TMI Tax Updates - e-Newsletter
August 24, 2016

Case Laws in this Newsletter:

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

TMI SMS

• Services provided to the Govt/ local authority with regard to water supply - exemption will include activity of construction of tube wells

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TMI Short Notes

1. Whether the vessels or ships that are afloat are not goods and immovable property? - CESTAT says Yes. - Whether GST would be applicable on sale / supply of floating vessels or ships?

  Service Tax:

2. Adjustment of excess paid service tax – rule 6(3) of STR, 1994

  Service Tax:

Articles

1. Tax authorities must change attitude of doubting –causing litigation lot of wastage of public money and resources and harassment of tax payers – a discussion about gains or loss in security transactions

   By: DEVKUMAR KOTHARI

News

1. Revenue Secretary reviews IT preparedness of the various stakeholders for smooth roll-out of Goods and Services Tax

2. The Union Finance Minister Shri Arun Jaitley reviews the Implementation of Insolvency and Bankruptcy Code (IBC) 2016; Calls for quick action to implement the IBC in a time bound manner

3. IPR Awareness, Outreach and Promotion Campaign

4. RBI Reference Rate for US $

5. Auction for Sale (Re-issue) of Government Stock

Notifications

Customs

1. 46/2016 - dated 23-8-2016 - Cus

Seeks to further amend Notification No. 96/2008-Customs dated 13.08.2008 so as to include 'Republic of Guinea-Bissau' in the list of countries eligible for preferential tariff under the said notification

2. 113/2016 - dated 22-8-2016 - Cus (NT)

Central Board of Excise and Customs rescinds the notification of the Government of India in the Ministry of Finance, Department of Revenue (Central Board of Excise and Customs) number 81/2011-Customs (N.T.) dated the 25th November, 2011

Income Tax

3. 69/2016 - dated 11-8-2016 - IT

Section 10(46) of the Income-tax Act, 1961 – Central Government notifies Haryana State Pollution Control Board, a body constituted by Government of Haryana, in respect of the following specified income arising to that Board

Circulars / Instructions / Orders

Service Tax

1. 199/09/2016 - dated 22-8-2016

Services provided to the Government, a local authority or a governmental authority with regard to water supply

Customs

2. 38/2016 - dated 22-8-2016

Guidelines regarding Provisional Assessment under section 18 of the Customs Act, 1962

Highlights / Catch Notes

Income Tax

• Court Rules Trust, Not Individual, Liable for Tax on Lottery Income Received by Trust.

  Case-Laws - HC : Levy of tax on the whole of the lottery income - the amount was received by the trust and not by the individual in his individual capacity - all the authorities have seriously committed error in holding that the assessee is liable to pay tax - HC
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• High Court Rules TDS Credit Belongs to Property Co-Owners; Assessee Entitled to Full TDS Credit on Rent Received.

  Case-Laws - HC : Entitlement to benefit of tax deducted at source - TDS belong to co-owners - entire rent realized by the assessee including the amount belonged to co-owners - credit of entire TDS credit allowed to assessee - HC
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• Individuals Must Prove Valid Reason for Not Deducting Tax at Source to Avoid Section 271C Penalty.

  Case-Laws - HC : Liability to pay penalty u/s. 271C can be fastened only on the person who does not have good and sufficient reason for not deducting tax at source and the burden, of course, will be on that person to prove such good and sufficient reason - HC
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• No Mark-Up on Reimbursement of Pre-Incorporation Expenses for NDTV Network Plc UK in Transfer Pricing Case.

  Case-Laws - AT : Transfer pricing adjustment - There can be no mark-up on reimbursement of expenses incurred by the assessee prior to incorporation of NDTV Network Plc UK - AT
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• Tax Assessments for Amalgamations: Successor Company Responsible u/s 170(2.

  Case-Laws - AT : As per the provisions of Section 170(2), in the case of amalgamation, the assessment must be made on the successor i.e. the amalgamated company and not on the predecessor i.e. amalgamating company. - AT
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• No Trading Liability Found u/s 41(1) for Unsecured Loan; No Income Additions for Assessee.

  Case-Laws - AT : Addition on account of cessation of liability of unsecured loan - assessee was not having trading liability u/s 41(1) of the Act - No additions - AT
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• Tax Deduction Denied: Genuine or Bogus Donation u/s 80G? SIES Fails to Confirm Return of Funds.

  Case-Laws - AT : Denial of deduction of donation u/s 80G - genuine donation or bogus - Since SIES has not specifically stated that the amount received from the assessee was returned back as per the aforesaid modus operandi, it cannot be held conclusively that either no donation was paid by the assessee to SIES or the amount paid by the assessee was returned by SIES - AT
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Customs

• Cess Act Repealed: No Cess Levied on Exports After September 25, 2006.

  Case-Laws - HC : The Cess Act was repealed by the legislature with effect from 25.9.2006. If that be so, cess under the Act could not have been levied on any export that was effected subsequent thereto - HC
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• Imported Goods Value Enhancement Deemed Incorrect Due to Lack of Evidence and Comparison with Similar Goods. No Demand Issued.

  Case-Laws - AT : Correctness of enhancement of value of imported goods - no evidence of any nature has been brought out or discussed before such enhancement. Even contemporaneous value of similar or identical goods have not been examined and discussed - no demand - AT
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• Provisional Assessment Guidelines u/s 18 of Customs Act, 1962 to Enhance Transparency and Expedite Trade Processes.

  Circulars : Guidelines regarding Provisional Assessment under section 18 of the Customs Act, 1962 - Circular
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Indian Laws

• Chartered Accountant Not Penalized for Selling Shares; Activity Unrelated to Professional Practice, No Misconduct Found.

  Case-Laws - HC : Professional misconduct - While selling the shares held by him the respondent was not acting as a Chartered Accountant. He was not discharging any function in relation to his practice as a Chartered Accountant - No inflicting of any penalty upon the respondent. - HC
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Service Tax

• CESTAT rules afloat vessels are goods, not immovable property; subject to GST on sale or supply.

  Notes : Whether the vessels or ships that are afloat are not goods and immovable property? - CESTAT says Yes. - Whether GST would be applicable on sale / supply of floating vessels or ships?
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• Well Stimulation Vessel Management Classified as Non-Taxable Service; Refund Granted for Service Tax Imposed (Section 65(95a)).

  Case-Laws - AT : Operation and Maintenance Management of Well Stimulation Vessel - Classification of service in question under ‘Ship Management Service' under Section 65(95a) upheld - The service provided during the disputed period from 16.06.2005 to 31.03.2006, is not taxable, being composite service, and cannot be vivisected - Refund allowed - AT
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• CENVAT Credit Applies to Outward Transportation from Factory to Customer; Assessee Benefits from Board's Relaxation.

  Case-Laws - AT : CENVAT credit – outward transportation of final product from factory gate to customer premises - When the Board has made the relaxation, the assessees in entitled to take the benefit thereof - AT
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• Refund Denied for SEZ Services Due to Lack of Approval from Committee; Condition 3(I) Not Met.

  Case-Laws - AT : Refund claim - services availed for developing SEZ - admittedly the appellants had not got the impugned services approved by the Approval Committee - at the time of availing services the condition 3(I) of the notification was not fulfilled, therefore, refund cannot be granted - AT
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• Adjustment of Excess Service Tax Payments u/r 6(3) of Service Tax Rules, 1994: Key Procedures and Compliance.

  Notes : Adjustment of excess paid service tax – rule 6(3) of STR, 1994
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• Water Supply Services to Government Exempt from Service Tax, Including Tube Well Construction Activities.

  Circulars : Services provided to the Government, a local authority or a governmental authority with regard to water supply - exemption will include the activity of construction of tube wells.
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Central Excise

• Cenvat Credit Denied for Input Services in Captive Mines Due to Rule 2(l) Exclusion on Construction Works.

  Case-Laws - AT : Cenvat credit - various input services availed in the captive mines - Regarding Conveyor Extension, shed extending work at Packing Plant and wagon loading, Borewell works, Providing Drain in railway siding, these are services in relation to construction or execution of works contract of the building or a civil structure or a part thereof or laying of foundation or making of structure for support of capital goods, hence they will be disbarred by the exclusion provision of the said Rule 2(l) - AT
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• Appeal Rights Expanded: Tribunal Can Hear Challenges to Denial of Cross-Examination Requests in Legal Cases.

  Case-Laws - AT : Whether an appeal would lie against the decision rejecting the request for cross examination - Tribunal has the power to entertain an appeal against the decision rejecting cross-examination. - AT
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• Physician Samples Valuation: Use Sale Price for Central Excise; Free Distribution by Distributor Irrelevant to Value.

  Case-Laws - AT : Valuation - physician samples - in the absence of any allegation of price at which the samples were being sold by the assessee to the distributor, the value of said samples has to be sale price of the goods. The fact that distributor further distributed the sample free of cost is irreverent to determine the value of physician samples. - AT
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• Repair and Maintenance of Machinery Qualifies for Cenvat Credit Under Central Excise Rules for Manufacturing Final Products.

  Case-Laws - AT : Cenvat credit - the activity of repair and maintenance of plant and machinery is an activity which has direct nexus with manufacture of final products and the goods used in this activity would be eligible for Cenvat Credit - AT
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VAT

• UHT Milk Recognized as Value-Added Product Under KVAT Third Schedule, Item No. 118, Affecting Tax Rates.

  Case-Laws - HC : Classification of goods - rate of tax - KVAT - the very fact that UHT milk is incorporated in the Third Schedule as item No.118 clearly indicates that it is a value added product and cannot be compared with ordinary milk or pasteurized milk - HC
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Case Laws:

• Income Tax

• 2016 (8) TMI 851
  Levy of tax on the whole of the lottery income - other beneficiaries of Neha Trust have paid taxes on their respective share of income from the said lottery prize in their individual capacity - Held that:- In our view, not accepting the trust deed and trust account, the authorities have seriously committed an error. The amount of ticket is from the trust account and the amount of prize is distributed amongst beneficiaries. Even T.D.S is shown in the balance sheet of the trust account. The learned counsel for the appellant has contended that the 1983 letter in the paper book is recently produced in the last week of July. Considering these facts, we are of the opinion that the amount is withdrawn from the trust account and it is not purchased by the appellant from the individual account. Taking into account the overall circumstances and the trust deed, distribution as per the trust deed and beneficiaries have paid taxes, all the authorities have seriously committed error in holding that the assessee is liable to pay tax. In the facts and circumstances of the case, we hold that the amount was received by the trust and not by the individual in his individual capacity. In that view of the matter, we answer the question in favour of the assessee and against the revenue. However, we make it clear that the amount of TDS and amount of tax collected from the appellant may be refunded to the appellant and lottery amount TDS may be refunded to Neha Trust.

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• 2016 (8) TMI 823
  TDS credit - Entitlement to benefit of tax deducted at source - TDS belong to co-owners - entire rent realized by the assessee including the amount belonged to co-owners - Held that:- The assessee is undoubtedly an owner of the property but he is not an absolute owner. His ownership is restricted to a certain percentage of the right in the property. The assessee has collected the rent payable with respect to the property in its entirety and thereafter has passed on the rent including the amount deducted on account of the tax to the other co-owners. There is, as such, no reason why the assessee should not be entitled to enjoy the benefit of tax deducted at source. Mr. Agarwal did not dispute that the assessee has paid the share of the co-owners including the share in the amount of tax deducted at source. In the facts of the case, we find no merit in the submission advanced by Mr.Agarwal. The question is, therefore, answered in the affirmative and against the revenue.

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• 2016 (8) TMI 822
  Penalty levied u/s.271C - non deduction of tds - Held that:- The assessee could not be faulted if it thought that its own determination of what would be the income of the Canadian and UK Companies were not conclusive of its liability to deduct tax from the provisions. Such belief appears to have been held by the assessee bona fidely. The bona fide belief is fortified when the assessee deducted and paid tax in October 2005 when it received invoices and remitted the service charges. In respect of the U.K. Company, no formal agreement was executed even later also, as in the case of the Canadian Company. This strengthens the assessee's claim that it was under the bona fide belief that tax was deducted only when service charge was determined by a specific agreement and were paid. There was no prompting by the Department and assessee had made the payment voluntarily. In this background, it would be relevant to refer to a judgment of the Apex Court in the case of CIT v. Eli Lilly and Co. (India) P. Ltd., [2009 (3) TMI 33 - SUPREME COURT ]. In that case, it has been held that liability to pay penalty u/s.271C can be fastened only on the person who does not have good and sufficient reason for not deducting tax at source and the burden, of course, will be on that person to prove such good and sufficient reason. - Decided in favour of the assessee

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• 2016 (8) TMI 821
  Transfer pricing adjustment - mark up of managerial services post incorporation - mark-up on reimbursement of expenses - Held that:- The expenditure incurred by the assessee, when the A.E. of the assessee was not in existence cannot in our view be taken as a factor for determining the A.L.P. of an international transaction that took place between the assessee and its A.E. post incorporation. Just because, post incorporation NDTV Network Plc UK has reimbursed the employee cost incurred by the assessee prior to incorporation, to the assessee, it does not lead us to a conclusion that on other managerial services provided by the assessee to the A.E., no mark up should be charged while reimbursing the expenditure. The assessee in this case has itself worked out 12.29% as the ALP margin, in its Transfer Pricing Report. It is not controverted by the Ld.Counsel for the assessee that in the subsequent Assessment Years, the assessee itself has admitted a mark up on reimbursement of expenditure on these management services. In view of the above discussion, we are of the considered opinion that the TPO is right in making a mark up of managerial services post incorporation of the A.E. Thus we hold that: (a) There can be no mark-up on reimbursement of expenses incurred by the assessee prior to incorporation of NDTV Network Plc UK. (b) The action of the A.O. in charging a mark-up on reimbursement of expenses incurred by the assessee on management services after incorporation is upheld. Though the Ld.Counsel for the assessee raised arguments on percentage of mark-up, in view of the percentage of mark-up adopted by the assessee in the subsequent years, we do not see any reason to interfere with the rate of mark-up adopted by the Ld.Transfer Pricing Officer. - Decided partly in favour of assessee Expenses incurred on upgradation of accounting software - Held that:- CIT(A) has allowed this expenditure as revenue in nature. While doing so he observed that the assessee itself has characterised certain software purchase on its own as capital assets. He observed that certain software needs regular upgradation or change as per the requirement of fast changing broadcasting industry and that his predecessor has allowed similar expenditure on upgradation of software as revenue in nature. We find no infirmity in this finding of the Ld.CIT(A). - Decided against revenue

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• 2016 (8) TMI 820
  Validity of the assessment framed u/s 143(3) r.w.s. 144C(1) - non-existing entity - Held that:- When the assessment was framed by the AO vide order dated 29.12.2015 in the name of M/s Suzuki Powertrain India Ltd., the said company had already amalgamated with M/s Maruti Suzuki India Ltd. and therefore, it was not inexistence. Moreover, it is clear from the provisions of Section 170(2) of the Act that in the case of amalgamation, the assessment must be made on the successor i.e. the amalgamated company and not on the predecessor i.e. amalgamating company. Therefore, in the present case, the assessment framed by the AO vide order dated 29.12.2015 on the amalgamating company i.e. M/s Suzuki Powertrain India Ltd. which was not inexistence on the date of passing the assessment order was not valid and as such the same is quashed. - Decided in favour of assessee.

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• 2016 (8) TMI 819
  Entitlement to exemption claimed u/s 54 - CIT(A) allowed the claim - Held that:- As the assessee infact using one residential unit consisting of four flats and therefore, on sale of such residential unit, the LTCG from the sale of residential unit of flat no. 1201A in “Evita” building was eligible for exemption u/s 54 of the Act in purchasing the residential unit (3 flats) 2203A, 2203B, 2203C & 2203D in “Richmond”. Thus, we do not find any illegality or infirmity in the order passed by the CIT(A), hence, this Ground of appeal raised by the Revenue is dismissed. - Decided in favour of assessee. Addition on account of cessation of liability of unsecured loan - CIT(A) allowed the claim - Held that:- CIT(A) after appreciating the fact of the case rightly come to the conclusion that assessee was not having trading liability u/s 41(1) of the Act. The unsecured loan was given by the close relative and the same is duly qualified as relative as per clause (v) of sub-section (2) of section 56 of the Act. Thus, we hold that the order of CIT(A) does not suffer from any illegality or infirmity, thus this Ground of appeal raised by Revenue has also no force and the same is dismissed.- Decided in favour of assessee.

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• 2016 (8) TMI 818
  Denial of deduction u/s 80G - assessee has claimed deduction on the ground that it had made payment as donation to South Indian Education Society (SIES) - AO has disallowed the claim of the assessee on the basis of report dated 22.12.2010 of the investigation wing of the department, which revealed that during the relevant period SIES used to issue bogus certificates u/s 80G - Held that:- Since SIES had disclosed the said modus operandi during investigation before the investigation wing, the AO during assessment proceeding, summoned SIES. In response thereof, SIES vide letter dated 23.10.2010 confirmed having received donation from the appellant/assessee. The Ld. Counsel for the assessee has contended that a general statement made by SIES before the investigating officer, is not sufficient to hold that the appellant/assessee has received back the amount paid to SIES as donation. In our considered view, there is force in the contention of the assessee. Since SIES has not specifically stated that the amount received from the assessee was returned back as per the aforesaid modus operandi, it cannot be held conclusively that either no donation was paid by the assessee to SIES or the amount paid by the assessee was returned by SIES. Hence, the Ld. CIT(A) has wrongly confirmed the disallowance in question made by the AO based on wrong assumption. We, therefore set aside the finding of the Ld. CIT(A) and allow this ground of appeal of the assessee.

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• 2016 (8) TMI 817
  Application to Settlement Commission - Held that:- The contention of the petitioner that NIL return has been filed to comply with the technical requirements, cannot be countenanced. Section 245C(1) of the Act, states that an assessee may at any stage of the matter relating to him, make an application containing full and true disclosure of his income, which has not been disclosed before the Assessing Officer, explaining the manner in which such income has been derived, additional amounts of income tax payable on such income and such other particulars, as may be prescribed to the Settlement Commission to have the case settled. To be entitled to file such an application under sub-section (1) of Section 245C, the assessee is required to comply with the conditions provided in the proviso, which are as hereunder:- (a) the assessee has furnished the return of income which he is or was required to furnish under any of the provisions of this Act; and (b) the additional amount of income-tax payable on the income disclosed in the application exceeds one hundred thousand rupees. Therefore, the return of income, which is contemplated under clause (a) of the proviso mandates the assessee to file a return, which he is or was required to furnish under any of the provisions of the Act and (b) the additional amount of income tax payable on the income disclosed in the application exceeds one hundred thousand rupees. Therefore, I do not agree with the learned counsel for the petitioner to state that the petitioners were justified in filing NIL returns before the Assessing Officer as clause (a) under the proviso is only a technical requirement. Requirement is a pre-requisite to be entitled to file the application before the Commission and cannot be reduced to an insignificant or a mere technical requirement.For all the above reasons, the petitioners have not made out any case for interference with the orders passed by the Settlement Commission.

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• 2016 (8) TMI 816
  Penalty u/s 271(1)(c) - Held that:- For levy of penalty under section 271(1)(c) of the Act, the AO has to arrive at a positive finding as to whether the assessee was guilty of concealment of income in respect of particular amount or the assessee was guilty of furnishing of inaccurate particulars of income in respect of an amount. In the instant case, it is observed from the order of the AO that he has not arrived at a final conclusion as to whether the assessee was guilty of concealment of income, or the assessee was guilty of furnishing inaccurate particulars of income. The word “and” used in the order levying penalty clearly indicates that the AO could not clearly specify that assessee was guilty of either concealment of income or of furnishing of inaccurate particulars of income. See Commissioner of Incometax, Ahmedabad v. Reliance Petroproducts (P.) Ltd. reported in [2010 (3) TMI 80 - SUPREME COURT ] - Decided in favour of the assessee

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• 2016 (8) TMI 815
  Allocation of selling and distribution expenses for the purpose of deduction under section 80IB - Tribunal reversing the view of the Assessing Office - Held that:- Tribunal relied on the decision of the Supreme Court in case of Bombay Dyeing & Manufacturing Co. Ltd. [1996 (2) TMI 8 - SUPREME Court ] which was squarely applicable in the present case. No question of law arises Transfer pricing adjustment - Assessing Officer had made additions on the ground that the commission paid by the assessee to associated enterprise was not at arm's length - Held that:- The entire issue was based on facts and appreciation of record. The Tribunal noted that the assessee had given justification for the payment of the commission and why it was at arm's length. It was pointed out that the commission paid by the assessee to the Associated Enterprise was at the rate of 7.84% as against 11% paid to unrelated party. It was found that the rate of commission ranged from 0.38% to 33.33% whereas the assessee's rate came to 3%. The Tribunal noted that the Revenue authority did not bring any comparable case on record to show that the payment of commission by the assessee to the associated enterprise was not at arm's length.

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• 2016 (8) TMI 814
  TDS u/s 194J - payment on account of royalty - Held that:- Allow the appeal for the limited purpose of remanding the matter to the learned Tribunal for the purpose of considering whether the services provided by the recipient of the aforesaid sum of 30,04,407/- and 22,91,045 are covered by Explanation 2 to clause (vi) of sub-section (1) of section 9 of the Income Tax Act as contended by Mr.Khaitan or the payment or any part thereof is on account of technical services as contended by Mr.Chaudhuri.

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• 2016 (8) TMI 813
  Assessment u/s 153A - disallowances of the expenditure - Held that:- We are in agreement with the views expressed in CIT, Bangalore Vs. IBC Knowledge Park (P) Ltd.[2016 (5) TMI 372 - KARNATAKA HIGH COURT ]that incriminating material is a pre-requisite before power could have been exercised under section 153C read with section 153A. In the case before us, the assessing officer has made disallowances of the expenditure, which were already disclosed, for one reason or the other. But such disallowances were not contemplated by the provisions contained under section 153C read with section 153A. The disallowances made by the assessing officer were upheld by the CIT(A) but the learned Tribunal deleted those disallowances.

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• 2016 (8) TMI 812
  G.P. estimation - rejecting the books of accounts - Held that:- Taking into account the observation that the gross profit of the assessee was around 6%, it will be proper to estimate the same @ 5%. and therefore, we are of the view that the Tribunal ought to have estimated the gross profit @ 5%. Consequently, the issues raised in the above Appeals are answered in favour of the Department and against the assessee

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• 2016 (8) TMI 811
  TPA - MAM - Held that:- We remand the issue of “most appropriate method” to be adopted for the determination of the transfer pricing adjustment and also the various adjustments to be made for determination of Arm’s Length Price to the file of the Assessing Officer. Disallowance of additional claim of depreciation on goodwill - Held that:- The goodwill amounting to 17975.03 lakhs arose as a result of merger and subsequently, the amount was increased by 16.95 lakhs as additional purchase consideration was paid. The assessee has recognized such goodwill in its books of accounts with effect from 1.1.2007 and claimed depreciation on such enhanced goodwill. We find that the DRP has taken into consideration the fact that the assessee had not claimed depreciation on such goodwill, while filing return of income from 2007-08 to 2011-12, but since the law is clear by virtue of the judgment of the Hon'ble Supreme Court in the case of Smifs Securities Ltd.[2012 (8) TMI 713 - SUPREME COURT ], DRP has directed the Assessing Officer to allow the same after verification of the claim of goodwill. This being a factual finding we do not see any reason to differ from the directions of the Dispute Resolution Panel. However, it is seen that the Assessing Officer, while giving effect to the directions of the DRP, has not allowed the additional depreciation. In fact, there is no discussion about the same in the assessment order. The Assessing Officer is, therefore, directed to give effect to the directions of the DRP. This ground of the assessee is accordingly treated as allowed. Claim of provision for site restoration fund - Held that:- The issue involved in this ground, not being before the authorities below, needs verification as to facts. In view of the same, we deem it fit and proper to admit the said ground of appeal and remand the matter to the file of the Assessing Officer for reconsideration in accordance with law and judicial precedents on the issue. This ground is also treated as allowed for statistical purposes. Claim of additional depreciation on the plant and machinery - Held that:- Assessing Officer has allowed normal depreciation on the very same assets, and has thus impliedly accepted that the said assets were acquired and put to use before the end of the relevant financial year. That being so, the Assessing Officer cannot take a contrary view, while considering the claim of additional depreciation. In view of the same, we deem it fit and roper to remand this issue also to the file of the Assessing Officer to verify the records, and if the depreciation is allowed under S.32, additional depreciation shall also be allowed on the same reasoning.

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• 2016 (8) TMI 810
  Penalty levied U/s 271D - Held that:- The revenue has accepted the explanation of cash deposit in the bank account , in the quantum proceedings , therefore no penalty proceeding were initiated in the quantum proceedings. Since the revenue has accepted the explanation of cash in the assessment proceedings, therefore, the same set of facts and documents cannot be made basis for imposition of penalty. The assessee, has submitted the reasons for accepting the cash in the quantum proceedings and the said reasons were accepted by the A.O and the same reasoning should have been accepted in penalty proceeding as well. In our view, now in the quantum proceedings U/s 271D of the Act, the officer, is not permitted to reopen and reexamine the reasoning given by the assessee. It is correct that the assessment proceedings and proceedings for violation of Section 269SS of the Act are independent proceedings but in the cases like in the hand, the revenue is not permitted to take contrary stand. The judgment in the case of Dimple Yadav [2015 (8) TMI 992 - ALLAHABAD HIGH COURT] was sought to be distinguished by the ld DR on the premise that the money after accepting from the creditor was not routed through the banking channel for the payment to the seller. In our view, this argument is not available to the revenue as the revenue has neither challenged the registration of the sale deed in favour of the assessee nor has challenged the cash consideration paid by the assessee to the seller at the time of registration before the Sub-Registrar of sale deed. In our view the case of the Dimple Yadav is squarely applicable to the facts and circumstances of the case. In the light of the above, we are of the view, the assessee has shown the reasonable cause within the meaning of Section 273B of the Act, therefore, the penalty order of the lower authorities is quashed and the appeal of the assessee is allowed.

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• 2016 (8) TMI 809
  Royalty income - India-Italy DTAA - technical agreement - existence of PE in India - Held that:- In substances neither there is any material about the requirement of the services by the recipient of the services nor provision of such services, if any, by the employees of the BO of the assessee. Therefore, in absence of any such material it cannot be said that income of royalty is the income arising out of results of the activities of the permanent establishment. In fact, the income of royalty is because of the direct dealing of the New Holland tractors limited with the assessee without the aid or support from its permanent establishments in India. Hence, we now decide the issue of admission of additional evidence. According to us , these evidences does not have any bearing in deciding the issue involved in the present appeal, hence we dismiss the application of revenue for admission of the linked in profile of the two employees of Bo as well as the extract of the directory. In view of this, we are not in agreement with the stand of the revenue that royalty income received by the assessee is effectively connected with its branch office in India and therefore in terms of article 12(5), assessee is not entitled for preferential tax treatment according to article 12 (1) & (2) of the DTAA. In the result We hold that royalty income earned by the assessee on account of technical agreement with the New Holland Tractors Private limited is not effectively connected with the BO of the assessee in absence of any positive and substantive material that services have been rendered by the employees of the BO of the assessee and therefore same is chargeable to tax as "Royalty" income as per article 13(1) and (2) of the India Italy DTAA - Decided in favour of assessee

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• 2016 (8) TMI 808
  Application for registration u/s 12A refused - denial of benefit of registration for the reasons that original/copy of the instrument is not filed in support of creation of the trust - whether execution of a formal deed of trust is necessary for granting registration u/s 12A ? - Held that:- In the instant case the religious institution was established by an order of a Bishop, called ‘decree’. On perusal of the ‘decree’, it is clear that a religious institution is established. Therefore, we are of the view that it is not correct on the part of the CIT(E) to deny registration to the appellant u/s 12A of the Act, for the reason that copy of the instrument in support of creation of trust is not filed along with Form 10A. - Decided in favour of assessee.

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• 2016 (8) TMI 807
  Disallowance u/s 14A read with rule 8D - disallowance of indirect expenditure computed in accordance with Rule 8D(2)(iii), that is, after taking 0.5% of the average value of investments - Held that:- So far as the Ld. Counsel’s plea that, investment which have yielded taxable income should be excluded from the working of the average value, we agree with such a contention because these investments have yielded taxable income, therefore, they are outside the purview Rule 8D(2)(iii) and cannot be part of average value of investments. Further so far as contention of the ld. Counsel that, assessee has made strategic investment by way of business necessity in associated and subsidiary companies, we agree with him that same should not be part of the investment for the purpose of disallowance, because the said investment cannot be said to be made for the purpose of earning the exempt income but for business and strategic compulsions which falls within the realm of ‘business purpose’ and this view has been upheld by the Tribunal in various decisions including that of Hon’ble Delhi High Court in the case of Cheminvest Ltd. Vs. CIT (2015 (9) TMI 238 - DELHI HIGH COURT ). Thus, we direct the AO to also exclude the strategic investment made in subsidiary companies for the purpose of working the disallowance of value of the investment. However, so far as other contention that the investments which has not yielded dividend or tax free income during the year should only be included, we are unable to accept the Ld. Counsel’s contention with regard to Rule 8D(2)(iii) which lays down that, “an amount equal to ½% of the average value of the investment, income from which does not or shall not form part of the total income, as appearing in the Balance-sheet of the assessee ,on the first day and the last day of the previous year” shall be taken. What is required to be seen is, whether the income from the investment which “does not” or “shall not” form part of the income. The phrase “does not” conveys something done or to be done in present, that is, ‘income during the year”; and “shall not” conveys something about in future, a strong assertion or intention, that is, ‘not earned income in future’. Hence in our opinion, the phrase “shall not” covers a situation where income earned in future or whenever it is earned, then it shall not form part of the total income at any time. Thus, this contention of the assessee prima facie does not appears to be in correct interpretation or in line with the Rule 8D(2)(iii). Thus, we direct the AO only to remove the investments which are giving taxable income and also the strategic investment from the working of average value of investments and from the balance, he should compute the disallowance as per Rule 8D (2)(iii). - Decided partly in favour of assessee.

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• 2016 (8) TMI 806
  Power of CIT to invoke revision proceedings under section 263 - undisclosed cash deposits - Held that:- We notice that the assessing officer has taken up the case of the assessee for scrutiny upon receipt of AIR information about the cash deposits made into the bank account of the assessee as well as the proper purchased by him. Hence the during the course of assessment proceedings, the AO has asked specific queries with regard to the above said items. The assessee, vide his letter dated 25-11-2011, has furnished his replies. The copy of the reply letter is placed at pages 8 to 12 of the paper book. A perusal of the same would show that the assessee has explained the details and sources for purchase of properties as well as the opening balance of cash. At page 18 of the paper book, the assessee has also furnished the personal Capital account and Personal Balance Sheet. We notice that the Personal Balance Sheet discloses a cash balance of 12,72,745/- as on 31.3.2008. At page 14 of the paper book, the assessee has furnished the Balance Sheet of M/s SPG 20,262/-. We notice that the Ld CIT has compared the cash balance available in the books of SPG 11.00 lakhs was paid in the immediately preceding year. The assessee has also furnished cash flow statement, copies of bank statement of all banks. He has also stated that the payment for purchase of property was given through bank accounts. Thus, we notice that the assessee has specifically explained that his share in the property was 50% and has also explained the sources for making investment. Thus, we notice that the assessee has given proper explanations to the assessing officer with regard to the impugned queries. The assessing officer has also discussed about the submissions made by the assessee in the assessment order and has accepted the same. Hence, the AO did not make any addition with regard to these items. Hence the assessing officer has taken possible view in respect of all the issues and hence the impugned assessment order cannot be termed as erroneous so far as it is prejudicial to the interests of the revenue. Accordingly, we set aside the revision order passed by the Ld CIT. - Decided in favour of assessee.

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• 2016 (8) TMI 805
  Income earned by the assessee out of share transactions - treated as capital gains or business income - Held that:- The assessee can hold both the portfolio i.e. that of the investor and that of the trader. Although, the assessee in this case had not kept separate accounts regarding its business activity but has treated all the purchases as its investment, however, the learned CIT (A) after going through the transactions in question and considering the explanation of the assessee has held that the intention of the assessee in respect of the transactions in which churning of portfolio was done within a period of less than a month was to earn quick profits. The order of the learned CIT (A) is thus well reasoned order and we do not find any infirmity in the same. Resultantly, both the cross appeals, one by the assessee and the other by the Revenue stand dismissed.

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• 2016 (8) TMI 804
  Penalty imposed u/s.271(1)(c) - non payment of TDS and advance tax - Held that:- The corresponding income with respect to the tax deducted at source and also the amount of advance tax paid by the assessee not only before the last date of financial year but also before search is equal to the amount of income returned by the assessee. It means entire income of the assessee was subject to TDS or the assessee himself has advance tax paid before the end of the financial year. Under these circumstances contention of ld. AR that the AO was not justified in holding that assessee has concealed its income have some merits. We also found that TDS as well as advance tax has been paid by the assessee not only before the due date of filing of return of income but also before search. Under these circumstances, we have to see the intention of assessee as to whether he wants to conceal the income or not. In the interest of justice and keeping in view the proposition of law advanced with respect to extended date of filing of return u/s.153A, which is supported by judicial pronouncements as cited by ld. AR, we restore the matter back to the file of AO for deciding afresh after giving due opportunity to the assessee. Non payment of admitted tax as required under section 249(4)(a) - Held that:- Considering the fact that there is tax deducted at source out of assessee’s income which has to be taken into account while computing the tax paid by the assessee and also considering the challans placed on record with regard to actual payments of tax, in the interest of justice, we restore this appeal to the file of CIT(A) for deciding afresh on merits as per provisions of Section 250 sub section 6 of the I.T.Act.

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• Customs

• 2016 (8) TMI 833
  Modification of bail conditions - offence under section 135 of the Customs Act, 1962 – requirement of marking presence in the court every month twice – travel abroad without permission – Held that: - the offence is compoundable. Other requirements like deposit of amount required by court duly fulfilled. The matter is now pending before the Settlement Commission, Customs and Central Excise at Mumbai. Communication dated 20.07.2016 of the said Commission, inter alia records that, “...In other words, customs officers will have no jurisdiction over the subject case until an order is passed under sub-section 5 of Section 127 C of the Customs Act, 1962 by the Settlement Commission. The applicant has, after his release, traveled abroad more than once, with the permission of the Court below and each time he has returned in time and has surrendered back his passport. Thus, now no purpose would be served by still continuing the conditions that the applicant shall leave the country only with the permission of the Court, and further that he needs to attend the customs office every month, for the purpose of marking his presence – bail conditions modified – application allowed – decided in favor of appellant.

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• 2016 (8) TMI 832
  Statutory remedy of appeal - bye-pass of appeal by writ petition – maintainability – huge pendency of matters in CESTAT - Imposition of anti-dumping duty – import of Synchronous Digital Hierarchy Transmission Equipment – Held that: - The Court does not find the above plea to constitute a sufficient justification to permit the Petitioner to bypass the statutory remedy of an appeal provided under the Customs Tariff Act, 1975. It would be open to the Petitioner to request the CESTAT, as and when an appeal is filed, to dispose it expeditiously – petition not maintainable – decided against petitioner.

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• 2016 (8) TMI 831
  Classification - export of marine products - fish – shrimps, prawns, cuttlefish etc., - Held that: - the goods in question are not fish to attract the levy of cess as provided in the Agricultural Produce Cess Act, 1940. No reason found to deviate from the principles laid down therein. Refund of cess paid - cess levied under section 3 of the Agricultural Produce Cess Act, 1940 - Held that: - the Cess Act was repealed by the legislature with effect from 25.9.2006. If that be so, cess under the Act could not have been levied on any export that was effected subsequent thereto. The levy of tax for the period thereafter is, therefore, clearly ultra vires – order of Tribunal not interfered – appeal dismissed – decided against appellant.

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• 2016 (8) TMI 830
  Imposition of penalty under Sec 112(a) of the Customs Act 1962 – import of diesel engines – 100% EOU – ITC bond – re-warehousing certificate – Held that: - appellant Natwar Dalmia is not any office bearer of La Grande and has not signed any Customs documents. His statement has also not been recorded by the department. The findings given by the Adjudicating authority is Shri Natwar Dalmia & his family have orchestrated the whole fraud with the sole intention of selling the good. No findings have been given by the Adjudicating authority as to what role specifically Sh. Natwar Lal played which could be penalized under Sec 112(a) of the Customs Act 1962. Penalty if any could have been imposed upon the importer company as per the relied upon case laws – penalty not imposed – appeal allowed – decided in favor of appellant.

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• 2016 (8) TMI 829
  Correctness of enhancement of value of imported goods – import of polyester knitted fabrics - no evidence or allegation regarding the bonafideness of the import transaction or the invoices submitted by the respondent – Held that: - it has been repeatedly held by this Tribunal as well as Hon'ble High Courts that the transaction value cannot be rejected mechanically based on suspicion or general alert without supporting evidence to the effect that the invoice value does not reflect the transaction value required for assessment. Here, no evidence of any nature has been brought out or discussed before such enhancement. Even contemporaneous value of similar or identical goods have not been examined and discussed – no merit in Revenue’s appeal - appeal dismissed – decided against Revenue.

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• 2016 (7) TMI 1215
  Revocation of license – writ petition filed – maintainability – statutory remedy of appeal available – Held that: - when the statute provides a complete machinery for redress of grievance, it requires an exceptional case for the writ court to exercise discretion in favour of the aggrieved litigant. In revenue matters the writ court must be more circumspect and entertain a writ petition only if noninterference would aggravate a palpable injustice to the aggrieved litigant or if the alternative remedy is not efficacious. In such case, he ought to be granted liberty to workout his remedy in accordance with the statute – writ petition not maintainable – appeal if filed to be decided on merits.

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• Corporate Laws

• 2016 (8) TMI 826
  Breach of principles of natural justice - non-observance of Principles of Natural Justice - whether CLB did not give any opportunity to make submissions to the appellant on the main company petition? - Held that:- Not only the contention raised by the learned counsel for the appellant is without there being any factual foundation but the same is not genuine because if the appellant consciously did not make any submission in the main company petition when main company petition as well as company application were heard simultaneously, no complaint can be made at the later stage that there is breach of Principles of Natural Justice. Apart from the above, in a matter of complaint of breach of principles of natural justice, it is by now well settled that unless the breach is satisfactorily demonstrated before the Court, the Court may decline to entertain such complaint. As per the observations made by us hereinabove, when we have found that considering the facts and circumstances, the exercise of the discretion by the CLB cannot be said to be unreasonable or perverse or by committing ex facie error on the face of the record, no useful purpose would be served in entertaining the complaint for breach of principles of natural justice though otherwise such a complaint is not genuine and not supported by any statement of fact in the memorandum of appeal nor any ground raised for such purpose save and except the oral submissions made by the learned counsel for the appellant during the course of hearing. Hence, we find that contention raised by the learned counsel for the appellant cannot be accepted. There is considerable force in the contention raised by the learned counsel for the appellant that respondent no. 2 by virtue of Section 15(2) of the University Act, is entitled to the office as Chancellor for his lifetime but, even by interim order dated 26.4.2016, this Court has not prohibited him from functioning as the Chancellor but what has been directed was that, any hindrance or interference in the administration of the University should not be created. Therefore, lawful exercise of the power as per the University Act by the Chancellor was not prohibited but, any hindrance or interference in the administration of the University which otherwise not permissible in law was prohibited in order to see that the educational activity of the University may not suffer. The question may remain as to whether CLB ought to have passed any interim order pending the conclusion of the proceedings before Civil Court or until the appellant approaches before the Civil Court. We would have addressed such question but it appears to us that since no motion was made in the proceedings in the Company Petition before the CLB, we need not express any view. In any case, proceedings of main Company Petition are still pending before CLB, if any contingency arises in law, CLB is not precluded from passing the interim order save and except on the point for which it has found that the appropriate adjudication should be made before Civil Court. As such, until the party approaches before the Civil Court, appropriate interim order could have been considered by CLB but, in our view, when no motion was made before CLB, all such aspects shall be a mere academic exercise but, suffice it to observe that as and when such contingency arises in law, the parties may move before CLB or may be before Civil Court as the case may be and at that stage, rights and contentions of both the sides would remain open. We do not find that the decision of CLB is against any law or is based on any irrelevant material or omission to consider the relevant material. Thus the appeal fails

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• Service Tax

• 2016 (8) TMI 852
  Refund of service tax paid inadvertently on non-taxable services - Operation and Maintenance Management of Well Stimulation Vessel - period from 16.6.2005 to 31.3.2006 - Classification of service - Ship Management service or Maintenance or Repair services - Whether the composite contract cannot be vivisected for taxing the taxable components repair and maintenance - Valuation - inclusion or reimbursement of expenses - difference of opinion - Majority Decision Held that:- the tax levy is not crystallized by the mere execution of a contract promising to render service on the agreed terms; section 65(105(zzg) makes it necessary that some repair or maintenance must have been undertaken for a consideration for the tax liability to arise. In proceeding to deny the claim of the assessee for refund, the undertaking, if any, of ‘repairs or maintenance’ has not been ascertained by the original authority. The operator of a ship or vessel under an O such an obligation may not even require maintenance as contemplated in section 65(64) of Finance Act, 1994. Not to be overlooked also is the performance of service on goods or equipment with ‘goods’ having the specific import supra. It may not be entirely correct in describing a ship or vessel as equipment though equipment may be fitted on board rendering the ascertainment thereof by the original authority to be that much more complex. It is also moot whether a ship or vessel may, with some degree of accuracy, be described as ‘goods.’ Logically, the oceans and the seas are equivalences of land and the inextricability of a vessel or ship from the waters should bring them within the ambit of immoveable. Ships before launch and for breaking up are goods but vessels or ships that are afloat are not goods except for the time that they are the subject of a sale agreement. That ships, vessels and motor vehicles need not exclusively be goods is also apparent in section 2 of Customs Act, 1962; they could also be conveyances. As conveyances, ships/vessels and motor vehicles move easily on water or land but, not being goods that are amenable to severance from land/water, are not distinguishable from immoveable property. Consequently, the legislative intent to tax 'repairs or maintenance' of conveyance under section 65(105)(zzg) of Finance Act, 1994 may not be so apparent. Motor vehicles were specifically excluded from its purview owing to existence of another taxable entry on 1st July 2003. Exclusion may not have been considered to be necessary for ships/vessels because the taxable entry came into effect on a much later date. It is clear that the later entry was not carved out of an existing entry; neither was there any partial recasting of an existing entry to bring any part of any existing entry within the newer entry. The two entries continue to have an independent existence after 1st May 2006. Judicial pronouncements have made clear that the extent of legislative intent to tax in such situations is easily ascertainable. Classification of service in question under ‘Ship Management Service' under Section 65(95a) upheld. The service provided during the disputed period from 16.06.2005 to 31.03.2006, is not taxable, being composite service, and cannot be vivisected, also on the ground that 'Ship Management Service' is not taxable prior to 01.05.2006. Refund allowed with interest - Decided against the revenue.

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• 2016 (8) TMI 850
  CENVAT credit – liability of assesse to pay service tax under reverse charge mechanism – section 66A of the Finance Act, 1994 – Management Consultancy Service – self-adhesive tapes – Notification No. 23/2004-CE (NT) dated 10.09.2004 states that any service tax paid by the manufacturing unit could be availed as credit earlier to 10.09.2004, only if the unit was also providing any taxable output service – SCN – recovery of cenvat credit alongwith interest and penalty – Held that: - assessee was not liable to pay service tax on reverse charge basis prior to 18.04.2006 when for the first time reverse charge method was introduced. Thus, respondent was not liable to pay service tax and secondly having paid it, the assessee is entitled to get cenvat credit and the assessee has rightly availed the cenvat credit. Extended period cannot be invoked as there is no suppression with intent to evade payment of duty on the part of the assessee – appeal dismissed – decided against Revenue.

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• 2016 (8) TMI 849
  CENVAT credit – outward transportation of final product from factory gate to customer premises – contract with customer to sell final products on FOR basis - Board circular No. 97/6/2007-ST dated 23.8.2007 – Held that: - in case of FOR destination sales, the ownership of the goods remain with the seller till delivery at the customer doorstep and the freight charges forming part of value of the assessable goods and borne by the assessee as sale on FOR destination basis, the outward transportation upto place of removal will be an activity covered under the definition of input service. Relaxation made by the circular issued on 23.8.2007. When the Board has made the relaxation, the assessees in entitled to take the benefit thereof – CENVAT credit allowed – appeal allowed – decided in favor of appellant.

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• 2016 (8) TMI 848
  Waiver of penalty – section 77 and 78 of the Finance Act, 1994 - demand of service tax with interest and penalty – Renting of immovable property – sale of space for advertisement – bonafide belief – no intention to evade tax – section 80(2) - section 80(1) - Held that: - It nowhere says that in case of failure to avail benefit under sub-section (2) of Section 80, the benefit under sub-section (1) of Section 80 will be taken away. As per sub-section (1) of Section 80 if the assessee proves reasonable cause for failure, then no penalty shall be imposible. The appellant has established that the failure was caused because they were a small scale service provider with regard to the service of sale of space advertisement. They bonafidely believed that no tax was payable on the services of renting of immovable property during the relevant period. There is no allegation of fraud, suppression of facts or willful misstatement - penalty imposed under Sections 77 and 78 not sustainable – demand of tax and interest already confirmed – appeal allowed – decided partly in favor of appellant.

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• 2016 (8) TMI 847
  Refund claim - services availed in terms of Notification No. 12/2013-ST dated 1.7.2013 in developing SEZ - receipt of specified services was not approved at the time when the said services were availed - Held that:- it is found that the Notification No. 12/2013 provides the exemption by way of refund. To avail the exemption, the assessee must fulfill the conditions of the notification at the time of availing the services. In the instant case, admittedly the appellants had not got the impugned services approved by the Approval Committee. Hence, at the time of availing services the condition 3(I) of the notification was not fulfilled, therefore, refund cannot be granted. - Decided against the appellant

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• Central Excise

• 2016 (8) TMI 846
  Cenvat credit - various input services - whether the captive mines of appellants can be considered as integrated with the main factory premises - Held that:- none of the input services on which credit has been availed by the appellant are excluded or barred by the provisions of the said Rule 2(l) as amended w.e.f. 01-03-2011. I also find that the said input services are very much in the nature of services directly or indirectly required in relation to the manufacturing /production activities carried out by the appellant at the impugned mine. In the circumstances, I hold that the disputed credits amounting to 83,823/- availed by the appellants on the aforesaid input services are eligible and correct in law. It is further held that appellants are eligible to avail the following disputed credits namely mining related work, Mines Garage Attendants works, Concrete pavement at Bulk Loading Area, Lab Modification work and Electrical Maintenance charges at other places amounting to 1,27,283/- and are ineligible to avail credit on Formation of New Gravel road for the reason that the said road has been laid outside the perimeter of the captive mines and hence cannot be considered as service in relation to manufacture of final products etc. in the factory. Regarding Conveyor Extension, shed extending work at Packing Plant and wagon loading, Borewell works, Providing Drain in railway siding, these are services in relation to construction or execution of works contract of the building or a civil structure or a part thereof or laying of foundation or making of structure for support of capital goods, hence they will be disbarred by the exclusion provision of the said Rule 2(l), as applicable during the relevant period. Therefore, these services found as ineligible for the purpose of the said Rule 2(l) amount to 1,01,645/-. However, keeping in mind that during the impugned period there did exist some lack of clarity on the eligibility or otherwise of credits relating to civil works etc and also noting that the appellant had filed ER-I returns all along, the penalty imposed under Section 11 AC of Central Excise Act read with Rule 15 of Cenvat Credit Rules, 2004, and the penalty imposed under Rule 25 of the Central Excise Rules, 2002, imposed by the adjudicating authority and upheld by the Commissioner (Appeals) cannot be sustained and will require to be set aside. - Appeal disposed of

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• 2016 (8) TMI 845
  Whether an appeal would lie against the decision rejecting the request for cross examination - Held that:- by following the judgement of the Hon'ble Delhi High Court in the case of J & K Cigarettes v CCE [2009 (8) TMI 64 - DELHI HIGH COURT] and Tribunal's decision in the case of Swiber Offshore Construction Pvt Ltd v CC [2013 (11) TMI 1232 - CESTAT AHMEDABAD] where it was held that it is always open to the affected party to challenge the invocation of provisions of Section 9D of the Act in a particular case by filing statutory appeal, which provides for judicial review, I am of the view that an appeal is maintainable against the decision rejecting cross examination. Even as per the provisions of Section 35B of the Act read with the definition of adjudicating authority', this Tribunal has the power to entertain an appeal against the decision rejecting cross-examination. The issues raised by the appellant, in its letter dated 18.2.2016 and argued before this Tribunal about the contention of the appellant regarding Section 9D of the Act and the manner in which it is to operate and, therefore, seeks to be provided the records of the examination-in-chief of the witnesses whose statements are referred to in the Show Cause Notice dated 11.05.2011 issued to the appellant, so that the appellant could, if necessary, seeks cross-examination of the said witnesses are no longer res-integra and stands decided by a number of authorities, most recently by Hon'ble Punjab and Harayana High High Court in Ambika International & others v UOI [2016 (6) TMI 919 - PUNJAB AND HARYANA HIGH COURT]. Therefore, in view of the above unequivocal expression of law as contained in a plethora of judicial authorities, the present appeal is allowed by setting aside the decision as communicated to the appellant by the impugned letter dated 18.03.2016, and the matter is remanded to the Principal Commissioner with a direction to adjudicate the Show Cause Notice strictly by complying with the mandate of Section 9D of the Act, in accordance with the directions contained in the judgment of Hon'ble High Court of Punjab & Haryana in Ambika International (supra). - Appeal disposed of

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• 2016 (8) TMI 844
  Valuation - physician samples - regular trade packs are being cleared on payment of duty in terms of section 4A of the Central Excise Act. Also selling of physical samples, not marked with any MRP to M/s. Sanat Products who is further distributing the same free of cost - appellants have paid duty on the transaction value of the said samples whereas Revenue is of the view that same have to be assessed on pro rata basis by taking into consideration the MRP of the regular trade packs - Held that:- the issue is no more res integra and stand settled in favour of the assessee by Hon’ble Supreme Court decision in the case of CCE, Surat vs. Sun Pharmaceuticals Indus Ltd. [2015 (12) TMI 670 - SUPREME COURT]. It stand held that in the absence of any allegation of price at which the samples were being sold by the assessee to the distributor, the value of said samples has to be sale price of the goods. The fact that distributor further distributed the sample free of cost is irreverent to determine the value of physician samples. - Decided in favour of appellant with consequential relief

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• 2016 (8) TMI 843
  Cenvat credit - duty paid on various items like lining plates, HRCS lifters, coolers, etc. used in the Clinker and Hammer, etc. - used for replacement, repair and maintenance of their Clinker and other machines - Held that:- the issue is no more res integra and stands decided by various High Courts where some of the decisions were upheld by Supreme Court where it was held that repairs and maintenance of plant and machinery is an activity without which smooth manufacturing is not possible. Commercially, manufacturing activity is not possible with malfunctioning machines, and leaking tanks, pipes and tubes. Therefore, the activity of repair and maintenance of plant and machinery is an activity which has direct nexus with manufacture of final products and the goods used in this activity would be eligible for Cenvat Credit. Therefore, the assessee is eligible for Cenvat credit. - Decided in favour of assessee with consequential relief

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• 2016 (8) TMI 842
  Reversal of input credit - inputs used in the manufacture of finished goods - destroyed in fire - Held that:- in view of the decision of larger bench in the case of Grasim Industries vs.-Commr. Of Central Excise, Indore [2006 (8) TMI 69 - CESTAT,NEW DELHI] wherein it was held that in respect of goods which were lost or destroyed by natural cause or by natural accident, does not provide any condition regarding reversal of credit taken in respect of inputs used on such goods, the First Appellate Authority was not correct in holding that cenvat credit with respect to inputs used in the manufacture of finished goods, destroyed in fire, is required to be reversed. - Decided in favour of appellant with consequential relief

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• 2016 (8) TMI 841
  Notification No.32/99-CE dated 08.07.1999 - eligibility for benefit - carrying out more than 25% expansion in the installed capacity of plywood production as prescribed in the exemption notification - no increase in the installed & licenced capacity in the old wood based industries of Nagaland after 30.10.2002 - Held that:- in view of the clarification dated 15.10.2009 discussed by the Adjudicating authority it cannot be said that no expansion in the installed capacity could be enhanced by the Respondent. There could be various stages by which installed capacities could be enhanced by the appellant so long as it remains within the licenced capacity decided by State Forest department in the light of Supreme Court s judgement dated 15.01.1998. There is also no requirement under Notification No.32/99-CE dated 08.07.1999 that licensed capacity fixed by State forest department has to be taken into consideration while allowing expansion and that appellant should in one go install all machinery required to cater to the licensed capacity sanctioned. Notification No.32/99-CE dated 08.07.1999 - eligibility for benefit - Chartered Engineer vide his report dated 17.05.2005 has not taken veneer production into consideration while arriving at more than 25% expansion in installed capacity - Held that:- Adjudicating Authority further justified the expansion by not only based on a Chartered Engineer s Certificate dated 17.05.2005, but also relied upon a report of National Institute of Technology Agartala (A Central Government Institute). Certification given by two experts cannot be brushed aside without taking any other opinion of an expert as held by various judicial pronouncements relied upon by the Respondent. No evidence has been brought on records in the review order that any other expert s opinion was taken by the Department to counter the expert opinions obtained by the Respondent. In the absence of any such expert opinion obtained by the department it cannot be appreciated that quantity of veneer production should also be taken into consideration while determining the expansion undertaken. CBEC also while issuing a clarification under F.No.354/08/98-TRU dated 09.07.1999 opined that in case of doubt the Central Excise Officers may consult department of Industries of State Govt. for the purpose of 25% expansion in installed capacity, etc. Notification No.32/99-CE dated 08.07.1999 - eligibility for benefit - Adjudicating authority has not enquired into the efficiency of the transformer and whether transformer of 1250 KVA will give 100% output - original ground plan showing list of plant & machineries before expansion carried out, could have been called by the Adjudicating authority - Held that:- it has not been amplified by the department as to how these verifications could have helped in establishing that more than 25% expansion in installed capacity has not been done. At the same time these suspicions and a separate expert contrary opinion could have been raised by the department to review the order dated 07.06.2005 passed by the jurisdictional DC, CEx, Jorhat allowing the benefit of Notification No.32/99-CE dated 08.07.1999. In the absence of Review of order dated 07.06.2005 the same has become final on admissibility of this exemption to the Respondent. - Decided against the Revenue

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• 2016 (8) TMI 840
  Cenvat credit - MS Channels, MS Angles, Plates, Rounds, Beams etc. - used in fabrication of supporting structures to Capital Goods during the period from 2007-08 to 2008-09 - Whether amendment of Explanation 2 to Rule 2(k) of CCR inserted vide Notification No. 16/2009-CE dt. 07/07/2009 will have retrospective effect - Held that:- it is clear from the Explanation 2 to Rule 2(k) that nowhere in the amendment, nothing has been explicitly stated or clarified that the amendment will have retrospective effect. The doctrine of fairness is also an important requisite in giving retrospective effect to amendments. In case, benefits were extended and availed as permitted in earlier law, it would be unfair to snatch them away simply by insertion of an amendment to that effect. An amendment which seeks to lend further clarity to an existing statutory provision can definitely be retrospective if so unequivocally stated so in the body of the amendment or in the statement purpose by the legislature, however such amendment can only throw more light on a existing provision but should not extinguish the rights availed of before the amendment. Period of limitation - Held that:- I do not find any infirmity in the finding of Commissioner(Appeals) that in view of similar demand issued to the same respondent on identical issue for earlier period, which has been decided in their favour, the law of limitation will hit the issue of impugned demand. This is a correct interpretation of law and is supported by a plethora of judgments of various courts. - Decided against the Revenue

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• 2016 (8) TMI 839
  Valuation - determination of assessable value u/s 4 by deducting permissible deductions from the wholesale price - Held that:- Revenue's contention that the assessee did not raise the point earlier that the expenses under various heads furnished were provisional is factually incorrect as we have already recorded that the assessee had clearly stated in its letter that the deductions under various heads were on provisional basis and the actual expenditure can be ascertainable only after finalisation of accounts. It is a fact that even as per the show cause notice expenses on account of transportation, container services and trade discounts were held to be deductible and accordingly provisional figures relating to these heads were allowed to be deducted in the show cause notice itself. In the wake of the fact that the actual figure of the total expenses under the aforesaid three heads held to be deductible from the wholesale price is 9558556/- which is far more than the total deductions claimed for the year 1994-1995 (viz. 58982962/- axiomatically no demand would survive after allowing deduction of the actual expenses relating to the said permissible three heads. Consequently we need not go into the merits of disallowing the expenses incurred under other various heads for the purpose of deciding whether the impugned demand is sustainable. As regards the contention of Revenue that by adopting the actual figures for deduction, the Commissioner has gone beyond the remand order dated 21.4.2011 of CESTAT, we have perused the CESTAT order and we are unable to fathom from the CESTAT's remand order as to how adopting the actual figures of permissible expenses for arriving at the assessable value is in disharmony therewith while at the same time doing so is in harmony with the order of the Supreme Court dated 15.5.2015. - Decided in favour of assessee

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• 2016 (8) TMI 838
  Whether an appeal would lie against the decision rejecting the request for cross examination - Held that:- by following the judgement of the Hon'ble Delhi High Court in the case of J & K Cigarettes v CCE [2009 (8) TMI 64 - DELHI HIGH COURT] and Tribunal's decision in the case of Swiber Offshore Construction Pvt Ltd v CC [2013 (11) TMI 1232 - CESTAT AHMEDABAD] where it was held that it is always open to the affected party to challenge the invocation of provisions of Section 9D of the Act in a particular case by filing statutory appeal, which provides for judicial review, I am of the view that an appeal is maintainable against the decision rejecting cross examination. Even as per the provisions of Section 35B of the Act read with the definition of adjudicating authority', this Tribunal has the power to entertain an appeal against the decision rejecting cross-examination. The issues raised by the appellant, in its letter dated 06.06.2016 and argued before this Tribunal about the contention of the appellant regarding Section 9D of the Act and the manner in which it is to operate and, therefore, seeks to be provided the records of the examination-in-chief of the witnesses whose statements are referred to in the Show Cause Notice dated 16.02.2012 issued to the appellant, so that the appellant could, if necessary, seeks cross-examination of the said witnesses are no longer res-integra and stands decided by a number of authorities, most recently by Hon'ble Punjab and Harayana High High Court in Ambika International & others v UOI [2016 (6) TMI 919 - PUNJAB AND HARYANA HIGH COURT]. Therefore, in view of the above unequivocal expression of law as contained in a plethora of judicial authorities, the present appeal is allowed by setting aside the decision as communicated to the appellant by the impugned letter dated 03.06.2016, and the matter is remanded to the Principal Commissioner with a direction to adjudicate the Show Cause Notice strictly by complying with the mandate of Section 9D of the Act, in accordance with the directions contained in the judgment of Hon'ble High Court of Punjab & Haryana in Ambika International (supra). - Appeal disposed of

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• 2016 (8) TMI 837
  Whether an appeal would lie against the decision rejecting the request for cross examination - Held that:- by following the judgement of the Hon'ble Delhi High Court in the case of J & K Cigarettes v CCE [2009 (8) TMI 64 - DELHI HIGH COURT] and Tribunal's decision in the case of Swiber Offshore Construction Pvt Ltd v CC [2013 (11) TMI 1232 - CESTAT AHMEDABAD] where it was held that it is always open to the affected party to challenge the invocation of provisions of Section 9D of the Act in a particular case by filing statutory appeal, which provides for judicial review, I am of the view that an appeal is maintainable against the decision rejecting cross examination. Even as per the provisions of Section 35B of the Act read with the definition of adjudicating authority', this Tribunal has the power to entertain an appeal against the decision rejecting cross-examination. The issues raised by the appellant, in its letter dated 05.04.2016 and argued before this Tribunal about the contention of the appellant regarding Section 9D of the Act and the manner in which it is to operate and, therefore, seeks to be provided the records of the examination-in-chief of the witnesses whose statements are referred to in the Show Cause Notice dated 06.07.2012 issued to the appellant, so that the appellant could, if necessary, seeks cross-examination of the said witnesses are no longer res-integra and stands decided by a number of authorities, most recently by Hon'ble Punjab and Harayana High High Court in Ambika International & others v UOI [2016 (6) TMI 919 - PUNJAB AND HARYANA HIGH COURT]. Therefore, in view of the above unequivocal expression of law as contained in a plethora of judicial authorities, the present appeal is allowed by setting aside the decision as communicated to the appellant by the impugned letter dated 20.05.2016, and the matter is remanded to the Principal Commissioner with a direction to adjudicate the Show Cause Notice strictly by complying with the mandate of Section 9D of the Act, in accordance with the directions contained in the judgment of Hon'ble High Court of Punjab & Haryana in Ambika International (supra). - Appeal disposed of

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• 2016 (8) TMI 836
  Whether an appeal would lie against the decision rejecting the request for cross examination - Held that:- by following the judgement of the Hon'ble Delhi High Court in the case of J & K Cigarettes v CCE [2009 (8) TMI 64 - DELHI HIGH COURT] and Tribunal's decision in the case of Swiber Offshore Construction Pvt Ltd v CC [2013 (11) TMI 1232 - CESTAT AHMEDABAD] where it was held that it is always open to the affected party to challenge the invocation of provisions of Section 9D of the Act in a particular case by filing statutory appeal, which provides for judicial review, I am of the view that an appeal is maintainable against the decision rejecting cross examination. Even as per the provisions of Section 35B of the Act read with the definition of adjudicating authority', this Tribunal has the power to entertain an appeal against the decision rejecting cross-examination. The issues raised by the appellant, in its letter dated 24.05.2016 and argued before this Tribunal about the contention of the appellant regarding Section 9D of the Act and the manner in which it is to operate and, therefore, seeks to be provided the records of the examination-in-chief of the witnesses whose statements are referred to in the Show Cause Notice dated 16.02.2012 issued to the appellant, so that the appellant could, if necessary, seeks cross-examination of the said witnesses are no longer res-integra and stands decided by a number of authorities, most recently by Hon'ble Punjab and Haryana High High Court in Ambika International & others v UOI [2016 (6) TMI 919 - PUNJAB AND HARYANA HIGH COURT]. Therefore, in view of the above unequivocal expression of law as contained in a plethora of judicial authorities, the present appeal is allowed by setting aside the decision as communicated to the appellant by the impugned letter dated 03.06.2016, and the matter is remanded to the Principal Commissioner with a direction to adjudicate the Show Cause Notice strictly by complying with the mandate of Section 9D of the Act, in accordance with the directions contained in the judgment of Hon'ble High Court of Punjab & Haryana in Ambika International (supra). - Appeal disposed of

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• 2016 (8) TMI 835
  Demand - recovery of Cenvat credit on capital goods, Central excise duty alongwith interest and penalty and a short levy - credit was taken prior to receipt of input into the factory - Held that:- it is found that the CBEC Circular 645/36/2002-CX., dated 16.7.2002 provided that if the capital good are written off before use then the Cenvat credit availed has to be reversed. In the present case, there were no allegation that the capital goods were not used at all nor there were allegations that the Capital goods were removed from factory. We, therefore, hold that the Original Order demanding Cenvat credit, interest thereon and penalty equal to the same is not sustainable. Also there are no allegation that the inputs were not at all received in to the factory. Therefore, the demand of Cenvat credit and interest thereon and penalty equal to same is not sustainable. In respect of short levy, it is found that no evidence has been produced to establish that additional consideration was received by appellants. The levy required as per transaction value was discharged. Therefore, original order is not sustainable to extent of confirmation of Central Excise duty, interest thereon and penalty equal to the same. - Decided in favour of assessee with consequential relief

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• 2016 (8) TMI 834
  Imposition of penalty - rule 15(1) of cenvat credit rules,2004 - Held that: - for supply of goods by the appellant to M/s DMRC the provisions of Rule 6(6)(vii) do not have any application. The appellant was required to pay an amount equal to 5% of the value of the goods supplied to DMRC, within the stipulated time frame which admittedly has not been done. Since the Provisions contained in the Cenvat Credit Rules, 2004 in the present case has been contravened / violated, the appellant is exposed to the Penal consequences provided under Rule 15 of the Rules. However, considering the overall facts and circumstances of the case, it was found that penalty imposed by the lower authorities in the higher side. Thus, in the interest of justice, the penalty reduced to 10,000 - impugned order modified - decided partly in favor of appellant.

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• CST, VAT & Sales Tax

• 2016 (8) TMI 828
  Classification of goods – KVAT – rate of tax – ultra heat treatment (UHT) milk under Third Schedule to the KVAT Act taxable at 4%/5% – fresh milk and pasteurized milk under Entry 19 of the First Schedule exempt - HSN code - Held that: - UHT milk cannot be included under the exempted category coming under the First Schedule. First of all, there is a specific entry as UHT milk in Schedule 3 Item No.118. Therefore, it is taxable at 4% during the relevant years. The entry in the exempted category in the First Schedule is with reference to milk and pasteurized milk. The product of the petitioner as per the invoice is UHT milk. When such fact is admitted, there cannot be any classification made with reference to the liquid form or powder form. The very fact that UHT milk is incorporated in the Third Schedule as item No.118 clearly indicates that it is a value added product and cannot be compared with ordinary milk or pasteurized milk - Contention of petitioner unsustainable – no interference with assessment orders - petition dismissed.

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• 2016 (8) TMI 827
  Best judgement assessment – KVAT – opportunity to revise the return to correct mistake – Held that: - Under Section 22 of the KVAT Act, where the assessing officer finds a return to be defective, then an opportunity is to be given to the dealer to file a fresh return curing the defects and only thereafter is the assessing officer expected to go ahead with a proposal for completion of assessment on best judgment basis, if the need arises. Circular No.27/2015, which is produced as Ext.P6 in the writ petition, the Commissioner of Commercial Taxes has also brought it to the notice of the assessing officers that they must comply with the procedural requirement under Section 22, 23 and 24 read with Rules 34, 35 and 38 of the KVAT Rules, while completing an assessment in relation to an assessee and before proceeding with the proposal for completing the assessment on best judgment basis - requirements of Sections 22, 23 and 24 to be complied with – petition disposed off – decided in favor of petitioner.

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• Indian Laws

• 2016 (8) TMI 825
  Professional misconduct - removal of respondent No.1’s name from the Register of Members for a period of six months - whether respondent No.1 was discharging functions as a Chartered Accountant when he sold the shares? - Held that:- Member of the Institute would be deemed to be in practice when, for remuneration received or to be received the person performs the acts enumerated in the four clauses hereinabove noted. Section 30 of the Act confers power on the Central Government to make regulations. In the instant case the respondent was acting as an individual in his dealings with the complainant which were purely commercial. While selling the shares held by him the respondent was not acting as a Chartered Accountant. He was not discharging any function in relation to his practice as a Chartered Accountant.The Reference is accordingly answered by declaring the law as above and not inflicting any penalty upon the respondent.

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• 2016 (8) TMI 824
  Demand the property tax for the buildings used by the petitioner Department which is owned by the President of India - Held that:- A clear exemption being granted, the levy or collection of property tax by the respondent Corporation on the buildings owned by the Union of India is unauthorised and illegal. Therefore, if any such tax have been collected, the same requires to be refunded. So far as the service charges are concerned, it seems that the Union of India had already agreed before the Hon'ble Supreme Court as recorded in the judgment in the case of Rajkot Municipal Corporation (2009 (11) TMI 946 - SUPREME COURT). Thus, it goes without saying that the Union of India will be bound by the said undertaking. As during the course of the argument, a question was posed by this Court to the learned counsel for the petitioner as to how these service charges have been quantified as the petitioner has stated in the affidavit that they have been paying service charges and the learned counsel replied by stating that there is no dispute to the said fact and the petitioner themselves have stated so in their letter dated 28.01.2009 stating that they are paying service charges to the Corporation of Chennai, half yearly, based on 33 1/3% of the property tax. Therefore, this submission is taken on record to state that there is no default on the part of the petitioner in remitting the service charges. In the light of the above stated legal position, the writ petition is disposed of by holding that the respondent Corporation are not entitled to levy and collect property tax for the buildings owned by the Union of India and if any property tax had already been collected, the same shall be refunded within a reasonable time. However, in terms of the agreement arrived at, as recorded by the Hon'ble Supreme Court in Rajkot Municipal Corporation (Supra), the petitioner is bound to remit the service charges to the respondent Corporation. Consequently, connected miscellaneous petition is closed. No costs.

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