TMI Tax Updates - e-Newsletter
September 14, 2016

Case Laws in this Newsletter:

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

Articles

1. Government notifies September 12, 2016 as the appointed date for GST Council Provisions

   By: Bimal jain

2. AMENDMENT OF CONSTITUTION FOR GOODS AND SERVICES TAX

   By: DR.MARIAPPAN GOVINDARAJAN

3. Definition Of Goods-Issues and comparision

   By: parth sharma

4. Removal of mandatory warehousing requirements for EOUs, STPIs, EHTPs etc,.

   By: RadheyShyam Mangal

Notifications

Companies Law

1. F. No. 1/5/2013 CL-V - dated 12-9-2016 - Co. Law

Notification for amendment to Schedule V of Companies Act, 2013

2. File No. 1/36/2013-CL V - dated 9-9-2016 - Co. Law

Companies (Mediation and Conciliation) Rules, 2016

Customs

3. F. No. 354/119/2016-TRU - G.S.R. 865(E) - dated 7-9-2016 - ADD

Corrigendum- Notification No.44/2016-Customs (ADD), dated the 8th August, 2016

FEMA

4. F. No. 1/31/EM-2015 - dated 8-9-2016 - FEMA

Corrigendum - Notification No. FEMA 5(R)/2016-RB, dated April 01, 2016

Income Tax

5. 80/2016 - dated 8-9-2016 - IT

Agreement between the Government of the Republic of India and the Government of Republic of Seychelles for the Exchange of Information with respect to taxes

6. 76/2016 - dated 2-9-2016 - IT

Agreement between the Government of the Republic of India and the Government of Republic of Maldives for the Exchange of Information with respect to taxes

Circulars / Instructions / Orders

Income Tax

1. 33/2016 - dated 12-9-2016

Clarifications on the Direct Tax Dispute Resolution Scheme, 2016

Customs

2. 31/2016 - dated 12-9-2016

Instructions regarding implementation of Rules of Origin under Free/Preferential Trade Agreements and the verification of preferential Certificates of Origin

Highlights / Catch Notes

Income Tax

• Retrenchment compensation reimbursed by original owner to subsidiary is an admissible deduction under contractual agreement.

  Case-Laws - HC : Retrenchment compensation paid by subsidiary to the workers of the two units which belonged to the assessee and which were transferred to the subsidiary and which amount was reimbursed by the assessee under a contractual agreement - allowable as an admissible deduction - HC
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• High Court Dismisses Petition as Assessee Forfeits Right to Challenge Assessing Officer's Jurisdiction Due to Delayed Objection.

  Case-Laws - HC : Reopening of assessment - The assessee had questioned the territorial jurisdiction of the assessing officer and the assessing officer held that the assessee had lost the right to raise the objection by efflux of time. - petition dismissed - HC
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• Rental Income from Leasing to BHL Classified as Business Income, Not House Property Income.

  Case-Laws - AT : Nature of rental income - Income from house property or business income - acquiring and leasing properties - rental/licence fee received by the assessee in respect of the subject property given on lease to BHL is liable to be assessed as business income and not as income from house property - AT
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• Penalty u/s 271(1)(b) of Income Tax Act for Non-Compliance Deemed Unjustified; No Default Found.

  Case-Laws - AT : Penalty u/s 271(1)(b) - non comply with notice u/s 142(1) - the failure of the assessee to comply with such notice cannot be said to be a default which may justify the levy of penalty u/s 271(1)(b) of the Act.- AT
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• Interest on FDRs not credited in books isn't income; Form 26AS figures aren't part of books.

  Case-Laws - AT : Accrual of interest on FDR - once no sum is credited in the books of accounts of the assesssee, it is really not known how any figure reflected in Form 26AS can be treated as income of the assessee as Form 26AS neither forms part of books of accounts of the assessee. - AT
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• Penalty u/s 271(1)(c) Invalid Due to Procedural Oversight in TDS Case, No Order u/s 201(1) Passed.

  Case-Laws - AT : Penalty u/s. 271(1)(c) - order passed u/s. 201(1)/201(1A) or u/s. 143(3) - non deduction of tds - not passing order u/s 201(1) before initiation of proceedings u/s 271C make imposition of penalty invalid - AT
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• Company Violates Financial Reporting by Hiding Capital Asset Sale Profits, Breaching Section 115JB of Income Tax Act.

  Case-Laws - AT : MAT - it is apparent that the assessee company had directly absorbed the profit derived from the sale of its capital asset in the balance sheet thereby avoided to disclose the same in its profit and loss account in order to escape from the clutches of the provisions of section 115JB of the Income Tax Act. This is against the provisions of the Companies Act as well as against the Income Tax Act. - AT
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Customs

• Net Foreign Exchange for 100% EOUs Calculated Annually from Year After Manufacturing Starts.

  Case-Laws - HC : 100% EOU - computation of NFE would be financial year wise and which would be the beginning of the financial year following the year under which the manufacturing activity commences. - HC
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• Customs House Agent's severe neglect leads to breach of CHALR 2004 Regulations 13 and 19, no leniency allowed.

  Case-Laws - AT : The appellant gravely failed to discharge its duties as CHA and thereby grossly violated Regulations 13 & 19 of CHALR, 2004 - Such serious violation on the part of the CHA can hardly deserve any condonation or leniency. - AT
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Service Tax

• Cenvat Credit Denied for Service Tax on Rent-a-Cab Services Used for Employee Transportation to Factory.

  Case-Laws - AT : Cenvat credit - service tax paid on Rent-a-cab service for picking up and dropping down of its employees to the factory and back - credit was rightly denied - AT
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• Appellant's Procedural Error in Not Registering as ISD Shouldn't Deny CENVAT Credit on Received Services.

  Case-Laws - AT : CENVAT Credit - the only irregularity committed by the appellant is that the Headquarters of the appellant was not registered as ISD Distributor. This being a procedural irregularity, therefore, cannot be made the basis of denying CENVAT Credit on services received by the appellant - AT
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• Proprietor Granted Service Tax Refund as Individual and Business Are Not Separate Entities.

  Case-Laws - AT : Refund claim - refund claim was made by M/s. A. K. Associates, a proprietary firm of Shri. Kishor Hiralal Daga whereas the Service Tax for which refund was sought for was paid by Shri. Kishor Hiralal Daga - proprietor and proprietorship form are not separate legal entities - refund allowed - AT
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Central Excise

• 50% of Unremitted Sales Tax Must Be Included in Taxable Value, Appellants' Collections Under Scrutiny.

  Case-Laws - AT : Valuation - amounts collected by the appellants as Sales Tax from the customers but not paid to the State Sales Tax authorities - 50% of the amount not payable to state, is liable to be included in the value - AT
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• Cenvat Credit on Imported Capital Goods Valid Under Target Plus Scheme; No Allegation of Non-Receipt or Entitlement Issues.

  Case-Laws - AT : Cenvat credit - import of capital goods against the Target Plus Scheme - in the absence of any allegation regarding non receipt of capital goods and the appellant's non entitlement of any other ground, the credit on these capital goods received and installed in the appellant's premises cannot be denied - AT
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• Rebate Claim Approved for Duty on Exported Goods u/r 18, Despite Area-Based Exemption Notification No.1/2010-CE.

  Case-Laws - AT : Rebate claim - duty paid on export of goods under Rule 18 of the Central Excise Rules when the appellants were working under area based exemption under Notification No.1/2010-CE dated 06.02.2010 - Refund allowed - AT
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• Rule 2(l) of Cenvat Credit Rules, 2004 allows claims on Cenvat credit for payroll accounting services.

  Case-Laws - AT : The inclusive definition given in Rule 2(l) of the Cenvat Credit Rules, 2004 covers accounting, which is a broader concept and includes payroll accounting, within its fold for which, appellant shall be entitled to get the Cenvat credit - AT
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VAT

• Sub-contractor payments excluded from main contractor's turnover for VAT and sales tax per Supreme Court ruling.

  Case-Laws - SC : Works contract - sub-contract - The value of the work entrusted to the sub-contractors or payments made to them shall not be taken into consideration while computing total turnover - SC
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Case Laws:

• Income Tax

• 2016 (9) TMI 513
  Retrenchment compensation paid by subsidiary to the workers of the two units which belonged to the assessee and which were transferred to the subsidiary and which amount was reimbursed by the assessee under a contractual agreement - allowable as an admissible deduction - Held that:- The Court held that by virtue of the fact that the employees had been taken over by the transferee company with the benefit of employment on and from the date of transfer, strictly speaking with no right to claim gratuity, it was difficult to see how the payment, which was made by the assessee to the transferee company could be really treated as gratuity. The Court held that it would be more appropriate to describe the payment as a contribution made voluntarily to the transferee company in order to provide funds to it for payment of gratuity, which could be claimed by the employees from the transferee company, though in respect of the period of employment with the assessee company. The judgment of our Court in Suren & Co. (1981 (4) TMI 31 - BOMBAY High Court ), which held the field as on the date of the Tribunal's order, was later on set aside by the Supreme Court in the case of W.T. Suren And Co. Ltd. vs. C.I.T. [1998 (2) TMI 4 - SUPREME Court] holding that the amount of gratuity paid to the transferee company was not on account of transfer of the unit but on account of stopping of that business and the employees working in that unit becoming surplus resulting in termination of their services. The payment of gratuity was made by the assessee, not on its own but at the instance and on behalf of the employees, whose services, though terminated in the assessee company, were taken over by the transferee company and that this was a payment of gratuity amount with the consent of the employees. In that view of the matter, the Supreme Court held that the payment of gratuity awarded by the assessee to the transferee company was, in the circumstances of the case, an expenditure wholly laid out or expended for the purpose of the business of the assessee and was an allowable deduction. This judgment of the Supreme Court clearly supports the Assessee's case here, though in the present case, as we have noted above, we are not really concerned with the payment of gratuity, but with payment in accordance with a commercial obligation. In that view of the matter, we are clearly of the opinion that the payment of Rs. 13.91 lakhs made by the Assessee to its subsidiary is an amount expended for the purpose of the business of the Assessee, and is, thus, an admissible deduction.

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• 2016 (9) TMI 512
  Reopening of assessment - time limit to raise objections - Held that:- Admittedly, the objection was not raised by the appellants within 30 days even from the date of issuance of notice under Section 148. The objection was raised by a letter dated 29th April, 2015 and the notices under Section 148 were received on 27th March, 2015. It is not also possible to contend that the period of limitation shall commence only from the date of issuance of the notice under Section 148. Notice under Section 148 was issued because prior thereto search and seizure was conducted and thereafter survey was conducted presumably leading to incriminating discovery. Thereafter documents were impounded and it is on the basis of these steps that the notice under Section 148 was issued. Each one of these steps was taken subsequent to 15th November, 2014 but the writ petitioner did not raise any objection. The assessee had questioned the territorial jurisdiction of the assessing officer and the assessing officer held that the assessee had lost the right to raise the objection by efflux of time. We, as such, find no substance in the case of the appellant.

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• 2016 (9) TMI 511
  Rental/licence fee received in respect of property given on lease to BHL - acquiring and leasing properties in the State of Jammu & Kashmir - liable to be assessed as business income and not as income from house property - Held that:- ‘Chennai Properties And Investment Limited’ (2015 (5) TMI 46 - SUPREME COURT), is directly and squarely applicable on this point. It holds that since the main object of the assessee was to acquire and let out properties, from which letting out, income was earned, such income is to be treated as business income. The ratio laid down by the Hon’ble Apex Court is that the nature of the activity of the assessee and the nature of the operation in relation to the leasing out of land, which is the deciding factor as to under which head the profits and gains earned from leasing out are to be assigned. Their lordships have held that so as to interpret such activities, the objects of the company must also be kept in view. Now, as observed, in the present case, undisputedly, the main object of the assessee happened to be acquiring land and buildings in the State of J & K and letting out the same. This is exactly the same object as was that of the assessee in ‘Chennai Properties And Investment Limited’ (supra). Therefore, in accordance with ‘Chennai Properties And Investment Limited’ (supra), we hold that the assessee is correct in contending by way of the additional ground taken that the rental/licence fee received by the assessee in respect of the subject property given on lease to BHL is liable to be assessed as business income and not as income from house property, as the assessed by the Taxing Authorities. The additional ground taken by the assessee is thus, accepted.

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• 2016 (9) TMI 510
  Penalty u/s 271(1)(b) - non comply with notice u/s 142(1) - Held that:- The assessee was given show cause notice u/s 142(1) was issued alongwith detailed questionnaire on 19.11.2012, requiring the assessee to furnish in writing some specified information on or before 29.11.2012. On the said date, the assessee did not attend the proceedings nor filed the request of adjournment. The AO has given show cause notice on 01.02.2013, as to why the penalty of Rs. 20,000/- should not be levied upon the assessee for non-compliance of statutory notice u/s 142(1) of the Income-tax Act, 1961. As per the assessee’s version before the appellate authority and also in the written submission that on the said date the assessee’s counsel was not available as he had gone to I.T.A.T., Indore Bench, Indore, for hearing and moreover, the details were still awaited to be taken out from the records, which were to be submitted before the AO and which was to be received from 50 District Offices all over Madhya Pradesh. The Officer incharge Mr. Lalit Chaturvedi had verbally informed the AO and requested for adjournment. Thus, it is seen that the counsel of the assessee was preoccupied with hearing before Tribunal, hence, the assessee could not appear before the AO on specified date. Further, the information was to be collected from 50 locations spread all over M.P. State, hence, it could not be produced on the stipulated date. It is also noticed that in subsequent hearing the assessee has furnished all information as required and assessment was to be framed u/s 143(3) of the Act. Therefore, following the principle enunciated in the decision of Apex Court in the case of Hindustan Steel Limited vs. State of Orissa, [1969 (8) TMI 31 - SUPREME COURT], we are of the view that there was no deliberate defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. In the light of these facts and circumstances, the failure of the assessee to comply with such notice cannot be said to be a default which may justify the levy of penalty u/s 271(1)(b) of the Act. - Decided in favour of assessee

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• 2016 (9) TMI 509
  'Service' eligible for exemption under Section 10AA - trading activity carried on by the SEZ unit of the respondent-assessee - Held that:- A perusal of the order of the High Court [2013 (10) TMI 1418 - ANDHRA PRADESH HIGH COURT] shows that this aspect is not considered and brushed aside by merely saying that the Tribunal has held it to be a 'service' and that it is a question of fact. No doubt, insofar as activity carried on by the respondent-assessee is concerned, factual aspects are not in dispute. However, whether that would constitute 'service' within the meaning of Section 10AA of the Act would be a question of law and not a question of fact. The High Court is, therefore, in error in not entertaining the said plea and dismissing the appeal of the Revenue by labelling it as a question of fact. We, accordingly, set aside the order of the High Court and remand the case to the High Court to decide the aforesaid question of law.

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• 2016 (9) TMI 508
  Rejection/refusal of extension of approval under Section 35(1)(ii) - refusing the extension of the approval granted by the High Court on the ground that the same was made by the Director and not by the competent authority i.e. the Finance Minister - Held that:- We have perused the order dated 22.10.2010 refusing to renew the approval for the period 01.04.2008 onwards. From the said order it is evident that the initial grant of approval was ordered by the Minister but the same was conveyed by the Director. The order dated 22.10.2010, recites that the decision not to extend the approval was approved by the prescribed authority. It has been averred by the appellant that under Rule 3, Govt. of India (Transaction of Business) Rules, 1961 such decisions are required to go to the CBDT and thereafter to the Minister which requirement was complied with in the present case. In view of the aforesaid averments, which remained uncontroverted, we are of the view the High Court was not justified in striking down/refusing the extension of the approval granted on the ground that the same has been passed by the Director, who is not competent to do so. 7. Accordingly, we set aside the order of the High Court and allow this appeal.

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• 2016 (9) TMI 507
  Disallowance of deduction u/s 80 IB - Tribunal upholding the decision of ld. CIT(A) reducing the disallowance of deduction u/s 80 IB on the issue of inter-unit investments - allocating interest expenditure of Ludhiana unit for the funds invested in Unit-I, Unit-II and Unit-III at Samba (J&K) based on ration between own capital and borrowed funds - Held that:- The CIT (Appeals) held that the assessee could only make a claim that such transfers were from self-generated funds which did not carry any interest. In this regard, it was further noted that as per the balance-sheet of the Ludhiana Unit, interest-free funds were available and that the funds had also been borrowed by the Ludhiana Unit from financial institutions on interest. The CIT (Appeals), accordingly, adopted the approach of finding out the ratio of the borrowed funds to the interest-free funds. It was found that as per the balance-sheet as on 31.03.2008, about 43 per cent of the capital constituted the interest-free reserves amounting to about Rs. 48.6768 crores, whereas, the borrowed funds constituted 57 per cent of the available funds aggregating to about Rs. 65.35 crores. He, accordingly, apportioned the amounts in respect of the three units depending on the amounts advanced by the Ludhiana Unit to each of them. The ITAT upheld this decision. The approach of the CIT (Appeals) and the ITAT cannot be said to be perverse, irrational or absurd. In fact, it is settled now that when there are interest-bearing funds and interest-free funds, the presumption is that an assessee would invest the amount yielding exempt income from the interest-free funds in the first instance. However, keeping all the facts and circumstances of the case in mind, the appellate authority decided to apportion the amount. - No substantial question of law.

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• 2016 (9) TMI 506
  Claim of higher deprecation - Whether the Appellate Tribunal is correct passing a cryptic order in sustaining the action of the respondent in restricting the claim of higher deprecation of 15% as against the claim of 60% for the computer machineries, thereby confirming the addition of the differential depreciation in the computation of taxable total income? - Held that:- We are of the considered opinion that orders of the authorities and the appellate tribunal, are correct, in holding that the machineries, for which, depreciation to the extent, sought for, do not fall under the definition, "computer, including computer software". Fact that the machineries do not fall under the abovesaid category, cannot be termed as perverse and therefore, the order impugned, does not call for interference. We have given our careful consideration, as to how both the appellate authority and the tribunal have considered the facts of the case and rendered findings, on the rival submissions of the parties. Going through the material on record, we are of the considered view that the concurrent findings of fact, rendered by the CIT (Appeals) and the Income Tax Appellate Tribunal, do not call for any interference, as no substantial question of law, is involved.

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• 2016 (9) TMI 505
  Transer of cases - Held that:- Impugned order transferring the petitioner's case from Mumbai to Chennai is a nonspeaking order inasmuch as it does not deal with any of the principal contentions of the petitioner that it is in no away related to the Sugal and Damani Group. This was evident by the fact that it is an independent company having its independent Directors, situate in Mumbai and has only a business relationship with Summit, which is a part of the Sugal and Damani Group. The aforesaid order indicates non application of mind to the objections raised by the petitioner. It is an accepted position that an assessee does not have a right to be assessed by a particular officer of the Revenue. Nevertheless, when a petitioner's case is being transferred from one State to another then, while passing an order under Section 127(2) of the Act, the order must indicate prima facie consideration of the objections made by the person whose case is proposed to be transferred. Mere stating that the objections have been duly considered, cannot be itself negate the objections and uphold the notice for transfer. The primafacie consideration must provide a link between the basis of the notice and the conclusion arrived at after prima facie consideration of the objections. This is clearly lacking in the impugned order dated 20th September, 2015. We also notice that the impugned order places reliance upon a panchanama to support the transfer when the same finds no mention in the show cause notices or even relied upon by the Revenue in the affidavit-in-reply filed. This is also a breach of principles of natural justice. In fact before us, no reliance was placed upon the panchanama.

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• 2016 (9) TMI 504
  TDS u/s 194C or 194J - payments made for processing charges to Adlab for supplying copies of final negative - nature of payment - Held that:- Such payments would be covered under sub-clause (e) of Explanation to Section 194C of the Act and may not be covered u/s. 194J of the Act, as no specialised job was to be done, nor any technical services have been rendered to the assessee. In the order u/s.201 of the Act, Assessing Officer had given details about various facilities available in Adlabs, but those facilities are used only for preparation of the final copy of negative. There is no technical service in such activity. Such jobs or work contracts of making several prints or the same final negative may not involve any technical or professional services as such, requiring the assessee to deduct tax u/s. 194J of the Act, but such contracts will be covered under the provisions of Section 194C of the Act. It was found evident that assessee has been consistently making TDS on payments for taking prints of negative, as per the provisions of Section 194C of the Act, while for original payments, it had been deducting TDS under the provisions of Section 194J of the Act and such deduction of tax had been accepted by same Assessing Officer and in assessee's own case for subsequent years in similar state of circumstances. Payments for supplying various copies of final negative has been made by assessee to Adlabs at the rate of Rs. 220/- per 100 mtrs., which itself indicated that the kind of work done by them was not very sophisticated or specialized. At the same time, the payment made to Kodak India Ltd., for processing of the final negative, was significantly higher, indicating that the nature of the work done by them was technical and specialized manner. In view of above, CIT(A) was justified in holding that assessee has rightly deducted TDS on the payments made to Adlabs, for supplying copies of final negative, as per the provisions of Section 194C of the Act. Consequently, CIT(A) was justified in granting relief to assessee on this account.

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• 2016 (9) TMI 503
  Nature of services rendered - whether were professional services in nature - what constitutes ‘independent personal services’ for the purpose of article 15 of Indo-US tax treaty and whether the services rendered by the assessee can fall in this category of services? - Held that:- Software development service rendered by an individual, which essentially requires predominantly intellectual skill, dependent on individual characteristics of the person pursuing software development, and based on specialized and advanced education and expertise, is also a professional service. As regards the objection of the Assessing Officer that software development is not specifically covered by article 15(2), as evident from the opening words of this provision to the effect “the term ‘professional services' includes (emphasis, by underlining, supplied by us)”, the specific professions set out therein are only illustrative and not exhaustive. The emphasis is essentially on the nature of services, but then, as we have noted above, that test is satisfied on the facts of this case. While dealing with the scope of services which are covered by article 15, it is important to bear in mind the fact that there could indeed be overlapping effect of the scope of services covered by the other articles but as long as the services are rendered by an individual or group of individuals, generally rendition of such services is covered by article 15. The exclusion clause set out in article 12(5)(e) typically exemplifies this approach. The applicability of article 15, therefore, is also substantially influenced by the status of the recipient- i.e. whether he is an individual or whether he is a corporate entity. In the light of all these discussions, in our considered view, the services rendered by the assessee are in the nature of professional services but then since the conditions set out in article 15(1) are admittedly not satisfied on the facts of this case, the taxability under article 15 does not arise. As a corollary to our finding that the services in question are in the nature of professional services, and by the virtue of exclusion clause in article 12(5)(e), which provides that the income from professional services rendered by an individual or group of individuals (other than a company) cannot be subjected to tax under article 15, the consideration for these services cannot be taxed under article 12(4) either. Revenue’s case for taxability under article 12(4) is thus clearly unsustainable in law and on the facts of this case. Learned CIT(A) was thus quite correct in this conclusions. We uphold his conclusions and decline to interfere in the matter.

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• 2016 (9) TMI 502
  Penalty u/s 271(1)(c) - Held that:- During the assessment proceedings, the assessee did not give any justification, rather, revised the return and reduced its claim of loss. Again during the penalty proceedings, the assessee did not give any explanation as to how mistake was occurred. Before the ld.CIT(A), it was contented by the assessee that a bona fide mistake was committed by the staff while preparing the statement of total income. According to the assessee, the assessee had no intention to conceal any particulars of income or avoid its tax liability, because, the assessee company never wants to claim prior period expenditure and deferred tax liability as revenue expenditure, because they have not been debited to expenditure account. The onus upon the assessee was to demonstrate as to how mistake has occurred. How such a mistake could be alleged as a bona fide mistake ? The only explanation on that score is that the company is operating at a very small level. Its total turnover was Rs. 19 lakhs. Apart from that the assessee did not bother to go to AO to give any explanation. How the AO could verify that explanation given by the assessee was false or not ? Because no explanation was given. Similarly, the assessee failed to give any material which can substantiate its explanation as to how the mistake has happened. - Decided against assessee.

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• 2016 (9) TMI 501
  Penalty u/s. 271(1)(c) - addition on unexplained cash credits assessed u/s. 68 - Held that:- Entire transaction is, as apparent, calculated to introduce liquid capital in the firm for payment to the outgoing partner, whose share thus gets acquired by the outgoing partner, introducing his family members as partners in his stead. The stated depositors, with no financial means of their own, are only ostensible sources of finance, introducing cash together on an appointed day, as if they were waiting with cash in their hands to be deposited with the firm and, further, shifting the source thereof to non-specified identities. It is clearly a concerted action with a view and toward the distinct objective of maintaining the continuity of the business of the firm in wake of the departure of a person holding 50% interest therein. There is a complete lack of bona fides, and the genuineness of the transactions, highly suspect. As explained in CIT vs. Durga Prasad More [1971 (8) TMI 17 - SUPREME Court] it is the truth of the recitals in the documents (or the truth of their contents) that is relevant and is to be established, or else it would leave the door wide open for tax evasion by merely executing self-serving documents, and that the Revenue authorities were fully entitled to look at the surrounding circumstances to find out the reality of the transaction and not put blinkers while looking at documents produced before them. In the present case, we have ‘statements’ instead of ‘documents’, so that the said decision is in ratio fully applicable in the facts and circumstances of the case. The ld. CIT(A) has incorrectly shifted the burden of proof and furnishing a reasonable explanation, substantiating the same, on the Revenue. When the assessee’s case falls either under part (A) or (B) of Explanation 1 to section 271(1)(c), he is deemed to have concealed particulars of income. There is, further, in the admitted and undisputed facts and circumstances, no case for application of the decision in Reliance Petroproducts (P) Ltd. (2010 (3) TMI 80 - SUPREME COURT), which stands wrongly applied by the ld.CIT(A). What the said decision states is that where a claim is found as not correct or valid in law, the same cannot by itself lead to the levy of penalty. It is trite law that penalty proceedings are separate and distinct proceedings, and is to be levied on its’ own merits - Decided in favour of revenue

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• 2016 (9) TMI 500
  FDRS Interest taxability - income accrued - Held that:- Assessee is engaged in the business of sales of bikes and owner of bikes are insured with M/s National Insurance Co. Ltd. or assessee IndusInd Bank. All sums received by the assessee as job charges duly declared. No dealings of the assessee with National Insurance Co. Ltd. and books of accounts has been accepted. No such sums received by the assessee. On perusing a Certificate from the Bank alongwith copy of FDR it shows that the interest is on account of FDRs of wife of the assessee Smt. Sarita Yadav. It is of the view that once no sum is credited in the books of accounts of the assesssee, it is really not known how any figure reflected in Form 26AS can be treated as income of the assessee as Form 26AS neither forms part of books of accounts of the assessee. As find considerable cogency in the assessee’s counsel that it is a well settled law that the bank account is not books of account of the assessee, therefore, the Form 26AS cannot be made a basis for addition. As regards the TDS Certificate is concerned, on perusing the records, as noted that the National Insurance Company has issued a TDS Certificate in the name of the assessee and mere issue of TDS certificate does not establish that there is any income credited to the income of the assessee as no sum is either due to the assessee or any sum has been actually received by the assessee, thus the addition of Rs. 11,605/- and Rs. 8,47,592/- is not tenable in the eyes of law, hence, the same are deleted. With regard to addition of Rs. 4,19,563/- relating to FDR interest, from the records, it reveals that this amount relates to Smt. Sarita Yadav, W/o Sh. Vikas Yadav, who is a regular income tax assessee. The FDRs interest and TDS claim was duly made in her return. The TDS deducted under the assessee PAN actually its belong to her. Nor the interest is claimed by the assessee nor the benefit of TDS is availed. Hence, the addition in dispute is untenable and the same is deleted. - Decided in favour of assessee

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• 2016 (9) TMI 499
  Addition u/s. 68 - Held that:- The burden of the assessee in respect of the loans stand discharged and therefore, no addition is tenable. Once the amount has been received by account payee cheques and the creditors have duly confirmed the transactions no adverse inference can be drawn. Therefore, assessee shows his inability to explain the source of source, which cannot be a basis to confirm the addition u/s. 68 of the Act. Hence addition deleted. - Decided in favour of assessee

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• 2016 (9) TMI 498
  Penalty u/s. 271(1)(c) - order passed u/s. 201(1)/201(1A) or u/s. 143(3) - non deduction of tds - Held that:- The assessee had offered the amounts to tax at the time of filing the Income Tax Return, and subsequently also paid the TDS too, and if the penalty is levied it would be result in double taxation. This view is fully supported by the jurisdictional High Court decision in the case of Woodward Governor India Ltd. Vs CIT (2001 (4) TMI 34 - DELHI High Court ) and Hindustan Steel Ltd. Vs State of Orissa (1969 (8) TMI 31 - SUPREME Court ). In my view, the ld. CIT(A) has rightly observed that the assessee was under a bonafide belief that since he has been hit under the provisions of section 40(a)(i), he need not deposit the tax so deducted. However as his financial position improved he did deposit the TDS alongwith the interest thereon and filed the copy of challan evidencing the payment of TDS. It was further noted that in the case of Indo Nissin Foods Ltd. v. CIT (2003 (9) TMI 294 - ITAT BANGALORE-B ) it is held that not passing order under section 201(1) before initiation of proceedings under section 271C make imposition of penalty invalid. - Decided in favour of assessee

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• 2016 (9) TMI 497
  Penalty levied under S.271(1)(c) - chargeability of capital gain tax - Held that:- We find that the assessee has filed the return of income on 24.5.2005, declaring income of Rs. 1,98,687, whereas the there was a search and seizure operation in the case of M/s. Om R.S. Wines on 12.4.2005. Even before the issuance of notice under S.153C of the Act, the assessee has declared the said transaction in the computation of income. The assessee has never taken the ground that the said land does not belong to the assessee herein, though it has raised such a ground before the CIT(A) in the first appeal preferred against the penalty order of the Assessing Officer. Thus, it is seen that the land belongs to the assessee and the transaction of development agreement and supplemental agreement was disclosed by the assessee to the Revenue authorities. Therefore, there cannot be a case of concealment of income. As regards furnishing of inaccurate particulars of income, it has been the stand of the assessee that the capital gains is chargeable to tax in the year in which the developer has given the possession of the developed area to the assessee. Though the Assessing Officer has recorded that the assessee has filed a letter stating that the built up area has been handed over to the assessee on 8.3.2004, it is not understandable as to how a building could have been completed within a period of three months of entering into the development agreement. It appears that the Assessing Officer has taken the supplemental agreement into consideration for presuming that the built up area has been apportioned to the assessee on 8.3.2004, as the supplemental agreement is entered for apportioning the developed area. Supplemental agreement alone cannot be taken as the proof of handing over of the built up area to the assessee. The Assessing Officer has accepted the assessee’s contention that the capital gains is chargeable to tax in the year of handing over of possession to the assessee. The Assessing Officer has come to the conclusion that capital gains have arisen in this year without proper verification of facts. Since the assessee has disclosed all the relevant facts to the Revenue authorities in is computation of income, we are of the opinion that there is no furnishing of inaccurate particulars of income or concealment or income. In the result, penalty levied under S.271(1)(c) is not sustainable - Decided in favour of assessee Undisclosed loan - Held that:- The assessee has disclosed the fact of advancing of loan to M/s. Om R.S. Wines in his return of income filed prior to issuance of notice under S.153C of the Act. Further, the assessee has also explained the availability of funds of Rs. 18,75,022 for assessment year ending on 31.3.2003 which fact has been considered by the Assessing Officer. The Assessing Officer has only presumed the property income to be Rs. 57,000 per year without taking into consideration the other sources of income. Since the assessee has disclosed the loan in the computation of income for the relevant assessment year, it is clear that there is no concealment of income or furnishing of inaccurate particulars of income.Since it has not been proved that the assessee has either furnished inaccurate particulars of income or concealed his income, the impugned penalty imposed by the Assessing Officer is not sustainable.- Decided in favour of assessee

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• 2016 (9) TMI 496
  MAT computation - disallowance of the cost of improvement under the normal computation and under the provisions of section 115JB - applicability of companies act - Held that:- Whatever be the nature of profit or loss is incurred by the assessee it has to be disclosed in the profit and loss account mandatorily as per the provisions of the Companies Act, 1956. Only the assets & liabilities and the profit/loss carry forwarded from the profit and loss account are disclosed in the balance sheet. The format of balance sheet as provided under Schedule VI of the Companies Act itself indicate the fact that only the assets & liabilities including reserves and carry forward of profit/loss from the profit & loss account are to be disclosed in the balance sheet. Thus the profit determined in the profit & loss account of the assessee complying with the Companies Act shall be the “book profit” of the assessee company for the purpose of Section 115JB of the Act, subject to the other provisions of the Income-Tax Act. To make it clear, there is no provision in the Companies Act to directly absorb any profit or loss in the balance sheet directly other than routing it through the profit and loss account of the assessee. Therefore, it is apparent that the assessee company had directly absorbed the profit derived from the sale of its capital asset in the balance sheet thereby avoided to disclose the same in its profit and loss account in order to escape from the clutches of the provisions of section 115JB of the Income Tax Act. This is against the provisions of the Companies Act as well as against the Income Tax Act. The decisions cited by the learned Authorized Representative has not considered the mandatory provision of Companies Act, 1956 with respect to Schedule VI Part II & III. Therefore, we are of the considered view that the learned Assessing Officer has correctly computed the “book profit” as per the provisions of the Act, which is rightly upheld by the learned Commissioner of Income Tax (Appeals).

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• 2016 (9) TMI 495
  Levy of penalty u/s. 271(1)(c) - income/profits from sale of flats in Wing A and C of project ‘Meghsparsha’ developed by the assessee - Held that:- The Hon'ble Supreme Court of India in the case of Commissioner of Income Tax and Another Vs. Anwar Ali [ 1970 (4) TMI 1 - SUPREME Court ] has observed that the findings in the assessment proceedings may constitute good evidence in the penalty proceedings but it does not follow that penalty for concealment u/s. 271(1)(c) is mandatory whenever a addition or disallowance is made. Penalty u/s. 271(1)(c) is to be imposed where the assessee has concealed the particulars of income or furnished inaccurate particulars. For levy of penalty one of the important factors to be considered is the bonafide of assessee. In the present case we find that the assessee had disclosed the income/profits from sale of flats in Wing A and C in the subsequent assessment year. The assessee had filed return of income for assessment year 2006-07 declaring income from sale of flats in Wing A and C almost one year prior to the completion of assessment for assessment year 2005-06. Thus, there was no intention on the part of the assessee to withhold such income and not to pay tax thereon, therefore bonafide of assessee is proved. In such circumstances we are of the considered view that no penalty u/s. 271(1)(c) is leviable. Accordingly, the impugned order is set aside - Decided in favour of assessee

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• Customs

• 2016 (9) TMI 526
  Validity of judgement - Rigorous Imprisonment and fine - Offences under Sections 22 and 23 of the Narcotic Drugs and Psychotropic Substances Act, 1985 - CHA - Transit Certificate - secret information of receipt of dry fruits which had the marking of 'AB', contained some narcotics as well - summon of two witnesses - search - section 50 of the Customs Act, 1962 - concealment of 165 packets of brown powder weighing 21 kilograms 450 grams was revealed - heroin - arrest of appellant - statements made under Section 108 of the Customs Act, 1962 - Held that: - the appellant has stated that up to 14.1.1999, there is mention of the appellant on the T.C. and thus, the consignment did relate to him. He received the consignment as he was to take delivery of the consignment, as he had received phone calls regarding this. These phone calls were received by his Clerks Amit Taneja, Janak Raj, and some were received by him. Statements made under Section 108 of the Customs Act, 1962 coupled with the statements of the prosecution witnesses which have found corroboration inter-se, the guilt of the appellant is proved beyond a reasonable doubt - no infirmity in the judgement of the Additional Sessions Judge-cum-Special Judge in convicting the appellant - appeal disposed off - decided against appellant.

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• 2016 (9) TMI 525
  100% EOU - requirement to achieve positive net foreign exchange (NFE) during every block of five years of its existence - period for computing the block of five years for consideration of NFE - manufacturing activity had commenced on 28.02.2003. the first block of such five years would comprise of financial year 2002-03 to 2006-07 and the second block of five years would comprise of the financial year 2007-08 to 2011-12. - the first block of five years would commence from 01.04.2003 and end on 31.03.2008 and, the second block would be the financial year 2008-09 to financial year 2012-2013 - foreign trade policy - which would be the relevant block period of five years for computing NFE? - Imposition of penalty - sub section (2) of Section 11 of the Foreign Trade Development and Regulation Act, 1992 Held that: - the computation of NFE would be financial year wise and which would be the beginning of the financial year following the year under which the manufacturing activity commences. Under no circumstances such period would be the period anterior with the date of manufacturing activity. Even if a literal interpretation of expression used in Clause 6.5 of the foreign trade policy is taken, it refers to the calculation of NFE cumulatively in block of five years “starting from the commencement of production” - block of five years to begin from 1.04.2003. Monitoring the performance of the unit - period envisaged would be the financial year immediately starting the manufacturing activity - the unit which has not completed one year from the date of commencement of commercial production will not be monitored. Further, a unit which has completed less than five years from the date of commencement of the commercial production, it would be monitored only for the number of completed years. The reference to completed years must be for a broken period between the date of commencement of production and the commencement of financial year. Interpretation of policy not in favor of petitioner - decided against the petitioner.

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• 2016 (9) TMI 524
  Restoration of order passed by first Appellate Authority - levy of redemption fine - Section 125 of the Customs Act, 1962 - imposition of penalty - Section 112(a) of the Customs Act, 1962 - amount of redemption fine and penalty increased buy the Tribunal - jurisdiction of Tribunal - Whether redemption fine and penalty, as determined by the first appellate authority, can be increased further by the Tribunal in the appeal filed by the assessee, especially when the appeal filed by the department against the same order passed by the first appellate authority had been dismissed? - Held that: - It is only in the appeal filed by the department that the amount of penalty could be increased and for that the appeal filed by the assessee had to be dismissed. But in the case in hand, the facts are otherwise. The appeal filed by the revenue was specifically dismissed. In the appeal filed by the assessee, the order passed by the first appellate authority was set aside and the quantum of redemption fine and penalty was increased. That course was not possible in the appeal filed by the assessee, especially when the appeal filed by the department had been dismissed - order passed by the Tribunal set aside - order passed by the first appellate authority restored - amount of penalty and redemption fine as imposed by first appellate authority justified - appeal allowed - decided in favor of appellant.

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• 2016 (9) TMI 523
  Claim of reward - information given to Department - raid carried on, on the basis of information of informer - excise duty evasion by one VFL - Polyester staple fiber - clandestine removal without payment of duty - O-41 register - CENVAT credit - Held that: - the Rewards Committee has not adverted to various factors which are required to be taken into consideration by the Rewards Committee for coming to the conclusion qua the informant's entitlement to receive reward and the quantum, the Rewards Committee has rather rendered its decision making it subject to outcome of the proceedings before the DRT. The non-advertance to various factors in non-recording of findings qua informant or as to why informant deserves what reward and not recording its clear findings, the order is rendered vulnerable and hence, the Rewards Committee will have to take afresh look into the matter. The Rewards Committee will give full opportunity to both the sides to raise all the contentions. Reading of the scheme, calls upon the Rewards Committee to take a decision on the final reward and such decision is to be arrived at after completion of adjudication /appeal /revision proceedings and the final reward to be determined on the basis of net sale proceeds of goods seized /confiscated (if any) and/or amount of additional duty /fraudulently claimed drawback recovered plus penalty /fine recovered - the scheme seals limit of reward to 20% of the net sale proceeds. It will be open to all concerned to raise all contentions including the contention of recovery as contemplated in “The Scheme” does not cover the payment of duty by utilizing the cenvat credit. Petition disposed off - decided in favor of petitioner.

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• 2016 (9) TMI 522
  Confiscation - gold - shortages found during stock-taking - goods not available for confiscation - fine in lieu of confiscation - recovery of customs duty - imposition of penalty - Section 111, 112A, 125 of the Customs Act, 1962 - Notification No.117/94-Cus dated 21/10/1994 - SEEPZ unit - Held that: - the decision of the Apex court in the case of Weston Components Ltd. v. CC, New Delhi [2000 (1) TMI 45 - SUPREME COURT OF INDIA] does not apply here. The confiscation always presumes availability of goods and presumption normally is that goods have been seized and thereafter the proceedings would culminate into confiscation or release. Confiscation would mean that seized goods become the property of the Government and the party to whom it is ordered to be released on payment of fine, will have to pay fine and redeem the goods. When the goods have been diverted and not released on execution of bond with conditions, the question of confiscation of the same does not arise since goods have already become someone else's property. Appeal disposed off - decided against Revenue.

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• 2016 (9) TMI 521
  Imposition of penalty - Section114A of the Customs Act, 1962 - penalty imposable equal to duty short paid or dutynot paid is Rs. 68,22,953/- - penalty imposed Rs. 25,00,000/- - 100% EOU - imported raw material and capital goods - exemption Notification No. 13/81-Cus. Dt. 09.02.1981 - Held that: - under Section 114A the penalty should be mandatorily equal to the duty short paid or non-paid. On this issue the Hon ble Supreme Court in the case of Rajasthan Spinning & Weaving Mills [2009 (5) TMI 15 - SUPREME COURT OF INDIA] and Dharmendra Textile Processors [2008 (9) TMI 52 - SUPREME COURT], held that the mandatory penalty provided under Section 11AC which is pari materia to Section 114A cannot be reduced from equal amount of duty short paid or non-paid - reduced penalty wrongly imposed - the appellant liable to pay the penalty under Section 114A equal to the duty confirmed in the adjudication order - reduced penalty not justified. Demand of interest - Section 28AB of the Customs Act, 1962 - interest demand not confirmed - Held that: - it appears that there is an apparent error on the part of the adjudicating authority that despite clearly holding that the interest is recoverable on duty payable under the provisions of Section 28AB of Customs Act 1962 in Para 15 of the impugned order, it was left from mentioning in the operating portion of the order - demand of interest upheld. Appeal allowed - decided in favor of Revenue.

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• 2016 (9) TMI 520
  Restoration of CHA license - forefeiture of security deposit - Regulation 20 of CHALR/2004 - imposition of penalty - Section 117 of the Customs Act, 1962 - CHA licence-holder, firm of Mr. Walia - H Card holder, Shri Gurnani - mureate of potash (MOP) - restriction on export - seizure - violation of provisions of regulations 12, 13 (a) 13 (b), 13 (d) 13 (0), 19 (5) and 19 (8) of CHALR/ 2004 by Mr. Gurnani - Held that: - As regards the cross-examination of Mr. Gurnanai, the only possible consequence of denial of his cross examination would be that Shri Gurnanai's statement may not be relied upon as an evidence. However, we find that the statement of Shri Gurcharan Walia is quite in harmony with the statement of Shri Gurnanai, and therefore, to the extent the statement of Shri Gurnani is in harmony with that of Shri Walia himself, it certainly is of corroborative value as Shri Walia in cross-examination could not have questioned those aspects which he himself admitted. The appellant allowed its license to be used and operated by Shri. Gurnani, for whom it sponsored H card even though it claimed he was not its employee (and therefore, sponsoring of H card itself was illegal). The appellant allowed using of its CHA license by Mr. Gurnani not as a one-off but for about 3 years and during this long period did not even take basic precaution to ensure that the license was not misused and that the obligations cast upon the licensee under CHALR 2004 were being fulfilled. The result was that the license got misused for attempted export of MOP which was restricted for export. The CHA licensee is reposed with a great degree of trust by the Customs Authorities and such conduct of the appellant was more than enough to irretrievably breach such trust. Such dereliction of duty on the part of a CHA, can potentially have even graver financial/security consequences. Thus, the appellant gravely failed to discharge its duties as CHA and thereby grossly violated Regulations 13 & 19 of CHALR, 2004 - Such serious violation on the part of the CHA can hardly deserve any condonation or leniency. The case of State of Punjab V. Ex-Constable Ram Singh [1992 (7) TMI 332 - SUPREME COURT] is relied upon where it was held that a single act of corruption is sufficient to award the maximum penalty which under the CHALR, is of revocation of the license - revocation of licence and imposition of penalty upheld - appeal dismissed - decided against appellant.

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• Corporate Laws

• 2016 (9) TMI 514
  Arbitration and Conciliation - Held that:- As admitted case of the respondents that both petitioners had transferred the equity shares of 35,04,28,478 constituting of 58.46% of respondent No.1 for just Rs. 2/-. The value of the said shares was Rs. 765 crores at that time in the market. Obviously, the respondent No.2 to clear the liabilities of respondent No.1 and in lieu thereof, the shares were transferred for Rs. 2/-. The respondents have not shown any cogent evidence before this Court that by this time they have spent more than Rs. 765 crores. The petitioners admittedly asked the respondents by letter dated 24th September, 2015 to take the steps to utilize the amount in the designated account No.2 in order to pay outstanding statutory dues and to take the necessary steps for compounding the offence under Section 276B of the Income Tax Act as alleged in the complaint. No doubt, certain details are provided to show that some dues were cleared. At the same time, it is not denied by the respondents if the BSE would have allowed the application filed in 2014, the warrants were supposed to be issued. It was agreed earlier and even after execution of SPA. Further during hearing the respondents have time and again mentioned that they are helpless at the hand of BSE. Otherwise, they are ready for issuance of warrants. As per issue of non-compounding of offences under Section 276B of Income Tax Act is concerned, as per SPA, in case the amount is received by the respondents and after adjustment already paid, the respondent is liable to pay the remaining outstanding as per details of designated account No.1 and 2 subject to the final adjustment of the amount before the Arbitral Tribunal. In case at this stage if both parties are agreeable they may take the necessary steps for the purpose of compounding of offences with cooperation with each other once the amount in the designated account No.1 and 2 is cleared. Without expressing anything on merit, as all the disputes have to be decided by the Arbitral Tribunal the part prayers in both petitions are allowed. The said amount of Rs. 579 crores shall be deposited by the respondents without prejudice in five equal monthly installments by way of fixed deposit for twelve months in the name of Registrar General of this Court. The first installment amount shall be deposited by the respondents on or before 7th August, 2016. Thereafter, the remaining installments shall be deposited on every succeeding month. Till the time all five installments are deposited, the interim order shall continue. As and when the amount is deposited, the petitioners would be at liberty to file the application for releasing of amount, the same would be considered on merit as well as the issue of interim orders. Both the parties shall take the necessary steps for the purpose of constitution of Arbitral Tribunal and once the Tribunal is constituted, it is expected that Arbitral Tribunal would publish the award within the period of twelve months. Liberty is also granted to move the application under Section 17 of the Act before the Arbitral Tribunal if so necessary or under any change of circumstances.

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• Service Tax

• 2016 (9) TMI 541
  Deposition of amount of pre-deposit to hear an appeal - against the demand for Rs. 130 crores, the stay of pre-deposit was granted to the extent of Rs. 100 crores - appellant obliged to deposit Rs. 30 crores as a pre-condition for hearing its appeal - Held that:- having regard to the present nature of law with effect from 06.08.2014, the pre-deposit should not exceed 7½ % of the demand. Therefore, the appellant should deposit an amount equal to 7½ % of the total demand, i.e. Rs. 130 crores, within three months. - Decided partly in favour of appellant

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• 2016 (9) TMI 540
  Cenvat credit - Tour operator service - Service utilised for pick up and drop of the employees to the work place - Held that:- the main aim of cenvat credit scheme is to avoid the cascading effect of taxation i.e. to avoid imposition of tax on tax. The principle benefit intended through Cenvat Credit Scheme should not be lost sight of while interpreting the statutory provision. There is no doubt that the impugned services have been consumed by the appellant during the course of their business and have been accounted as business expenditure, therefore, the denial of credit is not warranted and the claim of CENVAT Credit on tour operator service is allowed. Cenvat credit - Travel agency service - rendering of SAP implementation and support service to parent and subsidiary companies located outside India - Held that:- the services of the air travel agent was availed for making travel arrangements of employees to meet clients in connection with marketing and accordingly shall be eligible for refund. As long as the Travel Agency Service is not received for personal benefit of any employee but meant for travel of office personnel, credit is not deniable. This service is in connection with production, planning, import, marketing etc. Therefore, by following the decision of Hon'ble Gujarat High Court in the case of Principal Commissioner Vs Essar Oil Ltd. [2015 (12) TMI 1062 - GUJARAT HIGH COURT] the credit is allowable. Cenvat credit - Foreign exchange service - FOREX was purchased and the same was given to the employees who travel outside India in order to execute their work - services of Forex broker has been utilized for foreign exchange - Held that:- the expenditure has been incurred by the appellant for the purpose of providing its output service. The said service has not been specifically excluded under the definition of input service. Therefore, the said service will qualify in the first limb of the definition of input service i.e. used in or in relation to provision of output service and accordingly shall be entitled for refund. Cenvat credit - Renting of Immovable property services - rented premise is used for the purpose of carrying on the business i.e. for providing the output service - Held that:- it is an undisputed fact that the appellants are engaged in providing output service namely online database access and retrieval services, and it is impossible for the appellants to provide the service without building or a proper premises, absence of which would adversely affect the quality and efficiency of the provision of service exported. Therefore, as clarified by CBEC vide circular dated 19.01.2010, I find that rent has a direct nexus with the output service provided by the appellants and hence are eligible for the credit. - Decided in favour of appellant

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• 2016 (9) TMI 539
  Levy of interest alongwith penalty - Section 75 and 77(2) of Finance Act, 1994 - tax liability not been fastened on the appellants - administrative charges received from the client - differential service tax paid after pointing out by the department - treatment of payment made as voluntarily or under protest - Held that:- the show cause notice proposes to recover interest under Section 75 and penalty under Section 77(2) on the amount already paid by the appellant. Section 75 can be invoked only when the person liable to pay service tax in accordance with the provisions of Section 68 has not credited the same. I find that the appellants herein are contesting the demand and have paid the amount only on being pointed out by the department during audit. I find that there is no allegation in the Show Cause Notice to demand or appropriate the amount paid by the appellants. I also find that the finding of the adjudicating authority that the appellants had not disputed the tax liability is also not correct. Hence the demand of interest under Section 75 cannot be fastened on the appellants. Accordingly, penalty under Section 77(2) also fails. Invokation of extended period of limitation - period of dispute is from October 2006 to July 2008 - Show Cause Notice was issued only on 06.08.2010 - Held that:- the Show Cause Notice does not invoke provision of Section 73 to invoke the extended period of limitation and the case of the department fails on that ground alone. it is found that there has been no deliberate action on the part of appellants to invoke larger period and the department was well aware of the activities of the appellants. - Decided in favour of appellant

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• 2016 (9) TMI 538
  Cenvat credit - Service Tax paid on input services - Commissioning and installation service - Held that:- the said services are employed only to install the final product at the premises of the customer and only upon such installation, the final product would become operational and purpose of manufacture would fructify. Therefore, the appellant cannot be faulted with and the order of the Learned Additional Commissioner in appellant's own case whereby the learned adjudicating authority has allowed the credit on Commissioning and installation services also strengthens their case. Cenvat credit - Housekeeping services - Held that:- it is found that the said services are employed by the appellants only in compliance of Environmental laws and in particular the Factories Act, 1948, and when money is spent for the purposes of maintaining the factory premises clean and tidy, and the same is includible in the value of the final product, following the decision of the Hon'ble Madras High Court in the case of C.Ex & ST, LTU Chennai Vs Rane TRW Steering Systems [2015 (4) TMI 704 - MADRAS HIGH COURT] as well as decision in the case of Hinduja Foundries Ltd. Vs CCE, Chennai-I [2016 (4) TMI 326 - CESTAT CHENNAI], I hold that credit of Service Tax paid on such services cannot be denied. Cenvat credit - Air travel services - Held that:- when it is not in dispute that the said services were employed only for the company's executives to travel to achieve the business objective and the same has not been used for the employee's personal needs, credit of Service Tax paid on such services cannot be denied in view of the decision in the cases of Arkema Paroxides India Pvt Ltd. Vs CCE, Pondicherry [2016 (9) TMI 435 - CESTAT CHENNAI], Goodluck Steel Tubes Ltd. Vs Commissioner of C.Ex, Noida [2014 (1) TMI 37 - CESTAT NEW DELHI] and Innovasynth Technologies (I) Ltd. Vs CCE, Raigad [2015 (3) TMI 127 - CESTAT MUMBAI]. Cenvat credit - Rent-a-cab service - services employed only for the employees to travel to the customer's site in order to install the goods and without such installation, the product cannot be functional and such services are not used for the personal consumption of the employees - Held that:- the nature of the business of the appellants is such that employees need to travel to the customer's site to install the products and only on such installation the products would become operational. The very purpose of manufacture of such products is only to benefit the customer for whom it is made and that being the case, cab operator's services used for the transport of employees to the customer's site is an integral part to the manufacture of the final products and credit on the same cannot be denied. Therefore, by respectfully following the ratio laid down by the Hon'ble High Courts as mentioned above, I allow the assessees appeal in respect of Cenvat credit on input services, such as, commissioning and installation, housekeeping services, air travel services and rent-a-cab services. The penalty is also set aside. - Decided in favour of appellant

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• 2016 (9) TMI 537
  Cenvat credit - service tax paid on Rent-a-cab service for picking up and dropping down of its employees to the factory and back - eligible input service - Held that:- Rent-a-cab service availed by a service provider is an eligible input service for the purpose of availing credit whereas in the instant case, the appellant is a manufacturer of final products and not a service provider. Therefore, by following the ratio of this Bench decision in the case of S.K.D. Lakshmanan Fireworks Industries Vs C.C.E. & S.T., Tirunelveli [2015 (12) TMI 1102 - CESTAT CHENNAI], the cenvat credit availed by the appellant-manufacturer on the service tax paid on Rent-a-cab service for picking up and dropping down of its employees to the factory and back is not proper and denied as the said service is not an eligible input service. Accordingly, the impugned order-in-appeal is upheld. - Decided against the appellant

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• 2016 (9) TMI 536
  CENVAT Credit - took on services when Service Tax is paid by the Headquarters of the appellant and CENVAT Credit under CCR is taken at the only manufacturing unit of the appellant - appellant do not have any other manufacturing unit anywhere in India and has its Head Office unregistered as ISD distributor - Held that:- it is a well settled legal position that if the services are received and utilised in the appellant's factory then procedural irregularities cannot be made the basis for denying CENVAT Credit. In the present case, the only irregularity committed by the appellant is that the Headquarters of the appellant was not registered as ISD Distributor. This being a procedural irregularity, therefore, cannot be made the basis of denying CENVAT Credit on services received by the appellant. - Decided in favour of appellant

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• 2016 (9) TMI 535
  Refund claim - refund claim was made by M/s. A. K. Associates, a proprietary firm of Shri. Kishor Hiralal Daga whereas the Service Tax for which refund was sought for was paid by Shri. Kishor Hiralal Daga - Held that:- both the lower authorities seriously erred in rejecting the claim. It is a common sense that there is no separate legal status of proprietary concern. For all legal purpose, it is the proprietor only has locus standi for any operation of the proprietorship firm. Therefore, I hold that refund is not liable to be rejected on the issue of proprietor Shri. Kishor Hiralal Daga and proprietorship firm, M/s. A.K. Associates. However, one of the ground for rejection of refund is non submission of documents. The same can be submitted, if the same was not submitted earlier. However, it is made very clear that only due to non availability of all the documents refund cannot be rejected. If the payment of service tax is established even on the basis of other corroborated documents, refund can be given. Hence, the appellant is prima facie entitle for refund after verification of documents. - Appeal allowed by way of remend

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• Central Excise

• 2016 (9) TMI 534
  Cenvat credit - Service Tax paid on service charges to M/s. Broadgate Technical Service, for the pay roll preparation of employees of the appellants company - Held that:- appellant is correct in submitting that the nature of the impugned service is very essential to run the business of appellants and the service in dispute was availed to maintain back up, employees pay roll maintenance and pay slip generation. The definition of input service, as contained in Rule 2(l) of Cenvat Credit Rules, 2004 speaks about service used in relation to activities relating to business such as accounting, auditing, financing etc. payroll processing of employees is part of maintaining proper accounts, which is necessary for upkeep of tax accounting. In the appellants own case on similar set of facts for the previous period this Tribunal had passed the order in favour of the appellant reported in [2016 (9) TMI 494 - CESTAT CHENNAI]. - Decided in favour of appellant

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• 2016 (9) TMI 533
  Valuation - whether or not the amounts collected by the appellants as Sales Tax from the customers but not paid to the State Sales Tax authorities should be included in the assessable value for the purpose of levy of Central Excise duty - appellants obtained an Entitlement Certificate dated 20.10.2003 by the Haryana VAT authorities - Appellant contended that they are eligible for full education of Sales Tax payable by them in terms of the Entitlement Certificate as they have discharged 50% of the deferred tax liability and the remaining 50 % is deemed to have been discharged in full and as such nothing has been retained by the appellants Held that:- the Sales Tax/VAT payable/paid to the Haryana State Government is only 50% which was eligible for education. The remaining amount is legally allowed to be retained by the appellants and is not payable to the State exchequer. In such scenario, we find that the impugned order is correct in upholding the inclusion of that portion of Sales Tax/VAT in the assessable value collected by the appellants but not paid or payable to the State Government followed by the various decision of Hon'ble Supreme Court. Invokation of extended period of limitation - Demand for the period April 2003 to June 2006 - SCN issued on 02.07.2007 - Held that:- it is found that there is nothing in the impugned order which examined the party’s submissions against longer period demand. We note that in the present case the correct valuation for Central Excise purpose is in dispute. The dispute is directly relatable to Sales Tax amount paid/payable by the appellants directly relatable to Sales Tax amount paid/payable by the appellants to the State authorities. The Sales Tax amounts collected were all reflected in the invoices issued to the clients. Out of this amount, the appellants retained 50 % based on a scheme announced by the State Government. In this factual matrix, we find that the allegation of fraudulent intent or suppression of fact against the appellants is not sustainable. It is apparent that the issue involved is one of legal interpretation and without a positive evidence for deliberate suppression of fact with intent to evade payment of Central Excise duty invoking the extended period for demand, is not legally sustainable. Accordingly, we hold that the appellants will be liable to different duty of Central Excise during the normal period of demand as confirmed by the lower authority. The demand for extended period as well as penalties are set aside. Cum duty value for calculation of differential excise duty - eligibility - no amount representing excise duty has been collected from the buyers on this differential amount - Held that:- the appellants pleaded that differential duty, if any, payable should be arrived at taking the additional consideration as inclusive of excise duty as they have not collected any excise duty on such value from the customers. We find that in view of the facts discussed in the order, the appellants are eligible for such calculation of duty liability. - Appeal disposed of

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• 2016 (9) TMI 532
  Cenvat credit - import of capital goods against the Target Plus Scheme and whole of the duty payable on such import was debited from the Duty Credit Certificate issued under Notification No. 32/2005-Cus dated 8.4.2005 - non-submission of installation certificate from the jurisdictional Central Excise authority which is a need under notification on time - import was made by M/s. Nahar Exports Ltd. instead of appellant - Held that:- in the absence of any reference to the condition in the Cenvat Credit Rules, 2004, there is no justification for the view taken by the lower authorities. Further, admittedly, during the course of adjudication itself the appellant submitted attested copy of the certificate dated 22.9.2008 issued by the jurisdictional Deputy Commissioner wherein the use of capital goods so imported has been satisfied. We find that there is no justification in denying the credit to the appellant for the reason quoted by the lower authorities. The capital goods have suffered duty, have been used in the appellant's premises and have been duly installed and used by the appellant. Regarding import document bearing name of M/s.Nahar Export Ltd., we find that the appellant's name did figure in many documents alongwith M/s.Nahar Export Ltd., who is proprietor of the appellant. Even in respect of the document where the appellant's name figuring, it is settled position of law that as long as the capital goods have used, the duty payment has been satisfied and are to be put to intended use, the credit on the same cannot be denied. It is found that the appellant is manufacturing unit of M/s.Nahar Export Ltd. who are absolute owner of the appellant's firm as proprietor. It is also clear that in all the bills of entry the appellant's name alonwith their proprietor M/s.Nahar Export Ltd. is indicated. The goods were actually exported by M/s.Nahar Export Ltd. and in lieu of such export, they were granted certificate under Target Plus Scheme. That various statutory authority like Central Excise, DGFT, the appellant are considered alongwith M/s.Nahar Export Ltd. as the same entity.Therefore, in the absence of any allegation regarding non receipt of capital goods and the appellant's non entitlement of any other ground, the credit on these capital goods received and installed in the appellant's premises cannot be denied. - Decided in favour of appellant

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• 2016 (9) TMI 531
  Imposition of penalty - Rule 173Q and Section 11AC of the Act - clandestine removal of excisable goods - short payment of duty in respect of goods cleared from the factory without payment of duty with intent to evade payment of duty - Held that:- Partnership firm is a combination of Partners as per the Partnership Act where all partners are equally liable. In view of above, penalty imposed on the partners is sustainable. The Revenue will get the total demand/ penalty from the partners. When it is so then we find no reason to interfere with the impugned order passed by the Commissioner specially in view of Rule 173Q and 209A, where no further penalty is desirable. - Decided against the Revenue

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• 2016 (9) TMI 530
  Demand - goods lost in fire during the pendency the claim of remission of duty - Revenue claimed that they have conveyed the order of rejection of claim of remission of duty on 04.12.2012 and claim of the respondent is that no intimation was given prior to 11.12.2012 - Held that:- there is factual error either both of the sides, therefore, both the sides were asked to file an affidavit in support of their claim. As directed by this Tribunal, the respondent filed an affidavit that till 11.12.2012, no intimation of the order of rejection of claim of remission of duty was intimated either to the respondent or to the Ld. Commissioner (A). But no affidavit has been filed by the Revenue to support their claim that they have intimated order of rejection of claim of remission of duty on 04.12.2012 but the Ld. AR today submitted that it was intimated only on 19.12.2012. Therefore, I do not find any infirmity in the impugned order. As the Ld. Commissioner (A) has rightly held that the adjudication order of demanding duty from the respondent is pre mature. - Appeal disposed of

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• 2016 (9) TMI 529
  Rebate claim - duty paid on export of goods under Rule 18 of the Central Excise Rules when the appellants were working under area based exemption under Notification No.1/2010-CE dated 06.02.2010 - appellants have their factories located in the State of Jammu & Kashmir - Held that:- the Notification No. 01/2010 dated 06.02.2010 has not been specified in the condition 2(h). Since this notification has not been specified in the condition, the same cannot be read into it to deny the rebate claim. The appellants have rightly placed reliance on several case laws which mandates that the working of the notification should be read plainly as an ordinary man would read. Words which are not there cannot be read into the notification. Inasmuch as the condition 2(h) has not made rebate inadmissible if the manufacturer is operating under Notification No. 01/2010, the lower authorities have wrongly denied the payment of rebate. - Decided in favour of appellant with consequential relief

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• 2016 (9) TMI 528
  Rebate claim - Rule 18 of the Central Excise Rules read with notification no. 32/2008-CE (N.T.) dated 28.08.2008, between 07.06.2011 and 1.07.2011 - articles exported prior to coming into force of the Plastic Waste Management and Handling Rules, 2011 which was on 02.07.2011 - Held that:- the view taken by the Central Government in P.R.Chemicals [2015 (1) TMI 666 - GOVERNMENT OF INDIA] is the correct one. Instead in this case, the Central Government appears to have relied entirely on the textual meaning of export as the point in time when goods actually crosses the international border. Section 51 of the Customs Act, in our opinion, completely answers the issue at hand. Having regard furthermore, in part the Government was of the view that the notification was not retrospective and the consignment did qualify for rebate. In the present case as well, the petitioners were entitled to relief. It is therefore held that the impugned order cannot be sustained. The order of the appellate authority is restored. - Writ petition allowed

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• 2016 (9) TMI 527
  Validity of Rule 8(3A) of Central Excise Rules, 2002 - Held that:- this issue has already been decided by this Court in the case of M/s A.T.V. Projects India Ltd. Versus Union of India And Others [2016 (9) TMI 321 - ALLAHABAD HIGH COURT] wherein it was held that Rule 8(3A) of Rules 2002 is declared violative of Article 14 of Constitution and as a result thereof. Since the matter is concluded by above judgement of this Court, therefore, no substantial question arises. - Decided against the Revenue

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• 2016 (9) TMI 494
  Cenvat credit - service tax paid in availing Payroll Accounting Service - Held that:- the inclusive definition given in Rule 2(l) of the Cenvat Credit Rules, 2004 covers accounting, which is a broader concept and includes payroll accounting, within its fold for which, appellant shall be entitled to get the Cenvat credit. - Decided in favour of appellant

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• CST, VAT & Sales Tax

• 2016 (9) TMI 519
  Works contract - sub-contract - Is the assessee liable to turnover tax under Section 6-B of the Karnataka Sales Tax Act, 1957 on the payment made to the sub-contractor in spite of the fact that the sub-contractor had declared the turnover and paid taxes? - Held that: - It is not in dispute that the facts and the issue involved were identical, i.e. the assessee had assigned parts of the construction work to sub-contractors who were registered dealers. These sub-contractors had purchased goods and chattels like bricks, cement and steel and, where necessary, supply and erect equipments such as lifts, hoists, etc. The materials were brought to the site and they remain the property of the sub-contractor. Transfer of property in goods, becomes necessary event and unless there is a transfer of property, the amount paid is not to be included in the total turnover. The amount paid to the sub-contractor is not for transfer of property in goods. The value of the work entrusted to the sub-contractors or payments made to them shall not be taken into consideration while computing total turnover for the purposes of Section 6-B of the Karnataka Act - appeal allowed - decided against Revenue.

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• 2016 (9) TMI 518
  Validity of order of assessment - TNVAT Act, 2006 - FMCG products - stock transfers - maintenance of accounts - MFG-pro - SAP - audit by enforcement wing for 15 days - opportunity of personal hearing - Held that: - the impugned assessment is a very complicated issue and this is all the more established from the fact that the enforcement officials namely, the second respondent had spent 15 days in the place of business of the petitioner gathering details and information. Therefore, there is absolutely no reason for the first respondent to complete the assessment in the manner done in the impugned order. He is required to take into consideration relevant factors and should not proceed to decide the matter based on irrelevant considerations, which are not germane for determining the disputed issues. Above all failure to consider the petitioner's explanation dated 30.09.2014, amounts to serious violation of principles of natural justice - assessment order requires interference - first respondent directed to redo the assessment in accordance with law, after affording an opportunity of personal hearing and adopt any one of the modes for verification of the data/records in terms of the observations contained in this order - petition allowed - decided in favor of petitioner.

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• 2016 (9) TMI 517
  Validity of order of assessment - revision of assessment - audit conducted under Section 64 of the Act by Enforcement Wing Officers - delay in submitting of objections due to unavoidable cause - TNVAT Act - opportunity if being heard - Held that: - the assessment proceedings have been completed ex parte. However, the assessment officer cannot be blamed for the same, as the petitioner did not file the objection in time. Though pre-revision notice was served on them on 29.01.2016, taking into consideration of the fact that the petitioner pleaded one more opportunity, opportunity granted subject to certain conditions - petitioner directed to pay 15% of the disputed tax for each of the assessment years within a period of four weeks from the date of receipt of copy of this order. If the same is remitted, then, the petitioner is entitled to treat the impugned assessment orders as show cause notice and submit their objections within a period of fifteen days there from. On receipt of the objection, the respondent shall afford opportunity of personal hearing and redo the assessment in accordance with law, after considering the objection raised by the petitioner and also taking note of the submission that the petitioner may make during the course of personal hearing - petition disposed off - decided in favor of petitioner.

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• 2016 (9) TMI 516
  Validity of order - assessment order - revisional order - Section 21(1) of the Punjab General Sales Tax Act, 1948 - upper limit for revision of the order passed by the assessing authority while exercising powers under Section 21 of the Act is five years as held in the case State of Punjab & ors. Vs. Bathinda District Coop. Milk P. Union Limited [2007 (10) TMI 300 - SUPREME COURT OF INDIA] - Held that: - the order of assessment was passed by the assessing authority on 23.05.1996 and the revisional order was passed on 27.09.2004 nearly eight years thereafter, hence, the same deserves to be quashed being beyond the period of five years from the date of assessment order - petition allowed - decided in favor of petitioner.

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