TMI Tax Updates - e-Newsletter
July 30, 2016

Case Laws in this Newsletter:

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

TMI SMS

• Validity of levy of VAT on value of sale of liquor inclusive of services provided at restaurant/ hotels - claim of exemption denied - HC

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• Refund - exemption Ntf. No. 41/2007-ST is inapplicable in the case of exports where the appellant claimed drawback under the Drawback Rules

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Articles

1. FAQ on Trasitional provisions

   By: CA Akash Phophalia

2. READING DOWN MODEL IGST ACT (PART-8) (PAYMENT OF TAX)

   By: Dr. Sanjiv Agarwal

News

1. Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified

2. Request for identifying the necessary infrastructural requirements to facilitate the roll out of the Income Tax Business Application (ITBA)

3. THE BENAMI TRANSACTIONS (PROHIBITION) AMENDMENT BILL, 2016

4. Commerce Minister Smt. Nirmala Sitharaman says Government will hold to have all stakeholders of the Startup ecosystem on board in making India one of the best Startup destinations in the world.

Notifications

Customs

1. 44/2016 - dated 29-7-2016 - Cus

Amends Notification 52/2003-Customs dated 31.3.2003

DGFT

2. 17/2015-20 - dated 29-7-2016 - FTP

Amendment in the Import Policy Condition No.3 of Chapter 12 of ITC (HS), 2012, Schedule — I (Import Policy).

Circulars / Instructions / Orders

DGFT

1. 01/2015-20 - dated 26-7-2016

Relief in Average Export Obligation in terms of Para 5.19 of Hand Book Procedures of FTP 2015-20

Customs

2. 35/2016 - dated 29-7-2016

Removal of mandatory warehousing requirements for EOUs, STPIs, EHTPs etc. - Amendment to Notification 52/2003- Customs dated 31.03.2003.

Highlights / Catch Notes

Income Tax

• TDS Liability on Terminalling Charges: Infrastructure Expenses Considered Purchases, Payment Method and Agreements Not Sole Determinants.

  Case-Laws - AT : TDS liability - tds on terminalling charges - it shall not be inappropriate to treat the expenses on infrastructure facility at par with the purchase. The method for the payment of infrastructure facility and entering into a separate agreement cannot be the sole basis to treat the transaction independent of the purchase. - AT
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• Revenue Authorities Err in Capital Gain Calculation: Used Deemed Cost Instead of Actual Cost per Section 48 of Income Tax Act.

  Case-Laws - AT : Capital gains computation - lower revenue authorities have erred in computing the capital gain in the instant case on the basis of deemed cost of consideration u/s 50C whereas AO was statutorily required to compute the capital gain as per provisions contained u/s 48 of the Act on the basis of actual cost of consideration received by the assessee. - AT
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• Court Rules Addition to Assessee's Husband's Income Lacked Jurisdiction and Legal Basis in Search Case.

  Case-Laws - AT : Addition in the hands of assessee’s husband on protective basis - cash available on the date of search - addition made by the authorities below were without any jurisdiction and were not in accordance with law and the facts and circumstances of the case - AT
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• Assessee's Failure to Justify Share Capital Credit Results in Addition u/s 68, CIT(A) Decision Upheld.

  Case-Laws - AT : Addition u/s 68 - the assessee has failed to discharge its onus in respect of the credit received in the form of share capital by the assessee from the parties and, therefore, there is no infirmity in the findings of CIT (Appeals) on the issue - AT
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• Tax Case: Stamp Duty & Fees Added to Expenses; Suspicion Can't Replace Proof, Exemption Claim Allowed.

  Case-Laws - AT : Addition on account of expenses such as stamp duty, registration fees and other miscellaneous charges - suspicion cannot take the place of proof - claim of exemption allowed - AT
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Customs

• High Court Rules DRI's Detention of Petitioner's Goods Since 2016 Unlawful Due to Lack of Legal Authority.

  Case-Laws - HC : Provisional release of goods - undervaluation - declaration of goods evasion of duty - The net result is that the detention by the DRI of the goods imported by the Petitioner under the aforementioned B/E from 13th May, 2016 onwards is entirely without the authority of law. - HC
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• Anti-Dumping Duty Deemed Unauthorized; No Need for Alternative Remedy Before Seeking Refund of Illegally Collected Duty.

  Case-Laws - HC : Refund - Levy of anti-dumping duty - When a duty is collected wholly without authority of law and therefore, without jurisdiction, the question of alternative remedy becomes insignificant, to suggest that the order passed by the Deputy Commissioner dated 26.08.2015 is appealable is not quite correct. - HC
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Service Tax

• Appellant Pays Penalty for Peace Despite Strong Case on Cenvat Credit Eligibility; Penalty Ultimately Waived.

  Case-Laws - AT : Levy of penalty - It was contended that on merits Appellant had a good case, but to buy peace this issue was not agitated on merits and amount along with interest was paid. - issues pertaining to eligibility of Cenvat Credit - penalty waived - AT
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• Stay Granted on Ocean Freight Income Case; Rs. 10 Lakh Already Deposited by Appellants Pending Further Proceedings.

  Case-Laws - AT : Business Auxiliary services - income from ocean freight is more than the ocean freight expenses - appellants have already deposited ₹ 10 lakhs during investigation. - stay granted for the balance amount - AT
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• Refund of Unutilized Cenvat Credit Granted for Exported Services; All Availed Credit to be Refunded.

  Case-Laws - AT : Refund of un-utilized cenvat credit - brought forward of credit - undisputedly entire services of the appellant are exported, in such case entire Cenvat credit availed by the appellant has to be refunded to them. - AT
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• Cenvat Credit Approved for Service Tax on Group Insurance Premiums, Including Dependents, Despite Unchanged Premium Amounts.

  Case-Laws - AT : Cenvat Credit - input services - service tax paid on the premium charged on group insurance scheme - even if none of the dependents were within the coverage, the premium amount would not alter or vary. - full credit allowed - AT
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Central Excise

• Fraudulent Rebate Claims Lead to Valid Show Cause Notice Issued Within Extended Five-Year Period.

  Case-Laws - AT : Demand of rebate erroneously sanctioned - the rebate has been claimed by fraud. As fraud vitiates everything and Show Cause Notice issued within extended period of five years is clearly sustainable - AT
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• Appellant Rightly Claims CENVAT Credit for Unloading and Shifting Activities Within Warehouse Under Relevant Rules.

  Case-Laws - AT : Appellant has correctly availed cenvat credit on the activity of unloading and shifting of the godown of the goods - AT
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• Railway Sleeper Tax Value Excludes RITES Inspection Charges Paid by Railways, Not Includible for Tax Calculation.

  Case-Laws - AT : Assessable value of the sleepers - inclusion of inspection charges collected from the Railways and paid to RITES - the inspection charges paid to Rites on behalf of the Railways are not includible in the assessable value. - AT
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• Company Allowed CENVAT Credit for Worker Transport Services to Factory, Confirmed Under Tax Regulations.

  Case-Laws - AT : CENVAT credit claimed on the transport service availed to bring the workers to their factory site - credit allowed - AT
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• Appellant Rightly Claimed CENVAT Credit for Transportation Charges to Buyer's Location, Duty Paid Confirmed.

  Case-Laws - AT : CENVAT credit - As such the appellant was duty bound to supply the goods at the buyer’s end and on transportation charges the appellant has paid duty. In the circumstance, thus hold that the appellant has correctly availed the credit on outward transportation charges. - AT
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VAT

• Court Rules Restaurants and Hotels Must Pay VAT on Liquor; No Exemption Like Liquor Shops or Wine Dealers.

  Case-Laws - HC : Validity of levy of VAT on services provided at restaurant / hotels - Claim of exemption - In his submission, if exemption is available to liquor shop or wine dealer, there is no reason why the restaurant or hotel where liquor is being provided/sold would be deprived of the benefit of exemption. - Both the contentions rejected - HC
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Case Laws:

• Income Tax

• 2016 (7) TMI 1188
  Grant of registration under Section 12A - Held that:- We are in agreement with the contention of the Ld Senior Counsel of the appellant that the activities of the appellant are under complete control of State Government having no profit motive and for the purpose of charitable activities of general public utilities therefore, the CIT(E) was not justified and correct in dismissing application of the assessee. CIT(E) dismissed application of assessee for grant of registration under section 12A of the Act, by considering the irrelevant fact and by taking a hyper technical approach and he has not followed procedure for grant of registration as prescribed under section 12AA of the Act. At the same, we observed that the appellant successfully demonstrated that it has been created by the special act of the state i.e. UPIDA 1976 for the purpose of the development of infrastructure of a specified industrial area with a predominant purpose of creating and developing facility for development of industries in the state and its legal existence is akin to a municipal corporation for development of facilities in the specified area which is a charitable activity for the welfare of public at large and thus the same is an activity of general public utility. We are satisfied that there is no prime object or aliment of earning profit as private developer or builder and activities acquiring of land and selling developed property is an incidental and profit earned therefrom has to be used towards objects of the appellant which are of charitable purposes and thus newly inserted proviso to section 2(15) of the Act, cannot be pressed into service for denial of registration under Section 12A of the Act. Finally, we are inclined to hold that the appellant is entitled for registration under section 12A (1) (a) of the Act, and thus impugned order of the CIT(E) is dismissed and he is directed to grant registration under section 12A of the Act to the appellant authority. - Decided in favour of assessee.

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• 2016 (7) TMI 1187
  TDS liability - tds on terminalling charges - segregation of agreement into purchase and works contract - Held that:- From the facts we find that in the instant case the assessee was buying the petroleum products from BRPL. Besides the above the loading services were also provided by BRPL in connection with the purchase of the petroleum product. For the loading services the assessee was making the payment separately to BRPL. The petroleum products were purchased by the assessee in bulk and regular basis for which loading facility was provided by BRPL. The assessee for availing the loading facility was making the payment to the same party from which he was buying the products i.e. BRPL. Thus the loading facility was intricately linked with the every purchase of the products. It was not possible for the assessee to purchase the products without availing the infrastructure facility of BRPL. Thus in our view it shall not be inappropriate to treat the expenses on infrastructure facility at par with the purchase. The method for the payment of infrastructure facility and entering into a separate agreement cannot be the sole basis to treat the transaction independent of the purchase. In the case on hand, the rate lump sum consideration was fixed for the infrastructure facility. No direct labour was involved in the case on hand. The claim of the assessee that other companies to whom identical payments were made by the assessee have furnished the form 197/197A of the Act for non-deduction of tax, in our view the mere furnishing of form 197A of the Act cannot change the character of the transactions. The ld. AR also submitted that in the earlier years the identical payments were made for the availing of infrastructure facilities but no disallowance was warranted. The ld. DR failed to bring anything on record contrary to the arguments advanced by the ld. AR.Therefore, in our considered view, the provision of Sec. 194C, in the instant case is not applicable to the assessee. Accordingly, we reverse the orders of Authorities Below and grounds raise by assessee are allowed

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• 2016 (7) TMI 1186
  Capital gains computation - whether on actual amount received or on the deemed amount accrued to the assessee - Held that:- . AO without disputing the fact that the actual cost of consideration of the property in question was 5,00,000/- computed the capital gains on the basis of circle rate which were at 16,43,000/-. Ld. CIT (A) has also perpetuated the error committed by the AO which is not sustainable in the eyes of law. We are of the view that on the basis of actual sale consideration of 5,00,000/- received by the assessee, the long term capital gain came to be 2,93,211/-. So in view of the decisions rendered by the Hon’ble jurisdictional High Court in case cited as Smt. Nilofer I Singh (2008 (8) TMI 165 - DELHI HIGH COURT ), we are of the considered view that lower revenue authorities have erred in computing the capital gain in the instant case on the basis of deemed cost of consideration u/s 50C whereas AO was statutorily required to compute the capital gain as per provisions contained u/s 48 of the Act on the basis of actual cost of consideration received by the assessee. Whether lower revenue authorities have erred in computing the capital gain by ignoring the fact that the assessee has invested entire capital gain in specified bonds as per section 54EC? - Held tht:- AO as well as CIT (A) have erred in computing the capital gain in this case to the tune of 11,36,211/- by computing the capital gain on the basis of deemed cost of consideration as against actual cost of consideration required u/s 48 of the Act and have also lost sight of the fact that assessee has invested the entire capital in specified bonds as per provisions contained u/s 54EC of the Act. So, we answer the aforesaid question in favour of the assessee. - Decided in favour of assessee.

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• 2016 (7) TMI 1185
  Disallowance on account of remuneration to partners - Held that:- We find that the assessee computed the remuneration as per Section 40(b) of the Act and credited 50% each to both the partners. The AO did not dispute the fact that remuneration was paid to the partners. Secondly, this amount was taxable in the hands of partners and if the same is disallowed in the hands of assessee firm then it would be result in double taxation. In view of the above facts and circumstances of the case and the case laws cited by the ld. AR of the assessee, we feel that the ld. CIT(A) has rightly directed the AO to delete the addition. - Decided in favour of assessee. Addition on account of profit element in sales returns - Held that:- It emerges from the records that the assessee furnished the details of the amounts deducted by its clients in earlier years and the same was communicated to the assessee during this year which cannot be treated as bad debt. Hence, we find no reason to interfere with the order of the ld. CIT(A) which is sustained - Decided in favour of assessee. Disallowance of transportation expenses - Held that:- We feel that the ld. CIT(A) has rightly restricted the addition towards transportation expenditure to the extent of 26,537/- considering the facts and circumstances of the case of the assessee. Hence, we find no reason to interfere with the order of the ld. CIT(A) which is sustained.- Decided in favour of assessee. Addition on account of unexplained investment in construction of hotel building - construction expenditure was determined by the DVO - Held that:- We restore the issue to the file of the AO to recompute the self supervision charges at 7.5%( as done by DVO) instead of 12.5% as determined by the by the ld. CIT(A). As regards the cost of construction, the rate of PWD, Rajasthan shall be applied instead of CPWD rates. - Decided partly in favour of revenue for statistical purposes.

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• 2016 (7) TMI 1184
  Addition in the hands of assessee’s husband on protective basis - cash available on the date of search - Held that:- The authorities below have failed to apply their mind and appreciate the evidence available with it. Paragraph No. 2 of 4.3 of CIT(A)’s order clearly points out that there is a hard disk and hard disk was found during the course of search and on the basis of hard disk, the brought forward cash of 50,88,408/- was available on 11/11/2009. If the cash of 50,88,408/- was available on the date of search, than the wisdom of the assessee to keep the cash either at residence or in the locker cannot be doubted . The revenue authority cannot challenge the wisdom of keeping the cash either at residence or at the locker and therefore, the explanation given by the assessee during the course of search and further supported by the hard disk on the basis of which the cash book was prepared, which is an admitted piece of evidence, completely negate the case of the revenue. We have no doubt that the addition made by the authorities below were without any jurisdiction and were not in accordance with law and the facts and circumstances of the case. Accordingly, the addition in the hands of the assessee is deleted. Also the addition made in the hands of assessee Smt. Santosh Ahluwalia being cash found in the locker, in our opinion is also required to be deleted - Decided in favour of assessee.

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• 2016 (7) TMI 1183
  Penalty u/s 271(1)(c) - eligibility of deduction under section 10BA - Held that:- All the material facts were duly disclosed by the assessee in its return of income. The revenue has not disputed this fact. The assessee under the bona fide belief was of the view that it was eligible for deduction under section 10BA of the Act. Under these facts, when revenue has not pointed out the deliberate act on the part of the assessee which demonstrates furnishing of inaccurate particulars or concealment of material facts, we are of the considered view AO was not justified in levying the penalty under section 271(1)(c) of the Act. - Decided in favour of assessee

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• 2016 (7) TMI 1182
  Reopening of assessment - undisclosed cash credit - Held that:- The information available with Assessing Officer was sufficient to form a primary belief that income had escaped assessment and, therefore, we don’t find any infirmity in the finding of the learned Commissioner of Income-tax (Appeals) in dismissing the ground challenging the jurisdiction in reopening the assessment. From the finding of the learned Commissioner of Income-tax(Appeals), it is evident that the assessee was provided enough opportunity to represent its case but, however, no submission was filed before the learned Commissioner of Income-tax(Appeals). In view of non-submission, the learned Commissioner of Income-tax(Appeals) decided the issues on merit and we don’t find any infirmity in the findings of the learned Commissioner of Income-tax(Appeals) on the issue in dispute, accordingly, the ground of the appeal is dismissed. Addition u/s 68 - Held that:- We find that the assessee has initially provided details in respect of the share applicants to the Assessing Officer, however, when the summons sent to the share applicants written unserved with the postal remarks that no such firms/companies existed on that address and the Assessing Officer asked to produce those parties before him, it was the onus of the assessee to either produce those parties before him or provide their new addresses as in the case of private limited companies, the shares are allotted through private circulation only. The Assessing Officer also observed deposit of cash in the bank account of the share applicant just before issue of cheques to the assessee. The Assessing Officer gathered copy of bank statements of the share applicants directly from the banks through notice under section 133(6) of the Act and pointed out discrepancy in the copy of the bank statement of one of the share applicant supplied by the assessee. The Assessing Officer also observed that the shares issued at higher premium were subsequently bought back by the directors of the assessee company at very low value. In view of all the evidences, the learned Commissioner of Income-tax (Appeals) also upheld the finding of the Assessing Officer. Thus the assessee has failed to discharge its onus in respect of the credit received in the form of share capital by the assessee of 11 lakh from the parties and, therefore, there is no infirmity in the findings of ld. Commissioner of Income- tax (Appeals) on the issue in dispute and we, accordingly, uphold the findings of the learned Commissioner of Income-tax (Appeals) on this issue. - Decided against assessee Addition on account of notional commission charged the rate of 2% on the accommodation entries obtained - Held that:- The assessee obtained accommodation entries in respect of the share capital of 11 lakh and by the preponderance of probability in the facts of the case no person will provide such entries without any payment, thus, we uphold the unexplained commission expenses paid by the assessee. However, the Assessing Officer has not given any justification for the rate of 2% on the amount of accommodation entry. We therefore in the interest of Justice restore the matter back to the file of the Assessing Officer to apply the rate of commission on the basis of any comparable case. Accordingly, this ground of appeal is allowed partly for statistical purposes.

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• 2016 (7) TMI 1181
  Claim for deduction u/s. 80HHC in respect of the gains arising on maturity of foreign contracts - Held that:- As by following the decision of Hon’ble jurisdictional High Court rendered in the case of M/s Shah Originals (2010 (4) TMI 216 - BOMBAY HIGH COURT ), we hold that the Ld CIT(A) was justified in holding that the income arising from foreign exchange forward contract is not eligible for deduction u/s 80HHC of the Act, since it cannot be considered to be an income derived from export of goods or merchandise. - Decided against assessee.

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• 2016 (7) TMI 1180
  Disallowance of depreciation on capitalization of software development - Held that:- As the assessee is a software development company and the cost of the development of the software is an intangible asset and the product license are IPR’s. In view of the provision of the Act and AS-26 and further the fact that the cost of development of the software is an intangible asset and the IPR’s is the product, license is not in dispute, therefore, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals) to make the impugned addition. Addition made on account of sales of dollar being suppressed sales as per agreement with 3i Infotech - Held that:- Commissioner of Income Tax (Appeals) justifiably considered the agreement specially the terms and conditions as has been considered in para 4.2 of the impugned order and then reached to conclusion. The working mentioned in para 4.2 is exactly in terms of the agreement, wherein, no contradiction was pointed out by the department. Neither the ld. Commissioner of Income Tax (Appeals) found any suppression of sale nor anything was pointed before us. Even otherwise, nothing was brought on record by the Revenue evidencing that the project was completed during the year itself, thus, we affirm the stand of the ld. Commissioner of Income Tax (Appeals).This matter was kept for clarification by the Bench with respect to the front end commissions and as per the facts as emerging from the records, orders of the authorities below and statements and submissions as made by both the counsels, we are of considered view that the front end commission as are paid by the assessee company to M/s 3I Infotech, Dubai , the pith and substance of the agreement of the assessee with the foreign agent M/s 3I Infotech, Dubai is for arranging export order of software in favour of the assessee company and since it could not be brought on record by the Revenue that services were rendered from or in India by the said foreign agent i.e. 3I Infotech nor it could be brought on record that any technical services or technical knowhow or technical expertise, experience or expertise is provided by the 3I Infotech, Dubai and also the front commission pertains to the period prior to the new circular no. 7/2009 dated 22.10.2009, we hold that there was no liability on the part of the assessee to deduct tax at source on the said payment u/s 195 of the Act and the AO erred in invoking the provisions of Section 40(a) of the Act read with Section 195 of the Act. We confirm the orders of the CIT(A). Addition made on account of unaccounted sales - Held that:- Commissioner of Income Tax (Appeals) justifiably examined the documentary evidence filed by the assessee (Para 5.2 of the impugned order), terms of the agreements, and found that 50% of the payment were to be received on implementation. The contract was signed on 27/03/2008 and up to 31/03/2008, there was no implementation of work rather the work started on 01/04/2008 for which invoice for USD 70000 was raised which is 50% of USD 1,40,000. It is also noted that in case of product, License Company and accounting of the Revenue is based on percentage completion of work method. We find no suppression of sale as has been alleged by the Revenue. We have also perused and analyzed the agreement entered into between the parties and found that practically no work was commenced in the month of March, thus, no addition was warranted. Rejection of books of accounts - Held that:- The books of accounts were rejected by the ld. Assessing Officer on the plea that accounting standard were not complied with by the assessee. However, we note that the books of accounts were audited by M/s Delloitte Haskins, one of the big audit firms, who have not commented anything adverse/deviation in their audit report, thus, we find no infirmity in the conclusion of the ld. Commissioner of Income Tax (Appeals). Addition to the cost of software development cost by treating the proportionate value of incidental expenses - Held that:- Assessing Officer has not pointed out any infirmity in the explanation of the assessee. The totality of facts, clearly indicates merits in the contention of the assessee and as canvassed by the assessee, the ld. Assessing Officer made the addition to the cost of treating the proportionate value of incidental expenses ignoring the standard practices adopted by the assessee. In view of the explanation of the assessee, we allow this ground and more specifically when for earlier assessment year, the department had been accepting the claim of the assessee and in the impugned year, no contrary facts were brought on record.

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• 2016 (7) TMI 1179
  Disallowance of depreciation - CIT(A) delted the addition admitting additional evidence - Held that:- A reading of Rule 46-A(2) 5,01,470/- were capitalized in the books of accounts and not claimed in the profit and loss account and how those charges can be linked to the use of machineries on which depreciation is claimed by the Assessee. It also needs to be examined as to whether the power 1,75,340/- was sufficient to carry out the job work charges claimed by the Assessee. For the reasons given above, we are of the view that the order of the CIT(A) on this issue requires to be set aside and the issue needs to be looked into afresh by the AO in the light of the observations as set out above. We hold and direct accordingly. The AO will afford opportunity of being heard to the Assessee before deciding the issue. - Decided in favour of revenue

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• 2016 (7) TMI 1178
  Disallowance of Interest on borrowings - Held that:- The assessee’s borrowing was for the purposes of business as the same were utilised for advancing security deposit of 2,00,00,000/- for taking on leave and license basis shop on monthly license fee by the assessee for setting up jewellery outlet as an expansion of the existing business of dealing in gold and diamond jewellery , and interest of 7,23,050/- incurred on the said borrowings is incurred wholly and exclusively for the purposes of business as per the facts emerging from records, is an allowable revenue expenditure. We therefore order the deletion of addition of 7,23,000/- made to the income of the assessee by the AO as confirmed by the CIT(A). - Decided in favour of assessee Addition on account of rent - Held that:- The assessee has not made provisions of rent in the books of accounts as per terms of agreement and the issue is also not referred to Courts as per terms in the leave and license agreement , the assessee having coming forward with an explanation that no rent is payable as the licensor has not fulfilled the terms of leave and license agreement by delaying the construction of the layout structure of the shop , but it not conclusive enough to fasten tax liability on the assessee. It was starting point for the authorities below to start an enquiry to prove that payments have been made by the assesssee out of books and to disprove the contentions of the assessee and to fasten the liability on the assessee but no such enquiry has been conducted by the revenue and the assessee has also not brought on record clinching evidences to support and substantiate its contentions. Hence, we are of the considered view based on the facts and circumstances of the case that the matter need to be set aside and restored to the file of the AO for de-novo examination and adjudication of the issue on merits after granting opportunity of being heard to the assessee in accordance with the principles of natural justice and in accordance with law. - Decided in favour of assessee for statistical purposes. Addition on account of expenses such as stamp duty, registration fees and other miscellaneous charges - Held that:- no enquiry has been made by the Revenue and only estimation has been made on ad-hoc basis. The stamp duty charges as appearing in the leave and license agreement being cost of stamp paper are only 2000/- and the stamp paper was purchased on 28.05.2004 for 2000/- as per records, no other evidence/details are appearing on record regarding incurring of any further expenses by the assessee and the AO has estimated the same on ad-hoc basis without any working or basis of the same to come to conclusion that the expenses of 50,000/- are incurred by the assessee. In our considered view suspicion cannot take the place of proof. No enquiry has been conducted by the AO to disprove the contentions of the assessee nor the assessee has brought on record any evidences to support his contention that the expenses have been incurred by the licensor by way of confirmation from licensor etc. In our considered view, the matter need to be set aside and restored to the file of the AO for de-novo examination and adjudication of the issue by the AO - Decided in favour of assessee for statistical purposes.

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• Customs

• 2016 (7) TMI 1164
  Provisional release of goods - undervaluation - declaration of goods evasion of duty - import of branded goods declared as unbranded - import of mobile accessories, parts, memory card adaptor, plastic watches, tempered glass and mobile phone LCD - Petitioner states that it kept requesting for a copy of the entire panchnama as well as for the release of the goods, but did not receive any response. Held that:- The power of seizure under Section 110 of the Act has to obviously be exercised for valid reasons. The proper officer has to record his reasons to believe that the goods that he proposes to seize are liable to confiscation. The said reasons for exercise of the power have to be recorded prior to the seizure. In the present case, as already noticed, apart from the panchnama, there is no separate order passed under Section 110(1) of the Act by the proper officer recording the reasons to believe that the goods are liable for confiscation. Since till date no other order exists and no such order has been communicated to the Petitioner, it is not possible to accept the plea of Mr. Agarwala, learned counsel for the DRI, that the 'detention' of the goods by the DRI was with the authority of law and in any event should be treated as a seizure in terms of Section 110(1) of the Act. The net result is that the detention by the DRI of the goods imported by the Petitioner under the aforementioned B/E from 13th May, 2016 onwards is entirely without the authority of law. . The Customs will proceed to inspect the goods and assess the B/E. In other words, the grant of NOC by the DRI to the further course of action to be taken by the Customs has to be presumed. At the time of assessing the B/E, however, the concerns expressed by the DRI, as set out in para 13, 14 and 15 of the affidavit of Mr.. S.K. Mishra, will be kept in view by the Customs. Once the B/E is assessed and the duty, as assessed is paid by the Petitioner, the goods will be released to it subject to whatever conditions the Customs might want to impose for such release. - Decided in favor of petitioner.

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• 2016 (7) TMI 1163
  Import of gold chains and cigarettes - failure to declare - passing through green channel - import of baggage rules - The petitioner submitted a representation to the 2nd respondent on 25.04.2016 seeking for implementation of the order of the Commissioner (Appeals) and also stating that he intends to re-export the seized gold. This representation was not considered and therefore, the petitioner sent another reminder on 31.05.2016. Since the petitioner was not favoured with any order, he is before this Court by way of this writ petition. Held that:- Admittedly, as on date there is no order of stay granted by the Revisional Authority. Therefore, the 2nd respondent is bound to implement the order passed by the 1st respondent. But, however, this Court is inclined to grant some time to the Department to move an application for stay if they so desire. Accordingly, the 2nd respondent/Customs Department is granted 30 days time from the date of receipt of a copy of this order to move a stay application before the Revisional Authority and if they fail to secure any stay, on the expiry of the 30th day, the respondents shall release the gold subject to the petitioner paying the fine of 1,10,000/- and the personal penalty of 36,000/- and such release shall be only for re-export and not for clearance.

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• 2016 (7) TMI 1162
  Release of Import of gold jewellery seized - Commissioner (Appeals) allowed the appeals and directed the jewels to be returned and imposed a penalty of 10,000/- on each of the three writ petitioners. Since this order was not implemented, the petitioners have come up with the above writ petitions. - Held that:- it is seen that the orders were passed by the Commissioner (Appeals) in September 2015, they have been dispatched on 17.10.2015 and the petitioners received the same. However, the respondents seek to take note of the date of receipt of the orders by the Review Cell i.e. 3.2.2016. Be that as it may, till date, the orders passed by the Commissioner (Appeals) have not been reversed or modified or stayed and even according to the respondents, the Review Cell received the orders on 3.2.2016, but they did not take any steps to file revisions till May 2016. Therefore, this is a fit and proper case where a direction should be issued to the respondents to implement the orders passed by the Commissioner (Appeals) subject to certain other conditions also. - Decided in favor of petitioners.

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• 2016 (7) TMI 1161
  Refund - Levy of anti-dumping duty - import of 1.9 mm clear float glass from China - According to the petitioner, since the goods were not being cleared, the petitioner under duress and under protest, deposited the said sum of 3,72,790/­ on 14.05.2015 with the Customs Authorities. However, since according to the petitioner, no anti­dumping duty was leviable on the product which was imported, the petitioner applied to the authorities to refund such sum, which was unauthorizedly collected from the petitioner. Held that:- the department has not produced any document suggesting that anti­dumping duty was leviable on the product in question imported from China. The petitioner's assertions before the authorities as well as in the petition in this respect have not been disputed by the department at any stage. When a duty is collected wholly without authority of law and therefore, without jurisdiction, the question of alternative remedy becomes insignificant, to suggest that the order passed by the Deputy Commissioner dated 26.08.2015 is appealable is not quite correct. It is a mere communication refusing the petitioner's request for refund on the ground that he has no power to suomotu allow refund and it is not an order which is appealable. Even if it were to be so, we would have exercised our jurisdiction to strike down the same. Refund to be granted with interest - Decided in favor petitioner.

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• 2016 (7) TMI 1160
  Provisional release of goods - violation of orders of the high court - it was submmited that there is a complete breach and violation of this Court's order and direction. It is a mockery that instead of passing an order pursuant to the appearance of the petitioner, the Principal Chief Commissioner has allowed some body who not of the same rank, but in the department to address such communications and pre-judge the issue. Held that:- In the peculiar circumstances and expressing our strong displeasure we have taken up the request of Mr. Kantawala ourselves. We find that the good are lying with the Customs from November, 2015. Till date, there was no prohibition or any restraint on the department to pass an order of provisional assessment or to issue show cause notice and take up the adjudication proceedings themselves. Now allowing them to again consider the request for provisional release of goods and pass an order in that regard would be an exercise in futility. Now that everything is disclosed and placed before this Court, we do not think that any further time should be wasted. The consignment lying with the Customs serves nobody's purpose. - Writ petition disposed off with directions.

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• Corporate Laws

• 2016 (7) TMI 1155
  Winding up proceedings - Held that:- No attempt has been made in the present proceeding to show how the materials now being relied upon so substantially undermine the findings in the previous orders as to justify a modification of those directions. The letters are part of the record; ABN Amro’s explanation is of no consequence, given that DAAI had remitted the amount towards services rendered. In the opinion of this Court, the learned Single Judge cannot be faulted for refusing to vary the directions in the previous order, because the materials - i.e. income tax orders, unrelated Company Law Board proceedings, etc. do not show that the basis or substratum of the previous judgment has eroded. The Company Law Board proceedings do not concern the viability of DAIL; they relate to the management of other companies and the alleged misfeasance of individuals including Palaniswamy; he appears to have been incarcerated for some time. The orders made in criminal proceedings, similarly reflect the merits of the contentions made there. Their relevance in determining whether the amounts received in DAIL’s no lien escrow account, which was permitted with the secured creditor’s permission (on the representation that it would be used to receive investor’s contributions) from its subsidiary for services rendered are not really so. As noticed earlier, all indications are to the contrary. The explanation now sought to be given, i.e. that Odyssey made over the amounts to DAAI, as part of a conditional loan, do not detract from the inferences justifiably forming the basis of the previous judgment of 18.11.2005.

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• Service Tax

• 2016 (7) TMI 1177
  Levy of penalty - It was contended that on merits Appellant had a good case, but to buy peace this issue was not agitated on merits and amount along with interest was paid. - issues pertaining to eligibility of Cenvat Credit - duty paying documents - invoices in the name of head office - Held that:- So far as non-imposition of penalty for credits taken with respect to telephonic services and certain improper documents in the name of head office it is observed that Appellant is not contesting those issues and have paid these amounts. Penalties imposed under Section 78 of the Finance Act, 1994 is required to be set aside as there are conflicting case laws on these issues. - No penalty - Decided in favor of assessee.

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• 2016 (7) TMI 1176
  Business Auxiliary services - income from ocean freight is more than the ocean freight expenses. - It appeared to the Department that service tax was not paid on ocean freight charges and that further, ocean freight charged and collected from the shipper was more than the ocean freight amount paid to the shipping lines. - It was also appeared to the Department that services provided by the appellant to SEZ units were also liable for service tax liability. Held that:- the predominant part of the demand viz. that relating to service tax held as payable on the reimbursable amounts, being covered by the cases referred to by the learned advocate for the appellant. We also find that Mumbai Tribunal order in the case of CCE, Goa Vs. Machado 10 lakhs during investigation. In the circumstances, we find that balance of convenience lies in favour of the appellants in the matter of stay and we, therefore, order full waiver of pre-deposit beyond the 10 lakhs already deposited by them. There will be stay of recovery in the matter pending disposal of the case.

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• 2016 (7) TMI 1175
  Refund of un-utilized cenvat credit - brought forward of credit - determination of amount to be refunded for export of services for the relevant period - amount of CENVAT credit restricted as per service tax return for the quarter - Rul 5 of CCR - export of Information Technology Software Services during the period April-June,2012 - Held that:- It was held in the case of WNC Global Ltd [2015 (11) TMI 905 - CESTAT MUMBAI] that for the purpose refund, Cenvat credit of any particular quarter will include the amount of brought forward credit as well from the earlier quarter therefore following the ratio of the said decision, even though credit was availed in February 2012 the same was lying in the balance as on 31 March, 2012, the same was carried forward to April, 2012 and therefore opening balance of April, 2012 will also be included for the purpose of taking the net Cenvat credit in the quarter April-June, 2012. It is also pertinent that undisputedly entire services of the appellant are exported, in such case entire Cenvat credit availed by the appellant has to be refunded to them. It is also pertinent that undisputedly entire services of the appellant are exported, in such case entire Cenvat credit availed by the appellant has to be refunded to them. In my view the formula provided in the notification for calculation of refund amount is workable only in a situation when the assessee is engaged in the provisions of services which are exported as well as provided in the domestic market. For this reason also the appellant being 100% exporter of services is entitle for the refund of brought forward amount of 6,12,463/- Refund allowed - Decided in favor of assessee.

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• 2016 (7) TMI 1174
  Refund of unutilized cenvat credit - export of services - input services - service tax paid on the premium charged on group insurance scheme - Held that:- it appears that tax paid on insurance premium is eligible for availment as CENVAT Credit and the short-point for determination is the extent to which the premium does not relate to coverage of employees under the group insurance scheme. In the instant case, the appellant is charged with a premium which does not vary with the number of dependents who are additionally covered by the same insurance scheme. In other words, even if none of the dependents were within the coverage, the premium amount would not alter or vary. Accordingly no part of the premium can clearly be distinguishable as or attributable to the extension of coverage to family members. - Credit allowed - Decided in favor of assessee.

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• Central Excise

• 2016 (7) TMI 1173
  Demand of rebate erroneously sanctioned - Held that:- The rebate was duly sanctioned. However, the Department subsequently found out that the rebate claim was submitted on the basis of forged documents. Detailed investigation revealed that no export has taken place in respect of six of the shipping bills, and in other cases, exporters names were different. It is also observed that the learned Counsel appearing for the Appellants in the Adjudication proceedings concluded that there was nothing to submit on merit of the case. He only argued the matter before the Adjudicating authority on the grounds of time bar and legal maintainability of the Show Cause Notice. We find that the rebate has been claimed by fraud. As fraud vitiates everything and Show Cause Notice issued within extended period of five years is clearly sustainable. - Decided against assessee.

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• 2016 (7) TMI 1172
  Redemption fine and penalty imposed - clandestine removal of goods - non recording of shortage in their statures records - Held that:- In this case, upto 22.12.2010, the stock as per books was 366.184 MT but the goods found short of 124.302 MT having the value of 40,64,675/- which are to be included in the value of the clearance. If the same is done, the clearance of the appellant exceeded the threshold limit of 1.5 crore as per Notification No. 8/03-CE dated 1.3.2003. Therefore, the appellant was required to be registered on the said date and the appellant has not applied for registration, therefore, I do not any infirmity in the allegation against the appellant made by the Revenue that the goods weighing 211.882 MT in physical stock are meant for clandestine removal. In the circumstances, thus hold that the goods found in physical stock are liable for confiscation. In that circumstance, the redemption fine and penalty imposed on the appellant are highly excessive, therefore, the redemption is reduced to 1 lakh (one lakh) and penalty to 50,000/- (fifty thousand).

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• 2016 (7) TMI 1171
  Input service credit on the activity of unloading and shifting the goods in the premises of the buyer denied - Held that:- As per purchase order, the appellant was required to supply the goods at the premises of M/s Maruti Udyog Ltd. These facts are not in dispute therefore, any expense incurred by the appellant till the goods are delivered in the godown of M/s Maruti Udyog Ltd, the appellant is entitled to avail cenvat credit thereon. In these circumstances, the service of contractor availed by the appellant for unloading and shifting the goods in the godown of M/s Maruti Udyog Ltd. are entitled to input service credit. Therefore appellant has correctly availed cenvat credit on the activity of unloading and shifting of the godown of the goods - Decided in favour of assessee.

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• 2016 (7) TMI 1170
  Benefit of cenvat credit of service tax paid on the GTA services on outward transportation of the finished goods denied - Held that:- Outward transportation of the finished goods is an activity relatable to the assessees business and as such, service tax paid on the same would be admissible as cenvat credit. - Decided in favour of assessee

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• 2016 (7) TMI 1169
  Assessable value of the sleepers - inclusion of inspection charges collected from the Railways and paid to RITES -Held that:- We find that the issue is no more res integra and settled by the Larger Bench of the Tribunal in the case of Commissioner of Central Excise Vs. Bhaskar Ispat Pvt. Ltd. (2004 (3) TMI 102 - CESTAT, NEW DELHI ). It stands concluded in the said decision that the inspection charges paid to Rites on behalf of the Railways are not includible in the assessable value.

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• 2016 (7) TMI 1168
  Refund claim - Appellant has discharged duty on the molasses used in manufacture of ethyl alcohol while being processed for ethyl alcohol, the industrial alcohol that came out has suffered duty - prayer of the appellant is that the output (industrial alcohol) which has suffered duty should be set off against the input duty paid on molasses - Held that:- Commissioner confused without going into detail as to whether the molasses suffering duty has given rise to the dutiable product called industrial alcohol and non-dutiable product called portable alcohol and whether the industrial alcohol has suffered duty. For the misconception of the fact by the appellate authority, justice is to be advanced to the appellant since the facts are as narrated above remained disputed by Revenue. In view of the established fact as argued by appellant and also appreciating the jurisprudence of cascading effect appellant is entitled to refund to the extent the refund flows upon adjustment of duty paid on molasses used for manufacture of dutiable output and duty therein paid. In the result, all the five appeals are allowed and refund is to be allowed by Adjudicating authority in accordance with law. - Decided in favour of assessee.

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• 2016 (7) TMI 1167
  CENVAT credit claimed on the transport service availed to bring the workers to their factory site - Held that:- When the nexus and integral connection of input with the manufacture comes out, it would not be proper to entertain Revenue appeal since no evidence has come from Revenue to impeach the order of the Commissioner (Appeals). Such decision can be taken following the ratio laid down by the Apex Court in the case of Ramala Sahkari Chini Mills Ltd. Vs. Commissioner of Central Excise, Meerut (2010 (11) TMI 34 - SUPREME COURT OF INDIA ). There is no finding by the authority as to the absence of the nexus between the manufacture and the input service.Revenue has no material to contradict above proposition of the respondent. Accordingly, respondent is also entitled to CENVAT credit of the air travel agency service availed by it. - Decided in favour of assessee.

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• 2016 (7) TMI 1166
  Excisablity - rectified spirit which is manufactured from molasses - entitlement to exemption notification 67/95-CE dated 16.3.1995 - waiver of predeposit - Held that:- Considering that the matter is of legal interest and interpretation of the statute and also keeping in view the order of the Tribunal and also the Apex Court’s decision in of Commissioner Vs. Sakthi Sugars Ltd. (2016 (1) TMI 16 - SUPREME COURT OF INDIA ) as well as the deposit stated above to have been made, subject to verification by Revenue, there shall be waiver of predeposit of balance amount during the pendency of the appeal. So far as early hearing application is concerned, since stay application has been disposed today that has become infructuous and disposed accordingly.

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• 2016 (7) TMI 1165
  CENVAT credit on outward transportation charges - denial of claim on the premise that the appellant has not complied with the condition of CBEC circular No. 97/8/2007-ST dated 23.8.2007 - Held that:- It is a fact on record that the appellant has submitted all the documents i.e. purchase order and invoices before the adjudicating authority in reply to the show cause notice. However, the finding of the Commissioner (appeals) that the appellant has not produced evidence to support their claim, is not tenable. As the appellant produced all the documents to comply with the condition of CBEC circular No. 97/8/2007-ST dated 23.8.2007. The adjudicating authority was duty bound to consider the same and was required to pass appropriate order As examined the reply to the show cause notice and the documents produced by the appellant in support their claim. The said documents qualify the condition of CBEC circular No. 97/8/2007-ST dated 23.8.2007. As such the appellant was duty bound to supply the goods at the buyer’s end and on transportation charges the appellant has paid duty. In the circumstance, thus hold that the appellant has correctly availed the credit on outward transportation charges. - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2016 (7) TMI 1159
  Reversal of input tax credit (ITC) - local purchases from registration cancelled dealers - Held that:- the exercise of jurisdiction of the Assessing Officer is ex-facie arbitrary and illegal. - Decided in favor of assessee.

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• 2016 (7) TMI 1158
  Detention of goods to verify the genuineness - vehicle carrying prefabricated steel structurals and other allied articles - movement of goods from Andra Pradesh to Tamil Nadu - Held that:- It is not disputed by the respondents that the goods were accompanied with the documents mentioned in Section 69. Furthermore, the respondents does not dispute that the goods moved from State of Telangana to Tamil Nadu. In such circumstances, when there is no doubt that the transaction is an interstate transaction, then, in terms of Section 9(1) of the CST Act, the tax so leviable on the transaction shall be collected by that Government in accordance with sub-section (2) of Section 9 in the State from which the movement of the goods commenced which in the instant case is State of Telangana. Therefore, the impugned Goods Detention notices are liable to be set aside.

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• 2016 (7) TMI 1157
  Validity of levy of VAT on services provided at restaurant / hotels - Claim of exemption - In his submission, if exemption is available to liquor shop or wine dealer, there is no reason why the restaurant or hotel where liquor is being provided/sold would be deprived of the benefit of exemption. Another contention raised by the learned Counsel for the appellant was that under Karnataka Value Added Tax Act, 2003 (herein after referred to as the Act), there is no power to levy tax on the services provided, or the extra charges levied by the bar and restaurant for the liquor being served together with the refreshments or without refreshments. Held that:- It is well settled that when the exemption is to be claimed, strict interpretation would be called for. Further, if the exemption is assailed or the exemption is denied to a particular class of the persons or the dealer, the test would be, whether there was reasonable classification made out and whether such classification is based on intelligible differentia or not. The liquor or wine is subjected to tax at a different price and different consideration to the consumer in contra distinction to a sale by a dealer to a consumer of liquor or wine in a packed form of bottle or container. Under these circumstances, the classification made by the Legislature while granting exemption cannot be said to be on irrational basis, but it can be said that the dealer of liquor or wine is not similarly situated as that of the owner of bar and restaurant with C.L.9 licence, because as we recorded earlier, the manner of sale in a packed product, that too in an intact condition as made by the manufacturer, cannot be equated, nor can be said to be similarly situated with the person who is vending liquor or wine by holding C.L.9 licence in a bar and restaurant. When we find that there is a rational classification with the intelligible differentia, this Court cannot substitute its own reason, unless the Court finds that such classification is highly irrational or there is no any intelligible differentia at all.’ In the present case, we do not find that such condition is satisfied. Therefore, the contention raised for discrimination in the grant of exemption cannot be accepted. As recorded by us herein above, what is being marketed by applying the test of common parlance, is the peg/s of the liquor or wine and not a bottle of wine or liquor in packed form. Hence, we find that applying the test of common parlance, it cannot be said that the State has indirectly tried to levy tax for the services provided or the ambience provided by the person holding C.L.9 licence for vending liquor or wine or fenny or beer. Hence, we find that the said contention also cannot be accepted. Decided against the assessee.

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• 2016 (7) TMI 1156
  Levy of penalty - delay in payment of tax - Held that:- . The mere non payment of tax would not be sufficient to attract Section 8(b) of the Lodging Houses Act for the purpose of levying penalty. The authority should specifically record the finding that the non payment of dues was without sufficient cause and was on account of negligence. Further more, the authority in a single line rejected the reason given by the petitioner for not making payment of tax on time, by stating that cause given by the appellant is not sufficient cause. - Penalty order quashed.

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