TMI Tax Updates - e-Newsletter
June 22, 2016

Case Laws in this Newsletter:

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

Articles

1. krishi kalyan cess on pending payments

   By: Suriyanarayanan Iyer

2. EXEMPTION OF PROPERTY OF THE UNION FROM STATE TAXATION

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. The fight against inflation: a measure of our institutional development (Dr. Raghuram G. Rajan, Governor - June 20, 2016 - at Tata Institute of Fundamental Research, Mumbai)

2. RBI Reference Rate for US $

Notifications

Customs

1. 40/2016 - dated 21-6-2016 - Cus

Seeks to further amend notification No. 53/2011-Customs dated 01st July, 2011 so as to provide deeper tariff concessions in respect of specified goods imported from Malaysia under the India-Malaysia Comprehensive Economic Cooperation Agreement (IMCECA) w.e.f. 30.06.2016

2. 39/2016 - dated 21-6-2016 - Cus

Seeks to further amend Notification No. 96/2008-Customs dated 13.08.2008 so as to include ‘Republic of Togo’ and ‘Republic of Chad’ in the list of countries eligible for preferential tariff under the said notification

Income Tax

3. 48/2016 - dated 20-6-2016 - IT

Income–tax (15th Amendment) Rules, 2016 - Amendments in Due diligence requirement

Circulars / Instructions / Orders

Income Tax

1. Press Release - dated 20-6-2016

Threshold Limit of tax audit under section 44AB and section 44AD – clarification

Customs

2. F. No. 450/145/2015-Cus-IV - dated 15-6-2016

Single Window Project - Referral of imported consignments to PGAs

3. Public Notice No. 6/2016 - dated 31-5-2016

Import – Clearance of imported consignments of diamonds, precious stones, precious metal (in any form), semi-precious stones, pearls, jewellery made of gold or any other precious metal with or without studding industrial diamonds including powders of both natural and synthetic and synthetic stones - Instructions

Highlights / Catch Notes

Income Tax

• Income-tax (15th Amendment) Rules, 2016: Enhanced Due Diligence Requirements to Boost Compliance and Transparency in Tax Matters.

  Notifications : Income–tax (15th Amendment) Rules, 2016 - Amendments in Due diligence requirement - Notification
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• New Circular Clarifies Tax Audit Thresholds for Sections 44AB and 44AD, Aiding Compliance for Businesses and Professionals.

  Circulars : Threshold Limit of tax audit under section 44AB and section 44AD – clarification - Circular
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• Court Confirms Income Diversion: Sale Proceeds Unjustifiably Directed to Pushpadanta Infrastructure, Petitioner Fails to Explain.

  Case-Laws - HC : Genuineness of payment - diversion of income - There is not a word in the sale deed why the majority of the sale consideration was diverted to M/s. Pushpadanta Infrastructure Ltd. The petitioner has not been able to produce before the Revenue Authorities or even before us any reason why M/s. Pushpadanta Infrastructure Ltd. should have received such sale consideration - additions confirmed - HC
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• Court Quashes Reassessment: Section 69C Inapplicable Due to Documented Cheque Payments for Purchases.

  Case-Laws - HC : Reopening of assessment - The source of expenditure in question was very much available since in the reasons recorded itself, the Assessing Officer points out that the purchases were made by making cheque payments. Section 69C of the Act therefore has no applicability - reassessment quashed - HC
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• High Court reinstates penalty u/s 271C for TDS non-deduction; ITAT's decision to delete penalty overturned.

  Case-Laws - HC : Penalty under Section 271C - non deduction of tds u/s 194A - assessee had not established a reasonable cause, as contemplated in Section 273B to resist an order of penalty under Section 271C - ITAT wrongly deleted the penalty - HC
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• Loan Advances Not Deemed Dividend: Business Transaction Excluded u/s 2(22)(e) of Income Tax Act.

  Case-Laws - AT : Deemed dividend addition u/s 2(22)(e) - loan advances given - the transaction made between the assessee and the company are business transactions and is not covered U/s 2(22)(e) - AT
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• Section 40A(3): Cash Payments in Land Deals Justified by Business Expediency for After-Hours Transactions.

  Case-Laws - AT : Addition u/s 40A(3) - payment made in cash - land deals/negotiations are done with the farmers - the need for cash payments on Sundays/after banking hours and test of business expediency has been satisfactorily fulfilled in the instant case - AT
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• Tax Authorities Add Unexplained Gift from Mother to Assessee's Taxable Income Due to Lack of Source Explanation.

  Case-Laws - AT : Addition on account of unexplained gift - the amount of gift claimed to be received by the assessee from his mother is not satisfactorily explained by the assessee. Addition confirmed - AT
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• Rental Income vs. Service Income: Taxpayer Can Classify Income from Services as Business Income for Tax Purposes.

  Case-Laws - AT : Income derived from mere letting out of property - receipt of facility charges for providing specific services like house-keeping, security, etc - it is quite evident that the said services are distinct from letting out of the property and, therefore, assessee is justified in asserting that the same be taxed as ‘business income’.- AT
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• Penalty Imposed u/s 271(1)(c) Due to Misunderstanding of American Date System in Deduction Claim Proceedings.

  Case-Laws - AT : Levy of penalty by the AO u/s 271(1) (c) - claim of deduction for expenditure incurred in respect of seconded employees - CIT (A) has misconstrued the facts of the case for the reason that he has not understood the American system of dates and for that purpose the entire matter went for a toss - AT
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• Assessee's Appeal Deemed Not Maintainable Against Section 195(2) Order Related to ONGC.

  Case-Laws - AT : Appeal filed by the assessee before the learned Commissioner (Appeals) against the order passed under section 195(2) in the case of ONGC is not maintainable - AT
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Customs

• India Classifies Import of Second-Hand Multifunctional Devices from Canada as Hazardous Waste Due to Non-Functionality Issues.

  Case-Laws - AT : Import of multifunctional devices (MFDs) from Canada - second-hand machines - 40 machines are treated as hazardous waste - the MFDs, should have been functional/capable of direct re-use in the very state they are imported into India, without requiring addition of hard disk or other parts - AT
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• High Court Allows Writ Petition After Customs Broker's License Renewal Denial Due to Penalty on Managing Director.

  Case-Laws - HC : Renewal of Customs Brokers License was denied since the penalty was imposed on the Managing Director of the company - The regulations do not prescribe any qualification or disqualification for the officers of companies/firms other than the partner or director or the authorised employee who is handling the customs work. - the writ petition allowed. - HC
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• Steel Scrap Seizure Lifted: No Notice Issued u/s 124(a) Within Six Months, Goods to Be Released.

  Case-Laws - HC : Seizure of import of heavy melting steel scrap - goods were initially detained on the ground that hazardous items were being smuggled in the guise of heavy melting scrap - in the absence of any notice under Section 124(a) within six months from the date of seizure, the petitioner is entitled to get release of the goods. - HC
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• Customs House Agent License Revocation Overturned Due to Unreasonable Delays in Proceedings, Highlighting Importance of Timely Administrative Actions.

  Case-Laws - AT : Suspension of the CHA licence - Period of limitation - unfortunately, the proceedings was so delayed and revocation of licence was made - Such inordinate delay is good ground to set aside the order of the revocation - AT
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Service Tax

• Court Rules Accounting Constraints Insufficient to Prove Service Tax Passed On; Refund Sought by Appellant Approved.

  Case-Laws - AT : Claim of refund of service tax amount which was not required to be paid by appellant as per law - Unjust enrichment - claim of expenditure in the profit and loss account - The constraints faced in accounting cannot be a ground to assume that the duty has been passed on to another - AT
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• Service Tax Demand Overturned: No Malafide Intent Found in Extended Limitation Period for Public Sector Undertaking.

  Case-Laws - AT : Demand of service tax - extended period of limitation - malafide intention - reverse charge - assessee admittedly is a Public Sector Undertaking and cannot be attributed with any malafide to evade tax. - AT
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• Appellant granted penalty waiver u/s 80 for timely service tax payment; penalty reduced to 25% u/s 76.

  Case-Laws - AT : Waiver of penalty or benefit of reduced penalty @25% - Appellant has shown reasonable cause for non payment of service tax and considering facts that the appellant has discharged service tax, before issuance of show cause notice, they are entitle for the waiver of penalty imposed under Section 76 invoking Section 80 - AT
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• Appellant Not a Tour Operator; Service Tax Demand for 2005-10 Period Set Aside Due to Non-Taxable Activity.

  Case-Laws - AT : Tour Operator Service - The appellant's contention is that he is not a tour operator. He is not involved in the business of planning, scheduling, organising or arranging tours by any mode of transport - during the period 2005-06 to 2009-2010, the activity was not taxable - demand set aside - AT
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Central Excise

• Refund Approved for Education Cess Payments; Central Excise Act Provisions Not Applicable for Refund Process.

  Case-Laws - HC : Refund of Education Cess and Secondary and Higher Secondary Education Cess inadvertently paid on cesses - machinery provisions under the Central Excise Act, 1944 would not apply to refund of such amount - Refund allowed - HC
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• Court Rules Writ Petition Not Maintainable on Excise Duty for Food in Hotels; SSI Exemption Discussed.

  Case-Laws - HC : Levy of excise duty - manufacture - whether food cooked and served in Hotels and Restaurants are excisable - SSI exemption - Writ Petition is not maintainable - HC
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• High Court Confirms Cenvat Credit for Management Consultancy Services Linked to Manufacturing Activities.

  Case-Laws - HC : Cenvat Credit - input services - Management Consultancy Services - nexus with manufacturing activity established - credit allowed - HC
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• Excess Freight Not Included in Assessable Value for Petroleum Products Taxation When Collection Exceeds Actual Cost.

  Case-Laws - AT : Valuation - petroleum products - amount of freight collected is less than the actual expenditure. - any amount of freight which is collected in excess of actual freight is not includible in the assessable value. - AT
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• Appellants Eligible for Cenvat Credit on Cement Used in Plant Installation; Cement Classified as Input Under Excise Rules.

  Case-Laws - AT : Cenvat credit of the duty paid on cement as capital goods - cement used for installation and erection or plant and machinery - appellants are eligible for credit of excise duty paid on cement, under the category of inputs - AT
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• Cenvat Credit Valid for Transport Services Bringing Workers to Factory; Nexus with Manufacturing Process Confirmed.

  Case-Laws - AT : Cenvat credit claimed on the transport service availed to bring the workers to their factory site - When the nexus and integral connection of input with the manufacture comes out, it would not be proper to entertain Revenue appeal - AT
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• Appellants Cleared of Fraudulent Cenvat Credit Charges Due to Lack of Evidence by Department.

  Case-Laws - AT : Fraudulent availment of Cenvat Credit without receipt of raw material in the factory - as per department the appellants though imported goods vide Bill Entry, diverted the same without bringing the goods into the factory or use in their manufacture - department failed to substantiate its claim - demand set aside - AT
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• CENVAT Credit Allowed for Cutting or Slitting Steel Coils Despite Not Being Manufacturing u/r 16.

  Case-Laws - AT : Manufacture - entitle for cenvat credit - process of cutting/ slitting of cold rolled or hot rolled stainless steel coils/ plates of various length, width and thickness into coils of specific width - in view of the Rule 16, credit can not be denied even if the activity does not amount to manufacture - AT
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VAT

• Petitioner Denied Compounding Tax Benefits Due to Failure to Apply; Department's Action Deemed Justified.

  Case-Laws - HC : Works Contracts - benefit of compounding of tax - suppressed contract receipt - no compounding application was ever filed - Department was justified in acting accordingly as if petitioner had not opted for payment of tax at compounded rate. - HC
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• Revision Assessment Challenged: Order Issued on New Grounds Violates Natural Justice Principles, Lacking Original Show Cause Notice Reasons.

  Case-Laws - HC : Validity of revision assessment - input tax credit - the respondent has passed the impugned order giving reasons which were not the basis on which show cause notice was issued. Hence, this amounts to clear violation of principles of natural justice. - HC
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Case Laws:

• Income Tax

• 2016 (6) TMI 747
  Reopening of assessment - Ingenuine share transactions - Held that:- The total of payout during the period under consideration is some what lesser than what is recorded with the Assessing Officer in terms of volume of shares and the value of receipt. However, when such large entries are being examined and corelated, minor discrepancy would not shake the very foundation of reason to believe, particularly when substantial portion of such alleged payout is demonstrated through the entries, matching with the BSE record of buying and selling data of Prraneta Industries Limited. In the reasons recorded, the Assessing Officer has mentioned that such amount of Rs. 4.03 crores is received by the assessee during the assessment year 2010-11/2011-12 which is not genuine transaction. This one statement cannot be picked out of context and appreciated in isolation to argue that the Assessing Officer is not clear as to in which year such income should be taxed. The notice for the reopening was issued for the assessment year 2010-11, majority of transactions are relevant to such assessment year. If a small portion of the entries related to the subsequent assessment year, it would not mean that the assessment cannot be reopened for the year during which majority of these transactions actually took place. With respect to the additional ground raised in the other petitions, the data provided by the Revenue for a total of 4,50,572 shares which has stated to have been claimed, it is true that some 30,843 fall during the period post 31.03.2011. However, majority of the sale of shares of nearly 4,20,000 was during the period 01.04.2010 to 31.03.2011 and only on this ground therefore, we would not be justified in quashing the notice for reopening. - Decided against assessee

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• 2016 (6) TMI 746
  Reopening of assessment - taxability of income of the sugarcane - Held that:- A Division Bench of this Court in the case of Shri Chalthan Vibhag Khand Udylog Mandli Ltd. vs. Deputy Commissioner of Income-Tax, reported in [2015 (7) TMI 297 - GUJARAT HIGH COURT ], had quashed the notice for re-opening which was based on identical reasons, it was held that the difference between the price to be paid to cane growers and the purchase price declared by the Government under sugar Sugar Control Order cannot be said to be by way of distribution of profits. It was held that the Assessing Officer had not carried out any inquiry before coming to a contrary conclusion and that he should not have a reasonable belief for forming the opinion that the income chargeable to tax had escaped the assessment. Also see Shri Narmada Khand Udhyog Sahakari Mandli Ltd. vs. Income Tax Officer [2016 (2) TMI 385 - GUJARAT HIGH COURT ] - Decided in favour of assessee

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• 2016 (6) TMI 745
  Reopening of assessment - taxability of income of the sugarcane - Held that:- A Division Bench of this Court in the case of Shri Chalthan Vibhag Khand Udylog Mandli Ltd. vs. Deputy Commissioner of Income-Tax, reported in [2015 (7) TMI 297 - GUJARAT HIGH COURT ], had quashed the notice for re-opening which was based on identical reasons, it was held that the difference between the price to be paid to cane growers and the purchase price declared by the Government under sugar Sugar Control Order cannot be said to be by way of distribution of profits. It was held that the Assessing Officer had not carried out any inquiry before coming to a contrary conclusion and that he should not have a reasonable belief for forming the opinion that the income chargeable to tax had escaped the assessment. Also see Shri Narmada Khand Udhyog Sahakari Mandli Ltd. vs. Income Tax Officer [2016 (2) TMI 385 - GUJARAT HIGH COURT ] - Decided in favour of assessee

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• 2016 (6) TMI 744
  Genuineness of payment - diversion of income - Held that:- The petitioner was the owner of the land in question. He executed a sale deed in favour of Kusumben Doshi. As per the sale deed, the petitioner received only Rs. 58.68 lacs by way of sale consideration whereas M/s. Pushpadanta Infrastructure Ltd., as the confirming party, received Rs. 2.95 crores. There is not a word in the sale deed why the majority of the sale consideration was diverted to M/s. Pushpadanta Infrastructure Ltd. The petitioner has not been able to produce before the Revenue Authorities or even before us any reason why M/s. Pushpadanta Infrastructure Ltd. should have received such sale consideration. No agreement to sale, no lease document, no other document showing even in remote manner M/s. Pushpadanta Infrastructure Ltd. having acquired any right, title or interest in the land has ever come on record. It is not even stated that M/s. Pushpadanta Infrastructure Ltd. legally or otherwise was in possession of the land due to which such sale consideration had to be diverted to it. The Revenue Authorities, therefore, correctly disbelieved the genuineness of payment to M/s. Pushpadanta Infrastructure Ltd. and treated it as diversion of income.

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• 2016 (6) TMI 743
  Computing deduction u/s 80IA - inclusion of income from lab sample test - Held that:- The appellant company has apparently disclosed the Lab Sample Test income only I unit-I whereas the deduction u/s.80IA has been allowed on Unit-II and Unit-III. While computing the business profit in these units, the A.O. has adopted the net profit as per the P&L account of that unit and has reduced 'other income' being Lab Sample Test therefrom. As find that the said income has not been included in the first place in the Net Profit as per the P&L Account and therefore, the A.O. was not justified in reducing the same while computing the deduction u/s. 80IA. - Decided in favour of assessee Deduction u/s 80HHC - exclusion of sales tax and excise duty from the total turnover - Held that:- Excise duty and sales tax also cannot form part of the "total turnover" under Section 80HHC(3), otherwise the formula becomes unworkable. In our view, sales tax and excise duty also do not have any element of "turnover" which is the position even in the case of rent, commission, interest etc. It is important to bear in mind that excise duty and sales tax are indirect taxes. They are recovered by the assessee on behalf of the Government. Therefore, if they are made relatable to exports, the formula under Section 80HHC would become unworkable. The view which we have taken is in the light of amendments made to Section 80HHC from time to time. See Commissioner of Income Tax Versus Pogagen Amp Nagarsheth Powertronics Ltd. [2014 (3) TMI 934 - GUJARAT HIGH COURT ] - Decided in favour of assessee

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• 2016 (6) TMI 742
  Reopening of assessment - period of limitation - Held that:- . In view of the provisions of Section 150 (1) and 150 (2), on the basis of which order came to be passed on 5.11.2008, limitation was over on 31.3.2008, therefore, Special Civil Application is required to be allowed in favour of assessee

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• 2016 (6) TMI 741
  Reopening of assessment - Entitlement to exemption under section 10AA - applicability of Section 69C - bogus purchases - Held that:- Even if the expenditure of the so called bogus purchases is disallowed, the only effect it could have is to increase the profit of the assessee which in any case is exempt under section 10AA of the Act. Section 147 of the Act would be applicable where the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. When this fundamental requirement fails, power of reopening cannot be exercised. We are unable to appreciate the argument of the counsel for the Revenue that such income would not qualify as business income and that it should be treated as income from other sources by applying section 69C of the Act. This section pertains to unexplained expenditure and provides that where, in any financial year, an assessee has incurred any expenditure and he offers no explanation about the sources of such explanation or part thereof or the explanation offered is not satisfactory, the amount covered by such expenditure or the part, as the case may be, would be deemed to be the income of the assessee for such financial year. The present is not a case where the assessee has incurred expenditure, but failed to offer explanation about the source of such expenditure. The source of expenditure in question was very much available since in the reasons recorded itself, the Assessing Officer points out that the purchases were made by making cheque payments. Section 69C of the Act therefore has no applicability. Respective impugned notices for reopening of assessment are quashed. - Decided in favour of assessee

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• 2016 (6) TMI 740
  Reopening of assessment - eligibility of deduction under section 80IA - Held that:- The entire issue was examined by AO during the original assessment proceedings. We may recall, during scrutiny assessment, the Assessing Officer raised several queries calling upon the assessee to satisfy him regarding the same. One direction was to submit complete note on deduction claimed under Section 80IA and to show how the company satisfied the provisions of the said section. In response to such query, the petitioner gave detail work out of its claim of deduction under section 80IA of the Act from generation of power. The assessee also provided the reason for transaction price interdivision since the power was generated for captive consumption. In the details so supplied, the petitioner pointed out that the cost of steam per kg was taken at Rs. 0.74. In the same table, the assessee had also pointed out that cost of steam is charged to the process at Rs. 0.80 per kg. Thus, the assessee in the process of substantiating its claim for deduction under section 80IA of the Act, pointed out the price for transferring generated electricity by one division to another. Such working out included the cost of production of steam and the cost at which it was charged to the consuming unit. It was only after verifying such details that the Assessing Officer in the order of assessment dated 31.10.2012, made no alteration in the petitioner's claim of deduction under section 80IA of the Act. He disallowed certain part of the petitioner's claim for depreciation, but no disallowance was made on the claim for deduction under section 80IA of the Act. In fact, in the assessment order he noted that the petitionerassessee had claimed the deduction on such power generation though, the power is captively used by separate industrial undertaking of the assessee company. It can thus, be clearly seen that the entire claim of deduction of the petitioner under section 80IA was minutely scrutinized by the Assessing Officer in the original assessment proceedings. As long as the claim was examined and no additions made, it would not be open for the Assessing Officer to reopen the assessment on the premise that in the original assessment, no reasons were recorded for not disturbing the claim. - Decided in favour of assessee

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• 2016 (6) TMI 739
  Penalty under Section 271C - non deduction of tds as required by them under Section 194A - Held that:- When there is a failure on the part of the assessee to deduct tax at source in violation of Section 194A, the penal provisions of Section 271C are attracted. In such a case, the only way out for the assessee is to take the benefit of Section 273B by establishing that there was reasonable cause justifying their failure to comply with Section 194A. Burden under Section 273B is entirely on with the assessee and that a case which is beyond the control of the assessee and which prevents a reasonable man of ordinary prudence acting under normal circumstances, without negligence or inaction or want of bona fides, alone make out a reasonable cause. In this case, Annexure A order of the Joint Commissioner shows that the assessee failed to produce any evidence to substantiate its claims. However, the Commissioner (Appeals) decided the issue by putting the burden on the revenue, which is evident from the extracted portion of the Annexure B order passed by the Commissioner. The order of the Tribunal shows that the Tribunal has given totally different reasons which are mere surmises and assumptions made by it and are not founded on any materials that were made available by the assessee. All this therefore show that the assessee had not established a reasonable cause, as contemplated in Section 273B to resist an order of penalty under Section 271C. Therefore, we find that the Commissioner (Appeals) and the Tribunal acted illegally in cancelling the penalty levied on the assessee. - Decided in favour of revenue

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• 2016 (6) TMI 738
  MAT liability under section 115JB - ITAT set aside the computation of the Assessing Officer (AO), taxing the book profit, in accordance with section 115JB of the Income-tax Act - Held that:- In the instant case, there was no determination of the Assessing Officer that the final accounts of the assessee were not prepared in accordance with the Schedule VI to the Companies Act. Hence the determination of liability for payment of minimum alternate tax under section 115JB of the Income-tax Act, by ignoring the profit and loss account was not through due process. When the corrected return in consonance with the audited profit and loss account was submitted, those figures should have been the basis for determination of the minimum alternate tax under section 115JB of the Income-tax Act. In the proceeding under consideration, the Appellate Tribunal concluded that the end result as computed by the Assessing Officer was of his own making and the assessee could not be held liable to tax for non-disclosure of the income which the assessee had returned but adjusted against brought forward losses. We find such observation of the Tribunal with regard to the procedure adopted by the Assessing Officer, is consistent with the ratio of Apollo Tyres Ltd. (2002 (5) TMI 5 - SUPREME Court ), Malayala Manorama Co. Ltd. v. CIT reported in [2008 (4) TMI 20 - SUPREME COURT ] and also this court's decision in Amines and Plasticizers Ltd. v. Deputy CIT (Assessment) reported in [2006 (11) TMI 112 - GAUHATI HIGH COURT ]

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• 2016 (6) TMI 737
  Disallowance u/s 14A - Held that:- If there are interest free funds available a presumption would arise that investment would be out of interest free funds available. This view has also been endorsed by the Bombay High Court in a latest judgment in the case of HDFC Bank Ltd. Vs. DCIT (2016 (3) TMI 755 - BOMBAY HIGH COURT ), which was rendered in the context of disallowance under section 14A of the Act. Interestingly, in this case the High Court has reprimanded the Tribunal in not following an earlier judgment of the Court in the case of CIT Vs. HDFC Bank Ltd. (2014 (8) TMI 119 - BOMBAY HIGH COURT ), which in turn relying on the judgment of Reliance Utilities & Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT ), has held that owned funds being more than investments, it is to be presumed that these were made out of owned funds. Ironically, all the Landmark judgments relied on this case do not relate to the issue of section 14A of the Act.In view of the above, the Assessing Officer is directed to delete the addition made under section 14A of the Act. - Decided in favour of assessee Capitalization of interest towards machinery under installation account - Held that:- There were certain machinery & building under construction during the year. The assessee had capitalized certain interest on acquisition of the same claiming that to an extent the amount was borrowed for acquisition of these. We are of the considered view that in case the assessee has given a plausible explanation with regard to the extent of interest being capitalized by it suo-moto, the Assessing Officer cannot make further addition without bringing on record any material to show the nexus between the amount borrowed and utilized for acquisition or construction of such asset. Nowhere in his order the Assessing Officer had been able to substantiate that the amount of interest capitalized by the assessee itself is not correct. Further, the explanation given by the assessee that it has huge owned funds to acquire such assets also has a bearing on the issue. In view of this, we direct the Assessing Officer to delete the disallowance.- Decided in favour of assessee Disallowance of interest on advances given to two parties - Held that:- No evidence to show the business expediency for these advances could be filed. However, we must also add that from the reading of the Balance Sheet of the assessee, it is quite clear that the assessee possesses huge own funds, therefore, relying on the proposition laid down by the Jurisdictional Punjab & Haryana High Court in the case of Bright Enterprises Pvt. Ltd. (2015 (11) TMI 342 - PUNJAB & HARYANA HIGH COURT), we are inclined to hold that presuming in such fact situation that the money has been lent out of owned funds, no disallowance of interest is called for - Decided in favour of assessee

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• 2016 (6) TMI 736
  Estimation of income based on the previous history of the assessee - civil construction work - Rejection of book of accounts u/s 145(3) - Held that:- CIT(A) has effectively taken the net profit rate at 5.05% which is based on the previous history of the assessee. The ld. DR was not able to controvert the fact recorded by the ld. CIT(A) in his order. Therefore, we find no merit in this ground of appeal of the Revenue which is dismissed. - Decided against revenue Addition u/s 41 - addition on accounts of all the sundry creditors above Rs. 1,00,000/- - main contention of the Revenue was that the assessee has neither filed confirmations nor these parties were produced for examination -AR submitted that these were the trading liabilities and were not old in nature - Held that:- Most of the liabilities were of current year or immediately preceding year and the accounts were active in nature and the transactions were being carried out for the current year as well as in the subsequent year. Considering these facts and circumstances of the case, we are of the view that the ld. CIT(A) has rightly deleted the addition and find no infirmity in his order which is sustained - Decided against revenue

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• 2016 (6) TMI 735
  Deemed dividend addition u/s 2(22)(e) - Assessment made by the Assessing Officer U/s 153A - Held that:- Assessment U/s 153A read with Section 143(3), the ld Assessing Officer has to assess the income in abated year only where incriminating documents were found and seized and no regular addition can be made under this section as the Coordinate Bench has decided this identical issue in the case of M/s Jadau Jewellers and Manufacturers P. Ltd. (2015 (12) TMI 1526 - ITAT JAIPUR ) wherein it has been held that technical ground raised by the assessee succeeds and order passed U/s 153A read with Section 143(3) of the Act has been held void ab-initio. The other case laws referred by the assessee is also squarely applicable. Therefore, we have considered view that assessment made by the Assessing Officer U/s 153A read with Section 143(3) of the Act is out of jurisdiction. Accordingly, we allow the assessee’s appeal on this ground. In real estate most of the transactions are being made on the basis of agreement to sale and to avoid the stamp duty payment. In real estate business number of transactions of purchase and sale of the plots are being made and stamp duty finally is to be borne by the actual user of the plot at the time of registration. Therefore, generally the transactions made on agreement to sale basis. It is also a fact that this transaction was in between director of the company and company even as per this agreement, the assessee has to make registry of both the plots at the time of final conversion and allotment of Patta. The correspondence between the assessee and the JDA shows that there was efforts to convert the land commercially and get the patta from the JDA, which cannot be doubted. The assessee relied on various decisions on deemed dividend wherein it has been held that loan advances given against the consideration are business transactions not deemed dividend U/s 2(22)(e) of the Act. Therefore, we held that the transaction made between the assessee and the company are business transactions and is not covered U/s 2(22)(e) of the Act. Accordingly, we reverse the order of the ld CIT(A) - Decided in favour of assessee

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• 2016 (6) TMI 734
  Disallowance of contribution made to Trust - whether an allowable business expenditure? - proof of direct business nexus - Held that:- Similar orders were passed by the Tribunal for the assessment year 2009- 10 and 2010-11. There is no change of circumstances brought to our notice after passing of the orders referred hereinabove or no change in law has been brought to our notice by either of parties. We have heard the rival contentions and perused the material available on record. The issue in question is covered in favour of the assessee by the earlier decisions of the Coordinate Benches in assessee’s own case. Respectfully following the earlier decisions of the Coordinate Benches, the contribution - made by the assessee to SPARSH Trust is accordingly allowed as an eligible business expenditure under section 37(1) of the Act Disallowance of expenditure u/s 36(1)(va) r.w.s. 2(24)- depositing the employee’s contribution to PF and ESI - Held that:- Admittedly the contribution was deposited by the assessee with the Provident fund on the next day immediately it was due. The Provident fund Act by which the deposit of the contribution by the assessee within the grace period of 5 days from the date when it becomes due. The ld. CIT(A) has given the finding that the payments of ESI & PF were made before the due date of filing of income tax return. In light of decision of Hon’ble Rajasthan High Court in the case of CIT vs. State Bank of Bikaner and Jaipur and Jaipur Vidhyut Vitran Nigam Ltd. [2014 (5) TMI 222 - RAJASTHAN HIGH COURT ] we find no infirmity in the decision of Ld CIT(A) which is hereby deleted. Appeal Decided partly in favour of revenue

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• 2016 (6) TMI 733
  Provision made for Development of Land - whether is ascertained liability? - Held that:- Undisputedly, there is no change in the facts and circumstances of the case. The issue in question is covered in favour of the assessee by the earlier decisions of the Coordinate Benches in assessee’s own case - Decided in favour of assessee Addition u/s 40A(3) - payment made in cash - Held that:- Undisputedly the genuineness of the transactions and identity of the parties have been clearly spelt out by the assessee and forms part of the assessment records. The payments were made to farmers for purchase of their agricultural land and the payments are duly supported by the various documentation in form of agreement to sale, conveyance deed etc. The fact that the payments were made earlier through cheque cannot be made the sole basis for disallowance u/s 40A(3) of payments being made in cash. The assessee has explained the circumstances in which the land deals/negotiations are done with the farmers and the need for cash payment given the lack of banking facility, cheques given earlier not being deposited thus requiring cash payments in respect of these 21 transactions. Further, it is noted that these cash payments of Rs. 74.51 lacs constitute only a small percentage of total payments towards purchase of land totalling to Rs. 236.90 crores during the year under consideration and thus constitute an exception rather than a norm. In our view, the need for cash payments on Sundays/after banking hours and test of business expediency has been satisfactorily fulfilled in the instant case and the second proviso to section 40A(3) read with Rule 6DD which provides relaxation from the rigour of disallowance under section 40A(3) is clearly attracted. Further it is noted that the assessee has been in this line of business and in the past under similar circumstances, cash payments have been made to the farmers for purchase of the land and the Co-ordinate Bench vide its order dated 28.03.2014 has deleted the disallowance in A.Y. 2006-07, 2007-08 and 2008-09. Thus we find no infirmity in the order of the ld. CIT(A) who has rightly deleted the disallowance - Decided in favour of assessee

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• 2016 (6) TMI 732
  Addition on account of unexplained gift - amount received from the mother - Held that:- The mother of the assessee was not having any independent source of income and she was fully dependent for her maintenance on her four sons including the assessee. The said lady thus has no capacity to give the gift to the assessee and in the absence of any satisfactory explanation offered by her about immediate source from which the amount in question was claimed to be given to the assessee in cash, find myself in agreement with the authorities below that the amount of gift claimed to be received by the assessee from his mother is not satisfactorily explained by the assessee. Addition confirmed - Decided in favour of revenue Unexplained cash credits - addition u/s 68 - Held that:- There is nothing brought on record by the assessee to establish that the amount in question actually represented the trade advances. By assessee’s own submissions, the amounts in question represented loans and the primary onus, therefore was on the assessee to establish the identity and capacity of the concerned creditors as well as the genuineness of the relevant transaction. As rightly contended by the ld. DR in this regard, the assessee has however failed to discharge this onus. Keeping in view the adverse findings of the enquiry conducted by the AO, which the assessee has failed to explain. Thus the amount in question stated to be loans received by the assessee is rightly treated by the authorities below as unexplained cash credits which is liable to be added to the total income of the assessee under section 68. - Decided in favour of revenue Addition made on account of low withdrawals - Held that:- The estimate of personal and household expenses of the assessee as made by the AO, after taking into consideration the family size of the assessee, cost of living etc., is quite fair and reasonable. Therefore find no justifiable reason to interfere with the impugned order of the ld. CIT(A) confirming the addition made by the AO on account of low withdrawals and confirming the addition made on this issue - Decided in favour of revenue Addition on account of unexplained investment - Held that:- As rightly contended by the ld. Counsel for the assessee by relying on section 45 of the Transfer of Property Act, 1882, 50% of the investment in land, therefore is to be presumed as having made by the wife of the assessee and if there is a failure to explain satisfactorily the source of the said investment in the hands of the wife, the addition on account of such unexplained investment is liable to be made in her hands who is an independent individual separately assessed to tax and not in the hands of the assessee. Therefore delete the addition made by the AO and confirmed by the ld. CIT(A) on this issue - Decided in favour of assessee

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• 2016 (6) TMI 731
  Value of FBT u/s 115WB - Contributions to approved Pension Fund - liability to fringe benefit tax (FBT) - Held that:- As relying on Andhra Bank, Hyderabad Versus DCIT, Circle 1(1), Hyderabad [2014 (7) TMI 804 - ITAT HYDERABAD ] we set aside the impugned order and direct the AO to allow the claim of the assessee and not to consider the impugned contribution of the assessee to the “Pension Fund” as a Fringe Benefit provided by the assessee to its employees. As per the definition of ‘contribution’, no individual employee had any benefit earmarked the payment cannot be considered as covered by the provisions of 115WB(1)(c) – thus, the contribution made to the fund under this benefit scheme cannot be considered as the amount to be considered under the provisions of section 115WB(1)(c) for the purpose of FBT – Decided in favour of Assessee.

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• 2016 (6) TMI 730
  Income derived from mere letting out of property - receipt of facility charges for providing specific services like house-keeping, security, etc. - business income or income from house property - Held that:- Amount received from the tenants as ‘rent’ for letting of the property was assessable under section 22 of the Act as “income from house property” and the other receipts in respect of the services rendered to the tenants was liable to be assessed under section 28 of the Act as ‘business profits’. In our view, the ratio laid down by the Hon’ble Gujarat High Court in the case of Sarabhai (P) Ltd.(2002 (11) TMI 32 - GUJARAT High Court ) covers the instant situation. Undisputedly, the ‘facility service charges’ are being received by the assessee in return of providing specific services like house-keeping, security, etc. To the similar effect is also the judgment of the Hon’ble Madras High Court in the case of A.K.Complex (2007 (6) TMI 177 - MADRAS High Court ), which was relied upon by the assessee before us. The argument of the Revenue that services rendered by the assessee are not of special nature, and they are of routine nature expected to be provided by the Landlord, is of no consequence to decide the controversy in question. This is for the reason that factually it has not been disputed by the Revenue that services by way of housekeeping, security, etc. have been rendered by the assessee. Moreover, it has to be deciphered on the basis of terms and conditions in each case as to the nature of the services that may be provided by the owner of property to its tenants to decide as to whether they are distinct from an activity which is merely because of ownership of the property. In the present case, it is quite evident that the said services are distinct from letting out of the property and, therefore, assessee is justified in asserting that the same be taxed as ‘business income’. Thus, on this aspect, we set-aside the order of the CIT(A) and direct the Assessing Officer to recompute the income in view of the aforesaid directions Disallowance of expenditure - Held that:- P&L Account pertaining to administrative expenses reveal that various expenses on account of repairs and maintenance, filing fee, post and telegraph, bank charges, accounting charges, audit fee, etc. have been debited apart from expenses incurred on house-keeping and security charges, with which we have dealt with in the earlier part of this order. In our view, the Assessing Officer has mechanically disallowed the entire expenditure without appreciating that certain bare minimum expenses are liable to be incurred by the assessee company in order to maintain its status of a corporate body. Therefore, we deem it fit and proper to restore the matter back to the file of Assessing Officer in order to examine the allowability of expenditure afresh in the aforesaid light and thereafter recompute the income of the assessee. Thus, on this issue the assessee succeeds for statistical purposes.

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• 2016 (6) TMI 729
  Levy of penalty by the AO u/s 271(1) (c) - claim of deduction for expenditure incurred in respect of seconded employees under the Management Provision Agreement (MPA) - Held that:- We find that the assessee has filed details to the extent of 99.97 percent, which means the assessee on merits is eligible for deduction of these expenses from its income, what to talk of penalty under section 271(1)(c) of the Act. This case is not covered under any of the penalty provisions provided under section 271(1)(c) of the Act, it is very clear from the facts of the case itself. From the above facts, it is clear that it is not a case of concealment of income or furnishing of inaccurate particulars of income as the case may be because neither the AO nor CIT (A) has appreciated the facts of the case during penalty proceedings or during appellate proceedings. The meaning of the term “particulars” used in section 271 (1) (c) of the Act would embrace the details of the clam made. Where no information is given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing of inaccurate “particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provisions of section 271 (1) (c) of the Act, the penalty provisions cannot be invoked. The Revenue has wrongly invoked the provisions in the present case. The CIT (A) has misconstrued the facts of the case for the reason that he has not understood the American system of dates and for that purpose the entire matter went for a toss. In the given facts of the case, we are of the view that the penalty levied by AO and sustained by CIT (A) cannot be upheld and hence, the same is deleted. - Decided in favour of assessee

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• 2016 (6) TMI 728
  TDS u/s 195 - non tds deduction - PE in India - maintainability of appeal - appealable order u/s 246A - whether CIT(A) has erred in adjudicating the appeal filed by M/s Abu Dhabi Ship Building PJSC who is not Applicant of the application u/s 195(2)? - Held that:- The order appealed against is an order passed under section 195(2) against ONGC requiring it to deduct tax at source on payments made to the assessee. Further, there is no final determination of liability under the Act as far as the assessee is concerned which can only be determined when assessment is framed against the assessee. That besides, there being a specific provision under section 248 of the Act for filing appeal against order passed under section 195(2) of the Act, that too by payer / deductor of tax at source the said order cannot be challenged under section 246A of the Act by the respondent. In the aforesaid view of the matter, we are of the considered opinion that the appeal filed by the respondent assessee before the learned Commissioner (Appeals) against the order passed under section 195(2) in the case of ONGC is not maintainable. The learned Commissioner (Appeals), in our view, was not competent under the provisions of section 246A of the Act to entertain such an appeal. We, therefore, set aside the impugned order passed by the learned Commissioner (Appeals) and restore the order of the Assessing Officer under section 195(2). - Decided in favour of revenue

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• Customs

• 2016 (6) TMI 756
  Import of multifunctional devices (MFDs) from Canada - second-hand machines - 40 machines are treated as hazardous waste - adjudicating authority confirmed the higher assessable value based on the Chartered Engineer (C.E.) certificate. - Held that:- the 40 MFDs imported were not functional and did not satisfy the condition of direct re-use as envisaged in the MOEF-OM. It is true that some of the 40 MFDs, (however, not all) were found to be working after being tested with another suitable hard disk. In our considered view, the MFDs, should have been functional/capable of direct re-use in the very state they are imported into India, without requiring addition of hard disk or other parts - Decided against the assessee.

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• 2016 (6) TMI 755
  Valuation - validity of order of the Commissioner (Appeals) to remand back the matter without going into the ground realities of the fact and merits - Held that:- Neither the adjudicating authority nor the appellate authority having acted in accordance with law relating to valuation which is codified by 2007 Rules with interpretative Rules thereon and specific methodology of valuation is prescribed, ld. Commissioner (Appeals) is directed to re-adjudicate entire matter afresh taking into account the anxiety of revenue expressed in review decision. Granting reasonable opportunity of hearing to the appellant, he shall determine implication of every element of cost in respect of related party transaction and arrive at proper assessable value of the imports. - Matter restored before the Commissioner (Appeals) to re-adjudicate the matter and pass appropriate orders - Decided in favor of assessee.

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• 2016 (6) TMI 754
  Suspension of the CHA licence - Period of limitation - Held that:- Suspension of CHA licence was made in the present case on 31.03.2010. There was a post decisional hearing granted on 4.5.2010. The outcome of such hearing followed by suspension on 7.9.2010 was before Tribunal as aforesaid. Thereafter the matter travelled for proposition to revocation of licence. The show cause notice dated 5.7.2011 was its outcome. That notice required inquiry to be conducted by subordinate officer and reported to the Commissioner within time limit. But unfortunately, the proceedings was so delayed and revocation of licence was made by the impugned order dated 14.6.2015. Such inordinate delay is good ground to set aside the order of the revocation. - Decided in favor of CHA.

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• 2016 (6) TMI 753
  Seizure of import of heavy melting steel scrap - goods were initially detained on the ground that hazardous items were being smuggled in the guise of heavy melting scrap - According to the learned counsel for the petitioner under Section 110 (2) of the Customs Act, when no notice in respect of the seizure is given under Clause (a) of Section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized. Held that:- Since the provisions of the Section 110(2) is clear that in the absence of any notice under Section 124(a) within six months from the date of seizure, the petitioner is entitled to get release of the goods. - The 1st respondent is directed to release the goods covered by the bill of entry dated 06.08.2015 within a period of two weeks from the date of receipt of a copy of this order. - Decided in favor of petitioner.

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• 2016 (6) TMI 752
  Renewal of Customs Brokers License - application for renewal of the Customs Broker licence is not being considered by the commissioner since the penalty was imposed on the Managing Director of the company - Held that:- Regulation 5 of the Regulations only provides that the applicant for a licence to act as a Customs Broker in a Customs Station, shall not be a person on whom penalty has been imposed under the Customs Act, Central Excise Act and the Finance Act. The respondents have no case that any penalty has been imposed on the petitioner company. Mr. Bethusami Bethuraj on whom penalty was imposed as per Ext.P1 order is the Managing Director of the company. Mr. Bethusami Bethuraj is only an officer of the company. As such, refusal to deny renewal of the licence sought by the petitioner on the ground that penalty was imposed on its Managing Director cannot be sustained. The regulations do not prescribe any qualification or disqualification for the officers of companies/firms other than the partner or director or the authorised employee who is handling the customs work. - the writ petition allowed. - the first respondent to consider the application for renewal of licence submitted by the petitioner and grant the renewal sought by the petitioner if their application is otherwise in order. - Decided in favor of petitioner.

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• 2016 (6) TMI 751
  Claim of exemption on import of Uninterrupted Power Supply System 200 KVA Delphys Green Power C6 with Cardboard/Pallet Packing - Notification No.25/2005 dated 01.03.2005, which provides for exemption of Basic Customs Duty for import of Static Converters for automatic data processing machines and units thereof, and telecommunication apparatus - Maintainability of writ petition - Alternative appellate remedy. Held that:- the right of appeal is a statutory right and where the law provides remedy by filing an appeal on limited grounds, the grounds of challenge cannot be enlarged by filing a petition under Articles 226 of the Constitution of India. The Writ Petition filed under Article 226 of the Constitution of India by the appellant company was wholly misconceived and the same is not maintainable. Therefore, the learned Judge has rightly dismissed the Writ Petition as not maintainable in the light of the appeal remedy under Section 129-A of the Act - Decided against the petitioner.

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• Service Tax

• 2016 (6) TMI 779
  Claim of refund of service tax amount which was not required to be paid by appellant as per law - Unjust enrichment - claim of expenditure in the profit and loss account - Held that:- The excess amount paid is not in dispute. Further, it is to be borne in mind that the appellant is liable to pay service tax for the transactions on the basis of reverse charge mechanism. So, there is no question of the incidence of duty/tax being passed on to another. Without an iota of incidence the Commissioner (Appeals) has concluded that the refund is hit by unjust enrichment merely because the amount was said to be shown as expenditure. The constraints faced in accounting cannot be a ground to assume that the duty has been passed on to another. The appellant also produced Chartered Accountant certificate. - the refund amount is not hit by the doctrine of unjust enrichment. The order directing to credit the sanctioned amount to Consumer Welfare Fund is not sustainable and therefore set aside. - Decided in favor of assessee.

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• 2016 (6) TMI 778
  Demand of service tax - extended period of limitation - malafide intention - reverse charge - GTA services availed in the mining area for the purpose of transporting the mine product from the face of the mining area to the other areas - Held that:- The fact that the said Circular stand issued by the Board, and is in nature of clarification, is indicative of the fact that during the relevant period there was confusion. Further we note that the assessee admittedly is a Public Sector Undertaking and cannot be attributed with any malafide to evade tax. Further the Revenue has also not referred to any evidence to show that the tax was not being paid by the assessee on account of any suppression, mis-statement, with an intent to evade payment of duty - Demand set aside - Decided against the revenue.

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• 2016 (6) TMI 777
  Waiver of penalty or benefit of reduced penalty @25% - Construction service in respect of Commercial or Industrial Building and Civil Structure, Construction of Residential Complex and Works Contract Service - bonafide belief - The fact is not under dispute that appellant immediately after pointing out by the department has discharged the service tax alongwith interest within one month and before issuance of show cause notice. The appellant submitted that they were under bonafide belief that since works contract provided by them with material therefore the same is not liable for service tax. Appellant has shown reasonable cause for non payment of service tax and considering facts that the appellant has discharged service tax, before issuance of show cause notice, they are entitle for the waiver of penalty imposed under Section 76 invoking Section 80. - Decided in favor of assessee.

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• 2016 (6) TMI 776
  Valuation - works contract service - taxability of services prior to 01.06.2007 - Held that:- Without further going into the details of the submission made before us including facts of payment of service tax during the relevant period which according to the assessee is correct payment, we deem it fit to set aside the impugned order and remand the matter to the adjudicating authority for deciding appellants liability as also quantification of the tax required to be paid by them in the light of the Supreme Court’s judgment in the case of L&T Ltd. (2015 (8) TMI 749 - SUPREME COURT) - Matter remanded back.

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• 2016 (6) TMI 775
  Works contract service - Commercial or Industrial Construction Services (CICS) - demand was confirmed without allowing 67% abatement under Notification No.15/2004-ST or 1/2006-ST - Held that:- the demand for the Period prior to 01.06.2007 is not sustainable. Subsequent thereto (i.e. w.e.f. 01.06.2007) the service rendered will be correctly classifiable under Works Contract Service [65 (105) (zzzza) of Finance Act, 1994] and, therefore, the valuation for the purpose of levying service tax will have to be done under the provisions of Rule 2 A of the Service Tax (Determination of Value) Rules, 2006 because the appellant as per the records had not opted for the Compensation Scheme in terms of Rule 3 of the works contract (Composition Scheme for payment of Service Tax) Rules, 2007. - Matter remanded back for de-dono adjudication - Decided partly in favor of assessee.

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• 2016 (6) TMI 774
  Tour Operator Service - The appellant s contention is that he is not a tour operator. He is not involved in the business of planning, scheduling, organising or arranging tours by any mode of transport. - Scope of Section 65(115) of the Finance Act, 1994, during the period 2005-06 to 2009-2010 - Held that:- prior to amendment made in 2008, the appellant would not fall into the category of tour operator as the vehicles are not tourist vehicles. Again the definition of tour operator has two segments. One in the first portion dealing with person engaged in the business of planning, scheduling etc. of tours by any mode of transport and secondly the inclusive portion of the definition covering any person engaged in the business of operating tours in a tourist vehicle. - there is no evidence with supporting documents to sustain the case of department that the appellant operated tours in a tourist vehicle. Situation post-2008. - Held that:- The definition implies something more than ordinary travel or transport undertaken. In a situation where admittedly the appellant is transporting different persons with prefixed fair to different destinations in the same vehicle without a common contract, the activity will be more akin to transport of passengers rather than operating tour. More so, when we consider the definition of contract carriage, it is clear that the vehicle engaged should travel without stopping to pick up or set down, anywhere in the journey, passengers not included in the contract. The facts as pleaded in the case show such nature of transport is not being undertaken by the appellant. It is not established by Revenue by evidence, except going by the nature of the permit given to the vehicle owner. Here, for instance thirty different persons undertaking a travel for different distances though in the same vehicle paying prefixed fare cannot come under the business of operation of tour using such vehicle. There is absolutely no evidence to show that appellant made arrangements of accommodation to any destination. After perusing the facts and evidence presented before us and applying the law, we are of the considered view that the demand is unsustainable. - Demand set aside - Decided in favor of assessee.

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• Central Excise

• 2016 (6) TMI 773
  Refund of Education Cess and Secondary and Higher Secondary Education Cess inadvertently paid on cesses - Whether Crude Oil Cess is in the nature of excise duty - Applicability of provisions of section 11B of the CE Act - Period of limitation - Held that:- Crude Oil Cess is not in the nature of excise duty and consequently, the Education Cess and Secondary and Higher Secondary Education Cess computed thereon, also does not bear the character of a duty of excise, but is merely an amount paid under a mistake of law. As a necessary corollary, it follows that the provisions of the Central Excise Act, 1944 would not be applicable for refund of such amount paid by mistake. Moreover, since there was no liability to pay Education Cess and Secondary and Higher Secondary Education Cess, the provisions of the Central Excise Act as incorporated in the OIC Act would also not apply to the amount paid by mistake. Therefore, the alternative remedy suggested by the respondents cannot be said to be an efficacious remedy inasmuch as the amount paid by way of mistake is neither a duty of excise nor is it Crude Oil Cess to which the provisions of the OID Act apply, and consequently, the machinery provisions under the Central Excise Act, 1944 would not apply to refund of such amount. - Refund allowed - Decided in favor of petitioner. Interest on delayed refund - Held that:- Insofar as the claim of interest is concerned, the amount admittedly had been paid by the petitioner by way of a mistake. The position of law in this regard was not clear and hence, no fault can be found in the approach of the revenue authorities in retaining such amounts till the time the Circular dated 07.01.2014 came to be issued, clarifying the issue. It has been held hereinabove, that the amount in question is not in the nature of a duty of excise and hence the provisions of the Central Excise Act for refund would not be applicable. Consequently, the provisions of section 11BB of the Central Excise Act, which provides for interest on delayed refund, would also not be applicable. It is settled legal position that in the absence of a statutory provision entitling the assessee to interest, a mandamus cannot be issued to the revenue to pay interest. Though the petitioner has claimed interest at the rate of 18%, the same is not backed by any statutory provision and hence, the relief prayed for in the petition to that extent cannot be granted. Refund allowed - claim of interest rejected - Decided partly in favor of appellant.

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• 2016 (6) TMI 772
  Levy of excise duty - manufacture - whether food cooked and served in Hotels and Restaurants are excisable - SSI exemption - whether the value of the food sold in Restaurants should be taken into account to compute the aggregate value of clearances so as to decide the eligibility of availing the exemption provided under the Notification 8/2003-CE, dated 01.03.2003 - Maintainability of writ petition - alternative appellate remedy. Held that:- it is seen that the case of the petitioner itself largely rests upon the decision in the case of Indian Hotels Co., Ltd., & Ors., [2000 (8) TMI 5 - SUPREME Court]. The said decision arose under the provision of the Income Tax Act and the matter pertains only to the flight kitchen operated by the appellant Hotel. Therefore, the Hon'ble Supreme Court did not deal with the other contentions. - the petitioner cannot rest his case solely based on the interpretation given by the Hon'ble Supreme Court in the case of Indian Hotels Co., Ltd., & Ors., case, which arose under the Income Tax Act. As rightly pointed out by the learned Senior Standing counsel appearing for the respondent what the petitioner seeks to agitate is a disputed question of fact and such disputed questions would not be normally adjudicated in a Writ Petition, more particularly, when it involves a taxation statue. Therefore, the petitioner has not made out any grounds to entertain a Writ Petition as against the impugned order. Writ petition dismissed - Decided against the assessee.

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• 2016 (6) TMI 771
  Cenvat Credit - input services - Management Consultancy Services - nexus with manufacturing activity - Extended period of limitation - Held that:- It is hardly required to be stated that the manufacturing activity would be an ultimate result, but it begins with the establishment of the unit by purchasing machinery, raw material and also the availability of finance. In the absence of fund procured may be of its own source or through financial institution, it may not be possible to reach to the ultimate result of manufacturing activity. It cannot be said that the Management Consultancy Services so obtained has no nexus to the manufacturing activity. The Tribunal has rightly found that the input tax credit was available and we do not find that the view taken by the Tribunal could be said as erroneous. - Credit allowed - Decided against the revenue.

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• 2016 (6) TMI 770
  Default in payment of excise duty - restriction on utilizing Cenvat Credit - Rule 8(3A) of the Central Excise Rules, 2002 - they were directed to pay the duty amount, on consignment basis. They paid the duty liability through CENVAT Credit and subsequently, there was change in law. The Department contended that the punishment would continue, till the default is fully discharged and during that period, duty has to be paid through Personal Ledger Account (in short PLA ) on consignment basis. Held that:- this Court in M/s.Malladi Drugs & Pharmaceuticals Ltd., v. UOI and others [2015 (5) TMI 603 - MADRAS HIGH COURT], held Rule 8(3A) as ultra vires of Article 14 of the Constitution of India, the same is binding on the Department. - appellant / revenue submitted that the decision in Malladi Drugs & Pharmaceuticals' case, has been challenged, but no copy of the order of stay is placed before us - Revenue appeal dismissed - Decided against the revenue.

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• 2016 (6) TMI 769
  Estimation of substantial shortage of goods through visual joint stock verification - accurate verification of the stock was not conducted - Anomaly in the show cause notice - Held that:- There is no doubt that in course of the joint verification of the stock at the petitioner’s manufacturing facility conducted on September 22-23, 2015 substantial shortage of goods was discovered. However, such discovery has not culminated in any adjudication finding the petitioner guilty of actually evading duty. The demand raised by the authorities has been promised to be paid by the petitioner, though only a third of the amount may have been tendered by now. The petitioner only knows that stock shortage was discovered in course of the raid in September, 2015, but the petitioner is not aware of any other misgivings that the authorities may harbour against the petitioner. Since the opportunity afforded to the petitioner appears to have been a meaningless exercise without the petitioner being confronted with the material against the petitioner as may have been contained in the proposal forwarded by the Durgapur Commissionerate to the Chief Commissioner, the order impugned dated March 15, 2016 cannot be sustained. Accordingly, such order is liable to be set aside. However, since it is evident that the petitioner has not tendered payment of the entire sum of Rs. 1,50,05,658/- pursuant to the joint stock verification conducted in September, 2015, the order of March 15, 2016 will remain unconditionally stayed till the close of working hours of April 5, 2016 and, thereafter, the same will stand set aside, subject to the entire balance payment in respect of the above amount having been tendered by the petitioner to the respondent authorities. Matter remanded back.

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• 2016 (6) TMI 768
  Valuation - petroleum products - At the time of clearance from the said terminal, the respondents were collecting Rs. 44/- per KL over and above the assessable value declared as Free Delivery Zone (FDZ) charges - Revenue argued that the said amount is not related to transportation but is an additional consideration - Held that:- There is a large number of decisions of the Tribunal had allowed deduction of such charges collected for delivery of goods within the FDZ - he appellant had submitted the data before the Commissioner which shows that the amount of freight collected is less than the actual expenditure. - any amount of freight which is collected in excess of actual freight is not includible in the assessable value. - Decided in favor of assessee.

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• 2016 (6) TMI 767
  Area based exemption - denial of benefit of the exemption on the intermediate products namely water filter cartridges and EVA pipes. - Notification No.50/2003-CE dated 10.06.2003 - substantial expansion in the installed capacity - Held that:- It is admitted by the appellant that the substantial expansion in respect of the intermediate products have been undertaken only after the period of dispute. This brings us to the more fundamental question whether to increase the installed capacity of the unit, the capacity of each and every products manufactured in the unit needs to be increased. This aspect has been considered by this Tribunal over and over again. It has been held that only the overall increase in the installed capacity is to be taken into consideration while considering the expansion and there is no requirement that the expansion should take place in each and every section of the manufacturing unit. Validity of Show cause notices - Held that:- It appears that the demand has been crystalised as a result of the investigation ordered by the Commissioner whose reports dated 19.11.2007 and 13.02.2008, the Commissioner relies in the order. Inasmuch as copies of these reports have not been furnished to the appellant, the Commissioner has passed this order behind the back of the appellant clearly disregarding principles of natural justice. We also find that the basis of the demand does not emerge from the impugned order itself, making this error sufficient to set-aside the impugned order. Demand set aside - Decided in favor of assessee.

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• 2016 (6) TMI 766
  Cenvat credit of the duty paid on cement as capital goods - cement used for installation and erection or plant and machinery - Credit denied on the ground that credit is not admissible on cement, as it does not fall under the category of capital goods and that credit is not admissible as input because cement is not used directly or indirectly in the process of manufacture of final product. Held that:- the appellants used the cement for erecting and installing machinery(capital goods). It was used within the factory of production. The definition of capital goods does not require that capital goods should be used in the process of manufacturing. The only condition is that capital goods should be used in the factory of the manufacturer. It cannot be disputed that cement is necessary for laying foundation to fix machinery , and for support structures of capital goods. Following the decision laid by Larger Bench of Apex court in the case of Ramala Sahkari Chini Mills Ltd [2016 (2) TMI 902 - SUPREME COURT] I am of the opinion that appellants are eligible for credit of excise duty paid on cement, under the category of inputs. - Decided in favor of assessee.

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• 2016 (6) TMI 765
  Cenvat credit claimed on the transport service availed to bring the workers to their factory site disallowed - Held that:- Learned adjudicating authority has examined the issue as to the distance between the place of work and the place where workers are picked up. This aspect is also coming out from para-7 of his order. When the nexus and integral connection of input with the manufacture comes out, it would not be proper to entertain Revenue appeal since no evidence has come from Revenue to impeach the order of the Commissioner (Appeals). Such decision can be taken following the ratio laid down by the Apex Court in the case of Ramala Sahkari Chini Mills Ltd. Vs CCE Meerut - (2010 (11) TMI 34 - SUPREME COURT OF INDIA ). - Decided against revenue

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• 2016 (6) TMI 764
  Reversal of credit taken - credit taken on the gases in respect of these losses on the ground that the said inputs were either not received or were not accounted for purposely or used in the manufacture of exempted goods under Rule 57(i) of the Central Excise Rules, 1944 - Held that:- The process losses during the filling of a cylinder are use of input in or in relation to manufacturing process. Further find that the decision of Hon'ble High Court of Andhra Pradesh in case of Andhra Paper Mills (2011 (3) TMI 405 - ANDHRA PRADESH HIGH COURT ) goes a step further and allowed the credit in respect of the actual quantity filled even though the part of quantity was returned in this case later. - Decided in favour of assessee

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• 2016 (6) TMI 763
  Refund claim - Bar of unjust enrichment - Held that:- It is correct that the purchase order / agreement has a price variation clause. It is also seen that the prices are finalized much later after clearance of the transformers. It is submitted that appellants are receiving payments from DISCOMS, not invoice-wise, but as bulk amounts through cheques and RTGS. In case of negative price variation payments, the DISCOM (distribution company) only issue negative price variation approval letters. This was produced before the original authority. Further, DISCOM is a public sector undertaking. However,the appellant has now produced a Chartered Accountant certificate. The authorities below did not get opportunity to examine the same. So in my opinion, it is a fit case to be remanded to re-examine whether the refund is hit by the bar of unjust enrichment. The appellant is directed to produce Chartered Accountant certificate before the original authority. In view thereof, remand the matter to the original authority to re-examine the refund claim after giving reasonable opportunity for personal hearing. The appellant is at liberty to adduce any further evidence to establish their case. The impugned order is set aside and appeal is allowed by way of remand.

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• 2016 (6) TMI 762
  Fraudulent availment of Cenvat Credit without receipt of raw material in the factory - as per department the appellants though imported goods vide Bill Entry , diverted the same without bringing the goods into the factory or use in their manufacture - Held that:- Mere statements recorded would not be sufficient to establish the charges alleged in the show cause notice. The statements should be supported by corroborative evidence. In the case on hand, if the department alleges that the raw materials were diverted without reaching the factory, then there should surely be evidence let in to show how the appellants have substituted the raw material since the statutory records show production and clearance of finished goods on payment of duty. There is absolutely no evidence to show the substitution of raw material which in my view would cut the root of the allegation as the statutory records show that goods were manufactured. No shortage of raw material was detected during enquiry. Apart from the above, the statement of the transporter Shri Satish Agarwal has been retracted before a Magistrate and Sri Janakiram in cross examination retracted his statement and also deposed that his statement was recorded under duress. The case of the department is built-up mainly on these statements. As the statements have been retracted, there has to be some other evidence to conclude that the goods were not actually received. Whereas, the statutory records, weighment slips, job work challans, production register all stand in favour of the appellants. These documentary evidence do prevail over the retracted confessional statements Though the department alleges that there was cash flow in return for the fraudulent activity, which was unaccounted, there is no evidence in this regard. When the statutory records are proper and appellant has manufactured the final products and cleared them by paying duty, then the burden rests heavily upon the Revenue to establish with cogent evidence that the goods were not actually received in the factory. In the totality of facts and evidence, paced it is find that revenue has miserably failed to establish the allegations raised in the show cause notice. Thus disallowance of credit availed is not sustainable. - Decided in favour of assessee

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• 2016 (6) TMI 761
  Denial of credit on MS items - Held that:- In India Cements Ltd. Vs. CESTAT, Chennai [2015 (3) TMI 661 - MADRAS HIGH COURT ], the Hon ble High Court of Madras held that credit is admissible on MS items used for fabrication of structural supports. Such supports and fixation is necessary for functioning of the plant/machinery/equipment without movement and vibration without which the process of manufacturing could not be done. Applying the ratio laid in the above hold that the credit on MS items used as inputs is admissible Irregular credit availed on capital goods - Held that:- The original authority has stated that these items are used as such in the factory, as parts/components of the cement plant/machinery and therefore are capital goods. We do not find any evidence to take a different view. The allegation with regard to the credit availed on these items like air slide, bucket elevator, roto packer etc. is that being capital goods it is only a case of premature availment of credit as the appellants could avail the credit in the subsequent year. Therefore, the recovery of the irregularly availed credit in excess of 50% (Rs.16,22,615/-) is not justified. Taking into consideration the violation of the provision,it is find that appellants are liable to pay the interest on the irregularly availed credit on capital goods. The contention raised on behalf of appellant is that, the appellants did not utilize the credit availed and therefore there is no interest liability it is held that in the peculiar facts, when the appellant has contravened the provisions, the Revenue has to be compensated for the irregular credit availed. In view thereof, the demand/recovery of credit is set aside, whereas the demand of interest on the said amount is sustainable. The appellant is liable to pay interest on the amount till the date of reversal or if not reversed, till date on which the appellant could have availed remaining 50% credit on capital goods in the subsequent year. Enhancement of penalty - Held that:- d. In the instant case, the adjudicating authority has not imposed any penalty for irregular availment of credit on capital goods. If no penalty is imposed, the department has to file an appeal challenging the non-imposition of penalty. Only then can the Commissioner consider whether a penalty not imposed can be imposed. Section 35A does not empower the Commissioner(Appeals) to impose a fresh penalty under the guise of enhancement. The Commissioner(Appeals) has proceeded as though some penalty (nil penalty) is imposed by the adjudicating authority and that he is enhancing the nil penalty. Under no stretch of imagination can there be imposition of nil penalty. Either penalty is imposed or no penalty is imposed. The no penalty situation cannot be taken as nil penalty and be enhanced under Section 35A(3) of the Central Excise Act. When the Department has not filed appeal for non-imposition of penalty, the Commissioner(Appeals) cannot impose a new penalty invoking Section 35A(3). The penalty of Rs. 1,60,000/- imposed by Commissioner(Appeals) invoking Section 35A(3) is beyond his powers and therefore is set aside.

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• 2016 (6) TMI 760
  Manufacture - entitle for cenvat credit - whether the process of cutting/ slitting of cold rolled or hot rolled stainless steel coils/ plates of various length, width and thickness into coils of specific width as also de-coiling of such cold rolled or hot rolled stainless steel coils/ plates and cutting them into sheets of specific dimensions amount to manufacture as defined in terms of Section 2(f) of Central Excise Act, 1944? - Held that:- Tribunal and this Tribunal in the case of Jindal Stainless Steelway Ltd. vs. Commr. of C.Ex, Raigad (2014 (9) TMI 658 - CESTAT MUMBAI ) held that the activity of the appellant is amount to manufacture and appeal was allowed on the merit as well as on limitation. From the Rule 16 of Central Excise Rules, 2002, it can be seen that even if activities are not amount to manufacture, credit on duty paid goods as inputs is allowed and the same can be utilized for payment of duty on the processed goods. Therefore, in view of the Rule 16, credit can not be denied even if the activity does not amount to manufacture. As per the above position, we are of the considered view that impugned order is not sustainable; hence the same is set aside. - Decided in favour of assessee

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• 2016 (6) TMI 759
  Disentitlment to refund of Unutilised Credit under Rule 5 of the CENVAT Credit Rules, 2004 - intermediate goods were cleared by the appellant to the EOU and such goods having undergone processing by EOU resulting in output that was exported by that EOU - Held that:- There is no doubt that Revenue has conceived that the goods cleared by the appellant were intermediate goods and were cleared to EOU. The said EOU after processing that had exported. The finished goods arose out of that. Therefore, the appellant satisfied the condition of Rule 5(1) of CENVAT Credit Rules, 2004 effectuating export of the goods in question through the EOU. However the relief of refund of unutilised credit shall be subject to the working out of the quantum thereof in terms of in the formula prescribed by that Rule. There should be no dispute at all in respect of the calculation of quantum of refund applying the respective formula. Thus matter is remanded to the adjudicating authority to calculate the appropriate amount of refund admissible as per the formula prescribed by Rule 5 of CENVAT Credit Rules, 2004 and grant the same to the appellant as expeditiously as possible. - Decided in favour of assessee

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• 2016 (6) TMI 758
  CENVAT credit grant - duty paying document - existence of the name of the corporate office instead of factory - Held that:- The proposition of learned counsel appears to be truthful when the adjudication order and show cause notice is perused. The condition of CENVAT credit grant being fulfilled with the receipt of the input in the factory of the appellant and consumed thereat, the technical defect of existence of the name of the corporate office on the invoice does not make any difference. But, it is left to Department to cause enquiry as to whether basing such invoice the corporate office or any other plant of the appellant has taken credit doubly. In case they find any such wrong claim they are at liberty to initiate proceeding as that may be permitted by law.

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• 2016 (6) TMI 757
  Non speaking order - denial of natural justice - Held that:- Commissioner (Appeals) shall examine the relevant material facts, pleadings of the appellant in defence and test the same with evidence to apply the law to the situation and on the basis of outcome thereof shall pass a reasoned and speaking order. The appellant shall be given full length of hearing to overcome the grievance of violation of natural justice.

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• CST, VAT & Sales Tax

• 2016 (6) TMI 750
  Works Contracts - benefit of compounding of tax - validity of assessment orders u/s 25(1) of the KVAT Act, 2003 - The Intelligence Officer verified the accounts and found that they have suppressed contract receipt and penalty was imposed for the year 2009-10. - On verification it was found that petitioner has not filed any compounding application with the related documents as required under Sub rule 1 of Rule 11, but has remitted tax adopting the compounding rate. No application has been filed as provided under the Rules. In so far as no order had been issued, the allegation that tax has been paid at compounding rate which has to be ascertained is not sustainable. Held that:- It is clear from the reading of Section 25 that it is a special power given to the assessing officer to take action if for any reason the whole or any part of the turnover of the business of a dealer has escaped assessment in any year or has been under assessed. Therefore, when a fact situation gives rise to a situation warranting interference under Section 25(1), Section 22 cannot control Section 25. Section 25 is an independent power available to the Department to consider and take action in respect of escaped assessment, under assessment etc,. That apart, Section 22(2) would further clarify that even in an instance where revised return is filed, assessment is deemed to be completed subject to Section 25 of the Act. Therefore merely for the reason that the authorities did not invoke Section 22 within the prescribed period does not preclude them from invoking Section 25, if the facts give rise to an eventuality as provided therein. Hence, I do not find anything wrong in the action of the Department in invoking Section 25(1). In this case, no compounding application was ever filed and there is no question of any other person claiming benefit based on the same. In order to invoke Section 8 (a) of the Act, option is to be exercised by the works contractor. Option can be exercised only on compliance of the statutory format. In so far as the petitioner did not comply with such procedure, the Department was justified in acting accordingly as if petitioner had not opted for payment of tax at compounded rate. On facts itself, it is clear that the matter came to be noticed when a crime file was investigated by the officers where penalty had been imposed on the petitioner. Therefore, the said ground also is not available to the petitioner. - Decided against the petitioner.

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• 2016 (6) TMI 749
  Validity of revision assessment - input tax credit - scope of the SCN - genuineness of the purchases - movement of goods - Held that:- With regard to the averment that the proof for movement of goods has not been produced, it has to be pointed out that this was never the stand of the department in the show cause notice. At no point of time, the petitioner was called upon to produce any documents to prove the movement of goods. Therefore, the respondent has passed the impugned order giving reasons which were not the basis on which show cause notice was issued. Hence, this amounts to clear violation of principles of natural justice. That apart, the respondent has not considered the specific case of the petitioner that some of their sellers have filed monthly VAT returns along with Annexure-II manually and others have filed electronically. The petitioners had further stated that on their own volition, they made verification and it was found that the alleged difference in tax was reduced. This aspect of the matter was also not considered by the respondent. - the finding recorded by the respondent with regard to the difference in claim of ITC set aside - remanded back for passing speaking order. - Decided partly in favor of petitioner.

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• 2016 (6) TMI 748
  Evasion of tax - entry of goods in the state - proper documents - Detention of vehicles (viz., Trucks), which were transporting the abovesaid goods, were not authorized to enter the Kottakuppam Check Post - Held that:- it is evidently clear that the Court has considered all the issues, and held that the demand was wholly unjustified. Pursuant to the above order, the goods have been released, and the Department also not challenged the above referred order. - In the light of the above, the challenge to the impugned proceedings itself, have become academic, and the respondent cannot, in any manner, enforce the impugned proceedings. As the reasons assigned in the interim order will always hold the effect for the final relief. - Decided in favor of petitioner.

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