Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 19, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
GST
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Consumer Welfare Fund. - Deposit of amount into the fund - Payment of amount from the fund - Audit of the fund - Standing Committee of the fund - Rule 97 of the GST Rules, 2017 amended.
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Application for refund of tax, interest, penalty, fees or any other amount - Sub-rule (5) related to refund on account of inverted duty structure amended - See Rule 89 of the GST Rules, 2017
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Seizure order - wrong mention of the provision - even if the seizure is treated to be under Section 129(1) of the Central G.S.T., as there was no provision of E-Way bill on the relevant date under the Central G.S.T. prima facie the seizure appears to be illegal - HC
Income Tax
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Levy of penalty u/s 271B - assessee did not file tax audit report u/s.44AB before the due date of filing of return of income 139(1) - since the audit report was obtained before the due date and furnished before the AO when asked, No penalty in view the circular - AT
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Treating loss from derivative transactions as loss from speculation business - No doubt, if the said loss is incurred from derivative transactions, the same would not be speculation loss in terms of section 43(5)(d) of the Act. - AT
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Penalty u/s 271(1)(c) - The assessee had short term capital gain on sale of land which was wrongly claimed as long term capital gain by substituting year of acquisition as 1999 instead of 2004 and said mistake was not brought to the notice of AO suo moto. In this background penalty was confirmed - penalty deleted since the assessee had a bonafide belief - AT
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Disallowance made u/s 35(1)(ii) - weighted deduction - scientific research organization donation made - eligibility criteria - There is absolutely no provision for withdrawal of recognition u/s 35(1)(ii) of the Act. - AT
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Withholding tax on payment of legal representation charges to Simpson & Grierson, New Zealand - assessee has to prove that the services were rendered outside India and the same was utilized outside India and the payee is having no business or business connection in India. - AT
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Revision u/s 263 - Explanation 2(d) under section 263 specifically states that revision is possible only due to judgments of the jurisdictional High Court or supreme court. - as there were two views were available, the Ld. CIT should not be allowed to invoke the powers u/s.263. - If the answer of the above refereed question held as yes, then the Ld. CIT will invoke power in each and every cases and will create a huge mess. - AT
Customs
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Electronic evidences - Section 138C of Customs Act, 1962 - it is found that the entire case proceeded on the basis of the electronic documents as evidence. But the investigating officers had not taken pain to comply with the provisions of the law to establish the truthfulness of the documents and merely proceeded on the basis of the statements. Hence, the evidence of electronic devices, as relied upon by the adjudicating authority cannot be accepted. - AT
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Valuation of import goods - Even taking it for granted that the appellant has not filed any proof of document, viz., protest letter or representation against the excess payment, department is not entitled to collect amount, not exceeding 20% of the free on board value (FOB Value) of goods. - HC
Service Tax
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Commercial training and coaching Service - AIU is a statutory authority, competent to recognize any degree awarded by a foreign university and thus, the services provided by the respondent therein should be excluded from the purview of taxable service of commercial training and coaching service, for the levy of service tax - AT
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Valuation - no service tax liability would arise in respect of passenger service fee, being collected by the assessee on behalf of the Airport Authority of India and being paid by it to the said authority - demand set aside. - AT
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Levy of service tax - renting of immovable property service - Joint Venture (JV) agreement - sharing of revenue is not a consideration for rendition of any services - demand set aside - AT
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Erection, commissioning or installation service - Since the appellant admittedly provide works contract service and the definition of works contract service specifically excludes railway from its purview for levy of Service Tax, the activities provided pursuant to the contract even after 01.06.2007 cannot be taxed under the work contract service. - AT
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Commercial Training and Coaching Institute - appellant provides coaching for preparation of competitive exams conducted by the UPSC and MPSPC - Clearly the Appellants are running parallel college for imparting education in degree/ diploma recognized by the law and cannot be differentiated with the other courses run by the regular courses - benefit of exemption from service tax allowed - AT
Central Excise
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CENVAT credit - premium paid for group medi-claim policies for employees' family members - the employee is earning not for himself but also for the family members - credit allowed - AT
Case Laws:
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GST
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2018 (4) TMI 886
Seizure order - wrong mention of the provision - case of petitioner is that the seized goods were in transit from outside the State the transaction would be covered by the IGST Act, 2017 read with CGST Acy and that the provisions of the UPGST Act or its Rules or the notifications issued therein would not apply - Held that: - even if the seizure is treated to be under Section 129(1) of the Central G.S.T., as there was no provision of E-Way bill on the relevant date under the Central G.S.T. prima facie the seizure appears to be illegal - the goods seized be released along with the vehicle subject to the petitioner furnishing indemnity bond and security - petition disposed off.
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Income Tax
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2018 (4) TMI 885
Show cause notice u/s 12AA(3)/(4) for cancellation of registration already granted - writ petition maintainability against a show cause notice - Held that:- The satisfaction contemplated in Section 12AA (3) is to be recorded by the Principal Commissioner of the Income Tax at the time of passing the final orders. At this stage while issuing the show cause notice he has mentioned a prima facie satisfaction in this regard. All pleas including the plea that the registration can not be cancelled with retrospective effect can be raised by the petitioner before the Principal Commissioner, who shall necessarily consider all the relevant pleas and take a decision thereon after recording his satisfaction in terms of Section 12AA (3) and there is no reason for this Court at this stage to believe that he would not do so. It is not a case where the show cause notice has been issued by an incompetent authority without jurisdiction, which could persuade us to interfere in the mater at this stage. In this view of the matter, we decline to exercise our discretionary jurisdiction under Section 226 of the Constitution of India leaving it open for the petitioner to raise all relevant pleas before the concerned authority.
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2018 (4) TMI 884
Denying deduction u/s 80P(2) - Held that:- In view of the judgment of the Hon’ble jurisdictional High Court in the case of The Chirakkal Service Co-operative Bank Ltd. and Others (2016 (4) TMI 826 - KERALA HIGH COURT) wherein held the primary agricultural credit societies, registered as such under the KCS Act; and classified so, under that Act, including the appellants are entitled to such exemption. - thus we hold that the CIT(A) was justified in directing the A.O. to grant deduction u/s 80P(2) of the I.T.Act to the assessee. - Decided in favour of assessee.
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2018 (4) TMI 883
Addition made on account of deposit in S.B. A/c in the hands of the assessee’s brother substantively and addition of the same amount was made in the hands of the assessee protectively - Held that:- Order passed by the CIT(A) needs slight modification. The direction of the CIT(A) that if addition is deleted in the hands of Ram Prakash Senapati then addition in the hands of the assessee should be confirmed is not correct. In our considered view, if the addition in the hands of Ram Prakash Senapati comes to be deleted, then it has to be examined as to whether the addition can be made in the hands of the assessee or not. Hence, we modify the order of the CIT(A). We direct the Assessing Officer to adjudicate the issue of addition in the hands of the assessee after allowing reasonable opportunity of hearing to the assessee. With these directions, the grounds of appeal of the assessee are allowed. Levy of penalty u/s 271B - assessee did not file tax audit report u/s.44AB of the Act for the impugned assessment year 2009-2010 before the due date of filing of return of income 139(1) - Held that:- The audit report was obtained within section 139(1) time limit is not in dispute. It is also not in dispute that the copy of audit report was furnished to the Assessing Officer as and when the Assessing Officer called for the same. The revenue has not brought no material on record to show that the assessee has violated the above quoted circular of CBDT. In these circumstances, following the above quoted circular of the CBDT, in our considered view, penalty levied u/s.271B of the Act in the instant case is untenable - Decided in favour of assessee.
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2018 (4) TMI 882
Levy of penalty u/s.271(1)(c) - benefit of section 80-IB denied - Held that:- As relying on case of VISWAS PROMOTERS PRIVATE LIMITED vs. ACIT [2012 (11) TMI 1117 - MADRAS HIGH COURT] the assessee was entitled to proportionate deduction u/s.80IB(10) in respect of 28 units where the construction area did not exceed 1500 sq.ft. Therefore, it is not a case where the deduction u/s.80IB(10)(c) by the assessee was entirely not allowable to the assessee. Only that part of the deduction pertaining to units where the units area exceeded 1500 sq.ft claim for deduction u/s. 80IB (10) was not allowable to the assessee. Therefore, it cannot be said that the claim for deduction u/s.80IB(10) of the Act made by the assessee in its return of income was entirely wrong or false. In the instant case, the penalty was levied by the Assessing Officer on the ground that the assessee has concealed its particulars of income in respect of income of ₹ 16,65,433/-. However, it is observed that no material has been brought on record to show that the assessee has concealed its particular of income. Rather, in the instant case, the assessee disclosed the entire income and simultaneously claimed deduction of that income u/s.80IB(10) of the Act. It is not a case of concealment of income. Hon’ble Supreme Court in the case of CIT vs Reliance Petroproducts (P) Ltd.(2010 (3) TMI 80 - SUPREME COURT)has held that merely making of a claim of deduction which is found to be not allowable does not invite penalty u/s.271(1)(c) of the Act. In the instant case, in absence of details of any income where particulars were found to be concealed by the assessee, in our considered view, the penalty imposed by the Assessing Officer and confirmed by the CIT(A) is untenable. - Decided in favour of assessee
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2018 (4) TMI 881
Not allowing loss on account of writing off of stores lying in bonded ware house since 1997 and surrendered the title of such goods by this appellant - Held that:- We are of the view that write off of stores & spares imported earlier but lying in the godown of a port authority is a loss incidental to the business. We allow the loss accordingly. This issue of assessee’s appeal is allowed. Entitled to deduction of write off - Held that:- In respect to trade debtors, CIT(A) has deleted the disallowance only on the premise that write-off of bad debts in the books of account is sufficient for claiming deduction under the amended provisions of Section 36(1)(vii) of the Act and assessee is not further required to prove that the debt has become bad. For this, the assessee before lower authorities and before us relied on the decision of Hon'ble Supreme Court in the case of T.R.F. Ltd. Vs. CIT – (2010 (2) TMI 211 - SUPREME COURT). We find that this issue is squarely covered in favour of the assessee and hence, this issue of Revenue’s appeal is dismissed. Sales tax incentive availed under the package scheme of incentive of Government of Maharashtra to be allowed
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2018 (4) TMI 880
Penalty u/s 271(1)(c) - non production of the books of accounts and addition based on the estimate - Held that:- In case where the assessee’s books are rejected and assessment was made on best judgment after estimating the turnover and the rate of gross profit, it cannot be said that penalty cannot be imposed. In each case of the estimated addition it is required to be examined whether there was material to implicate the assessee for having concealed or furnished inaccurate particulars of income. In fact assessment by estimate is one of the accepted methodology of the taxation. Where the assessee conceals relevant material and evidence, the revenue has no option but to make the best judgment by an estimate. An addition made by estimation is as much legal as any other assessment. In the present case, hence, it cannot be said that merely because the estimate of income penalty cannot be levied. Here, there is no explanation by the assessee that why the books of accounts are not been produced by the assessee Non consideration of the decision of Hon'ble Karnataka High Court in CIT Vs. Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] which was cited before the bench but was not considered - Held that:- In the present case such decision was cited before us, however inadvertently same was not considered while deciding the penalty appeal of the assessee. In view of this we are of the opinion that not considering the decision of Hon'ble Karnataka High Court cited before us, renders the order of the tribunal suffering from mistake apparent from record. I Penalty initiated u/s 271(1)(c) - non specification of charge - Held that:- In the present case at the time of framing the assessment order the ld Assessing Officer has recorded a satisfaction that the assessee has furnished inaccurate particulars of income and concealed its income which attracts the provisions of section 271(1)(c) of the Act. while levying the penalty the AO has levied it holding that assessee has furnished inaccurate particulars of income. Therefore, while issuing notice has to come to the conclusion that whether it is a case of ‘concealment of income’ or is it a case of ‘furnishing of inaccurate particulars’. Both the above phrases have different connotation - levy of penalty has to be clear for which penalty is levied, the position is unclear then penalty is not sustainable. In the present case the situation is identical when there was no clear charge that whether the penalty is being initiated for ‘furnishing of inaccurate particulars of income’ or ‘concealment of income’ but levied penalty on furnishing of inaccurate particulars of income renders the order of the penalty unsustainable.
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2018 (4) TMI 879
Nature of loss - Treatment of the loss as a speculation loss u/s 73 - disallowance of claim of trading loss on purchase and sale of shares - Held that:- consequent upon scheme of arrangement and demerger, the assessee company shall be deemed to be investment company and shall be registered as non-banking financial company as per the judgment of the Hon’ble High Court which was approved prior to the FY, therefore, registration granted to the assessee as NBFC would relate back to the date of application i.e. 09.03.2004 as such the assessee would be NBFC in FY under appeal. Since Ld.CIT(A) accepted the genuineness of the transactions of sale and purchase of shares in question and his findings have not been challenged by the Revenue in the Departmental appeal, therefore, we are of the view that the assessee would be entitled for deduction of loss. Thus, Ld.CIT(A) was unjustified to direct the AO to allow loss as speculation loss u/s 73 of the Act. We accordingly, set aside the orders of the authorities below and delete the entire addition. - Decided in favour of assessee Disallowance of bad debts u/s 36(1)(vii) r.w.section 36(2) - Held that:- interest amount that it is allowable under above provision and issue is covered by the judgement of Hon’ble Supreme Court in the case of TRF Ltd. (2010 (2) TMI 211 - SUPREME COURT). Since the assessee was an investment company and it was a principal business of the assessee to grant loan and advance which was also granted earlier, therefore, if the principal amount and interests is not recoverable from debtor company for last several years, the assessee correctly write off same in its books of account as irrecoverable. The claim of the assessee is supported by the balance sheet of the debtor company to show that they have accumulated losses. The decisions relied upon by Ld. Counsel for the assessee support the claim of bad debt on principal amount as well as on interests. The AO thus should not have rejected the claim of the assessee. The claim of the assessee thus allowable as bad debts as well as business loss. Addition u/s 14A - Held that:- In the absence of any satisfaction recorded by the AO, no disallowance should have been made by the authorities below. The assessee claimed that no expenses have been incurred for earning dividend income and investments were existing since 1998 and further admittedly no interest element is involved to earn dividend income would show that no borrowed funds have been used for making investment. If AO was not satisfied with the explanation of the assessee, he should have brought some material on record to disbelieve the explanation of the assessee. He should record his satisfaction as to how the explanation of the assessee was unreasonable and unsatisfactory. In the absence of any evidence on record, disallowance made by the AO is not sustainable. We, accordingly, set aside the orders of the authorities below and delete the addition. MAT - computing book profit u/s 115JB by adding a sum being diminition in value of investment and the exempt income - Held that:- We are of the view that the order of Ld.CIT(A) cannot be sustained since we have deleted the addition of ₹ 36,35,873/- made u/s 14A of the Act. Further, it could not be taken for computing book profit u/s 115JB of the Act. Further this issue is covered in favour of the assessee by order of ITAT, Special Bench in the case of ACIT vs Vireet Investment Pvt. Ltd. (2017 (6) TMI 1124 - ITAT DELHI), we accordingly set aside the orders below and delete the addition. Expenditure on fees paid for management consultancy - allowable busniss expenditure u/s 37 - Held that:- We are of the view that no inference is called for in the matter. When the assessee engaged consultants for the purpose of business of the assessee, it is revenue expenditure because it was incurred wholly and exclusively for the purpose of business. This ground of appeal of Revenue has no merit, the same is, therefore, dismissed Addition on account of imputed interest on Non performing assets - Held that:- The assessee is a NBFC, the assessee has to follow RBI Guidelines with regard to accounting of NPAs and interests income relating thereto. The assessee followed RBI Guidelines. Ld.CIT(A) in AY 2007-08 decided the same issue in favour of the assessee. Since recovery of the principal amount is in dispute and no amount of loans outstanding against these parties have been recovered in past, therefore, the assessee correctly did not account for interests in the books of accounts. Ld.CIT(A), therefore, correctly deleted the addition on accrual of interests in respect of M/s Nalwa Metal & Alloys Ltd. and M/s Gagan Trading Co.Ltd. There is no infirmity pointed in the order of Ld.CIT(A) in following his order for AY 2007- 08. These grounds of appeal of the Revenue are dismissed.
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2018 (4) TMI 878
Transfer pricing addition - comparable selection criteria - functional similarity - Held that:- The assessee is engaged in the business of development of computer software for its Associated Enterprises (AEs), thus companies functionally dissimilar with that of assessee need to be deselected from final list.
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2018 (4) TMI 877
Reopening of assessment - non disposal of the assessee’s objections to the reasons recorded - Held that:- AO having not disposed of the assessee’s objections to the reasons recorded, by passing a separate speaking order before proceeding with the assessment, the assessee has been illegally debarred from exercising a legally enforceable right, which would have become available to him. Thus the assessment order is null and void and it is quashed as such. - Decided in favour of assessee.
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2018 (4) TMI 876
Unexplained investment u/s. 69/69C - identity and genuineness could not be proved - as per CIT-A sources of the investment made by the assessee towards purchase of four residential flats are fully substantiated - Held that:- CIT-A accepted confirmations filed by the assessee without any verification while it was incumbent on him to have satisfied after making necessary verifications / enquiry itself that the assessee has not adopted circuitous route to channelize its own black money as the payments made to the assessee by lenders is preceded by the entries in bank account of the similar amounts and further enquiries ought to had been made by learned CIT(A). We are of the considered view that this matter need to be restored to the file of the AO for denovo adjudication of the issues on merits in accordance with law after making proper and necessary enquiries/verifications and the assessee be directed to produce necessary documents/evidences in support of its contentions to prove the identity, creditworthiness and genuineness of these transaction - Appeal of the Revenue is allowed for statistical purposes.
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2018 (4) TMI 875
Addition u/s 68 - disallowance of unexplained cash credit - assessee being beneficiary of accommodation entry - Held that:- It is noteworthy that assessee was not supplied a copy of the statement of Shri Giriraj Vijayvargia nor any cross examination was allowed during the course of assessment proceedings. The assessee has throughout denied allegations of the AO of being beneficiary of accommodation entries given by Shri Giriraj Vijayvargia - each and every aspect has been touched upon on which the AO has relied while making the addition. A detailed and comprehensive findings has been given by CIT(A) as is reproduced as above and finally the CIT(A) deleted the addition by holding that the conclusion of the AO treating the transaction as sham was not proved on the basis of evidences on record and thus the CIT(A) narrated the said conclusion as derived on the basis of assumptions and surmises. CIT(A) also noted that assessee was not provided a copy of statement nor any cross examination was allowed to the assessee. CIT(A) has taken into account each aspect of the matter of investments in preference shares and sales thereof into account and only after noticing the infirmities and defects in the investigation/enquiry by the AO, a conclusion was reached by the Ld. CIT(A) in the appellate order which is correct and deserved to be upheld. - Decided against revenue
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2018 (4) TMI 874
Treating loss from derivative transactions as loss from speculation business - not allowing the setting off of this loss against regular business income and income from other sources - Held that:- It is not clear from the records that whether the assessee had made any factual submissions before the ld AO that the loss of ₹ 19,63,492/- was incurred out of derivative transactions are not. We are not able to ascertain the same from the paper book filed by the assessee except placing reliance on Form 10DB filed by the ld AR. No doubt, if the said loss is incurred from derivative transactions, the same would not be speculation loss in terms of section 43(5)(d) of the Act. This requires factual verification by the ld AO. Hence we deem it fit and appropriate, in the interest of justice and fairplay, to remand this issue to the file of ld AO for denovo adjudication. The assessee is at liberty to furnish necessary documents and evidences in this regard in support of his contentions. Addition u/s 68 - unexplained cash credit - Held that:- Some of the loan creditors had in fact appeared before the ld AO in response to the summons issued u/s 131 of the Act. The ld AO had not given any credit even for the parties who had appeared before him in response to summons u/s 131 of the Act. The assessee had also stated that more parties could have been produced before the ld AO during remand proceedings but for the sickness of the assessee. In these circumstances, we deem it fit and appropriate, in the interest of justice and fair play, to remand this issue to the file of the ld AO for de novo adjudication to give one more opportunity to the assessee to produce the parties who were not produced earlier before the ld AO. Accordingly, the Ground Nos. 2(a) to 2(c ) raised by the assessee are allowed for statistical purposes.
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2018 (4) TMI 873
Penalty u/s 271(1)(c) - deduction u/s 54B claimed - as per AO payment was made after due date of filing of return - Held that:- In order to show his bona fide the assessee has produced details of payment made to the vendors. The assessee has produced their identity, copy of sale deed and copies of receipts executed by the vendors. To our mind, a layman could easily habour a belief that since he has already invested total capital gain in purchase of new agriculture land, therefore, there might not be any liability of tax qua alleged capital gain. It is a different matter that he has not challenged additionas well as the ld.AO has adopted a different methodology for denying benefit to the assessee. But his explanation was not proved to be false by the Revenue. He has substantiated his explanation with the help of details of payments, copies of sale deed as well as receipts of payments executed by vendors. As far as case law referred by the ld.DR is concerned, it is altogether on different facts. The assessee had short term capital gain on sale of land which was wrongly claimed as long term capital gain by substituting year of acquisition as 1999 instead of 2004 and said mistake was not brought to the notice of AO suo moto. In this background penalty was confirmed. Here question was whether at the time of filing of return, the assessee could harbor a belief that there is no long term capital gain tax liability upon the assessee. Thus the assessee could easily harbor a belief that there was no long term tax liability upon him. It is a different matter that a belief did not meet approval of the AO. In view of the above discussion, we are of the view that assessee does not deserves to be visited with penalty. - Decided in favour of assessee
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2018 (4) TMI 872
Addition u/s 14A r.w.r. 8D - Held that:- Rule 8D of the Income Tax Rules applies w.e.f. assessment year 2008-09 only. We reiterate that we are in assessment year 2007-08. We thus find no merit in Revenue’s first substantive ground. MAT - Disallowance made u/s.14A is not to be added in MAT computation u/s.115JB Administrative expenditure disallowance u/s.14A - Held that:- The assessee derived exempt income from dividend of ₹ 48.76 crores, share in partnership firm to ₹ 1.618 crores, interest income of ₹ 14.74 crores and other income of ₹ 3.70lacs only. A safe presumption can be drawn that the assessee incurred major part of its administrative expenses qua the exempt income only. We thus affirm the impugned administrative expenditure disallowance of ₹ 49,85,705/- to a lump sum amount of ₹ 45lacs and grant part relief to the extent of ₹ 4,85,705/- only. Levy of interest u/s.234B - Held that:- It has come on record that the impugned interest liability had been fastened on the assessee only in view of retrospective amendment. Hon’ble jurisdictional high court in CIT vs. National Dairy Development Board [2017 (6) TMI 736 - GUJARAT HIGH COURT] holds that such a liability does not arise in case of retrospective amendment. We thus see no reason to interfere with learned CIT(A)’s findings under challenge.
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2018 (4) TMI 871
Disallowance made u/s 35(1)(ii) - weighted deduction - scientific research organization donation made - eligibility criteria - Held that:- As decided in assess's own case [2018 (3) TMI 811 - ITAT KOLKATA] there is no provision in section 35(1)(ii) of the Act to withdraw the recognition granted to the assessee therein. When there is no provision for withdrawal of recognition in the Act, the action of the revenue in withdrawing the recognition with retrospective effect from 1.4.2007 is unwarranted. There is absolutely no provision for withdrawal of recognition u/s 35(1)(ii) of the Act. Hence we hold that the withdrawal of recognition u/s 35(1)(ii) of the Act in the hands of the payee organizations would not affect the rights and interests of the assessee herein for claim of weighted deduction u/s 35(1)(ii) of the Act. - Decided in favour of assessee.
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2018 (4) TMI 870
Unexplained investment - seized documents on the basis of which the addition was made by the lower authorities - Held that:- AO is required to read the contents of the seized document as a whole. The AO cannot use part of the content of the seized document against the assessee and ignoring the other part of the contents without adducing any reason - We hold that the seized document should be read and applied in totality. As there was no mention of any cash payment to Shri Pawan Kumar Sharma and Smt. Meena Sharma in seized documents, accordingly, we hold that the AO has made the addition on his presumption and conjecture. As we have decided the issue in favor of assessee on technical count, we are not inclined to adjudicate other arguments of Ld. AR raised during the course of hearing. Thus, the appeal filed by the assessee is allowed. Penalty u/s 271(1)(c) - Held that:- The penalty was initiated on the charge of concealment of income but in the penalty order it was levied on Port the charges that this concealment of income as well as furnishing inaccurate particulars of income. Thus in the instant case the penalty has not been levied on the specific charge as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. In these circumstances, we are of the view that imposition of penalty cannot be sustained. The plea of the ld. Counsel for the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled - Decided in favour of assessee
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2018 (4) TMI 869
Disallowance u/s. 14A - Held that:- There is no finding that the assessee has earned any dividend income out of the concerned investments. Hence we hold that no disallowance u/s. 14A is permissible inasmuch as the assessee has not earned any exempt income on the concerned investment. MAT computation - disallowance u/s 14A for purpose of calculating the MAT u/s 115JB - Held that:- Since the assessee has not earned any exempt income, no disallowance is permissible u/s. 14A. No disallowance is required under normal provisions. In this view of the matter, no issue arises as to the disallowance of expenses u/. 115JB of the Act. Hence, this ground raised by the Revenue stands dismissed. Disallowance of interest u/s 36(l)(iii) - assessee had failed to prove during the course of assessment proceedings that the expenditure incurred on its subsidiary companies were from its surplus funds and not interest-bearing funds - Held that:- Identical issue was considered by this tribunal in assessee’s own case for assessment year 2009-10 that the assesses has incurred expenses on behalf of certain foreign subsidiaries and Indian subsidiary and shown them under the head Advances Recoverable. The assessee has not made any non business advance to the these companies, but these amount represents various debits in the nature of sale of spares, royalty receivable, service charges and the expenses incurred on their behalf such as traveling expenses, establishment expenses, financial guarantees, communications expenses, etc. The assessee does not have system of charging interest on such debits of expenses incurred on their behalf. Such advances did not attract any adjustment in Transfer Pricing order also. AO considered these debit balances as advances without interest and disallowed as interest u/s. 36(1)(iii). We do not find any merit for the disallowance so made by the A.O. - Decided in favour of assessee.
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2018 (4) TMI 868
Denying the increase in closing stock - not giving an opportunity of hearing or issuing any show cause notice in this regard or rejecting the audited books of account - Held that:- Grievance of the assessee is found to be justified and it is accepted as such. The increase in closing stock claimed by the assessee at ₹ 6 crore is directed to be allowed to the assessee.
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2018 (4) TMI 867
Penalty u/s 271(1)(c) - not specifically proving the charge as to whether the assessee has concealed income or furnished inaccurate particulars of income - Income disclosed by the assessee during the search and seizure action and subsequently offered to tax in the return filed u/s 153A - Held that:- There is no dispute that in case the Assessing Officer has initiative the penalty proceeding by issuing a notice u/s 274 without specifying the charge in the default committed by the assessee against which the AO intended to impose the penalty. The said, notice u/s 274 of the Act is in violation of the mandatory condition of making the assessee known about the grounds on which the AO propose to levy the penalty and consequently denying the assessee proper opportunity to contest and meet the case of the AO. In case where the assessee has disclosed unaccounted income during the course of search and seizure action and consequently surrendered the said income in the return filed u/s 153A then the question of making the assessee known about the charge does not arise. In the case in hand apart from the income surrendered by the assessee as disclosed in the statement u/s 132(4) of the Act the AO has also made various additions while framing the assessment u/s 153A of the Act. Therefore, this is not a case of simple levy of penalty against undisclosed income which was disclosed by the assessee and consequently offered to tax while filing the return u/s 153A of the Act but various complex facts and circumstances are involved in this case which requires to be considered while deciding the legal issue raised by the assessee against the validity of the notice u/s 274 of the Act. Relevant facts in respect of each and every addition and income offered by the assessee are requires to be considered in the light of the various decisions and precedents as relied upon by both the parties. Accordingly, in view of the above fact and circumstances, that the additional ground raised by the assessee is legal in nature and goes to the root of the matter the same is set aside to the record of the ld. CIT(A) for adjudication - Decided in favour of assessee for statistical purposes.
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2018 (4) TMI 866
TDS u/s 195 - Withholding tax on reimbursement of expenses made to IBS America Inc. u/s 201 - main contention of the assessee’s Counsel is with regard to reimbursement of expenditure pertaining to salary and overhead costs in relation to IBS Projects and does not include any element of profit so as to deduct TDS u/s. 195 - Held that:- The assessee has not substantiated the veracity of the claim by producing the agreement entered into with IBS, America. It is the primary duty of the assessee to show that it is a reimbursement of expenditure. The assessee has not produced the relevant documents to prove that it was reimbursement of expenditure. Therefore, in the interest of natural justice, we remit this issue to the file of the Assessing Officer for fresh consideration with a direction to the assessee to prove the same. Hence, this ground raised by the assessee is remitted to the file of the Assessing Officer for fresh consideration. Withholding taxes on marketing support charges paid to Avient Solutions Limited UK u/s. 201 - Held that:- As such the assessee cannot be called upon to comply with the provisions not in force at the relevant time but introduced later by retrospective amendment so as to deduct TDS on the impugned payments. In our opinion, the assessee cannot be required to comply with the provisions as this was not in the statute book at the time of incurring the impugned payments. To that extent, the Ld. AR’s argument is justified. However, if the services are rendered in India or payee has residence or business or business connection in India or services utilized in India, then the assessee is liable to deduct TDS. There is no finding in the order of the lower authorities whether the service is rendered in India or utilized in India with regard to the impugned payments. Withholding tax on payment of legal representation charges to Simpson & Grierson, New Zealand u/s. 201 - Held that:- In our opinion the assessee has to prove that the services were rendered outside India and the same was utilized outside India and the payee is having no business or business connection in India. Hence in the interest of natural justice, we remit this issue to the file of the Assessing Officer for fresh consideration.
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2018 (4) TMI 865
Application for registration u/s.12AA rejected - proof of charitable activities - Held that:- We find that in the instant case, the CIT, Cuttack was not justified in refusing to grant registration u/s.12AA of the Act on the grounds stated in the impugned order. CIT, Cuttack could not point out that any of the objects of the assessee society was not charitable in nature or any of the activity of the assessee society was non-genuine. Simply because the activities of the assessee society were little or not substantial cannot be a ground to not to grant registration u/s.12AA of the Act. Further, whether the activity of the assessee is of commercial nature or not is to be examined while granting exemption u/s. 11 & 12 by the Assessing Officer at the time of making the assessment. We set aside the impugned order passed by the CIT, Cuttack and direct him to grant registration u/s.12AA of the Act to the assessee society. Appeal of the assessee are allowed.
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2018 (4) TMI 864
Validity of assessment u/s 143(3) r.w.s. 144C - Final assessment order without issuing draft assessment order under section 144C - whether the draft assessment order passed in the case along with issue of demand notice is correct start of proceedings against the assessee? - Held that:- Draft assessment order passed by the Assessing Officer was complete assessment order which is not envisaged under section 143(3) r.w.s. 144C of the Act. Accordingly, we hold that the draft assessment order passed in the case is invalid in law and hence the consequent order passed does not survive. See DCIT Vs. M/s. Rehau Polymers Pvt. Ltd. (2017 (8) TMI 1294 - ITAT PUNE). - Decided in favour of assessee
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2018 (4) TMI 863
TPA - Adjustment made on account of arm's length price in relation to interest received / receivable on loans extended to associated enterprises - Held that:- The issue in the present assessment year has also to be decided in line with the issue decided in earlier years and following the same parity of reasoning, we direct the Assessing Officer to verify whether the loans were advanced to associated enterprises on LIBOR+ or WIBOR+ rates, as the case may be, and if so, then the said transaction was within arm's length price; otherwise; the TPO can re-compute the arm's length price of international transactions. Accordingly, the matter is set aside to the file of Assessing Officer/TPO to compute adjustment, if any, in the hands of assessee after verifying the claim of assessee. The ground of appeal raised by the assessee allowed for statistical purposes. Disallowance made u/s 14A read with Rule 8D - non-recording of satisfaction by the Assessing Officer before invoking provisions of section 14A - Held that:- In the present case, the Assessing Officer has failed to record necessary satisfaction as to why suo moto disallowance made by the assessee was not correct and in the absence of the same and applying the ratio laid down by the Hon'ble Supreme Court in Godrej & Boyce Manufacturing Company Ltd. Vs. DCIT (2017 (5) TMI 403 - SUPREME COURT OF INDIA) and in Maxopp Investment Ltd. Vs. CIT (2018 (3) TMI 805 - SUPREME COURT OF INDIA) we find no merit in the disallowance worked out by the Assessing Officer by invoking provisions of Rule 8D(iii) of the Rules. In the absence of recording of satisfaction under section 14A(2) of the Act, the action of Assessing Officer is not as per law and the same is reversed MAT computation - disallowance worked out under section 14A read with Rule 8D of the Rules not to be added - Held that:- We direct the Assessing Officer not to include the disallowance under section 14A of the Act read with Rule 8D of the Rules, if any, as part of book profits under section 115JB of the Act.
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2018 (4) TMI 862
Transfer pricing adjustment - loans advanced to AE - applicability of rate - Held that:- Hon’ble High Court of Bombay in CIT Vs. the Great Eastern Shipping Co. Ltd. [2017 (6) TMI 1207 - BOMBAY HIGH COURT]has upheld the action of the Tribunal wherein it was held that arm’s length price in the case of loans advanced to AE would be determined on the basis of rate of interest being charged in the country where the loan is received/consumed. The action of the assessee in adopting the bank rate prevailing in Australia is correct and the AO erred in adopting the Indian bank rate. The loan amount was given in Australian currency and as per the promissory note the AE has to return the amount in Australian Dollar. Therefore, applying the ratio laid by the Hon’ble High Courts discussed above, we hold that there was no necessity of any arm’s length adjustment in this case. - Decided in favour of assessee Addition u/s. 14A read with Rule 8D - Held that:- Coming to the discussion u/s. 14A read with Rule 8D(2)(iii) the settled position as on date is that only while computing Rule 8D(2)(iii) investments which have yielded dividend should only be taken into account while making the computation under Rule 8D(2)(iii) i.e. investment in dividend bearing scrips only to be taken into for consideration. Therefore, we remand the matter back to the file of AO to decide this issue afresh keeping in mind the aforesaid observation of ours and in accordance to law. The assessee is at liberty to file evidence to substantiate its case as regards the additional ground of strategic investment is concerned. Long Term Capital Gain/loss carry forward against the amount computed by the AO as per the provisions of sections 46, 48 and 49 of the Act - assets incurred or borne by the “previous owner” - Held that:- CIT(A) relying on the Tribunal’s decision in the case of Smt. Mina Deogun Vs. ITO reported in (2007 (8) TMI 375 - ITAT CALCUTTA-E ) as well as DCIT Vs. Manjula J Shah [2009 (10) TMI 646 - ITAT MUMBAI] which was later upheld by the Hon’ble Bombay High Court [2011 (10) TMI 406 - BOMBAY HIGH COURT] has decided in favour of the assessee and directed the AO to adopt the figure of long term capital loss to be carried forward to the next year at ₹ 4,56,14,076/- instead of ₹ 3,75,80,707/-. We note that sec. 49 of the Act deals with the manner of computation of the cost of acquisition of capital asset. Sec. 49(1)(iii)(e) of the Act specifically states that where the capital asset has become the property of the assessee by virtue of transfer referred to in clause (vi) of sec. 47 of the Act, the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it (and increased by the cost of any improvement of the assets incurred or borne by the “previous owner” or the assessee, as the case may be) - the indexation of cost has to be done from the original date when the shares were first acquired by the first previous owner - CIT(A) has rightly adjudicated the issue and has given relief to the assessee - Decided against revenue.
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2018 (4) TMI 861
GP addition - estimation of rate - Held that:- The assessee has assailed the G.P. estimated by Commissioner of Income Tax (Appeal) being very much on the higher side. As against the addition of 0.07% made by the Tribunal in assessment year 2009-10, the Commissioner of Income Tax (Appeal) has enhanced G.P. rate by 0.30% (approximately). The assessee in the assessment year under appeal has disclosed G.P. @ 0.61%. We are of considered view that increase in G.P. rate by 0.09% would meet the ends of justice. Thus, G.P. is enhanced from 0.61% to 0.70% of the total sale of ₹ 1961,54,11,702/- as per audit accounts. Disallowance u/s.40A(2)(a) in respect of purchase of gold bullion and gold ornaments - the same is rejected for the reasons given by the Tribunal in assessment year 2009-10. Thus, in view of our above findings, the ground No. 3 raised in appeal by assessee is partly allowed and ground No. 1 raised in appeal by Department is dismissed. Deemed dividend addition u/s. 2(22)(e) - why group companies paid advances much higher than the transactions, i.e. on account of purchases and sales? - Held that:- Similar view has been taken by Ahmedabad Bench of the Tribunal in the case of M.B. Stock Holding (P) Ltd. Vs. Assistant Commissioner of Income Tax (2001 (12) TMI 190 - ITAT AHMEDABAD-B ). The Tribunal held that business profits of the company accrue only at the end of the year and therefore, the current year‟s business profits are not to be included in the accumulated profits for computation of deemed dividend - This issue needs revisit to the file of Assessing Officer. The Assessing Officer shall decide the issue de novo in the light of our above observations after affording opportunity of hearing to the assessee, in accordance with law. Accordingly, ground No. 4 raised by assessee in appeal is partly allowed for statistical purposes. Disallowance of interest u/s.36(1)(iii) - Held that:- Assessee has neither furnished any document nor any meaningful submissions to controvert the findings of Commissioner of Income Tax (Appeal). Thus, we do not find any reason to interfere with the findings of Commissioner of Income Tax (Appeal) in confirming addition Addition u/s 14A - Held that:- In view of the undisputed fact that the assessee has not received any tax free income during the assessment year under appeal, , we hold that no disallowance u/s. 14A r.w.Rule 8D is called for during the assessment year under appeal. Disallowance of advertisement expenses - addition on the ground that advertisement hoardings were put up in Surat and Thane where the assessee was not having any of its business outlets - Held that:- The reason given by Assessing Officer to disallow advertisement expenditure is without any merit. In so far as objection raised by the Assessing Officer that the advertisement expenditure should have been debited in the P & L account of M/s. Rajmal Lakhichand Jewellers Pvt. Ltd. is concerned, the assessee has explained that proportionate advertisement expenditure on turnover basis is shared by all the group concerns. This fact has not been disputed by the Assessing Officer. Thus, we find no error in the order of Commissioner of Income Tax (Appeal) in deleting the disallowance made by the Assessing Officer Disallowance of excess remuneration paid to partners - addition u/s section 40(b) - Held that:- CIT-A correctly held that The remuneration to partner is based on current year’s “Book profits” and therefore it is to be deducted first before allowing the setoff of brought forward losses. The computation of Book Profit is as per section 40(b) while the setoff of brought forward losses is to be granted in terms of section 72. Therefore, while arriving at the business income, the deduction of section 40(b) is to be given first and then if at all there remains positive income, the brought forward losses are to be set off. The appellant had rightly claimed the deduction in the computation of income and therefore, the addition made on this score is deleted. Interest paid on gold deposit scheme to the partners - Held that:- As decided in assessee's own case for AY 2009- 10 there is no bar for the partner to obtain the gold under the gold deposit scheme which was simultaneously done by the assessee firm also. As long as the interest paid to the partner on such gold under the gold deposit scheme is within the permissible limit, there should not be any disallowance. Since in the instant case the firm has paid interest @9% on the gold deposited by the partner obtained from the customers under the gold deposit scheme account, therefore, it is immaterial as to at what rate of interest the partner has paid to the customers. In this view of the matter, we set-aside the order of the CIT(A) on this issue and direct the Assessing Officer to delete the addition.
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2018 (4) TMI 860
Revision u/s 263 - directed the AO not to allow deduction u/s. 80IB(10) while computing book profit u/s.115JB - Held that:- Supreme Court in the case of CIT vs. D.P.Sandhu Brothers [2005 (1) TMI 13 - SUPREME Court] held that the receipts which are not taxable cannot brought to tax under any other section. Deduction claimed by assessee in the instant case u/s.80IB (10) is not taxable under the normal provisions of the Act cannot be treated as part of book profit u/s.115JB, hence, the ld. AO has adopted one of the possible view. Thus, Income arising from development of housing projects are not taxable Sec 80IB(10) and were excluded from its purview. Sec. 80IB(10) income will not be part of MAT income and MAT tax. Thus, the assessment order was rightly passed and cannot be termed as erroneous & prejudicial to interest of revenue. Provision of section 263 will apply when decision of AO is erroneous as well as prejudicial to the interests of the Revenue. But in a case where two views are possible and the AO has taken one view, with which the CIT does not agree, it cannot be treated as an erroneous order, prejudicial to the interests of the Revenue. In that situation provision of section 263 cannot be invoke. Explanation 2(d) under section 263 specifically states that revision is possible only due to judgments of the jurisdictional High Court or supreme court. Further, the assessee has placed the reliance on the various decision where the ratio was laid down were in favour of the assessee. The considerable favourable view was available. Therefore, as there were two views were available, the Ld. CIT should not be allowed to invoke the powers u/s.263. If the answer of the above refereed question held as yes, then the Ld. CIT will invoke power in each and every cases and will create a huge mess. The power of CIT is restricted to the decision of the jurisdiction high court or Supreme Court which were overlooked by the assessing authority. No merit in the action of CIT u/s.263. - Decided in favour of assessee.
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2018 (4) TMI 859
Allowability of the non-compete fee - Held that:- Coordinate Bench of this Tribunal has considered the issue at length in the case of Prism T.V Pvt. Ltd [2016 (6) TMI 419 - ITAT HYDERABAD] for A.Y 2011- 12 to which one of us i.e. J.M is a signatory and has remanded the issue to the file of the AO for reconsideration after a decision is taken on the allowability of the non-compete fee in the case of Ushodaya Enterprises (P) Ltd. The assessee being a resultant company out of demerger of M/s. Ushodaya Enterprises as in the case of Prism TV Pvt Ltd and the facts and circumstances being enact by the same, this ground of appeal of the assessee is also accordingly remanded to the file of the AO with similar direction and is treated as allowed for statistical purposes. Cost of production of T.V. serials and programmes - Held that:- It is seen that the issue is fairly covered in favour of the assessee by the above decision in Prism T.V [above] and the A.O. is directed to treat the expenditure incurred by the assessee on cost of production of TV programmes as revenue expenditure. Depreciation on the film software library at 25% treating it as an intangible asset - Held that:- Remand the issue to the file of the AO to examine the issue of valuation of the asset and thereafter to allow depreciation @ 25% treating the software library as an intangible asset.
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Customs
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2018 (4) TMI 858
Release of detained goods - waiver of detention and demurrage charges - Held that: - the petitioner is entitled to issuance of certificate for waiver of detention and demurrage till it is released. In fact, such order has been passed by the Customs Authority and one such order dated 12.10.2017 passed by the Assistant Commissioner (DIU), Chennai -3 in favour of M/s. Far East Trading Establishment shows that the certificate has been given till the time of release. Since the direction was issued by this Court for grant of release subject to conditions, the petitioner is entitled to issuance of certificate for waiver of detention and demurrage charge till the date of release of the goods i.e., 22.12.2017. Petition allowed by way of remand.
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2018 (4) TMI 857
Valuation - Contention of the appellant is that he had added freight amount of EURO 3900, being 20% of FOB value, to the invoice value, to arrive at the assessable value - Whether the Hon'ble Tribunal has erred in directing the Commissioner of Customs, Appeals, to decide the case on merits, after only in the event if it is found that the assessable value was enhanced by the adjudicating Authority? Held that: - it is manifestly clear that where the cost of transport referred to, in clause (a) of sub-Rule 2 of Rule 10 of the said Rules is not ascertainable, such cost shall be 20% of the free on board value of the goods. Even taking it for granted that the appellant has not filed any proof of document, viz., protest letter or representation against the excess payment, department is not entitled to collect amount, not exceeding 20% of the free on board value of goods. Remand order of the CESTAT, Madras, with a rider that whether the miscellaneous charges were declined by the appellant, as otherwise, added at the instance of the assessing officer, in the course of assessment proceedings, is contrary to the statutory rules. Matter is remanded to the Commissioner of Appeals to reassess the Bill of Entry, dated 20/2/2009, in accordance with the statutory rule, extracted supra, within a period of one month from the date of receipt of a copy of this order.
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2018 (4) TMI 856
Valuation of imported goods - enhancement of assessable value - whether the transaction values declared by the importers are correct or not? - admissibility of evidences - Section 138C of the Customs Act, 1962. Held that: - the legislature by Section 138C had prescribed the detailed procedure to accept the computer print-outs and other electronic devices as evidences. It has been stated that any proceedings under the Act, 1962, where it is desired to give a statement in evidence of electronic devices, shall be evidences of any matter stated in the certificate - In the present case, the provisions of Section 138C of the Act were not complied with to use the computer print-outs as evidence. In the instant case, it is found that the entire case proceeded on the basis of the electronic documents as evidence. But the investigating officers had not taken pain to comply with the provisions of the law to establish the truthfulness of the documents and merely proceeded on the basis of the statements. Hence, the evidence of electronic devices, as relied upon by the adjudicating authority cannot be accepted. The demand of duty cannot be sustained, as the evidences as available for the alleged under valuation cannot be accepted under the law, as per the mandates of Section 138 C of the Act - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 855
Concessional rate of duty - N/N. 12/2012 C us dated 17 03.2012 - imported pre-forms semi precious stones - claim of the appellant is that their product should continue to be treated as rough gem stone only and whatever working done on the same is incidental for due packing and export - Held that: - the later amendment carried out by N/N. 12/13 clarifies that prior to 01.03.2013 duty applicable on performs of semi precious stone was the tariff rate of duty i.e. @ 10%. During 17.3.2012 to 28.2.2013 the applicable duty on perform of semi-precious stones was @ 10% i.e. tariff rate of duty - pre-forms imported by the appellants are not covered by any concessional rate of duty during the period of import - appeal dismissed - decided against appellant.
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2018 (4) TMI 854
Valuation - enhancement of the value - demand based on certificate issued by the Chartered Engineer (CE) - Held that: - circular No. 25/2015 clarifies that all the imports second hand machinery / used capital goods shall ordinarily be accompanied by an inspection / appraisement report issued by an overseas CE or Equivalent, prepared upon examination of the goods at the place of sale - Undisputedly this circular has not been followed in the cases in hand and that is no load port Chartered Engineer's Certificate's inspection / appraisement report. Which is in contravention of the provisions of customs and applied by authorities; transaction value i.e. declared value was rejected for non-production of the certificate from load port - the action of rejection of the declared value is correct and that the valuation arrived at by the lower authorities and the findings recorded by the First Appellate Authority on these points are correct and legal and does not require any interference. Undisputedly, products which were imported were without any, prior licence or permission from Ministry of Environment and Forests, and imported in violation of para 2.3 of the Foreign Trade Policy 2015-2020 - the goods imported have to be held as of prohibited nature and correctly confiscated by the lower authorities. Appeal dismissed.
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2018 (4) TMI 853
Refund claim - duty paid on goods which were exempt - time limitation - Section 27 of the Custom Act, 1962 - Held that: - appellant herein being a state government, should have, before discharging the custom duty considered all exemptions for the goods imported by them - there is no protest registered by the appellant against the discharge of duty by them, which would mean that they were convinced duty liability arises - time limitation would apply in the case. Refund cannot be allowed - appeal dismissed - decided against appellant.
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2018 (4) TMI 852
Penalty u/s 112 (b) of the CA 1962 on Director - non-fulfillment of the conditions of N/N. 12/2012-CE dated 17.03.2012 - Held that: - Since the adjudged demand confirmed against M/s. Andslite Pvt. Ltd. has already been set aside, there is no justification for imposition of penalty on the present appellant, who is the Director of the said company - penalty set aside - appeal allowed - decided in favor of appellant.
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Service Tax
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2018 (4) TMI 850
CENVAT credit - inward freight - GTA service - credit denied by relying in the decision in the case of SKF India Ltd. vs. CCE, Pune – I [2015 (6) TMI 79 – CESTAT MUMBAI] - Held that: - In as much as the effect of the said decisions have not been considered by Commissioner (Appeals), the matters remanded to Appellate Authority for reconsideration by taking into account the decisions referred - appeal allowed by way of remand.
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2018 (4) TMI 849
Works contract service - sub-contract - respondent-assessee entertained a view that in respect of these three contracts, the main contractor for whom the respondent-assessee worked as a sub-contractor, has already discharged the Service tax liability on the entire project and hence they were not required to pay any Service tax - Held that: - It is on record that on the activities provided as sub-contractor to the main contractor, the main contractor has already discharged Service tax liability. Circular dated 23.08.2007, clarifies that the services provided by the sub-contractor is essentially a taxable service. Since there are two streams of decisions by various Tribunal Benches, taking opposing views on the same issue, we are of the view that the matter needs to be considered by a Larger Bench - Registry is therefore directed to place the matter before the Hon’ble President for constituting Larger Bench.
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2018 (4) TMI 848
Scope of SCN - Cargo Handling Services - services of shifting and transportation of coal within the mining area - Held that: - the SCN in this case was issued, seeking confirmation of Service Tax demand under cargo handling service, whereas both the authorities below have changed the classification of service and confirmed the Service Tax demand under different head of service i.e. mining service - It is evident that the authorities below have traveled beyond the scope of the SCN, which is not sustainable as per the settled principles of law enunciated by the judicial forum - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 847
Valuation - includibility - passenger fee, user development fee, Development charges collected in the tickets and remitted to the airport authorities - Held that: - Since the appellant is the intermediary between the passenger and the airport authority and is not providing any taxable service with regard to the collection and deposit of such charges, the value of such charges cannot be included in the taxable value for payment of Service Tax - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 846
Commercial Training and Coaching Institute - appellant provides coaching for preparation of competitive exams conducted by the UPSC and MPSPC - The demands were confirmed by the adjudicating authority on the ground that the YCMOU is an open university and is basically a distance learning mechanism, in which the students are not expected to attend any specific college/ institute - CBEC Circular No. 59/8/2003 dt. 20.06.2003 - Held that: - Clearly the Appellants are running parallel college for imparting education in degree/ diploma recognized by the law and cannot be differentiated with the other courses run by the regular courses. Letter F1-52/2000(CPP-II) dt. 05.05.2004 issued by the Joint Secretary, University Grants Commission clearly states that the Degrees/ Diplomas/ Certificates awarded by the Open University in conformity with the UGC notification on specification of degrees as equivalent to the corresponding awards of the traditional universities in India - there is no doubt that the Appellant trust running courses are equivalent to regular courses of YCMOU and there cannot be any distinction between the regular colleges and the education imparted by the Appellant. In terms of CBEC Circular No. 59/8/2003 dt. 20.06.2003 the Appellant is not liable to service tax - also reliance placed in the case of COMMR. OF C. EX., TRIVANDRUM Versus TANDEM INTEGRATED SERVICES [2010 (8) TMI 401 - CESTAT, BANGALORE], where it was held that the colleges apart from imparting education for obtaining recognized degrees/diploma/certificates, also impart training for competitive examinations, such institutes or establishments are outside the purview of “Commercial Training or Coaching Institute”. Appeal allowed - decided in favor of appellant.
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2018 (4) TMI 845
Erection, commissioning or installation service - contract for design, manufacture, supply, installation, testing and commissioning of “trade control and signalling and telecommunication system” to a consortium, comprising of Siemens AG transportation Systems, Germany and the Indian Company, namely, Siemens Ltd. - Held that: - the contract awarded by the appellant is composite contract, involving both supply of material and for execution of the assigned job. Thus, as per the judgement of Hon’ble Supreme Court, in the case of Larsen & Toubro [2015 (8) TMI 749 - SUPREME COURT], such activities should be taxable under the category of works contract service. Since, such service was brought into the tax net w.e.f. 01.06.2007, the appellant cannot be taxed under any other category of service prior to such date - Since the appellant admittedly provide works contract service and the definition of works contract service specifically excludes railway from its purview for levy of Service Tax, the activities provided pursuant to the contract even after 01.06.2007 cannot be taxed under the work contract service. Appeal allowed - decided in favor of appellant.
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2018 (4) TMI 844
Non-payment of Service Tax - construction of individual villas in two projects namely “Manglam Aangan Villas” and “Manglam Arpan Villas”. Held that: - the whole case requires reconsideration by the Original Authority. It is necessary to examine, with reference to the factual details, whether the Residential Complex having individual villas is in fact having common areas as mentioned in the statutory definition. It is further required to be decided whether the activity carried out would be covered within the Construction of Complex Service or under the category of Works Contract Service. Matter remanded to the Adjudicating Authority for passing de novo orders - appeal allowed by way of remand.
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2018 (4) TMI 843
Works contract service - Revenue held the view that appellant has failed to pay Service Tax properly during the period under consideration - case of appellants is that they have already discharged the Service Tax liability on the basis of the actual receipts but the same has not been taken into account by the adjudicating authority - Held that: - the Service Tax demands in the impugned order have been worked on the basis of the bills raised by the appellant - The tax was payable upto 31.03.2011 on the basis of the actual receipts and not on the basis of the bills raised by the appellant. To this extent, the entire demand confirmed needs to be re-cast - the matter is required to be remanded back to the original adjudicating authority for considering the submissions made by the appellant - appeal allowed by way of remand.
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2018 (4) TMI 842
CENVAT credit - security agency service - It has been contended by Revenue that renting of immovable property is not a service and thus, security agency service cannot be considered as input service for the purpose of availment of Cenvat benefit - Held that: - For providing such taxable service, the appellant had availed the services of the security agency service. Since such service was in relation to providing the taxable output service, service tax paid on such service should be available as Cenvat credit to the appellant in terms of Rule (2) (l) of the Rules - credit allowed. N/N. 24/2007-ST dated 22.05.2007 - denial of benefit on the ground that no documentary evidences were produced to show the actual property tax paid by the appellant for letting out the properties - Held that: - Since the onus entirely lies with the appellant to prove entitlement of its claim for the benefit provided under Notification dated 22.05.2007, we are of the view that demand confirmed by the original authority is not improper - considering the submission of the appellant that it can produce the documents before the original authority to show that property tax has been paid and the same should be entitled for abatement, the matter remanded to the original authority for verification of such documents - matter on remand. Appeal allowed in part and part matter on remand.
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2018 (4) TMI 841
Sponsorship service - reverse charge mechanism - Held that: - the services, in this case, provided by the appellant should appropriately classifiable under sponsorship service as defined under Section 65 (99) (a) of the Act - Since under such category of service, the service receiver is liable to pay Service Tax under reverse charge mechanism, the appellant being a service provider cannot be fastened with the service tax liability. Club or association service - appellant received the subscription of membership fees from its member during the period 01.04.2005 to 15.06.2005 - Held that: - club or association service defined under Section 65 (105) (zzze) was brought into the Service Tax net only with effect from 16.06.2005 - Since the services were provided by the appellant prior to such effective date, service Tax demand cannot be confirmed under that category of service. Sale of space for advertisement in print media - Held that: - sale of space for advertisement in print media is specifically excluded from the definition provided in Section 65 (105) (zzzm) of the Act - Service Tax demand under such category of service cannot be confirmed against the appellant. Non-payment of service tax - security deposit - membership fees - Held that: - the appellant submitted that since the membership fee and security deposit were not realised by the appellant, no service tax is required to be paid thereon. However, such aspects have not been dealt with by the authorities - appeal allowed by way of remand. Appeal disposed off.
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2018 (4) TMI 840
Levy of service tax - renting of immovable property service - Joint Venture (JV) agreement - sharing of revenue - Held that: - identical issue decided in the case of Ruchi Infrastructure Ltd. Versus CCE, Indore [2017 (12) TMI 958 - CESTAT NEW DELHI], where reliance placed in the case of Mormugao Port Trust Versus Commissioner of Customs, Central Excise & Service Tax, Goa- (Vice-Versa) [2016 (11) TMI 520 - CESTAT MUMBAI], where similar issue was dealt and it was held that The money flow to the Assessee from SWPL, under the nomenclature of Royalty, is not a consideration for rendition of any services but infact represents the Appellant’s share of revenue arising out of the Joint Venture being carried on by the Assessee and SWPL - demand set aside - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 839
GTA service - reverse charge mechanism - For transporting paddy/rice the appellants engaged various trucks and entered into agreement for such arrangement with the truck owners - Held that: - One of the essential ingredients of existence of consignment note is missing. The arrangement in the present case for transport of the food grains cannot be brought under GTA service for tax liability on the part of the appellant on reverse charge basis - Further, the truck owners provided the trucks and did not act as transport agent - demand set aside - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 838
Business Auxiliary Services - activities of bringing down the sizes of the mined coal into certain specific sizes - sale of Coal on payment of Sales Tax/ VAT - Held that: - sales tax and service tax cannot be made applicable on the same transaction as the same is includible to each other - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 837
Valuation - includibility - Passenger Service Fee (PSF) and Excess Baggage Ticket (EBT) - Transport of Passengers for international Journey by Air service - Held that: - Since the appellant is the intermediary between the passenger and the airport authority and is not providing any taxable service with regard to the collection and deposit of the PSF amount, such fee cannot be included in taxable value for payment of service tax - The law is well settled that no service tax liability would arise in respect of passenger service fee, being collected by the assessee on behalf of the Airport Authority of India and being paid by it to the said authority - demand set aside. Excess Baggage Charges - Held that: - the said amount was collected from the passengers for carrying extra luggage above the normal level prescribed by the airlines. Such charges does not fall under any of the category of defined taxable service for the purpose of levy of service tax - demand set aside. The tickets sold by the appellant prior to the tax liability i.e. 1.5.2006 and used thereafter by the passengers - time limitation - Held that: - This Tribunal in the case of National Aviation Co. of India Ltd. [2015 (8) TMI 596 - CESTAT MUMBAI] has held that in absence of any specific exemption provided for the tickets used after 1.5.2006, the assessee is under statutory obligation to pay service tax on sale of such tickets - since the demand was confirmed beyond the normal period, the same is barred by limitation of time and demand cannot be sustained on the ground of limitation - demand set aside. Appeal allowed - decided in favor of appellant.
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2018 (4) TMI 836
Commercial training and coaching Service - basic contention of the Revenue is that certificate/diploma issued by the foreign university are not recognized by statutory authorities viz. UGC & AICTE and hence, the respondent should not come under the exempted category and would liable to pay service tax - Held that: - Tribunal in the case of IILM Undergraduate Business School Vs. CCE, Delhi [2017 (11) TMI 1271 - CESTAT NEW DELHI] has held that AIU is a statutory authority, competent to recognize any degree awarded by a foreign university and thus, the services provided by the respondent therein should be excluded from the purview of taxable service of commercial training and coaching service, for the levy of service tax - appeal dismissed - decided against Revenue.
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2018 (4) TMI 835
Commercial Coaching and Training Service - the appellant is a business partner of M/s. Maya Academy of Advance Cinema tics (MAAC) for imparting Computer Education and training programme in graphic animations and cinematics - Held that: - the present appeal is squarely covered by the decision of this Tribunal in the case of Samadhan System Pvt. Ltd Vs. CCE, Jaipur [2018 (2) TMI 1049 - CESTAT NEW DELHI], where it was held that MAAC is overall managing and the commercial coaching and training service suffered tax at their hands. No Service Tax liability will arise on the business partner of MAAC under commercial coaching and training service. - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 834
Manpower recruitment or supply agency service - Department took the view that labours were supplied by the appellant, who were under the control of the Dairy authorities and the activities performed by those workers were under the direction and control of the Dairy authorities - Held that: - The scope of work described in the said work order relates to washing of cans/ crate s and packing of milk. Since there is no specific mention about deployment of labour / work force, the services provided by the appellant should not fall under the taxable category of manpower recruitment or supply agency service - Since there is no specific mention about payment of reimbursement of wages and salaries to the workman, the services provided should not fall under such taxable category of service - appeal allowed - decided in favor of appellant.
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Central Excise
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2018 (4) TMI 833
Recovery of credit utilized for payment of duty - closure of factory - Revenue was of the view that they have to pay back the said credit involved in that quantum of the raw material which was lying in their factory at the time of closure of the factory - Held that: - Revenue has not adduce any evidence to show the clearance of the said raw materials and has moved on the presumption that with the vacation of the premises the raw material must have been removed - the impugned demand by requiring the appellant to debit the availed and utilized Cenvat credit set aside - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 832
CENVAT Credit - rejected goods - Rule 16 (1) and (2) of Central Excise Rules, 2002 - entire case of the Revenue is based upon the statements of the appellant’s buyers, who have returned the attachments to the appellant - Held that: - As the Revenue has exclusively relied upon the statements of various purchasers, it is felt that their cross examination was necessary so as to test the veracity of the said statement, especially when the appellants have maintained all the records including filing of D-3 returns and entering the goods in their statutory records. Hon’ble Punjab & Haryana High Court in the case of Jindal Drugs Pvt. Ltd. vs. Union of India [2016 (6) TMI 956 - PUNJAB & HARYANA HIGH COURT] held that statements cannot be relied upon straight way by the Adjudicating Authority, without following the procedure prescribed in Section 9D of the Central Excise Act. The deponent of various statements were required to be produced for their cross examination as also examination – in – chief for which purpose the matter is being remanded to the Original Adjudicating Authority - appeal allowed by way of remand.
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2018 (4) TMI 831
Clandestine removal - demand based upon the entries made in the records of one M/s Monu Steels, who is a consignment agent - Held that: - The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established - the findings of clandestine removal cannot be upheld based upon the third party documents, unless there is clinching evidence of clandestine manufacture and removal of the goods - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 830
CENVAT credit - premium paid for group medi-claim policies for employees' family members - Held that: - the employee is earning not for himself but also for the family members - The benefit of the insurance to the family members is allowable as per the ratio laid down in the case of M/s EXL Service [2017 (5) TMI 1461 - CESTAT NEW DELHI], where it was observed that the benefit can be extended to the employees and their family members - credit allowed - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 829
Classification of goods - Low Aromatic Naphtha (LAN) - whether classifiable under heading 2710.14 is actually classifiable as “Other Special Boiling Point Spirit” or is it classifiable as ‘Naptha’ under heading 2710.19 prior to 1.3.2005 and as ‘Naptha’ under 2710 11 90 after 1.3.2005? - Held that: - the test results prove that the products answers to the definition of “Special Boiling Point Spirits” in all respects except the description that appears in the single dash entry in the heading. The onus is on revenue to establish that the goods answer to the description given in single dash entry (upto 1.3.05) and to the definition of motor spirit after (1.3.05). Since revenue has not even attempted to test the goods for this purpose it has failed to establish its claim to classification under that entry. Appeal dismissed - decided against Revenue.
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2018 (4) TMI 828
CENVAT credit - MS angles, platform and MS plates and channels and GI structurals used in fabrication of capital goods - Held that: - the eligibility of credit on these items or similar such items have been subject matter of various decided cases of the Tribunals, High Courts and Hon’ble Supreme Court. By now, the legal position is to allow credit on various MS items which are used for fabricating capital goods or accessories and support structures of such capital goods - the decision in the case of Singhal Enterprises Pvt. Ltd. vs. CC & CE, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI] referred - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 827
CENVAT credit - inputs - MS Angles, Channels, Bars, Plates etc. - Revenue held a view that these items cannot be considered as inputs and were not entitled for credit as these are not used in or in relation to the final products - Held that: - these items were used mainly for fabrication of various capital machinery or accessories to such capital machinery and also connected structures which are essential for usage of capital goods - These items were held to be eligible in various decisions of the Tribunal - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 826
Confiscation of raw material u/r 25 of CER, 2002 - Non- accountal or improper accountal of raw material - Held that: - none of the 4 categories of offence mentioned in the said rule is applicable to the present case in respect of raw materials - The appellant is not the manufacturer or dealer or availed any benefit out of such material. The appellant was not liable to pay duty on the goods manufactured by using such raw material as they were enjoying SSI exemption. In such situation - application of Rule 25 for raw material is not justified - appeal allowed.
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2018 (4) TMI 824
CENVAT credit - input/capital goods/input services - Revenue held a view that the appellant being an EOU is eligible to get goods and services without payment of duty/ tax - Held that: - It is clear that the Section stipulates that when an exemption is granted under sub-section (1) to any excisable goods absolutely, the manufacturer of such excisable goods shall not pay the duty of excise on such goods - The appellant is not manufacturer of input or capital goods. They are actually recipient of such duty paid goods. Secondly, we note the said mandate of sub-section (1A) is only with reference to exemptions granted absolutely. Exemption N/N. 22/2003 which is subject matter of dispute covering the inputs and capital goods. The said notification, admittedly, contain various conditions including bond etc. to be fulfilled by the manufacturer supplier of such goods to the EOU. As such, it is apparent that such elaborate conditions when stipulated, not followed by the manufacturer supplier will not attract the provision of Section 5A (1A). In any case, the point is even if it is admitted for argument that the supplier had violated the said provision, the appellant as recipient of duty paid goods cannot be put to adverse finding. A distinction is sought to be made on the ground that the N/N. 44/2001 was issued under Rule 19 of CER 2002 whereas the present N/N. 22/2003 is issued under Section 5A. Appeal allowed - decided in favor of appellant.
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2018 (4) TMI 823
Liability of Excise Duty - waste and scrap - The view of the Revenue is that after the introduction of Explanation under Section 2(d) for “excisable goods” if such scrap is being capable of bought and sold for a consideration the same shall be treated as marketable - Held that: - the various goods on which the Revenue seeks to collect Excise duty are all, admittedly, products incidentally arising during the manufacture of finished goods on which in any case, the appellant is discharging duty. These scrap material are not emerging due to a process of manufacture. Hence, they do not qualify to be taxed for excise levy. The view of various judicial pronouncement on this issue has been consistent and clear. Such scrap materials arising as incidental products and even if they were sold for a consideration cannot be considered as excisable products. Reference made to the decision in the case of Magnum Ventures vs. CCE, Ghaziabad [2014 (4) TMI 416 - CESTAT NEW DELHI], where it was held that the emergence of sludge and pulper waste during the course of manufacture of paper or paper board cannot be held to the result of any manufacturing activity. Appeal allowed - decided in favor of appellant.
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2018 (4) TMI 822
Benefit of N/N. 12/2012-CE. - Hard Disk Drives - benefit denied by classifying the goods under Heading No.84717030 as “Removable or Exchangeable Disc Drive” - Held that: - the very same dispute came before the Tribunal in Supertron Electronics Pvt. Ltd. [2017 (1) TMI 1529 - CESTAT NEW DELHI], where it was held that The terms hard disk drive used in the notification has not been amplified either by adding “external” or “internal”. On this simple premise alone, exemption to the said item cannot be denied - benefit allowed - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 821
Exemption under N/N. 12/2013 - CE dated 1.3.2013 - heena powder - Notification requires that heena powder or paste, “not mixed in any other ingredients” falling under Chapter 33 are liable to nil rate of duty - Held that: - the facts of the present case did not reveal that any other ingredients at all has been added in making the henna paste - the clove oil is all quid used to make henna paste from powder and make it marketable as such paste in cones. The said process is for making the paste marketable/useable much later by the customers - benefit to be allowed - appeal dismissed - decided against Revenue.
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2018 (4) TMI 820
Condonation of delay in filing Rectification of mistake application - Held that: - the miscellaneous application for rectification of mistake filed by the Revenue has been filed before the Tribunal on 27.11.2017 - The relevant Final Order was issued by the Tribunal on 29.03.2017. The six months period allowed under Section 35C (2) of the Act requires the ROM, if any, to be filed on or before 28.09.2017 - Since the ROM application filed by the Revenue has been received on 27.11.2017, it is beyond the period of six months. In the absence of any provision in Section 35C (2) to condone any delay in filing the ROM application beyond six months, the delay cannot be condoned. ROM application dismissed.
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2018 (4) TMI 819
CENVAT credit - steel items like mill plates, channels, joists etc. - denial on the ground that these are structural items excluded from eligibility for credit - Held that: - the eligibility of steel items for Cenvat credit has been a subject matter of decision by the Tribunal, Hon’ble High Courts and the Hon’ble Supreme Court in various cases - It has been held by the Tribunal consistently that the steel items when they were used in fabrication of capital goods and their accessories inside the manufacturing premises are eligible for credit - credit allowed - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 818
Concessional rate of duty - N/N. 1/2011 CE dated 01/03 /2011 - denial on the ground that the assessee availed credit of duty/ tax availed on inputs/ input services - principles of natural justice - Held that: - The Original Authority only discussed the condition for availing the exemption under Notification No. 01/2011 without adverting to the statutory provision of Sub - Rule (3D) of Rule 6 which was strongly contended by the appellant. No analysis of such defense has been made by the Original Authority - Original Authority fell in error in not considering the legal provisions as contended by the appellant. Impugned order not sustainable - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 817
CENVAT credit - input services - removal and disposal of fly ash - penalty for credit availed on the basis of supplementary invoices - Held that: - removal and disposal of fly ash in a manner prescribed by the Government is a mandate requirement for continued production of electricity for activities used by the appellant - without such due disposal of fly ash, generation of electricity cannot happen - Any input services or inputs used for such generation of electricity are necessarily to be considered as input service for final excisable goods - credit allowed. Penalty - CENVAT credit - supplementary invoices - Held that: - basic reason to deny the credit fails. Accordingly, the penalty imposed on the appellant on this issue cannot be sustained. Appeal allowed - decided in favor of appellant.
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2018 (4) TMI 816
CENVAT credit - inputs - duty paying documents - it was alleged that credit availed on improper documents and without receipt of impugned inputs into the factory - denial of cross-examination - Held that: - Reason for denying the cross examination are mentioned in section 9D itself. The same should be recorded. In the present case, neither an opportunity for cross examination has been provided nor the reasons attributable under section 9D were recorded - appellant-noticee should be provided with all the documents which were recovered from their premises and also be provided fair opportunity to defend their case. The matter remanded back to the original adjudicating authority with the direction to decide the case afresh following the provisions of section 9D - appeal allowed by way of remand.
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2018 (4) TMI 815
SSI Exemption - determination of turnover to ascertain the base exemption level - denial of SSI exemption on the ground that their turnover was exceeding exemption limit for excisable goods - Held that: - the provisions of para 2(vii) read with para 3(A)(b) of N/N. 8/2003 is clear that clearance bearing brand name of another person are not to be included with the turn - over of the appellant - The Hon’ble Supreme Court in the case of Nebulae Health Care Ltd. [2015 (11) TMI 95 - SUPREME COURT] observed that the branded goods manufactured by SSI unit meant for third party are reckoned by normal provision of law and will have no bearing or relevance in the appellant’s availing the benefit of this exemption notification in respect of its own products manufactured by the SSI unit concerned. The inclusion of said turn-over of branded goods in turn-over of appellant for SSI limit is not legally sustained - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 814
CENVAT credit - input service - Sales Commission - Held that: - the issue has been squarely dealt with by the Tribunal in the casse of Essar Steel India Ltd. vs. CCE & ST, Surat – I [2016 (4) TMI 232 - CESTAT AHMEDABAD], holding that service tax paid on commission amount should be considered as input service for the purpose of availment of Cenvat credit - credit allowed - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2018 (4) TMI 813
Entertainment tax - whether the District Magistrate, Kanpur Nagar has justified in demanding sum of ₹ 13,19,223/- as an entertainment tax over whereas the entertainment tax had already paid by the petitioner to the tune of ₹ 87,94,847/- against the sale of Tickets for sum of ₹ 3,53,44,650/-? - Held that: - There is no dispute that the petitioner has paid the service tax and further that out of the demand of ₹ 1,01,14,075/- (Rs. one crore one lakh fourteen thousands and seventy five only) towards entertainment tax petitioner has already deposited a sum of ₹ 87,94,847/- and now the alleged demand is of ₹ 13,19,223/- which is being pressed illegally - the operation of the impugned order passed by the District Magistrate, Kanpur dated 21.02.2018 (annexure-1) shall remain stayed.
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Indian Laws
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2018 (4) TMI 851
Validity of Arbitral Award - award pertaining to Bank Guarantees and the amounts specified in Exhibit- GG of the Claim Petition - Refurbishment of Thermal Power Plant - termination of contract - violation of a fundamental condition of the Contract i.e. non-furnishing of a Letter of Comfort from the Power Finance Corporation as provided in Clause 5.6 of the Onshore Supply Contract - misrepresentation of the warranty contained in Clause 19.2 (vii) of both the Onshore and Offshore Supply Contracts and Clause 20.2 of the Onshore Services Contract. Held that: - the assertion made by the Board that the Units were achieving a capacity of 120 MW when operating in accordance with the good industrial practice, was found to be incorrect by the Arbitral Tribunal. We do not intend to take a different view on the findings of the fact recorded by the Arbitral Tribunal - Even if the Board believed that Units 3 and 4 were in fact designed for a capacity of 120 MW and operated at 120 MW, if it was found later that the assertion relating to the said capacity and functioning was not true, a clear case of misrepresentation, as per Section 18 of the Contract Act was made out. The evidence on record discloses that the Claimants could not ascertain the actual capacity and the functioning of the Units in spite of their best efforts. The relevant records were not furnished by the Board to enable the Claimants to ascertain the actual facts. The evidence on record supports the contention of the Claimants that it was not possible to ascertain the capacity and functioning of the Units only on the basis of visual inspections. The Arbitral Tribunal was of the opinion that the invocation of the Bank Guarantee was improper as it was not preceded by a Notice of Default as contemplated in Clause 16.3 of the Supply Contracts and a subsequent notice of termination under Clause 17.1 of the Supply Contracts. In view of the finding of the Arbitral Tribunal that the Board committed a serious breach of the contract and wrongfully terminated the contract, the Claimant was held to be entitled to return of the amounts for which the Bank Guarantees were given. The Bank Guarantee given on 24.02.2000 was a Performance Bank Guarantee and the Claimant is entitled for return of the amount for which the Bank Guarantee was given. The Arbitral Tribunal, however, failed to take notice of the fact that the other two Bank Guarantees were given for the amounts to be advanced by the Board. In fact, the Board had advanced the said amounts to the Claimants - the Claimant is not entitled for return of the amounts involved in the Bank Guarantees dated 22.02.2000 and 23.02.2000 as they were towards the amounts advanced by the Board. The award of the Arbitral Tribunal upheld with the modification that the Claimants are not entitled for the amounts involved in the Bank Guarantees dated 22.02.2000 and 23.02.2000 given by the Claimants - appeal disposed off.
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