Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 11, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
FEMA
PMLA
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Input tax Credit (ITC) of GST paid in relation with building or any other civil structure is not available and since sanitary fittings are integral part of building or any other civil structure, cenvat credit of GST paid on such sanitary fittings is not available - However, credit of GST is available on office fixtures 85 furniture, A.C. plant.
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An importer is required to pay IGST on the ocean freight. Therefore as on date, even if the importer has already paid IGST on CIF value imported goods, he is still required to pay IGST on ocean fright.
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No GST is leviable as on date on the said “marg sudharan shulk” charged and collected by the applicant - the applicant is liable to pay GST @ 18% on the said “Abhivahan Shulk” under Service Code 9997 and to be treated as “other services”.
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Applicability of notification dated 5.10.2017 issued by DIPP, Ministry of Commerce and Industry read with CBEC Circular No. 1060/9/2017-Cx. Dated 27th November 3017 - slump sale - the questions raised by the applicant do not fall under the purview of Authority for Advance Ruling created under CGST/SGST Act, 2017
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Tyres used in E-Rickshaw are not tyres of powered cycle rickshaw and hence they are required to be classified under Chapter Heading 4013 of GST Tariff, 2017 and attract 28% GST as on date.
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Roof Ventilators falls under Schedule-III of Notification No. 1/2017 – Central Tax (Rate) to GST Act, 2017 as amended and attracts a tax rate of 18% (CGST 9% + TGST 9%) w.e.f. 15-11-2017
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The product “Hydraulic Orbital Valve” is classifiable under Tariff Heading 84.81 of the Customs Tariff Act, 1975 and Goods and Services Tax rate applicable to Tariff Heading 84.81 is applicable to the said product.
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Appropriate forum - Rate of GST - confectionery items - case of petitioner is that it does not come within the purview of taxes at the rate of 18% to 28%, as imposed by the respondents - this Court is not an Expert Body to examine this question.
Income Tax
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Disallowance u/s. 40A(3) - making payments in cash - the assessee has also pleaded absence of bank account at Bathinda as among the reasons, which is plainly frivolous.
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Addition u/s 69C - non consideration of section 37 - AO should be trained properly, instead the same mistake is committed by Senior Officer also, which reflects very badly on the Revenue. Without any further comments, we express our anguish.
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Penalty u/s 272A(1)(C) - wilful noncompliance to the summons u/s 131 - it is the ITO/AO who has the power to pass the penalty order and not the Add. CIT. Therefore, we hold that the Addl. CIT had no jurisdiction to pass the penalty order in the case before us.
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TDS u/s 195 - No TDS is required to be deducted on the payment of advertisement expenses and technical and professional charges to foreign national as these recipients were foreign residents having no PE in India and the services were also rendered by them outside India.
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Mere shifting of boiler from one place to another in the case on hand did not result in creation of any additional and the benefit of the assessee - expenses allowed as revenue expenditure.
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TDS u/s 194H - trade turnover discount - assessee had been debiting trade discount allowed to its commission agents who were acting and procuring orders/effecting sales of its products for and on its behalf - No TDS liability u/s 194H
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TDS u/s 194A - non deduction of tds on payment of interest on FDRs to Gr. Noida Authority,a statutory authority constituted and 100% owned by UP State Government - No tax is required to be deducted from interest payment to any corporation established by a Central State or Provincial Act.
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Disallowance of traveling expenses - as per assessee it has paid fringe benefit tax at the rate of 20% - Now it is a settled position of law that no disallowance can be made once expenses are exigible to FBT.
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Entitlement to exemption u/s 54F - amount is not directly invested in purchasing of the villa - deposit of money by the assessee inter-alia in mutual fund prior to purchase of residential house albeit will not make any difference if the assessee had purchased the residential house within the time provided by the Act - Decided in favour of assessee.
Customs
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Valuation of imported goods - The only charge in the proceedings is that the Indian importer is related to the intermediary through whom the goods are supplied to DESU - the same cannot be a reason for rejecting the transaction value.
Service Tax
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The activities involved only temporary handling of the goods and shifting them from one place to another within the factory and as such, by no stretch of imagination come under the Cargo Handling Services as no transportation is involved in respect of the services
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The “Exposure fee” charged by the US Exim bank cannot be considered as any service by the Bank to the Respondent but is only an interest and is not liable to any service tax.
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Valuation - inclusion of reimbursable expenses in assessable value - only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax
Central Excise
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Classification of Sentim Toothpaste - The product is not ordinarily sold as tooth paste like colgate, peposodent, etc. but it is sold with a declaration on the product that it is used for treatment of tooth decay and cavity prevention for the sensitive teeth. Therefore, for the product in question, cannot be said that it is an ordinary tooth paste classifiable under chapter 33.
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Exemption to Sports Goods - ‘Thrillers’ and ‘Climbers’ manufactured and cleared by the appellant - there is no doubt that the product in question that being equipment used in children's playground are sports goods.
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Classification of bolting cloth - whether classifiable under CETH 5406.10 as claimed by BBCPL or would be classifiable under CETH 59.11 - running length of unprocessed goods would not be covered under Chapter 59.
Case Laws:
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GST
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2018 (6) TMI 431
Levy of IGST - Reverse charge mechanism - ocean freight in case of CIF basis contract - Credit of GST on various assets - Whether under Reverse Charge Mechanism, IGST should be paid by the importer on ocean freight in case of CIF basis contract, when service provider and service recipient both are outside the territory of India? - Held that:- Vide N/N. 8/2017- Integrated Tax (Rate) dated 28.6.2017 and N/N. 10/2017- Integrated Tax' (Rate) dated 28.6.2017 an importer is required to pay IGST on the ocean freight. Therefore as on date, even if the importer has already paid IGST on CIF value imported goods, he is still required to pay IGST on ocean fright. What will be the supporting document for importer under RCM to take the credit of IGST paid on ocean freight under CIF basis contract? - Held that:- Credit of IGST paid can be taken on the basis of invoice/challan issued. Whether credit will be available in GST of office fixtures & furniture, A.C. plant & sanitary fittings on newly constructed building on its own account for furtherance of business and accounting entry is capitalized in books of account? - Held that:- As per explanation to the Section 17 of CGST Act, 2017 credit is not available in respect of land, building or any other civil structure - Cenvat Credit of GST paid in relation with building or any other civil structure is not available and since sanitary fittings are integral part of building or any other civil structure, cenvat credit of GST paid on such sanitary fittings is not available - However, credit of GST is available on office fixtures 85 furniture, A.C. plant.
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2018 (6) TMI 430
Levy of GST - Marg Sudharan Shulk and Abhivahan Shulk - Whether GST is leviable on the “Marg Sudharan Shulk” and “Abhivahan Shulk” charged by Forest Division Dehradun from the non government, private and commercial vehicles engaged in mining work in lieu of use of forest road? - Held that:- Under GST, “the services by way of assess to a road or a bridge on payment of toll charges” are included in the list of exempted services - the said “marg sudharan shulk” is nothing but toll charges collected by the applicant from the users for using forest road and the said toll charges are being used for the maintenance of forest road - no GST is leviable as on date on the said “marg sudharan shulk” charged and collected by the applicant. GST on Abhivahan Shulk - Held that:- The said ““Abhivahan Shulk”“ is charged and collected by applicant in respect of forest produce carried out by a person - The said ““Abhivahan Shulk”” can not be termed as toll tax and rather is a form of consideration received by the applicant in lieu of services provided to the person for carrying forest produce - Since the services provided by the applicant do not find mention in the list of exempted services, therefore the applicant is liable to pay GST @ 18% on the said “Abhivahan Shulk” under Service Code 9997 and to be treated as “other services”. Ruling:- no GST is leviable as on date on the said “marg sudharan shulk” charged and collected by the applicant - the applicant is liable to pay GST @ 18% on the said “Abhivahan Shulk” under Service Code 9997 and to be treated as “other services”.
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2018 (6) TMI 429
Applicability of notification dated 5.10.2017 issued by DIPP, Ministry of Commerce and Industry read with CBEC Circular No. 1060/9/2017-Cx. Dated 27th November 3017 - slump sale - benefit of area based exemption under N/N. 50/2003-CE dated 10.6.2003 - shifting to a new location - addition or modification in the plant or machinery or on the production of new products during residual period of exemption - maintainability of advance ruling application. Held that:- Authority observes that the clarification requested by the applicant on the notification as well circular are not issued under the provisions of this Act. Moreover, advance ruling requested by the applicant also do not fall under sub-clause (a) to (g) of Section 97(2) of the CGST/SGST, Act which provides the list of subjects on which advance ruling can be sought - authority concludes that the questions raised by the applicant do not fall under the purview of Authority for Advance Ruling created under CGST/SGST Act, 2017 and hence the request in question is, not entertainable.
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2018 (6) TMI 428
Classification of goods - rate of applicable GST - three wheeled powered cycle rickshaw - What is the interpretation of the term ‘three wheeled powered cycle rickshaw’ as provided under SI. No. 190 o fthe Schedule 1-to Tariff Notification? - Is there any difference between an electric rickshaw operated by chargeable batteries (E-Rickshaw) and three wheeled, powered cycle rickshaw provided under Tariff Notification? - Whether inner tubes of butyl rubber used in e-rickshaw would fall within the meaning of term' ‘three wheeled powered cycle rickshaw’ and classification thereof? Held that:- The Electric Motor Vehicle Three Wheeled (commonly known as E-Rickshaw) are completely different from three wheeled powered cycle rickshaws. Three Wheeled Electric Motor Vehicle (known as E-Rickshaw in market) is a Motor Vehicle in Motor Vehicle Act also. It has to be registered with State Transport Authorities as a Motor Vehicle. The meaning of Powered Cycle Rickshaw was clearly explained in the case of KINETIC ENGINEERING LTD. VERSUS COLLECTOR [1996 (3) TMI 555 - SUPREME COURT] where Hon'ble Apex Court had taken note of the findings of Tribunal that that mechanically propelled cycle means an ordinary cycle fitted with a motor or petrol engine as the mechanically propelled cycle rickshaw means a cycle rickshaw fitted with a motor or petrol engine - Similar analogy can be drawn in the present case and authority in view of the aforesaid provisions of law comes to the conclusion that Powered Cycle Rickshaw referred to in the Explanation would not cover an Auto Rickshaw and would only cover an ordinary Cycle Rickshaw to which a motor or petrol engine has been fitted. E-rickshaw and powered cycle rickshaw are not one and the same but two different items. Ruling:- Tyres used in E-Rickshaw are not tyres of powered cycle rickshaw and hence they are required to be classified under Chapter Heading 4013 of GST Tariff, 2017 and attract 28% GST as on date.
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2018 (6) TMI 427
Classification of goods - Roof Ventilators - rate of GST - Held that:- As per the Rules for Interpretation of Customs tariff as made applicable to GST Tariff and General rules for Interpretation of the schedule, classification of Goods shall be governed by certain principles laid down therein. As per these general rules for interpretation, the heading which provides the most specific description shall be preferred to headings providing a more general description The primary function of these Roof ventilators is to provide ventilation by continuous extraction of air from the building. Even in trade parlance these goods are identified as Roof ventilators only and not as Windmills as contested by the applicant. Hence, in accordance with the general rules for interpretation, these Roof ventilators are correctly classifiable under the heading 8414 of the Customs tariff as adopted by GST. Ruling:- Roof Ventilators falls under Schedule-III of Notification No. 1/2017 – Central Tax (Rate) to GST Act, 2017 as amended and attracts a tax rate of 18% (CGST 9% + TGST 9%) w.e.f. 15-11-2017.
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2018 (6) TMI 426
Classification of goods - Steering Unit (Hydraulic Orbital Valve) - Whether the said product falls under Chapter Heading 8481 or 8431 or 8708 of the Customs Tariff Act, 1975? - Rate of GST - Held that:- In view of Note 2(a) of Section XVI of the Customs Tariff Act, 1975 and Explanatory Notes for ‘Taps, Cocks, Valves and similar appliances for Pipes, Boiler Shells, Tanks, Vats or the like, including Pressure Reducing Valves and Thermostatically Controlled Valves’ under Tariff Heading 8481 of the Harmonised System of Nomenclature, the product ‘Steering Unit (Hydraulic Orbital Valve)’ is appropriately classifiable under Tariff Heading 8481 of the Customs Tariff Act, 1975 - as the expression “parts” and “parts and accessories” under Section XVII of the Customs Tariff Act, 1975 do not apply to articles of heading 8481 in view of Note 2(e) of Section XVII of the Customs Tariff Act, 1975, and the product ‘Steering Unit (Hydraulic Orbital Valve)’ is item of Tariff Heading No. 84.81, the said product cannot be considered to be parts of vehicle, as it is excluded from Section XVII and hence the said product do not fall under Tariff Heading 8708 as “Steering wheels, steering columns and steering boxes; parts thereof”. Ruling:- The product “Hydraulic Orbital Valve” is classifiable under Tariff Heading 84.81 of the Customs Tariff Act, 1975 and Goods and Services Tax rate applicable to Tariff Heading 84.81 is applicable to the said product.
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2018 (6) TMI 425
Seizure of goods alongwith vehicle - Section 129(1) of the UPGST Act, 2017 - non filing Part-B of E-way Bill - Held that:- Part-B of E-Way Bill requires the details of the vehicle carrying the goods and the destination - as the complete details to be filled up in Part-B of the E-way Bill were supplied on 25.05.2018, the goods were not liable for seizure on 26.05.2018 - goods alongwith vehicle to be released on furnishing security other than cash or bank guarantee equivalent to the proposed tax - decided in favor of petitioner.
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2018 (6) TMI 424
Release of detained goods - Section 129 of the CGST Act as also the Kerala SGST Act - Held that:- Identical matter has been disposed of by a Division Bench of this Court in the case of THE COMMERCIAL TAX OFFICER AND THE INTELLIGENCE INSPECTOR VERSUS MADHU. M.B. [2017 (9) TMI 1044 - KERALA HIGH COURT], directing expeditious completion of the adjudication of the matter and permitting release of the goods detained pending adjudication, in terms of Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017. The writ petition is disposed of directing the competent authority to complete the adjudication provided for under Section 129 of the statutes, within a week from the date of production of a copy of the judgment.
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2018 (6) TMI 423
Seizure of goods and vehicle - penalty u/s 129(1) and 129(3) of the UPGST Act, 2017 - goods found in excess as against the disclosed goods - petitioner also downloaded the TDF - Held that:- It is clear that the goods were meant for one State to other and are being transported through the State of U.P. The petitioner being transporter has on wrong advice downloaded the transit declaration Form which was prescribed under the VAT Act and has no role so far as the transaction in question is concerned, which is covered by the provisions of the CGST, Act, 2017 - it also transpired that the goods of ₹ 3,59,220/- are found in excess as against the disclosed goods. Since the petitioner is a Transport Company and is not registered as a dealer at any place, therefore, it would be appropriate to direct the petitioner to deposit a sum of ₹ 67,010/-, which is estimated by the seizing authority as liability of tax, for release of the seized goods and vehicle - petition disposed off.
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2018 (6) TMI 422
Appropriate forum - Rate of GST - confectionery items - case of petitioner is that it does not come within the purview of taxes at the rate of 18% to 28%, as imposed by the respondents - Held that:- Under the Central Goods and Services Act, 2017, specific provision is there to raise objection before the Council or Commissioner, GST, and this Court is not an Expert Body to examine this question - petition has no merit and is accordingly dismissed in limine.
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Income Tax
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2018 (6) TMI 421
Penalty u/s 271(1)(c) - depreciation on assets given on sale and lease back basis - Held that:- The claim made by the respondent assessee was bonafide and not in the face of a statutory provision or any binding decision. In fact, the issue raised herein stands covered in favour of the respondent assessee by the decision of the Apex Court in Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT) where it has been observed that making of incorrect claim in law would not by itself amount to concealment of income or giving inaccurate particulars of income. The words concealment or giving inaccurate particulars of income have to be read strictly before the penalty provisions under Section 271(1)(c) of the Act can be invoked. In the present facts, the Revenue has not been able to show even remotely that there is any concealment of income or filing of inaccurate particulars of income. - Decided in favour of assessee.
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2018 (6) TMI 420
Disallowance of the interest - payment of excessive interest on unsecured loan - arbitrary interest rate application on advances - Held that:- No justification for the A.O. to make notional disallowance of ₹ 4,80,000/- by applying arbitrary interest rate of 12% on advances of ₹ 40 lakhs. Since the explanation given by the assessee in the written submissions reproduced above, have not been rebutted by the Revenue through any evidence or material on record, therefore, the calculation given by assessee for capitalizing interest in various projects is just and proper which is supported by book entries. The assessee availed balance amount in business and rightly claimed it to be revenue expenditure because all the amounts are coming-up in the mixed bank accounts maintained by assessee. Therefore, separate bifurcation would not be possible for the assessee. No disallowance to be made - Decided in favour of assessee Disallowance on account of interest on unsecured loans - Held that:- The explanation of assessee have not been rejected by the authorities below. Therefore, considering the totality of the facts and circumstances of the case and that similar issue have been considered in A.Y. 2012-2013 above, the facts in this assessment year are on better footing, therefore, authorities below were not justified in disallowing the interest incurred by assessee wholly and exclusively for the purpose of business. The A.O. also has not brought any evidence on record if borrowed funds have been used for non-business purposes ? No nexus have been pointed-out between borrowed funds and non-business activities of the assessee or if borrowed funds have been used for the projects pending completion. In this view of the matter, we set aside the orders of the authorities below and delete the entire addition. - Decided in favour of assessee
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2018 (6) TMI 419
Penalty u/s 271(1)(c) - unexplained money u/s 69A - Held that:- Mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars. See CIT vs. Reliance Petro Products Pvt. Ltd [2010 (3) TMI 80 - SUPREME COURT ] Assessee explained his genuine mistake and has surrendered the said amount to the Revenue Authorities and offered to tax. Therefore, the same cannot be held as act of furnishing inaccurate particulars on part of the assessee. Thus, the order of CIT(A) is set aside and appeal of the assessee is allowed.
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2018 (6) TMI 418
TDS u/s 194A - non deduction of tds on payment of interest on FDRs to Gr. Noida Authority - assessee in default - Held that:- From the perusal of the order u/s 201(1)/201(1A), it can be seen that the Assessing Officer has over looked the very fact that the Greater Noida Authority, the payee, is a statutory authority constituted u/s 3 of the Uttar Pradesh (UP) Industrial Area Development Act, 1976 and 100% owned by UP State Government. The CBDT Notification No. 3489 (Entry No. 39) dated 22/10/1970 issued in pursuance to Section 194A (3) (iii) (F) directs that no tax is required to be deducted from interest payment to any corporation established by a Central State or Provincial Act. Thus, it is not coming under the purview of TDS provision. This aspect was totally over looked by the Assessing Officer as well as the CIT(A). - Decided in favour of assessee
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2018 (6) TMI 417
Reopening of assessment - Held that:- Assessee had raised the objection against reopening of the assessment. The AO was required to dispose of those objections before framing the assessment. We, therefore, deem it proper to set-aside the assessment order and restore the objection raised by the assessee to the file of Assessing Officer to be disposed of. The AO thereafter would frame the assessment denovo, if he does not accept the objection raised by the assessee. Appeal filed by the assessee is allowed for statistical purposes.
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2018 (6) TMI 416
Disallowance of expenditure - Held that:- The assessee has debited expenditure under these heads in the assessment year 2008-09. While examining the correctness of the ITAT’s order, the Hon’ble High Court has observed that for the purpose business, the assessee has to maintain goodwill and continuity of business being provided by important members. Thus, in order to boost its business, the assessee could plan for providing certain incentives to the members. Following decision of the Hon’ble jurisdictional High Court in the case assessee’s own case, we allow this ground of appeal and delete disallowance. Disallowance of amortized premium - Held that:- The assessee is entitled for amortization of premium paid by it in acquiring scrip which were held till maturity. The ld.CIT(A) has appreciated this controversy, and hence this ground of appeal is rejected. Addition u/s 14A - Held that:- A presumption could be drawn that the assessee used interest free funds for earning such income. No interest could be disallowed as such. As far as half percent of average investment required to be considered for making disallowance is concerned, the ld.CIT(A) has already upheld disallowance upto ₹ 9.50 lakhs. The assessee has not challenged confirmation of such disallowance. It has raised grounds of appeal, but did not press at the time of hearing. Therefore, after taking into consideration the finding of the ld.CIT(A) we do not find any reason to interfere in it.
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2018 (6) TMI 415
Disallowance of deduction u/s 80P(2)(d) - Held that:- AO has not examined availability of the funds with an analytical process. Rather, he made reference to the gross-figure of various years. He has to identify the availability of funds in this year. The assessee has specifically submitted the details, exhibiting nexus between the availability of funds vis-à-vis its investment. It has demonstrated that interest free funds were more than the investment, and therefore, no disallowance could be made with help of section 14A out of deduction income and interest income earned by it for claiming dividend income under section 80P(2)(d). Respectfully following the order of the ITAT, which has been upheld by the Hon’ble High Court in the assessment year 2009-10, we do not find any merit in this ground of appeal. Disallowance of additional depreciation - Held that:- A perusal of the order of the ld.CIT(A) would indicate that there is no distinction between the expression “plant” for allowing normal depreciation vis-à-vis additional depreciation on that item. AO has created an artificial distinction on that ground. After going through the order of the CIT(A) we are satisfied that the ld.CIT(A) has examined the issue with all possible angle, and thereafter held that depreciation is admissible to the assessee. Therefore, we do not find any merit in this ground of appeal Additional depreciation on account of non-user of the machinery over a period of 180 days - Held that:- Assessee had earned the benefit as soon as he had purchased the new plant and machinery in full but it is restricted to 50% in that particular year on account of period of usages. Such restrictions cannot divest the statutory right. Law does not prohibit that balance 50% will not be allowed in succeeding year. The extra depreciation allowable u/s 32(1) (iia) in an extra incentive which has been earned and calculated in the year of acquisition but restricted for that year to 50% on account of usage. The so earned incentive must be made available in the subsequent year. The overall deduction of depreciation u/s 32 shall definitely not exceed the total cost of plant machinery. We set aside the orders of the authorities below and direct to extend the benefit.
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2018 (6) TMI 414
Addition on account of shortage of stock - Held that:- Explanation given by the assessee is not strong enough to justify the fact of theft specially taking into consideration the conduct of the assessee in not taking proper steps to control the situation. The assessee ought to have taken proper/adequate measure to save the loss of the company, as claimed. No proper explanation is forthcoming form the assessee in this respect. We think it fit to delete 10% of the addition in the total income as undisclosed stock of MS Scrap (wrong cut) as ordered by the AO - Decided partly in favour of assessee. Addition towards undervaluation of closing stock - method of accounting to be followed - Held that:- We find that the assessee has followed FIFO method while determining the cost of inventories. The raw materials were correctly valued following the Accounting Standard at cost or market value which ever is lower as shown by the assessee. The ld. CIT(A) without taking into consideration this particular aspect of the matter followed the observations made by the ld. AO which is unjust and we therefore deleted the addition of ₹ 5,58,525/- to the total income of the assessee on the ground of under valuation of stock of raw material - Decided in favour of assessee. Addition u/s 40(A)(2) - remuneration given to lady directors - Held that:- If the lady directors are not involved in pure managerial or supervising work of the assessee company their contribution to some extent cannot be brushed aside. Both the AO as well as the CIT(A) indirectly accepted that to certain extent the women directors are rendering services to the benefit of the assessee company. Furthermore, taking into consideration the return of income of these lady directors it can also not be said that the income has escaped taxation. We, therefore, think it fit to allow 30% of the remuneration given to these lady directors. - Decided partly in favour of assessee. Disallowance of depreciation - Held that:- The assets acquired by the assessee company on lease were ready to use though not used in the business for whatever reason the assessee is entitled to get relief of deprecation as charged on these assets and we therefore quash the order passed by the ld. CIT(A) and delete the addition made by the ld. AO - Decided in favour of assessee.
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2018 (6) TMI 413
Addition under the head interest on Government loan - whether the same does not fall under the purview of section 43B where the registration has been granted to the assessee u/s 12A - Held that:- In view the registration granted to the assessee u/s 12A with retrospective effect which covers the year under appeal as well as the consequent claim of the assessee for exemption u/s 11, the assessee has contended that the provision of section 43B cannot be invoked to make any disallowance in the assessee’s case. DR, on the other hand, has contended that this claim made by the assessee for the first time before the Tribunal requires verification by the AO. Even the claim of the assessee for exemption u/s 11 has been set aside by the Tribunal to the AO for deciding the same in the light of registration granted to the assessee u/s 12A with retrospective effect. We therefore restore the issue relating to disallowance u/s 43B to the file of the AO for deciding the same afresh after verifying the new claim made by the assessee that the provision of section 43B cannot be invoked in its case in the light of registration granted u/s 12A with retrospective effect.
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2018 (6) TMI 412
Entitlement to exemption u/s 80IC - Held that:- Since the deduction u/sec 80IC shall not in any case exceeds 10 assessment years, as specified in sub section (6), the appellant shall be eligible to claim deduction upto A. Y. 2013-14 at rate of deduction as may be applicable. From the submission made by the appellant and facts placed on records, AY 2011-12 is the 8th year of claiming deduction under the section 80IC and same shall be allowed till AY 2013-14. - Decided in favour of assessee.
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2018 (6) TMI 411
Unexplained credits u/s. 68 - Held that:- Since the cheques have been bounced, there are corresponding debits also and as assessee is maintaining books of account under Mercantile System of Accounting, both the deposit of cheques and bouncing of the cheques are bound to be recorded in the books of account. AO considered that these amounts as unexplained credits u/s. 68 is not explainable. CIT(A) examined the issue and very clearly stated that this cannot be considered as unexplained cash credits u/s. 68. Inspite of that, both in the original grounds of appeal and revised grounds of appeal, this issue is contested. We are not sure whether the Senior Officers like CIT are applying their mind to the facts of the issue before preferring appeals. It reflects sorry state of affairs. Addition u/s 69C - non consideration of section 37 - Held that:- CIT(A) categorically stated the provisions of Section 69C are not applicable, which deals with unexplained expenditure. A non-verifiable expenditure recorded in the books of account should have been considered u/s. 37(1). In spite of repeatedly stating in the order by the CIT(A), the grounds raised are again u/s. 69C. This clearly indicates that the Senior Officers or the AOs are not applying their mind to the issues involved and the statutory provisions which are to be invoked. Expenditure incurred in the books and the expenditure incurred outside the books and invokes wrong provisions so as to raise unnecessary demands. They should be trained properly, instead the same mistake is committed by Senior Officer also, which reflects very badly on the Revenue. Without any further comments, we express our anguish and dismiss the grounds as there is no merit in the grounds at all.
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2018 (6) TMI 410
Entitlement to exemption u/s 54F - amount is not directly invested in purchasing of the villa, rather it is routed through mutual funds - Held that:- The capital asset was sold on 26.02.2011. The capital asset was purchased on 31.03.2011 and before the purchase of the capital asset the amount was deposited in mutual funds. Therefore in the considered opinion of the bench, before the date of filing of the return, not only the capital asset was purchased by the assessee on 31.03.2011, but also the assessee had deposited and invested an amount of ₹ 15 lakhs with Canara Bank. Therefore the assessee has fulfilled all the conditions required u/s.54F for the purposes of claiming the exemption, in our view deposit of money by the assessee inter-alia in mutual fund prior to purchase of residential house albeit will not make any difference if the assessee had purchased the residential house within the time provided by the Act - Decided in favour of assessee. Proportional exemption - assessee had only invested the amount of ₹ 1,94,49,302/- in purchasing the villa and has also invested an amount of ₹ 15 lakhs in Canara Bank, a scheduled bank - Held that:- the assessee is entitled to the exemption for the amount spent either for fixing the doors or amount paid to the architects or purchasing the installations which were necessary for making the house habitable to the maximum amount of ₹ 16,26,300/-. - As in terms of Section 54F the assessee is only entitled to proportionate exemption vis-a-vis, cost of the original asset and the cost of the new assets. In the light of the above, the AO is directed to recomputed the capital gains exemption.
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2018 (6) TMI 409
TPA - selection of inappropriate set of comparables and not rejecting inappropriate company considered as comparable - Held that:- The assessee is engaged in manufacturing of material handling equipments thus companies functionally dissimilar with that of assessee need to be deselected from final list. Adjustment to the Profit Level Indicator of comparable for higher cost towards import of materials - Held that:- In view of the issue being set aside by the Tribunal in assessee’s own case in earlier years to determine the adjustment to the PLI on account of import duty, we find no merit in the ground of appeal No.2 raised by the Revenue and the same is dismissed Directions of DRP in not restricting TP adjustment to the international transactions with associated enterprises only pertaining to manufacturing and service activity - Held that:- The issue stands covered by the order of Tribunal in Demag Cranes & Components (India) Pvt. Ltd. Vs. DCIT [2013 (12) TMI 243 - ITAT PUNE] - Accordingly, we direct the Assessing Officer / TPO to restrict the adjustment, if any, on account of arm's length price of international transactions only to the extent of international transactions with associated enterprises.
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2018 (6) TMI 408
Penalty u/s 272A(1)(C) - wilful noncompliance to the summons u/s 131 - bonafide reasons for non-compliance - Held that:- Appellant had filed a letter informing that he is out of the country and will not be available till 6.6.2011. The Add. CIT has recorded this fact in the penalty order and therefore, it is not understandable as to why and how the next date of hearing was fixed on 6.6.2011 when the AO was very well aware that the appellant would not be available on that date - the appellant had reasonable cause for non-appearance before the AO on the above dates of hearing and it cannot be considered as a case of noncompliance The cause of action for levy of penalty has arisen on each date of default and the penalty of ₹ 10,000 has been levied for each date of noncompliance. Therefore, in effect, the penalty levied is only ₹ 10,000 per default and in such circumstances, it is the ITO/AO who has the power to pass the penalty order and not the Add. CIT. Therefore, we hold that the Addl. CIT had no jurisdiction to pass the penalty order in the case before us. We also find that the AR has given the explanation for reasonable cause for non-compliance of the summons u/s 131 for each day of the default. The fact that the assessment of the company was ultimately completed u/s 143(3) of the Act also proves that the assessee company has furnished the relevant details. AR has bonafide reasons for non-compliance and the AO had issued only one notice for non-compliance on three dates. - Decided in favour of assessee
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2018 (6) TMI 407
Long term capital gain addition - reference to the DVO under section 55A to determine fair market value of the property - assessee as co-owner sold the property - Held that:- In the case of other co-owners, viz. Late, Shantaben Patel, Babubhai Ramanlal Patel and Ilaben K. Patel for the assessment year 2011-12 similar issue went upto the Tribunal, and in the Tribunal [2018 (4) TMI 1549 - ITAT AHMEDABAD] considered the issue in detail and following the judgment of jurisdictional High Court in the case of Gaurangiben S. Shodhan [2014 (2) TMI 78 - GUJARAT HIGH COURT] deleted additions made under the head “Long Term Capital Gain”. Therefore, this issue being similarly situated be allowed in favour of the assessee. Value shown by the appellants of the property a on 1.4.1981 is considered then it was not less than fair market value and reference cannot be made. As far as the amendment carried out in section 55A is concerned, it is with effect from it is with effect from 01.07.2012 i.e. by finance 2012 the transaction taken place in F.Y. 2010-11 relevant to assessment year 2011-12 and the amended provision would not be applicable on this transaction. - Decided in favour of assessee
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2018 (6) TMI 406
Unexplained deposits in the bank account - Peak credit theory - Held that:- The assessee cannot choose peak credit theory to delete a part of the addition and also plead for applying net rate on the remaining portion of the unexplained deposits in the bank account. Doing so will be mutually contradictory - AO has made a reasonable estimate of income of the assessee in respect of unexplained deposits in the bank account by treating them as receipts from undisclosed or unrecorded business transactions. CIT(Appeals) has rightly confirmed the order of AO. We find no grounds to interfere with the order of CIT(Appeals). Accordingly, the appeal by the assessee is dismissed.
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2018 (6) TMI 405
Nature of income - profit from sale of shares - Capital gain or business income - Held that:- The accounting treatment in the books of accounts of the assessee cannot be rejected. The books of accounts are essential evidences. The recording of transactions in the books is a primary evidence of the intention for which such investment or purchase has been made. There has to be material to reject such primary evidence. The same cannot be rejected merely because the AO has a different view. A transaction has to be seen from the perspective of the person who has entered into that transaction. In the present case, the assessee all along has been making investment and accounting for the same as investments. This stand has been accepted in the past and there is no reason to differ with the same in the current year. The accounting treatment given in the current year being the same as in the earlier years, the AO was not justified in altering the same. The aforesaid view has also been upheld in the case of CIT vs. Girish Mohan Ganeriwala [2002 (10) TMI 61 - PUNJAB AND HARYANA HIGH COURT] whereby it was held that profit from sale of shares is assessable as capital gain more so, when such profits were assessed as capital gain in earlier years - Thus AO is directed to treat the income as capital gain declared by the assessee as against business income. Disallowance on account of traveling expenses - assessee before the AO has taken the stand that it has paid fringe benefit tax at the rate of 20% - Held that:- Now it is a settled position of law that no disallowance can be made once expenses are exigible to FBT. See BG Shirke Construction Technology Pvt. Ltd. Vs. CIT [2012 (10) TMI 435 - ITAT PUNE]
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2018 (6) TMI 404
Disallowance u/s. 40A(3) - making payments in cash against purchase of liquor for sale at the firm's allotted vends - commercial expediency - arguments of non practicality to make the payment through the banking channel on the basis of the dealership being temporary in nature in-as-much as the licence for the trade was issued to the appellant-firm only for a year, and that, as stated, not making the payment in cash would have caused unnecessary delay and additional financial burden. Held that:- We cannot help wondering as to how in the days of electronic payments could discount be insisted upon for payment only in cash, which is both risky and time consuming. A nominal advance of the payment being made, per cheque, equal to the payment to be made on a single day, avowedly not exceeding ₹ 20,000/-, would imply that payment to that extent stands received, which could then be repeated each day, entitling thus the purchaser to the discount on its daily purchase. The argument is devoid of business rationale and sense, as is the plea of the cash payments being made before the banking hours, i.e., opening of the bank (in the morning). Why, the assessee has also pleaded absence of bank account at Bathinda as among the reasons, which is plainly frivolous in-as-much as it is the assessee, operating as many as 5 vends thereat, who has to open a bank account; having already a bank account with Punjab & Sind Bank at Muktsar - the location of the sixth vend. We, therefore, are hardly impressed with the said pleas, besides finding them irrelevant. We find some merit in the assessee’s claim of each vend being managed separately, i.e., by one (or more) partner/s, with each vend maintaining separate accounts. If, therefore, each vend is maintaining separate books of account, having thus a separate account with the supplier, liable for payments thereto, i.e., against purchases made by it, and there is no interlacing of management, including purchase and sale; we discern a valid justification for not clubbing the payments made by each vend to the common supplier/s. This is as excise rules would be applicable vend-wise; each responsible for maintaining its’ stock, as well as the stock record - we find substantial basis for reckoning the payments for the purposes of u/s. 40A(3)/(3A) separately for each vend. Needless to add, this consideration would have no application where there is transfer of cash, stock, etc. from one vend to another, in which case there is a common link/management, including of cash, with the payments to the supplier being therefore monitored at the group level The matter, in view of the foregoing, is accordingly restored to the file of the Assessing Officer for factual verification and adjudication on the basis of the factual findings in light of our observations aforesaid - Decided partly in favour of revenue
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2018 (6) TMI 403
Addition on account of share capital treating the same as unexplained cash credit under Section 68 - Held that:- Even if the issue of share capital is taxed no addition can be made in assessee’s hands if identity of share holder is established. The assessee is not required to show source of shareholders funds. See case of Shri Ram Tie Up Pvt. Ltd,. (2018 (3) TMI 1403 - ITAT KOLKATA). Set aside the order passed by the authorities below on the issue in dispute and restore the matter to the ld. AO to decide the same denovo upon giving a reasonable opportunity of hearing to the assessee upon taking into consideration the entire evidence already placed before the authorities below as well as other documentary evidences which the assessee may choose to file in support of his case on the issue. Appeal of the assessee allowed for statistical purposes.
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2018 (6) TMI 402
Reopening of assessment - completed assessment u/s 143 - Held that:- Referring to the decision of full bench of Hon’ble Delhi High Court in the case of CIT vs Kelvinator of India Ltd. [2002 (4) TMI 37 - DELHI HIGH COURT] when the assessment is completed u/s 143(3), there is a presumption that all the issues relevant to the assessment have been considered and concluded by the A.O. by applying his mind. It was further held that even if there is any mistake committed by the A.O. while completing this assessment u/s 143(3), the same cannot be allowed to be taken as basis for reopening of the assessment as it would amount of giving premium to an authority exercising qua judicial function to taken benefit of its own wrong. Reopening of assessment by the A.O. in the assessee’s case was bad in law as the same was based on a mere change of opinion without there being any new tangible material coming to his possession. In that view of the matter, we uphold the impugned order of the Ld. CIT(A) cancelling the assessment made by the A.O. u/s 143(3) / 147 of the Act and dismiss this appeal of the revenue.
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2018 (6) TMI 401
PE in India - contracts in dispute as “effectively connected" to the PE - Income accrued in India - Held that:- The details of the personnel and their duration activity shows that the contracts are required to be rendered for substantially long period of time which supports the case of the assessee that the scope of work was required to be rendered in India and the time spent in India by the assessee/subcontractor proves that a Permanent Establishment (PE) was constituted in India. Therefore, the CIT(A) rightly held that income earned by the assessee under such contracts is effectively connected to a PE in India and is liable to tax at 40% on net income basis as per the RBI guidlines Interest levied u/s 234B - liable to pay advance tax under the provisions of section 208 - Held that:- Interest u/s 234B is not leviable as all payments to the non-resident appellant are subject to tax deduction at source u/s 195. The AO is directed to delete the interest levied u/s 234B. Decision in the case of DIT v. GE Packaged Power Inc. (2015 (1) TMI 1168 - DELHI HIGH COURT), is squarely applicable in the present case wherein held that no interest under section 234B of the Act can be levied on the assessee-payee on the ground of non-payment of advance tax because the obligation was upon the payer to deduct the tax at source before making remittances to them. Revenue appeal dismissed.
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2018 (6) TMI 400
TDS u/s 195 - advertisement expenditure and professional and consultancy fee u/s.40(a)(i) - services rendered outside India to non-residents - PE in India - Held that:- Both these payments were made by the UK branch of the assessee which was separate balance sheet, P & L account and filed return of income in UK and thus these for services were rendered by the foreign residents outside India having no PE in India. In agreement with the CIT(A) on this issue that Section 9(1) is applicable. CIT(A) also noted that assessee has not made any application u/s.195(2) therefore, the tax must be deducted u/s.195(1) - on the perusal of Rule 37BB which in respect of furnishing of information for payments in foreign currency made to non-residents not being a company or to a foreign company the provisions of 195(6) are effective w.e.f. 01/07/2009. The form No.15 CA and 15CB were not required to be given in respect of payments to non-resident Indians for the current year. No TDS is required to be deducted on the payment of advertisement expenses and technical and professional charges to foreign national as these recipients were foreign residents having no PE in India and the services were also rendered by them outside India. Set aside the order of CIT(A) by holding that no tax at source is required to be deducted at source. The AO is directed accordingly. Disallowance u/s.14A - Held that:- We direct the AO to delete the addition as the case of assessee is squarely covered by the case of Godrej & Boyce Manufacturing Co. Ltd., vs. Dy. Commissioner of Income Tax [2010 (8) TMI 77 - BOMBAY HIGH COURT] in which it has been held that recording of satisfaction is mandatory requirement without which the provision Section 14A r.w.Rule 8D cannot be applied. We set aside the order of CIT(A) and we direct the AO to delete the disallowance. - Decided in favour of assessee
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2018 (6) TMI 399
Additions on account of capitalizing the expenses claimed as revenue expenses - shifting of boiler and cylinder - Held that:- The above issue has already been decided by the coordinate bench in case of the assessee for assessment year 2008- 2009 wherein held mere shifting of boiler from one place to another in the case on hand did not result in creation of any additional and the benefit of the assessee. We, therefore, hold that the expenditure in question is revenue in nature Allowability of repairs expenditure - revenue or capital - Held that:- The revenue could not show us any reason to deviate from the decision of the Hon’ble Punjab and Haryana High Court in assessee’s own case [2011 (2) TMI 143 - PUNJAB AND HARYANA HIGH COURT] wherein the expenses on repair waterproofing groups and renovation outside the main shed building were allowed as revenue expenditure. Therefore respectfully following the decision of the coordinate bench following the decision of the Hon’ble Punjab and Haryana High Court in assessee’s own case we find no infirmity in the order of the Ld. CIT (A) in allowing the claim of the assessee holding that repairs and renovation expenditure with respect to the shed is revenue in nature Addition on account of technical know-how is fees paid to the parent company - revenue or capital - Held that:- CIT (A) has considered the various clauses of the agreement and held that the know-how was to remain the sole and exclusive property of the provider and the appellant company is required to fully exploit the same. Further the technical know-how was also to be paid in relation to the sales affected by the assessee company. It is also required to be noted that assessee is engaged in the same business for which technical know-how is by the assessee and it is not at its an altogether a new line of business which is developed. The Ld. departmental representative could not point out any infirmity in the order of the Ld. CIT (A). - Decided against revenue
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2018 (6) TMI 398
Addition u/s 40A - Held that:- As decided in assessee's own case [2015 (9) TMI 840 - ITAT DELHI] section 40A(3) has been wrongly invoked as admittedly no expenses relatable to the addition has been claimed and the assessee has successfully demonstrated that the payment were reimbursement made by CWPPL – Decided in favour of assessee. Disallowance on account of additional payment made - Held that:- As decided in assessee's own case [2015 (9) TMI 840 - ITAT DELHI] the material not having been confronted to the assessee in the face of the argument that even otherwise has no nexus has not been rebutted by the Revenue by any evidence or argument as the thrust of the parties attention remained focused on addressing the additions made. Addition on account of interest on post dated cheques - Held that:- As decided in assessee's own case fter examining the loose papers seized at the time of search at the assessee’s premises, it was noticed that interest is paid on the PDCs only during the period of extension of PDCs – CIT(A) rightly directed the AO to re-compute the interest on PDCs at the time of extension of the PDCs - if it is not possible to work out the extension of PDCs in each case, then the AO is directed to recomputed interest on PDCs after six months from the date of issue of the PDCs – the order of the CIT(A) is upheld – Decided against revenue.
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2018 (6) TMI 397
TDS u/s 194H - non deduction of tds on trade turnover discount - assessee in default - Held that:- In the present case, since concurrent finding has been recorded by the CIT(A) as well as the Tribunal that the assessee had been debiting trade discount allowed to its commission agents who were acting and procuring orders/effecting sales of its products for and on its behalf, the Assessing Officer was not justified in attracting the provisions of Explanation to Section 194H . Learned counsel for the appellant has not been able to point out any error or illegality therein. - Decided in favour of assessee.
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2018 (6) TMI 396
TPA - MAM - CUP method - Valuation as valued by the chartered engineer, are as valued by the customs authorities, or as valued by following the DCF method - Held that:- In the circumstances, we are in agreement with the DRP that the assessee justified the price paid by them with the valuation done by the independent chartered engineers, or the customs authorities or determined under DCF method. The reasoning given by the DRP to reach the conclusion that the additions cannot be sustained is impeccable and we find it difficult to take a different view in view of the said legal position. Are of the opinion that the impugned directions given by the DRP do not suffer an illegal infirmity so as to invite the interference of this tribunal in this appeal. With this view of the matter we find the grounds of appeal are devoid of merits and the appeal is liable to be dismissed. Consequently while upholding the directions given by the DRP, we dismiss the appeal of the Revenue. Cross Objection is also dismissed.
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Customs
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2018 (6) TMI 395
Validity of SCN dated 6th September, 2007 - Held that:- The High Court [2017 (11) TMI 1007 - GUJARAT HIGH COURT] was not correct in quashing the show cause dated 6th September, 2007 on the ground that the issues raised therein will be decided in the appeal pending before the Tribunal so far as the SCN dated 18th December, 2008 is concerned - it is not considered appropriate to record any findings as the same may have the effect of prejudicing the parties in the course of the adjudication of the SCN dated 6th September, 2007 and the appeal in respect of SCN dated 18th December, 2008 - appeal disposed off.
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2018 (6) TMI 394
Violation of condition of N/N. 64/88 dated 1.3.1988 - import of medical equipments - Demand of duty u/s 28(1) of the Customs Act, 1962 - Held that:- The demand of duty can be sustained under Section 28(1) of the Customs Act, 1962, which was invoked in the show-cause notice although ignored in the impugned order on account of mis-interpretation of the decision of Hon'ble Apex Court in the case of Jagdish Cancer & Research Centre [2001 (8) TMI 113 - SUPREME COURT OF INDIA]. The appellants in appeals contended that no market enquiry has been conducted before arriving at the quantum of redemption fine. In these circumstances, we have no option but to set aside the redemption fine imposed and remand the matter to the original adjudicating authority to conduct the necessary market enquiry before quantifying the redemption fine. Penalty of ₹ 10,000/- has been imposed on the main appellant and amount of penalty has been imposed on Dr. S. Krishnamurthy, MD - Held that:- Considering the facts of the case that the appellants imported the machine and failed to follow the post importation conditions, the penalty of ₹ 10,000/- imposed is sufficient. Appeal disposed off.
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2018 (6) TMI 393
Exemption on goods to be re-exported within stipulated time - Benefit of N/N. 104/94-Cus dated 16.3.1994 - The case of the Department is that 31 containers were re-exported but after the prescribed time period of 2 six months, and the containers were confiscated - Redemption Fine - Penalty - Held that:- The containers which were ordered to be confiscated were never seized and released provisionally nor the containers are available for confiscation. In such case, the confiscation of goods and consequent redemption fine cannot be imposed - redemption fine set aside. Penalty - Held that:- There is admitted violation of condition of N/N. 104/94-Cus dated 16.3.1994 inasmuch as the appellant did not re-export the containers within six months, therefore, for such violation, the appellant is liable for penalty - penalty imposed but quantum of penalty reduced. Appeal allowed in part.
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2018 (6) TMI 392
Import of Restricted item - old and used cathode ray tube imported into India without specific licence or permission - Confiscation - redemption fine - penalty - Held that:- There is no dispute as to the fact that the goods are covered under Hazardous Waste Management Handling Rules, 2008 and having been imported without specific licence from the authorities they are liable for confiscation - Confiscation and redemption fine upheld. Penalty imposed on the firm ARJ Exim (India) - Held that:- It needs to be upheld as the goods which were imported are held liable for confiscation under Section 111 (d) and 111 (m) of the Customs Act, 1962 and ARJ Exim (India) having filed bill of entry is liable to be visited with penalty under Section 112(a) of the Customs Act, 1962 - penalty upheld. Penalty of ₹ 1 lakh imposed on the individual Shri Manoj Kumar under Section 114AA of the Customs Act, 1962 - Held that:- The adjudicating authority has not recorded any findings in order to come to such a conclusion that Shri Manoj Kumar had knowingly intentionally mis-declared the goods with respect to the description - penalty not warranted. Appeal allowed in part.
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2018 (6) TMI 391
Quantum of redemption fine - penalty - Valuation of imported goods - Printing Rollers - undervaluation - mis-declaration of the goods as regards the country of origin - intent to evade - Confiscation - Held that:- The original authority arrived at a conclusion that there was mis-declaration of the goods as regards the country of origin with a sole view to evade duty of customs. The said fact also was further corroborated by un-retracted statement of the importer. It is also seen that the importer, in his statement recorded during investigations, gave the details of the original price of the goods, which tallied with the manufacturer's price and the reduced price as reflected in the invoices. The differential duty is only to the extent of ₹ 2,00,000/-, which stands confirmed by us as not challenged. As such, we agree with the Ld. Advocate that the redemption fine of ₹ 4,00,000/- is on the higher side - quantum of redemption fine as well as penalty reduced - appeal allowed in part.
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2018 (6) TMI 390
Valuation of imported goods - rejection of declared value on the ground that M/s Degmak Engineering Corporation and M/s Flow Fast Engineers (India) are related - Held that:- It is seen that there is no charges to the effect that the foreign supplier and the Indian importer are related. The only charge in the proceedings is that the Indian importer is related to the intermediary through whom the goods are supplied to DESU - the same cannot be a reason for rejecting the transaction value and consequently application of Customs Valuation Rules for revision of assessable value cannot be sustained - appeal allowed.
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FEMA
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2018 (6) TMI 389
Validity of proceedings - non-recording of reasons and its non-communication - whether the adjudicating Authority is bound to record his reasons for formation of an opinion under sub-Rule 3 of Rule 4 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 in writing and also communicate the same to the noticee if required by the noticee before proceeding with an enquiry? Held that:- The adjudicating Authority is not under any statutory obligation to communicate his reasons for forming an opinion to conduct an enquiry under sub-Rule 3 of Rule 4 of Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000. We may draw an analogy with the provisions of the Prevention of Money-Laundering Act, 2002. Whenever a statute requires a particular thing to be done in a particular manner, it is a trite position of law that it should be done in that manner alone and not otherwise. The provisions of sub-Rule 3 of Rule 4 in contra distinction to the provisions of the Section 5(1) of the Prevention of Money-Laundering Act, 2002, do not require the reasons to be recorded in writing. If we are to read into the provision, such a requirement, the same in our considered opinion would lead to disastrous results, where notices under various enactments which provide for enquiry on the basis of a subjective satisfaction of the adjudicating Authority or the enquiry officer or the Disciplinary Authority would take a stand that those Authorities should also record their reasons for forming an opinion and communicate the same.
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PMLA
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2018 (6) TMI 388
Offence under PMLA - provisional attachment orders - order of acquittal - Held that:- Once the main appellant has been acquitted by the Special Court under the Schedule Offence after the trial and no appeal has been filed by the State against the said Judgement (as informed by the parties), the appeal is liable to be allowed. The complaint under schedule offence was decided on merit after recording the evidence. The FIR was filed in 2009 as well as charge sheet have been quashed by the Special Court. Impugned Order that the reply/documents/materials and evidence filed by the appellant have not been considered nor the statement made by the appellants under section 50 of the Act. The Provisional Attachment Order has not discussed the source of funds available with the accused. It was merely assumed that the accused/appellant had not any savings despite of submitting the material and documents and also from his spouse, son Rakesh and Avinash. The Adjudicating Authority ought to have complied with all the principles of duly conducting a judicial proceeding where rights of the parties are to be based on the cogent findings based on the evidence led in the case, as every proceedings under the PMLA 2002 is a judicial proceeding within the meaning of section 50 of PMLA Act 2002. Sri Pandari has already been acquitted in the offence on the basis of allegation made. On the basis of same allegation, prosecution complaint under section 45 of the Act is pending. Except one property i.e. agricultural land which was purchased on 5th August, 2009, all other immovable properties were purchased/acquired during the period 1995 to 2007 in the name of Sri Pandari and his family members. Section13 of PC Act was added as schedule offence in PMLA, 2002 w.e.f. 1.6.2009. When the acquittal order was passed, the impugned order and prosecution complaint were already available with the respondent. Appeal allowed
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Service Tax
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2018 (6) TMI 387
SEZ unit - GTA Service - the goods are sold by the appellant in Domestic Tariff Area (DTA). The appellant only kept the goods transported to the DTA buyers after charging certain freight amount - Case of Revenue is that appellant have been engaged in providing the services of transport of goods by road to their customers at the time of removal of their finished goods in DTA - Whether the appellant can be called as the goods transport agency as defined under Section 50 (b) of Section 65 of the Finance Act, 1994 or not? - Held that:- To be called ‘Goods Transport Agency’ a person should fulfil two conditions, namely, he should provide service in relation to transport of goods by road and secondly should issue consignment note, by whatever name called. In this present case, admittedly, no consignment note was issued by the goods transporter. The slip issued by the appellant as recipient of service is taken by the adjudicating authority with such activity of transport to bring in tax liability. Such an attempt is beyond the scope of law. In cases where admittedly no consignment notes have been issued, the said transporter cannot be called Goods Transport Agency - the appellant do not fall under the definition of Goods Transport Agency, whose services are taxable in view of Section 65 (zzb) of the Finance Act. Scope of SCN - Held that:- In the present case perusal of show cause notice dated 05.04.2011 shows that the appellant has been fastened with the liability of Service Tax on the presumption of it being GTA. The show cause notice is absolutely silent about the appellant to not to be entitled for any exemption under Special Economic Zone Act, 2005 - Keeping in view that the show cause notice is the foundation of demand, the proceedings on the lines contrary to the allegations therein deserves rejection. The appellant being a unit in special economic zone shall be entitled for exemption in furtherance of Section 26 (1) (e) read with Section 26 (2) of SEZ Act and read with Rule 31 of SEZ Rules, 2006. Whether SCN is time barred? - Held that:- The SCN dated 05.04.2011 has been issued to the appellant calling him upon to discharge the service tax liability for the period from October 2005 to September, 2008. The entire demand is beyond the normal period of limitation of one year and as such being barred by limitation of such proviso to Section 73 (1) of Finance Act, 1994 is applicable to the present case. Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 386
Cargo handling service - Pig Iron Handling in Corex I II in factory of JSW Steel Ltd. - Granulated Dry Slag Shifting in factor of JSW Steel Ltd. - Loading Shifting of pellets from pellet plant to RMHS yard within factory - Loading shifting of pig iron within factory - whether the said services fall within the purview of Cargo Handling Services or not?- Held that:- These activities involved only temporary handling of the goods and shifting them from one place to another within the factory and as such, by no stretch of imagination come under the Cargo Handling Services as no transportation is involved in respect of the services - reliance placed in the case of Gaytri Construction Co. vs. CCE [2011 (9) TMI 481 - CESTAT, NEW DELHI]. Also, laying of sheet on machinery cannot be equated to construction activity. Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 385
Exposure fee - service or an element of Interest on loan? - Liability of Service tax - reverse charge mechanism - foreign exchange remittances made by the Respondent towards various expenses and fees incurred for raising External Commercial Borrowings (ECB) from various banks and institutions - Revenue was of the view that all the fee, charges paid by the Respondent to the foreign Banks fall under the category of taxable services of “Banking & Financial Services” and “Legal Consultancy Services” received by them from the Banks/ institutions/ companies based outside India and the Respondent is liable to discharge the service tax liability on the same under reverse charge mechanism - penalty. Whether the “Exposure Fee” paid by the Respondent to the US Ex-Im Bank is liable for service tax considering the same as “Service” or it is an element of interest on loan so availed by the Respondent? - Held that:- It is apparent that the interest rates would depend upon the various factors and the interest can be increased or reduced by charging under various heads. It is apparent that even the Indian Banks give loan to business entities on different interest rates under which the base rate remains same but the interest rate is varied by charging or not charging interest under some other head. In the instant case we find that the rate of interest from Commercial Banks and IIFC UK is based on two factors i.e 6 Months Libor rate plus fixed rate of interest in case of EXIM Bank, the two factors considered were fixed rate of interest @ 3.665 plus exposure fee @ 6.74%. Both the interest rates are much or less similar. The said position has not been considered by the revenue in its appeal. The revenue has relied upon the terminology of the agreement as well as policy handbook to canvass that “Exposure fee” is not interest. However we do not agree with the submission of the revenue for the reason that for deciding the nature and meaning of term “Exposure fee’ various facts and factors has to be taken into consideration. The nomenclature given by the party cannot determine the true character of an agreement. Further when the lender bank itself vide its three letters has clarified the position as to what is the intention and ratio behind charging “Exposure fee’, we hold that the interpretation made by the revenue is not sustainable. When the intention of the charging party is apparent in that case it has to be considered that the said amount is a loan pricing element and not towards any service. Various books, websites and other source of information relied upon by the Respondent support their claim Coming back to definition of term Interest in terms of Section 65B (30), we find that the Interest is payable in any manner in respect of money’s borrowed or debt incurred (including a deposit, claim, similar rights or obligation). In the present case, we have reached to the conclusion that the exposure fee is the manner of payment of interest of which the rate is arrived at on the basis of various factors associated with the borrowings. The amount of such Exposure fee is never fixed but is variable depending upon the factors as communicated by the US Exim Bank and clarified by the Bank. We thus after considering all the above factors and in view of our findings as above hold that the “Exposure fee” charged by the US Exim bank cannot be considered as any service by the Bank to the Respondent but is only an interest and is not liable to any service tax. Penalty on the amount of service tax paid by the Respondent on other service fee and charges which was recovered by the lenders from the Respondents - Held that:- There are bonafides on the part of respondent - the Respondent has very good team of employees well conversant with tax matters and it is not tenable that they were not aware of such provisions relating to service tax. Further ignorance of law is not excuse. That they never disclosed the fact related to payment of said fees/ charges to the department. Appeal dismissed - decided against Revenue.
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2018 (6) TMI 384
Erection, commissioning or installation services - notional amount - it was noticed that appellants paid service tax on erection, commissioning or installation services adopting a notional value of 15% of the gross amount realized for the supply and erection of lifts/escalators. On the balance portion of 85%, the appellants discharged VAT - It appeared to the department that such notional adoption of 15% of the gross amount realized is not proper and resulted in short payment of service tax - The demand has been raised alleging that the appellants have discharged service tax only on 15% of the gross amount realized for the supply and erection of lifts / escalators - Held that:- The service portion of the work order in regard to supply and erection of lift is to be taken as 15% - Further, as per the Tamil Nadu Value Added Tax Rules, 2007, the service portion of such works contract is to be considered as 15% and the appellant has to pay VAT on the balance portion - demand cannot sustain - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 383
Refund of service tax credit paid on various input services - the services were used for rendering export of output service - Whether computation of refund is correct in terms of the provisions of Notification No. 27/2012-CE (NT) read with Rule 5 of the CCR 2004? - Held that:- This issue needs reconsideration by the first appellate authority as appellant had produced re-conciliation statement indicating the correct amount of refund which needs to be calculated but the first appellate authority in the impugned order has not passed any observations or given any reasoning either to accept or to reject it - matter on remand. Refund claim - input services - Whether refund of input services viz. Air Travel agent services, accommodation services and cargo handling services has been denied correctly? - Held that:- The appellant has been taking a consistent stand that air travel, accommodation services were utilised for use of the employees at various locations to render output services which were exported - these services are squarely covered as eligible by the judgement in the case of Reliance Industries Ltd [2016 (8) TMI 123 - CESTAT MUMBAI] and Accenture Service Pvt Ltd [2015 (3) TMI 1114 - CESTAT MUMBAI] - refund allowed. Whether the refund of input services has been correctly denied on the ground that the invoices contained address, which was not mentioned in Service Tax Registration? - Held that:- It is the claim of the Learned Counsel that the appellants were functioning from this premises earlier and due to which there was a change in the premises and the service invoices raised by the input service providers for the service rendered by them were issued at the old address - the facts need to be reconsidered - matter on remand. Time limitation - Whether the refund claim is time barred? - Held that:- Larger Bench of the Tribunal in the case of Infotech Pvt Ltd [2018 (2) TMI 946 - CESTAT BANGALORE] has now settled the law which is that a refund application for service tax credit availed on the input services can be filed within one year from the end of the quarter from which services are exported - in the present case, the date of filing of the refund claim is within one year of the end of the specific quarters - refund claim is not barred by time. Appeal allowed in part and part matter on remand.
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2018 (6) TMI 382
Refund of service tax paid - denial on the ground that services have been utilized before the registration - invoices are drawn in the name of their marketing office at Mumbai - credit in respect of some services like rent-acab, personal insurance and catering services are not eligible to them - Held that:- the impugned order to that extent it denies refund claim stating that the services has been utilized before the registration, is unsustainable - reliance placed in the case of mPortal India Wireless Solutions Pvt. Ltd. [2011 (9) TMI 450 - KARNATAKA HIGH COURT], where it was held that registration is not necessary for refund - refund allowed. Denial of refund on the ground that invoices was drawn in the name of their marketing office in Mumbai - Held that:- It is undisputed that that the output services are provided prior to the registration of the unit - the ratio of the judgement of the Tribunal in the case of Samsung India Electronics Pvt. Ltd. [2017 (9) TMI 590 - ALLAHABAD HIGH COURT] will apply, where it was held that the refund could not be denied to the assessee merely on the basis of non-registration of the premises - refund allowed. As regard the CENVAT Credit on the third point, since the matter is not contested, refund is correctly denied. Appeal allowed in part.
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2018 (6) TMI 381
Valuation - inclusion of reimbursable expenses in assessable value - Held that:- The issue stands settled by the judgment of the Hon'ble Supreme Court in the case of Union of India Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT OF INDIA], where it was held that only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax - demand cannot sustain - appeal dismissed - decided against Revenue.
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2018 (6) TMI 380
Refund of unutilized CENVAT credit - Refund of unutilized cenvat credit - case of appellant is that they will be entitled to the CENVAT credit already availed under Rule 2 (l) of the CCR 204. Accordingly, the refund u/r 5 is to be paid to the appellant - Held that:- As pointed out by the appellant, the issues pertaining to the period prior to January 2012 stands already disposed of by the Commissioner (Appeals) in his earlier order. Since the finding in the present order appears to have been passed without noticing such fact, we have no hesitation in holding that this part of the order of the Commissioner (Appeals) order is null and void since the same had already been decided by his earlier order. Refund claim - various input services - Air Travel Agent - Business Auxiliary Service - Courier Agency - Custom House Agent - Event Management Service - Management, Maintenance and Repair service - Manpower Recruitment Service - Transportation of Goods by road - period January 2012 to March 2012 - Held that:- All services other than Event Management Service are covered by the definition of input service under Rule 2(l) of the CCR 2004 even after amendment carried out on 1.4.2011. Consequently, the appellant will be eligible for such services and hence eligible for refund of the same under Rule 5 of the CCR - However, in respect of Event Management Services, we fail to see the correlation of the same with the activities of the appellant and cannot be considered as an ‘input service’ - refund on all services allowed except event management services. It has been submitted by the appellant that FIRCs for an amount of ₹ 49 lakhs, which could not be produced before the lower authorities during the earlier proceedings, are now available with the appellant and can be produced for verification - a further opportunity is required to be given to the appellant for submission of such FIRCs for verification before the original authority who will consider the same before passing order in the de novo proceeding for the period Jan-March 2012. Appeal disposed off.
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Central Excise
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2018 (6) TMI 379
100% EOU - Misdeclaration of quantity and value of DTA Clearances - N/N. 8/97-CE dated 1.3.97, N/N. 6/97-CE dated 1.3.97 and N/N. 23/03-CE dated 31.3.32003 - issuance of second and third SCN on same issue - invocation of extended period of limitation - Held that:- The allegation of under-valuation was investigated by the Revenue resulting in SCN dated 04.09.2006. On the basis of the known facts, Revenue was already in a position to re-compute the overall ceiling of DTA clearances by adding the quantum of under-valuation detected, but Revenue failed to do so. For such re-computing and raising the revised demand, a further SCN dated 01.12.2006 has been issued in which the allegation of suppression has been made once again - The decision of the Hon’ble Supreme Court in the M/s Nizam Sugar Factory case [2006 (4) TMI 127 - SUPREME COURT OF INDIA] will be applicable and Revenue will be precluded from raising the allegation of suppression in the SCN dated 01.12.2006 - the demand of duty raised in SCN dated 01.12.2006 is required to be restricted to that falling within the normal period of limitation. Demand of duty on the cotton waste which stands cleared by the appellant in the DTA - Held that:- The decision in the case of M/s STI India covers the subsequent period and hence is applicable to the facts of the present case [2017 (4) TMI 328 - CESTAT NEW DELHI], where it was held that the value of cotton waste which stands exempted from duty is not required to be counted for DTA sales entitlement - there is no justification to include value of cotton waste in the DTA entitlement. The appeals filed by the appellants are partially allowed and the matter remanded to adjudicating authority for re-quantification of the demand within the normal period.
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2018 (6) TMI 378
CENVAT credit - common inputs used in taxable service as well as trading activities - clearance of goods as such - case of appellant is that they have reversed the credit, as under Rule 3(5), when they have cleared the goods as such - Held that:- The appellants have reversed the credit, as under Rule 3(5), when they have cleared the goods as such. In a normal trading activity, the goods which are procured, are sold and there is no question of availing the credit of such goods or clearing them on the payment of duty. In the present case, the appellant has availed credit on the inputs and, in some circumstances, they were not able to use the goods in the manufacture of final products. They have opted to clear the goods as such, under the provision of Rule 3(5) by reversing the credit - demand cannot sustain - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 377
Revenue neutrality - benefit of N/N. 67/95-CE - exemption on captive consumption of Cement - time limitation - Held that:- There is no dispute as to the consumption of cement for erection structures of plants for manufacturing of cement; even if the appellant is required to discharge duty on such captively consumed cement, they are eligible to avail CENVAT credit of this duty paid on cement captively consumed as it is undisputed that structures made out of captively consumed cement are used in relation to manufacture of final products and duty is discharged. The installation and erection activities by captively consumed cement is for further manufacturing of cement and the said final product cement is cleared on payment of duty - Similar issue came up before Hon’ble High Court of Andhra Pradesh in the case of Sai Sahmita Storage Pvt. Ltd., [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT], where Hon’ble High Court was considering the eligibility to avail CENVAT credit of duty paid on Cement and TMT Steel Bar for construction of warehouses and while dismissing the appeal of Revenue held that credit needs to be allowed as warehouses are used for rendering of taxable output services. The question of revenue neutrality does arise and it has to be held that credit of the duty paid may be available to the applicant - the entire demand is liable to be set aside on limitation. Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 376
Classification of goods - Sentim Toothpaste - case of Revenue is that the product Sentim Sensitive Fluoride Toothpaste, according to the department, is classifiable under chapter 33 of Central Excise Tariff Act, 1985 and the same is not eligible to be classified as medicament under Chapter 30 of Central Excise Tariff Act - Held that:- The product manufactured by the appellant is sold in the name of “Sentim Sensitive Fluoride toothpaste”. The products are manufactured from the ingredients i.e. drug namely Potassium Nitrate B.P., Sodium Fluoride dentrifice base and Sodium Benzoate. The product is not ordinarily sold as tooth paste like colgate, peposodent, etc. but it is sold with a declaration on the product that it is used for treatment of tooth decay and cavity prevention for the sensitive teeth. Therefore, for the product in question, cannot be said that it is an ordinary tooth paste classifiable under chapter 33. Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 375
CENVAT credit - fake invoices - The allegation of the department that the appellant had not received the quantity of inputs mentioned under these invoices, but erroneously availed the Credit - whether the appellant had correctly availed CENVAT Credit of the duty paid as mentioned in the invoices issued by the registered dealer M/s. Ushmi Ispat Pvt. Ltd., Mumbai? - Held that:- In the absence of evidences, to establish the fact of receipt of the inputs in their factory, when the vehicle numbers mentioned in the respective invoices, have been found to be incapable of carrying the quantity of goods mentioned under respective invoices, it is difficult to accept the contention of the appellant that the goods were received and used in or in relation to the manufacture of finished goods. It is necessary to be eligible to avail credit of the duty paid on respective invoices, the appellant should establish that not only the appropriate duty on the quantity of goods mentioned in the invoices have been paid, but also the quantity of goods have been received and used in or in relation of the manufacture of finished goods and the burden lies on the assessee when discrepancies are noticed in the input invoices on which credit availed - In the absence of corroborative evidences of receipt, there is no reason to interfere with the order of the Ld. Commissioner (Appeals) as far as confirmation of CENVAT Credit of ₹ 6,48,777/- with interest and penalty is concerned. The impugned order is modified to that extent and the appellant are eligible to discharge 25% of the penalty imposed under Rule 15(2) of Cenvat Credit Rules read with Section 11AC of the Central Excise Act, 1944, subject to the fulfillment of conditions mentioned under the said provisions - appeal allowed in part.
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2018 (6) TMI 374
Exemption to Sports Goods - benefit of N/N. 6/2006-CE dated 1.3.2006 - whether ‘Thrillers’ and ‘Climbers’ manufactured and cleared by the appellant are covered by the expression “Sports Goods” as used under N/N. 6/2006-CE dated 1.3.2006 and are eligible for exemption under the said notification? - Held that:- Identical issue decided in appellant own case M/S ARIHANT INDUSTRIAL CORPN. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, THANE [2016 (12) TMI 1382 - CESTAT MUMBAI], where it was held that The equipment used in children's playground are falling under the classification of sports goods falling under Chapter 9506 as per Bureau of Indian Standards. Therefore there is no doubt that the product in question that being equipment used in children's playground are sports goods - impugned goods eligible for exemption - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 373
Extended period of limitation - intent to evade - CENVAT credit - appellants had paid Engineering fees / Royalty / Technical Consultancy fees - reverse charge - the appellant had received the services only prior to 10.9.2004 - Held that:- The period involved in the notice is March 2005 & March 2006. However, the SCN has been issued only on 5.3.2008 - there are no ingredients which can justify the invocation of extended period of limitation - the proceedings are ab initio hit by limitation - appeal allowed on limitation.
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2018 (6) TMI 372
Validity of remand orders - issue of time limitation not considered in earlier remand orders - whether Commissioner (Appeals) can decided on the issue of limitation? - Held that:- The impugned order has been passed on the issue of limitation, which according to Revenue was not specifically remanded by Commissioner (Appeals) in the earlier order dated 16.5.2005 - So long as earlier order did not deal with the issue of limitation, it was open to the Commissioner (Appeals) to examine the issue of limitation - appeal dismissed - decided against Revenue.
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2018 (6) TMI 371
Classification of goods - bolting cloth - whether classifiable under CETH 5406.10 as claimed by BBCPL or would be classifiable under CETH 59.11 of Central Excise Tariff Act, 1985 - Clubbing of Clearances - CENVAT credit - Rule 4 of CENVAT Credit Rules - Held that:- The Hon'ble Apex Court in the case of Simplex Mills Co. Ltd. [2005 (3) TMI 117 - SUPREME COURT OF INDIA] has clearly held that running length of unprocessed goods would not be covered under Chapter 59 - There is no dispute that the goods are cleared inn running length and not in cut pieces. Since the issue of classification is clearly covered in the favour of respondents, the goods would not be classifiable under heading 59.11. The other issue relating to clubbing and availability of CENVAT Credit in view of classification under heading 59.11 do not affect the outcome of demand. Appeal dismissed - decided against Revenue.
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2018 (6) TMI 370
Clandestine removal - entire SCN is based on the alleged difference in the stock - no proper evidences found - Held that:- In absence of any positive evidence of clandestine removal of goods, merely on the strength of the alleged shortages, demand of duty on the charge of clandestine removal of goods cannot be sustained - appeal allowed - decided in favor of appellant.
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