Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 11, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Customs
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26/2015 - dated
9-4-2015
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Cus
Seeks to further amend Notification No 39/96- Customs, dated the 23rd July, 1996
Income Tax
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123/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – CORRIGENDUM - Notification No. S.O. 92(E) dated 6th January, 2015
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122/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –The Association of People with Disability, Bangalore
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121/2015 - dated
11-2-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – Purkal Stree Shakti Samiti, Uttarakhand
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Rollover of close-ended schemes - units of Mutual Funds under the Fixed Maturity Plans on extension of their term - no capital gains will arise at the time of exercise of the option by the investor to continue in the same scheme.
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Capitation fee received by trust - it cannot be held that for all the assessment years the assessee received capitation fee for admission of students in the management quota. This is a perverse inference. No endeavour is made to sustain the allegation of involuntary donation - HC
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Re-opening of assessments u/s 147 - beyond four years but within six years - There is no warrant to extend the period by two years, again as provided under Section 153, since on facts it cannot be said that the grant of exemption was in the absence of full and true disclosure by the assessee - HC
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Applicability of provision of Section 40A(3) - purchase of fish in cash from the fishermen or the headman of the fisher - no disallowance even if any portion in a sum exceeding twenty thousand rupees is made to a person in a day - HC
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Profit arising from sale of land - as the land sold is not only agricultural in nature but is also situated beyond 12 kms from the limit of a municipality notified by the central govt. - land sold by assessee not being a capital asset, the gain derived there from is not taxable at the hands of the assessee - AT
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TDS liability on Interest - disallowance u/s 40(a)(ia) - if the amount more than ₹ 10,000/- is credited as an interest on time deposits, then the urban cooperative Bank is liable to deduct the TDS as is laid down in the said provisions of section 194A - AT
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Undisclosed income on the basis of client code modification - when during the course of assessment proceedings the assessee has given the proper explanation for investment in various properties, the addition cannot be made on the basis of statement made at odd hours. - AT
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Exemption u/s. 11 - the payments made to the trustees - When the Trust is availing the services of these trustees and on account of the services rendered by them, there is a substantial growth in the Trust and its activities, when the payments are made for such services rendered, it cannot be said that it contravenes Section 13(1)(c) - HC
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Contingent liability - the warranty stood attached to the sale price of the product. It was held that warranty provisions had to be recognized because the assessee therein had a present obligation as a result of past events resulting in an outflow of resources and a reliable estimate could be made of the amount of the obligation. - deduction allowed - HC
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Recovery of tax due from the directors - no finding that the tax due cannot be recovered from the company - no liability could be fixed on the Directors under S. 179 of the Act to pay the tax due - HC
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Taxability of compensation - The dominant consideration for compensation being surrendering the right to sue; its neither in lieu of surrender of any agency or agreement for non competition - receipt is in the nature of capital receipt not taxable - AT
Customs
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4% SAD refund claim – CBEC allows filing of refund claim at each Customs stations where imports are made instead of single application per Commissionerate.
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Demand of duty on confiscated goods - option to redeem the goods in lieu of confiscation - Scope of Sections 124 and 125 - when in the Show Cause Notice issued under Section 124, nothing was stated about the payment of import duty, there could not have been direction to that effect in the final order - SC
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Classification of goods - toys, viz., Talking Parrot - bona fide belief - penalty, as imposed on the appellant/assessee is not justified in the facts of the present case - HC
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Illegal export of antique statue - Commission of offences punishable under Section 132 & 135 (i) (a) - Section 25 of the Antiquities Act clearly creates a bar with regard to the prosecution under the Customs Act. - HC
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Penalty u/s 114 - In the case of loading of container on the vessel and sailing of vessel without obtaining 'Let Export Order', the shipping line alone can be held liable for penalty and not the exporter. - AT
Service Tax
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CENVAT Credit - input services - appellant is eligible for credit on gardening and house-keeping services - AT
Central Excise
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Valuation - normal price - Related person / party - That Shaw Wallace and Detergents India Limited are “related persons” is made out by their holding/subsidiary relationship. However, from this, it does not follow that there is any arrangement of tax avoidance or tax evasion on the facts of this case - SC
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Valuation - normal price - Related person / party - wholesale purchaser - the single most relevant fact, namely, that Shaw Wallace paid for the same/similar goods to unrelated suppliers at a price lower than the price paid by Shaw Wallace to DIL, has not been adverted to at all by the Commissioner - SC
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Classification of Holograms and Holographic films - merely because a particular embossed hologram is self adhesive, therefore in all cases, it will attract entry 39 is not correct. - What is to be seen is whether the self adhesive part of the product is of primary use or the printed matter is of primary use - SC
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Classification of Holograms and Holographic films - CESTAT arrives at the exactly opposite result without telling us why. Secondly, we are again left guessing as to how the self adhesive aspect of the product is more important than the security aspect of the said product. - SC
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Manufacture - packing combination of mixture of raw rice, dehydrated vegetables and spices in the name of 'Rice and Spice' - Activity undertaken by the assessee does not amount to manufacture - Not liable to duty of excise - SC
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Valuation - Scope of the term Manufacturer - Job worker - Manufacture of medicaments - Once it has been determined that the job workers are the manufacturers, the assessable value of the goods would be a sum total of cost of raw material, labour charges and profit of the job workers - SC
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100% EOU - DTA clearance - Valuation of goods Rule 4 or under Rule 7 of the Customs Valuation Rules, 1988 - if Rule 4 is not applicable, the valuation of the goods has to be arrived at by applying Rules 5 and 8 in sequential order. - SC
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SSI Exemption - Once in respect of those goods where brand name of other party is used on manufactured goods and that other party is not a SSI unit, exemption is not available, it would lead to inevitable result that the value of such goods cannot be added as well, while considering the value of the goods cleared by the assessee in the previous year - SC
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Denial of refund claim - Bar of limitation - duty paid under protest - Protest refers only to a manufacturer and therefore, a person like the appellant, who was only a purchaser could not have made any protest - SC
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Valuation of goods - Applicability of Rule 8 on Job work - Rule 8 and Rule 9 are not applicable - Once Rule 8 is not applicable in the case of the respondent, it is Rule 11 only which becomes applicable - SC
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Valuation of goods - Inclusion of sales tax amount - amount of 75% was retained by the assessee - this component of sales tax which was retained by the assessee after 1.7.2000 shall be includible in arriving at the transaction value - SC
VAT
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Cancellation of registration - without any discussion on material on record, even in an exparte proceeding, the Commissioner could not have jumped to the conclusion that the petitioner had indulged in bogus billing activities leading to revenue loss - HC
Case Laws:
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Income Tax
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2015 (4) TMI 342
Capitation fee received by trust - Tribunal not considering that the capitation fee received by the assessee trust is a revenue receipt liable for taxation - Tribunal not considering that the trust was receiving capitation fee for admission of students under management quota, as it would clearly prove that it was not doing any charitable activities as per Section 2(15) of the Act - Held that:- The assessee/Trust is running about eight educational institutions. The Tribunal, based on the various documents filed by the assessee, (i.e.), the permission by the Deputy Director of Public Health, Government of Puducherry to utilize the facilities of the Government Hospitals; the constitution of Permanent Admission Committee under the Chairmanship of Hon'ble Justice A.Ramamurthy (Retd.), etc., rendered a categoric finding on fact that the assessee is running a number of educational institutions recognized by law and its charitable activities by way of education are bona fide. The department has not produced any evidence to rebut the said finding rendered by the Tribunal. Therefore, we do not find any reason to upset the said finding. As rightly held by the Tribunal, if the Assessing Officer had any doubt about the receipt of capitation fee or the explanation given, he should have conducted enquiry either with the students or with their parents or with any other person interested in the activities carried on by the assessee trust. But, without doing so, the Assessing Officer estimated the collection of contributions on the basis of the number of seats available under management quota multiplied by the amount of contribution attributable to individual seats. Any determination for purpose of tax cannot be based on hypothetical facts or conjectures or surmises. The inference drawn by the Original Authority is based on probability. In our considered opinion, based on the loose sheets and cash seized, which have been held as irrelevant to the present issue, it cannot be held that for all the assessment years the assessee received capitation fee for admission of students in the management quota. This is a perverse inference. No endeavour is made to sustain the allegation of involuntary donation. In any event, as rightly held by the Tribunal, it is not relevant in the present case as the allegation is violation of Section 13 r/w Section 11 of the Act. Having invoked Section 13, the mainstay of the case of the department should be based on the activities of the trust to plead that the same are not in consonance with Section 13 of the Act and, therefore, exemption under Section 11 of the Act should be denied, which we find is abysmally silent in the show cause notice and the assessment order. There appears to be no second opinion on this finding because the scope of Sections 11, 12 and 13, as we find is in relation to application of income and the utilization thereon for charitable purpose, as defined under Section 2(15). There is not even an iota of material to come to a conclusion to a different conclusion than what has been held by the CIT (Appeals) and the Tribunal. We find that the department has not made out a case of collection of capitation fee under the guise of donation and it has not established a case of involuntary nature of donations. - Decided in favour of assessee. Capitation fees received from students who were admitted in the management quota - ITAT deleted the addition - Held that:- That apart, for the assessment years 2002-2003 and 2003-2004 as Chief Commissioner of Income Tax-VI, Chennai, having jurisdiction over the case has notified this under Section 10(23C)(vi) of the Act that there is no applicability of section 11 or 13 in those two years. The department has not produced any evidence of breach of Section 10(23C)(vi) of the Act and, therefore, the respondent/Trust will be entitled to the benefit of exemption contained therein. In the present case, we find that the department had proceeded on a wrong premise without any basic materials to establish a case of violation of Section 13 of the Act. Therefore, in our considered opinion, the Tribunal was right in deleting the addition. - Decided in favour of assessee. Non following the jurisdictional High Court judgment in the case of P.S.Govindasamy Naidu & Sons v. ACIT, [2007 (10) TMI 382 - MADRAS HIGH COURT] by ITAT but relied on by revenue, as distinguishable on facts. In the said decision, it has been clearly held that the examination of parents and students of the college found that amounts paid were not corpus donation, but capitation fee. Therefore, the reasoning given in the said decision does not apply to the facts of the present case, as the Assessing Officer has not chosen to conduct any enquiry from any student or parent with regard to the donations. Decided in favour of the assessee. Whether the department has established a case of violation of Section 13(1)(d) of the Act as against the respondent/assessee? - Held that:- The very basis of the plea of the Revenue regarding violation of Section 13(1)(d) of the Act is that a sum of ₹ 44 Lakhs was found and seized in the course of the search from the residence of the Chairman of the assessee Trust. With regard to the said seizure, the Assessing Officer has accepted the disclosure of the seized cash as the income of the individual and, therefore, in our considered opinion, it cannot be said that assessee trust has violated the provisions of Section 13(1)(d) of the Act. In any event, from the show cause notice and the order of the Assessing Officer, we find that none of the ingredients of Section 13 is attracted to the facts of the present case. - Decided in favour of the assessee.
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2015 (4) TMI 341
Re-opening of assessments - proceedings under Section 147 initiated to reassess escaped income, beyond four years but within six years - assessee's failure to "fully and truly disclose all material facts" - whether the exemption claimed under Section 10A was applicable to the Company? - Held that:- The assessee having claimed such exemption on the first assessment year after incorporation and commencement of business, necessarily the constitution of the assessee Company is the most relevant factor in deciding the claim of exemption. The BCA between the holding Company and the assessee Company is the essential document which discloses the factum of commencement of business. De hors that, for the assessment year 2003-04, it has been unequivocally established that the BCA was before the Assessing Officer even before completion of the assessment. The production of the said document, as is evident from Exhibit P13, is pursuant to a hearing held on 19.12.2005. The Revenue does not dispute the factum of the BCA being available in the files before the assessment was completed for the assessment year 2003-04 and the subsequent years beginning from assessment year 2004-05. Hence, there could be no contention raised as to there being no full and true disclosure of material facts. If essential and basic documents which are to be necessarily examined before grant of exemption, if not gone into, then it is the default of the officer and not the assessee as held in Calcutta Discount Co. Ltd. (1960 (11) TMI 8 - SUPREME Court). Further, as held by the Hon'ble Supreme Court, here too the grant of exemption, is an inferential conclusion of the Assessing Officer and it cannot be said that the assessee while claiming exemption under Section 10A should have, in the same breath, pointed out that they are not entitled to it. This Court would not look into the question of whether there is a change of opinion or not, since the assessment of a subsequent year, which was challenged on the ground of exemption being disallowed, assailed as a mere change of opinion, has been declined consideration under Article 226 and the assessee relegated to the statutory remedy. This Court, hence, would not refer to the decisions on that aspect too. Any observation made on that count in this judgment is in the nature of a prima facie one; not binding on the statutory authorities who are to first consider that aspect. Going by the binding precedents with respect to full and true disclosure of material facts, this Court is of the opinion that no proceedings could be initiated under Section 147 of the IT Act. The impugned orders in the respective writ petitions would stand set aside, for the proceedings are hit by limitation; - having been initiated beyond four years - as provided under Section 153 of the Act. There is no warrant to extend the period by two years, again as provided under Section 153, since on facts it cannot be said that the grant of exemption, at least from the assessment year 2003-04, was in the absence of full and true disclosure by the assessee. - Decided in favour of assessee.
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2015 (4) TMI 340
Entitlement to deduction under Section 80-IA - Held that:- The business undertaking of the assessee is wind mill power generation/hosiery goods, etc., and it has claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment year in question and for the subsequent years as well. Having exercised its option and its losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. There appears to be no distinction on facts in relation to the decision reported in Velayudhaswamy Spinning Mills case (2010 (3) TMI 860 - Madras High Court). - Decided in favour of the assessee
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2015 (4) TMI 339
Interest received on income - whether would fall under the head 'Business Income' or 'Income from other sources' ? - whether ITAT was right in law in not deciding the issue on merits in respect of the interest income by remitting back the issue to the file of the Assessing Officer? - Held that:- A cursory glance at the order of assessment as also the order of the CIT (Appeals) reveals that the Assessing Officer has taken a view that the interest earned from money lending business is 'income from other sources', whereas the CIT (Appeals) has taken it under the head 'Business Income'. Both the authorities, as is evident from their orders, have given their finding for treating the said income under the relevant heads. However, the Tribunal has lost sight of the said findings recorded by the authorities below, and in its order has stated that no finding has been rendered on this issue on facts by the authorities below, which is factually incorrect. In such view of the matter, this Court is not inclined to decide the issue at this point of time on the questions of law raised above, since we find that the Tribunal had failed to go into the relevant portion of the orders of the Assessing Officer and CIT (Appeals) and come to a definite finding as to which view, i.e., whether the view of the Assessing Officer or the view of the CIT (Appeals), in regard to bringing the interest income earned from money lending business under appropriate head, is right on the facts of the present case. Thus the Tribunal has not decided the issue on facts and, therefore, no question of law arises for this Court to consider at this juncture. Accordingly, this Court remands the matter back to the Tribunal to decide the issue afresh on the basis of the materials available on record. - Decided in favour of assessee by way of remand.
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2015 (4) TMI 338
Unaccounted share capital received from six applicants - Held that:- It is not sufficient that the identity of the share applicant or the creditor should be established for the assessee to discharge the initial onus, which is upon the assessee. Under the requirement of Section 68, the assessee has to further satisfy the Revenue as to the genuineness of the transaction and the creditworthiness of the share applicant or the individual who is advancing amounts. The assessee’s reliance upon the CIT (Appeals) order to contend that the sources of the funds were in essence as Directors, is in this context of no avail. The assessee has contended that it was incorporated just before the end of the financial year. However, the assessee had to necessarily show that the amount which it indicated as borrowed from the six applicants in fact belonged to them. It is not sufficient for the assessee to just raise such contentions on the basis of certain observations of the CIT (Appeals) in this regard. The creditworthiness of the share applicants had to be seen in the context of the assertion made by them or the materials presented before the AO at the relevant time. The materials on record disclosed that some information from at least two individuals indicated that the money had not been given by them. In view of the fact that concurrently the lower authorities held against the assessee and given the intensive factual nature of the evidence, no substantial question of law arises. - Decided against assessee.
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2015 (4) TMI 337
Deduction u/s 80HHC on counter sales to foreign tourists in the showroom against the convertible foreign exchange in India - whether ITAT as well as the CIT(A) was justified in allowing the deduction u/s 80 HHC when there is no finding to the effect that the goods were cleared at any of the custom station? - Held that:- Apex Court in CIT vs. Silver & Arts Palace [2002 (12) TMI 12 - SUPREME Court] has held that the counter sale to the foreign tourists against convertible foreign exchange in India, is eligible for deduction under section 80HHC of the Income Tax Act. The Apex Court has also approved the decision of the Allahabad High Court in the case of Ram Babu & sons vs. Union of India [1996 (5) TMI 61 - ALLAHABAD High Court]. In the present case the assessee had produced the Sale To Foreign Tourists Voucher, which not only recorded the name and address of the customer (tourist), but also his/her passport number and the declaration given by him that the goods will not be gifted or sold in India. The goods sold at counter at the shop/emporium were sold to be taken out of the country, which necessarily involved clearance of baggage, by the customs authorites. There was no further proof, nor any document in proof of clearance of the goods at the Customs Station by the assessee is required. The declaration in the form of Sale To Foreign Tourist Voucher, for sale made against the convertible foreign exchange with the undertaking that the goods will not be gifted or sold in India, was sufficient proof for export out of India. Unless anything contrary was alleged and proved by the department, it was not necessary for the assessee to have produced the documents of clearance of goods sold by him to the foreign tourists at any Customs Station. The Explanation (aa) is not a rule of evidence, nor raises any presumption. It also does not require any proof of clearance at any Customs Station. The explanation is couched in double negative. It is a rule of exclusion and excludes only those transactions, which do not involve clearance at any Customs Station. It cannot be read in a manner, as suggested by learned counsel appearing for the department that a proof of customs clearance of baggage must be provided to establish the export of goods out of India for the purpose of deduction of profits on such sales under section 80HHC of the Income Tax Act. - Decided in favour of assessee.
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2015 (4) TMI 336
Applicability of provision of Section 40A(3) - purchase of fish in cash - Whether the Tribunal was justified in setting aside the order of the Appellate Tribunal which had disallowed 20% of the total purchases of fish on the ground that the entire purchases are made by cash contrary to sub-section (3) of Section 40A, when the payment of entire consideration by cash was not in dispute? - Held that:- The material on record discloses that the assessee procures fish from sea shore bordering Goa to Kochi and has been able to make export turn over of more than ₹ 10 crores. The 'producers' of 'fish or fish products' for the purpose of rule 6DD(e) of the Rules would include, besides the fishermen, any headman of fishermen, who sorts the catch of fish brought by fishermen from the sea, at the sea shore itself and then sells the fish or fish products to traders, exporters etc. It is only when fish is purchased from a trader; broker or any other middleman, the benefit of the aforesaid provision is not available. The assessee is a trader/exporter of fish. The assessee has purchased the fish from the fishermen or the headman of the fisher and once the purchase is made of fish from the aforesaid persons, no disallowance under sub-section (5) shall be made, even if any portion in a sum exceeding twenty thousand rupees is made to a person in a day, otherwise than by a crossed cheque drawn on a bank or an crossed bank draft in the cases of bank draft. Therefore, the order passed by the Tribunal holding that Section 40A(3) is not attracted to the facts of this case, is proper and cannot be found fault with. - Decided in favour of the assessee.
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2015 (4) TMI 335
Entitlement to benefits of exemption u/s. 11/12 - the assessee trust is controlled by two families and entire income and benefits are passed over to the said families - Tribunal wconfirming the deletion of addition on account of donation given for charitable activities despite of the fact that the assessee is not entitled for any exemption/ deduction and treating the construction expenses of ₹ 566627/- as revenue expenditure - Held that:- All the authorities have recorded concurrent findings of fact that the respondent-Trust stands registered under Section 12A of the Act, vide order dated 25.03.1976, which is still valid. It is not denied that the certificate under Section 12A, is still valid. The details of the expenses incurred on charitable activities, were filed along with the returns. We have gone through these details, which include expenditure of major part of donation on religious and other charitable purposes on 27 items. The amount spent on free food distributed in Rain Baseras in evening at ₹ 17,75,289.53, Prasad distribution on various functions, donation provided to the SMS Hospital for maintenance of Polytroma ward at ₹ 4,13,819/-, and other activities, clearly fall within the meaning of charitable purposes under Section 2(15) of the Act. Thus the findings recorded by the Income Tax Authorities that so long the registration under Section 12A of the Act is valid and the income is found to have been spent for charitable purposes, such income has to be excluded from the total income of the previous year, does not raise any substantial question of law for consideration in this appeal. - Decided against Revenue.
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2015 (4) TMI 334
Computation of capital gain - whether date of indexation must be reckoned as the date on which the final agreement was registered and not the date on which the flat was promised to be handed over to the Assessee? - Held that:- There is no dispute about the facts. The Tribunal found that the flat was agreed to be sold to the present Assessee in the year 1994 and a letter in that behalf was addressed and handed over. The formalities of transfer and handing over of physical possession were postponed to the date of final payment. That was because the agreed price of ₹ 94,40,000/- was not paid in one go or at the time of the allotment letter. A substantial payment was made between 1994-95. Once the last payment alone and which was in the sum of ₹ 9 lacs and odd was made that the document was executed, registered and possession was handed over. Therefore, in the given facts, the Tribunal found that when major payments have been made up to the financial year 1994-95 and only a small sum remained to be paid, which was paid later on, then, the date of indexation should be 24th February, 1994 and not what the Revenue determined in this case. That the Assessee later on sold his flat and that transaction resulted in a loss that while working out that loss this indexation from 1994 was claimed. That was denied and on the above ground but which the Commissioner and the Tribunal have not found to be tenable. No substantial question of law - Decided against revenue.
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2015 (4) TMI 333
Receipt in alleged repayment of the dues of the assessee and a receipt of sale of shares both in cash - ITAT deleted the addition - Held that:- The judgement of the Assessing Officer and the CIT(A) disclose in no uncertain terms that the evidence including steps which the assessee could have taken were not resorted to. Therefore, the Assessing Officer was entitled in law to draw an adverse inference which is authorized by Section 114(g) of the Evidence Act which permits a presumption as follows: “That evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it;” For the reasons aforesaid, we are of the opinion that the judgement under challenge cannot be sustained and, therefore, judgement of the Tribunal is set aside. The judgement of the CIT(A) that AO has rightly held that There is no material on record to show that cash of ₹ 21,55,950/- was received on sale of share. Similarly, there is no evidence on record to show that cash of ₹ 10,61,834/- was received from M/s. M L Dhingra & Associates. Confirmation from the said party was not filed before the AO is restored. - Decided against assessee.
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2015 (4) TMI 332
Addition on account of technical fee - whether is capital expenditure? - Held that:- Considering the material on record, especially the terms of the technical know-how agreement such as Article 14.3, 17, 17.1, 18, 18.2 and 22. The exercise of determining whether, regardless of nomenclature, any expenditure is in the revenue or the capital stream cannot be stereo typed into any formula. As noticed in Alembic Chemicals Work Co. Ltd. vs. CIT (1989 (3) TMI 5 - SUPREME Court) The exercise, therefore, is necessarily fact dependant. In the present case, based upon the terms and conditions which the parties agreed upon, the ITAT held that the payment of USD 3 lakhs could not be treated as capital expenditure. This Court finds no infirmity with that finding or any reason to interfere with the Tribunal’s decision. No substantial question of law arises under Section - Decided against revenue.
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2015 (4) TMI 331
Profit arising from sale of land - business income v/s short term capital gains - same was claimed to be exempt on the ground that the land sold, being an agricultural land, was not a capital asset under S.2(14) of the Act - Held that:- In the instant case, at the relevant point of sale of the land in question, the surrounding area was totally undeveloped and except mere future possibility to put the land into use for non-agricultural purposes would not change the character of the agricultural land into nonagricultural land at the relevant point of time when the land was sold by the assessee. It is also an admitted position that the assessee had not applied for conversion of the land in question into non-agricultural purposes and no such permissions were obtained from the concerned authority. In the Revenue records, the land is classified as agricultural land and has not been changed from agricultural land to nonagricultural land at the relevant point of time when the land was sold by the assessee. It is also not in dispute that there was no activity undertaken by the assessee of developing the land by plotting and providing roads and other facilities and there was no intention also on the part of the assessees herein to put the same for non-agricultural purposes at time of their ownership that land. No such finding has been given by the Department. No material or evidence in support of the fact that the assessees have put the land in use for nonagricultural purposes has been brought on record. The nature of the crop and the person who cultivated the land are duly mentioned in the revenue records shows that at the relevant point of time the land was used for agricultural purposes only and nothing is brought on record to show that the land was put in use for non agricultural purposes by the assessees. In view of the decision of the Hon’ble High Court in the case of Gopal C. Sharma vs. CIT [1993 (10) TMI 41 - BOMBAY High Court] it is also clear that the profit motive of the assessee in selling the land without anything more by itself can never be decisive to say that the assessee used the land for non-agricultural purposes. We may also refer to a decision of the Hon’ble Supreme Court in the case of N. Srinivasa Rao vs. Special Court (2006 (3) TMI 727 - SUPREME COURT) where it was observed that the fact that agricultural land in question is included in urban area without more, held not enough to conclude that the user of the same had been altered with passage of time. Thus, the fact that the land in question in the instant case is bought by Developer cannot be a determining factor by itself to say that the land was converted into use for non-agricultural purposes. - as the land sold is not only agricultural in nature but is also situated beyond 12 kms from the limit of a municipality notified by the central govt. Hence, land sold by assessee not being a capital asset, the gain derived there from is not taxable at the hands of the assessee. See Bhavya Commissioner Constructions Pvt. Ltd. case [2014 (9) TMI 85 - ITAT HYDERABAD] - Decided in favour of assessee.
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2015 (4) TMI 330
Revision u/s 263 - three issues were taken up by the CIT, while revising the order of the AO determination of capital gains, computation of income from House Property and treatment of proportionate License fee written off - Held that:- The CIT has not only mentioned as to how the order were erroneous, but has also established, by giving convincing reasons, that it was prejudicial to interest of revenue. Thus, the twin conditions were satisfied. Reasons recorded by the CIT clearly show that capital gain was not determined as per the provisions of the Act and thus the order was erroneous and prejudicial to the interest of revenue. Similarly, he proved that other two issues were erroneous and adversely affected the interest of revenue. In case of writing off of proportionate license fee the CIT came across about eight agreements that were not considered by the AO and same had bearing on taxability of the assessee. Clearly, the CIT after considering the available material reached to certain conclusions .It is not a case where two views were possible and the AO had taken one of the possible views. It is also not a case where the CIT has not recorded reasons or has not given a finding that the order of the AO was liable to revisionary provisions on both counts i.e.it was not sustainable legally and it was prejudicial to the interest of revenue. He successfully established that there was non-application of mind as well as non examination of the details by the AO while framing assessment. In short, on the touch stone of the principles enumerated at paragraph no.9 of our order, the revisionary order passed by the CIT succeeds and hence we are of the opinion that it does not need any interference from us. - Decided against the assessee.
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2015 (4) TMI 329
TDS liability on Interest - disallowance u/s 40(a)(ia) - Exemption on interest paid on deposit to members u/s 194A(3)(v) denied - assessee is a cooperative society engaged in carrying on the business of banking - Held that:- if the amount more than ₹ 10,000/- is credited as an interest on time deposits, then the urban cooperative Bank is liable to deduct the TDS as is laid down in the said provisions of section 194A and that urban co-operative Bank is not liable to deduct TDS if the interest accrued on time deposits is less than ₹ 10,000/-. Therefore, we reverse the finding of Ld. CIT(A) and restore this issue back to the file of Assessing Officer to verify this fact as per the decision of Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages P. Ltd. (2007 (8) TMI 12 - SUPREME COURT OF INDIA) and also the decision of CIT Vs. Eli Lilly & Co. [2009 (3) TMI 33 - SUPREME COURT] whether payee has paid tax on the interest income received from the assessee society and shown the same in his income tax return. - matter remanded back.
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2015 (4) TMI 328
Undisclosed income on the basis of client code modification - CIT(A) deleted the addition - Held that:- The total number of trade transactions is 38.58 lacs and the client code modification is only 36,161. Therefore, the client code modification is less than 1% of the total trading transactions. As per circular of Commodity Exchange, client code modification upto 1% is quite normal and is permitted without any penalty. That the Assessing Officer has not given any reason on what basis he presumed the client code modifications to be unusually high. In the light of the MCX circular, we are of the opinion that the client code modification was quite nominal and not unusually high as alleged by the Assessing Officer. All transactions at the Commodities Exchanges have been duly accounted in the books of account maintained by the concerned parties. When the transaction has been duly accounted for and the profit/loss has accrued to the concerned parties in whose names transactions have been closed, there cannot be any basis or justification for considering those profit/loss in the case of the assessee on the basis of mere presumption or suspicion. It is not the case of the Revenue that such alleged profit has actually been received by the assessee. In view of the totality of the above facts, we do not find any justification to interfere with the order of the CIT(A) in this regard and the same is sustained - Decided against revenue. Disclosure made by the appellant cannot be assumed to be voluntary and based on seized documents as held by CIT(A) - Held that:No defects or discrepancies in any of the seized documents have been pointed out by the Assessing Officer in the assessment order or by the ld. DR at the time of hearing before us. During the course of search also the officer recording the statement of Shri Nayan Thakkar has not specified any discrepancy or defect in any of the seized documents but made a general statement that there were defects and discrepancies in the various documents seized from the assessee’s premises. Such assertion by the authorize officer is found to be factually incorrect. In the affidavit of Shri Nayan Thakkar furnished before the Assessing Officer these facts have been clarified. He stated that after getting the photocopy of the seized documents and their verification with reference to the books of accounts, since no discrepancy was noticed, no undisclosed income was offered in the Return of Income. If there was any discrepancy or defect in the assessee’s books of accounts or the seized documents indicating any undisclosed income, the Assessing Officer ought to have mentioned the same in the assessment order. In the case of Kailashben Manharlal Chokshi (2008 (9) TMI 525 - GUJARAT HIGH COURT), the Hon’ble Jurisdictional High Court has noticed that when during the course of assessment proceedings the assessee has given the proper explanation for investment in various properties, the addition cannot be made on the basis of statement made at odd hours. Thus we find that the officer recording the statement of Shri Nayan Thakkar has mentioned that various defects and discrepancies have been observed from the papers and documents seized from the assessee’s premises. However, any defects or discrepancies were not specified. In view of the above, we are of the opinion that on the facts of the assessee’s case uphold the order of the CIT(A) - Decided against revenue.
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2015 (4) TMI 327
Entitlement to exemption u/s. 11 denied - the payments made to the trustees Mr. K.R.Lakshmeesh of ₹ 9,10,000/-, to Dr. Sabita Ramamurthy of ₹ 8,41,950/- and Mr. K.R.Jayadeep of ₹ 1,75,000/- was in violation of Section 13(1)(c) - Held that:- The payments of the aforesaid amounts to the trustees, out of the Trust amount, is not in dispute. The Tribunal has clearly set out the services rendered by these trustees for the Trust and thereafter it has come to the conclusion that the said amount paid, are reasonable and not excessive. When the Trust is availing the services of these trustees and on account of the services rendered by them, there is a substantial growth in the Trust and its activities, when the payments are made for such services rendered, it cannot be said that it contravenes Section 13(1)(c) of the Act. Consequently there is no justification for denying the benefit under Section 11 of the Act. - Decided in favour of assessee.
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2015 (4) TMI 326
Addition made under the head provision made on account of warranty which is in the nature of contingent liability - ITAT deleted the addition - Held that:- The issue involved in this appeal is already concluded by a judgment in the case of Rotork Controls India Pvt. Ltd. v. Commissioner of Income Tax, [2009 (5) TMI 16 - SUPREME COURT OF INDIA] wherein the assessee was engaged in the business of manufacture of valve actuators, which were sophisticated goods. The statistical data indicated that every year some of these were found defective. The valve actuator, being a sophisticated item, no customer was prepared to buy it without a warranty. Therefore, the warranty became an integral part of the sale price. In other words, the warranty stood attached to the sale price of the product. It was held that warranty provisions had to be recognized because the assessee therein had a present obligation as a result of past events resulting in an outflow of resources and a reliable estimate could be made of the amount of the obligation. Therefore, the assessee therein had incurred a liability during the assessment year which was entitled to deduction u/s.37 of the Income-tax Act, 1961. - Decided against revenue.
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2015 (4) TMI 325
Recovery of tax due from the directors - no finding that the tax due cannot be recovered from the company - Held that:- S. 179 of the Act imposes a personal liability on the Directors of a Private Company in respect of the Tax due from the company in the circumstances referred to therein. As could be seen from the impugned orders, nowhere respondent No.3 has referred to any of the proceedings initiated against the company to show that it is not possible to recover the tax due from the company. In the absence of such a finding, no liability could be fixed on the Directors under S. 179 of the Act to pay the tax due. Hence, the impugned orders and the consequent demand notices are liable to be set aside and are accordingly set aside. The matter is remitted to respondent No.3 for reconsideration in accordance with law after affording an opportunity of hearing to the petitioners. - Decided in favour of assessee.
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2015 (4) TMI 324
Revision u/s 263 - currency Swap Loss on account of hedging of Rupee loan with Dollar loan through OTC contracts with Banks was speculative in nature [not excluded as per clause (d) to section 43(5) and was not allowable against income from non-speculative business - Held that:- Currency swap loss of ₹ 6.04 Crores was directly covered in favour of assessee by the decision of the jurisdictional High court in the case of CIT v. Friends and Friends Shipping Pvt. Ltd [ 2013 (5) TMI 458 - GUJARAT HIGH COURT], wherein assessee had entered into forward contracts with banks to hedge against any loss arising to fluctuation in foreign currency. In some cases, export could not be executed and assessee had to pay certain charges to banks. Assessee treated said charges as business loss and claimed deduction. However, Assessing Officer disallowed said loss holding it to be speculative in nature. Matter travelled up to Hon’ble High Court, wherein it was held that foreign exchange contracts as incidental to assessee’s export business and incurred loss in said contracts, said loss was not in nature of speculative loss but same was allowed as business loss. Thus, matter was decided in favour of assessee. In such situation, order passed by Assessing Officer cannot be said to be erroneous so as to be prejudicial to the interest of revenue. In response to query raised by Bench whether currency loss of ₹ 6.04 Crores consists of all the losses or any profit earned in this currency swap agreements. The Learned Authorized Representative drew our attention to pages 29 and 30 of the compilation where ledger account of currency swap was compiled. He also pointed out that in certain currency swap transactions, profit is also earned and hence, sum of ₹ 6.04 Crores is net figure of loss. Thus case on merit also tilt in favour of assessee. There is no dispute to the proposition that Assessing Officer’s order can be revised in case of assessee made no inquiry in the assessment order. But in case before us enquiry has been done. So it can not be said that Assessing Officer has passed order without any enquiry or application of mind. So, the cases relied by learned Departmental Representative does not help the Revenue. In view of above discussion, CIT was not justified in setting aside the order of Assessing Officer by invoking provision of 263 of Act because Assessing officer has decided the issue after making enquires as discussed above. Moreover, on merit also case tilt in favour of assessee. So order of CIT u/s. 263 is quashed. - Decided in favour of assessee.
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2015 (4) TMI 323
Taxability of compensation - CIT(A) while deciding the appeal has held the impugned amount to be specifically taxable u/s 28(va) of the IT Act - notice u/s 153C - Held that:- Search in the premises of Cabana group was conducted on 31-7-09 whereas the settlement agreement in question and other agreements were executed much earlier on 24-11-08. It has not been alleged that the agreements are a subterfuge, thus the genuineness of agreements is not in question. All the clauses of the agreement read together reflect that the real intent, objective and purpose of the payment of compensation as per Settlement Agreement was to ensure withdrawal of all the pending litigation by Satyam from various forums instituted for breach of terms of conditions. The dominant consideration for compensation being surrendering the right to sue; its neither in lieu of surrender of any agency or agreement for non competition. This being so the compensation neither falls in the ambit of sec. 28 (ii) c as held by AO nor u/s 28 (va) as held by ld. CIT(A). Assessee has vehemently denied having any where admitted that part of the compensation was for non competition. In our considered view the compensation in question was meant, intended and paid for withdrawal of aforesaid litigation instituted by assessee which could have resulted in many adverse consequences for the reputation of Coca Cola/Atlantic besides entailing huge cost and efforts of litigation. Relinquishment of right to sue is neither a capital asset nor taxable u/s 28 which provides specific types of receipt to be held taxable as business income. Relinquishment of right to sue does not find any mention therein. In this eventuality we have no hesitation to hold that the impugned amount of ₹ 8,16,22,040/- is a capital receipt not liable to Income Tax. The addition is deleted, assessee's grounds in this behalf are allowed. Apropos the issue about validity of satisfaction u/s 153C, since we have allowed the relief on merits we find no necessity to dwell on this technical issue. - Decided in favour of assessee.
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Customs
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2015 (4) TMI 348
Demand of duty on confiscated goods - option to redeem the goods in lieu of confiscation - Scope of Sections 124 and 125 - import of medical equipment - Notification No. 64/88-cus dated 01.03.1988 - Breach of condition of Notification - Confiscation of goods - Imposition of penalty - Held that:- It is not in dispute that Show Cause Notice in the instant case was issued under Section 124 of the Act. - Nothing was stated about the payment of duty. However, in spite of the fact that Show Cause Notice was limited to confiscation of the goods and imposition of penalty, the final order which was passed included the direction to pay the customs duty as well. It is clear that when such an action was not contemplated, which even otherwise could not be done while exercising the powers under Section 124 of the Act, in the final order there could not have been direction to pay the duty. Notwithstanding the aforesaid position, as pointed out above, the Department is taking shelter under the provisions of sub-section (2) of Section 125 of the Act. However, on a plain reading of the said provision, we are of the view that such a provision would not apply in case where option to pay fine in lieu of confiscation is not exercised by the importer. Trigger point is the exercise of a positive option to pay the fine and redeem the confiscated goods. What is emphasised is that when in the Show Cause Notice issued under Section 124, nothing was stated about the payment of import duty, there could not have been direction to that effect in the final order Further, insofar as Section 125(2) is concerned, the contingency contained therein did not occur in the present procedure for want of exercise of option to pay fine. We, thus, are of the opinion that the view taken by the CESTAT is correct and the contrary view taken by the High Court in the impugned judgment [2006 (4) TMI 137 - HIGH COURT OF JUDICATURE AT BOMBAY] is not warranted on the interpretation of Section 125(2) of the Act. Argument raised in case [2001 (8) TMI 113 - SUPREME COURT OF INDIA] predicated on Section 28(1) of the Customs Act and plea was that notice was not issued by the “competent officer” and was also beyond the time prescribed under Section 28(1). In that context, the Court dealt with the provisions of Section 125(1) as well as 125(2) and observed that order of payment of duty under Section 125(2) would be an integral part of the proceedings relating to confiscation and consequential orders thereon. This order, however, must be pursuant to a show cause notice and adjudication. The court was not dealing with the question as to whether sub-section (2) of Section 125 would be applicable even when option to pay fine in lieu of confiscation is not exercised. - Decided in favour of assessee.
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2015 (4) TMI 347
Classification of goods - toys, viz., Talking Parrot - Wrong classification of goods - Imposition of penalty - Malafide intention or bonafide belief - Held that:- during the entire proceedings the assessee/importer was trying to prove the classification of goods imported in its favour. While the Commissioner (Appeals) differed with the finding of the adjudicating authority, the Tribunal also, initially, on its part, was not clear, as there were two different views and, therefore, the matter was referred to a Larger Bench, which came to decide the issue once and for all. - Therefore, it is clear that the assessee was all along pursuing the matter diligently under the bona fide belief that the classification as made by it is correct. However, this aspect has been lost sight of by the Tribunal, while upholding the order of the original authority, whereby the penalty imposed on the assessee has also been confirmed. It is clear from the records that the assessee was pursuing the matter under the bona fide belief that the classification offered by it is correct. In such circumstances, it cannot be said that the act of the assessee was wilful, deliberate and dishonest, in that he wanted to avoid payment of duty, thereby evading tax liability. The present case falls squarely within the parameters as propounded by the Supreme Court in Akbar Badurddin's case (1990 (2) TMI 50 - SUPREME COURT OF INDIA) - penalty, as imposed on the appellant/assessee is not justified in the facts of the present case, which the Tribunal failed to set aside - Decided in favour of assessee.
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2015 (4) TMI 346
Illegal export of antique statue - Commission of offences punishable under Section 132 & 135 (i) (a) - Additional Chief Metropolitan Magistrate discharged the respondent holding that there is complete bar with regard to prosecution under the Customs Act - Held that:- Section 4 of the Antiquities Act, 1947 made all the provisions of the Customs Act, 1962 applicable to an offence committed under Section 3 of the 1947 Act. An amendment was brought into force vide Section 4 of the Act of 1972 vide which the Legislature omitted the applicability of all the provisions of the Customs Act. Provisions of the Customs Act are now applicable only for confiscation and not for prosecution. Section 25 of the Antiquities Act stipulates that if any person contravenes the provision of Section 3, he shall be liable for punishment without prejudice to the action of confiscation or penalty for which he has rendered himself liable under the Customs Act. A reading of Section 25 shows that confiscation and penalty has to be under the Customs Act, whereas the punishment and prosecution has to be under the Antiquities Act for breach of Section 3 of the Antiquities Act. There is no force in the argument of the learned counsel for the petitioner that once the confiscation is done under the Customs Act, all the provisions of the Customs Act would come into operation and the Customs department would get power to launch prosecution against the respondent. Section 25 of the Antiquities Act clearly creates a bar with regard to the prosecution under the Customs Act. - Decided against Revenue.
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2015 (4) TMI 345
Confication of goods u/s 113 - Penalty u/s 114 - goods exported without 'Let Export Order' of the proper officer under Section 51 of the Customs Act, 1962 - Held that:- In the case of loading of container on the vessel and sailing of vessel without obtaining 'Let Export Order', the shipping line alone can be held liable for penalty and not the exporter. - As regards the reliance placed by the learned AR in the case of Nichrome India Ltd. (2009 (7) TMI 648 - CESTAT, MUMBAI), the other coordinate benches, even after referring to the said judgment granted relief to the assessee relying on the Bombay High Court Division Bench judgment in the case of Kusters Calico Machinery Ltd. (2010 (3) TMI 474 - BOMBAY HIGH COURT). Therefore, the judgment in the case of Nichrome India Ltd. (2009 (7) TMI 648 - CESTAT, MUMBAI) stand overruled. - in the facts and circumstances of the case, the appellant-exporter should not have been imposed any penalty, particularly when the shipping line was imposed with a penalty in the same case. - Decided in favour of assessee.
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Corporate Laws
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2015 (4) TMI 344
Period of limitation - Option given by Company law board not exercised in given time - Held that:- In view of the fact that Shri Rohan Thawani, ld. Counsel of the petitioner was present before the Company Law board on the date of the order dated 3.9.2007 passed in CA 152/2007, and before the High Court of Delhi on 26.7.2012 i.e. the date of the order dismissing the appeal, the knowledge thereof on such dates to the petitioner can safely be attributed. Similarly, since the order dated 26.7.2012 passed by the High Court of Delhi was an oral order dictated in open Court, the knowledge of such order must be attributed to the petitioner on the same day in view of the fact that Shri Rohan Thawani, Counsel for the petitioner, was present before the High Court on the date of such order and represented the petitioner from the very beginning till date. Since no appeal was preferred by the Petitioner against the order dated 26.7.2012, the date when he received a certified copy of the said order looses significance. Therefore, in any case, the exercise of option on 16.8.2012 by the petitioner, Dr, Raj Kachroo, was beyond the period of 15 days contemplated by the order dated 3.9.2007.and in the worst case scenario from 26.7.2012 i.e. the date of the final order passed by the High Court of Delhi in Appeal, is not entitled to any relief. - Appeal dismissed.
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Service Tax
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2015 (4) TMI 364
Demand of service tax - GTA outward transport service - Reverse Charge mechanism - clandestine removal of excess quantity of finished goods - Held that:- for the very same period and, for the same goods, the audit has raised objection on the presumption that they could have not discharged the GTA service tax on the excess quantity of goods cleared without payment of duty on the finished goods. It is surprising to see that the DGCEI had investigated the case and issued the show cause notice and demanded duty and the same has been settled by the Order of the Hon'ble Settlement Commission. The present show cause notice has been issued on the same goods covered under the above show cause notice on the presumption that the appellants have not discharged the service tax. No documents, or any work sheet on how the service tax amount on GTA outward transportation has been arrived was submitted by the Department nor it was brought in the show cause notice or in the impugned order. - demand of service tax on GTA outward on the alleged clandestinely removed goods is not sustainable and devoid of merits. The impugned order is liable to be set aside on merits - Decided in favour of assessee.
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2015 (4) TMI 363
Denial of CENVAT Credit - Gardening and House Keeping Services - whether the appellant is eligible for availing input service credit on gardening and house-keeping services, which was disallowed by the Commissioner (Appeals) in the impugned order - Held that:- appellant is a manufacturer of shampoo and manufacturing cold cream registered with central excise. As seen from the Pollution Control License Order dated 2012.2004 (sic) and Schedule-M of the Drug Control Act, it is mandatory for the appellant to maintain green cover and also should use the effluent treated water and keep the factory premises clean. Therefore, as per the statutory requirement, the appellant is required to maintain gardening and green cover and plants and cleanliness of the manufacturing premises. The case law relied upon by the appellant in the case of Murugappa Morgan Thermal Ceramics Ltd. (2013 (4) TMI 384 - CESTAT AHMEDABAD), applicable to the present case. The Tribunal rightly held that the services used for maintaining the garden will be admissible as it is required to maintain green cover as per law. Whereas, the case law relied upon by the Ld. AR M/s. Tyco Sanmar and M/s. Xomax Sanmar (2010 (8) TMI 711 - CESTAT, Chennai) wherein the issue relates to the cenvat credit on landscaping services and the same is not applicable to the facts of the present case. I hold that the appellant is eligible for credit on gardening and house-keeping services - Decided in favour of assessee.
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2015 (4) TMI 362
Condonation of delay - Non receipt of order - Held that:- It is clear that order was only dispatched and no evidence is available of receipt. According to the decision of the Tribunal referred to above in reproduced paragraphs, it is necessary that the order should reach the appellant. In this case, according to learned C.A., the appellant did not know that order has been sent to them and when they received Order-in-Original in a subsequent case, they came to know that earlier order has been passed and thereafter, they made a request to the department on 2/1/2013 and received a copy on 10/1/2013 and thereafter, the appellant filed appeal on 31/1/2013. In view of above discussions referred to above, appeal having been filed within time, the impugned order is set aside and since there is no order on merits, the matter is remanded to the Commissioner (Appeals) for fresh decision on merits treating the appeal as filed within the limitation period prescribed under the law - Delay condoned.
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Central Excise
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2015 (4) TMI 358
Valuation - normal price - Related person / party - wholesale purchaser - Applicability of Section 4(1)(a) proviso (iii) and Section 4(4)(c) of the Central Excise and Salt Act as they stood prior to the 2000 amendment of Section 4 - Evasion of duty - Held that:- “arrangement” spoken of in the proviso must be something by which the assessee and the related person “arrange” that the goods are sold at something below the normal price, so that tax is either avoided or evaded by such arrangement. Secondly, the expression “generally” also shows that such goods must predominantly be sold by the assessee to or through the related person - in mathematical terms, sales that are to or through a related person must consist of at least 50% of the goods that are manufactured and sold. The expression “to or through a related person” again goes back to the “arrangement” and is another way of saying that such sale can be effected directly to or indirectly through such related person. It is only when all three considerations are cumulatively met that proviso (iii) can be said to be attracted. When we come to the definition of “related person” the legislature has used a well known technique. It first employs the expression “means” and states that persons who are associated with the assessee so that they have a direct or indirect interest in the business of each other would get covered. The definition then goes on to use the expression “and includes” thereby indicating that the legislature intends to extend the definition to also include various persons that would not otherwise have so been included. These include a holding company, a subsidiary company, a relative and a distributor of the assessee and any sub-distributor of such distributor. The necessity for including holding and subsidiary companies as defined under the Companies Act, 1956 is to lift the corporate veil in order to get to the economic realities of the transaction. A reading of the definition of “relative” would show that the relative need not be a person who is so associated with the assessee that they have mutual interest in each other’s businesses. If that were the case, the expression “relative” in the second part would be otiose inasmuch as a relative would be subsumed within “person” in the first part. Thus, “relatives” would also be “persons” who are so associated with the assessee that they have a mutual interest in each other’s businesses. The legislature by application of a de jure test has extended the meaning of “related persons” to include the entire list of relatives per se without more as related persons. Similarly, holding companies and subsidiary companies by virtue of the exercise of control by a holding company over a subsidiary company are similarly included by application of a de jure test. Assessee argued that the price paid by Shaw Wallace and Company for the same/similar products as was sold by unrelated entities to it was even lower than the price paid by Shaw Wallace to Detergents India Ltd. This being the case, it is clear that on facts here there is no “arrangement” between Shaw Wallace and Detergents India Limited to depress a price which is otherwise at arm’s length. Though this fact is pleaded expressly before the Commissioner as pointed out above, the Commissioner’s order does not contain any finding based on this fact. On the other hand, there are copious findings as to how Shaw Wallace and Detergents India Limited are related persons because of a multitude of factors pointed out in the Commissioner’s order. That Shaw Wallace and Detergents India Limited are “related persons” is made out by their holding/subsidiary relationship. However, from this, it does not follow that there is any arrangement of tax avoidance or tax evasion on the facts of this case. This being the case, proviso (iii) to Section 4(1)(a) would not be applicable. Further, it would also not be applicable for the reason that there is no predominance of sales by Detergents India Limited to Shaw Wallace. As has been pointed out above, only 10% of its manufacturing capacity has been sold to Shaw Wallace, 90% being sold to Hindustan Lever Limited. For this reason also, proviso (iii) does not get attracted. Further, the single most relevant fact, namely, that Shaw Wallace paid for the same/similar goods to unrelated suppliers at a price lower than the price paid by Shaw Wallace to DIL, has not been adverted to at all by the Commissioner. - The appeals by Revenue are devoid of merit - Decided against Revenue.
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2015 (4) TMI 357
Classification of goods - Classification of Holograms and Holographic films - Classification under tariff entry 39.19 or 49.01 - held that:- It is clear that merely because a particular embossed hologram is self adhesive, therefore in all cases, it will attract entry 39 is not correct. What is to be seen, as has been pointed out above, is whether the self adhesive part of the product is of primary use or the printed matter is of primary use. It cannot be that invariably in all cases, the moment a hologram is self adhesive it will fall within entry 39 without more. After setting out the Explanatory Notes to HSN and the conclusion of such Note that products such as “comic stickers” would not fall within entry 39, the CESTAT arrives at the exactly opposite result without telling us why. Secondly, we are again left guessing as to how the self adhesive aspect of the product is more important than the security aspect of the said product. Equally, there is no reasoning so far as this aspect is concerned. We therefore find that the CESTAT is not correct in the finding reached and the judgment dated 19.12.2003 of the CESTAT is, therefore, set aside. Only one further thing remains. Various arguments were made by both sides on the Rules of Interpretation of the First Schedule to the Central Excise Tariff Act, 1985. - it is not necessary to go into any of these Rules for the purposes of this judgment inasmuch as we have found as a fact, in accordance with Note 2 to entry 49, that the security hologram part of the product in question is primary and the self adhesive part only incidental insofar as the user of the said goods is concerned - Since appellant has paid the duty during the pendency of these appeals. He will be entitled to a refund of the same in accordance with law. - Decided in favour of assessee.
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2015 (4) TMI 356
Manufacture - packing combination of mixture of raw rice, dehydrated vegetables and spices in the name of 'Rice and Spice'. - Classification under Heading 11.01 or under sub-heading 21.08 - Held that:- it is clear that there is no dispute about the legal proposition that the process would be treated as “manufacture” only if new product known to the market comes into existence with original product losing its original character. - mere addition of dehydrated vegetables and certain spices to the raw rice, would not make it a different product. Its primary and essential character still remains the same as it is continued to be known in the market as rice and is sold as rice only. Further, this rice, again, remains in raw form and in order to make it edible, it has to be cooked like any other cereal. The process of cooking is even mentioned on the pouch which contains cooking instructions. Reading thereof amply demonstrates that it is to be cooked in the same form as any other rice is to be cooked. Therefore, we do not agree with the CEGAT that there is a transformation into a new commodity, commercially known as distinct and separate commodity. Activity undertaken by the assessee does not amount to manufacture, this appeal is liable to succeed on this ground itself inasmuch in the absence of any manufacture there is no question of payment of any excise duty. We may, however, remark that even otherwise the classification of the product by the Revenue under sub-heading 21.08 may not be correct. In fact, the CEGAT has accepted that classification only on the ground that the product after mixing of raw rice with dehydrated vegetable and spice, has become a new product as it amounts to `manufacture' and on that basis it has held that it no longer remains product of milling industry. As we have held that it does not amount to `manufacture' as the essential characteristics of the product, still remains the same, namely, rice, a natural corollary would be that it continues to be the product of the milling industry and would be classifiable under sub-heading 11.01. Rate of duty on this product, in any case, is 'nil'. - Decided in favour of assessee.
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2015 (4) TMI 355
Valuation - Scope of the term Manufacturer - Job worker - Manufacture of medicaments - whether the respondent, who was getting its medicaments manufactured through the job workers, can be considered to be an independent manufacturer and another question is about the assessable value of the medicaments manufactured by the job workers for the purpose of assessment under the Central Excise Act, 1944. - Held that:- term ‘manufacturer’ or the loan licensee used under the provisions of the Drugs and Cosmetics Act, 1940 has nothing to do with the manufacturing activity or term ‘manufacture’ under the provisions of the Central Excise Act, 1944. Both the Acts referred to hereinabove have been enacted for different purposes. The provisions of the Drugs and Cosmetics Act, 1940 pertain to manufacture of drugs and quality of the drugs etc. The manufacturer of the drugs has to see that the quality of the drugs manufactured by him is as per certain standards and if there is any defect in the drugs manufactured by him or someone working under him, he becomes responsible or liable under the said Act. There is also a provision in the said Act with regard to getting the drugs manufactured by someone else. So a manufacturer, who is having a license to manufacture, can get the drugs/medicaments manufactured by another person under his supervision and he would be liable if the drugs manufactured by someone else are not as per the prescribed quality. Though the drugs/medicaments might not have been manufactured by the one who is a licensee and the actual manufacturer is guilty of manufacturing substandard drugs, the licensee becomes responsible and liable under the provisions in the said Act. Once the Tribunal, after appreciating relevant evidence, has come to a conclusion that the job workers were the manufacturers and the respondent - the loan licensee, was not the manufacturer, we see no reason to interfere with the said findings of fact, especially when the same is correct and not perverse. We are, therefore, in agreement with the findings arrived at by the Tribunal that the job workers are the manufacturers. Once it has been determined that the job workers are the manufacturers, the assessable value of the goods would be a sum total of cost of raw material, labour charges and profit of the job workers, as per circular No.619/10/2002-CX dated 19th February, 2002 and the law laid down by this Court in the case of Pawan Biscuits (2000 (7) TMI 78 - SUPREME COURT OF INDIA) and other cases. In such a case, the price at which the respondent brand owner sells its goods would not be the assessable value because the duty is to be paid at the stage at which the goods are manufactured and not at the stage when the goods are sold. - Decided against Revenue.
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2015 (4) TMI 354
100% EOU - DTA clearance - Valuation of goods Rule 4 or under Rule 7 of the Customs Valuation Rules, 1988 - Benefit of Notification No.8/97-CE dated 1.3.1997 or Notification no.2/95 CE - manufacturing of cotton fabrics - additional ground raised for the first time in the miscellaneous application was allowed by the tribunal - Held that:- Tribunal was not entirely wrong in allowing the respondent to raise the issue of valuation. It is because of the reason that in the Order-in-Original passed by the Commissioner, after holding that the Notification no.2/95 would be applicable and the respondent is not entitled for exemption under Notification no. 8/97, while determining the duty payable, the valuation which is taken is on the basis of clearance of cotton fabrics to the DTA. Therefore, it was within the domain of the Tribunal to decide as to whether the aforesaid basis at which the cotton fabric was cleared to the DTP was rightly taken or not. The order of the Tribunal, insofar as this aspect is concerned, namely, applicability of Rule 4 of the Valuation Rules, appears to be correct. While undertaking this limited enquiry into the said question, the Tribunal decided a pure question of law. In cases where excisable goods are produced or manufactured by hundred per cent export oriented undertaking are allowed to be sold in India, the duty of excise has to be the amount equal to the aggregate of the duties of customs which would be leviable under Section 12 of the Customs Act, on like goods produced or manufactured outside India if imported into India and where the said duties of custom are chargeable by reference to their value, the value of such excisable goods shall be determined, in accordance with the provisions of the Customs Act and Customs Tariff Act, 1975. - if Rule 4 is not applicable, the valuation of the goods has to be arrived at by applying Rules 5 and 8 in sequential order. Tribunal fell in error as applicability of Rules 5 and 6 depended on certain factual aspects which had to be gone into. The Tribunal has made certain observations on facts but without any material before it. The appropriate course of action for the Tribunal, in such a given situation was to remit the case back to the Commissioner to decide the issue after allowing the appellant to produce evidence in this behalf. - Matter remanded back - Decided in favour of Revenue.
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2015 (4) TMI 353
SSI Exemption - Determination of turnover - Exclusion of goods manufactured under the brand name of others - Use of words such as HM, PAL, KH - Held that:- Once in respect of those goods where brand name of other party is used on manufactured goods and that other party is not a SSI unit, exemption is not available, it would lead to inevitable result that the value of such goods cannot be added as well, while considering the value of the goods cleared by the assessee in the previous year. CEGAT has given two other reasons to deny the relief to the appellant. In its order it has observed that letters such as “HM” and “PAL”, no doubt, were initials of the buyers of the goods and they constitute the brand name as well, however, what was indicated was only initials with the sole purpose to identify the goods for particular automobile company. After the supply of these goods, the said automobile companies were affixing their proper trade mark/ brand name thereupon. On this basis, it is mentioned that the Notification in question would not apply - This reasoning of the CEGAT is contrary to the law laid down by this court in 'Kohinoor Elastics (P) Ltd. v. Commissioner of Central Excise, Indore' [2005 (8) TMI 115 - SUPREME COURT OF INDIA]. Value of the goods meant for “HM”, “PAL”, “KH”, etc. could not have been included while considering as to whether the appellant is entitled to the benefit of the aforesaid Notification or not. Once that is excluded and the case is confined to the brand name 'VIR' which is the appellant's own brand name and in respect of which the appellant had claimed exemption, the value of goods cleared in the previous year was less than ₹ 3 crores. Therefore, the appellant shall be entitled to the exemption under the said Notification. - Decided in favoru of assessee.
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2015 (4) TMI 352
Denial of refund claim - Bar of limitation - Held that:- In terms of Section 11B, the application for refund is to be made within six months. The assessee is claiming refund for the period from 25.09.1996 to 16.10.1996. An application for refund was made on 30.04.1999 which was beyond six months period. The appellant however, is relying upon the second proviso to Section 11B which stipulates that the limitation of six months would not apply where any duty has been paid under the protest. - appellant contends that it had filed the appeal against the Order-in-Original passed by the Assistant Commissioner denying CT-2 certificate which should be treated as protest. It is argued that the protest as stipulated under Rule 233B of the Rules refers only to a manufacturer and since the appellant is not the manufacturer for whom no mode of protest is stipulated, even filing of the appeal should be treated as protest. Protest as per Rule 233B refers only to a manufacturer and therefore, a person like the appellant, who was only a purchaser could not have made any protest in terms of Rule 233B. Therefore, if protest is lodged in one form or the other that should be construed as satisfying the condition stipulated in second proviso to Section 11B. Having said that, in the present case, we find that the appeal was filed only in September, 1997 or thereafter, though exact date of filing the appeal is not disclosed. Even if this appeal is treated as a form of protest that was much beyond six months period from the date of purchase that is 25.09.1996 to 16.10.1996. Therefore, the so-called protest would not come to the aid of the appellant. We therefore, are of the opinion that application for refund was time barred - Decided against assessee.
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2015 (4) TMI 351
Valuation of goods - Applicability of Rule 8 on Job work - Whether Rule 8 of the Central Excise (Valuation) Rules, 2000 or Rule 11 thereof would apply in arriving at the valuation of the goods at the end of the respondent/assessee - Held that:- Rule 8 will have no application to the facts of the present case. It is rightly pointed out by the CEGAT that for the applicability of this Rule two requirements are to be fulfilled. The first is that the excisable goods that the assessee manufactures are not sold by him and the second requirement is that these goods must be used for consumption either by him or on his behalf in the production or manufacture of other articles. In the present case, first condition is undoubtedly satisfied as the goods are not sold by the respondent. However, second condition is not at all met or fulfilled inasmuch as the goods are not used by the assessee for consumption either by him or on his behalf in the production or manufacture of other articles. As stated, these goods are supplied to the manufacturer of the motor vehicles. Rule would be applicable only in those cases that assessee is related in the manner specified in either of sub-clause (ii), (iii) or (iv) of clause (b) of sub-section (3) of Section 4 of the Act and not in those cases where the person is related in the manner as stated in clause (i) thereof. In those cases where Rule 9 is applicable, for the purpose of valuation, normal transaction value at which such goods are sold by the related person, is to be taken as the value of the goods. Proviso becomes applicable only when goods are not sold by the related person at all and used or consumed for home production. As there is no sale transaction by the related person, question of value thereof will not be available and therefore, to arrive at the value in such a situation one has to fall back on Rule 8. - Once Rule 8 is not applicable in the case of the respondent, it is Rule 11 only which becomes applicable as that is residuary provision for arriving at the value of any excisable goods which are not determined under any other rule - Dcided against Revenue.
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2015 (4) TMI 350
Valuation of goods - Inclusion of sales tax amount - amount of 75% was retained by the assessee - Held that:- This Court in Commissioner of Central Excise, Jaipur II vs. Super Syncotex (India Ltd.) [2014 (3) TMI 42 - SUPREME COURT] has considered the issue - Accordingly, as per the aforesaid decision, the assessee/respondent herein will not be liable to pay any excise duty on the sales tax amount which was retained under the Incentive Scheme up to 30th June, 2000. However, this component of sales tax which was retained by the assessee after 1.7.2000 shall be includible in arriving at the transaction value and sales tax shall be paid thereon. - Demand invoking extended period of limitation confirmed - However, penalty imposed is set aside - Decided partly in favour Revenue.
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2015 (4) TMI 349
Classification of doors and windows - Classification under Chapter sub-heading No. 3925.20 or Chapter sub-heading No. 3925.99 - Held that:- appellant contends, that the observations of the Tribunal are factually incorrect and contrary to the record and an endevour is made to point out that there is nothing which has come on record as has been expressed by the Tribunal. - If that is the contention of the appellant which is factual in nature, the remedy for the appellant is to approach the Tribunal by moving an appropriate application for rectification.
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CST, VAT & Sales Tax
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2015 (4) TMI 361
Reversal of input tax credit - Non production of purchase bills - Time production of purchase bills verification not granted - Held that:- Court is fully convinced that the Assessing Officer has clearly abdicated his quasi-judicial power. The Honourable Division Bench of this Court, in the case of Madras Granties Pvt. Ltd. vs. Commercial Tax Officer, Arisipalayam Circle, Salem and another reported in (2002 (10) TMI 767 - MADRAS HIGH COURT), considered the question as to the manner in which the Assessing officer has to proceed with the assessment even though reopening of the assessment was pursuant to a proposal submitted in Form D3 by the Inspecting Officer. The Honourable Division Bench pointed out that the Assessing Officer is a quasi-judicial authority and in exercising his quasi-judicial function of completing the assessment, he is not bound by the instructions or directions of the higher authorities, the same are not sustainable in law. The Assessing Officer has been solely guided by the proposal given by the Inspecting Officer, thereby, there was no independent application of mind and duties enshrined on the Assessing Officer under the provisions of the Act have been given a go-by. Further, when the representations were made by the petitioner stating that the records which are produced had to be taken back for want of time and they are willing to produce the records, the Assessing Officer should have afforded an opportunity to the petitioner to produce their records and it is erroneous on the part of the Assessing Officer to have come to the conclusion that the claim made by the petitioner stating that they are having all original bills and the same may be verified and further action dropped is only an after thought. Furthermore, the observation that personal hearing need not be granted is perverse as it is contrary to the provisions of the Statute and contrary to the settled legal principles. - Decided in favour of assessee.
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2015 (4) TMI 360
Penalty under Section 45A of the Kerala General Sales Tax Act - Held that:- Petitioner has already obtained an advantage by getting his penalty reduced to the actual amount of tax, as arrived at in the assessment order. This amount (Rs.1,42,425/-) is much lower than the tax amount that was found due by the 3rd respondent in Ext.P1 order (Rs.2,80,140/-). Thus, although the 1st respondent had reduced the penalty amount to the actual amount of tax involved, he then proceeded to adopt the tax amount, as arrived at by the Assessing Officer and not the tax amount arrived at by the Intelligence Officer in the penalty proceedings, as the basis for computation of the reduced penalty that was payable pursuant to Ext.P5 order dated 15.07.2009. The contention of the petitioner that the penalty amount should now be further reduced and confined to an amount of ₹ 24,288/-, based on the assessment order that was passed after considering materials that were not available before the Intelligence Officer while passing Ext.P1 order, is wholly unjustified and liable to be rejected. - Time period to make the balance payment is granted to the assessee - Decided against assessee.
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2015 (4) TMI 359
Cancellation of registration - involvement of the petitioner in bogus billing activities - Held that:- Though the petitioner has filed replies before the Commissioner, the Commissioner proceeded to adjudicate the show cause notices and cancelled the registration of the petitioner on the incorrect premise that the petitioner never remained present nor filed replies. Even after the petitioner had not personally been present, if there were any written replies filed by the petitioner, the Commissioner was duty bound to take the same in consideration before coming to any final finding with respect to the allegations made in the showcause notices and passing any order adverse to the petitioner. In the present case, decision in the order in original passed by the Commissioner is rather brief, it only refers to nonparticipation of the petitioner in the proceedings and in the later portion proceeded to confirm the proposal of cancellation of registration on the premise that the petitioner had indulged in the bogus billing activities. There are fundamental flaws in the approach of the Commissioner. Firstly, as noted earlier, the petitioner had made representations in writing. Contentions raised in the petition were therefore required to be taken into account before the Commissioner could take any final decision. Secondly, without any discussion on material on record, even in an exparte proceeding, the Commissioner could not have jumped to the conclusion that the petitioner had indulged in bogus billing activities leading to revenue loss of ₹ 51 lakhs. At least a brief discussion on material on record was necessary. - Matter remanded back - Decided in favour of assessee.
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Indian Laws
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2015 (4) TMI 343
Revision of package rates applicable under Central Government Health Scheme (CGHS) - Different rates of reimbursement to the private hospitals based on their accreditation with National Accreditation Board for Hospitals (NABH) - Indulging in unfair trade practice - Contravention of provisions of Section 3 and 4 of Competition Act ,2002 - Held that:- The activities performed by the above said entities cannot be covered under the definition of enterprises in terms of Section 2(h) of the Act as they are not engaged in any commercial or economic activities and as such provisions of Section 4 of the Act are not attracted against them. Therefore no, prima facie, case is made out under the provisions of Section 4 of the Act in the matter.The different rates prescribed by DGHS for NABH accredited hospitals cannot be considered as anti-competitive in any manner, rather it would act as an incentive to non-accredited hospitals to secure such accreditation and provide quality health care services, which will ultimately benefit the patients. As regards the allegations of violation of Section 3 of the Act, the Informant has not submitted any cogent evidence stating existence of any agreement, in any manner, between the Opposite Parties in the matter. Thus, prima facie, no case in terms of Section 3 of the Act is made out against the Opposite Parties. In view of the aforesaid, the Commission holds that no prima facie case is made out against the Opposite Parties either under the provisions of Section 3 or Section 4 of the Act for making a reference to the Director General for conducting investigation into the matter. - Order to close the proceedings.
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