TMI Tax Updates - e-Newsletter
June 2, 2017

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

TMI SMS

• Manufacture - dummy packs distributed to dealers, free of cost, for advertisement purpose - not liable to excise duty as not marketable

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• Depreciation - merely because the cost of the printer is abnormally high, the same cannot be ground to deny higher rate of deprecation @60%

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News

1. FM: In last three years, the present Government restored the credibility of the Indian Economy and the Government, introduced market mechanism based decision making process and eliminated the Government discretions among others

2. RBI Reference Rate for US $

3. NOTICE INVITING COMMENTS ON THE DRAFT COMPANIES (REGISTERED VALUERS AND VALUATION) RULES, 2017

4. COMPANIES (REGISTERED VALUERS AND VALUATION) RULES, 2017 - DRAFT

Notifications

SEZ

1. S.O. 1715(E) - dated 24-5-2017 - SEZ

Central Government de-notifies an area of 3.98 hectares at Sriperumbudur, Kancheepuram District in the State of Tamil Nadu

Circulars / Instructions / Orders

Income Tax

1. F.No.279/Misc./M-63/2017-lTJ - dated 31-5-2017

Order Under section 119 of the Income-tax Act 1961

Customs

2. 19/2017 - dated 31-5-2017

Implementation of Hon'ble Supreme Court’s Judgment dated 27.10.2015 in CA No. 554 of 2006 titled DGFT V/s Kanak Exports

Highlights / Catch Notes

Income Tax

• High Court Upholds Validity of Search Actions u/s 132(3) of Income Tax Act Without Prior Section 132 Action.

  Case-Laws - HC : Validity of Search proceedings - whether no action could have been initiated u/s 132(3) without there being any action initiated u/s 132 - no tax demand was pending - recovery of amount by debiting the bank account of the petitioners - bank accounts were put under restraint - HC dismissed all the petitions.
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• Transfer of Commercial Space from VAPL to SSPD Not Deemed Dividend u/s 2(22)(e) of Income Tax Act.

  Case-Laws - AT : Deemed Dividend - transfer of commercial space by VAPL to SSPD - Even if it was for the benefit of the assessee, no money has been received by the assessee and the assessee did not hold controlling shares in the transferor company. Thus, the provisions of section 2(22)(e) are not applicable - AT
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• Unexplained Partner Capital Not Added to Firm's Taxable Income; Tax to Be Added to Individual Partners' Accounts Instead.

  Case-Laws - AT : Unexplained capital introduced by the partners - the addition cannot be made in the hands of the firm and if anything remains unexplained the addition can only be made in the hands of the partners - AT
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• Higher 60% Depreciation Rate Allowed for Printers Integral to Computer Systems Despite High Cost.

  Case-Laws - AT : Depreciation on printer - the printer cannot function without the command from the computer - merely because the cost of the printer is abnormally high, the same cannot be ground to deny higher rate of deprecation @60% - AT
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• Section 263 Revision Limits: DIT Can't Overrule A.O's Decision on Section 44BB Interpretation of Income Tax Act.

  Case-Laws - AT : Revision u/s 263 - scope of section 44BB - A.O after considering the various submissions made by the assessee from time to time and has taken a possible view, therefore, merely because the DIT does not agree with the opinion of the A.O, he cannot invoke the provisions of section 263 to substitute his own opinion - AT
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Customs

• High Court Rules "Magistrate" in Customs Act Section 110 Refers to Executive Magistrate, Not Judicial or Metropolitan Magistrate.

  Case-Laws - HC : The word “Magistrate” appearing in Section 110 (IB) and (1C) of the Customs Act, 1962 must be interpreted so as to be read as a reference to an Executive Magistrate and not to a Judicial Magistrate or a Metropolitan Magistrate - HC
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Service Tax

• Court Rules Indian Railways Services to CTOs as 'Transport of Goods by Rail,' Eligible for 70% Tax Abatement.

  Case-Laws - HC : Classification of services - haulage charges - the services provided by the Indian Railways to CTOs is a service of ‘Transport of Goods by Rail’ and, therefore, eligible for abatement of tax treatment i.e., for abatement @ 70% - the SCN raising demand of service tax by treating 'haulage' as 'support services' is not correct, set aside - HC
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• Court to Decide if Renting Industrial Endoscopes is a "Supply of Tangible Goods for Use" Service.

  Case-Laws - AT : Whether hiring-out industrial endoscopes would qualify as “supply of tangible goods for use service” or not? - matter remanded back to ascertain that the item/ instrument has been supplied for use but without any legal right of its possession and effective control or not - AT
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• Hastily issued show cause notices with defects render tax demands invalid from the start, undermining proceedings.

  Case-Laws - AT : Validity of SCN issued in a very hasty and slipshod manner - Such short comings and deficiencies in the show cause notices are uncurable defects which will inevitably cast a shadow on the proceedings that have emanated from it - the demands of tax will fail, ab initio. - AT
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• Gas Cylinder Painting Classified as Management, Maintenance, or Repair Service under Finance Act 1994, Section 64(65.

  Case-Laws - AT : The scope of work undertaken by them which involves painting and other incidental activities of the gas cylinders, to make them fit for again use is clearly covered by the tax entry of management, maintenance or repair services in terms of section 64(65) of FA 1994 - AT
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• Appellants Cannot Defer Service Tax on Advance Payments Until Billing; Demand for Tax on Advances Upheld.

  Case-Laws - AT : Service tax on advance received - The appellants cannot take a plea that they will discharge service tax when they adjust the said advance amount as and when there is bill raised after provision of service. Such proposition will be against the legal provisions - demand sustainable - AT
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• Franchise Agreements: Royalties and Advertising Costs Excluded from Gross Value for Service Tax u/s 67.

  Case-Laws - AT : Valuation - includibility - whether amounts recovered by the assessee’s towards royalty, advertising plan, cost of manual supplied and certificates issued under the franchise agreements both on account of “Bachpan” and “Heights” were part of the gross value u/s 67 for the purpose of payment of Service Tax? - Held No - AT
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• Refund Approved for Unutilized CENVAT Credit on Business Auxiliary Services Classified as Export of Service.

  Case-Laws - AT : Refund of unutilized cenvat credit - Business Auxiliary Services - identifying potential clients, gathering market data, identifying potential markets, providing analysis of competitive positions etc. - the service is held as Export of Service - refund allowed - AT
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Central Excise

• CENVAT Credit Reversal Not Required for Diminished Goods Value if Usable and Available in Factory.

  Case-Laws - AT : CENVAT credit - Merely because the value of goods diminished in the books of accounts of the assessee would not by itself permit the Department to insist on reversal of the credit particularly when such goods were still available in the factory in usable condition - AT
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• Exemption Denied: Notification 6/2000-CE Benefits Not Applicable for Non-Captive Use of Vibration Isolation Systems.

  Case-Laws - AT : Benefit of N/N. 6/2000-CE - vibration insolation systems - manufactured goods supplied to M/s. Roshni Power Tech Ltd., who in turn utilised such goods in the manufacture of non-conventional energy systems - the exemption is available only for captive consumption - benefit was rightly denied - AT
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• Dummy Packs for Ads Not Subject to Central Excise Duty Due to Non-Marketability.

  Case-Laws - AT : Levy of duty - marketability - dummy packs distributed to dealers, free of cost, for the purpose of advertisement - the dummy packs did not attract Central Excise duty - AT
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• Machines in Rice Milling: Air Jet Filters Classified Under CTH 8437, Not CTH 8421.10, Per Central Excise Case Laws.

  Case-Laws - AT : Classification of machines - Air Jet Filters - Super Jet Small Filters - rice milling machinery or otherwise? - whether classified under CTH 8421.10 or under CTH 8437? - the items in question are required to be classified with the machines of that kind i.e., 8437 - AT
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Case Laws:

• Income Tax

• 2017 (6) TMI 24
  Reopening of assessment - notice issued delayed - Held that:- Delay in issuing a notice under Section 143(2) of the Act would be fatal to the re-assessment proceedings. See Assistant Commissioner of Income Tax & Anr. Versus M/s. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA ] - Decided in favour of assessee.

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• 2017 (6) TMI 23
  Validity of Search proceedings - whether no action could have been initiated u/s 132(3) without there being any action initiated u/s 132 - no tax demand was pending - recovery of amount by debiting the bank account of the petitioners - bank accounts were put under restraint - Held that:- In the present case, both Petitioners not only suppressed material facts in their petitions in the first place, but after this was pointed out in the Department’s counter-affidavit, the Petitioners were most casual in their response thereto making no attempt to justify the suppression of such material facts. In fact, the length of the respective rejoinders in both petitions only serves to demonstrate the extent to which material facts within the knowledge of the Petitioners were not placed before the Court in the first instance. Whether without a search warrant in the petitioners names, and without there being a demand raised and finalised, there is no power under Section 132 read with Section 132B to require RBL to issue a DD favouring the Department for the balance sum lying in the account that has been frozen? - Held that:- The assertion by both sets of Petitioners that this is ‘realization’ of the debt owed by the bank to the Petitioners and that the amount therein cannot be transferred to the Department is based on an incorrect understanding of the legal position under Section 281B of the Act. The said provision states that in order to protect the interests of the Revenue, it may be necessary to go in for a provisional attachment. Therefore, the direction issued to RBL by the Department does not mean that the money is finally taken over by the Revenue. It will undoubtedly be kept in a suspense account like a PD Account to await the final orders in the assessment proceedings and the issues raised as a consequence thereof. For this purpose, as already observed, the argument that this does not constitute ‘assets’ or ‘money’ within the meaning of Section 132(1) read with Section 133 of the Act has not merit. The decisions citied by learned counsel for the Petitioners do not appear to have discussed the purport of Section 281B of the Act which has a direct bearing in this case. The Department has been able to demonstrate at this stage that the monies in these bank accounts were essentially the undisclosed income of the 'key person' i.e. Mr. Mukkar. The restraint order under Section 132(3) of the Act passed in this case was but a logical corollary of the search action and permissible under the Act. Consequently, even on merits, not even a prima facie case has been made out by either of the Petitioners. Petitioners have made deliberate false statements on oath and have also suppressed material facts in the pleadings before this Court with a clear attempt to mislead the Court. Having regard to the impact this has on the administration of justice, the Court is satisfied that a prima facie case is made out for a complaint being filed against the above persons to be prosecuted under Section 193 IPC.

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• 2017 (6) TMI 22
  Eligibility to exemption u/s 80HHC - burden of proof of clearance at any Customs Station - Held that:- The assessee had produced the 'Sale to Foreign Tourists Voucher', which not only recorded the name and address of the customers (tourist), but also his/her passport number and the declaration given by him that the goods will not be gifted or sold in India. The goods were sold at the counter at the shop/emporium to be taken out of the country, which necessarily involved clearance of baggage, by the customs authorities. No further proof, nor any document in proof of clearance of the goods at the Customs Station by the assessee is required. The Explanation (aa) is not a rule of evidence, nor raises any presumption of such sale, which is not for export of goods out of India. It also does not require submission of any proof of clearance at any Customs Station. The explanation is couched in double negative terms. It is a rule of exclusion which excludes only those transactions, which do not involve clearance at any Customs Station. It cannot be read in a manner, as suggested by learned counsel appearing for the department that a proof of customs clearance of baggage must be provided to establish the export of goods out of India for the purpose of deduction of profits on such sales under Section 80HHC of the Income Tax Act. - Decided in favour of the assessee

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• 2017 (6) TMI 21
  Computation of deduction u/s 80HHC - whether relief u/s 80IB of the Act is to be deducted from profits and gains of business before computing relief u/s 80HHC ? - Held that:- The parties will be governed by the said decision subject to decision of Supreme Court in the case of ASST. COMMR. OF I.T BANGALORE Versus M/s MICRO LABS LTD.[2015 (12) TMI 708 - SUPREME COURT] stating that the the two provisions are required to be read harmoniously, for Section 80-IA(9) should not be treated as a redundant provision as it was introduced for the purpose of achieving a clear objective. Consequently, it has held that the deduction under Section 80HHC cannot be computed without reference to the bar under Section 80IA(9). It is well established in law that the language of the statute must be read as it is, and the statute must not be read by adding or substituting the words unless it is absolutely necessary to do so. Section 80-IA(9) does not affect the computability of deduction under various provisions under heading C of Chapter VI-A, but it affects the allowability of deductions computed under various provisions under heading C of Chapter VI-A, so that the aggregate deduction under section 80-IA and other provisions under heading C of Chapter VI-A do not exceed 100 per cent - Central Board of Direct Taxes Circular No. 772 dated December 23, 1998 wherein it is stated that section 80-IA(9) has been introduced with a view to prevent the taxpayers from claiming repeated deductions in respect of the same amount of eligible income and that too in excess of the eligible profits - Decided in favor of the assessee. See Associated Capsules Private Limited v. Deputy Commissioner of Income Tax and another [2011 (1) TMI 787 - BOMBAY HIGH COURT] - Decided in favour of assessee.

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• 2017 (6) TMI 20
  Estimation of profit in respect of IMFL business carried by the assessee - Held that:- The coordinate bench of the Tribunal in the case of Tangudu Jogisetty (2016 (7) TMI 379 - ITAT VISAKHAPATNAM) has considered the profit level in the line of business and decided that 5% of purchase price is reasonable profit margin in the line of IMFL business and directed the A.O. to re-compute the profit of the assessee. In view of the above we direct the A.O. to re-compute the income of the assessee at 5% of purchase price. Accordingly, this ground of appeal raised by the assessee is allowed. Unexplained investment - Held that:- The assessee has not given any explanation and also not filed any details before the Assessing Officer, therefore, the Assessing Officer has treated the impugned amount as unexplained income and the same is added to the total income of the assessee. On appeal, ld. CIT(A) confirmed the order of the Assessing Officer. Now, the assessee filed a petition for admission of additional evidence, wherein he stated that he is pursuing to gather the information. He has not specifically mentioned that what is pursuing to gather the information. Find that the explanation given by the assessee is a vague and the request made by the assessee cannot be accepted. Thus, this petition filed by the assessee for admission of additional evidence is rejected. So far as merits of the case is concerned, the assessee except stating that his wife has given a gift to the tune of 4,01,079/-, no other material has placed before me. Therefore, find no infirmity in the order passed by the ld. CIT(A). Thus, this ground of appeal raised by the assessee is dismissed.

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• 2017 (6) TMI 19
  Estimation of profit in respect of IMFL business carried by the assessee - Held that:- The coordinate bench of the Tribunal in the case of Tangudu Jogisetty (2016 (7) TMI 379 - ITAT VISAKHAPATNAM) has considered the profit level in the line of business and decided that 5% of purchase price is reasonable profit margin in the line of IMFL business and directed the A.O. to re-compute the profit of the assessee. In view of the above we direct the A.O. to re-compute the income of the assessee at 5% of purchase price. Accordingly, this ground of appeal raised by the assessee is allowed. Unexplained unsecured loans - Held that:- The assessee carried the matter in appeal before the ld. CIT(A) and no evidence was filed to substantiate the claim of the assessee. Even before the Tribunal also, the assessee is not able to file any evidence in respect of the above unsecured the loans. Thus, this ground of appeal raised by the assessee is dismissed.

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• 2017 (6) TMI 18
  Estimation of profit in respect of IMFL business carried by the assessee - Held that:- The coordinate bench of the Tribunal in the case of Tangudu Jogisetty (2016 (7) TMI 379 - ITAT VISAKHAPATNAM) has considered the profit level in the line of business and decided that 5% of purchase price is reasonable profit margin in the line of IMFL business and directed the A.O. to re-compute the profit of the assessee. In view of the above we direct the A.O. to re-compute the income of the assessee at 5% of purchase price. Accordingly, this ground of appeal raised by the assessee is allowed. Addition of unsecured loans - Held that:- On appeal before the CIT(A), no details were filed. Even before the Tribunal also, the assessee is not able to explain the genuineness of the transactions and also not filed any evidence in respect of the above impugned unexplained cash credits, therefore, find no infirmity in the order of the ld. CIT(A). Thus, this ground of appeal raised by the assessee is dismissed.

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• 2017 (6) TMI 17
  Addition on account of “Deemed Dividend” u/s 2(22)(e) - subject of transaction was transfer of commercial space by VAPL to SSPD - as per revenue the assessee was holding interest in both the transferor and transferee companies, and the amount remained unpaid during the year - Held that:- It is not a case of payment of cash but transfer of assets, and the transaction was duly recorded in the books of both entities. These accounting entries and the books of account have not been rejected or assailed by the revenue. Further, there is no evidence to suggest that the assessee was the real beneficiary and the transaction itself was sham. Thus, there appears no justification for the assumption that the assessee stood to benefit from the transfer. Suspicion, however strong, cannot take the place of evidence as has been held in a catena of judgments. We further find that the present case is also not hit by the provisions of section 2(22)(a) of the Act as it is not the case of revenue that profits have been distributed. Thus, the argument of the assessee that VAPL did not have accumulated profits, or that the AO was wrong in considering the assessed income as part of accumulated profits, is only academic and not relevant to the case. No basis for concluding that the transaction of transfer of commercial space between VAPL and SSPD was sham or colourable, and amounted to payment for the benefit of the assessee. Even if it was for the benefit of the assessee, no money has been received by the assessee and the assessee did not hold controlling shares in the transferor company. Thus, the provisions of section 2(22)(e) are not applicable. The case is also not hit by the provisions of section 2(22)(e). Therefore, the Ld. CIT(A) has rightly deleted the addition/disallowance in dispute - Decided in favour of assessee.

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• 2017 (6) TMI 16
  Penalty levied u/s 271 (1 )(c) - non-disclosure of capital gain on the sale of agricultural land under the bonafide belief of its non- taxability - Held that:- CIT-A has himself accepted that the assessing officer at the beginning was not clear as to whether it is a case of concealment of income or furnishing of inaccurate particulars of income. Assessee cannot be held guilty of contumacious conduct so as to warrant levy of penalty under section 271 (1) (c). This view is supported by the larger bench of honourable apex court in the case of Hindustan Steel Ltd., vs. State of Orissa [1969 (8) TMI 31 - SUPREME Court] Accordingly the conduct of the assessee was not contumacious so as to warrant levy of penalty under section 271(1)(c). This is more so when at the beginning of the enquiry the assessing officer was not clear as to whether there is a concealment of income or furnishing of inaccurate particulars of income. Accordingly we set aside the order's of authorities below and delete the levy of penalty. - Decided in favour of assessee.

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• 2017 (6) TMI 15
  Rejection of books of accounts u/s 145(3) - ad hoc estimate of 1 crore in trading result as the gross profit rate during the year has declined in comparison to the earlier year - Held that:- assessee has given very elaborate rebuttal of Assessing Officer’s observations and reasoning in its detailed explanation as to why the books of accounts cannot be rejected, relevant portion of assessee’s contention has already reproduced above. Based on entire material on record and assessee’s explanation, the Learned CIT (Appeals) has accepted the assessee’s contention and held that there is no a valid reason or material to reject the books of account and disturb the trading account. Apart from that, we find that the Tribunal in assessee’s own case for the A.Y. 2009-10 on similar set of facts has deleted the said ad hoc addition in trading account and also set aside the AO’s similar reasoning for rejection of books of accounts. No distinguishing features have been pointed out by the ld. DR before us. Therefore addition deleted - Decided in favour of assessee Delayed payment of Employees contribution to EPF/VPF - Held that:- As the payments have been made much before the due date filing of return of income, then we do not find any reason for making any disallowance as the same is covered by the decision of Hon'ble Supreme Court in the case of CIT vs. Alom Extrusions Ltd. (2009 (11) TMI 27 - SUPREME COURT ). Thus, the second ground as raised by the Revenue is dismissed.

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• 2017 (6) TMI 14
  Penalty levied under section 271(1)(c) - eligibility for depreciation on energy meters - Held that:- We find that issue in dispute in respect of which the penalty was levied by the Assessing Officer has already been restored to the file of the Assessing Officer for the re-computation of depreciation and there for penalty levied by the Assessing Officer in respect of those additions/disallowances cannot survive and the ground raised by the Revenue is rendered merely academic. Accordingly, the ground of appeal is dismissed. - Decided in favour of assessee.

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• 2017 (6) TMI 13
  Assessment in the hands of the assessee in the status of the firm - unaccounted contract receipts - Held that:- CIT(A) has granted relief to the assessee on the basis of the pleadings of the assessee that the amount of 74,10,868/- declared by the assessee firm includes 24,20,688/-, which was shown in 26AS in old PAN number allotted in company status. Now the assessee challenges the order of the ld. CIT(A) that he should not have issued direction to the Assessing Officer that to consider the receipts of 24,20,688/- in the hands of the assessee in the status of the firm and to make fresh assessment thereon. When the assessee himself has stated in his pleadings that the total receipts of 74,10,868/- includes receipt of 24,20,688/- also then what grievance remains. The assessment order passed by the Assessing Officer in the status of the company was quashed by the ld. CIT(A) then in my considered view, there is no grievance remains and the plea of the assessee is unfair and unjustified.

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• 2017 (6) TMI 12
  Registration U/s 12A - proof of charitable purposes - Held that:- The assessee was registered with the society of Registration, Jaipur on 16/1/1999 vide certificate No. 508/98-99. The assessee applied for registration U/s 12A of the Act on 03/3/2000 alongiwth Form No. 10A and certified copy of Trust Deed. This fact is evident from the inward register maintained in the office of ITO. The copy of the same is placed at page No. 7 of the paper book. The relevant entries were at sl. No. 159 and 160. The assessee got a letter dated 22/6/2000 from the ITO, Ward-2, Jodhpur, in this regard. The assessee replied to the same on 10/7/2000, which is evident from page No. 8 of the paper book. Thus, the assessee’s claim that he has applied for registration U/s 12AA of the Act alongwith necessary documents is well established. The assessee had also complied with the queries raised by the authorities. Therefore, the CIT has failed in making any order either registering the assessee Trust under 12A or refusing the same within six months. While making order U/s 143(3) of the Act, the Assessing Officer has accepted the status of the assessee as registered U/s 12A. The Assessing Officer records that the assessee engaged in the charitable activities for educational purpose at Jodhpur, Pali, Marwar and Barmer. The Assessing Officer also held that the income of assessee is exempted U/s 11 of the Act. Considering all these facts and circumstances, we hold that the assessee society shall be entitled for all the benefits available for assessee registered U/s 12A of the Act. The assessee shall be entitled for the benefit of Section 11 of the Act. - Decided in favour of assessee.

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• 2017 (6) TMI 11
  Addition on bogus purchases - Held that:- It would be reasonable and proper if the addition is sustained to the extent of 10% of the bogus purchase as the purchases were made in cash totally and the there were lot discrepancies in the books of account of the assessee and therefore, in the present case it would be fair and reasonable if the addition is restricted and sustained to 10% of the total purchases in order to cover the leakages of revenue. - Decided partly in favour of assessee.

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• 2017 (6) TMI 10
  Denial of benefit u/s 11 and 12 - proof of charitable purposes - Held that:- On perusal of the order of the Hon’ble Delhi High Court in the assessee’s own case [2015 (10) TMI 600 - DELHI HIGH COURT] observed that the objects of the assessee society were solely for the purposes of education and not for the purposes of profit. Also that the distribution of surpluses was prohibited and further, in the event of dissolution of the assessee society, its assets would have to be transferred to another institution, carrying on similar activities and the same cannot be distributed to its members. The assessee has been running three schools that are affiliated to CBSE and admittedly, this would not have been permissible in case the assessee did not exist solely for educational purposes and/or if the assessee was found to be pursuing the profit motive. The surpluses generated by the assessee were necessarily to be applied towards its charitable objects and, therefore, in view of the aforesaid, exemption cannot be denied by the assessee only for the reason that it had been generating surpluses. The fact that certain advances had been made to Col. Satsangi and some of his family members who were also involved in running the school cannot be construed as diluting the predominant object of the assessee which was managing schools and the substratal purposes of its activities was education. The Hon'ble High Court held that the assessee would quality for exemption u/s 10(22)/10(23C) of the Act. Therefore, respectfully applying the ratio of the judgment of the Hon'ble High Court, we deem it fit to restore the assessment to the file of the Assessing Officer for re-examination and fresh assessment after duly considering the status of the assessee’s application for approval u/s 10 (23C) (vi) before the DGIT(E) and after giving proper opportunity to the assessee to present its case.Assessee’s appeal stands allowed for statistical purposes.

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• 2017 (6) TMI 9
  Addition of bogus purchases - Held that:- The quantitative tally of purchase and corresponding sale of goods alleged to be bogus is not available with exacting specification. The enquiry about the bonafide of the purchase is not established by the CIT(A). The assessee is apparently not interested in defending the appeal of the revenue and revert the allegations of the AO. Consequently, we consider it appropriate that matter be remitted back to the file of the CIT(A) for de-novo consideration of the entire facts in issue after ascertaining the consumption, stock sale qua the purchase under dispute. Accordingly the order of the CIT(A) is set aside in terms of directions noted above. The appeal of the revenue is allowed for statistical purpose.

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• 2017 (6) TMI 8
  Expenditure disallowed on account of foreign exchange contract by treating them as speculation u/s. 43(5) - Held that:- The undisputed fact is that the assessee is in the business of manufacturing, import and export of diamonds. It is in this line of activities, the assessee was heavily exposed to foreign exchange currency fluctuation during its regular business activities. It is not the case of the Assessing Officer that assessee is a dealer in foreign currency. Although, the A.O. has treated the assessee as a dealer in foreign currency only on the strength of the volume of transactions entered into by the assessee to hedge its probable losses in foreign exchange rate fluctuation. On identical set of facts, in the case of Soorajmull Nagarmull [1980 (9) TMI 69 - CALCUTTA High Court] as held hat the assessee was not a dealer in foreign exchange. Foreign exchange contracts were only incidental to the assessee’s regular course of business . The loss was not a speculative loss but was incidental to the assessee’ business and allowable as such. - Decided in favour of assessee. Unexplained capital introduced by the partners - Held that:- It is true that the assessee has filed the tax details of all the partners. It is also true that the Assessing Officer has not disputed that the credits in the accounts of the partners were not deposits from the partners. In our understanding of the law, the addition cannot be made in the hands of the firm and if anything remains unexplained the addition can only be made in the hands of the partners. We find that the reliance placed by the ld. CIT(A) on the decision of the Hon’ble Jurisdictional High Court of Gujarat in the case of Pankaj Dyestuff Industries (2005 (7) TMI 601 - GUJARAT HIGH COURT) is well founded and, therefore, no interference is called for. - Decided in favour of assessee. Addition made on account of foreign travel expenses - Held that:- It is true that Mr. Sapin Shah and Ms. Priyanka Shah are not partners of the assessee firm. It is also true that they are employees of the firm who travelled abroad for the purposes of the business of the assessee. We find that the assessee has filed the details of sales made at Hong Kong and Dubai in support of its foreign travel expenditure. Merely, because the two persons who went abroad were not partners of the assessee firm would not justify the disallowance made by the A.O. We also find that the lump sum disallowance of 5 lakhs is without any basis as the assessee has successfully proved the sales made at Dubai and Hong Kong.- Decided in favour of assessee. Addition made u/s. 40(a)(ia) - Held that:- the assessee has successfully reconciled the TDS amount with the quantum involved and there remains no reason why the addition should be sustained. The First Appellate Authority has rightly deleted the disallowance after reconciling the TDS amount with the quantum on which the tax has been deducted at source. Therefore, no interference is called for.- Decided in favour of assessee. Addition on account of labour charges - Held that:- The assessee has debited labour charges of 23.22 crores during the year under consideration as compared to 22.75 crores incurred in the immediately preceding year. The rise in the labour expenses is only to the tune of 47 lakhs which is higher by 2% from the expenses incurred in the immediately preceding assessment year. In our considered opinion, this cannot be a reason for making the impugned disallowances as the A.O. has failed to justify the addition made by him. The First Appellate Authority has rightly deleted the same - Decided in favour of assessee.

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• 2017 (6) TMI 7
  Adjustment of advance tax and interest - assessee strongly seeks credit of the seized cash of 40lacs advance tax in the impugned assessment year 2009-10 as well as in respect of interest liability u/s.234B & C - Held that:- Assessee had submitted its application well in time seeking credit of the cash sum seized against the above liabilities. We do not see any such evidence at the appellant’s behest intimating the revenue authorities to grant credit of the seized cash as advance tax. Shri Divatia is fair enough in referring to assessee’s return dated 29-30/09/2009 seeking to claim the above seized cash as advance tax. We therefore quote this tribunal’s decision in Kanishka Prints Pvt. Ltd. vs. ACIT (2013 (7) TMI 14 - ITAT AHMEDABAD) and direct the Assessing Officer to grant the assessee the credit prayed for from the date of filing of its return only with all consequential benefits. The assessee’s grievance stands partly accepted in view of our above discussions. - Decided partly in favour of assessee.

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• 2017 (6) TMI 6
  Disallowance on account of exemption u/s 10B - disallow the adjustment of loss of eligible units from a profit of other eligible units - Held that:- After considering the relevant finding given in the impugned order as well as the judgment of Hon'ble Supreme Court in the case of CIT vs. Yokogawa India Ltd (2011 (8) TMI 845 - Karnataka High Court ), we find that the issue, whether the benefit given u/s 10A/10B is an exemption provision or not or it is dealing with the deduction. Here the case of the AO is that, since the provision of section 10B is in the nature of exemption and not deduction, therefore, the profit of the exempt unit cannot not to be included in the taxable income and accordingly, the loss of exempt unit cannot be set off from income of the non exempt unit. It is an undisputed fact that the assessee had incurred losses from its two units which were eligible for deduction u/s 10B and the said losses have been adjusted against the profit of non-eligible units. We find that this precise issue has been dealt with by the Hon'ble Supreme Court after detailed discussion and analyzing the provisions of section 10A (similar to section 10B) as it stood prior to the amendment by Finance Act 2000 and also after the amendment w.e.f. 1.4.2001. In view of the aforesaid law settled by the Hon'ble Supreme Court, the reasons given by the ld. Assessing Officer to disallow the adjustment of loss of eligible units from a profit of other eligible units cannot hold ground and consequently is set aside; and the claim of the assessee to allow the adjustment of losses of eligible units with the profits of non-eligible units is directed to be allowed. - Decided against revenue

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• 2017 (6) TMI 5
  Deduction u/s 54 on account of investment made in new residential house - amount paid/invested upto the due date of filing of return u/s 139(1) - Held that:- It is the settled proposition of law that when there are two views on a particular issue and there is no decision of the Jurisdictional High Court on that issue, then the decision which is in favour of the assessee should be adopted. Since the assessee in the instant case has made payment of 1,35,16,645/- before the due date of filing of return u/s 139(4) of the Act, therefore, we are of the considered opinion that the assessee is entitled to deduction u/s 54 of the Act to the extent of 1,35,16,645/-. Payment of the above amount is not doubted. Therefore, it is immaterial as to from where the assessee has obtained the money and paid the amount. In this view of the matter, we hold that the assessee is entitled to deduction u/s 54 of the Act of 1,35,16,645/- as against 81,72,207/- allowed by the A.O. - Decided partly in favour of assessee.

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• 2017 (6) TMI 4
  Depreciation on printer - @ 60% or 15% - A.O rejected the claim of higher rate of depreciation @ 60% on the ground that the machine purchased by the assessee was not a normal printer but a heavy duty printer which can print Media mainly Flex, PVC Vinyle, one way vision etc. - Held that:- Merely because the cost of the printer is very high as compared to that of a computer, therefore, higher rate of depreciation cannot be denied on that ground. We find merit in the above arguments of the ld. counsel for the assessee. It is an admitted fact that that the printer has been used by the assessee for the purposes of its business. It is also admitted fact that the printer cannot function without the command from the computer. Therefore, merely because the cost of the printer is abnormally high, the same, in our opinion, cannot be ground to deny higher rate of deprecation @ 60%. See CIT Vs. BSES Yamuna powers Ltd [2010 (8) TMI 58 - DELHI HIGH COURT] held computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system. In fact, the computer accessories and peripherals cannot be used without the computer. Consequently, as they are the part of the computer system, they are entitled to depreciation at the higher rate of 60% percent - Decided in favour of assessee.

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• 2017 (6) TMI 3
  Revision u/s 263 - A.O has not made proper enquiries to determine the nature of services rendered by the assessee - as per CIT-A assessee being a second-leg contractor is only providing technical services to Aker and any sum in the nature of fees for technical services, for a project not undertaken by the recipient is outside the scope of section 44BB - Held that:- Proposition that the provision of section 44BB of the Act are held to be applicable to the tax payer being a second leg contractor/sub-contractor. Further, it has been held in various decisions including the decision of the Hon'ble Delhi High Court in the case of DIT Vs. OHM Ltd. [2012 (12) TMI 422 - DELHI HIGH COURT ] that the services rendered in relation to extraction and production of mineral oil are taxable u/s 44BB of the Act. So far as the receipts of out-country services as taxable in India is concerned, we find in terms of section 90(2) of the Act, provisions of the Act are over ridden by the provisions of DTAA to the extent more beneficial to the non-resident assessee. Article 7(1) and 7(2) of the Indo-UK DTAA provides that profits attributable to PE in India shall be only profits arising from activities carried out by the PE in India. Therefore, we find merit in the submission of the ld. counsel for the assessee that assessee’s income taxable in India shall only be so much of profits under contract as is attributable to the PE in India. See Carborandum Co vs CIT [1977 (4) TMI 2 - SUPREME Court ] Since in the instant case the A.O after considering the various submissions made by the assessee from time to time and has taken a possible view, therefore, merely because the DIT does not agree with the opinion of the A.O, he cannot invoke the provisions of section 263 to substitute his own opinion. It has further been held in several decisions that when the A.O has made enquiry to his satisfaction and it is not a case of no enquiry and the DIT/CIT wants that the case could have been investigated/ probed in a particular manner, he cannot assume jurisdiction u/s 263 of the Act. In view of the above discussion, we hold that the assumption of jurisdiction by the DIT u/s 263 of the Act is not in accordance with law. We, therefore, quash the same and grounds raised by the assessee are allowed

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• 2017 (6) TMI 2
  Discrepancies in the books of accounts - import purchases of 53,410 kg. not found recorded in the import register - AO has rejected books of accounts of the assessee and estimated gross profit at 10% in place of gross profit 3.8% shown by the assessee - Held that:- We found that in the A.Y.2010-11, assessee has made GP of 4.55% in the year 2011-12, 4.02% and during the year under consideration at 3.87%. Looking to the amount of sale vis-à-vis GP disclosed by the assessee, and deficiency pointed out by AO and reply filed by assessee needs to be considered afresh in the light of documentary evidences alleged to be filed before him. It is clear that AO has not properly appreciated the evidence filed before him. We found that CIT(A) has also not dealt with the issue on merit and has just relied on the findings of the AO without addressing the reply filed by the assessee and without considering the documentary evidence in support of the same. In the interest of justice and fair play, we set aside both the orders of the lower authorities and restore the matter back to the file of the AO for deciding afresh after considering the documentary evidence filed in support of the short comings pointed by him which was produced by learned AR during the course of hearing before us as well as before the CIT(A) during the appellate proceedings. Appeal of the assessee is allowed for statistical purposes.

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• 2017 (6) TMI 1
  Penalty imposed u/s 271(1)(c) - Held that:- On quantum addition, quashed the notices issued u/s 153/153C of the Act were held to be invalid, resultantly the assessment orders passed u/s 143(3) r.w.s 153C dated 29/12/2008 were cancelled. Identically, for Assessment Year 2001-02 and 2003-04 in the case of assessee itself, the Tribunal deleted the penalty. In view of this factual matrix, we are of the view that penalty imposed u/s 271(1)(c) will not survive. Our view find support from the decision in K.C. Builders vs ACIT (2004 (1) TMI 7 - SUPREME Court) and the ratio laid down in CIT vs S.P. Viz (1988 (10) TMI 24 - PATNA High Court). Even otherwise, when the quantum addition is deleted, there remains no basis at all for levying the penalty for concealment or furnishing inaccurate particulars. The penalty cannot stand on its legs when addition on the basis of which the penalty was imposed remains no more in existence, thus, the appeal of the assessee is allowed and the ld. Assessing Officer is directed to delete the penalty. - Decided in favour of assessee.

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• Customs

• 2017 (6) TMI 35
  Smuggling of Gold - validity of detention order - release of detenu on Bail - whether in the absence of the satisfaction of the detaining authority that there was an imminent possibility of grant of bail, detention order is vitiated? - Held that: - there was material before authority upon which he was satisfied that the petitioner was likely to be released or that such release was imminent - the satisfaction of the Detaining Authority was based on the fact that there was a possibility of the petitioner’s husband applying for bail again and not that there was an imminent likelihood of the petitioner’s husband being released on bail, the subjective satisfaction of the Detaining Authority and the consequent detention order dated 10th October, 2016 are vitiated - petition allowed - decided in favor of petitioner.

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• 2017 (6) TMI 34
  Interpretation of statute - Magistrate - Section 3(4) of the Code of Criminal Procedure, 1973 - Seizure of goods - worn clothes - Held that: - the exercise of certification of the correctness of the inventory or taking of photographs of the seized goods or drawing representative samples can be nothing but an exercise which is administrative or executive in nature within the meaning of clause (b) of sub-Section (4) of Section 3 Cr.P.C. - the word “Magistrate” appearing in Section 110 (IB) and (1C) of the Customs Act, 1962 must be interpreted so as to be read as a reference to an Executive Magistrate and not to a Judicial Magistrate or a Metropolitan Magistrate - petition dismissed - decided against petitioner.

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• 2017 (6) TMI 33
  Refund of SAD - N/N. 102/2007-Customs dated 04.09.2007 - bar of time limitation - Held that: - the decision of Hon’ble High Court of Delhi in the case of Sony India Pvt. Ltd. [2014 (4) TMI 870 - DELHI HIGH COURT], in similar facts held that In the absence of specific provision of Section 27 being made applicable in the said notification, the time-limit prescribed in this section would not be automatically applicable to refunds under the notification - limitation will not applicable for refund of SAD - refund allowed - appeal allowed - decided in favor of appellant.

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• 2017 (6) TMI 32
  Valuation - technical know-how fees - royalty - includibility - Rule 9(1)(c) of the said Rules - Held that: - In the judgment of the Hon’ble Supreme Court in the case of Ferodo India Pvt. Ltd. [2008 (2) TMI 12 - Supreme Court], identical issue was under consideration before the Apex Court and it was held that royalty/license fee shall not be a condition prerequisite to the sale of the imported goods and hence not includible in the assessable value thereof - appeal dismissed - decided against Revenue.

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• 2017 (6) TMI 31
  Jurisdiction of the DRI officers to issue SCN - scope of proper officer - Availing of fraudulent duty exemptions - Held that: - sub-section 11 was inserted under Section 28 of the Customs (Amendment and Validation) Act, 2011 dt. 16/09/2011, assigning the functions of proper officers to various DRI officers with retrospective effect - Later on, i.e. for the period subsequent to the amendment, the issue of DRI officers having the proper jurisdiction to issue the SCN came up before the Hon’ble Delhi High Court in the case of Mangali Impex Vs. UOI [2016 (5) TMI 225 - DELHI HIGH COURT], inter alia, laying down that even a new inserted Section 28(11) does not empower either the officers of DRI or the DGCEI to adjudicate the SCN issued by them for the period prior to 08/04/2011. There are two views holding the field and the matter now stand before the Hon’ble Supreme Court - matters remanded to the original adjudicating authority to first decide the issue of jurisdiction, after the availability of Supreme Court decision in the case of Mangali Impex. Appeal allowed by way of remand.

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• 2017 (6) TMI 30
  Jurisdiction of the DRI officers to issue SCN - scope of proper officer - Availing of fraudulent duty exemptions - Held that: - sub-section 11 was inserted under Section 28 of the Customs (Amendment and Validation) Act, 2011 dt. 16/09/2011, assigning the functions of proper officers to various DRI officers with retrospective effect - Later on, i.e. for the period subsequent to the amendment, the issue of DRI officers having the proper jurisdiction to issue the SCN came up before the Hon’ble Delhi High Court in the case of Mangali Impex Vs. UOI [2016 (5) TMI 225 - DELHI HIGH COURT], inter alia, laying down that even a new inserted Section 28(11) does not empower either the officers of DRI or the DGCEI to adjudicate the SCN issued by them for the period prior to 08/04/2011. There are two views holding the field and the matter now stand before the Hon’ble Supreme Court - matters remanded to the original adjudicating authority to first decide the issue of jurisdiction, after the availability of Supreme Court decision in the case of Mangali Impex. Appeal allowed by way of remand.

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• Corporate Laws

• 2017 (6) TMI 27
  Applications for revival of the liquidation proceedings - Held that:- Since the petitioner company has accepted the payments in the extended period and that too with interest on the default installments, then simply because there was delay in making the payments under the settlement agreement, it would not be justifiable to take recourse to clause 4 of the Settlement Agreement and thus vitiating the efforts made by the Court to conclude the settlement. After receiving huge payments with interest and yet again making the respondent suffer liquidation proceedings would be asking too much. The conditional offer made by the learned counsel for the petitioner to deposit the amount so received only once a liquidator is appointed is not acceptable and such a plea cannot be allowed. In view of above, the applications for revival of the liquidation proceedings are dismissed.

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• 2017 (6) TMI 26
  Oppression and mismanagement - Invoking power of the NCLT to call for meetings, rectification of the register of members and investigation into the affairs of the company respectively - Held that:- The petition is allowed. In the light of the above contentions, it is therefore concluded that the acts of the Respondents amount to oppression against the Petitioner. Therefore, it is directed that the Petitioner's shareholding is reinstated to before the resolution for increase in the authorised capital was passed on 28th March, 2014. In addition to this, the share transfer of 31.11% shareholding in the Company, made to R12 is reversed as the same was done without the approval of the Board in a meeting of 26th July, 2014 for which no notice was served upon the Petitioner as well. As a consequence, R13, R15 and R16 are hereby directed to refund the money in lieu of the transfer of the aforementioned shares to R12. Moreover, it is directed that the appointments of R18 to R21 as additional directors be reversed as the same was done without the approval of the Board and the notices for the meetings held on 15th July, 2014 and 26th July, 2014 were never served upon the Petitioners. The Company is directed to hold an AGM within 3 months from the date of Order. Also, an exit option is hereby given to both the Petitioners and the Respondents with a preference to given to the Petitioners for exiting the Company. Preliminary decree is being passed in the matter the present petition for valuation of main business by an independent valuer. Both the groups of shareholders are being directed to give the name of an independent valuer through consensus within seven days from the date of order, failing which both the groups will have the option to give names of three independent valuers within one week thereafter, so that the Tribunal may issue order to the valuer for valuation of the aforesaid company and report for valuation may be called within three months and expenditure of independent valuer will be borne by both the Petitioners and Respondents in equal proportion. Based on the current valuation by the registered valuer, either of the parties may then sell its shares to the other that it holds in the Company and subsequently exit the Company within three months after valuation, with a preference to be given to the Petitioner. Parties are to bear their own costs.

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• Service Tax

• 2017 (6) TMI 60
  Classification of services - haulage charges - whether the services would be classified as support charges or otherwise? - Held that: - there is such a Circular No. 334/8/2016-TRU dated 29th February, 2016, which clarifies that the services provided by the Indian Railways to CTOs is a service of ‘Transport of Goods by Rail’ and, therefore, eligible for abatement of tax treatment i.e., for abatement @ 70% of the value of haulage charges collected from the Petitioner - the SCN which raise a demand of service tax by treating 'haulage' as 'support services' stands negated by the aforementioned Circular - petition allowed - decided in favor of assessee.

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• 2017 (6) TMI 59
  Attachment of Bank account - Held that: - since the Petitioner admitted to the liability by letter dated 23rd January 2017, no purpose would be served in going through the exercise of issuing an SCN following by an adjudication - it is directed that within six weeks from today, an SCN will be issued to the Petitioner. The Petitioner to file its reply thereto within the time - petition disposed off.

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• 2017 (6) TMI 58
  Export of service - reverse charge - Business Auxiliary Service - Whether Business Auxilliary Services (BAS) rendered by the assessee to their foreign client qualifies as export of service? - Held that: - the subject matter is covered by the Tribunal”s decisions in the cases of M/s. Gap International Sourcing (India) Pvt. Ltd. vs. CST [2014 (3) TMI 696 - CESTAT NEW DELHI], where it was held that these services have to be treated as delivered outside India and used outside India and since payment for the service has been received in convertible foreign exchange, the same would have to be treated as exported out of India - appeal allowed. Whether hiring-out industrial endoscopes would qualify as “supply of tangible goods for use service” or not? - Held that: - CBEC Circular No. 334/1/2008 TRU dated 29.02.2008 clarifies that wherever supply of tangible goods for use involves transfer of both possession and control it is deemed sale leviable to VAT /Sales Tax, then the said activity would not be liable to service tax under “supply of tangible goods for use service”. The circular mentions, that if the item/ instrument has been supplied for use but without any legal right of its possession and effective control, then the use of the item is to be treated as “service” and not the “sale” and in that case service tax will be liable to be paid under the category of “supply of tangible goods for use service” - the subject transactions are to be verified by the original authority, whom we are remanding this matter, then only it can be determined whether there is a “service” or a “sale”. Appeal allowed - part matter decided in favor of assessee and part matter on remand.

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• 2017 (6) TMI 57
  Validity of SCN - non-speaking order - classification of services rendered by appellant - it was contended that the SCN did not specify the correct classification of services and the demand was vague and therefore not legal and proper - Revenue was of the view that that copies of statement showing the payment details by various units of NLC to the concerned assessees had been annexed to the SCN. In the circumstances, the assessees cannot contend that they were not aware of the reasons for demand of service tax - Regarding non-mentioning of the services provided by the assessees on which service tax had been demanded, it is argued that the assessees were very well aware of the services in which they were involved and hence this cannot be taken as an excuse - extended period of limitation. Held that: - None of the SCNs indicate the reasoning for proposing tax liability, the services alleged to have been provided by the assessee and the individual liability of each of such service. Nor is there any worksheet forming part of the notice or as an annexure. Sadly, all these notices merely refer to the amount received by the assessees from NLC for the dispute period and have thereupon directly proceeded to calculate the service tax liability thereon on the basis of whole order - As it is practically not feasible to adhere to the normal procedure of issuing summons, collecting agreement copies and recording statements, considering the volume of work, show cause notices were issued to the contractors based on the data received from M/s. NLC indicating the service provided as the service for which they had registered themselves or the service as deduced from the data received from M/s. NLC. The entire process of issue of show cause notices was done in a very hasty and slipshod manner without giving any raison detre for demanding service tax on the various activities deduced by department to have been provided by the respondents/assessees - The show cause notices do not also indicate the list of the activities provided by the department, or justify all these activities fall within the ambit of taxable services for the purposes of the Finance Act, 1994 or indicate specifically the separate tax liabilities demanded on each such individual taxable service. Such short comings and deficiencies in the show cause notices are uncurable defects which will inevitably cast a shadow on the proceedings that have emanated from it - the demands of tax that may have been resultant of these proceedings will fail, ab initio. The Hon’ble CESTAT in the case of Hi-Cons Building Products Vs. Commr. Of C.Ex. & Cus.&S.T., Cochin [2011 (1) TMI 714 - CESTAT, BANGALORE] has held that Since the adjudication order is silent on the exact services rendered by the assessee, we consider it fit to set aside the impugned order. Any infirmity in the SCN cannot be bridged by adjudication proceedings and order passed by the adjudicating authority and first appellate authority. All the appeals filed by the department do not have any merit - appeal dismissed - decided against Revenue.

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• 2017 (6) TMI 56
  Management, maintenance or repair services - painting and upkeep of old cylinders - Held that: - The scope of work undertaken by them which involves painting and other incidental activities of the gas cylinders, to make them fit for again use is clearly covered by the tax entry of management, maintenance or repair services in terms of section 64(65) of FA 1994 - demand upheld - appeal dismissed - decided against appellant-assessee.

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• 2017 (6) TMI 55
  Scientific and Technical Consultancy Services - taxability - appellant received security deposit/advance payment from their clients for providing taxable service in future - Held that: - it is not in the choice of the appellant about timing of the payment of service tax. In terms of Section 67(3) when a consideration is received towards a taxable service, service tax on the same has to be paid. The appellants cannot take a plea that they will discharge service tax when they adjust the said advance amount as and when there is bill raised after provision of service. Such proposition will be against the legal provisions - demand sustainable. Extended period of limitation - Held that: - receipt of amount has not been reflected fully in the statutory returns as is evident from the narration recorded in the show cause notice - extended period invocable. Penalties - Held that: - penalties under both sections cannot be imposed. W.e.f. 10.05.2008 as a proviso has been added in Section 78 of the FA, 1994 to state that if penalty is payable under this Section, the provisions of Section 76 shall not apply for the period 10.05.2008 to 31.03.2010, penalty u/s 76 is not tenable and the same is set aside. Appeal dismissed - decided partly in favor of appellant, as regards setting aside of penalty imposed u/s 76.

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• 2017 (6) TMI 54
  Valuation - includibility - whether amounts recovered by the assessee’s towards royalty, advertising plan, cost of manual supplied and certificates issued under the franchise agreements both on account of “Bachpan” and “Heights” were part of the gross value under Section 67 for the purpose of payment of Service Tax? Whether the advertisement reimbursement charges should be included in the gross amount for charging service tax? - Held that: - It is settled provision of law that any expenditure incurred by the service provider in the course of providing taxable services and reimbursed cannot be considered as consideration for taxable services - there is no justification for including reimbursable expenditure in the taxable service tax. Amounts received by the assessee towards cost of manuals and certificates supplied - levy of tax - Held that: - the invoices raised for supply of manual and certificates indicate that the assessee has paid VAT for such sales covering the value of manual and certificates supplied. It is settled law that no service tax is leviable in cases where goods have been sold on payment of VAT/ Sales tax. Consequently, we conclude that no Service Tax is leviable on the amounts received for manuals and certificates. Levy of tax - Royalty Charges - Held that: - such amounts have been charged for transfer of technical know-how on running of Play School by franchisees - service not taxable. There is no justification for levy of service tax on the amounts received by the assessee towards royalty, cost of manuals and certificates as well as advertisement reimbursement charges - the demand of service tax for the entire period from 01.07.2003 till 30.06.2012 is required to be set aside - appeal allowed - decided in favor of appellant.

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• 2017 (6) TMI 53
  Condonation of delay - relevant date of service of notice - time limit stipulated in Section 35B of the CEA - Held that: - the appellant has failed to give satisfactory reason for such an inordinate delay of 948 days in filing the appeal. Therefore, I am not inclined to condone the delay - delay not condoned - appeal dismissed - decided against appellant.

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• 2017 (6) TMI 52
  Penalty u/s 78 - intent to evade tax - Held that: - the appellant has categorically proved or referred that there was no intention to evade and they paid the service tax along with interest before the issue of notice and the Revenue has not been able to bring any evidence on record to show that there was any intention on the part of the appellant to evade payment of tax - penalty set aside - appeal allowed - decided in favor of appellant.

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• 2017 (6) TMI 51
  Refund of unutilized cenvat credit - export of services - Business Auxiliary Services - identifying potential clients, gathering market data, identifying potential markets, providing analysis of competitive positions etc. - Rule 3(2) of Export of Service Rules, 2005 - Held that: - the issue is squarely covered in favour of the assessee in the case of M/s. Microsoft Corporation (I) (P) Ltd. Versus CST. New Delhi [2014 (10) TMI 200 - CESTAT NEW DELHI (LB)], where it was held that services provided by the agents and some agencies being delivery of money to the intended beneficiary of the customer of the western units abroad, which may be located in India and the services provided being business auxiliary services is also to the western unit who is recipient of services and consumers of services, it has to be held that services were being exported in terms of Export of Services Rule 2005 and not liable to Service Tax - the service is held as Export of Service - appeal dismissed - decided against Revenue.

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• 2017 (6) TMI 50
  100% EOU - Refund claim - input services - photocopying services - housekeeping services - renting of immovable property services - Held that: - with regard to refund on account of input services relating to photocopying and housekeeping, reliance placed in the case of the Hon’ble Bombay High Court in the case of Coca Cola India Pvt. Ltd. Vs. CCE [2009 (8) TMI 50 - BOMBAY HIGH COURT] wherein it has been that any input service in or in relation to business fall under the definition of input service - both these services fall in the definition of input service and we allow refund by holding the same as input service - appeal allowed to appellant subject to verification of invoices relating to housekeeping and photocopying - appeal allowed by way of remand.

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• Central Excise

• 2017 (6) TMI 49
  Penalty - benefit of Cenvat credit of duty on ‘bins’ - classification of 'bins' - classified under heading 8474.90 or under 73.08? - Held that: - the demand for reversal of Cenvat Credit is confirmed only to the extent falling within the normal time limit. Rest of the demand is set aside and matter remanded to the adjudicating authority for re-quantification - appeal allowed by way of remand.

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• 2017 (6) TMI 48
  CENVAT credit - recovery of credit on inputs written-off in the books of accounts - Held that: - the issue has been considered by the Hon’ble Gujarat High Court in the case of Ingersoll Rand (India) Ltd. [2013 (2) TMI 32 - GUJARAT HIGH COURT], where analyzing the Circulars issued by the CBEC dated 22.2.1995 and 16.7.2002 and the relevant Rules, it was held that Merely because the value of goods diminished in the books of accounts of the assessee would not by itself permit the Department to insist on reversal of the credit particularly when such goods were still available in the factory in usable condition - appeal allowed - decided in favor of appellant.

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• 2017 (6) TMI 47
  CENVAT credit - whether the Commissioner (Appeals) have rightly held that the respondent-assessee is entitled to Cenvat credit on purchase of the raw material from M/s M.K. Steels-proprietor Shri S.K. Gupta, of Kolkata? Held that: - the respondent-assessee have received the inputs/raw materials along with the duty paying documents which are supported by pre-authenticated documents like road permit of the State of West Bengal and the State of Uttar Pradesh. Further, it is observed in the impugned order that the respondent assessee have made proper entries in their Cenvat records and other statutory records and have also manufactured dutiable goods which have been cleared on payment of duty - it is not the case of revenue that the respondent-assessee received only duty paying document from M/s M.K. Steels whereas they have received the raw material from any other source - credit allowed - appeal dismissed - decided against Revenue.

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• 2017 (6) TMI 46
  100% EOU - N/N. 1/1995-CE dated 4.1.1995 - clandestine removal of finished goods which were manufactured using the duty-free raw materials as well as capital goods - whether the raw materials/capital goods used for manufacture of finished products have been subjected to duty as per the order of the Settlement Commission are liable to duty or not? - Held that: - if the goods are not exported, the exemption as per the Notification is eligible if the finished goods are cleared on payment of appropriate excise duty - In the present case, undisputedly, the appellants have paid the excise duty on the finished goods. Therefore, the duty liability on the finished products have attained finality as per the order of the Settlement Commission dated 6.9.2007 - the department was all through aware of the SCN as well as the proceeding pending with regard to the demand of duty on the finished goods. In spite of that, there has been a delay of seven years in issuing the SCN demanding duty on inputs as well as capital goods. Extended period of limitation - Held that: - Since it is a continuous one, the time limit/limitation cannot be applied in the present case cannot be accepted for the reason that the department would very well have covered the same issue regarding the demand of duty on inputs/capital goods in the SCN issued for demanding duty on finished goods - the demand is barred by limitation. Appeal allowed - decided in favor of appellant.

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• 2017 (6) TMI 45
  CENVAT credit - ground for present appeal is that the Department has done theoretical calculation for admissible Cenvat credit on the basis of Charted Engineer's Certificate and that the Department did not do actual verification of consumption of inputs - Held that: - there is no basis for arriving at the quantity of inputs which is presumed to be excess of the so called appropriate quantity of inputs for manufacture - it is beyond the jurisdiction of adjudicating authority to decide as to what is the appropriate quantity of input required for manufacture of specified quantity of final product - the SCN is issued on the basis of presumption and therefore and not sustainable - appeal allowed - decided in favor of appellant.

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• 2017 (6) TMI 44
  Benefit of N/N. 6/2000-CE dated 1.3.2000 - vibration insolation systems - denial of benefit on the ground that the benefit claimed by the appellant is allowable only when the parts required for non-conventional energy devices are consumed within the factory of production of such parts for the manufacture of main equipments - In the present case, the goods manufactured in the appellant factory have been supplied to M/s. Roshni Power Tech Ltd., who in turn utilised such goods in the manufacture of non-conventional energy systems. Held that: - the same issue pertaining to the same appellant has come before the Tribunal in an earlier case for a different period GERB VIBRATION CONTROL SYSTEMS (P) LTD. Versus COMMR. OF C. EX., BANGALORE [2007 (10) TMI 180 - CESTAT, BANGALORE], where it was held that item 21 of list 9 of not. 6/02 indicates that the exemption is available only for captive consumption, tribunal cannot ignore such condition stipulated in notification so exemption not available - benefit rightly denied. Appeal dismissed - decided against appellant.

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• 2017 (6) TMI 43
  CENVAT credit - whether they are entitled to CENVAT Credit on front end loader, vacuum pump and spares of crane under Rule 57 Q (1) read with explanation of the CER, 1944? - Held that: - from the definition in Rule 57 Q read with explanation it is evident that all items falling under Chapter 84 are eligible save and except internal combustion engines of a kind used in motor vehicles, compressors of a kind used in refrigerator and air conditioning appliances and machinery, expansion valves and solenoid valves of a kind used for refrigerating, air conditioning appliances and machinery - the items in dispute do not fall under any of the exceptions and as such the appellant is entitled to Cenvat Credit on the same - appeal allowed - decided in favor of assessee.

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• 2017 (6) TMI 42
  Warehousing of goods - waste - whether the assessee M/s Jindal Saw Ltd. should have paid Customs duty or Central Excise duty on the finished products namely steel pipes, under the fact that they were granted Customs license for private bonded warehouse u/s 58 of the CA, 1962, for storage of raw material without payment of Customs duty? - Held that: - in view of the findings of the learned Commissioner (Appeals) being order dated 31/01/2006 Appeal No.14 CE/06, which is in conformity with the view expressed by the Board vide the clarification dated 9th May, 2006, the appellant assessee have rightly paid Central excise duty on the finished products and have rightly paid Customs duty on the waste and scrap generated in the course of manufacture, cleared in DTA - appeal allowed - decided in favor of assessee.

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• 2017 (6) TMI 41
  Levy of duty - marketability - dummy packs distributed to dealers, free of cost, for the purpose of advertisement - classification - Held that: - the dummy packs were not marketable, since they were not capable of being bought and sold in the market because they were advertising material of the assessee who were marketing the same - the dummy packs did not attract Central Excise duty - since the question of dutiability does not arise, the question of classification of the said goods under chapter 48 and 49 does not arise - appeal allowed - decided in favor of assessee.

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• 2017 (6) TMI 40
  Classification of machines - Air Jet Filters - Super Jet Small Filters - rice milling machinery or otherwise? - whether classified under CTH 8421.10 or under CTH 8437? - Held that: - These two items which are the subject matter of the present dispute are admittedly parts suitable for use solely or principally with machines falling under 8437. In terms of the Section Note above, the items in question are required to be classified with the machines of that kind i.e., 8437 - appeal rejected - decided against Revenue.

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• 2017 (6) TMI 39
  100% EOU - refund claim - rejection on the ground that the refund of CENVAT credit can be claimed by the assessee only after adjudication is completed and accordingly refund claim returned being premature - Held that: - these two appeals are required to be remanded back to the original authority to decide the refund claims of the appellant keeping in view the earlier order passed in favor of the appellant and also the subsequent order passed by the Assistant Commissioner of Central Excise as well as the Commissioner of Central Excise - appeal allowed by way of remand.

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• 2017 (6) TMI 38
  Clandestine production and removal - SS Steel Ingots/Billets/SS Flats and other products of iron steel falling under Chapter 72 of CETA, 1985 - Held that: - Revenue could not discredited the evidence which was produced before the courts below to the effect that SS Flats seized from the premises of two cutters were duty paid. It is not the case of Revenue contrary to the submission of the respondent that majority of SS Flats found in the premises of the two cutters were purchased by M/s. Agarwal Steels from RJIL and not from JAL. I further find that the Revenue have mainly relied on the uncorroborated oral evidence. It is well settled law that when there is conflict between oral and documentary evidence, it is the documentary evidence which prevails over the oral evidence. Once duty paid nature of the goods in question is established, the goods could not have been confiscated. The courts below have rightly rejected the allegations of the Revenue which was based only of the oral statements initially given and further presumptions, whereas the findings of the courts below are based on facts which was relatable with the documents and records as well as capacity of production - appeal dismissed - decided against Revenue.

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• 2017 (6) TMI 37
  100% EOU - refund claim of CENVAT credit - appellant are exporting their final products and as they were not making any regular DTA clearances, they had unutilised Cenvat credit avialed on input services - Held that: - Since the appellant has only one factory and the entire credit relates to the services rendered to the said factory of the appellant and there is no dispute on the receipt of services by the factory of the appellant and the use of the services in or in relation to the manufacture of the export goods by the appellant - CENVAT credit cannot be denied to the appellant on procedural grounds - the appellants are entitled to refund except refund of 2048/- for which the appellant could not produce sufficient documents - appeal allowed - decided in favor of appellant.

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• 2017 (6) TMI 36
  CENVAT credit - capital goods being sent to their own unit are those which have been used by the assessee for several years - Held that: - the issue is squarely covered in favor of the appellant by the judgement of the Karnataka High Court in the case of Solectron Centrum Ltd. [2014 (10) TMI 596 - KARNATAKA HIGH COURT], where it was held that Capital goods purchased for DTA unit was used, it was not removed as such and when it was removed to EHTP unit again, they have no liability to pay the credit - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2017 (6) TMI 29
  Whether in the facts and circumstances of this case the sale was exempted under section 6(2) of the Central Sales Tax Act, 1956 being an inter state sales under Section 3(b) of the said act? - Held that: - The mere mention of the appellant i.e. the purchaser in that sale as belonging to Ahmedabad does not establish an inter-state sale. However, the invoice must be read with the lorry receipt. The LR refers to the lorry/truck number, the date of the transaction and indicates that the goods were to be transported from Rajasthan to Punjab. The sale, therefore, was in the course of inter-state trade or commerce. Whether the subsequent sale, namely, the sale between the appellant and M/s S.T.Cottex Exports Pvt. Ltd. conforms to the type of second sale referred to in Section 6(2)? - Held that: - The subsequent sale referred to in section 6(2) must be a sale during the movement of the goods effected by the transfer of documents of title to such goods to a registered dealer. In other words the subsequent sale must be during such movement i.e. movement caused by the first sale and must be effected by the transfer of documents of title to such goods to a registered dealer. It is not sufficient if the subsequent sale is effected by transfer of documents of title to such goods. It is also necessary that this second sale must be subsequent to the first sale and the subsequent sale must be during the movement of the goods under the first sale. It is true that no tax is payable in respect of these transactions under the Punjab Vat Act. However, the mis-declaration in respect of the consignment would invite the penalty under Section 51(7)(b) nevertheless. Section 51(7)(b) would come into operation, if it is found that there has been an attempt to avoid or evade the tax due “or likely to be due under this Act”. It is necessary to to remand the matter even to avoid the liability under section 51(7)(b) of the Punjab Value Added Tax Act, 2005 on the ground that in any event there was no intention to avoid or evade the tax. Appeal allowed by way of remand.

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• 2017 (6) TMI 28
  Levy of entry tax - Regasified Liquefied Natural Gas i.e. RLNG - Whether RLNG sold to revisionist by Gas Authority of India Ltd. (GAIL) is 'Compressed Natural Gas (CNG)', so as to oust it from the purview of taxing Entry 8(a) of Schedule IV of Uttar Pradesh Value Added Tax Act, 2008 or otherwise? Held that: - The product to be taxed vide Entry 8(a) is natural gas, other than Compressed Natural Gas (CNG), when sold to an industrial unit of a registered dealer, for use in the process of manufacture of taxable goods other than non-vat goods against certificate prescribed by the Commissioner. The taxing entry not only defines the product but also sufficiently deals with its user and use. Law is however settled that while defining a taxing entry the words are not to be interpreted in its technical sense, but has to be understood in its popular sense - The scientific or technical attribute of the product may have relevance for academic purposes, but for the taxing statute the exclusionary part of the natural gas would have to be construed as a distinct entity understood in its popular sense or common parlance - In case Natural Gas in compressed form is to be treated as Compressed Natural Gas (CNG) then almost all category of Natural Gas which is capable of being transported (because only in compressed form Natural Gas could be transported) would get covered. What is intended to be excluded from Natural Gas thus is a particular variant of Natural Gas, in compressed form, which is identified as Compressed Natural Gas (CNG) in the trade or industry and is understood and used as such. It is the common parlance test which is of vital significance in a fiscal statute for interpreting a taxing entry where it is not defined. The exclusionary part i.e. Compressed Natural Gas (CNG) has not been defined in the notification and other parts of the entry which deals with the subject or its use would not be helpful in interpreting the exclusionary part. The common parlance test therefore would be the reliable and safe guide to understand import of the exclusionary part used in the entry. What is meant by Compressed Natural Gas (CNG), in common parlance? - Held that: - The mere fact that part of Automobile component energized by CNG receives gas at 21.5 bar would not mean that CNG is treated in common parlance or in trade or industry as natural gas supplied at a pressure of 21.5 bar. Compressed Natural Gas (CNG) in common parlance is usually understood as natural gas used to energize transport vehicle with least environmental damage caused. The department as well as the Tribunal do not appear to have erred in holding that Compressed Natural Gas (CNG) is the gas used for energizing vehicle in the transport sector, particularly when revisionist itself treated it so and no other illustration is brought on record to show that natural gas supplied upto 10 bar (revisionist receives natural gas at 6-7 bar) is known and understood in the industry or common parlance as CNG. The court must avoid construction on the language of statute which would render a part thereof devoid of any meaning or application. 'RLNG' supplied by GAIL to the revisionist is not Compressed Natural Gas (CNG) so as to oust it from taxing Entry 8(a) of the Act, and the Tribunal has not erred in holding it so. No other point has been pressed - revision application dismissed - decided against assessee.

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• Indian Laws

• 2017 (6) TMI 25
  Offence punishable under Section 138 of the Negotiable Instruments Act - Dishonour of cheque for insufficiency, etc., of funds in the account - liability of director - Held that:- The petitioner was not a director in the company on the date the cheque was presented for encashment. No notice in terms of Section 138 of the Negotiable Instruments Act was issued to or served on him. Having resigned from the position of the director, there was no occasion for him to be privy to the service of notice of demand on the company. Since he was no longer responsible for the conduct of the business of the company, and had no occasion to be aware of the dishonor of the cheque or the notice of demand served in its wake, it cannot be said by any stretch of reasoning that he had knowledge or could have exercised due diligence to prevent the commission of the offence or is guilty of connivance or neglect, there being no material shown to impute consent. For the foregoing reasons, the continuance of the criminal proceedings against the petitioner is found to be an abuse of the judicial process. This court is duty bound to secure the ends of justice by taking measures to prevent such abuse of judicial process. Thus, the petition is allowed.

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