Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 10, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
TMI Short Notes
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Application of Section 14A r.w.rule 8D - whereas in the earlier years AO did not make any disallowance - While it is true that the principle of res judicata would not apply to assessment proceedings under the Act, the need for consistency and certainty and existence of strong and compelling reasons for a departure from a settled position has to be spelt out which conspicuously is absent in the present case - SC
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Section 14A of the Act would operate to disallow deduction of all expenditure incurred in earning the dividend income u/s 115-O which is not includible in the total income of the assessee - SC
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Nature of loss on the sale of foreign - the foreign cars do not form part of a block of assets and, admittedly, have not been granted depreciation - the foreign cars were utilized in the business of the assessee, the loss arising out of their sale would be liable to be categorized as a business loss - HC
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Non-compliance of the provisions of section 40(a)(i) - commission payments received by the Indian agent on behalf of the Hong Kong entity in India - Non deduction of TDS - The inevitable conclusion in law is that the commission payments are liable to tax in India - Additions confirmed - HC
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Disallowance u/s 40A(3) - cash payment for purchase of land - assessee has filed necessary evidences to prove that the impugned land has been acquired as an investment and subsequently converted into stock in trade of his business - AO directed to delete additions made towards cash payments u/s 40A(3) - AT
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Disallowance of legal & professional fee - pre-bidding expenses - The assessee after participating in the bidding, if the bid is successful, it allotted the work to the subsidiaries and receives fee from the subsidiaries - the matching principles have no application - AT
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Undisclosed income U/s 69 - Joint bank account - when it is claimed that the assessee (student) could not possibly have any source of income, the addition on his hand is not justified within the parameters of the Income Tax Act. If at all, the additions could have been made, it could have been done either in the hands of the father or the mother of the assessee - AT
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Disallowance on account of cost of improvement while computing the capital gain - The amount of interest paid by the assessee constitutes the actual cost to the assessee for that property. To exclude the interest amount from the actual cost of the assets/property would lead anomalous result - Claim of deduction u/s 24(b) has no bearing - AT
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Annulling reassessment order - period of limitation - scope of Explanation (1)(ii) appended to section 153(1) - as soon as the order was vacated, the limitation will restart and will exhaust itself on the period of limitation provided under the Act – assessment Barred by limitation - AT
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As per the provisions of section 271D and 271E, for any default u/s 269SS and 269T, penalty is leviable. However, such penalty is to be imposed by the Joint Commissioner of Income Tax. The assessment order in the present case was completed by the Assistant Commissioner of Income Tax and hence beyond his jurisdiction. - AT
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TDS u/s 194H - assessee paid commission at 23% of its income as per the agreement between assessee and other clubs - relationship of ‘agent’ and ‘principal’ could not be proved - No TDS liability - AT
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Penalty u/s 271(1)(c) - after the survey operation, the assessee found there was omission to disclose the income otherwise taxable under the Income-tax Act and accordingly filed revised return within the statutory period and offered the same for taxation - No penalty - AT
Customs
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Refund of SAD - N/N. 102/2007 - There is no stipulation in the notification that the exemption is available only if the rate of ST/VAT is equal to or higher than the rate of additional duty of Customs; nor is there a condition that if the rate of ST/VAT happens to be lower than 4%, the refund would be restricted to the lower amount - refund allowed- AT
Indian Laws
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Order to pay compensation - N.I. Act - whether when compensation is ordered as payable for an offence committed under Section 138 of the Negotiable Instruments Act, and in default thereof, a jail sentence is prescribed and undergone, is compensation still recoverable? - Held Yes - SC
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Liability of one of an independent Director of a Company under Section 141 of N.I. Act for the dishonour of the cheque issued by the original accused on behalf of the company - Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. - HC
Service Tax
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Refund claim - rejection on the ground that the appellant has availed drawback - the services availed in the course of export, post clearance have not been factored in the All Industry Rates of Drawback and accordingly the same is not relevant for the purpose of refund - AT
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GTA service - mining of coal in various coal fields - recipient of service - reverse charge mechanism - as no consignment note as generally understood or delineated in Rule 4B was issued by the transporter to the appellant in the transaction the tax liability under GTA does not arise - AT
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Renting of premises for residential purposes is not included within the scope and preview of such taxable service, for the reason that such renting is not in connection with business or commerce - However, a deeming fiction has been created that use of immovable property partly for business or commerce and partly for residential or any other purposes should be construed as immovable property for use in course or furtherance of business or commerce - AT
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CENVAT credit - credit taken for the unit not registered - centralized registration not there - the CENVAT Credit in respect of input and input services used for providing the services at site including the services of sub-contractor are admissible input services. - AT
Central Excise
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Benefit of N/N. 6/2002-CE - clearance of vibration isolation systems - denial of benefit on the ground that the impugned item can be considered as parts of waste convention devices producing energy - conditions prescribed in the notification cannot be ignored - No exemption - AT
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Remission of duty - Rule 21 of CER, 2002 - goods destroyed by fire - The satisfaction envisaged by the rule is not arbitrary satisfaction but the judicial satisfaction of the Commissioner based upon objective analysis of the facts - remission allowed - AT
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Penalty u/r 26 - in the present case it is not the case of the clandestine removal of the goods but non-receipt of the inputs and fraudulent availment of the credit without physical receipt of the inputs - the penalty upon the appellant imposed under Rule 26 will not sustain - AT
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Classification of rectified spirit - ethyl alcohol and rectified spirit are one and the same - rectified spirit which is not used for human consumption is nothing but ethyl alcohol and is finding place in tariff item no. 22072000 - AT
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Zinc Ash - cleared from factory for consideration - whether excisable product or not? - Goods are non-excisable when cleared from the factory for a consideration, are to be treated as excisable goods - AT
VAT
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Assessee is entitled to the benefit of Incentive Scheme/Sales Tax Exemption on the expenses incurred/investment made on purchasing the land, constructing building and installing the plant and machineries prior to 31st December 2005 but the payment might have been made subsequently ie., after 31st December 2005 - HC
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Classification of Vicco Vajradanti tooth paste and powder or Vicco Turmeric cream in the said judgments dealing with the Central Excise Laws are not relevant for examining the classification of the products under the local Act, which have specifically included face cream under the Entry of Cosmetics and tooth paste and tooth powder under the Entry of Toilet articles - HC
Case Laws:
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Income Tax
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2017 (5) TMI 403
Applicability of Section 14A with regard to dividend income on which tax is paid under Section 115-O - whether the phrase “income which does not form part of total income under this Act” appearing in Section 14A includes within its scope dividend income on shares in respect of which tax is payable under Section 115-O of the Act and income on units of mutual funds on which tax is payable under Section 115-R? - Held that:- Section 14A of the Act would operate to disallow deduction of all expenditure incurred in earning the dividend income under Section 115-O which is not includible in the total income of the assessee. The provisions of Sections 194, 195, 196C and 199 of the Act, quoted above, would further fortify the fact that the dividend income under Section 115-O of the Act is a special category of income which has been treated differently by the Act making the same non-includible in the total income of the recipient assessee as tax thereon had already been paid by the dividend distributing company. The other species of dividend income which attracts levy of income tax at the hands of the recipient assessee has been treated differently and made liable to tax under the aforesaid provisions of the Act. In fact, if the argument is that tax paid by the dividend paying company under Section 115-O is to be understood to be on behalf of the recipient assessee, the provisions of Section 57 should enable the assessee to claim deduction of expenditure incurred to earn the income on which such tax is paid. Such a position in law would be wholly incongruous in view of Section 10(33) of the Act. Thus holding that Section 14A of the Act would apply to dividend income on which tax is payable under Section 115-O of the Act the first question formulated in the appeal has to be answered against the appellant-assessee. Application of Section 14A r.w.rule 8D - whereas in the earlier years AO did not make any disallowance - Held that:- Sub-sections (2) and (3) of Section 14A of the Act read with Rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under Rule 8D or in the best judgment of the Assessing Officer, what the law postulates is the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Section 14A(2) and (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable. In the present case, we do not find any mention of the reasons which had prevailed upon the Assessing Officer, while dealing with the Assessment Year 2002-2003, to hold that the claims of the Assessee that no expenditure was incurred to earn the dividend income cannot be accepted and why the orders of the Tribunal for the earlier Assessment Years were not acceptable to the Assessing Officer, particularly, in the absence of any new fact or change of circumstances While it is true that the principle of res judicata would not apply to assessment proceedings under the Act, the need for consistency and certainty and existence of strong and compelling reasons for a departure from a settled position has to be spelt out which conspicuously is absent in the present case. Second question formulated must go in favour of the assessee and it must be held that for the Assessment Year in question i.e. 2002-2003, the assessee is entitled to the full benefit of the claim of dividend income without any deductions.
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2017 (5) TMI 370
Addition u/s 14A - Held that:- It does not seem to be in dispute that assessee was already having a surplus reserve Interest free fund out of which investment was made. Therefore, Assessing Officer was not justified in making the disallowance of deduction under Section 14A. Learned Counsel appearing for the Revenue is not disputing that the assessee was having surplus reserved tax free fund, out of which investment was made. Under the circumstances, the learned ITAT has not committed any error in deleting disallowance of deduction under Section 14A of the IT Act. - Decided against revenue Disallowance of deduction of Bad Debts - Held that:- The Revenue is not disputing that ₹ 12,00,000/- was towards Bad Debts due and payable by NIFCL with whom the assessee did the business upto 2000-01. It appears that thereafter the same was not recoverable and therefore, in the year under consideration the assessee treated it as a Bad Debt and claimed the deduction under Section 36(1) (vii) of the IT Act. Considering the decision of the Bombay High Court in the case of Shreyas S. Morakhia (2012 (3) TMI 103 - BOMBAY HIGH COURT ), such claim is allowable. Under the circumstances, no error has been committed by the learned ITAT in deleting the disallowance of deduction of Bad Debt - Decided against revenue Present Tax Appeal is ADMITTED to consider the following substantial question of law. “Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in deleting the disallowance of deduction u/s 40(a)(ia) of Income Tax Act, 1961?”
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2017 (5) TMI 369
Allowability of loss claimed by the assessee on sale of foreign cars - Whether the Tribunal is right in holding that the foreign cars can be treated as capital asset of the assessee and any profit or loss arising of such cars can only be treated as capital gain or loss? - Held that:- In the present case, the foreign cars do not form part of a block of assets and, admittedly, have not been granted depreciation in so far as depreciation was not allowable in respect of foreign cars for the relevant period. The provisions of section 50 of the Act are thus inapplicable to the present case. The assessee sold the foreign cars and the sale consideration resulted in a loss of an amount of ₹ 51,6,108/-. Such loss has been written off in the books of accounts and claimed as a business loss. The extent of depreciation that could have been claimed would be the amount, by which the sale consideration falls short of the written down value. In the present case, ₹ 51,6,108/-, the written down value as defined under section 43(6), would mean actual cost less depreciation actually allowed. In the present case, since no depreciation was allowed, the written down value would equal the actual cost. The loss suffered by the assessee on the sale of foreign is quantified at a figure of ₹ 51,6,108/-. The only question that remains is to determine the nature of loss. In view of the categoric finding of the Commissioner of Income Tax (Appeals) that has attained finality, to the effect that the foreign cars were utilized in the business of the assessee, the loss arising out of their sale would be liable to be categorized as a business loss. - Decided in favour of assessee.
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2017 (5) TMI 368
Non-compliance of the provisions of section 40(a)(i) - commission payments received by the Indian agent on behalf of the Hong Kong entity in India - Non deduction of TDS - Held that:- An agreement had been entered into by the appellant with M/s.Textile Services Limited, Hong Kong for canvassing of export orders. Commission was paid on various dates between 2.7.2001 to 25.1.2002 amounting to ₹ 17,84,293/-. The amount was paid to M/s Textile Services Limited, an agent of the foreign entity based in Delhi. Concurrent orders of the authorities confirm the position that the commission has actually been received in India and no details were forthcoming to establish that the Indian entity received the same for onward transmission to Hong Kong. The inevitable conclusion in law is that the commission payments are liable to tax in India. The liability to deduction of tax at source is in terms of section 40(a)(i) of the Act. The argument of the learned counsel as well as the substantial question of law sought to be raised appear to be a clever afterthought, particularly since this argument was not raised either at time of assessment or first appeal but for the first time before the Tribunal even though all earlier orders were passed after the insertion of sub clause (ia) of section 40. Thus the commission payments have been received by the Indian agent on behalf of the Hong Kong entity in India, we find no infirmity in the order of the lower authorities and answer the substantial question of law against the appellant and in favour of the Revenue.
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2017 (5) TMI 367
Disallowance of procurement expenses - Held that:- Though these appeals were heard and from a perusal of the order passed by the tribunal, it is apparent that it has come to a conclusion that there cannot be any justification for such 10% dis-allowance. There is nothing like a reasonable token disallowance. The tribunal found that its earlier order of 30th December, 2005 was thus violated. It deleted the retention of disallowance of 10% made by the Commissioner of Income Tax (Appeals). As far as the Revenue's appeals are concerned, from the discussion and from para 7 onwards, it is apparent that the tribunal found that such dis-allowances as were made cannot be sustained for the reasons that the tribunal has set out. We do not think that we should re-appreciate and reappraise the factual matters. Our further appellate jurisdiction does not enable us to do this. The concurrent orders, therefore, cannot be termed as perverse or vitiated by any error of law apparent on the face of the record. - Decided against revenue
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2017 (5) TMI 366
Addition towards sundry creditors for others u/s 68 - assessee failed to furnish details of creditors like partywise breakup, confirmation duly attested in the account copy and bank account details of the creditors - Held that:- Once the genuineness of the expenditure was not doubted, the creditors arised out of such expenditure cannot be added u/s 68 of the Act, for the simple reason that the assessee has failed to furnish confirmation letters from parties. We further observed that the assessee has filed a paper book containing details of expenditure incurred under the head Arogya Shree schemes along with ledger extract. On perusal of the details filed by the assessee, we find that the assessee has provided expenditure incurred towards medical camps through marketing agents and the same has been settled subsequently in the next financial year as and when the amount has been received from State Government. Therefore, we are of the view that once the expenditure has been accepted as genuine, the A.O. was erred in treating the creditors arised out of such expenditure as unexplained credits u/s 68 of the Act. The CIT(A) after considering relevant submissions of the assessee and also analyzing the ledger extracts, rightly directed the A.O. to delete the additions made towards sundry creditors for others shown under the head current liabilities. We do not find any error in the order of the CIT(A). - Decided against revenue. Disallowance of 10% expenditure incurred under the head Arogya Shree schemes - Held that:- Since the expenditure incurred under the head Arogya Shree schemes mostly remains payable at the end of the year, it is very difficult to ascertain the genuineness of expenditure and also mode of payment, whether the same has been paid by cheque or cash. The A.O. has identified the cash payments and disallowed 10% of such expenditure. In case of the remaining expenditures, because the entire expenditure has been treated as unexplained credits, the A.O. would not have gone into the genuineness of expenditure. The CIT(A) after considering the nature of expenditure and also fact that most of the expenditure are supported by self-made vouchers rightly directed the A.O. to disallow 10% of total expenditure incurred under the head Arogya Shree scheme. We do not find any error in the order of the CIT(A). - Decided against assessee. TDS u/s 194J - professional charges paid to Doctors u/s 40(a)(ia) for failure to deduct tax at source - Held that:- On perusal of the ledger extract filed by the assessee, we noticed that the assessee has paid professional charges to visiting consultants on day to day basis, which is much below the threshold limit provided u/s 194J of the Act for deduction of tax at source. Therefore, we are of the view that the assessee not obliged to deduct tax at source on such professional charges. The A.O. without appreciating the facts simply made additions u/s 40(a)(ia) of the Act. No disallowance u/s 40(a)(ia) if expenditure has been paid before the end of the financial year - alternative plea of the assessee - Held that:- As in the case of Merilyn Shipping and Transporters Vs. ACIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM ) has considered the issue and after considering the relevant provisions of the Act, observed that no disallowance can be made u/s 40(a)(ia) of the Act, if expenditure has been paid on or before 31st March of the financial year. In this case, the assessee has filed necessary evidences to prove that the expenditure has been paid before 31st March of the financial year. Therefore, we are of the view that the assessee need not to deduct tax at source u/s 194J of the Act on professional charges paid to doctors as the said payment does not exceed the prescribed limit provided u/s 194J of the Act for deduction of tax at source. - Decided in favour of assessee.
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2017 (5) TMI 365
Disallowance under the provisions of section 40A(3) - cash payment for purchase of land - Held that:- In a particular case where there exist a business expediency and other relevant factors and also the payments are genuine, then the Acts provide for immunity from disallowance of expenditure, if the assessee proves to the satisfaction of the assessing officer that there exists a business expediency in making the cash payments. In this case, the assessee has filed necessary evidences to prove that the impugned land has been acquired as an investment and subsequently converted into stock in trade of his business. Therefore, we are of the view that the A.O. was erred in disallowing cash payments by invoking provisions of section 40A(3) of the Act. Hence, we direct the A.O. to delete additions made towards cash payments u/s 40A(3) of the Act. - Decided in favour of assessee.
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2017 (5) TMI 364
Penalty u/s. 271(1)(c) - additions on account of foreign travel expenses and addition u/s. 68. - Held that:- CIT(A) has rightly observed that it was nowhere submitted that the three basic requirements of proving the identity, creditworthiness and genuineness of the transactions were duly fulfilled. Ld. CIT(A) held that the assessee has furnished inaccurate particulars with a view to concealment of income and explanation given by the assessee is not bonafide. Hence, the penalty was rightly confirmed by the Ld. CIT(A) on additions on account of foreign travel and addition u/s. 68 of the Act, which does not need any interference on our part, hence, we uphold the same - Decided against assessee.
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2017 (5) TMI 363
Addition on leave encashment - addition u/s 43B - Held that:- As the assessee is not able to file any material to show that the liability is a crystallized. We find that the Assessing Officer and the ld. CIT(A) have observed that it is only a contingent liability and the assessee is not able to substantiate that the liability has been crystallized. Therefore, we are of the opinion that the claim made by the assessee cannot be allowed, hence, ground raised by the assessee is dismissed. Disallowance of legal & professional fee - pre-bidding expenses - Held that:- CIT(A) is not correct in observing that the expenses incurred are not for the assessee’s business. The assessee’s business is to identify the project and study the feasibility of the project and participate in the bidding/tender. After successful in bidding for project, it will be allotted to the subsidiaries or keep the project alone with the assessee and therefore, the assessee has to incur expenditure, whether it may succeed or may not succeed in the bid. On the basis of assumption and presumptions, it cannot be said that the expenditure incurred by the assessee is not for the purpose of business. The assessee after participating in the bidding, if the bid is successful, it allotted the work to the subsidiaries and receives fee from the subsidiaries such as rendering services, reimbursement of expenses, payment for services rendered. We find that the matching principles referred by the ld.CIT(A) have no application. Therefore, we are of the opinion that the assessee has incurred these expenditure towards bid/tender documentation wholly and exclusively for the purpose of assessee’s business, therefore it has to be allowed under section 37 - Decided in favour of assessee. Disallowance of miscellaneous expenses - Held that:- The assessee is not able to file any details and it is not able to substantiate its claim to prove that impugned expenditure comes under the purview of section 37 of the Act. In view of the above, we find that the estimation made by the ld. CIT(A) scaling down the disallowance from 25% to 10%, is fair and reasonable, hence, no interference is called for. Thus, this ground of appeal raised by the assessee is dismissed. Addition of interest - amount advanced to the trust - Held that:- CIT(A) after considering the explanation of the assessee and after perusal of the bank statement, he has observed that assessee has invested in the QIP proceeds in mutual funds after few months, some of the mutual funds have been redeemed and the proceeds of which was utilized to make the advance to the Trust and gave a finding that interest bearing funds are not utilized to make the impugned advance to the GVK Employees Welfare Trust. Thus, we find no infirmity in the order of the ld. CIT(A), hence, this ground of appeal raised by the Revenue is dismissed. Addition of business loss - Held that:- Assessee has entered into agreement with M/s. Pluto Software Pvt. Ltd. for relocation of the liaison office. As per the agreement, it has paid advance. Since the relocation was not materialized, advance amount paid as per the agreement has been written off as the party M/s. Pluto Software Pvt. Ltd. has forfeited advance because the transaction does not pass through as agreed. Therefore, the amount forfeited would take the character of business loss and is allowable under section 37 of the Act. We find that there is no infirmity in the order passed by the ld.CIT(A). The Departmental Representative has not brought any material to show that the expenses incurred by the assessee are not connected with the business of the assessee - Decided against revenue
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2017 (5) TMI 362
Disallowance of unpaid expenditure incurred under the head ‘machinery rents’ u/s 68 - failure to file confirmation letters from the parties - Held that:- ITAT has given a specific direction to the A.O. with a legal proposition that once the expenditure has been accepted as genuine, the creditors arised out of such expenditure cannot be considered as unexplained u/s 68 of the Act. The A.O. ignoring the above findings, went on to disallow the expenditure as unproved expenditure for the simple reason that the assessee has failed to furnish necessary details, ignoring all the evidences filed by the assessee in the form of confirmation letters from the party and also ledger extracts to prove the payment of such outstanding credits in the subsequent financial years. We further observed that the assessee has filed a paper book containing confirmation letters along with ledger extracts. On perusal of the details filed by the assessee, we find that the parties have confirmed the transactions and also outstanding balance at the end of the year. Therefore, we are of the view that the A.O. was erred in travel beyond the directions of the ITAT, while disallowing the entire expenditure incurred under the head ‘machinery rents’. - Additions deleted - Decided in favour of assessee. TDS u/s 194C - reimbursement of expenditure incurred by the parties towards cost of fuel and spare parts - Held that:- The provision of section 194C of the Act has no application, when the payment is made towards reimbursement of cost of fuel and spare parts. The A.O. never disputed the fact that the impugned expenditure is incurred is towards reimbursement of fuel and spare parts, but disallowed said expenditure for failure to produce contractual agreements to prove its claim. We do not find any merits in the findings of the A.O. for the reason that there is no necessity of written contractual agreement to prove the expenditure incurred towards reimbursement of cost of fuel and spare parts. The assessee is in the business of hiring of machinery and in the process it has hired out its machineries to M/s. ESSAR Constructions, Chennai. The assessee has instructed the party to incur expenditure towards cost of fuel and spare parts, which was adjusted against the machinery rents payable to the assessee. Since, the party has deducted amount towards cost of fuel and spare parts, there is no necessity for the assessee to deduct TDS u/s 194C of the Act. In so far as amount paid to M/s. Kishore Enterprises, the assessee has filed necessary proof to prove the said amount has been paid for supply of spare parts. Therefore, we are of the view that the A.O. was erred in disallowing machinery maintenance expenditure u/s 40(a)(ia) - Decided in favour of assessee.
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2017 (5) TMI 361
Revision u/s 263 - capital gain on sale of land - nature of land - agriculture land situated within municipal limit or not - Held that:- In the present case, the land sold by the assessee not situated in any of the places as mentioned above. In fact the land situated in a hamlet village is not even situated in a village. Therefore, section 2(14)(iii)(a) has no application. So far as application of section 2(14)(iii)(b) of the Act is concerned to attract the capital gains, the land must situate within 8 kms. from the notified municipality. In the present case, the land is situated 3 kms. away from Anakapalle municipality, however, the Anakapalle municipality is not a notified municipality as per the notification dated 6.1.1991 and amended notification no.11186 dated 28.12.1999, therefore, section 2(14)(iii)(b) of the Act has also no application. Once land is classified in the revenue record as an agricultural land even assessee has not carried agricultural operations, capital gain tax cannot be attracted. Exclusion provided u/s 2(14)(iii) does not apply to agricultural land situated within the Panchayat limits. The impugned land sold by the assessee not attract the capital gains tax and no capital gain can be taxed. We also observed that the assessing officer has not at all examined before passing the order u/s 143(3) of the Act whether the capital gain attracts or not. After survey proceedings, assessee filed the return and same is accepted without making any enquiry. It is the duty of the A.O. to conduct an enquiry before assessing particular income has to be taxed or not. In this case, such enquiry was not made by the A.O. In view of the above, we are of the opinion that the A.O. is not correct in taxing exempt income as a capital gain. We find that the Ld. CIT(A) without considering the facts of the case and without examining whether the impugned land is an agricultural land or not, the ground raised by the assessee is dismissed. Thus, we reverse the order passed by the CIT(A) and the ground raised by the assessee is allowed.
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2017 (5) TMI 360
Addition on account of lower profit rate - Held that:- Assessing Officer adopted a method, which is not in accordance with the accounting standard. Further, none of the items in the closing stock was found to be valued at the lower rate than the opening stock rate and the ld. CIT(A) has recorded that most of the items were valued at higher rate. The assessee has provided closing stock value/rate of each item, which is higher than the opening stock value/rate of corresponding item. Further, if DEPB sales amounting to ₹ 25,90,518/- and foreign exchange gains of ₹ 10,21,906/- is added to the gross profit then the ratio comes to 21.08% for the year under consideration. The Assessing Officer’s allegation that the assessee has undervalued the closing stock by ₹ 64,93,830/- is not factually established. The Assessing Officer applied average basis only on the closing stock to enhance its value but he has not adopted the same for the opening stock. Thus, it is not correct and consistent in valuing in opening and closing stock. The assessee has adopted the same method of inventory since last 15 years. The net sales for the year under appeal are higher than the preceding year. - Decided against revenue Addition u/s 68 - Held that:- It is undisputed fact that these credits were received during F.Y. 1997-98 and 1998-99. The Assessing Officer has made addition by invoking the provisions of Section 68 of the Act in the year under consideration. These amounts were opening balance at the first day of F.Y. under consideration, hence provision of Section 68 of the Act are not attracted. At the most, addition could have been made by invoking the provisions of Section 41(1) of the Act. The assessee itself has written back these loans amounts and paid taxes for the assessment year 2013-14. Considering all these facts, we do not find any infirmity in the order of the ld. CIT(A) - Decided against revenue Addition on account of differenence between gross turnover as per sales tax return and gross turnover as per balance sheet - CIT-A deleted addition - Held that:- D.R. was not able to controvert the finding recorded by the ld. CIT(A) with regard to clerical mistake while preparing the VAT-10 return of 4th quarter and the mistake was apparent from the record. The turnover declared in the P&L account was correct. Therefore, we concur with the finding of the ld. CIT(A) on this issue and the same is hereby uphold. - Decided against revenue Addition on account of lower profit rate - Held that:- We find that the provisions of Section 145(3) of the Act were invoked without any basis. It was based only on assumptions and presumptions. Assessee has not undervalued the closing stock nor any specific defect was found in claim of expenses debited to the P&L account. Considering all these facts and circumstances of the case, we do not find any infirmity in the order of the ld. CIT(A), therefore, we sustain the order of the ld. CIT(A).- Decided against revenue
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2017 (5) TMI 359
Reopening of assessment - bogus purchases - CIT(Appeals) in giving relief to the assessee by relying on the additional evidence without giving any opportunity to the Assessing Officer to verify the same - Held that:- Keeping in view all the submissions made by the assessee which are duly supported by the copies of submissions made by the assessee during the course of assessment proceedings before the Assessing officer and which are duly acknowledged by the Office of the Assessing Officer, find that the bills of the concerned three parties in support of its claim for purchases made from the said parties were duly produced/filed by the assessee during the course of assessment proceedings before the Assessing Officer and the same did not constitute additional evidence filed by the assessee before the ld. CIT(Appeals) for the first time as alleged by the ld. D.R - Decided against revenue.
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2017 (5) TMI 358
Non - prosecution - TDS u/s 194C - payment of wages to labour sardars for non deduction of TDS - addition u/s. 40(a)(ia) - Held that:- It is noticed that inspite of service of notices for the hearing even on 15-03- 2017 fixed by the Bench none appeared on behalf of the assessee nor any adjournment petition was filed. It appears that the assessee is not interested in prosecuting his case. In view of the above, following the decisions in the case of Multiplan India (P) Limited [1991 (5) TMI 120 - ITAT DELHI-D ] and Estate of late Tukojirao Holkar Vs. CWT [1996 (3) TMI 92 - MADHYA PRADESH High Court] we dismiss the appeal of the assessee in limine for want of prosecution.
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2017 (5) TMI 357
Undisclosed income U/s 69 - unexplained source of cash deposits made in the bank account - Assessee has a Joint account with his father - Held that:- In the present case, in the paper book filed by the assessee, it was clear from the documentary evidence that at the relevant time, the assessee was a student of ICFAI University, Dehradun and had no source of income. The bank account details filed clearly shows that both the accounts, one was the joint account with his father and another was with the mother of the assessee. From taking guidance of the case of CIT Vs. Smt. P.K. Noorjahan (1997 (1) TMI 6 - SUPREME Court) the question whether source of investment should be treated as income U/s 69 has to be considered in the light of the facts of each case. A discretion has been conferred on the ITO U/s 69 of the Act to treat the source of investment as income of the assessee if the explanation offered by the assessee is not found satisfactory. However, the said discretion should be exercised keeping in view the facts and circumstances of a particular case. when it is claimed that the assessee could not possibly have any source of income, the addition on his hand is not justified within the parameters of the Income Tax Act. If at all, the additions could have been made, it could have been done either in the hands of the father or the mother of the assessee, therefore, we arrive at our considered view that the findings of the ld. CIT(A) are hereby reversed and we direct the deletion of entire addition U/s 69 from the hands of the assessee. - Decided in favour of assessee
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2017 (5) TMI 356
Disallowance on account of cost of improvement while computing the capital gain - Held that:- Deduction u/s. 24(b) and computation of capital gains u/s 48 were altogether covered by different heads of income i.e., income from ‘house property’ and ‘capital gains’. None of them excludes operative of the other. The interest in question was indeed expenditure in acquiring asset. Since both provisions were altogether different, assessee was entitled to include interest paid on housing loan for computation of capital gains u/s 48 despite the fact that same had been claimed u/s 24(b) while computing income from house property. If the property is purchased from borrowed funds then consideration for the purchased amount, the interest on borrowed fund also has to be paid. The amount of interest paid by the assessee constitutes the actual cost to the assessee for that property. To exclude the interest amount from the actual cost of the assets/property would lead anomalous result. The interest amount should be definitely added to the actual cost of the property. Respectfully following the above we reverse the findings of the ld. CIT(A) and hold that the interest paid to bank for acquiring capital asset would be eligible as part of cost of acquisition. - Decided in favour of assessee
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2017 (5) TMI 355
Annulling reassessment order - period of limitation - whether order passed after expiry of limitation provided in section 153(3)? - whether for computing period of limitation, period during which the assessment proceedings is stayed shall be included or period consumed in communication of Hon’ble High Court’s order to the AO shall also to be excluded? - Held that:- A perusal of the above details would indicate that 194 days are available to the AO from 29.7.2013. But he passed the assessment order after more than 200 days. The AO was of the opinion that time limit for passing the assessment order would commence from the date of communication of the order. It has been observed that this order was communicated to him on 14.2.2014 and he was to pass an order within 60 days from this date. Accordingly, he has passed it on 26.2.2014. But this interpretation of the Explanation (1)(ii) appended to section 153(1) has not been approved by the ld.CIT(A). The finding of the ld.CIT(A) is based upon orders of the ITAT, wherein the Tribunal has considered scope of Explanation (1)(ii) to section 153(1) of the Income Tax Act. This Explanation has fallen for consideration before the Hon’ble High Allahabad Court in CIT Versus Drs. X-Ray and Pathology Institute Pvt. Ltd. [2013 (11) TMI 19 - ALLAHABAD HIGH COURT] as held as soon as the order was vacated, the limitation will restart and will exhaust itself on the period of limitation provided under the Act – assessment Barred by limitation – Decided against the Revenue.
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2017 (5) TMI 354
Unexplained cash credit U/s. 69A - Held that:- The assessee has failed to bring on record any evidence to establish his claims that the deposits in the ICICI Bank, saving bank account at Khar (W), Mumbai was out of receipts connected with his business transactions. In our view the assessee has failed to controvert the findings of the authorities below that he was not engaged in any business activity during the year under consideration. Therefore, in our considered opinion, the said unexplained deposits the source of which has not been satisfactorily explained by the assessee, has been correctly treated as unexplained money under section 69A of the Act and brought to tax in the assessee’s hands. In this view of the matter, and finding no reason to interfere with the decision of the learned CIT(A) in the impugned order, we uphold the same - Decided in favour of revenue.
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2017 (5) TMI 353
Disallowance of depreciation on Business Development rights - Held that:- Except for raising this ground, the assessee has failed to bring on record before us any material evidence to establish its claim for being allowed depreciation @25% on business development rights and controvert the findings of the authorities below. In this view of the matter we find no reason to interfere with or deviate from the judicious findings of the learned CIT(A) in rejecting the assessee’s claim for being allowed depreciation @25% on business development rights. Consequently, ground No. 1 of Assessee’s appeal is dismissed. Disallowance of claim for set off of brought forward losses under section 72A(6) r.w.s. 47(xiv) Proviso (c) - Held that:- Except for raising this ground, the assessee has failed to controvert the findings of the authorities below and thereby establish with material evidence that its claim for being allowed set off of brought forward losses under section 72A(6) r.w.s. 47(xiv) of the Act is in order. In this view of the matter, we find no reason to interfere with the judicious decision rendered by the learned CIT(A) in rejecting the assessee’s claim for being allowed set off of brought forward losses under section 72A(6) r.w.s. 47(XIV) of the Act. Consequently, ground No. 2 of the assessee’s appeal is dismissed. Disallowance of Market Intelligence Collection Charges - Held that:- Except for raising this ground, the assessee has failed to bring on record material evidence to controvert the findings of the learned CIT(A) and thereby establish with material evidence that its claim for being allowed expenditure incurred on market intelligence collection charges is in order and was to be allowed. In this view of the matter, we find no reason to interfere with the decision rendered by the learned CIT(A), in sustaining the disallowance in respect of the assessee’s claim for market intelligence collection charges to the extent of ₹ 31,00,093/- @ `50/- per customer. - Decided against assessee.
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2017 (5) TMI 352
Claim of deduction on account of commission/brokerage paid against hiring of showroom - revenue v/s capital expenditure - Held that:- Where the assessee had paid commission/brokerage for taking on lease premises from where the assessee is running its showroom and the concerned party had charged commission/brokerage to the assessee for finalizing the deal, then the same is to be allowed as an expenditure in the hands of assessee as revenue expenses. The Ground of appeal No.1 is thus allowed in favour of assessee. Disallowance u/s 269SS and 269T - as per AO where the payments have been made in cash then the same are to be added back to the total income of the assessee under section 269SS and 269T r.w.s. 40A(3) - Held that:- We find no merit in the approach adopted by the CIT(A) upholding the addition in the hands of assessee that the provisions of section 269SS and 269T of the Act are to be applied in making the aforesaid disallowance. As per the provisions of section 271D and 271E of the Act, for any default under section 269SS and 269T of the Act, penalty is leviable. However, such penalty is to be imposed by the Joint Commissioner of Income Tax. The assessment order in the present case was completed by the Assistant Commissioner of Income Tax and hence beyond his jurisdiction. In any case, disallowance is made under section 269SS and 269T of the Act which is invalid. Accordingly, the Ground of appeal No.2 raised by the assessee is thus allowed. Disallowance of interest expenses - advances to several related persons interest free - Held that:- The first plea of the assessee that the Bank charges and loan processing charges cannot be considered for making the said disallowance and also interest on term loan, which was raised during the year under consideration and was specifically used by the assessee for its business, cannot be disallowed is acceptable and hold that no disallowance is to be made out of the bank charges, loan processing charges and interest on term loan. The total advances made by the assessee are to the tune of about ₹ 3 crores as against the share capital and the reserves and surplus, i.e. opening balance as on 01-04-2009 the assessee has made investment in fixed deposits and other investments totaling to ₹ 4.38 crores. Accordingly, we find no merit in the plea of the assessee in this regard. However, the AO is directed to restrict the disallowance to ₹ 10,69,222/- and ₹ 68,000/-. The ground of appeal raised by the assessee is thus partly allowed.
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2017 (5) TMI 351
TDS u/s 194C - disallowance made u/s.40(a)(ia) - non deduction of TDS on freight expenses - Held that:- CIT(A) has held that the assessee was not liable to deduct TDS from the freight payments as the assessee did not own any truck, which was necessary for transportation business. Thus, it remains undisputed fact that the assessee was deriving income only on commission basis as he does not own any trucks. Further, the CIT(A) observed that there was no liability of the assessee to deduct TDS from the payments made for transportation charges as Forms 15-I collected from the truck owners were filed with the office of the CIT, Raipur. No positive material was brought on record by the ld D.R. to controvert the above findings of the CIT(A). Hence, we do not find any good and justifiable reason to interfere with the order of the CIT(A) - Decided in favour of assessee.
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2017 (5) TMI 350
TDS u/s 194H - non deduction of tds on payments made by assessee to other race clubs - relationship of ‘agent’ and ‘principal’ - assessee paid commission at 23% of its income as per the agreement between assessee and other clubs - Held that:- CIT-A in AYs. 2001-02 to 2008-09 fairly concluded that the nature of transaction on account of inter-venue betting between HRC and other clubs is on ‘principal’ to ‘principal’ basis and hence, the demand u/s. 201(1A) did not survive. Thus as here is no ‘agent-principal’ relationship and provisions of Section 194H are not attracted. - Decided in favour of assessee.
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2017 (5) TMI 349
Reopening of assessment - addition on share capital received - Held that:- Nothing was brought on record to counter the findings of the AO and CIT(A), except stating that reopening was based on ‘suspicious’ nature of information. Neither the reasons for reopening nor the statements provided to assessee in the course of assessment proceedings were placed on record. Even the copy of the objections stated to have been filed before the AO were not placed on record. In the absence of any contrary evidence, the findings of the AO and CIT(A) cannot be disturbed. - Decided against assessee Coming to the merits of addition assessee did file not only the copies of the confirmations received from the above said three companies but also the statements of banks through which the funds have been transferred/received. Not only that the copies of the assessment orders completed in those cases were also placed on record indicating that prima-facie assessee has discharged his onus. However, as submitted, the AO was not in receipt of such confirmations from the said three parties, before he completed the assessment on 19-02-2014. Ld.CIT(A) without examining the facts, confirmed the addition on legal principles. Therefore, it is of the opinion that AO should examine whether those companies have invested in assessee-company. - Decided in favour of assessee for statistical purposes.
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2017 (5) TMI 348
Denial of cost of construction / improvement while calculating the capital gains - Held that:- For the sake of record the schedule of agreement dated 06-12-2003 shows the ‘property of plot admeasuring 600 Sq. yards (along with portion of old house admeasuring 1000 Sq. feet) out of 1828 Sq. yards equal to 1529 Sq. Meters bearing premises No. 8-2-293/82/8/1323/A, Road No. 67, Jubilee hills layout’. Similar description was mentioned in the other two documents also, which indicate that out of the 1828 Sq. yards of the land, there was a portion of old house admeasuring 1000 Sq. feet. Immediately thereafter the Assessees have entered a memorandum of construction agreement dated 29-03-2005 for construction the residential property with specifications of columns, beams etc., as stated in second page of the construction agreement, for a consideration of ₹ 45,00,000/-. M/s Maheshwari Megaventures Ltd., had shown this receipt of ₹ 45,00,000/- which was accepted by the A.O. It was also on record that the said company has spent only an amount of ₹ 27,77,538/- and balance was offered as profit. As seen from the notes on accounts also, the said company has taken over an entertainment center in the month of Feb 2006 and a restaurant which were not capitalized. However, A.O finds that the bills produced pertain to items for Hotel and other items which are used in hotel / restaurant, but not cost of construction on the project. Since, this forum is not in a position to examine whether the Assessee’s contentions are correct or not, I am of the opinion that the claim is to be reexamined. A.O is directed to examine the issue afresh, in the light of the evidence that may be produced and allow the expenditure accordingly, if the same is spent on the building on the property. Assessee appeal is allowed for statistical purposes.
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2017 (5) TMI 347
Penalty under Section 271(1)(c) - disallowance u/s 40A(2)(a) - revised ROI filled after survey operation - Held that:- It is an admitted fact that the assessee has filed revised return of income under Section 139(5) of the Act voluntarily disclosing all the income earned during the year under consideration. Other than the statutory disallowance of ₹ 5,43,708/- under Section 40A(2)(a) of the Act, the entire income disclosed by the assessee was accepted without any further addition. When the assessee has filed revised return within the statutory period, under Section 139(5) of the Act, this Tribunal is of the considered opinion that it cannot be said that the assessee has concealed any part of income or furnished any inaccurate particulars of income. The statutory provision allows the assessee to file revised return whenever there was omission to disclose the income which is otherwise taxable under the Income-tax Act. In this case, after the survey operation, the assessee found there was omission to disclose the income otherwise taxable under the Income-tax Act and accordingly filed revised return within the statutory period and offered the same for taxation. Therefore, this Tribunal is of the considered opinion that it is not a fit case for levy of penalty under Section 271(1)(c) of the Act. - Decided in favour of assessee.
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Customs
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2017 (5) TMI 380
Classification of imported goods - seaweed fertilizer (liquid) , seawinner , and seaweed fertilizer (flakes) - classified under CTH 3101.00.99 or under CTH 3824.90.90? - benefit of N/N. 12/2012-Cus. dated 17.3.2012 - hazardous waste or not? - Held that: - The test reports have confirmed that the imported goods were without toxic elements like mercury, silica, manganese, lead, arsenic, etc. and the report further confirmed the presence of fertilizing elements such as nitrogen, potassium and phosphorous. Since the imported goods comprise of fertilizing elements like nitrogen, potassium, phosphorous, the learned Commissioner (A) has ordered for classification of the same under CTH 3105 - appeal rejected - decided against Revenue.
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2017 (5) TMI 379
Refund of SAD - N/N. 102/2007 dated 14.09.2007 - import of Digital Set Top Boxes (STB) along with certain other equipments, and sale as such - denial on the ground that STBs were not sold as such but were assembled with other items and were sold as ‘antenna systems and accessories’, the descriptions in the bills of entry did not match the description in the domestic sale invoices and appropriate VAT was not paid as the appellants sold the products at a price lower than the price of import - Held that: - the identical issue pertaining to refund of SAD under Customs Notification No. 102/2007-Cus dated 14.09.2007, for the earlier period had already been decided by the Tribunal in favour of the appellant in the case of M/s. Dish TV India Ltd. Versus C.C. (ICD) Tughlakabad, New Delhi [2016 (10) TMI 861 - CESTAT NEW DELHI], where it was held that, The invoices for sale issued by the appellant describes the goods as ‘antenna system and accessories’, however from the packing list attached with invoice it can be clearly made out that this package includes STBs. - Refund cannot be disallowed on this ground. There is no stipulation in the notification that the exemption is available only if the rate of ST/VAT is equal to or higher than the rate of additional duty of Customs; nor is there a condition that if the rate of ST/VAT happens to be lower than 4%, the refund would be restricted to the lower amount - refund allowed - decided in favor of appellant.
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2017 (5) TMI 378
Import of steam coal - whether central excise education cess and excise secondary and higher secondary cess is available in terms of exemption N/N. 28/2010 and 29/2010? - Held that: - identical issue has come up before the Tribunal in the case of Singareni Collieries Co. Ltd. Vs. CCE, Hyderabad-II [2016 (8) TMI 1112 - CESTAT HYDERABAD], where it was held that exemption from E. Cess and S.H.E. Cess under Notifications No. 28 and 29/2010 both dated 22.06.2010 is applicable only with respect to Clean Energy Cess levied under the Finance Act, 2010, but will not be applicable with respect to Central Excise duty levied on coal w.e.f 01.03.2011 - demand upheld - penalty set aside - appeal allowed - decided partly in favor of Revenue.
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Corporate Laws
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2017 (5) TMI 375
Winding up petition - Held that:- There is substance in the case of the petitioner company that even otherwise both the consultancy agreement of 24-7-2010 and the following bill dated 20-8-2010 between the petitioner company and CGEPL are got up documents, and set up in a desperate attempt to derail the winding up petition. This inter alia not least for the reason that the respondent company has not controverted the allegation specifically made that its Memorandum of Association does not include as the main or even ancillary and incidental objects, business relating to Solar Energy. Nor does the respondent company has any expertise in the field of Solar Energy having exclusively engaged in the business of dairy since its inception in 1997. Further the consultancy agreement dated 24-7- 2010 was signed on behalf of CGEPL by Ajay Pareek, brother of Alok Pareek and Akshay Kumar Bhargava, co-promoter and director with Alok Pareek, on behalf of the respondent company. No explanation has also been forthcoming from the respondent company as to why the bill dated 20-8-2010 bears No.1/2010 for a company doing business since 1997 and why despite consultancy being a service chargeable to Service tax, service tax was not deducted and paid to the government. Also extremely odd and suspicious is that the bill No.1/2010 dated 20-8-2010 for alleged consultancy service by the respondent company to CGEPL was signed by Ajay Pareek, brother of Alok Pareek and marked attention to his brother Alok Pareek as director of CGEPL-also director in the respondent company. In the facts and evidence on record a case of a debt of ₹ 20 lac remaining unpaid to the petitioner company despite a winding up notice to the respondent company has been made out. The defence of the respondent company to the winding up petition is malafide, convoluted, mutually destructive and palpably false, what of being bonafide and based on substantial grounds making out a triable issue. No iota of public interest against the winding up has even been urged and cannot be found.
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2017 (5) TMI 374
Attachment orders - Official Liquidator take over possession of the subject property - Held that:- There are two inescapable conclusions that are axiomatic: (a) That DAL had offered attachment of the subject property to the Official Liquidator to discharge and pay all the existing and future liabilities, including all the dues owed to various secured and unsecured creditors of GAL. (b) Despite repeated opportunities both, DAL and GAL have failed, avoided and neglected to disburse and discharge the said outstanding liability. Therefore, in view of the foregoing facts and circumstances, it is considered appropriate, at this stage in the first instance, whilst awaiting the decision of the Hon’ble Supreme Court in the Special Leave Petitions instituted on behalf of Taneja and DAL, to direct the Official Liquidator to comply with the direction issued by this Court by way of the order dated 08.10.2013 (relevant portion of which has been reproduced in paragraph (12) hereinabove), insofar as, it required the Official Liquidator to take over possession of the subject property. The Official Liquidator is directed to comply with the direction contained in the order dated 08.10.2013, forthwith. 24. The order dated 11.09.2014 (reproduced in paragraph (15) hereinabove), rendered by this Court is modified accordingly. The Official Liquidator is directed to file a report in compliance with the present order, on or before the next date of hearing.
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Insolvency & Bankruptcy
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2017 (5) TMI 373
Qualification of attorney holder to initiate proceeding under Section 7 of the Code of 2016 - corporate insolvency resolution proceeding under the Code of 2016 - Held that:- One may note here that under the power of attorney in question, the author thereof had bestowed various power on the attorney appointed thereunder which included the power to initiate winding proceeding as well. But then, in view of our foregoing discussion, its needs to be concluded conclusively that the power, so given to the attorney under the instrument above, can never be stretched to embrace the power to initiate a corporate insolvency resolution proceeding under section 7 of the Code of 2016. Code of 2016 itself constituted two totally new classes of Adjudicating Authorities for purpose of adjudication of the matters, covered by the Code, aforesaid and such Authorities were even not in existence when the power of Attorney was executed on 20.10.2014. All these speak loud and clear that under no circumstances, the power of attorney in question can be said to have authorised the attorney, appointed there-under, to initiate a corporate insolvency resolution proceeding under section 7 of the Code. I have no doubt, whatsoever, in my mind that when the financial creditor executed the power of attorney in question on 20.10.2014, he could not have visualized even remotely that the donee would be required, one day, to initiate a corporate insolvency resolution proceeding under the Code of 2016 which, as stated above, was not even in existence in 2014. Thus no hesitation in holding that Shri Srinjoy Bhattacharjee did not have requisite authority to initiate the proceeding under section 7 Code, 2016 against the corporate debtor. A perusal of the orders rendered by the learned Members of the NCLT, Kolkata Bench makes it clear. Therefore, this Bench has no occasion or the authority to embark upon the question which is sought to be presented before this court by the learned counsel for the corporate debtor.In view of the foregoing discussions, have found reason to concur with the finding arrived at by the learned Member (J) while differing respectfully from the conclusion, reached by the learned Member (T), NCLT, Kolkata Bench.Resultantly, the reference is answered as stated above.
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Service Tax
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2017 (5) TMI 402
Club or association service - the assessee collected charges from members of clubs for various services but had not paid service tax in respect thereof - The department was of the view that these amounts would fall within the ambit of the words “any other amount” as defined in Section 65 (105) (zzze) read with Section 65 (25a) of the Finance Act, 1994 - principles of mutuality - Held that: - The controversy as to whether the issues such as the one raised in the present appeal relates to taxability or not, is now set at rest including by the department. We are informed that similar questions are, in fact, pending before the Supreme Court - appeal dismissed only on the ground that it is not maintainable under Section 35G.
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2017 (5) TMI 401
Pre-deposit - maintainability of appeal - Levy of service tax - Board was constituted in order to regulate the employment of private security guards employed in factories and establishments in Mumbai and Thane districts and to make better provision for their terms and conditions of employment - SCN alleges that the Board renders services. The services are referable to a statute, namely, the Finance Act, 1994. It is on this premise that the tax was sought to be imposed - Held that: - The Central Excise Act, 1944 has been amended by the Finance Act, 2015. The remedy of appeal against the order-inoriginal is available by section 35-B, namely Appeal to the Appellate Tribunal. By a further provision and incorporated in the statute, namely, section 35-F, the Tribunal or the Commissioner (Appeals), as the case may be, are mandated not to entertain any appeal. There is no financial hardship of such nature to hold that the statute imposes a excessive or onerous condition so as to avail of the right of appeal. Pertinently, neither the provisions are challenged nor the stipulation as aforesaid. The writ petition is filed only on the ground that it is not possible for the Board to arrange for the predeposit. This is not enough to entertain this petition. Petition dismissed - decided against petitioner.
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2017 (5) TMI 400
Maintenance or repair service - hauling/maintenance of plant and equipments of the client - case of appellant is that in the absence of any maintenance contract or agreement, the one time repair activities carried out by them cannot be taxed as “maintenance or repair service” - Held that: - The period involved in the present dispute is from 01/07/2003 to 31/03/2005. During the said period the service tax liability under “maintenance or repair service” will arise when the same service is provided by any person under maintenance contract or agreement - there is no maintenance contract or agreement in the said arrangement. There is a fine distinction between one time repair activity, (though it may involve work as a part of overall maintenance) and a regular maintenance contract. The maintenance agreement or contract, may or may not include in its scope repair of specific equipment - The Tribunal in the case of Basant Enterprises vs. CCE, Bhopal [2011 (4) TMI 550 - CESTAT, NEW DELHI], held that the liability under maintenance or repair service cannot be apply to repair activity in terms of rate contract work order - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 399
Refund claim - denial on the ground that appellant availed CENVAT credit - Held that: - this ground of rejection is not tenable under the fact that the appellant availed benefit under N/N. 30/2004 CE and further no instance of taking Cenvat credit in pointed out in the impugned orders - refund allowed. Refund claim - rejection on the ground that the appellant has availed drawback as per shipping bills, goods should have been exported without availing drawback of service tax paid on specified services - Held that: - CBEC Board Circular No. 13/2000-SC is specific in stating that only the input services which have been used in the manufacture, have been factored - the services availed in the course of export, post clearance have not been factored in the All Industry Rates of Drawback and accordingly the same is not relevant for the purpose of refund - refund allowed. Refund claim - services of foreign commission agents under BAS - rejection on the ground that conditions of N/N. 41/2007 ST not met - Held that: - The ld. counsel have taken me through the relevant shipping bills, wherein the payment of commission have been effected. Further, drawn my attention to the debit notes issued by the foreign service providers, wherein reference of letters of credit, invoice numbers of the appellant, etc. are available, in support of the export transaction. It is also not the case of revenue that the appellant have paid more commission than the permissible amount i.e. 2% of the aforesaid value of the exports - rejection not tenable. Refund claim - denial on the ground that the appellant did not submit any evidence that the service provider, were authorized by port trust or other port to render the services - Held that: - Board Circular No. 112 clarified that the granting of refund to exporters on taxable services that he receives and uses for export, do not require verification of registration certificate of the supplier of service - refund allowed. Refund claim - CHA services - denial on the ground that the conditions of CHA Services as given in serial No. 13 of the notification not met - Held that: - bill of lading number and date, export container number, vessel name, port of loading, port of delivery, description of export goods etc., is given. In this view of the matter, I hold that all the relevant information is available for allowing the refund of CHA Services received - refund allowed. Refund claim - C & F Agent Services - denial on the ground that the said service was notified by way of amendment with effect from 07/12/2008 - Held that: - From the bill it is evident that the services are been provided in the nature of terminal handling charges and documentation charges. I find that these services are eligible services at the same are also provided by the CHA and also fall under the port services. In this view of the matter, I hold that the appellant is entitled to refund for this service - refund allowed. Refund claim - transport of goods by rail - services of transporting the container from the ICD, by Container Corporation of India (Concor) to the Gateway Port - denial on the ground that the appellant failed to certify the conditions of the services by Rail - Held that: - The appellant have taken me through the sample invoice of Concor in the appeal paper book, in which Concor have given the container number, cost of freight and the cost of handling charges. The name of the appellant is also there. Accordingly, I hold that the appellant is entitled to refund on the services subject to verification of the invoices of Container Corporation of India with the shipping documents and/or let export order - matter on remand. Refund claim - GTA Services - Held that: - the refund of tax/duty on GTA Services is available in principle, subject to verification of the bills of the GTA Service provider with the export documents - matter on remand. Refund claim - time limitation - the refund claim was filed for the period October to December 2008 on 30/06/2009 - Held that: - it had been clarified in the said notification that for the refund claim of April to June quarter 2008, the refund claim can be filed up to 31/12/2008 - in view of the amending notification, refund is allowed. Appeal allowed - decided partly in favor of appellant.
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2017 (5) TMI 398
GTA service - mining of coal in various coal fields - recipient of service - reverse charge mechanism - main issue of present case is non-issue of consignment note and implication of such consignment note for tax liability to be fastened on the appellant - Held that: - as no consignment note as generally understood or delineated in Rule 4B was issued by the transporter to the appellant in the transaction the tax liability under GTA does not arise. - Decision in the case of South Eastern Coal Fields Ltd. vs. CCE, Raipur [2016 (8) TMI 677 - CESTAT NEW DELHI] followed. Appeal allowed - decided in favor of appellant.
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2017 (5) TMI 397
Construction services - demand - Held that: - as per the N/N. 16/2005 dt. 07/06/2015, as amended by N/N. 26/2007 dated 22.05.2007 and N/N. 34/2012 dated 20.06.2012 exemption was provided in relation to construction services in relation to port and other ports, w.e.f. 16/06/2015. Hence the activity relating to the port, no service tax is leviable. Maintenance repair service - classification of services - Held that: - Since there appears to be doubt in the classification per se of the service provided, we set aside the demand on this score and remand the matter to the lower authority for denovo adjudication - matter on remand. Site formation, excavation, clearance - benefit of N/N. 17/2005-ST dated 07.06.2005 - Held that: - he said service is indeed exemption as per the exemption Notification No.17/2005-ST dt. 07/06/2005. In that notification, exemption was granted for site formation and clearance, excavation and earthmoving and demolition and such other similar activities. Thus, we set aside the impugned order in this regard and allow the claim of the appellant. Works contract - abatement - N/N. 01/2006-ST dated 01.03.2006 - Held that: - It appears that the appellant has made the plea for the first time and not done so earlier before the lower authorities. When it is so, we set aside the impugned order on this issue and remand the matter to the lower authority to decide the issue de novo. Matter also remanded to fix the demand under “management, Maintenance or Repair service”, Commercial or Industrial Construction services. Appeal allowed - decided partly in favor of appellant and part matter on remand.
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2017 (5) TMI 396
Renting of Immovable property service - appellant had rented out housing quarters and other premises on rent to its contractors other persons, but did not pay the service tax under the taxable category of Renting of Immovable property service - N/N. 6/2005 –ST, dated 01.03.2005 - Held that: - Renting of premises for residential purposes is not included within the scope and preview of such taxable service, for the reason that such renting is not in connection with business or commerce - However, a deeming fiction has been created in the explanation-2 appended to the said definition, providing that use of immovable property partly for business or commerce and partly for residential or any other purposes should be construed as immovable property for use in course or furtherance of business or commerce - the matter should go back to the original authority for passing the reasoned and speaking order on the basis of documents to be produced by appellant - appeal allowed by way of remand.
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2017 (5) TMI 390
CENVAT credit - credit taken for the unit not registered - centralized registration not there - case of appellant is that The credit so availed was utilized towards payment of Service Tax in respect of the services provided by the appellant. Therefore, the only reason that the site at which the services were used being non-registered, the credit cannot be denied - Rule 3, Rule 4 read with Rule 2 of Cenvat Credit Rules, 2004 and Rule 4(2) of the Service Tax Rules, 1994 Held that: - the output services provided by the appellant either from their Powai premises or at site, the appellant is a sole service provider for such services. The Service Tax is paid by the appellant on the entire services which is provided either from the Powai unit or at site. Therefore, the CENVAT Credit in respect of input and input services used for providing the services at site including the services of sub-contractor are admissible input services. Therefore, there is no reason for denying the credit on such services - credit allowed - decided in favor of assessee.
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Central Excise
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2017 (5) TMI 395
CENVAT credit - reversal - Rule 6(3)(b) of the CCR 2004 - maintenance of separate books of accounts - Held that: - Tribunal remanded the matter to the Adjudicating Authority, to not only verify the said fact but to also ascertain the exact amount of Cenvat credit qua which reversal has, purportedly, been carried out by the Assessee/ first respondent - appeal allowed by way of remand.
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2017 (5) TMI 394
Benefit of N/N. 6/2002-CE dated 1.3.2002 - clearance of vibration isolation systems - denial of benefit on the ground that the impugned item can be considered as parts of waste convention devices producing energy - Held that: - the same issue pertaining to the same appellant has come before the Tribunal in an earlier case GERB VIBRATION CONTROL SYSTEMS (P) LTD. Versus COMMR. OF C. EX., BANGALORE [2007 (10) TMI 180 - CESTAT, BANGALORE] for a different period which stands decided against the appellant, where it was held that item 21 of list 9 of N/N. 6/02 indicates that the exemption is available only for captive consumption. Tribunal cannot ignore such condition stipulated in notification so exemption not available - appeal dismissed - decided against appellant.
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2017 (5) TMI 393
Remission of duty - Rule 21 of CER, 2002 - goods destroyed by fire - As per report of the Fire Officer and the Police the cause of fire is electric short-circuit - denial of remission on the ground that the incident does not appear to be an accident by natural cause and does not fall under the ambit of Rule 21 of CER, 2002 - Held that: - it was found that the fire occurred due to electric short-circuit. There is no involvement of any human being in causing the fire. No one is to be blamed for it and it is just an unavoidable unforeseen event that has happened - On reading Rule 21 of the CER, 2002, it is clear that the assessee is entitled to remission of Excise duty, if he is able to satisfy the Commissioner that the goods in question were destroyed as a result of unavoidable accident - This satisfaction envisaged by the rule is not arbitrary satisfaction but the judicial satisfaction of the Commissioner based upon objective analysis of the facts - the appellant is entitled to the remission claim under Rule 21 of CER, 2002 - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 392
Penalty u/r 26 - whether the appellant Shri Milind Pires, Director of M/s.Surya Smelting Pvt. Ltd. is liable for penalty u/r 26 of CER, 2002 for the offence that the company M/s.Surya Smelting Pvt. Ltd. has availed fraudulent Cenvat credit on the invoices without receipt of inputs physically? - Held that: - Rule 26 can be invoked only in case where a person is dealing with the goods which is liable for confiscation. In the present case, the fraudulent credit was availed without physical receipt of inputs. This fact itself make it clear that no goods was involved which was liable for confiscation. Therefore, the ingredients of Rule 26 does not get satisfied - in the present case it is not the case of the clandestine removal of the goods but non-receipt of the inputs and fraudulent availment of the credit without physical receipt of the inputs - the penalty upon the appellant imposed under Rule 26 will not sustain - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 391
Classification of rectified spirit - The contention of revenue is that with effect from 01.03.2005 Central Excise Tariff item no. 22072000 covers ethyl alcohol and other spirit Denatured of any strength. Therefore, the product known as rectified spirit does not exist in Central Excise Tariff and on fermentation of molasses rectified spirit comes into existence which does not find place in Central Excise Tariff - whether ethyl alcohol and rectified spirit are two different commodities or one and the same commodity? Held that: - ethyl alcohol and rectified spirit are one and the same - rectified spirit which is not used for human consumption is nothing but ethyl alcohol and is finding place in tariff item no. 22072000 - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 389
Rectification of mistake - the case of the applicant was listed for hearing on 13.01.2017, in the supplementary cause list, along with the case of Unipearl Alloys and others, the Tribunal disposed of all the connected appeals by a composite order, but the name of the appellant/ applicant was not mentioned in the said order - Held that: - On perusal of the cause list dated 13.01.2017, it is found that the name of the applicant/ appellant appears at serial No. 39 of the said cause list and the same was listed along with the appeal of M/s. Unipearl Alloys & Others - in the the final order, inadvertently, the order in the case of the applicant/appellant has not been passed - ROM application allowed - decided in favor of assessee.
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2017 (5) TMI 388
Penalty - shortage of stock - appellant claim that due to the mischief or wrong advice of those technical persons, resulted in discrepancy in the actual stock and book records - whether the penalty imposed u/s 11 AC by the Additional Commissioner have been rightly reduced to 25% under proviso to Section 11 AC of the Act? - Held that: - there is no instance of any clandestine activity found by the revenue. Only on the apparent shortage of inputs and finished goods, the demand had been raised which is wholly presumptive in nature - This Tribunal in several similar matters have held that no demand of duty is sustainable, only for some apparent shortage found at the time of stocktaking without any instance of clandestine activity on the part of the manufacturer - on the discrepancy pointed on inspection appellant had reversed the Cenvat credit taken on the raw material and paid the duty on the finished goods found short, under intimation to the revenue - the SCN is vague and presumptive and accordingly not sustainable - appeal dismissed - decided against Revenue.
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2017 (5) TMI 387
Benefit of N/N. 6/2006-CE dated 01.03.2006 - denial of benefit of notification on the ground that appellant are neither a contractor who participated in International Competitive Bidding nor sub-contractor for supply of the goods - Held that: - Tribunal in the case of SARITA STEELS & INDUSTRIES LTD. Versus COMMR. OF C. EX., VISAKHAPATNAM [2010 (7) TMI 568 - CESTAT, BANGALORE] has already decided that exemption cannot be denied for the reason that sub-contractor did not take part in International Competitive Bidding - relief from excise duty is not granted through the mechanism of deemed export but administered through exemption notification issued - Revenue has not made any case that any of the conditions specified in the exemption notification is not fulfilled - appeal allowed - decided in favor of assessee.
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2017 (5) TMI 386
Natural justice - Clandestine manufacture and clearance of goods - case of appellant is that even though they have requested for supply of the relied upon documents listed at Sr. No.14 to 17 of the list of documents annexed to the SCN, the same were not supplied to them - Held that: - it is prudent to remand all these appeals to the Adjudicating Authority to decide the issues afresh against the aforesaid appellants after affording an opportunity of cross examination of the witnesses, namely, Shri Sushil Kumar Patodia and Shri Hari Prasad Agrawal and handing over the documents at Sr. No.14 to 17 of the list of the relied upon documents - appeal allowed by way of remand.
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2017 (5) TMI 385
Zinc Ash - cleared from factory for consideration - whether excisable product or not? - Held that: - Board circular F.No.96/115/2015-CX.1, dt.25.04.2016, clarifies that bagasse, Dross and Skimming of non-ferrous metals or any such by-product or waste which are non-excisable goods when cleared from the factory for a consideration, are to be treated as exempted goods - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 384
CENVAT credit - denial on the basis of some shortage recorded by M/s. Mahindra and Mahindra in their books of account, there is nothing as such recorded in the books of appellant - The department case is that whatever shortage is found in respect of input supplied by the principle to the appellant, credit to that extent is not admissible to the appellant accordingly credit was denied - Held that: - shortage recorded by M/s. Mahindra and Mahindra Ltd was wrong. Subsequently they have clarified and corrected. It is also undisputed that department did not find any discrepancy in the books of the appellant. The appellant after verification of their stock and books came to the conclusion that actual shortage if at all is there, it is ₹ 44 Lakh, on which which they have admittedly reversed the credit - there is no reason that only on the basis of some shortage recorded in the books of M/s. Mahindra and Mahindra, why the credit should be disallowed to the appellant when there is no evidence of any manipulation on the part of by the appellant in their books of account and no evidence of diverting inputs otherwise - credit allowed - decided in favor of assessee.
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2017 (5) TMI 383
CENVAT credit - clandestine removal - there was an attempt of burglary for clandestine removal of Nickel (input) from the appellant factory - case of Revenue is that inputs (Nickel) has been removed from the factory on which credit has been availed. Rule 3(5) provides that when inputs are removed as such, without being used in manufacture of final products, the assessee is liable to reverse the CENVAT credit availed on such inputs - Held that: - The adjudicating authority has not relied upon the General Manager’s report which reports removal of 23 tonnes of Nickel. The adjudicating authority states that it is based on tampered documents. When the department has issued show-cause notice basing upon the figures stated in such report, the adjudicating authority cannot brush aside such report lightly. It has to be supported by reasons. It is not disputed that the documents regarding the issuance / removal of Nickel were lost in fire. It is also revealed that such fire was not by accident but articulated. Whether these incidents of clandestine removal of Nickel and articulated fire with intent to destroy documents will constitute deliberate acts of suppression has to be examined. All these issues need to be reconsidered - matter on remand. The plea of appellant that they have reversed the credit prior to utilisation has to be looked into - matter on remand. Appeal allowed by way of remand.
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2017 (5) TMI 382
Clandestine removal - shortage of stock - storage loss - whether duty has been rightly demanded on the shortage found in the stock of raw materials and/or finished goods at the time of inspection in the factory of the appellants? - Held that: - there have been no actual weighment of the whole stock lying in the factory premises. Only a sample of the stock was weighed and the same was multiplied with the number of bags and Ingots etc, as could be counted or estimated. Thus, the fact of estimation of the stock is evident on the face of the record - in such manner of stock taking, there are bound to be variation and/or discrepancy. The variation in the case of sponge iron is less than 20%, whereas the variation in the stock of MS Ingots is about 55%. The variation in stock of sponge iron is considered as normal variation and the same does not attract any adverse inference. So far stock of MS ingots is concerned, there is a variation about 55%. Considering the variation of 20%, as normal, the demand on the balance shortage of MS ingots, lying in the furnace division as well as rolling mill division, confirmed. Penalty - Held that: - in view, the facts on record, there is no instance of any clandestine activity and/or removal of Excisable Goods - it is not a fit case for penalty u/r 25 of CER read with Section 11AC of the Act. Appeal allowed - decided partly in favor of appellant.
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2017 (5) TMI 381
Reversal of CENVAT credit - Rule 6(3) of CCR - demand on the ground that assessee failed to maintain separate accounts in respect of inputs and input services used in the manufacture of dutiable and exempted products - Held that: - Hon’ble High Court of Allahabad in the case of CCE Vs. Asian Fertilizers Ltd. [2011 (8) TMI 1091 - ALLAHABAD HIGH COURT] has allowed the appeal of the assessee by observing that assessee is not required to pay 8% of price of exempted goods for not maintaining separate records as Rule 6(3)(b) of CCR 2004 is not applicable on reversal - the demand has been confirmed on the appellant for taking irregular credit for the period 2005 – 2010. But the ratios laid down in the above mentioned case were also not available before the adjudicating authority. When it is so, for verification of credit of CENVAT, the findings have not been adequately elucidated in the impugned order - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2017 (5) TMI 377
Benefit of Sales Tax Exemption - Notification dated 28th July 2016 - exemption limit - Eligibility Certificate - economic development of District of Kutch - investment in purchase of assets - relevant date of investment - typing error in Gujarati version - interpretation - Whether the petitioner-Company is entitled to Incentives/Sales Tax Exemption under the Scheme on the investment made/expenditure incurred after 31st December 2005, but within a period of 18 months from the date of commencement of the commercial production? - Held that: - in case of Small Scale Industrial Units, Medium and Large scale Industrial Units, the assets acquired upto the period of six months or within 1 year from the date of commencement of commercial production or till the date of completion of the said Scheme ie., 31st December 2005; whichever is earlier between the two, shall be considered eligible for the purpose of Incentives. However, in the Gujarati version of the Incentive Scheme, the expression “whichever is earlier between the two” is missing in case of Industrial Units having project cost exceeding ₹ 10 Crores. The aforesaid seems to be an inadvertent mistake in publication/typing - even the petitioners also understood that the assets acquired within a period of 18 months from the commencement of commercial production or till the Scheme ends on 31st December 2005 [whichever is earlier between the two] shall be considered eligible for the purpose of the incentive. - when the petitioners and all other Industrial Units/ Undertakings/Projects [105 in number] understood the Scheme, the manner in which the State Government had pleaded and all are treated equally and in case of all Industrial Undertakings/Projects, the assets acquired only upto 31st December 2005 are considered eligible for the purpose of incentive, the petitioners are not entitled to incentive on the assets acquired subsequently after commencement of commercial production or after 3.12.2005 - claim of petitioner rejected. Whether the petitioner-Company is entitled to Incentives/Sales Tax Exemption under the Scheme on the investment/expenditure incurred after 31st December 2005 with respect to Phase II project? - Held that: - only those Units/Industries/Projects which had not gone in production before 31st December 2005 are considered as pipeline projects. In the present case, the petitioner-Company had already gone in production w.e.f 27th December 2005, and therefore, as per the Scheme/Government Resolutions amended from time to time and lastly amended vide G.R dated 7th January 2005, the case of the petitioners shall not fall under the category of pipeline project - petition dismissed. Whether the petitioner-Company is entitled to Incentive/Sales-tax exemption under the Scheme on the plant and machineries installed in the Project by 31st December 2005 but the actual payment is made subsequently ie., after 31st December 2005? - Held that: - the petitioner-Company is entitled to the benefit of Incentive Scheme/Sales Tax Exemption on the expenses incurred/investment made on purchasing the land, constructing building and installing the plant and machineries prior to 31st December 2005 but the payment might have been made subsequently ie., after 31st December 2005 - partly decided in favor of petitioner. Petition dismissed - decided partly in favor of petitioner.
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2017 (5) TMI 376
Classification of goods - Vicco Vajradanti tooth paste and powder or Vicco Turmeric cream - whether medicine and drugs or cosmetics? - The learned Single Bench has relied upon an order passed by the Division Bench in the case of Commissioner of Commercial Tax vs. Dawar Brothers [1998 (2) TMI 544 - MADHYA PRADESH HIGH COURT], to hold that Vicco Vajradanti tooth paste and powder or Vicco Turmeric cream possess medicinal properties, therefore, fall under the category of medicines and drugs and not the cosmetics - Held that: - we find that the order of the learned Single Bench following the order in the Dawar Brother’s case, cannot be sustained. In Dawar Brother’s case, it has been noticed that the argument of the revenue was that the taxing statute does not define drugs and medicines, therefore, the provisions under consideration required to be given meaning in trade - The said argument of the revenue is factually incorrect. No doubt the drugs and medicines falling in Entry 16 Part-IV Schedule-II of the Act are not defined but cosmetics have been explained so as to include face cream and the toilet articles to include tooth paste and powder. Thus the statute itself have clarified the classification of the products manufactured by the writ petitioner as face cream and the tooth paste and tooth powder. There is no question as to whether it is an ayurvedic medicine or cosmetic cream. The classification of a product under a statute cannot be read into another statute. Each statute has to be interpreted on the basis of the provisions contained therein. Therefore, classification of the products in the said judgments dealing with the Central Excise Laws are not relevant for examining the classification of the products under the local Act, which have specifically included face cream under the Entry of Cosmetics and tooth paste and tooth powder under the Entry of Toilet articles. Petition dismissed - decided against petitioner.
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Indian Laws
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2017 (5) TMI 372
Order to pay compensation - Money ordered to be paid recoverable as fine - N.I. Act - whether when compensation is ordered as payable for an offence committed under Section 138 of the Negotiable Instruments Act, and in default thereof, a jail sentence is prescribed and undergone, is compensation still recoverable? - Held that:- the deeming fiction of Section 431 Cr.P.C. extends not only to Section 421, but also to Section 64 of the Indian Penal Code. This being the case, Section 70 IPC, which is the last in the group of Sections dealing with sentence of imprisonment for non-payment of fine must also be included as applying directly to compensation under Section 357(3) as well. The position in law now becomes clear. The deeming provision in Section 431 will apply to Section 421(1) as well, despite the fact that the last part of the proviso to Section 421(1) makes a reference only to an order for payment of expenses or compensation out of a fine, which would necessarily refer only to Section 357(1) and not 357(3). Despite this being so, so long as compensation has been directed to be paid, albeit under Section 357(3), Section 431, Section 70 IPC and Section 421(1) proviso would make it clear that by a legal fiction, even though a default sentence has been suffered, yet, compensation would be recoverable in the manner provided under Section 421(1). This would, however, be without the necessity for recording any special reasons. This is because Section 421(1) proviso contains the disjunctive “or” following the recommendation of the Law Commission, that the proviso to old Section 386(1) should not be a bar to the issue of a warrant for levy of fine, even when a sentence of imprisonment for default has been fully undergone. The last part inserted into the proviso to Section 421(1) as a result of this recommendation of the Law Commission is a category by itself which applies to compensation payable out of a fine under Section 357(1) and, by applying the fiction contained in Section 431, to compensation payable under Section 357(3). As is well known, a legal fiction is not to be extended beyond the purpose for which it is created or beyond the language of the section by which it is created. However, once the purpose of the legal fiction is ascertained, full effect must be given, and it should be carried to its logical conclusion. The object of the legal fiction created by Section 431 is to extend for the purpose of recovery of compensation until such recovery is completed - and this would necessarily take us not only to Section 421 of the Cr.P.C. but also to Section 70 of the Penal Code, a companion criminal statute, as has been held above.
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2017 (5) TMI 371
Liability of one of a Director of a Company under Section 141 of N.I. Act for the dishonour of the cheque issued by the original accused on behalf of the company - Held that:- ed. The law so far as the liability of a Director of a Company under Section 141 of the Act is concerned, is no longer res integra. The Supreme Court in the case of National Small Industries Corporation Limited v. Harmeet Singh Paintal and another [2010 (2) TMI 590 - SUPREME COURT OF INDIA ]vwherein held that in the absence of specific averment as to the role of the respondents and particularly in view of the acceptable materials that at the relevant time they were in no way connected with the affairs of the company, we reject all the contentions raised by learned counsel for the appellants. Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases. This application succeeds and is hereby allowed. The proceedings of the Criminal Case pending in the court of the learned Metropolitan Magistrate, Court No.36, Ahmedabad are hereby quashed so far as the applicant is concerned. The case shall now proceed further expeditiously in accordance with law so far as the other co-accused are concerned. Rule is made absolute to the aforesaid extent.
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