Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 12, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Reopening of assessment - return filed was processed u/s 143(1) - ITAT was right that the reopening was based merely on a change of opinion. Not only did he examine the records but came to the conclusion that "there was prima facie no evidence that the liabilities were not ascertained liabilities." - HC
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Claim of depreciation on the plant & machinery purchased from the amount withdrawn from the account maintained with NABARD - the depreciation is not a expenditure but an allowance - the same is out of the purview of section 33AB(6) - No additions - AT
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Addition on cess on green leaf expenditure - Expenditure on cess should be allowed as a deduction before computing the composite income under Rule 8 and the apportionment is to be made after the income is so computed - AT
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TDS u/s 194H - assessee is not required to deduct tax at source under section 194H of the Act in respect of bank guarantee commission/charges paid to banks.- AT
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Denial of claim of bad debts - Genuineness of the claim made by the assessee has not been proved by it. As far as bad debts of Rokko Sarees and Fabrics Ltd. are concerned it is found that the disputed sum was not a part of the P&L account. Therefore, none of the claims made by the assessee can be allowed - AT
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TP adjustment related to Interest on Mobilization advance - since assessee-company is not charging any interest from the AEs and non-AEs and also not paying any interest on the amounts received by it from the main contractor, this adjustment is not warranted - AT
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Transfer Pricing adjustment - The assessee could not have approached the two unrelated parties and have asked them to explain why they were giving discount to the assessee. The upward adjustments made by the TPO are uncalled for - AT
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Penalty u/s 271(1)(c) - unexplained expenditure - Merely because the suppliers could not be traced at the given address would not automatically lead to a conclusion that there was concealment of income or furnishing of inaccurate particulars by the assessee. - AT
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Transfer pricing adjustment - absence of international transaction - If the product manufactured and sold by the assesse is India specific then it cannot be said that any benefit could have accrued to the AE on account the AMP spend in India in respect of such brands. - AT
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Determination of nature of expenditure incurred for renovation of factory building - A repair ordinarily involves renewal and restoration of the existing wear and tear. Such expenditure, in our view, is in the nature of current repair in spite of major expenses alleged to have been incurred - AT
Customs
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Where any drawback payable to any claimant u/s 74 or 75 is not paid within the period set out under subsection (1) of Section 75A, then, there is an obligation to pay interest. That interest is to be paid at the rate fixed u/s 27A - The entitlement for interest is from the date after the expiry of the period of one month till the payment of such drawback. - HC
Corporate Law
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Compounding of offence - Unless and until a reference is made to the Tribunal, unless and until the Tribunal declares contravention of requirements of Schedule XIII and unless and until the Tribunal proposed to imposes fine as contemplated under sub-section (10), there is no cause of action for the petitioners to invoke Section 621A - petitioners cannot seek compounding of violation of Section 309(5B) - Tri
Service Tax
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Consideration received for providing coaching/training in English language - benefit of N/N. 9/2003-ST and N/N. 24/2004-ST - commercial coaching in English language is covered for exemption under these notifications - AT
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Refund claim - excess deposit of service tax - In absence of any specific power conferred under the statue empowering the authorities to condone the delay in late submission of refund application, the refund claim filed beyond the period of one year from the date of payment of service tax will be clearly barred by limitation of time - AT
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Penalty u/s 76 of FA, 1994 - delay in payment of service tax due to financial crisis - the head office has not release the fund, the appellant could not be pay service tax in time - penalty waived u/s 80 - AT
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Penalty u/s 77 and 78 of FA - non-payment of service tax for the period prior to registration - the appellant has paid entire amount of service tax payable by them before audit took place - reasonable cause proved - no penalty - AT
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BAS - Commission paid foreign agents - foreign agent acted as an agent outside India in relation to sale of the processed tobacco - liable to service tax, the liability thereof being on the appellant-assessee under reverse charge mechanism in terms of Rule 2(1)(d)(iv) of the Service Tax Rules - AT
Central Excise
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Classification of retreading/resoling of the worn out tyres - Since the specific entry is to be preferred to a General Entry, we have no hesitation to hold that the impugned goods are classifiable under 4008.21. - AT
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CENVAT credit - input services - The department has not adduced any evidence to the effect that such cost was incurred by employees or any other person. By merely stating that the appellant has not incurred the charges for the said services the department cannot deny the credit - AT
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Levy of Interest - retrospective amendment - The liability to pay interest would only arise on default and is really in the nature of quasi-punishment. Interest liability can be prospective only. - interest set aside. - AT
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Refund claim - excess duty paid due to downward revision of price - They have furnished CA certificate to substantiate that the incidence of duty has not been passed on - refund allowed - AT
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CENVAT credit - silo hoses and corrugated hoses - These goods are integral to the manufacturing process and would fall within the definition of capital goods/parts, and the credit was allowed - AT
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Refund claim - unutilized Cenvat Credit of Service Tax paid on the input services used in the manufacture of the final products, which were cleared for export - denial on the ground that there was no prescribed procedure for filing the refund claim during the relevant period - substantive right cannot be denied - refund allowed - AT
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Suo moto availing re-credit of credit reversed earlier - pending the investigation in show cause notice, the appellants had voluntarily reversed the credit - Since the the dropping of proceedings pertaining was sustained, no demand can survive - AT
VAT
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Doctrine of Promissory Estoppel - while upholding the retrospective restriction of sales tax exemption, Apex Court observed that, "at the time of insertion of Section 41BB by amendment vide Amendment Act 22 of 2001, the Statement of Objects and Reasons accompanying the introduction of the Bill specifically stated that the purpose of the amendment was ‘to restrict grant of incentives in proportion to goods manufactured in the expansion units located in the backward areas of the States’."
Case Laws:
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Income Tax
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2017 (5) TMI 489
Percentage of pre-deposit for stay of the demand - Held that:- AO should have, in the impugned order, discussed para 4(B)(b) of the aforementioned OM which provides that wherein AO is of the view that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount lower than 15% is warranted that is in a case where addition on the same issue has been deleted by appellate authorities in earlier years, the AO should refer the matter to the administrative Pr.CIT/CIT, who shall then decide the quantum/proportion of the demand to be paid. Instead of remanding the matter to the AO for the above exercise, the Court is of the view that the interests of justice will be met by requiring the Petitioner to deposit around 10% of the demand of ₹ 17,57,53,977 as a lump sum amount
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2017 (5) TMI 488
Addition on account of booking of vehicles-in the bogus/fictitious names - Held that:- Having heard Mr Zoheb Hussein, learned counsel for the Revenue the Court is not persuaded to hold that the ITAT erred in appreciating the evidence before it or that its conclusions on that basis. The findings have turned purely on facts and the view taken was certainly a probable one. The AO's additions, which were upheld by the CIT (A) appeared to have proceeded on surmises and conjectures. As rightly pointed out by the ITAT without some cogent and credible material that the bookings were in fact made by the Assessee for itself, the additions ought not to have been made. - Decided in favour of the Assessee
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2017 (5) TMI 487
Addition on undisclosed investment - assessee had sold the land - Held that:- Though the land was purchased by the assessee along with one Bharatbhai Patel, addition made only in the case of the assessee and no addition was made in the hands of his partner Bharatbhai Patel. Considering the above facts and circumstances, when the learned CIT(A) has deleted addition made by the A.O. made on account of undisclosed investment and when the same has been confirmed by the learned tribunal, it cannot be said that the learned CIT(A) and learned tribunal have committed any error. We see no reason to interfere with the impugned orders. - Decided in favour of assessee.
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2017 (5) TMI 486
Validity of proceedings under Section 153C - Held that:- The documents and material seized are only the balance sheet, audit reports etc., which did not reflect any income that was not already disclosed when the assessments were finalised initially under Section 143(3) of the Act. This by itself is sufficient to delete the additions sustained by the CIT (A). Consequently, the ITAT was not in error in ordering such deletion. - Decided in favour of assessee.
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2017 (5) TMI 485
Disallowance of demurrage and wharfage charges - deduction under Section 37(1) - Held that:- The said question already stands answered in favour of the Assessee and against the Revenue by the judgment of this Court in Mahalaxmi Sugar Mills Company v. Commissioner Of Income Tax [1984 (5) TMI 6 - DELHI High Court] Applicability of provision of section 43B - superannuation/post-retirement benefits of the employees of the Assessee - Held that:- The making of a provision to meet a contingent liability need not be in order to meet such liability entirely in the year of its creation. The provision having been made on the basis of an actuarial report, which is not shown by the Revenue to be unacceptable on the ground that it is not based on known accounting or financial principles, the mere fact that the actual pay out in a particular AY may be far less than the provision cannot provide a justification to deny the deduction. The Court concurs with the view of the CIT (A) and ITAT that the provision does not attract Section 43 B of the Act Accrual of income - Addition of notional accrued interest - Held that:- No part of the advance given by the Assessee to M/s. Karsan has been able to be recovered by it. As pointed out by learned counsel for the Assessee, there was a case registered with the Central Bureau of Investigation (CBI) in that regard and any prospect of the money being recovered has all but vanished. Since no part of the principal amount could actually be recovered by the Assessee, there was no 'real income' and the question of adding any notional accrued interest to its income on such amount does not arise.
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2017 (5) TMI 484
Reopening of assessment - return filed was processed under Section 143 (1) - Held that:- ITAT was right that the reopening was based merely on a change of opinion. Not only did he examine the records but came to the conclusion that "there was prima facie no evidence that the liabilities were not ascertained liabilities."
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2017 (5) TMI 483
Addition on cess on green leaf expenditure - Held that:- We find that in identical facts and circumstances, Hon’ble Supreme Court in the case of Commissioner of Income Tax Vs. M/s Apeejay Tea & Co. Ltd.[2015 (8) TMI 1260 - SUPREME COURT ] wherein held Expenditure on cess should be allowed as a deduction before computing the composite income under Rule 8 and the apportionment is to be made after the income is so computed - Decided in favour of the assessee. Purchase of office equipments out of money withdrawn from the account maintained with NABARD - Deduction of the withdrawal from the account maintained with NABARD against the provision of Sec. 33AB(4) - Held that:- From the provisions of section 33AB(3) of the Act, we find that the assessee is entitled to utilize the amount withdrawn from the account maintained in NABARD for the purposes as specified in the scheme. And in the instant case the assessee has utilized the fund as per the scheme. It is also important to note that the provisions of section 33AB(4) of the Act also provides the assessee to utilize the money for purchase of the computers. Thus we do not find any reason to interfere in the order of ld. CIT(A) - Decided against revenue Addition of depreciation on the plant & machinery purchased from the amount withdrawn from the account maintained with NABARD - Held that:- We note that the Hon’ble Apex Court in the case of Garden Silk Weaving Factory vs. CIT (1991 (3) TMI 1 - SUPREME Court ) has held that the depreciation is not a expenditure but an allowance. Thus, in our considered view, we are inclined to hold that the depreciation is an allowance and therefore the same is out of the purview of section 33AB(6) of the Act. Thus we do not find any reason to interfere in the order of ld. CIT(A).- Decided against revenue
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2017 (5) TMI 482
Penalty u/s 271(1)(c) - validity of notice u/s 274 - assessee had declared additional income pursuant to the search operation - Held that:- There is no merit in the penalty order passed by the Assessing Officer in this regard wherein he has not come to a conclusion as to which limb of section 271(1)(c) has been fulfilled by the assessee. In any case, in the satisfaction recorded by the Assessing Officer, while initiating the penalty proceedings, he was satisfied that the assessee has furnished inaccurate particulars of income whereas this is a case of search wherein certain income was not offered to tax, hence at best, it is a case of concealment of income and not furnishing of inaccurate particulars of income. Be that as may be, the Assessing Officer in the final analysis has not levied the penalty for furnishing of inaccurate particulars of income but also for concealing the income on one addition of ₹ 75 lakhs. There is no merit in the said order passed by the Assessing Officer under section 271(1)(c) of the Act. See Kanhaiyalal D. Jain Versus The Asst. Commissioner of Income Tax, Central Circle – 3, Nashik [2016 (12) TMI 1238 - ITAT PUNE ] - Decided in favour of assessee
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2017 (5) TMI 481
TDS u/s 194H - Default under section 201(1) - non deduction of TDS on expenses/payments incurred on account of bank guarantee commission - Held that:- Following the order of the Coordinate Bench in the assessee’s own case for A.Y. 2011-12 [2016 (7) TMI 1284 - ITAT MUMBAI] we hold that the assessee in the case on hand is not required to deduct tax at source under section 194H of the Act in respect of bank guarantee commission/charges paid to banks. Also see Kotak Securities Limited Versus Deputy Commissioner of Income-tax, TDS Circle 2(1), Mumbai [2012 (2) TMI 77 - ITAT MUMBAI] - Decided in favour of assessee.
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2017 (5) TMI 480
Penalty levied u/s. 271(1)(c) - wrong computation of income with regard to STCG - Held that:- We find that the assessee had filed all the details about the assets sold during the year, that figures picked up by the AO for making addition are part of the return of income filed by the assessee. Thus,in our opinion, prima facie the assessee had not concealed any particular of income.There was difference of opinion between the AO and the assessee about the treatment to be given to the amount in question.No authority is required to be cited to hold that assessment and penalty proceedings are two independent proceedings and that quantum addition should not and cannot result in automatic levy of concealment penalty.The AO is required to consider the explanation filed by the assessee during the penalty proceedings to decide the levy of penalty. If a claim made by an assessee is not permissible legally, it cannot be held that by lodging such a claim it had filed inaccurate particulars. In the case under consideration, the AO made the additions invoking the provisions of section 50 C of the Act. Even at the time of penalty order there was no unanimity that the provisions of section 50C would be applicable to section 48 only or they would be applicable to section 50 also. Thus, there was difference of opinion about the addition. So in our opinion, penalty was not leviable for such a disputed issue. We find that in the case of Panchiram Nahata (2009 (11) TMI 817 - ITAT KOLKATA ) the Tribunal has held that where it was not in dispute that sold asset was depreciable asset, the AO was not justified in adopting the value as per stamp duty authorities. - Decided in favour of assessee.
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2017 (5) TMI 479
Treatment of capital gain/loss as business gain/loss - Held that:- As in earlier year similar transactions were treated by the ITAT as transactions of investment giving rise capital gains/loss. Furthermore Hon’ble Delhi High Court in the case of Radials International (2014 (5) TMI 18 - DELHI HIGH COURT) has held that investment activity through PMS agreement doesn’t given arise to business activity of making profit. Hence we hold that assessee’s investment activity cannot be held to be business activity. Accordingly the gain/loss on account of share transactions are to be assessed under the head of capital gains. Accordingly, we set aside orders of authorities below, and decide the issue in favour of assessee. Disallowance u/s. 14A - Held that:- On issue of disallowance u/s.14A earlier the tribunal has remitted the issue to the file of the A.O with certain directions. On the facts of the circumstances of the case, in our considered opinion the issue in the present appeals also need to be remitted to the file of the A.O with similar directions. Both the counsel fairly aggrieved to this proposition. Accordingly respectfully following precedent from tribunal in assessee’s own case as above we remit the issue to the file of A.O with similar direction to examine the issue accordingly.
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2017 (5) TMI 478
Denial of claim of bad debts - assessee had claimed bad debts for the sums outstanding from seven foreign parties as well as for freight charges paid on behalf of Rokko Sarees and Fabrics Ltd. - Held that:- Writing off of bad debts and claiming deduction for it are two different steps and have different consequences. In first situation only assessee is involved. But,in second situation State also has stakes.Legislature in its wisdom has laid down certain conditions u/s.36 of the Act and those provisions govern the writing off of bad debts and not the sweet will of the assessees. The provisions of the impugned section stipulate that for claiming deduction the assessee should establish that amount in question was not received.It was claimed that it did not possess documents prior to AY.2001-02. In our opinion, nothing prevented it to claim deduction in the year 2001-02. Genuineness of the claim made by the assessee has not been proved by it. As far as bad debts of Rokko Sarees and Fabrics Ltd.are concerned it is found that the disputed sum was not a part of the P&L account.Therefore,none of the claims made by the assessee can be allowed. - Decided against assessee. Denying claim on account of export incentives written off - Held that:- We find that the FAA had specifically asked the assessee to furnish evidence in its support.But,it had failed to produce any evidence in that regard.As discussed in earlier paragraphs,it is the duty of the assessee to furnish documentary or other evidence to claim any deduction.In the case before us, except making a claim it has not done nothing to support its claim.Therefore,we are of the opinion that the order of the FAA does not suffer from any legal or factual infirmity.Confirming the same,we decide second ground of appeal against the assessee. Disallowance of 20% of service charges paid by the assessee to its sister concern - Held that:- We find that while deciding the similar issue for the earlier assessment year,the Tribunal had upheld the disallowance at the rate of 20%, that the administrative expenses incurred during the year were on higher side as compared to expenses of previous assessment year.The rule of consistency is applicable to AO as well as to the assessee. Nothing was brought on record before us to distinguish as to how the facts of the AY.2006-07 were not similar to the facts for the year under appeal. In absence of dissimilarity of the facts, we are of the opinion that order of the Tribunal for the earlier years should not be disturbed.Therefore,confirming the order of the FAA, we dismiss the last ground of appeal raised by the assessee. Disallowance of cash expenses @15% - Held that:- We find that the AO had disallowed an amount of ₹ 1,00,909/- out of the various expenses,as the assessee had incurred the expenses in cash and had produced self made vouchers.In our opinion,without rejecting the books of accounts and pointing out the defects in method of accounting audited accounts should not be rejected on ad hoc basis.It is not known as to what had happened on 12.10.2011,when the matter was discussed with the AR of the assessee. Considering the peculiar facts and circumstances of the case,we are of the opinion that ad hoc disallowance made by the AO and confirmed by the FAA was not on sound footing. So,reversing the order of the FAA, we decide second ground in favour of the assessee.
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2017 (5) TMI 477
TP adjustment related to Interest on Loan - Held that:- There is no need for any adjustment on this account, as assessee has already received 6.37% interest which is more than the Singapore prime lending rate of 5.38%. In view of that, we delete the addition made by the AO/TPO/ DRP. TP adjustment related to Corporate Guarantee - Held that:- Considering the Co-ordinate Bench decision given in the case of Asian Paints Ltd. Vs. CIT (2014 (5) TMI 880 - ITAT MUMBAI ) we however, direct the AO/TPO to consider only 0.27% as the guarantee commission on the amount involved. TP adjustment related to Interest on Mobilization advance - Held that:- since assessee-company is not charging any interest from the AEs and non-AEs and also not paying any interest on the amounts received by it from the main contractor, this adjustment is not warranted. As seen from the order of the TPO in the next year AY 2013-14 stated with regard to receivables it is noticed from the information filed that the company is not exporting and supplying any goods or services to AEs. The balances appearing in the Balance Sheet are mobilization advances which are to be adjusted against future supply bills and hence no adverse inference is drawn, thus no adjustment is required on the issue of mobilization advances during the impugned year also. Disallowance of sub-contract expenditure - Held that:- It is a fact that the assessee-company, had been carrying out contract works on a national level with Turn Over running into crores of rupees. It naturally, requires time for any company working at such a huge platform to retrieve all the information sought for by the department which involves great amount of time, manpower etc. When the information that' is sought for, involves a matter of huge quantum documentation of money, the company is bound to take time in complying with sanctioning or approval process from various internal departments of the company in order to maintain confidentiality norms entered with such third party. Therefore, if compliance could take naturally long time, then the AO is expected to give adequate and proper time to the assessee before he completes his assessment. Hence, the assessment completed by the AO on 31-03-2015, without providing sufficient and reasonable time to the assessee to furnish the required information, is against the principles of natural justice. We direct the AO to independently examine the claim of sub contract expenditure. In case assessee billed and offered the said contract receipts, AO is directed to accept the sub contract payments, as assessee received the corresponding amounts from main contractor and offered the same for taxation. In case there is any failure or the nexus was not fully established, Assessee agrees that being a subcontractor a small percentage of the expenditure can be estimated for disallowance, following the principles laid down by the Coordinate Benches as relied upon above. In that event, AO is directed to disallow only a certain percentage of the above amount, if necessary. The addition made is accordingly deleted and the issue of examination of impugned sub contract payments is restored to AO to consider afresh as directed. Disallowance on account of License Membership, Subscriptions & Access Fee - Held that:- Since the AO disallowed specific expenditure, we direct him to provide the quantification of the said expenditure and to what nature of expenditure the supporting bills or vouchers are not provided by assessee. After furnishing the details of the disallowance of ₹ 24,99,777/- to assessee, assessee is directed to furnish the supporting bills or vouchers. AO is accordingly directed to examine this issue again. In case assessee fails to furnish the relevant vouchers/justify the expenditure, disallowance to that expenditure can be made. With these observations, the issue in this ground is set aside to the file of AO to examine the same afresh. Disallowance on account of Miscellaneous and Entertainment expenses - Held that:- AO quantified the expenditure as un-vouched expenditure at ₹ 27,58,572/-, the quantification of which was not furnished to assessee. However, in this case, he has quantified the amount for disallowance at 20% of the above amount. As seen from the earlier ground, AO disallowed 100% of the amount un-vouchered and in this case, AO disallowed 20% of the amount un-vouched, Thus, there is no consistency in the AO’s approach. We are of the opinion that in case AO furnishes the details of un-vouchered expenditure quantified and assessee could furnish the necessary details as directed in earlier ground, AO is directed to accept the same to the extent assessee could furnish the vouchers. AO is however, directed to restrict the disallowance to 10% of the above expenditure instead of 20% made in the order. With these observations, the issue is again restored to the AO for fresh examination.
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2017 (5) TMI 476
Disallowance u/s.10B - Held that:- When it is found that at the relevant time the Development Commissioner granted the approval of 100% EOU in favour of the assessee-Company, which came to be subsequently ratified by the Board of Approval and as observed hereinabove as such the ratification shall be from the date on which the Development Commissioner granted the approval, both the learned CIT(A) as well as the learned Tribunal have rightly held that the assessee was entitled to deduction under Section 10B of the Act as claimed. We confirm the view taken by both the authorities below holding that the assessee was entitled to 100% EOU as claimed. See PCIT, GANDHINAGAR Versus ECI TECHNOLOGIES PVT. LTD [2015 (5) TMI 230 - GUJARAT HIGH COURT] Disallowance on account of write-off of trade advances - Held that:- There is no dispute that the assessee has actually written off ₹ 13,98,298/- being advance to the supplier. There is also no dispute relating to the return of moulds by the assessee on finding them not suitable for the purposes of its business. The undisputed fact is that the advance of ₹ 13,98,298/- was given by the assessee in its ordinary course of business. Therefore, any write off is a business loss incurred in the ordinary course of its business. Therefore, we do not find reason to interfere with the findings of the ld. CIT(A). Transfer Pricing adjustment - Held that:- After giving a thoughtful consideration to the orders of the authorities below and after understanding the factual matrix, we fail to understand how the assessee is expected to explain the quantification of the varying difference in the discount given by two unrelated parties. The assessee could not have approached the two unrelated parties and have asked them to explain why they were giving discount to the assessee. The upward adjustments made by the TPO are uncalled for and, therefore, calls for no interference with the findings of the First Appellate Authority. Revenue appeal dismissed.
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2017 (5) TMI 475
Reopening of assessment - reasons to believe - Held that:- The present case is one of change of opinion. Further, as regards the requirement of true and correct disclosure by the assessee, find that in the reasons recorded, the A.O has nowhere made any allegation on this count. Not even a whisper of any allegation that there has been a failure on the part of the assessee to disclose fully and truly all material particulars necessary for assessment. See Allied Strips Limited Versus Assistant Commissioner Of Income Tax Central Circle-15 [2016 (5) TMI 580 - DELHI HIGH COURT] - Decided in favour of assessee.
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2017 (5) TMI 474
Penalty u/s 271(1)(c) - unexplained expenditure - Held that:- Section 69C could not be applied to the facts of the case as the payments were through banking channels which were duly reflected in the books of accounts and therefore, there was no unexplained expenditure within the meaning of Section 69C incurred by the assessee. Further, we find that the assessee was in possession of purchase invoices and various other documentary evidences qua these purchases. A bare perusal of the purchase invoices reveals that the assessee has purchased consumables etc. from the alleged bogus suppliers, which are connected, at least to some extent, with the business of the assessee. The assessee, during quantum proceedings itself filed revised computation of income after disallowing the alleged bogus purchases by citing the reason that the suppliers were not traceable during assessment proceedings. Merely because the suppliers could not be traced at the given address would not automatically lead to a conclusion that there was concealment of income or furnishing of inaccurate particulars by the assessee. The assessee made a claim which was bona fide and the same was coupled with documentary evidences but the same remained inconclusive for want of confirmation from the suppliers. Therefore, overall facts of the case do not justify imposition of penalty on the assessee and therefore, the same deserves to be deleted on merits of the case. - Decided in favour of assessee
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2017 (5) TMI 473
Disallowance on account of transit breakages - Held that:- The disallowance has been upheld by the Hon’ble High Court of Delhi [2015 (10) TMI 491 - DELHI HIGH COURT] in assessee's own case for AY 2001-02. In view of the fact that this issue has been decided against the assessee by the Hon’ble High Court and against which SLP filed by the assessee was also dismissed, we decide the issue against the assessee and as such these grounds of appeal are dismissed. Transfer pricing adjustment on account of marketing support services - absence of international transaction - Held that:- Respectfully following the co-ordinate benches decision in the assessee’s own case we direct that the reimbursements have to be included in the cost base and the operating margins have to be computed accordingly. As regards the grounds of appeal raised by the revenue against the partial relief granted by the Ld. CIT (A) towards allocation of costs, no sustainable ground has been presented before us by the revenue and as such the order of the Ld. CIT (A) is confirmed. Hence, these grounds of appeal of the assessee and the revenue are disposed off in terms of these directions. Transfer pricing adjustment on account of Advertisement, Marketing and Promotional (“AMP”) expenses incurred by the assessee for promotion of its brands in India - Held that:- As where the products are India specific there cannot be any adjustment in respect of the AMP expenditure since no benefit arises to the AE on account of such expenditure. Accordingly, these grounds of the revenue are rejected and order of the Ld. CIT (A) is confirmed.Our adjudication in favour of the assessee is guided by the undisputed fact that in the case of the assessee the AMP spend was India specific as the said brands were also India specific and there is no possibility that any benefit could have arisen to the non-resident AE. If the product manufactured and sold by the assesse is India specific then it cannot be said that any benefit could have accrued to the AE on account the AMP spend in India in respect of such brands. Disallowance of deduction being provision for commission on sales - Held that:- Since there is no discussion by the AO on the issue at hand, we deem it fit and in the interest of justice to set aside the addition and remand the matter to the file of the AO for a fresh consideration in accordance with law and after giving adequate opportunity to the assessee. Addition being 10% of brand expenses made by the AO treating the same as being capital in nature - Held that:- We find force in the arguments of the Ld. Counsel that the issue is squarely covered in favour of the assessee as there is a clear finding that such expenditure does not result in any enduring benefit. Hence, these grounds of the revenue are dismissed and the order of the Ld. CIT (A) is confirmed.
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2017 (5) TMI 472
Determination of nature of expenditure incurred for renovation of factory building - eligibility for deduction in terms of section 30(a)(ii) - capital expenditure or revenue expenditure - Held that:- The amount spent cannot be said to be a capital expenditure as made out by the revenue. The expenditure might have secured some enduring benefit to the assessee because of the renovation. However, the test of enduring benefit per se is not a certain or conclusive test and cannot be applied blindly and mechanically with regard to the particular facts and circumstances of the given case. The assessee has spent money on replacement of flooring, plastering, doors, plumbing etc. Such amount incurred in strengthening of existing layout cannot be regarded as a capital expenditure. The expenditure on repairs of the building is merely incurred to refurnish and renovate the existing structure and is not in the nature of creation of a capital asset. No structural changes is shown to have been made by the assessee while incurring such expenditure. A repair ordinarily involves renewal and restoration of the existing wear and tear. Such expenditure, in our view, is in the nature of current repair in spite of major expenses alleged to have been incurred - Decided against revenue. Contravention of section 145A while valuing the closing stock for determination of taxable income - unutilized CENVAT credit not been included in the valuation of closing stock of raw-material - Held that:- no reason to interfere with the order of the CIT(A). The CIT(A) has found the entire exercise to be revenue neutral. Secondly, to give effect to section 145A, both the opening stock and closing stock are required to be simultaneously brought in parity as a matter of legitimate expectation. See case of Dy.CIT vs. Balvant Lallubhai Rotliwala [2016 (3) TMI 444 - ITAT AHMEDABAD ] where on similar facts, addition made under s.145A was deleted by the ITAT. The guidance note issued by the ICAI also supports the case of the assessee for the proposition that there is no impact on ultimate profit by resorting to exclusive method of accounting for the purpose of valuation of stock as adopted by the Assessee. The Revenue has not brought on record anything contrary to the assertions made by the CIT(A) in favour of assessee Disallowance of bad debt - .AR submitted in the alternative that the aforesaid claim ought to have been allowed as ‘business loss’ under s.28 - Held that:- The assessee has not been able to prove that the impugned amount was given as advance for business purpose except for bald assertions made to this effect. Therefore the nature of alleged advance given is not known. Hence, whether the debt was attributable to trade or commerce of the assessee is not known at the first place. The claim towards bad debts has been therefore rightly rejected by the Revenue. The alternative ground towards business loss also does not merit acceptance for the similar reason. The loss is required to be proved to be emanating from business of the assessee. Secondly, the loss is required to be proved to have been crystallized during the year. No material or evidence has been brought on record to this effect. - Decided against assessee. Disallowance under s.14A computation - Held that:- The disallowance under s.14A is restricted to the extent of dividend income earned.
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2017 (5) TMI 471
Rightful owner of the money found deposited in the bank accounts - survey under section 133A - Held that:- We could see variance in the amount brought to tax in the hands of Shri Naresh Agarwal and the assessee company, the reason is attributed, to some extent, to the fact that the Assessing officer has distributed the total amount of ₹ 3,41,99,953 among three companies including the assessee company. The fact remains that the deposits found deposited in the same bank accounts have been brought to tax in hands of Shri Naresh Agarwal and the assessee company. On perusal of the assessment orders, we find that there existed an ambiguity to determine the person to whom the deposits and the resultant income rightfully belongs. We, therefore, donot find anything wrong in the action of the Revenue authorities in bringing to tax the same amount in the hands of Shri Naresh Agarwal and the assessee company as there exist an ambiguity or doubt as to the rightfully owner of the money found deposited in the bank accounts. Rightful owner of the money so found deposited in the bank accounts and who should be finally assessed to tax in respect of said bank deposits - Held that:- The records of transaction of the bank accounts basis which the AO has determined the assessee’s company tax liability is a critical piece of evidence which can support and corroborate the statements so recorded. It is equally important to know the contents of these documents and how the AO has established the necessary nexus with the assessee company. Unfortunately, the records and paperbook submitted before us is silent on this and in absence of the same, we are unable to take a view in the matter solely basis the statements so recorded.Further, the ld AR has raised various contentions (as noted above) in terms of inconsistency in the statements of Shri Naresh Agarwal, the absence of nexus with the assessee company, the locus standi of Shri Sharad Heda and how the same cannot be relied upon and held against the assessee. In our view, what is relevant is that the statements should be read as a whole and any inconsistencies should be examined. Further independent investigation be carried out by the AO to determine the necessary nexus with the assessee company with the amounts so deposited in the bank accounts and the locus standi of shri Sharad Heda, the relationship and linkage with the promoters/directors and in the affairs of the assessee company before a final view is taken in the matter. In our view, there is not enough material on record for us to take a view in the matter and the matter deserves to be set-aside to the file of the ld CIT(A) to examine the same afresh. Appeal filed by the assessee is allowed for statistical purposes.
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2017 (5) TMI 470
Addition u/s 68 - unexplained cash credit - credit-worthiness of the “DE”, genuineness of the transaction - Held that:- CIT(A) has discussed this issue in little detail, but devoted much energy in reproduction of CIT(A)’s order passed in the case of Shri Dipin G. Patel. The ld.CIT(A) also reproduced the finding of the AO, submissions made by the assessee. While making an analysis of the statement given by Shri Dipin G. Patel, the ld.CIT(A) just reiterated replies given by him. But he has not analysed inference required to be drawn from those replies. Basically, the ld.CIT(A) was of the opinion that it is the onus upon the assessee to prove source of loan and its nature. Once the assessee failed to file confirmation from creditor, then it will be construed that she failed to discharge onus. As observed earlier, in the normal circumstances, the ld.CIT(A)’s action could be appreciated. But, it is to be seen in the context that when a creditor turn hostile, then whether an assessee should be given an opportunity to prove his case with the help of circumstantial evidence or not. The role of the AO is not only of prosecutor, rather he is an adjudicator also. It is for the Revenue to provide a platform to the assessee where with the help of statutory powers of the AO, she could explain her position for not visiting her with tax liability. Looking into these facts and circumstances, we are of the view that impugned orders deserves to be set aside because the assessee was not granted sufficient opportunity at the level of the AO. These appeals are remitted to the file of the AO for re-adjudication. The ld.AO shall examine the ledger account of the assessee exhibiting details of loans received by the assessee through account payee cheque, and thereafter he would direct the bank for providing bank statement of the creditor during those periods. He would supply all incriminating materials to the assessee for giving an explanation. The assessee will be at liberty to submit any explanation or details in support of her defence. The observations made by us will not impair or injure the case of the AO and will not cause any prejudice to the defence/explanation of the assessee. All appeals of the assessee are allowed for statistical purpose.
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2017 (5) TMI 469
Addition under Section 40(a) (i) - whether the export commission is neither royalty nor fee for technical service? - Held that:- By a separate order passed in Commissioner of Income Tax- IV v. Hero Motocorp Ltd (2017 (5) TMI 435 - DELHI HIGH COURT), an identical question that arose in AY 2006-07 has been answered in the negative i.e. against the Revenue and in favour of the Assessee. - Revenue appeal dismissed.
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Customs
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2017 (5) TMI 499
Condonation of an inordinate delay of 364 days - delay was due to time taken to file better affidavit as claimed by appellant - Held that: - The Court finds no reason why more time should be granted for filing a better affidavit particularly when there is already considerable unexplained delay in filing the appeals and more than two months' time was available to the Department since the previous hearing, to file a better affidavit - No attempt has been made to give a satisfactory explanation for the inordinate delay, much less every day's delay, in filing the appeals. The Court, therefore, declines to condone the delay of 364 days in filing the appeals - application for COD dismissed - decided against appellant.
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2017 (5) TMI 498
Entitlement to interest - delay in giving credits - drawback on imported materials used in the manufacture of goods which are exported - Validity of application of Public Notice No.150/95, dated 21.9.1995 with retrospective effect - beneficiaries of Pass Book Scheme - The petitioners pointed out that the credits have to be given in the Pass Book issued to the petitioners. Once the earlier stand was incorrect and the petitioners were deprived of the credits without adherence to the law, the credits are in terms of money. They being entitlement for payment of customs duty can therefore be safely equated with money. The money was not released or paid in terms of the entitlement of the petitioners. That was delayed. The wrongful deprivation of this money, therefore, should attract interest. Held that: - A bare perusal of Section 27A would indicate that, if any duty ordered to be refunded under subsection (2) of Section 27 to an applicant is not refunded within three months from the date of receipt of application made under subsection (1) of Section 27, then, there shall be paid to that applicant interest at such rate, not below five per cent and not exceeding thirty per cent per annum as is for the time being fixed by the Central Government, by Notification in the Official Gazette. Where any drawback payable to any claimant under Sections 74 or 75 is not paid within the period set out under subsection (1) of Section 75A, then, there is an obligation to pay interest. That interest is to be paid at the rate fixed under Section 27A. The entitlement for interest is from the date after the expiry of the period of one month till the payment of such drawback. At the relevant time, it was three months. It is, therefore, not possible to agree with Mr. Rao that for such delayed release of the supplementary credit, though in terms of money, there is no obligation to pay interest - respondents shall pay the amount of interest quantified at ₹ 1,58,91,182/ within a period of six weeks - petition allowed - decided in favor of petitioner.
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2017 (5) TMI 497
Smuggling - gold bars - absolute confiscation - Held that: - it is discretion of the adjudicating authority to allow redemption of goods or to absolute confiscate this discretion is to be based on the fact of individual case. Present case is clear case of smuggling of gold into country therefore Ld. Commissioner exercising his discretionary power confiscated the gold bar absolutely. Looking to the nature of the case, there is no illegality in the action of the Ld. Adjudicating authority for absolute confiscation of the gold bars, therefore absolute confiscation is upheld. Penalty on Shri. Khemani Purushotam Mohandas, from whom the gold was seized - Held that: - Since Shri. Khemani Purushotam Mohandas was caught red handed having possession of smuggled gold penalty was rightly imposed upon him. Penalty on Shri Jitendra N. Jeswani and Shri. Narendra P. Jeswani, from whom Shri. Khemani Purshotam Mohandas, was continuously talking over phone while traveling - Held that: - Department could not produce any evidence to establish that both the appellants Shri Jitendra N. Jeswani and Shri. Narendra P. Jeswani were conspirator in the smuggling of goods - penalty set aside. Appeal allowed - decided partly in favor of appellant.
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Corporate Laws
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2017 (5) TMI 494
Open offer obligation under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 - whether the inter-se promoter transfers made prior to completion of 3 years of listing the target company are eligible for general exemption from open offer under Regulation 10(1)(a)(ii) of SAST Regulations? - Held that:- Regulation 10(1)(a)(ii) clearly states that in order to be eligible for exemption from making an open offer inter-se transfers of shares amongst persons named as promoters in the shareholding pattern by the target company in terms of its listing agreement has to be for not less than 3 years prior to the proposed acquisition. The argument that the promoters have to be named in the listing agreement for minimum period of 3 years overall, not necessarily 3 years subsequent to the signing of the listing agreement, cannot be accepted by a plain reading of Regulation 10(1)(a)(ii). The impugned order clearly states that the inter-se transfers amongst promoters on July 9-10, 2014, September 5, 2014 and October 20, 2014 were not exempted from the open offer obligations. Further, vide e-mail dated December 4, 2015 addressed to the Manager to the Open Offer it was stated that Regulation 10(1)(a)(ii) of SAST/Takeover Regulations, 2011 was triggered. As such, there is no ambiguity in the order as the provision relating to exemption of inter-se promoter transfers from the open offer obligations is available only under Regulation 10(1)(a)(ii) of SAST/Takeover Regulations, 2011. An interpretation provided under the Scheme by an official of department of SEBI cannot be used against the correct interpretation of law (in the instant matter SAST/Takeover Regulations, 2011). Thus no reason to interfere with the impugned direction of SEBI dated May 5, 2016. As a result, the appeals fail.
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2017 (5) TMI 493
Compounding of offence for the violation of Section 309(5B) of the Companies Act, 1956 - company had not obtained approval for initial appointment under Section 269 read with clause (e) of Part I to Schedule XIII of the Act - Held that:- Sub-section (9) of Section 269 says that the Tribunal may terminate the appointment if it is in contravention of requirements of Schedule XIII. Sub-section (10) of Section 269 says that the Tribunal may, while passing an order declaring there is contravention of requirements of Schedule XIII, pass an order imposing fine on the company and its officers. Therefore, this Tribunal is given power under Section 269(9) of the Act to declare that there is contravention of requirements of Schedule XIII and to impose fine on the company and its officers. Further, sub-section (11) says that, if the company contravenes the orders passed by the Tribunal under sub-section (10) of Section 269, the company and its officers shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to pay a fine which may extend to 500 rupees. Unless and until a reference is made to the Tribunal, unless and until the Tribunal declares contravention of requirements of Schedule XIII and unless and until the Tribunal proposed to imposes fine as contemplated under sub-section (10), there is no cause of action for the petitioners to invoke Section 621A of the Act. The Registrar of Companies in his report also stated that the application does not appear proper. In view of the above discussion, it is held that the petitioners cannot seek compounding of violation of Section 309(5B) before this Tribunal under Section 621A of the Act.
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FEMA
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2017 (5) TMI 492
Enforcement of the Award - recognition and enforcement of Award made in favour of Docomo - Held that:- As regards the refusal of permission by RBI for the second time, after the Award, the seeking of such permission by Tata was based on its earlier opposition to the Award which was similar to the one raised now by RBI. With Tata having accepted the Award as such, it has withdrawn its objections thereto and consequently its stand in the application made to RBI on 1st July 2013 seeking permission. As long as the Award stands, there is no need for any special permission of RBI for remission by Tata of the amount awarded thereunder to Docomo as damages. The refusal by RBI of such permission which is not required in the first place, or the fact that such refusal has not been challenged, would therefore not affect the enforceability of the Award. There is no provision in law which permits RBI to intervene in a petition seeking enforcement of an arbitral Award to which RBI is not a party. Its prayer for permission to intervene is rejected. Validity of the SHA and the Award - Clause 5.7.2 of the SHA was a contractual promise by Tata to find a buyer for Docomo's shares which could always have been performed using general permissions of RBI under FEMA 20. It was held that the promise was valid and enforceable because sub-regulation 9(2)(i) of FEMA 20 permitted a transfer of shares from one non-resident to another non- resident at any price. The AT held that Tata could have lawfully performed its obligation to find a buyer at any price, including at a price above the shares' market value, through finding a non-resident buyer. Its failure to do so was, according to the AT, a breach entitling Docomo to damages. The SHA, therefore, could not be said to be void or opposed to any Indian law including the FEMA, much less the ICA. FEMA contains no absolute prohibition on contractual obligations. It envisages grant of special permission by RBI. As rightly held by the AT, Clause 5.7.2 of the SHA always was legally capable of performance without the special permission of RBI, using the general permission under sub-regulation 9(2) of FEMA 20. As far as the Award itself is concerned, the interpretation placed by the AT on the clauses of the SHA was consistent with the intention of the contracting parties and not opposed to any provision of Indian law. There is nothing in the SHA as interpreted by the Award that renders it void or voidable under the ICA or opposed to either the public policy of India or the fundamental policy of Indian law. The AT's interpretation of the various provisions of the FEMA and the regulations thereunder have also not been shown to be improbable or perverse. What was invested by Docomo was US $ 2.5 billion and what it will receive in terms of the Award is only 50% of that amount. The Court finds that no ground under Section 48 of the Act is attracted to deny the enforcement of the Award. Is the compromise valid? - Held that:- The Court is unable to find anything in the Consent Terms which can be said to be contrary to any provision of Indian law much less opposed to public policy or void or voidable under the ICA. The issue of an Indian entity honouring its commitment under a contract with a foreign entity which was not entered into under any duress or coercion will have a bearing on its goodwill and reputation in the international arena. It will indubitably have an impact on the foreign direct investment inflows and the strategic relationship between the countries where the parties to a contract are located. These too are factors that have to be kept in view when examining whether the enforcement of the Award would be consistent with the public policy of India. It appears to be a well settled legal position that parties to a suit, or as in this case, an Award, may enter into a settlement even at the stage of execution of the decree or Award. The Award dated 22nd June 2016 passed by the AT in London in LCIA Case No. 152896 under the LCIA Rules is declared as enforceable in India and shall operate as a deemed decree of this Court.The parties are bound by the Consent Terms and will proceed to take steps in terms thereof.
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Service Tax
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2017 (5) TMI 523
Consideration received for providing coaching/training in English language - taxability - benefit of N/N. 9/2003-ST dated 20/06/2003 and N/N. 24/2004-ST dated 10/09/2004 - scope of coaching or training in English language - Held that: - the notification does not talk about any coaching or training in language, either Indian or foreign. Apparently, the lower authorities were guided by the Circular dated 20/06/2003 of the Board which clarified that among other things foreign language institute would not be chargeable to service tax. The Board was clarifying the scope of vocational coaching and training.The lower authorities have mis-directing themselves into the analysis of whether or not English is a foreign language. In similar set of facts, the Tribunal has held that such commercial coaching in English language is covered for exemption under these notifications - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 522
Refund claim - excess deposit of service tax - denial on the ground of time limitation - Section 11B of the CEA, 1944 - Held that: - The said statutory provision mandates that an application for refund of duty/service tax shall be filed before the expiry of one year from the relevant date - In this case, the refund application was filed beyond the period of limitation prescribed u/s 11B ibid - In absence of any specific power conferred under the statue empowering the authorities to condone the delay in late submission of refund application, the refund claim filed beyond the period of one year from the date of payment of service tax will be clearly barred by limitation of time - refund rejected - appeal dismissed - decided against appellant.
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2017 (5) TMI 521
Waiver of Pre-deposit - Software company providing IT services having clientele abroad - reverse charge - The case of the department is that these branch offices of the applicant are providing support services of business or commerce to the applicant in furtherance of their business of the IT services. Since a branch office established in other country by a person in India is treated as a separate person for the purpose of charge of service tax under reverse charge mechanism under section 66A of FA, 1994, therefore the applicant is required to discharge the liability of service tax on the consideration paid to their branch offices, in lieu of such services - the contention of the applicant is that they have reimbursed the salary and other expenses to their overseas branch offices on which the department is asking to the applicant to pay service tax as per section 66A under BSS. Held that: - the applicant is not liable to pay service tax on the amount reimbursed to the branches located overseas - reliance placed in the case of Milind Kulkarni M/s.Tech Mahindra Ltd. vs. CCE, Pune [2016 (9) TMI 191 - CESTAT MUMBAI], where on similar issue, it was held that mere existence as a branch for the overall promotion of the objectives of the primary establishment in India which is essentially an exporter of services does not render the transfer of financial resources to the branch taxable under section 66A - appellant not liable to pay tax on amount reimbursed to the branches located overseas. Insurance service - demand - Held that: - the insurance service providers are not registered with the IRDA, therefore, these services are not taxable under the category of life insurance service under section 65 (105) (zx) and general insurance service under section 65 (105) (d) of the Act - demand set aside - the requirement of pre-deposit of the amount of service tax on this account also waived. With regard to the service tax on visa facilitation under BSS, we find that the services have been received outside India consumed outside India. Therefore, prima facie service tax is not payable by the applicant. Accordingly, the applicant has made out a case of waiver of pre-deposit, we do as the same. The applicant has already made deposit of ₹ 7,28,22,020/-. For compliance of the provisions of section 35F of CEA, 1944 read with section 83 of the FA, 1994, the same is sufficient, we waive the requirement of pre-deposit of balance amount - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 520
Penalty u/s 76 of FA, 1994 - delay in payment of service tax due to financial crisis - whether non payment of service tax in time is beyond the control of the appellant, therefore, there was a reasonable cause for non payment of service tax in time consequently, the benefit of section 80 of the Act can be given to the appellant or not? - Held that: - it was not the intention the appellant not to pay service tax in time but due to the reasons that the head office has not release the fund, the appellant could not be pay service tax in time - the appellant has been able to show reasonable cause for non payment of service tax in time, therefore, the penalty imposed on the appellant under Section 76 of the Act is set aside by giving the benefit of Section 80 of the Act - appeal allowed - decided in favor of assessee.
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2017 (5) TMI 519
Penalty u/s 77 and 78 of FA - non-payment of service tax for the period prior to registration - case of appellant is that the appellants were paying VAT on the service provided by them, therefore, they were under bonafide belief as they are paying VAT on their activity, they are not required to pay service tax prior to registration - Held that: - the appellant was under bonafide belief that they are required to pay service tax after registration. Further, the appellant has paid entire amount of service tax payable by them before audit took place. In these circumstances, the appellant has been able to show a reasonable cause for non-payment of service tax before 25.10.2010 - benefit of section 80 of the FA, 1994 extended to appellant - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 518
Business Auxiliary Service (BAS) - Goods Transport Service (GTA service) - Renting of Immovable Property Service - demand - manufacture of cigarettes and undertaking of other processes to make tobacco suitable for manufacture of cigarettes - Held that: - the activity of the assessees is in relation to the agriculture and not subject to service tax as a business Auxiliary Service even before or after the negative list was issued on 01/07/2012 - there is no merit in the impugned orders where the said activity of threshing and redrying was brought under BAS - demand set aside. GTA service - The assessee-appellants have brought the tobacco bundles from the auction platform to their factories. The dispute arose when the goods are brought for the buyers, customers and assessees are doing job work - the main plea of assessees on this issue is that no consignment notes have been raised - Held that: - the assessees are the service recipients for which they are paying the freight charges. When it is so, then we are of the view that the Department has rightly applied GTA and demanded the service tax for the reason that without an accompanying paper/document, goods cannot be received without which is the basis of amount for payment - demand upheld. Renting of immovable property for commercial purpose - Department has demanded the service tax under sub-section (105) (zzzz) of Section 65 Finance Act, 1994 w.e.f. 01/06/2007 under the head of "renting of immovable property services" - Held that: - it is an undisputed fact that the immovable property in question was given for the purpose of commercial activities. When it is so, then the service tax is leviable - demand upheld. Commission paid foreign agents - demand - foreign agent acted as an agent outside India in relation to sale of the processed tobacco - Held that: - the services rendered by the foreign agent shall be classifiable as a taxable service under clause 19(1) of Section 65 of the Finance Act, 1994 and the commission paid shall be liable to service tax - the amount of commission paid shall be liable to service tax, the liability thereof being on the appellant-assessee under reverse charge mechanism in terms of Rule 2 (1) (d) (iv) of the Service Tax Rules - demand upheld. Issue of penalties is remanded for de novo consideration. However, it is clarified that such reconsideration will only be concerning penalties with regards to demands of GTA, Renting of Immovable Property and commission paid to foreign agent. Appeal disposed off - appeal allowed in part and part matter on remand.
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Central Excise
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2017 (5) TMI 517
Principles of natural justice - Whether the tribunal was justified in deciding the matter without considering the effect of the depositing of duty by the appellant before issuance of the notice? Held that: - Sub-section 2 B of Section 11 A provides that if any excise duty has not been levied or paid, but is subsequently paid by the person concerned before the issuance of the SCN, sub-section 2 B of Section 11 A contemplates that the CEO shall not serve any notice under sub-section 1 of Section 11 A for the purposes of realization of duty. A perusal of the SCN reveals that it is not notice u/s 11 (A) (1) of the Act for the realization of the duty rather it is a notice for the confiscation of the seized goods and for the imposition of the penalty. This is quite distinct from a notice u/s 11 (A) (1) of the Act - The notice dated 24.9.2004 was for the purposes of an order u/s 33 as envisaged by the Section 33 A of the Act. It was not a notice u/s 11 (A) (1), which is said to be prohibited by Section 2 B of Section 11 A. Appeal dismissed - decided against appellant.
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2017 (5) TMI 516
Maintainability of appeal - jurisdiction - alternate remedy of appeal - petitioners have invoked the writ jurisdiction of this court mainly on two grounds, namely, that the SCN which forms the basis of the impugned order-in-original is without jurisdiction and further that the impugned order-in-original has been passed in breach of the principles of natural justice - Held that: - it is noteworthy that the SCN is dated 30.3.2007 and the circulars on which reliance has been placed are dated 10th March, 1995 which was in existence when the SCN came to be issued. Thus, at the relevant time itself, the petitioners had an opportunity to challenge the SCN on the ground of lack of jurisdiction. However, the petitioners did not choose to do so and now seek to directly challenge the show cause notice after the same has been adjudicated by the impugned order in original - after a period of ten years, the petitioners cannot be permitted to invoke the writ jurisdiction of this court on the ground that the SCN is without jurisdiction. Insofar as the breach of principles of natural justice is concerned, a perusal of the paragraph 3 of the impugned order-in-original reveals that several notices had been sent to the petitioners through speed post, which were delivered to the petitioners. In all, it appears that seven hearing notices were issued to the petitioners, out of which, at least four were served upon the petitioners. However, the petitioners failed to appear in any of the scheduled hearings and failed to, in any manner, respond to the said notices - this court is of the view that the petitioners are not entitled to invoke the extraordinary writ jurisdiction of this court under Article 226 of the Constitution of India leaving it open for the petitioners to avail of the alternative remedy of appeal before the Tribunal. Petition dismissed as not maintainable in view of the availability of an equally efficacious remedy by way of appeal before the Tribunal - decided against petitioner.
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2017 (5) TMI 515
Maintainability of appeal - Pre-deposit - Section 35F of the CEA, 1944 - Held that: - until the admission of this petition, there would be no coercive action so as to recover any sums under the SCN which stands confirmed by the order impugned in the writ petition.
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2017 (5) TMI 514
Reversal of CENVAT credit - inputs and capital goods such as explosives, lubricants, detonators, components etc. provided to contractors for mine development work/ore productions - whether the explosives, lubricants, detonators, pipes and rods on which Cenvat Credit was availed and supplied to various outsource companies who undertake the mining activities is correct or the respondent is required to discharge the Cenvat Credit on such goods? Held that: - the adjudicating authority after recording the entire issue of how the contracts have been signed by the respondent with their clients for mining activity and also provision of rule 3(5) of the Cenvat Credit Rules recorded that the SCN itself admits that the goods have been used for undertaking mining activities on behalf of the assessee. As such there is no removal of inputs or capital goods and there is no question of any reversal under rule 3(5) of the Cenvat Credit Rules 2004. Therefore, credit cannot be denied in this case - In the absence of any evidence to show that these goods were never used in the mining area of the respondent, the findings recorded by the adjudicating authority are correct and there is no need for interference in such reasoned order - credit remains allowed. Reliance placed in the case of C.C.E., Raipur Versus Bhilai Steel Plant [2017 (1) TMI 293 - CESTAT NEW DELHI], where it was held that no amount is required to be paid under Rule (4) on capital goods as there has been no removal. Appeal dismissed - decided against Revenue.
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2017 (5) TMI 513
Refund claim of CENVAT credit - denial on the ground that the claim was filed under Rule 5 of CENVAT Credit Rules, 2004 as existed prior to CENVAT Credit (Third Amendment) Rules, 2012 - Held that: - as per CBEC Circular No.83/2000 dated 16.10.2000 which is cited supra, the Board has clarified that even if the assessee has claimed drawback even then he is entitled to claim refund under Rule 5 of CCR - reliance was placed in the case of Commissioner of Central Excise, Khanpur vs. Meghdoot Pistons (P) Ltd. [2006 (4) TMI 21 - CESTAT, NEW DELHI] wherein it has been held that The refund of Cenvat/Modvat credit has no relation to grant of drawback relatable to customs duties - refund allowed - appeal dismissed - decided against Revenue.
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2017 (5) TMI 512
Classification of goods - retreading/resoling of the worn out tyres - the department took the view that the product which emerges as a result of the process undertaken in the appellant s unit was pre cured tread rubber strips classifiable under 4008.21 of the CETA, 1985 - assessee took the view that the product will be rightly classifiable under 4016 as other articles of vulcanised rubber other than hard rubber - Held that: - When we consider CETH 4008.21, we find that it specifically includes plates, sheets and strips for resoling or repairing or retreading rubber tyres. The third part of Chapter Note 9 supports the above view. On the other hand, we find that the Heading 4016 is a General Residuary Heading which covers other articles of vulcanized rubber other than hard rubber. Since the specific entry is to be preferred to a General Entry, we have no hesitation to hold that the impugned goods are classifiable under 4008.21. Since this particular tariff subheading is excluded from the purview of SSI Notification No.1/93, we come to the conclusion that the appellant will not be entitled to the benefit of SSI exemption during the relevant period. Extended period of limitation - Held that: - in respect of the same assessee, there have been earlier proceedings in which the process of manufacture and the classification of the goods have been considered and decided. For these reasons, we are of the view that the demand of duty needs to be restricted to the normal period of limitation. Appeal disposed off - decided partly in favor of assessee.
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2017 (5) TMI 511
Benefit of N/N. 6/2002-CE dated 1.3.2002 - manufacture of conveyor belt systems - The appellant has supplied conveyor belt systems to their customers, M/s. Kalpa-taru Power Transmission Limited, which has been granted license from Rajastan Renewable Energy Corporation to set up biomass based power project - impugned item can be considered as parts of waste convention devices producing energy so original authority denied the exemption - Held that: - similar issue decided in the case of GERB Vibration Control Systems (P) Ltd. vs. CCE, Bangalore [2007 (10) TMI 180 - CESTAT, BANGALORE], 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 - exemption rightly denied - appeal dismissed - decided against appellant.
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2017 (5) TMI 510
CENVAT credit - input services - canteen services - air ticketing services - bus transport services - denial on the ground that the appellant has not produced corroborative evidence to show that such cost has been incurred by the appellant company - Held that: - The department has not adduced any evidence to the effect that such cost was incurred by employees or any other person. By merely stating that the appellant has not incurred the charges for the said services the department cannot deny the credit when the invoices are issued to the appellant company and service tax is paid by them - appellant is eligible for credit on canteen services, air ticketing services, mobile phones, bus transport and car rental services availed prior to 01.04.2011 - credit on car rental services after 01.04.2011 denied as the said services have been expressly excluded from the definition of input services after 01.04.2011. Appeal allowed - decided partly in favor of appellant.
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2017 (5) TMI 509
Interest - penalty - suppression of facts - N/N. 64/95-CE dt. 16.03.1995 and 10/97-CE dt. 01.03.1997 - case of appellant is that the FA, 2005 made with retrospective amendment, in that circumstances, the charges of suppression is not sustainable against the appellant - Held that: - the issue on interest came before the Hon’ble Apex court in the case of Star India Pvt. Ltd. Vs. CCE, Mumbai & Goa [2005 (3) TMI 10 - Supreme Court], where it was held that The liability to pay interest would only arise on default and is really in the nature of quasi-punishment. Interest liability can be prospective only. - interest set aside. On the issue of penalty, in appellant’s own case [2010 (6) TMI 699 - CESTAT NEW DELHI], this Tribunal has held that it was not the case of the respondent that there was any case of fraud, wilful mis-statement, collusion or suppression of facts on the part of the appellants in utilizing the credit without complying with the requirement of Rule 6(2) of the said Rules, thus penalty cannot be levied - penalty set aside. Appeal allowed - decided in favor of appellant.
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2017 (5) TMI 508
CENVAT credit - fake invoices - denial on the ground that the second stage dealer has not supplied the goods and issued only invoices - Held that: - the authorized signatory Sh. Parmod Kumar himself has admitted that they have received irregularly invoices to avail inadmissible cenvat credit and voluntarily reversed the cenvat credit, these facts are on record and the said statement has not been retracted. In that circumstances, the authorities below has rightly denied the cenvat credit to the appellant - appeal dismissed - decided against assessee.
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2017 (5) TMI 507
Reversal of MODVAT credit - opting out of MODVAT credit scheme - it was found the figures of reversal of credit were not matching with the figures of balance sheet - the sole ground for filing the appeal by the Revenue is that the Commissioner (Appeals) has not examined the books of accounts - Held that: - the books of accounts were examined by the Commissioner (Appeals) where the stock position of 31.3.1997 and 31.3.1998 was with the department itself which shows that on the inputs in question, the respondent has not taken the credit - When the certificate is on record, the Commissioner (Appeals) has rightly set aside the demand against the respondent, therefore, there is no infirmity with the impugned order - appeal dismissed - decided against Revenue.
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2017 (5) TMI 506
Refund claim - excess duty paid due to downward revision of price - denial on the ground of unjust enrichment - Held that: - The respondents have furnished evidence to show that APCPDCL has made payments as per provisional prices in terms of the relevant purchase order and complying with the price variation clause - They have also furnished a Chartered Accountant certificate to substantiate that the incidence of duty has not been passed on - refund allowed - appeal dismissed - decided against Revenue.
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2017 (5) TMI 505
CENVAT credit - silo hoses and corrugated hoses - Held that: - silo hoses are used for connecting the silo with other machineries in the factory. Therefore they being similar to corrugated hoses and used for connecting the machinery, the credit is eligible - reliance placed in the appellant's own case [2016 (7) TMI 1198 - CESTAT HYDERABAD], where it was held that These goods are integral to the manufacturing process and would fall within the definition of capital goods/parts, and the credit was allowed - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 504
Refund claim - amount deposited as pre-deposit, in excess of what was required to be submitted - refund denied on the ground that the same has not been appropriated at the time of adjudication - Held that: - the appellant has paid a sum of ₹ 4 crore through TR-6 challans which were placed on record and the same has been recorded in the SCN itself. In that circumstance case, the appellant was entitled for the refund claim of ₹ 4,66,35,243/- but the authorities below has sanctioned a claim of ₹ 3,66,35,243/- which is incorrect. In fact the appellant is still entitled for refund of ₹ 1 crore which was required to be refunded in pursuance of the order of this Tribunal dated 15.5.2006 - refund allowed - decided in favor of appellant.
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2017 (5) TMI 503
Refund claim - unutilized Cenvat Credit of Service Tax paid on the input services used in the manufacture of the final products, which were cleared for export - denial on the ground that there was no prescribed procedure for filing the refund claim during the relevant period - Held that: - the substantive benefit which has been allowed u/r 5 of CCR, 2004 cannot be denied to the appellant in the absence of the prescribed procedure for filing the refund claim - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 502
CENVAT credit - supplementary invoices - demand on the ground that the vendors have never amortized the additional cost of capital goods on their own - Held that: - the element of suppression of fact by the vendors is not established and the supplementary invoices issued by them cannot be said to be tainted with the element of suppression in Section 11AC - there was no suppression on the part of the vendors - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 501
Refund claim - denial on the ground that the appellant was required to utilize the accumulated credit and has observed that adjustment clause is mandatory - Held that: - refund being substantive right, Central Excise officer has no jurisdiction to curtail it and find reasons for non-adjustment. The refund of accumulated Cenvat Credit cannot be denied to the appellant - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 500
CENVAT credit - non-maintenance of separate records for inputs used in exempted and dutiable goods - demand of 10% of exempted goods - Held that: - when the appellant has already reversed the Cenvat Credit on input/input services attributable to final exempted goods, they are not required to pay 10% of value of exempted goods. The approach adopted by the ld. Commissioner (Appeals) is in accordance with law and the services for which statutory records were not required to be maintained have been correctly pointed out by the First Appellate Authority. We do not find any infirmity in the methodology adopted by the Commissioner to satisfy about the input services used for dutiable goods. Re-credit of amount - Held that: - The genesis of this SCN is that pending the investigation in SCN dt. 06.09.2005, the appellants had voluntarily debited ₹ 9,37,988/-. Later on they took back the credit of 9,15,714/- as they felt that they were entitled for the input service credit. Since, the dropping of proceedings pertaining to SCN dt. 06.09.2005 is u[pheld, the issue relating to re-credit of ₹ 9,15,714/- raised in the SCN dt. 07.04.2006 also does not survive. Appeal dismissed - decided against Revenue.
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CST, VAT & Sales Tax
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2017 (5) TMI 496
Doctrine of Promissory Estoppel - Investment in Backward area - constitutional validity of the MVAT Act, 2009 which amended certain provisions in the MVAT Act, 2002 with retrospective effect from April 01, 2005 - case of Revenue is that the effect and consequence of this amendment was that, with retrospective effect from April 01, 2005, industrial units which had made capital investments in very backward areas in the State of Maharashtra and which were earlier entitled to claim VAT exemption benefit on the entire production of their respective industrial units, had their exemption benefit substantially curtailed, being limited to, only a portion of the total production of the unit due to the aforesaid retrospective amendment - whether retrospective amendment in the MVAT Act stands the test of constitutionality and is valid in law? Held that: - It would be of relevance to emphasise that at the time of insertion of Section 41BB by amendment vide Amendment Act 22 of 2001, the Statement of Objects and Reasons accompanying the introduction of the Bill specifically stated that the purpose of the amendment was ‘to restrict grant of incentives in proportion to goods manufactured in the expansion units located in the backward areas of the States’. Thus, the legislative intent was manifest by inserting the said provision to provide the incentives to the eligible units on proportionate basis. Section 93(1) follows providing for proportionate incentives. Once we find that from the very beginning the statutory scheme itself provided for proportionate incentive and this legislative intent was expressed even in the Objects and Reasons, it cannot be said that there was no provision of this nature prior to 2009 and such a provision was inserted for the first time in the year 2009. Reliance was placed in the case of Epari Chinna Krishna Moorthy and Another Versus The State of Orissa and Others [1964 (3) TMI 55 - SUPREME COURT OF INDIA], where it was held that Section 2 in substance declares that the intention of the delegate in issuing the notification granting exemption was to confine the benefit of the said exemption only to persons who actually produce gold ornaments or employ artisans for that purpose. In any event, we do not think that in the circumstances of this case it would be possible to hold that by making the provision of section 2 of the Orissa Sales Tax Validation Act, 1961 retrospective the Legislature has imposed a restriction on the petitioners' fundamental right under Article 19(1)(g) which is not reasonable and is not in the interest of the general public - there is no substance in the argument that the retrospective operation of S.2 of the impugned Act is invalid. The impugned amendment is upheld - appeal dismissed - decided against appellant.
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2017 (5) TMI 495
Reopening of assessment - Section 34(1) of DVAT Act - time limitation - Held that: - it is only when the Assessee came forward with the present petition complaining of the failure by the DVAT Department to process its refund claim in terms of Section 38 of the DVAT Act, that the DVAT Department decided to examine the return filed more than four years earlier - While, technically, it could be argued that these default assessment orders were passed within time they were in fact issued on the last date of expiry of limitation. The Court cannot be blind to what the orders really purport to do. The Court is constrained to observe that there has been a persistent attempt by the DVAT Department to somehow ensure that the refund claims are defeated by creating fresh demands which are then adjusted against the refund amount. The Court is, therefore, not able to sustain any of these orders of notice of default assessment of tax and interest passed on 31st March, 2017 by the VATO, Ward-50 creating fresh demands in respect of the periods of November and December, 2012 and January and March, 2013. The said notices of default assessment of tax are hereby quashed. Petition allowed - decided in favor of petitioner.
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Indian Laws
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2017 (5) TMI 491
Final seniority list for the cadre of Assistant Commissioner, Commercial Tax - Held that:- Inter se seniority in a particular service has to be determined as per the service rules. The date of entry in a particular service or the date of substantive appointment is the safest criterion for fixing seniority inter se between one officer or the other or between one group of officers and the other recruited from different sources. Any departure in the statutory rules, executive instructions or otherwise must be consistent with the requirements of Articles 14 and 16 of the Constitution. The seniority cannot be reckoned from the date of occurrence of the vacancy and cannot be given retrospectively. The promotion takes effect from the date of being granted and not from the date of occurrence of vacancy or creation of the post. Appointment be issued in "order as it stood in the cadre from which they are promoted". Unless there is specific rule entitling the applicants to receive promotion from the date of occurrence of vacancy, the right of promotion does not crystallize on the date of occurrence of vacancy and the promotion is to be implemented on the date when it is actually effected by way of appointment (in case of sealed cover procedure when the recommendations are kept in sealed cover awaiting the outcome of the disciplinary proceedings, promotions have to be retrospectively made with or without financial benefits subject to decision of the appointing authority.
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2017 (5) TMI 490
Defalcation of public funds, fraudulent transactions and fabrication of accounts in Animal Husbandry Department of State of Bihar popularly known as fodder scam - whether in view of Article 20(2) of Constitution of India and section 300 Cr.PC, it is a case of prosecution and punishment for the same offence more than once ? - Held that:- Section 218 deals with separate charges for distinct offences. Section 219 quoted above, provides that three offences of the same kind can be clubbed in one trial committed within one year. Section 220 speaks of trial for more than one offence if it is the same transaction. In the instant case it cannot be said that defalcation is same transaction as the transactions are in different treasuries for different years, different amounts, different allotment letters, supply orders and suppliers. Thus the provision of section 221 is not attracted in the instant case. There are different sets of accused persons in different cases with respect to defalcation. There may be a conspiracy in general one and a separate one. There may be larger conspiracy and smaller conspiracy which may develop in successive stages involving different accused persons. In the instant case defalcations have been made in various years by combination of different accused persons. Thus, there can be separate trials on the basis of law laid down by this Court in Ram Lal Narang v. State (Delhi Administration) (1979 (1) TMI 241 - SUPREME COURT). In the instant case, offences are not the same offence. There can be different trials for the same offence if tried under two different enactments altogether and comprised of two different offences under different Acts/statutes without violation of the provisions of Article 20(2) or Section 300 Cr.PC. Each defalcation would constitute an independent offence Each defalcation would constitute an independent offence. There was conspiracy hatched which was continuing one and has resulted into various offences. It was joined from time to time by different accused persons, so whenever an offence is committed in continuation of the conspiracy, it would be punishable separately for different periods as envisaged in section 212(2), obviously, there have to be separate trials. Thus it cannot be said to be a case of double jeopardy at all. It cannot be said that for the same offence the accused persons are being tried again.
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