TMI Tax Updates - e-Newsletter
April 11, 2017

Case Laws in this Newsletter:

Income Tax Customs PMLA Service Tax Central Excise Indian Laws

Articles

1. Un-necessary litigation by taxpayer is also not desirable –awarding costs can discourage litigation

   By: DEVKUMAR KOTHARI

2. LARGE TAX PAYER UNIT

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Andhra Pradesh Investment Meet

2. Export of Organic Produce

3. Business Reform Action Plan

4. Exhibition Centres and Trade Fairs

5. RBI Reference Rate for US $

6. Mega Prizes of ₹ 1 crore, ₹ 50 lakh and ₹ 25 lakh for Consumers making digital payments of less than ₹ 1600

Notifications

Companies Law

1. F. No. 01/10/2013 CL-V - dated 7-4-2017 - Co. Law

Companies (Registration of Charges) Amendment Rules, 2017

SEZ

2. S.O. 1091(E) - dated 31-3-2017 - SEZ

Central Government notifies 4.28 hectares area at OMR Road, Perungudi, Chennai in the State of Tamil Nadu and constitutes an Approval Committee

Circulars / Instructions / Orders

Customs

1. 13/2017-Cus - dated 10-4-2017

DTA clearance of goods procured by EOUs/EHTP/STP units from indigenous sources – charging of Duty – reg.

2. 12/2017 - dated 31-3-2017

Clarification regarding legislative changes relating to Customs Act, 1962 proposed in the Finance Bill, 2017-reg.

Highlights / Catch Notes

Income Tax

• High Court Rules Banker's Cheques Valid u/s 40A(3) and Rule 6DD of Income Tax Rules.

  Case-Laws - HC : Disallowance u/s 40A(3) - AO opined that banker’s cheques were not covered in any of the provisions of Rule 6DD of the Income Tax Rules as they were the account payee demand drafts u/s 40A(3) - the expression used in the Income Tax itself is “a bill of exchange”, which is a class of instruments, that cannot be ignored or disallowed by virtue of Section 40A(3) read with Rules 6 DD of the Income Tax Rules - HC
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• Department's Appeal Lacks Evidence, Filed Without Substantive Grounds u/s 10(23)(iiib) for Benefits Denial.

  Case-Laws - AT : Denying benefit u/s 10(23)(iiib) - the department has merely filed appeal for the sake of filing, otherwise it has also not placed any document on record which can suggest that the assessee does not fulfill criterion contemplated in section 10(23C)(iiiab). - AT
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• Valuation of Closing Stock Must Include SAD in Line with Purchases, Sales, and Opening Stock u/s 145A.

  Case-Laws - AT : Addition on account of difference in the closing stock valuation as per section 145A on accounting of non-inclusion of Special Additional Duty (SAD) - It is not appropriate to include the figure of SAD only in the figure of closing stock without modifying the figures of purchases, sales and opening stock. - AT
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• Tax Authorities Must Assess Actual Income, Avoid Exploiting Taxpayer Mistakes in Partnership Remuneration Cases.

  Case-Laws - AT : Wrong figure of disallowance under partnership remuneration - revenue cannot take undue advantage of the ignorance of the assessee or genuine mistake committed by the assessee and is always duty bound to assess only the real income of the assessee - AT
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• Forex Losses as Business Losses Can Be Offset Against Surrendered Income Per Section 70(1) of Income Tax Act.

  Case-Laws - AT : Forex losses are business losses and related to pre search period - allowed to be set off u/s 70(1) with the income surrendered during search - AT
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• Non-residents exempt from advance tax and interest u/s 234B if payer fails to deduct tax at source.

  Case-Laws - AT : No doubt, if the person (payer) who had to make payments to the non-resident had defaulted in deducting the tax at source from such payments, the non- resident is not absolved from payment of taxes thereupon. However, in such a case, the non-resident is liable to pay tax and the question of payment of advance tax would not arise. - No interest liability u/s 234B - AT
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• Court to Decide if Share Trading Loss is Business or Speculation Loss; Assessee Exempt from Section 73 Explanation.

  Case-Laws - AT : Share trading loss - business loss OR speculation loss - the funds deployed in the business of granting loans and advances by the Assessee was more over a number of AYs. - Thus the principal business of the Assessee was giving of loans and advances and therefore the Assessee was outside the mischief of Explanation to Sec.73 - AT
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• Depreciation Allowed on Plant Machinery Installed Offsite for Business Use, AO's Objection Overruled.

  Case-Laws - AT : Depreciation on plant machinery installed at customer's site free of cost - AO’s objection was that since the equipments in question had not been installed at the assessee’s factory premises, it cannot be said that the equipments were used for the purpose of assessee’s business - Views of the AO cannot sustain - AT
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• Long-term capital gains by partnership firm excluded from book profit for MAT u/s 115JB.

  Case-Laws - AT : MAT computation - inclusion of share of long term capital gain earned by a partnership firm - Assessing Officer directed to exclude share income from partnership firm while computing book profit u/s. 115JB - AT
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Customs

• Import Policy Allows Second-Hand Furniture Under 10 Years Old as Capital Goods for Service Provision.

  Case-Laws - AT : Prohibited goods - import of old and used furniture, not more than 10 years old - furniture would fall under the category of capital goods used for providing services - import policy allows import of second hand capital goods - AT
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• Technical Documents for Spin Drawing Machine Reclassified from Chapter 84 to Chapter 49.

  Case-Laws - AT : Classification of the technical documents which were imported by the appellants for the use in setting up spin drawing winding machine - classifying the technical documents under chapter 84 is unsustainable - The technical documents are correctly classifiable under chapter 49 - AT
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• Machines for Forming PET Bottles Eligible for Benefits Under Notification 21/2002, Classified Under CTH 84 2230 00.

  Case-Laws - AT : Classification of empty bottle Inspector Morella number Lynott Tronic 735M 2 - forming of the PET bottle - The machines imported by the appellant being used in conjunction with form, fill and seal machine, merits classification under CTH 84 2230 00 and eligible for benefit of N/N. 21/2002 - AT
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• Exemption from Extra Customs Duties on Turbines Could Undermine Law's Intent and Reduce Public Revenue.

  Case-Laws - AT : Project import - Prima facie, Turbine does not produce energy without being integrally connected to other energy producing devices. Therefore any grant of exemption benefit of additional duty of customs to turbine shall defeat purpose of the law and shall cause loss to the public revenue - AT
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Indian Laws

• Section 138 of the Negotiable Instruments Act: Accused Can Rebut Presumption; Complainant Must Prove Debt Beyond Reasonable Doubt.

  Case-Laws - HC : The offence u/s 138 of the NI Act though technical, is punitive in nature. Hence, once the accused had rebutted the initial presumption it was imperative upon the complainant to prove beyond reasonable doubt that the cheques were issued towards the existing debt or liability - HC
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Service Tax

• "Gross Amount Charged" in Finance Act, 1994, Section 67: Taxable Value Linked to Specific Services Rendered.

  Case-Laws - AT : Value of taxable services - expression ‘gross amount charged’ in Section 67 of Finance Act, 1994 is limited to the consideration taxed in the impugned order because the expression ‘gross amount charged, is not an isolated phrase but to be read in conjunction with the expression ‘for such service provided’. - AT
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Central Excise

• Tribunal Wrongly Dismisses Appeals for Non-Production of Documents Without Legal Basis, Violating Statutory Provisions.

  Case-Laws - HC : When there is no provision of law which provides for production of documents as stipulated by the Tribunal while dismissing the appeals, the Tribunal is not justified in perfunctorily dismissing appeals on grounds which are not envisaged under any statutory provision. - HC
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• CENVAT Credit Upheld: Lack of Evidence Against Appellant in Fake Invoice Case, Supplier's Statement Insufficient.

  Case-Laws - AT : CENVAT credit - fake invoices - In the absence of any corroborative evidence in support of the statement made by the supplier (dealer), the cenvat credit cannot be denied to the appellant - AT
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• Appellants' Lack of Transparency Fails to Overturn Revenue's Case on Clandestine Removal Offense.

  Case-Laws - AT : Clandestine removal - Preponderance of probability is in favor of Revenue when appellants failed to come out with clean hands. Although appellant tried that investigation should be in dark to unearth the offence committed, they failed since self-speaking evidence came up in the course of investigation - AT
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• CENVAT Credit Applicable: Scrap Not Exempted Goods u/r 6(2) of CCR, 2004; No Further Inquiry Needed. (2.

  Case-Laws - AT : CENVAT credit - applying the first principle of law, scrap generated not being exempted goods manufactured, that is totally ruled out from scope of application of Rule 6 (2) of CCR, 2004. When the appellant succeeds on the first principle of law, there is no need to make any further enquiry - AT
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• Revenue Fails to Prove Filter Cake as Excisable Product; Not Intended for Market Trade.

  Case-Laws - AT : Filter Cake emanated from the affluent plant - excisability / marketability - Revenue thereby failed to discharge its burden of proof demonstrating that the Filter Cake came out as a product itself intended to be manufactured and traded in market under common parlance - goods therefore not excisable - AT
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• Technical and Royalty Fees Excluded from Goods' Assessable Value Due to Lack of Appellant Responsibility for Royalty Burden.

  Case-Laws - AT : Valuation - technical know-how fee - royalty fee - There is no evidence that the burden of royalty is to be borne by the appellants. Same is therefore not includible in the assessable value of the goods. - AT
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Case Laws:

• Income Tax

• 2017 (4) TMI 458
  Disallowance under Section 40A(3) - AO opined that banker’s cheques were not covered in any of the provisions of Rule 6DD of the Income Tax Rules as they were the account payee demand drafts under Section 40A(3)- cancellation of disallowance by ITAT - Held that:- This Court is of the opinion that the literal construction of Section 40A(3) sought to be canvassed by the Revenue is narrow and contrary to the provisions of the Negotiable Instruments Act, 1881, especially Section 5 thereof. See Punjab & Sind Bank Vs. Vinkar Sahakari Bank Ltd. & Ors. [2001 (9) TMI 993 - SUPREME COURT OF INDIA] held once the holder, which in this case is the complainant Bank, has elected to treat the instrument as a cheque it cannot but be treated as a cheque thereafter. This is an irretrievable corollary of exercising such an election by the holder himself. A complaint is maintainable under Section 142 in the event a banker’s cheque is dishonoured. This Court also notices that the expression used in the Income Tax itself is “a bill of exchange”, which is a class of instruments, that cannot be ignored or disallowed by virtue of Section 40A(3) read with Rules 6 DD of the Income Tax Rules. No substantial question of law arises.

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• 2017 (4) TMI 457
  Penalty under section 271(1)(c) - exigibility to capital gains tax - Transfer exigible to tax by reference to Section 2(47)(v) of the Income Tax Act, 1961 read with Section 53-A of the Transfer of Property Act, 1882 - JDA entered by assessee - Held that:- The matter is no longer res integra. In C.S.Atwal’s case [2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT] concluded that Section 53A of 1882 Act, by incorporation, stood embodied in section 2(47)(v) of the Act and all the essential ingredients of Section 53A of 1882 Act were required to be fulfilled. In the absence of registration of JDA dated 25.02.2007 having been executed after 24.09.2001, the agreement does not fall under Section 53A of 1882 Act and consequently Section 2(47)(v) of the Act does not apply. In view of cancellation of JDA dated 25.02.2007, no further amount has been received and no action thereon has been taken. It was urged that as and when any amount is received capital gains tax shall be discharged thereon in accordance with law. In view of the aforesaid stand, while disposing of the appeals, we observe that the assessee appellants shall remain bound by their said stand. The issue of exigibility to capital gains tax having been decided in favour of the assessee, the question of exemption under Section 54F of the Act would not survive any longer and has been rendered academic. Thus as quantum proceedings have been adjudicated in favour of the assessee. Once that is so, no penalty under section 271(1)(c) of the Act would be exigible. - Decided in favour of assessee.

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• 2017 (4) TMI 456
  Addition u/s 68 - unexplained credits - Held that:- AO emphasized on the Report of the Investigation Wing of the Income Tax Department about the accommodation entries and believing on the same the AO held that the creditworthiness, identity, genuineness of the transaction could not be proved by the assessee and accordingly, the amount of Rs. 10,01,000/- was treated as unexplained credits as per the provisions of section 68 of the I.T. Act, 1961 and added the same in the hands of the assessee, which establish that AO has not appreciated and corroborated the evidences as filed by the assessee and passed a non-speaking order, which is not sustainable in the eyes of law, which needs to be set aside. However, on the other hand, Ld. CIT(A) has passed a detailed order and upheld the addition made by the AO, but Ld. CIT(A) has not at all appreciated the facts and circumstances of the case as discussed by the AO in the assessment order. We further find that Ld. CIT(A) also not obtained any Remand Report from the AO which is very much essential before adjudicating upon the issue in dispute. We are of the considered view that AO has passed a non-speaking order and Ld. CIT(A) has passed a detailed order and upheld the action of the AO, without discussing and appreciating the facts of the case as narrated by the AO in the assessment order. Therefore, in the interest of justice, we cancel both the orders of the revenue authorities and set aside the issues in dispute raised in grounds of appeal to decide the same afresh

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• 2017 (4) TMI 455
  Non grant of credit of TDS on interest earned on FCCBs - Held that:- Both parties to this issue are in agreement that this issue of the assessee’s claim of grant of credit for taxes deducted at source on interest received on FCCBs requires to be restored to the file of the AO for verification thereof in accordance with law, with which proposition we too are in agreement. We, therefore, restore this issue to the file of the AO with the direction to verify the assessee’s claim in accordance with law and before granting credit for the impugned TDS to the assessee, fully satisfying himself that the amount of TDS has been deposited into the Government’s account; that the assessee is the lawful deductee, that the gross amount of interest has been considered as the assessee’s income and that no other person has or will claim credit of the very same taxes. We hold and direct accordingly. This ground is accordingly treated as allowed for statistical purposes. Non grant of TDS credit on interest earned on fully convertible debentures and fees for technical services - Held that:- Both parties are in agreement that this issue of the assessee’s claim for grant of TDS credit on interest earned on fully convertible debenture and fees for technical services requires to be restored to the file of the AO for verification thereof in accordance with law; with which suggestion we are also in agreement. We, therefore, restore this issue to the file of the AO with the direction to verify the assessee’s claim in accordance with law and before granting credit for the impugned TDS to the assessee, fully satisfy himself that the amount of TDS has been deposited into the Government’s account; that the assessee is the lawful deductee; that the gross amount of interest has been considered as the assessee’s income and that no other person has or will claim credit of the very same taxes. Interest earned in respect of investments made in FCCBs issued by Dolphin Offshore Enterprises (India) Ltd. - Held that:- The assessee’s contention is that the AO erred in considering and taxing the entire interest amount of Rs. 20,97,204/- received by the assessee’s group companies from Dolphin Offshore Enterprises (India) Ltd. As agreed to and suggested by both parties, we set aside this issue also to the file of the AO to consider only the actual amount of interest received by the assessee from Dolphin Offshore Enterprises (India) Ltd. in the hands of the assessee company and not the entire amount of interest paid to the group companies.

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• 2017 (4) TMI 454
  Denying benefit under section 10(23)(iiib) - Held that:- We are concerned with income provided under clause, 10(23)(C)(iiiab) which reads …. Any income received by any person on behalf of …….any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the government…..” In the order for the Asstt.Year 2006-07, the Tribunal has observed that the assessee is a hundred percent government institution imparting education in tribal regions, as per the directions of the Central Government from whom grants are received. In order to substantiate this claim, the assessee has made reference to a large number of documents which has been referred by the Tribunal in its order dated 25.11.2011 (extracted supra). The ld.CIT(A) has examined these aspects in the light of this order and observed that the assessee is entitled to exemption provided in section 10(23C)(iiiab). The question before us is what is the material collected by the AO in this assessment to deny this benefit to the assessee. A perusal of the assessment order would indicate that he has not made reference to any circumstances or documents. Similarly, the department has merely filed appeal for the sake of filing, otherwise it has also not placed any document on record which can suggest that the assessee does not fulfill criterion contemplated in section 10(23C)(iiiab). - Decided in favour of assessee.

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• 2017 (4) TMI 453
  Penalty u/s 271AAA - Whether the assessee has disclosed manner and substantiate that manner? - Held that:- The assessee has admitted additional income of Rs. 23 crores whose break up has been given in the statement itself. Name of the assessee is available at serial no6. This statement is based on the noting found in the diary. Deponent has duly explained that amounts mentioned against each entity was in coded word viz. instead of Rs. 5 lakhs it should be read as 5 crores two “Os” are to be added. He further disclosed that this is the net taxable income written in this diary. Thus, he has offered an income of Rs. 1.14 crores. The assessee has paid taxes as well as interest. The dispute between the assessee and Revenue pertained to condition no.2 that is whether the assessee has disclosed manner and substantiate that manner. In order to evaluate circumstances pertained to this condition, we find that reply to question 15 would show that group had different projects which have constructed building, thereafter, they have excluded certain amounts on a net basis from these projects, which were not accounted in the books. On account of search and seizure of the incriminating material, this net income was offered for taxation. The manner was disclosed as out of various housing projects constructed by the group. Apart from these questions, no other question relating to manner and substantiate earning of such income was asked from the assessee during the course of assessment proceedings. The AO has nowhere asked the assessee to demonstrate the manner or substantiate that manner. Thus, we are of the view that the ld.CIT(A) has rightly deleted the penalty - Decided in favour of assessee

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• 2017 (4) TMI 452
  TPA - AMP expenses to be an international transaction - Held that:- It is a matter of record that the Hon’ble High Court in Sony Ericsson (2015 (3) TMI 580 - DELHI HIGH COURT) has held AMP expenses as an international transaction. It can be seen that in some later decisions, view taken is at variance. Equally, the tribunal is also not consistent in its stand. When the TPO in the instant case held AMP expenses to be an international transaction, he did not have any occasion to consider the ratio laid down in several judgments of the Hon’ble jurisdictional High Court, which is now available for consideration. Respectfully following the predominant view taken in several Tribunal orders of co-ordinate benches, we are of the considered opinion that it would be in the fitness of things if the impugned order is set aside and the matter is restored to the file of TPO/AO for a fresh determination of the question as to whether there exists an international transaction of AMP expenses. If the existence of such an international transaction is not proved, the matter will end there and then, calling for no transfer pricing addition. If, on the other hand, the international transaction is found to be existing, then the TPO will determine the ALP of such an international transaction in the light of the relevant judgments of the Hon’ble High Court, after allowing a reasonable opportunity of being heard to the assessee Addition on account of difference in the closing stock valuation as per section 145A on accounting of non-inclusion of Special Additional Duty (SAD) - Held that:- The assessment year under consideration is 2010-2011. Section 145A, which was inserted by the Finance (No.2) Act, 1998 with effect from 1.4.1999, has been made applicable from the assessment year 1998-1999. It provides that the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head “Profits and gains of business or profession” shall be in accordance with the method of accounting regularly employed by the assessee and further adjusted to include the amount of any tax, duty, cess etc. paid or incurred by the assessee to bring the goods to the place of its location as on the date of valuation. According to the prescription of this section, which is applicable to the year under consideration, the amount of tax, duty, cess etc. is liable to be included in the value of purchases, sales, opening and closing stock. It is not appropriate to include the figure of SAD only in the figure of closing stock without modifying the figures of purchases, sales and opening stock. As the AO has not adjusted all the relevant figures with the amount of tax, duty, cess etc., we set aside the impugned order and restore the matter to the file of A.O. for deciding it afresh on the provisions of section 145A.

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• 2017 (4) TMI 451
  Determination of total income u/s 143(1) - wrong figure of disallowance under partnership remuneration - mistake committed by the assessee resulted in the error creeping in the assessment order - Held that:- The assessee had genuinely committed a mistake in mentioning the wrong figure of disallowance under partnership remuneration which was duly brought to the notice of the revenue at the time of appellate proceedings. But both the authorities failed to appreciate the contentions of the assessee comprising of genuine typographical error and fastened unreasonable tax liability on the assessee. We find lot of force in the argument of the ld. AR and we are convinced with the explanations given by the ld. AR as stated supra as they are completely borne out from the facts on record. In the instant case, the ld. AO also had not disposed of the rectification petition filed by the assessee on 9.7.2013 pointing out the aforesaid mistake. We find that the ld. CIT(A) upheld. the action of the ld. AO on the ground that the assessee had not filed any revised return of income to justify its claim. We would. like to mention here in this regard that it is well settled that the revenue cannot take undue advantage of the ignorance of the assessee or genuine mistake committed by the assessee and is always duty bound to assess only the real income of the assessee. See ACIT vs Rupam Impex [2016 (1) TMI 1114 - ITAT RAJKOT] We direct the ld. AO to grant relief to the assessee. Accordingly, the grounds raised by the assessee are allowed.

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• 2017 (4) TMI 450
  Nature of loss - forex loss or busniss loss - carry forward of the business loss - whether loss in question ought to have been allowed by the AO in the light of the admitted position that the loss and finance costs were genuine business losses? - Held that:- The only basis on which the AO could have successfully denied the claim of the Assessee was to show that the forex loss and finance cost were incurred post search with a view to reduce the income surrendered in the course of search. The finding of fact by the CIT(A) in this regard is that forex loss incurred by the Assessee was not post search event to reduce the taxability of additional income as alleged by him as forex transactions were carried out by the Assessee throughout the relevant financial year and not post search period. - This finding of fact was not challenged before us as these facts were not disputed even by the AO in the order of Assessment. Therefore forex loss and financial costs were not incurred by the Assessee in the year under consideration for the first time to reduce the taxability of the additional income offered for taxation. It is not disputed that the sum of Rs. 30 crores offered to tax in the course of search was duly credited in the profit and loss account. Thus the Assessee has complied with the surrender made at the time of surrender. There is nothing brought on record by the revenue to show that the sum of Rs. 30 crores offered in the course of search as undisclosed income was net of any other loss of the Assessee. In the circumstances, as per the provisions of section 70(1) of the Act, which provides that where the net result for any assessment year in respect of any source falling under any head of income, other than "Capital gains", is a loss, the assessee shall be entitled to have the amount of such loss set off against his income from any other source under the same head, will apply. In the case of Assessee there is no dispute that the loss of Rs. 14,90,97,080/- computed by the AO as per the assessment order is business loss and the additional income of Rs. 30 crores admitted by the Assessee in the course of search operation is the business income. Thus they are income and loss under the same head from different sources. Both the loss and income are assessable under the head "Profit and gains from Business or Profession". Thus, as per the provisions of section 70(1) of the Act, loss incurred by the Assessee from one source is allowable as set off from the income of another source under the same head. Therefore, there is no reason to assess the business income of Rs. 30 crores separately and allow the carry forward of the business loss of Rs. 14,90,97,080/-. The action of the AO in doing so was contrary to the provisions of the Act. We therefore find no grounds to interfere with the order of the CIT(A) - Decided against revenue

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• 2017 (4) TMI 449
  Disallowance of property expenses - Held that:- We find that the ld DR did not advance any argument on the subject mentioned deletion of disallowance. On the contrary, the ld AR relied on the order of the ld CIT(A). We find that the assessee had submitted that the expenses were incurred towards maintenance of property located at King’s Court, Calcutta which is situated just adjacent to the registered office of the assessee and it was used for the purpose of business only. We find that the ld CIT(A) had observed that on perusal of the details filed thereon, the said expenses related to mainly salaries to the maintenance staff, staff uniform including washing charges, service charges for lift, municipal taxes etc. We find that the said expenses are not in the nature of capital expenditure and also not personal in nature. Hence the same are squarely allowable as deduction u/s 37 of the Act. Carry forward of losses of amalgamating company in the hands of the amalgamated company - Held that:- The amendment brought in section 72A(2)(ii) of the Act is only procedural in nature. The amendment brought in section 72A(2)(ii) of the Act had shifted from stringent measures to be complied with to the relaxation scheme for the benefit of the assessee. Hence the same is a beneficial provision intended to cure the genuine hardship that had been hitherto created to the assessee. Hence the same would have to be held retrospective in operation. We have already held the purpose of the amendment brought in section 72A(2)(ii) of the Act hereinabove and the amendment brought in thereon is only procedural in nature and hence respectfully following the aforesaid Hon’ble Supreme Court and Hon’ble Jurisdictional High Court decisions supra, we hold that the procedural amendment would have to be retrospective in nature and hence the same is applicable for the Asst. Year 1996-97 in the hands of the amalgamated company and accordingly the loss of the amalgamating company shall be eligible to be carried forward in the hands of the amalgamated company. We hold that the ld CIT(A) had rightly granted relief to the assessee by allowing the benefit of carry forward of losses pertaining to the amalgamating company in the hands of the amalgamated company (assessee herein). Accordingly, the grounds raised by the revenue are dismissed.

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• 2017 (4) TMI 448
  Interest under sec.234-B liability - TDS liability u/s 195 - liability of the assessee to pay advance tax - Held that:- Under Sec.195 there is an obligation on the payer, i.e. any person responsible for paying to a non-resident, to deduct income tax at source at the rates in force from such payments excluding those incomes which are chargeable under the head 'Salaries'. Therefore, the entire tax is to be deducted at source which is payable on such payments made by the payee to the non- resident. Sec.201 of the Act lays down the consequences of failure to deduct or pay. These consequences include not only the liability to pay the amount which such a person was required to deduct at source from the payments made to a non-resident but also penalties etc. Once it is found that the liability was that of the payer and the said payer has defaulted in deducting the tax at source, the Department is not remedy-less and therefore can take action against the payer under the provisions of Sec.201 of the Income Tax Act and compute the amount accordingly. No doubt, if the person (payer) who had to make payments to the non-resident had defaulted in deducting the tax at source from such payments, the non- resident is not absolved from payment of taxes thereupon. However, in such a case, the non-resident is liable to pay tax and the question of payment of advance tax would not arise. The provisions of Sec.209(1)(d) have been amended by the Finance Act, 2012 but those amendments are not relevant for the present case which relates to AY 1992-92. We therefore hold that the assessee was not liable to pay any interest under sec.234-B of the Act following the judgments referred to earlier. We find no merits in the relevant grounds of appeal of the revenue wherein the revenue has challenged the order of the CIT(A) holding that charging of interest u/s.234B of the Act in the present case was not in accordance with law. Levy of interest u/s.220(2) - Held that:- CIT(A) has not given any finding as to whether interest is chargeable u/s.220(2) of the Act or not. He has only directed the AO to follow the CBDT Circular No.334 dated 3.4.1982 and charge interest u/s.220(2) of the Act in accordance with the said circular. The Assessing Officer and the Assessee will be at liberty to put forth their claim as to whether para 2.1 or 2.2 of the CBDT Circular will apply. The CIT(A) ought to have rendered a finding on this aspect. We are of the view that the order of assessment by the AO u/s.147 of the Act as well as the order u/s.154 of the Act were only set aside in appeal and such setting aside did not render the assessment final and issues were set aside for fresh consideration by the AO. In such circumstances, the charging of interest would be governed by para 2.2 of the Circular and charging of interest u/s.220(2) as done by the AO should be held to be proper. We hold accordingly. Consequently, the relevant grounds of appeal regarding levy of interest u/s.220(2) of the Act raised by the Revenue in its grounds of appeal are allowed.

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• 2017 (4) TMI 447
  Share trading loss - business loss OR speculation loss - whether for coming to a conclusion that the principal business of an Assessee is giving of loans and advances, whether the funds deployed would be the relevant criteria? - Held that:- The decision in the case of Savi Commercial (2015 (4) TMI 554 - CALCUTTA HIGH COURT) clearly lays down the proposition that volume of loans and advances would be decisive to come to a conclusion that the principal business of a company was granting loans and advances. It is undisputed that the funds deployed in the business of granting loans and advances by the Assessee was more over a number of AYs. Thus the conclusion of the CIT(A) that the principal business of the Assessee was giving of loans and advances and therefore the Assessee was outside the mischief of Explanation to Sec.73 of the Act, is just and proper and calls for no interference. - Decided against revenue Addition on bogus sundry creditors - Held that:- In the light of the findings of CIT(A) that the income in question has been written back in A.Y.2013-14 and offered to tax, the action of AO in bringing the said amount to tax in A.Y.2008-09 cannot be sustained. Moreover, there was no material on record to show that the assessee’s liability to re-pay M/s. Swagatam Lefin Pvt. Ltd was remitted by the other party or the liability ceased to exist. Therefore the condition for invoking the provision of Section 41(1) of the Act was not satisfied. The CIT(A) was therefore fully justified in deleting the addition made by AO. Consequently ground raised by the revenue is dismissed.

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• 2017 (4) TMI 446
  Depreciation on plant machinery installed at customer's site free of cost - Held that:- The installation of equipments in the client’s premises of assessee’s equipments was necessary and part and parcel of nature of business carried on by the assessee. It cannot therefore be said that the equipments in question had not been used for the purpose of the business of the assessee. The fact that the equipments were used in the business premises of the clients cannot be the basis to disallow the claim of the assessee for deduction on account of depreciation. The decision of the Hon’ble Supreme Court in the case of ICDS Ltd. vs CIT [2013 (1) TMI 344 - SUPREME COURT] clearly supports the claim of the assessee in this regard. It is clear from the perusal of the order of AO that the AO’s objection was that since the equipments in question had not been installed at the assessee’s factory premises, it cannot be said that the equipments were used for the purpose of assessee’s business. This reason given by the AO for disallowing the claim of the assessee for depreciation cannot be sustained in view of the factual and legal position discussed as above. - Decided against revenue Disallowance of Travelling and Conveyance - CIT(A) restricted addition to 5% - Held that:- The assessee had filed complete details of reimbursement of travelling expenses in the present case before CIT(A). When these details were forwarded to the AO the AO did not find any fault. He however, has stated in his remand report that the assessee could not produce certain other details called for as to what were the other details called for is not spelt out in the remand report. It is therefore clear that there is no valid basis for sustaining the disallowance made by the AO. The CIT(A) has however has taken a conservative approach and disallowed 5% of the reimbursement of travelling expenses. We are of the view that no fault could be found with the approach adopted by CIT(A).- Decided against revenue Disallowance of Labour Supply Expenses - CIT(A) restricted addition to 5% - Held that:- We are of the view that the order of CIT(A) on this issue does not call for any interference. As already observed despite filing of all the details, the AO has given a vague remand report that some of the details called for were not furnished. In the given facts and circumstances the CIT(A) with a conservative approach sustained the disallowance of 5% of the labour supply expenses. We do not find any fault with the approach of CIT(A).- Decided against revenue Disallowance of Misc. Expenses - CIT-A allowed claim - Held that:- In the light of the admitted factual position that all details were furnished by the Assessee in the proceedings before CIT(A) and in the light of the remand report of the AO wherein no defects have been pointed out in the details furnished by the Assessee, the very basis of disallowance made by the AO did not survive. In these circumstances, the addition made by the AO was rightly deleted by the CIT(A)- Decided against revenue

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• 2017 (4) TMI 445
  Penalty u/s.271 (1)(c) - invalid notice - Held that:- The notice dated 30.12.2011 issued for initiation of penalty proceedings under section 271(1)(c) of the Act for A.Y. 2006-07 is defective and issued without application of mind and is therefore invalid and bad in law. Consequently the order dated 27.09.2013 levying penalty under section 271(1)(c) of the Act for A.Y. 2006-07 is also invalid and liable to be cancelled. In this view of the matter the impugned order of the learned CIT(A) is reversed and the additional grounds 1 and 2 raised by the assessee for A.Y. 2006-07 are allowed.

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• 2017 (4) TMI 444
  Penalty under section 271(1)(c) - whether AO has not specified charges which is to be levied against the assessee? - addition of interest u/s.24(b) - Held that:- In the assessment order while recording satisfaction for initiation of penalty, the ld.AO has recorded a categorical satisfaction that the assessee has furnished inaccurate particulars of income. The letter dated 4.2.2013 has not been placed on record by the ld.counsel for the assessee. This show cause notice has been replied by the assessee and a perusal of the reply would indicate that the assessee was duly confronted with specific charges of furnishing inaccurate particulars. Therefore, on the strength of the judgment referred to by the ld.counsel, the assessee cannot draw any benefit on facts. The charge was specific and from the reply of assessee it is not discernable that there was confusion in his mind while preparing his defense. We have confronted the assessee to explain what has operated in the minds of the assessee when he filed the return. What led the assessee to include the total interest expenditure as allowable expenditure. Neither it has been alleged that on advice of tax consultant, it was claimed as allowable expenditure, nor is the case of the assessee that without verification of the facts, he has signed the return under a bona fide mistake, which was prepared by the clerk in the tax consultant office. Under these circumstances, the ld.counsel for the assessee cannot draw benefit of the proposition laid down in the decision referred before us. Therefore, we are of the view that the ld.Revenue authorities have appreciated the facts in right perspective and we do not see any reason to interfere in the finding of the ld.CIT(A). - Decided against assessee

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• 2017 (4) TMI 443
  Belated employees contribution to PF - addition as income of the assessee u/s. 2(24)(x) - Held that:- We find that the FAA has directed the AO to verify the records and to delete the addition only after verification. In our opinion, the direction of the FAA is as per law and no appeal should have been filed with regard to the said issue. Accordingly, we decide First Ground of appeal against the AO. Addition u/s 40A(2)(b) - Restricting the remuneration to the Directors -Held that:- We have seen that while making the disallowance, the onus is on the AO and the AO has not brought any material on record as to how the remuneration paid to two Directors are excessive, no comparable on the basis of region cum industry was referred by the AO or by the ld. CIT(A) while restricting the disallowance. Considering the fact that the order of ld. CIT(A) is of non-speaking order, we restore this ground of appeal to the file of ld. CIT(A) to decide the issue afresh Carry-forward of unabsorbed depreciation - Held that:- Any unabsorbed depreciation available to an assessee on 1st day of April 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001, thus once the Circular No.14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997-98 upto the A.Y.2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever See case of General Motors India Pvt. Ltd [2012 (8) TMI 714 - GUJARAT HIGH COURT] - Decided aganst Revenue.

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• 2017 (4) TMI 442
  MAT computation - inclusion of long term capital gain earned by a partnership firm, in which the assessee is the major partner, as part of book profit of the assessee computed u/s. 115JB - Held that:- As consistent with the view taken by the co-ordinate bench in the case of M/s. Rahil Impex Pvt. Ltd. (2016 (6) TMI 1199 - ITAT MUMBAI), we set aside the order passed by the learned CIT(A) and direct the Assessing Officer to exclude share income from partnership firm while computing book profit u/s. 115JB of the Act.

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• 2017 (4) TMI 441
  Rate of depreciation allowable on computer software - Held that:- In the light of the precedent in the assessee’s own case, we deem it fit and proper to direct the Assessing Officer to allow the depreciation on computer software @ 60%. Accordingly, on this issue assessee succeeds. Disallowance made under section 14A - Held that:- CIT(A) following the judgment of Godrej & Boyce Mfg. Co. Vs. DCIT (2010 (8) TMI 77 - BOMBAY HIGH COURT) correctly noticed that rule 8D of the Rules was not applicable for the instant assessment year and that the same was applicable prospectively from assessment year 2008-09 onwards and, therefore, he disagreed with the action of the Assessing Officer and has corectly directed the Assessing Officer to restrict the disallowance under section 14A of the Act to2% of the exempted income, which came to Rs. 10,39,345/-. - Decided against assessee

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• Customs

• 2017 (4) TMI 421
  Misdeclaration of quantity of goods in terms of weight - import of polyester fabrics - utilisation of Duty Free Replenishment Certificate (DFRC) licence for clearance despite clear ineligibility - Held that: - the rival contentions revolve around the classification of the product. The claim of the importer that benefit of a split verdict should favor the assessee may be valid for invoking penal provisions but would be inappropriate where the dispute pertains to the levy of duty as prescribed by the law which brooks no such tolerance - the acceptance of the claim of irrelevance of weight in relation to assessment has also failed to address the issue of utilisation of a licence that was allegedly not permissible to be used for import of the impugned goods - Matter is remanded back to adjudicating authority to consider all the allegations in the notice and issue a fresh order - appeal allowed by way of remand.

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• 2017 (4) TMI 420
  Prohibited goods - import of old and used furniture, not more than 10 years old - confiscation on the ground that import of the goods more than 10 years old was not permitted - the appellants are service provider - Held that: - The term plant would include whatever apparatus is used by a businessman for carrying out his business. The appellants are in business of providing service on financial market like identical in security and funds. In terms of the definition of capital goods provided in the EXIM Policy, it can be seen that the capital goods include any plant required for rendering services - In the instant case, the nature of services provided by the appellant is such that even furniture would fall under the category of capital goods used for providing services. In these circumstances, the defence of the appellant that import policy allows import of second hand capital goods has merit - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 419
  Classification of the technical documents which were imported by the appellants for the use in setting up spin drawing winding machine - It is the case of the appellants that the said drawings are correctly classifiable under chapter heading number 4911 1090 while it is the case of the revenue that the drawings are correctly classifiable under chapter heading number 8445 40 - Held that: - the value of the documents were already considered and included by the revenue for levy and discharge of Customs duty. These documents were only drawing required for assembly of the machine, the same cannot be by any stretch of imagination considered as parts/ components of the machine and merit classification under 8445 - the impugned order classifying the technical documents under chapter 84 is unsustainable The technical documents are correctly classifiable under chapter 49 - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 418
  Classification of imported goods - empty bottle Inspector Morella number Lynott Tronic 735M 2 - whether the machinery imported by the appellants merits classification under Customs tariff heading number 8422 or 9031? - Held that: - The use of the machines in the factory of the appellant is not in dispute. The manufacturing activity, as explained before us as well as before the adjudicating authority, is PET bottles are formed, inspected and filled with aerated water sealed, packed and cleared. The use of the machine which are imported, as explained by the learned Counsel, is just after the forming of the PET bottle. If that be so, we find that the explanatory notes to the HSN clearly support the case of the appellant - the explanatory note of HSN to chapter 90 does not support the case of the revenue as the said explanatory notes talks about stand-alone test bench or equipments which is not in conjunction with any machinery. The machines imported by the appellant being used in conjunction with form, fill and seal machine, merits classification under CTH 84 2230 00 and eligible for benefit of N/N. 21/2002 - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 417
  Project import - Exemption from ADD - N/N. 6/2002-CE dt.1.3.2002 - denial on the ground that the device as a whole was not imported - Revenue’s objection was that since N/N. 21/2002-Cus. dt. 1.3.2002 was issued for power generation projects under Project Import Registration, simultaneous benefit shall not be allowed under N/N. 6/2002-CE dt.1.3.2002 - whether the Additional Duty of Customs is exempt on Turbine imported through Tuticorin Port in terms of N/N. 6/2002-CE dt. 1.3.2002 while Customs duty exemption under N/N. 21/2002-Cus. dt. 1.3.2002 was granted to the appellant under project import registration? - Held that: - exemption is granted at public cost subject to certain conditions, stipulation as well as limitations which cannot be very casually to be applied to interpret the intention of an exemption notification. That requires very strictly interpretation so that exchequer does not suffer by virtue of exemption granted liberally. Law is well settled that if by a prima facie consideration, of exemption is grantable, then liberal approach is permissible. But that is not the case here. Prima facie, Turbine does not produce energy without being integrally connected to other energy producing devices. Therefore any grant of exemption benefit of additional duty of customs to turbine shall defeat purpose of the law and shall cause loss to the public revenue. Accordingly, appellant not being entitled to the grant of exemption under N/N. 6/2002-CE, appeal is dismissed - decided against appellant.

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• PMLA

• 2017 (4) TMI 415
  Money laundering - offence - order of attachment of the bank accounts in exercise of powers under section 102 of the Cr.P.C. read with section 65 of the PMLA - Held that:- A bare reading of section 5 would show that for the authorised officer (not below the rank of Dy. Director) to exercise power of provisional attachment, it is no longer necessary, that the person, who is in possession of any proceeds of crime should have also have been charged for the commission of a scheduled offence. The Act 2 of 2013 has deleted Clause (b) of Sub-Section (1) of Section 5, as it stood prior to the amendment. Clause (c) of Sub-Section (1) of Section 5, as it stood prior to the 2013 amendment, is now shown as Clause (b) in the amended statute. Consequently, the designated officer can provisionally attach a property which, does not concern a person charged with a scheduled offence as long as the following ingredient is found: he has reason to believe, based on the material in his possession, that a person is in possession of proceeds of crime and, such proceeds, are likely to be concealed, transferred or dealt with in any manner which may result in frustrating the proceedings relating to confiscation of proceeds of crime. Therefore, the contention advanced on behalf of the writ applicants that no order of attachment could have been passed unless in relation to the scheduled offence, a report was forwarded to the Magistrate under Section 173 of the Cr.PC is, according to me completely untenable. The first proviso applies if at all to the persons who are charged with the scheduled offence. It has no applicability to the persons other than those charged with the scheduled offence. The first proviso, however, has another exception carved out in the form of the second proviso to Section 5(1) of the PMLA. Thus, in effect, even vis-a-vis persons against whom proceedings are taken out qua scheduled offence, the power of provisional attachment can be exercised provided the conditions stipulated in the second proviso are fulfilled. The words used in the opening part of the second proviso make it clear that it takes into account "any property" of "any person" who is in possession of the proceeds of crime. The limitation of attaching properties of persons who are charged with the scheduled offence or the limitation on attachment of properties, only when persons accused of having committed scheduled offences are charged, has been done away with. Whether the concerned officer could have taken recourse to the second proviso to Sub-Section (1) of Section 5 in the instant case?- Held that:- In order to trigger the second proviso, the authorised officer (not below the rank of Dy. Director) should have reasons to believe on the basis of material in his possession that if, the property in issue, which is involved in money-laundering is not attached, the non- attachment of the said property is likely to frustrate "any proceeding" under the Act. While the words 'reasons to believe' are wide in their import, it cannot include a mere suspicion or ipse dixit of the authorised officer. The belief of the authorised officer should lead him to form an honest and reasonable opinion based on reasonable grounds. [See: ITO Vs. Lakhmani (1976 (3) TMI 1 - SUPREME Court) and Naveen Chandra Vs. WTO (1980 (1) TMI 60 - GUJARAT High Court )] The reasonability of the grounds which lead to the formation of belief warranting provisional attachment is tested from the point of view of whether or not they are germane to the formation of belief that if, provisional attachment is not ordered, it could lead to frustration of proceedings under the Act. Therefore, if the grounds are relevant and have nexus to the formation of belief then, of course the designated / authorised officer would have the necessary jurisdiction to take action under the Act. What is required to be examined is not the adequacy or sufficiency of the grounds but the existence of belief. In coming to this conclusion, in my view, all that one is to examine, is that, whether there was some material which, gave rise to a prima facie view that if provisional attachment was not ordered, it would frustrate proceedings under the Act. Once the adjudicating authority comes to the conclusion that the property in issue is involved in money-laundering, he is required to confirm under Sub-Section (3) of Section 8, the attachment made Sub-Section (1) of Section 5, by an order, in writing. Upon such finding being recorded, the attachment of the property in issue, will continue, during the pendency of proceedings relating to offence under the PMLA or, under corresponding law of any other country before a competent court of criminal jurisdiction outside India. In case in the trial of the offence under PMLA, the special court, records a finding that the offence of money-laundering, has been committed, it shall order that such property involved in money-laundering, which has been used in the offence of money-laundering, shall stand confiscated. If a converse finding is reached then, the property in issue, will stand released. Provisions to this effect are contained in Sub- Sections (5) and (6) of the Act. Therefore, the manner in which the attachment proceedings are legislatively structured, indicate, that when, the designated/authorised officer orders provisional attachment, based on the material available with him, it is a tentative view, taken, keeping in mind that, if provisional attachment is not ordered, it could lead to frustration of proceedings under the PMLA. It is not unknown that trial of offences both under the PMLA Act as also of scheduled offences, often takes considerable time and if, power of provisional attachment is not exercised where, circumstances demand and jurisdictional facts exist, it could result in defeating the very purpose for which, PMLA has been enacted. If properties, which reflect the proceeds of crime change hands, it could lead to creation of bonafide third party interest which may, make it difficult, if not impossible, for the concerned authorities, to retrieve the proceeds of crime. For the foregoing reasons, this application fails and is hereby rejected. Notice is discharged. However, let me remind the authority concerned that the order of attachment of the bank accounts in exercise of powers under section 102 of the Cr.P.C. read with section 65 of the PMLA should not continue for an indefinite period of time.

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• Service Tax

• 2017 (4) TMI 440
  Refund claim - N/N. 41/2007-ST dated 06.10.2007 - Terminal Handling Charges, other Port Services, Fumigation Expenses - denial on the ground that the services are not port services - Held that: - The said issue came up before this Tribunal in the case of M/s SRF [2015 (9) TMI 1281 - CESTAT NEW DELHI], where it was held that exporter should not be unduly burdened with a condition to establish that the service provider was registered under port services - Terminal Handling Charges, Other Port Services and Fumigation Services are covered under port services, therefore the appellant is entitled for refund claim. Refund claim - Testing, Inspection and analysis services - denial on the ground that the appellant has not produced the agreement for those services - Held that: - the agreement is not requirement and the same is only procedural requirement for the same and in the case where there is no agreement, the appellant cannot be asked to produce the agreement - the appellant is entitled for refund claim on Testing, inspection and analysis services. Refund claim - Courier charges - denial on the ground that IEC code number of the appellant is not mentioned on the invoices issued by the service provider - reliance was placed in the case of Amar International [2015 (7) TMI 100 - CESTAT MUMBAI], where it was held that There is no dispute that the details of the appellant/exporter as also description of goods are mentioned in these invoices under the circumstances the objection can at the most be called procedural infirmity - the appellant is entitled for refund claim on the courier services. Refund claim - GTA service - denial on the ground that the appellant has not produced the relevant documents for entertaining to their refund claim - Held that: - as the appellant is preferred to produce the relevant documents in support of the services received by the appellant, the matter needs examination at the end of the adjudicating authority - matter on remand. Appeal allowed - part matter on remand and rest appeal allowed in favor of appellant.

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• 2017 (4) TMI 439
  Whether, the appellant in the capacity of recipient of service can pay service tax from its cenvat account? Held that: - the issue involved in this case is no more res-integra in view of the judgment of Hon’ble Gujarat High Court in the case of Commissioner of Central Excise and Customs Vs. Panchmahal Steel Ltd., [2014 (12) TMI 876 - GUJARAT HIGH COURT] where it was held that though the assessee was liable to pay service tax on GTA Service, it could have utilized Cenvat credit for the purpose of paying such duty - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 438
  Business auxiliary service - incentives received - commission on cargo booked by IATA agents - short paid tax - The impugned order appears to hold that the unclaimed amount is commission received as General Sales Agent and liable to tax - Held that: - expression ‘gross amount charged’ in Section 67 of Finance Act, 1994 is limited to the consideration taxed in the impugned order because the expression ‘gross amount charged, is not an isolated phrase but to be read in conjunction with the expression ‘for such service provided’. Consequently there is no scope for taxing the amounts transferred to IATA agents as consideration for service rendered by assessee. Cum-tax valuation - target incentive - Held that: - As the amount is not evidenced as receipts for services but is merely deemed to be so, it is plain that tax has not been collected on this amount. Moreover the amount paid by the airline is a consequence of contractual terms which does not admit to additional payment of tax on the contracted amount. In accordance with principles of equity, the amount on which tax has been collected should be considered as including the tax component. Likewise, the commission received as General Sales Agent on cargo bookings effected by IATA agents is covered by contractual agreement which, too, does not provide for tax liability on the amount paid by the airlines. Consequently, we find that they are entitled to ‘cum-tax’ valuation of services on which tax has been computed. This would reduce the tax liability, interest liability and penalties arising therefrom. Penalty - Held that: - considering the promptitude with which payments were made along with interest, penalty u/s 76 of Finance Act, 1994 imposed in connection with the first notice is not warranted and is aside. Appeal disposed off - decided against Revenue.

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• 2017 (4) TMI 437
  Refund - N No. 41/2007-S.T., dated 6-10-2007 - Held that: - a part of the period in some of the cases and whole of the period in one of the cases is subsequent to the introduction of the said Notification, Revenue’s objection of denial of refund claims is unsustainable. Accordingly, we remand the matters to the original adjudicating authority for examining the period in question and to decide the same according to law - Appeal allowed by way of remand.

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• 2017 (4) TMI 436
  Condonation of delay - Period of limitation - Held that: - As the reason stated by ld. Counsel for the appellant that the accountant left the job and demand being on lower side and the status of the appellant can be understood that appellant is poor person. In that circumstances, it would be in the interest of justice to grant an opportunity to the appellant of being heard on merits - Appeal allowed by of remand.

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• 2017 (4) TMI 435
  Imposition of penalty u/s 78 of FA, 1994 - power of revisional authority - appellant case is that initially in the SCN, there was no proposal to impose penalty u/s 78 of the FA, 1994, thus, the revisionary authority has no power to impose penalty u/s 78 of the FA, 1994 - Held that: - The said SCN was never reviewed, therefore, no authority can go beyond the SCN dated 21-2-2007. Admittedly, the Revisionary Authority has gone beyond the allegation of the SCN dated 21-2-2007 - the order of Revisionary Authority to impose penalty on the appellant u/s 78 of the FA, 1994 is illegal - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2017 (4) TMI 434
  Maintainability of appeal - dismissal on the ground that the panchnamas, statements by the appellants are illegible and some of the statements are in vernacular language (Gujarati) and not translated ones - The Appellate Tribunal was further of the view that the appeal was of 2006 and hence, there was no reason to keep it pending - Held that: - sub-rule (1) of rule 11 of the rules, the Tribunal can upon sufficient cause being shown, in its discretion, accept a memorandum of appeal even if it is not accompanied by the documents referred to in rule 9 or is in any other way defective, and in such cases may allow the appellant to file such documents, or make necessary amendment within such time as it may allow. Under sub-rule (2) of rule 11, the Tribunal may reject the memorandum of appeal referred to in sub-rule (1) if the documents referred to therein are not produced or the amendments are not made, within the time-limit allowed. The rule, however, provides for rejection of memorandum of appeal at the threshold, and does not provide for rejection of an appeal which has been entertained at the initial stage. Having regard to the provisions of rule 11 of the rules, it is evident that at the stage of filing of memorandum of appeal, the same was found to be in order, inasmuch as, the appeal has been entertained at that time and has also been admitted. The stay application filed by the petitioners has also been heard and the petitioners have been granted relief. The very fact that the appeal has been admitted by the Tribunal after hearing the parties, is indicative of the fact that it has been found to be maintainable. Moreover, when the memorandum of appeal has not been rejected by the Tribunal under sub-rule (2) of rule 11 of the rules and when the Registrar/Deputy Registrar or any other authorised officer has not returned the specified documents or set of documents as contemplated under subrule (5) of rule 16, and the appeal has been admitted, it can be safely presumed that the requirements of rules 9 and 16 of the rules were duly complied with at the relevant time - an appeal which was maintainable at one stage of the proceeding, after due compliance with the provisions of the rules, cannot become non-maintainable merely because the documents submitted at the relevant time have over a period of time become faint and illegible. At best, the party can be called upon to remove the defect and provide legible documents, however, that cannot be a ground for dismissal of the appeal, and that too, on the ground of maintainability. Moreover, when there is no provision of law which provides for production of documents as stipulated by the Tribunal while dismissing the appeals, the Tribunal is not justified in perfunctorily dismissing appeals on grounds which are not envisaged under any statutory provision. The appeal as well as the interim orders made therein are restored - petition allowed - decided in favor of petitioner.

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• 2017 (4) TMI 433
  Jurisdiction - power of Commissioner (Appeals) to condone delay - The entire ground of the revenue in their appeal is that the Commissioner (Appeals) has condoned the lapses u/r 96ZM whereas the power for condoning such lapse is vested only with the jurisdictional Commissioner and the Commissioner (Appeals) has no power to exercise the jurisdiction of the Commissioner - Held that: - As per Rule 96ZM, only jurisdictional Commissioner has power to condone the lapse, therefore the Commissioner (Appeals) cannot exercise the power which is vested in Commissioner. The right course on the part of the Commissioner (Appeals) was that he should have directed the adjudicating authority to first ascertain the decision of the Commissioner on the issue of condoning the lapse and thereafter pass a reasoned order - matter remanded to the original adjudicating authority with a direction that the respondent shall approach to the Commissioner for the same and after disposal of such matter by the Jurisdictional Commissioner the adjudicating authority shall pass a fresh order - appeal allowed by way of remand.

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• 2017 (4) TMI 432
  CENVAT credit - fake invoices - it is alleged that the appellant has not received the goods physically and have received only the invoices on the strength of the appellant taken the cenvat credit - Held that: - the invoices issued by the dealer shows the address of the manufacturer supplier who has not been investigated at all. Moreover, the transporter vehicle number is also mentioned on the invoices but either transporter is found non existence or transporter did not come forward for verifying the facts. The Revenue has not made any effort to find out the transporter and to ascertain the true facts whether the goods have been transported to the appellant or not. In the absence of any corroborative evidence in support of the statement made by the supplier (dealer), the cenvat credit cannot be denied to the appellant in the light of the decision in the case M/s ANG Metal Recycling Pvt. Ltd. [2016 (6) TMI 271 - CESTAT CHANDIGARH] - as no corroborative evidence produced by the Revenue, therefore, the cenvat credit cannot be denied to the appellant - appeal allowed - decided in favor of assessee.

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• 2017 (4) TMI 431
  CENVAT credit - MS items like MS angles, channels, steel pipes etc., used for the purpose of repair - denial on the ground that items being used for non-manufacturing purposes - Held that: - identical issue has come up before the Tribunal in the case of Hindustan Zinc Vs. CCE, Jaipur [2013 (3) TMI 427 - CESTAT NEW DELHI], where it was held that the items used for repair and maintenance of plant and machinery would be eligible for Cenvat credit. The CENVAT credit is allowable only on such items used for maintenance and repair of plant and machinery. In the impugned order, such bifurcation has not been made by the lower authorities. Hence the impugned order set aside and matter remanded to the original adjudicating authority only, for the limited purpose to cause such bifurcation - appeal allowed by way of remand.

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• 2017 (4) TMI 430
  Valuation - hosiery goods - unjust enrichment - Revenue alleged that excise duty element having been disclosed in the invoices issued by the appellant such duty element was realized by it and was unjustly enriched at the cost of the exchequer - Held that: - Appellant has clearly depicted respective invoices through which the goods were sent to consignment agent and the corresponding bills issued by the consignment agent disclosing the price in respect of sale of those goods. Appellant demonstrated that in no case the price quoted in invoice has exceeded the MRP charged by the consignment agent - Appellant is entitled to reasonable opportunity of hearing to demonstrate to the authority as to its claim that it was not been unjustly enriched - appeal allowed by way of remand.

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• 2017 (4) TMI 429
  CENVAT credit - welding electrodes used for fabrication and repair and maintenance of capital goods - Held that: - the appellant had explained that the MS items were used for repair and maintenance of plant and machinery. The Department has no case that they conducted an inspection in the premises of the factory after receiving this reply. There is no case for the Department, that appellant has diverted the MS items procured by them - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 428
  CENVAT credit - debonding of EOU - Credit on imported capital goods, raw material and indigenous raw material at the time of de-bonding of a 100% EOU - Held that: - The specific inclusion of the proviso in respect of the capital goods meant that the cenvat credit should be extended only to that extent and applicability of the Cenvat Credit Rules to raw materials and inputs, at the time of bonding by necessary implication stood excluded. As regards the Cenvat Credit on raw materials on account of wastage involving Rs. 12,022/-, assessee had taken credit of Rs. 12,022/- on duty paid on account of wastage of raw materials. Any waste of raw materials cannot be inputs and are not used in final product. Further Rule 2(l) specifically states input means all goods used in the factory for the manufacture of final products. Accordingly, the assessee is not eligible to take Cenvat credit on such waste. As regard the admissibility of cenvat credit on imported capital goods, cenvat credit has been denied on the ground that the assessee did not produce TR-6 challan, bills of entries or invoices containing the details of duty payment - Held that: - The appellants have enclosed the copies of the official correspondences stating that (page 53 and 51 of the paper book) all the TR-6 challans in question were submitted to the department even before availing the cenvat credit. Since production of challans and eligibility thereof for cenvat credit on capital goods is a question of fact, which needs to be verified, the same is liable to be remanded to the adjudicating authority for verification. The order of the Commissioner is upheld in respect of duty, interest and penalty in relation to raw materials and waste - In respect of the capital goods, the matter is remanded back. On the issue whether the assessee is eligible to take credit on the basis of TR-6 Challans, the Commissioner (Appeals) has given no findings on the same, since the credit has been disallowed in respect of imported capital goods, raw materials and indigenous raw material. We agree with the Commissioner that the issue is superfluous in view of his disallowing the credit. Appeal allowed by way of remand.

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• 2017 (4) TMI 427
  CENVAT credit - travel for marketting - Survey and Mapping Service - C&F agency service - services of Consulting Engineer and Management Consultant - subscription services - mechanical disallowance - Held that: - Integral connection of the expenses to the manufacturer appears and there is inextricable link between these two. Therefore appellant succeeds in its claim and in view of the relief granted substantially, there shall be no penalty. Repairs and maintenance service - Held that: - they are integral part of the manufacturing concern for which denial of CENVAT credit of the service tax paid on such services is ruled out. Air Travel Agency service - tour operator services - Held that: - services of such agencies were used to book tickets and carry out the travel by the officers for marketing as well as business promotion. Therefore Cenvat credit of the paid on such services is allowed. The renting service availed relating to regional sales office service was for the purpose of business for which CENVAT credit is allowable. Appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 426
  Clandestine removal - cotton yarn - demand of duty with interest and penalty - Id. counsel vehemently opposed the adjudication on the ground that when the principal appellant RRM had sent the goods for the purpose of job work, there is no fault that can be found against that appellant. If at all there is any breach of law, that may be attributable to job worker and duty liability shall be confined to the job worker exonerating the appellant from the charges leveled against it - Held that: - Preponderance of probability is in favor of Revenue when appellants failed to come out with clean hands. Although appellant tried that investigation should be in dark to unearth the offence committed, they failed since self-speaking evidence came up in the course of investigation. The evidences gathered by investigation were so cogent and those could not be scrapped or rebutted by the appellant. The duty liability of Rs. 49,24,207/- evaded through such subterfuge by the appellants and demanded by the original authority under proviso to Section 11 (A) (1) of CEA, 1944, along with interest thereon, which demand been upheld by the Commissioner (Appeals) in the impugned order, does not call for any interference. For the same reasons, equal penalty imposed on the appellants under Section 11 AC ibid is also justified and appeal on this count also cannot succeed. Appeal dismissed - decided against appellant.

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• 2017 (4) TMI 425
  CENVAT credit - whether appellant not manufacturing the exempted goods, the scrap and waste generated in the course of such manufacture shall render the appellant liable to a percentage levy u/r 6 (2) of the CCR, 2004? - Held that: - Law is very clear that the rule has application where an assessee manufactures both dutiable final product as well as exempted final product. But in the present batch of appeals, appellant has not at all manufactured any exempted final product - What that was the outcome in the course of manufacture of dutiable final product was scrap. Therefore, applying the first principle of law, scrap generated not being exempted goods manufactured, that is totally ruled out from scope of application of Rule 6 (2) of CCR, 2004. When the appellant succeeds on the first principle of law, there is no need to make any further enquiry - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 424
  Filter Cake emanated from the affluent plant - excisability / marketability - the contention of appellant being on two counts i.e. there was no intention to manufacture Filter Cake and the goods itself is found to be sludge by the Appellate Commissioner, the goods not meeting the twin test - Held that: - the Explanation added to Section 2(d) of CEA, 1944 incorporated w.e.f. 10.05.2008 shall operate from that date without brining Revenue's case into its fold for levy prior to that date. Revenue thereby failed to discharge its burden of proof demonstrating that the Filter Cake came out as a product itself intended to be manufactured and traded in market under common parlance - goods therefore not excisable - appeal allowed - decided in favor of assessee.

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• 2017 (4) TMI 423
  Valuation - technical know-how fee - royalty fee - M/s Bharat Apex Industries prepares the drawings as per specification of customers and due to lack of manufacturing facilities place orders on their vendors including the Appellant for manufacture and supply of heat exchanger - whether the additional consideration would form part of assessable value? - Held that: - the issue of inclusion of the value of cost of design and drawings in the assessable value is no longer res integra. In the Apex Court Judgment of Mysore Kirloskar Ltd. Vs. Commissioner of Central Excise, Belgaum [2002 (1) TMI 117 - CEGAT, BANGALORE], the Hon be Supreme Court has held that the design and drawings were not includible in the assessable value. The agreement is not merely for design and drawings but a complete contract for technical know-how, royalty, training, sales assistance, supplies and even accounting audit of M/s Bharat Apex Industries Ltd. by public accountant selected by the licensor - inclusion of consideration for design and drawings in the price of goods is proper and correct - demand with interest sustained. Royalty is payable by M/s Bharat Apex Industries Ltd. on the ex-factory sales price of the product and the same is granted to the M/s Bharat Apex Industries Ltd. for an exclusive but non-transferable license and same is being paid by M/s Bharat Apex Industries Ltd. in connection with the marketing and sale of the product as per Para 10.2 of the agreement. There is no evidence that the burden of royalty is to be borne by the appellants. Same is therefore not includible in the assessable value of the goods. The facts of the Pepsi case are entirely different as there was integral link between the obligation of the bottlers to purchase the concentrate exclusively from the assessee and use of trademark of assessee subject to payment of royalty - demand set aside for royalty. The penalty is reduced to Rs. 1,80,000/- on the basis of pro-rata value of the technical know-how and drawing and designs. Appeal disposed off - decided partly in favor of assessee.

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• 2017 (4) TMI 422
  CENVAT credit - duty paying documents - denial on the ground that M/s. AMC had altered the description of goods from Brass Circles and Brass Strips to Brass Sheets on its invoices and thus, had passed on inadmissible cenvat credit to the appellant - Held that: - no proper investigation was conducted in the factory of the appellant to ascertain whether the disputed goods were received and utilized for the intended purpose. Rather, the statement recorded from the Director of the appellant company revels that the goods namely, Brass Sheets received under the cover of invoices were used/utilized for manufacture of the final product. No where in this statement, it has been mentioned that the appellant had not received Brass Sheets under the cover of Central Excise invoices from the register dealers M/s. AMC. Thus, in absence of any specific investigation to show non-receipt of goods by the appellant, cenvat demand confirmed against the appellant cannot be sustained - credit allowed - appeal allowed - decided in favor of appellant.

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• Indian Laws

• 2017 (4) TMI 416
  Conviction and sentence u/s 138 r/w. 141 of the Negotiable Instruments Act - Held that:- A conjoint reading of evidence of CW2 and CW3 reveals that both these witnesses had no personal knowledge about the transaction. They were not entrusted with the duty of maintaining the records of the company. They had not prepared the statement of account and had no knowledge about the genuineness of the entries reflected in Exh.'FF'. The evidence of CW3 clearly indicates that apart from the system administrator no other person had access to the server. His evidence does not indicate that he was involved in the management of the relevant activities. The evidence of CW3 therefore, does not indicate that he was occupying an official position in relation to the operation of the device and was not entrusted with a duty of the management of the relevant activities. In short, the Complainant Company had failed to prove the source and authenticity of the statement as well as the competency of CW3 to issue the certificate. In this fact situation, the findings of both the courts below are totally erroneous and contrary to the evidence on record and the relevant provisions of law and have thus resulted in miscarriage of justice. It has to be borne in mind that section 65B only relates to the admissibility of electronic records. It authenticates the genuineness of the copy/computer printout and thus absolves the parties from producing the original. This section only makes the computer output admissible on complying with the requirements of the section. It does not prove the actual correctness of the entries and does not dispense with the proof or genuineness of entries made in such electronic records. Furthermore, there is no presumption regarding the genuineness of the entries in electronic records. Hence, it was necessary for the Complainant Company to prove the correctness of the entries. In the instant case, the witnesses examined by the complainant did not have any personal knowledge regarding the entries made in the said statement at Exh.'FF' and were therefore not competent to depose about the correctness of the entries. It is also to be noted that section 34 of the Evidence Act stipulates that the entries in account books regularly kept in course of business are relevant piece of evidence and admissible. The section further states that such entries cannot be the sole basis of fixing liability on any person. In the instant case, apart from statement at Exh.'FF' the complainant company had not produced any other material to prove that the liability of the accused in respect of the amount specified in the subject cheques. Hence, the accused could not have been held guilty of the offence solely on the basis of the said statement. The offence under section 138 of the NI Act though technical, is punitive in nature. Hence, once the accused had rebutted the initial presumption it was imperative upon the complainant to prove beyond reasonable doubt that the cheques were issued towards the existing debt or liability. In the instant case, the complainant has failed to discharge this burden. As a consequence thereof, the accused could not have been held guilty of the said offence. 77. Under the circumstances and in view of discussion supra, the impugned orders have resulted in miscarriage of justice and this necessitates exercise of revisional powers. Hence, the Revision Application is allowed.

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