Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 16, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
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Unclaimed Amount Under IEPF
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Recovery of Black Money
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Appointment of Senior/Junior Standing Counsels
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National Committee on Trade Facilitation constituted under the Chairmanship of the Cabinet Secretary to develop the pan-India road map for trade facilitation
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified
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Auction for Sale (Re-issue) of Government Stock
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Foreign Tax Credit (‘FTC’) - Currency conversion using telegraphic transfer buying rate (‘TTBR’)
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Nature of Rental income - The business of the company is to lease its property and to earn rent and therefore, the income so earned should be treated as its business income. - SC
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Addition on salary received - Other than the statement made by the assessee’s wife u/s 134(2) of the Act which has been denied by the assessee, the revenue has not produced any substantial evidence to prove its case - Additions made by the AO deleted - HC
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Disallowance u/s 37 - compensating the damage to the environment - The compensation was paid because the assessee had failed to install the pollution control device within the time prescribed - claim of expenditure allowed as incurred fro the purpose of business - HC
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Non deduction of TDS - period of limitation - The said proviso cannot be interpreted, as is sought to be done by the Department, to enable it to initiate proceedings for declaring an Assessee to be an Assessee in default u/s 201 for a period earlier than four years - HC
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Penalty u/s 272A(2)(k) - late filing of TDS return - No plausible explanation had been tendered by the assessee for filing the tax deducted at source returns belatedly and, therefore, the benefit under section 273B of the Act could not be given. - HC
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TDS u/s 194J - revenue sharing agreement - The relation between these stakeholders is one of collaborators as per the agreement made and the revenue shared cannot be said to be payments for technical services rendered - HC
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MAT - Taxability of book profits of the merged entity - book profits u/s 115JB - Pursuant to the merger, M/s HPLCL does not exist in the eyes of law. - department cannot be unjustly enriched by the taxes paid by M/s HPLCL based on standalone financials - AT
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TDS u/s 195 - Existence of PE in India - When the entire relationship qua the distribution revenue is that of principal to principal basis and the Taj India is acting independently, then it moves out from the conditions laid down in Article 5(4) - It does not constitute PE in India - AT
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Penalty order u/s 271(1)(c) deleted for want of a valid show cause notice u/s 274 of the Act. - AT
Customs
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Exemption additional duty, safeguard duty and anti-dumping duty for import of fabrics under Special Advance Authorization Scheme
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Import of gold - prohibited goods or not - If there is a fraudulent evasion of the restrictions imposed, under the Customs Act, 1962 or any other law for the time being in force, then import of gold, in contravention of the above, is prohibited. - HC
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Refund of SAD - if the sales tax / VAT payable under the Sales Tax Act is “nil”, the appropriate sales tax paid will also be “nil” and it cannot be said that the importers did not pay appropriate VAT. - AT
DGFT
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C.I.F. value of import of consumer electronic items at any one time by any person through post or otherwise for personal use is enhanced to ₹ 50,000/- from ₹ 2,000/-
Service Tax
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Mandap keeper services - Short-payment of service tax – extended period of limitation - Tribunal has not rendered any findings so far as the appellant had not paid the service tax on the amounts disputed and he was under the bona fide impression that the halls were not fallen under the levy of service tax - demand set aside - HC
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Imposition of penalty - Section 76 of the Finance Act, 1994 - There are no conditions or ifs and buts in the said Section. Hence, the contention of the appellant that they had not paid the service tax because of a bonafide mistake is not relevant. - AT
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Refund of service tax - the expression “in relation to transport of export goods” used in the notification is wide enough to cover transport of empty containers from yard to factory for stuffing goods for export purpose - AT
Central Excise
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Cenvat credit - reversal of credit - since, the appellant had no intention to manufacture slag, the same, should not be considered as excisable goods. Since the slag seized to the excisable goods, the question of dutibility or exemption does not arise. - AT
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Cenvat credit - the department was not aware about the simultaneous availment of depreciation as well as Cenvat Credit of the same amount of duty. Therefore there is a clear suppression of fact on the part of the appellant - demand confirmed invoking extended period of limitation - AT
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Cenvat Credit - extended period of limitation - The Revenue has failed to establish why the credit availed on cement was not made part of the earlier show-cause notice, when these items were availed during such period also. Therefore, the entire demand is barred by limitation - AT
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Cenvat credit - When the endorsed Bill of Entry is accompanied by proper invoice and evidence the payment of duty the credit cannot be denied treating it as not a valid document for taking credit. - AT
VAT
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Inter-sate sale or not - in case of non-surrender of transit pass, if a dealer could produce sufficient legally valid and reliable documentary evidence to prove that the goods moved without the transit pass in question had actually crossed the borders of the State, such evidences may be accepted by the Assessing Authority as an evidence of inter-state movement of goods. - HC
Case Laws:
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Income Tax
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2016 (8) TMI 522
Nature of Rental income - to be taxed under the head Income from House Property or Profit and gains of business or profession - Held that:- It is an admitted fact in the instant case that the assessee company has only one business and that is of leasing its property and earning rent therefrom. Thus, even on the factual aspect, we do not find any substance in what has been submitted by the learned counsel appearing for the Revenue. In view of the law laid down by this Court in the case of Chennai Properties (2015 (5) TMI 46 - SUPREME COURT) and looking at the facts of these appeals, in our opinion, the High court was not correct while deciding that the income of the assessee should be treated as Income from House Property. - The business of the company is to lease its property and to earn rent and therefore, the income so earned should be treated as its business income. We, therefore, set aside the impugned judgments and allow these appeals with no order as to costs. We direct that the income of the assessee shall be subject to tax under the head Profits and gains of business or profession .
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2016 (8) TMI 521
Penalty under section 271(1)(c) - claim of capital expenditure - Held that:- he claims have been made by the assessee on the advice of the Chartered Accountant handling the work of the assessee company and that the claim is technically allowable as regards to scientific research and R & D expenses looking to the work of new product development undertaken by the assessee. All facts, including bills & list of parties from whom these capital assets were purchased, duly audited by the Chartered Accountant, were filed in the assessment proceedings and as per the opinion of the Chartered Accountant looking after the case, the assessee company had claimed the deduction on these two items. Thereafter, the Tribunal observed that the bona fide explanation offered by the assessee was negatived by the Assessing Officer and on that basis a return cannot be said to be false unless there is an element of deliberateness in it. The Tribunal, therefore, reversed the order of the Commissioner of Income-tax (Appeals) and cancelled the penalty. We are in complete agreement with the view taken by the Tribunal. The Tribunal has rightly reversed the order of the Commissioner of Income-tax (Appeals) and cancelled the penalty. - Decided in favour of assessee
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2016 (8) TMI 520
Block assessment framed u/s.158BC - necessity of issuing statutory notice u/s.143(2) - Held that:- As considering the decision of this Court in the case of Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT OF INDIA] he questions, which are raised in the present appeal are required to be answered in favour of the assessee wherein held by the Apex Court that if an assessment is to be completed under Section 143(3) read with Section 158BC, notice under section 143(2) should be issued within one year from the date of filing of the block return. Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and is not curable and therefore the requirement of notice under section 143(2) cannot be dispensed with. - Decided in favour of assessee
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2016 (8) TMI 519
Penal proceedings u/s 271(1) (c) - treating the interest income as income from other sources - Held that:- Apex Court in the case of Commissioner of Income Tax vs. Reliance Petroproducts Pvt. Ltd. reported in [2010 (3) TMI 80 - SUPREME COURT] wherein the Apex Court has held that a mere making of a claim, which is not sustainable in law by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee and such a claim made in return cannot amount to furnishing inaccurate particulars and that therefore there is no question of inviting penalty under section 271(1)(c). The revenue has not been able to prove that there is a mala fide intention on the part of the assessee. The main issue seems to be bona fide difference in the interpretation of law and therefore it cannot be said that the details supplied by the assessee in its return were found to be incorrect or erroneous or false. Therefore, there would be no question of inviting the penalty under section 271(1)(c) of the Act. - Decided in favour of assessee
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2016 (8) TMI 518
Entitlement to registration under section 12A(a) r.w.s. 12AA - Dawoodi Bohra Community - Held that:- Considering the decision of the Honble the Supreme Court in the case of Dawoodi Bohra Jamat (2014 (3) TMI 652 - SUPREME COURT ), the question, which is raised in the present appeal is required to be answered in favour of the assessee as held that respondent-trust was a charitable and religious trust which did not benefit any specific religious community and therefore, it could not be held that section 13(1)(b) of the Act would be attracted to the respondent-trust and thereby, it would be eligible to claim exemption u/s. 11 of the Act. Even otherwise there are concurrent finding of facts with which we also concur and therefore no elaborate reasons are required - Decided in favour of assessee
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2016 (8) TMI 517
Reopening of assessment - Shri Nikunj Shah and Shri Jitendra Shah had issued bogus bills to various parties including the assessee and escaped income was stated to be only ₹ 1 lakh - deduction u/s 80HH of the Act on income not derived from industrial undertaking - Held that:- Considering the assessee’s revised return which was taken into account while completing the regular assessment as well as the reassessment, it is borne out that the assessee itself had disclosed income of ₹ 20 lakhs from the transactions carried on with said Shri Nikunj Shah and Shri Jitendra Shah in revised return which stood taxed and the Assessing Officer had not made any addition in the reassessment on this account. We are of the view that the Tribunal has rightly held that the Assessing Officer has travelled beyond the scope of Section 147 proceedings. The view taken by the Tribunal is just and proper and does not call for any interference by this Court. Even otherwise, the fact that no appeal has been preferred by the assessee against the order of CIT(A) nor any cross objection has been filed in one of the appeals will be covered by the decision of this Court in the case of Dahod Sahakari Kharid Vechan Sangh Ltd. (2005 (7) TMI 45 - GUJARAT High Court ). In that view of the matter, we are of the view that the Tribunal is justified in holding that the Assessing Officer had no jurisdiction to initiate proceedings against the CIT(A)’s order upholding the jurisdiction of the Assessing Officer to initiate reopening proceedings. Accordingly, the said question is answered in favour of assessee. Deduction u/s 80HH on income not derived from industrial undertaking is not being decided in view of the fact that we have already answered the question with regard to section 147 proceedings in favour of the assessee. So far as questions with regard to penalty proceedings are concerned, we are of the opinion that the same shall not survive in view of the fact that the substantial question has already been decided in favour of the assessee.
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2016 (8) TMI 516
Interest disallowed under section 57(iii) - interest for the same borrowing has been allowed in the immediately preceding year - Held that:- It would not be equitable to permit the revenue to take a different stand subsequently in respect of the amounts which were the subject matter of previous years assessment. In our view, once the interest is allowed in the previous year and if there is no change in the condition then it can be disallowed in the current years assessment. Accordingly, the question which is posed in this appeal requires to be answered in favour of the assessee and against the department. Therefore, the present appeal deserves to be allowed in favour of the assessee
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2016 (8) TMI 515
Disallowance under section 36(1)(iii) - interest free advances given to the sister concern - Held that:- Interest free loan given to the sister concerns is permissible and therefore, the Commissioner (Appeals) has rightly deleted the disallowance made by the Assessing Officer under section 36(1)(iii) of the I.T. Act. See Commissioner of Income-tax v. Raghuvir Synthetics Ltd.[2013 (7) TMI 806 - GUJARAT HIGH COURT] Disallowance of preoperative expenses of new business - Held that:- Entry in the books of account under the Company law is not relevant and in view of the decision of this court in the case of Commissioner of Income-tax v. Nirma Ltd. (2014 (10) TMI 396 - GUJARAT HIGH COURT), the Tribunal has rightly upheld the decision of the Commissioner (Appeal) restricting dis allowance.
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2016 (8) TMI 514
Addition on salary received - addition on evidence of the statement made by the assessee’s wife - Held that:- It is borne out that the authorities proceeded on the basis of the statement made by the assessee’s wife that she was paying salary to the assessee every month. This statement had been denied by the assessee but the same was not retracted by the assessee’s wife. However, what remains to be seen here is that the revenue has not been in a position to bring any evidence on record so as to strengthen its case. Other than the statement made by the assessee’s wife u/s 134(2) of the Act which has been denied by the assessee, the revenue has not produced any substantial evidence to prove its case. Assessing Officer has erred in proceeding with the calculation of undisclosed income without there being any cogent and corroborating evidence to the statement made u/s 132(4). Moreover, the calculation made for the entire block period without any basis or material from the seized documents, in our opinion, cannot be permitted. In the case of Standard Tea Processing Co. Ltd. (2013 (7) TMI 539 - GUJARAT HIGH COURT ), this Court has held that as the materials admittedly related to a brief period between 01.4.1998 till 29.7.1998, in absence of any documents found during search to even link the assessee’s activities for the entire period, to project by way of extrapolation the facts found during the brief period of about four months would not be permissible and rightly so held by the Tribunal.In view of the above, we are of the opinion that the Tribunal has erred in coming to the conclusion that the assessee had received salary of ₹ 8000/- p.m. for the relevant block years in each year without evidence. The impugned order passed by the Tribunal is therefore required to be set aside. - Decided in favour of assessee
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2016 (8) TMI 513
Validity of notice issued under Section 10 of the Interest Act, 1974 - Held that:- The notice issued upon the petitioner is bad in law; inasmuch as, the petitioner had also addressed a letter dated 28/11/1995 to the respondent informing that since the petitioner is not a credit institution, it is not liable to interest tax. Reliance placed upon a decision in case of Khurana Engineering Ltd. (2013 (2) TMI 128 - GUJARAT HIGH COURT ) is also relevant for this purpose because as held therein after the date of amalgamation of the company, the transferor-company is no more in existence on the date of issuance of notice and therefore the said notice issued upon the said company held to be invalid. So far as the argument of the petitioner with regard to the period of limitation of issuance of notice is concerned, the said notice was issued after a period of ten years preceding the letter dated 28/11/1995 issued by the petitioner informing the respondent that it is not a credit institution whereupon only Section 5 of the said Act applies and therefore petitioner did not file the return. Thus, for the period of ten years nothing was turned up and suddenly the notice was issued, which in the opinion of this Court is bad in law. The act of reopening of notice is not within the period of limitation. The petitions deserve to be allowed and the same are allowed. The impugned notice dated 09/03/2005 (ExhibitB to the petition) issued under Section 10 of the Interest Act, 1974 by the respondent is hereby quashed and set aside. Rule is made absolute.
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2016 (8) TMI 512
Entitlement to deduction under Section 80IA - Held that:- Taking into account the above referred decision of this court in the case of Commissioner of Income-Tax v. Atul Intermediates (2014 (4) TMI 676 - GUJARAT HIGH COURT ) and the decision of the Hon'ble Supreme Court in the case of Assistant Commissioner of Income-Tax v. Micro Labs Ltd. (2015 (12) TMI 708 - SUPREME COURT ), we are of the view that the assessee is entitled to deduction under Section 80IA of the Income Tax Act. ITAT was right in law and on facts in confirming the order passed by the CIT (A) directing the Assessing Officer to allow the claim under Section 80IA without reducing deduction under Section 80HHC of the Income-tax Act - Decided in favour of assessee
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2016 (8) TMI 511
Disallowance u/s 37 - compensating the damage to the environment - Held that:- The payment of the sum of ₹ 12,50,000/- would not be deductible if the same had been made for the purpose of achieving an illegal object or for an illegal purpose. Such payment is opposed to public policy which presumably is the reason why the same is not deductible. The payment in this case was for the purpose of compensating the damage to the environment and this compensation has been recovered on the “polluter pays principle” adopted by the Organization for Economic Cooperation and Development which has been recognized in M.C. Mehta Vs. Kamal Nath and Others [1996 (12) TMI 352 - SUPREME COURT] It is nobody’s case that the business pursued by the assessee was illegal. The compensation was paid because the assessee had failed to install the pollution control device within the time prescribed. Therefore, payment of the sum of ₹ 12,50,000/- is not hit by explanation-1 to Section 37 of the Income Tax Act. The payment is undoubtedly for the purpose of business or is in consequence of business carried on by the assessee and is thus covered by section 37. For the aforesaid reasons, the order passed by the learned Tribunal is set aside. - Decided in favour of assessee.
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2016 (8) TMI 510
Addition u/s 68 - Held that:- The assessee had produced all relevant details in its possession, namely, names, permanent account numbers, income tax returns, and bank statements of all the investors. The amounts in question had been received by way of account payee cheques. Having regard to the fact that the permanent account numbers and the income tax returns of all the investors had been furnished by the assessee, the Assessing Officer could have easily verified the same. He, however, placed reliance upon the fact that the summons issued to the parties under section 137 of the Act could not be served and hence, did not accept the genuineness of the transactions. In the opinion of this court, taking into account the concurrent findings of fact recorded by the Commissioner (Appeals) and the Tribunal, it cannot be said that the conclusion arrived at by the Tribunal is, in any manner, contrary to the record or that the same suffers from any legal infirmity so as to give rise to any question of law, much less a substantial question of law warranting interference.
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2016 (8) TMI 509
Validity of the action initiated under Sections 201(1) and 201(1A) - non-deduction of tax at source for periods earlier than four years prior to 31st March, 2011 - Held that:- Circular 5 of 2010 of CBDT clarifying that the proviso to Section 201(3) of the Act was meant to expand the time limit for completing the proceedings and passing orders in relation to ‘pending cases’. The said proviso cannot be interpreted, as is sought to be done by the Department, to enable it to initiate proceedings for declaring an Assessee to be an Assessee in default under Section 201 of the Act for a period earlier than four years prior to 31st March, 2011. Consequently, the notices impugned in the present petitions issued by the Department seeking to initiate proceedings against the Petitioners for declaring them to be Assessees in default under Section 201(3) of the Act are hereby quashed.
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2016 (8) TMI 508
Penalty under section 272A(2)(k) - technical default in filing returns late on the part of the appellant - non reasonable cause - Held that:- here was a delay of nearly five years in filing the deduction of tax at source returns/statements as is discernible from the perusal of Form No. 26Q reproduced above for the financial year 2008-09 relating to the assessment year 2009-10. No plausible explanation had been tendered by the assessee for filing the tax deducted at source returns belatedly and, therefore, the benefit under section 273B of the Act could not be given. Moreover, the authorities below had noticed that the appellant was supposed to mandatorily file the tax deducted at source returns within the prescribed time as provided under rule 31A(2) of the Rules. Since the appellant had failed to do so, it had rightly been treated to be in default for not filing the tax deducted at source returns within the prescribed period. Further, it had also been recorded that the penalties under section 272A(2)(k) of the Act have rightly been imposed upon the appellant in all the three financial years. The assessee had failed to explain that there was any reasonable cause or failure to comply with the provisions of law and the authorities below had concurrently concluded that there was delay in filing the tax deducted at source returns without any justifiable reason or cause. - Decided against assessee
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2016 (8) TMI 507
TDS u/s 194J - non deduction of TDS on technical work payments - Held that:- Both the appellate authorities have taken into consideration the agreement entered by and between the parties/stakeholders and the dominant intention of the parties was to conduct the business of providing specific e-learning courses in the State of Rajasthan and share the revenue generated by way of fees received from the learners. Admittedly, in the revenue sharing model, the entry fees (course fee/exam fee), collected from the learners have been received by the respondent, which in turn redistributed it to be shared with the ITGKs and VMOU as per the agreement. For instance, the aggregate revenue of ₹ 2,300 for RS-CIT course, which is received by the ITGK from the learner, is transferred to the respondent which is shared among the three stakeholders. In our view, the transaction between the ITGK and RKCL and VMOU are not of a service provider or service receiver. The relation between these stakeholders is one of collaborators as per the agreement made and the revenue shared cannot be said to be payments for technical services rendered by ITGKs and VMOU to RKCL as held by the Assessing Officer. - Decided in favour of assessee.
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2016 (8) TMI 506
Denial of deduction u/s 80IA - adoption of arbitrary figure of 5% of the income as business income - Held that:- The assessee has failed miserably to substantiate its claim that it manufacture software, profit from which is eligible for deduction u/s 80IA of the Act. Therefore we confirm the finding of the ld CIT(A) in confirming the disallowance of deduction of ₹ 14.46 lakhs as well as confirming the rejection of the book results applying the provisions of section 145 rws 144 of the Act and considering only 5% of the income of the Assessee as business income and balance 95% as income from other sources. In the result all the grounds of the appeal of the assessee is dismissed.
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2016 (8) TMI 505
MAT - Taxability of book profits of the merged entity - book profits u/s 115JB - Held that:- There was profit as per profit and loss account in the case of HPLCL and loss in the case of HPL on standalone basis. Pursuant to the merger, there was only combined loss as per profit and loss account and hence there cannot be any liability that could arise u/s 115JB of the Act in the hands of the merged entity. It is not in dispute that the merger had taken place with retrospective effect from 1.4.2008 as approved by the Hon’ble Calcutta High Court and hence valid for the period commencing from 1.4.2008 to 31.3.2009 relevant to the Asst Year 2009-10 (i.e the year under appeal before us). Pursuant to the merger, M/s HPLCL does not exist in the eyes of law. We hold that the department cannot be unjustly enriched by the taxes paid by M/s HPLCL based on standalone financials. It is well settled that the Constitution of India mandates the collection of taxes only when it is in accordance with law as per Article 265. In view of the aforesaid findings and discussions, we hold that the ld CITA had rightly directed the ld AO to recompute the book profits u/s 115JB of the Act after taking into accounts the combined accounts of both the companies (i.e merged entity) as well as their unabsorbed losses and depreciation, if any. Accordingly, we find no infirmity in the order of the ld CITA in this regard and dismiss the grounds raised by the revenue.
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2016 (8) TMI 504
TDS u/s 195 - income from Indian operation - whether the assessee did had an agency PE in the form of Taj India within the meaning of Article 5(4) of the India-Mauritius-DTAA? - Held that:- An agent is deemed to be a PE of a foreign enterprise, if he is not independent and has habitually exercises an authority to conclude contracts in the name of the enterprise unless the activities of such person are limited to those mentioned in paragraph 4 that is, to the purchase of goods or merchandise for the enterprise; or if he has no such authority, but habitually maintains a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise. Thus, the character of an agent, who can be said to be a dependent only if, firstly, the commercial activity for the enterprise is subject to instructions or comprehensive control and secondly, he does not bear the entrepreneur risk. It is sufficient for the establishment of an agency PE that the agent has sufficient authority to bind the enterprise’s participation in the business activity. Here in this case, none of the conditions as stipulated in Article 5(4) is applicable because Taj India is acting independently qua its distribution rights and the entire agreement ostensibly is on principal to principal basis as analyzed and found by ld. CIT (A). When the entire relationship qua the distribution revenue is that of principal to principal basis and the Taj India is acting independently, then it moves out from the conditions laid down in Article 5(4). Thus the distribution income by the assessee cannot be taxed in India, because Taj India does not constitute an agency PE under the terms of Article 5(4) - Decided in favour of assessee Royalty payment - Disallowance of various expenses under section 40(a)(i) like, ‘transponder charges’ and ‘uplinking charges’ - payments has been paid to PanAmSat International Systems Inc. USA for providing facility of transponder for telecasting ‘Ten Sports’ channel in various countries including India - Indo-US-DTAA - Held that:- Payment made to the non-resident outside India for rendering the services of equipment outside India is not taxable in India. Hon’ble Delhi High Court in the case of Asia Satellite Telecommunications vs. DIT, reported in (2011 (1) TMI 47 - DELHI HIGH COURT ) later on reiterated that there is no royalty payment in such cases under the domestic law, that is, section 9(1)(vi), prior to amendment. Thus judicial precedents supported the case of the assessee. Here, the maxim of “lex non cogit ad impossplia, that is, the law of the possibly compelling a person to do something which is impossible, that is, when there is no provision for taxing an amount in India then how it can be expected that a tax should be deducted on such a payment. This view has been upheld by in catena of decisions including the ITAT Mumbai Benches in the case of Channel Guide India Ltd (2012 (9) TMI 95 - ITAT MUMBAI ) wherein, it has been held that, assessee cannot held to be liable for deducting TDS in view of the retrospective amendment which has come at a much later date. Thus, we hold that assessee was not liable to deduct TDS at the time of making the payments. Accordingly, disallowance under section 40(a)(i) could not have been made by the AO - Decided in favour of assessee Distribution of income taxable as ‘royalty’ under section 9(1)(vi) up to 12th July, 2002 - Held that:- We are unable to concur with the divergent stand taken by the AO that for three months the payment will constitute ‘royalty’ and for balance nine months, the payment will constitute ‘business income’. It has also been brought to our knowledge that in the subsequent years the AO has treated ‘distribution income’ as business income and not as royalty. Thus, prior to period 12th July, 2002, also when assessee was not registered under the Laws of Mauritius then also it will not affect the nature of income. In any case, as stated earlier, under the distribution agreement, the assessee company has not granted any license to use any copyright to the distributor or to the cable operators. The assessee only makes available the content to the cable operators which are transmitted by them to the ultimate customer/viewers. Further, rights over the content at all times lies with the Assessee Company and are never made available with the distributors or cable operators. Thus, the finding of the CIT(A) on this score is also confirmed that even for the first period 01.04.2002 to 12th July, 2002 the said income will not constitute ‘royalty’. AO himself has treated the income from distribution activity as business income for the period of 9 months and in the subsequent years. The same income cannot have two treatments, one as royalty and other as business income.- Decided in favour of assessee Disallowance of programming cost - Held that:- The programming cost is paid to the assessee to various nonresident outside India for acquiring right brought on sports events taking place outside India. Thus, such programming cost cannot be deemed to arise in India as liability to pay programming cost as assumed by the assessee company outside India and it cannot be held to be borne by any PE in India. - Decided in favour of assessee
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2016 (8) TMI 503
Penalty order under Section 271(1)(c) - Held that:- We delete the penalty levied under Section 271(1)(c) of the Act for want of a valid show cause notice under Section 274 of the Act. - Decided in favour of assessee.
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Customs
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2016 (8) TMI 530
Release of gold – smuggling – seizure – prohibited goods or not - gold certified to be of foreign origin – liable to confiscation – voluntary admitted that gold smuggled and sold without invoices and received gold bars in consideration – search of various buyers to whom smuggled gold sold - Provisional release of goods under Section 110-A of the Customs Act, 1962 – Held that: - the discretion exercised by the competent authority, to deny provisional release, is in accordance with law. When there is a prima case of smuggling, for which, action for confiscation is taken, such proceedings taken should be allowed, to reach its logical end, and not to the stiffed, by any provisional release – provisional release not allowed. Prohibited goods - If there is a fraudulent evasion of the restrictions imposed, under the Customs Act, 1962 or any other law for the time being in force, then import of gold, in contravention of the above, is prohibited. For prohibitions and restrictions, Customs Act, 1962, provides for machinery, by means of search, seizure, confiscation and penalties. Act also provides for detection, prevention and punishment for evasion of duty. The expression, subject to prohibition in the Act and any other the law for the time being in force. in Section 2(33) of the Customs Act, has wide cannotation and meaning, and it should be interpreted, in the context of the scheme of the Act, and not to be confined to a narrow meaning that gold is not an enumerated prohibited good to be imported into the country. If such narrow construction and meaning have to be given, then the object of the Customs Act, 1962, would be defeated. Appeal dismissed – decided against appellant.
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2016 (8) TMI 529
Requirement of Sanitary Import Permit (SIP) – import of frozen fish – detention of consignment for testing purposes – Held that: - the question of interpretation and applicability of the notifications of requirement of Sanitary Import Permit being there or not in the present case, has become academic and need not be decided by this Court at this stage. Tests were carried out and certified that the consignment under question is free from pathogens with respect to the general microbiological parameters regarding the frozen fish. Direction to the respondents to release the consignment in-question of the imported frozen fish of the petitioner immediately, subject to payment of the incidental expenses of the laboratory tests carried out by the respondents – immediate release granted – payment of laboratory charges by appellant – appeal disposed off – decided in favor of appellant.
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2016 (8) TMI 528
Restoration of licence – search - contravention of Regulation 11(j) and 11(m) of the Customs Brokers Licensing Regulation, 2013 – Held that: - It is not the case where the Appellant refused to access, or concealed, or removed or destroyed any document. It is clear that a search has been conducted and documents have been received from the Appellant. The representative of the Appellant also appeared before the investigating Officers and deposed statement under Section 108. The strong allegation of refusal, removal or destruction of documents should not be levelled against the Appellant. Regulation 20 - the suspension order to be followed by action under Regulation 20 within a period of 90 days of receipt of offence report – Held that: - till date no follow up by way of show cause notice under Regulation 20 has been issued for revocation of Appellant’s licence. The offence report has been recorded in the impugned order which resulted in the suspension. As such, the time limit of 90 days prescribed has already lapsed. It is held in catena of decision by High Courts and Tribunal that the time limit prescribed in CBLR, 2013 is mandatory and failure to adhere the same will make the action without jurisdiction – impugned order not justified – decided in favor of appellant.
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2016 (8) TMI 527
Refund of SAD – sale of imported goods on payment of appropriate sales tax or VAT – denial of refund claim – goods exempted from payment of VAT under sales tax act – Held that: - if the sales tax / VAT payable under the Sales Tax Act is “nil”, the appropriate sales tax paid will also be “nil” and it cannot be said that the importers did not pay appropriate VAT. Stamping the invoice with “no credit of additional duty of customs levied under section 3(5) of the Customs Tariff Act 1975" – another ground adopted by Commissioner(Appeals) of non-fulfilment of condition – Held that: - admittedly Commissioner (A) has travelled beyond the show cause notice. There is no allegation of contravention of non-stamping of the invoice to the effect that no credit of SAD would be admissible to their customers. The only allegation made in the show cause notice is as regards contravention of conditions relatable to non-payment of VAT at the time of sale of goods. Commissioner(appeals) cannot go beyond the issue mentioned in SCN – appeal allowed – decided in favor of appellant.
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2016 (8) TMI 526
Condonation of delay – appeal – waiver of show cause notice by appellant – attending the personal hearing – filing of RTI application to get the documents – delay in filing appeal as appeal filed after receipt of the documents – Held that: - there is no system of providing RUD along with order but the fact that the appellant entered into a correspondence with the Revenue for supply of these documents, so as to enable them to file the appeal before the higher appellate forum, reflects the fact that the appellant was vigilant about his right to challenge the order. He may not be a legal expert to know that RUDs are never supplied with the order but in his ignorance spent time to procure the same - no intentional lapse on the part of the appellant – condonation of delay allowed – decided in favor of appellant.
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Service Tax
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2016 (8) TMI 549
Mandap keeper services - Short-payment of service tax – bonafide belief - extended period of limitation - Section 73(a) of the Finance Act – Held that: - Tribunal has not rendered any findings so far as the appellant had not paid the service tax on the amounts disputed and he was under the bona fide impression that the halls were not fallen under the levy of service tax where certain kind of activities were to be held and therefore also it cannot be said that the appellant has deliberately evaded the service tax. The information was sought for under Section 71 of the Act and if such information was not supplied then the case would fall under Section 73(a), but the demand was called for in the year 2001 and on the basis of the information supplied, showcause notice came to be issued and thus the case of the assessee would not fall under Section 73(a) and it would fall under Section 73(b) of the Act. The tribunal has committed serious error by not considering the submissions made by the appellant. Appeal disposed off – decided in favor of appellant.
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2016 (8) TMI 548
Imposition of penalty - Section 76 of the Finance Act, 1994 – non-payment of service tax - no wilful intention to evade tax – payment of tax and interest on being pointed out by auditor before SCN - Held that: - any person who fails to pay service tax shall be liable to a penalty under the provisions of said section. There are no conditions or ifs and buts in the said Section. Hence, the contention of the appellant that they had not paid the service tax because of a bonafide mistake is not relevant. Section 78 of the Finance Act, 1994 - the freight charges shown in the Freight Ledger do not tally with the figures shown in the ST-3 Returns for 3 years – continued suppression of facts – Held that: - penalty under Section 78 is imposable if service tax is not paid with intent to evade payment of service tax by suppressing or concealing the value of taxable service. The appellant which is a limited company had suppressed the figures of freight charges paid in the ST-3 Returns filed. However, they had shown the correct figures in the ledgers, which was detected by the Central Excise Audit Officers. If, the audit had not detected the same, the service tax would not have been paid and the public exchequer would have been poorer by the said amount. Thus, penalty rightly imposed. Appeal dismissed – decided against appellant.
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2016 (8) TMI 547
Refund – denial – business support service – services received inside the port – Held that: - there is no dispute that the services are with reference to export of goods rendered inside the port, the claim cannot be denied on the ground that tax has been paid under different classification by the provider of service. The Board also clarified that there is no requirement of verification of registration certificate of the supplier of service – refund allowed. GTA service – transportation of goods from ICD to port - supporting invoices not submitted along with claim – Held that: - appellant submitted all the documents as soon as they were received – refund allowed. Appeal disposed off – decided in favor of appellant.
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2016 (8) TMI 546
Refund of service tax – split up charges for above services not available - terminal handling charges – authorization of service provider to provide ‘port services’ - Notification No. 41/2007-ST dated 06/01/2007 - Held that: - when the service involved was in connection with the export of goods and the service tax has been discharged refund cannot be denied on the ground that the person who provided service should have authorization from the port and evidence to that effect should be produced. Transportation of containers from and to the port of export shipment – the transport of empty containers from port to factory – Held that: - the expression “in relation to transport of export goods” used in the notification is wide enough to cover transport of empty containers from yard to factory for stuffing goods for export purpose. Appeal allowed – decided in favor of appellant.
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2016 (8) TMI 545
Taxability – maintenance and repair service – construction of residential complex service – works contract service – composite contract involving supply of materials and services – Held that: - indivisible works contract are liable to service tax only after the introduction of works contract service in the Finance Act, 1994 w.e.f. 01/6/2007 as held in the case CCE & CUS, Kerala vs. Larsen & Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT – service tax levied on works contract service – appeal dismissed – decided against revenue
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Central Excise
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2016 (8) TMI 544
Validity of impugned order - passed by the Revisionary Authority - officer was of the same rank as is the appellate authority - Held that:- the impugned order was passed by the Joint Secretary to Government of India who was also Commissioner of Central Excise and Customs. For the detailed reason that the order in appeal as well as revisionary order had been passed by the officers of the same rank is not permissible as per law. Hence, the impugned order dated 3.3.2011, passed by the Revisionary Authority is set aside, however, with liberty to the revenue to proceed afresh in accordance with law. - Writ petition disposed of
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2016 (8) TMI 543
Cenvat credit - inputs and capital goods used in or in relation to manufacture of the Silico Manganese slag and Ferro Chrome slag come into existence as a residue/ waste product - slag emerged during the course of manufacture of the main final product are exempted from payment of Central Excise duty - Held that:- since, the appellant had no intention to manufacture slag, the same, should not be considered as excisable goods. Since the slag seized to the excisable goods, the question of dutibility or exemption does not arise. Therefore, the embargo created in Rule 6(3) of the Cenvat Credit Rules, 2004 for payment of amount equal to 5%, 6% or 10% of the value of exempted goods has no application in the circumstances of the present case. It is found that the CBEC in Chapter 5 at paragraph 3.7 in the Supplementary Instructions 2005 have clarified that Cenvat credit is admissible in respect of the amount of inputs contained in any of the waste, residue or by-product. Therefore, confirmation of amount under Rule 6(3) of the Rules by the authorities below is not in conformity with the cenvat statute. - Decided in favour of appellant
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2016 (8) TMI 542
Restoration of appeal - Appeal dismissed by Tribunal for want of clearance from Committee on Disputes (COD) - Held that:- the issue before Hon'ble Gujarat High Court in the case of Commissioner Of Central Excise And Customs Versus Krishak Bharti Cooperative Ltd [2016 (6) TMI 358 - GUJARAT HIGH COURT] was to consider application for restoration of appeal dismissed earlier for want of clearance from COD. The said application was opposed by the respondent on the ground of delay. While considering the fact of the case as a whole, the Hon'ble High Court observed that the delay in filing the Restoration application cannot be the ground for rejection as while dismissing their appeals, liberty was extended to the Revenue for its restoration after clearance from COD. Since COD is no more relevant after delivery of the judgment of Hon'ble Supreme Court in the case of Electronics Corporation of India Vs UoI [2011 (2) TMI 3 - Supreme Court], the appeal has been restored by the Hon'ble High Court. - Restoration of appeal allowed
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2016 (8) TMI 541
Cenvat credit – manufacture of dry cell batteries – defective batteries in course of manufacture – no duty paid – reversal of cenvat credit in relation to defective dry cell batteries –cbec instruction stating CENVAT credit admissible in respect of the amount of inputs contained in any of the waste, refuse or bye product - Held that: - Even today CBEC instruction stand that CENVAT credit is admissible in respect of input contained in any of the waste, refuse or by product – SCN unsustainable – O-I-A and O-I-O set aside – appeal allowed – decided in favor of appellant.
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2016 (8) TMI 540
Cenvat credit - recovery of inadmissible credit - availed simultaneous Cenvat credit and depreciation under Income Tax Act, 1961 - impermissible in terms of Rule 4(2) and Rule 4(4) of the Cenvat Credit Rules, 2001 - Held that:- Rule 4(4) of Cenvat Credit Rules 2001/2002 has a clear provision that if the depreciation is availed under Section 32 of the Income Tax Act, 1961 in respect of the duty suffered on capital goods the Cenvat Credit of the said amount cannot be allowed. Therefore both the lower authorities have correctly held that the Cenvat Credit in respect of the duty on which depreciation was claimed, is not admissible. Period of limitation - Invokation of extended period of limitation - Held that:- the department was not aware about the simultaneous availment of depreciation as well as Cenvat Credit of the same amount of duty. Therefore there is a clear suppression of fact on the part of the appellant, therefore the demand is correctly raised by invoking extended period. - Decided against the appellant
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2016 (8) TMI 539
Confiscation in lieu of redemption fine and imposition of penalty - Rule 25 of Central Excise Rules - seizure of entire stock of raw materials and finished goods - excess stock found - weighment was done on eye estimation basis and on the basis of average weighment of each ingots and not on actual basis - Held that:- when the weighment was done on eye estimation and not on actual basis and the actual quantity/shortage cannot be obtained. In that circumstance, the impugned order is not sustainable in the eye of law and the same is set aside. - Decided in favour of appellant with consequential relief
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2016 (8) TMI 538
Demand - irregular Cenvat credit on Cement - Period of limitation - Held that:- it can be safely inferred that department was well aware of the credit availed on cement at the time of issuance of the earlier show-cause notice itself. As already mentioned earlier, the period of the earlier show-cause notice and the show-cause notice pertaining to this appeal are overlapping. The dates of the invoices of cement also fall in these overlapping periods. When the demand of part of the items of the subject period is hit by limitation unless there is some cogent evidence to establish willful suppression, regarding the cement items, the entire demand would be time barred. The contention of the department that credit availed on cement came to light only in audit is not tenable. The Revenue has failed to establish why the credit availed on cement was not made part of the earlier show-cause notice, when these items were availed during such period also. Therefore, the entire demand is barred by limitation - Decided in favour of appellant with consequential relief
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2016 (8) TMI 537
Cenvat credit - revarsal alongwith interest and penalty - goods written off as obsolete items in annual reports - period involved is from 2002-03 to 2006-07 Held that:- the period involved is prior to the amendment to Rule 3 by which sub rule (5B) and Sub-Rule (5C) was inserted. The amendment by which the assessee is required to reverse the credit in case the goods are written off, as obsolete was introduced only after 01-04-2007 and the period involved in the present case is prior to 01-04-2007. Therefore, by following the judgment of Bombay High Court in the case of CCE. Navi Mumbai Vs Hindal Co Industries Ltd. [2011 (6) TMI 662 - BOMBAY HIGH COURT] and the judgment of Gujarat High Court in the case of CCE Vs Ingersoll Rand(India) Ltd. [2013 (2) TMI 32 - GUJARAT HIGH COURT], the impugned order is unustainable. - Decided in favour of appellant with consequential relief
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2016 (8) TMI 536
Cenvat credit - allowability - availed on MS angles, channels, beams, plates etc. - used for fabrication of technological structures bridges, supporting to the equipments like reactors, distillation column, heat exchangers, receivers in utility and production blocks, pipe line systems etc. - Held that:- I am not able to agree with the view of the Commissioner that the MS items used as support structure for capital goods/parts/components/ are not eligible for Cenvat credit. The use of MS items to manufacture /fabricate capital goods/parts/ accessories has been settled in the cases of Rajasthan Spinning and Weaving Mills and India Cements. While considering the issue the Hon’ble Courts have taken the view that the machineries in a factory have to be properly supported and connected. Such structural supports are necessary for the machines to make them function without vibration or movement. In Divis Laboratories Ltd Vs CCE Viskahpatnam [2006 (1) TMI 312 - CESTAT, BANGALORE] it was held that the items like angles channels, beams pipes tubes etc. used as parts of technological structures which support a reaction vessel or used in particular equipment in the manufacture of bulk drugs was admissible. Cenvat credit - allowability - items for making canteen sheds - Held that:- claim of credit on MS items used for making canteen sheds, is not admissible for the reasons that canteen sheds do not qualify as capital goods as provided in Cenvat Credit Rules, 2004. It then becomes necessary to quantify the amount of impugned item used in the manufacture of canteen shed and shall furnish evidence regarding the quantity of impugned items used in the construction of canteen shed and is also liable to reverse the credit availed on manufacture of canteen shed. Therefore, the credit on MS items used by the appellant can be allowed except for the use in the making of canteen shed. - Decided partly in favour of appellant
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2016 (8) TMI 535
Cenvat credit - ceramic/refactory items brass tubes and supporting structures - not confirmed to the definition of capital goods in terms of Rule 57Q - Held that:- the ld. Commissioner (Appeals) is in error in denying the credit of ceramic/refractory items i.e brass tubes. I hold that they qualify as components and accessories of boiler (plant) and accordingly, the same is held eligible for modvat credit. Further, so far as supporting structures are concerned following the ruling of the Honourable Supreme Court in the case of Scientific Engineering House Private Ltd. Vs. CIT [1985 (11) TMI 1 - SUPREME Court] and the ruling of this Tribunal in the case of Shakumbari Sugar and Allied Industries Ltd. versus CCE, Meerut I [2012 (12) TMI 220 - CESTAT, NEW DELHI], I hold that the appellant will be entitled to modvat credit on supporting structures which have been brought in the factory of production till 15.3.1995. - Decided in favour of appellant with consequential relief
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2016 (8) TMI 534
Refund claim - Cenvat credit wrongly paid under protest - capital goods received by them during the period in question were actually used for the manufacture of capital goods - non-submission of clinching evidence that the said items were used in the manufacture of capital goods - Held that:- it is an admitted fact that the appellant have enhanced their installed capacity of production from 5000 M. T. to 15,000 M. T. which have been approved by the Central Excise Department. It is further admitted fact that the expansion in capacity took place during the period 2007 to 2009, to which the amount in dispute (input credit) in this appeal relates. It is further found that the Id. Commissioner (Appeals) in the appellant's own case have by a speaking and reasoned order accepted the claim of Cenvat credit. Accordingly, the appellant is entitled to refund of ₹ 70,549/- being the amount debited by them under protest on 1/4/13, with interest as per Rules. - Decided in favour of assessee with consequential relief
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2016 (8) TMI 533
Demand of interest - utilization of Cenvat Credit to pay duty during the defaulted period - contravention of provision of Rule 8(3A) of the Central Excise Rules, 2002 - non-service of show cause notice - Held that:- in the light of the judgment of Hon'ble High Court of Madras in the case of AR Metallurgical (P)Ltd Vs CESTAT, Chennai [2015 (5) TMI 661 - MADRAS HIGH COURT] followed by the judgment of Hon'ble High Court of Gujarat in the case of Indsur Global Ltd Vs UOI [2014 (12) TMI 585 - GUJARAT HIGH COURT], it is held that the condition contained in sub-rule (3A) of Rule 8 of the Central Excise rules, 2002 as unconstitutional, therefore, the demand of interest is not sustainable. - Decided in favour of appellant
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2016 (8) TMI 532
Cenvat credit - eligibility - wrong availment of credit on the strength of endorsed Bills of Entry - Held that:- the appellants have furnished along with these endorsed Bills of Entry, the invoices issued by the importer as well as the TR6 challan evidencing the payment of customs duty. Also the appellants themselves sought clarification from the Department regarding the eligibility and entitlements of CENVAT credit on the endorsed Bill of Entry. On receiving clarification that credit cannot be availed, they voluntarily reversed the credit. The Department issued show-cause notice after such reversal of credit, which was unwarranted. When the endorsed Bill of Entry is accompanied by proper invoice and evidence the payment of duty the credit cannot be denied treating it as not a valid document for taking credit. - Decided against the Revenue
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2016 (8) TMI 531
Demand - Differential duty - unexplained shortage of raw materials - stock verification method adopted - Held that:- it is found that in the method of stock verification adopted, there is bound to be variation. Further the variation found is about 10% in the case of raw material and less than 5% in the stock of finished goods which I hold as normal variation in such method of calculation. Secondly it is found that the appellant had given cogent explanation regarding the shortage of raw material within 5 days of inspection, by stating that the raw material charged in the furnace had escaped to be noticed in the stock verification and the same was not entered in the stock records/RG1, and accordingly there is no discrepancy in the stock of raw material. Therefore, the variation found is a normal variation and no adverse inference could be drawn. - Decided in favour of appellant
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CST, VAT & Sales Tax
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2016 (8) TMI 525
Inter-sate sale or not - e-Transit Pass in Form LL - Refund - Compounding fee – Kerela Value Added Tax – coconut oil – detention of goods – verification of genuineness of transactions - Circular No.26/2014 dated 16.06.2014 stating the situation where inspite of genuine transaction assesse could not produce the transit pass – Held that: - in case of non-surrender of transit pass, if a dealer could produce sufficient legally valid and reliable documentary evidence to prove that the goods moved without the transit pass in question had actually crossed the borders of the State, such evidences may be accepted by the Assessing Authority as an evidence of inter-state movement of goods. The officers of the Department were also cautioned that this cannot be accepted for repeated violations. This was the first occasion for the petitioner - genuine transaction – no tax and penalty required to be collected – writ petition allowed – petitioner directed to file revision claim for refund of tax and penalty.
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2016 (8) TMI 524
Writ petition - rate of tax - sales of food and drinks to their customers including the sales to the partnership firm, which is running the lodging house - tax paid at 2% under section 7(1)(b) of the TNVAT Act – classification of the assessee as a Two Star Hotel - demand of tax at higher rates – production of branch wise sale details at the earliest – penalty under Section 27(1)(b) of the TNVAT Act – SCN - the respondent, without adverting to any of the records, overruled the objections raised and assessed the petitioner to tax at further rate. Held that: - If the order proceeds on the reasons other than those stated in the notice, in fairness to the claim of the petitioner, the respondent should have indicated the same too in the notice and if the same has not been done, it would amount to violation of principles of natural justice. The respondent directed to examine the specific contention raised by the petitioner that the lodging facility is being carried on by a different entity namely a partnership firm and they are a public limited company. The Assessing Officer has to take note of the advance ruling issued by the authority – writ petition allowed – impugned order set aside – matter remanded back.
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2016 (8) TMI 523
Valuation of closing stock – Enquiry – sales suppression and closing stock at the time of closure of business is assessable under KVAT Act, 2003 - adjudication of the court – opportunity of heard provided – Held that: - Whether this approach of the assessing officer is justifiable under the circumstances of the case and whether the objections submitted could have been further inquired into are all matters which requires an adjudication of facts, which cannot be adjudicated by this Court in the proceedings under Article 226 of the Constitution. Whether the particulars provided by the petitioner in their objection was sufficient enough to consider their defence and to arrive at a finding are all matters which could be considered by the appellate authority in a proper manner. No violation of principles of natural justice – right of petitioner to appeal reserved – writ petition closed.
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