Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 5, 2017
Case Laws in this Newsletter:
Income Tax
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Customs
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15/2017-Customs - dated
3-5-2017
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ADD
Seeks to levy definitive anti-dumping duty on import of Elastomeric Filament Yarn from China PR, South Korea, Taiwan and Vietnam for a period of five years (unless revoked, superseded or amended earlier) in pursuance of final findings of the Directorate General of Anti-Dumping & Allied Duties dated 24.03.2017
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14/2017-Customs - dated
3-5-2017
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ADD
Seeks to extend the levy of anti-dumping duty, imposed on Viscose Filament Yarn originating in or exported from China PR under notification No. 23/2012-Customs (ADD), dated 04.05.2012, for a further period of one year i.e. upto and inclusive of 03.05.2018
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43/2017 - dated
4-5-2017
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Cus (NT)
Rate of exchange of conversion of the foreign currency with effect from 5th May, 2017
Income Tax
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36/2017 - dated
2-5-2017
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IT
Income-tax (9th Amendment) Rules, 2017
Service Tax
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17/2017 - dated
4-5-2017
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ST
Seeks to amend notification No. 25/2012-ST dated 20.06.2012 so as to exempt life insurance services under 'Pradhan Mantri Vaya Vandana Yojana'.
SEZ
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S.O. 1391(E) - dated
26-4-2017
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SEZ
Central Government notifies 0.850 hectares area and de-notifies 2.520 hectares area at Nagavara Village, North Bangalore Taluk , in the State of Karnataka
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S.O. 1129(E) - dated
6-4-2017
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SEZ
Central Government rescinds Notification Number S.O. 667 (E) dated 12th March, 2009
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S.O. 1130 (E) - dated
31-3-2017
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SEZ
Central Government notifies 4.95 hectares area at Byatarayanapura Village, Yelahanka Hobli, Bengalaru North, Bangalaru in the State of Karnakata and constitutes an Approval Committee
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Addition of income on the basis of statement made by the employees/ director during the course of search - the statement which are made by the employees were indubitably voluntarily made and not forced. The subsequent retraction was not found acceptable by the Authorities - Additions confirmed - HC
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Did the ITAT fall into error in holding that the surrender made by the assessee in the course of the survey and confirmed two months later in writing, was deserved to be deleted in the circumstances of the case for lack of any corroborative material? - Held Yes - HC
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A notice sent by post to the addressee at his proper address would be deemed to have been delivered to him in the ordinary course, if not returned undelivered and such service is sufficient even for the purposes of Section 148 of the Act. - HC
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Exemption u/s 11 of the IT Act - denial on the ground that it exceeded the number of Indian students permitted in each class, in violation of the approval granted by Min of External Affairs - the issue was crystallised in earlier year in favour of Assessee - exemption allowed - AT
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Set off of carried forward Business losses against the Short Term Capital Gains u/s 72 - the gain on sale of office premises represents profits of business - the brought forward losses are eligible for set-off against short term capital gain on sale of office premises - AT
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Exemption u/s 11 - Trust - it was alleged that the principle activity of the assessee trust was letting out the auditorium with clear profit motive - allegation has not substance - exemption allowed - AT
Indian Laws
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Service of notice through WhatsApp - Defendants who avoid and evade service by regular modes cannot be permitted to take advantage of that evasion - The Defendants must now face the consequences - HC
Service Tax
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CENVAT credit - Landscaping of factory or garden certainly would fall within the concept of modernization, renovation, repair, etc. of the office premises. At any rate, the credit rating of an industry is depended upon how the factory is maintained inside and outside the premises - credit allowed - HC
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Recovery of CENVAT credit - service provided in the State of Jammu and Kashmir - there is no logic or soundness to hold that the inputs/input services used for rendering 'broadcasting service' should be restricted to such as evidenced to have been used for rendering service in the rest of India - AT
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Refund claim - unutilized input service credit - Rule 5 of CCR, 2004 read with N/N. 5/2006-CE - the principle of unjust enrichment is not applicable in the export of services - Further, the appellate order being beyond the scope of SCN is not sustainable - AT
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Refund claim - N/N. 41/2007-ST - invoices do contain basic particulars and co-relation as per the chart furnished by the appellant should be sufficient to consider their claim - procedural infractions cannot take away the substantive benefit in cases where export of goods is established - AT
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Classification of taxable services - Revenue has not been able to identify the specific description which would best fit the activity in the manner sought for in the show cause notice - demand set aside - AT
Central Excise
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The process to which old tyres are subject to produce two or more pieces of cut tyre is not ‘manufacture’ within the meaning of Section 2 (f) of the CE Act. - HC
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Refund claim - unjust enrichment - excess duty paid under the provision of Chewing Tobacco & Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 - The department fails to prove that said excess duty paid lacs was recovered by the assessee from the customers - refund allowed - AT
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Valuation - Once the Sales Tax department has assessed the Sales Tax as paid, the Central Excise department cannot contend that since the State Government has remitted the amount back to the appellants as incentive, Sales Tax was not paid by them - Thus when the sales tax/ Vat is payable at the time of removal in that case in terms of Section 4(d) of the Central Excise Act, the same is not includible in the transaction value - AT
VAT
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Whether the amount paid by the dealer as Entry Tax for bringing the goods within the local area would form part of the turnover of assessee for the purposes of payment of VAT or not? - Held Yes - HC
Case Laws:
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Income Tax
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2017 (5) TMI 193
Rejection of books of accounts - g.p. determination - Held that:- Appellant-assessee had failed to produce the Registers indicating Production, Issuance and Consumption. Thus the view to reject books of account for the Assessment Years 2006-07 and 2007-08 is a possible view on facts. HC order confirmed.[2017 (5) TMI 189 - BOMBAY HIGH COURT].
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2017 (5) TMI 189
Rejection of books of accounts - non maintenance of stock register - Held that:- The grievance of the assessee that mere non maintenance of stock register would not warrant rejection of the books of account putting a reliance upon the decision of this Court in R. B. Bansilal Abirchand Spinning and Weaving Mills v/s. Commissioner of Income Tax, Poona [1969 (3) TMI 17 - BOMBAY High Court ] but in the above case, there is a finding of fact that in view of the nature of industry, it was not practicable or possible to keep account of the stock. In the case before us, it has never been the case before the authorities under the Act or even before us that it was not possible to maintain production register. Therefore, the above submission on behalf of the Assessee has no merits in the context of the present facts. Subsequent Assessment Year 2008-09, the Tribunal on an identical set of circumstances accepted the books of accounts as maintained - Held that:- In view of the distinction in facts as recorded by the Tribunal for the Assessment Year 2008-09, it cannot be said that its order for the Assessment Year 200809 will apply to Assessment Years 2006-07 and 2007-08. The Tribunal has taken to a different view in the Assessment Year 2008-09 on set of facts, completely different from that existing in the Assessment Years 2006-07 and 2007-08. Thus inapplicable. In our view, the concurrent finding of facts rendered by the authorities under the Act that the appellant-assessee had failed to produce the Registers indicating Production, Issuance and Consumption. Thus the view to reject books of account for the Assessment Years 2006-07 and 2007-08 is a possible view on facts. Therefore it cannot be said to be perverse and/or arbitrary. - Decided against assessee Addition to income - gross profit @ 27% for Assessment Year 2006-07 and 22% for Assessment Year 2007-08 estimated - Held that:- In this case, the estimate has been arrived at on the basis of the material on record and also various statements made by the employees and directors during search and survey proceedings. In fact, the Apex Court in Brij Bhushan Lal Praduman Kumar etc. v/s. CIT [1978 (10) TMI 2 - SUPREME Court] itself clearly lays down that when best judgment Assessment is done, to some extent there would be element of guess work and so far as estimate is relatable to some evidence or material, it cannot be said that the estimate, is perverse and/or wild. Thus, there is no merit in the above submission on behalf of the Appellant-assessee. Whether the statement made by the employees/ director during the course of search and survey cannot be the basis for arriving at undisclosed income of the Assessee? - Held that:- CBDT Circular dated 10th March, 2003 would not be applicable to the present facts. The Circular was issued when it was brought to the notice of the CBDT that the assessees were forced to confess to undisclosed income during the course of a search. This forced confession formed the basis attributing undisclosed income to the assessee in absence of any credible evidence in support of the confesion. In the present facts, the statement which are made by the employees were indubitably voluntarily made and not forced. The subsequent retraction was not found acceptable by the Authorities. These are questions of appreciation of facts and unless the nonacceptance of retraction is shown to be perverse no interference in the present facts is called for. - Decided against assessee.
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2017 (5) TMI 172
Did the ITAT fall into error in holding that the surrender made by the assessee in the course of the survey and confirmed two months later in writing, was deserved to be deleted in the circumstances of the case for lack of any corroborative material? - Held that: - The Court is not satisfied that the retraction made by the Assessee two years after the declaration was bonafide. There was no satisfactory explanation for not including the said amount in the return of income filed by the Assessee on 26th September, 2009 - there was no justification whatsoever for the ITAT to have deleted the additions made by the AO which were upheld by the CIT(A) - appeal allowed - decided in favor of Revenue.
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2017 (5) TMI 171
Service of notice - whether sending of a notice under Section 148 of the Act to the addressee at his correct address by registered post would be deemed to be served, if not returned undelivered and would be sufficient service for the purposes of Section 148 of the Act and reassessment proceedings? - Held that: - In view of the Section 27 of General Clauses Act, since the notice under Section 148 of the Income Tax Act was admittedly sent to the respondent-assessee by registered post at his proper address and the same was not returned unserved, a presumption of service of the said notice arises. After the service of the notice as aforesaid, proceedings under Section 142 were drawn and notice under Section 142(1) was issued to the respondent-assessee on 23.01.2002. In respect to the said notice, the respondent-assessee filed reply on 04.02.2002 and claimed that he had not received any notice under Section 148 of the Act - The filing of the aforesaid reply by the respondent-assessee reveals that he actually had the knowledge of the notice under Section 148 of the Act. Moreover, as desired by him, the reasons for issuing the notice under Section 148 of the Act were communicated to him as is evident from the order-sheet entry dated 05.03.2002. A notice sent by post to the addressee at his proper address would be deemed to have been delivered to him in the ordinary course, if not returned undelivered and such service is sufficient even for the purposes of Section 148 of the Act. Appeal allowed - decided in favor of Revenue.
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2017 (5) TMI 170
Exemption u/s 11 - the loan was given without interest to the person referred to in section 13(3) which is in contravention to the provisions of section 13(2)(a) of the Income Tax Act, 1961 - whether the assessee has contravened the provisions of section 13(1)(c) and 13(3) of the Income Tax Act, 1961 or not? - Held that: - similar question in respect of A.Y. 2001-02 arisen from same judgment was considered by this Court in Income Tax Appeal No. 142 of 2007 and has been answered in favor of Revenue and against the Assessee - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 169
Exemption u/s 11 of the IT Act - denial on the ground that it exceeded the number of Indian students permitted in each class, in violation of the approval granted by Min of External Affairs - Held that: - We are surprised that the Ld.CIT(A) upheld the order of A.O on the issue of admission of Indian students over and above the prescribed limits, without noticing the order of her predecessor, which was accepted by Revenue in that year. Since this issue was already crystallised by the order of CIT(A) in earlier year, We are of the opinion that A.O was precluded in making that as an issue in the Assessing Order in this year. Ld. CIT(A) should have followed the predecessor order on the issue, rather than relying the consequential order passed by A.O on wrong appreciation of facts. Since, this issue is no longer required to be adjudicated, as it was crystallised in earlier year in favour of Assessee, we have no hesitation in setting aside the order of A.O and CIT(A) on this issue and allow the grounds of Assessee - appeal allowed - decided in favor of assessee.
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2017 (5) TMI 168
Exemption u/s. 54EC of the I.T. Act, 1961 - investment in REC Bonds - Whether the first proviso to Section 54EC(1) would restrict the benefit of investment of capital gains in bonds to that financial year during which the property was sold or it applies to any financial year during the six months period? - Held that: - Hon’ble Madras High Court has elaborately considered this issue in the case of CIT vs. C. Jaichander [2014 (11) TMI 54 - MADRAS HIGH COURT] has held that Section 54EC(1) of the Act restricts the time limit for the period of investment after the property has been sold to six months. There is no cap on the investment to be made in bonds - assessee is eligible for exemptions as per the extant provision of Section 54EC for the whole of the amount of Rs. One Crores invested - it was permissible on the part of assessee to make investment of ₹ 1 crore split into ₹ 50 lakh each in two financial years that is on 21.01.2011 and 06.07.2011 respectively - appeal dismissed - decided against Revenue.
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2017 (5) TMI 167
Set off of carried forward Business losses against the Short Term Capital Gains - Scope of section 72 - Held that: - section 72 of the Act prescribes set-off of unabsorbed business loss against the profits and gains of any business or profession carried on by the assessee and assessable for that assessment year - the objection of the Assessing Officer that the gain on sale of office premises was assessable as short term capital gain is of no avail to deny the set-off envisaged under section 72 of the Act because in commercial sense, the gain on sale of office premises represents profits of business - the brought forward losses are eligible for set-off against short term capital gain on sale of office premises - decision of CIT(A) upheld. Allowance of expenses - professional fees, ROC, Audit fees and Tax Audit fees - Whether the Ld. CIT(A) was correct in allowing expenses of professional fees, ROC, Audit fees and Tax Audit fees of ₹ 1,18,772/- against income from other sources even though there was no business activity during the year and ROC expenses claimed pertains to prior period? - Held that: - the CIT(A) has noted that the impugned expenses are statutorily required to be incurred and, therefore, the same was allowable. In our considered opinion, the CIT(A) made no mistake in allowing the claim of the assessee because even in the absence of regular business activity, such expenses are required to be statutorily incurred and, therefore, the same are allowable against the assessed income - decision of CIT(A) upheld. Appeal dismissed - decided against Revenue.
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2017 (5) TMI 166
Validity of reassessment proceedings - the claim of the assessee U/s 54F was in respect of long term capital gain arising on the sale of plot, has been disallowed - claim of AO is that AO came to know that the assessee was having two residential properties - The ld AR of the assessee has categorically stated that the assessee is not having any residential property at Bayana. The figure mentioned in the balance sheet was a mistake of the accountant - Held that: - It is noticed that the balance sheet submitted for the year ending of 31/3/2008 relevant to assessment year 2008-09 has shown house property - However, the balance sheet filed for preceding year i.e. 31/3/2007 relevant to assessment year 2007-08, the assessee has shown two house properties one located at Bayana and another at Jaipur - Assessing Officer was justified in reopening the assessment proceedings I find it appropriate to restore the issue back to the file of the Assessing Officer. The Assessing Officer shall investigate with regard to the claim of the assessee that he is not having any property at Bayana and after ascertaining the correct fact, the Assessing Officer shall decide the issue accordingly in accordance with law - appeal allowed by way of remand.
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2017 (5) TMI 165
Addition on account of bogus purchases - Held that: - when the AO not doubting the sales cannot disallow the entire purchases without giving detailed findings. At the most GP on the said purchases could be brought to tax which has already been done by applying 2% of the amount of total alleged bogus purchases - the order of the ld.CIT(A) upholding the entire purchases which according to the facts on records were duly entered in the stock register and subsequently sold cannot be sustained - the order of ld.CIT(A) on this issue is set aside and AO directed to delete the addition on account of bogus purchases, whereas the disallowance made on account of GP is sustained to cover possible leakage of revenue. Disallowance of Interest under rule 8D(2)(ii) of the Rules - expenditure at the rate of 0.5% of the average investment u/s 14A of the Act read with rule 8D(2)(iii) of the Rules - disallowance - Held that: - the assessee‟s own funds were ₹ 3,89,28,953/- whereas the investments made by the assessee in shares and securities were ₹ 1,25,15,918/- as per the balance sheet as on 31.3.2010 - in view of the ratio laid down in the case of HDFC Ltd [2014 (8) TMI 119 - BOMBAY HIGH COURT], wherein the Hon'ble Jurisdictional High Court has clearly held that the when the assessee own funds are more than the investments made in the shares and securities made out of own funds, there is no need to disallow the expenditure u/s 14A of the Act r.w.r.8D of the Rules - the disallowance of ₹ 48,202/-made under section 14A of the Act read with rule 8D(2)(iii) of the Rules, is sustained. Appeal allowed - decided partly in favor of assessee.
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2017 (5) TMI 164
Repair and maintenance of premises taken on lease - to be treated as revenue expenditure or capital expenditure? - Held that: - the premises in which the repairs and maintenance were carried out by the assessee were taken on rent and it would be against the basic principle of accountancy and provision of law to treat the said expenditures incurred on repairing and maintenance as capital nature - appeal allowed. Addition on account of unclaimed credit balances - Held that: - The ld. AR submitted before us that the said amounts were to be adjusted in the subsequent years and were actually adjusted and therefore should not be added to the total income of the assessee. In our opinion, this matter requires fresh verification at the end of the AO and therefore the same is being remanded to the file of the AO - matter on remand. Advances written off under the head computer expenses - disallowance - Held that: - the assessee has given advances for purchase of computer software which was to be used by the assessee for the purpose of carrying is business smoothly and more efficiently. We find that now it is settled legal position of law that any advances or any expenditure incurred on computer software to be used for the purpose of business were to be in the nature of business expenditure and has to be written of in the year of purchases - amount allowed. Appeal partly allowed and part matter on remand.
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2017 (5) TMI 163
GP estimation - non maintaining of proper books of accounts - Held that:- The lower authorities have rightly invoked the provisions of Section 145(3) of the Act for not maintaining the qualitywise quantitative details of dhania and hence the gross profit rate was not verifiable from the records. As regards confirming the addition of ₹ 3,72,233/- by the ld. CIT(A) estimating the gross profit rate at 3% by taking into consideration the assessment order and submissions of the assessee before him, the Bench feels that in order to maintain equity and justice the lumpsum addition of ₹ 2.00 lacs (Rs. Two Lacs) only is sustained. Thus the appeal of the assessee is partly allowed.
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2017 (5) TMI 162
Rectification proceedings carried out u/s. 154 - non-service of rectification notice - Held that:- Issuance of notice or handing over the notice to the dispatch section is not sufficient. Unless and until a notice is served upon the assessee or is returned back by the postal authorities with comments of refuse to receive, it cannot be presumed that notice was served upon the assessee. In the absence of a valid service of notice, all other proceedings would be vitiated for not following the basic principle of natural justice. Only on this count the order of the FAA deserves to be reversed. However, we find that the order passed by the AO u/s. 143(3) of the Act became final after the judgment of the Hon’ble High Court of Bombay wherein it had upheld the order of the Tribunal wherein the revisionary proceedings, initiated by the CIT, u/s. 263 of the Act, were set aside. As a result, the claim made by the assessee for carry forward and set off of unobserved loss/ depreciation had to be allowed. Thus, the AO had wrongly held that no depreciation was available in the AY. 2003-04, that the unabsorbed loss/depreciation was being carried forward from the earlier years. Thus order passed by the FAA has to be reversed. - Decided in favour of assessee.
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2017 (5) TMI 161
Addition u/s 14A read with rule 8D - disallowance u/r 8D(2)(iii) made suo-moto by the assessee in the return of income at 0.5% of average investments and reiterated by AO in the assessment order - Held that:- AO accepted the disallowance computed by the assessee in the return of income. This being the position, we find that what the assessee is seeking, at the most, is rectification of mistake made by the assessee in the return of income for which separate procedure / remedy has been provided in the Act. The calculation made by assessee as well as AO were made as per the formulae prescribed u/r 8D(2)(iii) @0.5% of average investments. Even on merits, we find that the investment made by the assessee during impugned AY substantially rose from ₹ 0.22 crores as on 31/03/2010 to ₹ 52.24 Crores as on 31/03/2011 and it is hard to accept that such huge investments did not entail even a single rupee of expenses in terms of manpower / administrative resources. No distinction has been made between strategic and non-strategic investments. The Ld. AR has contested that the disallowance could not be made as the assessee did not earn any dividend and secondly, the investments were strategic and placed reliance various judicial pronouncements in this regard placed in the paper book. However, we have already noted that Rule 8D(2)(iii) uses the expression ‘shall not form’ which shows that the factum of actual receipt of dividend is not material so as to attract this disallowance. - Decided against assessee. Computation of book profit u/s 115JB - Held that:- Since, we have already dismissed the assessee’ appeal on the issue of disallowance u/r 8D(2)(iii), the same being, consequential in nature, also gets dismissed. To summarize, whatever disallowance has been suffered by assessee u/s 14A read with Rule 8D, corresponding adjustment thereof shall also be made in Book Profit u/s 115JB.
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2017 (5) TMI 160
Penalty u/s 271(1)(c) - the actual sale consideration was lesser than the value adopted by the Stamp Valuation Authority - Held that:- The Revenue has not brought any material on record suggesting that the assessee had received actual consideration as adopted by the Stamp Valuation Authority. Therefore, we do not see any reason for taking a different view as adopted by the Co-ordinate Benches of this Hon’ble Tribunal, at the Hon’ble Calcutta High Court in the case of CIT vs. Madan Teatres Ltd.[2013 (6) TMI 96 - CALCUTTA HIGH COURT]. We therefore direct the Assessing Officer to delete the penalty. - Decided in favour of assessee
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2017 (5) TMI 159
Addition of unexplained income u/s 68 - amount received as cash deposits - assessee claims that it had received trading deposits - it was found by the AO that assessee is giving conflicting statements as some time the assessee is claiming to be sub-broker and while some time the assessee was claiming that he is not sub-broker but trader in shares - Held that: - the confirmations from these creditors carrying name, address and PAN were filed but copies of tax-returns of these creditors were not filed by the assessee - all these confirmations from creditors filed by the assessee need verification by the authorities below so as to ensure that mandate of Section 68 of 1961 Act was fulfilled - appeal allowed by way of remand.
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2017 (5) TMI 158
Rectification of mistake - brought forward losses and depreciation rejected - Held that:- We are of the opinion, that the F AA was not justified in rejecting the claim made by the assessee. He has also accepted that in the competition of income the assessee has shown income at Rs nil. As per the settled principles of taxation jurisprudence the Department is entitled to collect due taxes only and that due taxes arise from taxable income. In the case under consideration the assessee had inadvertently, in the return of income, disclosed some income that had not accrued/arisen to it. In the circumstances, after-the-fact was brought to the notice of the revenue authorities, there was no justification to levy any taxes. Claim made by the assessee before the FAA should have been allowed after verification. Therefore, in the interest of Justice, we are restoring that the issue to the file of the FAA, who would verify the veracity of the claim made by the assessee. If it is found that claim made by the assessee about brought forward losses and the depreciation was in order considering the earlier years returns of income, the appeal filed by the assessee should be allowed. The assessee is directed to extend full cooperation to the FAA. Effective ground of appeal is allowed in favour of the assessee, in part.
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2017 (5) TMI 157
Business loss - Disallowance of amount written off towards 380 sq.ft of transferable development rights as the same were not recovered and has become bad - Held that:- The partner in the assessee firm brought these TDR’s into the firm as its capital contribution and was treated as part of stock in trade over the years before being written off during the year. We are not in agreement with the conclusion the first appellate authority on this issue that claim of the assessee remained unsubstantiated. In our considered view the assessee has to be allowed write off of the said TDR when it finally became bad. But finding merit in the arguments of ld.DR that the documents relating to TDR were not before the AO and the matter should be restored back to AO for verification of claim of the assessee on the basis of the said papers. Therefore, it would be in the interest of justice, if the order of the FAA is set aside and the AO is directed to consider the issue of allocation of TDR denovo with fair and reasonable opportunity of hearing to the assessee. Accordingly, we set aside the order of Id. CIT(A) and direct the AO to decide the issue on the basis of material available on record and also evidence as supplied by the assessee in the set aside proceedings and allow the claim of the TDRs were found to be brought in by the partner as capital contribution. - Appeal of the assessee is allowed for statistical purposes.
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2017 (5) TMI 156
Disallowance of claim u/s 54F of the Income Tax Act, 1961 - capital gains which was deposited in capital gain account - As per the Assessing Officer, the assessee has not utilized the capital gain till the stipulated period of three years expired on 31.01.2015 - The assessee claims that since there was a dispute on the property in J.P Nagar and therefore the assessee could not carryout the construction on the said plot and accordingly the assessee has offered the capital gain in the Assessment Year 2013-14 - Held that: - It is pertinent to note that in case the assessee could not invest the amount for purchase of new residential house or construction of new residential house before the date of furnishing the return of income, the amount shall be deposited by him in the capital gain account for availing the deduction under Section 54/54F of the Act - The consequence of non-utilisation of the capital gain within period of three years would lead to assessment of the capital gain to tax in the assessment year relevant to the previous year in which the three years expires. It is neither the discretion of the assessee nor the discretion of the Assessing Officer to assess the said amount to capital gain tax in the assessment year other than the year as provided in Section 54/54F and particularly as per proviso to sub-section (4) of the said section so long the amount is deposited in Capital Gain Account. Thus the addition made by the Assessing Officer for the year under consideration is not sustainable and the same is deleted. Appeal allowed - decided in favor of assessee.
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2017 (5) TMI 155
Set-off of unabsorbed depreciation - scope of rectification u/s 154 - whether the unabsorbed depreciation, which remained to be adjusted beyond Assessment Year 2001-02, be allowed to set off in perpetuity or the maximum period is 8 years? - Held that- whether or not the amendment to Sec. 32 of the Act, has prospective or retrospective effect on the application of the current year’s depreciation and unabsorbed business loss and depreciation for the purpose of computation of income tax, is a disputed question of law and the Hon’ble Supreme Court in the case of T.S. Balram vs Wockhardt Brothers [1971 (8) TMI 3 - SUPREME Court] has held that such disputed questions do not fall in the category of ‘mistake apparent from record’, as such, such matters will not be available for rectification u/s 154 of the Act. Placing reliance on the decision of the jurisdictional High Court in the case of General Motor India [2012 (8) TMI 714 - GUJARAT HIGH COURT], the ld. CIT(A) held that Any unabsorbed depreciation available to the assessee on 1st day of April 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001, and once the Circular No. 14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y 1997-98 upto the A.Y 2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever. The ld. CIT(A) was perfect in his reasoning basing on the binding precedents and we do not see any illegality or irregularity in the finding reached by ld. CIT(A) on this aspect - appeal dismissed - decided against Revenue.
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2017 (5) TMI 154
Validity of rectification order - prayer for one more opportunity of being heard - The assessee has claimed that reply was duly filed before the AO in rectification proceedings u/s 154 of 1961 Act, which was brushed aside and not considered by AO before passing rectification orders dated 04-05- 2012 u/s 154 of 1961 Act. The assessee also produced detailed reply on merits before the learned CIT(A) in the appellate proceedings and requested for remanding the matter before the AO for consideration of its reply on merits, which again was not considered by learned CIT(A) on merits and order of the AO was merely confirme - Held that: - The taxes can only be collected as per authority of law and if any mistake has crept in the tax-audit report and the assessee comes forward with a bonafide reply, it is the bounden duty of the authorities to consider such reply on merits so that correct taxes can be collected from assessee. It cannot be simply brushed aside at threshold itself without considering the same on merits - the issues under this appeal need to be set aside and restored to the file of the A.O. for de novo determination of the issues on merits after considering the explanations and evidences submitted by the assessee on merits - appeal allowed by way of remand.
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2017 (5) TMI 153
Exemption u/s 11 - Trust - it was alleged that the principle activity of the assessee trust was letting out the auditorium with clear profit motive - denial of amended provisions of section 11 - Held that: - The issue is covered by the decision of Hon’ble High Court of Delhi in assessee’s own case vide judgment in ITA No.499/2012 dated 05.11.2012 for the assessment year 2008-09 [2012 (9) TMI 1095 - DELHI HIGH COURT], where it was held that In view of the fact that the previous orders in which the claim for the assessee to be a charitable trust was upheld, we do not see any reason to interfere with the impugned order in this aspect - appeal dismissed - decided against assessee.
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Service Tax
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2017 (5) TMI 192
Recovery of CENVAT credit - service provided in the State of Jammu and Kashmir - According to the impugned order, they were, in the circumstances of exclusion, permitted to discharge only 20% of the taxability by recourse to CENVAT credit for the period from 2006-07 to 2007-08 and the excess credit utilised was sought to be recovered - contention of assessee was that tax that was not leviable cannot be subject to circumscribing provisions of the tax laws and, even if it does, should not impinge upon the benefits of legislation flowing to assessees. Held that: - As the Finance Act, 1994 does not extend to State of Jammu and Kashmir, output services provided there are not subject to tax. However, in the matter of rendering such service, it is moot whether the provision of services to the excluded territory required additional use of input/input services. Nor is it the case of the tax authorities that the scale of services rendered in the rest of India could have been achieved by isolating a portion of the inputs/input services as attributable to services rendered in the State of Jammu and Kashmir. In such a situation, there is no logic or soundness to hold that the inputs/input services used for rendering 'broadcasting service' should be restricted to such as evidenced to have been used for rendering service in the rest of India. In these circumstances the availment the CENVAT credit to the full extent cannot be questioned. It's utilisation thereof cannot also be restricted. As the entire quantum of input services would be required to provide the taxable service, the scope for delineating that pertaining to the exempt service cannot be said to exist. Legislative intent would appear to have been targeted at precluding the utilisation of CENVAT credit that would not be available had the assessee restricted itself to taxable output services. There is no justification for invocation of rule 6(3) of CCR, 2004 to disallow any portion of the availed credit - appeal allowed - decided in favor of assessee.
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2017 (5) TMI 191
Classification of taxable services - Business auxiliary service - site formation and clearance service - mining service - supply of tangible goods service - Held that: - Even if the work executed for M/s Hindustan Construction Corporation Ltd did incorporate procurement of machinery, there is no evidence furnished by Revenue to support their contention that the activity did not extend beyond such procurement - Revenue has not been able to identify the specific description which would best fit the activity in the manner sought for in the show cause notice. Furthermore, the manner in which the other activities, i.e. ‘business auxiliary service’ and ‘supply of tangible goods service’ are not covered by 'transportation of goods service' has not been established by Revenue - We are, therefore, unable to find any justification for interfering with the demand that was dropped in the impugned order - appeal allowed - decided in favor of assessee.
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2017 (5) TMI 188
CENVAT credit - house keeping service - land scaping service - Held that: - this Court in similar circumstances held that cenvat credit would be available to an Assessee with respect to house keeping and land scaping services - reliance placed in the case of Commissioner of Central Excise, Bangalore II Vs. Millipore India Pvt Ltd. [2011 (4) TMI 1122 - KARNATAKA HIGH COURT], where it was held that Landscaping of factory or garden certainly would fall within the concept of modernization, renovation, repair, etc. of the office premises. At any rate, the credit rating of an industry is depended upon how the factory is maintained inside and outside the premises - credit allowed - decided in favor of assessee.
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2017 (5) TMI 187
Classification of service - construction activities - classified under the category of Works contract service under the categories of Commercial or Industrial Construction Service/Residential Complex Services - Held that: - The contracts executed by the respondent were involving supply of materials subjected to sales tax liability. The Original Authority held, on perusal of the contract agreements, that all are contracts with materials. In such factual background there can be no service tax liability on these contracts for the period prior to 1.6.2007 - issue of classification of services rendered by the respondent under construction services or under finishing services is no more relevant - appeal dismissed - decided against Revenue.
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2017 (5) TMI 186
Refund claim - unutilized input service credit - Rule 5 of CCR, 2004 read with N/N. 5/2006-CE dated 14.3.2006 - unjust enrichment - Held that: - it has been clearly held that the principle of unjust enrichment is not applicable in the export of services - the impugned order has clearly travelled beyond the show-cause notice and the Order-in-Original and the appellant has been put into a worse off situation than originally he was because of the Order-in-Appeal - appeals are allowed by way remand to the original authority to decide and quantify the refund claim - matter remanded.
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2017 (5) TMI 185
Business Auxiliary Services - service of selling of lottery tickets to State of Nagaland and Manipur alongwith other services like issuing invoice, settling the accounts and collecting the money etc - whether the services fall under the category of Business Auxiliary Services or not? - Held that: - had the case been a case of provision of lottery service after 16.5.2008 because from that date, any service provided in relation to promotion or marketing of lottery tickets etc. has been made taxable. But that is not the case in the present appeal. This appeal relates to prior period - reliance placed in the case of Union of India Vs. Martin Lottery Agencies Ltd. [2009 (5) TMI 1 - SUPREME COURT OF INDIA], where it was held that after introduction of explanation to the section 65(19) [Meaning of Business Auxiliary Service] service tax may be levied after May 2008 - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 184
Refund claim - export of rice - N/N. 41/2007-ST - denial on the ground of lack of supporting evidence and co-relation of document submitted by the appellant - Held that: - There is no rejection based on any legal issue and it is found that the appellants have submitted a chart containing details like invoice number, date, shipping bill number, load port details, description of goods, service providers details, tax paid etc - the rejection of refund claims appears to be made on a summary basis. Admittedly, invoices do contain basic particulars and co-relation as per the chart furnished by the appellant should be sufficient to consider their claim - procedural infractions cannot take away the substantive benefit in cases where export of goods is established. The lower authorities did not examine all the supporting documents submitted by the appellant. It is to be noted here that the decided cases dealing similar set of facts and Board’s clarifications were also to be considered before deciding on the eligibility of the appellant for the claims - appeal allowed by way of remand.
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Central Excise
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2017 (5) TMI 183
Manufacture - Whether the process to which old tyres are subject to produce two or more pieces of cut tyre is ‘manufacture’ within the meaning of Section 2 (f) of the Central Excise Act, 1944? - Held that: - Even where an entire unit is set up for the purposes of converting old and used tyres into pieces of cut tyres, the essential character remains the same. Used tyres and tubes remain as such even after they are cut into pieces. They do not undergo any transformation so as to amount to 'manufacture' within the meaning of Section 2 (f) of the CE Act - the mere classification of old and used tyres under Tariff Entry No. 4012 or Tariff Item No. 4004 with the rate of duty at 12.5% would not mean that the process by which the scrap rubber was obtained from old tyres amounted to manufacture. With the first limb of the 'two-fold' test, i.e. 'manufacture', not being satisfied, the question of examining whether they become excisable as a result of their marketability does not arise - The process to which old tyres are subject to produce two or more pieces of cut tyre is not ‘manufacture’ within the meaning of Section 2 (f) of the CE Act. Whether the decision of this Court in Modi Rubber Limited v. Union of India [1986 (12) TMI 41 - HIGH COURT OF DELHI AT NEW DELHI] requires to be reconsidered? - Held that: - There can be no manner of doubt that by referring to the decision of Modi Rubber Limited v. Union of India and thereafter coming to the conclusion that cinder was not 'manufactured', the Supreme Court in Union of India v. Ahmedabad Electricity Co. Limited [2003 (10) TMI 47 - SUPREME COURT OF INDIA] impliedly approved the decision of this Court in Modi Rubber Limited v. Union of India, where it was held that Excise duty is an incidence of manufacture and, therefore, it is essential that the product sought to be subjected to excise duty should have gone though the process of manufacture. Cinder cannot be said to have gone through any process of manufacture, therefore, it cannot be subjected to levy of excise duty. - The decision of this Court in Modi Rubber Limited v. Union of India does not require to be reconsidered. Petition allowed - decided in favor of petitioner.
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2017 (5) TMI 182
Stay application - the Division Bench of the Tribunal which is required to adjudicate the appeal and decide the stay application filed by the petitioners, is not available, the stay application filed by the petitioners is not being heard and decided - It is the case of the petitioners that if the bank guarantee is invoked and the bond is enforced, the stay application filed by the petitioners before the Tribunal would be rendered infructuous - Held that: - in the absence of the Division Bench of the Tribunal, the petitioners for no fault of their own, cannot be rendered remediless. Under the circumstances, the court is of the view that the interests of justice would be served if the petition is disposed of with a direction that till the stay application filed by the petitioners is heard and decided by the Tribunal, the respondents shall not enforce condition No.1 of paragraph-8 of the impugned order - petition allowed - decided in favor of petitioner.
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2017 (5) TMI 181
Refund claim - excess duty paid under the provision of Chewing Tobacco & Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 - denial on the ground of unjust enrichment - Held that: - when the Appellant has produced their ledger account and they are showing excess duty payment as debts or money receivable from Revenue and this fact has further been supported by the Certificate of the Chartered Accountant, then It seems that there is no question of any further proof required to be submitted by the Appellant - The department fails to prove that said excess duty paid of ₹ 24 lacs was recovered by the assessee from the customers. Thus, the said excess burden of duty was not passed on to the customers by the Appellant - refund allowed - decided in favor of assessee.
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2017 (5) TMI 180
Refund claim of credit already reversed - irregularly availed CENVAT credit - whether removal of inputs/capital goods or for that matter inputs/capital goods which were removed from the factory by assessee, had been done on reversal of modvat credits as liable and whether in respect of other impugned goods, they had indeed been released for manufacturing process or otherwise lying unused in the factory premises for reasons of obsoleteness? Held that: - Both sides agree that the quantum of inputs and capital goods are very huge in number and consequently, the connected documents/records thereof are also voluminous. This forum definitely does not have wherewithal to examine all these documents individually and in detail to prove or disprove assertions of the assessee/Revenue. 14. It would therefore in the fitness of things that the matter is remanded back to the original authority involved in these three appeals for causing such verification afresh - It is further made clear that since refund claims are allowed in the earlier proceedings totaling to around ₹ 12 lakhs and the assessee has not pressed for the balance amount of ₹ 14,12,184/-, the second amount will also be considered as not being contested with to the demand preceding the case - appeal allowed by way of remand.
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2017 (5) TMI 179
Reversal of cenvat credit u/s 6 of CCR - removal of packing material separately without payment of duty - Whether the appellant are not required to pay 10% of the value of exempted goods - the appellant have reversed proportionate Cenvat Credit availed on input services attributable to final exempted goods - Difference of opinion The matter be placed before the Hon'ble President to appoint 3rd Member to resolve the issue.
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2017 (5) TMI 178
CENVAT credit - job work - eligible input - furnace oil procured and delivered to the factory of manufacture but transferred to job worker to produce and supply ‘steam’ required in the factory of the appellant - denial on the ground that the place of production of ‘steam’ is not the factory of production for which furnace oil had been procured and, hence, not in compliance with the definition of input in rule 2(k) of CCR - Held that: - appellants had, in their reply, asserted that coal is the fuel used in the boiler at the premises of the sister unit and, hence, the utilisation of furnace oil at the premises of associate unit in the process is itself in question - also, job work does not apply to production of consumables to be used by the appellant owing to the definition of ‘job work' in rule 2(n) of CCR, 2004 - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 177
Valuation - claim of Refund of excess duty paid - recovery of sales tax amount/ VAT amount and to retain with themselves as an incentive - case of Revenue is that as per the provisions of Rule 6 of Central Excise Valuation Rules, 2000 read with Section 4 (1) and 4 (3) (a) (d) of the Central Excise Act, 1944 and Para 10 and 11 of Board’s Circular No M.F. (DR) F.No.354/81/2000 - TRU dt. 30.06.2000 the amount of sales tax retained by the Respondent as an incentive was required to be added/considered for levy of Central Excise duty as an additional consideration. Rejection of refund claim on the ground that the Sales tax was collected by the Respondent from their customers and retained by them. That since the said amount was not actually payable, the same is liable to be included in assessable value and is liable for duty. Held that: - the tax was actually payable and there was as such no blanket exemption from sales tax. The term “remission” from sales tax itself means that the sales tax was actually payable at the time of clearance of goods but was remitted at a later date by passing of assessment orders by the Sales Tax authorities - the “sales tax” is “actually payable” to the government at the time of removal of goods from the “place of removal”. The liability to pay the sales tax/ Vat is not extinguished at the time of removal of goods since it is not exempted from sales tax/Vat. It is only after the assessment of the sales tax officer and subject to the condition that the Respondent’s liability to the Sales tax is “remitted”. Thus when the sales tax/ Vat is payable at the time of removal in that case in terms of Section 4 (d) of the Central Excise Act, the same is not includible in the transaction value. Further the sales tax amount was adjusted against the remission granted by the sales tax authority under an assessment. Once the Sales Tax department has assessed the Sales Tax as paid, the Central Excise department cannot contend that since the State Government has remitted the amount back to the appellants as incentive, Sales Tax was not paid by them. Hence, we find that once the Sales Tax department assessed the Sales Tax as paid, the condition of Section 4(3)(d) of the Central Excise Act, 1944 stands fulfilled. In case of exemption no tax is actually paid or actually payable, whereas in the case of remission, tax is actually payable and paid which is allowed to be remitted by way of retention or by way of refund - In the instant case, it is not that Sales Tax was not only payable but in fact it stood actually paid, as the remission was nothing but the incentive or capital subsidy which the State Government granted with respect to the investment made by the appellants in the earthquake ravaged region of Kutch of State of Gujarat. Instead of recovering Sales Tax and then refunding the same as capital subsidy, the State Government had remitted the same to appellants. Consequently like CST since VAT which was payable was actually paid the same is required to be excluded from the transaction value. Hence for this reason also the sales tax remitted by the Government towards incentive of Capital investment cannot be a part of the transaction value. Appeal dismissed - decided against Revenue.
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2017 (5) TMI 176
Clandestine removal - parallel invoices - entries in ISI register - demand of duty with interest and penalty - Held that: - the demand on account of shortage on finished goods and raw material used in manufacture of clandestine removal of goods of ₹ 67,660/- and ₹ 1,14,571/- respectively are not sustainable - As the short found goods have been cleared on the strength of parallel invoices/entries made in shipra note book and no other positive evidence has been produced by the Revenue for clearances of the finished goods found short and raw material found shortage used in manufacturing of the finished goods. As the appellant has cleared two or three times more than of the quantity entered in ISI register , therefore, the entries made in ISI register cannot be the basis of the demand of duty on account clandestine clearance of the goods. Penalty - Held that: - As the appellant has paid an amount of ₹ 4 lacs during the course of investigation itself. In that circumstances, the penalty is reduced to 25% of the duty confirmed on the main appellant which shall be payable by the appellant within 30 days of the receipt of this order failing which the appellant shall be liable to pay 100% of the duty confirmed as penalty. Penalties on directors - Held that: - without the knowledge of the directors, the goods cannot be cleared clandestinely, therefore, the penalties on both the directors are sustainable. Appeal allowed - decided partly in favor of appellant.
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2017 (5) TMI 175
Clandestine removal - recovery of the floppy from residence of an employee of one of the group companies, Id. counsel is directed to quantify the liability. Certain incrimination materials were recovered from one of the employees - Held that: - adjudication order was passed long back on 12.04.2007. Aforesaid aspects directed need verification for further examination on the next date of hearing - Revenue is directed to examine thoroughly the quantification aspect as against each incriminating material found during search - matter on remand.
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CST, VAT & Sales Tax
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2017 (5) TMI 174
Whether the amount paid by the dealer as Entry Tax for bringing the goods within the local area would form part of the turnover of assessee for the purposes of payment of VAT or not? Held that: - By virtue of Explanation 5 to the definition of "sale price", it is apparent that only the tax charged or chargeable is not to form part of sale price. The amount of Entry Tax paid by the dealer while bringing goods within local area is not liable to be collected from the purchaser, and would not fall within purview of Explanation 5, and thereby would be included in the definition of 'sale price' as contained under Section 2(ad) of the Act - the amount of Entry Tax paid would constitute part of "turnover of sale" so as to render the dealer liable to pay tax upon it under the U.P. VAT Act - revision dismissed - decided against assessee.
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2017 (5) TMI 173
Seizure of goods - deposit of security to the extent of tax liable to be paid on such goods - It is also pointed out by Revenue that the revisionist is an unregistered dealer in the State, which has sold goods within the State of U.P., with an intend to evade payment of tax - Section 3 (b) of the Central Sales Tax Act, protection whereof is claimed by the assessee to defend movement of goods - Held that: - The prima facie observation of the Tribunal have however not been shown to be vitiated by any error of law or perversity. Once that be so, the revisionist would be treated to be unregistered dealer in the State, and is found to have sold goods within the State without payment of tax. In such circumstances, the order of seizure cannot be said to be unjustified. The revisionist, would therefore be required to protect the interest of revenue in terms of Section 48 (7) of the Act - the order of the Tribunal is modified, inasmuch as the release of goods would be allowed to the revisionist, if it furnishes cash security to the extent of amount payable towards tax - revision allowed - decided partly in favor of revisionist.
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Indian Laws
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2017 (5) TMI 190
Service of notice through WhatsApp - Suit seeking injunction in respect of the Kannada film Pushpaka Vimana, already been released - Held that:- Defendants who avoid and evade service by regular modes cannot be permitted to take advantage of that evasion - The Plaintiffs have given the Defendants every opportunity to appear - Where an alternative mode is used, however, and service is shown to be effected, and is acknowledged, then surely it cannot be suggested that the Defendants had ‘no notice - Vikhyat in particular does not seem to have cottoned on to the fact that when somebody calls him and he responds, details can be obtained from in-phone apps and services, and these are very hard to either obscure or disguise. There are email exchanges. There are message exchanges. None of these to my mind establishes that the Defendants are not adequately served. - The Defendants must now face the consequences. There is material prima facie to show that the Kannada film is a copy of the original Korean film. Paragraph 3.12 of the plaint has details. It quotes, inter alia, Vikhyat as admitting that he ‘adapted’ the screenplay of the Korean film for the Kannada film. There are fifteen separate instances of such admissions and corroborating material set out in that paragraph. Prima facie, Dr Saraf is correct in saying that the Kannada film is a colourable imitation of the Korean original. The Kannada film has been released and there is also a possibility that the Defendants have even made a telecast. Therefore there is absolutely no reason whatsoever why an ad-interim order in terms of prayer clause a(i), (ii), (iii) and (iv) and prayer clause b(i),(ii) and (iii) should not be granted today. - Interim relief granted to petitioner.
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