink-wrap software is not liable to tax in India. Therefore, the Assessing Officer is hereby directed to delete the full addition. Accordingly, these issues are decided in favour of the assessee against the revenue.
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2017 (3) TMI 330
Addition u/s 68 - non admitting additional evidence with respect to investment in share capital by Cavere Trading Private Limited - Held that:- CIT(A) did not consider the confirmation in respect of the Cavere Trading Pvt. Ltd. on the ground that why the same was not filed before the Assessing Officer but we are of the view that by not considering the said documents, the prejudice would be caused to the assessee if an opportunity of being heard was not granted. Moreover, these documents are relevant and are necessary for the adjudication of the matter of controversy in the interest of justice, therefore, we set aside the finding of the CIT(A) in this regard and direct the Assessing Officer to decide the matter afresh by giving an opportunity of being heard to the assessee by considering the relevant documents produced by the assessee in connection with the Cavere Trading Pvt. Ltd. in accordance with law. Accordingly this issue is being decided in favour of assessee. Disallowance of office renovation expenses - Held that:- The company has incurred one time renovation expenses like civil work, electrification etc for setting up the network of the branches which has been included in repair and maintenance expenses shown under the group `Office and other expenses' . It is not in dispute that the said expenditure was incurred in respect of running of office premises. Anyhow, it is to be seen whether such type of expenditure is required to be treated as capital expenditure or revenue expenditure. In this regard the law relied by the representative of the assessee speaks that the repair and renovation of leased business premises is liable to be considered as revenue expenditure. In view of the above mentioned law i.e. Thiru Arooran Sugars Ltd. Vs. DCIT (2013 (2) TMI 450 - Madras High Court )we are of the view that the expenditure to the tune of ₹ 23,66,226/- is revenue in nature which is allowable in accordance with law. - Decided in favour of assessee. Disallowance of residential renovation expenses - Held that:- The Assessing Officer declined the same on the ground that no business connection was established in connection with Directors. No evidence of any kind was found, however, nothing new was produced before CIT(A). After filing the appeal before us no new material has been produced before us. Any how alternative ground is quite reasonable, therefore, depreciation in accordance with law is liable to be allowed on the amount expended for the renovation of residential. Accordingly, these issues are decided in favour of the assessee against the revenue.
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2017 (3) TMI 329
Reopening of assessment - exemption claimed u/s.54F - income of the HUF was included in the individual hand and the claim of deduction was not taken on the net consideration - Held that:- As relying on the CBDT Circular No.667 dated 18-10-1993 has held that when the property already stands in the name of the HUF and there is no evidence on record to show that the assessee received the land by way of release from the co-owners and the assessee has not paid any price to the coowners, there is no justification on the part of the assessee to claim deduction u/s.54F on the value of 614 square meters of land. Uphold the order of the CIT(A) in rejecting the claim of the assessee that the release of land by the members of the HUF in favour of HUF for utilization in construction of residential property be included in the exemption claimed u/s.54F of the Act. - Decided against assessee Investment towards construction of residential property - Held that:- CIT(A) after elaborately discussing the issue has given clear cut finding that the assessee did not furnish any details towards the construction expenditure of ₹ 3 lakhs such as the nature of construction, permission from the competent authority for construction, date of utilization of funds for construction, bills and vouchers for various items of expenses for construction and above all whether the new building was completed within the specified period of 3 years from the date of transfer, completion certificate from competent authority and the nexus between the consideration received and the investment in the construction of house property. The Ld. Counsel for the assessee could not adduce any evidence before us to counter the above factual findings given by the Ld.CIT(A). Since the assessee failed to substantiate with evidence regarding the investment of ₹ 3 lakhs in construction of the house property, therefore, we find no infirmity in the order of the CIT(A) rejecting the claim of the assessee that an amount of ₹ 3 lakhs was utilized towards construction of the house property. - Decided against assessee Estimating the cost of acquisition @ ₹ 100/- per sq.mtr as on 01-04-1981 for the purpose of indexation - Held that:- Since the order of the CIT(A) is based on the report of assessee’s own valuer who has determined the value at ₹ 100/- per sq.mtr as on 01-04-1981, therefore, in view of the reasoned order given by the CIT(A) on this issue we find no infirmity in the same. - Decided against assessee
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2017 (3) TMI 328
Unexplained cash credit entries - Held that:- As in compliance to notices issued u/s 131 of the I.T. Act to both the persons by the AO, details have been furnished. The AO has given the finding that Shri Virender Kumar Jain is closely associated to Sh. Surender Kumar Jain. However, no such report is available on record and Assessing Officer has also not narrated how they are closely associated. M/s Steller Investment Ltd. is connected to Sh. Surender Kumar Jain who is said to be hawala operator is also not clear from the assessment order. In view of these facts, I find that AO has wrongly disbelieve share application money received from M/s Steller Investment Ltd. Regarding the share application money received from Sh. Vijendra Thapliyal and AO noticed that there was a balance of ₹ 15,50,OOO/- before issuing the cheque for share application money. However, he has added this amount on the ground that before issuing the cheque appellant has received some money in the bank account. Without investigating who has given the money before issuing the cheque for share application, AO has disbelieved the transaction. There is no allegation against Shri Vijendra Thapliyal for providing the accommodation entry to the assessee, but Ld. A.O. has added this amount alongwith 2% commission for paying commission to get entries. The action of the AO clearly indicates that he has treated both the transactions similar without assigning any reason. During the year the assessee has not received any income because business was not carried on by the appellant. The AO has wrongly treated the share application money as income of the assessee. If any amount is to be added it should be added in the hand of Directors because only they can take the entry by giving the cash from their pockets.- Decided in favour of assessee Addition on account of share application money - Held that:- 2% commission addition was rightly deleted, due to the fact that there is no evidence that assessee has taken entry for share application money.- Decided in favour of assessee
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2017 (3) TMI 327
Exemption u/s 10A - whether the assessee has not justified or explained his claim that the employees had gone to US for training? - assessee company was a registered unit of Software Technology Park of India and had been providing human resources related to ITES services to its holding company in the US and claiming exemption u/s 10A Held that:- In order to substantiate the fact that the said services qualify for exemption u/s 1OA of the Income tax Act, the assessee enclosed Notification No. 890E dated 26.09.2000 issued by the CBDT, as per which Human Resources Services under Information Technology Enabled Products are eligible for the said exemption. Hence these facts make it clear that the assessee was entitled to exemption under section 1OA of the Act. It is also established that the assessee company was entitled to exemption u/s 1OA there is very little force left in the AO's position that the assessee company had concealed income derived by its employees on their visit to USA. If the employees had earned any Income during their visit to the holding company in USA, the assessee company could have shown the same and claimed exemption u/s 1OA of the Income Tax Act. Thus, any attempt by the assessee company to under-state its income by resorting to the practices mentioned above defies logic and common sense. CIT(A) has observed that during the course of appellate proceedings, it was revealed that a number of details submitted at the time of assessment proceedings were not acknowledged by the AO in his assessment order. These include note on expenses on travelling and expenditure on foreign training, copies of passports of Directors and some of the employees, addresses and e-mails ids of employees sent abroad, business work flow chart, etc. In addition during the course of appellate proceedings, the assessee submitted some more information which goes to establish the fact that the employees had gone on training rather than for rendering services abroad. This includes a note on the nature of training given, sample copy of training letters of employees selected for training, copy of passport and visa of the employees etc. Assessee also gave necessary documents to substantiate the fact that it is eligible for exemption u/s 1OA of the Income Tax Act. All these documents together with the assessee's submissions establishes the point that the 11 employees of the assessee company had gone for training to its holding company in the US. The assessee has explained the rationale for undertaking such training for its employees. The case law referred by in the case of CIT vs Samsung India Electronics Ltd. (2013 (7) TMI 365 - DELHI HIGH COURT) wherein has specifically held that expenditure incurred on training is allowable for the purpose of assessee's business. Therefore addition in dispute was rightly deleted by the Ld. CIT(A) - Decided against revenue
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2017 (3) TMI 326
Addition u/s 68 - unsecured loan received treating the same as unexplained cash credit - Held that:- Both the depositors were having the sufficient amount in their bank account and only a nominal amount was deposited in cash before issuing the cheques to the assessee, so it cannot be said that amount was deposited before issuing of the cheques to the assessee. In the present case, identity of both the parties is not in dispute, their creditworthiness is also proved because there was sufficient balance in their bank accounts, the genuineness of the transaction is also proved since the transaction took placed through banking channel and both the depositors are regularly assessed with the income tax department. Therefore, the assessee discharged the onus cast upon it for proving the identity and creditworthiness of the depositors alongwith the genuineness of the transaction. Therefore, the addition made by the AO and sustained by the ld. CIT(A) was not justified. - Decided in favour of assessee
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2017 (3) TMI 325
Unexplained source of cash deposit - Held that:- Assessee was dealing in its whole business on cash basis. The assessee has filed profit and loss account and balance sheet of the business which has been accepted by the AO as is evident from the assessment order. The assessee does not maintain any current account and deposits all the receipts in the saving bank account. In this case the assessee has advanced fresh loan of ₹ 9,50,000 to three parties and assessee’s source of deposit is mainly the withdrawals of ₹ 1,66,500/- and collection from Debtors of ₹ 10,87,362/- from his business, as is evident from the fact that opening debtors is of ₹ 2,79,166/- and total sales made during the year is ₹ 9,46,850/-. Out of this during the year assessee received amount of ₹ 10,87,362/- in cash and ₹ 1,33,221/- vide cheques. Thus find considerable cogency in the assessee’s contention that the cash received and withdrawals after making payment for expenses and creditors deposited in to the bank account and the same was used to advance the loan to the said parties. Hence, it is crystal clear that the payments are totally out of assessee’s business and the results have been accepted by the AO, as the business income has been assessed at ₹ 1,51,580/-, hence, the source of deposit has been explained by the Assessee to the AO and addition made on this account is not sustainable in the eyes of law, hence, the same needs to be deleted. - Decided in favour of assessee
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2017 (3) TMI 324
Addition on account of profit on pre-payment of deferred sales tax loan liability - claimed by the assessee as capital receipt - AO rejected the claim of assessee and made addition on the premise that waiver of sales tax liability tantamounts to cessation of liability and hence, taxable u/s. 41(1) - whether the difference between the actual sales tax liability and the liability discharged by the assessee in terms of scheme floated by the State Government is ‘capital receipt’ or ‘revenue receipt’? - Held that:- It is capital receipt and is not taxable u/s. 41(1) of the Act. See Sulzer India Ltd. Vs. Joint CIT [2014 (12) TMI 267 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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2017 (3) TMI 323
Registration u/s 12AA - proof of charitable activities u/s 2(15) - assessee society organizes workshop/various courses in its Institute for imparting training to the officials large in number - Held that:- The objective of the assessee institute of imparting correctional administration training only serves to strengthen the criminal justice system in the country and make it more effective. By imparting training to concerned officers in correct administration, it ensures besides other thing that convicts when released are equipped to merge themselves in the main stream of the society and become contributing members rather than disturbing elements. This for all purpose serves the larger interest of the society/general public and can be nothing else but a public utility service. The fact that people have been awarded the Ramon Magsaysay award for government service including human prison reforms outlines the public utility of correctional system. The assessee, therefore, rightly contended that the holistic intervention implies comprehensive understanding of the root cause of criminality and corresponding mode of treatment leading to provision of after care for rehabilitation. The prisoner coming to main stream of society is relevant and benefit of general public and society. The imparting of training in Correctional Administration to all officials of prison/police/judicial department would ultimately benefit the prisoners to change their attitude and behaviour so that they can be re-habilitated in society on completion of their sentence. Ultimately, the consumer of this training provided to the officers of Correctional Administration would be initially the prisoners who are part of the society and ultimately general public of society. The training would promote the welfare of general public. The objects of the assessee are to promote welfare of general public which would be charitable in nature. Therefore, the primary purpose and the predominant object of assessee society are to promote the welfare of general public, the purpose would be charitable purpose. Assessee is entitled for registration under section 12AA of the Act. - Decided in favour of assessee.
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2017 (3) TMI 322
MAT computation - adding back Rent equalisation reserve to the book profits - Held that:- The main object of the AS 19 is to deal with the leases concerning movable assets and it specifically excludes lease agreements to use lands. We find considerable force in the submissions of ld. CIT-DR that AS 19 is not applicable to lease of immovable property. Therefore, the Assessing Officer rightly added back the rent equalization reserve debited to Profit & Loss Account while computing the book profit for the purposes of section 115JB of the Act. Moreover, the assessee itself has added back this reserve for the purposes of computation of total income under the normal provisions of the Act. Therefore, in any view of the matter, the stand of the assessee is contradictory. - Decided against assessee.
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2017 (3) TMI 321
Transfer pricing adjustment towards Advertisement, marketing and promotion expenses - Held that:- We find that when the TPO held AMP expenses to be an international transaction, he did not have any occasion to consider the ratio laid down in several judgments of the Hon’ble jurisdictional High Court, which is now available for consideration. Respectfully following the predominant view taken in several Tribunal orders of coordinate benches, we are of the considered opinion that it would be in the fitness of things if the impugned order is set aside and the matter is restored to the file of TPO/AO for a fresh determination of the question as to whether there exists an international transaction of AMP expenses. If the existence of such an international transaction is not proved, the matter will end there and then, calling for no transfer pricing addition. If, on the other hand, the international transaction is found to be existing, then the TPO will determine the ALP of such an international transaction in the light of the relevant judgments of the Hon’ble High Court, after allowing a reasonable opportunity of being heard to the assessee. Admission of additional ground : “i. That on the facts and circumstances of the case and in law, the AO/DRP have erred in not granting set-off of brought forward loss and unabsorbed depreciation, as per the provisions of section 72 and section 32 of the Act, before determining total income of the Appellant.”
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2017 (3) TMI 320
Validity of best judgment assessment - absence of the copy of the remand report being made available, the assessee as non opportunity to file a replication to meet out the same - ingenuineness of 'other expenses' - Held that:- A perusal of the details of the ‘Other expense’ aggregating to ₹ 3,77,44,684/-(supra) reveals that the same comprised of expenses in the nature of Govt. dues of ₹ 1,00,33,581/- paid by the assessee, while for out of the remaining expenses of ₹ 2,77,11,103/-, expenses aggregating to ₹ 2,35,87,815/- had been incurred by the assessee vide cheques, and as such expenses only to the tune of ₹ 41,23,288/- were met out in cash. Thus from the aforesaid details as had been brought to our notice by the Ld. A.R, we find that expenses of ₹ 41,23,288/- out of total expenses of ₹ 3,77,44,684/-, which therein works out to 10.92% are found to have been incurred by the assessee in cash. Thus in light of the aforesaid facts as have been placed on record by the Ld. A.R, which though are subject to verification, we are unable to persuade ourselves to subscribe to the finding of the A.O in the remand report that most of the expense were incurred in cash, and as such the genuineness of the same could not be established. We are further of the considered view that in the absence of a copy of the remand report being made available to the assessee, the latter had remained divested of any opportunity of bringing the aforesaid serious infirmities in the body of the remand report to the notice of the CIT(A). Thus the observations of the A.O in the body of the remand report do not inspire any confidence, and the same when pitted against the facts projected before us by the assessee are apparently found to be incorrect. A.O is herein directed to verify the genuineness and veracity of the bifurcated details of the ‘Other expense’ aggregating to ₹ 3,77,44,684/- as had been furnished by assessee at Page 5 of ‘APB’ furnished before us, and in the backdrop of the fact that the details as regards the same were not open for verification before the A.O during the course of the original assessment proceedings, shall therein proceed with and make necessary verifications as regards the allowability of the same as per the statutory provisions contemplated under the Income tax statute. - Decided in favour of assessee for statistical purposes. Disallowance of purchases - Held that:- In light of the claim of the assessee that no copy of the remand report was made available during the course of the appellate proceedings, coupled with the fact that though the confirmations of the remaining parties could not be collected during the course of proceedings before the lower authorities due to reasons beyond the control of the assessee, but had now been collected, and last but not the least the methodology adopted by the CIT(A) for working out the disallowance being based on misconceived facts and all the more adopting an irrational method, thus does not inspire any confidence, we therefore in all fairness and in totality of the aforesaid facts therein restore the issue to the file of the A.O for making necessary verifications.- Decided in favour of assessee for statistical purposes. Ex-parte order passed under Sec. 144 - Held that:- We are unable to persuade ourselves to subscribe to the contention of the revenue that an appellate authority after justifying the validity of framing of a ‘best judgment’ assessment, in the backdrop of the facts attending thereto, thereafter stands divested of its jurisdiction to modify the assessment on merits. We are of the considered view that the appellate courts on coming across a ‘best judgment’ assessment which is assailed before it, on finding that the income of the assessee has been unreasonably assessed at a high pitched amount, which is either not found justifiable in the backdrop of the method adopted for framing of such an assessment, or is found to be based on illogical reasonings, therein duly stands vested with the jurisdiction to modify such an assessment, and therein bring the same within the parameters of an assessment which can safely be held as a fair assessment of the income of the assessee. In the backdrop of the aforesaid scope and gamut of the powers of the CIT(A) while adjudicating an appeal involving a ‘best judgment’ assessment under Sec. 144, the order passed by the CIT(A) in the case of the present assessee, remaining within the arena of his jurisdiction,thus cannot be principally faulted with. We are unable to subscribe to the contention of the revenue that the additions/disallowances made by an A.O in an assessment framed under Sec. 144 cannot be dislodged by an appellate authority on merits. - Decided against revenue
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2017 (3) TMI 319
Reopening of assessment - accommodation entries from the bogus companies - Held that:- The assessee had received the money as share application money from the companies which were genuine, their creditworthiness was proved, the transaction was genuine through banking channel and all the requisite details asked by the AO were furnished. Therefore, the addition made by the AO was rightly deleted by the ID. CIT(A). - Decided in favour of assessee.
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2017 (3) TMI 318
Addition of notional interest on account of interest free loan given to subsidiary - Held that:- Facts and circumstances of the present case are exactly similar and identical to the assessment years 2010-11 & 2012-13, hence, the addition in dispute needs to be deleted. We also find that in the case of CIT vs. Dalmia Cement Bharat Ltd. [2009 (7) TMI 45 - DELHI HIGH COURT ] has held that “In the absence of anything to show that the interest free loan given by the assessee company to its subsidiary company was for personal benefit of any director or for any other personal reasons, it has to be held that the loan was given for the purposes of business and commercial expediency and, therefore, no portion of the interest paid by the assessee on its borrowed funds can be disallowed on the ground that a part thereof has been diverted to the subsidiary company. - Decided in favour of assessee.
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2017 (3) TMI 317
Additions made u/s 153A - Held that:- AO has completed the assessment and made the addition in dispute without any incriminating material found during the search and seizure operation and the addition in this case was purely based on the material already available on record. Hence, the addition in the case is deleted. See Commissioner of Income Tax (Central) -III Versus Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT ] - Decided in favour of assessee
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2017 (3) TMI 316
Addition in respect of custom formality and custom expenses - Held that:- We find that during the survey proceedings, the director of the company had admitted that company would surrender the entire expenditure claimed under the head custom expenses and custom formalities, that on 31/03/2007 he filed an affidavit and partially retracted his statement, that the FAA restricted the disallowance at the rate of 25% of the expenditure as against the 100% disallowance made by the AO. We find that the FAA had given a categorical finding of fact that in some cases the assessee had raised the bills against such expenditure in the names of the customers and had offered such receipts in its return of income. If any income has been offered for taxation corresponding expenditure has to be allowed, is the cardinal principle of tax-jurisprudence. The FAA has restricted the disallowance to 25% as against the 100% disallowance made by the AO. We find that similar issue was decided by the Tribunal in the case of APL India Private Ltd. (2005 (5) TMI 288 - ITAT MADRAS-D) and held that in the case of clearing and forwarding agents the disallowance should not exceed 25%. - Decided against revenue.
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Customs
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2017 (3) TMI 349
Benefit of N/N. 208/81 - import of Lifesaving Equipment viz. Infusion Solution Administration Sets - whether the goods are covered under Sl. Nos. 19, 42 or 44 of Part B of the Notification or not? - Held that: - The lifesaving equipment that was imported is totally out of scope of either entry 19, 42 or 44 of Part B to the notification for the reason that there was no set of equipment intended to enjoy the exemption - the burden of proving eligibility to the exemption lies on the claimant. Appellant failed to show that “Lifesaving Equipment viz. Infusion Solution Administration Sets" and "Lifesaving equipment viz. Intravenous Cannulae and tubing for long term use (Infusion Solution Administration Sets)” satisfy the condition of exemption. In absence of discharge of burden of proof by the appellant, there is no scope to consider its claim of exemption - appeal dismissed - decided against appellant.
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2017 (3) TMI 348
Classification of goods - remote control for home theatre, home automation, viz, Crestron MTX-3 Panel System - whether the requirement of obtaining 'equipment type approval' was mandatory? - Held that: - The Rules, undoubtedly, are in the public domain. Moreover, it would appear that the intention of the Rules is to ensure that equipment capable of operating in the licensed frequencies are not manufactured under the guise of producing equipment for operation in de-licensed frequencies - The Wireless Planning Co-ordination Cell of the ministry of Telecommunications and Information Technology have a wide-ranging mandate to control wireless equipment in the country and may be approached by the appellant-commissioner for ensuring strict compliance of the Rules upon deployment of the said equipment if so empowered under the statute - application dismissed.
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2017 (3) TMI 347
Jurisdiction - denial of the deemed export benefit - the case at hand is similar to the one dealt with by this Court PATEL ENGINEERING LTD. Versus UNION OF INDIA [2015 (2) TMI 173 - BOMBAY HIGH COURT], where it was held that Department having clarified and interpreted its policy for the first time in March 2011, it could not have relied upon such clarification to reopen the concluded cases or review them as attempted. This is a clear case of afterthought - Though the Revenue would submit that it has approached the Hon'ble Supreme Court of India challenging the same, nothing has been pointed out which would indicate that either the Judgment is quashed or set aside or no effect can be given to it in future cases - petition allowed.
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2017 (3) TMI 346
Valuation of imported goods - natural justice - Held that: - the Original Authority has enhanced the value of the good imported without giving any opportunity to the appellant to present their case - matter remanded back to the Original Authority with a direction to give opportunity of presenting the case to the appellant and pass reasoned order for coming to the conclusion for passing a particular order - appeal allowed by way of remand.
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2017 (3) TMI 345
Refund claim - additional duty of Customs paid u/s 3(5) of the CTA, 1975 - N/N. 102/2007-Cus dated 14.09.2007 - denial on the ground that these claims have been filed in contravention of the restrictive condition laid down by the CBEC vide Circular No. 6/2008-Cus dated 28.04.2008 - Held that: - there is no murmur of any non-compliance of the conditions specified in the said notification - Circular No. 6/2008-Cus dated 28.04.2008 prescribes that only a single claim against a particular Bill of Entry should be permitted to be filed within the maximum time period of 1 year. From the wordings of the Circular, it is clear that the same has been issued for the convenience of processing of the refund claims on regular periodicity. The Circular, however, does not specify any condition to say that a second refund claim filed in a month would be barred. In any case, it is well settled that the substantial benefit granted by law cannot be taken away by a circular - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 344
Continued imposition of ADD - import of Viscose Staple Fibre excluding bamboo fibre - import from Hongkong - continuation of ADD on the ground that there is likelihood of price under cutting in case of cessation of ADD - Held that: - Section 9A (5) of the Customs Tariff Act, 1975 provides for review of the anti dumping duty imposed - If upon review, if the Government is of the opinion that the cessation of such duty is likely to lead to continuation or recurrence of dumping and injury, it may, extend the period of such imposition for a further period of 5 years - in the present case, we find the appellant could not place before us any empherical evidence to counter the final findings on Sunset review by the DA. It has been clearly recorded that cessation of existing anti dumping duty on the subject goods is likely to result in recurrence of dumping and injury to the DI - continuation of ADD upheld - appeal dismissed - decided against appellant.
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2017 (3) TMI 343
Recovery proceedings - petitioner did not file any appeal within time prescribed and impugned order has attained finality, and pursuant to the said order, recovery proceedings have been initiated. Now, order dated 28.3.2003 is proposed to be challenged in 2017 by means of this writ petition and the explanation is that the said order was not served upon petitioner - Held that: - There is no other explanation with regard to the delay and laches. Delay and laches constitute substantial reason for disentitling relief in equitable jurisdiction under Article 226 of the Constitution of India - We find no justification to entertain the writ petition after more than 13 years, particularly when statutory appeal was also available but the same was not filed and the order has attained finality - petition dismissed - decided against petitioner.
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2017 (3) TMI 342
Permission to Export Shark Fins - prohibited item - export of Shark Fins was prohibited as per N/N. 110 (RE-2013)/ 2009-2014 dated 06.02.2015 issued by the Director General of Foreign Trades, New Delhi, and that this Court has stayed the above notification up to 09.03.2016, the Purchase Order was dated 18.02.2016 and there was sufficient time for fulfilling the export obligation as the stay was up to 09.03.2016 - Held that: - The fact remains, 3,788 Kgs. of Dried Shark Fins, admittedly collected by the petitioner before 09.03.2016, are remaining with the petitioner. There is no local market for the Shark Fins, according to the petitioner. I am of the considered opinion that if the Shark Fins are not exported, and if there is no local market for the same, it transforms itself into huge waste, and the Government of India suffer adverse financial consequences, even though in a small measure. There is every possibility that the same could generate as a waste, and thereby create environmental pollution also, adding to the already existing adverse environmental conditions - a further short period can be provided to the petitioner to export the same - petition allowed - decided in favor of petitioner.
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2017 (3) TMI 341
Import of Bakery Shortening from Sri Lanka - import prior to withdrawal of exemption - Held that: - under a notification dated 24.7.2006 and 11.9.2006 under which relief would be given to the parties who were issued the letter of credit prior to 2.6.2006 even other than NAFED the department itself allowed relief to the parties who have made import by way of making bill of lading before 2.6.2006 - it is reflected that much before 2.6.2006, the goods have been imported under letter of credit prior to the aforesaid date and thus the tribunal had rightly allowed the relief to the assessee - appeal dismissed - decided against Revenue.
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Corporate Laws
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2017 (3) TMI 337
False and inadequate material disclosures made in the Red Herring Prospectus - minimum capitalization norms applicable to NBFCs not adhered - non informed investment decision - penalty of ₹ 1 crore on the appellants under Section 15HB of the SEBI Act, 1992 - Held that:- Decision of the AO that disclosing the letter of RBI dated 26.09.2012 in the RHP, but not disclosing in the RHP that RBI by the said letter dated 26.09.2012 had sought strict compliance of minimum capitalization norms applicable to NBFCs amounts to suppressing material information in the RHP and thus violative of the provisions contained in the ICDR Regulations and Merchant Bankers Regulations cannot be sustained, because, minimum capitalization norms were not applicable to the investors permitted to participate in the offer of CARE and the said norms had no bearing on the investors permitted to participate in the offer of CARE to take an informed investment decision. No fault can be found with CARE for not disclosing the norms which were not applicable to the investors to whom the offer was made in the RHP dated 24.11.2012. Fact that subsequent to the RHP dated 24.11.2012, RBI by its letter dated 06.12.2012 directed CARE to apply minimum capitalization norms to non-resident investors covered under Schedule 2 & 8 and CARE in the circumstances of the case complied with the said direction cannot be a ground to hold that information relating compliance of minimum capitalization norms were suppressed in the RHP dated 24.11.2012. Once it is held that there was no infirmity in the RHP of CARE, then it cannot be said that the appellants without exercising due diligence have issued certificate to the effect that the RHP of CARE contains true and adequate information. Consequently, appellants cannot be said to have violated the Merchant Bankers Regulations. In the result, decision of the AO that the appellants have violated the provisions contained in the ICDR Regulations and Merchant Bankers Regulations cannot be sustained. Consequently, penalty of ₹ 1 crore imposed on the appellants cannot be sustained.
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Service Tax
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2017 (3) TMI 380
100% EOU - Refund claim - Real Estate Agent's Services - denial on the ground that though the appellant had availed facility management services, in the invoices the service tax is collected under category of Real Estate Agent Services - Held that: - The category of registration of service provider cannot be a ground for denying refund as the category registration of the service tax provider is beyond the control of the appellant - refund allowed - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 379
Refund claim - purchase of flats from builder - whether the appellants who are purchasers of an apartment/flat/residence from a builder or a developer is entitled to claim refund of service tax paid by him to the builder on the ground that service tax was not taxable before 1.7.2010? Held that: - As long as the document shows that the service provider is a registered person, his registration number is available and details of service tax paid and the certificate by the developer that he has paid the service tax and statement showing the value of service tax are provided, in our opinion, would be sufficient. Reliance placed in the case of JOSH P JOHN AND OTHERS Versus CST, BANGALORE AND OTHERS [2014 (9) TMI 597 - CESTAT BANGALORE], where it was held that prior to 01.07.2010 the service in dispute in these cases was not taxable. Transactions where individuals have entered into agreements for purchase of flats/residences with the builder/developers, in our opinion, is not covered by the definition. Matter remanded back to the original authority who will decide the refund claim - appeal allowed by way of remand.
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2017 (3) TMI 378
SEZ unit - Refund claim - denial on the ground that the appellant had taken CENVAT credit on input services - N/N. 17/2011-ST dated 01 .03.2011 - whether the appellants have fulfilled the condition 2(g) of the N/N. 17/2011-ST when they have taken the CENVAT credit and reversed the same before filing the refund claim? - Held that: - reliance was placed in the case of Hello Minerals Water Pvt. Ltd., Vs. Union of India [2004 (7) TMI 98 - ALLAHABAD HIGH COURT ], where it was held that reversal of Modvat credit amounts to non-taking of credit on the inputs. Hence the benefit has to be given of the notification granting exemption/rate of duty on the final product since the reversal of the credit on the input was done at the Tribunal’s stage. The Ld. AR, has pointed out that in the case of SEZ the condition has to be complied being mandatory. However, the Ld. AR, has not been able to convince as to how the said condition which is similar in all the notifications discussed in the case laws would stand on a different footing. Rejection of refund is unjustified - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 377
Self / suo-moto adjustment of excess service tax paid - time bar - Works contract service - Held that: - the appellant has given the details of the adjustments made by them. The letter dated 30.06.2009 reveals that the appellants had properly intimated that they had paid excess service tax and the same is adjusted for subsequent period. The only irregularity raised is that they did not intimate before adjustment - The facts do not reveal any suppression of facts with intent to evade payment of duty - demand is time barred - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 376
Business Auxiliary Services - receipt of commission - deposit of service tax by the recipient of services i.e. MUL - authorized dealer selling cars on behalf of MUL - Held that: - The service tax liabilities discharged by MUL/MSIL would refer to the amounts constituting the proportion of the commission it retains and discloses as the consideration/service received, for which tax is to be paid. There is no positive assertion that the amount or the portion of the commission, which is apparently of a substantial percentage-to the petitioner are also deducted in service tax - the service tax returns of MUL/MSIL would reflect the amounts received and retained by it and not necessarily include within the turnover the amounts received in aggregate - the petitioner’s contention that MUL/MSIL had paid for the transaction so as to absolve it of its liability to satisfy the demands is clearly unfounded. Petition dismissed - decided against petitioner.
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2017 (3) TMI 375
Power to remand - refund claim - whether the Commissioner (Appeals) has powers to remand to the adjudicating authority for re-determination of the claim of refund? - Held that: - the order of remand passed by Commissioner (Appeals) having merged with the Final Order passed by the Tribunal dated 03.12.2013, I am of the view, that the present appeal has to be remanded to the Commissioner (Appeals) for the reason that the order passed by the original authority is non est in law - the appeal is allowed by way of remand to Commissioner (Appeals).
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2017 (3) TMI 374
Refund claim - export of services - N/N. 41/2007-ST dated 06.10.2007 - Held that: - all the services have been availed by the appellant for the course of export of goods. There is no dispute that the services have been provided by the service provider who had paid services on these services. It is also not in dispute that all these services have been availed by the appellant themselves - reliance was placed in the case of M/s Sakuma Exports Ltd. Versus Commissioner of Service Tax, Mumbai-I [2017 (1) TMI 235 - CESTAT MUMBAI] - refund allowed - appeal allowed - decided in favor of appellant.
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Central Excise
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2017 (3) TMI 373
Scope for collecting duty - Additional Duties of Excise - whether the said duty being a surcharge leviable on duty, which itself being ‘nil’, would exclude the intermediate goods from levy under the Additional Duties of Excise? - Held that: - From a cumulative reading of section 3 of Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 it would not be possible to alienate chargeability under this Act from assessment under Central Excise Act, 1944 and when the effective rate of duty is ‘nil’ there is no assessment at all. With the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 making specific reference to the chargeability and assessment of duty under Central Excise Act, 1944 the necessity to base the tax on the effective rate of duty, whether it be ‘nil’ or otherwise, is inevitable. Appeal rejected - decided against Revenue.
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2017 (3) TMI 372
Denial of benefit of exemption - Notification no. 8/2001-CE - There is no dispute that the impugned brand names are registered with various individuals - Held that: - the notification does not restrict the exception to registered brands and, hence, it would only be reasonable to conclude that such a touchstone was not intended by the Central Government when it issued the exemption notification - The exception accorded in the exemption notification to certain branded goods has a different objective. No uniform rule can be promulgated for admitting to the benefit or for denial of the exception. A small unit that balances on the edge of survival can hardly be expected to find the resources to do so and we would be condemning the small units to stagnate by denying them the opportunity to grow through brand building - The use of the brands by appellants cannot be considered to have intended to communicate a connection in the course of trade with the person who purportedly owns the brand name - Appeal allowed.
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2017 (3) TMI 371
CENVAT credit - Rule 6(3) of the CCR, 2004 - import of e-bikes in CKD condition - whether the credit lying in CENVAT account shall lapse, being unutilised? - Held that: - appellant is importing e-bikes in CKD condition and clearing the same alongwith indigenously procured battery and paying duty thereon. Therefore, the e-bikes has became exempt from duty w.e.f. 29.04.2008. It is also admitted fact that as appellant was not maintaining separate account of inputs, therefore, the appellant start paying 10% of the value of e-bikes as per Rule 6(3) of the Cenvat Credit Rules, 2004 on their clearances. In that circumstances, Revenue cannot allege that the cenvat credit lying in their cenvat account on 29.04.2008 shall lapse as appellant is clearing e-bikes and parts prior to 29.04.2008 on payment of duty - provisions of Rule 11(3) of the CCR are not applicable. Appellant was not maintaining separate account for inputs used in manufacturing of e-bikes and parts thereof, therefore, provisions of Rule 6(3) are squarely applicable to the appellant as the appellant is manufacturing both dutiable and exempted final product and appellant is liable to pay 10% of the value of e-bikes at the time of their clearance and the cenvat credit lying in their cenvat account shall not lapse wholly but the cenvat credit lying in their cenvat account attributable to inputs, work in progress and finished e-bikes shall lapse. Appeal allowed - decided in favor of appellant.
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2017 (3) TMI 370
SSI exemption - valuation - sale of branded goods to related person - Held that: - It is admitted that the respondent is not clearing 100% goods to the related person. In that circumstances, the Rule 9 read with Rules 8 are not applicable. The Respondent cleared goods to various customers and they have cleared the goods to SEPL and affix their brand name on the pipes. The respondent did not include to claim SSI exemption the pipes cleared to SEPL - Held that: - the clause 4 of SSI Exemption notification is not applicable to the goods cleared by the respondent as branded goods - Therefore, the value of such clearances goods cannot be added to arrive on the aggregate value clearance during the respectively period. Appeal dismissed - decided against Revenue.
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2017 (3) TMI 369
Valuation - manufacture of motor vehicles parts and clearance to own other unit - valuation done as per the valuation Rules 6b(ii) of erstwhile Central Excise (Valuation) Rules, 1975 - The department s objection is that the assessable value which is on cost construction method is not correct in as much as the appellant have not included Head Office admin expenses, R D expenses and royalty in the cost of the production - Held that: - there is no dispute that the recipient units are the appellant s own units. Therefore if there is any differential duty, liability the same is available as CENVAT credit to the recipient units. As per the submission of Learned Counsel the recipient units have paid ₹ 75.49 crores and ₹ 16.41 crores duty from PLA respectively. In such case the entire exercise of payment of duty and availment of credit is revenue neutral - even though duty is payable and the recipient unit is part of the same entity and is eligible for MODVAT/CENVAT credit paying duty from PLA also then it is a revenue neutral exercise. For this reason demand of duty cannot be recovered - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 368
Clearance of ‘diphenoxylate hydrochloride’ from one unit to another - determination of price under rule 6(b)(ii) of Central Excise Valuation Rules, 1975 - time limitation - Held that: - the notice had not brought out any evidence of misdeclaration or suppression of facts with intent to evade duty and a notice of 11th June 2002 cannot, in absence of such evidence, invoke the extended period to demand duty - The notice itself is barred by limitation of time - appeal dismissed - decided against Revenue.
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2017 (3) TMI 367
Valuation - transportation charges - whether transportation charges have been included in the assessable value at the place of removal or not? - Held that: - freight and insurance incurred upto the depot has been included in the assessable value for payment of duty on clearance from the factory. It is only the freight recovered from the customers for delivery at their premises that is itemised separately and not included in the assessable value - In terms of amendment of ‘place of removal’ with effect from 28th September 1996, the assessable value is that which is inclusive of costs upto ‘place of removal’ which is the Taloja storage premises with the duty thereof to be discharged at the factory itself. It would appear from the records that this was being scrupulously followed by the appellant - We do not, therefore, find any justification for adding the freight and insurance incurred thereafter in the assessable value in the absence of legal requirement to do so. There is no evidence or finding of suppression of facts or other ingredient for invoking the extended period. In these circumstances, the bar of limitation will not extend even to the last month covered in the demand. Appeal allowed - decided in favor of appellant.
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2017 (3) TMI 366
100% EOU - Refund claim - CENVAT credit - air travel agency service - banking and financial service - Business Auxiliary Service - Catering service - General Insurance Service - Repair and Maintenance and testing services - recruitment and training service - manpower supply service - personality development service - renting of tangible goods service - and management or business consultancy service - Held that: - the issue is squarely covered in favour of the appellant by various decisions where on similar issues, refund was allowed - I allow the appeals of the appellant by setting aside the impugned orders and allowing the appeals with consequential relief, if any, subject to verification of the documents by the original authority - appeal allowed by way of refund.
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2017 (3) TMI 365
Valuation - scrap - Iron and scrap is generated out of the capital goods installed in the factory - whether clearance of Iron waste and scrap after 16.06.2005 alleged to be generated out of capital goods on which CENVAT Credit availed, be subjected to duty on its transaction value or otherwise? - Held that: - though the appellant has been vehemently arguing that they had received the 3333 MTs of M.S. Angles, Channels, Beams, Nut Bolts etc, during the period 1986-87 to 2006-07, and used in the maintenance of the plant and machinery for replacement of worn out parts, and the worn parts were removed as waste and scrap of 1930MTs, the said facts had not been verified. No doubt the onus lies on the department to establish that the waste and scrap did arise out of the capital goods on which credit availed, but, in the present case, the evidences adduced by the appellant in establishing the fact no CENVAT credit had been availed on such M. S. Angles, Channels, Beams, Nut Bolts etc., used in the repair and maintenance of the worn out parts of the plant and machinery, and the worn out parts were cleared as waste and scrap, needs to be verified, before confirming the duty on transaction value of waste and scrap under Rule 3(5A) of CCR,2004 - appeal allowed by way of remand.
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2017 (3) TMI 364
Classification of waste - acrylic fibre - whether the waste generated in second part of the unit where the appellant is manufacturing 100% cotton dyed yarn and cotton blended yarn, the waste generated therefrom is to be classifiable under chapter 52 or chapter 55 of the Central Excise Tariff Act or not? Held that: - the waste of acrylic fibre is mixture of two or more textile materials, the same is to be classified if consisting wholly of that one textile material which predominates by weight over any other single textile material as per section note 2(A) of section 9 of the Tariff Act, cotton waste is predominates by weight over acrylic fibre in the facts and circumstances of the case, therefore, the same is to be classified under chapter 52 of the Central Excise Tariff Act, 1985 which exempts from payment of duty - the duty cannot be demanded - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 363
Imposition of penalty u/r 15 (2) of CCR, 2004 - removal of inputs as such - failure to reverse the credit - Rule 3(5) of CCR, 2004 - Held that: - Though it is alleged by the department that the solvents were removed as such, there is no evidence to show that these solvents were fit for use in the manufacture of final products. It is the case of the appellant that the solvents had deteriorated in quality and were not usable solvents and therefore they had cleared them as spent solvents. That spent solvents do not attract any duty at all - appellants have paid the entire duty along with interest prior to the issuance of SCN. From the facts revealed I am able to conclude that there is no iota of evidence to establish any suppression of facts or willful-misstatement on the part of appellant since the department has no case that the inputs cleared are fit for use by appellant for manufacture of finished goods - penalty imposed is unwarranted - appeal allowed - decided in favor of appellant
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2017 (3) TMI 362
Imposition of penalties u/r 173Q of the CER, 1944 - fake invoices - Held that: - No cross examination was granted to the appellant. It is nowhere has been investigated from where the goods received by the appellant or no investigation conducted in the premises to ascertain whether the appellants are maintaining the proper stock of the goods tallying with the statutory records. In that circumstance, it is very difficult to rely on the statement made by the third party that the appellants were involved in the activity of issuing fake invoices - merely on the basis of statement of the transporter, the penalty on the appellants cannot be imposed u/r 173Q of the CER, 1944. The penalty u/r 173Q cannot be invoked unless and until the appellant have dealt with such goods during the impugned period. Admittedly, it is allegation against the appellants that they have dealt with issuance of bogus invoices - the penalty u/r 173Q of the CER, 1944 is not imposable. Penalty set aside - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 361
Exemption under N/N. 120/84-CE and N/N. 287/86-CE dated 5th May 1986 - clearance of ‘Servoquench 11’ and ‘Servotherm medium’ - Held that: - the decision of the Hon’ble Supreme Court in Hindustan Petroleum Corporation Ltd [1999 (9) TMI 375 - CEGAT, CALCUTTA], has excluded straight blended oils from the purview of ‘speciality oils’ and, hence, assessee is not entitled to claim the benefit of N/N. 287/86-CE for the two products that, admittedly, are straight blends. However, the impugned order has extended benefit of N/N. 120/84-CE which is without any restriction or condition save that the products should be ‘blended or compounded lubricating oils and greases. Even if N/N. 287/86-CE claimed by assessee in the classification list is not extendable and has been denied in the order of original authority, the claim for duty-free clearances cannot be denied. Appeal dismissed - decided against Revenue.
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2017 (3) TMI 360
Benefit of N/N. 14/2002-CE dated 01.03.2002 - concessional rate of duty - Man made Processed Knitted Fabrics classifiable under Tariff sub Heading No. 6002.93 of Central Excise Tariff Act, 1985 - Held that: - similar issue came up before this Tribunal in the case of M/s Jarnail Government House [2016 (12) TMI 273 - CESTAT CHANDIGARH], where it was held that The appellant is not required to produce the evidence of payment of duty on Textile Fabrication - benefit of N/N. 14/2002-CE is available to the assessee - appeal dismissed - decided against Revenue.
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2017 (3) TMI 359
Valuation - enhancement of assessable value - Held that: - the assessable value has to be arrived at on the basis of the price which is actually paid and in a case the prices is not sole consideration or if the buyers and sellers are related persons then after establishing that the price is not sole consideration the transaction value can be rejected and taking the other evidences into consideration the assessable value can be arrived at. Such exercise has not been done in these cases on hand. Therefore, we reject the enhancement of assessable value in respect of the Bills of Entry which are involved in all the appeals being decided and we restore the assessable value as declared by the appellant in said Bills of Entry - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 358
Clandestine removal - Income surrendered before income tax Department - survey u/s 133-A of Income Tax Act, 1962 - The said income has been presumed by the Revenue that the same is profit of the manufacturing business of the appellant - Held that: - the income surrendered before the income tax department cannot be presumed as profit of manufactured goods without any cogent evidence that the said income is out of manufacturing activity of the assessee - As Revenue failed to discharge their onus to prove that the income surrendered before the income tax authorities is as profit of goods manufactured by the appellant with cogent evidence, the demand of duty is not sustainable - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 357
Clandestine removal - there was some shortage of the finished goods in the factory as compared to the production recorded in the RG-1 Register & 11 loose slips were retrieved - Held that: - the said 11 loose slips have not been established by Revenue to have been recovered from the record maintained at the manufacturing unit of the appellant as it was on the record that as per the statement dated 13/11/2002 of Shri Amit Kumar Jain, it was very clearly stated by him that the said 11 loose slips did not belong to them and were placed by Officers in the record - no evidence has been brought on record about the procurement of raw materials and the clearances of the finished goods and the purchasers to whom such goods were cleared and how the sale proceedings were recovered and accounted for - allegations in respect of evasion of Central Excise duty to the tune of ₹ 30,57,948/- on the basis of the said 11 loose slips and allegation of evasion of Central Excise duty of ₹ 26,49,514/- on the basis of the said 129 GRs is presumptive. Appeal allowed - decided in favor of appellant.
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2017 (3) TMI 356
CENVAT credit - Input services utilized towards construction of rest rooms and provision of amenities to railway personnel in the railway yard - denial on the ground that the yard was situate outside the factory premises and that the ultimate purpose of the same was for providing rest and relief to the employees - capital goods installed in the railway yard adjacent and attendant to the factory premises - denial on the ground that the goods were installed outside the factory premises; that railway yard separated by public roads was not the appellant's sole property; that railway yard was also used by other manufacturers in the vicinity - Held that: - No doubt, the railway yard was definitely used for handling coal which is essential to the manufacturing process, nonetheless as, the same is outside the factory premises, it cannot come within the ambit of eligible "capital goods" for the purpose of Rule 2 (1A) of Cenvat Credit Rules, 2004. The cenvat credit in respect of the railway siding and rest rooms/other fittings in the railway yard outside the factory cannot be availed since not falling within the ambit of the definition of "capital goods" - appeal dismissed - decided against appellant.
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2017 (3) TMI 355
CENVAT credit - Refund claim of the credit restored after reversal / restoration of disallowed credit - unjust enrichment - Held that: - CENVAT credit, and its utilisation, stands on different footing as this credit is a matter of right flowing from having paid duty or tax on goods or services procured for manufacture of goods or for rendering of services. Its avowed purpose of avoiding the cascading effects of taxation can be met only when it is passed on by utilising of such credit. Commercial exigency dictates that a lower price will stimulate a beneficial outcome for the seller and access to this credit enables that commercial objective. Hence credit, or re-credit, in the CENVAT account benefits the buyer and others in the chain and is, correspondingly, of no benefit to the seller. Accordingly, to even conceive that restoration of CENVAT credit is to be prevented as a matter of course is not in accordance with the fundamentals that motivated the incorporation of ‘value added’ in indirect taxation. It is only tax administrators who continue to hold fast to the hurdle of ‘unjust enrichment’ to deny rightful claims for restoration of CENVAT credit. Such obduracy is ill-founded. Appeal allowed - decided in favor of appellant.
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2017 (3) TMI 354
CENVAT credit - denial on the ground that invoices issued by service provider do not contain STP code of the service provider - Held that: - not only is the input service, namely, Banking and Other Financial Services for FOREX, an eligible “input service” for the purposes of Rule 2(l), also the availment of the said credit on the strength of computer generated service issued by the bank is very much in order - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 353
Job-work - N/N. 214/86-CE dated 25th March 1986 - use of granules in the manufacture - demand of duty on the ground that the assessee had not fulfilled the condition of the notification, namely, the supplier availing of credit u/r 57A gives an undertaking to the jurisdictional Assistant/Deputy Commissioner of the factory of job-worker that goods will be used in or in relation to manufacture of final products and produces evidence of such usage besides discharging duty on the finished products. Held that: - the appellant is in receipt of raw materials supplied under cover of challans issued by their principals and that the goods produced out of these have been received by principals. These goods have, after further processing, been cleared on payment of duty by the principals. We also do not find any allegation in the notice, or finding in the adjudication order, that this was not so. There has been substantive compliance of the procedure under the erstwhile Central Excise Rules, 1944 and the successor CENVAT Credit Rules - appeal allowed - decided in favor of assessee.
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2017 (3) TMI 352
CENVAT credit - Molasses - inputs - input services - capital goods - manufacture of rectified spirit - Held that: - the issue in the instant appeal is no more res-integra and is covered by the earlier decision passed by this Tribunal in the appellant’s own case M/s Bajaj Hindusthan Sugar Ltd. Versus Commissioner of Central Excise, Lucknow [2016 (8) TMI 386 - CESTAT ALLAHABAD], where the credit was allowed on similar issue - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 351
Refund claim - accumulated CENVAT credit availed on input services - clearances to 100% EOU - denial on the ground that the goods were cleared to EOU either under bond or under LUT and there was no physical export and hence, the assessee did not fulfill the requirement prescribed under Rule 5(1) - Held that: - The Hon le High court of Gujarat in the case of CCE Vs. NBM Industries [2011 (9) TMI 360 - GUJARAT HIGH COURT] has held that refund could not be denied on the ground that it was case of deemed export. Since the Apex Court as well as the High Courts have specifically held that deemed exports are equivalent to physical export and therefore keeping in view the precedents of the High Court and the Supreme Court, the clearances to an EOU is to be treated as export and refund of unutilized credit is allowed to the respondent-assessee - appeal dismissed - decided against appellant.
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2017 (3) TMI 350
Restoration of appeal - appeal was rejected being not maintainable at the threshold stage of admission itself as the appellant failed to fulfill the condition of pre-deposit by not filing the waiver application as is prescribed in this regard u/s 35F of the CEA - Held that: - considering that very small amount is involved in the present appeal, this case needs to be remanded back to the Commissioner with a direction to decide the appeal on merit without insisting for pre-deposit - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2017 (3) TMI 340
Seizure - penalty - vehicle was intercepted by the mobile squad, the details of purchaser and seller, who were situated in other States, were not found to be registered and their TIN number was found wrong at the website concerned - Held that: - the very transaction of sale is doubted for the reason that description of purchaser and seller does not match with the records, and the details furnished relates to some other person, this Court would not be justified in holding that proceedings for penalty cannot be initiated at all. The interest of the assessee can always be protected, but the interest of revenue has also to be safeguarded - this Court would not be justified in holding at this stage that no penalty proceedings can be initiated - revision disposed off.
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2017 (3) TMI 339
Applicability of compounded rate for works contract - KVAT - . The petitioner's contention is that the petitioner had applied for a compounding in the year 2015-16 but, had specifically not filed any application for the year 2016-17 and there was no compounding applied for that particular work, ie; the second contract obtained by the petitioner. - Held that: - From the time of introduction of the 4th proviso, necessarily there is a mandate to continue the compounding when applied for and allowed in an year; at least of that work commenced in the year. However, the proviso was introduced only after the commencement of the subject assessment year being 2016-17. The petitioner had not applied for a compounding in that year. The mere fact that the petitioner's work, which commenced in the previous year, had been compounded for that year would not require continuance under the scheme in the subsequent year, for reason of there being no provision available requiring such a continuance. It is pertinent that though the petitioner filed a quarterly return and not a monthly return, the petitioner did not show the tax payable under the compounded scheme, but however made a self assessment under the regular scheme itself. In such circumstance, the omission to file a monthly return can only be considered an inadvertent omission. Petition allowed - decided in favor of petitioner.
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2017 (3) TMI 338
Validity of assessment order - natural justice - notice for the assessment year 2009-10 was issued by the Excise and Taxation Officer, Sangrur to the petitioner under Section 29(2) of the Punjab Value Added Tax Act, 2005 for 9.3.2015. On 10.3.2015, the order was reserved, however, the petitioner was granted opportunity to give written submissions till 16.3.2015. The petitioner submitted written reply on 16.3.2015. On 20.3.2015, notice was issued to show cause as to why penal action be not taken under Section 56 of the VAT Act, which was issued for 26.3.2015. The notice was issued only under the VAT Act. No proceedings had taken place on 26.3.2015. As the assessment order had not been passed, the petitioner submitted his objections on 1.4.2015 and on the same day, vide separate letter filed reply to the penalty notice as well. There is no order sheet prepared for penalty proceedings. Held that: - the assessment orders deserve to be set aside merely on the ground of violation of principles of natural justice. The matter was not dealt with properly. It was quite in haste towards the end. The assessment proceedings may have started earlier but the assessment was put on fast track after this Court directed the authorities to decide the claim of the petitioner for refund of the tax for the previous years. It is well settled that a quasi-judicial authority, while acting in exercise of its statutory power must act fairly with an open mind. Justice is rooted in confidence and justice is the goal of a quasi-judicial proceeding also. If the functioning of a quasi-judicial authority has to inspire confidence in the minds of those subjected to its jurisdiction, such authority must act with utmost fairness. The orders of assessments having been passed in haste without observing the principles of natural justice, deserve to be set aside - petition allowed - decided in favor of petitioner.
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Indian Laws
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2017 (3) TMI 336
Complaint case under Section 138 NI Act - effect of settlement - Held that:- Once the parties have settled their disputes and have arrived a settlement, the same should be given effect in entirety and should be treated as a solemn settlement. Mr. Rakesh Kapoor who is present in Court, states that he cannot return back the money. Thus the respondent No.2 having taken the benefit of the settlement, the other terms of the settlement, arrived at between the parties, are also required to be complied with. Since one of the terms of the settlement arrived at between the parties i.e. clause 7 notes that there was no criminal or civil cases instituted by Rakesh Kapoor pending before any Court and if any such case is brought to the notice of Rakesh Kapoor, the same shall be withdrawn by making an appropriate application before the concerned court and that on the same set of allegations for which the above noted FIR was registered and a complaint case under Section 138 NI Act is filed, the charge sheet has been filed, the same is liable to be quashed in view of the settlement arrived at between the parties and the respondent No.2 having taken the benefit of the settlement. Consequently, FIR No. 1111/1998 under Sections 420/467/468/471 IPC registered at PS Kalkaji, Delhi and the proceedings pursuant thereto are hereby quashed.
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2017 (3) TMI 335
Mesne profit tendered to the respondents/plaintiffs - whether the said amount had been tendered without prejudice to the rights of the appellants/defendants to file/pursue the present appeal? - Held that: - appellants/defendants states that he has obtained instructions from the department and filed copies of the orders passed in Ex.No. 125045/2016 which reveal that the decretal amount was tendered by an officer of the appellants/defendants to the authorised representative of the respondents/plaintiffs on 18.11.2016 in the execution petition which was disposed of. At the time of tendering the decretal amount, the appellants/defendants did not reserve their right to pursue the present appeal that was filed on 27.10.2016, but remained under objections and was re-filed on six occasions, only to be listed before the Court on 19.12.2016. By the said date, the decretal amount had already been paid to the respondents/plaintiffs - appeal dismissed.
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