TMI Tax Updates - e-Newsletter
September 1, 2016

Case Laws in this Newsletter:

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

TMI SMS

• Refund - reduction in value - credit notes towards trade discount raised by the Assessee subsequent to the sale - refund allowed - SC

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• Delayed deposit of collected service tax - due to lack of funds - Such possibilities do occur in the world of business - No penalty - Tri

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Articles

1. Disclosures on the Website

   By: CSHithakar Chouta

News

1. Advisory on Introduction of Special Advanced Authorisation Scheme

2. Cabinet approves simplification and liberalisation of the Foreign Direct Investment Policy, 2016 in various sectors

3. Cabinet approves creation of a Project Development Fund to catalyse Indian economic presence in Cambodia, Laos, Myanmar and Vietnam

4. India jumps 19 places in World Bank’s Logistics Performance Index; Improves its Ranking from 54 (in 2014) to 35 (in 2016)

5. Closure of financial accounts under Rule 114H (8) of the Income-Tax Rules, 1962 under alternative procedure of FATCA

6. RBI Reference Rate for US $

Notifications

Customs

1. 118/2016 - dated 31-8-2016 - Cus (NT)

Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver

Income Tax

2. F.No. Q-22013/1/2014-Ad.1C (AAR) - dated 23-8-2016 - IT

Settlement Commission (Income Tax and Wealth Tax) (Recruitment and Conditions of Service of Chairman, Vice-Chairman and Members) Amendment Rules, 2016

Service Tax

3. 38/2016 - dated 30-8-2016 - ST

Seeks to amend Notification No. 26/2012- Service Tax dated 20.06.2012, by inserting of entry “5A” for transportation of passengers embarking from or terminating in a Regional Connectivity Scheme (RCS) airports, with abatement of 90%,for a period of one year from the date of commencement of operations of the Regional Connectivity Scheme (RCS) airport, with condition of without taking any CENVAT credit

Circulars / Instructions / Orders

VAT - Delhi

1. 13 of 2016-17 - dated 31-8-2016

Filing of online return for first quarter of 2016-17 - extension of period thereof

Income Tax

2. 31/2016 - dated 30-8-2016

Jurisdiction of income-tax authorities

Highlights / Catch Notes

Income Tax

• Service Tax Exclusion for Service Providers Confirmed u/s 145A of Income Tax Act. Trading Receipts Clarified.

  Case-Laws - HC : Addition u/s 145A - inclusion of service tax as part of trading receipts - ection 145A of the Act would have no application in cases where service is provided by the Assessee - HC
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• Assessee denied depreciation claim u/s 32 as property wasn't used for intended purpose before fiscal year-end.

  Case-Laws - AT : Depreciation - prior to ending of the relevant financial year, though the assessee had an opportunity to take possession of the property for the purpose of fit-outs, he cannot say that he has put the property to use for the purposes of claim of depreciation u/s 32 of the Act either in respect of building or machinery therein - AT
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• Foreign Currency Contract Losses Assessed Annually for Accurate Hedge Reconciliation; Monthly Reviews Incomplete.

  Case-Laws - AT : Loss on account of foreign currency forward/option contracts - It is only at the year end that one can still reconcile the hedging transactions with the actual exposure or delivery and come to a conclusion whether hedging contract exceeded the actual exposure or not but certainly not on week to week or month to month basis. - AT
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• Court Upholds Assessee's Claim for Depreciation on Vehicles, Confirms Lease as Operating Lease per CIT(A) Decision.

  Case-Laws - AT : Claim for depreciation on the leased vehicles - the finding by the ld. CIT(A) of the character of the lease as an operating lease cannot, under the circumstances, be faulted, and the assessee, accordingly, entitled to it’s claim for depreciation on the leased vehicles - AT
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• Section 54F Exemption Based on Actual Sale Value, Not Stamp Duty Valuation, for Capital Asset Transactions.

  Case-Laws - AT : Exemption u/sec. 54F - net consideration computation to be invested or value fixed u/s 50C as stamp valuation - Under provisions of Sec. 54F of the Act, net consideration has to be invested in the Residential property but not the deeming value being fiction. - AT
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Customs

• Royalty Payment Not Relevant for Current Valuation if Linked to Different Transaction, According to Accounting Records.

  Case-Laws - AT : Valuation - if it is found that the royalty payment shown in the Books of Account is not related to the present transaction and related to some other transaction, the same cannot be relevant for the valuation in the present case. - AT
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Indian Laws

• High Court Rules: No Debt Acknowledgment, No Extension of Limitation Period u/s 19 of Limitation Act, 1963.

  Case-Laws - HC : Guarantee executed by the defendant - period of limitation extended on account of the acknowledgement of debt, in terms of Section 19 of the Limitation Act, 1963 - as there is no acknowledgement of debt, the provision of Section 19 of the said Act, are not attracted to the facts of the present case.- HC
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Service Tax

• Penalty Waived for Non-Deposit of Taxes Due to Credible Financial Hardship in Business Operations.

  Case-Laws - AT : Non fulfilling the obligation to deposit the collected tax to the Government of India - No reason to disbelieve their claim of inability to pay tax owing to lack of funds. Such possibilities can and do occur in the world of business. - Levy of penalty waived - AT
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• Service Tax Demand Unjustifiable if Tax Deposited Under Different Category Than Service Provided.

  Case-Laws - AT : Demand of Service Tax in respect of the same transaction on the ground that the deposit of Service Tax was under a different category whereas a different category of service has been provided cannot be held to be justifiable. - AT
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• Tax Liability Confirmed Beyond Original Notice for Construction Services Raises Validity Concerns Under Show-Cause Procedures.

  Case-Laws - AT : Commercial and Industrial Construction Services - confirmation of tax liability on the appellant on a category which is not alleged in the show-cause notice is traversing beyond the allegations made in the show-cause notice. - AT
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Central Excise

• Cenvat Credit Applies to Returned Duty-Paid Goods Without Needing Application or Permission u/r 16.

  Case-Laws - AT : Cenvat credit - duty paid goods cleared on their own invoices received back due to defect/rejection - no procedure such as making application or taking permission is required for compliance of Rule 16. - AT
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• Education Cess Exemption Only Applies to Clean Energy Cess, Not Central Excise Duty on Coal (Finance Act, 2010.

  Case-Laws - AT : Exemption from E. Cess and S.H.E. Cess under Notifications No. 28 and 29/2010 both dated 22.06.2010 is applicable only with respect to Clean Energy Cess levied under the Finance Act, 2010, but will not be applicable with respect to Central Excise duty levied on coal w.e.f 01.03.2011 - AT
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• Appellant Entitled to Refund Under Central Excise Laws; Unjust Enrichment Not Applicable.

  Case-Laws - AT : Unjust enrichment - Refund claim - the amount was deposited by the appellant on the direction of the appellate authorities. - question of unjust enrichment does not arise - AT
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• Cenvat Credit Approved for Light Fittings and Fixtures as Movable Property in Factory, Rejecting Immovable Property Argument.

  Case-Laws - AT : Cenvat credit - various light fittings and fixtures were brought into the factory after duty payment and were installed for the intended purposes. To call these items as immovable property is without basis - credit allowed - AT
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VAT

• Court Considers Double Taxation Risk on 4-5% Tax for Contractee; Emphasizes Proof of Contractor's Tax Payment Needed.

  Case-Laws - HC : Levying tax at 4/5% on the contractee - if the petitioner furnishes proof of payment of tax by the contractors on the very same turnover, to then consider whether tax can be levied on the petitioner as it may then amount to taxing the very same deemed sale of goods twice. - HC
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Case Laws:

• Income Tax

• 2016 (8) TMI 1096
  Addition u/s 145A - inclusion of service tax as part of trading receipts - Tribunal deleted the addition - Held that:- We do not find any ambiguity in Section 145A of the Act as arising for our consideration. However, even if one were to assume the main part of Section 145A of the Act, is capable of more then one interpretation, the interpretation sought to be canvassed by the Revenue, is not sustainable. Therefore, Section 145A of the Act would have no application in cases where service is provided by the Assessee. Addition u/s 43B - unpaid service tax liability disallowed - Held that:- It is an admitted position before us that the respondent assessee had not claimed any deduction on account of the service tax payable in order to determine its taxable income. In the above view, there can be no occasion to invoke Section 43B of the Act. The issue stands concluded against the Revenue by the decisions of this Court in Commissioner of Income Tax Vs. Ovira Logistics P. Ltd. [2015 (4) TMI 684 - BOMBAY HIGH COURT ] and Commissioner of Income Tax Vs. Calibre Personnel Services Pvt. Ltd. (2015 (2) TMI 587 - BOMBAY HIGH COURT )

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• 2016 (8) TMI 1095
  Sale of depreciable asset / office premises - acquisition of new building - Computation of WDV versus Addition u/s 50(1)(iii) - Did the assessee acquire the office building for a consideration in the relevant previous year for the purposes of Sec. 50(1)(iii) of the Act? - Held that:- Sec. 50 of the Act does not contemplate use of property to complete the process of acquisition of property. Acquisition is a process whereby the rights of the parties are crystallized in unequivocal terms and each party has complied with or is ready to comply with the mutual obligations. Here, in this case, all that has to be done by the assessee was done by parting with valuable consideration and starting the work of fit-outs well before the end of the financial year. Possession has both physical and psychological components and when once the assessee started with work of fit-outs, having discharged his obligation under the contract, his animus possidendi accompanies the act of corpus possidendi. The distinction between possession and occupation has to be kept in mind, which is relevant only for the purpose of determining the question of “use”, but not for the purpose of acquisition contemplated in Sec. 50(1)(iii) of the Act. Occupation could be equated to the term “use” as contemplated u/s 32 of the Act whereas it cannot be equated to the concept of possession to understand the completion of the process of acquisition in terms of Sec. 53A of the Transfer of Property Act. Here, in this matter, assessee did all that he has to do under the contract, and his further act of taking over the property in furtherance of his animus of owning the property thereby excluding every other from dealing with or interfering with the property, is suffice to hold that the assessee acquired the property during the financial year for the purposes of Sec. 50(1)(iii) of the Act. For these reasons, we are unable to accept the contentions of the Revenue that there was no property in existence before the end of the relevant financial year, that there was no agreement between the parties and there is no acquisition that took place during the relevant financial year. We hold that the assessee by his acts of parting with full sale consideration and gaining the ability to have every other person excluded from dealing with the property and by proceeding with the work of fit-outs has demonstrated that it acquired the property for the purposes of Sec. 50(1)(iii) of the Act. We hold the issue in favour of the assessee. Entitled to claim depreciation in respect of the building and machinery - Held that:- It is the admission of the assessee that there was no usage of the property before the Occupation Certificate was issued by the appropriate authority. As a matter of fact, it is the argument of learned counsel for the assessee before us that in order to have the benefit of Sec. 32 of the Act one has to satisfy the twin requirements of owning the property and making use of it on any day in the relevant previous year. Here, prior to ending of the relevant financial year, though the assessee had an opportunity to take possession of the property for the purpose of fit-outs, he cannot say that he has put the property to use for the purposes of claim of depreciation under Sec. 32 of the Act either in respect of building or machinery therein; as such, we hold that the assessee is not successful to show its entitlement to the relief of depreciation u/s 32 of the Act.

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• 2016 (8) TMI 1094
  Addition u/s 14A - Held that:- The investments which has not yielded dividend or tax free income during the year should only be included, no supporting decision has been placed before us by the ld. Counsel before us that only the investments which have not yielded the exempt income during the year has to be excluded. Rule 8D(2)(iii) lays down that, an amount equal to % 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). Accordingly, we direct the AO to remove the strategic investments only from the working and from the balance, he should work out the disallowance as per Rule 8D (2)(iii). Loss on account of foreign currency forward/option contracts - Held that:- Hedging is often done based on actual estimated exposure looking to the past transactions undertaken and based on that, hedging is done in respect of transaction yet to be done in the near future. Bill to bill or one to one basis exposure of hedging cannot be done in a continuum business and nothing has been brought on record that RBI puts such kind of condition or bar for hedging of foreign currency based on actual bill to bill exposure. Hedging contracts need not succeed the contract for sale and actual goods manufactured but may get settled within a reasonable time. Quantity and timing may not be relevant for a short period in a continuous transaction as long as transaction construed is based on genuine hedging and finally it coincides with the actual exposure undertaken. It is only at the year end that one can still reconcile the hedging transactions with the actual exposure or delivery and come to a conclusion whether hedging contract exceeded the actual exposure or not but certainly not on week to week or month to month basis. Thus, the disallowance of loss sustained by the Ld. CIT(A) of 8,23,26,649/- cannot be upheld simply on the ground that the exposure do not tally with the month-wise transaction. In view of our above conclusion, we allow the claim of 8,23,26,649/- and accordingly, the grounds raised by the assessee is allowed.

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• 2016 (8) TMI 1093
  Claim for depreciation on the leased vehicles - Held that:- The economic life of the vehicle depends also on its’ user, and that a period of five years, coupled with extensive user, may exhaust the life of a vehicle and, in any case, with reference to a particular (standard) operating efficiency. Even so, the fact remains that the assessee extends various lease terms to its’ clients and, two, a higher term opted by a lessee would necessarily imply a low salvage/sale value, so that the assessee is entitled to recover the principal (along with profit), so that its claim for depreciation – which is a charge toward the capital consumed, would be in any case exigible; the only caveat being that in such a case, i.e., where the depreciation is preferred on the basis of the accounting theory, the same shall have to be on a systematic basis, and not necessarily at the rates as defined under the Act. The insurance premium, though recovered from the lessee (as part of fleet management charges), is the obligation of the lessor, whose name is shown therein as the beneficiary. Confirmation from all major clients also stands furnished before the AO. In our view, therefore, the finding by the ld. CIT(A) of the character of the lease as an operating lease cannot, under the circumstances, be faulted, and the assessee, accordingly, entitled to it’s claim for depreciation on the leased vehicles. Transfer (of a part) of fleet management charges to maintenance accounts - Held that:- We observe several expenses forming part of the fleet management services, viz. providing relief vehicles, drivers, emergency breakdown services, door to door services, etc., and which are essentially period costs, so that all such costs which do not exhibit a pronounced increase with time, i.e., in relation to the age of the corresponding vehicle, would not be subject to such appropriation. The AO’s finding shall further include that in respect of reversal of the credit (on the basis of the rule being purportedly followed) as well. Reference to the said rule, we may add, is only toward the assessee following a scientific basis in allocating the revenue over the term of the lease and, accordingly would stand to be examined by the A.O., and the allowance of the assessee’s claim by us is subject to his returning positive findings. We decide accordingly.

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• 2016 (8) TMI 1092
  Exemption u/sec. 54F - net consideration computation to be invested or value fixed u/s 50C as stamp valuation - Held that:- The assessee has invested entire net sale consideration in the construction of house property alongwith two others at Bangalore which is not disputed and complied the stipulated conditions of provisions of Sec. 54F of the Act that within three years from the date of transfer of original Asset i.e. 3rd December, 2007 and assessee should construct and take possession of the residential property on or before 3rd December, 2010. But the assessee has entered into agreement of construction on 06.11.2009 for construction of house property at Bangalore alongwith two others and sale deed was registered on 29.03.2010 much before the stipulated date. Therefore, there is no dispute on violation of stipulated conditions of Sec. 54F of the Act. Further, on the aspect of applicability of provisions Sec. 50C of the Act, the ld. Authorised Representative submitted that the guideline is to be considered for the purpose of stamp duty valuation and not for assessment. Further, the vacant land sold at Trichy is on canal and low lying areas formed into drainage pit which shall not fetch the such market value. The Section 50C of the Act provisions are deeming fictions and the assessee has not received sale consideration other than the amount specified in the sale deed. Under provisions of Sec. 54F of the Act, net consideration has to be invested in the Residential property but not the deeming value being fiction.

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• 2016 (8) TMI 1091
  Waiver of interest charged under Section 220 (2A) application rejected - Held that:- The Commissioner of Income Tax, who is competent authority to consider the question of waiver, has noticed that Assessee has maintained certain documents showing goods taken on Uchanti (goods taken on returnable basis from parties) but same were recorded as sales in accounts and thus he was found guilty of undisclosed income leading to evasion of tax and for that reason, Assessing Officer found him guilty of evasion of tax which was affirmed in Appeal. Further, there was nothing to place before authorities concerned to show that it was a case of genuine hardship of Assess. Since these all are findings of fact and it has not been shown that findings recorded by CIT are perverse, we do not find that we can look into matter and examine the same as sitting in appeal since in supervisory jurisdiction of this Court and exercising writ jurisdiction, scope of judicial review is very limited and narrow. It is not to correct the errors in the orders of the court below but to remove manifest and patent errors of law and jurisdiction without acting as an appellate authority. This power involves a duty on the High Court to keep the inferior courts and tribunals within the bounds of their authority and to see that they do what their duty requires and that they do it in a legal manner. But this power does not vest the High Court with any unlimited prerogative to correct all species of hardship or wrong decisions made within the limits of the jurisdiction of the Court or Tribunal. It must be restricted to cases of grave dereliction of duty and flagrant abuse of fundamental principle of law or justice, where grave injustice would be done unless the High Court interferes. In the present case no justification interference by this Court in this writ petition in exercise of jurisdiction under Article 226 of Constitution of India

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• 2016 (8) TMI 1090
  Reopening of assessment - Deduction under section 80P(2)(d) - Held that:- Assessee's claim of deduction under section 80P(2)(d) of the Act that the Assessing Officer passed the order of assessment in which, as noted, he allowed the entire claim of deduction under section 80P of 1.51 crores which naturally included the said figure of 69.98 lacs under section 80P(2)(d) of the Act. During the assessment thus Assessing Officer had full materials at his command to consider the relevant question namely, whether the interest income of 69.98 lacs could be allowed deduction without adjustment against the interest expenditure or not? The fact that interest was paid by the assessee on borrowed funds was very much on record as can be seen from the answer given by the petitioner to the queries raised by the Assessing Officer. In fact, in the reasons recorded also, Assessing Officer does not refer to any external material which could be the source of such income that the assessee had expended 11.22 croes by way of interest. Thus the Assessing Officer having examined the specific claim of deduction under section 80P(2)(d) of the Act, it would now not be open for him to reexamine the claim which would be based on mere change of opinion

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• 2016 (8) TMI 1089
  Addition made on account of interest paid on Bank OD and unsecured loan - ITAT deleted the addition - Held that:- We find that the impugned order records the fact that the interest free advances made by the respondent assessee to its sister concern was to the extent of 28.67 crores at a time when it had its own interest free funds available to the extent of 41.84 crores. Therefore, in view of the decision of this Court in Commissioner of Income Tax Vs. Reliance Utility and Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT ] wherein it is held that if both interest free funds and interest bearing funds are available, then a presumption arises that investments / advances have been made out of interest free funds, the disallowance of interest payment of 46.84 lakhs made to the bank was deleted. This was since interest free advances are much less than the interest free funds available with the respondent assessee giving rise to the presumption as laid down in Reliance Utility Power Ltd. (supra). - No substantial question of law - Decided against revenue Disallowance u/s 14A - ITAT restricting the disallowance only to the extent of 5% of dividend income arbitrarily - Held that:- Disallowance made by the CIT(A) at 5%, the exempt dividend income is reasonable. - Decided against revenue

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• 2016 (8) TMI 1088
  Validity of assessment - Whether the Appellate Tribunal is right in canceling the assessment order framed by AO without going into the merits, on the ground that the Assessing Officer had issued notice u/s. 158BC to the assessee to file the return within 15 days from the date of service of notice? - Held that:- While block assessment is to be made, the Assessing Officer is having knowledge about the statutory provision and while issuing notice he should have mentioned in it about his source of power and should have referred to time which is required to be given for the purpose of filing of return under section 158BC of the Act. The words mentioned in the notice are 'within fifteen days’ whereas the provision mandates the time of “not less than fifteen days”. In view of the decisions of the Supreme Court referred more particularly New India Industries Ltd. (1995 (1) TMI 66 - SUPREME Court ), we are of the opinion, fifteen days means, clear fifteen days which is the requirement under law. In that view of the matter, we are of the view that the notice which was issued by the authority asking the assessee to file the return within fifteen days is not in accordance with the provisions of the Income-tax Act and therefore it is invalid. In our view, the authority who is issuing the notice must be aware of the Act and must construe the provision strictly. The words `not less than fifteen days’ have to be interpreted correctly. In that view of the matter, since the Assessing Officer asked the assessee to file the return within fifteen days of the service of the notice, the notice issued by the Assessing Officer is invalid. We are, therefore, of the opinion that the Tribunal has rightly cancelled the order of the Assessing Officer. The questions referred to us are, therefore, answered in favour of the assessee and against the revenue.

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• 2016 (8) TMI 1087
  Nature of receipt in the hands of the assessee - corpus fund received - Held that:- Consideration for which the amount has been paid by the developer are, therefore, not relevant in determining the nature of receipt in the hands of the assessee. In view of these discussion, assessee could not be said to be of revenue nature, and, accordingly, the same is outside the ambit of income under section 2(24) of the Act. The impugned receipt ends up reducing the cost of acquisition of the asset, i.e. flat, and, therefore, the same will be taken into account as such, as and when occasion arises for computing capital gains in respect of the said asset. Subject to these observations, the appeal of assessee is allowed. Compensation received by assessee for paying rent - Held that:- This amount was given by Developer for paying rent while development of the project was taking place. In fact, assessee submitted before me that he has made expenditure of 6,80,000/- towards rent while development activity of the project was taken place. So, Assessing officer is directed to allow the claim of assessee to same extent because it is nothing but compensation received by assessee for paying rent. This cannot be said to be income of assessee. Assessing Officer is directed accordingly.

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• 2016 (8) TMI 1086
  Addition on unexplained cash credit under sec. 68 - share application money - Held that:- The assessee had furnished details of the share applicants supported with some evidence. The first category was of those share applicants who had paid share application money in cash and the second category of the share applicants was those paid share applicant money through cheque. In the first category of share application, the assessee had furnished their details and confirmations by their affidavit and in case of some parties their PANs were also furnished. Besides, it was also explained that they had received their money back from the assessee upon cancelation of their application for allotment of shares. This refund of money to them was made in the next financial year and the same has been accepted by the Assessing Officer in the assessment of the next year. It is also an important aspect of this category of share applicants that during the course of assessment proceedings, they had appeared before the Assessing Officer and had confirmed of paying and receiving back their respective share application money from the assessee. We are thus of the view that the assessee had discharged its primary onus to establish genuineness of this category of the share applicants. Thereafter, the onus was shifted upon the Assessing Officer to dislodge the claim of the assessee by disproving those evidences and submissions made by the assessee discussed above. In absence of conducting such exercise by the Assessing Officer, the Assessing Officer was not justified in making the addition of 8,27,500 received in cash. The Assessing Officer is thus directed to delete this addition made under sec. 68 of the Act. The second category of the said share applicants are those who had paid the share application money through cheques. Their details were also furnished by the assessee to the Assessing Officer supported with their affidavits, income-tax returns and bank statements. Besides, it was also submitted that assessee had allotted shares to these applicants. Thus, we find that the assessee had discharged its primary onus by furnishing the above evidences and submissions that shares were allotted by the assessee to them. The onus thereafter was shifted upon the Assessing Officer to rebut those evidences and submissions of the assessee to justify the addition of 7,84,000 made by the Assessing Officer on this account. Merely on the basis that cash was deposited in their account immediately before issuance of share application money by them from their respective bank account an addition under section 68 of the Act cannot be made on the basis of mere suspicion that it was the unaccounted money of the assessee which was deposited in the bank account of those share applicants which was issued by them through cheques to the assessee. The Assessing Officer ought to have examined the source of money of those shares subscribers. We thus find that the Assessing Officer in this regard also has failed to discharge his onus to justify the above addition of share application money paid through cheques. The Assessing Officer is thus directed to delete the addition of 7,84,000. In total, the addition of 16,11,500 (Rs.8,27,500 + 7,84,000) is directed to be deleted. - Decided in favour of assessee.

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• 2016 (8) TMI 1085
  Eligibility of deduction u/s 80IC - AO has recorded that the assessee has sold one amplifier which was purchased from sister concern namely M/s Saraswati Dynamics, Roorkee and, therefore, the year under which the survey took place the assessee was not engaged in manufacturing activities - Held that:- A.O. has allowed deduction u/s 80IC of the Act in the immediately preceding years. Survey should have been done before allowing deduction u/s 80IC of the Act in the very first year of its claim, but the Revenue has conducted the same in 2008. The survey team failed to collect the evidences during the survey as to how the business was closed for the Assessment Year 2008-09. The operation was closed in November 2008 because of the natural calamities. The production of all the documents were produced by the assessee company before the Assessing Officer related to the business of the assessee to the government organization till September 2006. These documents has categorically revealed that the very foundation of the Assessing Officer’s order was not justified as the Assessing Officer for the Assessment Year 2006-07 has made a clear findings that the assessee has purchased digital powers sub assemblies for which invoice has been raised by M/s Saraswati Dynamics Pvt. Ltd dated 8/3/2006. Thus the sub assemblies cannot be termed as the amplifier as a whole. In the same para, the Assessing Officer mentioned that assessee had sold amplifier to SHAR Centre, Sriharikota for 1,27,51,250/- for which invoice has been raised dated 06.03.2006. But while computing the total income the Assessing Officer has made disallowance for the receipt for amplifier from the total income amounting to 1,27,51,250/- and as relates to total expenses has disallowed purchase of amplifiers as to 57,20,000/-. There was manufacturing activity going on during the relevant assessment years. The disallowance was not proper and the reason for disallowance of the benefit under Section 80IC does not sustain. Thus, the CIT(A) has rightly held that A.O was not correct while disallowing the benefit under Section 80IC of the Act.

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• 2016 (8) TMI 1084
  Penalty u/s.271(l)(c) - Held that:- aAssessee has declared business loss of 64,89,606/- in the return of income duly processed u/s 143(1) of the Act and in the reassessment proceedings u/s 147 of the Act no material record was available before the Assessing Authority to assess the income as the records were destroyed. We also observe that assessee company incurred heavy losses due to which even quantum appeal was also withdrawn due to non-availability of records as well as lack of office data. We also observe that Assessing Officer has not brought on record any material evidence to prove that assessee has concealed any income. It was just due to lack of records and books of account that Assessing Officer has to frame an assessment order by applying net profit rate of 5% on the gross turnover of the assessee. But there was no iota of evidence against the assessee which could prove that there was concealment of income or furnishing of inaccurate particulars. In these circumstances, we are of the view that no penalty is required to levied u/s 271(1)(c) except on the unexplained cash credit of 30,000/-. We find no reason to interfere with the order of ld. CIT(A). This ground of Revenue is dismissed.

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• 2016 (8) TMI 1083
  Disallowance of interest expenses - Held that:- When the assessee is paying interest on the amounts borrowed by it, the only business fund can be used on the ground of business expediency and not otherwise. The assessee is to prove the nexus that the assessee has business transactions with this party but during the course of hearing, the learned counsel for the assessee submitted that he has no business transactions with this party, therefore, the assessee was unable to prove that business funds were utilised for advancing for business purposes. The peculiar facts of this case prove that the assessee has not been able to substantiate its claim that the advance was given on commercial consideration. - Decided against assessee. Ad hoc disallowance of Kapas expenses - Held that:- As cash payments were made to labourers and these were for exigency of business. It is of the view that there was no basis for the authorities below to reject the claim of expenses of the assessee - Decided in favour of assessee. Disallowance of pressing expenses - Held that:- The disallowance made by the authorities below is not justified - Decided in favour of assessee.

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• 2016 (8) TMI 1082
  TDS u/s 195 - Payment of commission to the foreign agents - Held that:- Once, the genuineness of the expenditure has been accepted in earlier years, the payment of commission to the same parities cannot be considered as incurred for non-business purposes. Further, the commission have been paid to the non-resident who do not have any Permanent Establishment in India and, therefore, not liable to tax in India. Therefore, the provisions of Section 195 also do not apply on the facts of the case. Considering the aforementioned facts in totality, we do not find any error or infirmity in the findings of the ld. CIT(A). Both these appeals by the Revenue are accordingly dismissed.

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• 2016 (8) TMI 1081
  Transfer pricing adjustment - ALP in respect of royalty and management fees - Held that:- The issue is covered, in favour of the assessee in assessee’s own case for the assessment year 2010-11. There is no occasion to take a different view of the matter for this year. In any event, one can discard the TNMM and proceed to adopt CUP only when a comparable product or service is available. When no such comparable is available, as in this case, there cannot be any occasion to resort to CUP, and, as such, in such a situation, CUP cannot be accepted as MAM over the TNMM. The very approach underlying these ALP adjustments is not fallacious and legally unsustainable. We, therefore, direct the Assessing Officer to delete ALP in respect of royalty and management fees.

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• 2016 (8) TMI 1080
  Revision u/s 263 - Principal Commissioner was of the view that the AO merely allowed provision for warranty expenditure without looking into the aspect of whether such provision was made on a scientific basis as per guidelines laid down by the Hon’ble Apex Court in the case of Rotork Control India Pvt.Ltd.(2009 (5) TMI 16 - SUPREME COURT OF INDIA ) - Held that:- From perusal of the assessment order it is not discernable whether the AO had applied his mind on this aspect. No doubt once it is established that the AO had applied his mind on this issue and took one of the possible view, it is settled law that CIT cannot exercise jurisdiction u/s 263 of the Act, but in the present case, we have gone through the written submissions filed before the Addl.CIT as well as the ACIT during the course of assessment proceedings wherein the Addl.CIT has sought for details of the provisions made for warranty expenditure. The Addl.CIT, Range 11, in exercise of power vested with him u/s 144A had issued a notice dated 03/12/2012 calling upon the appellant to explain and justify warranty expenditure charges debited of 14.40 cores and how the same has been calculated on any scientific basis. The appellant only stated the policy being followed by it and also made a mere bald statement that provision was estimated following scientific method. Thus, nowhere the assessee-company has stated what is the scientific method followed by it. The AO, without looking into what scientific basis, merely accepted the submission and allowed deduction thereof. Therefore, it cannot be said that the assessee-company had followed the guidelines laid down by the Hon’ble Apex Court in the case of Rotork Control India Pvt.Ltd (supra). Thus, in our considered opinion, constitutes nonapplication of mind on this aspect by the AO. The ratio laid down by the Hon’ble Apex Court in the case of Malabar Industries Co. Ltd. (2000 (2) TMI 10 - SUPREME Court ) is squarely applicable to the facts of the case wherein the Hon’ble Apex Court held that where AO merely accepted the claim of the assessee in absence of any supporting material without making any enquiry, exercise of jurisdiction by the CIT was held to be justified. - Decided against assessee.

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• 2016 (8) TMI 1079
  Deemed dividend u/s 2(22)(e) - Held that:- The assesseecompany i.e. Suresh Enterprises, Pvt. Ltd., is not a shareholder in Shejawadkar Builders Pvt. Ltd. Therefore, the essential condition for invoking provisions of sec.2(22)(e) is not fulfilled in this case. The recipient of loan should be a shareholder in the companies from which loans have been received, was not taken before the lower authorities. Therefore, this issue cannot be adjudicated by this Tribunal. This contention cannot be accepted as it is purely a question of law. Fact that the assessee is not a shareholder in the company Shejwadkar Builders Pvt. Ltd.,is borne out of the assessment order itself. Therefore, the contention raised by the learned DR is rejected. - Decided in favour of assessee.

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• 2016 (8) TMI 1078
  N.P. determination - Held that:- CIT (A) has examined in detail the material placed before him and also considered the average rate of net profit rate shown for the assessment years 2005- 06, 06-07, 07-08, 08-09 and 09-10. The ld. CIT (A) has considered the past history of the assessee as well as considering the material placed before him adopted the rate of 5% which appears to be reasonable looking to the facts and circumstances of the case. - Decided against revenue Addition of receipts/sales made on account of less receipts shown by the assessee from various projects in the books - Held that:- reason to disturb the quantum of turnover which has been declared by the appellant. Moreover, if an amount has to be included in the turnover for this year, the same amount has either to be excluded from the turnover declared in the preceding year or of the turnover declared in the succeeding year. In either case, it is not going to matter much in terms of the ultimate results declared by the appellant. Accordingly, no reason in making an addition to the turnover of the appellant - Decided against revenue Separate liablility for tax on interest income and other income apart from the trading addition sustained - Held that:- We find force in the contention of the ld. Counsel for the assessee that when the interest paid and earned in the course of business in that event deduction on payment of interest is required to be allowed. Accordingly, we delete the addition made by the ld. CIT (A) on this account. In respect of the other income the ld. Counsel for the assessee has demonstrated that it is part of the contract business and therefore, once the net profit is applied for assessing the income, such receipts cannot be separately added to the income. While accepting the contention of the ld. Counsel, we direct the AO to delete the addition. This ground of the assessee is allowed.

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• Customs

• 2016 (8) TMI 1119
  Valuation- Payment of royalty or technical knowhow license fee - Held that:- We find that the adjudicating authority in the Order-in-Original has mentioned that “there is no royalty and technical knowhow or license fee paid/payable”. The learned Commissioner (Appeals) also passed the order on this findings made out in the Order-in-Original, whereas from the Books of Account, it is clear that there is payment of royalty or technical knowhow license fee during the period 1999-2000 and 2000-01. From this, it appears that the records of the appellant have not been verified properly. Even if it is assumed that the adjudicating authority has given the order after verification of this aspect, but nothing was discussed in the Order-in-Original. Therefore, the matter needs to be reconsidered. However, we made it clear that if the royalty or technical knowhow fees said to have been paid as appearing in the Books of Account of the appellant if related to the present transaction, then only it will be the relevant factor for valuation. However, if it is found that the royalty payment shown in the Books of Account is not related to the present transaction and related to some other transaction, the same cannot be relevant for the valuation in the present case. Thus we remand the matter to the adjudicating authority to verify the Books of Account and to give a clear finding whether there is royalty payment and if there is, whether it is related to this transaction or otherwise and thereafter to pass a reasoned order. The appeal is disposed of by way of remand to the adjudicating authority.

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• 2016 (8) TMI 1118
  Loading of 20% of the value - Held that:- As from both the lower authorities order that no documentary evidences have been produced either before the adjudicating authority or before the Commissioner (Appeals). Therefore in the absence of any documentary evidence the loading of 20% of the value appears to be incorrect. Since, the appellant have undertaken to submit the documents if one more opportunity is given, we are of the view that the matter needs to be remanded. We, therefore set aside the impugned order and remand the matter to the original adjudicating authority. The appellant is directed to produce all the necessary documentary evidences before the adjudicating authority, who shall pass de novo adjudication order after affording the personal hearing to the appellant.

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• 2016 (8) TMI 1117
  Seeking revocation of suspension of the C.B. license - Held that:- The suspension and the confirmation have been done in accordance with Regulation 19 of CBLR and within the timeline prescribed therein. We also agree that there is no evidence that the SCN issued by DRI on 28.09.2015 has been received by Commissioner of Central Excise, Indore who is the competent authority to issue notice under Regulation 20(1) ibid. Thus, the contention of the Ld. DR that there is no violation of time-line prescribed under CBLR has force. That having been said, it is pertinent to note that when DRI sent the initial report which led to suspension and of the license confirmation of suspension, it is expected that copy of the SCN should/would have been sent to Commissioner of Central Excise, and Customs Indore for necessary action, if so deemed fit, for revocation of license under Regulation 20 of CBLR. If the DRI SCN has actually been received by Commissioner of Central Excise, Indore, then non-issuance of the SCN as per Regulation 20(1) so far clearly violates said sub regulation inasmuch as such SCN is required to be issued within 90 days of the receipt of the offence report and in such a scenario continuation of suspension would become untenable. However, even if, it is presumed that DRI SCN has not been received by Commissioner of Central Excise and Customs, Indore, we need to take note of the fact that more than 14 months have elapsed since suspension of the appelant's CB license and more than 8 months has elapsed since issuance of the SCN by DRI and still no action for revocation of license under Regulation 20 has been initiated. It is trite to say that suspension cannot be a substitution for revocation and we cannot countenance a situation where suspension is continued for inordinately long time affecting the appellant s means of livelihood without any steps taken to issue SCN for revocation of license under Regulation 20 ibid.

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• Service Tax

• 2016 (8) TMI 1123
  Non fulfilling the obligation to deposit the collected tax to the Government of India - penalty imposed - Held that:- The provisions of Finance Act 1994 and the rules framed therein require deposit of tax by the 5th of the following month. There is no requirement to deposit tax on the date of collection but can be held within the business enterprise till the stipulated date. It would appear that the appellant-assessee had discharged the tax liability belatedly and without waiting for a show cause notice by borrowing from a bank. The sole ground for imposing penalty against the service provider has been their breach of obligation to deposit the tax collected. No reason to disbelieve their claim of inability to pay tax owing to lack of funds. Such possibilities can and do occur in the world of business. That, however, does not confer immunity from being proceeded against for failure to comply with tax obligations. There is also no doubt that there is an obligation cast upon every service provider to collect the tax due through the service recipient and deposit the amount with the exchequer. However, the law does contemplate and is not averse to use of the tax so collected within the business till the stipulated date for payment. That this period was unilaterally extended by the assessee is not in dispute. Yet, the contention of the assessee that delay is not evidence of intention to evade tax is not one that can be dismissed out of hand. A delay is, without doubt, a delay but, in the absence of any other convincing evidence, is more reflective of lack of promptitude than deliberate evasion. Tax and interest were paid without waiting for a show cause notice by recourse to loan from a bank. The need to issue notice is, therefore, questionable and taxability before May 2006 is a matter of doubt. Thus we are of the opinion that this is a fit case for invoking of the provisions of section 80 to set aside the penalties imposed.

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• 2016 (8) TMI 1122
  Service tax liability on the appellant under the category of “sponsorship services” - Held that:- The issue is settled in favour of the assessee in Coca Cola India Pvt. Ltd. case [2014 (12) TMI 667 - CESTAT NEW DELHI] wherein held apart from noting that the issue of sponsorship of Cricket has been held to be not covered by the sponsorship service, by the Tribunal in the case of Hero Motocorp Limited v. CST, Delhi reported (2013 (6) TMI 447 - CESTAT NEW DELHI ), which would not cast any obligation on the appellant to discharge Service Tax, we also note that the Service Tax on the same transaction already stands deposited by M/s. KPH, under the category of Business Auxiliary Services. Demand of Service Tax in respect of the same transaction on the ground that the deposit of Service Tax was under a different category whereas a different category of service has been provided cannot be held to be justifiable.

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• 2016 (8) TMI 1121
  Commercial and Industrial Construction Services - service tax demand - Held that:- The show-cause notice specifically alleges that the appellant had rendered the services of “Manpower Recruitment and Supply Agency Services” and directed them to show-cause as to why the tax should not be demanded from them under the said services. The appellant also replied to the show-cause notice on the allegations made. In our view the adjudicating authority should have confined his findings only to the allegations raised in the show-cause notice and should have recorded his findings whether the services rendered by the appellant falls under the category of Manpower Recruitment and Supply Agency services or otherwise. In Para 7.2 of the impugned order the adjudicating authority categorically accepts that though the show-cause notice is raising the demand under Manpower Recruitment and Supply Agency services, he has confirmed the demand under Commercial and Industrial Construction Services. The reasoning given by the adjudicating authority are unsustainable as they do not fit in any school of jurisprudence. In our view, the decisions of Tribunal as cited by the learned Counsel would directly apply in the case in hand and it has to be held that the confirmation of tax liability on the appellant on a category which is not alleged in the show-cause notice is traversing beyond the allegations made in the show-cause notice.

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• Central Excise

• 2016 (8) TMI 1113
  Cenvat credit - duty paid goods cleared on their own invoices received back due to defect/rejection - Cenvat credit took on the returned goods for reprocessing during 14/7/2001 to 31/3/2005 on the strength of their own invoices - procedure laid down under Rule 173H of CER, 1944 read with Rule 16 of CER, 2002 viz., non-maintainance of separate account for returned goods, no proper documents evidencing payment of duty on rejected goods and no permission was taken from the department before bringing such goods into their factory has not been followed. Rule 16 of Central Excise Rules, 2002 provides that on the duty paid goods brought in the factory, the assessee can avail the Cenvat Credit as if there is receipt of input. Rule does not prohibit taking credit on the assessee’s own invoices. The appellant's own invoice in present case is duty paid invoice therefore whether the invoice is of appellant's own or issued by person returns the goods back, it is one and the same. It is immaterial who has issued invoice but important is whether invoice is duty paid invoice. Therefore irrespective of fact whether the invoices are of appellant or otherwise if duty paid goods is brought in the factory of the assessee credit can be allowed. As regard the contention of the show cause notice as well as adjudication order that the procedure has not been followed, on going through the aforesaid Rule 16, I find that no procedure is prescribed for taking credit on the returned goods, therefore only requirement is duty paid goods should be brought in the factory and same should be recorded in their books and at the time of re-issue of such repaired/reprocessed goods proper duty has to be paid therefore no procedure such as making application or taking permission is required for compliance of Rule 16. Therefore, in my view Cenvat credit availed on the returned goods is allowable. - Decided in favour of appellant

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• 2016 (8) TMI 1112
  Whether exemption extended under Notifications 28/2010-CE and 29/2010-CE are applicable only with regard to Clean Energy Cess levied on coal as contended by department or whether the said exemption will also be applicable with regard to Central Excise Duty levied on coal as contended by the appellant - quantity of Coal removed during periods under Section 11A of the Central Excise Act, 1944 on payment of 5% Excise Duty. Held that:- we find ourselves in agreement with the submission of the Revenue that Section 83(5) of Finance Act, 2010 clearly lays down that Clean Energy Cess shall be in addition to any Cess or Duty leviable on the goods specified in the Tenth Schedule or under any other law for the time being in force, which shows that Clean Energy Cess is only one of the duties of Excise leviable on coal, limited to the said Tenth Schedule. Hence, an exemption from E. Cess and S.H.E. Cess on Clean Energy Cess does not mean exemption from E. Cess and S.H.E. Cess on Central Excise Duty. Substance is also find in the argument that since Basic Excise Duty on coal was introduced only w.e.f 2011, it is incongruous that a notification issued in 2010 can exempt E. Cess and S.H.E. Cess on Basic Excise Duty, for the simple reason that E. Cess and S.H.E. Cess has to be calculated on the aggregate of Central Excise Duty. The Government found it necessary to issue a separate Notification No. 17/2015-CE to rescind erstwhile Notification No. 28 and 29/2010-CE, in our opinion, vindicates the conclusion that the impugned exemption from E. Cess and S.H.E. Cess was initially available only to Clean Energy Cess, w.e.f. 22.06.2010, and that E. Cess and S.H.E. Cess was very much imposable on Central Excise Duty till the amending Notification 14 & 15/2015-CE dated 01.03.2015. Even the CBEC had clarified vide Circular 354/42/2014-TRU 22nd September, 2015 that the exemption from Education Cess and S.H.E. Cess under Notifications No. 28/2010-CE and 29/2010-CE both dated 22.06.2010 (prior to 01.03.2015), is applicable only in respect of Clean Energy Cess leviable on Coal under Tenth schedule to Finance Act, 2010, hence Education Cess and S.H.E. Cess shall be leviable on Excise Duty on Coal. The exemption of E. Cess and S.H.E. Cess vide Notifications No.28/2010-Central Excise and No. 29/2010Central Excise, both dated 22nd June, 2010, also meant that the Notification simultaneously exempted E. Cess and S.H.E. Cess on duty of excise. If this was the case, there would have been no need for the Government to issue, after four years, Notification No. 15/2015-CentraI Excise dated 1st March, 2015 specifically exempting duty of excise from E. Cess and S.H.E. Cess, on all excisable goods. Only because all excisable goods now stood exempted from E. Cess and S.H.E. Cess w.e.f 1st March 2015, there arose the necessity for the Government to issue Notification No. 17/2015-Central Excise dated 1st March, 2015 rescinding Notifications No. 28/2010-Central Excise and No. 29/2010-Central Excise, which had already exempted the levy of Education Cess and Secondary & Higher Education Cess on the Clean Energy Cess leviable on coal much earlier on 22nd June, 2010. Therefore, we have no difficulty in concluding that exemption from E. Cess and S.H.E. Cess under Notifications No. 28 and 29/2010 both dated 22.06.2010 is applicable only with respect to Clean Energy Cess levied under the Finance Act, 2010, but will not be applicable with respect to Central Excise duty levied on coal w.e.f 01.03.2011. - Decided against the appellant

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• 2016 (8) TMI 1111
  Unjust enrichment - Refund claim - amount deposited by them on the direction of the higher judicial forum for hearing and disposing of the appeal filed by the appellant in respect of a period beyond limitation - Held that:- the judgment of the Hon’ble Delhi High Court in the case of Commissioner of Customs (I&G) v. Ericsson India Pvt. Ltd. [2013 (11) TMI 448 - DELHI HIGH COURT] very clearly lays down the law indicates that the amount deposited after the clearance of the goods, question of unjust enrichment does not arise. Therefore, both the lower authorities have erred in coming to a conclusion that the refund claim is hit by bar of unjust enrichment. Even the reliance by the Revenue as to the applicability of the unjust enrichment to captive consumption is correct in the circumstances in which it was delivered but in the present case, the facts are totally different, the amount was deposited by the appellant on the direction of the appellate authorities. Therefore, the impugned order is unsustainable and liable to be set aside. - Decided in favour of appellant with consequential relief

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• 2016 (8) TMI 1110
  Cenvat credit - welding electrodes - they are general purpose items used in various work shops of the appellant and, as such, has no connection with their manufacturing activity - Held that:- the issue has been settled in favour of the Assessee in various judicial pronouncement which are being followed by the Tribunal. By applying the decision of Tribunal in the case of Lafage India Pvt. Ltd. vs. CCE, Raipur [2016 (8) TMI 1012 - CESTAT NEW DELHI] and in the case of Mangalam Cement Ltd. vs. CCE, Jaipur - I [2016 (8) TMI 593 - CESTAT NEW DELHI] by following the decision of Hon’ble Chhattisgarh High Court in Ambuja Cements Eastern Ltd. vs. CCE, Raipur [2010 (4) TMI 429 - CHHAITISGARH HIGH COURT], i find no merit in the denial of credit on these welding electrodes, so the impugned order is not sustainable on this issue. Cenvat credit - light fittings - these high-bay lighting systems were mounted on civil structures to illuminate the factory premises - Held that:- the admitted fact is that they are classified under the eligible Chapter Heading (Chapter 84, 85 and 9405) of the Tariff and are used by the manufacturer in the factory of manufacture. The items are light structures, lamps, high mast light, tubes/glass and fixtures. The eligibility for credit is thus satisfied. I find no substance in the reasoning of the Original Authority regarding light fittings becoming part of civil structure. I find this by itself is not a ground for denial of credit. Admittedly the various light fittings and fixtures were brought into the factory after duty payment and were installed for the intended purposes. To call these items as immovable property is without basis. These goods are used within the building premises, mills and shops to enhance illumination. This enables round the clock operation of the assessee. - Decided in favour of appellant

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• 2016 (8) TMI 1109
  Refund claim - period of limitation - duty paid under protest - appellant stated that the credit on certain services are at the moment under judicial scrutiny and keeping in mind the instructions of the Revenue they had reversed the credit - Revenue argued that letter of protest has been written to Superintendent of Customs and not to Superintendent of Excise - Held that:- I find that the letters dated 26/03/2008 and 03/07/2009 were addressed to the Superintendent of Excise & Customs and to the Commissioner of Central Excise, respectively. I find that the letters are in the nature of protest though the word protest has not been mentioned in the said letters. In these circumstances, I hold that reversal has made protest and the limitation clause cannot be invoked against the appellant. - Decided in favour of appellant

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• 2016 (8) TMI 1108
  Cenvat credit - Special denatured spirit received from M/s.Hanil Era Textile Ltd. - M/s.Hanil Era Textile Ltd. had fraudulently taken excess Cenvat Credit by showing more Cenvat Credit than available as per law, as a closing balance at the end of the month of July 2008 and used the same to pay duty for clearance of special denatured sprit to the appellant - Held that:- there is no evidence produced to assert that the appellants knew that the supplier of goods had wrongly availed Cenvat Credit. The decision of the Tribunal in the case of RS Industries Vs. CCE, New Delhi [2002 (11) TMI 169 - CEGAT, NEW DELHI] squarely covers the issue in this case, therefore, by relying on the same, Cenvat credit is not allowed. - Decided in favour of Revenue

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• 2016 (8) TMI 1107
  Whether the entire consideration received by the manufacturing unit in respect of goods cleared clandestinely has to be treated as cum-duty price and the duty required to be paid by them needs to be re-quantified - Clendestine removal - Held that:- in view of the decision of Hon'ble supreme Court in the case of Amrit Agro Industries Ltd. vs. CCE [2007 (3) TMI 14 - SUPREME COURT OF INDIA], the department itself accepted that the normal price includes the duty element and as such the entire consideration has to be considered as inclusive of excise duty. Therefore the demand confirmed against the appellant is required to be recomputed by taking the entire value of the goods as being cum-duty. For the said purpose the matter is being remitted to the adjudicating authority for doing the needful. Imposition of penalty on proprietor - Rule 26 of the Central Excise Rules, 2002 - Appellant contended that inasmuch as penalty already stands imposed upon the proprietary unit, the imposition of separate penalty upon the Proprietor is not called for - Held that:- by following the decision of Tribunal in the case of Royal Springs vs. CCE, New Delhi-I [2002 (4) TMI 547 - CEGAT, NEW DELHI], the penalty imposed upon the Prop. was set-aside, the said decision stands confirmed by the Hon'ble Supreme Court in Commissioner vs. Royal Springs [2002 (10) TMI 788 - SUPREME COURT]. The issue is well settled and does not require the support of any further decisions. Therefore, the imposition of penalty upon Sh. Kewal Krishan Ajimal, Prop. of M/s Vishavakarma Hydraulic Works is set aside. - Appeals disposed of

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• 2016 (8) TMI 1106
  Demand - fraudulent Cenvat credit availed on the invoices issued by M/s. Ispat Industries Ltd - Held that:- On going through decisions of this Tribunal in cases of Amar Ispat Pvt Ltd Vs. Commissioner of Central Excise Thane-I, it is found that facts, of other cases, evidences and modus operandi are more or less same in these decisions therefore the ratio of the various decisions of Tribunal are squarely applicable in the present case. Therefore it is established that the appellant have availed Cenvat credit fraudulently without receipt of the goods. - Decided against the appellant

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• 2016 (8) TMI 1105
  Refund claim - unutilized credit lying in the Cenvat account due to closure of the factory - Cenvat got accumulated due to exemption under Notification No. 30/2004-CE dated 9.7.2004 and the goods have been cleared for export - Held that:- this issue has been considered by various High Court’s judgments as well as two Larger Bench decisions of this Tribunal. It is found that the Ld. Commissioner (Appeals) in the impugned order has not dealt with any of such judgments. Therefore the matter need reconsideration in the light of the judgments of Larger Bench in the case of Gauri Plasticulture (P) Ltd. Vs. Commissioner of Central Excise, Indore [2006 (8) TMI 225 - CESTAT, MUMBAI], Steel Strips Vs. Commissioner of C.Ex., Ludhiana [2011 (5) TMI 111 - CESTAT, NEW DELHI] and Karnataka High Court judgment in the case of Union of India Vs. Slovak India Trading Co. Pvt. Ltd. [2006 (7) TMI 9 - KARNATAKA HIGH COURT]. - Appeal allowed by way of remand

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• 2016 (8) TMI 1104
  Cenvat credit - fraudulently availed on the dealers’ invoices without receipt of the inputs covered therein - appellant submitted that the goods were purchased, received and used in the appellant's factory as per the various records maintained by them and the goods covered by the invoices were received by the appellants - Held that:- that the department’s whole case is based on transporter’s statement and statement of loading clerk who stated that the goods were not transported to Pune but to Nagpur. I find that mere statement is not sufficient to establish charge of fraudulent cenvat credit. Whether the goods were physically received or otherwise by the appellants is a positive act, which must be proved with tangible evidence beyond any doubtand not with circumstantial evidences. In the present case charge of non receipt of goods was made against the appellant. The director in his statement categorically stated that they have received the goods covered under the sale invoices of dealers, the entries of such receipts were made in the stock account i.e. Form IV register and also in the accounts purchase ledger, the payments of the said purchases were made through cheques. This statement of the director could not be negated by the department. The charge of non-receipt of goods is only on the statements of transporter and loading clerk of the weigh bridge. The said statements can only be relied upon only if the same is corroborated by independent and cogent evidence, which department failed to adduce. Moreover, when this sole evidence was relied upon, which is contradictory to the statement given by the director of the appellants. In such case the department must have allowed the cross examination of the transporter, which department failed to do. Therefore statements of third person without cross examination and without support of corroborative evidence can not be used against the appellants. Hence, the order passed by the adjudicating authority is legal and proper and the impugned order is unsustainable. - Decided in favour of appellant

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• 2016 (8) TMI 1103
  Liability of interest and penalty - Suo moto abatement - regularized by the Commissioner though at later stage but the grant of abatement should be considered deemed to have been granted when the appellant has suo moto taken the abatement - Held that:- the appellant had taken the suo moto abatement by paying less duty to that extent towards the closure of the factory from 15.7.1999 to 23.7.1999 but for the same period the Commissioner vide order had allowed abatement. In this peculiar fact I am of the view that the abatement suo moto taken by the appellant was knowingly allowed by the Commissioner. Therefore the suo moto abatement has been regularized by the Commissioner’s order. The abatement stand granted from the date of suo moto abatement taken by the appellant. I therefore do not see any reason why the interest is payable, consequently penalty is also not imposable. Therefore, the interest and penalty is set aside. - Decided partly in favour of assessee

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• 2016 (8) TMI 1102
  Demand of duty - Rule 8(3A) of Central Excise Rules, 2002 - Held that:- we find that the Tribunal by following the judgements of the Hon'ble Gujarat and Hon'ble Madras High Courts held that demand of duty under Rule 8(3A) is unsustainable. Both the Hon'ble Gujarat High Court and Madras High Court have held that condition contained in Rule 8 (3A) of Central Excise Rules 2002 for payment of duty "without utilisation of cenvat credit" is contrary to the scheme of availment of cenvat credit under CCR and the said Rule 8(3A) is arbitrary and violative of Article 14 of the Constitution. Accordingly, the Hon'ble High Court has struck down the Rule 8(3A) as unconstitutional. Therefore, in view of the same, the impugned order is set aside. - Decided in favour of appellant with consequential relief

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• 2016 (8) TMI 1101
  Condonation of delay - 1802 days - appellant is a Government department and had to seek prior approval from the higher authorities and the matter was also under consideration by the Ministry of Home Affairs, so the appeal could not be filed within the stipulated time. Also were under the impression that the appeal filed against OIO No. 8/2011 dated 25.02.2011 would cover the issue involved in the present impugned order and hence, did not file a separate appeal against the impugned order. Held that:- by following the decision of Tribunal in their own case [2013 (11) TMI 100 - CESTAT MUMBAI] wherein the Mumbai Bench of the Tribunal being satisfied with the very same reason and condoned the delay of 826 days, delay is condoned in this appeal also. - Decided in favour of appellant

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• 2016 (8) TMI 1100
  Refund claim - acumulated Cenvat credit due to closure of factory - Rule 5 of CENVAT Credit Rules, 2004 - Held that:- it is found that in the various judgements, Courts have held that accumulated credit on account of closure of factory can be claimed as refund under Rule 5. Therefore, in view of the above, refund under Rule 5 is admissible for accumulated credit on account of closure of factory. - Decided in favour of appellant with consequential relief

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• 2016 (8) TMI 1099
  Demand of differential duty - duty short paid by showing the lower prices to their products which were cleared to few buyers than the prices they have charged to other buyers - Held that:- we find that the first appellate authority has not considered the fundamental / factual matrix as to that during the period in question; different prices could be charged to different class of buyers. In order to appreciate the factual matrix, we deem it fit to set aside the impugned order and remand the matter back to the first appellate authority to reconsider the issue afresh after following the principles of natural justice. - Appeal allowed by way of remand

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• CST, VAT & Sales Tax

• 2016 (8) TMI 1116
  Levying tax at 4/5% on the contractee - failure to comply with Section 22 (3) of the Andhra Pradesh Value Added Tax Act 2005 in deducting TDS from the bills of the contractor - Held that:- On a conjoint reading of Rules 18 (1) (bc) and (bd), it is evident that the contractor is required to obtain Form-501-A from the Assistant Commissioner, and supply the same to the contractee; the contractee is required to complete the Form and supply the same to the contractor within fifteen days from the date of each payment; and the contractor is required to submit Form-VAT-501 or Form VAT-501-A, duly certified by the contractee, together with Form VAT 200 by the 20th of the month, following the month in which the payment was received by them. On deducting tax at source from the bills of the contractor, the contractee is obligated to remit the tax deducted at source to the Government. Filing Form-501-A, along with their monthly returns, would enable the contractor to adjust the tax deducted at source, from their bills by the contractee, with the tax payable by them on their turnover. That does not absolve the contractee to deduct tax at source as it is a statutory obligation cast on them under Section 22 (3) of the Act. Assessing authority, while examining whether a part of the turnover on which tax has been levied on the petitioner consists of Inter-State works contracts and pure service contracts, shall also consider whether, even in respect of local works contracts, the contractors had paid tax thereon and, if the petitioner furnishes proof of payment of tax by the contractors on the very same turnover, to then consider whether tax can be levied on the petitioner as it may then amount to taxing the very same deemed sale of goods twice. The amount already paid by the petitioner i.e., for 4.27 Crores, shall remain with the Department till a fresh assessment order is passed. The assessing authority shall, after giving the petitioner an opportunity of being heard and a personal hearing, pass orders afresh in accordance with law at the earliest, in any event within three months from the date of receipt of a copy of this order.

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• 2016 (8) TMI 1115
  Best judgment assessment - Rejection of accounts - Held that:- Assessing authority did not lay its hand or rest his estimation on any material that may have been found in the possession of the assessee. While it was open to him to undertake an assessment to the best of his judgment consequent to the rejection of account, the same could not have been based on surmises and conjectures. It is settled law that while a best judgment assessment necessarily entails an exercise of estimation which may be tinged with a degree of guess work, the same cannot be completely disengaged or unconnected with material maintained and disclosed by the assessee. The estimation itself which had to be made to the best judgment of the assessing authority has to be a judicious and empirical exercise. In the facts of the present case the enhancement of the turnover to 3,00,000, its subsequent reduction by the first appellate authority to 2,30,000/- is not based on any material or evidence that may have been collected or which may have been found during the course of assessment. Such an assessment far from being characterized as one having been made to the best of the judgment of the authority, can only be described as capricious and whimsical. The orders in the opinion of this Court cannot be sustained

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• 2016 (8) TMI 1114
  Levy of penalty under the provisions of Section 13-A (4) of the U.P. Trade Tax Act 1948 - Held that:- Significantly neither the assessing authority nor for that matter the Tribunal return or record any finding as to whether the goods which were seized had not been accounted for in the books of accounts which were maintained by the assessee. As noted above, both the assessing authority as well as the Tribunal have primarily proceeded to consider a failure on the part of the assessee to establish how the raw material had entered into the State to be fatal to its case. The Tribunal as well as the assessing authority have also referred to inconsistencies in the pleas taken by the assessee in respect of the bills and gate passes under which the raw material is said to have entered into the State. The assessing authority as well as the Tribunal have permitted the introduction of considerations that were wholly irrelevant to the exercise of power under section 13A. The goods were shown to belong to a bona fide dealer. They were shown to have been duly entered in the books of accounts. How the raw material from which the goods were manufactured entered into the State was a wholly irrelevant consideration and clearly tainted the statutory enquiry beyond repair. Having embarked upon this exercise, in the opinion of this Court, both the assessing authority as well as the Tribunal completely misdirected the enquiry, which was liable to be undertaken under sub-section (4). It is on account of this approach that no findings have been entered by the Tribunal as to whether the goods had been duly accounted for by the assessee. The Tribunal, this Court notes, does not refer to any evidence nor records any reason to dispel what the first appellate authority recorded in his order namely that the goods had been duly recorded in the books of accounts of the assessee.

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• Wealth tax

• 2016 (8) TMI 1120
  Eligibility of exemption from Wealth Tax under the provisions of Section 2(ea) of the Wealth Tax Act, 1957 whether lands were being used by the assessee for industrial purposes ? Held that:- The issue has been decided against the appellant by a Division Bench judgment of this Court The Commissioner of Wealth Tax, Patiala versus M/s Industrial Cables (India) Limited [2013 (4) TMI 832 - PUNJAB AND HARYANA HIGH COURT]

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• Indian Laws

• 2016 (8) TMI 1098
  Eligibility of benefit of the presumption under Section 118 of the NI Act - Held that:- Both parties have failed to establish the respective fact asserted. The respondent failed to prove having paid US$ 1,13,829.78 to appellant No.2 and the appellants failed to prove that the cheques were issued as security for payment yet to be received. Therefore, the learned Single Judge has rightly held that circumstances enwombing the facts asserted would be relevant. The appellants admit that the cheques were issued in October, 2002 but claimed that they were towards security for 53.5 lacs which the respondent had offered to invest with them. As per the appellants the respondent did not invest any money with them. The dates of the cheques which are 11 in number span over one year commencing from December, 2002 and ending on January, 2004. The appellants have to explain as to why they did not write any letter to the respondent informing that since he promised investment had not been made the cheques which were offered as security should be returned. This would be the normal conduct of any person who had issued the cheques in the circumstances pleaded by the appellants. The appellants have failed to render any satisfactory explanation for not having so written to the respondent. We conclude by holding that the respondent would be entitled to the benefit of the presumption in his favour raised under Section 118 of the NI Act, 1881 and since the presumption has not been rebutted, notwithstanding the respondent having failed to prove consideration being paid as claimed by him he would be entitled to the decree passed by the learned Single Judge which we find is with interest @ 9% per annum simple.

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• 2016 (8) TMI 1097
  Guarantee executed by the defendant - period of limitation extended on account of the acknowledgement of debt, in terms of Section 19 of the Limitation Act, 1963 - Held that:- Where a payment is made on account of a debt, before the prescribed period of limitation under the said Act expires, by the debtor, a fresh period of limitation is set into motion from the time such payment is made. In the present appeal, it is observed that subsequent upon the disbursement of the loan on 23.12.2000, the appellant has not averred that any payment has been received from the defendants. In the facts and circumstances, the submission made on behalf of the appellant to the effect that there was an acknowledgement on the part of the defendants, in view of the guarantee furnished by the latter, which according to them was a continuing guarantee and extended the period of limitation on account of acknowledgement of debt, is fallacious and devoid of merits. There admittedly is no other acknowledgement of debt in writing by the defendants apart from this unsupported argument of “continuous guarantee” set up by the appellant. Thus, the provision of Section 19 of the said Act, are not attracted to the facts of the present case.

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