TMI Tax Updates - e-Newsletter
August 22, 2016

Case Laws in this Newsletter:

Income Tax Service Tax Central Excise

Articles

• ELIGIBLE INPUT SERVICES FOR TAKING CREDIT AS DECLARED BY TRIBUNALS/HIGH COURTS
• GIST OF GST
• INSOLVENCY PROFESSIONAL AGENCY

Notifications

Customs

• 47/2016 - dated 19-8-2016 - ADD
  Seeks to extend the levy of anti-dumping duty on imports of 1-Phenyl-3-Methyl-5-Pyrazolone originating in, or exported from, People's Republic of China, (imposed vide notification No.80/2011-Customs, dated the 24th August, 2011) for a period of one year i.e. upto and inclusive of the 23rd August, 2017

  ---

• 46/2016 - dated 19-8-2016 - ADD
  Seeks to extend the levy of anti-dumping duty on imports of Caustic Soda, originating in, or exported from Chinese Taipei (imposed vide notification No.79/2011-Customs, dated the 23rd August, 2011) for a period of one year i.e. upto and inclusive of the 22nd August, 2017

  ---

Income Tax

• 75/2016 - dated 19-8-2016 - IT
  Income-tax (21st Amendment) Rules, 2016 - Class or classes of buyers to whom provisions of sub-section (1D) of section 206C shall not apply

  ---

Highlights / Catch Notes

Income Tax

• ITAT was not right in law in holding that deduction of interest expenses was not admissible u/s 36(1)(iii) of the Income Tax Act, 1961 merely because shares were never allotted to the appellant in response to the share application. - HC
  Visit to Get Source

  ---

• Penalty u/s 271B - delay in completion of statutory audit was reasonable cause for non- compliance with section 44AB - penalty cancelled - AT
  Visit to Get Source

  ---

• The loss incurred in share trading business by such companies, i.e. like the assessee, will not be treated as speculation business loss but normal business loss, and hence the same loss can be adjusted against other business income or income from any other sources of the year under consideration. - AT
  Visit to Get Source

  ---

• Transfer pricing - Valuation of an intangible asset - revenues generated out of the Intellectual Property (“IP”) or not. - for valuation of an intangible asset, only the future projections alone can be adopted and such valuation cannot be reviewed with actuals after 3 or 4 years down the line. - AT
  Visit to Get Source

  ---

Service Tax

• Cenvat credit - availed on transportation charges in the process of cleaning and disposal of waste - the disposal of hazardous waste by the appellant is an essential activity, without which, the final products being excisable insecticides, cannot be manufactured. - Credit allowed - AT
  Visit to Get Source

  ---

• Cenvat credit - insurance premium having been paid for the health insurance of the employees of the factory and Pest Control Service availed to protect the property of the company - credit allowed - AT
  Visit to Get Source

  ---

Central Excise

• Classification - activated carbon fabrics - is found that it is covered by Note 7 to Chapter 59 which attracts textile fabrics of a kind use for technical purposes falling under 5911 - AT
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2016 (8) TMI 745
  Reopening of assessment - Held that:- When the assessee has submitted all details of payment of commission, professional fees and others, before the AO at the time of original assessment, there is no failure on the part of the assessee to disclose all facts truly and fully for its assessment and the reasons recorded by the AO that there is failure on the part of the assessee to disclose all facts truly and fully for reopening the assessment after 4 years from the end of relevant assessment year, are not justified. Accordingly, we are inclined to allow the appeal of the assessee. TDS u/s 195 - disallowance u/s.40(a)(i) being sales commission paid to various persons outside India - Held that:- As decided in assessee’s own case nature of services mentioned will come not within the definition of “fees for technical services” given under explanation 2 of Section 9(1)(vii) of the Act. By virtue of such services, the concerned recipients had not made available to the assessee any new technic or skill which assessee could use in its business. The services rendered by the said parties related to clearing, warehousing and freight charges, outside India. The logistics service rendered was essentially warehousing facility. In our opinion, this cannot be equated with managerial, technical or consultancy services. Even if it is considered as technical service, the fee was payable only for services utilized by the assessee in the business or profession carried on by the said non-residents outside India. Such business or profession of the non-residents, earned them income outside India. Thus, it would fall within the exception given under sub-clause (b) of Section 9(1) of the Act. In any case, under Section 195 of the Act, assessee is liable to deduct tax only where the payment made to non-residents is chargeable to tax under the provisions of the Act. In the circumstances mentioned above, assessee was justified in having a bonafide belief that the payments did not warrant application of Section 195 of the Act. In such circumstances, we are of the opinion that it could not have been saddled with the consequences mentioned under Section 40(a)(i) of the Act. Disallowances were rightly deleted by the ld. CIT(Appeals) TDS u/s.194A - disallowance u/s.40(a)(i) being interest payment to various banks outside India - Held that:- The interest was paid to the banks located in India and not outside India and the payment was not made on foreign currency for the amount borrowed from foreign banks. Being so, this payment is exempt from the provisions of TDS u/s.194A(3)(iii)(a) and disallowance u/s.40(a)(i) is not warranted. - Decided in favour of assessee Disallowance made u/s.40(a)(i) being expenditure incurred on sales promotion, advertisement, legal fees outside India - Held that:- As noted by the CIT(Appeals), this payment is not covered under the provisions of sec.9(1)(v)/(vi)/(vii) of the Act. Being so, we confirm the findings of the CIT(Appeals) on this issue as convinced with the explanation offered by the ld. AR and held that the expenditure incurred towards promotion, advertisement and legal fee will not attract provisions of TDS and allowed the ground of appeal. Disallowance of additional depreciation claimed - Held that:- As decided in assessee’s own case on perusal of the provisions of section 32 as applicable for the relevant assessment year clearly shows that additional depreciation is allowable on the plant and machinery only for the year in which the capacity expansion has taken place which has resulted in the substantial increase in the installed capacity. In the assessee’s case this took place in the assessment year 2005-06 and the assessee has also claimed the additional depreciation during that year and the same has also been allowed. Each assessment year is separate and independent assessment year. The provisions of section 32 of the Act do not provide for carry forward of the residual additional depreciation, if any. - Decided against the assessee. Disallowance u/s.14A based on Rule 8D - Held that:- Rule 8D for this A.Y. 2008-09 is not applicable, as this came into effect from 24.3.2008.. In view of the above decision of the jurisdictional High Court, we direct the Assessing Officer to disallow 2% exempted income. Allowing the depreciating on UPS at 60% as against the assessee’s claim of 80% - Decided against assessee. Deduction claimed u/s.35AC - CIT(A) reducing the claim u/s.10B by allocating deduction claimed u/s.35AC and exempted income - Held that:- This issue came for consideration before the Tribunal in assessee’s own case for the A.Y. 2007-08 and the CIT(Appeals) has given a finding that the AO should carry out similar exercise in line with directions given by the Tribunal for the A.Y. 2007-08 for this year also and find out the tangible benefits which the 10B units have derived from the R & D activities carried out by the assessee and decide the disallowance Addition made towards power charges paid to Wescare India Ltd. - Held that:- This issue came up for consideration before the Tribunal in assessee’s own case wherein the Tribunal remitted the issue back to the file of the AO for fresh consideration. Accordingly, on similar line, we remit this issue back to the file of the AO for fresh consideration. This ground is allowed for statistical purposes. Assessee is entitled to depreciation at 60% on UPS, treating it as part of computers. Addition back the disallowance u/s.14A to the book profit of the assessee - Held that:- This issue of disallowance made by the Assessing Officer for this assessment year by invoking the provisions of sec.14A r.w.Rule 8D, was in normal computation also. In our opinion, disallowance made u/s.14A r.w. Rule 8D cannot be added while computing book profit u/s.115JB of the Act that the disallowance is only disallowance for the purpose of computing taxable income of the assessee in the normal course. There is no provision in the Act to add these kind of disallowance while computing book profit u/s.115JB and it cannot change the book profit on this count. Therefore, even if there is an addition in view of provision u/s.14A r.w. Rule 8D, that cannot be added back to compute the book profit u/s.115JB

  ---

• 2016 (8) TMI 744
  Grant of deduction under section 80IA(4) - Application for approval and for notification of its industrial part under the Industrial Park Scheme, 2008 came to be rejected - Held that:- To begin with CBDT is not accurate in commenting that MARS Planning & Engineering Services Pvt. Ltd., was appointed by the petitioner as an agency for quality maintenance. MARS Planning & Engineering Services Pvt. Ltd. was appointed by GIDC in order to advise the Government about the completion of the industrial park and for maintenance of the facilities as per the State Government subsidy scheme for the specified period. It was in this background that MARS Planning & Engineering Services Pvt. Ltd. had in its report dated 5.9.2010 certified that the infrastructure work was completed and the assessee should be approved as having completed the project of industrial park. It was on the basis of such recommendations from MARS Planning & Engineering Services Pvt. Ltd., and GIDC that the specially constituted committee in its meeting dated 28.2.2011 decided to grant the subsidy under the said scheme at the rate of 20% of the eligible investment in such park. A final approval in this respect was issued on 14.3.2011 and subsequently the Industries Commissioner under letter dated 8.4.2013 certified that as per the joint inspection team report, the park has completed industrial park as per the guidelines issued by Government Resolution dated 10.6.2004. Ignoring such evidence, CBDT proceeded on the basis that AUDA which was a local authority had not given any clear certificate that the industrial park was completed with constructed units by 31.3.2011. This insistence from CBDT was impermissible for two reasons. Firstly, the scheme pertained to certificate from a local authority and would not confine its purview to certification by AUDA alone and second that the insistence on demonstrating completion of industrial units by the leasing industries was not part of the requirement of the scheme at all, as held in case of Ganesh Housing Corporation Ltd.(2011 (8) TMI 654 - Gujarat High Court ). For such reasons, the second part of the CBDT's objection must fail. Coming to the first objection, of the petitioner having failed to produce a completion certificate from the local authority, we have noticed that MARS Planning & Engineering Services Pvt. Ltd. was appointed by GIDC for the purpose of certifying the quality control and completion of the project for State subsidy. MARS Planning & Engineering Services Pvt. Ltd. had already given such completion certificate well before 31.3.2011, on the basis of which State Level Committee had approved the petitioner for grant of subsidy, which was also granted along with completion certificate. There was thus voluminous evidence on record to suggest that the project was completed before 31.3.2011. However, we do appreciate the anxiety of CBDT that such task should normally not be part of its responsibility. It is in this regard that completion certificate should be provided by a local authority. In strict sense of the term, perhaps the petitioner did not fulfill this requirement. However, a more liberal or practical approach could be that when MARS Planning & Engineering Services Pvt. Ltd. was appointed by GIDC who had certified that the project was completed before 31.3.2011 and when the State Government had acted on such report and approved the subsidy, this should have been seen as a substantial compliance of such requirement. However, to put the issue beyond any controversy, we permit the petitioner to produce such certificate from GIDC, which is also a local authority, before CBDT which may be done latest by 30.9.2016. If such certificate providing that the project of the petitioner is completed before 31.3.2011, is issued, CBDT shall approve the petitioner for grant of deduction under section 80IA(4) of the Act and issue necessary notification in this respect, within three months from the date of receipt of such certificate.

  ---

• 2016 (8) TMI 743
  Rectification of mistake - Computation of book profit u/s.115JB - exclusion of capital receipts - Held that:- Looked from the limited angle of powers of rectification, we do not find that the Tribunal has committed any error. Whether the Commissioner of Income Tax (Appeals)'s directions would cover the normal as well as MAT computation of income, was a debatable issue. The Assessing Officer thus having passed an order taking one view, the same was not open to rectification.

  ---

• 2016 (8) TMI 742
  Application of Section 40a(ia) - whether the payments were made by the assessees in the previous year - Held that:- Having regard to the judgment of the Gujarat High Court in Merilyn Shipping & Transport case [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] the orders of the Tribunal has to be set aside and the matter has to be remitted to the Tribunal for fresh consideration. It is also clarified that if the assessees so desire, it would be open to them to claim the benefit of Section 194(C)(3) as it stood prior to its substitution by Finance Act 2009 before the Tribunal, if necessary by producing additional materials also. It is also ordered that on consideration of the said contention, if the Tribunal finds that factual adjudication is necessary, it would be open to the Tribunal to remit the matter to the Assessing Officer for reconsideration.

  ---

• 2016 (8) TMI 741
  Partnership firm - profit sharing ratio - Applicability of section 13(b) of the Indian Partnership Act on a firm - Held that:- The provisions of section 13(b) of the Partnership Act and clause 7 of the partnership deed dated 16.9.1981, this Court held that section 13(b) of the Act would apply only when there is no contract to the contrary and that a look at clause 7 of the Partnership deed would show that there is a contract to the contrary. Proceeding further, this Court has referred to the judgment in Saraf Trading Corporation [1998 (8) TMI 41 - KERALA High Court ] and thereafter held that “hence, according to us, section 13(b) of the Partnership Act will not apply”. Thus, there is a categoric finding in the judgment in Nalini V.Saraf (2003 (7) TMI 22 - KERALA High Court ) that section 13(b) of the Partnership Act will not apply to the firm. The aforesaid facts would show that the Tribunal was justified in its conclusion that section 13(b) of the Partnership Act would not apply. Consequently, the Tribunal's order dismissing the appeals of the Revenue cannot be interfered with as illegal. - Decided in favour of assessee.

  ---

• 2016 (8) TMI 740
  Penalty levied on them under Section 271(1)(c)- Held that:- Assessing Officer has proceeded to levy the penalty on the basis that in the absence of an explanation submitted by the assessee he was satisfied that, these are cases fit for penalty under Section 271(1)(C). There is no finding that there are any concealment of any particulars of income or that the assessee has furnished inaccurate particulars of income to attract Section 271 (1)(c). That the assumption of the Assessing Officer is factually erroneous as is evident from the orders passed by the First Appellate Authority, which refers to the explanations submitted by the assessee and the contentions therein. Thus, there is absence of a finding rendered by the Assessing Officer, bringing the case within the scope of clause (B) of Explanation (1) to Section 271(1) (c). Secondly, the Assessing Officer has levied penalty ignoring the explanations submitted by the assessee. Consequently, as held by the Apex Court in Commissioner of Income Tax v Reliance Petro Products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT ] . We may here reiterate that merely because of the assessee has made certain claims, which were not accepted or was not acceptable to the Revenue, that itself would not attract the penalty under Section 271(1)(c). If that is the interpretation accepted that in every return where the claim made is not accepted for some reason, the assessee will be inviting penalty under Section 271(1)(c). - Decided in favour of assessee.

  ---

• 2016 (8) TMI 739
  Deduction of interest expenses - admissibility under section 36(1)(iii) - Held that:- Merely because ultimately such shares could not be acquired for the reasons stated hereinabove, would not detract from the fact that the amount had been borrowed for the purpose of business. When funds are invested for business purposes, there can be no guarantee that the purpose would be achieved. What has to be looked into is whether the funds were expended as a measure of commercial expediency, which includes such expenditure which a prudent businessman incurs for the purposes of business. Once it is established that there was a nexus between the expenditure and the purpose of the business, the revenue cannot justifiably claim to put itself in the armchair of the businessman and assume the role to decide the reasonableness of such expenditure. In the facts and circumstances narrated hereinabove, the court is of the view that the amount in question having been borrowed for the purposes of its business, the requirements of section 36(1)(iii) of the Act stand satisfied and the assessee was entitled to deduction of the interest paid on such borrowed funds notwithstanding the fact that ultimately, the purpose for which the capital was borrowed was not served and the shares were not actually allotted to the assessee. The findings recorded by the Assessing Officer that the amount was paid under the guise of share application money to the sister concern, stand dislodged by the facts which emerge from the record, inasmuch as, the amount was directly paid by the concerned bank to the sister concern and in fact, share applications had been made for 4,29,000 shares which was reflected in the records of the assessee as well as the sister concern. As regards the contention of the learned advocate for the revenue that the borrowed funds were advanced towards share application money which shares would have ultimately yielded dividend which would be exempted income and hence, in the light of the decision of the Kerala High Court in the case of Leena Ramachandran (2010 (6) TMI 612 - Kerala High Court ), the expenditure incurred by the assessee towards purchase of shares would not be an admissible expenditure is concerned, in the opinion of this court, the view adopted in the above decision is contrary to the view adopted by this court in the case of Additional Commissioner of Income tax v. Laxmi Agents (1975 (12) TMI 7 - GUJARAT High Court) wherein the court has upheld the finding of the Tribunal that though the income from the dividend has to be assessed under a separate head, payment of interest by the assessee and amounts borrowed for the purpose of earning interest must be allowed as business expenditure and not expenditure incurred for earning dividend. The court has also held that if it is once established that capital was borrowed for the purpose of business, it is immaterial how the borrowed capital was applied because all that clause (iii) of section 36(1) of the Act requires is that borrowings on which interest is paid should be for the purpose of business. In the light of the above discussion, it is not necessary to refer to and deal with the other decisions on which reliance had been placed by the learned advocate for the appellant. For the foregoing reasons, the appeals succeed and are accordingly allowed. The questions are answered in the negative namely, in favour of the assessee and against the revenue. The Income Tax Appellate Tribunal was not right in law in holding that deduction of interest expenses was not admissible under section 36(1)(iii) of the Income Tax Act, 1961 merely because shares were never allotted to the appellant in response to the share application. The Income Tax Appellate Tribunal accordingly was not right in law in confirming the disallowance of interest for each of the assessment years. In the light of the fact that this court has held that section 37(1) (iii) is applicable to the facts of the present case, the issue regarding application of section 57(iii) of the Act is left unanswered. The impugned order passed by the Tribunal is accordingly quashed and set aside and the order passed by the Commissioner (Appeals) is hereby restored.

  ---

• 2016 (8) TMI 738
  Penalty levied u/s 271(1)(c) - violation of provisions of Section 43B - non payment of employer contribution towards PF/ESIC within time stipulated under the approved installment scheme - Held that:- The assessee came out with explanation which was a bonafide explanation which satisfied the mandate of Section 271(1)(c) of the Act and hence penalty u/s 271(1)(c) of the Act against the assessee is not exigible in this case subject to verification of the plea of the assessee that it has been granted installment scheme by the PF/ESIC authorities for payment of employer contributions towards PF/ESIC dues of ₹ 27,84,655/- and the assessee has duly complied with the said approved installment scheme while making payment of employer contribution towards PF/ESIC dues of this amount of ₹ 27,84,655/ - within time stipulated under the said approved installment scheme . The assessee is directed to produce the copy of approval letters from PF/ESIC authorities before the A.O. approving installment scheme with reference to employer contribution of ₹ 27,84,655/- towards PF/ESIC dues and the A.O. shall verify the same as per our directions as setout above and thereafter delete the penalty levied u/s 271(1)(c) of the Act after being satisfied that the assessee has duly paid the said employer contribution of ₹ 27,84,655/- towards PF/ESIC within time stipulated under the approved installment scheme. - Decided in favour of assessee.

  ---

• 2016 (8) TMI 737
  Disallowance u/s. 14A - Held that:- The undisputed facts of the case are that the assessee had shown dividend income of ₹ 25. 99 lakhs that it had not made any disallowance u/s. 14 A of the Act, that the AO after considering the submission of the assessee made a disallowance of ₹ 50. 64 lakhs. We find that the assessee had borrowed the funds for its business (pages 107-09 of the paper book), that it had not invested the borrowed money for making investment that yielded dividend income, that the own funds of the assessee were of ₹ 68. 78 crores, that the investment was of ₹ 12. 26 crores only. In our opinion, if the funds owned by the assessee or more than the investments made no disallowance could be made for interest expenditure. The presumption, as held by the various honorable High Courts, is that the assessee utilised its own funds for making investments. In the case under consideration the AO had not brought on record any fact proving that the loan taken by the assessee was not used for the business purposes. If the assessee had utilised the borrowed funds for its business and not for the investment, there was no justification for invoking the provisions of section 14A of the Act. Therefore, we hold that the order of the FAA confirming the disallowance of ₹ 43. 42 lakhs under the head interest expenses cannot be endorsed. As far as the disallowance made under the head 0. 5% of the average investment is concerned, we would like mention that same should be restricted to 2% of the dividend income. Effective ground of appeal, raised by the assessee, is allowed in its favour, in part.

  ---

• 2016 (8) TMI 736
  Entitlement for claim of unabsorbed deprecation - Held that:- It is an undisputed fact that the claim of carried forward of depreciation aggregating to ₹ 1,31,03,362/- pertains to assessment years 1998-99, 2000-01 and 2001-02. Before the amendment, the time limit for carried forward of unabsorbed depreciation was for period not more than 8 assessment years immediately succeeding the assessment years for which the aforesaid allowance was first computed. However, by the Finance Act, 2001 an amendment was brought under section 32(2), whereby, restriction of 8 years for the carried forward and set off of unabsorbed depreciation was removed. - Decided in favour of assessee.

  ---

• 2016 (8) TMI 735
  Treatment to share trading loss - normal business loss or speculation loss - assessee is a member of the National Stock Exchange (NSE) having its main business as stock broking - Held that:- the amendment brought in by the Finance Act 2014 should be construed as curative in nature and hence to be given retrospective applicability. It is not in dispute that the principal business of the assessee in the instant case is trading in shares. If the amendment supra is given retrospective effect, then the same would automatically fall under the exception provided in the Explanation to Section 73 of the Act and accordingly the loss incurred on delivery based share transactions should not be construed as speculation loss. Hence the grounds raised by the revenue in this regard are dismissed. - Decided in favour of assessee.

  ---

• 2016 (8) TMI 734
  Deduction u/s 80IC - Held that:- Section 80IC was inserted to give effect to the new package announced by the Union Cabinet. The Circular further clarifies that this section provides for deduction for a period of 10 years from the profits of new undertaking or enterprise or existing undertaking or enterprise on their substantial expansion (see highlighted portion of the circular). The contention of the Ld. Counsel of the assessee was that word ‘existing’ qualifies only the undertaking or enterprises and does not mention any particular date for carrying out substantial expansion. Assessee appellant is eligible for deduction under section 80 IC @ 25 % of the profit derived from industrial undertaking for these years and not @ 100 % of deduction claimed by the assessee

  ---

• 2016 (8) TMI 733
  Levy of penalty levied u/s.271(1)(c) - AO disallowed interest as of the view that assessee had diverted interest- bearing funds for nonbusiness purposes - It is well settled that the parameters of judging the justification for addition made in the assessment case of the assessee is different from the penalty imposed on account of concealment of income or filing inaccurate particulars of income and that certain disallowance/addition could legally be made in the assessment proceedings on the preponderance of probabilities but no penalty could be imposed u/s. 271(1)(c) of the Act on the preponderance of probabilities and Revenue has to prove that the claim of expenses by the assessee was not genuine or was inflated to reduce its tax liability. Further, merely because additions have confirmed in appeal or no appeal has been filed by assessee against additions made, it cannot be the sole ground for coming to the conclusion that assessee has concealed any income. Further, in the present case, there is nothing on record to demonstrate that assessee had filed inaccurate particulars of income or had concealed the particulars of income. We also get support from the judgement of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt.Ltd. reported at (2010 (3) TMI 80 - SUPREME COURT ), wherein the Hon’ble Apex Court has held that a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. - Decided in favour of assessee.

  ---

• 2016 (8) TMI 732
  Penalty under section 271B - delay in filing of tax audit report - Held that:- In the present case, it appears that statutory audit of the assessee got completed on 27.11.2009 and on the same date tax audit report was signed. The assessee filed the return of income on 28.01.2010 and the delay in getting the tax audit report was due to the delay in completing the statutory audit. The assessee was prevented by sufficient cause for non-compliance with the provisions of section 44AB. As decided in APL (India) Private Limited Versus JCIT (OSD) -8(1), Mumbai [2014 (4) TMI 206 - ITAT MUMBAI ] held that delay in completion of statutory audit was reasonable cause for non- compliance with section 44AB and it was held that Tribunal was right in cancelling penalty levied under section 271B - CIT(A) was not right in upholding the levy of penalty under section 271B – Decided in favor of Assessee.

  ---

• 2016 (8) TMI 731
  Validity of proceedings u/s. 153C - Held that:- In the instant case, the AO has categorically recorded that during the course of search, the seized material relating to the assessee was found. Therefore, it cannot be said that no incriminating material was found during the course of search to initiate proceedings u/s. 153C of the Act. During the course of hearing, the ld. counsel for the assessee could not establish that there is no relevant incriminating material available before the AO on the basis of which the impugned additions on account of interest received on refund of income-tax was made. Therefore find that there was sufficient incriminating material available before the AO to initiate proceedings u/s. 153C of the Act and since the assessee has not offered the income received on interest on refund of income-tax to tax, the AO has rightly made the addition which was later on confirmed by the CIT(Appeals) - Decided against assessee.

  ---

• 2016 (8) TMI 730
  Addition u./s 40(a)(ia) - assessee has failed to deduct TDS under respective TDS provisions - Held that:- Following the coordinate bench decision of ITAT, Visakhapatnam in the case of Merilyn Shipping & Transporters Vs. ACIT (2012 (4) TMI 290 - ITAT VISAKHAPATNAM) held that no disallowance can be made under the provisions of section 40(a)(ia) of the Act, if expenditure incurred is already paid during the same financial year. However, the CIT(A) has set aside the issue to the file of the A.O. and directed the A.O. to examine the issue with reference to paid and payable. In case the expenditure incurred under these heads is paid during the same financial year, then no disallowance can be made u/s 40(a)(ia) of the Act. In view of the clear factual position recorded by the CIT(A) and also legal position clarified by the coordinate bench of this Tribunal in the case of M/s. Merilyn Shipping & Transporters (supra), we are of the view that the CIT(A) has rightly held that no disallowance can be made, if the expenditure incurred is paid during the same financial year even though no TDS has been deducted. We do not see any reason to interfere with the order of the CIT(A). Hence, we inclined to upheld the order of CIT(A) and reject the ground raised by the revenue. Disallowance of bad debts claim - Held that:- Once the debt is written off in the books of accounts, no need to prove that the debt has become bad in the year in which the claim is made. We find force in the arguments of the assessee for the reason that in view of the clear provisions of section 36(1)(vii) of the Act, once the assessee written off debt as irrecoverable, need not to prove that the debt has become bad. The only requirement is that it needs to write off the debt in the books of accounts. The CIT(A) after considering the explanations furnished by the assessee, set aside the issue to the file of the A.O. and direct the A.O. to examine whether the bad debt claim made by the assessee is part of revenue receipts in the earlier years. In case the same is offered to tax in the earlier years, then claim made by the assessee towards bad debt should be allowed. The CIT(A) has rightly decided the issue. We do not see any error or infirmity in the order passed by the Ld. CIT(A). Hence, we inclined to upheld the CIT(A) order and reject the ground raised by the revenue. Higher rate of depreciation - commercial vehicles - A.O. disallowed the claim of higher rate of depreciation for the reason that the assessee main business is not hiring of vehicles Held that:- CIT(A) after considering the submissions of the assessee and also taken into account the remand report issued by the A.O. clarifying the nature and purpose of commercial vehicles held that these vehicles are eligible for higher rate of depreciation. We do not see any error or infirmity in the order passed by the CIT(A). Addition on account of unexplained expenditure of branch offices - Held that:- When the unexplained income has been assessed based on material detected during the course of search and seizure operation, the A.O. is not correct to disbelieve and ignore the expenditure reflected in the same document. When income and expenditure are relating to the same business and the branch it is difficult to reject and read both the items as separate and isolated. We find force in the arguments of the assessee for the reason that the assessee has maintained a cash book wherein various receipts and expenditure pertains to its business activity is recorded. Once income is assessed based on a particular seized document, the A.O. was not correct in making separate additions towards expenditure by holding that the assessee has failed to prove the sources for expenditure. In our considered opinion, the A.O. was completely erred in making separate additions towards income and expenditure. When the income and expenditure is part of a single seized document, the A.O. should have telescoped the sources available in the form of income to the expenditure. The CIT(A) after considering the explanations furnished by the assessee directed the A.O. to set off the expenditure against additions made towards unexplained income based on the seized documents. We do not see any error or infirmity in the order passed by the CIT(A). Hence, we inclined to uphold the CIT(A) order and reject the ground raised by the revenue. Addition on account of admission of income u/s 132(4) - Held that:- A.O. made addition solely on the basis of statement of the assessee. The statement given by the assessee is not supported by any corroborative evidences found during the course of search. We further observed that as admitted in the statement recorded u/s 132(4) of the Act, the assessee has admitted ₹ 1,00,00,000/- income for the assessment year 2009-10 in the hands of M/s. Venkatarama Engineering. Similarly, in the statement the assessee has disclosed income of ₹ 1,55,30,000/- for the assessment year 2010-11 which is based on the books of accounts as on the date of search. Therefore, we are of the opinion that the additions made by the A.O. based on the assessee’s admission u/s 132(4) of the Act without any incriminating material cannot sustain in the eyes of law. The A.O. failed to bring on record any material evidences to show that these additions represents undisclosed income of the assessee. The CIT(A) after considering the explanations furnished by the assessee deleted the additions made by the A.O. We do not see any reasons to interfere with the order passed by the CIT(A). Hence, we inclined to uphold the CIT(A) order and reject the ground raised by the revenue. Disallowance of pro-rate depreciation for 11 days in the hands of Maruthi Transporters - Held that:- As per the proviso provided to sec. 32(1)(ii) of the Act, there is concept of less than 180 days and more than 180 days for the purpose of allowing depreciation. In case, asset is put to use for more than 180 days or less than 180 days, then it is eligible for 100% or 50% depreciation as the case may be, irrespective of the fact that the assets is purchased or put use on any date between 1st day of the financial year or last day of the financial year. Under the given facts and circumstances, there is a little possibility of double claim by both the assessee’s for those eleven days. Though, assessee claims that it has claimed depreciation for eleven days, the A.O. observed that the succeeding company has claimed depreciation for the whole year. The facts are not clear, tterefore, we set aside the issue to the file of A.O. and direct the A.O. to verify the claim in the light of the discussion above and allow accordingly. In case, both firm as well as the Company have claimed depreciation on pro-rata basis for actual number of days the assets are held by them, then the A.O. is directed to allow depreciation as claimed by the assessee.

  ---

• 2016 (8) TMI 729
  Nature of ‘Royalty’ - payments received towards sale of software as part of machinery - India-Israel DTAA - Held that:- Following the decision of the Coordinate Bench of the Tribunal in the assessee’s own case for A.Y. 2011-12 we hold that the amounts received by the assessee on sale of operational/application software and spare parts is not exigible to tax as ‘Royalty’ and therefore the addition made by the AO and sustained by the DRP is to be deleted. We hold and direct the AO accordingly.

  ---

• 2016 (8) TMI 728
  Claim for setting off the loss from 'share trading activity' - Treatment to speculation business loss - Held that:- The Co-ordinate bench after detailed discussion of the issue has finally concluded that that the amendment inserted in Explanation to section 73 of the Act by Finance (No. 2) Act, 2014 w.e.f. 01.04.2015 is clarificatory in nature and would therefore operate retrospectively from 01.04.1977 from which date the Explanation to section 73 was placed on the statute. Accordingly, a company, the principal business of which is the business of trading in shares, would fall under the exception to the explanation to section 73 of the Act. Therefore, the loss incurred in share trading business by such companies, i.e. like the assessee, will not be treated as speculation business loss but normal business loss, and hence the same loss can be adjusted against other business income or income from any other sources of the year under consideration. The AO, therefore, is directed to allow the assessee's claim for setting off the loss from 'share trading activity' and also the expenditure incurred relating to the said share trading activity against the income from ‘business or profession’ for the year under consideration.- Decided in favour of assessee Disallowance u/s 14A - Held that:- The strategic investment in group companies cannot be held to be for investment purposes or with the object of earning of dividend/tax exempt income, but the same, in the light of above referred to Judicial decisions can safely be said to be related to the business activity of the assessee and no disallowance, therefore, is attracted on such an income u/s 14A of the Act. Thus we direct the AO to exclude the strategic investments made by the assessee in group companies while calculating the disallowance under section 14A read with rule 8D of the Income Tax Act. Since the assessee, in the case in hand, has not earned any dividend income in respect of the investments made, hence no disallowance of expenditure u/s 14 A is attracted in relation to the investment portfolio. The disallowance made by the AO in the case of the assessee under section 14A of the Act is hereby ordered to be deleted. - Decided in favour of assessee

  ---

• 2016 (8) TMI 727
  Transfer pricing - Valuation of an intangible asset - revenues generated out of the Intellectual Property (“IP”) or not. - Held that:- What is important is the value available at the time of making business decision. It should be left to the wisdom of the businessman, he knows what is good for the organization. No doubt, ‘IP” was sold to “AE”. The method adopted should be consistent and should be documented to review in the future. The review does not mean replacing the projection with actuals. It is the rational of adopting the values for making decision at the point of time of making decision. When the values are replaced subsequently, it is not valuation but evaluation i.e. moving the post of result determined out of projections. The revenue is doubting the valuation because the actual revenues were favourable. In rational decision making, the actual results are irrelevant. In the present case, the valuation was done by two independent valuers not by the assessee. The other issue with this are that the revenue adopted the actuals of AE without considering whether they are revenues generated out of the “IP” or not. They simply adopted the revenues of AE without giving proper findings that the revenues of AE are all generated only out of this “IP” (Jungle Book). The assessee submitted that these revenues are generated by “AE” out of other properties(IPs) as well. We are of the view that the revenue cannot adopt such values without proper verification. In our considered view, for valuation of an intangible asset, only the future projections alone can be adopted and such valuation cannot be reviewed with actuals after 3 or 4 years down the line. Accordingly, the grounds raised by assessee are allowed. Apportionment of profit of the AE based on the ownership arising out of exploitation of intangibles - whether the TPO justified to determine the profit attributable to Indian entity (assessee) when he himself determined the sale consideration of IP (Jungle Book)? - Held that:- After the completion of the sale process, the “AE” has done transaction with the outsiders or outside the jurisdiction of the Indian territorybut there is no transaction done with the assessee involving the above IP (jungle book) to consider that there exists a international transaction. Once, the IP is sold and Arm’s length price is determined, the “IP” becomes the property of “AE”. The assessee has no locus standi to claim any benefit neither the revenue. The revenue has grievances on the arrangement and existences of group companies. There is no doubt, there exists tax planning. There can be tax planning within the four corners of the taxation laws. There is enough mechanism in the existing Act and also there is DTAA – arrangement with Ireland, which will take care of the situations of tax avoidance. The revenue has not brought any cogent evidence to prove that there exists any tax avoidance. In our considered view, the action of the TPO is not justified and accordingly, the grounds raised by assessee are allowed. Payment towards management consultancy service fee - Held that:- After analyzing the case laws and assessee’s own case in the earlier year, the coordinate bench of this Tribunal has adjudicated that management consultancy charges have to be allowed as per the MoU and OECD guidelines. Respectfully following the earlier decision, we are inclined to allow the grounds raised by the assessee. Mark up on travel and other expenses reimbursed by the AE - Held that:- The assessee as a group company, incurred travelling and other expenditure on behalf of DQE, Mauritius. Assessee had raised the bill for reimbursement on cost to cost basis, it is normal in the case of group companies. There is no element of service in these transactions. These transactions are not in any way connected to the nature of business of assessee. These are the services rendered by outsiders for the AE’s and only payment was made by assessee and got reimbursement from “AE”. Since there is no element of service by the assessee, adding markup on these kind of transactions are not justified. As held in the case of M/s Cognizant Technologies Solution (spra), the additions made were deleted by Chennai Bench of ITAT. Accordingly, the grounds raised by the assessee are allowed. Adjustment in respect of bonus shares issued by the appellant to its AE - Held that:- The TPO made a general observation in his report on the issue of bonus shares but the TPO or the AO had not made any addition. Since there is no demand raised, the ground raised by the assessee on this issue becomes infructuous. Hence, need no adjudication

  ---

• 2016 (8) TMI 726
  Deemed dividend under section 2(22)(e)- Held that:- Bare perusal of the findings returned by the AO goes to prove that he has merely followed the assessment order of the earlier year AY 2008-09 and has not applied his mind whereas CIT (A) has examined the issue threadbare. It is proved on record inter alia that the payment made by the assessee to three group concerns is not a dividend nor the payment made by the company was by way of advance of loan rather the payment was made by the assessee to M/s. Siegwerk Benelux N.V., M/s. Siegwerk (Asia Pacific) Pvt. Ltd. & M/s. Siegwerk Druckfarben for work done. So, we find that no case is made out to interfere into the findings returned by the CIT (A), hence ground no.1 is determined against the revenue. Addition claimed being royalty in profit & loss account - assessee has not filed any detail or documents to substantiate its claim of royalty payment nor assessee has proved if TDS has made on such payment or not - Held that:- AO has merely made the addition on account of payment of royalty to the tune of ₹ 70,18,413/- on the grounds inter alia that assessee has failed to furnish the expenses to substantiate its claim of royalty payment; that the nature of payment is that the assessee has failed to explain if payment is capital or revenue in nature; that the genuineness of the actual payment has not been proved; that it is not proved that tax at source has been deducted or not, but CIT (A) has not preferred to call the remand report qua the said documents nor entertained the said documents on the basis of some request for additional evidence. However, it is admitted fact that the royalty payment made by the assessee company qua the AY 2008-09 and AY 2010-11 has already been allowed as revenue expenditure by the revenue authorities. In these circumstances, we find it expedient to restore the matter to the AO to decide afresh. AO to allow the royalty payment to the tune of ₹ 70,18,413/- after due verifications of the documents relied upon by the assessee. So, the ground no.2 is determined in favour of the revenue. Addition u/s 14A - Held that:- Assessee’s own case in its favour by restoring the matter back to the file of the AO for de novo consideration in the light of observations made therein, AO passed fresh order dated 31.01.2014 (copy available on the file) and accepted the contention of the assessee that expenditure of ₹ 1,32,520/- was made for earning of exempt income, the file is required to be restored back to AO to determine the issue afresh in the light of his earlier year order as well as in view of the mandate of section 14A(2) by considering the assessee’s claim by providing opportunity of being heard and if the assessee’s claim is rejected then he should resort to Rule 8D. - Decided in favour of the revenue.

  ---

• 2016 (8) TMI 725
  Addition on material or return of income filed by the assessee prior to the date of search - Held that:- As where assessments are not pending, there cannot be any abatement of the assessments and, hence, the Assessing Officer has no power to bring to tax any income on the basis of the material or return of income filed by the assessee prior to the date of search - Decided in favour of assessee.

  ---

• Service Tax

• 2016 (8) TMI 757
  Cenvat credit - Township security services - security services in question were provided to their residential township which is not in or in relation to the manufacture of final products or clearance of final products - Held that:- the documents produced by the appellants indicate that the security services were provided by the service provider M/s Jayendra Security services only to the factory premises. Neither in the appellant been controverted or disproved. Nor is it the case of the department that the said documents relied upon by the appellant are concocted or otherwise not genuine. This being the case, security services provided in factory premises, has to be considered as an eligible input service for the purpose of rule 2(l) of the Cenvat Credit Rule, 2004. There cannot be any infirmity or legal bar in the appellant availing the disputed credit, and therefore, the impugned order is required to be set aside. - Decided in favour of appellant

  ---

• 2016 (8) TMI 724
  Cenvat credit - availed on transportation charges in the process of cleaning and disposal of waste - prescribed document to avail credit as per the provisions of Rule 9(1)(e) of Cenvat Credit Rules, 2004 - nexus with manufacture and clearance of goods, upto the place of removal - ambit of the definition of input service, in terms of Rule 2(1) of CCR, 2004 - Held that:- the disposal of hazardous waste by the appellant is an essential activity, without which, the final products being excisable insecticides, cannot be manufactured. Thus, the transport service in question have been incurred in relation to the manufacture of final taxable products. - Decided in favour of appellant with consequential relief

  ---

• 2016 (8) TMI 723
  Cenvat credit - insurance premium having been paid for the health insurance of the employees of the factory and Pest Control Service availed to protect the property of the company - Held that:- so far as the Cenvat credit on insurance service is claimed, the exclusion of such service in certain events has been incorporated into the law with effect from 1-4-2011. That is only in respect of the insurance coverage given to employees during journey availing leave travel concession. But that had not taken away welfare of workers under the Factories Act, from its fold if insurance service is availed to overcome difficulties under Workmen's Compensation Act, in case of hazard. Accordingly, appellant's claim of Cenvat credit on the service tax paid to avail insurance service for employees employed in factory is permissible. Pest Control to maintain property of the assessee being integral to the protection of the business, therefore, appellant is also entitled to credit thereon. - Decided in favour of appellant

  ---

• Central Excise

• 2016 (8) TMI 756
  Classification - activated carbon fabrics - whether to be classified under heading 5911 as "Textile products and articles , for technical use as per appellant or under 3802 as 'activated carbon' as per Revenue - Held that:- inasmuch as the goods continued to remain a fabric, it merits classification under section XI of Central Excise Tariff Act dealing with textile and textile articles. Hence, appropriate classification will be under Chapter 59 dealing with impregnated, coated, covered or laminated textile fabric; textile articles of a kind suitable for industrial use. From the reported use of the product, it is found that it is covered by Note 7 to Chapter 59 which attracts textile fabrics of a kind use for technical purposes falling under 5911. - Decided in favour of appellant

  ---

• 2016 (8) TMI 755
  Condonation of delay - 84 days - Erroneous refund - Held that:- no one appeared on behalf of appellant, therefore, in the interest of justice, the Tribunal ought to have condoned the delay by imposing cost for the lapse on the part of appellant. Accordingly the impugned order passed by the Tribunal is set aside and the delay in filing the appeal is condoned, but on payment of cost of ₹ 2000/-. - Decided in favour of appellant

  ---

• 2016 (8) TMI 754
  Cenvat credit - wrongly availed in contravention of Rule 3(4) of the Central Credit Rules, 2004 - assessee is said to have purchased Copper Wire in the invoices, manufacturer is shown as M/s Navneet Yarn Pvt. Ltd. and the description of the goods is shown as Copper Wire which is 99% of purity and admittedly it has been found during investigation that M/s Navneet Yarn Pvt. Ltd. is not at all a manufacturer of Copper Wire rather has been found to be a manufacturer of entirely different product namely; texturing of Polyster Yarn. Held that:- When M/s Navneet Yarn Pvt. Ltd. from whom M/s. V.K. Enterprises purchased the goods and in turn sold to the assessee has been admittedly found to be a manufacturer of Polyster Yarn, an entirely different product and which has been proved on record by the Revenue on the basis of the investigations carried out and confronted the same to the appellant, in our view, all these are finding of fact based on the material on record found by all the three authorities who in unison have come to the conclusion that the Cenvat Credit was wrongly taken. Even if the seller is a registered dealer under Central Excise and an assessee under Sales Tax Laws, Income Tax Laws and other statutory laws and payment is by cheque, in our view, will not make any difference as long as on investigation it revealed that the goods purchased were not proved to the hilt and Revenue has made out a clear cut case of irregular availment of Cenvat Credit. Therefore, we find no infirmity or perversity in the order of the Tribunal so as to call for interference. - Decided against the appellant

  ---

• 2016 (8) TMI 753
  Cenvat credit - emergence of saw dust and wood waste / scrap while manufacturing of wooden furniture - appellant submitted that the saw dust, waste and scrap of wood are not manufactured goods and they arise in the course of manufacture of dutiable final products and, therefore, Rule 6 of the Cenvat Credit Rules, 2004 are not applicable to waste products - Held that:- this issue is no longer res-integra and has been decided in favour of the appellant in a series of the judgments delivered by various judicial fora. - Decided in favour of appellant with consequential relief

  ---

• 2016 (8) TMI 752
  Cenvat credit - ineligible credit taken wrongly - took Cenvat credit on basic customs duty, CVD, cess on textile and education cess instead of taking only on the countervailing duty and education cess as per law - appellant reversed the credit amount alongwith interest on being pointed out by the audit before issuance of SCN - Held that:- the issue is no more res integra in view of the judgment of the Hon’ble Karnataka High Court in the case of CCE, ST, LTU Bangalore Vs. Bill Forge Pvt. Ltd. [2011 (4) TMI 969 - KARNATAKA HIGH COURT] and the decision of the Larger Bench in the case of JK Tyres & Industries Ltd. Vs. ACCE. It is a fact that the appellant has reversed the credit before utilization of the same and a small portion of the cenvat credit was utilized but the same was reversed along with interest before the issue of show-cause notice and in view of the judgment of this Tribunal in the case of Kumar Organics Product Ltd. Vs. CCE, Bangalore [2014 (12) TMI 273 - CESTAT BANGALORE], the appellant is not liable to pay interest as well as penalty. Therefore, by following the ratio of decisions cited supra, impugned order is not sustainable in law. - Decided in favour of appellant with consequential relief

  ---

• 2016 (8) TMI 751
  Whether the appellant is liable to reverse cenvat credit on capital goods when the capital goods are removed after being used for a period of about one year also - Held that:- the capital goods was imported on 14.03.2006 and was used for a year and then cleared on 10.04.2007 without payment of duty under the belief that there was no provision in the Cenvat Credit Rules 2004 to pay cenvat either in full or depreciated amount of cenvat during the relevant period. By respectfully following the ratio of the Karnataka High Court, in the case of CCE, Bangalore II Vs. Solectron Centum Electronics Ltd. [2014 (10) TMI 596 - KARNATAKA HIGH COURT], prior to amendment effected on 13.11.2007, the assessee is liable to pay duty on removal of used capital goods. Therefore, the impugned order do not sustain and is set aside. Invokation of extended period of limitation - Held that:- the ratios of the judgments states that when there are conflicting decisions of the Tribunal and also of the High Courts on a particular issue, the extended period is not invocable. Therefore following the ratio in the above cited judgments, I hold that the show-cause notice in this particular case is beyond limitation and the demand is time-barred. - Decided in favour of appellant

  ---

• 2016 (8) TMI 750
  Cenvat credit - 100% EOU clears the goods to the appellant on payment of duty in terms of Notification No. 23/2003-CE dated 31.03.2003 - appellant availed credit of duties paid by the 100% EOU - Held that:- the issue whether the appellant is entitled to avail credit of the education cess and special additional duty is settled in favour of the appellant by the decisions of this Tribunal in the case of Emcure Pharmaceuticals Ltd. V. CCE, Pune [2008 (1) TMI 147 - CESTAT, MUMBAI] wherein the Tribunal allowed the appeal of the assessee by holding that the respondent can avail the cenvat credit of education cess of the goods supplied to them by 100% EOU and the restriction imposed under Rule 3(7)(a) is not applicable. Similar view is fortified by the decision of the Tribunal in the case of Shreya Pets Pvt. Ltd. Vs. CCE, Hyderabad IV reported in [2008 (9) TMI 351 - CESTAT, Bangalore] wherein the Tribunal by following the decision of Emcure Pharmaceuticals (supra) has held that the assessee is entitled to avail 100% credit of education cess on the goods supplied to them by a 100% EOU. The decision in the case of Emcure Pharmaceuticals was also followed by the Tribunal in the case of CCE, Daman Vs. PVN Fabrics [2012 (10) TMI 870 - CESTAT, AHMEDABAD] as also in the case of Jai Corporation Ltd. Vs. CCE, Vapi [2014 (11) TMI 706 - CESTAT AHMEDABAD]. Further it is found that on identical issue for the earlier period, in the appellant's own case, this Tribunal allowed the appeal relying on the decisions of the Tribunal cited supra. Therefore, by following the precedent in the above cases, the impugned order is set aside. - Decided in favour of appellant

  ---

• 2016 (8) TMI 749
  Modvat credit - inputs used in the manufacture of their finished goods - no documents were supplied to the Appellant as directed by this Bench - Revenue contended that relied upon documents were given to the Appellant along with the show cause notice, therefore, no need of supplying the same to the Appellant again - Held that:- if Order dated 10.07.1998 passed by this Bench was not acceptable to the Revenue then the same could have been appealed against. Adjudicating authority was not correct in making his observations in Order-in-Original dated 30.12.2013, after more than fifteen years of the Order dated 10.07.1998 passed by this Bench, that the relied upon documents need not be provided again to the Appellant in spite of specific order passed by this Bench. Therefore, in the absence of supply of the documents, appeal filed by the Appellant is required to be allowed for not complying with the Order dated 10.07.1998 and for not fulfilling the principles of natural justice. - Decided in favour of appellant

  ---

• 2016 (8) TMI 748
  Invokation of extended period of limitation - Section 11A(1) of the Central Excise Act 1944 - Clandestine removal of goods - availed area based exemption vide Notification No.32/99 dated 08.07.1999 granting 100% duty exemption - Held that:- the charges of clandestine removal are serious charges and in the absence of any evidence of removal/seizure of finished goods, it cannot be held a justifiable ground for confirmation of the act of clandestine production and removal. We also find that there was no proper stock taking and there is no evidence showing the manufacture of the goods and their clearances without payment of duty. Clandestine removal being a positive act, the burden of proving the same is on the Revenue and cannot be discharged on the basis of conjectures and assumptions. The appellant is also the beneficiary of the North East exemption vide Notification No.32/99-CE and it defies logic as to why appellant will indulge in clandestine manufacture and removal when they are entitled to cash refund of the duty paid through PLA. There is nothing on record to indicate that the appellant assessee had infact manufactured the final products out of the inputs on the basis of input-output ratio. As such, in the light of various decisions relied upon by the appellant, and in the absence of any concrete evidence of clandestine manufacture/removal of the goods, the impugned order is not sustainable. - Decided in favour of appellant

  ---

• 2016 (8) TMI 747
  Cross utilization of credit wrongly - AED(ST) alongwith interest and penalty - appellant received semi finished fabrics from its sister unit under cover of invoices - duty paid was shown to be 16% basic excise duty but the appellant on its own apportioned it in two parts and 50% was taken as credit under basic excise duty and the remaining 50% was taken as credit under AED (ST) in terms of Notification No. 17/2000-CE dated 01.03.2000. Held that:- it is a fact that the notification was issued on 01.03.2000 and prescribed an aggregate duty of 16% ad valorem and possibly for that reason the invoices issued in the month of March 2000 itself showed the aggregate duty of 16% ad valorem and were stamped with stamp showing apportionment as per the said notification. It has to be taken into consideration that the Notification was issued on 01.03.2000 and was being applied immediately thereafter in the same month when it may still have been in the process of being figured out as to how be depict the aggregate duty @ 16% ad valorem in the excise invoices. One also cannot lose sight of the fact that the appellant did not stand to gain in any way whatsoever by doing such apportionment because it was not as if the BED credit would have lapsed if the entire duty shown in the invoices was taken as BED Credit because it was paying BED in cash to the tune of Crores of rupees after utilizing cenvat credit. Thus, it is not a case where the appellant could have gained any advantage whatsoever by apportioning the duty equally between BED & AED(ST) for taking cenvat credit. In any case, the action of the appellant was in conformity with the legal requirement prescribed under Notification 17/2000-CE. Once credit under AED(ST) of 50% of the duty shown in the invoices is upheld, the demand does not survive and as a consequence nor would interest and penalties. - Decided in favour of appellant*--

  ---

• 2016 (8) TMI 746
  Interest liability for differential Central Excise duty without issuance of show cause notice - Rule 7(4) of the Central Excise Rules, 2002 - supply of pre-stressed railway sleepers to Indian railways at the Provisional Price, which was finalised subsequently - Held that:- Sub-rule (4) of Rule 7 mandates that the assessee shall be liable to pay interest on any amount payable, consequent upon passing of order of final assessment sub-rule (3) of the said rule. Thus, it is apparent that the interest liability is automatic, if the differential duty, as a result of finalisation of assessment, is paid subsequently. Further Rule 7 of the Central Excise Rules, 2002, no where specifies that for payment of interest, show cause notice has to be issued by the Department. Hence, there is no requirement of issuance of any specific show cause notice for recovery of the interest amount. In the present case since the adjudication order has clearly provided that the interest is required to be paid in terms of Rule 7(4) of the rules, we do not find any infirmity in the said order and also in the impugned order passed by ld. Commissioner (Appeals). - Decided against the appellant

  ---