Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 27, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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GST slab of 28% may become virtual "hollow shell" in year or so, says CEA
Income Tax
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Nature of expenditure - payment made to sub-tenant - In fact, through the negotiation the assessee acquired some kind of an enduring right of possession over the occupied area of the said premises surrendered to them by those occupants. It had the incidents of permanence - the expenditure was capital in nature.
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Nature of land sold - the decision to treat the transferred property as agricultural land is against law and facts, especially since the assessee has not established that the land in his possession and sold by him was an agricultural land put to use for agricultural purposes - decision of ITAT reversed.
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TDS u/s 195 - The assessee is not liable to deduct tax under the provisions of section 195 of the I.T. Act on account of foreign agency commission paid outside India for promotion of export sales outside India.
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TDS u/s 194H - prepaid connections - Distributor is merely a link between assessee and ultimate consumer / subscriber and distributor can at best enforce obligation on the part of assessee to provide connection / talk-time to subscriber which itself would not change the characteristic of transaction from ‘principal to agent’ to ‘principal to principal’. - Demand confirmed.
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Addition towards undisclosed income being write back of redeemable non cumulative preference shares - write back of preference share capital cannot be taxed u/s 28(iv) of the Income-tax Act, 1961.
Indian Laws
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Extension of Due Date for filing of Income Tax Returns - from 31st July, 2018 to 31st August, 2018
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Dishonor of cheque due to insufficiency of funds - Section 138 of the Negotiable Instruments Act, 1881 - The petitioners are not stated to be signatories to the cheques in question. They cannot be roped in merely because they have been directors of the company accused.
Service Tax
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Demand of Interest u/s 75 - There can be no dispute that interest on the service tax short paid and paid subsequently either on own volition or on being pointed out by the department, is required to be paid and if not paid suitable action for the recovery of the interest needs to be initiated against the defaulting entity.
Central Excise
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Manufacture - process of cleaning of scrap rubber to crumb rubber - segregation of different types of rubber produced naturally - The conversion of scrap rubber into rubber powder does not amount to manufacture.
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Transfer of CENVAT Credit to other unit - Rule 10 of CCR - The documents evidencing the physical movement of such goods to the Manda Unit also have been submitted - Denial of transfer of credit not justified
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This is a case where entire quantification of demand is based on the statements of the purchaser the request for cross examination of the persons tendering the statements should have been allowed, in case the same is not allowed or possible, at least reasons thereof should have been recorded.
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Valuation - Job work - In one hand appellant was otherwise entitle for the manufacture and clearance the goods without payment of duty under Rule 4(5)(a) and if at all duty is payable the same is available as Cenvat credit to the BPCL and HPCL, therefore entire case is of revenue neutral - demand set aside.
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CENVAT credit - Duty paying documents - If the appellant were entitled to take credit on their inputs on the strength of the original invoices issued by the supplier, they can validly claim to be entitled to take cenvat credit of the additional amounts of duty paid on the same goods by the supplier under the supplementary invoices
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CENVAT Credit - reversal of input services - removal of inputs as such - There is no provision to reverse credit of service tax availed in relation to such inputs or capital goods when removed from the factory.
Case Laws:
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GST
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2018 (7) TMI 1638
Classification of Demo Cars - whether the sale of 'demo cars' will fall under Rule 32(5) of the GST Rules, 2017? - The applicant seeks permission to withdraw the above application - Held that:- The application seeking advance Ruling is hereby dismissed as withdrawn.
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2018 (7) TMI 1637
Appeal of order - Held that:- Since the petitioner has been pursuing the matter before this Court, it is directed that if petitioner files the statutory appeal within one month, the Appellate Authority shall consider and decide the same on merits - petition disposed off.
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2018 (7) TMI 1636
Availability of alternative remedy of appeal - invocation of Bank Guarantee - Held that:- In terms of Section 107 of the Act, read with Rule 108 of the Goods and Services Tax Rules, to appeal, the petitioner has three months' time from the date of Ext.P8 impugned order. The 7th respondent is the appellate authority - Because the petitioner has three months' time to appeal, it may be inequitable for the authority to invoke the bank guarantee before the petitioner could exhaust its appeal remedy-within the period of limitation, though. The respondent will not invoke the bank guarantee for three months - petition disposed off.
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2018 (7) TMI 1635
GST on lotteries - Validity of Notifications issued by the State of Goa - seeking deletion of the State of Goa as a party Respondent - distinction between lotteries run by the State Government and the lotteries authorized by the State Government - Petitioners are aggrieved by not only impugned notification issued by State of Goa under the GGST Act, 2017 but also by the act of the Centre of issuing the impugned notifications under the CGST Act, 2017 as well as the IGST Act, 2017 which seeks to levy Goods and Services Tax on lotteries organized, promoted and conducted by the State of Sikkim. Held that:- It is not the actual incidence of GST under the GGST Act, 2017 which are impugned in the present Writ Petitions but the provisions of law made by the Parliament as well as the respective State Governments including the State of Goa by which it seeks to levy GST on lotteries. A part of the cause of action for the present Writ Petition having arisen within the jurisdiction of this Court coupled with the fact that the said Writ Petitions WP(C) No. 36/2017 and WP(C) No.38/2017 having been filed prior in time before this Court to the Writ Petition filed by Serenity Trades Private Limited in WP(C) No.759/2017 in the High Court of Bombay at Goa and WP(C) No.59/2017 is being heard together with the said two Writ Petitions this Court is of the view that the aforesaid applications filed in the aforesaid Writ Petitions for deletion of State of Goa from the array of Respondents in the said Writ Petitions are liable to be dismissed. Applications dismissed - The State of Goa may file the counter affidavit, if they desire to do so.
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Income Tax
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2018 (7) TMI 1639
Revision u/s 263 - CIT found fault with the assessment order in respect to assessee’s claim for deduction u/s. 80IE of the Act, computation of tax liability u/s. 115JB and payment of tax u/s. 115O - Held that:- As the issues which has been set aside by the Ld. Pr. CIT for fresh adjudication of AO vide impugned order dated 30.03.2017 has already merged with the order of the Ld. CIT(A) so, the Ld. Pr. CIT lacks jurisdiction to interfere with the order on the issues that has already merged with the order of the Ld. CIT(A) dated 20.07.2016. Coming to AY 2012-13. We note that all the three identical issues discussed above which has been remitted by the Ld. Pr. CIT has been taken cognizance by the Ld. CIT(A) in the regular appeal preferred by the assessee well before the Ld. CIT issued the SCN conveying his desire to invoke revisional jurisdiction u/s. 263 of the Act, therefore, as per the clause (c) to Explanation (1) of sec. 263 the subject matters of all the three issues was already under appeal before the Ld. CIT(A) and, therefore, the Ld. CIT does not enjoy revisional jurisdiction u/s. 263 to interfere on these issues which is under appeal before the Ld. CIT (A). Therefore, we find merit in the appeal of the assessee and we quash both the impugned orders of the ld. Pr. CIT. Thus, both the appeals of the assessee are allowed.
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2018 (7) TMI 1631
Nature of expenditure - expenditure made by the appellant to the sub-tenant inducted by it in an earlier year for resuming the sub-tenanted portion of Wallace House for its own business use - revenue or capital - Held that:- The principles are plain that when one is examining an expenditure in connection with property, one has to see what is the dominant purpose of making this expenditure. If it results in acquisition of any right to property, whether free hold, lease hold or a mere right to possession, having some kind of permanence and of enduring nature the expenditure is capital. But if the expenditure is pre-dominantly for expansion of business although it results in acquisition of some capital, then the business purpose of the expenditure is paramount. The expenditure has to be taken as revenue. In the present case, it is just not established how the business of the assessee was perceived to grow out of the property acquired by them by negotiating the eviction of the said occupants. In fact, through the negotiation the assessee acquired some kind of an enduring right of possession over the occupied area of the said premises surrendered to them by those occupants. It had the incidents of permanence. In those circumstances we agree with the revenue that the expenditure was capital in nature.- decided against assessee
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2018 (7) TMI 1630
Deduction u/s 10A computation - Whether reimbursement of expenses obtained by the assessee for services rendered outside the country has to be excluded from the total turnover, since it stands excluded from the export turnover? - Held that:- The issue is no longer res integra and is covered by the decision of the Hon'ble Supreme Court in CIT v. HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT] as held if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software under section 10A of the Income-tax Act are allowed only in export turnover but not from the total turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the respondent which could have never been the intention of the Legislature. - Decided in favour of assessee
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2018 (7) TMI 1629
Stay of demand - recovery proceedings - Held that:- Fix a lumpsum amount to be paid by the petitioner in installments and thereafter permit the petitioner to prosecute the appeal pending before the CITA. This court is of the view that if the petitioner is permitted to file another fresh stay application before the CITA, it will unnecessarily result in another round of litigation, which will have impact in disposal of the appeal. Therefore this court deems it fit to fix an amount of ₹ 35,00,00,000/- (Rupees Thirty Five Crores only) to be paid by the petitioner company in 12 equal monthly installments as a condition to stay the recovery proceedings and keep it in abeyance till the disposal of the appeal pending before the CIT-A.
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2018 (7) TMI 1628
Denying deduction u/s. 80HHC - reducing the export profit for the year by amount of brought forward unabsorbed depreciation and unabsorbed losses - Held that:- This issue stands concluded against the appellant-assessee and in favour of the respondent-Revenue by the decision of the Apex Court in IPCA Laboratory Ltd. vs. Deputy Commissioner of Income-Tax [2004 (3) TMI 9 - SUPREME COURT]. Computing book profit u/s 115JB - whether appellant is entitled to reduce the net profit as per Profit and loss Account by the profit eligible for deduction u/s. 80HHC computed with reference to book profit (after adjustments) as per explanation (iv) to section 115JB? - Held that:- This issue is no longer resintegra as it stands concluded in favour of the appellant-assessee by the decision of the Apex Court in Commissioner of Income-Tax V/s. Bhari Information Technology Systems P. Ltd, [2011 (10) TMI 19 - SUPREME COURT OF INDIA] Computing book profit u/s. 115JB the deduction should be of 100% of the amount calculated u/s. 80HHC(3)- Held that:- This issue is also no longer res-integra. This is so as it stands concluded by the decision of the Apex Court in Ajanta Pharma Ltd. vs. CIT [2010 (9) TMI 8 - SUPREME COURT] in favour of the appellant-assessee and against the Respondent-Revenue. Levy of interest u/s. 234B, 234C and 234D on income taxes payable on the deemed income u/s. 115JB - Held that:- his issue stands concluded against the appellant-assessee and in favour of the respondent-Revenue. This, by the decision of this Court in Joint Commissioner of Income-Tax v. Rolta India Ltd. [2011 (1) TMI 5 - SUPREME COURT OF INDIA]
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2018 (7) TMI 1627
Entitled to deduction under Section 80IA - interest on fixed deposits in the bank - Held that:- In view of the difference in language of the two Sections, this Court held that interest on fixed deposits in the bank would be profits and gains derived from any business of an industrial undertaking. The same reasoning would apply to extend deductions under Section 80IA of the Act for the compensation received for non supply of spare parts. Thus, the issue stands concluded in favour of the appellant assessee by the decision of this Court in Jagdishprasad M. Joshi (2008 (11) TMI 326 - BOMBAY HIGH COURT). - Decided in favour of assessee
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2018 (7) TMI 1626
Entitled to benefit of Section 80IB(10) - whether Tribunal justified in failing to appreciate that it had remanded the issue back to the file of the AO to reconsider the matter afresh and therefore the AO was justified in adjudicating whether the Assessee was entitled to the deduction ? - Held that:- Observations of the Tribunal in the context of the present facts are unexceptional. The officers of the Revenue cannot defy directions of the Tribunal and agitate new issues which result in unnecessary harassment and inconvenience to taxpayers. The Assessing Officer was bound by the directions given in the first order dated 29.10.2010 of the Tribunal. The Assessing Officer was obliged to strictly follow directions and decide issues as directed by the Tribunal. It is not open to the Assessing Officer to rake up new issues which were never the subject matter of the controversy in the first round of litigation and ignore the directions of the Tribunal to examine claim of the Respondent in respect of two issues. Thus, in these facts, we see no reason to entertain this Appeal. It may also be pointed out that Mr. Pinto the learned Counsel for the Revenue very fairly states that the dispute on merits stands concluded in favour of the Assessee and against the Appellant-Revenue. This by the decisions of this Court in CIT v. Happy Home Enterprises [2014 (9) TMI 707 - BOMBAY HIGH COURT] and CIT v. Sarkar Builders [2015 (5) TMI 555 - SUPREME COURT]. Thus, in these facts entire exercise of preferring these appeals would be academic. No substantial question of law.
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2018 (7) TMI 1625
Stay of demand - recovery proceedings - respondent has directed the Assessee to pay 20% of the tax demanded on or before 26.03.2018 and if such condition is complied, the collection of remaining 80% of the tax will remain stayed - Held that:- Instruction issued by the Board are illustrative and not exhaustive. The instruction itself was issued to bring about uniformity in the manner in which the stay petitions have to be dealt with by the Assessing Officers. Even in the said instruction, discretion has been given to the Assessing Officer to impose conditions which are just and proper. Therefore, to state that CBDT instruction does not cover facts and circumstances like the assessee's case is incorrect way of interpreting the issue which has arisen for consideration before the second respondent. In the light of the above discussion, this Court is of the view that the impugned order calls for interference. However, since the appeals are pending before CIT (A) and as admitted by the second respondent that the case as canvassed by the petitioner has to be dealt with by the CIT (A) on the merits of the additions made by the Assessing Officer, with a view to avoid double exercise, I propose to pass the following order, while setting aside the impugned order. Writ petition is allowed and the impugned order is set aside with a direction to the petitioner to file a stay petition before Commissioner of Income Tax (Appeals) within a period of one week from the date of receipt of a copy of this order. On receipt of the stay petition, the Commissioner of Income Tax (Appeals) is directed to afford an opportunity of personal hearing to the authorized representative of the Assessee and pass orders on the stay petition on merits and in accordance with law. It is made clear that this Court has not rendered any finding on merits of the assessment.
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2018 (7) TMI 1624
Condonation of delay - delay of 435 days - reasonable cause - Held that:- The explanation offered by the Applicant herein clearly reveals that the Assessee on receipt of the impugned order did not exercise due care and diligence. It appears that the impugned order of the Tribunal was accepted and only upon the service of prosecution notice this exercise of filing the appeal was triggered. The explanation offered does not inspire confidence. It is undisputed that the order of the Tribunal dated 8th July, 2016 was served/ received by the Appellant on 14th September, 2016 and the explanation for the delay that the Director came to know of the order of the Tribunal only on December, 2017 does not appear in the above facts a bona fide explanation. No reason to condone the delay of 435 days in filing the Appeal
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2018 (7) TMI 1623
Recovery proceedings - power conferred on the Tax Recovery Officer - attachment orders - Held that:- In the instant case, the respondent has issued the impugned notice and the petitioner has straightaway approached this Court and filed this writ petition. In my considered view, this writ petition is not the proper remedy, which the petitioner should have availed. In this regard, it is relevant to point out that the 2nd Schedule to the Income Tax Act contains the procedure for recovery of tax. The procedure for such investigation and the manner in which the proceedings to be conducted are enumerated under Rule 11 of the said Rules. Therefore, if the petitioner's claim is that the property is not liable for such attachment, then the petitioner has to make a claim before the Tax Recovery Officer and for such reason, the petitioner could not have approached this Court invoking the jurisdiction under Article 226 of the Constitution of India. Therefore, the Court holds that the writ petition is not maintainable. However, considering the fact that the Income Tax Act and Rules framed thereunder, especially Rule 11 under the 2nd Schedule, provides for a remedy to the assessee, the petitioner is at liberty to avail such a remedy. Writ petition is dismissed 'as not maintainable' with a direction to the petitioner to file a claim before the respondent in terms of Rule 11(1) of the 2nd Schedule to the Income Tax act within a period of four weeks from the date of receipt of a copy of this order.
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2018 (7) TMI 1622
Treating the interest income received on mobilisation advance to the contractors as revenue income - the said interest income was adjusted in the final bills of the contractor and resulted in reduction of the cost of construction - Held that:- The advances, which the assessee made to the contractors to facilitate the construction activity of putting together a very large project was “as much to ensure that the work of the contractors proceeded without any financial hitch as to help the contractors”. These facilities were found to be intrinsically connected with the construction of the steel plant. They were found to be rightly held as capital receipts and not income of the assessee from any independent source. Respectfully following the decision of Bokaro Steel Ltd.[1998 (12) TMI 4 - SUPREME COURT] we answer the questions of law in favour of the assessee and against the revenue.
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2018 (7) TMI 1621
Nature of land sold - Capital asset or agricultural land - Held that:- On the question of law framed as (i), we find that the decision to treat the transferred property as agricultural land is against law and facts, especially since the assessee has not established that the land in his possession and sold by him was an agricultural land put to use for agricultural purposes. There could not have been any reliance placed on the certificate issued by the Village Officer and it did not raise a valid presumption in favour of the assessee. The reliance so placed was also against the binding precedent in Asha George. The second question of law framed is also answered against the assessee and in favour of the Revenue. The third question of law is on facts and the report of the Inspector as relied on by the AO spoke of two factory buildings in the adjacent property. We do not find any relevance to that fact. The orders of the first appellate authority and the Tribunal are set aside.
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2018 (7) TMI 1620
TDS u/s 195 - Addition on account of non-deduction of TDS u/s 40(a) (ia) on Contract Payment and Commission - Held that:- The Hon'ble Delhi High Court in the case of EON Technology P. Ltd. (2011 (11) TMI 20 - DELHI HIGH COURT) has also taken similar view where it has been held that non-resident commission agents based outside India rendering services of procuring orders cannot be said to have a business connection in India and the commission payments to them cannot be said to have been either accrued or arisen in India. The assessee is not liable to deduct tax under the provisions of section 195 of the I.T. Act on account of foreign agency commission paid outside India for promotion of export sales outside India. Accordingly, the order of the CIT(A) is set-aside and the grounds raised by the assessee are allowed
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2018 (7) TMI 1619
Sale of land and flats - nature of income - "income from capital gains" OR "income from business" - Held that:- Even though the partnership firm was formed 05.04.2005 and the land was registered in the name of the firm on 23.05.2005, the assessee has not commenced any business activities; no other land appears to have been purchased; no supplementary work was carried on by the assessee-firm in the subject land; no organized effort was made other than simply entering into Memorandum of Understanding with the builder. As all risks and rights relating to construction of building were vested with the builder and the assessee has not taken any risk in the construction and development of flats, this Tribunal is of the considered opinion that the profit on sale of the land in the hands of the assessee-firm cannot be treated differently than as it was treated in the case of Mrs. Saroj Agarwal. This Tribunal is of the considered opinion that the profit on sale of land has to be necessarily assessed as capital gain and not as business income
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2018 (7) TMI 1618
Grant of registration u/s 12AA denied - President and the Managing Trustee were to be chosen from the two families viz. family of late Shri Moti Ram Ghiraiya and late Shri Lala Dhanik Ram Ghiraiya and as per the Ld. C.I.T. (E), this was in the nature of revocable transfer which was not permissible in view of section 63 - Held that:- In the case of Smt. Mansukhi Devi Bihani Jan Hitkari Trust [2004 (2) TMI 302 - ITAT JODHPUR] it has been held that the Trust could not be denied registration u/s 12AA of the Act merely on the ground that the Board of trustees was to be constituted of family members. As we have already noted, the Ld. Commissioner of Income Tax (E) has not examined the assessee’s application for registration in light of the genuineness of the objects of the Trust. Accordingly, we deem it fit to restore the issue to the file of the Ld. C.I.T. (E) with a direction to re-examine and reconsider the assessee’s application for registration after duly examining the objects of the assessee trust and also after duly considering the order above - decided in favour of assessee for statistical purposes.
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2018 (7) TMI 1617
Reopening of assessment - addition u/s 68 - non independent application of mind by AO - borrowed knowledge - Held that:- AO has merely relied on the report of the investigation wing but it is apparent that he has not applied his mind to the materials which were before him. In our view, without forming a prima facie opinion only on the basis of the report of the Investigation Wing of the Income Tax Department, it was not legal for the AO to have simply concluded that he has reason to believe that income chargeable to tax has escaped assessment. Unless the basic jurisdictional requirement is satisfied, a post mortem exercise of analysing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity. In the circumstances and respectfully following the judgment of the Hon’ble High Court of Delhi in the case of Pr. Commissioner of Income Tax-4 vs. G&G Pharma India Ltd. (2015 (10) TMI 754 - DELHI HIGH COURT) we hold that the reopening of the case of the assessee for the assessment year is bad in law. In the circumstances, we quash the reassessment proceedings. - decided in favour of assessee
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2018 (7) TMI 1616
Penalty imposed u/s 271(1)(c) - unexplained cash - as per assessee the permission sought by AO was from Addl. Commissioner which was not as per law as the permission sought must have been from the Joint Commissioner - Held that:- The definition of Joint Commissioner clearly provides that wherever the word Joint Commissioner used in Income Tax Act, it means a person appointed to be a Joint Commissioner of Income Tax or Additional Commissioner of Income Tax under sub-Section (1) of Section 117 of the Act. Section 117 of the Act provides that the Central Government may appoint such persons as it thinks fit to be income tax authorities. Thus, in our considered view, the approval given by the Additional Commissioner is as per the scheme of law and there is no illegality. For unexplained cash the appellant has not given confirmation of the persons who are said to have given the cash, in spite of numerous opportunities having been given. Also, the appellant has not been able to produce the persons who are said to have given this cash. Also, no evidences, in the form of cash book, bank book, bank statement etc, showing the source of this cash in hands of the persons giving the cash were produced or submitted. The appellant has submitted Xerox copies of cash receipts but these receipts contained only the signature of the appellant and not of the buyers / persons said to have given cash. Furthermore, these receipts also do not contain the dates on which this cash was received. The appellant has filed a copy of the FIR filed by the buyers / person said to have given cash which states that the buyers have given a sum of ₹ 3, 51, 00, 000/- by cheque and cash. In this FIR, the amount of cash given or the date on which this cash was given, has not been mentioned. It is also not clear from the FIR whether the cash given is substantial or is merely a token amount. The above discussion would show that the appellant has not been able to substantiate his explanation. - Decided against assessee
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2018 (7) TMI 1615
Usurpation of jurisdiction of Pr. C.I.T. u/s 263 - interference in the order passed by Assessing Officer u/s 143(3) by CIT-A - G.P. rate determination by AO - Held that:- AO has discharged his duty as an investigator as well as that of an adjudicator and has applied his mind on the issue before him and taking into consideration the explanation rendered by the assessee, has taken a reasonable and plausible decision to impose gross profit rate of 3.5% and also making ad hoc addition of ₹ 50,00,000/- on the undisclosed sales and has made the addition of ₹ 40,50,672/-., which decision is in line with the ratio laid in President Industries Ltd. [1999 (4) TMI 8 - GUJARAT HIGH COURT]and Tribunal’s decision in India Seed [2000 (1) TMI 146 - ITAT DELHI-B]. Therefore, the order of AO cannot be termed as unsustainable in law. Therefore the jurisdictional fact for usurping the jurisdiction is absent and the action of Ld. Pr. CIT is without jurisdiction and all subsequent action is ‘null’ in the eyes of law. Therefore, we are inclined to quash the order impugned before us. - Decided in favour of assessee
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2018 (7) TMI 1614
Adjustment of Transfer Pricing - determine the Arms Length Price (ALP) on account of reimbursement of personnel costs - FTS - income of the recipient chargeable under the head ‘salary’ in view of the expenses - Held that:- The payment in question being reimbursement of salary is not fee for technical services in the light of relevant provisions of the Act and India-Singapore DTAA. Further, there is no dispute that the assessee has made payment towards the reimbursement of salary expenditure, which clearly shows that there is no element of profit in the said payment. The agreement clearly supports this fact. Even otherwise, the entire amount of salary received by Shri Vineet Nagrani, has been subjected to tax in India and there is no dispute on this. Accordingly, we are of the view that it cannot be taxed in the hands of the assessee. Accordingly, this main issue is decided in favour of assessee. As regards to other alternative issues, we need not to adjudicate as we have decided the main issue in favour of assessee.
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2018 (7) TMI 1613
Claim of exemption u/s 11(1)(a) - educational activity - Held that:- Respectfully following the decision of the Division Bench of the Tribunal in the case of Aadarsh Public School [2018 (2) TMI 1692 - ITAT DELHI], it is held that the findings of CIT(A) are not in accordance with law and his action of denial of benefit of section 11 and 12 is reversed and it is further held that educational activity has been specifically treated as charitable purpose u/s 2(15) and I do not uphold the finding of Ld. CIT(A) that charging of fee would amount to uncharitable activity. It is further held that judgments referred by Ld. CIT(A) have not been interpreted correctly and have been interpreted out of context. Fee charged from the students has been applied for the purpose of carrying out charitable activity. Reverse the finding of Ld. CIT(A) that income by way of fee cannot be held to be derived from property held under trust. I also do not approve the order of Ld. CIT(A) that the entire receipts are liable to be taxed under the head income from other source in this case and this finding given by CIT(A) is set aside and it is directed that the Ld. A.O. should grant exemption u/s 11 and section 12 to the appellant as per the income & expenditure account submitted by the assessee. CIT(A) passed in this case for the above stated reasons is reversed and thus, enhancement of income made by him at ₹ 2,61,15,153/- is hereby set aside and addition made by him is hereby deleted. Accordingly, all these grounds stand allowed.
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2018 (7) TMI 1612
TDS u/s 194H - not deducting tax at source in the case of commission payments made to its distributors on prepaid connections - Held that:- Though distributor commits assessee to subscribers and exercise his authority to ensure arranging connection to subscriber, it will not alter the situation since the overall context in which such power is given to distributor has to be looked into in the circumstances of the case and the role of distributor can only be said to be a middleman between service provider on one hand (assessee herein) and ultimate consumer on the other hand. Distributor is merely a link between assessee and ultimate consumer / subscriber and distributor can at best enforce obligation on the part of assessee to provide connection / talk-time to subscriber which itself would not change the characteristic of transaction from ‘principal to agent’ to ‘principal to principal’. We therefore hold that the order passed by Assessing Officer, as confirmed by Ld CIT (A), by holding that assessee is a defaulter u/s 201(1) and consequently liable to pay interest u/s 201(1A) is in accordance with law. See VODAFONE MOBILE SERVICES LIMITED (FORMERLY KNOWN AS VODAFONE SOUTH LIMITED) VERSUS DCIT- (TDS) , CIRCLE-15 (2) , ADDL. CIT (TDS) , RANGE-2, HYDERABAD [2017 (10) TMI 380 - ITAT HYDERABAD] - Decided against assessee
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2018 (7) TMI 1611
Slump sale - entire sale consideration was taken as income of the impugned assessment year - Held that:- Release of the amount lying in the escrow account is subject to issue of a letter from seller and purchaser to the escrow agent. No doubt, release of the escrow amount, is dependent on satisfaction of various responsibilities undertaken by the assessee in relation to the slump sale. However, in our opinion, this by itself would not be a reason to hold that consideration for the slump sale was not ₹ 18,31,00,000/-. Consideration is clearly mentioned in the slump sale agreement as ₹ 18,31,00,000/-. Segregating such consideration to two parts, one part payable in the relevant previous year and other part payable in the next year could not be in our opinion to a reason to say that capital gains arose only with reference to first part, even though release of the second part was subject to the seller abiding by certain conditions of the slump sale agreement. What is chargeable to tax is profits or gains arising from the slump sale. Profits or gains arising from a slump sale can be correctly computed only if the total consideration arising to an assessee on account of sale is reckoned. There is no provision which allows the assessee to segregate the consideration as per slump sale agreement in accordance with the year of receipt. - Decided against assessee Allowance of expenditure restricted - Held that:- Admittedly, assessee had transferred its business on 06.04.2011 in a slump sale. Even if we accept that it was necessary for the assessee to incur some expenditure for maintaining its corporate status, we cannot understand why assessee incurred manufacturing expenses. The table reproduced by us clearly indicate that assessee incurred manufacturing expenses of ₹ 2,84,847/-. At the best, assessee would be eligible for 6/365 of the manufacturing expenditure of ₹ 2,84,847/-, since it transferred its business on 06.04.2011. This works out to ₹ 4,683/-. However, assessee’s claim with regard to employee benefits, finance costs and administrative and other expenses ought not have been disallowed since these were necessary to maintain its corporate status. Therefore out of the total claim of ₹ 10,41,749/-, we direct the ld. Assessing Officer to allow ₹ 7,61,585/-. Balance of the disallowance is sustained. Ground of the assessee is partly allowed.
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2018 (7) TMI 1610
Addition towards undisclosed income being write back of redeemable non cumulative preference shares - addition on the basis of admission of the assessee during the course of search - Held that:- In this case, facts are identical to the case already considered by the co-ordinate bench in the case of Nalwa Chrome Pvt Ltd. [2017 (3) TMI 820 - ITAT MUMBAI] . The AO has made addition towards redeemable non cumulative preference shares u/s 28(iv) of the Income-tax Act, 1961. Since, the co-ordinate bench has already taken a view that share capital receipt cannot be taxed either u/s 28(iv) or 41(1) of the Act. Therefore, being consistent with the view taken by the co-ordinate bench, we are of the considered view that write back of preference share capital cannot be taxed u/s 28(iv) of the Income-tax Act, 1961. The Ld.CIT(A), after considering relevant facts has rightly deleted addition made by the AO. We do not find any error in the order of the CIT(A). Hence, we are inclined to uphold the findings of CIT(A) and dismiss the appeal filed by the revenue.
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2018 (7) TMI 1584
Disallowance u/s.14A - Tribunal deleted addition relying on judgment in case of Commissioner of Income tax Ahmedabad IV v. Banaskantha Dist. Co. Op. Milk Producers' Union Ltd [2014 (5) TMI 12 - GUJARAT HIGH COURT] confirming the decision of the Tribunal - Held that:- SLP dismissed..
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2018 (7) TMI 1583
Trading addition - rejection of books of accounts - Held that:- Learned Additional Solicitor General seeks leave to withdraw this petition in view of a recent circular of 11th July, 2018. The special leave petition is dismissed as withdrawn.
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2018 (7) TMI 1567
Stay of recovery of the tax payable subject to payment of instalments of ₹ 2.50 Crores per month, of which, the first instalment was to be paid on or before 15.06.2018 and the subsequent instalments on or before 15th of every subsequent month. Income Tax Appellate Tribunal has also directed that if the Revenue seeks adjournment on any ground, the Assessee is entitled to get a blanket stay. Held that:- Considering that the principal tax amount claimed is in the region of ₹ 69.00 Crores and odd, we do not deem it appropriate to interfere with the order except to direct that the Income Tax Appellate Tribunal shall hear and dispose of the appeal within six months from date.
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2018 (7) TMI 1566
Deduction u/s.80P(2)(a)(i) & Section 80P(2)(d) - Interest and dividend income received from the Banaskantha Dist.Central Co-operative Bank Ltd. - Held that:- Taking into consideration the entire facts of the matter and the decision cited by the Ld. AR, we are of the considered view that the assessee is entitled to deduction u/s.80(2)(a)(i) & 80P(2)(d) of ₹ 22,52,868/- & ₹ 4,44,200/- being interest and dividend income respectively derived from the deposits with the Banaskantha Dist.Central Cooperative Bank Ltd. and thus accordingly delete the impugned disallowance of ₹ 22,51,000/-.
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Customs
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2018 (7) TMI 1609
Dismissal of appeal on delayed filing - Service of order not made - pre-deposit condition of filing appeal not complied with - Detention of goods belonging to the petitioner by the Officers of Customs and/or Officers of Central Excise all over India - It is the specific case of the petitioner that on further inquiry from the department, it appears that even the department does not have any proof that the order dated 13th September 2012 is served on the petitioner. Held that:- The right of Appeal is a creature of a statute and legislature is yet within its power to confer such a right subject to stipulation and conditions as long as they are not so onerous so as to amount to be unreasonable restriction on exercise of such right and making it illusory. Since right of Appeal cannot be claimed as an absolute right, it is necessarily to be exercised in the manner in which it can be availed as provided in a statute. Since it is a statutory right, it can be circumscribed by the conditions in its grant - If a statute enumerates certain conditions and provides that only on compliance of certain conditions, the right of Appeal available under the statute can be availed, then it is imperative that those conditions/stipulations must be strictly adhered to and complied with. Section 129 provides conditional right of Appeal in respect of an Appeal against the duty demanded or penalty levied - If the mandate of the statute requires to make pre-deposit of some amount as a condition precedent, entertainment of an appeal by the appellate authority, then, compliance of the said condition is mandatory and we need not dilate on the settled positiion, which is also not disputed by the learned counsel for the petitioner. It is apparent from record that when the petitioner filed an appeal, the address that was tendered was at G.I.D.C, Makapur, Baroda and when the order is passed on 12th September 2012, the said order has been forwarded to the petitioner at the same address i.e. M/s.India Medtronic Pvt. Ltd, 919/2, GIDC Estate, Makarpura, Baroda 390 010, and also to the Willingdon and Associates, Trident 'C' Block, 3rd floor, Opp GERI Compound, Race Course, Vadodara - It is thus clear that the said order which has been passed on 13th September 2012 making the condition of deposit of 50% amount as a condition precedent for hearing of appeal and in absence of which directing its dismissal was never communicated to the petitioner. Thus, the petitioner was never made aware of the fact that the Appeal filed by him resulted into a dismissal on expiry of period of two weeks from 12th September 2012. The interest of justice would be served if the appeal filed by the petitioner is restored to its file and the Commissioner is directed to decide the same on its own merits - appeal restored.
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2018 (7) TMI 1608
Condonation of delay in filing appeal - non-service of copy of order - reasons adduced for seeking condonation of delay were unsubstantial or not? - Held that:- It is apparent that there was some considerable laxity on the part of the respondents, who appears to have used different addresses. There is no clear material on record to show that the petitioner was communicated with the order in original and at the same time, this Court notes some laxity on the part of the appellant as well. Nevertheless, the fact remains that the appellant was denied an opportunity to have the order on merits in original adjudication. The present appeal filed by the appellant is allowed and the matter is accordingly remitted to CESTAT for consideration of the appellant’s appeal on its merits, on appellant depositing the amount of pre-deposit - appeal disposed off.
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2018 (7) TMI 1607
Principles of natural justice - Cross-examination of persons - Mis-declaration of imported goods - Smuggling of contraband - Held that:- Revenue did not rely merely upon the statement of Mr. Malkiat Singh, who later claimed, was a mere lender and had no substantial means, but also upon other material, including crucial evidence seized from the premises of Mr. H.S. Chadha - the plaintiff’s request for cross-examination and its rejection by the Revenue cannot be characterized as violation of principles of natural justice. Penalty u/s 112 on Mr. Inderjit Singh - Held that:- Involvement of Mr. Inderjit Singh in the whole operation was also with knowledge. The fact that he was an employee of Mr. H.S. Chadha, in the opinion of the Court, does not in any manner absolve him of having contravened provisions of law which attracted penalty - penalty upheld. Appeal dismissed - decided against appellant.
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2018 (7) TMI 1606
Failure to file the required Bill of Entry - appellant, a declared consignee for the goods - Mr. R.K. Nayyar, a friend of the appellant, had placed an order with M/s. A.K. International Trading Co. Ltd., Zhejiang, China in the name of the appellant. Mr. R.K. Nayyar had then requested the appellant to clear the goods and it was then that the appellant came to know of the order placed by Mr. Nayyar - Confiscation - penalty. Held that:- The Commissioner failed to appreciate that in the access of any Bill of Entry which is yet to be filed by the assessee/consignee, there can be no scope for alleged evasion of anti dumping or basic customs duty. No statement or other evidence has been put forth to establish such intent or evasion of duty either. The appellant being no more than a declared consignee in the subject consignment, has also not remitted any payment against the said goods and exercised no rights of ownership thereon either. Section 30(3) of the Act provides that “If the proper officer is satisfied that the import manifest or import report is in any way incorrect or incomplete, and that there was no fraudulent intention, he may permit it to be amended or supplemented” - It is unfathomable that the desire to ensure that the shipping documents were consistent with each other and fully reconciled with the shipping goods, could be attributed to a fraudulent intention. Such implication makes 30 (3) of the Act totally redundant. In the event of the amendment being proper, there can be no basis for imposing fine or penalty in terms of Section 111(f), 111(g) or 112 (a) of the Customs Act, 1962. In the absence of finding of a fraudulent intention and the need for adjudication of the application for amendment, the action of the lower authorities in proceeding to confiscate the goods, impose fine and penalty was not warranted - appeal allowed - decided in favor of appellant.
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2018 (7) TMI 1605
Project Import - import of goods classifiable under heading 98101 of Customs Tariff Act, 1975 - benefit of project import denied - registration of contract for availing benefit of project import - whether the Commissioner (Appeal), in the impugned order, as correctly followed the provisions of PIR-86 while rejecting the appeal filed by the appellant? Held that:- From the combined reading of Rule 4 and 5 it is the evident that the registration of the contract for availing the benefit of Project Import has to be done on or before their importation so, the Commissioner (Appeals) finding that the registration should be done prior to import is not correct - In this case, the appellant has not effected the clearance of goods till their project at the strength of Sponsoring Authority Certificate was permitted by the Customs - no violation of project import benefit has been committed by the appellant. Also the appellant was registered for benefit under project import benefit initially, after the lapse of seven and a half years. The Department can t take the stand contrary to that at the time of finalization denying the concessional rate of duty under project import. Appeal allowed - decided in favor of appellant.
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2018 (7) TMI 1604
Penalties u/s 112 (a) of the Customs Act, 1962 - EPCG Scheme - destruction of the material obtained by the appellant against the provisions of EPCG scheme, which was subsequently converted into 100% EOU - Held that:- It is a fact that Ld. Adjudicating Authority has ignored the decision taken by the High Powered Committee/Grievance Committee which was subsequently converted into 100% EOU to fulfill the export of the finished goods with the value addition and acting upon that permission was granted for the destruction of the old and obsolete machinery - It has also been clarified by the CBEC Circular No. 21/95-CUS dated 10.3.1995 that the adjudicating authority should proceed in conformity with the clarification issued by the Development Commissioner under Ministry of Commerce. Appeal allowed - decided in favor of appellant.
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2018 (7) TMI 1603
Demand of Customs Duty foregone - failure to achieve positive NFE within the communicated period of 5 years from the date of commencement of production - appellant were 100% EOU which were converted into SEZ unit - Held that:- Hon’ble High Court of Bombay in the case of Mavi Industrial Ltd. vs. Commissioner of Cus. & C.Ex, Thane-II [2013 (5) TMI 576 - BOMBAY HIGH COURT] has held that Before expiry of the extended period of LOP it is neither open to the Development Commissioner nor to the customs authorities to treat that the assessee had ceased to be a 100% EOU after the expiry of the first block of five years and consequently the question of enforcing the penal liability before the expiry of the extended period does not arise at all - appeal allowed - decided in favor of appellant.
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2018 (7) TMI 1579
Refund claim - Held that:- The appellant shall furnish bond in terms of directions passed by the Customs, Excise & Service Tax Appellate Tribunal in its order dated 13.04.2018 - appeal disposed off. Permission sought to withdraw petition - Held that:- Permission granted - The writ petition stands dismissed as withdrawn.
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2018 (7) TMI 1578
Valuation - import of goods - inclusion of expenditure on advertisement and promotion - Held that:- Learned senior counsel appearing for the appellant states that the duty amount has already been paid - The penalty is stayed, in the meantime.
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2018 (7) TMI 1577
Benefit of concessional rate of duty - imported “Ethylene Vinyl Acetate” - N/N. 21/2002 dated 01.03.2002 (Sl. No.494) amended by N/N. 11/2006 dated 01.03.2006 - Held that:- There is no merit in the present appeal - Admission is refused and the civil appeal is, accordingly, dismissed.
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Insolvency & Bankruptcy
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2018 (7) TMI 1634
Initiation of Corporate Insolvency Resolution Process - proof of outstanding debt - Held that:- The conditions in the loan agreement that unsecured loans, obtained by the CD, would be non-interest bearing as well as the conditions that such loans cannot be repaid during the currency of the bank loan are all business decisions, taken by the parties thereto in the best interest of all concerned and as such, said cannot be questioned alleging that such conditions in the agreement aforesaid violated the law laid down in section 27 of the Contract Act. As already found that the decision to the effect that unsecured loans, obtained by the CD, would be non-interest bearing and that such loans cannot be repaid during the currency of the bank loan were also approved by the management in CD when the applicant herein along with his son and daughter-in-law was at helm of affairs of such a company. Such state of affairs hardly approves of the conduct of the applicant in approaching this Authority with an application u/s 7 of the Code, 2016 seeking initiation of CIRP against the CD. Applicant miserably fails to show that as on 03-07-2015, the CD owed an amount to the tune of ₹ 38,88,745/- or that there was a default in payment of such debt on such a date and many other subsequent dates. Petition dismissed.
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2018 (7) TMI 1633
Corporate Insolvency Resolution Process - outstanding debt - Held that:- It is the case of the Operational Creditor that the aforesaid amount of ₹ 30/- crores was advanced by it to Monnet Ispat for construction of power plant and supply of ancillary equipment. The Operational Creditor is to stand in the shoes of its Predecessor-in-interest. The relationship between them was that of supplier of goods and services which is fully covered by the provisions of Section 5(20) & 5(21) of the Code. Therefore, there is no escape from the conclusion that the applicant is an Operational Creditor and the argument to the contrary advanced by Mr. Sibal would not be sustainable. On the occurrence of default, a notice under Section 8 of the Code is required to be issued as is evident from the opening sentence of Section 8(1) of the Code. The fact that the amount has become due becomes evident from the payment sought to be made by three cheques which were taken back by the Corporate Debtor and the amount remained unpaid. The intention to recover and the willingness to pay stand established which was followed by issuance of a demand notice. Therefore, acknowledgement of debt is established by executing the tripartite agreement. The default has also been established on account of issuance of cheques and its non-payment has also been established. Therefore, it cannot be argued that default has not occurred. The expression default within the meaning of Section 3(12) of the Code has been defined to mean non-payment of debt when whole or any part of the amount of debt has become due and payable and is not paid by the Corporate Debtor. If this cannot be regarded as default what else could be so regarded. Argument that the notice of demand has been served only on the Director would also lack substance as Rule 5(2)(b) of the Rules clearly postulates that demand notice or the copy of the invoice demanding payment may be delivered to the Corporate Debtor by electronic mail service to a whole time Director or designated partner etc. Once the demand notice was served on the Director then the requirement of the Rules stands satisfied. Under Section 20 of the Companies Act, 2013 read with Section 27 of the General Clauses Act such a service would also be regarded as good service. In any case the Corporate Debtor cannot take shelter of these types of technical submission especially when the debt has not been disputed and in fact stand acknowledged in the tripartite agreement, by issuing credit notes, by issuing cheques and other overwhelming evidence on record. In view of the above therefore, we do not find any substance in the objection raised on behalf of the Corporate Debtor and the same are hereby rejected. Petition admitted.
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2018 (7) TMI 1632
Insolvency Resolution Professional (IRP) - plea of the IRP seeking for his discharge - Held that:- It is evident from the representations of the OC, CD as well as Financial Creditors who are before us that there is prime need for the CIRP Process to commence, as envisaged under the provisions of IBC, 2016 and in consonance with the order of admission of CIRP as initiated against the CD by this Tribunal. From the submissions made by the stakeholders who were before us, it is clear that the management of the CD is willing to act in accordance with IBC, 2016 and cooperate with the IRP. However, the unprofessional action of IRP has virtually made the CIRP process initiated by this Tribunal by way of admission of Company Petition as a non-starter. The delay on the part of IRP ascribing, however, of a procedural nature in the application about receipt of the order of this Tribunal dated 28.02.2018 even though fairly conceded by Ld.Counsel appearing for the IRP/Applicant that the IRP appointed by this Tribunal was put on notice through telephone about the order of appointment immediately after the order shows that there was a delay on the part of IRP/Applicant who has failed to recognize the importance of his unique position in the entire scheme of IBC, 2016, particularly in relation to CIRP of the CD. Ld. Counsel for the Applicant/IRP represented before this Tribunal that with great efforts after passing the qualifying exam a certificate of registration has been granted to him to act as a Resolution Professional. It is also pertinent to note that consent has been given to IBBI as rightly pointed out in the affidavit filed by IBBI by the Applicant/RP herein to be included for a period of 6 months commencing from 01.01.2018 to 30.06.2018 and Which panel list was forwarded to this Tribunal and also from which panel list this Tribunal had chosen and appointed the Applicant as the IRP of the CD and hence the stand taken by the Ld. Counsel for the Applicant/IRP before us that declaration in Form 2 has not been filed the same being a pre-condition and subject to which the IRP assumes charge as per the orders of this Tribunal is too technical and cannot be accepted as it does not hold much water. The reasons given in the application does not in any way mention that in relation to CD and its affairs he cannot act independently and hence filing Form-2 is only a mere formality and that cannot be made a ground that his appointment has not been accepted and he is not an IRP, more so when consent to act as an IRP has already been given to IBBI based on which panel list has been forwarded and from which it is sought to be withdrawn. Thus it can be seen that the act of the IRP is totally unprofessional and instances of similar nature on the part of IRPs is being evidenced in some of the matters before this Tribunal and also seems to be not uncommon, before other Benches of NCLT as well. This practice of IRP’s appointed by NCLTs based on panel list provided by IBBI and subsequently trying to resile from their consent earlier given and that too upon appointment by Adjudicating Authority (AA) is strongly required to be eschewed and is to be nipped in the bud at the earliest opportunity. In this connection, the role of the Insolvency Professionals on the one hand and on the other that of AA and their interplay has been succinctly brought in the Report of the Bankruptcy Law Reforms Committee Volume I, Rational and Design, 2015 and at Chapter 4.4 dealing with the Insolvency Professionals after elucidating the role of IPs in the process of Insolvency and Bankruptcy and while stressing the importance of IPs concludes Taking into consideration all of the above, we are not in a position to entertain the plea of the IRP seeking for his discharge. In the circumstances, this Application stands dismissed with costs of ₹ 50,000/- payable to Insolvency and Bankruptcy Fund as envisaged under Section 224 of IBC, 2016 and in case of absence of the fund to the credit of Prime Minister’s Relief Fund. Further the IRP is directed to commence the performance of his duties forth with not later than 3 days from the date of this order in the interest of all the stakeholders concerned and facilitate the convening of the 1st Committee of Creditors meeting. Further, the unprofessional attitude of the Resolution Professional/Applicant cannot also be looked away as well and in the circumstances, this Tribunal directs the following to IBBI, being the Regulator of IRP (i.e.) to initiate such actions as contemplated under several of the Regulations as framed by it in relation to IPs and Insolvency Professionals Agencies empanelled with it
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Service Tax
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2018 (7) TMI 1601
Mandap keeper service - Interpretation of statute - whether tea and snacks served by the appellants while performing the service of Mandap keeper amount to satisfy meal? Held that:- A snack cannot be equated to a high tea; for that logic, it comes rarely closer to a substantial and satisfying meal . Therefore, it is to be concluded that snack cannot fulfill the conditions of the food being substantial and satisfying - Appeal dismissed - decided against appellant.
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2018 (7) TMI 1600
CENVAT Credit - input services - rent-a-cab service - health insurance service - interior decorator service - denial on account of nexus - Held that:- The appellant had accepted that CENVAT Credit availed on services such as rent-a-cab service, health care service and interior decorator service were ineligible to be availed as CENVAT Credit - As stated by the appellant, when the Purchase Orders were issued from the Kolkata office, the invoices should have been addressed to the Kolkata office - the cenvat invoices should be verified and the matter should be decided accordingly. Penalty u/s 78 - Held that:- There is no material on record to establish fraud, collusion, willful misstatement or suppression of facts on the part of the appellant - penalty u/s 78 of the Finance Act is unwarranted and is set aside. The matter is remanded to the Adjudicating Authority for verification of the documents and to pass order in accordance with law - appeal allowed by way of remand.
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2018 (7) TMI 1599
Scope of SCN - all the grounds raised by the appellant not taken care of by impugned order - inclusion of commission amount in assessable value - benefit of cum-duty - Held that:- It is noticed that in the year 2006-07 the impugned order treated the entire amount received as commission and treat the same as the assessable value for payment of duty. It is oppose that the total amount received as commission in the instant case as should be treat as exclusive of the commission and that have been granted - No reason have been recorded as to why the benefit of cum-duty have been granted to amount have been received. Also, it is apparent that while gross amount pertaining to the year 2007-08 has been added to assessable value, gross amount of income recorded in financial year 2008-09 but received in subsequent year has not been deducted - thus, the impugned order has failed to take notes of all the grounds raised by the appellant. The matter is remanded to the Commissioner (Appeals) for all the ground raised by the appellant in their appeal memorandum and pass a fresh order - appeal allowed by way of remand.
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2018 (7) TMI 1598
Demand of Interest u/s 75 of the Finance act 1994 - imposition of penalties - delayed payment of service tax - relevant date for determination of the rate of taxation - What is the nature of interest under a Fiscal Statue which arises on the account of delayed payment of tax? - Held that:- The interest is compensatory in nature and is required to be paid by the tax payer in case of any default in payment of tax for the period of default - In a Fiscal statue the interest is levied as statutory liability and arises on account of delayed payment of taxes. Whether a separate notice demanding interest is required in case of delayed payment? Or the interest becomes statutorily payable on determination of the tax dues? - Held that:- No separate notice is necessary for the purpose of recovery of interest and same has to be recovered along with the tax as arrears of tax. If a notice is required to be issued demanding interest then in that case what will be the relevant date for computing the limitation for issue of such a notice? - Held that:- The demand for interest cannot be quantified till the arrears of tax are paid and it is consequently not possible to specify a definite figure in the recovery certificate. However in case of nonpayment of the interest along with the tax arrears if a notice demanding such interest is to be issued the same should be issued within reasonable time from the date of payment of tax arrears. There can be no dispute that interest on the service tax short paid and paid subsequently either on own volition or on being pointed out by the department, is required to be paid and if not paid suitable action for the recovery of the interest needs to be initiated against the defaulting entity - thus, the demand of interest upheld. Penalty - Held that:- The case is pure of short payment of taxes due on the due on the due date. It is not the case of the department that appellant has suppressed the value of taxable service or has not declared the same to the department. Further entire amount of tax paid by the appellant on reverse charge was available to the Appellant as CENVAT credit there can be no question of intention to evade payment of tax - Since Appellant was paying the taxes on reverse charge basis in respect of Information Technology Software Services, the delay in seeking registration for the same can be condoned without any penal consequences in term of Section 80 of the Finance Act, 1994. Demand of Interest upheld - penalties set aside - appeal allowed in part.
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2018 (7) TMI 1582
Cargo Handling service - Held that:- There is no merit in the appeal - The civil appeal is, accordingly, dismissed on ground of delay as well as on merits.
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2018 (7) TMI 1581
Business Auxiliary Services - Held that:- There is no legal and valid ground for interference - Admission is refused and the civil appeal(s) are, accordingly, dismissed.
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2018 (7) TMI 1576
Cargo Handling Service - demand of service tax with equal amount of penalty - Held that:- There is no merit in the present appeal - Admission is refused and the civil appeal is, accordingly, dismissed.
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2018 (7) TMI 1575
Mandap keeper service - rooms rents - Applicability of Circulars - Held that:- We are unable to accept the submission of learned Additional Solicitor General that the Circular would not have an application in the given facts of the case - SLP dismissed.
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2018 (7) TMI 1573
Classification of Services - Mining services or Cargo Handling Services? - Held that:- The civil appeal is dismissed on the ground of delay - appeal dismissed.
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2018 (7) TMI 1572
Condonation of delay in filing appeal - Held that:- There is a delay of 214 days in filing this appeal which is not satisfactorily explained - appeal is dismissed on the ground of delay.
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Central Excise
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2018 (7) TMI 1597
Maintainability of appeal - monetary amount involved in the appeal - CENVAT Credit - Held that:- In the present appeal the amount involved is ₹ 12,71,048/- - In terms of the Instructions issued by the Central Board of Indirect Taxes & Customs dated 11.7.2018, the monetary limit fixed for filing appeals in the High Court stands raised to ₹ 50 lakhs, which is applicable even in pending cases. As the amount of tax involved in the present appeal is less than ₹ 50 lakhs, the same is dismissed as not maintainable - appeal dismissed being not maintainable.
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2018 (7) TMI 1596
Principles of Natural Justice - Opportunity of personal hearing not provided - Availability of alternative remedy - Rebate Claim - Circular No.1053/2/2017- CX, dated 10.03.2017 - Held that:- In the instant case, after giving show cause notice granting 30 days time, the authority, without waiting for any reply, on the 32nd day, passed an order - The impugned order passed within two days from the date of lapse of the time granted in the show cause notice is certainly in violation of principles of natural justice and, therefore, it is liable to be set aside. While adjudicating the issues, it is incumbent on the adjudicating authority to provide opportunity of personal hearing, not one, at least three, with sufficient interval of time, so that,the noticeee may avail the opportunity of being heard. The very object of the Master Circular issued by the Central Board of Excise and Customs mandates that the provision of personal hearing is very essential before deciding any issue by a quasi judicial authority. Section 33-A reads that the opportunity of being heard to a party in a proceeding, if the party so desires, shall be given. Sub-Section (2) of Section 33-A mandates that if sufficient cause is shown, at any stage of proceeding, that time shall be granted for reasons to be recorded in writing. Further, it provides for three adjournments to a party, which means that adjudicating authority shall not arbitrarily curtail the opportunity, but shall give opportunity in letter and spirit. The provision, if read as a whole and cogently, compels the adjudicating authority to adhere to the principles of natural justice by affording personal hearing. When an order is passed in violation of principles of natural justice, a Writ Petition under Article 226 of the Constitution of India can be entertained. The availability of alternative remedy is not a bar for entertaining the Writ Petition. In such circumstances, the Writ Petition is maintainable. The matter is remanded back to the first respondent for consideration afresh - petition allowed.
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2018 (7) TMI 1595
Manufacture - process of cleaning of scrap rubber to crumb rubber - whether the process amounting to manufacture or not? - Held that:- If conversion of old rubber into crumb rubber powder does not amount to manufacture, a process of manufacturing crumb rubber from scrap rubber should not be an act of manufacture. Moreover, in the appellant’s case, they are drawing the scrap rubber from rubber tree laces and cup lumps which are collected from the tree as a post-harvest practice. The activity undertaken by the appellants is more in the nature of segregation of different types of rubber produced naturally and to convert it into crumb rubber. The burden to prove that there is manufacture is not discharged by the department beyond reasonable doubt - whereas the appellants have produced the certificate issued by the Rubber Board but the department has not produced any evidence to negate the certificate thus issued. The conversion of scrap rubber into rubber powder does not amount to manufacture as the department’s basic contention on the manufacture itself does not flows water other arguments - appeal allowed - decided in favor of appellant.
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2018 (7) TMI 1594
Time Limitation - it was alleged that the appeal filed by the Department before the Commissioner (Appeals) was time barred - monetary amount involved in the appeal - Held that:- Admitted facts are, the date of the order of the adjudicating authority in the present appeal is 05.10.2016; the date of communication of the same to the reviewing authority was 17.10.2016, the date of order of the reviewing authority is 12.01.2017 and the date of filing of the appeal before the lower appellate authority is 19.01.2017. I is clear that the first appeal before the lower appellate authority is within the period of three months from the date of communication of the order which is well within the meaning of Section 35E (3) of the Central Excise Act, 1944. In view of the legal requirement of Section 35E (3) which is extracted herein above, the limitation would start from 17.10.2016 i.e., the date of communication of the order, which is relevant in the context of the amended provision of Section 35E (3) with effect from 01.06.2007 - the lower appellate authority has committed an error in holding that the limitation began on the date when the adjudicating authority affixed his signature However, considering quantum of amount/duty involved coupled with the fact that for the subsequent period the Revenue itself has not raised any demand, it is found that the issue is more an academic in nature and therefore the Revenue’s appeal dismissed - Revenue Appeal is therefore dismissed on monetary limits alone, on the basis of CBEC Circular F. No. 390/Misc./116/2017-JC dt. 11.07.2018, without going into the merits.
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2018 (7) TMI 1593
Transfer of CENVAT Credit to other unit - Rule 10 of CCR - denial on the ground that the appellant has failed to comply with conditions of the said Rule - Held that:- The transfer of credit is permissible when factory is shifted from one site to another. Such transfer of Cenvat Credit will be allowable just to satisfy to Sub Rule 3 which satisfy that stock of input as such are in progress, or goods is also transferred along with factory to the new site. The Sub Rule further provides that such transfer is to be duly accounted to the situation of the Jurisdictional AC/DC. - A view of the Department is that the condition of the Sub-Rule 3 has not been satisfied by the appellant. The findings of the lower authority is that the inputs/ capital goods on which credit has been availed as well as finished goods on which appellant is liable to pay duty were not available in the records of the Bagru Unit at the time of filing application for transfer (12/05/2012). But it is admitted by the appellant that the physical transfer preceded such application - the Department should have taken up the verification of the documents submitted by the appellant which appear to indicate clearly the stock position of various goods at the Bagru Unit at the time of its transfer. The documents evidencing the physical movement of such goods to the Manda Unit also have been submitted. Denial of transfer of credit not justified - matter is remanded to the Original Authority for reconsideration of the claim for transfer of Cenvat Credit after verification of the documents - appeal allowed by way of remand.
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2018 (7) TMI 1592
CENVAT Credit - clearance to SEZ Developers - inputs used in manufacture of taxable as well as exempted goods cleared to such SEZ developers and promoters - non-maintenance of separate records - Held that:- There is no dispute as to the fact that clearances effected by the appellant to SEZ developers and promoters are after claiming the benefit of non-payment of duty during the period December, 2007 to July, 2008 - An identical issue was before the Tribunal, one of the appellant’s sister concerns Sujana Metal Products Ltd. [2011 (9) TMI 724 - CESTAT, BANGALORE], wherein, it was held that clearances made to SEZ developers and promoters are nothing but clearances made to SEZ developers and after the SEZ act came to existence on invoking the provision of CENVAT Credit Rules, 6(6) 2004 as the goods which are developers are export of dutiable goods. Appeal allowed - decided in favor of appellant.
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2018 (7) TMI 1591
Clandestine removal - cross-examination of all purchasers denied - principles of Natural Justice - illicit clearance plastic bags - parallel invoices - appellant cleared the finished goods namely plastic bags to various traders by raising Kachcha Chiththi/documents. Whether the denial of cross examination of the witnesses by the adjudicating authority has prejudicially impacted the right of the appellant to put forth a proper defence in the matter? Held that:- It is quite evident that the quantum of clearances have been determined on the basis of monthly purchases stated by the buyers of the goods in their statements recorded. The quantum of purchase so stated in the statement is not further corroborated. In such a situation when the entire demand against the appellant is based on the uncorroborated statement of purchasers of the finished goods adjudicating authority should have allowed the opportunity for cross examination of each of the person whose statement has been relied for computing the demand. There is no doubt about the fact that appellant was indulging in clandestine clearance of the goods and was evading the payment of duty. However this determination itself is not sufficient to fasten the demand of duty on the appellant. The quantum of goods clandestinely cleared and duty evaded need to be determined on the basis of the principles/ evidences admissible in law. Till the time such a determination is done the mere fact of clandestine clearance is not sufficient confirm the demand - In the present case since the quantification of entire demand against the appellant is based on the quantum of purchases made as stated by the purchaser of the finished goods in their statements, there can be no justification for denial of cross examination as requested by the appellant. In similar situation in the case of Alliance Alloys Pvt Ltd Vs Commissioner Of Central Excise Delhi [2016 (7) TMI 153 - CESTAT CHANDIGARH], this Tribunal has been remanding the matter to the adjudicating authority for allowing the cross examination of the witnesses. This is a case where entire quantification of demand is based on the statements of the purchaser the request for cross examination of the persons tendering the statements should have been allowed, in case the same is not allowed or possible, at least reasons thereof should have been recorded - matter remanded for allowing opportunity of cross examination of the remaining witnesses and determination of the demand and penalty thereafter - appeal allowed by way of remand.
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2018 (7) TMI 1590
Valuation - Manufacture of Mild Steel Drums on job work basis - Whether the appellant have taken correct cost of raw material i.e. CRS sheets for arriving at correct assessable value? - Held that:- In order-in-original the adjudicating authority has taken different cost of raw material and the duty was re-quantified by enhancing from ₹ 75,40,706/-, which was originally confirmed to ₹ 2,31,30,925/. Firstly the unit cost per drum was given by the C.A. of BPCL and HPCL. The department has not adduced any evidence which is contrary to C.A. certificate provided by HPCL and BPCL therefore the unit per cost provided by BPCL and HPCL has to be accepted - it can be seen that it is appellant’s appeal challenging the demand of ₹ 75,40,706/- therefore without filing an appeal by the department proposing enhancement of demand, appellant by filing an appeal cannot be in the worse position by which demand is increased therefore the demand of ₹ 75,40,706/- in any circumstance could not have been increased to ₹ 2,31,30,925/- - demand set aside. Whether the cost of bought out lid supplied along with drums is includible in the assessable value of drums? - Held that:- For the manufacture of drum there is no role of lid. The drum is manufactured without lid. It is also noticed that in the previous occasion appellant had been supplying the drums without lid. It is also fact that in all cases of manufacture and supply of drums lid was not supplied. However, only in some cases and for limited period bought out lid was supplied along with drums - the cost of lid cannot be included in the value of drums - demand set aside. Whether the profit element appearing in balance sheet of the appellant is includible in the assessable value of the drum when the fabrication cost paid by the principle, M/s. BPCL and HPCL as already been included? - Held that:- Profit which is appearing in the balance sheet is arrived out of receipt of fabrication charges which already included profit which is appearing in the balance sheet. There is no case of the department that appellant have received some additional consideration over and above the job charges received from the principals HPCL and BPCL, therefore profit appearing in the balance sheet which is part of the fabrication charges cannot be again included in the assessable value of the drum, demand to this extent is also not sustainable - demand set aside. Whether the value of the scrap retained by the appellant and realised proceeds by selling scrap in the market can be added in the assessable value of the drums? - Held that:- The appellant have paid duty on the scrap value and the same value was sought to be included in the assessable value of drums. Once the value has suffered the duty, demand of duty on such value will amount to duplication of demand - demand set aside. Revenue neutrality - Held that:- In one hand appellant was otherwise entitle for the manufacture and clearance the goods without payment of duty under Rule 4(5)(a) and if at all duty is payable the same is available as Cenvat credit to the BPCL and HPCL, therefore entire case is of revenue neutral. Demand do not sustain - appeal allowed - decided in favor of appellant.
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2018 (7) TMI 1589
Benefit of N/N. 1/2011-CE dated 01.03.2011 - availability of CENVAT Credit on inputs and utilization of the same by beneficiary of the notification - demand of Interest and penalty - Held that:- The appellants have complied with all the necessary statutory returns within the stipulated time and the fact of claiming exemption benefit was disclosed in the ER-1 returns filed during the relevant period. It is also not in dispute that the appellants paid the entire duty amount through the CENVAT Account and thereafter, through the current account, thereby, causing no loss of Revenue to the exchequer. The mistake seems to be that of procedural and irregularities - the subsequent payment in cash was the only action by which procedural irregularities could be rectified. The appellant has made out a case for non-imposition of penalty and also for setting aside the demand of interest - appeal allowed - decided in favor of appellant.
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2018 (7) TMI 1588
Method of Valuation - clearance of paints manufactured - Rule 8 of Central Excise Valuation Rules or under Rule 11 of Central Excise Valuation rules? - Held that:- Identical issue decided in appellant own case M/S COROMANDEL PAINTS LTD. VERSUS CCE & CC, VISAKHAPATNAM [2016 (6) TMI 1018 - CESTAT HYDERABAD], where it was held that the value adopted by the appellants under Rule 8 of the Central Excise (Determination of price of Excisable goods) Rules, 2000 was not in order and that since the application of paint contains labour costs, the assessable value is to be determined under Rule 11 only after deduction of the value of labour component from the total value for supply and apply. The demand of the duty liability needs to be upheld along with interest, but the penalties need to be set aside - appeal allowed in part.
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2018 (7) TMI 1587
CENVAT credit - Duty paying documents - credit availed on the basis of supplementary invoices - Rule 9(1)(b) of the Cenvat Credit Rules, 2004 - Held that:- There is no reason to hold that the supplementary invoice evidencing payment of additional duty amount should be treated on a different footing visà- vis the original invoices evidencing payment of duty on the said goods in as much as both these documents were issued under the same provisions of law - If the appellant were entitled to take credit on their inputs on the strength of the original invoices issued by the supplier, they can validly claim to be entitled to take cenvat credit of the additional amounts of duty paid on the same goods by the supplier under the supplementary invoices. In any case it was not in dispute that the inputs were received in the appellant’s factory. The substantive requirement of cenvat credit were thus met by the party. The benefit was not liable to be denied on procedural grounds. Credit allowed - appeal allowed - decided in favor of appellant.
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2018 (7) TMI 1586
Waste - liability of excise duty - Aluminium Dross & Skimmings arising as waste in the manufacture of “Aluminium Alloy Bars, Aluminium Notch Bars and Shorts” - Held that:- There is no justification for charging excise duties on Aluminium Dross and Skimming. Hon’ble Bombay High Court in the case of Hindalco Industries Ltd. vs. Union of India [2014 (12) TMI 657 - BOMBAY HIGH COURT] has held that It cannot be said that dross and skimmings are transformation resulting in a new and different article with a distinctive name, character or use or that they ordinarily come to the market to be bought and sold and are known to the market and cannot be held as excisable. CBEC has also changed its stand by following the decision of the Bombay High Court. The earlier circular suggesting that duty was payable on such Aluminium Dross and Skimming stand withdrawn. Appeal allowed - decided in favor of appellant.
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2018 (7) TMI 1585
CENVAT Credit - reversal of input services - removal of inputs as such - GTA service for inward transportation of iron ore and coal - Waste - iron ore fines and coal fines - Held that:- The iron ore fines and coal fines generated in the process of manufacture, are nothing but waste products - The iron ore fines and coal fines had not been manufactured by the appellant but were generated in the process of manufacture, and hence, the appellant has not infringed the provisions of Rule 2(l) of the Cenvat Credit Rules, 2004. Identical issue decided in the case of SEVEN STAR STEELS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS & SERVICE TAX, BBSR-II [2013 (5) TMI 119 - CESTAT KOLKATA], where it was held that when the credit availed inputs or capital goods are removed from the factory of the assessee, sub-rule (5) of Rule 3 of the Cenvat Credit Rules, 2004 provides for recovery of equal amount of credit. There is no such provision to reverse credit of service tax availed in relation to such inputs or capital goods when removed from the factory. Appeal allowed - decided in favor of appellant.
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2018 (7) TMI 1580
Seeking cross examination of six officers of the department - Held that:- Application for exemption from filing certified copy of the impugned order is allowed - SLP dismissed.
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2018 (7) TMI 1574
CENVAT Credit - Input services in relation to GTA - transportation of their final product from their premises to customers premises - scope of the restriction "upto to place of removal" - Review of order - Held that:- There is no error much less apparent in the order impugned - The review petition is, accordingly, dismissed.
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2018 (7) TMI 1571
Duty and penalty on depreciated value of Capital goods - unit has been lying closed since the year 1993 - Held that:- We are not inclined to interfere with the impugned judgment - The civil appeal is accordingly dismissed.
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2018 (7) TMI 1570
Benefit of N/N. 6/2002-CE - supply of plastic power cables and stainless steel wire to Thermal Power project - Held that:- The appeals are dismissed on the ground of delay in terms of the signed order.
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CST, VAT & Sales Tax
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2018 (7) TMI 1569
Settlement of arrears of tax - rejection of Settlement application under Tamil Nadu Sales Tax Settlement of Arrears Act, 2001 on the ground that the petitioner has not paid 90% of the amount payable under Section 6(3) of the Settlement Act, along with the application. Held that:- The application for settlement filed by the petitioner was kept pending for three years and without affording an opportunity to the petitioner to make out any deficit (assuming so), the first respondent should not have rejected the application, especially when, Rule 3(5) provides for 10 days time to be granted for making good the deficit, if any. Apart from that, while computing the amount payable by the petitioner for being entitled to pursue the application under the Settlement Act, the authority should have afforded an opportunity to the petitioner, especially when, decision was taken after three years, after the application was lodged - In the light of the procedural flaw committed by the first respondent in considering the application filed by the petitioner for settlement, this Court is inclined to interfere with the impugned order. The matter is remanded to the first respondent with a direction to the first respondent to afford an opportunity of personal hearing to the petitioner - petition allowed by way of remand.
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Indian Laws
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2018 (7) TMI 1602
Dishonor of cheque due to insufficiency of funds - Section 138 of the Negotiable Instruments Act, 1881 - Concern on day to day activities of company - petitioners were the Directors of the company accused, denying that they had any concern or responsibility with the conduct of the day-today business of the company - Held that:- Averments are deficient to the effect that there is not even a whisper of allegation that the petitioners are persons who were in charge of or responsible to the company accused for the conduct of its business “at the time the offence was committed”. The petitioners are not stated to be signatories to the cheques in question. They cannot be roped in merely because they have been directors of the company accused. The general averments that they were responsible for all the business dealings and for the circumstances leading to the dishonour of the cheques or that they had given any assurance as to the cheques, do not suffice. The view taken by the revisional court, therefore, cannot be upheld - The complaint cases, in so far as these petitioners are concerned, do not pass the muster of the requisite basic averments - petitions are allowed - decided in favor of petitioners.
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2018 (7) TMI 1568
Prosecution of the parties - Section 141 Negotiable Instruments Act, 1881 - concern of the accused with the responsibility for the conduct of the day-to-day business of the company - Held that;- Averments are deficient to the effect that there is not even a whisper of allegation that the respondents are persons who were in charge of or responsible to the company accused for the conduct of its business “at the time the offence was committed”. The respondents are not stated to be signatories to the cheques in question. They cannot be roped in merely because they have been directors of the company accused. The general averments that they were responsible for all the business dealings and for the circumstances leading to the dishonour of the cheques or that they had given any assurance as to the cheques do not suffice. Petitions dismissed.
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