TMI Tax Updates - e-Newsletter
May 26, 2017

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. Credit of unsold stock [Section 140(3)] - Actual Credit as well as Notional Credit - Part-I - GST Transitional provisions

   By: CASanjay Kumawat

2. Section 12(6) of CGST Act 2017 - Time of Supply linked with GSTR-1

   By: Pradeep Jain

News

1. Keeping eye on impact of GST on telecom sector, says Sinha

2. Proposed GST Tax rates would be lesser than the prevailing taxes in case of Sugar, Tea and Coffee (other than instant coffee) and Milk Powder; Present incidence of taxes on sugar is 8% while proposed GST rate on Sugar is only 5% i.e. 3% less;

3. African development Bank’s President thanks India for success of the annual meetings of the bank held in Gandhinagar; Expects that all these meetings would substantially contribute to the AFDB’S new transformation agenda encapsulated in the High 5s – related to the fields of power, Agriculture(food security), connectivity (Transportation), industrialization(Skill Development) and Health

4. African Development Bank’s President Thanks India for success of the Annual Meeting of the Bank held in Gandhinagar

5. RBI Reference Rate for US $

6. Cabinet approves policy for providing preference to 'Make in India' in Government procurements

7. Cabinet approves phasing out Foreign Investment Promotion Board

Notifications

Customs

1. 50/2017 - dated 24-5-2017 - Cus (NT)

Amendment to notification 63/94-Customs (N.T), dated 21.11.1994 so as to notify Valmikinagar in West Champaran District, Bihar as a Land Customs Station

Income Tax

2. 35/2017 - dated 28-4-2017 - IT

Section 10(46) of the Income-tax Act, 1961 Central Government notifies Odisha Electricity Regulatory Commission, a commission constituted by the State Government of Odisha, in respect of the following specified income arising to that Commission

Indian Laws

3. F. No. 5(91)/2015-BE-I - G.S.R. 501 (E) - dated 23-5-2017 - Indian Law

Supersession Notification No. G.S.R. 180 (E) dated 17th February, 2016

Circulars / Instructions / Orders

VAT - Delhi

1. 6/2017-18 - dated 24-5-2017

Multiple Assessment Orders

2. 4/2017-18 - dated 15-5-2017

Issue of pending registration cases

3. 3/2017-18 - dated 1-5-2017

Regarding Disposal of refunds

Highlights / Catch Notes

Income Tax

• Section 12A/12AA: Societies Must Show Substantive Evidence of Charitable Activities Beyond Financial Compliance for Registration.

  Case-Laws - HC : Registration under Section 12A/12AA - The mere fact that there were no financial irregularities in running of the societies is not sufficient to infer that the societies are actually carrying activities of charitable purposes in consonance with their objects. - HC
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• Court Upholds Case Transfer u/s 127 of Income Tax Act; No Prejudice Found in Officer Reassignment.

  Case-Laws - HC : Transfer of cases - section 127 - Considering it cannot be said that the impugned order of transfer under Section 127 of the IT Act suffers from any illegality more particularly when the case has been transferred from one Officer to another Officer at same station and neither any prejudice is pleaded nor any prejudice is shown to have been caused to the petitioner. - HC
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• No Penalty for Non-Filing Form 3CEB: Genuine Misunderstanding of Section 139D(c) Deemed Reasonable Cause u/s 273B.

  Case-Laws - AT : Penalty u/s 271BA - non-filing of audit report in Form 3CEB - international transactions - the expression "May" used in section 271BA needs to be viewed liberally - in view of the reasoning given by the assessee due to bonafide mistaken understanding of provisions contained in section 139D(c) which itself would determine reasonable cause in terms of section 273B - no penalty - AT
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• Unexplained Cash Credits u/s 68: Assessee's Unsecured Loan from Suspected Shell Entities Leads to Income Additions.

  Case-Laws - AT : Unexplained cash credit u/s.68 - unsecured loan taken - the assessee has maintained stoic silence on being told about these lenders being alleged to be shell entities, thus not inclined to believe that these are genuine business transactions - additions confirmed - AT
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• Fair Market Value Key in Capital Gain Calculation u/s 50C; Unregistered Sales Use Declared Value by Taxpayer.

  Case-Laws - AT : Capital gain computation - fair market value of the property - Applicability of section 50C - If the sale transaction in question is not registered with stamp value authorities, then full value of consideration has to be accepted as declared by the assessee - AT
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Customs

• Classification of Synthetic Waste for Rugs Confirmed Under CTH 6310 Amid Debate Over CTH 63109040 vs. CTH 5603.

  Case-Laws - AT : Classification of New Trim Cutting Synthetic Waste - classified under CTH 63109040 or under CTH 5603 - imported goods are in the nature of waste used for manufacture of rugs and hence will be rightly classifiable under CTH 6310. - AT
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• No Penalty for Customs House Agent Due to Lack of Evidence on Export Over-Valuation Awareness Under Customs Act Sections 114(iii) & 117.

  Case-Laws - AT : Imposition of penalty u/s 114 (iii) of the CA and u/s 117 of the CA on CHA - o evidence on record to show that he was aware of the over-valuation of the export consignment and he simplicitor proceeded by the declaration made by the exporters - no penalty - AT
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• C&F Agent Penalized for Aiding Customs Duty Evasion; CHA's Lack of Penalty Doesn't Exempt Others Involved.

  Case-Laws - AT : Penalty on C&F Agent - aid and abetment in the evasion of the customs duty - it cannot be said that since the CHA was not penalised the appellants should also be absolved from the penalty - AT
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Service Tax

• Penalty Imposed for Failing to Remit Service Tax Despite Rural Location and Limited Education u/s 78.

  Case-Laws - AT : Penalty u/s 78 - the respondent has collected the service tax from the client and not paid to Revenue - The reason given by the Commissioner (Appeals) for non-imposition of penalty is that the respondent was in a rural area and not very highly educated - order of commissioner (appeal) is not correct - penalty confirmed - AT
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• SEZ Units: Interest Recovery Requires Show Cause Notice and Determination u/s 73(1) of Finance Act, 1994.

  Case-Laws - AT : SEZ unit - Recovery of interest - adjustment with Refund claim - The Department cannot proceed to recover the interest u/s 87 without issuing a SCN and determination of the amount due and payable by the appellant as provided under sub-Section (1) of Section 73 of the FA, 1994 - AT
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• Refund Approved: No Show Cause Notice Issued, Payment Deemed Mistaken for Club Service Tax Dispute.

  Case-Laws - AT : Refund claim - Club or Association Service - Marking of protest is a message to the department that there is a dispute in payment of tax. - In the present case, no such SCN has been issued and thereby the appellants have been deprived of their right to contest the demand - The amount paid thus becomes an amount paid by mistake - refund allowed - AT
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• Court Rules Materials Supplied by Recipient Excluded from Service Tax Calculation in Construction Services Case.

  Case-Laws - AT : Construction service - Valuation - the value of free supplied material from the service recipient need not to be included in the value of discharge of service tax liability - AT
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Central Excise

• Cement in 50 kg Bags for Institutions Qualifies for Benefits u/r 2A, SWM Rules, 1977, Despite "Not for Sale" Mark.

  Case-Laws - AT : Valuation - MRP Valuation - cement in packed form (in 50 kg bags) - supply to industrial consumer or institutional consumer - though goods marked as not for sale, are covered u/R 2A of SWM Rules, 1977 and such goods are eligible for the benefit of N/N. 4/2006-CE - AT
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• Refund of Unutilized CENVAT Credit Allowed Only for Exported Goods u/r 5 of Central Excise Law.

  Case-Laws - AT : Refund of CENVAT Credit lying unutilized - Rule 5 authorizes grant of refund only in case where final products have been exported. Thus, there is no provision in law of Central Excise for grant of refund of such accumulated credit to the appellant - AT
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• Magnesium Sulphate: Proper Classification Needed for Tariff Heading as Fertilizer or Micronutrient in Chapters 28/29.

  Case-Laws - AT : Classification of Magnesium Sulphate - Fertilizer/Micronutrient - there is no specific heading in the tariff for classification of micronutrient. However, where the micronutrient is a separate chemically defined compound, it will be classifiable under the heading for that chemically defined compound, under Chapter 28 or Chapter 29. - AT
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• Court Rules CENVAT Credit Eligible for Water Pipeline Services; Nexus with Manufacturing Process Established u/r 2(l.

  Case-Laws - AT : CENVAT credit - input services - pipelines exclusively used for transport of water - subject input service is having sufficient nexus with the manufacturing process of the appellant and is covered by the definition of ‘input service’ under Rule 2(l) of CCR, 2004 - AT
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VAT

• Composite Works Contract Classified as Works Contract: 30% for Labor Charges u/r 9(3) UP VAT.

  Case-Laws - HC : Composite works contract - valuation - remainder i.e. after excluding the earthwork, entire contract constitutes the works contract and that 30% thereof was liable to be appropriated towards labour charge is based upon correct interpretation of Rule 9(3) of UP VAT - HC
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• High Court rules no penalty for Solvent Cement Solution tax classification dispute due to valid differing interpretations.

  Case-Laws - HC : Levy of penalty - Rate of tax - Solvent Cement Solution - classification - it is a case of classification and two views are possible and at least the assessee also succeeded before the Dy. Commissioner (A) and in my view, once it is a case of classification then the penalty need not be levied - penalty set aside - HC
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Case Laws:

• Income Tax

• 2017 (5) TMI 1170
  Grant of registration u/s 12AA - whether the Trust failed to establish genuineness of its actual activities? - Held that:- Looking to the reasons given by Income Tax Appellate Tribunal, Circuit Bench, Ranchi in allowing the claim it appears that factually wrong aspects have been appreciated and wrongly this appeal has been allowed of the respondent. It has been observed by the Income Tax Appellate Tribunal that there was an application for renewal of the registration. It is factually a wrong aspect of the matter. Moreover, previously the registration was granted under Section 12AA is also not a fact of this case. It ought to be kept in mind by the Income Tax Appellate Tribunal that whenever they decide more than one matter, all care should have been taken for factual aspects of each & every case, otherwise, this type of error is bound to occur. In view of these facts, we, hereby, quash and set aside the order passed by the Income Tax Appellate Tribunal, Circuit Bench, Ranchi and we hereby remand the matter to Income Tax Appellate Tribunal, Circuit Bench, Ranchi for its afresh decision.

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• 2017 (5) TMI 1169
  Registration under Section 12A/12AA - applications for registration rejected pointing out certain irregularities and that the societies are being run by the family members as a camouflage of charity - Held that:- The tribunal on the basis of the objects of the societies and the fact that those objects were not disputed recorded satisfaction that the societies were for charitable purposes. However, regarding the second aspect it only records that as no financial irregularity has been found, the genuineness of the activities of the societies also stand established. The mere fact that there were no financial irregularities in running of the societies is not sufficient to infer that the societies are actually carrying activities of charitable purposes in consonance with their objects. The activities of the societies have to be examined independently before coming to the conclusion that they are actually and genuinely for charitable purposes. In the absence of any such finding, we are of the opinion that this aspect of the matter was required to be considered by the tribunal before directing for the registration of the society. The profit earning or misuse of income derived by charitable institution from its activities may be a ground for refusing exemption under the Act which is a matter to be considered and decided at the time of assessment but at the time of grant of registration it is incumbent upon the registering authority to see if the activities of such institution or trust are in consonance with the objects of the trust or the institution and are not a camouflage but are real, pure and sincere. We answer the question partly in favour of the society and partly in favour of the Revenue and while confirming the order of the tribunal in so far as it set aside the order of the Commissioner of Income Tax and that the objects of the society are of charitable nature, we direct the tribunal to reconsider the matter with regard to the genuineness of the activities of the societies as to whether they are in consonance with the charitable objects for which they have been established and to pass a fresh order on this limited aspect within a period of three months.

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• 2017 (5) TMI 1168
  Non-chargeability of capital gains in respect of the land in the assessment year under consideration - year of transfer - Held that:- The capital gain would be taxable in the year in which such transactions are entered into even if the transfer of the immovable property is not effective or complete under the general law. The assessee entered into an agreement with the builder/developer for development of the impugned land and construction of flats thereon. Also, the assessee signed a development agreement dated 27.06.2006 in favour of the builder/developer and gave possession of the property to the builder/developer. Further, the assessee acted on the impugned agreement by accepting from the builder/developer payments by cheques on different dates in the financial year 2006-07 relevant assessment year 2007-08. All the conditions of sub-clause (v) of section 2(47) are satisfied in this case and therefore, it has to be inferred that a "transfer" did take place within the meaning of section 2(47)(v). The argument that the deeds in respect of the sale of flats were not registered/executed is not a relevant consideration so far as provisions of sub-clause (v) of section 2(47) are concerned. The completion of "transfer" of an immovable property as per the general law is not a requirement for the applicability of the provisions of sub-clause (v) of section 2(47). Thus, the taxability of long term capital gains only taxed in the F.Y 2006-07 relevant to A.Y 2007-08 and ordered accordingly. Computation of short term capital gains on selling of assessee’s share of residential and commercial constructed area - the gain on the transfer of the asessee’s share in constructed area is to be brought in tax as short term capital gains after giving due deduction as enumerated in sec.48 of the Act. The Assessing Officer has to consider this issue of computation of capital gains on assessee’s share of construction area along with undivided share in land which was actually transferred by the asseseee in this assessment year. In other words, the Assessing Officer cannot bring into tax entire share of constructed area along with undivided share in land only on receipt basis as transferred unless there is actual transfer in terms of Sec.45 of the Act. Accordingly, we direct the Assessing Officer to tax the gains arising from transfer of capital asset effected in the previous year alone in the relevant assessment year 2011-12. Since we have held that there was a transfer u/s.45 in the A.Y 2007-08 and the long term capital gains to be computed in terms of Sec.2(47)(v) of the Act in the A.Y 2007-08 and short term capital gains to be computed in transfer of capital asset in the respective previous years when the transfer of constructed area when it was actually taken place, there is no question of computing any business on the impugned issue. Accordingly, the findings of the CIT(Appeals) on applicability of Sec.45(2) is infractuous.

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• 2017 (5) TMI 1167
  Transfer of cases u/s 127 - Held that:- Even the reasons are recorded to transfer the case of the petitioner from respondent No.2 to respondent No.1 i.e. for “coordinated investigation”. Proposal was made by DGIT (Investigation), Ahmedabad for centralization of 234 cases of the beneficiaries who have taken contrived losses through Client Code Modification at their respective places of assessment (without change of location) with one officer of Central charge of respective station. The same came to be accepted and the case of the petitioner came to be transferred to Centralized office at Rajkot i.e. respondent No.1. All the requirements which are required to be followed have been followed. The decision seems to have been taken in larger public interest and for “coordinated investigation” of similar cases at the Central Office at the location. As in the present case the case has been transferred from one Officer to another Officer in the same city / station and that the procedure as required to be followed under Section 127 of the IT Act has been followed and that even the reasons are recorded i.e. “coordinated investigation” at one Central Office at the locations. As observed hereinabove, even in the present case subsequently the assessment order has been passed by the respondent No.1 to whom the case was transferred vide order of assessment dated 29.12.2016 passed under Section 143(3) read with Section 147 of the IT Act, against which the petitioner – assessee has preferred the appeal, which is pending before the learned CIT(A). Considering it cannot be said that the impugned order of transfer under Section 127 of the IT Act suffers from any illegality more particularly when the case has been transferred from one Officer to another Officer at same station and neither any prejudice is pleaded nor any prejudice is shown to have been caused to the petitioner.

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• 2017 (5) TMI 1166
  Adjustment towards Risk Profile of the Appellant compared with that of Comparable Companies - Held that:- As pointed out by the D.R, there is no thumb rule for risk adjustments in each and every cases, whenever the assessee claimed any risk adjustment in accordance with Rule 10C(2)(e). While arriving the ALP, the assessee has to identify and quantify the level of risk involved between the assessee and the comparables while undertaking for analyses in the transfer pricing documents. The risk adjustments could be given only to company to company basis considering levelof risk involved between the assessee and the comparable companies. It is primary duty of the assessee to provide requisite information pertained to the claim. Since the assessee did not discharge its initial onus and in the absence of information to compute the reliable accurate risk adjustments, it is not possible to grant risk adjustments claimed by the assessee. However, considering high degree of risk involved with the comparables, we are inclined to grant risk adjustments at 2% on adhoc basis. Accordingly, this ground is partly allowed. Adjustment towards Abnormal Expenses incurred by the Appellant during the year - Held that:- The assessee is a contract-manufacturer and having mark-up raised from 5% to 9.5% on the goods procured by it, later it was revised to 7%, so that the wastage suffered by the assessee taken care of by mark-up prices and manufactured goods. Once the price was marked up, there cannot be any loss to the assessee and the entire wastage is taken care by marked up price of sale price. Hence, we do not find any merit in the plea of the assessee with regard to claim of abnormal wastage. Abnormal depreciation as discussed in earlier, the assessee’s pricing pattern is marking up of 7% on the cost of goods manufactured. Being so, the increase in depreciation cost has also taken care of by mark up of sales price. Accordingly, the assessee cannot seek any further adjustments towards additional depreciation cost. This ground of appeal by assessee is also rejected. Reject the claim of deduction u/s.10B - Held that:- There was a business loss in the assessment year 2000-01 and the assessee has not claimed deduction u/s.10B and made a note in the statement of income that the company is claiming exemption u/s.10B from this assessment year onwards. There was no claim of deduction u/s.10B and also the Revenue is not allowed any claim u/s.10B of the Act in the relevant to assessment year 2000-01, as such it is to be noted that assessment year 2000-01 cannot be considered as first year of claim of deduction u/s.10B of the Act. From the assessment year 2001-02, deduction u/s.10B of the Act was to construed as first year of claim of deduction u/s.10B of the Act. Accordingly, it is to be allowed for ten consecutive years commencing from the assessment year 2001-02 ending on assessment year 2010-11. Accordingly, we direct the AO go grant deduction u/s.10B of the Act. This ground of the assessee is allowed.

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• 2017 (5) TMI 1165
  Penalty u/s. 271BA - non-filing of audit report in Form 3CEB in respect of the international transactions on or before the due date of filing the return u/s. 139(1) - assessee submitted that he was in a bonafide belief that no documents need to be filed along with the return of income in terms of explicit provisions contained section 139D(c) - Held that:- We find that in the instant case that the assessee had made available the audit report in Form 3CEB on 20.01.2012 which was much before the completion of proceedings by the Ld. TPO on 22.01.2014. In this regard, the expression "May" used in section 271BA of the Act, in our considered opinion, needs to be viewed liberally, in view of the reasoning given by the assessee due to bonafide mistaken understanding of provisions contained in section 139D(c) of the Act which itself would determine reasonable cause in terms of section 273B of the Act. Case of CIT Vs. A.N. Arunachalam [ 1994 (1) TMI 65 - MADRAS High Court ] would clearly support the facts of the case of the assessee. We also find that it is not the case of the Revenue that audit report in Form 3CEB was not obtained by the assessee on 02.09.2010. Accordingly, we hold that the assessee had substantively compiled with the provisions of the Act by obtaining the audit report in time, by filing the same though belatedly on 20.01.2012 but before the date of completion of assessment. Thus no hesitation in directing the Ld. AO to delete the penalty u/s. 271BA - Decided in favour of assessee.

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• 2017 (5) TMI 1164
  TDS u/s 195 - Disallowance of commission payment to foreign agents - non deduction of tds - Held that:- Keeping in view the decision of my predecessor on the issue of payment of commission without deduction of tax which related to payment to one Dr. Paul Le Provost who has received during this year about Rs. 47.76 lakhs out of total 61.37 lakhs, hereby agree with the decision taken by him on this issue. As the commission paid to the other agents is on the same line as paid to Dr. Paul Le Provost and all the details regarding services rendered and also the business of the assessee being the same so the payment of commission cannot be held as in genuine as well as provisions of Section 40(a)(ia) are not attracted so the whole amount of commission does not attract provisions of Section 40(a)(ia) r.w.s. 195 of the Act. As a result the grounds dealing with this issue are allowed and the disallowance made by the Assessing Officer is deleted. - Decided in favour of assessee. Disallowance of commission to foreign agents u/s 37(1) - AO has disallowed as he found that the appellant has failed to furnish the details of services rendered for the appellant - Held that:- When the respondent – assessee had produced necessary documentary evidence in the form of confirmation letters of the commission paid to the foreign agents, necessary documents /invoices on which the commission have been paid have been produced and the commission has been paid through banking channel and with respect to the very foreign agents in the previous years the claim of the respondent – assessee had been accepted consistently, learned CIT(A) as well as the learned tribunal has rightly deleted the disallowance made by the Assessing Officer.- Decided in favour of assessee.

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• 2017 (5) TMI 1163
  Reopening of assessment - claim of deduction under Section 80 IC of a sum inclusive of the interest income earned by the Assessee - reasons to believe - Held that:- In the present case the reasons for reopening do not enable a reader to ascertain in what manner the Assessee failed, when the original assessment took place, to make a full and true disclosure of material facts relevant to the assessment. On the contrary a reading of the original assessment order dated 31st March, 2011 reveals that this aspect of deduction being claimed under Section 80 IC was examined by the AO and allowed only after verifying the certificate and other documents in support of such claim. The reasons for reopening the assessment do not satisfy the jurisdictional pre-condition mandated by the first proviso to Section 147 of the Act, viz., to indicate clearly the failure on the part of the Assessee to disclose fully and truly all material facts necessary for the purposes of the assessment for AY 2009-10, the reopening cannot be sustained in law. - Decided in favour of assessee.

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• 2017 (5) TMI 1162
  Allowability of deduction u/s 80P - Held that:- Assessee is only providing credit facilities among its members and is not doing any banking activity and the bye laws of the Assessee also restricts its activities as being confined to members only and the Assessee also did not carry out any activities with anyone other than the members of the Society. The Assessee is only a Cooperative Society providing credit facilities to its members and not a Cooperative Bank to deny the deduction u/s 80P of the Act. The Revenue could not rebut the findings of the Ld. CIT (Appeals) and show us that how the Assessee falls under a Cooperative Bank and the Assessee is carrying on banking activities in general and with public. Thus we sustain the order of the Ld. CIT (Appeals) and reject the ground of the Revenue. - Decided in favour of assessee.

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• 2017 (5) TMI 1161
  Indexation benefit on the borrowing cost - LTCG computation - leasehold right was cancelled on 29th March 1998 and the same was restored back on 6th August 2004 - Held that:- As explained by this Court in Commissioner of Income Tax v. Mithlesh Kumari (1973 (2) TMI 11 - DELHI High Court) the interest amount constituted part of the actual cost of the land. In fact the AO has in the assessment order calculated the LTCG by including the interest cost. It has been noted by the CIT (A) that the construction activities were carried out continuously and uninterruptedly even during the period when the lease was cancelled and later restored. Consequently, the Court finds no error having been committed by the ITAT in restoring the indexed interest cost as directed by the AO. No substantial question of law - Decided against revenue

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• 2017 (5) TMI 1160
  Disallowance of expenditure in respect of interest and administrative expenses under Section 14A - Held that:- The assessee was already having its own surplus fund and that too to the extent of Rs. 2319.17 Crores against which investment was made of Rs. 111.09 Crores, there was no question of making any disallowance of expenditure in respect of interest and administrative expenses under Section 14A of the Act, therefore, there was no question of any estimation of expenditure in respect of interest and administrative expenses of Rs. 54,39,916/= under rule 8D of the Rules. Thus it cannot be said that the learned Tribunal has committed any error in deleting the disallowance of expenditure incurred in respect of interest and administrative expenses under Section 14A of the Act. We are in complete agreement with the view taken by the learned Tribunal. - Decided against revenue. Disallowance of expenditure incurred towards foreign exchange gain - Held that:- The money was borrowed by the assessee in foreign exchange for the purpose of expanding its business and making investment. Therefore, as rightly observed by the learned CIT [A] as well as the learned Tribunal, the purpose was, on capital account and any exchange fluctuation resulting into profit or loss should be treated on capital account and adjusted from the cost of the asset, but it cannot have any impact on the revenue account. At this stage, it is required to be noted that in the case of the very assessee, the assessee had incurred loss in the same account in the earlier assessment years as well as subsequent assessment year and the treatment given by the assessee has been accepted. Therefore, the learned CIT [A] as well as the Tribunal has rightly deleted the disallowance made on account of foreign gain. - Decided against revenue.

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• 2017 (5) TMI 1159
  Unexplained cash credit u/s.68 - unsecured loan taken - addition made on information received from DIT (Inv) - Held that:- The assessee has not been able to produce these lenders for verification and reasonably explain the complete circumstances in which these lenders, who were not even routinely engaged in the business of giving loans and advances, gave him unsecured loans on 12% p.a interest- which essentially is possible in situations of close relationships and trust; and the assessee has maintained stoic silence on being told about these lenders being alleged to be shell entities, thus not inclined to believe that these are genuine business transactions. Genuineness is a matter of perception but essentially a call on genuineness of a transaction is to be taken in the light of well settled legal principles. There may be difference in subjective perception on such issues, on the same set of facts, but that cannot be a reason enough for the fact finding authorities to avoid taking subjective calls on these aspects, and remain confined to the findings on the basis of irrefutable evidences In considered view, and for the detailed analysis set out earlier in this order, the alleged loan transactions of the assessee cannot be held to be genuine on the peculiar facts and circumstances of this case. As the genuineness of transactions stands rejected, it is not really necessary to deal with other aspects of the matter. - Decided against assessee.

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• 2017 (5) TMI 1158
  Penalty under section 272A(2)(k) - delay in filing TDS statements within statutory period - legitimate reasons for delay - Held that:- The delay in furnishing the statement was due to the reasons that the person who was looking after for furnishing the statement of TDS returns left employment of assessee. The assessee made their effort to bring the employee back in their employment. In support of their contention the assessee has placed on record the copy of e-mail communication with the employee. The lower authorities have not given any finding that non-furnishing of TDS returns was deliberate or the assessee got any benefit due to delay in furnishing the statement. Thus assessee has given sufficient explanation for delay in furnishing the statement of TDS within the prescribed period. Considering the decision of Hindustan Steel Ltd Versus State of Orissa [1969 (8) TMI 31 - SUPREME Court] when there was no contemptuous or dishonest act on behalf of assessee in view of the explanation offered by assessee, we accept the explanation offered by the assessee. Thus, respectfully following the decision of Ahmedabad Tribunal in the Acquafill Polymers Co Private Limited (2016 (2) TMI 1079 - ITAT AHMEDABAD) we accept the ground of appeal of the assessee and direct the assessing officer to delete the entire penalty levied under section 272A(2)(k) of the Act. - Decided in favour of assessee.

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• 2017 (5) TMI 1157
  Reopening of assessment - disallowing of expenditure claimed against incentive bonus and conveyance allowance - Held that:- Hon’ble apex court’s decision in Raymond Wollen Mills Ltd. vs. ITO (1997 (12) TMI 12 - SUPREME Court) settles the law that a reopening can be resorted to on the basis of a mere prima facie material wherein sufficiency and correctness of the same is not to be considered at the threshold stage. We observe in this backdrop of facts and law that the Assessing Officer rightly reopened assessment in assessee’s case after taking note of hon’ble apex court’s decision hereinabove. This first substantive ground in assessee’s appeal is accordingly declined Expenditure claimed against incentive bonus - There is no dispute that the LIC has issued a clarification way back w.e.f. 01.04.1989 entitling Development Officers for reimbursement to the extent of 30% of the incentive bonus granted to them. Hon’ble jurisdictional high court’s former judgment also caps the same @30%. Learned Departmental Representative vehemently contends that the assessee’s expenditure in question is much less than the one in hand. Mr. Popat strongly rebut the same by referring to assessee’s reply dated 30.12.2013 at page 6 of assessment order claiming the actual expenditure to be much more than the one in question. We find that the same has nowhere been controverted in assessment order. The Revenue’s argument regarding quantification stands rejected. Assessee appeal allowed. Restricting conveyance disallowance only after adopting estimation method - We observe in these facts that there is no plausible reason for the CIT(A) to restrict the impugned expenditure in absence of any specific irregularity being pointed out. The fact however also remains that the assessee’s evidence in the case file does not produce the relevant details. We thus conclude that the impugned disallowance of conveyance allowance @50% is too high. The same is accordingly ordered to be deleted to the extent of 75%. The balance 25% disallowance amount of Rs. 10,155/- is accordingly upheld. The very order shall be followed in latter two years regarding this third substantive ground (supra) wherein the impugned disallowance would stand confirmed @25% of the original claim raised before the Assessing Officer. This third substantive ground in all three appeals is partly accepted.

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• 2017 (5) TMI 1156
  Unexplained cash credit - Held that:- As rightly held by the Ld. CIT(A) that the assessee has discharged her onus in respect of amounts received from her husband and Mr. Rajesh Gautam. However, in respect of Ms. Sonia Bassi no confirmation has been filed. Therefore it cannot be said that the assessee has discharged her preliminary onus on this entry. Considering all the factors, we are of the considered view that Ld. CIT(A)’s action in confirming the addition of Rs. 18 lacs was relating to Ms. Sonia Bassi as unexplained since no confirmation has been filed either at the assessment stage or at the appeal stage. The balance addition made under this head was rightly deleted, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the addition in dispute and dismiss the ground no. 1 raised by the Revenue. Unexplained investment in jewellery - Held that:- Even in the absence of documentary evidences it cannot be completely denied that there could be increase in the value of the jewellery held by the assessee due to appreciation in the price of gold. The standard gold rate was Rs. 12,280/- for 10 gms of 24 carat gold as on 31.03.2008 which, had increased to Rs. 15,105/- for 10 gms of24 carat gold. Thus there is increase in the price of gold during the financial year 2009-10 by about Rs. 2,825/- which comes to 23% on the price prevailing as on 01.04.2008. However, the assessee has shown increase in the total value of jewellery by almost 42% (Rs.3,70,121 ÷ Rs. 89,40,67 x 100) which definitely is on the higher side. Further, the assessee has failed to submit any documents in this regard. The AO also does not seems to have taken up assessment of Wealth Tax of the appellant. In this background, Ld. CIT(A) has rightly held that the addition is restricted to Rs. 1,50,000/- and the balance is deleted and directly the AO to restrict the addition on this issue to Rs. 1,50,000/- only, which which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the addition in dispute and accordingly, the dismiss the ground no. 2 raised by the Revenue Unaccounted income - Held that:- The confirmations bear PAN of the lenders. The transactions have been routed through banking channels. In this background Ld. CIT(A) has rightly observed that the AO is required to proceed against the lenders if they were found to be without adequate source justifying the loans. During the assessment proceedings very little has been done by the AO to transfer the onus back to the assessee if he was not satisfied with any matter. There are no evidences to show that he wanted to assessee to lead further evidences to satisfy any of his doubts. In this background the Ld. CIT(A) has rightly deleted the addition of Rs. 1,28,89,000/- made as unaccounted income of the assessee, which does not need any interference on our part - Decided against revenue

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• 2017 (5) TMI 1155
  Imposition of penalty under Section 140A(3) - applicability of provision of section 221 - sufficient reason for non-payment of admitted tax - Held that:- Before levy of the penalty, the assessee has been communicated exact nature of contravention, for which the assessee was liable, for penalty under section 221. We find that the Assessing Officer has mentioned all the allegations and charges against the assessee in clear terms in the show cause notice and the assessee has also duly responded to those charges. The assessee in its submission also referred to the relevant section for levy of penalty as 140A(3) of the Act. In the circumstances, respectfully following the judgment in the case of Sh. PK Palanisamy (2009 (7) TMI 1311 - SUPREME COURT), we find that the proceeding of the Assessing Officer in the impugned order, in substance and effect in conformity with provisions of section 221 of the Act and thus, proceedings in question of the Assessing Officer cannot be held as invalid. - Decided against assessee Limitation for levy of penalty falling under the chapter XXI “penalties imposable” under the Income Tax Act has been specified in section 275 of the Act. As far as penalty under section 221 of the Act is concerned, the limitation has not been provided, however it should be levied within a reasonable period of time. We find that the penalty has been levied even before the completion of the assessment and thus in our opinion it has been levied well within a reasonable period. Whether the assessee was not having any liquidity problem for making payment of tax under section 140A - Held that:- From the order of the lower authorities, we find that the assessee did not file the documentary evidence in support of contention of liquidity crunch, however, before us, the assessee has sought one more opportunity for discharging its onus of showing “good and sufficient cause” for not making the payment of admitted tax liability. We are of the opinion that in the interest of natural justice, the assessee should be allowed one more opportunity to discharge his onus in terms of second proviso to section 221 of the Act. Accordingly, we restore the issue of levy of penalty for nonpayment of admitted taxability to the file of the Assessing Officer for deciding afresh after allowing a reasonable opportunity of hearing to the assessee. - Appeal partly in favour of assessee for statistical purpose.

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• 2017 (5) TMI 1154
  Interest earned on loans and advances given to parties / concerns - income from the business activity of the assessee or it is case of simple diversion of fund for non-business activity - Held that:- We find that there is merit in the finding of the A.O. that the loan advanced for more than three/four years to M/s. Vijay Parikh & Associates, Arpit Samani, Parikh Granito, M/s. Nisha Enterprise cannot be treated as a temporary investment of the borrowed funds. Even the loan provided to M/s. Shri Shankar Sanitation, Shubh Hotel P. Ltd. and Shub Builders P. Ltd. has crossed the limit of more than two years. Thus there is merit in the finding of the A.O. that “AS-16: Borrowing Costs” is not applicable in the present case. The issue of netting off of interest income against interest expenditure shall arise when the interest earned by the assessee emanate from its business activity and there is relationship between the two. The above issue shall not arise if there is diversion of fund for nonbusiness activity. These aspects have not been examined either by the A.O. or the learned CIT(A). In view of the above, we set aside the order of the learned CIT(A) and restore the matter to the file of the A.O. to examine the above and pass an order after giving reasonable opportunity of being heard to the assessee. The assessee is also directed to file the relevant details before the A.O.

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• 2017 (5) TMI 1153
  Reopening of assessment - to reat the share income as unexplained investments u/s.69 - Held that:- Assessee's case case is that the Assessing Officer ought to have disposed of her objections to reopening in question. The case file does not indicate any such recourse taken at assessee’s behest so as to challenge the reopening reasons. We repeat that learned CIT(A)’s findings on merits have gone against the assessee in proving source of the money in question to be arising from sale of shares. Section 147 Explanation 2 squarely applies in facts of instant case wherein the assessee claimed her profits to be arising from share transactions as exempted which were found to have been never carried out. We thus decline assessee’s challenge to this legal aspect of the reopening in question as well. - Decided against assessee.

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• 2017 (5) TMI 1152
  Bogus purchases - A.O. has exclusively relied on the information received from the Sales Tax Department (Investigation Wing), Mumbai - Held that:- A.O. has not gone beyond the findings of the Sales Tax Department. In Income-tax proceedings, there is extensive use of oral examination of witness or the assessee to ascertain and establish facts. Oral examination provides information, confirmation or contradiction useful in these 8 proceedings. The statement is recorded in oath. The witness is obliged to state the truth and if he makes a false statement he is punishable for perjury. The assessee or the department, as the case may be, can cross-examine the witness to test the truth of his statement. In State of Kerala vs. K.T. Shaduli Grocery Dealer [1977 (3) TMI 160 - SUPREME COURT] recognised the importance of oral evidence by holding that the opportunity to prove the correctness or completeness of the return necessarily carry with it the right to examine the witnesses and that includes equally the right to cross – examine witnesses. At least in the cases where details were filed by the assessee (para 5.4 and 5.5 of the assessment order), the A.O. could have examined the witness. The A.O. has failed to do so. Addition of entire amount of purchases to gross profit of the assessee - Held that:- We have to ascertain the profit element embedded in such purchases which can be added to the income of the assessee. We find it just and fair to estimate 12.5% of the purchase cost of Rs. 62,40,000/- as the profit element and direct the A.O. to adopt the same and make disallowance. As the enhancement of Rs. 3,12,000/- made by the learned CIT(A) is bereft of any objective yardstick as the same has been estimated @ 5% of the value of bills on the presumption that the assessee might have incurred expenditure in cash to secure bogus bills, the A.O. is directed to delete the same.

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• 2017 (5) TMI 1151
  Capital gain computation - whether the “fair market value of the property” can be substituted in place of “full value of consideration” in section 48? - Held that:- Full value of consideration mentioned in section 48 of the Act may be replaced by the value assessed or adopted by the stamp value authorities or fair market value only if section 50C of the Act applies in this case and which depends on the fact whether the sale transaction was registered by the stamp valuation authorities. If the property in question has been sold through registered sale deed and the value adopted or assessed by the stamp valuation authority is higher than the value declared by the assessee in the return of income, the provisions of Section 50C of the Act are clearly applicable. If the sale transaction in question is not registered with stamp value authorities, then full value of consideration has to be accepted as declared by the assessee following the decision in the case of Quark Media House (India) Pvt. Ltd. (2017 (1) TMI 1290 - PUNJAB AND HARYANA HIGH COURT). Since this issue has not been properly verified by the learned CIT(A) while holding that the provisions of Section 50C of the Act are not applicable in the case, we feel it appropriate to restore the issue to the file of the Assessing Officer to examine the issue afresh. - Decided in favour of assessee for statistical purposes.

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• 2017 (5) TMI 1150
  Disallowance u/s 14A r.w.Rule 8D(2)(iii) computation - Held that:- We are of the considered view that the assessee did offer the suo motu disallowance but did not relate the same to the accounts of the assessee as is contemplated u/s 14A(2) of the 1961 Act and in the absence thereof the AO applied Rule 8D of the 1962 Rules r.w.s. 14A of the 1961 Act to make disallowance of expenditure incurred in relation to income which does not form part of the total income Assessee has conceded that if one more opportunity is granted the assessee will explain disallowance of expenditure incurred in relation to income which does not form part of the total income having regards to the accounts of the assessee before the AO and injustice caused to the assessee by invocation of Rule 8D of the 1962 Rules r.w.s. 14A of the 1961 Act can be removed Keeping in view facts and circumstances of the case, in our considered view the matter needs to be set aside and restored to the file of AO for re-computing the disallowance u/s. 14A of the 1961 Act of the expenditure incurred in relation to the earning of income which does not form part of the total income having regards to the accounts of the assessee. Appeal filed by the assessee allowed for statistical purposes.

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• 2017 (5) TMI 1149
  Disallowance of devaluation of investment in Govt.Securities - Held that:- We do not find any merit in the action of lower authorities for disallowing loss arose on the year end revaluation of securities. Our view is supported by decision of Hon'ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd. (2014 (8) TMI 119 - BOMBAY HIGH COURT ). The loss claimed by the assessee bank is revenue in character and an allowable business loss. - Decided in favour of assessee

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• Customs

• 2017 (5) TMI 1181
  Penalty u/s 114(iii) of the CA, 1962 - Fraudulent availment of drawback - appellant had filed the documents for non-existent party and the goods cleared just for claiming drawback - Held that: - it was revealed that the exporter was existing on the address given on record, but subsequently he left the premises, therefore at the stage when the exporter had left the premises the allegation against the CHA is not proved that he dealt with export consignment on behalf of the non-existent exporter. The appellants CHA is not in anyway concerned with or was aware of the valuation of the goods so it cannot be expected from a CHA to know whether the drawback was correctly availed or not - penalty set aside - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1180
  Classification of goods - New Trim Cutting Synthetic Waste - classified under CTH 63109040 or under CTH 5603 - N/N. 12/2012 Cus. dated 17.3.2012 - Held that: - Fabric with the width of 2.6 inches to 4 inches even if it is in running length cannot be considered as synthetic strip classifiable under CTH 5603. The CTH 6310 covers “used or new rags, scrap twine, cordage, rope and cables and worn out articles of twine, cordage, rope or cables, of textile materials”. The Circular No. 20/2011 Cus dated 15.4.2011 has clarified that the import of Trim Cutting waste or fibre trim of continuous length with width upto 10” fall under CTH 6310 required for the manufacture of Chindi rugs will be allowed for clearance without any import license. The above CBEC circular strengthens the view that imported goods are in the nature of waste used for manufacture of rugs and hence will be rightly classifiable under CTH 6310. Appeal rejected - decided against Revenue.

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• 2017 (5) TMI 1179
  Imposition of penalty u/s 114 (iii) of the CA and u/s 117 of the CA on CHA - over-valuation of export - Held that: - the appellant filed shipping bills on the basis of documents received by them. If there is any difference in the value of the export consignment, the CHA cannot be held responsible for the same as it is not the duty of the CHA to adjudge the correct value of the goods. There is virtually no evidence on record to show that he was aware of the over-valuation of the export consignment and he simplicitor proceeded by the declaration made by the exporters. In such a scenario, the appellant cannot be held liable for any aiding and abetting and consequently to penalty - appeal allowed - penalty set aside - decided in favor of appellant.

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• 2017 (5) TMI 1178
  Benefit of N/N. 39/96-Cus dated 23rd July 1996 - eligibility for duty-free import of ‘conventional billet turning lathe’ - refund claim - unjust enrichment - Held that: - Mere non-compliance with a procedural requirement cannot stand in the way of denial of substantive benefit to an assessee. Moreover, the state cannot enrich itself by collection of taxes that do not have the authority of law. On perusal of the bill of entry, it is seen that the appellant had sought the application of exemption under notification no.39/96-Cus and that this had been denied without espousing any reasons. It is clear that appellant was entitled to the exemption and ineligibility has not been cited as one of the grounds of appeal before the first appellate authority. It would, therefore, appear that the bill of entry had been wrongly assessed and required rectification. The appellant could have applied for, and obtained, rectification which would have eliminated the duty liability and, thereby, entitle them to refund arising from erroneous computation. The appellant is entitled to a refund as sanctioned by the original authority - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1177
  Penalty on C&F Agent - they aided and abetted in the evasion of the customs duty - undervaluation of imported clearances - case of appellant is that he is only a clearing and forwarding agent and involved in the clearance of the goods. Therefore, as regards valuation issue, he is not a party to the undervaluation of imported goods - it is also contended by appellant that CHA were involved in the clearing of the goods but those CHAs were not made noticees in the present case - Held that: - the appellant is a clearing and forwarding agent but as per their statement they are engaged in the clearing of the goods by using the CHA licence of some other CHA. Therefore, it cannot be said that since the CHA was not penalised the appellants should also be absolved from the penalty - the appellant was actively involved in the clearing of the goods and fact of undervaluation was known to them, therefore they aided and abetted in the evasion of the customs duty, committed by the two exporters namely M/s. Vastupal Tejpal (India) and M/s. Bhaktiprem International - penalty upheld - appeal dismissed - decided against appellant.

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• 2017 (5) TMI 1176
  Imposition of redemption fine in lieu of confiscation of material which was already disposed off/sold and not available for confiscation - Held that: - the goods on which the Revenue has sought imposition of redemption fine were cleared and disposed of by the appellant. The said goods are not available for confiscation. The said goods were also not seized and released under any bond or undertaking. In these circumstances, the same cannot be confiscated and therefore, no redemption fine could have been imposed. Penalty - Held that: - duty in excess of Rs. 36 lakhs has been confirmed against the appellant. It is noticed that the SCN alleges that imported goods were mis-declared. The impugned order confirmed the said mis-declaration. In these circumstances, I find that the quantum of penalty imposed on the importer is very low. Considering the role of importer in the mis-declaration, the penalty is revised from Rs. 1 lakh to Rs. 5 lakhs. Appeal allowed - decided partly in favor of Revenue.

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• 2017 (5) TMI 1175
  Benefit of N/N. 6/2006-CE dated 01.03.2006 - import of Hard disc drives - whether the appellant-importer are eligible for a concessional rate of duty of customs or otherwise? - Held that: - In the case of Fortune Marketing and Ors. [2017 (4) TMI 1002 - CESTAT MUMBAI], it was held that the appellant importers are eligible for a concessional rate of duty of customs claimed by them for the said product under Exemption N/N. 6/2011 CE dated 01.03.2011 as amended from time to time and held that imported “hard disc drives” are eligible for concessional rate of duty as claimed by the Importer appellants - appeal allowed - decided in favor of appellant.

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• Service Tax

• 2017 (5) TMI 1204
  Simultaneous Penalty u/s 76 and 78 of FA - Banking and Financial Services - Held that: - simultaneous penalty u/s 76 and 78 of FA, 1994 prior to 10.2.2008, the day when there was amendment made in Section 78 of FA, 1994 will be imposable - During the period after 10.5.2008 as per the amended provisions of Section 78 if penalty is payable u/s 78, penalty u/s 76 of FA, 1994 is not to be imposed. The period involved in this case is 2006-2007 to 2008-2009. Thus the period involves the duration both prior to 10.5.2008 and after 10.5.2008. Therefore, the penalty is liable to be imposed for the offence pertaining to the period prior to 10.5.2008 under both the sections i.e. Section 76 and 78 of FA, 1993 - But for the period after 10.5.2008, no penalty u/s 76 can be imposed as already penalty u/s 78 has been imposed. The matter is remanded to the original adjudicating authority to decide the quantum of penalty u/s 76 and 78 for the contraventions pertaining to the period prior to 10.5.2008 as well as for the contraventions pertaining to the period after 10.5.2008 - appeal allowed by way of remand.

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• 2017 (5) TMI 1203
  Manpower Recruitment or Supply Agency Service - job-work - case of appellant is that they are not a manpower supply agency. They have undertaken job of cutting or packing of footwear, in the premises of the client, as per the instructions of the client - Held that: - There is no evidence of supply of manpower with details of number and nature of manpower, duration and other conditionalties for such supply. In absence of such evidence, the simple allegation that the appellant received some amount from the clients for job work and such amount should be taxed under “Manpower Recruitment and Supply Agency Service” is not sustainable - In absence of any supporting evidence, it is not feasible to contend that the appellants provided taxable service under the category of “Manpower Recruitment and Supply Agency Service” - demand set aside - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1202
  Penalty - Extended period of limitation - Commercial Training & Coaching Centre Service - Held that: - the claim of the respondent for exemption under N/N. 6/2005-ST was not allowed. The impugned order has already been upheld with reference to time bar and setting aside the penalty imposed u/s 78 - when the demand was not sustainable for the extended period, penalty u/s 78 was also not imposable. Such penalty was set aside - appeal dismissed - decided against Revenue.

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• 2017 (5) TMI 1201
  Penalty u/s 78 - power of Commissioner to condone delay - condonation of delay in filing appeal - Commissioner could not have condoned the delay in excess of two months - Held that: - It can be seen that the Finance Act was amended on 28/05/2012 and only thereafter sub-section (3A) of Section 85 within the operational prior to 28/05/2012. The Commissioner at the material time had power to condone the delay of upto to three months. In view of the above, it is seen that the Commissioner (Appeals) has not exceeded his power and therefore, the miscellaneous application is dismissed. It is a fact that the respondent had collected service tax from the clients and still not paid to Revenue. The reason given by the Commissioner (Appeals) for non-imposition of penalty is that the respondent was in a rural area and not very highly educated. It is a fact that the respondent has collected the service tax from the client and not paid to Revenue. Levy of Penalty confirmed - appeal allowed - decided partly in favor of revenue.

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• 2017 (5) TMI 1200
  SEZ unit - Recovery of interest - adjustment with Refund claim - refund claim included the amount paid by assessee of duty and interest for delayed payment of duty - General Insurance Business - Banking and Financial Services - Chartered Accountant Services, etc. - N/N. 9/2009 as amended by N/N. 15/2009 - whether the Department can recover the interest amount of Rs. 30,05,219/- u/s 87 of the FA, 1994 without issuance of a SCN and without adjudication proceedings to determine the amount due and payable by the appellant? Held that: - after introduction of sub-Section (1B) to Section 73, in case the appellant fails to pay the service tax or interest thereon, under the self assessment method, the amount can be recovered without service of notice. The said Section has come into force only w.e.f. 14.05.2015 - the period in the present case being prior to 14.05.2015 it was incumbent upon the Department to issue a SCN and initiate proceedings for the determination of the amount due and payable by the appellant before initiating recovery u/s 87 of FA, 1994. The Department cannot proceed to recover the interest u/s 87 without issuing a SCN and determination of the amount due and payable by the appellant as provided under sub-Section (1) of Section 73 of the FA, 1994 - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1199
  Refund claim - Club or Association Service - fees collected for issuing Country of Origin certificate to its members - duty paid under protest - denial of refund on the ground that the exemption u/s 96 (J) (1) of FA, 2011 is applicable only to membership fee collected by a Club or Association and that it does not apply to fees collected for issuing Country of Origin certificate to its members Held that: - Marking of protest is a message to the department that there is a dispute in payment of tax. In such circumstances, it is for the department to issue a SCN and initiate proceedings for determination of tax as provided u/s 73 of the FA, 1994 - In the present case, no such SCN has been issued and thereby the appellants have been deprived of their right to contest the demand. The ground for rejecting the refund claim as stated in the deficiency memo is that the appellant is liable to pay the service tax for the period 2006-07 and 2007-08. When there has been no determination of the amount due after raising a dispute, the department cannot unilaterally determine that the amount is due and retain the same. The amount paid thus becomes an amount paid by mistake. The appellants are therefore eligible for refund. Appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1198
  100% EOU - CENVAT credit - reverse charge mechanism - Business Auxiliary Service - Held that: - the appellants have discharged the said liability by debit in their CENVAT credit account - Correctness of such payment of service tax liability by the recipient of service while discharging service tax in terms of Section 66A has been upheld by the Tribunal in similar set of facts - In Paramount Communication Ltd. [2016 (12) TMI 287 (CESTAT-DELHI)] held that wherever the service recipient discharges service tax liability on reverse charge basis, he has to be considered as output service provider, thus entitling the utilization of payment of such service tax by credit - the impugned order rejecting the payment of the appellant by CENVAT credit is not legally sustainable - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1197
  Sub-contract - liability of tax - whether sub-contractor is liable to service tax and is a service tax provider? - Held that: - the issue is no longer res integra and is squarely covered by the judgement of this Tribunal in the case of Sunil Hi-Tech Engineers Ltd. [2014 (10) TMI 524 - CESTAT MUMBAI (LB)], where it was held that The appellant is liable to pay service tax on the taxable services rendered by him in the capacity of a sub-contractor - decided in favor of revenue.

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• 2017 (5) TMI 1196
  Construction service - Valuation - value of material supplied free by clients for rendering services of commercial or industrial construction services - includibility - Held that: - the issue is no more res integra as Larger Bench of the Tribunal in the case of Bhayana Builders (P) Ltd. vs. CST, Delhi [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] has held that the value of goods and materials supplied free of cost by a service recipient to the provider of the taxable construction service, being neither monetary or non-monetary consideration paid by or flowing from the service recipient, accruing to the benefit of service provider, would be outside the taxable value or the gross amount charged, within the meaning of the later expression in Section 67 of the FA, 1994 - the value of free supplied material from the service recipient need not to be included in the value of discharge of service tax liability - appeal allowed - decided in favor of assessee.

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• Central Excise

• 2017 (5) TMI 1195
  Maintainability of petition - alternative remedy available u/s 35-B of CEA Act, 1944 - principles of natural justice - Held that: - the Commissioner, while passing the adjudicating order impugned, acted in flagrant violation of principles of natural justice by refusing to cross examine the witnesses and that resulted into an order absolutely arbitrary. The violation of principles of natural justice is so apparent that the same is not even required to be established by adducing evidence. The doctrine of alternative remedy is not a rule of law but a policy and self-restraint and that can very well be waived in certain eventualities including the violation of principles of natural justice, however, it is not necessary that wherever and whenever such eventuality exists, the writ Court must entertain a petition for writ - we are having no hesitation in holding that an efficacious alternative remedy is available to the petitioners and no reason exists to entertain these petitions for writ without exhausting the same. Petition dismissed - the petitioners are having an effective alternative remedy - decided against petitioner.

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• 2017 (5) TMI 1194
  Refund claim - cash equivalent of the export benefits - Section 11B of CEA, 1944 - Held that: - reliance was placed in the case of POWER GRID CORPORATION OF INDIA LTD. Versus COMMR. OF CUS., CHENNAI [2008 (10) TMI 92 - CESTAT, CHENNAI], where it was held that what was paid by the appellants was the cash equivalent of the duty of customs forgone by the Dept. as deemed export benefits, cash payment made by appellants should be treated as a ‘deposit’ and claim for its refund should be entertained without reference to the time-bar provisions of Section 27 of the CA - matter allowed by way of remand.

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• 2017 (5) TMI 1193
  MODVAT (deemed) credit - N/N. 7/2001-CE(NT), dt.01.03.2001 - deemed credit - denial of credit on the ground that since there was default on the part of the appellant in not depositing the duty in time and making incorrect entry in their RT-12 return about the payment of duty through TR-6 challan, therefore, the benefit of deemed credit cannot be extended to them - Held that: - to examine the claim of the Appellant that they had informed the fact of non-payment of duty against few TR-6 challan vis-`-vis the entries made in the RT-12 returns, the matter need to be remanded to adjudicating authority who would analyze in detail the same before arriving at the conclusion about the intention of the Appellant in not discharging the duty during the relevant period - appeal allowed by way of remand.

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• 2017 (5) TMI 1192
  Refund of CENVAT credit - supplies to 100% EOU - whether the Auto components supplied by the respondent to the 100% EOU amounts to deemed export? - Held that: - sale to 100% EOU is virtually in the nature of export as 100% EOU can not sell its products in local market and is obliged to export its entire production. Therefore, such sale is deemed export having all the elements of export - export takes into its fold deemed export as well and no distinction can be drawn between export and deemed export - refund allowed - appeal dismissed - decided against Revenue.

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• 2017 (5) TMI 1191
  Valuation - MRP Valuation - cement in packed form (in 50 kg bags) - supply to industrial consumer or institutional consumer - benefit of N/N. 4/2006-CE Sr.No.1(b) or 1(c) - case of Revenue is that subject supplies/sales, though declared as Not for Resale are not covered under Rule 2A of SWM Rules, therefore, concessional rate of duty as per N/N. 4/2006-CE Sr.No.1(b) or 1(c) will not be applicable to sales made to/for builders, developers, contractors and construction firms, manufacturers of finished goods, captive consumption - Held that: - The present matter is covered by the Tribunal's decisions in the casea of Ambuja Cement Ltd Vs CCE Raipur [2017 (1) TMI 1130 - CESTAT NEW DELHI], where it was held that packages of commodities containing a quantity of more than 25 kg or 25 litre excluding cement and fertilizers sold in bags upto 50 kg and packaged commodity meant the industrial or institutional consumer are excluded from the provisions of the said Rules - appellant elgible for benefit. The sales made to various categories of buyers are covered u/R 2A of SWM Rules, 1977 and such goods are eligible for the benefit of N/N. 4/2006-CE - appeal allowed - decided in favor of assessee.

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• 2017 (5) TMI 1190
  Penalty u/r 26 of CER, 1944 - clandestine manufacture and removal of exempt goods - non-accountal of receipt of raw material - Held that: - there is no evidence produced by the appellant to indicate that there was no receipt of said raw material and there was no manufacturing on their part out of the said raw material. On the other hand, the statements on record proved that the subject goods were manufactured for which they have paid duty voluntarily on 15.2.2012 - penalty upheld. Penalty on Shri Deepak Agrawal - Held that: - Shri Deepak Agrawal has been found to be controlling all activities of the appellant assessee. He has been the main person responsible for evasion of duty and for suppression of production and clandestine removal of said goods from the assessee’s factory, thus wilfully, contravening the provisions of Central Excise Act and the Rules made thereunder - Though, Shri Agrawal has been main person responsible along with the assessee appellant for evasion of duty of Central Excise duty, considering that the equivalent penalty has been imposed on the assessee appellant, I take the lenient view and reduce penalty imposed on Shri Agrawal of Rs. 2 lakhs to Rs. 50,000/- only. Appeal allowed - decided partly in favor of appellant.

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• 2017 (5) TMI 1189
  Refund claim - refund of CENVAT Credit lying unutilized in their Cenvat Credit account - Held that: - it is clear that Rule 5 of CCR, 2004 does not authorize granting refund of CENVAT Credit in all the cases; it authorizes grant of refund only in case where final products have been exported. Thus, there is no provision in law of Central Excise for grant of refund of such accumulated credit to the appellant - As the policy of the Government is that tax on exported goods is zero rated and the export goods should not suffer any taxes. Therefore, a provision such as Rule 5 allows the refund of duty in respect of CENVAT credit on inputs which have suffered Central Excise duty but the finished goods are exported - appeal dismissed - decided against appellant.

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• 2017 (5) TMI 1188
  Clandestine removal - the plea of production capacity is less than the quantity alleged to have been removed has been taken for the first time through the Chartered Engineer's Certificate produced during the adjudication proceeding - Held that: - since the unit of the Respondent is not capable of manufacturing the quantity alleged to have been removed clandestinely, in view of the Chartered Engineer's Certificate, therefore, the allegation of clandestine manufacture and clearance made on the basis of entries made in various private records remain uncorroborated and hence, cannot be relied upon - we remand the matter to the adjudicating authority with the direction to get the Chartered Engineer's Certificate verified and if necessary could independently - appeal allowed by way of remand.

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• 2017 (5) TMI 1187
  Pre-deposit - Held that: - the applicant is required to make pre-deposit of 25% of the duty amount as directed by the Hon'ble High Court and affirmed by the Hon'ble Apex Court. Without making the said deposit no remedy is available to the applicant - restoration of appeal - appeal dismissed - decided against appellant.

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• 2017 (5) TMI 1186
  Classification of goods - Magnesium Sulphate - eligibility to exemption as Fertilizer/Micronutrient - classified under Chapter 28 as in organic chemical compound or under CETH 3105 as “other fertilizers” - Held that: - It is stated that in trade parlance sale of micronutrient as “micronutrient fertilizer” would not lead to classification thereof under Chapter 31 as fertilizers for the purposes of Central Excise Tariff. For classification under Chapter 31, at least one of the elements, mainly nitrogen, phosphorous or potassium should be an essential component of the fertilizer as per note 6 of Chapter 31. It was further clarified there is no specific heading in the tariff for classification of micronutrient. However, where the micronutrient is a separate chemically defined compound, it will be classifiable under the heading for that chemically defined compound, under Chapter 28 or Chapter 29. There is no evidence that they were filing any returns during the relevant time. On claim regarding registration made by the appellant, we have seen the registration in form R-2. The said registration stipulates Magnesium Sulphate Micronutrient fertilizer for the purpose of procurement of excisable goods used for special industrial purpose under erstwhile Rule 192. In any case registration certificate was issued by the Department, based on the application made by the appellant, before starting the manufacture. This by itself does not decide the correct classification of the product. In respect of repeat SCN for subsequent period, we find no justification for invoking provisions of Section 11A (1) proviso, for extended period and also for imposing penalty u/s 11AC of the CEA, 1944. Appeal disposed off - decided partly in favor of appellant.

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• 2017 (5) TMI 1185
  Short shipment/export of Concentrates (goods) of the certain quantity of the zinc and lead concentrate with reference to the goods cleared from the factory for export under Bond - demand - Held that: - the impugned order has raised a new issue saying that there may be possibility that the goods cleared under these ARE-1s have been diverted. This observation is mentioned in the impugned order in respect of four ARE-I mentioned in the table in para 21 of the impugned order - appellant states that all the evidences for export of the subject goods are available with them - the matter deserves to be remanded to Commissioner for fresh adjudication, where the appellant shall be given opportunity of personal hearing and submission of relevant documents to prove the fact of export of goods - appeal allowed by way of remand.

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• 2017 (5) TMI 1184
  CENVAT credit - input services - pipelines exclusively used for transport of water - denial on account of nexus - Held that: - subject input service is having sufficient nexus with the manufacturing process of the appellant and is covered by the definition of ‘input service’ under Rule 2(l) of CCR, 2004 - service tax paid on such services is eligible to be claimed as Cenvat Credit by the appellant-assessee - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1183
  Short payment of Central Excise duty - un-accountal clearance of finished goods - Held that: - the appellants are pleading that when the Department is considering quantification of unaccounted clearance, they should also necessarily consider the clearances as recorded, in the statutory records. There are instances where the recorded duty paid clearance is much higher than calculated production as made by the officers, based on investigation - it is clear that the lower authorities should have recorded the finding as to the claim of the appellant regarding overall re-conciliation of quantum of excisable product, giving adjustment, recorded clearances vis-à-vis calculated clearances, so that the overall unaccounted clearance can be brought out properly. The fact remains that the short payment of Central Excise duty was calculated based on the private records maintained by the appellant and after comparing the same with statutory records - If the basis of short levy is comparison of private records with statutory records, the impugned order did not give any detailed finding on this aspect at all. Appeal allowed by way of remand.

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• 2017 (5) TMI 1182
  Penalty u/r 15(4) of CCR 2004 - appellant is a manufacturer - Held that: - penalty u/r 15(4) is imposable only on the service provider for wrong availment of CENVAT credit - In the present case the appellant is a manufacturer also availed the credit in the status of manufacturer therefore penal provisions u/r 15(4) is not applicable to the appellant. Therefore penalty imposed u/r 15(4) read with Section 78 of FA, 1994 which is applicable to the service provider is set aside - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2017 (5) TMI 1174
  Composite works contract - valuation - According to the department, after excluding the earthwork, the remaining part of contract constitutes the works contract, and since labour charges have not been separately appropriated in the books of account, as such, benefit of labour charges to the extent of 30% has been allowed relying upon the provisions of Rule 9(3) of The Uttar Pradesh Value Added Tax Rules, 2008 - Held that: - In absence of any material brought on record to show the basis for such further categorization of work into one constituting labour work, and the other constituting works contract, which also included labour component, the authorities cannot be said to have acted in an unjustified manner in discarding the assessee's claim in that regard - In absence of any material brought on record to the contrary, the finding of the Tribunal that remainder i.e. after excluding the earthwork, entire contract constitutes the works contract and that 30% thereof was liable to be appropriated towards labour charge is based upon correct interpretation of Rule 9(3) and the grievance of assessee in that regard cannot be accepted. Tribunal was justified in treating the quantum of works contract to be Rs. 41,04,40,584/- and appropriating 30% thereof towards labour charges - Appeal dismissed - decided in favor of Revenue.

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• 2017 (5) TMI 1173
  Maintainability of appeal - section 39(2) of the Haryana General Sales Tax Act, 1973 - whether the State of Haryana is entitled to file an appeal u/s 39(2)? - Held that: - Section 39(2) does not confer the right of appeal only in favor of the assessee. It does not limit the right of appeal to any particular person or party. There is nothing in the scheme of the Act that persuades us to read a limitation to this effect into sub-section (2) of section 39. If the Legislature intended restricting the right of appeal to assessees, it would have provided so expressly - it was clear from a reading of the provisions of the Act that it was only under section 39(7) that the State has the power to file an appeal against the orders of the revisional authority and since the order appealed against was not passed by the revisional authority the State has no right to file an appeal against the order of the JETC. The mere existence of a power of revision under section 40 does not imply that there is no right of appeal. Further, merely because there is a right of appeal under section 39(7) against an order passed in revision under section 40(2), it does not follow that the State does not have a right of appeal under section 39(2) - petition allowed - decided in favor of petitioner.

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• 2017 (5) TMI 1172
  Penalty - interest - PVAT Act - Whether the VAT Tribunal Punjab Chandigarh has grossly erred in upholding the order of the Excise & Taxation Officer-cum-Notified Authority as upheld by the Deputy Excise & Taxation Commissioner (Appeals) Patiala imposing penalty u/s 53, u/s 60 and levying interest u/s 32(1) of the Punjab VAT Act? Held that: - It is apparent that the appellant did not challenge the order of this Court in so far as it dealt with the constitutional validity of Section 19 of the Act. The importance of this is that the appellant before us accepted the judgement of this Court at least on the issue of the constitutional validity of the Act. Due date or payment of interest - Held that: - the due date for payment is not the date of the final assessment, but the date stipulated in Rule 36. Under Section 26(3), every person is bound to pay the full amount of tax due from him as per the provisions of the Act. Thus, liability for payment of interest under Section 32(1) is from the due date for payment. The due date for payment would be the date on which payment is liable to be made under Rule 36. Section 26(3) requires every person to pay “the full amount of tax due from him as per the provisions of the Act” and not the amount which according to the assessee is payable. The words “full amount of tax due from him as per provisions of this Act” refer to the amount actually payable under the Act and not the amount which according to the assessee is payable. Section 11-B of the Rajasthan Act is similar to Section 32(4) and not to Section 32(1) of the Act with which we are concerned. It is not possible to incorporate the provisions of sub-section (4) of Section 32 into sub-section (1) of Section 32. Sub-section (4) in fact is a separate and independent liability in addition to the liability under subsection (1) There is no reason to absolve the appellant of the liability under Sections 32(1), 53 and 60 - appeal dismissed - decided against assessee.

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• 2017 (5) TMI 1171
  Rate of tax - Solvent Cement Solution - taxable at 4% or at 10%? - whether PVC Solvent Cement included within Entry No.54 of the Notification dt.26.03.1999 or otherwise? - Held that: - in a case of classification one can take into consideration common parlance test, in my view as well, for stopping common leakage some other products will have to be purchased rather than the product which has been used/produced/sold by the assessee. The entry insofar as VAT Act under consideration is concerned, is limited and it is to be read as it is and cannot be enlarged as claimed by the counsel for the petitioner - the finding reached by the Tax Board is a finding of fact and no question of law can be said to arise out of the order of the Tax Board. Penalty u/s 65 of the act - Held that: - though it is a case of survey which may have resulted into some taxability @10% as against 4% claimed by the assessee but the fact remains that it is a case of classification and two views are possible and at least the assessee also succeeded before the Dy. Commissioner (A) and in my view, once it is a case of classification then the penalty need not be levied - penalty set aside. Appeal allowed - decided partly in favor of assessee.

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