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TMI Tax Updates - e-Newsletter
May 1, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Highlights / Catch Notes
Income Tax
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Additions towards unexplained investment in share capital u/s 68 - The revenue is free to go behind the investors and reopen their cases as they have voluntarily and willingly confirmed the investment - assessee need not have to prove the source of the source - AT
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TPA - The failure on the part of the assessee to furnish the Audit Report in Form 3CEB from an Accountant in the prescribed proforma within the prescribed period, without reasonable cause, is a clear violation of the provisions of section 92E - levy of penalty u/s 271BA confirmed - AT
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Unexplained investment in silver articles - assessee failed to come out with the plausible explanation in this regard as the silver articles have been found in his possession - AO taking into consideration the social and financial standing of the family has arrived at 50% which is just and proper. - AT
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Claim of deduction u/s 54F - one cheque returned by the builder due to technical reasons - The assessee cannot get the exemption towards unutilized amount as the said amount has not been invested by the assessee in the purchase/construction of new residential house property - nor the same has been deposited in capital gain account with bank - AT
Corporate Law
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Once the provisions of Section 220 of the Income Tax Act are incorporated in Section 28A, full effect must be given to Section 220 of the Income Tax Act for recovery of the amounts referred to in Section 28A of SEBI Act. - SAT
Service Tax
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Training or coaching services - retrospective amendment - Vires of explanation added to section 65(105)(zzc) - Once there is a power to make retrospective amendment and of the above nature, then, one cannot pick one or two words from the explanation and read them in isolation. The explanation would have to be read as a whole - Petition dismissed - HC
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CENVAT credit - Gardening service used within their factory - where an employer spends money to maintain their factory premises in an eco-friendly manner, the tax paid on such services would form part of the cost of the final products and the same would fall within the ambit of "input services" - HC
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Club or association services - receipt of donation against "Building Fund" - Since the donation amount does not present any additional facilities or relating to the membership in the club, the same has no nexus with the taxable service provided by the appellant - AT
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Cenvat Credit - Input service - construction services for construction of factory building - prior to the amendment the setting up of a factory premises of a provider for output service relating to such a factory fell within the definition of ‘input service’ - AT
Central Excise
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Classification of Yarn - the products manufactured by assessees are nothing but air mingled yarn and, therefore, cannot be classified under Chapter No. 56 in view of the fact that it does not contain a core around which another yarn has been woven - SC
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Right to have retrospective exemption from duty - Issuance of a notification u/s 11C is in the nature of subordinate legislation. Directing the Government to issue such a notification would amount to take a policy decision in a particular manner, which is impermissible - SC
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Once the appellant accepts that in law it was liable to pay the duty, even if some of the units have been able to escape payment of duty for certain reasons, the appellant cannot say that no duty should be recovered from it by invoking Article 14 of the Constitution - SC
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Quantum of mandatory deposit - whether an appellant has to pay 10% mandatory deposit over and above the mandatory deposit of 7.5% of the duty liability/penalties - Held Yes - Tri (LB)
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Gold Potassium Cyanide Solution - dutiability - product consumed by the appellant captively for manufacture of Gold Eyed Handle Sewing Needle - Revenue failed to prove the marketability of the product - demand of duty set aside - AT
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Valuation - value of bought-out items like bolts, nuts, corner plate etc. cannot be included in the assessable value of other manufactured goods cleared by the appellant in terms of section 4 of the Central Excise Act, 1944 - AT
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CENVAT credit - photo frames given as a gift in Diwali institutional packs - the same would fall within the ambit of “manufacture” - credit allowed - AT
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Valuation - Where on the respective date sale price is not available for the purpose of ascertainment, the value of goods in time nearest i.e., immediate past, to the time of removal of the goods shall be considered for the purpose of Rule 7 - AT
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Classification of Grey Oxide and Red Lead Oxide - trade parlance theory - the product in question cannot be classified under chapter heading 28.24 without any positive evidence - AT
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Refund claim - period of limitation - If no such liberty or protest is indicated at the time of payment of duty and interest, definitely such applicants are not entitled to claim such benefit provided under the second proviso to Section 11B - AT
Case Laws:
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Income Tax
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2017 (4) TMI 1195
Validity of recovery proceedings u/s 226(3) - whether the first respondent has validly recovered the money and whether the petitioners are entitled for refund of such money so recovered? - Held that:- As already pointed out that on the date of issuance of the notice under Section 226(3), there is no legal impediment or bar for the first respondent to recover such dues. Section 226(3) of the Act also enables and empowers the Assessing Officer or the Tax Recovery Officer to seek such payment from the person to whom such notice was issued either forthwith or within the time specified in the notice. In other words, it is the discretion of such authority to specify the time for such payment in the said notice. In this case, the first respondent directed the second respondent to make the payment forthwith. Therefore, legally, the first respondent is not barred from seeking such payment forthwith. The impugned action of the first respondent cannot be termed as illegal, merely because the recovery was made on the same day of issuance of notice, especially when the liability of the petitioners exists. On the other hand, it only exhibits the over enthusiastic act of the first respondent to see that a target goal is achieved on that day, being the end of the financial year. Apart from the above, it is an admitted fact that the impugned proceedings are already lifted on the same day after recovery and as such those proceedings are not in force as on today. Petitioners are not entitled to seek for refund of the amount recovered at this stage, as a matter of right, since neither Section 237 nor Section 240 of the Act would come to their rescue as on date. Admittedly the amount recovered is the amount due as per the assessment order confirmed in appeal. On the date of recovery or even thereafter till this date, there is no legal impediment for the first respondent to collect such due. When that being the factual position, I do not understand as to how the petitioners are justified in seeking for refund unless they satisfy that their claim would come under the purview of either section 237 or section 240. As already pointed out that both the provisions, in this case, would not come into operation as of now, as such situation has not arisen so far. Therefore, the refund claim made by the petitioners cannot be sustained. No justification on the part of the petitioner in contending that the amount recovered is over and above the amount liable to be paid, more particularly, the impugned proceedings does not specifically refer to any Assessment Years.
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2017 (4) TMI 1194
Validity of assessment u/s 153C - Satisfaction Note - Held that:- The letter dated 27th January, 2010 written by the Petitioner to RGEPL and recovered from the premises of RGEPL was a document which belonged to the Petitioner. As regards the other document seized, and mentioned in the Satisfaction Note viz., the extract of the ledger account maintained by the Petitioner concerning the payments of commission made by it to RGEPL, even if it is held to 'belong' to the Petitioner, it could hardly be said to be an 'incriminating' document. This was a document relevant only for the AY 2010-11. It could not have been used for re-opening the assessments of the earlier years i.e. AYs 2007-08 to AY 2009-10, 2011-12 and 2012-13. This position again stands settled by the decision in CIT-7 v. RRJ Securities Ltd (2015 (11) TMI 19 - DELHI HIGH COURT). The fact that the Revenue's SLP against the said decision is pending in the Supreme Court does not make a difference sine the operation of the said decision has not been stayed. While the ledger account extract may be relevant for AY 2010-11, it cannot be said to be incriminating material warranting re-opening of the assessment. The return originally filed by the Petitioner for the said AY 2010-11 was picked up for scrutiny and finalised by an assessment order under Section 143 (3) of the Act. The payments of commission to RGEPL to the tune of ₹ 4.95 crores as reflected in the ledger account was already disclosed in the Petitioner's accounts which were examined while finalising the regular assessment. Therefore, the ledger account could not have led the AO to be satisfied that any income had escaped assessment for the AY 2010-11. The net result is that neither of the documents mentioned in the Satisfaction Note could have formed a valid basis for the AO to initiate proceedings against the Petitioner under Section 153 C of the Act for AY 2010-11 or any of the other years as proposed.- Decided in favour of assessee.
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2017 (4) TMI 1193
Transfer pricing adjustment - brand promotion by the assessee for its foreign parent company - whether the benefit accruing to the HMC Korea, as a result of increased brand value due to sale of Hyundai cars in India by the assessee company, constitutes an international transaction? - Held that:- In the present case since no services are performed, the discussion about benefit of the services is academic. We have referred to the above discussions in the OECD Guidelines just to highlight the fact that even in situations in which benefit test is specifically set out in the definition of international transaction, the determination of arm’s length price of a service has two components- first, of rendition of service; and- second, of benefit accruing from such services. When the first condition is not satisfied, as in the present case, the matter rests there, and there is no question of benchmarking the benefit in isolation. In our considered view, an incidental benefit accruing to an AE, therefore, cannot be benchmarked unless it is result of a specific service by the assessee. An accretion in the brand valuation of a brand owned by the AE does not result in profit, losses, income or assets of the assessee company, and it cannot, therefore, result in an international transaction qua the assessee. Unless the transaction is such that it affects profits, losses, income or assets of both the enterprises, it cannot be an international transaction between these two enterprises. If the assets of one of the enterprises are increased unilaterally, without any active contribution thereto by the other enterprise, such an impact on assets cannot, in our humble understanding, amount to an international transaction. The accretion in brand value of the AE’s brand name is not on account of costs incurred by the assessee, or even by its conscious efforts, and it does not result in impact on income, expenditure, losses or assets of the assessee company. It is not, therefore, covered by the residuary component of definition of ‘international transaction’ either. As for the emphasis placed by the learned Departmental Representative, as also by the authorities below, on the exhaustive definition of ‘intangibles’ in Explanation to Section 92B, we may only reiterate that this definition would have been relevant only in the event of there being any transaction in the nature of sale, purchase of lease of intangible assets but then, it is not even the case of the revenue, that there was any sale, purchase or lease of intangibles. In view of these discussions, as also bearing in mind entirety of the case, we are of the considered view that the accretion of brand value, as a result of use of the brand name of foreign AE under the technology use agreement- which has been accepted to be an arrangement at an arm’s length price, does not result in a separate international transaction to be benchmarked. The impugned ALP adjustments must, therefore, stand deleted. We hold so. Grievance of the assessee, with respect to ALP adjustments on account of accretion in brand value of the AE due to its use by the assessee, is thus upheld. - Decided in favour of assessee Tax withholding obligation from interest payments to Mauritian entities - TDS u/s 195 - Held that:- Once we find that the provisions of article 5 and article 7 donot come into play, as is the situation in this case, the next thing to be examined is the scope of article 11. Article 11(1) provides that “interest arising in a contracting state and paid to the resident of the other contracting state may be taxed in that other state”. In effect thus interest income is not taxable in source jurisdiction but only in residence jurisdiction. There is, of course, a rider in article 15(6) which provides that, inter alia, article 11(1) “shall not apply if the recipient of the interest, being a resident of a contracting state, carried on business in the other contracting stare in which interest arises, through a permanent establishment situated therein”. The treaty protection of article 11(1) can thus indeed be denied when recipient of interest has a PE in the source country and the business is being carried on through such PE in the source country. As we have seen in our analysis earlier, this condition is clearly not satisfied on the facts of this case. There is more armoury in store for the revenue. It has been emphasized by the Assessing Officer that the Mauritian entities are part of the global MNE groups and the Mauritian companies, as they apprehend, could at best be front companies or conduit companies, not the beneficial owners. There is no dispute that Mauritian entities in question were carrying out banking business in Mauritius, and there is nothing on record to show, or even indicate, that the beneficial owner of interest income were not these Mauritian entities. In addition to this undisputed position, neither a case has been made for existence of any PE nor for business having been carried out through such a PE. All that is established is the presence of some of the affiliates of the MNE group to which the recipient of interest income belongs, and some peripheral role played by such affiliates, but these facts donot establish, or even indicate, existence of the PE. The protection of article 11(1) cannot, therefore, be declined on the facts of the present case. We are, therefore, of the considered view that the income embedded in these interest payments was not taxable in India. Accordingly, the assessee did not have any tax withholding obligations, under section 195, in respect of these payments, and, as a corollary thereto, disallowance under section 40(a)(i) was not justified.- Decided in favour of assessee Accrual of income - treating the export incentives on account of Focus Market Scheme and Focus Products scheme as income of the year - Held that:- In assessee’s own case for the assessment year 2007-08 as held The incentive on target plus scheme is nothing but an entitlement for a duty credit based on incremental exports which should be substantially higher than the general annual export target that is fixed. The incentive on focus market scheme is to offset high freight cost and other externalities to select international market with a view to enhance India’s export competitiveness in those countries. It is pertinent to note that the assessee will be entitled to such benefit only after verification of the claim of the assessee by relevant governmental authorities and issuance of licence by such governmental authorities. Therefore, the facts of the assessee’s case are similar to the facts decided by the Hon’ble Apex Court cited supra. Therefore, respectfully following the decision of Hon’ble Supreme Court, we hereby hold that the notional income computed by the assessee cannot be treated as taxable income of the assessee during the relevant previous year. However, the same shall be taxed in the previous year in which the assessee has received the licences and derived such income. - Decided in favour of assessee. Disallowance of unrealized loss - Held that:- In the absence of applicability of section 43A of the Act to the facts of the case and in the absence of any other provision of the Income Tax Act dealing with the issue, claim of exchange fluctuation loss in revenue account by the Assessee in accordance with generally accepted accounting practices and mandatory accounting standards notified by the ICAI and also in conformity with CBDT notification can not be faulted. No inconsistency with any provision of Act or with any accounting practices has been brought to our notice. Otherwise also, in the light of fact that the conversion in foreign currency loans which led to impugned loss, were dictated by revenue considerations towards saving interest costs etc. we have no hesitation in coming to the conclusion that loss being on revenue account is an allowable expenditure under S. 37(1) of the Act. See Cooper Corporation (P.) Ltd. Versus Deputy Commissioner of Income-tax [2016 (5) TMI 809 - ITAT PUNE] Disallowance of depreciation on account of reduction of capital subsidy granted by SIPCOT form the cost of assets - Held that:- On identical issue, in respect of the assessment year 2007-08, was remitted to the file of the DRP for fresh adjudication on the nature of the subsidy. Whatever are the findings of the DRP for the assessment year 2007-08 will be equally valid for this assessment year as well. We, therefore, remit the matter to the file of the Assessing Officer for examining the matter afresh in the light of those findings of the DRP. While so deciding the matter, the Assessing Officer will give a due opportunity of hearing to the assessee. Subsidy received from the Government of Tamilnadu in the form of refund of output VAT - revenue of capital receipt - Held that:- The assessee has raised an additional ground of appeal that “subsidy received from the Government of Tamilnadu in the form of refund of output VAT is a capital receipt not chargeable to tax” and to that extent the stand of the authorities below is incorrect and needs to be vacated. While there cannot indeed be any objection to the appellant raising any new issue before the Tribunal, in view of the decision of Hon’ble Supreme Court in the case of NTPC Ltd Vs CIT [1996 (12) TMI 7 - SUPREME Court], with the consent of the parties, this matter is required to be remitted to file of the Assessing Officer for adjudication de novo on merits, in accordance with the law, by way of a speaking order and after giving a fair and reasonable opportunity of hearing to the assessee Disallowance of provision for warranty - Held that:- As in assessee’s own case for the assessment year 2002-03 DRP didn't erred in deleting the disallowance of provision for warranty Guarantee commission paid to the bank etc for purchase of machinery is a revenue expenditure. See ACIT Vs Akkamamba Textiles Ltd [1996 (10) TMI 71 - SUPREME Court] Depreciation claimed on assets used for office purpose allowed referring assessee’s own case for the assessment year 2007-08 Disallowance u/s 43B in respect of ‘performance reward’ which is said to be distinct from ‘bonus’ - Held that:- We find that this issue is covered against the assessee by direct decision, on this point, by Hon’ble Uttarakhand High Court, in the case of CIT Vs Kisan Sahkari Chini Mills Ltd [2008 (8) TMI 351 - UTTARAKHAND HIGH COURT]. No direct decisions, in favour of the assessee and on this point, have been brought to our notice. In this view of the matter, we uphold the stand of the Assessing Officer and decline to interfere in the matter. Depreciation being allowed @ 60% in respect of UPS, Printers and Scanners, and thus treating the same at par with the computers - Held that:- This issue is also covered in favour of the assessee by Hon’ble Delhi High Court’s judgment in the case of CIT Vs BSES Yamuna Powers Ltd [2010 (8) TMI 58 - DELHI HIGH COURT] wherein Their Lordships have, inter alia, observed that “We are in agreement with the view of the Tribunal that computer accessories and peripherals such as, printers, scanners and server, etc., form an integral part of the computer system. In fact, the computer accessories and peripherals cannot be used without the computer. Consequently, as they are the part of the computer system, they are entitled to depreciation at the higher rate of 60 per cent”. In this view of the matter, we approve the conclusions arrived at by the DRP and decline to interfere in the matter.
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2017 (4) TMI 1192
Unexplained cash deposits in Assessee’s bank Account - Held that:- Undisputedly the assessee had deposited cash into his bank account and has explained the source to be the payments received from the debtors of the firm. Since the assessee was the proprietor of the business prior to its conversion into a partnership firm and since he continues to be the Managing Partner of the firm, we are inclined to accept the assessee’s contentions that the debtors of the firm issued cheques in his name or that they paid in cash to the assessee. The assessee had submitted before the AO that this amount was shown in the books of the firm as loans and advances, while it is shown as payable in the assessee’s books of account. This contention of the assessee has not been verified by any of the authorities below. The AO has brushed it aside on the ground that the copies of the ledger extracts are prepared by the assessee himself/the firm as per his/their convenience and therefore not reliable. The assessee has filed the copy of the Partnership Deed and we find that the partners inducted are not in any way related to the assessee and also they are entitled to equal share of profit as the assessee. In such circumstances, it cannot be held that the books of the firm are prepared as per the convenience of the assessee. Thus we deem it fit and proper to remand this issue to the file of the AO for re-examination de novo in accordance with law. Unexplained investment - Held that:- We find that the CIT (A) has reproduced the capital account of the assessee in the books of M/s. Filmors wherein the capital brought in is shown as ₹ 32.00 lakhs and the opening balance is shown as ‘Nil’ and the closing balance at ₹ 19,32,370.50. As per the partnership deed, all the partners have equal sharing ratio and it is seen that the other partners who have joined the firm along with the assessee have introduced ₹ 18,50,000/- each and there are withdrawals by them too. The AO has sought explanation for the capital introduced and we see no reason to interfere with the findings of the authorities below as such findings are based on the audited books of the firm M/s Filmors. As regards the source for such capital, we are of the opinion that this needs reverification, as we have remanded the issue of the sources for the cash deposits to the AO to verify the books of M/s. Samaritan Agencies and the bank deposits to see whether the assessee was in fact in receipt of the payments from the debtors of M/s. Samaritan Agencies. The AO, therefore, shall also examine if the assessee was in receipt of the amounts from the debtors of M/s. Samaritan Agencies, the amount which was collected and whether it was sufficient source for both cash deposits as well as the capital introduction in M/s. Filmors. This ground of appeal is accordingly treated as allowed for statistical purposes only with regard to the source of the capital.
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2017 (4) TMI 1191
Additions towards unexplained investment in share capital u/s 68 - as per AO assessee has not proved the genuineness of the transactions on account of investment in share capital by Smt. M. Rama Devi and Smt. S. Anuradha - Held that:- The assessee has confirmed the investment by submitting the confirmation letters from the investors along with their bank statement. The AO is not happy with the sources of the investors but direct source of investment is clearly established by the assessee. In our considered view, the assessee has clearly discharged its part of obligation to establish the genuineness of the transaction. Now, AO is not happy with the source of the source. The revenue is free to go behind the investors and reopen their cases as they have voluntarily and willingly confirmed the investment. In our considered view, the assessee need not have to prove the source of the source and hence, assessee has established the genuineness of the transaction and addition u/s 68 cannot be invoked.- Decided in favour of assessee.
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2017 (4) TMI 1190
TPA - rejecting the economic analysis conducted by the assessee for the determination of the Arm's Length Price ( 'ALP') in connection with the transactions pertaining to Management Service and Unit charges (‘MSU Charges') and General & Administrative Expenses ('G& A') - Held that:- For the year before us the assessee has submitted 11 papaerbooks. According to paper book no 5 assessee has demonstrated the nature of the services in relation to general and administrative expenses . In paper book no 6 assessee has submitted the details of recovery of expenses details of payment made of management unit charges by the assessee. Paper book no 7 , 8, 10, 11 and 12 contains the details of the benefit received by the assessee on receipt of services with respect to general and administrative expenses, showing the time sheets of individual fro time writing cost etc. and details of third party costs. Paper book no 9 contains the details of list of application to which the assessee’s employees have access to show that the assets are used by the assessee. The Ld DR could not point out on any infirmity in the above submission of the assessee with respect to satisfaction of need, benefit, duplicity, or shareholder’s activity test. We do not find any reason to deviate from our finding as the facts and circumstances leading to the dispute are identical. In view of this we dismiss ground No. 1, 2 and 3 of the appeal of the revenue. Adjustment on account of loan transaction - Held that:- In the present case the Ld. assessing officer has assumed the rate of interest @ 12.5 % without any basis but merely on assumptions and presumptions. Furthermore the Ld. Dispute Resolution Panel has also held that the refund amount of the assessee was wrongly adjusted and only actual amount of interest received from the Department by the associated enterprise shall be retained as an addition. We also do not approve the finding of the Ld. Dispute Resolution Panel and we failed to understand what relationship the amount of interest on refund received by the associated enterprise have with the amount of arms length price of the interest on loans given by the assessee to the associated enterprise. In fact the interest on refund given by the revenue to the AE is statutory interest rates, which cannot be used for benchmarking of loan between two business concerns. Thus we set aside this ground of appeal of the revenue back to the file of the Ld. Transfer Pricing Officer to determine arm’s length price of interest in one of the prescribed method and in accordance with the provisions of section 92C of the income tax act. Further we have perused the decisions relied upon by the Ld. authorized representative stating that there is no international transaction in absence of existence of some tangible material. As we have already held that in the present case the parties are acting in concert with its associated enterprise and there is a liquidation of the assets of the assessee for paying the tax liability of the associated enterprise we do not find those decisions can be applied to the facts of this case. In view of this ground No. 4 of the appeal of the revenue is allowed with above direction. Addition on account of expenses claimed for club entrance and subscription fees for the employees of the company - Held that:- We are of the view that issue is identical to ground No. 5 of the appeal of the revenue for assessment year 2010 – 2011 wherein we have held that the Ld. Dispute Resolution Panel has correctly directed the Ld. assessing officer to delete the disallowance was respect to the club expenditure. For the same reasons and on the same logic we also hold that Ld. Dispute Resolution Panel has correctly directed the Ld. Transfer Pricing Officer/Ld. assessing officer to delete the disallowance with respect to the club expenditure - Decided against revenue Claim of the expenditure as deduction in the year in which the expenditure become infructuous - Held that:- In the case of Joshi Technologies International Inc. v. UOI,[2015 (5) TMI 521 - SUPREME COURT] it was held that Where the production sharing contract entered into between the assessee with Ministry of Petroleum and Natural Gas did not incorporate clause for granting benefits under section 42 of the Act, it cannot be said the failure to incorporate the same in the contract was not inadvertently omitted and, therefore, assessee was not entitle for deduction under section 42 of the Act . So first of all it is mandatory that these expenditure are mention in the PSC, then only the question of its allowability arises in any assessment year u/s 42 of the act. It is also mentioned in the orders of lower authorities that the assessee has not made claim in respect of said expenditure when the expenditure become infructuous i.e. in FY 2011-12 being the year in which the area was surrendered prior to commercial production. From the above observation it is apparent that that the claim of the assessee falls in section 42(1)(a) when the expenditure becomes infructuous. Apparently, such expenditure became infructuous in Assessment Year 2011-12. In view of this the ld Assessing Officer as well as the ld Dispute Resolution Panel has correctly held that the assessee is not entitled for deduction therefore, in this year i.e. AY 2009-10, the claim of the assessee cannot be accepted. Adjusting the appellant’s refund with the demand of AE which is not an international transaction - Held that:- While deciding ground No. 4 of the appeal of the revenue we have already held that above transaction is an international transaction under section 92B of the income tax act and therefore arm’s length price of such transaction is required to be determined in accordance with the provisions of section 92C of the income tax act and set aside the issue to the file of the Ld. Transfer Pricing Officer. Therefore accordingly we dismiss this ground of appeal of the assessee.
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2017 (4) TMI 1189
Disallowance 14A r.w.r. 8D - Held that:- The law in regard to the disallowance u/s 14A has evolved quite recently and subsequent to passing of impugned assessment order. Ld. DR was unable to prima facie rebut the issues raised by the Ld. Counsel before us. Under these circumstances, we find it appropriate to send this issue back to the file of the AO where the assessee shall be free to raise all legal and factual issues with regard to the disallowance u/s 14A and shall file requisite evidences to establish its claim, as may be required by the AO from time to time. The AO shall decide this issue afresh after considering the material and the arguments as may be brought on record by the assessee on objective basis and shall be free to decide this issue independent of the voluntary disallowance made by the assessee in the return of income. The AO would be well within his powers to assess the income below the amount offered by the assessee in the return of income, if the facts of this case and law applicable thereon so demands. Thus, with these directions, this issue is sent back to the file of the AO and may be treated as allowed, for statistical purposes. Disallowance of interest u/s 36(1)(iii) - whether there was no prudence in carrying out the activity in such a manner which culminated into incurring of net interest loss - Held that:- The doubt noted by the AO with respect to incurring of loss could have at the best be it a triggering point for further investigation but that itself cannot be a conclusive ground to make disallowance in the hands of the assessee. Unfortunately, the AO failed in carrying out any investigation to contradict the transaction. In fact, it also appears to us that AO did make some verification but nothing ingenuine or wrong was noted by him. Rather, the transactions were duly substantiated. Similarly, at the stage of Ld. CIT(A) also nothing wrong or ingenuine could be brought on record by him. Under these circumstances, we find that disallowance has been made merely on the basis of whims and fancies, surmises & conjectures and doubts & suspicion made by the lower authorities. It is well settled law that a revenue officer cannot sit in the armchair of a businessman and dictate how a business is to be carried out. Thus, taking into account the totality of facts and circumstances of the case, we find that the AO had no material in his possession so as to enable him to make the impugned disallowance. Thus, the disallowance made by him on mere suspicion is not sustainable in law and therefore, it is deleted.
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2017 (4) TMI 1188
Disallowance on account of Sale Support Service and Allocation of Management Fees - Held that:- Entire cost of a project is not required to be added while determining the tax liability of an assessee. AS-7 stipulates that only those costs should be considered that are directly attributable to a project.Other costs like general administration costs,selling costs, depreciation on those assets which are not used in construction activities,are not be considered for capitalization or proportionate allowance. In the case under consideration the AO had held that only 26.32% of the impugned expenses were to be allowed. In our opinion expenses incurred by the assessee on salary of the office employees/management fees cannot be disallowed on proportionate basis.They do not have any direct nexus project.Such expenditure fall in the category of expenses incurred for running of day-today business. So,we do not find any legal or factual infirmity in the orders of the FAA.Confirming the same, we decide First ground of appeal against the AO. Disallowance on account of sponsorship fees and management fees - Held that:- We find that the assessee group had entered into an agreement with India Win,that it was a cosponsor of Mumbai Indian IPL team, that it had incurred similar expenditure in the subsequent two years, that out of the total expenditure the assessee had claimed a very small proportion under the head sponsorship expenses. Such an expenditure is for advertising the brand name of the Group.Being a recurring expendiuture, it had to be allowed as revenue expenditure. We find that in the case of Delhi Cloth and General Mills Co.Ltd.(1978 (4) TMI 75 - DELHI High Court) held that expenditure incurred for organizing sports events are allowable items of revenue expenditure as such events publicise the names of the sponsor.The AO was not justified in capitalising the expenses.The entire expenditure was rightly allowed by the FAA as revenue expenditure. After going through the details of expenditure incurred by assessee under the head managerial expenses, we are of the opinion that it had not got any enduring benefit from the expenditure incurred nor did the expenditure create any capital asset. Thus this ground of appeal against the AO. Disallowance of traveling expenses - Held that:- We find that the AO have disallowed the entire expenditure,that the FAA verified the details of travelling expenses,that he found that personal element was there in the expenditure incurred by the assessee,that he deleted 75% of the disallowance. In our opinion, his order does not suffer from any infirmity. After considering available material he estimated the disallowance,whereas the AO had disallowed entire claim.Confirming the order of the FAA, we decide this ground against the AO. Addition of excess amount received by the assessee - difference in the amount advanced by the assessee and the amount refunded to it by KIPL - FAA held that amount refunded by KIPL to the assessee and its sister concern was equal to the amount paid as advanced by the group, that no excess payment was received by the assessee and deleted the addition - Held that:- We find that the assessee had advanced ₹ 3.65 crores to the KIPL for supply of steel, that one of the sister concern also had advanced money to the supplier,that KIPL returned the money to the group by issuing two cheques of ₹ 2 crores each, that the assessee had paid ₹ 65.60 lakhs to its sister concern.The FAA has given a categorical finding of fact that the total amount paid to the assessee and its sister concern,put together, was same as that total advances given by them to KIPL.There is nothing on the record to controvert the finding given by the FAA. Therefore, we are not inclined to interfere with his order.Confirming the same,we decide last ground of appeal against the AO.
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2017 (4) TMI 1187
Admission of additional evidences - CIT(A) in the second round of litigation refused to admit the additional evidences by invoking Rule 46A of 1962 Rules - Held that:- The assessee has produced large number of documents with respect to the complaint lodged by the assessee with The Institute of Charted Accountants of India against its erstwhile erring CA Mr Vijay Patil who was not handing over relevant records to the assessee which disabled assessee in filing evidences before the AO. Thus, in our considered view the assessee has established a reasonable cause for not presenting the evidences before the AO at the time of framing of the assessment order dated 25-11-2010 passed by the AO u/s 143(3)(ii) of 1961 Act. The Rule 46A of 1962 Act is an aid to advance justice to compute correct income which can be brought to tax under the provisions of 1961 Act in the hands of tax-payer so as to achieve mandate of 1961 Act which itself derives its powers from Article 265 of Constitution of India which stipulates that taxes are not to be imposed save by authority of law and No tax shall be levied or collected except by authority of law. Rule 46A of 1962 Act cannot be used as sword to stifle bona-fide tax-payers rather it is a shield in the aid of bona-fide tax-payers as well Revenue to advance the cause of justice and to achieve mandate of 1961 Act. Keeping in view the factual matrix of the case as it emerges from the records and to advance justice , we are of the considered view that, in the interest of substantial justice and fair play, this matter needs to be set aside and restored to the file of the ld. CIT(A) with a direction to admit all the additional evidences
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2017 (4) TMI 1186
Levy of penalty under section 271BA - assessee has failed to comply with the requirement of the provisions of section 92E - Held that:- No plausible reason put forth by the assessee to establish how it was prevented by reasonable and sufficient cause from getting the Audit Report in Form 3CEB prepared by a Accountant in the prescribed proforma and filing the same before the concerned authority within the time specified, as stipulated under section 92E of the Act. Transactions of share investment, as entered into by the assessee in the case on hand, clearly fall within the ambit of the provisions of section 92E of the Act since the international transaction of investment in share capital of the assessee by the NRI Director of the assessee company falls within the ambit of section 92E of the Act. As laid out therein, it is mandatory for the person entering into an international transaction to file the Audit Report in Form 3CEB, duly prepared by an Accountant, setting out the particulars of such international transactions before the concerned authority within the time prescribed. In our considered view, the failure on the part of the assessee to furnish the Audit Report in Form 3CEB from an Accountant in the prescribed proforma within the prescribed period, without reasonable cause, is a clear violation of the provisions of section 92E of the Act and we therefore uphold the levy of penalty under section 271BA of the Act as it is clearly warranted in the factual and legal matrix of the case on hand. - Decided against assessee.
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2017 (4) TMI 1185
Unexplained cash payment - Addition relied on statement and figures mentioned in the seized document found during the course of search - Held that:- It is seen that against the figure of ₹ 35 lakhs, cheque amounts have been mentioned and so the break up amounts have also been mentioned on the back side of the seized documents which is also verifiable from the bank statements/books of accounts. On further perusal of ledger a/c submitted by the Ld AR it is also seen that the amount of ₹ 35 lacs was given by the assessee to M/s Megha Realmart Pvt Ltd. by cheque which is evident from the copy of ledger account of the assessee in the books of M/s Megha Realmart Pvt. Ltd. The Assessee has jgiven ₹ 35 lacs to M/s Megha Realmart Pvt Ltd. on 20.01.2011 by cheque out of which ₹ 25 lacs is transferred to his loan account and ₹ 10 lacs was adjusted against the share capital issued to the assessee. It is also a fact that for making this addition, AO has simply relied on the sworn statement only. To corroborate his findings, AO has also not brought on record any evidence to prove that assessee had made cash payment of ₹ 35 lacs instead of payment of payment by cheque as claimed by the assessee. - Decided against revenue Unexplained investment in silver articles - AO noted and accepted the assessee’s explanation that gifts of silver articles during social functions and occasions of birth of children etc are customary in Indian families - Held that:- It is not in dispute that these silver items especially given the nature of these items in terms of coin, trays, utencils, etc are generally given as gifts on various social and other family occasions/functions. However, in terms of reasonableness of such gifts which can be given or accepted, there cannot be any straight jacket formula. It all depends upon the facts and circumstances of each case. The onus is on the assessee to come out with the plausible explanation in this regard as the silver articles have been found in his possession. However, in absence of the same, the AO taking into consideration the social and financial standing of the family has arrived at 50% which we find just and proper. In light of above, the additions made by the AO is sustained and the order of the ld CIT(A) is set aside. - Decided against the assessee.
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2017 (4) TMI 1184
Penalty imposed u/s 271(1)(c) - disallowance made u/s 40(a)(ia) - default relates to the timing of deduction of whether TDS should have been deducted at a time of credit in the ABA Pool Account or at a time of credit to the account of the individual ABA? - Held that:- Liability to pay under the contract is a relevant consideration for determining the liability towards the TDS and only when such event happens, the TDS has to be deducted. The entries/credit in the books of account have therefore to be read taking into consideration the contractual obligations under the contract and cannot be read devoid of the same. Its a different matter that such explanation has not been accepted by the AO and by the ld CIT(A) while confirming the disallowance in the quantum proceedings. However, the said explanation continue to hold the fort and support the case of the assessee against non-levy of penalty for furnishing inaccurate particulars of income. Further, the said explanation coupled with the fact that there is no dispute that the expenditure is genuine and the services have been availed by the assessee company and the amount have been paid to them also support the case of the assessee against non-levy of penalty. It is now well settled as held in case of Reliance Petroproducts Limited (2010 (3) TMI 80 - SUPREME COURT) that mere making of claim which is not sustainable in law by itself will not amount to furnishing inaccurate for return of income. There is no finding given by the Assessing Officer that in the details supplied by the assessee in its return of income, there is any incorrect, erroneous or false information which has been supplied by the assessee. - Decided in favour of assessee
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2017 (4) TMI 1183
Disallowance u/s 14A - Held that:- We find that assessee has not given details as to when shares were acquired and what was the source of financing cost of acquisition of shares in the earlier year and in the current year. We observed that It is also not disputed that the assessee has earned exempt income because of which the expenditure related to earning of such income would be disallowable in terms of the provisions of sec. 14A of the act. After considering the totality of the facts of the case about availability of sufficient own funds, we exclude interest components of ₹ 88,991/- out of the total disallowance of ₹ 3,19,784/- and restrict the disallowance to ₹ 2,30,793/-. Therefore, this ground of the assessee is partly allowed. Not allowing deduction u/s. 80IA - assessee generating power for captive consumption - Held that:- This issue in question was covered in favour of the assessee in the case of Alembic Ltd [2016 (7) TMI 1239 - GUJARAT HIGH COURT] wherein allowed the claim of the assessee even in respect of electricity generation plant established by the assessee and the income derived from such enterprise of the assessee, it would have to be held that the assessee fully complied with the requirements prescribed under section 80-IA in order to avail the benefits provided therein. Therefore, the contention based on the interpretation of the expression `derived from’ could have no application to the case where the provisions of section 80-IA got attracted. - Decided in favour of assessee . Disallowance of deduction u/s. 35(2AB) - expenditure on scientific research on in-house research and development facilities - AO rejected the claim of deduction for the period prior to 01-04-2008 to 31-03-2010 on the ground that in the Form No. 3CM dated 22/10/2008 giving approval u/s. 35(2AB) it was specifically mentioned that the Research and Development facilities was approved for the purpose of section 35(2AB) with effect from 01- 04-2008 to 31-03-2010 - Held that:- We have perused the paper book furnished by the assessee and find that the assessee claim that application for approval of in-house research and development was made on 22-12-2006. In order to verify the same we have gone through the pages of paper book and find that as per para 43 of page no. 235 It was stated that application to the prescribed authority was made on 26-06-2008. We have further verified from page no. 162 in the paper book that a letter dated 24-10-2008 was addressed to the assessee from the Ministry of Science and Technology Department of Scientific and Industrial Research Training providing reference of the application of the assessee dated 26.06.2008. The claim of the assessee that it had applied on Dec 22, 2006 could not be substantiated in view of supporting material indicating that assessee had applied on 26/06/2008. We observed that above findings throw lights on the contentions that the facts of the case of the assessee are distinguished from the decision of the case of Claris Life Sciences Ltd.[2008 (8) TMI 579 - Gujarat High Court]. we considered it will be more appropriate to restore the issue of applicability of the decision in the case of the Claris Life Sciences Ltd to the file of the assessing officer to decide a fresh
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2017 (4) TMI 1182
Claim of deduction u/s 54F - Held that:- The assessee cannot get the benefit of Section 54F of the unutilized amount to the tune of ₹ 41,27,149/- as the said amount has not been invested by the assessee in the purchase/construction of new residential house property at Mahabaleshwar till the date of filing of return on 18-08-2011 nor the same has been deposited by the assessee in capital gain account with bank as stipulated u/s 54F(4) of 1961 Act. The assessee had claimed that she issued cheque to the Builder to the tune of ₹ 40,45,975/- dated 12th August, 2011 which was returned back to the assessee by the said builder namely ‘Kumar Builders’ a month later on 12-09-2011 with the comments "cheque sent back as favoring is wrong and date is also rewritten". The assessee has prayed that benefit of said cheque amount of ₹ 40,45,975/- should be granted to assessee u/s 54F of 1961 Act as it shows that the assessee made the payment on 12-08-2011 but due to some technical errors , cheque was returned by builder after one month . As per agreement dated 17-01-2011 , the assessee was required to issue the cheques in favour of ‘Windsor Park Collection account’. All other cheque were issued by the assessee in favour of ‘Windsor Park Collection account’ except this cheque which was stated to be returned by builder after one month due to technical reasons. Contention of the assessee of having paid defective cheque of ₹ 40,45,975/- to the builder namely ‘Kumar Builder’ which was not encashed by the said builder due to technical defects in cheque does not inspire confidence and cannot be accepted to the extent of granting exemption u/s 54F of 1961 Act due to reasons cited above. Thus, based on our above detailed discussions and reasoning and keeping in view factual matrix of the case, the assessee will be entitled to benefit u/s 54F of 1961 Act of the amount which was invested by the assessee in acquiring the aforesaid new under construction residential property till the date of filing of return of income on 18-08-2011 for which the AO is directed to grant exemption u/s 54F of 1961 Act after verification of records Decided against the assessee.
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Customs
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2017 (4) TMI 1204
Maintainability of revision petition - production of proof for realisation of the export proceeds - Bank Realisation Certificate - Held that: - it is evident that the Original Authority has not adverted to the particular Bank Realisation Certificate produced by the petitioner and considered the same, especially when the Appellate Authority has specifically directed to do so - confirmation of such order passed by the Original Authority in the further appeal and revision also cannot be sustained, unless the Original Authority consider the Bank Realisation Certificate produced by the petitioner and give a specific finding as to whether those Bank Realisation Certificates are containing the required particulars for allowing the duty drawback - matter is remitted back to the Original Authority viz., the second respondent herein for passing fresh order - petition allowed by way of remand.
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2017 (4) TMI 1203
100% EOU - whether the first petitioner should have obtained prior permission to undertake the domestic sale or not for it to receive the exemption thereunder? - Held that: - The petitioner had proceeded on the basis of requirement of prior permissions in its reply to the show cause and in its approach to the Settlement Commission. The department has also proceeded on such basis. The Settlement Commission has passed the impugned order on such basis - it would be appropriate to set aside the order of the Settlement Commission impugned herein. The matter is remanded to the Settlement Commission to be decided afresh - appeal allowed by way of remand.
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2017 (4) TMI 1202
Smuggling - vessel on foreign run had been brought into India and diverted for repairs - smuggling of diesel oil, paint, thinner out of the ship in the night - removal of hardener from the vessel immediately prior to the arrival of Customs officers on board the vessel in the morning of 20.10.2012 - the quantity of paint on board exceeded the declaration by 41 liters and the quantity of thinner by 5 liters - Held that: - the impugned order to the extent of confiscation of the vessel M.V. Minnath under Section 111(f), 111(g) and 111(h) of the Customs Act is justified and its release on payment of redemption of the vessel on payment of ₹ 6,00,000/- under Section 125 of the Customs Act 1962 is justified and legal - Similarly, the confirmation of duty demand on the vessel M.V. Minnath represented by Steamer Agent, M/s. Costal shipping Link (I) Pvt. Ltd. to the extent of ₹ 6,65,072/- is also legal and proper. The confiscation of the stores and consequent, demand of duty and the redemption of ₹ 1 lakh is not justified because the Revenue has not produced any evidence on record to show that it is a smuggled goods and it is also a fact that after the repair, the vessel left along with stores. In this context, the Revenue can only demand duty for mis-declaration as there was some discrepancy in the stores declared by the Master of the vessel and the actual store recovered. Even though the vessel was carrying 6180 litre of diesel, 1045 litre of paint and 225 litre of thinner, only 5627 litre of diesel, 280 litre of paint and 80 litre of thinner were declared by the vessel. Therefore, as per the Commissioner, actual quantities of import appeared to have been mis-declared with the object of implementing a predetermined scheme of subsequent illegal diversion of the goods. In my opinion, the appellants are liable to pay the duty with regard to the excess quantity not declared by them. With regard to imposition of penalty of ₹ 50,000/- on the vessel M. v. Minnath, representative of M/s. Coastal Shipping Link (I) Pvt. Ltd. and the Steamer Agent under Section 112(a) of the Customs Act, 1962 and penalty of ₹ 10,000/- on Shri Mohammed Adam, the Master of the vessel under Section 112(a) and 112(b) of Customs Act and also imposition of penalty of ₹ 50,000/- on the M/s. Coastal Shipping Links (I) Pvt. Ltd., Steamer Agent for the vessel under Section 112(a) and 112(b) of the Customs Act, 1962 is justified and is upheld. Though the Commissioner has also imposed penalty of ₹ 10,000/- on M/s. Sea Blue Shipyard under Section 112(b) and 117 of the Customs Act but the said party has not filed any appeal before this Tribunal. The original authority is directed to re-quantify the duty and fine as per the direction above and appropriate the same from the deposit made by the appellant - appeal allowed by way of remand.
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2017 (4) TMI 1201
Imposition of redemption fine and penalty - Section 112(a) of the CA, 1962 - valuation - the quantity and description of the goods differ from invoice produced by the party - case of appellant is that Mere presumption of investigating officer without considering the value of contemporaneous import is not a reason to allege undervaluation - Held that: - There is no material on record to show that the appellant has suppressed the material facts from the customs authorities - Further, in similar circumstances, the customs has loaded the price but did not impose any redemption fine and penalty - appeal allowed - decided in favor of appellant.
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2017 (4) TMI 1200
100% EOU - benefit of N/N. 52/2003-Cus dated 31.03.2003 - demand on the ground that appellant have not fulfilled their export obligation - appellant were engaged in the manufacture and export of stone studded gold jewelry and was allowed the duty free imports of the raw materials, along with other goods - Held that: - the appellant could not produce the documents before the adjudicating authority, though a request was made to the adjudicating authority to procure the said documents from the Port of export in his official capacity and to verify the said fact from the corresponding concerned office. The appellants now have the documents in their custody - matter in respect of the said demands needs to be remanded once again for verification of the documents - appeal allowed by way of remand.
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Corporate Laws
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2017 (4) TMI 1197
Investigation into the affairs of the Petitioner Company in the public interest to be carried out by the Serious Fraud Investigation Office (‘SFIO’) - Held that:- From a perusal of all, it is patently clear that the impugned order is based upon material that has been prima facie demonstrable before this Court. The facts and circumstances summarised in the preceding paragraphs hereinabove, also reveal that the impugned order cannot be said to have been based on any irrelevant or extraneous considerations. In my view, Respondent No.1 has bestowed sufficient attention to the ample material available before it, before passing the impugned order. The ground on which investigation was found to be warranted is ‘public interest’, within the meaning of the provisions of section 212 of the 2013 Act. The Black’s Law Dictionary, Sixth Edition, defines the expression 'public interest' to mean something in which the public, the community at large, has some pecuniary interest, or some interest by which their legal rights or liabilities are affected. As elaborated in the preceding paragraphs, the argument that the impugned order be set aside, since no public interest has been made out, is baseless, devoid of merit and thus rejected. The opinion formed by Respondent No.1, to order an investigation by the SFIO into the affairs of the Petitioner Company, in the public interest, does not warrant any interference. In view of the foregoing discussion, the issue raised in the present petition is answered in the negative and against the Petitioner Company. It is necessary to refer to the report dated 31.10.2016, submitted by the SFIO. A bare reading of the said report would show that the affairs of the Petitioner Company have been conducted in a manner prejudicial to the public interest, in addition to that of the shareholders. In view of the findings of the SFIO, as satisfied that the recommendation contained therein, warranting prosecution for the offences punishable under the relevant provisions of the 1956 Act, 2013 Act and the IPC, cannot be said to be without any justification.
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2017 (4) TMI 1196
Interest liability on a person who fails to pay the amounts specified in Section 28A within the stipulated time - Held that:- Once the provisions of Section 220 of the Income Tax Act are incorporated in Section 28A, full effect must be given to Section 220 of the Income Tax Act for recovery of the amounts referred to in Section 28A of SEBI Act. Not to do so would defeat the object with which Section 220 has been incorporated in Section 28A of SEBI Act. Thus, the arguments of the appellants if accepted it would render the provisions of Section 220 specifically incorporated in Section 28A redundant or otiose and therefore, such argument advanced by the appellants cannot be accepted. Fact that in the 1st & 2nd Ordinances promulgated by the President of India for amending the SEBI Act, Section 220 of the Income Tax Act was not sought to be incorporated in Section 28A, cannot be a ground to ignore the rights and obligations contained in Section 220 of the Income Tax Act which are specifically incorporated in Section 28A of SEBI Act by the Securities Laws (Amendment) Act, 2014 with retrospective effect from 18.07.2013. Very fact that the legislature, contrary to the provisions contained in the Ordinances, deemed it necessary to incorporate Section 220 of the Income Tax Act in Section 28A of SEBI Act for recovery of the amounts specified under Section 28A, clearly shows that the legislature intended to apply the rights and obligations contained in Section 220 of the Income Tax Act for recovery of the amounts specified under Section 28A of SEBI Act. Therefore, argument of the appellants that the interest liability contained in Section 220 of the Income Tax Act incorporated in Section 28A of SEBI Act would not be applicable for recovery of the amount specified under Section 28A cannot be accepted. Accordingly, we hold that Section 28A read with Section 220 inserted to SEBI Act with retrospective effect from 18.07.2013 imposes interest liability on a person who fails to pay the amounts specified in Section 28A of the SEBI Act within the stipulated time. Whether Section 28A can be invoked for demanding interest on the amounts due to SEBI pursuant to the orders passed prior to 18.07.2013 - Held that:- Section 28A, read with various provisions contained in Section 220 of the Income Tax Act makes it abundantly clear that the rights and obligations set out therein are prospective in nature. Accordingly, we hold that where the orders passed by SEBI prior to 18.07.2013 do not envisage interest liability for the delayed payment of the amounts specified in the respective orders, on insertion of Section 28A, the RO is authorised to demand interest on the amount remaining unpaid after expiry of 30 days from 18.07.2013 and not for the period prior to 18.07.2013. In the result, we hold that in all appeals, (except in Appeal No. 41 of 2014) since the penalty orders passed prior to 18.07.2013 do not contemplate interest liability for the delayed payment, the RO could not invoke Section 28A and demand interest on the unpaid amount for the period prior to 18.07.2013. In Appeal No. 41 of 2014 the directions given by the WTM of SEBI on 21.07.2009 was to disgorge the unlawful gain of ₹ 4.05 crore with interest @ 12% per annum quantified at ₹ 1.95 crore up to 21.07.2009 within 45 days from 21.07.2009 failing which, the appellants were debarred from entering the Securities market for a period of 7 years without prejudice to the right of SEBI to recover the unlawful gain with interest till payment. Since the order passed by the WTM of SEBI on 21.07.2009 contained an obligation to pay interest @ 12% per annum on the unlawful gain of ₹ 4.05 crore till payment, the RO was justified in demanding interest on the unlawful gain of ₹ 4.05 crore from 21.07.2009 till payment. Accordingly, Appeal is dismissed.
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Service Tax
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2017 (4) TMI 1232
Training or coaching services - Vires of explanation added to section 65(105)(zzc) by the Finance Act 14 of 2010 dated 8th May, 2010 with retrospective effect from 1st July, 2003 - whether the amendment brought has retrospective effect or not? - case of petitioner is that the language of this explanation and particularly the words employed “hereby declared” would demonstrate as to how the legislature intended not to give retrospective effect to the 2010 amendment. The amendment is thus but prospective - Held that: - the legislature refers to a commercial training or coaching. It means any training or coaching provided by a commercial training or coaching centre. The commercial training or coaching centre means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than the sports, with or without issuance of a certificate and includes coaching or tutorial classes. Once there is a power to make retrospective amendment and of the above nature, then, one cannot pick one or two words from the explanation and read them in isolation. The explanation would have to be read as a whole. So read, it clarifies the definition of the term “commercial training centre” or “coaching”. Once commercial training or coaching centre is defined and which definition is clarified by this explanation, then, the earlier views of the Benches of CESTAT would not hold the field. No assistance can be derived from the same. The service tax has to be computed, assessed and recovered in terms of the clear provisions of law and the power to levy, asses and recover is referable to the Central Excise Act, 1944. Therefore, the provisions of section 11A and its subsections and other sections of the Central Excise Act, 1944 would apply. If so applied, there is no basis for the apprehension that the tax would be recovered by extending the retrospective effect given to this explanation. The effect may be from 1st July, 2003, but to recover the tax from that date, there should be a power and there should be no fetter on that power. If there is any fetter or restriction on that power, then, that would operate. Petition dismissed - decided against petitioner.
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2017 (4) TMI 1231
CENVAT credit - Gardening service used within their factory - Gardening service was received and used in compliance with the regulation enforced by Pollution Control authorities - Held that: - the issue is decided in favor of assessee in the case of Commissioner of Central Excise and Service Tax Versus M/s. Rane TRW Steering Systems Ltd. [2015 (4) TMI 704 - MADRAS HIGH COURT], where it was held that where an employer spends money to maintain their factory premises in an eco-friendly manner, the tax paid on such services would form part of the cost of the final products and the same would fall within the ambit of "input services" and, therefore, the assessee is entitled to claim the benefit - credit allowed - decided in favor of appellant.
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2017 (4) TMI 1230
Maintainability of petition - alternative remedy available - issue involved is period of limitation and also the ground of jurisdiction - whether the question involved is mixed question of fact and law and it deserves to be gone into by the appellate forum? - Held that: - in those cases that when an alternative remedy is available, more particularly, in the cases of fiscal nature, invoking of the jurisdiction under Article 226 of the Constitution of India, is not permissible - This Court exercising discretionary jurisdiction under Article 226 of the Constitution of India, is not inclined to entertain this writ petition only on the reason of availability of alternative remedy - appeal dismissed - decided against appellant.
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2017 (4) TMI 1229
Maintainability of petition - availability of an alternative forum, being the Customs Excise and Service Tax Appellate Tribunal - ex facie error of law on the part of the adjudicating authority in ignoring a circular - Held that: - the appellants’ contentions deserve to be examined - So far as the stay petition is concerned, there shall be a restraint order on realization of any sum in pursuance of the order of the Commissioner dated 27th December, 2016 until further order of this Court - petition maintained and thus admitted.
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2017 (4) TMI 1228
Maintenance and repair service - appellant did not discharge service tax liability attributable to such taxable service - time limitation - Held that: - the appellant had no intention to evade the payment of service tax. Proviso to Section 73 (1) cannot be invoked in such a case. The impugned order confirms that the elements of Section 73 (1) is absent in invoking extended period. Therefore, impugned order confirming the service tax demand beyond the normal limitation period is not sustainable - demand beyond normal period set aside - appeal allowed - decided partly in favor of appellant.
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2017 (4) TMI 1227
Club or association services - appellant received some donation from the members towards the building fund but did not discharge the service tax on such donation amount - case of appellant is that the amount received against “building fund” has no nexus with any service provided by the appellant as a club towards its members since payment of donation is not compulsory - Held that: - Since the donation amount does not present any additional facilities or relating to the membership in the club, the same has no nexus with the taxable service provided by the appellant - the service tax demand on the donation amount cannot be sustained - appeal allowed - decided in favor of appellant.
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2017 (4) TMI 1226
GTA services - reverse charge mechanism - failure to pay tax during the period 01.01.2005 to 31.03.2008 - Held that: - the goods transport service availed by the appellant is not conforming to the definition of GTA service for the purpose of payment of service tax by the appellant under reverse charge mechanism - in an identical situation this Tribunal in the case of Nanganj Sihori Sugar Co. Ltd. [2014 (5) TMI 138 - CESTAT NEW DELHI] has held that service tax demand cannot be confirmed under GTA service - appeal allowed - decided in favor of appellant.
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2017 (4) TMI 1225
Renting of immovable property service - non-payment of service tax by appellant - demand of duty with interest and penalty - Held that: - the services provided as per the contract fall under the taxable category of “renting of immovable property”, on which service tax is leviable - in view of the fact that there were divergent views with regard to the leviability of the service tax on renting of immovable property, the benefit of Section 80 ibid can be extended in this case for non-imposition of penalty u/s 76, 77 and 78 of the FA - penalty set aside - appeal allowed - decided partly in favor of appellant.
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2017 (4) TMI 1220
CENVAT credit - input service distributor (ISD) - overriding commission/sales commission - Bangalore Unit had availed credit for combined sales turnover of Bangalore and Hubli plant without obtaining the registration as Input Service Distributor - Held that: - this Tribunal vide its Final Order dated 10.7.2015 in the appellants own case [2016 (2) TMI 590 - CESTAT BANGALORE] has allowed the appeal on merit. It was held in the case that both the units at Bangalore as well as at Hubli are the units of the same appellant and the credit availed by one unit could have been distributed to the other unit even though the services were not actually availed at that unit. This leads to the conclusion that either of the two units could have availed the entire credit. As such, it is of the view that denial of credit to the Bangalore unit is not justified - credit allowed - decided in favor of assessee.
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2017 (4) TMI 1213
Cenvat Credit - Input service - construction services for construction of factory building - Held that: - the issue is no more res integra and is squarely covered by the judgment of Hon’ble Punjab & Haryana High Court in the case of CCE, Delhi-III Vs. Bellsonica Auto Components India P. Ltd. [2015 (7) TMI 930 - PUNJAB & HARYANA HIGH COURT], where it was held that prior to the amendment the setting up of a factory premises of a provider for output service relating to such a factory fell within the definition of ‘input service’. Input service credit - construction of boundary wall - Held that: - issue is covered in the favour of the assessee in the case of Nirma Ltd. Vs. CCE & ST, Vadodara-I [2013 (7) TMI 46 - CESTAT AHMEDABAD], where it was held that construction services utilized for establishing the factory were eligible for cenvat credit. Appeal dismissed - decided against Revenue.
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Central Excise
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2017 (4) TMI 1224
Classification of goods - Polyester Covered Yarn - Nylon Covered Yarn - Whereas the appellants/assessees argue that these products are covered by Chapter No. 56 and come under CSH No. 5606.06, the Revenue has taken the position that the aforesaid goods fall in CSH No. 5402.62/61 - Held that: - the Assessing Officer referred to Rule 3(a) of the Rules of Interpretation as per which the heading which provides the most specific description is to be preferred to the heading providing a more general description. The Tribunal has revisited the entire issue taking into consideration all the aspects of the matter and in the light of tests reports of MANTRA, affirmed the findings of the Authorities below that the products manufactured by assessees are nothing but air mingled yarn and, therefore, cannot be classified under Chapter No. 56 in view of the fact that it does not contain a core around which another yarn has been woven - appeal dismissed - decided against appellant.
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2017 (4) TMI 1223
Right to have retrospective exemption from duty - Prayer for Issuance of notification u/s 11C of the CEA, 1944 to the effect that duty payable by the appellant on goods manufactured by it shall not be paid - use of power in manufacturing process - Held that: - there is no clinching evidence to suggest the existence of a general practice not to levy excise duty. Under the impression that it was to be demanded from registered units and five such registered units were, in fact, paying the duty, show cause notices were issued to the remaining two units, namely, the appellant and Gurukripa. That itself negates the argument of existence of general practice of not levying the duty of excise. It is stated at the cost of repetition that merely because some unregistered firms which were initially getting the SSI exemption, but omitted to be covered under the Act on their crossing the SSI limits, would not, in our opinion, establish any such practice. Issuance of a notification under Section 11C of the Act is in the nature of subordinate legislation. Directing the Government to issue such a notification would amount to take a policy decision in a particular manner, which is impermissible. In the instant case the appellant has already paid the duty. Section 11C contemplates those situations where duty is not paid. It does not cover the situation where duty is paid and that is to be refunded. It would neither be a case of discrimination nor it can be said that the appellants have any right under Article 14 or Article 19(1)(g) of the Constitution which has been violated by non-issuance of notification under Section 11C of the Act. Once the appellant accepts that in law it was liable to pay the duty, even if some of the units have been able to escape payment of duty for certain reasons, the appellant cannot say that no duty should be recovered from it by invoking Article 14 of the Constitution. It is well established that the equality clause enshrined in Article 14 of the Constitution is a positive concept and cannot be applied in the negative. Appeal dismissed - decided against appellant.
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2017 (4) TMI 1222
Quantum of mandatory deposit - whether an appellant has to pay 10% mandatory deposit over and above the mandatory deposit of 7.5% of the duty liability/penalties, as the case may be, as provided u/s 35F of the CEA, 1944 and Section 129E of the CA, 1962? - Held that: - in order to prefer an appeal before the Tribunal, an assessee/appellant needs to deposit 10% of the amount of duty confirmed or the penalty imposed as the case may be irrespective of the amounts equivalent to 7.5% deposited by them for preferring an appeal to the first appellate authority - On reading of provisions of pre-deposits under Central Excise Act, 1944 and Customs Act, if an assessee or importer wishes to exercise his statutory right of second appeal, then the said exercise of right it needs to be considered as an independent right and proceeding subsequent to pre-deposit of the amount to exercise first appeal needs to be considered as having come to closure - the appellant is required to deposit separately 10% of the amount of the duty confirmed/ penalty imposed, for preferring of appeal before the Tribunal against the order of Commissioner (Appeals).
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2017 (4) TMI 1221
Clandestine manufacture and removal - PVC pipes - demand on the basis of ledger books recovered, parallel invoices and weighment slips - extended period of limitation - Held that: - The appellant had made inculpatory statement but merely the statement is not sufficient to allege the charge of clandestine removal of goods. In fact, that statement should be corroborated by some evidence which revenue have failed to do so. Therefore, the demand on the basis ledger book or ledger /loose sheets recovered during the course of investigation are not sustainable. The original copy of the invoices would have been recovered from the buyers of the goods but the statement/documents recovered from the buyers were not relied upon documents. Moreover, it has been recorded by the adjudicating authority in the impugned order that no records were resumed. There is no evidence of the sources of the original invoices, therefore, the clearances of basis of parallel invoices cannot be confirmed. Moreover, it is alleged that parallel invoices have been issued but no investigation was conducted at the end of the buyers whose names were reflecting in the parallel invoices. In that circumstances, the demands cannot be confirmed on the basis of parallel invoices recovered during the course of investigation. Therefore, the demand on account of parallel invoices is not sustainable. The weighment slip produced by the appellant these weighment slip does not have any contents of the goods, whether the finished goods or raw material or there is no evidence to corporate that these weighment slip pertains to the clandestine removal of the goods by the appellant. In the absence of any positive evidence the demand on the basis of weighment slip cannot be confirmed against the appellant. Appeal allowed - decided in favor of appellant.
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2017 (4) TMI 1219
Intermediate product - Gold Potassium Cyanide Solution - dutiability / marketability - product consumed by the appellant captively for manufacture of Gold Eyed Handle Sewing Needle - Held that: - what is manufactured by the appellant is evidently Gold Potassium Cyanide Solution and not Gold Potassium Cyanide crystalline powder - it has not been established by Revenue as to the marketability of Gold Potassium Cyanide Solution manufactured by the appellant. This impugned product, therefore, fails to satisfy the twin tests namely (i) process constituting manufacturing and (ii) marketability - the product in question is definitely not marketable and therefore cannot be charged to duty - appeal allowed - decided in favor of appellant.
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2017 (4) TMI 1218
CENVAT credit - capital goods - job-work - case of Revenue is that the capital goods involved in the present appeal are mostly consumables items like inserts, drills, tools and there is no likelihood of their being used in the manufacture of their own products in future and that too after a lapse of long period of over one and half years - Held that: - the issue is squarely covered by the judgments of this Tribunal in the case of CCE vs. M/s. Kyungshin Industrial Motherson Ltd. [2015 (11) TMI 899 - MADRAS HIGH COURT], where it was held that The Tribunal has rightly held that availment of Modvat credit on capital goods to be job work is in order - appeal dismissed - decided against Revenue.
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2017 (4) TMI 1217
Valuation - bought-out items such as bolts, nuts, corner plate, locking pin etc. - Department took the view that these bought-out items are essential and integral to the storage systems so assembled at the customers site and therefore their cost is required to be included in the assessable value - Held that: - once these bought out items are used at the customer's site for installation of the storage system, they would become part of the immovable property attached to the ground and hence would not be exigible - value of bought-out items like bolts, nuts, corner plate etc. cannot be included in the assessable value of other manufactured goods cleared by the appellant in terms of section 4 of the Central Excise Act, 1944. Extended period of limitation - Held that: - the said assessee suppressed the fact with intent to evade payment of duty, there has been no attempt or elaboration in the notice to justify such an allegation - extended period and penalty not imposable. Appeal allowed - decided in favor of appellant.
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2017 (4) TMI 1216
100% EOU - refund claim - the cenvat credit on the inputs remains unutilized due to the exports - Held that; - the adjudicating authority as well as the first appellate authority have gone into the factual matrix of the case, all the records which were produced and came to a conclusion that the respondent could not have utilized cenvat credit as they are a 100% EOU - the first appellate authority has relied upon the CBEC circular No.120/01/2010-ST dated 19.1.2010 as also the interpretation of N/N. 5/2006-CE, to hold that there is no requirement of one-to-one correlation of the goods manufactured or exported - appeal rejected - decided against Revenue.
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2017 (4) TMI 1215
Deduction on account of interest on receivables - Held that: - cheque discounting charges charged by the Revenue are not includible in the assessable value, is not sustainable. CENVAT credit - photo frames given as a gift in Diwali institutional packs - denial on the ground that the same is not used in or in relation to the manufacture of final product - Held that: - the issue has been settled in the case of CCE vs. Prime Health Care Products [2010 (10) TMI 881 - GUJARAT HIGH COURT], where it was held that the process of packing and re-packing the input, that is, toothbrush and tooth paste in a unit container would fall within the ambit of “manufacture” as defined under the Act and as such, the assessee would be entitled to claim cenvat credit on such input. Appeal allowed - decided in favor of appellant.
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2017 (4) TMI 1214
CENVAT credit - duty paying invoices - appellants are claiming the benefit of Cenvat Credit as capital goods for GP Sheets and Aluminum Sections on the basis that humidification plant was machinery as a whole under Chapter 84 and not a plant - the air duct being manufactured from the GP Coils/GP Sheets has been claimed as part of humidification machine which takes shape of plant after the installation of air ducts in different places in the factory premises - Held that: - reliance placed in the case of CCE, Chandigarh Vs. Modern Steel Ltd. [2006 (12) TMI 410 - CESTAT, NEW DELHI], where it was held that It is evident from the deliberate change in the definition of “capital goods” by omitting “plant” as well as “components, spare parts and accessories of plant thereof” there has come about a major shift in legislative intent, because plant was capable of a very wide meaning - the Ld. Commissioner (Appeals) has rightly rejected the claim of the appellants that the impugned goods are either capital goods or parts of the capital goods. As for the claim of the appellants that the impugned goods be treated as inputs, I find that these goods are not used in or in relation to manufacture of final products and they are also not used in the manufacture of capital goods which are further used in the factory of manufacturer. Hence, this claim is also not tenable. Extended period of limitation - penalty - Held that: - The irregular availment of Cenvat Credit was revealed by the Audit of the party and came to the notice after examining their documents - the extended period has rightly been invoked and penalty has rightly been imposed. As for the interest, the same is compensatory in nature. Appeal dismissed - decided against appellant.
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2017 (4) TMI 1212
Imposition of penalty - evasion of duty - unaccounted deal - Held that: - Although, learned counsel pleads innocence of this appellant, it was not a reality. He cannot be presumed to be innocent when his qualification and the responsibility he discharged in respect of the position he held in management is examined - penalty upheld - decided against assessee.
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2017 (4) TMI 1211
Remission - loss of goods by fire - Rule 21 of CER, 2002 - Held that: - the findings of the learned Commissioner are unsubstantiated and are not based on the evidences on record. It also appeared that the learned Commissioner misinterpreted the fire report - We also hold that it is the fire Department which is the authority to conclusively decide the reasons for the fire and also if there was any negligence on the part of the manufacturer assessee in compliance with any safety standards or conditions of consent to operate. Reversal of Cenvat Credit - amendment vide Notification No.33/2007 CE. - The said amendment introduction of Sub-rule (5C) in Rule 3 of Cenvat Credit Rules, 2004 has been brought about much after the incident of fire and as such the said amendment/provisions are not applicable in the facts of this case. As regards capital goods the learned counsel has stated that as per Rule 3(5A) the demand of Cenvat credit by way of reversal on the capital goods arises only in case of removal of such capital goods - Appeal allowed - decided in favor of the assessee.
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2017 (4) TMI 1209
Shortage of goods - a quantity of 15,151.75 mtrs. of polyester man made fabrics was short against the recorded balance - Held that: - Since upon appreciation of the facts, based on evidence, the authorities below have held that the entire search proceeding are in-fractuous/ void and the Department has not brought any tangible evidence to prove its case against the Respondent, I am of the fire view that such observations cannot be disturbed at this juncture - appeal dismissed - decided against Revenue.
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2017 (4) TMI 1208
Valuation - assessable value of the goods cleared from the consignment agent's premises - Revenue's stand is that assessable value of the goods cleared from consignment's agent’s premises is to be determined in accordance with Rule 7 without any variation to the mandate of the Rule - Held that: - the value of clearances of the material period shall be determined as per law prescribed by Rule 2 (b) of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000 read with Rule 7 thereof - Where on the respective date sale price is not available for the purpose of ascertainment, the value of goods in time nearest i.e., immediate past, to the time of removal of the goods shall be considered for the purpose of Rule 7 - the appeal is remanded to the learned adjudicating authority for redoing the adjudication at the earliest issuing notice to the appellant - appeal allowed by way of remand.
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2017 (4) TMI 1207
Classification of Grey Oxide and Red Lead Oxide - trade parlance theory - Benefit of N/N. 50/2003- CE dated 10.03.2003 - denial on the ground that as the said items are covered under Chapter Heading 28 are mentioned in Annexure-I to the Notification No. 50/2003 ibid and the Red Lead and Grey Oxide manufactured by the assessee are classifiable under Chapter Heading 28.24, therefore, the assessee is liable to pay duty - extended period of limitation - Held that: - in somewhat similar case where the classification of the product was based on the process involved, this Tribunal held that commercial parlance test will not be invoked for determining classification of such product - the trade parlance test is not applicable to the fact and circumstances of the case the test reports relied by the Revenue is inconclusive, as no procedure was followed and the assessee was deprived from re-testing the samples, therefore, the product in question cannot be classified under chapter heading 28.24 without any positive evidence. The assessee is entitled for benefit of N/N. 50/2003-CE - appeal allowed - decided in favor of appellant.
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2017 (4) TMI 1206
Classification of goods - Organic Composite Solvents - classified under CTH 3814.00 or CTH 2710.13 - case of appellant is that the Commissioner has clearly gone beyond the SCN in discussing the characteristics of raw material i.e. Naphtha and in holding that was a Motor spirit - whether the product manufactured by the appellants namely Organic Composite Solvents is classifiable under chapter sub heading 2710.13? - Held that: - the onus of proving that the product in question falls within the definition of Motor Spirit classifiable under aforesaid sub heading is on the Revenue. In this case, the product in question has admittedly not been got tested by the department. The entire case of the department is therefore based on the test result recorded in the laboratory testing register of the appellants - in the absence of a proper test report done by the department, the reliance placed on the other evidence does not lead to the conclusion that impugned goods are Motor Spirit - appeal allowed - decided in favor of appellant.
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2017 (4) TMI 1205
Refund claim - time limitation - duty paid under protest - CENVAT credit on capital goods - Scope of section 11B - Held that: - reliance was placed in the case of M/s. ITEL Industries Ltd. Versus The Commissioner of Central Excise [2014 (3) TMI 796 - KERALA HIGH COURT], where it was held that no question of limitation would fall for consideration or deserves to be extended depending upon the conditional deposit when duty and interest payable if any made by the applicants. If no such liberty or protest is indicated at the time of payment of duty and interest, definitely such applicants are not entitled to claim such benefit provided under the second proviso to Section 11B - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (4) TMI 1199
Issuance of F-forms - necessity for the Petitioner having to bifurcate the F forms arose as a result of the creation of the separate State of Telangana & Andhra Pradesh. The Petitioner further points out that there is no tax effect as far as the Govt. of NCT of Delhi is concerned - Held that: - The facts and circumstances of this case are similar to the one in which the decision in Ingram Micro India Pvt. Ltd. Vs. Commissioner, Department of Trade & Taxes [2016 (2) TMI 244 - DELHI HIGH COURT], where on similar issue it was held that Respondent No. 2 was not justified in declining to issue C-Forms to the Petitioner - the DVAT Department will issue to the Petitioner the requisite „F’ form - petition allowed - decided in favor of petitioner.
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2017 (4) TMI 1198
Correctness and legality of reassessment order - natural justice - Held that: - there is no express reference to ‘C’ Forms filed by petitioner on 28.02.2017 and 04.03.2017. The basis on which first respondent–authority has proceeded to frame reassessment order is on the ground that there is no written reply filed by petitioner to proposition notice dated 22.02.2017 – Annexure-D. Thus, there is a lack of opportunity to the petitioner in the proceedings before first respondent and impugned order is in clear violation of principles of natural justice - petition allowed - decided in favor of petitioner.
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