Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 2, 2018
Case Laws in this Newsletter:
Income Tax
Customs
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Sludge/waste oil is bye-products which are used in the power generation, therefore, the same is part and parcel of business of the assessee and is eligible for deduction u/s 80IA.
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TDS liability - Furnishing of PAN by the transporters (GTA) - section 194C(6) and 194C(7) are independent of each other and cannot be read together to attract disallowance u/s. 40(a)(ia) of the Act r.w.s. 194C of the Act.
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Computation of MAT - Addition on debenture redemption reserve fund - adjustments to book profit u/s. 115JA/ 115JB - the amount set aside to redeem debentures must be treated as a known liability and cannot be considered to be a reserve - cannot an treated as unascertained liability.
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Eligibility for exemption u/s 11 - proof of charitable activities - Testing of water and thereby supplying good quality of water contribute to health of the people. - the activity of the assessee has to be considered as advancing of general public utility - Benefit of exemption allowed.
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Mode of computation - sale of tenancy rights - Benefit of indexation - Cost of acquisition to be taken as NIL for Fair Market Value (FMV) as on 1.4.1981 - Scope of section 55(2)(a) and 55(2)(b) - issue decided in favor of revenue.
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Only when a return is filed claiming deduction under Section 80P, the AO will be enabled to first consider the question of eligibility of the assessee and then consider the allowability of deduction from the total income
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Agricultural produce - tapping of toddy is a traditional agricultural enterprise within the State and the State also encourages it; as distinguished from the foreign liquor trade. - Exemption allowed.
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Expenditure of acquisition of distribution rights of feature film - There can be no deduction permissible on the cost of acquisition without generation of income credited in the books of account. The subject films were never commercially exploited and generated absolutely no income.
Customs
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Valuation of imported goods - Titanium Dioxide Anatase B101 - the revenue has taken the quantity of grade and country of origin into consideration for comparing contemporaneous import and thereafter reached to the conclusion and enhanced the assessable value - valuation sustained.
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Refund claim - Mere filing and pendency of the review petitions would not enable the Department to withhold the refund claims of the petitioner, whose writ petition was allowed in the year 2009 and SLP was dismissed in the year 2010.
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Interpretation of Statute - Refund of SAD - A mere conversion of imported logs in the Sawn Timber without loss of identity of the original product would not deprive the importer of the benefit of the exemption notification.
FEMA
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Offence under FEMA - Adjudicating Authority is correct in holding that Sh. Rajesh S. Adani is the person incharge and responsible for the conduct of business of AEL and shall be deemed to be guilty of contravention alleged against AEL.
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FEMA - Power to compound contravention - RBI was not bound to put an end to the compounding proceedings - the compounding proceedings initiated vide the compounding applications of the petitioner and pending before the RBI should proceed, but strictly in accordance with law.
Service Tax
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Classification of services - deputation of certain qualified technical staff to joint venture companies for performing the assigned duties - Appellant cannot be put to tax liability under the category of 'Manpower Recruitment or Supply Agency's Service' for the activity now under dispute
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Refund of service tax paid which is otherwise exempted - Rejection on the ground that the same is filed beyond the period of limitation u/s 11B of CEA - Provisions of section 11B are not applicable - refund allowed.
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Commercial or industrial construction service - Value of free supplies by service recipient do not comprise the gross amount charged under N/N. 15/2004-ST, including the Explanation thereto as introduced by N/N. 4/2005-ST. - benefit of abatement cannot be denied
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Sale or service - Commercial Training or Coaching Service - sale of study material to students - benefit of Exemption N/N. 12/2003 dated 26/06/2003 will be available for the cost of study materials sold.
Case Laws:
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Income Tax
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2018 (6) TMI 1518
Deduction in respect of expenditure of acquisition of distribution rights of feature film - Deduction of the amounts in connection with the acquisition of satellite distribution rights on three Malayalam films denied - Held that:- Rule 9B(5) starts with a non-obstante clause laid down that deduction under Rule 9B shall not be allowed unless the distributor credits in the books of accounts, the amounts realised by the distributor in case where the distributor himself has exhibited the film on commercial basis. The assessee was therefore required to credit the amount realised by him by exhibiting the film in the profit and loss account. Hence the deduction is permissible under Rule 9B only if the film has been commercially exploited and an income received. Sub-rule (4) of Rule 9B only permits carrying forward of the cost of acquisition to the next year for the purpose of claiming deduction, which can be claimed only if there is income generated by the film and the same is credited to the books of accounts as provided in the overriding sub-rule at Rule 9B(5). There can be no deduction permissible on the cost of acquisition without generation of income credited in the books of account. The subject films were never commercially exploited and generated absolutely no income. It is an admitted case that the feature films were never exhibited and there was no amount credited in the profit and loss account as amount received on exhibition of films. The finding of the Appellate Authority as well as the Tribunal is therefore, to be upheld and we find no reason to interfere and the claim of the assessee fails.- Decided in favour of the Revenue
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2018 (6) TMI 1517
Recovery proceedings - Invocation of the provisions of Sections 230 and 179 - Liability of directors of private company in liquidation - Appellant was detained when Section 179 proceedings were initiated and proceeded with - Held that:- Time frame of six weeks has been granted for conclusion of the proceedings under Section 179 and further time of four weeks with respect to an order under Section 230. In such circumstances, we would issue specific orders fixing the time within which a notice has to be served, appearance has to be made and orders passed. We are also of the opinion that Exhibits P13 and P8 orders have to be quashed; but, however, with a restriction that the order not to travel outside India as is seen from Exhibit P8 shall continue till fresh orders are passed. It is so ordered. The appellant is directed to appear before the 2nd respondent on 29.06.2018, on which date he shall be issued with a fresh notice under Section 179 and under Section 230.
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2018 (6) TMI 1516
Section 10A deduction - Deduction of expenditure incurred for ‘Export Turn Over’ required to be deducted from ‘Total Turn Over’ for the purpose of computing the deduction u/s.10A - Held that:- The controversy is no longer res integra as held exclusions made from export turnover have to be considered for reduction from total turnover also while working out deduction available u/s.10A of the Act. Accordingly, we direct the AO to rework the deduction available to the assessee u/s.10A. See case of M/s. Tata Elxsi Ltd., vs. Asst. Commissioner of Income Tax, [2015 (10) TMI 634 - KARNATAKA HIGH COURT] affirmed by Income-tax, Central – III vs. HCL Technologies Ltd., [2018 (5) TMI 357 - SUPREME COURT].
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2018 (6) TMI 1515
Entitled to claim deduction u/s 80P(2)(iii) - denial of claim mere reason that no return was filed; when deduction as permissible under Section 80A(1) is of the total income - Held that:- Only when a return is filed claiming deduction under Section 80P, the AO will be enabled to first consider the question of eligibility of the assessee and then consider the allowability of deduction from the total income. - Decided against the assessee. Agriculture produce or intoxicating liquor - Held that:- As has been found by the first appellate authority and the Tribunal, toddy is a product which is extracted from a tree just as any other agricultural produce is extracted. AO in his order as also his report before the first appellate authority had waxed eloquent about there being no activity of sawing and tilling and so on and so forth. A coconut or palm cultivation would not require such sawing and tilling as is required with a paddy cultivation. The mere fact of a particular agricultural activity having not been carried out would not be the sole ground for denying the exemption as available to the marketing of an agricultural produce when carried out by the Co-operative Society. The fact of the tree tax being paid by the Society is only on account of the license of tapping and vending having been obtained by the Society. The tax so paid is on behalf of the members of the Society. We also have to notice that tapping of toddy is a traditional agricultural enterprise within the State and the State also encourages it; as distinguished from the foreign liquor trade. We, hence, do not find any reason to interfere with the orders of the Tribunal. We answer the questions of law as framed by us in the appeals filed by the Revenue, against the Revenue and in favour of the assessee. Income from toddy marketing as eligible for deduction - Held that:- Out of 636 members, 498 members are toddy tappers who have their own property from which toddy is extracted. The 498 members together have 3845 trees on their own land. A specimen of 974 trees were considered for the purpose of verifying the yield. As found that 90% of the total of 19,85,461 litres of toddy traded by the assessee came from 498 members having 3845 trees on their own land. It is hence the Tribunal found that 100% of the assessee's income from toddy marketing was eligible for deduction. We do not find any perversity in the findings on facts. We, hence, on that question also hold against the Revenue and in favour of the assessee. The appeals by the Revenue are dismissed.
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2018 (6) TMI 1514
Cost of acquisition of the asset - Mode of computation - sale of tenancy rights - Benefit of indexation - Cost of acquisition to be taken as NIL for Fair Market Value (FMV) as on 1.4.1981 - Scope of section 55(2)(a) and 55(2)(b) - Held that:- Section 55 (2)(b) of the Act is a residuary clause dealing with the cost of acquisition of the capital assets which are not covered by Section 55(2)(a). Capital asset in this case being tenancy rights is covered by Section 55(2)(a). Appellant cannot avail of Section 55(2)(b) of the Act. It is in the above context that the impugned order holds that the indexation by substituting cost of capital assets to the previous owners who acquired the property before 1st April, 1981 by the market value as on 1st April, 1981 which is specifically referred to in Section 55 (2)(b) (ii) of the Act, would have no application to determine the cost of acquisition of tenancy rights which was a subject matter of sale. Cost of acquisition of tenancy, cannot be substituted by the fair market value as on 1st April, 1981, restored the issue to the Assessing Officer for the limited purposes to determine the cost of acquisition. This, in terms of Section 55(3) i.e. cost of acquisition to the previous owners or the market value on the date on which the capital asset become the property of the previous owner for the purposes of determining the income chargeable under the head 'capital gain' in respect of the sale of tenancy rights. No impediment in the Appellants challenging the order passed by the Assessing Officer, before the Appellate Authorities, consequent to the remand by the impugned order of the Tribunal under the Act and in accordance with law. No liberty for the same is required.
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2018 (6) TMI 1513
Eligibility for exemption u/s 11 - proof of charitable activities - Testing of water and supplying good quality of water contribute to health of the people - Held that:- Assessee’s activity comes within the purview of exceptions provided sub-section (15) of sub-clause (i) for the reason that the activity of the assessee is testing of the water quality, which monitors quality in reservoirs and slum areas, for that, assessee has charged some fee and almost the entire fee was spent towards testing activity, as admitted by the CIT(A) himself. Testing of water and thereby supplying good quality of water contribute to health of the people. Therefore, the activity carried out by the assessee as per its object to take care of health of the people and the activity of the assessee has to be considered as advancing of general public utility. Therefore, the assessee is eligible for exemption u/s 11. Assessee is entitled for exemption u/s 11. - Decided in favour of assessee.
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2018 (6) TMI 1512
Undisclosed income - Entries in the alleged diary - declarations made in his statement u/s 132(4) - Held that:- Burden is on the assessee to show that the entries in the alleged diary do not belong to the Asstt. Year 2011-12 by producing cogent evidence to show they relate to the year 1998-99. Revenue cannot be expected to prove that these entries relate to Asstt. Year 2011-12 because of the nature of the entries, which are in the personal knowledge of the assessee. It is always open for the assessee to produce relevant material to show that these entries relate to the Asstt. Year 1998-99 not for 2011-12, in the absence of which we find it difficult to accept the bald denial made by the assessee. The findings of the authorities below on this aspect, do not suffer any illegality or irregularity and they have to be confirmed. We, therefore, dismiss Ground Nos. 1 to 3. Outstanding balance to be found from the diary - Held that:- Two amounts are surrendered separately, as such, they cannot be telescoped against each other is not sound and cannot be accepted. These two transactions have an intrinsic link as submitted by the learned AR that it is only out of the sale amount the receivable from the persons listed on the leaf relating to 1.1.1998 arise. We accept the same and direct the authorities to telescope ₹ 2.44 crores into ₹ 2.60 crores in which event nothing over and above the declaration of ₹ 4 crore is taxable. We accordingly answer Ground No.4 in favour of the assessee. Adjustment of the seized amount against the advance tax liability - Held that:- Allow the credit for the cash seized towards the advance tax payable by the assessee on the date of seized viz. 11.11.2010 as requested by the assessee. See KANISHKA PRINTS (P.) LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE - 2, SURAT [2013 (7) TMI 14 - ITAT AHMEDABAD]
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2018 (6) TMI 1511
Disallowance u/s 40(a)(i) on account of non-deduction of TDS - consultancy and legal service charges - depreciation disallowed to the assessee with the help of section 40(a-) Held that:- In the case of Sonic Biochem Extractions P.Ltd [2013 (9) TMI 193 - ITAT MUMBAI] Tribunal did not approve this line of reasoning adopted by the AO and held that depreciation cannot be disallowed to the assessee with the help of section 40(a) because section 40(a) is applicable if the assessee has claimed deduction of expenditure mentioned in the section. Other decisions referred by the ld.counsel for the assessee are also to this effect. CIT(A) has rightly deleted the disallowance Assessment of interest income - whether without filing revised return, the assessee can raise new plea before the ld.CIT(A) in order to exonerate itself from tax liability? - Held that:- A ground would have a reference to an argument touching a question of fact or a question of law or mixed question of law or facts. A legal contention would ordinarily be a pure question of law without raising any dispute about the facts. Not only such additional ground or contention, the Courts have also, as noted above, recognized the powers of the Appellate Commissioner and the Tribunal to entertain a new claim for the first time though not made before the assessing officer. Income Tax proceedings are not strictly speaking adversarial in nature and the intention of the Revenue would be to tax real income. This is primarily on the premise that if a claim though available in law is not made either inadvertently or on account of erroneous belief of complex legal position, such claim cannot be shut out for all times to come, merely because it is raised for the first time before the appellate authority without resorting to revising the return before the assessing officer. Quantification of interest income available with the assessee for set off against pre-operative expenditure in power project implementation - Held that:- We find that the ld.CIT(A) has not independently examined any issue in this order, rather followed order of his predecessor in the assessment year 2008-09. The ITAT did not approve the order of the ld.CIT(A) in the assessment year 2008-09 and respectfully following the order of the ITAT in the assessment year 2008-09, we are of the view that interest income is available with the assessee for set off against pre-operative expenditure which is titled as “project development expenditure".
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2018 (6) TMI 1510
Reopening of assessment - assessee argued that the issuance of notice u/s.148 is not valid as the same was based on change of opinion - Held that:- In the instant case, no opinion was formed earlier by the Assessing Officer as no assessment was made and, therefore, it cannot be alleged that there was any change of opinion. We, therefore, do not find any merits in the arguments of the assessee. Accordingly, the cross objections filed by the assessee are dismissed. Computation of MAT - Addition on debenture redemption reserve fund - treatment as a known liability - AO added back the amount which was debited in the profit and loss account under the head “debenture redemption reserve fund” and computed the book profit u/s. 115JA - CIT-A deleted the addition - Held that:- D.R. could not point out any specific error in the order of the CIT(A), which was passed following the order of the Tribunal in the case of assessee itself for the assessment year 2003-04 wherein held that the amount set aside to redeem debentures must be treated as a known liability and cannot be considered to be a reserve. Further, it is clear that such amount set aside towards debentures redemption is not an unascertained liability. Ground of appeal is accordingly allowed Penalty u/s.271(1)(c) - write back of provision for contingencies of 24,60,00,000/- in computing' the Book Profits under Section 115JB - Held that:- Assessee had furnished all the details of its expenditure as well as Income In Its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on Its part. It was up to did authorities to accept its claim in the return pinot. Merely because the assessee had claimed the expenditure, which claim not accepted or was not acceptable to the revenue, that, by itself, would not attract the penalty under section 271(1)(c). If the contention of the revenue was accepted, then in case of every return where the claim 'made was not accepted by the Assessing Officer for any reason, the assessee would invite penalty under section 271(1)(c), That is clearly not the Intendment of the Legislature - Decided against revenue
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2018 (6) TMI 1509
TDS u/s 194C - Non-deduction of TDS on freight and transportation expenses - Furnishing of PAN by the transporters (GTA) - Held that:- Undisputedly assessee provided the PAN Number of the transporters to the A.O. before the completion of assessment proceedings and has therefore complied to the provision u/s. 194C(6) of the Act. Once the assessee make sufficient compliance to the provision of section 194C(6), requirement to deduct tax at source seizes on the part of assessee. Section 194C(7) of the Act merely cast a duty on the assessee to furnish particulars of persons referred in section 194C(6) of the Act to the prescribed authority. Respectfully following the decision of the Kolkata Tribunal in the case of Soma Rani Ghosh (2016 (10) TMI 55 - ITAT KOLKATA) and given fact and circumstances of the case are of the view that section 194C(6) and 194C(7) are independent of each other and cannot be read together to attract disallowance u/s. 40(a)(ia) of the Act r.w.s. 194C of the Act. In the given case as the compliance to the provision u/s. 194C(6) of the Act has been duly performed, no disallowance was called for u/s. 40(a)(ia) of the Act. - decided in favour of assessee
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2018 (6) TMI 1508
Taxability of the amount received for supply of software as royalty - Held that:- We hold that the amount received by the assessee not being in the nature of royalty as per Article–12 of the India–Israel DTAA is not taxable as such in India, but, has to be treated as business profit of the assessee. Dependent agent PE in India - Held that:- We hold that TTI India cannot be treated as assessee’s dependent agent PE in India, hence, the amount is not taxable at the hands of the assessee. The grounds are allowed. The amount received by the assessee from supply of software to Reliance Communication Ltd. and Indus Towers Ltd. are not in the nature of royalty, this ground becomes redundant
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2018 (6) TMI 1507
Addition of Labour Charges - addition on account of Cutting charges - Held that:- Addition is made on presumption basis and without enquiry. Even then, the alternative plea of the assessee was considered and 50% of the income was reduced. When a factual finding is given by the CIT(A) that the addition is made on presumption and that no evidence was found in the impounded material that cutting charges have been levied on the quantity of 2400 MT and when the assessee has furnished confirmations from three parties to that effect, the question of making of addition on this issue does not arise. Hence the entire addition should have been deleted. Hence the addition is deleted and the ground is allowed. Computation of profit of sale of land - Held that:- Merely because the assessee offered income of the purchase and sale of agricultural land, the income cannot be taxed under the Income Tax Act, 1961. Allow the additional grounds filed by the assessee.
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2018 (6) TMI 1506
Addition u/s 41(1) - Held that:- No other alternative but to delete the addition for the reason that there is neither remission or cessation of liabilities in this case. Merely because evidence of repayment of sundry creditors is not produced, an addition u/s 41(1) cannot be made. CIT(A) has not followed the basic proposition of law laid down by the Court on application of Section 41(1) - delete the disallowance and allow the ground of the assessee.
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2018 (6) TMI 1505
Rate of depreciation allowable on printers and UPS/inventories i.e. computer accessories - Held that:- CIT(A) followed the proposition of law laid down by the ITAT, Kolkata Benches in the case of ITO vs. Samiran Majumdar [2005 (8) TMI 293 - ITAT CALCUTTA-B] and allowed 60% depreciation on these computer accessories. We see no infirmity in the same. Hence we uphold the same and dismiss the grounds of appeal. Disallowance of bad debts - Held that:- Claim u/s 36(1)(vii) of the Act is allowable once the assessee writes off debts as bad debts in its accounts and no further conditions need be satisfied. In the case appellant, the trade debts had been written off in the books of accounts in the year under consideration and hence allowable as deduction. In view of the above facts, and respectfully following the decision TRF Ltd [2010 (2) TMI 211 - SUPREME COURT] direct the AO to delete the disallowance made by him on account of bad debts. Computing book profits u/s 115JB - Held that:- AO that the provision for reduction of slow moving goods should be reduced from computation of book profits u/s 115JB. Adjudicating ground no.1 of the assessee’s appeal, we uphold the order of the CIT(A) and dismiss this ground of the revenue.
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2018 (6) TMI 1504
Credit of TDS - arrears of tax demands arose only on account of TDS mismatch - Held that:- As the issue under consideration is materially identical to that of AY 2007-08, following the decision therein, we set aside the order of the CIT(A) and direct the AO to give credit of TDS of ₹ 62,92,887/- after verification of the claim of the assessee. Needless to say that assessee may be given proper opportunity of being heard. Accordingly, the grounds raised by the assessee on this issue are allowed.- Appeal of the assessee is allowed for statistical purposes.
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2018 (6) TMI 1503
Eligibility for claim of deduction u/s 80IA - sale receipts of sludge/waste oil eligible for deduction - AO was of the view that sale receipts of sludge/waste oil is only incidental not derived from the business of the assessee - Held that:- Sludge/waste oil is bye-products which are used in the power generation, therefore, the same is part and parcel of business of the assessee and is eligible for deduction u/s 80IA of the Act. We find that similar issue has been decided by the coordinate bench of this Tribunal in assessee’s own case for AY 2010-11 [2015 (9) TMI 493 - ITAT HYDERABAD] we hold that the assessee is eligible for claim of deduction u/s 80IA. - Decided in favour of assessee.
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2018 (6) TMI 1502
Disallowance on account of prior period expenses - Held that:- As the business of the assessee is going concern and the tax rates are rationalized and same in the respective AY under consideration, there is no loss to the revenue to allow the prior period expenditure. In large organisation, there are chances of pending approval or some issue with administration, the expenses may be claimed in the subsequent year. As per disclosure norms, assessee is to disclose the same as prior period expenses but there are regular business expenditure and as long as these expenditures are matched with the income, then, expenses are allowable expenditure. Assessee has offered both income as well as expenses. Therefore, AO is not correct in disallowing expenses selectively - we direct the AO delete the disallowance made on account of prior period expenditure. - decided in favour of assessee.
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2018 (6) TMI 1501
Transfer pricing adjustment to the international transaction of intragroup services - Held that:- Intragroup services involved in the year under consideration are identical to the facts and circumstances and the intragroup services availed in assessment year 2012-13 it is expected from the assessee for proper benchmarking to lead evidence with respect to each of the nature of services with respect to each class of services mentioned in the above chart with corresponding manner of rendering of the services, the time lag of initiation of services and closure of the services. The evidences produced are apparently very general and do not show the rendering of the services. We set aside the appeal of the assessee to the file of TPO/AO for verifying the evidence of rendering of the services by the AE with respect to nature of each of the services listed in the agreement. The assessee is also further directed to lead proper and credible evidence with respect to nature of services and how and when those services have been rendered by the AE. It is also made clear that AO shall not question the need and benefit arising out of these services as the same have been conclusively decided by the order of the coordinate bench for earlier years in the case of the assessee itself. Appeal of the assessee with respect to ground No. 1, 2, and 3 are allowed with above direction accordingly. Addition made on account of fall in gross profit of the assessee - Held that:- It is evident that the Assessing Officer has neither invoked section 145 (3) nor rejected books of accounts of the assessee. In such circumstances, we do not understand as how the Assessing Officer has made addition for decrease in gross profit rate during the year under consideration. In the normal business, it is not necessary that always the gross profit rate will be steady and it may increase or decrease depending on the prevailing business atmosphere. Without rejecting books of accounts of the assessee, the Assessing Officer cannot tweak with the gross profit rate declared by the assessee. We direct the Assessing Officer to delete the said addition. Disallowance of expenditure in respect of intra-group services made under section 37(1) - Held that:- We find that though the transfer pricing addition for intra-group services has been made, but no disallowance under section 37(1) has been made on protective or otherwise basis in those years. Thus, the Revenue has in earlier and subsequent year accepted this position that no such disallowance is required. The facts and circumstances in the year under consideration on the issue in dispute are identical to the earlier and subsequent assessment years and the Revenue has accepted that no disallowance under section 37(1) is required, in such circumstances, the Revenue cannot insist for sustaining the addition in view of the rule of consistency - Appeal of the assessee is partly allowed for the statistical purposes.
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2018 (6) TMI 1500
Special audit under section 142(2A) - validity of appointment - assessment by limitation - Held that:- In the light of the ITAT’s finding in the assessment year 2009-10, we have analysed the objection of the assessee in the present assessment year and find that these objections were also similar to that of the assessment year 2009-10. AO ought to have visualized the complexity of accounts and compelling circumstances for exercising such power. Though while making a proposal for approval, an opportunity was provided to the assessee, but after submitting explanation no opportunity was granted to the assessee, nor any reasons were assigned. The proposal was sent without communicating to the assessee and the ld.Commissioner has approved the proposal. Thereafter, an order under section 142(2A ) was passed running into few lines. The question was also raised before the Tribunal that it has no jurisdiction to entertain objection of the assessee against appointment of special auditor. The Tribunal after taking into consideration time limit provided in section 153(1) of the Act for passing assessment order observed that the assessment order in assessment year 2009-10 was to be passed before 31.12.2011 whereas, it was passed on 1.82012. The special auditor was appointed on 8.12.2011 just 23 days prior to expiry of limitation for passing the assessment order. Thus, in this given factual matrix, the Tribunal has considered that had the case was not referred for special auditor, the assessment would have become time barred and in order to gain time, a reference for appointment of special auditor was made. We allow the preliminary grounds of appeal raised by the assessee and hold that directions dated 26.03.2014 by the learned Addl. CIT, Range-18, New Delhi for special audit under section 142(2A) of the Act were illegal, invalid and not in accordance with the law; therefore, the assessment order impugned in the present appeal is barred by limitation and thus quashed. - Decided in favour of assessee.
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2018 (6) TMI 1478
Exemption u/s.10B - assessee being 100% Export Oriented Unit (EOU) for these assessment years in respect of the ‘deemed export of goods’ made during the period in question through a third party - Held that:- ‘Deemed Export’ by the assessee Undertaking even through a third party who has exported such goods to a Foreign country and has fetched Foreign Currency for India, still remains a ‘Deemed Export’ in the hands of the assessee undertaking also. If the Parliament intended to put any restrictive meaning for curtailing the said deduction, such words could be employed in sub-section (1) itself, which could have excluded ‘Deemed Export’ from the ambit and scope of word ‘export’ employed in sub-section (1) of S.10B. The Explanation defining ‘Export Turnover’ in both these provisions does not make any such distinction between the ‘Direct Export’ and ‘Deemed Export’. The word ‘export’ read with the background of Exim Policy of Union of India would certainly include ‘Deemed Export’ also within the ambit and scope of the ‘Export Turnover’ as explained in Explanation-2 of sub- section (9A) of the said S.10B of the Act. Restrict the deduction in the hands of the respondent-assessee by excluding the ‘Deemed Exports’, does not have any merit and the said contention deserves to be rejected and the same is accordingly rejected. Establish that both the Respondents-assessees before us and the entity through whom such export was made by the assessee for the period in question, have claimed any double or repetitive benefit u/s.10B of the Act for the same transaction of export. The issue raised in the present case by the Revenue is squarely covered by the decision of the Division Bench of this Court in M/s. Tata Elxsi’s case [2015 (10) TMI 634 - KARNATAKA HIGH COURT] - substantial question of law decided in favour of the assessee.
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Customs
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2018 (6) TMI 1499
Interpretation of Statute - Refund of SAD - Benefit of Notification dated 14-9-2007 - refund of additional duty of Customs paid by the importer of goods u/s 3(5) of the Customs Tariff Act, 1975 - Held that:- A mere conversion of imported logs in the Sawn Timber without loss of identity of the original product would not deprive the importer of the benefit of the exemption notification - appeal dismissed - decided against Revenue.
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2018 (6) TMI 1498
Validity of Criminal Prosecution against petitioner - case of petitioner is that in absence of any departmental proceedings, prosecution of the present petitioner cannot be continued - Held that:- The fact remains that criminal prosecution of the petitioner is based on some departmental proceedings which were formed to be basis for taking out Customs Appeal before the Division Bench of this Court which already stood withdrawn upon the request of the Revenue as is apparent from the order dated 10-4-2017 - Once the basis for such prosecution being departmental proceedings have already come to an end in favour of the petitioner and against Revenue. The prosecution initiated against the petitioner in Criminal Complaint No. 43/S/2013 pending on the file of Chief Metropolitan Magistrate, Esplanade, Mumbai needs to be quashed - petition allowed.
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2018 (6) TMI 1497
SEZ Unit - Refund claim - duty paid under protest - the question of refund of duty remained suspended because of inter-departmental disputes though the petitioner had succeeded before the High Court and the SLP was also dismissed by the Supreme Court - Held that:- Mere filing and pendency of the review petitions would not enable the Department to withhold the refund claims of the petitioner, whose writ petition was allowed in the year 2009 and SLP was dismissed in the year 2010. The Department cannot consider such belated development as automatic implementation of the declaration [laid down] by the High Court. It is always open for the Department to pursue its remedies, but in facts of the present case, must release the refund, if otherwise payable in law, subject to outcome of such proceedings. The petitioner’s refund applications shall be decided latest by 31-12-2017 - petition disposed off.
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2018 (6) TMI 1496
Classification of imported goods - encoders, modulators and multiplexers - whether classifiable under Heading 8517 or under Heading 8528? - Held that:- It is directed that the competent authority shall proceed to hear and dispose of the show cause notices. Since the notices have been issued way back in the year 2014, it may be desirable to hear them expeditiously. Subject to the cooperation of the petitioner, the competent authority will take a final decision on such SCN latest by 15-2-2018 - petition disposed off.
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2018 (6) TMI 1495
Rectification of Mistake - case of appellant is that the Tribunal has passed the Final Order without dealing with several contentions which were strongly submitted during the hearing - Held that:- It appears that the Tribunal sustained the impugned order passed by the lower Authority in toto and dismissed the appeals. It is also seen that the Final Order is not passed in limini or in any summary fashion. Detailed reasons have been given in the Final Order for each and every conclusion. ROM review of the appeal is not permissible.
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2018 (6) TMI 1494
Valuation of imported goods - Titanium Dioxide Anatase B101 - enhancement of value on the basis of contemporaneous import - Held that:- The Transaction value has been assessed by the lower authority on the ground that contemporaneous import of Chinese Origin Titanium Dioxide Anatase B 101 indicates the proper value. While assessing the value at US $ 1390 PMT he has taken into consideration the country of origin, Quantity of grade - when the revenue has taken the quantity of grade and country of origin into consideration for comparing contemporaneous import and thereafter reached to the conclusion and enhanced the assessable value - appeal dismissed - decided against appellant.
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2018 (6) TMI 1493
Lifting of attachment of Bank Account - the account have been frozen by Revenue without any demand being persisting against the appellant - Held that:- Revenue has to explain the reason why the bank accounts have been attached and whether there is any order against the appellant calling for such mode of recovery passed in the presence of appellant and hearing him. If so, how the enforceability of the order arose and in which proceeding to be informed to Tribunal - The Authority should also explain the initiation of the proceedings and its outcome in his reply. Such reply to reach Tribunal on 24-11-2017.
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FEMA
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2018 (6) TMI 1492
Powers of investigation in relation to the contraventions of the FEMA - Power to compound contravention - Power of Reserve Bank to compound contravention - Held that:- we are in agreement with the petitioner that if the Enforcement Directorate is of the view that the compounding proceedings relate to a serious contravention suspected of money laundering as in this case, then, this court is not prevented from seeking appropriate clarifications from the Enforcement Directorate with regard to presence or availability of material in its possession before it forms the view. In our opinion, the use of the word 'view' hardly makes any difference. Eventually, whether a view can be equated with an opinion or not in the light of the far reaching consequences, the Enforcement Directorate would have to satisfy this court that there is some material available with it, based on which, it communicated to the RBI its view as in this case of serious contravention suspected of money laundering. Thus, there is a broad agreement that this court, in exercise of its powers of judicial review, can seek such answers and clarifications from the Enforcement Directorate. Course adopted by the RBI and its remittance of the proceedings straight away to the adjudicating authority can be questioned by the applicant seeking compounding of the contravention under the FEMA, by making an application to the RBI. Thus, the applicant invoking the RBI's power of compounding can then approach a court of law and challenge both, the refusal or reluctance on the part of RBI to proceed further as also the Enforcement Directorate's communication or view to the aforesaid effect. If that is the constitutional safeguard and protection ensured to every aggrieved applicant, then, it is not necessary to declare the proviso unconstitutional. We agree with Mr. Dwarkadas that no interpretation which totally takes away the power to compound contravention vesting in the RBI be placed on the proviso. We must, on a harmonious and complete reading of the statutory scheme, together with the rules, hold as above and that would ensure that the contravention can be compounded by resort to section 15 and the requisite rules by the RBI. It is only when a situation of the above nature is faced, then, the applicant seeking compounding of the contravention may invoke the powers of judicial review to strike down the actions of the statutory authorities. In no case, the RBI can probe or question the sufficiency or adequacy of the materials regarding the view of the Enforcement Directorate, but must leave the matter to the applicant seeking compounding to workout his/her remedies. That is how we can ensure that the proviso does not become a weapon or tool of unbridled harassment nor will it allow the misuse of the power conferred in the Enforcement Directorate. It is precisely to rule out such exercise of power that we have allowed the view of the Enforcement Directorate to be tested in exercise of our powers of judicial review. It is a right at best to make an application seeking compounding of the contravention, but beyond that, the applicant cannot insist on an order of compounding contravention, as prayed by him, to be passed. The matter is left to the Compounding Authority's discretion and if that discretion is not exercised reasonably, the applicant has a legal remedy available to him/her to approach a court of competent jurisdiction questioning that action of the RBI. Hence, if the exercise of the right to seek compounding of the contravention is controlled and regulated by the statute, then, we cannot agree with Mr. Dwarkadas that the intervention as envisaged by the proviso is unconstitutional or ultra vires the parent Act. While upholding the constitutional validity and legality of the proviso, particularly by reading it in the manner noted above, we are in agreement with Mr.Dwarkadas that in the facts of this case, the RBI was not bound to put an end to the compounding proceedings. We are of the opinion that the compounding proceedings initiated vide the compounding applications of the petitioner and pending before the RBI should proceed, but strictly in accordance with law. Thus, the above discussion concludes this judgment. Rule is made absolute by quashing and setting aside the communication dated 1st December, 2017 and further directing the RBI to consider the compounding applications in accordance with law uninfluenced by the communication of the Enforcement Directorate dated 1st December, 2017 or any prior letters/communications, which are quashed and set aside by this judgment We also proceed to direct the RBI to render the necessary guidance to the petitioner in the matter of compounding of the contraventions under the FEMA. Since it was clearly stated before us by the RBI that it is presently inhibited in considering the compounding applications or proceeding to decide the same in view of the communication/letter of the Enforcement Directorate, then, as a result of quashing of the same, the RBI is free to proceed and decide the same.
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2018 (6) TMI 1491
Offence under FEMA - Person deemed to be guilty of contravention alleged against AEL. - Sh. Rajesh S. Adani resposibility for the conduct of business of AEL - Held that:- Letters and conduct goes to show that Sh. Rajesh S. Adani is covered u/s 42 of FEMA, 1999 being responsible for day to day affairs\business activities of AEL as Managing Director. All the aforesaid actions of Sh. Rajesh S. Adani justified the findings in the impugned order therefore it is held that the Adjudicating Authority is correct in holding that Sh. Rajesh S. Adani is the person incharge and responsible for the conduct of business of AEL and shall be deemed to be guilty of contravention alleged against AEL. Question of retrospective operation of section 13 of FEMA, 1999. Admittedly the present proceeding has been initiated after coming into force of FEMA, 1999 and various regulations there under. If the violations are proved then penal provisions have been provided under section 13 of FEMA, 1999. Therefore, question of retrospective operation of section 13 of FEMA, 1999 does not arise. Hence, we do not subscribe to the said contention of the appellants. Accordingly, this contention of the appellants are not legally valid hence rejected. The Adjudicating Authority in exercise of power u/s 13 of FEMA, 1999 has imposed consolidated penalty of ₹ 4, 00,00,000/- (Rupees Four Crore only) on AEL and a penalty of Rs, 1,00,00,000/- ( Rupees One Crore only) on Sh. Rajesh S. Adani in respect of the contraventions of the provisions section 6(3)(a) r/w the relevant Regulations. Further A sum of ₹ 10,00,000/- (Rs. Ten Lakhs only) has been imposed on AEL and a Penalty of ₹ 2, 50,000/- (Two Lakh Fifty thousand only) on Sh. Rajesh S. Adani for violation of provisions of Section 8 of FEMA,1999 r/w with relevant Regulations for non- repatriation of USD 2,71,293/-. Adjudicating Authority has imposed consolidated penalty on the ground stated in second para of the last but one page of the impugned order. The impugned judgment of the Securities appellate Tribunal has set a serious wrong precedent and the powers of the SENBI to impose penalty under Chapter VIA are severely curtailed against the plain language of the statute which mandatorily imposes penalties on the contravention of the Act/Regulations without any requirement of the contravention having been deliberated or contumacious. The impugned order sets the stage for various market players to violate statutory regulations with impunity and subsequently plead ignorance of law or lack of mens-rea to escape the imposition of penalty. The imputing mens rea into the provisions of Chapter VI A is against the plain language of the statute and frustrates entire purpose and object of introducing Chapter VI A to give teeth to the SEBI to secure strict compliance of the Act and the Regulation.’ The materials placed before us are very much clear that the AEL started the setting up of AGL, Mauritius, WOS of AEL with the permission of the RBI to carry on trading business in marine products, Agro based products, Plastics, PVC goods, Shoe polish etc. by virtue of RBI approval dt. 07.08.1996. The WOS at Mauritius started its operation in 1997 but instead of doing trading business as aforesaid it started investment by way of setting up of step down subsidiaries at Dubai and Singapore and in setting up a Joint Venture Company. The AEL had mis-declared about the non-pendency of investigation in the ODA form and also has not repatriated a sum of USD 2,71,293/- accrued to its WOS, Mauritius on liquidation of joint venture company namely Adani-Wilmar (Singapore) Pvt. Ltd. The intention of AEL was clear and deliberate leading to contravention of various provisions of law under FEMA,1999 and Regulations their under as held in earlier paragraphs. Taking into consideration the amount involved in the contravention, the consolidated penalties imposed on the appellants are confirmed even though it is on the lower side as there is no appeal filed by the ED challenging the quantum of penalties.
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Service Tax
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2018 (6) TMI 1519
Classification of services - deputation of certain qualified technical staff to joint venture companies for performing the assigned duties - whether to be classified under the head Manpower Recruitment or Supply Agency’s Service or otherwise? - Held that:- Identical issue decided in appellant own case M/S GAIL (INDIA) LTD. VERSUS CST, NEW DELHI [2017 (6) TMI 1232 - CESTAT NEW DELHI], where it was held that no tax liability arise for such activity under category “recruitment or supply of manpower” service. The Appellant cannot be put to tax liability under the category of 'Manpower Recruitment or Supply Agency's Service' for the activity now under dispute - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 1490
CENVAT Credit - various input services used in providing taxable and exempted output services - non-maintenance of separate records - Rule 6(3A) of Cenvat Credit Rules, 2004 - Held that:- The issue is covered by the judgment of Hon’ble Madras High Court in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS GOYAL PROTEINS LTD. [2014 (2) TMI 1321 - RAJASTHAN HIGH COURT], where it was held that the assessee, having accepted before the Tribunal to reverse the Cenvat credit as recorded by the Tribunal as regards reversal of the amount involved under such a situation, the High Court held that when the matter has been remanded back to the Adjudicating Authority to redetermine the credit in accordance with law there was no substantial question of law and accordingly dismissed the appeal of the Revenue. To ascertain the exact amount required to be reversed on the input services used in providing the exempted output services, the matter needs to be remanded to the adjudicating authority - appeal allowed by way of remand.
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2018 (6) TMI 1489
Sale or service - Commercial Training or Coaching Service - liability of service tax on sale of study material to students who did not attend the classes - case of appellant is that no Service Tax is liable to be paid since no service of coaching has been rendered and the study material has simply been sold - Held that:- Identical issue decided in the case of COMMISSIONER OF CENTRAL EXCISE & S.T., LUCKNOW VERSUS ANURAG MATHS CLASSES, ANIL CHEMISTRY CLASSES AND RAJESH PHYSICS CLASSES [2018 (4) TMI 114 - CESTAT ALLAHABAD], whee it was held that the benefit of Exemption N/N. 12/2003 dated 26/06/2003 will be available for the cost of study materials sold - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 1488
Commercial or industrial construction service - benefit of abatement under N/N. 1/2006-ST dated 01.03.2006 - receipt of free supply from the service recipient - Held that:- Identical issue decided in the case of M/S BHAYANA BUILDERS (P) LTD. & OTHERS VERSUS CST, DELHI & OTHERS [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)], where it was held that Value of free supplies by service recipient do not comprise the gross amount charged under Notification No. 15/2004-ST, including the Explanation thereto as introduced by N/N. 4/2005-ST. - benefit of abatement cannot be denied - appeal dismissed - decided against Revenue.
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2018 (6) TMI 1487
Refund of service tax paid which is otherwise exempted - Rejection on the ground that the same is filed beyond the period of limitation u/s 11B of CEA - Held that:- Identical/similar facts arose in the case of Parijat Construction before the Hon’ble High Court of Bombay, [2017 (10) TMI 659 - BOMBAY HIGH COURT], where the petitioner-appellant therein had filed refund claim beyond the period of one year on noticing that they are not supposed to pay service tax liability, the view of the Tribunal that provision of Section 11B of Central Excise Act, 1944 would be attracted was set aside by Lordships - following the same, the refund allowed in present case also - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 1486
Penalty u/s 78 - payment of service tax liability on being pointed out - Manpower Recruitment and Supply Agency Services - ground taken by appellant is being an illiterate person and located in a rural area and was not aware the liability to service tax during the period - Held that:- The service tax liability on “Manpower Recruitment and Supply Agency Services” was introduced from 16.06.2005 and the issue was very much confusing and it is possible that the appellant from rural area may not have access to an expert advice regarding on taxability of services - the appellant has put forth justifiable reason for invoking the provision of Section 80 of the Finance Act, 1994 - penalty set aside - appeal allowed - decided in favor of appellant.
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Central Excise
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2018 (6) TMI 1485
Demand of Interest and Penalty - Section 15(4) of the Oil Industry (Development) Act, 1974 - failure to pay cess on due dates during the period from April, 2002 to June, 2003 - Held that:- Section 15(4) does not provide for payment of interest. Therefore, in the absence of any substantive provision in the Oil Industry (Development) Act, 1974, which obliges the respondent to pay interest on delayed payment of cess, the Tribunal has rightly dismissed the appellant’s appeal - appeal dismissed - decided against Revenue.
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2018 (6) TMI 1484
Clandestine removal - demand based on third party evidences - the entire case of the Revenue is based upon the records recovered from M/s Monu Steels and based upon the statement of the representative of M/s Monu Steels as also the appellant’s Director - Held that:- The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established - the findings of clandestine removal cannot be upheld based upon the third party documents, unless there is clinching evidence of clandestine manufacture and removal of the goods. Demand set aside - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 1483
Clandestine removal - demand based on consumption of electricity - absence of corroborative evidences - Held that:- There is no evidence produced by the Revenue to show that the appellants were indulging in clandestine activities. No efforts have been made by the Revenue to show that the entries in the records of M/s. Manu Steels related to actual transportation and supply of raw material to the appellant - demand not sustainable - appeal allowed - decided in favor of appellant.
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2018 (6) TMI 1482
Demand of Interest and penalty - confirmation of recovery of CENVAT Credit - Invocation of Rule 14 of CENVAT Credit Rules, 2004 which requires that CENVAT credit should have been taken and utilised for invoking the liability provisions under section 11AB of the Central Excise Act, 1944 - Held that:- Reference to section 11A is limited to the extent that CENVAT credit was recoverable whereas in the present instance CENVAT credit has been reversed and the interest liability would arise only on invoking section 11AA. Considering the legal position, interest liability does not arise. Imposition of penalty - Held that:- Imposition of penalty is independent to rule 14 of CENVAT Credit Rules, 2004 and rule 15 for invoking the liability to penalty under section 11AC of Central Excise Act, 1944, the ingredients specifically mentioned therein must exist - From a perusal of the show cause notice, it is seen that there is no allegation to that effect - penalty not sustainable. Appeal allowed - decided in favor of appellant.
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2018 (6) TMI 1481
CENVAT Credit - Commission given to the commission agent - the impugned order is passed on presumption that the commission agent may not have paid the service tax liability to the Govt. exchequer - Held that:- It is well settled law that if the service tax liability is discharged by the service provider and if the services are eligible for availment of CENVAT Credit, Credit cannot be denied at the recipient, end more so, only on a presumptive ground that there is no evidence that service tax was credited to the Govt. exchequer - credit allowed - appeal allowed - decided in favor of appelalnt.
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2018 (6) TMI 1480
Equivalent penalty u/s 11AC of the CEA and also u/r 13 of CCR 2004 - failure to pay an amount equal to 8% of the total value of exempted final goods having manufactured by availing CENVAT credit of service tax of duty / tax paid on ‘input services’ and ‘inputs’ and also an amount of Central Excise duty paid on the scrap generated at jobworkers premises - Held that:- The provision of Section 11AC of the Central Excise Act, 1944 and Rule 13 of Central Excise Rules, 2002 were not made applicable to the demands raised for reversal of an amount equivalent to 8% of the value of the exempted goods cleared when CENVAT Credit is availed on common inputs and input services - This position of law has not been appreciated by both the lower authorities. In absence of any provision in the statute, in my opinion, imposition of penalty equivalent to the amount cannot be upheld - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2018 (6) TMI 1479
Principles of Natural Justice - de-oiled rice bran - exemption from turnover tax - the revisional authority has not held any enquiry in the matter and rejected the said contention of the assessee by observing that the evidence was not produced by the assessee - Held that:- There is no cogent reason assigned by the learned revisional authority for not looking into the said aspect. By making a bald observation; the evidence was not produced by the assessee before the said authority, we are of the opinion that revisional authority could have very well summoned the record of the assessing authority as well as the appellate authority below and looked into that aspect of the matter to arrive at the correct finding - appeal allowed by way of remand.
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