TMI Tax Updates - e-Newsletter
July 6, 2018

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws PMLA Service Tax Central Excise CST, VAT & Sales Tax Wealth tax

Articles

1. ARBITRATOR’S POWER TO PROCEED ex parte

   By: DR.MARIAPPAN GOVINDARAJAN

2. RECENT ADVANCE RULINGS IN GST (PART-3)

   By: Dr. Sanjiv Agarwal

News

1. Exchange Rate of Foreign Currency Relating To Imported and Export Goods Notified

2. RBI Reference Rate for US $

3. Competition Commission of India (CCI) launches an Online Guidance System for determining notifiability of Merger & Acquisitions in terms of the Competition Act, 2002

Notifications

Customs

1. 60/2018 - dated 5-7-2018 - Cus (NT)

Exchange Rates Notification No.60/2018-Custom(NT) dated 05.07.2018

GST - States

2. 11/2018 - dated 28-5-2018 - Karnataka SGST

Seeks to amend notify levy of Priority Sector Lending Certificate (PSLC) under Reverse Charge Mechanism (RCM).

Circulars / Instructions / Orders

GST - States

1. NO.C1-2697/2018/CT - dated 12-6-2018

In order to clarify the nomination of state nodal officer.

2. No. GST-04/2018-19 - dated 30-5-2018

Clarifications on refund related issues — reg.

DGFT

3. Trade Notice No. 19/2018-19 - dated 5-7-2018

Implementation of Notification No.04 dated 25.04.20 18 - reg.

Highlights / Catch Notes

GST

• GST Applies to Tripartite Agreements: Developer's Compensation for Alternate Accommodations or Delayed Handover Considered Taxable Supply.

  Case-Laws - AAR : Levy of GST - Tripartite agreement - taxability of services - scope of 'supply' - Alternate accommodation to be paid to the tenant of the old building by the developer/owner - compensation for alternate accommodation / damages for delayed handover of possession of the new premises - Levy of GST confirmed.
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Income Tax

• Income Tax Act Section 56(2)(vii)(a): Revenue can't label a loan as a gift between parties to avoid tax inconsistency.

  Case-Laws - AT : Addition u/s 56(2)(vii)(a) - When the revenue has accepted the amount as loan in the hands of other party, the Revenue cannot take up a contrary stand and treat the same loan in the hands of the assessee as a gift or a sum received without consideration taxable u/s56(2)(vii)(a)
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• No Penalty Imposed: Unexplained Advances Not Considered Income u/s 271AAB; Impact on Turnover Assessment Discussed.

  Case-Laws - AT : Penalty u/s 271AAB - need to maintain the books of account u/s 44AA - determination of turnover - unexplained advances - The amount of advance itself is not in the nature of income though the source of the advances can be added to the income of the assessee - No penalty
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• Tax Settlement Rejected Due to Payment Shortfall; Adjustment Request Overlooked, Contrary to Chapter IIXA's Purpose for Facilitating Settlements.

  Case-Laws - HC : Rejection of an application for settlement of case - short fall in payment of tax and interest - request for adjustment with refund amount was not considered - application ought not to have been rejected on such technical ground, bearing in mind the object and purpose for which Chaper IIXA was inserted in the Income Tax Act.
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• Reassessment Based on Special Privilege Fee Difference Invalid; Retrospective Government Orders Determine Correct Fee.

  Case-Laws - HC : Additions towards difference in SPF [Special Privilege Fee] paid and admissible - the subsequent Government orders will have to be taken into consideration for arriving at the SPF payable for the said year - to be applicable with retrospective effect - Reopening of assessment is not valid.
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Customs

• Extended Limitation Period for 100% EOU Under Customs Act Section 14 Requires Detailed Fact and Law Analysis.

  Case-Laws - HC : 100% EOU - Extended period of limitation - escapement of assessment u/s 14 of the Customs Act, 1962 - The question of limitation is a mixed question of fact and law. It is not purely a question of law. The said question cannot be decided summarily without considering the materials available on record.
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Service Tax

• Service Tax Demand on Rent-a-Cab, Air Travel, and Parking Charges Overturned by Tribunal Decision.

  Case-Laws - AT : Demand of service tax - Rent a Cab Services - Air Travel Agency Services - Parking charges which their travel desk had collected from customers who were provided with Rent-a-Cab Services - demand set aside.
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• Service Tax on Mould Manufacturing Deemed Unjustified Under Design Services Category, Section 65(105)(zzzzd) Finance Act 1994.

  Case-Laws - AT : Service or manufacture? - The activity undertaken by the appellant is nothing but the manufacture of moulds and hence levy of service tax on such amount under the category of design services under Section 65(105)(zzzzd) of the Finance Act, 1994, is not justified.
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• Crane Hiring, Sludge Removal, and More Not Classified as Construction Service for Tax; Evaluate Contracts Individually.

  Case-Laws - AT : Classification of services - some contracts are for hiring of crane, removal of sludge, excavation of river channel, labour supply, replacement of equipment, cleaning activities, replacement of equipments/valves and some fabrication works. All the independent contracts cannot come under the purview of Construction Service.
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• Tax Ruling: Technical and Marketing Services to GDPL Not Classified as Business Auxiliary Services Under Tax Law.

  Case-Laws - AT : Business Auxiliary Services - While providing any technical know-how, the specifications, marketing strategies and even providing promotional services to GDPL, appellant is actually providing those services to self - The same cannot be categorised as Business Auxiliary Service.
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• Settlement Application Denied: Service Tax Demand and Cenvat Credit Eligibility Unresolved Due to Missing Final Verification Report.

  Case-Laws - HC : Rejection of settlement application - demand of service tax and eligible of Cenvat Credit - For any inaction on the part of Revenue to submit Final Verification Report, the petitioners cannot be made to suffer.
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Central Excise

• Products Kelp-G Purakelp EC, K-Humate 3% Granules, and Multiplex-G-Purakelp & K-Humate classified as vegetable bio-fertilizers, not PGRs.

  Case-Laws - AT : Classification of Kelp-G Purakelp EC, K-Humate 3% Granules- K-Humate and Multiplex-G-Purakelp & K-Humate - plant growth regulators (PGRs) or vegetable bio-fertilizer - the products are not plant growth regulators.
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• Appellant Challenges Confiscation of Goods and Redemption Fine, Admits to Clandestine Removal for Duty Evasion.

  Case-Laws - AT : The appellant are only contesting confiscation of raw material, packing material and finished goods and imposition redemption fine. It clearly shows that the appellant have accepted that there was clandestine removal of the goods and there was malafide intent to evade payment of duty.
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• CENVAT Credit Denied: Compressor at Gas Well 30km Away Not Part of Factory Premises Under Definition.

  Case-Laws - AT : CENVAT Credit - scope of 'Factory' - capital goods - Whether the compressor used at the gas well to pump gas into tankers which is about 30 K.M. away from the manufacturer can also be considered as a part of the factory premises of the appellant? - Held No - Credit not allowed.
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• CENVAT Credit Disclosure: Appellant's ER-1 Form Lacked Detailed Components, Demand Confirmed Using Extended Limitation Period.

  Case-Laws - AT : CENVAT Credit - extended period of limitation - The appellant had disclosed the full value of the credit which they have taken in the ER-1, but they have not disclosed the components of the credit which they have taken. The ER-1 during the relevant period also did not provide details of the credit taken - Demand confirmed invoking extended period of limitation.
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• Court Confirms Rejection of Valuation in Related Party Transactions Due to Interdependence and Facade of Corporate Entities.

  Case-Laws - AT : Valuation - related party transaction - there is interdependence between the appellants - it has to be held that leave about mutuality of interest, all the companies were one and the same managed by one person; corporate entities are created as a façade - Rejection of valuation confirmed.
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• Appellants improperly claimed CENVAT credit on services for non-taxable activities, violating Cenvat Credit Rules, 2004.

  Case-Laws - AT : CENVAT Credit - manufacturing as well as trading activity - The appellants should not have availed any credit on input services when such services are attributable to an activity which is not at all taxable and hence, not covered by the scope of Cenvat Credit Rules, 2004.
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VAT

• KVAT Liability Confirmed: Banks Taxed on Sale of Repossessed Vehicles, Even Without Ownership at Sale Time.

  Case-Laws - HC : Liability of KVAT on the proceeds realized from the sale of hypothecated vehicles - The Bank is not the owner of the vehicle at the time of sale. But however, after re-possession, sells the vehicles and effects transfer and delivery of the goods (vehicle) to the purchaser after receiving consideration - Levy of tax on Bank confirmed.
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Case Laws:

• GST

• 2018 (7) TMI 227
  Levy of GST - Tripartite agreement - taxability of services - scope of supply - Alternate accommodation to be paid to the tenant of the old building by the developer/owner - compensation for alternate accommodation / damages for delayed handover of possession of the new premises. Is GST applicable on the compensation for alternate accommodation to be paid to me (the tenant of the old building) by the developer/owner? - Held that:- For vacating the said premises, the applicant has received/is to receive compensation from the developer - the act of vacating premises for facilitating the developer implies that the applicant has agreed to do an act and such act, of vacating the premises, by the applicant, squarely falls under clause 5(e) of the Schedule II mentioned above and therefore the amounts received by the applicant for having agreed to do such an act, would attract tax liability - Answered in the affirmative. Is GST applicable on the compensation for alternate accommodation / damages for delayed handover of possession of the new premises to be paid to me (the tenant of the old building) by the developer/owner? - Even during the period of redevelopment, the applicant remains a tenant of the owners of the old premises and continues to pay them due rent @ Rs. 5,000/- per month. However in lieu of they vacating the rented premises for redevelopment as per the agreement of redevelopment as referred above, the applicant is agreeing to the obligation to the obligation to refrain from an act or tolerating an act or situation of redevelopment in place of old premises and of not causing hindrance or creating obstacle in the same - the receipt of amounts towards alternate accommodation or delayed possession of premises would be receipt of amounts for doing an act i.e. vacating the premises for redevelopment as well as tolerating the construction cum redevelopment work till possession of new redeveloped premises as per agreement and further for tolerating an act i.e the act of not having completed the redevelopment work within 36 months. In view thereof, the same would definitely be a supply under the GST Act and therefore, there arises an occasion to levy lax under the GST Act on the impugned transactions - Answered in the affirmative. Ruling:- GST is applicable on the compensation for alternate accommodation received by them. GST is applicable on the compensation for alternate accommodation/ damages for delayed handover of possession of the new premises received by them.

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• Income Tax

• 2018 (7) TMI 229
  Non deduction of tds u/s 194A - assessee had paid an interest to its members where the individual payment to members exceeded Rs. 10,000/- p.a. - Held that:- Provisions of the section 194(3)(v) of the Income-tax Act have been amended so as to expressly provide that the exemption provided from deduction of tax from payment of interest to members by a co-operative society under Section 194A(3)(v) of the Income-tax Act shall not apply to the payment of interest on time deposits by the co-operative banks to its members. As this amendment is effective from the prospective dated of 1st June, 2015, the co-operative bank shall be required to deduct tax from the payment of interest on time deposits of its members, on or after the 1st June, 2015. Hence, a cooperative bank was not required to deduct tax from the payment of interest on time deposits of its members paid or credited before 1st June, 2015. See ACIT v. The Bellary Dist. Co-operative Central Bank Ltd [2018 (7) TMI 228 - ITAT BANGALORE] - Decided in favour of assessee.

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• 2018 (7) TMI 228
  TDS u/s 194A - assessee is a cooperative society registered under the Karnataka Cooperative Society Act, 1959 - Held that:- The Ministry of Finance, Government of India vide Circular No.19/2015 in F.No.142/14/2015-TPL, has held that the Co- operative Banks are not required to deduct tax at source on time deposits of its members paid or credited on or before 1.6.2015 The provisions of the section 194A(3)(v) have been amended so as to expressly provide that the exemption provided from deduction of tax from payment of interest to members by a co-operative society under section 194A(3)(v) shall not apply to the payment of interest on time deposits by the co-operative banks to its members. As this amendment is effective from the prospective date of 1st June, 2015, the co-operative bank shall be required to deduct tax from the payment of interest on time deposits of its members, on or after the 1st June, 2015. Hence, a cooperative bank was not required to deduct tax from the payment of interest on time deposits of its members paid or credited before 1st June, 2015. SEE THE COMMISSIONER OF INCOME-TAX TDS, VERSUS THE NATIONAL CO-OPERATIVE BANK LTD BANASHANKARI 2ND STAGE BRANCH, BANGALORE [2016 (6) TMI 1118 - KARNATAKA HIGH COURT] - Decided against revenue

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• 2018 (7) TMI 226
  TDS u/s 194H - non deduction TDS on payment of commission/brokerage on price difference to the milk societies (DCS & PDCS) - assessee in default u/s. 201(1) - Held that:- SLP dismissed.

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• 2018 (7) TMI 225
  Rejection of an application for settlement of case - short fall in payment of tax and interest - request for adjustment with refund amount was not considered - Held that:- The application before the Settlement Commission contained all details and thus the Department which has to peruse the same and file a report as required under section 245D(2C) of the Act. The explanation offered by the Revenue stating that the petitioner has not specifically claimed the refund of Rs. 98,18,350/- is not acceptable, since the application has to be scrutinised as a whole and all details have to be verified for its correctness, more particularly, the details in Enclosure B of the application. Thus, I find that the application ought not to have been rejected on such technical ground, bearing in mind the object and purpose for which Chaper IIXA was inserted in the Income Tax Act. In the case on hand, a Supplementary Report was filed by the PCIT on 13.02.2018, to which the petitioner submitted his response pleading inadvertence and that he was under the bona fide belief that the refund claimed is yet to be processed given the short span of time after filing of his return of income. Settlement Commission is a forum before which the assessee surrenders himself and it is not a forum for challenging the legality of assessment order or other orders passed in any proceedings under the Act. The Scheme of the Act clearly shows that the power conferred on the Settlement Commission is wide, as it has the power to give immunity against prosecution or imposition of penalty. This court is of the view that the petitioner should be permitted to proceed further and for which purpose the petitioner should be given an opportunity to pay the tax. Writ petition is allowed, the impugned order is set side and the matter is remanded to the 1st respondent- Income Tax Settlement Commission, Additional Bench,Chennai for fresh consideration.

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• 2018 (7) TMI 224
  Disallowance of Provision for Warranty - Held that:- Merely because the assessee had returned back the provisions in subsequent year cannot be a basis for disallowing the assessee’s claim in the current year, particularly when the assessee had given specific basis for making warranty provisions. The Hon’ble Apex Court in case of Rotork Controls India (P) Ltd. (2009 (5) TMI 16 - SUPREME COURT OF INDIA) has given the criteria which are fulfilled by the assessee herein. Thus, issue is squarely covered in favour of the assessee Disallowance of Liquidated Damages (‘LD’) u/s 37(1) - Held that:- Assessing Officer as well as the CIT(A) has not taken correct cognizance as to liquidated damages incurred by the company and accordingly deducted by the customers from the payment of sale proceeds is as per the agreed terms and contract. All these factors have not been properly assessed by the Assessing Officer as well as CIT(A). The Ld. AR’s contention that these provisions have been set off in the next Assessment Year i.e. 2008-09 the same has to be verified at the level of the Assessing Officer. Therefore, we direct the Assessing Officer to verify all these documents along with the claim of set off of this claim in the year 2008- 09. Therefore, this issue is restored to the file of the Assessing Officer. Needless to say, the Assessing Officer has to give proper opportunity of hearing to the assessee by following principles of natural justice. Therefore, Ground No. 2 and 2.1 is partly allowed for statistical purpose. Adjustment made u/s 145A - Unutilized Countervailing duty - Held that:- Assessing Officer as well as the CIT(A) has not taken the cognizance of the actual calculation relating to the counter valley duty and service tax paid by the assessee. Therefore this needs to be examine at the level of the Assessing Officer. We direct the Assessing Officer to look into this aspect as per the provisions of Section 145A as well as in the light of the provisions of given under the Income Tax Act and decide this issue afresh. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Addition of Countervailing Duty paid on imported goods - additional ground - Held that:- Countervailing Duty of Rs. 1,84,25,285/- paid on imported machinery is permissible deduction in accounting the total income for the ay 2007-08 and hence the assessee is entitled to deduction of Rs. 1,84,25,285/-. This ground was not at all taken before the lower authorities at any stage. Therefore, this is a factual ground which cannot be entertained at this stage and therefore, the additional ground is rejected. Transfer pricing adjustment - Held that:- iT is pertinent to note that recovery of expenses such as travel, telephone expenditure of Rs. 2,54,531 are third party costs and hence no mark up is required as per the Transfer Pricing Provisions. In relation to support of dedicated employees and ad-hoc support sample cases of salary cost of employees and the corresponding amount recovered from AEs below shows that a markup of more than 5% was charged. The Company has earned a high mark up over the salary cost paid by the Company to its employees. These contentions of the Ld. AR are supported by the documentary evidences and were not taken into cognizance by the TPO/Assessing Officer as well as DRP Disallowance being the custom duty on leased machine is not proper on behalf of the Assessing Officer - Held that:- It is pertinent to note that the assessee the company capitalized the value of the machine in the books of accounts inclusive of customs duty. Therefore, the customs duty paid by the company was never debited to the P&L account, and thus, disallowing customs duty is not proper on behalf of the Assessing Officer. Disallowance of countervailing Duty paid in earlier years and shown as assets in the balance sheet in this year as written off - Held that:- As pointed out by the Ld. AR that though countervailing duty of Rs. 2,278,207/- and Rs. 18,425,285/- paid in AY 2006-07 and 2007-08 was allowable deduction in the respective assessment years, however, the Company could not claim the same in computing the total income for the AY 2006-07 and AY 2007-08 under erroneous misconception that the same was creditable against other duties / taxes payable. From the perusal of the submissions of the Ld. AR it can be seen that in this A.Y. 2008-09, the issue of countervailing duty was allowed by the Assessing Officer with the proper direction of the DRP. Therefore, there is no need to interfere with the same. Ground dismissed.

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• 2018 (7) TMI 223
  Addition of unexplained cash and cheque seized from the assessee - unexplained income - search proceedings - onus to prove - Held that:- In terms of section 132(4A) it may be presumed that any books of accounts, documents, money, bullion, jewellery etc. found in the possession or control of any person in the course of search belongs to such person. This presumption is rebuttable presumption and onus is on the person from which possession said items of books of accounts or cash etc has been found. In the instant case, the onus was on the assessee and he has failed to discharge his onus in view of our observations above. Section 110 of the Evidence Act has also specified that when the question is whether any person is owner of anything of which he is shown to be in possession, the burden of proving that he is not the owner is on the person who affirms that he is not the owner. In the instant case, the assessee was in possession of the cash and thus the burden of proving that he is not the owner of the said cash is on the assessee. As the assessee has failed to discharge this onus, the assessee is held to be owner of the said cash and in absence of any explained source of said cash in the hand of the assessee, it is held to be unexplained. - Decided against assessee. Addition on cheque sized no name of the drawee was mentioned in the said cheque and the same has not been in encashed by the assessee, the cheque has remained merely a piece of paper without any monetary value . In view of the no monetary value of the said cheque, no addition can be made in the hands of the assessee. Accordingly, we direct the Assessing Officer to delete the said addition - Decided in favour of assessee.

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• 2018 (7) TMI 222
  Reopening of assessment - Whether the Joint/Addl. Commissioner is satisfied on the reasons recorded by the ITO/IAC/(A) that it is a fit case for the issue a notice u/s 148? - approval in accordance of law - approval has been granted by observing thus: “Yes” - Held that:- Sections 147 and 148 of the IT Act, it is trite, are charter to the Revenue to reopen completed assessments. Section 151 of the Act provides a safe-guard that the sword of section 147 of the Act may not be used unless the competent statutory officer is satisfied that the AO has good and adequate reasons to invoke the reopening provisions. As per the mandate of section 151 (2) of the Act, the Competent Authority has to examine the reasons, material or grounds on which the reopening is sought to be based and to judge as to whether they are sufficient and adequate to the formation of the necessary belief of escapement of income from taxation on the part of the AO. It is if and only if the Competent Authority, after applying his mind, is of the opinion that the AO’s belief is well reasoned and bonfide, that he will accord his sanction thereon. See case of Shri Ghanshyam [2018 (7) TMI 143 - ITAT AGRA] Also In ‘Chhugamal Rajpal vs. S.P. Chaliha’ (1971 (1) TMI 9 - SUPREME COURT), it has been held that where the Commissioner, while granting the sanction just noted the word “Yes” and affixed his signature thereunder, he had only mechanically accorded permission, and that the important safe-guards provided in section 151 were lightly treated. Thus the approval granted by the Pr. CIT in the present case, is also found to be unsustainable in law and the same is quashed alongwith all proceedings pursuant thereto - Decided in favour of assessee.

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• 2018 (7) TMI 221
  Disallowance u/s. 24(b) - Income from house property - interest payment on the housing loan disallowed for a reason that copy of housing loan sanctioning letter was not furnished by the assessee - Held that:- For disallowance against house property income, ld. Authorised Representative has given an undertaking that assessee will produce evidence for interest payments relating to the housing loan if given one more opportunity. Coming to the aspect of interest payment there is an obvious dichotomy between the observations of the ld. Assessing Officer and what is stated by the ld. Commissioner of Income Tax (Appeals). It is not even clear, as to the head of income under which ld. Commissioner of Income Tax (Appeals) considered the interest. Though it is stated by the ld. Commissioner of Income Tax (Appeals) that assessee had advanced loans to sister concerns, it is also mentioned that assessee did not file any confirmation of the loan creditors. The disallowance was for interest and not for unconfirmed credits - this issue needs a revisit by the ld. Assessing Officer - decided in favour of statistical purposes.

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• 2018 (7) TMI 220
  Penalty u/s 271AAB - need to maintain the books of account - determination of turnover - unexplained advances - Held that:- When the assessee is not required to maintain the books of account as per section 44AA, then the matter is required to be examined whether the alleged undisclosed income is recorded in the other documents maintained in the normal course as per clause (c) to Explanation to section 271AAB. Undisputedly the alleged income was found recorded in the diary which is nothing but the other record maintained in the normal course, thus the same would not fall in the definition of undisclosed income. Once the said income is found as recorded in the other documents maintained in the normal course, then it cannot be presumed that the assessee would not have disclosed the same in the return of income to be filed after about one year from the date of search. Hence, the penalty levied under section 271AAB is not sustainable and the same is deleted. See Ravi Mathur vs. DCIT [2018 (6) TMI 1128 - ITAT JAIPUR] The amount of advance itself is not in the nature of income though the source of the advances can be added to the income of the assessee. The assessee has explained the source of the said advances from his activities. Accordingly, by following the earlier order of this Tribunal, we delete the penalty levied by the AO under section 271AAB of the Act. - Decided in favour of assessee

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• 2018 (7) TMI 219
  Depreciation to assessee trust - principles of the appellant society under section 11 - double deduction - Held that:- The issue of depreciation is squarely covered in favour of the assessee in assessee’s own case by the judgement of Hon’ble Delhi High Court in case of DIT(E) vs. Indraprastha Cancer Society (2014 (11) TMI 733 - DELHI HIGH COURT). In the said judgement the Hon’ble Delhi High Court has duly noted that insertion of Sub Section (6) to Section 11 of the Act has been inserted w.e.f. 01st April, 2015 only and, therefore, the legal position would undergo a change and will be applicable w.e.f. 1st April, 2015 only and will not be applicable to earlier Assessment Years. Since the present appeal before us pertains to the A.Y. 2010-11, the issue stands covered in favour of the assessee Provision for bad and doubtful debts - Held that:- This issue is also covered in favour of assessee by the judgement of Hon’ble Delhi High Court in the case of DIT(E) vs. National Association of Software and Services Companies (2012 (5) TMI 204 - DELHI HIGH COURT) Tribunal was right in law in holding that the provision for doubtful debts must be deducted from the income of the trust on commercial principles, for the purposes of Section 11(1)(a) of the Act - Decided in favour of the assessee

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• 2018 (7) TMI 218
  Deemed dividend u/s. 2(22)(e) addition - assessee is a director/shareholder of the company BMPL having a running/current account with the company - Held that:- Running account or current account of the Director & shareholder of the company cannot be treated as loan or advance account. In this case, the perusal of the ledger account clearly shows that the assessee’s account with BMPL was a running/current account, containing both debit as well as credit entries. Credit balance arising in the said account on 09.11.2006, cannot be treated as deemed dividend in the hands of the assessee. See COMMISSIONER OF INCOME-TAX VERSUS IDHAYAM PUBLICATIONS LIMITED [2006 (1) TMI 97 - MADRAS HIGH COURT] We set aside the orders of the authorities below and delete the addition of deemed dividend - Decided in favour of assessee.

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• 2018 (7) TMI 217
  Capital gain on sale of land - Treatment of land as capital asset - assessee has sold an immovable property being agricultural land - land situated beyond 8 Kms. of Municipal limits - Held that:- The land in question is agricultural land situated beyond 8 Kms. of Municipal limits, therefore, the transactions of sale in land by the appellant cannot be regarded as capital asset within the meaning of sec. 2(14) of the Act. Transaction of sale of land in question is held to be not liable for charging of capital gains. - Decided in favour of assessee. Deduction u/s. 54B - Assessing Officer has denied the same on the ground that the sale deed has not been produced - Held that:- Commissioner of Income Tax (Appeals) has given a finding that there is a proper agreement and the consideration has duly been made. This is not been disputed by the Revenue and, accordingly, we uphold the order of the ld. Commissioner of Income Tax (Appeals) on this issue also - Decided in favour of assessee.

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• 2018 (7) TMI 216
  Disallowance of commission paid to related party - assessee submitted that the assessee has made genuine payment of commission which is supported by the necessary documentary evidence as well as the confirmation by the payee himself - Held that:- The assessee in this case is a female senior citizen. She is engaged into liquor business in far-flung remote areas. She has engaged a commission agent to facilitate the sales. She has paid a sum of Rs. 40,03,210/- as commission against a total sale of Rs. 53,13,73,895/-. There is an income of 50% in the sales as compared to previous year. The commission payment is duly backed by an agreement. The recipient has also appeared before the assessing officer and confirmed the same. The recipient has also offered the same as income in his income tax return which has been accepted by the Revenue. The assessee has duly deducted the tax deduction at source from the payment. No infirmity in the order of the ld. Commissioner of Income Tax (Appeals). - Decided against revenue

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• 2018 (7) TMI 215
  Addition u/s 56(2)(vii)(a) - assessee has claimed to have received a loan - AO was of the opinion that the agreement in this regard was not proper agreement - Held that:- As noted by the ld. Commissioner of Income Tax (Appeals), the amount received from the M/s. San Finance Corporation by the assessee fully qualifies as loan. The M/s. San Finance Corporation has shown the same amount as loan in its balance sheet, the same has been duly accepted by the Revenue. As a matter of fact, in the hands of M/s. San Finance Corporation, the assessing officer has disallowed 12% on the interest-free loan given by the M/s. San Finance Corporation to various persons including the assessee. Commissioner of Income Tax (Appeals) is quite correct in holding that Revenue cannot take contradictory stands. In the case of the M/s. San Finance Corporation, it has held that the same is loan. When such a stand has been taken, the Revenue cannot take up a contrary stand and treat the same loan in the hands of the assessee as a gift or a sum received without consideration taxable under section 56(2)(vii)(a) of the Act. See THE COMMISSIONER OF INCOME TAX VERSUS MR. CHANDRAKANT H. SHAH [2010 (9) TMI 1221 - BOMBAY HIGH COURT - Decided in favour of assessee

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• 2018 (7) TMI 214
  Unexplained cash credits - addition of share application money as the assessee failed to establish the identity, creditworthiness and genuineness of the transaction - CIT-A deleted addition - Held that:- Assessee in this case has duly submitted all the necessary details in respect of the share application received which included name, address, company incorporation details, share application details, balance sheets, PAN, bank statements, acknowledgement of income tax return filed and confirmation from the parties. The Assessing Officer has not found any fault in these submissions except that he wanted to verify the details by asking the assessee to produce the promoter/director of these companies. The assessee has duly discharged its onus and no onus was cast on the assessee in the impugned assessment year to produce the persons or the books from the investment companies. The requirements of enquiry and obtaining explanation from the person making the investment in these circumstances have been brought into the statute books by amendment to section 68 to be prospective as they were effective only from 01.04.2013. Admittedly, the present assessment year being assessment year 2010-11, the Assessing Officer was not justified to take up the issue of obtaining explanation from the Directors/promoters of the investing companies. - Decided in favour of assessee. Business income taxable u/s. 28(iv) - income accrued to the assessee u/s. 28(iv) - assessee had made investment in the shares of PPSL at a discounted rate as PPSL had issued shares to few other entities and individuals at higher rate during the same period - Held that:- In the opinion of the Assessing Officer the benefit u/s. 28(iv) accrues. In this regard, we are of the opinion that while question of benefit u/s. 28(iv) of the Act accrues or not, will arise only if there is in fact any benefit. The above facts, that the said company (PPSL) was continuously incurring losses and has huge accumulated losses clearly indicate that the price, at which it was purchased cannot be said to be understated. Hence, there is no question of any kind of gain arising in purchase of these shares at the stated price above. Assessee is the purchaser of the share as investment and there is no incident that has taken place during the current accounting year which can be said to lead to any income accrued or arisen during the year. If at all the assessee transfers the shares then the probable benefit or profit, if any, in question can be brought to tax in those particular years as long term or short term capital as the case may be. In this regard, from a reading of section 28(iv) of the Act and the corresponding amendment in section 2(24) it is clear that even when the assessee purchases goods or assets at a price lower than the market price, under whatever circumstances the same cannot be brought to tax u/s. 28(iv). The assessee has clearly submitted that there is no business relationship as such between these parties. However, the Assessing Officer has disbelieved these submissions by generally referring to an enquiry which had revealed that some group companies have given corporate guarantees to PPSL for term loan. These unsubstantiated claims without specific finding about the name of the entity involved cannot be said to be giving rise to a business relationship among the parties. The assessee has simply purchased some shares of a loss making company at less than the face value from third parties. The assessee has not sold those shares and obtained any benefit of any kind whatsoever. Hence, the addition u/s. 28(iv) is not at all justified - Decided in favour of assessee.

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• 2018 (7) TMI 213
  Revision u/s 263 - claim of deduction under section 80IA(4) - shouldering of investment for a period of three moths cannot be said to be shouldering of investment - ITAT held that the issue in the said case needs to be re-examined by the Assessing Officer - CIT-A noted that the ITAT directed the Assessing Officer to examine the case particularly from the point of view whether the assessee is expected to shoulder out the investment part in execution of the contract - Held that:- After the direction of the ITAT, the Assessing Officer had elaborately examined the issue. He has specifically mentioned that he is following the guidelines as emanating from the above said decision of the ABG Heavy Industries Ltd. (2010 (2) TMI 108 - BOMBAY HIGH COURT) by numerically noting the facts of the case which compared favourably with the guidelines emanating in the aforesaid case. AO noted that in this case, the assessee is responsible for funds and the development of the project. He is also responsible for the risk, damage, etc and hence, the Assessing Officer came to the conclusion that the assessee was eligible for deduction u/s. 80-IA(4) of the Act. Observation of the ld. Commissioner of Income Tax is totally extraneous and unsustainable - Commissioner of Income Tax has obtained the assessee’s response in this regard. He noted that the assessee was shouldering the investment and after the substantial completion of the work, which entailed approximately three months, the assessee was made payment. The ld. Commissioner of Income Tax disregarded this aspect by holding that the payment of bills after three months is normally phenomenon in government contracts. We find this observation strange and not at all sustainable as even if the assessee is putting his investment for three months, it can by no stretch of imagination be said that the assessee is not shouldering investment. Hence, the Assessing Officer’s acceptance of this aspect can by no stretch of imagination be said to be improbable or impossible view. Commissioner of Income Tax has further stated that the Assessing Officer is directed to examine the matter in the light of the above discussion. He further stated that the Assessing Officer may also examine the case from the other perspective arising out of the decision of the ITAT. We find that this clearly shows that the ld. Commissioner of Income Tax is sitting in appellate forum over the ITAT decision in this case, which is totally unsustainable. - Decided in favour of assessee.

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• 2018 (7) TMI 212
  Reopening of assessment - procedure to be followed when a notice under Section 148 of the said Act is issued - non disposing of objections of assessee - Held that:- In the instant case, no speaking order has been passed by the Assessing Officer but he directly proceeded to pass the reassessment order which is un-doubtly contrary to the directions in GKN DRIVESHAFTS (INDIA) LTD. VERSUS INCOME-TAX OFFICER AND OTHERS [2002 (11) TMI 7 - SUPREME COURT]. As the Assessing Officer is bound to dispose off the objection(s) of the assessee by passing speaking order before proceeding with the re-assessment, hence, the appropriate course should be to restore back the matter to the file of the Assessing Officer with a direction to dispose off the assessee’s objections by passing speaking order thereon and thereafter, to proceed with the reassessment proceeding, if required, as per law. Set aside the impugned order passed by the Ld CIT(A) with direction to the Assessing Officer for passing a speaking order on assessee’s objections and thereafter can proceed further, if required, as per law

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• 2018 (7) TMI 211
  Denying the benefit of section 80P(2)(a)(i) for the interest earned on bank deposits - Held that:- By virtue of the local State laws meant for cooperative societies or other statutory requirements if certain deposits in scheduled banks are required to be maintained by the cooperative society mandatorily then in such a situation, interest income on such fixed deposits with banks i.e. other than cooperative banks are also eligible for deduction u/s 80P(2)(a)(i) - if any surplus fund or any amount put in the fixed deposit for any other liabilities created under the head funds which are not statutorily required to be maintained by the assessee society then the interest earned on such bank deposits made out of these funds is liable to be assessed as income from other sources u/s 56 of the Act. Direct the Assessing Officer to conduct necessary inquiry in this matter and also direct the assessee to produce the relevant documents, records, bylaws as well as rules and regulations of cooperative society to demonstrate that the fixed deposits which have been made are for the funds statutorily required to be maintained by the society and to this extent if the assessee is able to demonstrate this fact, the benefit of section 80P(2)(a)(i) may be given to it. The Assessing Officer is directed to examine the material produced by the assessee before him and make the assessment accordingly - appeal of the assessee is allowed for statistical purposes.

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• 2018 (7) TMI 210
  TDS u/s 195 - Disallowance u/s.40(a)(ia) - taxability of non-resident where services are rendered outside India and non-resident has no permanent establishment in India - Held that:- In the present case, we find that the Revenue has not controverted the submissions of the assessee that Mohd. Iqbal of Oman has rendered services to the assessee outside India and that he has no permanent establishment in India. The commission has been paid to him for the services rendered to assessee outside India. Commission paid to Mohd. Iqbal was not chargeable to tax in India. Therefore, there was no question of deducting tax at source on the payments made to him by assessee. We find merit in the submissions of the assessee. Accordingly, ground raised in appeal by assessee is allowed.

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• 2018 (7) TMI 209
  Deduction under section 80IB in respect of the Jammu unit - Held that:- Since, the entire basis for adverse inference by the Assessing Officer as well as of ld. CIT (A) is upon the assessment order and first appellate order given in the Assessment Year 2006-07, which the Tribunal has reversed by holding that assessee has rightly shown the payment of licence fee/royalty under the corporate unit; therefore, respectfully, following the precedence of the earlier year (2016 (5) TMI 1443 - ITAT DELHI) we also give the same direction that the licence fee, royalty payment of Rs. 6 crore has rightly been shown under the Corporate Division and accordingly, the finding of the ld. CIT(A) is reversed. Disallowance of claim for deduction on account of ‘Self Cenvat Credit Availment’ u/s.80IB - challenging the finding that Excise refund is a capital receipt in nature and not liable to tax - Held that:- Assessee besides relying upon the decision of Hon'ble Delhi High Court in the case of Dharampal Prem Chand [2008 (11) TMI 231 - DELHI HIGH COURT]wherein distinction has been made between the treatment given to the excise duty and the duty draw back in the DEPB in the context of which various judgments have been rendered which has been cited by the Assessing Officer. The Hon'ble Delhi High Court has held that Excise duty refund is a profit derived from the industrial undertaking while computing the eligible deduction u/s.80IB. We find that in the case of Balaji Alloys as confirmed by SC [2016 (4) TMI 1161 - SUPREME COURT] that Excise duty refund as granted by the State of Jammu and Kashmir is a capital subsidy. When the excise duty refund has been treated as capital subsidy not part of taxable receipts, then entire controversy sets at rest and accordingly, the finding of the ld. CIT (A) that excise refund is a capital in nature stands confirmed MAT computation - whether such capital receipt in the form of excise duty refund should be treated as part income while computing book profit u/s.115JB - Held that:- The amount being capital in nature, cannot be part of book profit. Disallowance u/s 14A - Held that:- Once assessee has produced all the relevant books of account, explained the nature of expenses debited and has explained that none of the expenditure can be said to be attributable to earning of exempt income, then onus shifts upon the Assessing Officer to examine the books of account and nature of expenditure debited and after recording his ‘satisfaction’ as per the mandatory requirement given in Section 14A(2) and (3) r.w.s. Rule 8D(1), then only he can proceed to make disallowance under Rule 8D - Thus, in the absence of any recording of mandatory satisfaction as per Section 14A (2) r.w.s. Rule 8D (1) Assessing Officer cannot mechanically apply Rule 8D for the purpose of disallowance. Accordingly, disallowance made u/s.14 by Assessing Officer is hereby deleted.

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• 2018 (7) TMI 208
  Addition of Transfer Pricing Adjustment u/s 92CA - MAM selection - Held that:- Since the operating profit ratio of the assessee @ 10.99% is higher than the average of the operating profit ratio of comparables companies, i.e., 10.79%, the international transactions entered into by the assessee were considered as having been entered at arm’s length price, applying TNMM. From the records it can be seen that the assessee has not sold any products to the associated enterprises on which royalty was payable and the entire amount of royalty was paid by the assessee on sales made to independent enterprises. Therefore, the TPO/AO as well as DRP were not correct in determining the arm’s length pricing of model fees and payment of royalty. This issue is squarely covered by the earlier Assessment Years in assessee’s favour. Addition of freight inward/import clearing expenses to cost of closing inventory - Held that:- Adjustment made to total value of closing stock and consumption of stocks is uncalled for. If valuation of closing stock is changed then the value of opening stock should also be changed on the same basis or method. The closing stock of a particular year is the opening stock of the subsequent year. It is not the case of the revenue that the method of valuation of closing stock is materially affecting the accounts and profits disclosed by the assessee. This adjustment sought to be made is revenue neutral and at best may result in preponment or postponement of revenue. The issue is whether such exercise is at all required on the ground of materiality. Materiality is a concept which is well recognized both in accountancy and law. Accounting standards notified by the CBDT u/s 145(2) mandate that the concept of materiality be taken into consideration when finalizing the accounts of an assessee. Addition on account of cost of rejection of semi-finished goods and obsolete items to the value of closing stock - Held that:- It is pertinent to note that it is not practically possible for the assessee to segregate normal and abnormal wastages embedded in the aforesaid costs and therefore, the assessee, as per consistent and regular method of accounting, accepted by the Revenue as such in the earlier years, did not consider the aforesaid expenditure for the purposes of valuation of closing inventory of finished goods. The AO/DRP was not correct in making this addition. The issue is squarely covered in assessee’s favour by the order of earlier assessment years. Disallowance of provision for increase in price of material - Held that:- While price revisions are pending or negotiations are on, the vendors keep on supplying the material provisionally at the agreed rates, with the understanding that pursuant to negotiations being finalized, the arrears of the amount due to them would be paid to them retrospectively. Such price revisions, being an accrued liability at the time of purchase of raw materials, are recorded in the books of accounts by the assessee. At the year end, the company estimates the additional liability on account of price revision under negotiation and makes upward/downward provision, as the case may be, in relation to material supplied until the end of the relevant year. Thus, the Assessing Officer was incorrect in disallowing this claim. Disallowance of cost of scrap material - Held that:- The assessee is not dealing in scrap, and/or holding the scrap as inventory, and thus was not required to value the closing stock after taking into account the value of scrap. The Tribunal for A.Y. 2010-11 and 2011-12 while coming to the aforesaid conclusion, laid emphasis on the fact that such transaction was revenue-neutral and held that considering the size of the assessee company, it could not be expected to keep quantitative tally of miniscule items. The facts are identical in the presnt year as well. Disallowance of prior period expense - Held that:- It can be seen that the assessee is a large sized manufacturing company which receives services from several vendors, running into hundreds. The assessee made reasonable attempt to quantify the liability incurred towards expenses during the relevant previous years and provide for it which was not doubted by the Assessing Officer. It is not practically possible to consider and provide for all expenses, in absence of relevant details/material/information for various reasons like, non-receipt of bills/invoices from the vendors, the contract terms with vendors not being settled, disputes in relation to bills received, services contracted by zonal/regional/branch officer not intimated to the head office, etc. Therefore, the assessee in our opinion has rightly claimed deduction for miscellaneous expenses aggregating to Rs. 18,01,39,937 pertaining to prior period. Advertisement provisions of Head Office - assessee made provision for various expenses incurred during the year on the basis of reasonable estimate - Held that:- The provision for advertisement expenses, has been made on the basis of actual Purchase orders and agreements and thus, has been made on reasonable and scientific basis. Detail of provisions for advertisement was submitted before the lower authorities. Further, The Assessing Officer, in the set-aside proceedings for A.Y. 2008-09, vide order dated 26.02.2015, accepted the claim of the assessee and allowed relief on the aforementioned identical issue by observing that the assessee had computed the provision on the basis of actual Purchase Orders, which was scientific and logical in nature. Disallowance of alleged excessive purchases from related parties as per AS-18 - Held that:- The purchase prices of components which are purchased from various suppliers are based upon negotiations with such vendors and are different due to various factors. The assessee also prefers purchasing material from certain suppliers, due to business/commercial expediency. The said parties are not related to assessee, in terms of the provisions of section 40A(2)(b) of the Act. During the relevant previous year, the assessee made total purchases of various raw materials, etc. aggregating to Rs. 17,791.60 crores. Out of the aforesaid total purchases, purchases from related parties, i.e., parties related to the assessee, in accordance with definition given in AS-18 issued by the ICAI and as disclosed in the notes to accounts of the audited accounts of the relevant previous year, but admittedly not related in terms of definition provided in section 40A (2). Deemed dividend addition - payment received on behalf of Hero Honda Fin Corp. Ltd. (HFCL) - Held that:- It is pertinent to note that when payments by dealers to HFCL are due to the dealers, due to convenience of facility of collection centers of the assessee available all over India, make payment into the assessee's bank account, for and on behalf of HFCL, which is in turn remitted by the assessee to HFCL in 2- 3 days. Thus, the assessee is mere custodian of the said amount. Thus, Section 2(22)(e) will not be applicable in the present case. Disallowance of payments made for advisory services availed form Hero Corporate Services Ltd. - allowable busniss expenses - Held that:- The assessee made elaborate submissions explaining the nature of services received from Hero Corporate Services Ltd. and nexus of same with the business of the assessee. This fact is identical with the earlier Assessment Years. The issue is squarely covered in favour of the assessee by the Tribunal’s order for A.Ys. 2010-11 & 2011-12. Besides this the Revenue has accepted this issue and has not challenged the same in Hon’ble High Court. Thus, this issue attains finality Disallowance of purchase u/s 40a(ia)for alleged failure to deduct TDS u/s 194C - Assessing Officer held that the assessee by specifying the name of vendors of raw material along with purchase price thereof, was controlling the supply of raw material to the vendors, which was to be deemed as supply of raw-material by the assessee itself, and hence the contract with vendors constituted ‘work contract' under section 194C - Held that:- The test is to see the fact whether the assessee acquired any title to the raw material purchased by the vendors from the suppliers. The answer to this is no. We are unable to understand as to how the assessing officer as well as the DRP has considered this as a deemed purchase by the assessee. The reason enunciated by the assessee w.r.t identifying the suppliers of the material along with the determination of price of the raw material fixing of payment terms etc., clearly constitutes a matter of business expediency for the assessee - it is a case of contract of sale and not contract of work. Hence, in our view, the provision of Sec. 194C are not applicable and consequently the disallowance made u/s 40(a)(ia) is to be deleted. Disallowance of legal and professional expenses u/s 40(a)(ia) - failure of the assessee to deduct tax at source there from under section 194J - Held that:- In the present Assessment Year, the Assessing Officer disallowed the aforesaid expenses, invoking section 40(a)(ia), for the failure of the assessee to deduct tax at source there from under section 194J of the Act. But it is pertinent to note here that the Assessing Officer did not doubt that the payment was made by assessee towards reimbursement of expenses, it was still held that assessee was liable to deduct tax at source under section 194J of the Act. Thus, the issue is squarely covered by the order of the Tribunal for A.Ys. 2010-11 and 2011-12. TDS at lower rate or wrong provision -Payment made to M/s. G2 RAMS India Pvt. Ltd. for event organization - addition us 40(a)(ia) - Held that:- Assessee had incurred expenditure on account of display of hoardings for advertisements and arrangement of various events for publicity. All arrangements for this event were done by M/s G2 RAMS India Pvt. Ltd. The said company was entrusted with the overall responsibility for organizing the event. The contract entered into with the said company was a composite contract for organizing an event, involving various arrangements for carrying out work of organizing the event. In view of the above, tax was deducted at source u/s 194C of the Act before remitting the payment under that Section. Thus, the facts are identical to that of the A.Ys. 2010-11 and 2011-12 and therefore, the order of the Tribunal is applicable in the present case. Disallowance of additional depreciation of computers installed at Supervisory Officer - Held that:- Remanding back the matter to the file of the Assessing Officer to determine if the computers were used for data processing at industrial premises or not. We direct the Assessing Officer that after taking congnizance of the same pass appropriate order. Gains from sale of investments - busniss income or capital gains - Held that:- It is pertinent to note that the assessee invested surplus funds arising in the course of business under various modes of investment like mutual funds/PMS, shares, etc. The gains realized from sale of such various instruments, amounting to Rs. 278.54 crores during the relevant previous year, were disclosed under the head ‘capital gains.’ The issue is identical in the AY 2010- 11 and 2011-12 wherein the Tribunal allowed this issue in favour of the assessee. Addition u/s 14A as per Rule 8D - Held that:- Though the Assessing Officer did not accept the method of disallowance computed by the assessee under section 14A and made further disallowance of Rs. 62.30 lakhs (disallowing interest expense of Rs. 38.91 and administrative expense of Rs. 94.16 lacs) invoking provisions of Rule 8D of the Income Tax Rules, 1962 after reducing the suo moto disallowance of Rs. 70.77 lakhs made by the assessee in the return of income. But the Assessing Officer has not given the proper calculation to that effect. Therefore, the matter is restored back to the file of the Assessing Officer. Disallowance of Royalty expenditure on the ground of being capital in nature and disallowance on account of cess on model fee - Held that:- No proprietary rights in the know how vested in the assessee, the assessee being a mere licensee with limited rights to use the technical assistance during the currency of the agreement, there is no explicit or implied intention to transfer or create ownership in the technical know-how /technical information in the assessee. In view of the aforesaid, expenditure by way of royalty, technical guidance fee and model fees incurred by the assessee was allowable revenue deduction as held in the decision given by the Tribunal for A.Ys. 2010-11 and 2011-12 Depreciation on Model Fee - Held that:- Expenditure was incurred on new model fees prior to commencement of production of new models of two wheelers, thus, this action is revenue neutral in a broader perspective as the same adjustment would be required to be made to the opening stock of finished goods for the year under consideration. Disallowance of reimbursement of foreign travelling expenses to directors/employees, on the ground of no evidence/proof of actual expense incurred by employees - Held that:- It is pertinent to note that for payment of per diem allowance, as per policy, the assessee does not require the expenses to be necessarily supported / backed by bills considering the practical difficulties/impossibilities in producing invoices for petty expenses like local conveyance, telephone bills, etc. The employees are only required to submit details of expenditure incurred in specified form, on basis of which travel bill is settled. The Tribunal in A.Ys. 2010-11 and 2011-12 and earlier years held that disallowance cannot be made merely on the basis that vouchers were not produced by the employees, Expenses incurred on advertisement on death anniversary of Late Shri Raman Munjal - Held that:- Expenditure incurred by the assessee on death anniversary of Sh. Raman Kant Munjal was not personal expenditure of the promoter family and satisfied the tests of ‘commercial and business expediency' and thus was an allowable business deduction under Section 37(1) of the act. Disallowance of commission paid to Managing Director & CEO u/s 36 - Held that:- Commission paid to directors with reference to percentage of profits of the company for the services rendered as per the terms of appointment, constitutes part of the remuneration package, and in the absence of any disallowance on other components of remuneration paid to such director, the commission cannot, ipso facto be classified as payment of profit/dividend covered within the exception provided under Section 36(1)(ii) of the Act. Disallowance of expenses incurred on account of ‘Corporate Social Responsibility - allowable busniss expenditure - Held that:- As decided in previous years expenditure incurred by the assessee company on Corporate Social Responsibility, prior to insertion of explanation 2 to Section 37(1) of the Act, was an allowable business deduction under the said provision. The Tribunal, in the said order, further elaborated that the role of the assessee was not restricted to merely earning profit, but also discharging certain community related expenses, which would be considered to have been incurred on account of commercial/ business expediency. Disallowance u/s 80IC on account of job work/ outsourcing of manufacturing activity - Held that:-0utsourcing of certain intermediary processes or procurement of finished components in the process of manufacture does not tantamount to outsourcing of manufacturing activities and thus would not hamper the claim of deduction of the assessee company under Section 80 IC of the Act. Disallowance of deduction u/s 80IC - lower consumption of electricity - part of the manufacturing activity(ies) at Haridwar were outsourced on the basis of lower consumption of power per unit at Haridwar plant vis-à-vis rate of power consumption at other two plants - Held that:- Identical ground in the immediately preceding assessment years, i.e. AY 2010-11 and AY 2011-12 has been deleted by the Tribunal wherein the Tribunal noted that difference in consumption of electricity was on account of the fact that the plant at Haridwar was more energy-efficient and hence certain processes were carried out in said plant. The Tribunal further held that outsourcing of certain intermediary processes or procurement of finished components in the process of manufacture does not tantamount to outsourcing of manufacturing activities and thus would not hamper the claim of deduction of the assessee company under Section 80 IC of the Act. Disallowance of deduction u/s 80IC on account of inter-unit transfer of goods - Held that:- For the purpose of computing market price of inter-unit transfer of goods, when the non-eligible units procured goods at market price from third party vendors and supplied the same to the eligible uni t at the same purchase price as increased by the applicable freight cost, no further substitution of such price is warranted in terms of section 80IA(8) of the Act and the transaction was a genuine business transaction borne out of commercial expediency Disallowance of deduction u/s 80IC of the Act on account of inflation of profit by charging higher basic price of Rs. 812 crores (restricted to 556 crores) - Held that:- Provisions of section 80 IA (8) of the act do not apply to the assessee on transfer of services of marketing division of the company to the eligible industrial undertaking whose profits are claimed as deductible - Reverse the action of the assessing office in partly disallowing deduction under section 80IC on account of the have profit earned by the assessee in the eligible unit. Eligible deduction under section 80-IC - allocation of head office expenses - profit attributable to advertisement and marketing activities carried out at Head Office - Held that:- Head office is not a separate profit centre and, therefore, no profit is to be separately attributed to such activity. It further observed that, for the purpose of working out eligible deduction under section 80-IC of the Act, actual expenses incurred at the head office are to be allocated between various profit centers on a rational and scientific basis Computation of deduction u/s 80IC - inclusion of other income - certain income earned by the eligible unit - Held that:- Other incomes in the nature of Interest on loan to employees, interest on loan to vendors for working capital support, freight recovery, sundry sales, cash discounting from vendors and exchange fluctuation gain, etc. earned by a unit eligible for deduction under Section 80IC of the Act shall be considered as incidental to the activity of carrying out manufacturing and thus eligible for deduction under that section. Accordingly, the aforesaid issue stands squarely covered in favour of the assessee Claim of deduction under Section 80IC - Non compliance of Rule 18BBB and nonadherence to condition specified in Industrial Policy of Rs. 1129 crores (restricted to NIL) - Held that:- Deduction u/s 80IC cannot be denied for alleged failure to comply with the three conditions specified in the assessment order. As regards compliance of conditions precedent for claiming deduction u/s 80IC, we note that the appellant during the course of set-aside proceedings had point-wise given entire details /information as to how it satisfied each condition precedent for claiming deduction under said section. The claim of deduction of the appellant is also duly supported with the audit report in Form 10CCB issued by the auditors, answering each question in the format and how the appellant satisfied all such conditions. In the final assessment order, the assessing officer has not pointed out violation of any such condition precedent. Disallowance expenses incurred on repair and maintenance of various assets alleging to be capital expenditure - Held that:- Expenditure incurred is allowable repairs and maintenance expenditure on the existing assets of the company and is revenue in nature. Expenditure incurred on mobile phones - Nature of expenses - revenue or capital - Held that:- As decided in own case in view of the rapid changes/up-gradations in technology, expenditure incurred by the assessee company on acquisition/purchase of mobile phones is a regular business upgradation/ replacement expenditure, which shall be eligible as business deduction u/s 37(1) of the Act.

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• 2018 (7) TMI 207
  Reopening of assessment - AO disallowed a sum being the difference in SPF [Special Privilege Fee] paid and admissible - Held that:- Special Privilege Fee which was revised by subsequent Government Orders substitutes the rates fixed in the earlier Government Order, therefore, it is untenable on the part of the Revenue to contend that they will consider as to whether the claim of additional vend fee amounting to Rs. 435,17,13,674/- is admissible or not. The fundamental error which has crept in on account of usage of wrong terminology. The Prohibition Act and the Rules framed thereunder have fixed a fee payable by the petitioner corporation to the Government and this is termed as the Special Privilege Fee payable on account of special status given to the Corporation with regard to distribution of sale of IMFL in the State of Tamil Nadu. Assessing Officer enquired and passed an assessment order allowing the relief. Subsequently the assessment was reopened and an order was passed. This order was tested and ultimately a decision was arrived in favour of the assessee. The only issue to be decided is Special Privilege Fee payable by the petitioner. This has been dealt with by the Tribunal in the assessee's own case for the current assessment year as well as earlier and held that the subsequent Government orders will have to be taken into consideration for arriving at the SPF payable for the said year. No further enquiry is required or any verification is required as only the legal interpretation to be given is to the effect of the subsequent Government Orders which have been held to be substitutive in nature, therefore deemed to be retrospective with effect from issuance of the first Government Order. The show cause notices are without jurisdiction and not sustainable in law.

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• 2018 (7) TMI 206
  Surplus arising from sale of shares and securities - short terms capital gains OR income from business - period of holding - Addition u/s 68 - Held that:- SLP dismissed.

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• 2018 (7) TMI 205
  Entitlement to registration u/s 12A - proof of charitable activities - non-furnishing of explanation regarding registration of the assessee society twice - Held that:- SLP dismissed.

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• 2018 (7) TMI 204
  Disallowance of depreciation on Morrison rope dyeing machine - boiler as part of the dying machine - machine installed by the appellant company is an energy saving device or not - Held that:- The Special Leave Petitions are dismissed both on the ground of delay and merits.

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• 2018 (7) TMI 203
  Additions u/s 69 - initial burden to explain the nature and source of the investment in land not recorded in the books of assessee - Held that:- Special leave petitions are dismissed having regard to the the peculiar facts without going into the question of law raised.

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• 2018 (7) TMI 202
  Validity of reopening of assessment - inadequate notice - person authorized to accept notice - Held that:- Special Leave Petition is dismissed on the ground of delay as well as on merits

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• 2018 (7) TMI 201
  Depreciation on boiler leased by the assessee - Held that:- The Special Leave Petition is dismissed both on the ground of delay as well as on merits.

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• 2018 (7) TMI 200
  Addition u/s 69C - amount candid and voluntary surrender made by the assessee during the course of survey - Held that:- SLP dismissed.

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• 2018 (7) TMI 199
  Validity of reopening of assessment - failure to follow the judgment of the GKN Driveshafts (India) Ltd. vs. Income Tax Officer, (2002 (11) TMI 7 - SUPREME Court) to the effect that on receipt of objection given by the assessee, to the notice u/s 148, AO is bound to dispose of the objections by passing a speaking order - Held that:- SLP dismissed.

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• 2018 (7) TMI 198
  Non grant approval u/s.80G(5) - fulfillment of required conditions - Held that:- The special leave petition is dismissed.

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• 2018 (7) TMI 197
  Orders passed without allowing the petitioner an opportunity to file its return - no notice under Section 142(1)(i) - Held that:- The Special Leave Petition is dismissed on the ground of delay.

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• 2018 (7) TMI 196
  Exigibility to capital gains tax - Transfer exigible to tax - JDA - Scope and legislative intent of Section 2(47)(ii), (v) and (vi) - essential ingredients for applicability of Section 53A of 1882 Act - Meaning to be assigned to the term “possession” - Whether in the facts and circumstances, any taxable capital gains arises from the transaction entered by the assessee? Held that:- In view of the judgment passed by this Court COMMISSIONER OF INCOME TAX VERSUS BALBIR SINGH MAINI, CS ATWAL [2017 (10) TMI 323 - SUPREME COURT OF INDIA] the Special Leave Petition stands dismissed.

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• 2018 (7) TMI 143
  Reopening of assessment - Additional CIT granted the approval by observing merely that he was satisfied - approval in accordance of law - Held that:- Sections 147 and 148 of the IT Act, it is trite, are charter to the Revenue to reopen completed assessments. Section 151 of the Act provides a safe-guard that the sword of section 147 may not be used unless the competent statutory officer is satisfied that the AO has good and adequate reasons to invoke the reopening provisions. As per the mandate of section 151 (2) the Competent Authority has to examine the reasons, material or grounds on which the reopening is sought to be based and to judge as to whether they are sufficient and adequate to the formation of the necessary belief of escapement of income from taxation on the part of the AO. It is if and only if the Competent Authority, after applying his mind, is of the opinion that the AO’s belief is well reasoned and bonfide, that he will accord his sanction thereon. In ‘Chhugamal Rajpal vs. S.P. Chaliha’ [1971 (1) TMI 9 - SUPREME COURT], it has been held that where the Commissioner, while granting the sanction just noted the word “Yes” and affixed his signature thereunder, he had only mechanically accorded permission, and that the important safe-guards provided in section 151 were lightly treated. The approval in the case at hand is clearly an approval granted without application of mind, and therefore, it is not at all a legally tenable approval. - Decided in favour of assessee.

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• Customs

• 2018 (7) TMI 194
  Principles of natural justice - denial of opportunity of cross-examination - classification of goods - Held that:- The request made for cross examination has been rejected by the authority, not once, but twice. The rejections have been by speaking orders. More importantly all the officers have discharged their official function and the department has specifically stated that they have not recorded any statement from the officers so as to make them available for cross examination, as if they have rendered a personal opinion in the matter - the officers having discharged their official duty, that too, based upon the documents which were filed by the importer cannot be subjected to cross examination at the instance of the importer. At best, the importer can place materials before the Adjudicating Authority to establish that the assessment done was improper or incorrect. Whether the petitioner should be permitted to bye-pass such a remedy and whether the Court should exercise discretion in the matter? - Held that:- The issue which is in dispute in the current proceedings pertain to classification of the goods which have been imported to arrive at the rate of duty payable. This undoubtedly is a factual issue which cannot be adjudicated in a Writ Petition - petition not maintainable. Petition dismissed as not maintainable.

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• 2018 (7) TMI 193
  100% EOU - Extended period of limitation - escapement of assessment u/s 14 of the Customs Act, 1962 - The case of the respondent is that the Show Cause Notices were issued in respect of the periods from 1994-1996 and 1993-1996 respectively. The Show Cause Notices were issued, beyond the period of five years from the relevant date - Held that:- The appellant issued Show Cause Notices on 01.11.2001 and 07.11.2001 respectively for recovering the amount due to the revenue. The Show Cause Notices issued on 01.11.2001 and 07.11.2001 clearly shows that based on specific intelligence report, the Preventive Unit searched the factory premises of the respondent on 10.11.2000 and 11.11.2000 and certain incriminating documents were seized under Mahazar. The Show Cause Notices cannot be termed as time barred. The question of limitation is a mixed question of fact and law. It is not purely a question of law. The said question cannot be decided summarily without considering the materials available on record. Appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 192
  Refund of SAD - N/N. 102/2007-CUS dated 14.09.2007 as amended - Rejection on the ground of time limitation - the appellant filed the refund claims after the period of one year - Held that:- There is no dispute on the facts of the case that the refund claim was filed after one year from the date of payment of duty and as such was not eligible to be sanctioned in terms of Notification No.102/2007-CUS as applicable during the relevant period. The Learned Commissioner (Appeals) had relied on the judgment of the Hon ble High Court of Delhi in the case of Sony India Pvt Ltd, [2014 (4) TMI 870 - DELHI HIGH COURT] wrongly holding that this judgment reached finality as the Hon ble Apex Court has dismissed the appeal of the Revenue thereon. In fact the Hon ble Apex Court had clearly dismissed the petition on the grounds of time bar, leaving the question of law open. As a creation of law, the Tribunal cannot go beyond the law itself. The validity of the Act, Rules, Regulations and Notifications cannot be questioned or modified by the Tribunal. Only the High Courts and Supreme Court which examine the constitutionality of the laws can do so. Unless the notification is amended or modified by a judicial pronouncement of the High Court having jurisdiction over this Bench or of the Supreme Court, the Tribunal is bound to follow the notification as it stands - In this case not only is there no judgment of the jurisdictional High Court but there are two conflicting judgments of two different High Courts. Under these circumstances, the proper course of action for me is to follow the notification. Time limitation applies - refund rightly rejected - appeal allowed - decided in favor of Revenue.

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• 2018 (7) TMI 191
  Refund of BCD - unjust enrichment - whether the incidence of duty on the raw-materials which were imported should be deemed to have been passed on to the customers in the form of prices in the final products or not? - Held that:- Appellant have not produced any evidence to substantiate that this portion was not included in the cost of their final products and thereby the burden has not been passed on to the consumers. Thus, they have failed in discharging their burden of proving that the unjust enrichment does not apply to their case - Even in their appeal filed before this Bench, they have not produced any documents to show that the doctrine of unjust enrichment does not apply to their case. If the person claiming the refund can show that the burden of duty has not been passed on to the customers, it should be given to such person. In this case, the Assistant Commissioner has erred in rejecting the claim on the ground of unjust enrichment. He should have sanctioned the amount and ordered it to be credited to the consumer welfare fund - the Order-in-Appeal is modified to that extent that the refund of the amount is sanctioned and ordered to be credited to the consumer welfare fund. Appeal disposed off.

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• 2018 (7) TMI 190
  Principles of natural justice - benefit of Advance License - case of appellant is that they were not supplied with the order of rejection of warehousing period extension so that the same could have been appealed against before the Hon’ble Tribunal - whether the goods imported earlier and kept under bond which has expired could be extended the benefit of advance licences which has subsequently been issued by the licensing authority? - Held that:- The matter is no more res integra in view of judgment in the case of U.K.Paint Industries vs. Commr. Of Customs [2013 (12) TMI 1247 - DELHI HIGH COURT], wherein the department has rejected the request for the release of imported goods against the licence on the ground that the advance licences was issued subsequent to the date of import and it cannot be used for goods imported earlier and on which customs duty is payable in terms of Section 72(1) - appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 189
  Revocation of CHA License - forfeiture of security deposit - violation of the statutory time limits prescribed in the CBLR, 2013 - on merits, the case of Revenue against appellant is that the appellant has allowed the license to be misused in Mumbai. In Mumbai, the Authorised Representative of the appellant has sub-contracted the CHA license to unauthorised persons who were found to have indulged in evasion of Customs duty by filing the bills of entry in the name of non existent importers. Held that:- The CBLR, 2013 have prescribed time limits for completing the disciplinary action against the Customs Brokers. Proceedings are required to be initiated by the Licensing authority after receipt of Offence Report and in time bound manner - however, the time limit contained in Regulations cannot be construed to be mandatory and has held to be directory - the proceedings in the present case cannot be held to be vitiated for non-completion of the proceedings within the time limit specified in the CBLR,2013. In the present proceedings the Licensing Authority has given elaborate findings to the effect that the appellant has contravened CHA Regulations. By the act of sub-letting of the CHA license in Mumbai, the contravention of Regulation 12 is established. The appellant has been found to have failed in carrying out proper verification of the antecedents of the importers thereby facilitating smuggling of goods by filing documents in the name of fictitious firms - there are no reason to interfere with the findings of the lower authority that the appellant has contravened several Regulations under the CBLR,2013. Revocation of CHA License upheld - appeal dismissed - decided against appellant.

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• 2018 (7) TMI 188
  Redemption fine - penalty - misdeclaration of imported goods - rerollable steel scrap - the goods were misdeclared as heavy melting scrap which attracts nil BCD - Held that:- It is seen from the records that the appellant had misdeclared the goods as heavy melting scrap. However, the quantum of duty that would have been payable in case the goods are described as re-rollable scrap is only Rs. 63,000/- - further, the appellant is a first importer. The redemption fine can be reduced from Rs. 3,00,000/- to Rs. 1,00,000/- - quantum of penalty upheld - appeal allowed in part.

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• 2018 (7) TMI 187
  Refund of SAD - N/N. 102/2007-Cus. dated 14.9.2007 as amended - refund was rejected on the ground that the sales invoice did not bear the endorsement that CENVAT credit of SAD is not admissible - Held that:- The said issue stands decided in the case of Chowgule & Company Pvt. Ltd. [2014 (8) TMI 214 - CESTAT MUMBAI (LB)], where it was held that Condition relating to endorsement on the invoice was merely a procedural one and the purpose and object of such an endorsement could be achieved when the duty element itself was not specified in the invoice. Since the object and purpose of the condition is achieved by non-specification of the duty element the mere non-making of the endorsement could not have undermined the purpose of the exemption. However, taking note of the fact that the sales invoices have not been completely produced by the appellant, the matter requires to be remanded to the adjudicating authority who shall give an opportunity to the appellant to furnish the invoice. Appeal allowed by way of remand.

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• 2018 (7) TMI 186
  Time limitation - It is the case of the Revenue that the respondent had erroneously availed benefit of duty exemption by mis-declaring the goods - Held that:- The law on the issue is well settled. The test reports of the samples drawn from a particular consignment cannot be applied to the other consignments. The allegations of misdeclaration and suppression raised against the assessee in show cause notice dated 04.07.2005 are unfounded inasmuch as the entire details were known to the department. It was not open to the Department to invoke larger period of limitation against the assessee to demand the differential duty - appeal dismissed - decided against Revenue.

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• Corporate Laws

• 2018 (7) TMI 195
  Amalgamation of National Multi-Commodity Exchange of India Limited with Indian Commodity Exchange - Held that:- The provisions of sub-sections (3) and (6) of Section 230 shall apply mutatis mutandis in case of merger and amalgamation of companies. But in the case at hand, the Honourable Supreme Court vide its orders granted liberty to NOL to raise all issues before this Tribunal subject to all objections. As stated by NOL in the affidavit that the stage of amalgamation proceedings was also brought to the notice of the Honourable Supreme Court and the Honourable Supreme Court, after considering the stage of the amalgamation proceedings and the provisions of the Companies Act, gave liberty to NOL to raise all issues before this Tribunal. No doubt, the Honourable Supreme Court gave liberty to NOL to raise all issues before this Tribunal, but it is subject to all objections, even as per the order of the Honourable Supreme Court. Therefore, in view of Section 230(4) and the judgment of Rainbow Denim Ltd. (2000 (12) TMI 871 - SUPREME COURT OF INDIA), this is not the stage for NOL to raise objections. In case the Scheme is approved by the shareholders and unsecured creditors and in case NMCE comes up before this Tribunal with a petition to sanction the Scheme, then, at that stage, NOL is at liberty to raise all objections and all such objections raised by NOL have to be considered by this Tribunal before approving of the Scheme. This Tribunal is of the considered view that necessary directions can be given to NMCE and ICEX to conduct meetings for approval of the proposed Scheme. The order dispensing meetings or order to conduct meetings in respect of proposed merger of NMCE with ICEX is subject to final result in the SLPs pending before the Honourable Supreme Court of India, the proceedings before the Appellate Authority under PMLA and T.P. on the file of this Tribunal relating to shareholding rights of NOL. The Objector NOL is also given liberty to raise all the objections in respect of the Scheme of merger of NMCE with ICEX in the petition seeking sanction of the Scheme, if any, is filed, subject to order of the Honourable Supreme Court in the pending SLPs

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• PMLA

• 2018 (7) TMI 185
  Violation of PMLA - writ prayers seek protection of possession claimed by petitioners against respondents or allow petitioners to continue to remain in possession of properties claimed by them under lease arrangement - Held that:- The petitioners claim a right through respondent Nos. 3 to 6 or respondent No. 3 as the case may be, who are accused in the case pending investigation and trial under the PMLA, 2002. The mode, manner and method of exercising jurisdiction under Sections 5 and 8 together with vires of the Act have been unsuccessful, and steps under the PMLA, 2002 are taken up by 2nd respondent. After first two important rounds namely, provisional attachment dated 30-3-2010 and order confirming provisional attachment on 21-7-2010 as late as, June, 2011, the petitioners claim a right to possession through lease arrangement. The lease arrangement pleaded is certainly after the cloud has shrouded on the activities of the accused in the crime registered on 9-1-2009 and subsequent registration of Enforcement Case by the 2nd respondent. At the time of alleged execution of lease arrangement, the accused in the crime registered by CID and also the case registered by Enforcement Directorate, several Directors were suffering from more than one disability of free participation, much less voluntarily part possession by creating third party interest on the properties held by them subjected to attachment under the PMLA, 2002. The sequence of events stated by petitioners appears to be improbable, since this Court is not adjudicating on legality of orders passed under Section 8(4) of the PMLA, 2002, further deliberation is not undertaken, except to note that the assertion of petitioners that a right or a subsisting right is created is without merit and warrants rejection. This Court refrains from expressing further view in this behalf. Therefore, the very documents on which the petitioners rely upon, this Court has difficulty in recognising the right claimed by the petitioners, much less protect the right or possession alternatively pleaded by petitioners in exercise of jurisdiction under Article 226 of the Constitution of India. The petitioners are governed by the law as on the date of orders passed under Sections 5(5) and 8(4) and therefore by operation of Section 8(4) read with possession claimed to have been taken on 29-3-2011 and without any resistance thereafter by the accused in the Enforcement Case, the steps taken by the 2nd respondent are one in the nature of removing the occupation of persons without right and title and for such eventualities Section 54 authorises the 2nd respondent to take the assistance of one or the other authorities specified therein. The proceedings, dated 19-12-2013 and 24-7-2014 are steps taken in accordance with law and are legal and valid. This Court, for the above reasons, is not persuaded to exercise its jurisdiction under Article 226 of the Constitution of India either for protecting the right claimed by the petitioners or the alternative prayer to allow petitioners to remain in possession of respective properties claimed by them.

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• Service Tax

• 2018 (7) TMI 184
  Rejection of settlement application - demand of service tax and eligible of Cenvat Credit - The impugned order is primarily passed on the basis of the fact that there was no proper explanation from the petitioner qua his claims. They did not produce requisite documents in support of settlement inspite of requisition being sent to them - Held that:- In the present case, respondent no.2 proceeded on interim report of revenue and before receipt of final report, the impugned order was passed. In pursuant to order dated 13th April, 2017, passed by Settlement Commission allowing application under Section 32E to be proceeded with, it was expected that respondent no.2 would look into all material aspects by giving sufficient opportunity to assessee to establish his claim in the application. For any inaction on the part of Revenue to submit Final Verification Report, the petitioners cannot be made to suffer. To ascertain the correct position in the matter, respondent no.2 could have granted the petitioner and the Jurisdictional Revenue Authority further hearing. It would be appropriate to remand the proceedings back to respondent no.2 for fresh consideration by setting aside the impugned order - Appeal allowed by way of remand.

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• 2018 (7) TMI 183
  Scope of SCN - whether the Commissioner (A) can take a completely different ground which was not an issue in the Order-in-Original? - Held that:- The findings of commissioner as per whose order the appellants have paid the duty by way of cash and Cenvat credit were completely ignored. The letters of the appellants have not been replied. The claim of appellants that they have not taken credit of exempted services was not verified. Progressively the Order-in-Original and the Order-in-Appeal went tangentially to the issue raised in the SCN. Commissioner, vide order 05/2006 dated 23.01.2006, while confirming the demand against the appellants, did not give any finding against the availment of credit by the appellants. Show Cause Notice also did not seek to reject the claim on this count. Therefore, a strong case is made out by the appellants. In the instant case both, original and appeal authorities, have gone beyond the scope of the Show Cause Notice. Appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 182
  CENVAT credit - As per the Revenue, the services provided by IHCL were Franchisee Services in which case they were not entitled to avail the entire credit of the Service Tax paid by the Service provider, but the credit should have been availed only to the extent of 20% in terms of Rule 6(3) of Cenvat Credit Rules - Held that:- In the case of Piem Hotels Ltd. v. Commissioner of Central Excise, Nasik [2016 (4) TMI 290 - CESTAT MUMBAI], the service recipient from the same service provider i.e. M/s.IHCL was held entitled to 100% credit of the Service Tax by holding that the services provided by M/s.IHCL were nothing but Management Consultancy Services - the appellant is entitled to the full 100% credit of Service Tax paid by M/s. IHCL - decided in favor of appellant. Mandap Keeper Services - appellant explains that they have paid Service Tax on the said services after availing 60% abatement and without availing any Cenvat Credit, they were discharging their full Service Tax liability in respect of such Hall Hire Charges, without the claim of any abatement, for which case they would be entitled to full Cenvat credit of Service Tax paid on various input services - Held that:- Inasmuch as the dispute relates to the factual position we deem it fit to set aside the demand on the said count and remand the matter to the original adjudicating authority for verification of the appellant s claim - matter on remand. Demand of around Rs. 16.90 Lakhs is confirmed on Shop and Showcase Rental , Business Center Income and Health Club Services - Held that:- Appellant submits that they have already discharged their tax liability on the said services by including the same in the value of Banquet, Internet and Beauty Parlour Services . Inasmuch as the said dispute also relates to factual verification and inasmuch as we have already remanded the matter in respect of other demand we direct the original authority to verify the appellant s claim in respect of the said services also - matter on remand. Demand of Rs. 51,154/- stands confirmed on Vodafone Tower Rental - Held that:- according to the appellant this also stands already discharged under the head Banquet . This also needs verification which would be done by the original adjudicating authority - matter on remand. Appeal allowed in part and part matter on remand.

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• 2018 (7) TMI 181
  Business Auxiliary Services - Technical assistance and marketing services - marketing services - promoting the products of WGS in the markets in India - Held that:- The onus is upon the Department to satisfy us that the services of the appellant in three of the cases falls within the expressed ambit of the definition of Business Auxiliary Services - in the facts of present case, the GDPL is providing service to the appellant while manufacturing the product under the brand name of the appellant. While providing any technical know-how, the specifications, marketing strategies and even providing promotional services to GDPL, appellant is actually providing those services to self, the product marketed being the product of the appellant itself. GDPL is merely a Contract Bottling Unit (CBU) - The services rendered by the appellant were rendered to self. The same cannot be categorised as Business Auxiliary Service. Promotion and marketing services - the appellant has agreed for providing inter-alia promotion, marketing and even customer care services for which the appellant even has received certain consideration - Held that:- Every intention and purpose of the agreement of appellant with WMIL is centred to market the product of affiliate and sale thereof for which the promotion and marketing activities are centered essentially to be carried out without which business of WMIL could not sustain. Such activities are essentially being envisaged under Business Auxiliary Services - The impugned order has rightly considered the agreement of appellant with WMIL as an agreement for providing Business Auxiliary Services - demand upheld. Agreement with WGS for promoting the products of WGS in the markets in India - WGS is an entity based outside India - Held that:- Though the appellant were providing marketing and promotional services to them but the recipient being abroad, the appellant were receiving remuneration in convertible foreign exchange from WGS - There has been a Notification No. 6/99 dated 09.04.1999 providing exemption to taxable services where consideration was received in convertible foreign exchange. Though this exemption was withdrawn vide another Notification No. 2/2003-ST w.e.f. 01.03.2003, but subsequently vide Notification No. 21/2003 – ST dated 20.11.2003, the exemption was restored - demand set aside. Extended period of limitation - penalty - Held that:- The Department has not produced any such evidence on record which may suggest that appellant has acted with an intent to evade payment of tax. Hence, there was no justification by the Department to invoke the extended period of five years while issuing the Show Cause Notice - The only taxable service in the category of Business Auxiliary Service has been observed to have been rendered by the appellant to WMIL, but the period of demand thereof is w.e.f. July, 2003 to June, 2004. The Show Cause Notice is dated 09.02.2007. Hence, the demand is beyond the period of one year and as such is held not sustainable. Appeal disposed off.

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• 2018 (7) TMI 180
  Classification of services - construction services - the assessee’s contention is that their activities cannot be classified under the category of Commercial or Industrial Construction Service under Section 65(25)(b) of the Finance Act, 1994, since all the orders were titled as Work Orders and the scope of the work also included supply of goods and rendering of services - Held that:- All the contracts are not for construction services and the same needs to be revisited in view of the facts of the case - On going through the work orders, it is observed that some contracts are for hiring of crane, removal of sludge, excavation of river channel, labour supply, replacement of equipment, cleaning activities, replacement of equipments/valves and some fabrication works. All the independent contracts cannot come under the purview of Construction Service. It would be appropriate to remand the matter to the Adjudicating Authority to consider the submissions of the assessee and the grounds of appeal filed by the Revenue - appeal allowed by way of remand.

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• 2018 (7) TMI 179
  Service or manufacture? - The customers supplied the drawing for preparation of moulds, which are required to be used for the manufacture of forging - whether taxable under the category of “design services” or not? - Held that:- It is observed that the design and drawing supplied by the customers have been utilized by way of design and preparation of the moulds within the factory. It is evident that the moulds are, in fact, prepared within the factory and the product came into existence in the factory and is liable to payment of excise duty if the same is cleared out of the factory. The activity undertaken by the appellant is nothing but the manufacture of moulds and hence levy of service tax on such amount under the category of design services under Section 65(105)(zzzzd) of the Finance Act, 1994, is not justified. Appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 178
  Valuation - non-inclusion of income received from handling charges in assessable value - main contention put forward by the appellant is that the amount alleged to be received by the appellant as handling charges in the show cause notice is nothing but reimbursable expenses - Held that:- The appellant has not adduced sufficient evidence to establish this plea - The ld. counsel has pleaded a further chance to establish the same. Taking note of the request made by the appellant, we are of the considered opinion that a further chance can be granted to the appellant to establish his case - Appeal allowed by way of remand.

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• 2018 (7) TMI 177
  Penalties u/s 77 and 78 - Commercial or Industrial Construction Service - payment of service tax under wrong head - Bona fide belief - Held that:- The issue whether works contract services was liable to levy of service tax was contentious issue for a long time. Further the appellant had inadvertently deposited dues under wrong head which shows that there was no intention to evade payment of tax - Moreover, the issue and the period was immediately after 1/6/2007. The penalty imposed under section 78 of the Finance Act, 1994 is unwarranted - the penalty imposed under Section 78 is set aside without disturbing the confirmation of demand, interest or the penalty imposed under Section 77. Appeal allowed in part.

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• 2018 (7) TMI 176
  Demand of service tax - Rent a Cab Services - Air Travel Agency Services - Parking charges which their travel desk had collected from customers who were provided with Rent-a-Cab Services - Service charges which they received from their travel division (IATA agent) for booking air tickets for clients staying at the hotel - Commission received from the travel division for booking air tickets on behalf of the service provider - Held that:- The travel division undertakes the booking of air tickets. The travel division raises invoice charging service tax on the basic fare which is forwarded to the travel desk. The bills raised at the travel desk includes the value of inter-division services alongwith service tax and service charges. Since service tax on the basic fare is being discharged by the travel division of the appellant company under Air Travel Agency Services, the demand on the appellant treating these two divisions as separate entities is incorrect - demand do not sustain. Parking charges - Held that:- This is in the nature of reimbursable expenses and therefore cannot be subject to levy of service tax - the demand cannot sustain. Appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 175
  CENVAT credit - proportionate credit in terms of trading activity - Held that:- Discernably, the adjudicating authority has denied the entire quantum of credit availed by the appellant without going into any proportionate eligibility in terms of provisions laid down in CCR - there is case for remanding the matter for de novo consideration to reconsider the net liability of the appellant after calculating the same in terms of Rule 6 (3AA) of the CCR 2014 - appeal allowed by way of remand.

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• 2018 (7) TMI 174
  Services provided to a SEZ unit for services consumed within SEZ unit - interpretation of statute - services as cab Operator to IT/ITES SEZ companies by way of picking and dropping the employees - benefit of N/N. 4/2004 cit. 31.03.2004 - SCN alleges that the services have not been consumed within the SEZ unit. Held that:- The words 'in a SEZ' used in the said Rule has led to doubts as to whether services which are partly availed outside the SEZ like that of tour operator service/ Rent -a-cab service used for picking up and dropping employees are eligible for exemption from service tax - When the service is ultimately consumed within the SEZ unit, whether services commenced outside the unit /or ended outside unit is of no consequence. When in effect the services are consumed within SEZ, the benefit of notification cannot be denied. Further by virtue of Section 51 of the SEZ Act, the provisions of the SEZ Act, has overriding effect over the provisions contained in any other law - also, Rule 31 cannot restrict the benefit of exemption extended under the Act. Appeal dismissed - decided against Revenue.

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• Central Excise

• 2018 (7) TMI 173
  Grant of anticipatory Bail - offences punishable under Sections 9, 9A, and 9AA of the Central Excise Act, 1944 - Held that:- For granting anticipatory bail, reasonable apprehension of being arrested is enough. If in the facts and circumstances, the respondent had fear of being arrested and moved the Sessions Court seeking anticipatory bail and that the Sessions Court granted anticipatory bail having regard to those circumstances, there is no illegality in it. Petitioner-Department has no intention to arrest the respondent - It is not understandable as to how the interest of the petitioner has been affected just because the Sessions Court granted anticipatory bail for a period of three months. Even otherwise, the petitioner could have approached the Sessions Court itself for cancellation of the anticipatory bail as Section 439(2) of the Code of Criminal Procedure, 1973 vests the Sessions Court also to modify its order. - the petition is meritless and therefore it is dismissed.

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• 2018 (7) TMI 172
  CENVAT Credit - manufacturing as well as trading activity - Input Service distribution - it was alleged that the appellant has wrongly availed Cenvat credit on the basis of Invoices issued by their ISD as the said Input service are not used in or in relation to the manufacture of their final dutiable goods - validity of proceedings under Rule 14 of the Cenvat Credit Rules, 2004 - exempted service as given under Rule 2(e) & 2(l) of Cenvat Credit Rules, 2004. Held that:- The admitted facts are that the appellants availed Cenvat credit on input services and they had considerable turnover and income in trading activities. It is also admitted that the services on which credit have been availed are partly relatable to trading activities also. The appellants contested the reversal of credit, to a proportionate extent, on the ground that trading is not an exempted service prior to the insertion of explanation w.e.f. 1.4.2011. But he has failed to consider that trading is not a taxable service also. In other words, trading is an activity which is not covered under the scope of Cenvat Credit Rules, 2004. The appellants should not have availed any credit on input services when such services are attributable to an activity which is not at all taxable and hence, not covered by the scope of Cenvat Credit Rules, 2004. A deemed fiction is apparently created by naming ‘trading’ as an exempted service by way of explanation in Rule 2 of Cenvat Credit Rule w.e.f. 1.4.2011. I find that prior 1.4.2011 there was no scope at all even to consider the trading activity to be covered under the credit scheme. After the explanation, the position has become more clear to the effect that the trading activity can be considered as an exempted service for the operation of scheme under Cenvat Credit Rules - the Appellants should not have availed credit for common input services which are used for taxable output service as well as trading activity, as it is imperative to identify and reverse that amount of credit attributable to the trading activity. The ld. Commissioner (Appeals) is justified in the impugned order in holding that this explanation is clarificatory in nature and has retrospective applicability and therefore the explanation inserted vide N/N. 3/2011 dated 1.3.2011 has retrospective effect. Extended period of limitation - Held that:- The trading is not an activity or a service covered by the Cenvat scheme prior to the introduction of clarificatory explanation. The appellants have no reason to avail credit on services which they are fully aware were being used for trading activity also. There is no question about the bona fide belief of the appellant contrary to the provisions of law - the Appellant had knowingly utilised the said service in respect of their trading activity and neither the appellant maintained the separate record as required by them as per Rule 6(2) of Cenvat Credit Rules, 2004 nor they availed any option under Rule 6(3) of Cenvat credit Rules, 2004 for the reversal of Cenvat credit taken on common input service - extended period rightly invoked. Appeal dismissed - decided against appellant.

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• 2018 (7) TMI 171
  Valuation - related party transaction - interdependence of different companies involved - lifting of corporate veil - time limitation - Whether the appellants are related to M/s. Concept Sales and other distributors so as to fall under the mischief of related person in terms of Section 4 of Central Excise Act, 1944? - Held that:- All these firms were making payments to M/s ABC Communications which was also a firm of the appellants - None of the so called sales meetings were attended by any of the persons of Gautham Traders, Vysya Sales Corporation, Concept International, Matha Agencies. Only Shri George Varghese attended the same - None of the proprietors of the said distribution firms had invested any capital nor they received share of the profits; They did not have any control of day to day activities of the firms; the persons have lent their names only and had no say in the affairs of the firms. In instant case, mutuality of interest is established by the investigation and has been brought out by the learned Commissioner in his Order-in-Original. The corporate veil has been lifted satisfactorily. It has been established that the Directors of the appellants were managing various distributors of M/s. Concept Sales either by themselves or through their employees. None of the distributing firms were functioning independently and were for all practical purposes controlled and managed by Shri George Varghese of the appellants - there is interdependence between the appellants, M/s. Concept Sales and other distributing firms. As discussed above, there have been number of financial transactions shown in the name of different companies which are in favour of the Directors of the appellants. Therefore, under these circumstances, it has to be held that leave about mutuality of interest, all the companies were one and the same managed by Shri George Varghese; corporate entities are created as a façade. The conclusions drawn, on the mutuality of interest of different firms involved; rejection of the transaction value claimed by the appellants and valuation arrived in show-cause notice and affirmed by the learned Commissioner, not once but twice, need to be given credence and requires to be held up. Whether the issue is barred by limitation? - Held that:- An earlier show- cause notice was issued by the Superintendent only on the ground that the price at which appellants have sold the aerated bottles to M/s. Concept Sales was less than the cost of production. Consequent to the investigation by DGEI, facts of interconnectedness, interdependence nature of the units and inexplicable financial transactions between different companies have come to light. Therefore, it cannot be said that the department had the knowledge of these aspects at the time of issuance of the first show-cause notice - SCN is not time barred. Whether the department was correct in including the clearances of soda of McDowell brand by the appellants? - Held that:- The value of clearances of McDowell which is also falling under same chapter 22 had been taken into account for computing the aggregate value of first clearances of Rs. 20 lakhs; since the appellants had crossed the limit of Rs. 20 lakhs on 11.1.1993 itself, for the chapter 22 the clearances made subsequent to that date were taken for calculation of duty payable. - the department has given due allowance to the clearances in each of the years as per the prevalent notification and as such the contentions of appellants are unsubstantiated. Whether the discounts claimed by the appellants are eligible to be allowed? - Held that:- The principle has been fairly set right by various judicial pronouncements that the discounts which are known at the time of clearance and are passed on can be allowed - The learned Commissioner held that the quantity discount based on free supply shown in the invoices of M/s. Gowtham Traders cannot be extended to the appellants. Penalties - Held that:- Only one of the Directors of the appellants i.e. Shri George Varghese had a prominent and dominating role in managing the affairs of different companies. Therefore, penalty on him and the other director cannot be equal - Having held that the other noticees had hardly any role in the day to day affairs of the firms, levying penalty on them appears to be harsh - As the issue has been under litigation over two decades now, we find that there is a need to revise the penalties downwards. Appeal disposed off.

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• 2018 (7) TMI 170
  Clandestine removal - no corroborative evidences - demand based solely on third party documents - Held that:- It is a fact that the Revenue has not adduced any corroborative evidence to show the movement of 150.040 MT of MS Ingots from the premises of the SSPL to the Appellant or movement of 144.038 MT of MS Angles/ channels and 3.008 MT of Waste and Scrap (end cutting) from the premises of the Appellant to any buyers or the customers nor they brought on record any evidence as to who is buyers of 144.038 MT of MS Angles/ channels and 3.008 MT of Waste and Scrap (end cutting) allegedly sold by the Appellant. The law as to whether the 3rd party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well settled. Only on the basis of statement of third party no demand could be made. The show cause notice has been issued and the demand for the month of May, 2010 has been confirmed merely on the basis of the ledger account retrieved from the pen drive [for the period from 2009 to 2011] seized from the premises of SSPL on 7.7.2011 and there is no evidence to prove that such unaccounted figure has actually been received by the Appellant. Mr. Nitin Agrawal, Director of SSPL also in his statement nowhere mentioned the name of the Appellant - demand cannot sustain. Appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 169
  CENVAT credit - inputs - welding electrodes - denial on the ground that the welding electrodes were not used in or in relation to manufacture of final products and therefore, no credit is admissible as they do not qualify to be called as inputs under the CENVAT Credit Rules, 2004. Held that:- It appears that the Government had been revising the CENVAT Rules from time to time expanding the scope of credit and also bringing about increasing harmony between the CENVAT Credit Rules and the erstwhile Service Tax Credit Rules and eventually merged them in 2004. The process of expansion of scope of CENVAT Credit continued even after 2004; simultaneously, the rates of Central Excise duties as well as Service Tax were also harmonised reducing the gaps between them and eventually, they have been merged into the Goods & Services Tax - In 2002 Rules, inputs used in or in relation to manufacture were allowed credit and this definition was further enlarged in 2004 Rules. In 2011, credit was allowed on all goods used in the factory by the manufacturers subject to some exceptions. It no longer mattered whether the inputs were used in or in relation to manufacture or not. The relevant period in the current cases is May, 2013 to May, 2015. Therefore, the definition of inputs under CENVAT Credit Rules, 2004 as amended in 2011 is relevant for the purpose - In terms of the amended definition of inputs under CENVAT Credit Rules, 2004 (after 2011) as is applicable to the relevant period, the welding electrodes can definitely be called inputs. The assessee is entitled to input credit on the welding electrodes used in repair and maintenance of machinery in his factory - appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 168
  CENVAT credit - input services - commission paid to the sales/commission agents - whether the commission paid to the sales/commission agents is related to promotion of any activity specified in the inclusive part of the definition of input service provided under Rule 2 (l) of the Cenvat Credit Rules, 2004? - Held that:- Whether the explanation added in Rule 2 (l) of Cenvat Credit Rules, 2004 vide notification dated 03/02/2016 has retrospective effect or not, has come before this Tribunal in the matter of Essar Steel India Ltd. vs. CCE & ST, Surat – I [2016 (4) TMI 232 - CESTAT AHMEDABAD], where it was held that the explanation inserted in Rule 2 (l) of Rules 2004 by N/N. 2/2016-CX (NT) should be declaratory in nature and effective retrospectively. Explanation to Rule 2 (l) of Rules 2004 says it in clear terms that there is no bar on availment of Cenvat credit on sales promotion service by way of sale of dutiable goods on commission basis. Appeal dismissed - decided against Revenue.

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• 2018 (7) TMI 167
  CENVAT Credit - input services - Vehicle Insurance - Construction related services i.e., false ceiling/partition works - Installation services used for ineligible capital goods - Works contract services used for construction related works - Held that:- In the definition of input services, the credit on vehicle insurance claimed by them is covered by exclusion clause (B) above, while the credit on construction related services and works contract services fall is covered under (A) above as it falls under sub-clause (zzzza) of clause (105) of Section 65 of the Finance Act. The civil construction work undertaken was in the nature of composite works contract with some amount being added as sale of goods and VAT being paid and for the remaining amount, service tax being paid, considering it as the service element of the composite works contract - The appellant had argued earlier that they can prove through agreements, the contracts which they had with their service providers do not fall under the category of works contract. But they have not produced any such agreements and the invoices show that they were works contracts - Thus, appellant have no evidence to show that these invoices do not pertain to works contract. Time limitation - Held that:- The appellant had disclosed the full value of the credit which they have taken in the ER-1, but they have not disclosed the components of the credit which they have taken. The ER-1 during the relevant period also did not provide details of the credit taken - the extended period of time under Section 11A can be invoked. Appeal dismissed - decided against appellant.

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• 2018 (7) TMI 166
  Clandestine removal - shortage of raw material - no evidences could be produced - Held that:- From the cross examination, it is very clear that the Central Excise officers did not conducted any physical weighment of raw materials. Therefore, it is not establish that officers found shortage of 8855.398 MT of raw materials - demand do not sustain - appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 165
  CENVAT Credit - scope of 'Factory' - capital goods - Whether the compressor used at the gas well to pump gas into tankers which is about 30 K.M. away from the manufacturer can also be considered as a part of the factory premises of the appellant? - Held that:- The definition “Capital goods” under Rule 2(a) of CCR 2004 specifically requires the goods to be used in the factory of the manufacturer of the final products subject to some exceptions. The current case does not fall in those exceptions. Therefore, the capital goods in this case i.e. compressor must be used in the factory of the manufacturer of the final products if CENVAT credit must be allowed. The definition of “Factory” has been given in Central Excise Act and this clearly does not cover the gas well where the compressor has been installed - It is true that the goods are finally required for the manufacture and so are many other raw materials sourced from various places without which the manufacture cannot take place. All these places from where raw materials are sourced, cannot be treated as part of the factory of the manufacturer. There is nothing on record to show that the well is part of the registered premises of the factory of the manufacturer - CENVAT credit not admissible - demand upheld. Penalty - Held that:- Appellant has enough reason to suspect that they were entitled to the credit and hence any malafide intent cannot be attributed - penalty not warranted. Appeal allowed in part.

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• 2018 (7) TMI 164
  Confiscation of raw material, packing material and finished goods - Redemption fine - case of appellant is that Rule 25 of Central Excise Rules under which these goods have been confiscated is meant only for finished goods - Clandestine manufacture and removal - paints and varnishes - Held that:- It is admitted fact that no Cenvat credit has been taken by the appellant. In that situation, there is force in the contention of the appellant that there is no provision in the Central Excise Act for confiscation of such raw material and packing material - also, the first appellate authority in para 10 of the impugned order has failed to give any cogent basis for confiscation of raw material and packing material - the confiscation of the raw material and packing material is without authority of law and is accordingly set aside. Confiscation of inished goods, which were found in the premises - Held that:- It is not disputed that the appellant were maintaining kachcha parchis for clandestine removal of the goods. The appellant had already crossed turnover limit of SSI exemption - the appellant had been systematically clearing the goods without payment of duty in clandestine manner. In these circumstances, reasonable conclusion is that the appellant wanted to remove finished goods in clandestine manner in active connivance with his close relatives as they had already crossed SSI exemption limit - confiscation of finished goods and redemption fine thereupon upheld. The appellant are only contesting confiscation of raw material, packing material and finished goods and imposition redemption fine. It clearly shows that the appellant have accepted that there was clandestine removal of the goods and there was malafide intent to evade payment of duty. Appeal allowed in part.

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• 2018 (7) TMI 163
  Penalty u/s 11AC - Valuation - physician samples - Method of valuation - whether the penalty under Section 11AC of Central Excise Act, 1944 is imposable or not? - Held that:- It is a matter of record that the appellants have voluntarily complied and made good of the short payment of duty, which has arisen by sheer ignorance on the part of them about the new procedure for Valuation of physician samples provided by CBEC vide their Circular No.813/10/2005-CX dated 25.04.2005. It is also matter of record that as soon as, the short payment was pointed out, the appellants have voluntarily paid the Central Excise duty including interest thereon There was no intent to evade, rather due to ignorance, the appellant continued to pay Central Excise duty as per previous Guidelines of the CBEC and as soon as they came to know of the new Guidelines issued in 2005, they have paid the differential amount of Central Excise duty with interest - the short payment of Central Excise duty which was later on made good by making payment of equal amount of Central Excise duty, has resulted only because of ignorance and not because of any intention to evade duty and therefore, the provisions of Section 11AC in this case, are not invokable and no penalty under this Section is imposable. Penalty set aside - appeal allowed in part.

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• 2018 (7) TMI 162
  Classification of manufactured goods - Kelp-G Purakelp EC, K-Humate 3% Granules- K-Humate and Multiplex-G-Purakelp & K-Humate - The Department felt that the products manufactured by the appellants were plant growth regulators (PGRs), whereas the appellants maintained that they were manufacturing vegetable bio-fertilizer - Held that:- The report of the Chemical Examiner, which was admittedly done in respect of only one of the three products in question, merely states that the product is answering the test of amino acids. However, their exact profile and composition could not be ascertained. On the basis of the literature, which states that one of the ingredients is plant growth hormone, the report concludes that the product is a plant growth regulator. Clearly, the report is inconclusive and the conclusion that the product is plant growth regulator has been made on the basis of literature without paying attention to other ingredients and the nature of application and mode of action of the product. Board had issued a Circular dt. 06.04.2016 on the subject of classification of fertilizers, micronutrients and plant growth regulators in which it was clarified that notifications issued under the Fertilizer (Control) Order 1985 are not relevant for deciding the classification of Central Excise Tariff. Revenue has not been able to rebut the contention of the appellants that the products are not applied directly to the plant and are mixed with soil or clay to make them useable - also, Chapter 38 covers the plant growth regulators which are ‘separate chemically defined elements or compounds’. The CRCL test report has failed to establish that the product is a separate chemically defined element or compound and the same is not forthcoming from the literature as well. The conclusion in the impugned order that the products are plant growth regulators is not sustainable - appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 161
  CENVAT credit - inputs - cement, angles, TMT bars, etc - Held that:- The impugned order has relied upon the judgment of the Tribunal in the case of Vandana Global Ltd. [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] in holding that the definition of ‘inputs’ does not include cement, angles, TMT bars, etc. However, this judgment of the Tribunal has been disapproved by the Hon’ble Calcutta High Court in the case of Surya Alloy Industries Ltd. v. Union of India [2014 (9) TMI 406 - CALCUTTA HIGH COURT] - credit cannot be denied. Further, the Chartered Engineer’s certificate reflects that the impugned goods were actually used during the manufacture of the final products - the usage of various iron and steel items is to be analysed in light of the decision of the Hon’ble Supreme Court in the case of Rajasthan Spinning & Weaving Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT OF INDIA]. Shortage of finished goods detected during the stock verification - Held that:- There is no force in the submission of the ld. Advocate, as it was not substantiated by any evidence. The demand of duty is required to be upheld. Appeal allowed in part.

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• 2018 (7) TMI 160
  Clandestine removal - integrated steel plants - excesses and shortages of stock - demand of differential duty with interest and penalty - Held that:- In the circumstances of the present case, the excess stocks have been adjusted against the shortages and the Adjudicating Authority has finally arrived at figure Rs. 1.97 crores duty demand - there is no justification for imposition of penalty under Section 11AC in view of the Board Circular No.486/52/99-CX dated 23.09.1999 by which the integrated steel plants were required to only make payment of duty demand but there is no justification of imposition of any penalty. Demand of interest under Section 11AB - Held that:- It is to record that the section 11AB was introduced in the statute book on 28.09.1996 and the Commissioner has recorded in the impugned order that period of the present demand pertains to the period prior to such date - the duty demand has been paid by the respondent within a period of three months from the date of passing of the order and hence there is no justification to insist on payment of interest u/s 11AB. Quantum of redemption dine and penalty - Held that:- As per show cause notice the duty demand was amounting to Rs. 31,31,13,259/- while the demand as per the impugned order is Rs. 1,97,99,605/-. The adjudicating authority has also adjusted the excess and shortages which resulted in reduction of the overall demand - there is no reason to interfere with the redemption fine and penalty imposed by the adjudicating authority. Appeal dismissed - decided against Revenue.

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• 2018 (7) TMI 159
  Valuation of goods cleared by the appellant to its subsidiary - related party transaction or not - The view of the department is that central excise duty is required to be paid, in terms of Rule 10 of the Valuation Rules, 2000 at the price at which the subsidiary sells the goods to independent buyers - Held that:- The applicability of Rule 10 of the Central Excise Valuation Rules, 2000 and the circumstances in which it can be applied have been clarified by the CBEC vide their Circular dated 01.07.2012, where it was held that when goods are partly sold to related persons and partly to independent buyers, there will be no applicability of Rule 10. The Rule 10 will be applicable only in those cases where 100% of the goods are sold through related persons - There is no justification for insistance on payment of duty at the price at which the goods are sold by the related persons It is the submission of the appellant that the mutually agreed price at which goods are sold to the related persons is at par with the price of such goods sold to independent buyers. We also note that related details also have been submitted before the Adjudicating Authority. But we find from the impugned order that this aspect has not been discussed by him - the Adjudicating Authority is directed to consider this submission made by the appellant and accept the mutually agreed price if it is on par with the selling price to independent buyers. Appeal allowed by way of remand.

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• 2018 (7) TMI 158
  Utilization of CENVAT Credit - whether CENVAT credit availed on the Basic Excise Duty can be utilized for payment of education cess and secondary higher education cess? - Held that:- Rule 3(4) clearly lays down the CENVAT Credit availed under Rule 3(1) by a manufacturer / service provider can be utilized for payment of any of duty of excise on any final product. Reliance placed in the case of UNION OF INDIA VERSUS KAMAKHYA COSMETICS & PHARMACEUTICAL PVT. LTD. [2012 (7) TMI 902 - GAUHATI HIGH COURT], where it was held that there was no bar to utilize CENVAT Credit of Basic Excise Duty for payment of education Cess. Demand do not sustain - appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 157
  CENVAT credit - input services - demurrage charges - it was alleged that appellant availed the cenvat credit of service tax paid for services which were in the nature of penalty and cannot be treated as input service - Held that:- The service provider would charge penalty or demurrage for failure to receive the guranteed quantity for a certain period. On perusal of the agreement, it is clear that the said charges are related to the service provided by the service provider - the service rendered by M/s IMC Ltd. is in respect of manufacturing of excisable goods - denial of credit unjustified. In the present case, the appellant availed MS pipeline facility belonging to M/s IMC Ltd. The service provider paid the tax which cannot be denied and therefore, the availment of cenvat credit by the recipient unit cannot be denied. Appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 156
  Refund of Excise duty - N/N. 32/1999-CE - It is the case of the department that the appellants have wrongly included the cost of transportation in the assessable value and as such they have inflated the transaction value and paid higher duty - Held that:- The issue is no more res-integra in view of the decision of the Tribunal in the case of Commissioner of Central Excise, Shillong Vs. Guwahati Carbon Ltd. [2009 (4) TMI 269 - CESTAT, KOLKATA], where the appeal of the Revenue was allowed in an identical situation, holding that the Respondents are not entitled to include freight and insurance charges in the assessable value and the duty on the impugned goods requires to be re-calculated accordingly - appeal dismissed - decided against appellant.

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• 2018 (7) TMI 155
  Principles of Natural Justice - it is the contention of appellant that materials collected on verification ordered after conclusion of personal hearing has been used to their detriment without placing them on notice. The invoices for eleven months, supplied by the appellant, had been extrapolated for the entire period of demand and, that too, with a mere assertion - Held that:- The adjudicating authority has failed to discharge its responsibility of ascertaining the tax liability, the special privilege of daily discharge of tax liability arising out of the specific peculiarities in the manufacturing process and sanctified by instructions/circulars of Central Board of Excise and Customs, indicates the intention to deviate from the normal practice of duty liability - It is in this context that the decisions cited supra must be seen and the principles laid down therein should have been complied with by the adjudicating authority. The failure to afford adjustments of excess against short fall is attributable to insufficient assistance in the adjudication proceedings. Therefore, the adjudicating authority must be given an opportunity to conform to judicial decisions. The adjudicating authority is directed to evaluate the submissions made by the appellants and the applicability of the cited judicial pronouncement to determine the liability, if any, afresh - appeal allowed by way of remand.

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• 2018 (7) TMI 154
  Demand of interest on delayed payment of Education Cess - Held that:- The identical issue has come up before the Tribunal in the case of Oil & Natural Gas Corpn. Ltd. Vs. Commr. of Central Excise & Customs, Visakhapatnam II [2009 (4) TMI 814 - CESTAT BANGALORE], where it was held that There is no provision in the Oil Industry (Development) Act, 1974, for demand of interest for delayed payment of Cess. The demand of interest is not sustainable - appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 153
  Benefit of N/N. 67/95-CE - Captive consumption of molasses in the manufacture and clearances of rectified spirit - Department also took a view that the respondents have wrongly reversed an amount equivalent to 10% of the price of rectified spirit - Held that:- The Tribunal in the case of Sakthi Sugars Ltd. [2007 (6) TMI 471 - CESTAT, CHENNAI] held that the assessees therein were eligible to benefit of exemption under N/N. 67/95 in respect of the molasses captively consumed for manufacture of red sanders - Appeal dismissed - decided against Revenue.

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• 2018 (7) TMI 152
  CENVAT credit - repair and maintenance of building etc. - denial on the ground that the same was treated as construction services, which stand excluded from the ambit of Rule 2 (l) of Cenvat Credit Rules 2004 w.e.f. 01.04.2011 - Held that:- Whether the work contracts in the present case were for new construction or for repair and maintenance is required to be examined - Being the factual dispute, the same can be resolved only at the level of the adjudicating authority - matter remanded to the original adjudicating authority for examining the documents and for re-deciding the issue - appeal allowed by way of remand.

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• 2018 (7) TMI 151
  Time limitation - Excisability/marketability - manufacture of leather bags - Held that:- The adjudicating authority has correctly concluded that the circumstances concerning the processes undertaken by various job workers of the principal HBQ has been in the knowledge of the department, definitely from 2003 onwards and the department cannot then allege suppression with intention to evade payment of duty - there is no infirmity in the decision of the adjudicating authority that the SCN dated 3.07.2009, for the demand period of 2004-05 to 2006-07 is hit by limitation - appeal dismissed - decided against Revenue.

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• 2018 (7) TMI 150
  Penalty u/r 26 of CER - abetting the receipt of excisable goods against invalid documents and passing on irregular cenvat credit to their customers - Held that:- It is not in dispute that the goods covered by the invoices were received at Dankuni depot. Only some of the goods that were addressed to Taratala depot were received at Dankuni depot due to the transition of depot operation of the assessee - As per Rule 11(2) of the said Rules, It is clear that the invoice should bear the name of the consignee, which in the instant case has been recorded correctly and the same has not been disputed by the department. Penalty under Rule 26(2) of the Rules is imposable on a person if he (i) issues any invoice without delivery of goods, (ii) issues any document or abets in making such document on the basis of which the recipient of the document avails any ineligible benefit - In the instant case, the assessee had not issued invoices without delivery of goods or that such invoices had enabled their customers to avail any inadmissible credit of duty. Therefore, Rules 11(2) and 26(2) of the Rules are not applicable to the instant case. Appeal dismissed - decided against Revenue.

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• CST, VAT & Sales Tax

• 2018 (7) TMI 149
  Taxability - materials like sand, jelly, bricks, etc purchased from unregistered dealers were held to be taxable - Commissioner of Commercial Taxes, Zone-I exercising powers under Section 64(1) of the Act revised the said order of the First Appellate Authority, and the order of First Appellate Authority was set aside restoring the order of the Assessing Officer relating to the tax periods April 2005 to March 2009 - Jurisdiction. Whether the Revisional Authority is justified in law in holding that the appellant is liable to purchase tax U/s 3(2) of the Act? - Held that:- To attract Section 3(2), the relevant factors to be satisfied are: i) Registered dealer or a dealer liable to be registered under the Act purchasing the taxable goods from the unregistered dealer; ii) Such purchase from the unregistered dealer is for use in the course of business of the registered dealer. If these two conditions are satisfied, registered dealer is liable to pay tax u/s 3(2) of the Act - once the taxable goods purchased from the unregistered dealers are used for development of their own property in the course of the business of the registered dealer, liability to pay tax u/s 3(2) of the Act arises. The decision of the Revisional Authority that the activity of formation of layout is a ‘business’ is in conformity with the provisions of the Act, merely for the reason that no input tax credit can be claimed by the dealer, on this transaction, no liability u/s 3(2) arises, is only a misconceived notion of the Assessee and cannot be acceptable - the subsequent transactions of the URD purchased goods is immaterial for the purpose of levy of tax under Section 3(2) of the Act - demand of tax upheld. Jurisdiction - validity of proceedings by the Addl. Commissioner U/s 64(1) of the Act - Held that:- The order of the Appellate Authority is not only erroneous but prejudicial to the interest of the revenue as discussed above. The twin test i.e., [i] the appellate order being erroneous and [ii] prejudicial to the interest of the revenue, being satisfied, the proceedings initiated by the Addl. Commissioner of Commercial Taxes is well within the scope and ambit of Section 64(1) of the Act. The action of the Revisional Authority cannot be held to be without jurisdiction. Appeal dismissed - decided against appellant.

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• 2018 (7) TMI 148
  Review application - modification/rectification of assessment of base year - compounding of tax under the Kerala General Sales Tax Act - Held that:- It is apposite to allow these review petitions and recall the judgment, against which these applications have been impelled.

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• 2018 (7) TMI 147
  Levy of Turnover tax - sale of Bread - Composition Scheme - Whether the Gujarat Value Added Tax Tribunal was justified in holding that lump sum tax is payable under the Gujarat Value Added Tax Act, 2003 on the turnover of sales of “bread”? - Held that:- Ordinarily a dealer engaged in the manufacturing activity would not be entitled to composition of tax provided under sub-section [1] of Section 14, unless the manufacturing activity in question has been specified for exclusion from such treatment by the Government by an order in writing. As per sub-section [3] of Section 14, a dealer who is permitted to pay lump sum tax is not entitled to certain benefits, such as to claim tax credit in respect of tax payable by him on his purchases or charge any tax on his sales invoice in respect of the sales on which lump sum tax is payable. In case of the dealers, who want to pay lump sum tax in lieu of normal tax, the rate of tax prescribed was one-half per cent. This one-half per cent was to be computed as per notification dated 31st March 2006 on the total turnover of the dealer, which was quickly corrected to “taxable turnover” by a later notification dated 29th April 2006. The Government, by virtue of the said notification dated 31st March 2006, do not intended to compute the lump sum tax of a manufacturer of bakery items on the basis of his total turnover. The very purpose of the composition scheme would be in jeopardy if the payable tax by a dealer is substituted by percentage of his taxable and non-taxable turnover. Turnover tax not leviable - appeal allowed - decided in favor of appellant.

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• 2018 (7) TMI 146
  Levy of Turnover tax - sale of Bread - Composition Scheme - Whether the Gujarat Value Added Tax Tribunal was justified in holding that lump sum tax is payable under the Gujarat Value Added Tax Act, 2003 on the turnover of sales of “bread”? - Held that:- Ordinarily a dealer engaged in the manufacturing activity would not be entitled to composition of tax provided under sub-section [1] of Section 14, unless the manufacturing activity in question has been specified for exclusion from such treatment by the Government by an order in writing. As per sub-section [3] of Section 14, a dealer who is permitted to pay lump sum tax is not entitled to certain benefits, such as to claim tax credit in respect of tax payable by him on his purchases or charge any tax on his sales invoice in respect of the sales on which lump sum tax is payable. In case of the dealers, who want to pay lump sum tax in lieu of normal tax, the rate of tax prescribed was one-half per cent. This one-half per cent was to be computed as per notification dated 31st March 2006 on the total turnover of the dealer, which was quickly corrected to “taxable turnover” by a later notification dated 29th April 2006. The Government, by virtue of the said notification dated 31st March 2006, do not intended to compute the lump sum tax of a manufacturer of bakery items on the basis of his total turnover. The very purpose of the composition scheme would be in jeopardy if the payable tax by a dealer is substituted by percentage of his taxable and non-taxable turnover.

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• 2018 (7) TMI 145
  Liability of KVAT on the proceeds realized from the sale of hypothecated vehicles - hypothecation wherein the original owner is the borrower - Whether on the facts and in the circumstances of the case where (a) the Bank is not the owner of the vehicle at the time of sale and property in the vehicle was with the registered owner and (b) the Borrower executes irrevocable power of attorney to the Bank authorizing the bank to sell the vehicles and other documents necessary under the Motor Vehicles Act for transferring the vehicles and based on these documents the sold vehicles gets transferred from the registered owner to the purchaser; the Appellate Tribunal is right in holding that the petitioner Bank is liable to KVAT on the proceeds realized from the sale of hypothecated vehicles. Held that:- The sale, in the present case, is of a second hand vehicle which is taxable under the KVAT Act at that point of time at the rate of 4%; on the consideration. The fact that the financier had merely facilitated the sale cannot be a cause for absolving itself from the liability to include the consideration received in the turnover of the financier; exigible to tax on sale of goods - the KVAT Act, takes within the definition of dealer, any person involved in transactions where there is a system of payment by installments and definition of sale and turnover includes a sale made by one on behalf of another where the latter is the owner; on which tax is payable as has been specified in the schedules. The Bank is not the owner of the vehicle at the time of sale. But however, after re-possession, sells the vehicles and effects transfer and delivery of the goods (vehicle) to the purchaser after receiving consideration, by effecting such transfer on delivery of the vehicle and handing over the sale letter executed by the registered owner which was received by the Bank as per the specific terms of the contract of finance; the right being recognised by the Motor Vehicles Act too. There is no distinction insofar as a pledge or hypothecation is concerned and sale effected on default of payment, especially in the context of the financier exercising the right to sell the goods, which belongs to another, either under a statute or on the specific terms of the contract, would be effecting sale of goods exigible to tax. Penalty - Held that:- The fact that the amendment was brought in and there was a challenge to it indicates that there was a debatable issue even with respect to the pledge of ornaments. In the present case, the transaction was hypothecation and the possession was with the registered owner who is the loanee. The assessee bonafide claimed a distinction insofar as pledge and hypothecation which however is negatived by this Court - penalty not imposable. Appeal disposed off.

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• Wealth tax

• 2018 (7) TMI 144
  Wealth tax assessment - Agriculture Land / stock-in-trade - AO brought the same to section 2(ea)(b) of the Wealth Tax Act on the ground that the land was converted into non-agricultural land - Held that:- CWT(A) himself accepted that the land has already been converted into non-agricultural and the same has shown as stock-in-trade. Once assessee has treated the land which is in dispute is stock-in-trade, it has to be treated as business asset. Simply because assessee is not offered income from real estate, nature of the asset cannot be changed. Therefore, we allow this ground of appeal raised by the assessee. House site at Tenali to the extent of 1400 sq.ft. - Held that:- he assessee has valued the property at Rs. 11.50 lakhs. The Assessing Officer has adopted the market value, based on the SRO’s value of Rs. 34,02,000/-. On appeal, ld. CWT(A) confirmed the order of the Assessing Officer. Before us, the assessee has not brought any material on record to show that why SRO value adopted by the Assessing Officer is not correct. Therefore, we find no infirmity in the order passed by the ld. CWT(A). Ground of appeal raised by the assessee is dismissed. Land to the extent of 2.08 acres at Kalakkal, Medak District - assessee claimed it as an agricultural land and sought exemption - Held that:- In this case, Assessing Officer has not examined whether the land is an agricultural land or not. The assessee also failed to produce the relevant material before the Assessing Officer in this regard. Insofar as non-conversion of agricultural land is concerned, this aspect is not considered by the Assessing Officer. Under these facts and circumstances of the case, we are of the opinion that the entire issue involved in this appeal has to be re-examined after considering the relevant material. Therefore, we set aside the order passed by the ld.CWT(A) and remit the matter back to the file of the Assessing Officer to adjudicate this again Flat situated at Chandanagar - Market value assessment - assessee contended before the Assessing Officer that the said flat was let out for 300 days and the same is exempt under section 5 & 6 of the Wealth Tax Act - Held that:- CWT(A) scaled down the market value of rent at 5,000/- per sq.yard in relation to structure and directed the Assessing Officer to value the same at Rs. 14,40,000/-. Both the Assessing Officer and the ld. CIT(A) have not considered the submissions made by the assessee with regard to exemption claimed under section 5 & 6 of the Wealth Tax Act. The assessee contends that once the property was let out for more than 300 days, the Revenue without examining the fact, brought to tax the value of the asset. Therefore, we deem it fit to send the issue back to the file of the Assessing Officer to verify the facts

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