Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 13, 2017
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
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Salary accrued to a non-resident seafarer for services rendered outside India on a foreign ship shall not be included in the total income merely because that said salary has been credited in the NRE account maintained with an Indian bank by the seafarer.
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Levy of penalty u/s 271 (1)(c) - Effect of amendment to clause 3 (iii) and Explanation 4 to section 271(1)(c) - SC confirmed the order of HC imposing penalty wherein it was observed that the amendment is clarificatory and not substantive and would apply even to assessment year prior to April 1, 2003
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The expenses like auditor fees , ROC fee and other expenses etc. which are incurred by the assesseee company to carry out and meet legal and statutory compliances has to be allowed u/s 37(1) - AT
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Transfer - Capital Gains - the transfer of 78% of the undivided right of the land took place in the previous year relevant to assessment year 1997-98. Thus the related capital gain is not exigible to tax in the year under consideration i.e. 2001-02. - AT
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The interest income earned by the assessee from mobilization advance to contractor Railway Vikash Nigam Ltd., is rightly treated by the assessee as capital receipt which goes on to reduce the cost of capital work in progress. - AT
Customs
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Levy of anti dumping duty on low ash metallurgical coke when imported from specified countries - injury to domestic industry - there is no basis in the submission, that the losses are because of high coal prices, when importing from relating party - Levy of ADD upheld - AT
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Jurisdiction of the Officers of Directorate of Revenue Intelligence (DRI) - operation of the judgment in the case of Mangali Impex [2016 (5) TMI 225 - DELHI HIGH COURT] has been stayed by the Hon’ble Supreme Court in Union of India & Ors. Vs. Mangali Impex Ltd. [2016 (8) TMI 1181 - SUPREME COURT] - Adjudicating Authority directed to reach to his decision on the basis of outcome of the civil appeal in Mangli Impex - AT
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Overvaluation of export goods - claim of duty drawback - When Customs was made to believe on the basis of fraudulent documents and defrauded, ulterior motive and deliberate intention of the appellants came out. Their premeditated design and malafide to cause evasion is proved. - AT
Service Tax
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Rejection of VCES - The scheme itself cannot be defeated by holding that on the earlier occasion parties like the petitioners have accepted their liability - The authorities need not be so anxious to protect the government revenue and reject the applications, as are made in the present case by closing the files instantaneously. - HC
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Refund of cenvat credit for the period prior to registration of Assessee - refund should not be denied on technical grounds. - HC
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Construction and commissioning of petrol pumps for oil companies - denial of abatement - when the works contracts were not subject to service tax prior to 1.6.2007, entire demand of service tax set aside - AT
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Refund - deposit of service tax with interest on the instruction of revenue - Subsequently, CBEC clarified that service as provided by the appellant, was covered under Export of Service Rules, 2005 and the same was not a taxable service - refund allowed - AT
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Extended period of limitation - There were two earlier proceedings against the appellant regarding the tax liability as “Commission Agent” under “BAS” - No justification for the subsequent demand by invoking suppression of facts. - Demand set aside - AT
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There has been a large number of litigation and clarification, with reference to valuation of C & F Agency Service. - it is not tenable to hold that this is a fit case for invoking extended period alleging fraud, collusion, willful mis-statement or suppression of facts - AT
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Valuation - Clearing & Forwarding Agency Services - a general observation regarding mandatory ceiling of re-imbursement by itself cannot be taken as a support for excluding a portion of the value on the ground that these are re-imbursable expenditure - AT
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Classification of service - Since in this case the Appellant has undertaken only the transportation activity and the services were rendered to M/s. NEPL which is a private Ltd. concern, we hold that the services are of transportation on which the Appellant is not liable to service tax being taxable under reverse charge mechanism. - AT
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Classification of service - CHA services or C&F services - Demand of tax under reverse charge mechanism - CHA invoice shows the nomenclature “Clearing and Forwarding Division” below its name - classification cannot be determined based on such nomenclature - AT
Central Excise
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Even though the demand was confirmed for the extended period which was accepted by the appellant that alone is not the reason for imposing penalty u/s 11AC. Penalty u/s 11AC can only be imposed when it is established that there is suppression of facts on the part of the appellant - AT
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Valuation - service for sold out machine - charges collected by the appellant from customer, whom the machines were sold long back, is not includible in the assessable value of the machine - AT
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Refund claim - unjust enrichment - case of respondent-assessee is that at the stage of payment of refund, which is already sanctioned, the issue of unjust enrichment is not applicable for the reason that the department had accepted the order of sanction of refund and no appeal was filed - refund allowed - AT
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SSI exemption - interconnected units - The constitution of the two firms are different. DMGP is a Private Limited Company whereas DDIL is a Limited Company and hence they have separate legal existence and separate registrations not only for Central Excise but also for Sales Tax and other government departments - each one will be eligible for the benefit of SSI exemption - AT
Case Laws:
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Income Tax
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2017 (4) TMI 534
Addition u/s 68 - no sum found credited in the books of an assessee maintained for any previous year - Held that:- The addition made by the A.O in respect of the cash deposit in the bank account of the assessee by invoking Section 68 has to fail for the very reason that as per the judgment in the case of Shri Bhaichand N. Gandhi (1982 (2) TMI 28 - BOMBAY High Court) a bank pass book or bank statement cannot be considered to be a ‘book’ maintained by the assessee for any previous year, as understood for the purpose of Section 68 of the Act. Therefore, on this count itself the impugned addition ₹ 10,53,000/- deserves to be deleted. We find that the explanation rendered by the assessee in respect of the nature and source of the cash deposit in her bank account has been disbelieved by the lower authorities without establishing any credible infirmity or fallacy in the substantial material which was made available on record by the assessee. We are of the considered view that the assessee had not only put forth an explanation in respect of the nature and source of the cash deposit in her bank account, but rather it remains as a matter of fact that substantial material was placed on record by the assessee to fortify the genuineness and veracity of his aforesaid explanation. We find that the explanation of the assessee had been dislodged by the A.O merely on the basis of doubts, surmises and conjectures, which we are afraid cannot form a basis for making an addition in the hands of the assessee. - Decided in favour of assessee.
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2017 (4) TMI 533
Short deduction u/s. 192 - allowing exemption u/s. 10(5) towards the reimbursement of LTC/LFC claims of its employees - treating the assessee-Bank as an ‘assessee in default’ u/s. 201(1) - Held that:- On careful perusal of the provisions of s.10(5) we are of the view that the said provision was introduced in order to motivate the employees and also to encourage tourism in India and, therefore, the reimbursement of LTC/LFC was exempted, but, there was no intention of the Legislature to allow the employees to travel abroad under the garb of benefit of LTC available by virtue of s.10(5) of the Act. However, in the present case the employees of the assessee-Bank have travelled outside India and raised claims of their expenditure incurred therein. There is no dispute that the assessee-Bank may not be aware with the plan of travel of its employees initially, however, at the time of settlement of LTC/LFC bills, the employees should have placed comprehensive details before the assessee-Bank as to where they have travelled/visited and raised the claims, that means to say, the assessee-Bank was well aware of the fact that its employees have travelled in foreign countries too by availing LTC/LFC for which they were not entitled for exemption u/s. 10(5) of the Act. Such being the scenario, the assessee-Bank cannot now plead that it was under the bona-fide belief that the amounts claimed were exempt u/s. 10(5) of the Act. Thus, the Assessing Officer(TDS) was within her domain to term/charge that the assessee- Bank was under obligation to deduct TDS on such payments. Since the assessee- Bank had failed to do so, the A.O.(TDS) had rightly treated the assessee an ‘assessee in default’ u/s. 201(1) of the Act. The assessee had relied on various case laws for the proposition that its estimate is bona fide and it cannot be held to be an ‘assessee in default’ u/s. 201(1) of the Act. This contention of the assessee is without legal basis, since the assessee had made no effort to prove how its belief was formed that such foreign travel expenses would come within the ambit of sec. 10(5) of the I.T. Act. - Decided against assessee.
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2017 (4) TMI 532
Disallowance u/s 40A(3) - Held that:- The fact that assessee was forced to carry on its transportation activity through the assistance of agents is proved beyond doubt. Hence we hold that it does not make any difference whether the said agent through whom the business per se was carried on , was appointed by the assessee or by the truck owners association. The assessee had stated that out of the total consideration of hire charges paid by the assessee, a portion is also attributed towards the agency commission which is being recovered by the truck owners. Hence it could be concluded that the assessee indeed had paid commission to the agents and the same has been routed through payment made to truck owners towards truck hire charges. We also find that the Hon‟ble Rajasthan High court in the case of Smt Harshila Chordia vs ITO (2006 (11) TMI 117 - RAJASTHAN HIGH COURT) had held that the exceptions contained in Rule 6DD of the Rules are not exhaustive and that the said rule must be interpreted liberally. Thus we hold that the subject mentioned cash payments would fall under the ambit of exception provided in Rule 6DD(k) of the Rules in the facts and circumstances of the case and accordingly the provisions of section 40A(3) of the Act could not be made applicable in the instant case. - Decided against revenue
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2017 (4) TMI 531
Levy of penalty u/s 271 (1)(c) - Effect of amendment to clause 3 (iii) and Explanation 4 to section 271(1)(c) - Held that:- HC order confirmed [2016 (10) TMI 779 - ALLAHABAD HIGH COURT]. Explanation 4 to section 271(1)(c) of the Act is clarificatory and not substantive and would apply even to assessment year prior to April 1, 2003, the date on which the amendment was brought into force.
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2017 (4) TMI 530
Exemption under Section 80-IB - built, up "area" - Held that:- As decided in Commissioner of Income Tax Vs. Anriya Project Management Services (P.) Ltd. [2012 (5) TMI 196 - KARNATAKA HIGH COURT ] the definition of "built, up "area" inserted by Finance No. 2 of 2004 which name into of it of from 01.04.2005 is only prospective in nature. It has no application to the housing projects which were approved by the local authority prior to that date. Prior to 01.04.2005, in calculating the 1,500 sq. ft. of a residential unit, the area covered by a balcony was excluded. Therefore, the definition of built-up area which is now inserted has no applicable to constructions which were put up in accordance with the housing projects approved by the local authority prior to that date Submission of Revenue that Assessee sold residential units mentioning in sale deeds total area of flat which included area for balcony also, will have no relevance for question up for consideration, for the reason, that applicability of statutory provision has to be examined in the light of relevant statutory provisions and not behaviour of parties or manner in which they understood things. Thus questions (i) and (ii) are answered in favour of Assessee for the reason that specifications of flats have been considered by Tribunal in the light of rules of local bodies which approved plan. There was no otherwise restriction available in Section 80-IB(10) in respect of projects approved before 01.04.2005. - Decided in favour of Assessee Built up area of shops and other commercial establishment - Held that:- As considered applicability of amended provisions of Section 80-IB in the context whether subsequent amendment proposed to alter condition of Developer may cause a serious detriment in the process of construction and development activities. For example, if as per extent rules of local body, shops and commercial activities construction was permitted upto 10% and project was also sanctioned to Assessee allowing 10% area for commercial purposes, by applying amended provision which came into force on 01.04.2005, can it be said that Assessee has now to demolish extra coverage, meant for commercial purpose in order to bring its development activities within prescribed limits of new provision and to avail benefit under Section 80-IB(10), only because of the reason that project was not complete as on 01.04.2005. Court said that answer would have to be given in negative on the principle that planning as per law prevailing prior to 01.04.2005 has been observed and acted upon by Assessee. It has acquired vested right thereof which can not be taken away. Revenue authorities cannot be allowed to ask Assessee to do something which is almost impossible. Similar view was taken in another decision in Commissioner of Income Tax Vs. Veena Developers (2015 (5) TMI 193 - SUPREME COURT ). Thus, question (iv) answered against Revenue and in favour of Assessee. Deduction u/s 80IB (10) (a) - Held that:- Looking to objective and purpose of conditions of completion of project and the fact that it is not a provision which came for the first time altogether into existence on 01.04.2005, we are inclined to follow Madhya Pradesh High Court's judgment in The Commissioner of Income Tax, Bhopal Vs. M/s Global Reality (2015 (10) TMI 2384 - MADHYA PRADESH HIGH COURT ) and hold that Assessee in question was supposed to comply Section 80-IB(10)(a) as came to exist on amendment by Finance Act, 2004. - Decided in favour of revenue Judgments of earlier Assessment Years ought not have been followed blindly by Tribuna - Held that:= It is true that earlier judgment of Tribunal did not become final since Revenue preferred appeal in this Court but still applying rule of precedent in support of question of law, we follow the view already taken. We do not find any per se impropriety or lack of jurisdiction. Question, however, as to whether Assessee satisfied all conditions required for deduction under Section 80-IB(10) or not, has not been examined by Tribunal for the reason that it has proceeded with impression that entire amendment made by Finance Act, 2004 w.e.f. 01.04.2005 in Section 80-IB(10) would be prospective and, therefore, whether project of Assessee was complete or has obtained completion certificate and other relevant circumstances, we find, there is no discussion or finding recorded by Tribunal in all these appeals. Therefore, we leave aforesaid questions open at this stage, inasmuch in our view, it is appropriate that on these aspects, matter may be examined by Tribunal in the light of other questions answered above by this Court.
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2017 (4) TMI 529
Reopening of assessment - Held that:- The matter has to go back to the respondent for passing a speaking order on the objections and thereafter, to pass the final order of assessment. Accordingly, the writ petition is allowed and the impugned order of assessment is set aside and the matter is remitted back to the respondent to pass a speaking order on the objections raised by the petitioner, after giving an opportunity of hearing to them. Such exercise shall be done by the respondent within a period of four weeks from the date of receipt of a copy of this order. Thereafter, it is open to the respondent to pass the final order on merits and in accordance with law within a period of four weeks.
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2017 (4) TMI 528
Reopening of assessment - denial of deduction u/s 36(1)(iii) - Held that:- Where the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment, he may assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings. The argument that the Assessing Officer was not competent to pass an order of reassessment in respect of any other income which may have escaped assessment other than on which reasoned to believe have been recorded is not tenable and is turned down. - Decided against assessee. Assessee appellant has taken loan for business purposes from various sources including U.P.F.C. and Bank of Baroda and had paid interest thereon amounting to ₹ 5,93,644/-. It claimed deduction of the said amount under Section 36(1)(iii) of the Act but the authorities denied the said deduction on the ground that the assessee has given interest free advances to its partners which means that it had surplus money which could have been utilised to clear off the loan so as to reduce the interest liability. In order to get the benefit under Section 36(1)(iii) of the Act it is settled in law that only three factors are relevant namely that the assessee had borrowed money for business purpose; it has utilised it for the business; and that it had paid interest on it. In the case at hand there is no dispute that the borrowing was for business purposes, it was utilised in the business and the assessee had paid interest on it therefore, the interest so paid was deductable under Section 36(1)(iii) of the Act. Accordingly, denial of deduction on any other ground is not tenable in law. Therefore, interest amount as paid by the assessee is liable to be deducted under Section 36(1)(iii) of the Act. - Decided in favour of assessee.
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2017 (4) TMI 527
Advance receipt for sale of land - Held that:- Tribunal has come to the conclusion that in the absence of proper evidence being available and based on unverified papers and without there being any evidence substantiating the transactions, if the addition was made, there is no error in the same.We find that the aforesaid finding recorded by the Tribunal is based on due appreciation of the evidence and materials that came on record. It is a finding of fact and we see no reason to interfere into the aforesaid finding recorded by the Tribunal as far as this ground is concerned. Addition on undisclosed income for the assessment year 1996-97 - Held that:- Tribunal lost sight of the fact that the subject matter of addition was one that was already declared in the regularly filed return before the search operation and, therefore, this could not be a subject matter of block assessment. Under these circumstances, this addition was not permissible. The CIT (Appeals) also have allowed this deduction on this account alone. The Tribunal while doing so did not consider this aspect properly. Once the capital amounting to ₹ 1,79,019/- was reflected in the original returns filed before the block assessment and there was no reopening of the assessment in accordance with law with regard to the original return filed and assessment ordered, the amount could not be added in the block assessment. To that effect, an error has been committed by the Tribunal. Tribunal has committed an error in adding the capital amount as undisclosed assets when in the original regular return filed this was permitted, reopening with this assessment in the block assessment being impermissible, the addition has to be quashed. Payment of receipt of certain amount as gift from appellant's NRI brother - Held that:- Both the Assessing Officer and the CIT (Appeals) have found that the assessee has failed to prove that this amount was received as gift from the brother. The concurrent findings recorded by the Assessing Officer and the CIT (Appeals) and the Tribunal in this regard needs no consideration. To that account also, the appeals stand rejected. Payment of interest under Section 158BFA (1) - Held that:- Tribunal has simply recorded a finding that there is delay in filing of the return which is attributable to the assessee and, therefore, interest was rightly assessed. However, while doing so, the Tribunal did not take note of the finding recorded by the learned Appellate Authority, as indicated hereinabove, wherein the delay is attributed to the Department in the matter of submitting photo copies of the seized documents which resulted in delay of filing of the return and if that be so, charging of interest under Section 158BFA (1) was not permissible. Accordingly, this question is answered in favour of the assessee by holding that the delay in filing of the return is not attributable to the assessee and, therefore, interest under Section 158BFA (1) was not chargeable. To that effect also, the order passed by the Tribunal is quashed.
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2017 (4) TMI 526
Disallowance of Royalty expenses under Section 35AB - Held that:- From the impugned judgment and order passed by the learned ITAT, it appears that the learned Tribunal has deleted the disallowance of Royalty expenses of ₹ 1,12,12,352/- under Section 35AB of the Act made by the Assessing Officer, relying upon and considering its earlier order in the case of very assessee, but for earlier assessment year. It is reported that against the decision of learned Tribunal on the very issue and in the case of very assessee, but with respect to earlier assessment year, an appeal was preferred by the Revenue before this Court and the Division Bench had not admitted the appeal qua the aforesaid issue. Meaning thereby, the order passed by the learned Tribunal in the case of very assessee on the very issue, but with respect to earlier assessment year, has been accepted by the Division Bench of this Court and/or the same has not been upset by the Division Bench of this Court. Thus it cannot be said that the learned Tribunal has committed any error of law.
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2017 (4) TMI 525
Retrospectivity of amendment to Section 40(a)(ia) by the Finance Act, 2010 - Held that:- As the various High Courts have already taken a view on this very issue and in the absence of any reasons to take a different view, we see no reason to discard the same. Thus, the amendment to Section 40 (a)(ia) of the Act by Finance Act, 2010 is retrospective with effect from 1st April, 2005 as held by various High Courts.
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2017 (4) TMI 524
Additions made in the block assessment - gold and diamonds found and seized during search - Held that:- A tabulation of the additions have been circulated, being, cash introduced in capital account, Capital and credits in the accounts of M/s.RRR Testing, Net profit, various credits and consequential interest payments and on-money paid on purchase of land. The provisions of s.158 BB require that undisclosed income is to be computed solely on the basis of evidence found as a result of search or requisition of books of accounts or other documents and such other materials or information as are available with the assessing officer and relatable to such evidence. On a query from the Bench, the learned Standing counsel fairly states that the additions are based only on the returns of income filed by the wife as well as various other entities that were available with the department and are not relatable to seized material. The additions thus fail and have been rightly deleted by the Tribunal. The addition of an amount of ₹ 7,68,420/- arises from a difference in valuation viv-a-vis the assessee and the departmental valuer and is, again, not relatable to search material. In view of the aforesaid, substantial questions No.(i) and (iii) extracted above are liable to be answered against the Revenue and in favour of the assessee. Additions made in the block assessment - no opportunity to cross-examine was granted - Held that:- It is relevant to note that the present assessment emanates from a search where gold and diamonds have been found and seized. It is incumbent upon the assessee to tender an explanation about the same. The explanation tendered has to be credible and bonafide, in the absence of which, the burden placed on the assessee would not stand discharged. In view of the elements noted by us above, being the unexplainable difference between the time of alleged receipt of gold from Ganga Jewellers and the date of accounting for the same as well as the retention of the gold with the assessee for more than 1 = years till the time of return to M/s Ganga Jewellers and in the light of the fact that the assessee could not produce even basic documents such as receipt vouchers, we believe that this burden has not been discharged. The Commissioner of Income tax Appeals has dealt with the matter in a proper manner setting out the facts and appreciating them in the right perspective, taking note of the relevant factors pointed out in the earlier part of this order. We, thus reverse the order of the tribunal on this account and restore the order of the Commissioner of Income tax (appeals) to the effect that the explanation tendered by the assesee is a mere after thought to explain the excess unaccounted jewellery found on the date of search. The explanations tendered by the assessee have been made several months after the time of search. This, coupled with the fact that primary documents such as the entrustment slips have not been produced, lead us to believe that the explanation tendered is a mere after thought. We also note the statement of the proprietor of Brijesh Enterprises who confirms that the transaction was not bonafide, but an accommodation for commission. No opportunity has been sought to cross examine the proprietor and in any event, this aspect of the matter is merely incidental and in addition to the overwhelming evidence already available to disprove the verision of events adduced by the assessee. The totality of circumstances support the conclusion that the assessee has failed to discharge the burden cast upon him to explain the diamonds in his possession. In any event, the statements of Sri.Misrimal and Sri.Hemendra K.Jhaveri, proprietor of M/s Brijesh enterprises are, but one spoke in the entire wheel and the totality of the events that transpired have to be taken into consideration. Viewed in this light, the conclusion of the Tribunal on this account is unsustainable. Substantial question number (ii) is thus answered against the assessee and in favour of the department.
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2017 (4) TMI 523
Eligible for deduction u/s. 80IA - whether computing provisions of sub-section (5) of Section 80IA would apply to the years earlier than A.Y. 2009-10 or not? - Held that:- Section 80IA which has been substituted w.e.f. 1.04.2000 provides that where the GTI of an assessee includes any profits and gains derived by an undertaking from any eligible business referred to in sub-section (4), there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income, a deduction of an amount equal to 100% of the profits and gains derived from such business for ten consecutive years. Substituted sub-section (2) of Section 80IA provides that an option is given to the assessee for claiming any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate. The fifteen years is the outer limit within which the assessee can choose the period of claiming the deduction. The "initial assessment year" in the case of the assessee in A.Y. 2009-10, when the claim of deduction u/s. 80IA was made for the first time, and the current A.Y. 2010-11 is the second year of the assessee’s claim u/s.80IA. Therefore, we are of the considered opinion the assessee is eligible for deduction u/s. 80IA as claimed, therefore, the Ld. CIT(A) has deleted the addition which does not need any interference on our part. See Satbhav Engineering Ltd [2014 (1) TMI 233 - ITAT AHMEDABAD] - Decided in favour of assessee
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2017 (4) TMI 522
Allowability of exemption u/s 54EC - Held that:- Section 54 EC of 1961 Act is a beneficial provision and is to be reasonably interpreted to give effect to the intention of Parliament while legislating the said provision and it cannot be construed in manner to frustrate the intention of legislature. In this case, the assessee admittedly received payments after execution of the agreement on 06-08-2008, which were received over a period of time from 07-08-2008 to 15-11-2008 and investments of ₹ 43,51,000/- were made in NHAI/REC Bonds on 26-03-2009 which is within six months if reckoned from the date of receipt of last installment of sale consideration by the assessee on 15-11- 2008 and also is within six months from the receipt of second installment of ₹ 35,00,000/- on 26-09-2008. It is also admitted and undisputed that first installment of ₹ 19,92,750/- received by the assessee on 07-08-2008 was utilized by assessee for paying architect fee and payment of share of his brother in TDR. Considering the factual matrix of the case as discussed above, we are of the considered view that the assessee is eligible for exemption u/s 54EC of the Act and addition of ₹ 24,85,420/- made by the AO and as confirmed by learned CIT(A) is not sustainable in eyes of law and is hereby ordered to be deleted. The alternate ground raised by the assessee that capital gain on sale of TDR is not taxable has become academic and infructuous and the said question of law is kept open
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2017 (4) TMI 521
Allowing business expenses u/s 37 and claim of depreciation - suspension of manufacturing due to action under section 13(2) of SARFESI Act, 2002 by secured lenders against the assessee company - Held that:- In any case no evidence has been placed by the assessee on record to demonstrate that any attempt or efforts have been made by the assessee to do any business or to re-start its manufacturing unit at Mansa in the last 12 years since the said industrial unit in Mansa stood closed in the year 2005 till as of now in the year 2017. In our considered view, the expenses claimed by the assessee cannot be allowed as business expenses as they were not incurred wholly and exclusively for the purpose of business of the assessee as there is in-fact no business carried on by the assessee during previous year relevant to the impugned assessment year and there was also no possibility of carrying on business by the assessee in a near distant visible future keeping in view the severe and serious disability imposed by action by secured lenders under SARFESI Act and continued with the secured lenders , as mandate of Section 37(1) of 1961 Act is not fulfilled in the instant case. The secured assets of the assessee being under possession of the secured lenders during the previous year cannot be claimed by the assessee to have been put to business use both active as well passive user as both being ruled out , as it is not temporary lull in business but severe and serious disability disabling assessee to put the said asset for business user as mandated u/s 32(1) of 1961 Act to enable assessee to claim depreciation. The assessee is a single location unit entity having only one manufacturing unit in Mansa at Gujarat and Block of Assets constituted mainly assets of Mansa unit and hence it could also not be claimed by the assessee that the assets of Mansa unit formed part of Block of assets which block of asset also consists to have other assets of any other unit which is functional , as in the instant case it is a single unit / single location entity having only industrial unit in Mansa at Gujarat , and the assessee cannot claim that other assets except assets of Mansa unit were being put to use for business and hence consequently under the concept of Block of Asset, the assessee claim of depreciation of Mansa Unit should be allowed , as it is a single unit / single location company and the entire Block of asset revolves around and consists mainly of assets of Mansa unit which itselves are not put to use for business purposes during the entire previous year due to disability imposed under SARFESI Act, 2002 as discussed above. The depreciation claimed by the assessee is also not allowable as the entire block of asset which consists mainly of assets of Mansa unit at Gujarat was not put to use by the assessee, keeping in view peculiar factual matrix of the case and mandate of Section 32(1) of 1961 Act is not fulfilled in the instant case The expenses like auditor fees , ROC fee and other expenses etc. which are incurred by the assesseee company to carry out and meet legal and statutory compliances has to be allowed as the said expenses are incurred for meeting and complying with statutory compliances and obligations as imposed by law, for which we are remitting matter back to the file of the AO for identification of such expenses incurred for audit, ROC fees and other expenses incurred to carry out other statutory compliances , and to allow such expenses after verification. Thus, the appellate order of the ld. CIT(A) is set aside and the assessment order of the A.O. is confirmed subject to allowability of audit fee, ROC fee and other expenses incurred for undertaking and meeting statutory compliances , in accordance with our orders as detailed above.
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2017 (4) TMI 520
Lon term capital gain computation - valuation u/s 50C - whether CIT(A) has merely accepted DVO report without any application of mind? - Held that:- As the assessee submitted that there was no registered agreement with the builder. The documents registered were power of attorney’s only and not the agreement for sale, hence, section 50C of 1961 Act is not applicable. Also that the authorities below adopted stamp duty valuation which is legally unsustainable. The DVO has not considered the objections raised by the assessee vide letter dated 8.3.2011, submitted in response to notice dated 09-02-2011 issued by DVO . The said non-consideration of objections has led to serious prejudice to the assessee. It was submitted that the MOU w.r.t. these properties was registered on 25.05.1996 and power of attorney was registered on 12.09.2005. It was submitted by learned counsel for the assessee also that matter may be set aside so that there is proper consideration of the objections by the authorities below. Thus, in nutshell both the ld. Counsel for the assessee and the ld. D.R. had both fairly agreed that these issues in cross appeal requires reconsideration by authorities below and matter need to be set aside for re-determination of the issues on merits, after granting proper and sufficient opportunity to the assessee and the AO as per Rule 46A(3) of 1962 Rules, also after considering the objections of the assessee.
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2017 (4) TMI 519
Addition of deposits as undisclosed income - Held that:- We find that there were three credits in the said Dena bank received by the assessee viz. Salary income, commission income and interest income which was claimed by the assessee to be declared by the assessee in the return of income filed with the Revenue and claimed to be offered for taxation voluntarily by the assessee in ROI filed with Revenue. We are of the considered view that the same income cannot be taxed twice, but aforesaid contentions of the assessee certainly need verification by the authorities below . As such, we remit this matter back to the file of the A.O. for verification in the said saving bank account of the assessee with Dena Bank and were already subjected to tax in ROI filed voluntarily by assessee with Revenue. Regarding the other additions as sustained by learned CIT(A) , as agreed and admitted by the ld. counsel for the assessee, we are confirming the said additions in the hands of the assessee. The AO shall grant proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. - Decided partly in favour of assessee for statistical purposes.
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2017 (4) TMI 518
Income from transactions in securities - “capital gains” or " business income" - Held that:- Assessee company is engaged in the business of trading in securities. During the year assessee has shown the sale of securities as business receipts at ₹ 73,91,026/-. We also observe that assessee has entered into as many as 7000 transactions of purchase and sale of around 4lacs equity shares of a single company namely Suraj Stainless Steel Ltd. and the total value of shares sold is ₹ 8,58,03,298/-. The transactions of purchase and sale carried on by the assessee in which even on a single day i.e. 14.11.2006 almost 63 transactions have been entered into of the same scrip. We also observe that the total share capital of the company was ₹ 2,42,000/- and the unsecured loan stood at ₹ 45lacs which proves the fact that assessee has borrowed funds for entering into the share transactions. We also find that assessee has not controverted the fact during the assessment proceedings that the purchase and sale transactions of the very same scrip i.e. Suraj Stainless Steel Ltd. was entered into in preceding financial year also and sale value was treated as business turnover and unsold shares were shown as stock in trade. Thus assessee is regularly in the business of purchase-sale of equity shares, share transactions entered during the year were in large number, funds were borrowed for the purpose of trading, no separate account has been maintained for the investment portfolio and all the transactions of purchase sale raised are only for one scrip namely Suraj Stainless Steel Ltd. In these facts and circumstances, assessee cannot take shelter of the CBDT Circular no. 4/2007 dated 15.06.2007. As far as the decision of co-ordinate bench in the case of Sugamchand C. Shah vs. ACIT (2010 (1) TMI 942 - ITAT, Ahmedabad) is concerned there have been various decisions thereafter by the Jurisdictional High Court wherein it has been held that transactions cannot be bifurcated by the period of holding and actual nature of transactions with surrounding circumstances are to be seen and therefore the directions of ld. CIT(A) given to Assessing Officer will not stand for. In the totality of facts we are of the considered opinion that the alleged short term capital gain shown by the assessee for A.Y. 2007-08 & 2008-09 should be treated as business income. - Decided in favour of revenue.
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2017 (4) TMI 517
Assessment order u/s 153A - Held that:- AO informed the assessee about the copy of bank account obtained under DTAA. However, a contradictory observation has been made in para 6 of the assessment order that the requisite information from Swiss Banking Authority had not been received. We, therefore, considering the totality of the facts as discussed hereinabove, set aside the impugned order and restore the matter back to the file of the AO to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard and by confronting the assessee with the documents which relates to him. As regards to the legal issue relating to the validity of the assessment u/s 153A of the Act, it is noticed that the assessee in para 2.20 of his written submissions dated 22.08.2016 stated that the search team had confronted the assessee with unauthentic document. In the present case, it is not clear as to whether any authentic document was confronted to the assessee or not. The AO also mentioned that a reference was made on 27.11.2012 but it is not clear for which purpose the said reference was made. So in the absence of clear facts on record, this issue is also set aside to the file of the AO to be adjudicated afresh, in accordance with law after providing a due and reasonable opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.
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2017 (4) TMI 516
Computation of taxable Long Term Capital Gain - selection of assessment year - CIT-A directing the AO to tax the taxable Long term capital gain in respective assessment years in which the properties received were sold by the legal representative/heirs of the deceased appellant in respective hands of such legal representative/heirs - Held that:- As find that as per provisions of section 45 of the Income tax Act, capital gain is chargeable to tax in the year in which transaction of related capital asset takes place. In the instant case, the transfer which took place was 78% of undivided right of the land of A.0.450 dec on plot Nos.277 & 278/Khata No.1406. The issue before me is whether the said transaction took place in assessment year 2001-02 or not and consequently the capital gain is chargeable to tax in assessment year 2001-02 or not. Perusal of the provisions of section 2(47)(v) of the Act shows that transfer of a capital asset includes any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. In the instant case, it is not in dispute that under a written agreement dated 18.12.1996, the assessee handed over the possession of land to the builder M/s. Atrick Construction (P) Ltd., on a consideration of ₹ 3 lakhs and 22% of the constructed area to be built by the builder. Thus, the transfer of 78% of the undivided right of the land took place in the previous year relevant to assessment year 1997-98. Thus the related capital gain is not exigible to tax in the year under consideration i.e. 2001-02. Therefore, do not find any merit in this appeal of the revenue and hence, the same is dismissed. - Decided in favour of assessee
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2017 (4) TMI 515
Interest income earned from mobilization advance to contractor Railway Vikash Nigam Ltd. - treated as capital receipt - Held that:- The advance which the assessee made to the contractors to facilitate the construction activity of putting together a very large project was as much to ensure that the work of the contractors proceeded without any financial hitch as to help the contractors. The arrangements which were made between the assessee company and the contractors pertaining to these three receipts were arrangements which were intrinsically connected with the construction of its steel plant. The receipts had been adjusted against the charges payable to the contractors and had gone to reduce the cost of construction. They had, therefore, been rightly held as capital receipts and not income of the assessee form any independent sources. Thus find that the facts of the instant case are similar to the facts of the case which were before the Hon’ble Supreme Court in the above case of Bokaro Steel Ltd (1998 (12) TMI 4 - SUPREME Court). In the instant case also, the mobilization advance given to the contractor were for the purpose of contract work of laying down the railway line and intrinsically connected with the capital expenditure of the appellant prior to the commencement of its business. Thus the interest income earned by the assessee from mobilization advance to contractor Railway Vikash Nigam Ltd., is rightly treated by the assessee as capital receipt which goes on to reduce the cost of capital work in progress. Therefore, delete the addition and allow the grounds of appeal of the assessee.
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2017 (4) TMI 514
Penalty under Section 271(1)(c) - Disallowance under Section 40(a)(ia) towards non-deduction of TDS on interest payment to Reliance Consumer Finance and Capital contribution - Held that:- There is a variation in the figure of confirmed concealed income in the impugned order. We also observe that at the time of completion of assessment under Section 143(3) addition of ₹ 7,65,000/- was made towards unexplained capital contribution. But when the issue came up before the ld. CIT(A), it was contended that out of ₹ 7,65,000/-, ₹ 7,50,000/- was a loan received from Reliance Consumer Finance in the personal capacity and was accordingly introduced as capital in the firm and balance sum of ₹ 15,000/- was transferred from Savings Bank account of the partners held with Dena Bank to the account of the assessee-firm. Ld. CIT(A) admitted the additional evidence furnished by the assessee in relation to the alleged sum of ₹ 7,65,000/- and directed the Assessing Officer to verify the genuineness of these two documents and if they are found correct, he has also directed the Assessing Officer to delete the impugned addition. However, during the course of hearing before us, it was submitted that till date no opportunity has been provided by the Assessing Authority calling for necessary details so that the assessee can prove the genuineness of the unexplained cash credit of ₹ 7,65,000/-. This fact has also not been controverted by the ld. Departmental Representative. We also observe that the impugned addition of ₹ 4,56,455/- under Section 40(a)(ia) of the Act is towards the non-deduction of TDS on the payment of interest to Reliance Consumer Finance which is well observed in para 4.2 of the of the order under Section 143(3) of the Act, which further adduce the fact that there is a loan from Reliance Consumer Finance. We are of the considered view that penalty under Section 271(1)(c) of the Act needs to be framed afresh as the present order is having lots of deficiencies in form of variation of figures, and also it is not complying to the directions of ld. CIT(A) in the quantum appeal orders - Appeal of the assessee is allowed for statistical purposes.
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2017 (4) TMI 513
Rectification of mistake - commission paid to the directors not allowable u/s 36(1)(ii) of the Act - Held that:- We are of the considered view that the revenue by filing the application seeking rectification of the order of the CIT(A), had made a futile attempt to undo the lapse on its part in not assailing the said order of the CIT(A) before the Tribunal. That our aforesaid view is further fortified from the very fact that we have been informed by the Ld. A.R that the revenue had even exhausted its efforts for seeking rectification of the orders passed by the Tribunal in the case of the assessee for A.Y. 2004-05 by filing a miscellaneous applications u/s 254(2), which however had been rejected. We strongly feel that such back door entry attempted by the revenue by filing the present application for rectification, instead of approaching the proper forum, needs to be deprecated. CIT(A) had rightly rejected the application of the revenue seeking rectification of the order passed by his predecessor, for the reason that the contrary view which was arrived at by the ‘Special bench’ of the Tribunal in the case of the assessee for another year, viz. A.Y. 2006-07, was not in existence at the time when the order was passed by the CIT(A). The Ld. D.R had neither drawn our attention to any such mandate of law which requires rectification of a mistake on the basis of a subsequent order of a Tribunal, nor had placed on record any judicial pronouncement to support his aforesaid contention. - Decided against revenue
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2017 (4) TMI 512
Disallowance of hire charges - Held that:- Since the details called for were not filed, the AO disallowed the assessee’s claim. On appeal, the learned CIT(A) observing that no primary details or explanations were filed to support the assessee’s claim regarding payment to ‘Mahindra’, upheld the disallowance made by the AO. Before us also, except for making the claim that the said expenditure is purely business expenditure allowable under section 37(1) of the Act, no explanations were made or details/evidences filed to support and justify the assessee’s claim. In this view of the matter, we have no reason to interfere with the findings of the authorities below and uphold the same. - Decided against assessee Non-reconciliation of turnover - Held that:- CIT(A) records that the assessee submitted the relevant documents and information in this regard and allowed the assessee relief by deleting the said addition to turnover, evidently without affording the AO adequate opportunity of being heard and to rebut the same. In this factual matrix of the matter, we are of the view that the learned CIT(A) has violated the principles of natural justice as mandated under Rule 46A(3). Thus as CIT(A) having failed to give adequate opportunity to the AO of being heard in the matter, the conditions enumerated in sub-Rule (3) of Rule 46A remained uncomplied with. We, therefore, set aside the order of the learned CIT(A) in deleting the addition on account of unreconciled turnover (i.e. between TDS certificates and turnover shown in the Profit & Loss account) and restore the matter to the file of the learned CIT(A) for fresh consideration and adjudication thereon, only after affording the AO adequate opportunity of being heard and to rebut the details/evidences put forward by the assessee in this regard. - Revenue’s appeal is allowed for statistical purposes
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2017 (4) TMI 511
Additional depreciation carried forward - whether balance additional depreciation could be carried forward to the year, following the previous year, in which, additional depreciation was claimed? - Held that:- The Division Bench in M.M.Forgings case [2011 (1) TMI 203 - MADRAS HIGH COURT ] the said case was not concerned with the issue, with which, we are faced, that is, the right to carry forward the balance additional depreciation. Therefore, the judgment is completely distinguishable. The second submission of Mr.Ravi, that Circular no.8 of 2002 dated 27.08.2002 and Circular no.281 dated 29.11.1979, have not been taken note of, in our judgment rendered in Commissioner of Income Tax, Madurai Vs. M/s.Shri T.P.Textiles Private Limited [2017 (3) TMI 739 - MADRAS HIGH COURT ], according to us, will not impact, either the reasoning or the conclusion reached by us, in the said matter. It is pertinent to note that the Circular no.281 dated 29.11.1979, pre-dates the insertion of the relevant provision, i.e., second clause to Section 32 (1) (iia). The said clause (iia), admittedly, was inserted by virtue of the Finance (No.2) Act, 2002, with effect from 01.04.2003.In so far as the second Circular is concerned, i.e, Circular no.8 of 2002 dated 27.08.2002, in our view, in no way, helps the case of the Revenue. The Circular does not dwell on the point which we are confronted with.In any case, according to us, the Circulars are not binding on the Court, though, they may be binding on the Revenue. [See CIT V. Hero Cycles Pvt. Ltd., (1997 (8) TMI 6 - SUPREME Court )]. The last submission that Mr.Ravi advanced, was, in fact, predicated on the reasoning given by the Assessing Officer, which, according to us, is misconceived, as the manner of calculation of depreciation, cannot, to our minds, impede the claim of the Assessee for balance additional depreciation, in the year following the previous year, in which, the said asset is installed and put to use. - Decided against revenue
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Customs
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2017 (4) TMI 545
Levy of anti dumping duty on low ash metallurgical coke when imported from specified countries. - Challenge to the Customs Notification dated 25/11/2016 - The appellants strongly contested that there is no injury to domestic industry due to import of subject goods from the specified countries. The loss or injury, if any, to the domestic industry is not relatable to import of subject goods but are due to other reasons. Held that:- The import from subject countries has increased significantly and the market share of domestic sales has actually come down, in spite of increase in total demand. The magnitude of dumping has been examined by the DA. On the causal link, the point raised by the appellant, like high inland freight cost and poor performance of DI due to other factors, due consideration was given by the DA in his investigation. The DA also specifically taken note of the imports made by Gujarat NRE from related party and their financial performance. It was noted that Gujarat NRE stopped buying coal from Australia in October 2013. Hence, there is no basis in the submission, that the losses are because of high coal prices, when importing from relating party. Each one of the point raised by the appellants have been dealt with adequately on legal and factual basis by the DA. - Levy of ADD upheld - Decided against the appellant.
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2017 (4) TMI 544
Undervaluation of goods being automobile parts - Smuggling of goods - seizure of goods after importation and clearance against bill of entry - t NIDB data for the contemporaneous imports reflects higher value of identical goods - Held that:- For such purpose, proving the value to be wrong declaration, independent evidence is required and mere reference to NIDB data is not sufficient. It is held by various Courts that NIDB data cannot be made the basis for enhancement of the value. As regards the other goods seized from the premises - On verification of the sellers, the address of the shops etc. shown in the sales challans, were found to be either false or non-existence. - When the appellant was confronted with the said fact, he clearly deposed that the goods were purchased by him from the sales representative and sale was not directly from the shops. The appellant has also produced the sales tax challan along with sales bill on record. This fact establish that the goods stand purchased in India only. As regards their foreign origin and smuggled character, we note that even though the said goods are considered to be imported goods, the same are not notified in terms of provisions of section 123 of the Customs Act. As such, the burden to establish that they are smuggled into India lies heavily on the Revenue and is required to be discharged by production of sufficient evidence. Demand set aside - Decided in favor of assessee.
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2017 (4) TMI 543
100% EOU - exemption from duty free import in terms of Notification No. 52/2003 Cus - import of Electricity Meter Test Equipment (EMTE) - Held that:- the manufacturer/supplier located at Slovakia, have adequately explained that the machine supplied by him, and the one ordered by the appellant is one and the same and there is hardly any difference. - along with the Electricity Meter Testing Equipment other goods which supplement or complement the Electricity Meter Testing Equipment were also imported, which have not been objected to by the Revenue. - the explanation given by the machine manufacturer have not been found to be wrong and further there is no adverse test report available on record, justifying disallowance of benefit under Notification No. 52/2003 Cus. Benefit of exemption allowed - Decided in favor of assessee.
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2017 (4) TMI 542
Jurisdiction of the Officers of Directorate of Revenue Intelligence (DRI) - Fraudulent advance authoritsation - Seizure of goods sold on high sea sale - determine ownership of the goods - levy of penalty on CHA - levy of penalty on the high sea sellers - Held that:- It may be stated that operation of the judgment in the case of Mangali Impex [2016 (5) TMI 225 - DELHI HIGH COURT] has been stayed by the Hon’ble Supreme Court in Union of India & Ors. Vs. Mangali Impex Ltd. [2016 (8) TMI 1181 - SUPREME COURT] and the Hon'ble Court is seized of the matter. Tribunal being creature of the statute, is subordinate to the Hon'ble Supreme Court and it should not overreach to the Jurisdiction of higher court following the principle laid down in Union of India Vs. West Coast Paper Mills Ltd. - [2004 (2) TMI 344 - SUPREME COURT OF INDIA] Accordingly, without expressing any opinion on the aforesaid preliminary issue of Jurisdiction raised by Assesses, except reiterating the law of the land and judicial pronouncement as above, we are compelled to remand the appeals hereafter state by this order, to learned Adjudicating Authority to reach to his decision on the basis of outcome of the civil appeal in Mangli Impex and granting fair opportunity of hearing to both sides shall pass appropriate order. - Matter remanded back.
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2017 (4) TMI 541
Rectification of order - Certain inadvertent omissions in the fair copy of the Interim Order No.4 to 96/2017 dated 6.01.2017 were noticed. Taking suo motu cognisance of the same following amendment to that order is made to read as under and this shall form an integral part of the said order.
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2017 (4) TMI 540
Overvaluation of export goods - claim of duty drawback - fraudulent transactions and inflated value of the consignments to claim drawback - levy of penalty for abetment in fraud - redemption fine - Held that:- Against the finding of the adjudicating authority on the issue of export of low priced inferior quality goods no defence could be led by the exporter appellants to discard the same. Market inquiry as well as statements recorded, demonstrated fraudulent act, oblique motive and malafides of appellant. Exports consignments were overvalued. That could not be ruled out by the exporter appellant in the absence of any cogent and credible evidence led by them in the course of hearing before Tribunal. Further, when the investigation found that Shri Krishna Prasad was also involved in the Red Sanders smuggling, that could not be ruled by him. His fraudulent act perpetuated. Non-existent firms M/s. Amritsar Knit Readymade Garments also M/s. JM Fashions crippled the appellants to come out with clean hands in absence of any sales invoices being produced. M/s. Sri Sairam Exports and M/s. Sindhu Textiles were mere bubbles. Therefore appellants fail to deserve any consideration under law. When Customs was made to believe on the basis of fraudulent documents and defrauded, ulterior motive and deliberate intention of the appellants came out. Their premeditated design and malafide to cause evasion is proved. That does not call for any interference to any aspect of the conclusion and findings of the adjudicating authority. Law is well settled that fraud is sworn enemy of Justice and do not dwell together. Demand with penalty and fine confirmed. - Decided against the appellants.
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Corporate Laws
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2017 (4) TMI 538
Jurisdiction of this court to hear and dispose of the present proceeding - cases transfer to NCLT - Held that:- Sec. 434 (1)(c) of the 2013 Act carries an absolutely clear mandate that all proceedings under the Companies Act, 1956 including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies before the date of coming into operation of that Section in the High Court shall stand transferred to the NCLT. The word all means all. It admits of no exception. The use of the word including in the said sub-Section cannot by any stretch of imagination mean that the words ‘all proceedings under the Companies Act’ have to be understood as proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies. The word including in that sub-Section is only clarificatory. As have no doubt in my mind that each and all proceedings instituted under the Companies Act, 1956 including the proceedings like the present one, pending in the High Court as on 15 December, 2016 stand transferred to the NCLT. It is an automatic transfer by operation of law. No sanction of the court is required. It is a statutory mandate and has to be followed whether such mandate is wise or not. All that the Court is required to do is to send the records of this Court to the NCLT. In view of the aforesaid, with effect from 15 December, 2016 this Court lost jurisdiction to hear and dispose of the present proceeding which stands transferred to the NCLT by operation of law. Accordingly, direct the Registrar, Original Side, to send the records of CP 611 of 1988 along with all connected applications excepting the contempt application being CC 43 of 2014 to the Regional Bench of the National Company Law Tribunal.
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2017 (4) TMI 537
Perpetual injunction restraining the defendants from revoking, canceling or terminating the registered user agreement - Held that:- Mere stipulation of time in the contract does not automatically attract the time being the essence of a contract. The time, being the essence of a contract, must be gathered from the various clauses of an agreement and the intention of the parties in course of the dealing. In the instant case, it is a debatable issue whether the parties extended the time stipulated in the said agreement, which can only be decided upon full-fledged trial. It would not be wrong to say that if the time stipulated in the agreement is extended mutually even in absence of any stipulation in this regard in the agreement, such time cannot be an essence of a contract. It would not be proper for this Court to delve into these questions at the interlocutory stage when both the parties are at variance on extension of time. The Court can safely proceed on the premise that the financial support was given by the GVL to BWL by increasing the share capital of BRC and allotting those additional shares to GVL at a premium of ₹ 48/- per share with clear understanding that the same would be returned to BWL at a price of ₹ 158/- per equity share. The various clauses in the MOU conveys a definite intention of the parties that such amount is secured by nominating a person in the board of directors of the BRC by GVL. The matter took the different turn when the GVL wanted to have a full control of the BRC as BWL failed to buy back those shares within the stipulated time. Various meetings are called by the BRC and applications are pouring in on every such action for protection and preservation of the rights of the respective parties. From time to time the Court passes interim orders which are still operative. There is no difficulty in molding the relief under the changed circumstances even if the rights of the parties are crystallized at the time of institution of the suit. The interim orders are passed in aid of the final relief to protect and preserve the rights of the parties. This Court is unable to accept the submission of Mr. Mitra that the Court cannot pass an interim order on the basis of the facts unrelated and / or unconnected with the main reliefs. Thus All the applications are disposed of on the following orders:- (i) All the parties are restrained from issuing any further shares of BRC and / or from changing the capital structure of the said company in any way or manner whatsoever; (ii) BWL and BRC are restrained from revoking, canceling or terminating the registered user agreement dated February 25, 2008 as modified by the agreement dated February 26, 2010 read with the letter of undertaking dated February 26, 2010 issued by the BWL to GVL till 25th February, 2020; (iii) The GVL and BRC and their agents, assigns and / or directors are restrained from selling, transferring, alienating and / or mortgaging the immovable assets of BRC; (iv) The Joint Special Officers appointed by the Division Bench in the order dated 6th February, 2012 shall continue to function and discharge their duties in the manner as indicated in the said order. In addition thereto, the Joint Special Officers shall submit the accounts in the form of report on half yearly basis till the disposal of the suit; (v) BRC is further restrained from inducting any new directors into the Board of Directors till the disposal of the suit.
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Service Tax
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2017 (4) TMI 564
Rejection of VCES - Valuation - inclusion of reimbursement of their expenses in the value of taxable services - Since the petitioners throughout held the view that they are not liable to pay service tax but noticing that there was a Voluntary Compliance Encouragement Scheme of 2013 traceable to paragraph 104 to 114 of the Finance Act, 2013 with effect from 10th May, 2013 and the Service Tax Voluntary Compliance Encouragement Rules, 2013 were also introduced, they filed an application in the prescribed form. Held that:- the payment which has been made and for a past audit objection, for an earlier period cannot be utilized to reject the application as is now made by the present writ petitioner. The application invoking VCES has to be considered and if at all rejected, it must be on the touchstone of the paragraphs of the VCES, 2013 and the wording thereof. The scheme itself cannot be defeated by holding that on the earlier occasion parties like the petitioners have accepted their liability. The authorities need not be so anxious to protect the government revenue and reject the applications, as are made in the present case by closing the files instantaneously. They have to apply their mind. They must consider the application in accordance with the paragraphs of the scheme. - Matter restored before the authorities.
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2017 (4) TMI 563
Refund of cenvat credit for the period prior to registration of Assessee - Held that:- We do not find anything in the aforesaid rules which require registration as a condition or eligibility to claim refund. Even Form-A no where suggests that any such condition must be observed. Moreover, if refund is otherwise admissible to a party by a Tax Department, interpretation to the Statute which justify refund to the party must be given for the reason that State or Tax Department cannot be expected to retain Revenue which legally is refundable to the party. It should not be allowed to be retained when legally Revenue is not entitled to such money. Moreover, in Formica India Division v. Collector of Central Excise - [1995 (3) TMI 98 - SUPREME COURT OF INDIA] Court has also observed that refund should not be denied on technical grounds. - Decided against the Revenue.
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2017 (4) TMI 562
Construction and commissioning of petrol pumps for oil companies - denial of abatement - eligibility for abatement of 67% in the taxable value for services rendered under “commercial or industrial construction service” - Held that:- Admittedly, all the contracts executed by the appellant/assessee are in the nature of indivisible works contract. They were registered with the State VAT Authorities under the said category. The Hon’ble Supreme Court in Larsen & Toubro Ltd. (2015 (8) TMI 749 - SUPREME COURT) held that such works contracts are liable to service tax only w.e.f. 01/06/2007. Accordingly, following the ratio of the Hon’ble Supreme Court in Larsen & Toubro Ltd. (2015 (8) TMI 749 - SUPREME COURT), we find that there is no merit in the appeal filed by the Revenue regarding re-classification of the service or for denial of abatement to the appellant/assessee. - Demand set aside - Decided in favor of assessee.
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2017 (4) TMI 561
Refund - deposit of service tax with interest on the instruction of revenue - Subsequently, CBEC clarified vide Board Circular No. 111/05/2009 ST dated 24/02/2009, wherein inter-alia clarified that service as provided by the appellant, was covered under Export of Service Rules, 2005 and the same was not a taxable service. Held that:- the amount paid towards tax no longer remained tax in view of the CBEC Board Circular No. 111/05/2009 ST dated 24/02/2009 - the amount of interest as initially paid, also partook the nature of Revenue deposit, upon clarification of the law - Adjudicating Authority directed to grant refund of the said amount of ₹ 10,24,535/- with interest from 3 months ended from the date of refund application dated 30/07/2009. - Decided in favor of assessee.
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2017 (4) TMI 560
Levy of penalty u/s 76 - The sole grievance of the Department is that, the adjudicating authority has dropped the penalty under Section 76 of the Finance Act, 1994. - Commercial or Industrial Construction Service - Held that:- It is not fair on the part of the Department to file the Appeal for the reason that the penalty under Section 76 was not levied, especially when the penalties under Section 77 and 78 of the Finance Act, 1994 were also levied. Further, it may be mentioned that as far as the imposition of penalty under Section 76 and 78 of the Finance Act, 1994 is concerned, the provisions are mutually exclusive. Where conditions warranting imposition of penalties under Section 78 exist, penalty under Section 76 cannot be levied.
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2017 (4) TMI 559
Extended period of limitation - Business Auxiliary Service - It is the case of the appellant that the present show cause notice invoking demand for extended period cannot be legally sustained as repeat notice cannot be issued invoking extended period. - Held that:- There were two earlier proceedings against the appellant regarding the tax liability as “Commission Agent” under “BAS”. It is now a well settled legal position that repeat show cause notices for subsequent periods cannot be, generally, issued invoking again longer period on the ground of suppression, mis-statement, etc. In the present case, we do not find tenable justification to allege suppression on the part of the appellant. The appellants have been put to adjudication twice for their activities under the very same tax entry “BAS” and both the cases were dropped either originally or on remand proceedings. No justification for the subsequent demand by invoking suppression of facts. - Demand set aside - Decided in favor of assessee.
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2017 (4) TMI 558
Valuation - Clearing & Forwarding Agency Services - inclusion of re-imbursement of the actual expenditure - Extended period of limitation - Held that:- The agreement did not specifically list all such expenditures and in the absence of such categorical stipulation, a general observation regarding mandatory ceiling of re-imbursement by itself cannot be taken as a support for excluding a portion of the value on the ground that these are re-imbursable expenditure - decided against the assessee. Extended period of limitation - Held that:- there has been a large number of litigation and clarification, with reference to valuation of C & F Agency Service. - it is not tenable to hold that this is a fit case for invoking extended period alleging fraud, collusion, willful mis-statement or suppression of facts. As such, we hold that the service tax liability, as confirmed by the impugned order, shall be restricted to normal period. The penalties imposed on the appellants are also set aside.
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2017 (4) TMI 557
Classification of service - Transportation activity or Site formation and clearance, excavation and earthmoving and demolition - Appellant submits that show cause notice is vague and based on assumptions and presumptions without looking into the actual facts - work order of loading, unloading and transportation of coal at Open Cast mines - Held that:- We find that whatever may be the activity of the work contractor M/s. NEPL, it is the nature of services of the Appellant which has to be looked into for imposition of service tax. On overall perusal of the SCN and the impugned order, we find that nowhere the activity of the Appellant and its agreement with M/s. NEPL was considered. Since in this case the Appellant has undertaken only the transportation activity and the services were rendered to M/s. NEPL which is a private Ltd. concern, we hold that the services are of transportation on which the Appellant is not liable to service tax being taxable under reverse charge mechanism. Thus, the Appellant is not liable to any service tax under the category of “Site formation and clearance, excavation and earthmoving and demolition” services. - Decided in favor of assessee.
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2017 (4) TMI 556
Classification of service - CHA services or C&F services - Demand of tax under reverse charge mechanism - CHA invoice shows the nomenclature “Clearing and Forwarding Division” below its name - Held that:- the services rendered by M/s. United Liner Agencies of India Pvt. Ltd. is a CHA service and not a Clearing and Forwarding Agency Service. Although the nomenclature used by the service provider is Clearing and Forwarding Agent but the services rendered by the said agent is in the nature of services rendered by CHA and he has registered with the Customs Department as CHA. In view of these facts, we hold that the appellants are not liable to pay the service tax as they have already paid the same to the CHA who in turn has paid to the Government and the appellants are not liable to pay the service tax on reverse charge mechanism. - Demand set aside - Decided in favor of assessee.
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Central Excise
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2017 (4) TMI 555
Benefit of N/N. 67/95 - captive consumption - In respect of the goods cleared under N/N. 10/1997 dated 1-3-1997 intermediate goods manufactured and captively consumed in the said goods is not eligible for N/N. 67/95 - personal penalties - Held that: - the appellant have claimed exemption under N/N. 10/97 as well as 67/95 in respect of captively consumed goods, it was known to the department that appellant is clearing the final product under exemption N/N. 10/97-CE. Accordingly, it was not prevented to the department to take action immediately after receipt of the classification declaration wherein aforesaid exemption were claimed. Therefore, there is no malafide intention on the part of the appellant. Even though the demand was confirmed for the extended period which was accepted by the appellant that alone is not the reason for imposing penalty u/s 11AC. Penalty u/s 11AC can only be imposed when it is established that there is suppression of facts on the part of the appellant. Since there is no malafide proved, personal penalty on Shri. Hariharan is also not tenable - appeal allowed - decided partly in favor of appellant.
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2017 (4) TMI 554
Shortage in stock - appellant's case is that there was no variation in the quantity of final product. While the department considered the production slips, they should also have considered the issue slips - Held that: - Admittedly, the documents, which have been placed before the Tribunal in the form of a signed re-conciliation statement of production, accounted and captive consumption, another statement showing the issue of various PVC compounds for captive consumption and various material requisition slips were not produced before the Commissioner (Appeals). It would therefore be in the fitness of things that these documents now submitted by the appellants are presented before Commissioner (Appeals), who should examine the aforementioned documentary evidence and pass a fresh speaking order - appeal allowed by way of remand.
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2017 (4) TMI 553
Valuation - service for sold out machine - includibility - whether in respect of already sold out machines charges of servicing of the said machine, training of the operator, charges for providing assistance in plant layout and service charges for changing power voltage in the electric motor collected by the appellant are chargeable to excise duty for the valuation of their final product? - Held that: - These activity are completely independent from the manufacture and sale of the machine - charges collected by the appellant from customer, whom the machines were sold long back, is not includible in the assessable value of the machine - appeal allowed - decided in favor of appellant.
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2017 (4) TMI 552
Short payment of tax - abatement of duty - appellant's case is that they have been requesting for abatement of duty on the ground that most of the time the factory was closed during the material period and the appellant have scrupulously followed the procedure - Held that: - the appellant have complied with various provisions of Rule 96ZB(2) for claiming the abatement of duty - the appellant’s request though declined by the Commissioner vide letter dated January 1999 but the appellant’s subsequent letter dated 01.02.1999 was not disposed of by the Commissioner. In view of the above fact, the confirmation of duty demand by the adjudicating authority i.e. Additional Commissioner is premature. It is desirable that the ld. Commissioner should have considered the detailed correspondence made by the appellant for claiming abatement of duty during the closure of the factory which was not done so - demand being premature, is set aside - matter related to the abatement of duty needs to be reconsidered - appeal allowed by way of remand.
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2017 (4) TMI 551
SSI exemption - N/N. 8/2000-CE as amended - appellant product became entitle for exemption only for ₹ 10 Lakhs for the period 1-3-2001 to 31-3-2001 - SCN was issued on 11th July, 2004 - Time limitation - Held that: - when appellant approached for obtaining the Central Excise registration in the month of July, 2001 atleast at that time department could have noticed exemption of more than ₹ 10 lakhs availed by the appellant in the month of March, 2001. In these undisputed facts, we are of the clear view that there is no suppression of facts on the part of the appellant and nothing prevented department to issue show cause notice firstly on the issue of amendment N/N. 15/2001-CE dated 16-3-2001, secondly in the month of July, 2001 when the appellant had obtained Central Excise registration and therefore department could have avoided the delay of more than a year in issuance of SCN - demand set aside being time barred - appeal allowed - decided in favor of appellant.
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2017 (4) TMI 550
CENVAT credit - extended period of limitation - demand - Held that: - suppression, mis-statement, etc. cannot be leveled against the appellant, justifying invocation of the extended period of limitation for issuance of the SCN - Commissioner (Appeals) have rightly remanded to the adjudicating authority for a fresh decision considering the facts and additional evidence produced before him. In this view the matter, the impugned order upheld in appeal directing the adjudicating authority to pass a fresh order as directed - appeal allowed - decided in favor of appellant.
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2017 (4) TMI 549
CENVAT credit - whether the CENVAT credit is admissible on garden services in respect of maintenance of garden located within the factory premises of the appellant? - Held that: - the credit has been allowed in various judgments on the garden services - it was brought on record that the maintenance of garden is statutory requirement under the Maharashtra State Pollution Control Board - CENVAT credit admissible - appeal allowed - decided in favor of appellant.
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2017 (4) TMI 548
Reversal of CENVAT credit - the case of Revenue is that as per Rule 11 of CER, 1944 when the finished goods became exempted the appellant was not entitled to the credit of unutilised goods, they were supposed to reverse the credit - Held that: - As per the provisions of cenvat credit on capital goods only if the capital goods is used exclusively for exempted goods credit is not admissible. In the present case after receipt of the capital goods on which credit was denied the finished goods was dutiable. Subsequently, the finished goods became exempted, therefore it cannot be said that the capital goods were used exclusively for exempted goods - Rule 11 is clear that this provision is applicable only in respect of inputs or input services and not on capital goods. Therefore the payment of amount equivalent to the cenvat credit in respect of stock of capital goods as on date of exemption is not applicable in the facts of the present case. Though appellants have paid the amount of cenvat credit but they have filed the appeal before the Commissioner (Appeals) challenging the entire order - it cannot be said that the appellant has not challenged the demand of cenvat credit. Appeal allowed - decided in favor of appellant.
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2017 (4) TMI 547
Refund claim - unjust enrichment - case of respondent-assessee is that at the stage of payment of refund, which is already sanctioned, the issue of unjust enrichment is not applicable for the reason that the department had accepted the order of sanction of refund and no appeal was filed - Held that: - every refund at the time of sanction has to pass through the check of unjust enrichment - However, in the present case, the sanctioning authority had already sanctioned the refund and since the amount was payable to the respondent the same was adjusted against some confirmed demand. If this is so, then it is not open for the department that for payment of refund any question of sanction of refund can be raised - appeal dismissed - decided against Revenue.
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2017 (4) TMI 546
SSI exemption - interconnected units - Department's case is that all units were being run and controlled by the members of the same family; that the same were being run as one unit and as such units had no independent existence - N/N. 8/2003 dated 1.3.2003 - whether sales made by DMGP to DDIL are entitled to the SSI benefit? - Held that: - It is not in dispute that both these entities have separate registered manufacturing premises. It is nobody’s case that there are no equipments in either of the premises and it is also not the view taken by the Revenue that the entire manufacturing happened at one of the two premises and the other is a dummy one. Inasmuch as both the units have separate manufacturing premises with equipments and the fact that they are manufacturing different automobile parts, leads us to conclude that both are separate manufacturing units - The constitution of the two firms are different. DMGP is a Private Limited Company whereas DDIL is a Limited Company and hence they have separate legal existence and separate registrations not only for Central Excise but also for Sales Tax and other government departments. Under the circumstances, DMGP as well as DDIL are to be considered as separate manufacturing premises and each one will be eligible for the benefit of SSI exemption under N/N. 8/2003-CE dated 01.3.2003. Brand Names of DMGP and DDIL - Held that: - the two brand names are not identical and are being applied on different products manufactured by DMGP and DDIL. There is also nothing on record to suggest that there is any dispute regarding use of brand names. Consequently, the brand names are different and separate for the two units. Whether DMGP and DDIL are “interconnected undertakings”? - Held that: - it is evident that all the three entities are to be considered as interconnected undertakings. Once these three are considered as interconnected undertakings then the valuation of goods manufactured by DMGP and / or DDIL and sold exclusively through DDSC, cannot follow transaction value, it will be necessary to take recourse to Central Excise Valuation Rules. It is found that entire goods manufactured by DMGP as well as DDIL are sold only through DDSC after which the goods are sold to dealers. The eligibility of various discounts/ abatements need to be determined in the light of legal position settled by various case laws of Apex Court, including in recent case of Purolator India Limited vs. CCE Delhi [2015 (8) TMI 1014 - SUPREME COURT] - For re-determination of value as well as duty liability the case is remanded to Original Adjudicating Authority. Appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2017 (4) TMI 539
Detention of goods - Local sale or inter-state sale - Jurisdiction - According to the learned counsel, the transaction in issue was an inter-state sale, and since, the appellant was registered with the relevant authorities, i.e. sales tax authorities in the State of Karnataka, Central Sales Tax, if any, payable, would be payable to the said authority. Held that:- The respondent, however, via the impugned notice, rejected the stand taken by the appellant and proceeded, instead, to impose tax, as if, a local sale transaction had been entered into between the appellant and BCPL. Furthermore, the respondent came to the conclusion that the appellant had employed fraud and therefore, penalty had to be levied. Consequently, penalty was levied, which was quantified at twice the amount of the tax arrived at by the respondent. Authorities directed to release the goods on furnishing of bank guarantee.
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Indian Laws
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2017 (4) TMI 536
Reference to the parties to arbitration - Permanent injunction - whether suit is bad for misjoinder of parties as well as for causes of action? - Held that:- The appellants even though had different causes of action against the respondent but it was a continuity of the agreement dated 06.06.2009 and oral agreement is evidenced by the transcript of conversation between the appellant No. 2 and the respondent on 6/07.04.2011, therefore, both the appellants could have joined as plaintiffs in a suit and the suit is not bad for misjoinder of parties or causes of action. Hence, learned single Judge as also the division bench, was not right in giving an option to the appellants to pursue reliefs qua appellant No. 1 or qua appellant No. 2 only. In the present case, the prerequisites for an application under Section 8 are fulfilled, viz., there is an arbitration agreement; the party to the agreement brings an action in the court against the other party; the subject matter of the action is the same as the subject-matter of the arbitration agreement; and the other party moves the court for referring the parties to arbitration before it submits his first statement on the substance of the dispute. We have come to the conclusion that the civil court had no jurisdiction to entertain a suit after an application under Section 8 of the Act is made for arbitration. In such a situation, refusal to refer the dispute to arbitration would amount to failure of justice as also causing irreparable injury to the defendant. As we have already held that the oral agreement as evidenced by the transcript of conversation between the appellant No. 2 and the respondent on 06/07.04.2011 substituting the alleged written agreement dated 06.06.2009 and which contained a clause for arbitration, the same clause for arbitration would also be applicable to the oral agreement. The Division Bench has also erred in law in affirming the order passed by learned single Judge. Both the orders, therefore, cannot be sustained and are set aside and, therefore, in view of the decision in P.R. Shah (supra), there can only be one arbitrator and there can only be a single arbitration. The appeal succeeds and is allowed. However, instead of remitting the matter back to the learned single Judge for deciding the suit itself on merits, we refer the disputes raised by the appellants to the sole arbitrator already appointed, viz., Hon’ble Mr. Justice V.K. Gupta (Retd.) and request the arbitrator to decide the disputes expeditiously in accordance with law.
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2017 (4) TMI 535
Accident at mining Colliery - mines worked in contravention of SSR - Held that:- Specific responsibility as laid upon the manager to ensure that no mine or part of a mine shall be worked in contravention of SSR and the provisions of SSR are to be effectively complied with. Mahendra Prasad Gupta and Nageshwar Sharma were working as General Manager and Additional General Manager respectively. As part of the report accepts that they were neither appointed as agent nor manager. They were not the managers of the mines either. Therefore, they are not covered by sub-section (4) of Section 18 of the Act. Though, it is alleged that they took part in management, control, supervision and direction of the mine, and on that basis, they are treated as ‘agents’. The prosecution did not produce any material to substantiate the aforesaid or mention the basis for this conclusion. In order to make them liable, it was necessary to show that they had contravened the provisions of the Act or of Regulations, Rules, Bye-Laws made there-under. They are also not covered under the categories of those persons which are specified in sub-section (5) of Section 18 of the Act. We are, therefore, of the opinion that it was not appropriate to convict these two appellants and their conviction is accordingly set aside. With this we advert to the question of sentence that is given by the courts below to Binoy Kumar Mishra and Madhusudan Banerjee. It was argued by the learned counsel for these two appellants that having regard to certain extenuating factors, even if the conviction is maintained, they may be fastened with the sentence of fine only. We are inclined to accept this submission of the counsel for these two appellants. No doubt, the incident was unfortunate, but it is an old incident which occurred more than 20 years ago. No doubt, Binoy Kumar Mishra was holding the post of Manager and in that capacity he was supposed to exercise due diligence. At the same time, mine was under the direct control of other three persons who stand convicted and in respect of whom the conviction and sentence has become final. The only role attributed to him was that he acted in violation of SSR. The fault on his part was more in the nature of negligence in performance of his duties and that he could have exercised little more diligence. Insofar as Madhusudan Banerjee is concerned, no doubt, he was an ‘agent’ and, therefore, was directly responsible to ensure that safety measures are taken. However, we find that he retired from service 15 years ago. He is 75 years of age and is suffering from various ailments, including heart disease. He met with an accident in October 2016 and fractured his hip bone because of which he is confined to bed and cannot even go to toilet without help. Keeping in view the aforesaid circumstances in respect of these two appellants, we are of the opinion that the interest of justice would be subserved by imposing the sentence of fine only. Conviction under Section 72A of the Act entails maximum imprisonment of six months or with fine which may extend to ₹ 2,000/-, or with both. Likewise, Section 72C(1)(a) stipulates imprisonment which may extend to two years or with fine which may extend to ₹ 5,000/- or with both. Section 72C(1)(b), likewise, prescribes maximum imprisonment of one year or with fine which may extend to ₹ 3,000/-, or with both. The sentences imposed by the trial court are modified in respect of these two appellants by substituting the sentence of maximum fine prescribed under the aforesaid provisions, which would be ₹ 2,000/-, ₹ 5,000/- and ₹ 3,000/- respectively.
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