Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 23, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Disallowance u/s 40A(3) - payment of expenditure in cash - CIT-A relied on sub rule (j) of 6DD for deleting disallowance - claim of the assessee that it was on account of business expediency that such payments were made - expenditure allowed
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Income from a let out house property - If a particular type of expenditure is not specifically provided to be deductible, deduction, therefore, cannot be claimed from out of the annual value. Neither section 23 nor section 24 provides for the deduction of the expenses incurred towards the stamp duty or registration charges in respect of the lease.
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Notional income from house property - the building is under furnishing itself shows that it is being used and occupied by the assessee for the purpose of the business. Even otherwise there is no evidence that property is let or being used by the assessee for any other purposes - Additions to be deleted.
Customs
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Refund of SAD - period of limitation - The provisions of the General Clause Act, 1897 does indicate that the day on which the duty has been paid has to be excluded for arriving at the period of one year for filing of the refund claims.
Service Tax
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CENVAT credit - input services - the input services have suffered service tax and CENVAT credit can be taken by the appellant and the registration is not a mandatory requirement for claiming CENVAT credit.
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CENVAT credit - Rule 5 of Taxation of Services (Provided from outside India and received in India) Rules, 2006 does not restrict the availment of other input services which have contributed in the provisions of their other output services.
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Distribution of CENVAT credit - Input service - The finding recorded by the Appellate Authority that the assessee is entitled to take credit only in the unit where the product is manufactured is therefore not the mandate of Rule 7 of the Cenvat Credit Rules
Central Excise
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Manufacture - whether the fabrication and erection of steel structural at the site of the respondent amounts to manufacture or not? - The immovable iron and steel structures not being goods will not fall under Heading 73.08 of the Excise Tariff.
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Adjustment of sanctioned refund towards other alleged dues - Whether the department can suo moto adjust from the sanction refund / rebate? - Section 11 of the Central Excise Act, 1944 does not contemplate adjustment of monies due to the assessee towards the amount due to the revenue.
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Whether the resins in question are classifiable under heading 3909 or 3506? - As per HSN explanatory notes to chapter 39, glue manufactured by appellant for use as adhesive is outside the preview of chapter 39
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Distribution of CENVAT credit - Input service - technical consultancy fee - denial on account of nexus - The finding recorded by the Appellate Authority that the assessee is entitled to take credit only in the unit where the product is manufactured is therefore not the mandate of Rule 7 of the Cenvat Credit Rules.
Case Laws:
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Income Tax
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2017 (6) TMI 922
Waiver of interest claimed under Sections 234A, 234B and 234C - Held that:- The Division Bench of the Bombay High Court in De Souza Hotels Private Limited V. Chief Commissioner of Income Tax and Others(2012 (4) TMI 348 - BOMBAY HIGH COURT) has come to the conclusion, with which, we are in complete agreement, that unless the Assessee's case comes within the ambit and scope of the Circular dated 26.06.2006, the Chief Commissioner would have no power to reduce or waive interest under Sections 234A, 234B and 234C. In so far as the judgment in N.Haridas & Co. V. Chief Commissioner of Income Tax and another, (2007 (2) TMI 211 - MADRAS High Court) is concerned, it was passed in peculiar facts and circumstances of the case. In that case, waiver/reduction of interest was sought on the ground that the tax, which was required to be paid under the Voluntary Disclosure of Income Scheme 1997, could not be paid, in time, by the Managing Partner, even though, he had made a declaration as required, since, he was diagnosed with blood cancer, and to which, he succumbed shortly thereafter. It appears that the order was perfunctory, which is why, the Division Bench in paragraph 7 observed that the impugned order of the Chief Commissioner merely observed that the condition prescribed in Notification dated 23.05.1996 was not satisfied. We may indicate herein that the notification/circular dated 23.05.1996 precedes the circular in issue, i.e., Circular dated 26.06.2006. Circular dated 26.06.2006 supersedes the earlier circular dated 23.05.1996. We are, thus, concerned only with Circular dated 26.06.2006. For all these reasons, we are of the view that the judgment in the matter of : N.Haridas & Co. (cited supra) cannot help the cause of the respondent in this case. Therefore, the appeal will have to be allowed.
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2017 (6) TMI 921
Special audit made under Section 142(2A) - Held that:- While forming an opinion to get the accounts audited by Special Auditor; considering the specialized nature of business activities of the assessee, and/or while considering the multiplicity of transactions, there need not be any books of account before the Assessing Officer. In the present case, AO has thought it fit to get the account audited by the Special Auditor as requisitioned material are to the extent of 40,000 papers in 45 gunny bags, which were found during the search conducted of the premises of Asharam Bapu and others and the Trust. Under the circumstances, when large number of papers are required to be considered / verified vis-a-vis the assessee and other persons whose names figured in the requisitioned papers, and when considering section 142(2A) when the the AO has thought it fit to exercise powers under Section 142(2A) of the IT Act, it cannot be said that the Assessing Officer has committed any error and/or illegality. Specific reasons are given so mentioned in the showcause notice as to why and for what purpose the special audit is required. Therefore, it cannot be said that the Assessing Officer has committed any error and/or illegality in passing the impugned order of special audit, in exercise of powers under Section 142(2A) of the IT Act. We see no reason to interfere with the impugned order passed by the Assessing Officer ordering special audit under Section 142(2A) of the IT Act in exercise of powers under Article 226 of the Constitution of India.
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2017 (6) TMI 920
Addition u/s 40(a)(ia) - non deduction of TDS - expenditure payable v/s paid during the year - Held that:- The subject matter is no more rest intergra. The Hon’ble Supreme Court decision in its recent decision in case of M/s Palam Gas Service (2017 (5) TMI 242 - SUPREME COURT) has held that Section 40(a)(ia) covers not only those cases where the amount is payable but also those cases where the amount has been paid during the financial year without deduction of TDS. Coming to another contention raised by the AR that the amendment brought-in in section 40(a)(ia) by the Finance Act 2014 where it is provided that 30 percent of any sum payable to a resident shall be disallowed as against 100% disallowance made earlier should be applied in the instant case and disallowance restricted to 30% of the total amount. On perusal of the Finance Act, 2014, it is noted that the said amendment has been brought in and made effective from 01.04.2015 and there is nothing which suggest such amendment is made effective or to be read as retrospective in nature. In view of the clear wordings as enacted by the legislature, the same cannot be held applicable to the assessee for the year under consideration. - Decided against assessee. Disallowance of unpaid service tax and VAT under section 43B - Held that:- Firstly, regarding VAT, the issue is no more rest intergra in view of the decision of Hon’ble Supreme Court in case of Chowringee Sales Bureau [1972 (10) TMI 4 - SUPREME Court]. In context of section 43B, how the said ruling continues to hold good has been discussed by the Coordinate Bench in case of SVG Express [2016 (12) TMI 452 - ITAT JAIPUR] as held case of Chowringhee Sales Bureau continues to hold good except that its rigour has been slightly modified to the extent that the taxes collected can be deposited before the due date of filing of return of income and in case there is a delay, it will be added to the professional receipts of the assessee and will be allowed to claim deduction of the amount in the year of payment” . Thus disallowance of VAT payable has rightly been made by the Assessing officer Disallowance regarding to service tax - Held that:- We prima facie find force in the contentions of the ld AR that where amount on which service tax was payable was not collected, there cannot be a question of collection or deemed collection of service tax and in absence of the same, there cannot be a question of deemed receipt and applicability of section 43B of the Act. However, we find that there is no finding of fact recorded by the lower authorities in this regard to support the said contention of the ld AR that the assessee did not receive the amount on which service tax was payable from the parties to whom services were rendered. We, accordingly, set aside the matter relating to service tax to the file of the Assessing Officer to examine the same afresh after providing reasonable opportunity to the assessee. Appeal of the assessee partly allowed for statistical purposes.
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2017 (6) TMI 919
Additions on account of creditors for purchase of goods - Held that:- As find from the findings of the assessing officer and the Ld. CIT(A) that the purchase parties were not found to be existed at the given addresses. In spite of giving opportunities, the assessee failed to prove the genuineness of the transactions as a result whole of the purchases were disallowed by the assessing officer. The ld. CIT(A) had restricted the disallowance to the extent of 25% of the total disallowance on the basis of the decision of ITAT Ahmedabad in the case of Vijay Proteins Co. vs. ACIT (1996 (1) TMI 144 - ITAT AHMEDABAD-C). We noticed that the disallowance of whole of the purchases by the assessing officer was excessive therefore 25% of the alleged disallowance confirmed by the Ld.CIT(A) appeared to be reasonable Addition u/s. 40A(3) - Held that:- As noticed that the assessing officer has obtained photocopies of cheques from the bank and detected nature of payment made through these cheques were above ₹ 20,000/- towards purchase made by the assessee in violation of provision of section 40A(3) of the act.. We have further noticed that the assessee failed to give any satisfactory explanation to justify the payments against purchases made in excess of ₹ 20,000/- each, other than account payee cheques or drafts and failed to furnish any supporting documentary evidences. In view of the above facts and circumstances we do not find any reason to interfere in the detailed finding of the Ld.CIT(A). Introduction of capital from unexplained sources - unaccounted income of the assessee - Held that:- As assessee has introduced fresh capital during the year and has not furnished convincing supporting evidences in respect of introduction of capital. We further find that the source of capital explained by assessee in the form of cash received from Dubai appeared to be inconclusive without involving any banking channel. After considering the detailed findings of the Ld.CIT(A), consequently we could not find any cogent supporting evidences to intrude in the decision of Ld.CIT(A).
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2017 (6) TMI 918
Disallowance u/s 40A(3) - payment of expenditure in cash - CIT-A relied on sub rule (j) of 6DD for deleting disallowance - claim of the assessee that it was on account of business expediency that such payments were made - Held that:- We find that the said rule apply for payments made on a day on which banks are closed. Nevertheless there is much strength in the contention of the ld. Authorised Representative that exceptional situations mentioned in Rule 6DD are not exhaustive. Hon’ble Delhi High Court in the case of Basu Distributor vs. ITO [2006 (12) TMI 104 - DELHI High Court] has held that there could be exceptional and unavoidable circumstances that may not find a place in Rule 6DD which would still be a reasonable ground for not applying the rigours of Sec. 40A(3) of the Act. Ld. Commissioner of Income Tax (Appeals) had given a clear finding that assessee could demonstrate business expediency which justified the payments being made in cash. We cannot find any lacuna in this finding of the ld. Commissioner of Income Tax (Appeals). For deposits made in Karur Vysa Bank Ltd, a clear finding has been given by the CIT(A) that it was proceeds of the deposits made by the assessee in the year 2005-06. Ld. Commissioner of Income Tax (Appeals) has also noted that assessee had accounted accrued interest of B77,188/-. Revenue has also not raised ground citing violation of Rule 6DD. We are therefore of the opinion that ld. Commissioner of Income Tax (Appeals) was justified in deleting both the additions. - Decided in favour of assessee.
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2017 (6) TMI 917
Taxing interest income under the head “Income from other sources” - Nature of income - expenses attributable to exempt income or income from House Property and not to interest income - Held that:- The fact that a person carried on business does not lead to the inference that all income received by such a person is business income. The same assessee can have income which may require to be classified under more than one head. It is the manner in which the income is derived that is relevant and not merely the fact that the person is engaged in a business or in a profession. Interest received by a company which carries on business, from bank deposits and loans could only be taxable as “business income”. (ii) Interest paid on overdraft obtained for the purpose of business cannot be deducted from the interest earned on monies kept in fixed deposits as such income derived by way of interest on fixed deposits has to taxed under the head “income from other sources”. (iii) However, though the assessee may not be entitled to have interest paid by it on the overdraft to the bank, deducted from the interest received by it on the short term fixed deposits, the assessee is entitled to deduction of the same from its business income. Facts being similar, we follow the ratio laid down in the case of South Indian Shipping Corporation Ltd. [1998 (2) TMI 43 - MADRAS High Court] and hold that the AO has rightly brought to tax interest income under the head “Income from other sources”. However, the AO is directed to allow the claim of expenses of ₹ 15,56,592/- from the business income of the assessee, after verification.
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2017 (6) TMI 916
Income from a let out house property - Disallowance of brokerage from the annual letting value of the let out property - Held that:- As decided in Commissioner Of Income-Tax, Delhi I Versus HG. Gupta And Sons [1983 (12) TMI 54 - DELHI High Court] the expenses incurred in providing the proper stamp paper in case of a lease or agreement to lease is by virtue of the provisions contained in section 23 of the Indian Stamp Act, 1899, and is on the lessee or intended lessee, in the absence of an agreement to the contrary. It may be for this reason, that the Legislature did not include such expenses in the permissible deductions under section 23 or section 24. If a particular type of expenditure is not specifically provided to be deductible, deduction, therefore, cannot be claimed from out of the annual value. Neither section 23 nor section 24 provides for the deduction of the expenses incurred towards the stamp duty or registration charges in respect of the lease. If the view of the Tribunal is accepted that the expenditure incurred has to be deducted from the gross rent in order to arrive at the reasonable annual letting value, then the annual letting value would be different in the first year as compared to the subsequent years, The expenditure incurred on a lease for a period of 5 years towards the stamp duty and registration charges is only in the first year. The annual value of any property is deemed to be the same for which the property might reasonably be expected to let from year to year. It is a notional income to be gathered from what a hypothetical tenant would pay which is to be objectively ascertained on a reasonable basis. The annual value cannot be left to fluctuate when the lease is for a period of 5 years. Answer the reference in the negative, i.e., in favour of the department and against the assessee.
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2017 (6) TMI 915
Estimation of profit in respect of IMFL business carried by the assessee - Held that:- 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. Thus 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:- Assessee has filed the confirmation letters from four creditors amount to ₹ 7,99,000/-. The assessee has not given proper details during the course of assessment proceedings. However, before the ld. CIT(A), he filed details and confirmation letters, hence, ld. CIT(A) has called remand report. In the remand report, the Assessing Officer has doubted the transaction on the ground that assessee paid the impugned amounts by way of DDs, but those DDs were taken by the third parties and not by the assessee. As find that AO without calling the assessee and without making any enquiry, simply doubted the transaction, in my opinion, the action of the Assessing Officer is not justified. CIT(A) is also not justified in confirming the order of the Assessing Officer. It is a fit case to remit the matter back to the file of the Assessing Officer to decide the issue in afresh in respect of unexplained investment
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2017 (6) TMI 914
Addition made u/s 94(7) - disallowance of loss on sale of shares - assessee has received dividend income and also the claim loss on sale of same shares from which it has received dividend - Held that:- There were huge opening balances of shares of GHCL coming from earlier years which were more than 1.40 crore shares and during the year assessee has purchased only 5,65,864 shares. As against such huge holding of GHCL shares, only 16,50,414 of these shares were sold. Thus, prima facie it cannot be reckoned that the loss on sale of GHCL is only on account of the shares which were held for less than period of three months. This aspect has not been examined by the lower authorities. Under these facts and circumstances, we are of the considered opinion that this issue should be restored back to the file of the Assessing Officer who shall examine the details as furnished by the assessee and also examine the conditions as laid down in u/s 94(7) before disallowing the loss. Disallowance u/s 14A - Held that:- Neither of the authorities have analysed the assessee’s accounts specifically the nature of expenditure debited to the profit & loss account as well as the stocks of shares recorded in the books of account, i.e., whether it is held as stock-in-trade or as investment or as both. When the assessee has demonstrated that the interest bearing funds have been utilized for giving loans and advances on which huge interest income has been earned, then prima facie there could not be any case of disallowance of interest. Similarly with regard to the working of indirect expenditure there are various aspects which needs to be examined to like nature of expenses debited, working of average value of investment, if rule 8D at all is held to be applicable. None of these fact and assessee’s nature of accounts have been examined by AO or CIT (A) as per law enshrined in section 14(2). Accordingly, the whole matter regarding disallowance u/s 14A should be restored back to the file of the Assessing Officer to re-examine the claim. Appeal of the assessee is allowed for statistical purposes.
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2017 (6) TMI 913
Addition on account of income from house property from a vacant property - notional income - annual value of the property computation - Held that:- When the assessee has already stated that the impugned property is used as a transit house and has also given necessary details of work being done there such as supply, etc of aluminum glazing and ACP, the rejection of this contention of the assessee is not proper. In fact the building is under furnishing itself shows that it is being used and occupied by the assessee for the purpose of the business. Even otherwise there is no evidence that property is let or being used by the assessee for any other purposes. In view of this mere rejection of the submission of the assessee cannot be used to tax the income from the impugned property. Hence, we direct AO to delete the addition on account of notional income u/s 23. Further, it is also stated that property is lying vacant therefore, according to the provisions of section 23(1)(c) it cannot be charged to tax. - Decided in favour of assessee Disallowance on account to interest to partners - Held that:- Where the drawings are deemed to have been made by the partners on day to day basis then respective profits should also have been credited on day to day basis. The ld DR could not point out any contrary decision. In the facts of the present case the opening balance of the partner capital account is ₹ 3457875/-. Profits earned during the year is ₹ 5804796/- and drawings of the partners is ₹ 2864259/- which makes the closing balance of ₹ 6398412/-. From the above figures it is apparent that profits are much higher then the drawings and therefore, the reasoning given by the coordinate bench clearly applies to the facts of the present case. Therefore, on relying on Deval Utensil Factory case [2005 (8) TMI 328 - ITAT PUNE-B ] we direct the ld Assessing Officer to delete the disallowance confirmed by ld CIT(A) on account of excess interest paid to the partners on capital.- Decided in favour of assessee Addition u/s 40A(3) - Held that:- No reason to dislodge the findings of the lower authorities in disallowance of the above, which is clear cut violation of section 40A(3) paid on 24.10.2008 in cash. - Decided against assessee
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2017 (6) TMI 912
Rejection of books of accounts - bogus purchases - Held that:- Perused the order passed by the Hon’ble Punjab & Haryana High Court in assessee’s case for Assessment Year 2008-09 [2015 (9) TMI 391 - PUNJAB & HARYANA HIGH COURT ]. The Ld. AR and Ld. DR both agreed to remand back the matter before the Assessing Officer. It is necessary to produce the PAN Numbers of the respective parties which are now available before the Assessing Officer. The entire issue needs to be look into afresh by the Assessing Officer. Therefore, we are directing the Assessing Officer to decide this issue afresh
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Customs
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2017 (6) TMI 884
Misdeclaration of quantity of imported goods - confiscation - redemption fine - penalty - whether the lower authority is correct in confiscating the goods which were not declared while filing the Bill of Entry and consequent penalties are correct or otherwise? - Held that: - there is no dispute that there is mis-declaration of the goods contained in the consignment; is in itself a valid reason to hold that excess found goods are liable to be confiscated under the provisions of Section 111 of Customs Act, 1962 - the mis-declared quantity and value of goods is correctly confiscated, and appellants contention that error of as mis-declaration was a genuine mistake due to fault of supplier is unacceptable and the proposition is rejected. Both redemption fine and penalty needs to be in proportion of the value of undeclared goods. In my considered view, ends of justice will be met if the redemption fine imposed by the lower authorities is reduced to ₹ 2 lakh and consequent penalties imposed is reduced to ₹ 50,000/- under Section 112(b)(ii) and ₹ 1 lakh under Section 114AA of the Customs Act, 1962 Appeal allowed - decided partly in favor of appellant.
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2017 (6) TMI 883
Refund of SAD - rejection on the ground that refund claims were filed after the expiry of one year as stipulated in N/N. 102/2007-Cus as amended by N/N. 93/2008-Cus dt. 01/08/2008 - Held that: - The clauses of N/N. 93/2008, specifically states that the importer shall file a claim for refund of the said additional duty of customs paid on the imported goods with the jurisdictional customs officer before the expiry of one year from the date of payment of the said additional duty of customs - the respondent had filed refund claims on 26/03/2014 while the duties were paid in respect of one Bill of Entry on 26/03/2013 and in respect of another on 21/03/2013 - refund rejected. The provisions of the General Clause Act, 1897 does indicate that the day on which the duty has been paid has to be excluded for arriving at the period of one year for filing of the refund claims - in this case, the date of payment of duty i.e. 26/03/2013 has to be excluded for computing the period of one year as per the N/N. 93/2008 Appeal allowed - decided partly in favor of appellant.
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2017 (6) TMI 882
Refund claim - denial on the ground that appellant did not protest the enhancement during the assessment but at a later date vide his letters, after the assessment was over as well as did not prefer any appeal to the appellate authority - Held that: - the appellants are not entitled to claim refund unless they challenge the assessment order which has not been done in the present case - refund rightly rejected - appeal dismissed - decided against appellant.
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2017 (6) TMI 881
Valuation - imported colour TV panels - It appeared to revenue that as per the examination reports, the goods under declaration vide bills of entry were mis-declared with regard to description, models, specifications other parts, and therefore, value - whether the learned Commissioner have rightly rejected the declared value and revalued the same under Rule 12 of customs valuation Rules 2007? - whether the goods in question have been rightly held to be liable to confiscation with option to redeem by payment of redemption fine and further the penalty imposed of Rs. Eight lakhs under Section 112 (a) of the Act have been rightly imposed? Held that: - there is no test report obtained by learned Commissioner from any approved Laboratory or Government Laboratory and in such circumstances the revaluation done appears to be untenable - reliance placed upon the opinion of Samsung India Electronic Private Limited and Sony India Private Limited who are not the approved Government Labs or valuer and at the same time are the competitors of the appellant in manufacturing and import of TV panels and colour Tvs, selling and marketing the same in India - the impugned order is vitiated and fit to be set aside. The learned Commissioner will have the sample of goods tested or valued by an approved valuer or from the Government Lab/Chartered Engineer, and as per the opinion of such competent laboratory or engineer etc., the valuation shall be finalized in accordance with the Valuation Rules, 2007. Appeal allowed by way of remand.
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Corporate Laws
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2017 (6) TMI 879
Winding up proceedings - whether company under liquidation is never the owner of the property? - Held that:- Till date, no Statement of Affairs have been filed and thus, the exdirectors have willfully and deliberately neglected to file Statement of Affairs with the Official Liquidator. It is further contended by the Official Liquidator that because of nonfiling of statement as provided under the provisions of the Act, the office of the Official Liquidator is in complete dark about the assets liability and records of the Company under liquidation and in facts as rightly contended by the Official Liquidator, the winding up proceedings are unnecessarily being delayed. Having heard Mr. Mishra, learned Official Liquidator and on perusal of the record as well as the statement made, the prayers prayed for in paras 7(a) and 7(b) of the application deserves to be accepted and is hereby accepted.
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Insolvency & Bankruptcy
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2017 (6) TMI 880
Insolvency & Bankruptcy Code - whether filing of “a copy of certificate from the “Financial Institution” maintaining accounts of the Operational Creditor confirming that there is no payment of unpaid operational debt by the 'Corporate Debtor' as prescribed under clause (c) of sub-section 3 of Section 9 of the 'I & B Code' is mandatory or directory? Held that:- The word 'shall' used in sub-section (3) of section 9 of 1 & B Code' is mandatory, including clause 3 therein. The appellant has enclosed a Final Award given by Sole-Arbitrator, Hong Kong Special Administrative Region, People's republic of China dated 18th August 2014 to suggest that the respondent Corporate Debtor is liable to pay the amount determined by arbitrator but defaulted to pay the amount. Even if such submission is accepted, the Adjudicating Authority cannot assume that the amount has not been paid pursuant to the award till on the basis of evidence on record i.e. copy of certificate from the “Financial Institution” maintaining accounts of the appellant confirming that there is no payment of an unpaid operational debt by the Corporate Debtor”. From the record we find that the appellant was given opportunity to complete the record by enclosing the certificate of “Financial Institution” and thereby to remove the defects within 7 days but failed to do so. In J.K. Jute Mills Co. Ltd. v. Surendra Trading Co. [2017 (6) TMI 254 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, ALLAHABAD], the Appellate Tribunal was considering whether the time limit prescribed in 'I & B Code' 2016 for admitting or rejecting the petition or initiation of Insolvency Resolution Process is mandatory? The Appellate Tribunal, by Judgment dated 1st May 2017 held that proviso to sub-section (5) of section 7 and proviso to sub-section (5) of section 9 granting “Financial Creditor/Operational Creditor” to complete the documents, if incomplete is mandatory. This Appellate Tribunal in “J.K. Jute Mills Company Limited, the appellant having failed to complete the documents within 7 days, the Tribunal was right in dismissing the application preferred by the Appellant. The argument that the foreign companies having no office in India or no account in India with any “Financial Institution” will suffer in recovering the debt from Corporate Debtor cannot be accepted as apart from the 'I & B Code', there are other provisions of recovery like suit which can be preferred by any person. Appeal dismissed.
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Service Tax
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2017 (6) TMI 911
CENVAT credit - input services - AMC, courier, security, rent and office management services in connection with Chartered Accountant services - Department is of the view that M/s. DHS neither a provider of services such as courier, renting, office management, etc., (they are Chartered Accountants) nor are they registered as input service distributors according to service tax law. Hence, such CENVAT credit availed by the appellant is wrong - Held that: - it is an admitted fact that the appellant have paid the service tax to DHS who in turn has paid the same to the service provider and it is also an admitted fact that the input services have suffered service tax and CENVAT credit can be taken by the appellant and the registration is not a mandatory requirement for claiming CENVAT credit. There is no suppression on the part of the appellant, as the appellants have been filing ST-3 returns for the entire impugned period, which has been admitted by both the authorities and they have disclosed all the facts in the ST-3 returns and therefore, the department is barred from going back and holding that the availment of CENVAT credit by the appellant as incorrect or illegal. Appeal allowed - decided in favor of appellant.
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2017 (6) TMI 910
CENVAT credit - input services - rent a cab services/air travel agent's service/tour operator service - denial on account of nexus - Held that: - the decision in the case of Commissioner of Central Excise Versus M/s. Visteon Automotive Systems India (P) Limited [2016 (12) TMI 1383 - MADRAS HIGH COURT] relied upon, where it was held that availing of such services are necessary to the manufacture and transporting the workers to and fro from the factory is included under input services, in relation to the manufacture of excisable goods - credit allowed - appeal dismissed - decided against Revenue.
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2017 (6) TMI 909
Refund claim - GTA services - denial on the ground that the appellant did not file complete documents viz. Documents evidencing export of the said goods and documents evidencing payment of service tax on the specified service - denial also on the ground of time bar - Held that: - the refund in this case has been claimed under N/N. 41/07-ST dt.6.10.2007, which is a self-contained notification to grant refunds of Service Tax to exporters. There is express provision made in the clause (2) (e) and proviso thereof in the notification that the claim has to be filed within sixty days of the order for export made under Section 51 of the CA, 1962. There is nothing in the language of the Notification to indicate or imply the application of time limit of Section 11B of CEA, 1944 - the Commissioner (Appeals) has taken the right decision to apply the time limit as prescribed in the N/N. 41/07-ST. Refund claim - time limitation - Held that: - the adjudicating authority needs to reexamine the refund claim and appellant's contentions afresh on the basis of documents of the CHA and shipping bills to establish connection between the two as has been done for the refund already sanctioned - matter on remand. Appeal disposed off - part matter decided against appellant and part matter on remand.
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2017 (6) TMI 908
Extended period of limitation - Commission to overseas commission agent - reverse charge mechanism - Held that: - As the issue of payment of service tax was in dispute, therefore, there is no malafide intention of the appellant in not paying the service tax - extended period not invocable - penalty also set aside - demand restricted to normal period - appeal allowed - decided partly in favor of appellant.
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2017 (6) TMI 907
100% EOU - Refund of CENVAT credit - input services - manpower recruitment and supply agency services - rent-a-cab scheme operator services - Held that: - these two services viz., manpower recruitment agency and rent-a-cab operator service fall in the definition of input services as contained in Rule 2(l) of CCR - The various decisions of the Tribunal and the High Court has given a very wide interpretation of definition of input service so as to include all the activities relating to business and the appellant has been able to establish that these two services were very much necessary for smooth operation of the organization and are related to the business activities - the appellants are entitled to claim the refund of the same and the impugned order denying the refund is not sustainable - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 906
CENVAT credit - denial on the ground that appellant were not registered - time limitation - Held that: - with regard to the availment of CENVAT credit without registration, the issue is squarely covered in favor of the assessee in the case of mPortal India Wireless Solutions Pvt. Ltd. [2011 (9) TMI 450 - KARNATAKA HIGH COURT], where it was held that Registration not compulsory for refund. CENVAT credit with regard to other input services - Held that: - The learned Commissioner (A) has rightly held that Rule 5 of Taxation of Services (Provided from outside India and received in India) Rules, 2006 does not restrict the availment of other input services which have contributed in the provisions of their other output services. Extended period of limitation - Held that: - the demand is hit by limitation for the period October 2008 to September 2010 because the assessee has not concealed any information from the Department and the Department has failed to bring in any evidence on record to prove that assessee indulged in fraud, suppression of facts, collusion or willful mis-statement with an intend to evade payment of duty - demand set aside. Appeal dismissed - decided against Revenue.
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2017 (6) TMI 886
Distribution of CENVAT credit - Input service - technical consultancy fee - denial on account of nexus - Rule 7 of Cenvat Credit Rules - Held that: - the issue involved in the present case is squarely covered in favour of the appellant by the judgments in the case of Commissioner of Central Excise, Bangalore-I Commissionerate Versus Ecof Industries (P.) Ltd. [2011 (4) TMI 560 - KARNATAKA HIGH COURT], where it was held that The finding recorded by the Appellate Authority that the assessee is entitled to take credit only in the unit where the product is manufactured is therefore not the mandate of Rule 7 of the Cenvat Credit Rules - appeal allowed - decided in favor of appellant.
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Central Excise
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2017 (6) TMI 905
Extended period of limitation - penalty - case of Revenue is that the impugned goods were neither input, nor capital goods and, therefore, the assessee had deliberately taken credit by indulging in willful misstatement or suppression of facts - Held that: - In the present case, there was no suppression or misrepresentation in respect of availment of CENVAT credit and, therefore, this Court is of the considered opinion that in the light of the judgment delivered by the Division Bench of Gujarat High Court in the case of Commissioner Vs. Dynamic Industries Ltd. [2014 (8) TMI 713 - GUJARAT HIGH COURT], the Tribunal was justified in remanding the matter back and holding that mandatory equal penalty and extended period of 5 years are not attracted - appeal dismissed - decided against Revenue.
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2017 (6) TMI 904
Penalty u/s 11AC - Whether the imposition of the penalty under Section11AC of the Central Excise Act is mandatory or directory? - whether the failure on the part of the Assessee to file requisite declarations and make disclosures qua clearances of waste and scrap in the returns filed in Form RT-12 would bring the case within the ambit and scope of the proviso to Section 11A(1) of the CE Act? - extended period of limitation - Held that: - As is evident upon a plain reading of Section 11A of the CE Act, that the proviso incorporated therein empowers the Central Excise Officer to serve the SCN within the extended period of five years, albeit, from the relevant date, in case, any of the circumstances provided for in the main part of the Section, to which we have made a reference above, arose on account of the reason of fraud, collusion or willful mis-statement or suppression of facts or contravention of any of the provisions of the Act or the Rules made thereunder, with an "intention to evade" payment of duty by the noticee or his agent - the defining principle for invoking the extended period of limitation is, that there should be an "intention to evade payment of duty" by the noticee or his agent. The fact is that, in so far as the subject waste and scrap is concerned, there was, for a long period of time, clearly an uncertainty, as to whether or not they were excisable goods and hence, amenable to duty as claimed by the Revenue. The mere failure to make declarations/or disclosure of the clearance of waste and scrap in the returns would not amount to suppression in the given facts and circumstances - extended period not invokable. Penalty - Held that: - the payment of penalty under Section 11AC of the CE Act would follow, only if, the finding of fact is returned that there was an escapement of duty, due to a conscious and deliberate wrong doing on the part of the Assessee. Thus, in other words, the penalty under Section 11AC would follow, as night follows day, only if, such a finding is returned. In other words, it will be mandatory to levy penalty only, if, such a finding is reached in the matter. In the instant case, one has not been able to arrive at such a conclusion - penalty set aside. Appeal dismissed - decided against Revenue.
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2017 (6) TMI 903
Exemption from payment of Special Excise Duty (SED) - N/N. 6/2002-CE dated 1.3.2002 - seventh tyre cannot be said to be used in the manufacture of excisable goods in terms of N/N. 6/2002-CE dated 01.03.2002 rendering them ineligible for the exemption - Held that: - The Motor Vehicle Act has statutorily required motor vehicles to have seven tyres six tyres fitted to the chassis and seventh as a spare tyre. At the point of sale of the motor vehicle, only six tyres have been found fitted on the chassis. Such being the case, the contention of the appellant that the seventh tyre also has been used in the motor vehicle cannot be appreciated - appeal dismissed - decided against appellant.
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2017 (6) TMI 902
Manufacture - whether the fabrication and erection of steel structural by M/s. Saba Engineering Pvt. Ltd. at the site of the respondent amounts to manufacture or not? - Held that: - the issue was a contentious issue during the relevant period which travelled upto the Larger Bench of the Tribunal and the Larger Bench in the case of Mahindra & Mahindra Ltd. Vs. Commissioner of Central Excise, Aurangabad & Ors. [2005 (11) TMI 103 - CESTAT, NEW DELHI], where it was held that The immovable iron and steel structures not being goods will not fall under Heading 73.08 of the Excise Tariff. The structurals after fabrication become immovable property and not capable of being shifted - The Larger Bench in the above decision has observed that when the structural are fixed to the earth they are not excisable. Appeal dismissed - decided against Revenue.
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2017 (6) TMI 901
Clandestine manufacture and removal - shortage of stock - Held that: - The first issue is with regard to shortage of 24.20 MTs found during the conduct of stock taking at the factory on 26.6.2003. Admittedly, there was no physical stock taking and comparison with the statutory record was done by mere eye estimation. It is the department s contention that the ingots manufactured are all regular sizes and therefore mere eye estimation was sufficient for such stock taking. That it was also not practically and logistically possible to get such huge stock weighed. When there is no physical stock taking by weighing the stock, we have to agree with the findings of the Commissioner (Appeals) that no credence can be placed on such eye assumption of the stock. This cuts the root of the department s case as the stock to be compared with the accounts and documents recovered is an assumptive figure. There is no evidence regarding excessive usage of raw materials or consumption of electricity by the respondents. Though the department allege that the respondents have procured excessive raw materials, from the discussions made as above, we have to say that there is no cogent evidence to establish that such huge quantity of raw materials was obtained by them. Consequently, we have to say that the allegation that they removed finished goods clandestinely without payment of duty, also does not sustain. In a large number of cases, it has been held that unless there is clinching evidence to establish clandestine removal, the demand cannot be confirmed solely on the basis of private records. Such private records have to be corroborated by evidence other than statements. Charge of clandestine removal being serious charge, the same has to be proved to a possible extent even though evidence to a mathematical precision may not be possible. Appeal dismissed - decided against Revenue.
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2017 (6) TMI 900
MODVAT credit - capital goods - Whether the denial of MODVAT credit on capital goods imported by the appellant is admissible or not? Held that: - Sub-clause (a) of the said definition states that capital goods means machines, machinery, plant equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products. Thus, machineries fall within the definition of capital goods - CBEC Circular 351/67/97-CX dated 5.11.1997 states that the crucial test for allowing MODVAT credit would be whether the capital goods were covered either in terms of classification or description of capital goods as defined in Explanation to Rule 57Q. Due to doubts which arose as to whether credit is admissible on capital goods imported under Tariff Heading 98.01, as there was no corresponding Central Excise Tariff Heading, the circular was issued. The said circular also directed that on furnishing of certificate as given therein, the credit can be allowed - The appellants having furnished the certificate, there is no reason to disallow the credit. Appeal allowed - decided in favor of appellant.
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2017 (6) TMI 899
CENVAT credit - duty paying invoices - in the invoices, the description of the goods is not as per purchase orders or the goods received by the appellants in their factory - Rule 7(1)(a) of CCR, 2004 - Held that: - similar issue decided in the case of Omax Autos Ltd. Versus Commissioner of Central Excise, Delhi-III [2011 (7) TMI 994 - CESTAT, New Delhi], where it was held that description of the goods different but the fact is not denied, the appellants received the goods, therefore, the appellants are entitled to take credit - CENVAT credit allowed - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 898
Waste - Liability of duty - Fly Ash generated during generation of electricity - Held that: - the fly ash emerging during the course of generation of electricity cannot be considered as a manufactured product liable to Central Excise Duty - reliance placed in the case of The Central Board of Excise & Customs Government of India, The Commissioner of Central Excise Versus M/s. Mettur Thermal Power Station (A Unit of Tamil Nadu Generation & Distribution Corporation Ltd. (TANGEDCO) [2017 (1) TMI 222 - MADRAS HIGH COURT], where it was held that the fly ash produced during combustion of coal in the manufacture of electricity is a waste by-product. The same is not emerging out of any manufacturing process - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 897
Reversal of CENVAT credit - removal of Capital Goods - capital goods Moulds cleared to sister units on returnable basis - Held that: - there is no allegation with regard to suppression of facts. It is also clear that the appellants are removing the capital goods only to their sister units and the department is fully aware of such practice adopted by the appellant. On the basis of records as well as facts, the appellants cannot be saddled with suppression of facts with intent to evade payment of duty. Moreover, the capital goods being removed to the sister units, would give rise to a situation of revenue neutrality. Demand set aside - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 896
CVD exemption - import of Polyester Knitted Fabrics and PVC Coated Fabrics - N/N. 30/2004-CE dated 9.7.2004 - denial of exemption on the ground that the credit availed on inputs - Held that: - identical issue was decided in the case of Monte Carlo Fashions Ltd., Oswal Woollen Mills Ltd. Versus CC, Amritsar [2017 (6) TMI 612 - CESTAT CHANDIGARH], where The proviso after Para 1 of exemption N/N. 30/2004-C.E. was substituted on 17-7-2015 vide N/N. 34/2015. Such substitution changed the scope of the condition and is subsequent to the decisions of Hon’ble Supreme Court, unamended proviso of the notifications are applicable - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 895
Adjustment of sanctioned refund towards other alleged dues - It is the case of the appellant that no SCN has been issued raising such demand and that the department cannot adjust the alleged demand of ₹ 4,61,268.36 and ₹ 7,87,024/- being interest thereon from the sanctioned refund - appellant claims that the department has suo moto adjusted the refund / rebate against duty demand which has never been adjudicated or crystalized by issuance of a SCN - Held that: - The SCN dated 18.12.1982 admittedly did not raise any demand of duty. The allegation raised in the said SCN was only with regard to classification and proposal for denying the exemption under N/N. 66/82. This being the case, the department cannot unilaterally adjust the amounts from the sanctioned refund. It has also to be mentioned that with effect from 28.2.1986, the new Central Excise Tariff Act, 1985 came into force and the impugned products were brought under different classification i.e. Chapter 48. The N/N. 66/82 was rescinded. The department has taken this opportunity to include in the show cause notice the proposal for demand of duty and interest. Relating to the classification dispute raised in the SCN dated 18.12.1982. In our view, such a SCN issued belatedly after adjustment of the rebate / refund claim, and that too after much agitation of the issues, is not legal and proper. The Hon’ble Supreme Court in the case of Metal Forgings Vs. Union of India [2002 (11) TMI 90 - SUPREME COURT OF INDIA] has held that a SCN is a mandatory requirement for raising demand. The letter dated 2.5.2003 or 14.5.2003 issued by the department raising the demand for the first time or the show cause notice dated 13.5.2004 issued by the department belatedly pursuant to Order-in-Appeal dated 8.1.2004 will not take the place of a show cause notice for the dispute relating to the show cause notice dated 18.12.1982. Whether the department can suo moto adjust from the sanction refund / rebate? - Held that: - reliance placed in the case of COMMISSIONER OF C. EX., BANGALORE-III Versus STELLA RUBBER WORKS (UNIT-II) [2013 (3) TMI 299 - KARNATAKA HIGH COURT], where it was held that Section 11 of the Central Excise Act, 1944 does not contemplate adjustment of monies due to the assessee towards the amount due to the revenue. The SCN dated 18.12.1982 did not quantity the differential duty demand arising out of the denial of benefit of N/N. 66/82. As a consequence to Supreme Court's decision in the absence of SCN quantifying demand, it is not possible to say that the appellant is liable to pay the duty demand / interest confirmed in the denovo adjudication order No. 16/2005 dated 31.1.2005. The SCN dated 13.5.2004 cannot be taken to correct the flaw or fill in the lacuna in the SCN dated 18.12.1982. Therefore, it cannot be concluded that the amount adjusted to the sanctioned refund has been properly quantified. Such adjustment of uncrystalized demand is against law. The appellant is eligible for the entire refund/rebate - adjustment set aside - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 894
SSI exemption - use of brand name of others - manufacture and clearance of leather chemicals with the brand names of others - Held that: - in terms of para-5 of the SSI N/N. 8/98 dt. 2.6.98 and para-4 of N/N. 8/99 dt. 22.8.99 and 8/2000 dt. 1.3.2000. In terms of relevant paras of the above notifications, the benefit is to be denied in respect of specified goods, if cleared bearing a brand name of another person - In the present case, the allegation is that the two respondents have cleared the goods bearing the brand name of another person i.e. the brand name originally owned and used by M/s.Aksol Chemicals and subsequently by various group companies. It is on record that as per Sale Deed dt. 27.03.1998 and Deed of Assignment, all the group companies ceased to exist and the entire properties and goodwill were legally transferred to both the respondents with the consent of all the family members who were proprietors/partners in the group companies. Thus, there is no dispute that the owners of the brand name have legally assigned all the brand name to both the respondents. Since the dispute is pertaining to the period after such assignment of brand names, the clearances made by both the respondents bearing these brand names has to be held as clearances of goods bearing the brand name of respondents themselves - further, M/s.Aksol Chemicals did not exist - demand not justified. With regard to allegation that "Emi" was a brand name belonging to MTPL, we note that Smt. K.K. Maheswari, Director of MTPL in her statement dt. 2.11.2000 has categorically stated that she was not the owner of the brand name "EMI" which was used as prefix to the description of goods cleared through MTPL. Appeal dismissed - decided against Revenue.
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2017 (6) TMI 893
Maintainability of appeal - time limitation - condonation of delay - power of Commissioner (A) to condone delay - there is a delay of more than 3 years - appeal was filed wrongly before inappropriate forum - Held that: - appellant has wrongly filed the appeal before the Office of the Commissioner instead of before the Office of the Commissioner (A) and that was a bona fide mistake and the Department should have returned the appeal to the assessee for filing the same before the right forum but the same was not done by the department and therefore, the time spent in pursuing appeal before a wrong forum is condonable and the delay is condoned - the present appeal is very much within the condonable limit of the Commissioner (A) - appeal restored - the case remanded back to the Commissioner (A) to decide the same on merits - appeal allowed by way of remand.
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2017 (6) TMI 892
Refund of CENVAT credit - duty paying invoices - denial on the ground that bills/invoices were found ineligible - Held that: - such inadequacies of their coming in the invoices are, for that matter distribution of credit without registration as input service distributor, are only procedural irregularity, nonetheless they are curable defects - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 891
Penalty - irregular availment of CENVAT credit - case of appellant is that they are not laible to penalty as they have not utilized these credits and they have paid the amount as soon as the Department pointed out to them - Held that: - In pursuance of the direction of the Tribunal, the appellant paid the interest on 27.03.2012 - Since the appellants have paid the amount wrongly availed along with interest 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 the demand of excise duty, therefore, there is no justification for imposing penalty and therefore the impugned order to the extent of imposing penalty is not sustainable in law - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 890
CENVAT credit - various input services - denial on account of nexus - Held that: - all the services fall in the definition of input service as provided in Rule 2(l) - part of credit to the tune of ₹ 5,539/- denied on the ground that appellant could not produce any document justifying the CENVAT credit - except this part, entire amount of credit allowed - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 889
CENVAT credit - input services - repair work at their guest house at Bangalore - AMC charges for hospital equipments - AMC charges for their New Delhi plant and sites situated at Assam - Held that: - the appellant’s case is covered by the decision in the case of Veena Industries Limited [2016 (1) TMI 161 - CESTAT AHMEDABAD] wherein it has been held that the appellant has rightly taken the CENVAT credit on the input service provided by the sub-contractors and they have paid the applicable service tax on the output service provided by them - appeal allowed - decided in favor of appellant.
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2017 (6) TMI 888
100% EOU - refund of accumulated unutilised CENVAT credit - calibration charges - catering services, freight inward - freight outward - denial on account of nexus and time bar - Held that: - Section 11B and Explanation B(a)(i) provides a period of one year is taken from the date on which the ship or the aircraft of such goods are loaded, leaves India - in the present case, the original authority has rejected the partial claim since the same has been filed beyond one year from the date of export of the impugned goods - refund rightly rejected. Refund claim - catering services - Held that: - reliance placed in the case of M/s BNY MELLON INTERNATIONAL OPERATIONS (INDIA) PVT LTD. Versus COMMISSIONER OF CENTRAL EXCISE (APPEALS) PUNE-III [2013 (3) TMI 203 - CESTAT MUMBAI], where it was held that CENVAT Credit of service tax paid on the outdoor canteen services is available to the appellant if the employees have not borne the service tax amount and the appellant has not charged the employees for providing the service. Since the appellants are entitled for CENVAT credit of service tax on these services, they will also be eligible for refund of the same under Rule 5 if the services pertain to the period of refund in question - refund allowed. Refund claim - freight outwards - Held that: - since the appellant is in export, therefore the place of removal is the port - the appellants are entitled to refund on freight outwards. Refund claim denied on calibration charges and freight inwards on account of nexus - further, the refund claim of ₹ 1,82,355/- is time barred. Appeal allowed - decided partly in favor of appellant.
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2017 (6) TMI 887
Price variation clause - receipt of additional consideration - the appellant had paid the duty along with interest - penalty u/s 11AC - Held that: - the learned Commissioner (A) has given cogent reasons for imposition of penalty - The assessee admits that whenever the appellants receive additional consideration they had paid duty on the same, but the reasons that prevented payment of applicable duty in the present instance lack credibility. The onus is on the assessee to intimate the department of any such receipt and also to pay the duty - penalty upheld - appeal dismissed - decided against appellant.
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2017 (6) TMI 885
Area Based Exemption - N/N. 50/2003-CE - classification of the intermediate product namely- Phenol Formaldehyde Resin, Urea Formaldehyde Reason, and Melamine Formaldehyde Resin, which is 100% for captive purposes for manufacture of decorative plywood, particle board, etc. - The Department was of the view that these resins would not be eligible for captive consumption exemption under N/N. 67/95-CE, and since the same are not covered by the Hill area exemption under N/N. 50/2003-CE, the same would be chargeable to duty - whether the intermediate product-resin is marketable or capable of being marketed or not? - Held that: - The test of marketability is that the product which is made liable to duty must be marketable in the condition in which it emerges. The word ‘Marketable’ means saleable or suitable for sale. It need not in fact be marketed - The characteristics of which are same and use or degree of quality of product may differ, but the product is known by the same and unique name in the market and has a commercial identity - learned Commissioner have erred in holding that the appellant's goods are also capable of being bought and sold without any chemical composition comparison along with competitive shelf life study. Whether the resins in question are classifiable under heading 3909 or 3506? - Held that: - Once it is established that paper is quoted with certain resols which have the essential characteristics of meriting classification under chapter 39 and which according to Note-01 of chapter 39 are to be called plastics. We find that learned Commissioner erred in relying on the said ruling in absence of comparison of chemical composition - as per HSN explanatory notes to chapter 39, glue manufactured by appellant for use as adhesive is outside the preview of chapter 39. Admittedly, the glue in question is curried glue to which hardner and other substances are added and therefore, glue manufactured by the appellant is not covered by clause 1 to note 6 of chapter 39, such glue being not in the form of block, lump or powder - the impugned order is bad and fit to be set aside. Extended period of limitation - penalty - Held that: - Since the matter is highly debatable and the Clarification issued by Ministry is in Appellant’s favor, hence extended period of limitation cannot be invoked and consequently penalty also cannot be imposed. Appeal allowed - decided in favor of appellant.
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