TMI Tax Updates - e-Newsletter
September 16, 2016

Case Laws in this Newsletter:

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

TMI SMS

• Cenvat credit cannot be denied on playing cards supplied as free gift alongwith final product - Tri

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Articles

1. CENVAT credit on rent-a-cab – hidden ambiguity that may allow credit despite of other restrictions

   By: Venkataprasad Pasupuleti

News

1. Meeting taken by Prime Minister to review the preparedness for rollout of Goods and Services tax(GST)

2. The Union Finance Minister Shri Arun Jaitley to review the Quarterly Performance of Public Sector Banks (PSBs) & Financial Institutions (FIs) tomorrow: Review of Banks’ performance in terms of overall credit growth, Financial Inclusion and performance of Social Sector Programs including PMJJBY,PMSBY,APY; Review of MUDRA and Stand-Up India Schemes among others

3. Exchange Rate of Foreign Currency relating to Imported and Export Goods notified

4. Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver notified

5. Direct Tax Dispute Resolution Scheme, 2016 which has come into force from 1st June, 2016, can be availed up to 31st December, 2016

6. Government reiterates that information contained in a valid declaration under the Income Declaration Scheme, 2016 is confidential and shall not be shared with any authority

7. RBI Reference Rate for US $

Notifications

Customs

1. 121/2016 - dated 15-9-2016 - Cus (NT)

Rate of exchange of conversion of the foreign currency with effect from 16th September, 2016

2. 120/2016 - dated 15-9-2016 - Cus (NT)

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

Circulars / Instructions / Orders

Income Tax

1. F.No.225/195/2016-ITA II - dated 14-9-2016

Clarification req. u/s 119 of the Income-tax Act, 1961 dated 9th September 2016

DGFT

2. 16/2016 - dated 14-9-2016

Guidelines for Issuance of Duty Credit Scrips under Incremental Export Incentivisation Scheme (IEIS) for Quarterly period (01.01.2013 to 31.03.2013) in pursuance of Trade Notice 04 dated 05.05.2016

Highlights / Catch Notes

Income Tax

• Court Rules in Favor of Taxpayer Seeking Refund for Excess Taxes After Position Change.

  Case-Laws - HC : Refund of excess taxes paid - This is a case where the assessee wanted to shift its stand from the liability not having accrued to having crystalized. Not allowing refund under such circumstances would not shake the credibility of the department. - HC
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• Expenses Disallowed u/s 37 for Lacking Seminar Details and Including Spouses' Travel Costs as Business Expenditure.

  Case-Laws - AT : No details of the seminars conducted abroad are brought on record as also spouses of the Doctors also travelled overseas along with Doctors and the expenses of the spouse on air ticket as well stay abroad are charged as an business expenditure u/s 37 of the Act which cannot be called as being incurred wholly and exclusively for the purposes of business of the assessee. - AT
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• Section 221: Understanding Penalties for TDS Defaults and Timing of Deposits in Relation to Assessing Officer Proceedings.

  Case-Laws - AT : TDS default - Considering the penal nature of section 221, it would be in the fitness of things to make a distinction between a case where the TDS is deposited suo-motu before any proceedings are initiated by the Assessing Officer and a case where the deposit of the TDS is made after initiation of proceedings by the Assessing Officer but before levy of penalty. - AT
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• Unexplained Cash Credit: Bank Statements Not Considered Books u/s 68 of Income Tax Act.

  Case-Laws - AT : Unexplained cash credit u/s 68 - the bank Pass Book or bank statement cannot be construed to be a book maintained by the assessee for any previous year as understood for the purposes of section 68 - AT
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• Section 153C Proceedings Canceled for Insufficient Satisfaction, No Refund or Adjustment for Taxpayer Deposits Allowed.

  Case-Laws - AT : Though the assessment proceedings U/s 153C are cancelled on account of lack of satisfaction in accordance with law but the assessee is not entitled to refund or adjustment of any amount deposited by him pursuant to the filing of the return of income in response to the notice U/s 153C - AT
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• Forfeiture of booking fees qualifies as business income for exemption u/s 80IB of the Income Tax Act.

  Case-Laws - AT : Exemption U/s 80IB - The forfeiture of the amount is result of the failure on the part of the customer to cancel the booking, which in our view, is an income directly drawn from the business of the assessee. - AT
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Customs

• High Court Upholds 6.47% Tolerance Limit for Acid Grade Fluorspar Short-Landing, Aligns with Case Law and Customs Regulations.

  Case-Laws - HC : Short-landing of goods - Acid Grade Flurospar - Adoption of the tolerance limit at 6.47% is correct. - HC
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• Court Rules 10-Year-Old Case Not Maintainable Due to Lack of Jurisdiction, Nullifying Any Judgment Rendered.

  Case-Laws - HC : Just because the case pending for a period of 10 years, it cannot be made maintainable as any judgement made in the lack of jurisdiction will be a nullity anyway - appeal not maintainable. - HC
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Service Tax

• High Court Rules Compliance with Condition No. 3 of Notification No. 41/2007-ST Essential for Service Tax Refund on GTA Services.

  Case-Laws - HC : Refund claim - service tax paid on the transport of goods by road (GTA) services - Notification No.41/2007-ST - condition No.3 in the exemption notification, is also the substance or essence of the exemption notification and the compliance with the same is mandatory - HC
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Central Excise

• Appellant Challenges Double Taxation on Scrap Valuation in Job-Work Charges Dispute; Duty Already Paid on Scrap.

  Case-Laws - AT : Job-work - Valuation - the appellant has discharged the duty liability on the scrap and again, demanded duty by including the value in job work charges, which will amount to double taxation. - AT
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• Cenvat Credit Lapse Confirmed for E-Bike Manufacturers u/r 6(3) After Duty Exemption on April 29, 2008.

  Case-Laws - AT : Whether the provisions of Rule 6(3) of the cenvat Credit Rules are applicable or not and whether the Cenvat Credit shall lapse on 29.04.2008 when e-bikes became exempted from levy of duty or not - manufacture of exempted i.e. e-bikes and dutiable i.e. its parts - Rule 6(3) is applicable - Credit shall lapse - AT
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• Cenvat Credit on Capital Goods for R&D Purposes Allowed; Reversal Demand Not Sustainable Under Cenvat Credit Rules.

  Case-Laws - AT : Cenvat credit - capital goods used exclusively for R&D purposes - the demand for reversal of cenvat credit is not sustainable inasmuch as it is allowable under the definition of capital goods under the Cenvat Credit Rules - AT
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• Cenvat credit allowed for duty-paid playing cards given as gifts with final products under applicable regulations.

  Case-Laws - AT : Cenvat credit cannot be denied on playing cards supplied as free gift alongwith final product - playing cards were purchased on payment of duty - AT
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VAT

• Goods Sold in Bonded Warehouse Before Importation Completion Exempt from VAT, Court Rules.

  Case-Laws - HC : It would prima facie appear that the goods stored by the petitioner in the bonded warehouse being sold before the import is completed, there would be no liability to pay value added tax on such transaction. - HC
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• High Court Upholds Bank Account Attachment for Debt Evasion u/s 45, Validating Commissioner's Authority.

  Case-Laws - HC : When the petitioner is in debt to nationalized banks to the tune of Hundreds of Crores of Rupees and when the department has also material to suggest that the petitioner had evaded payment of duty worth sizable amounts, the Commissioner was well within his rights to exercise power of provisional attachment under Section 45 of the Act - attachment of bank account justified - HC
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Case Laws:

• Income Tax

• 2016 (9) TMI 608
  Refund of excess taxes paid - Condonation of delay - rectification of mistake - revision petition - Held that:- Even without the service of intimation, the petitioner had sufficient knowledge about the acceptance of return as far back as in May 2005. The first attempt to file revision petition, made in December 2008, was thus merely grossly belated. The only explanation that the petitioner offered was that since the intimation was served much later, there was no delay at all. However, if it was presumed that the limitation began to run from May 2005, what prevented the petitioner from filing the revision petition earlier, there is no explanation at all. The petitioner merely referred to the power of the Commissioner to condone the delay for good and sufficient cause being shown, but did not elaborate, in the present case, what such good and sufficient cause was. The Commissioner in our opinion therefore, committed no error in holding that the petitioner had failed to show sufficient cause for condoning the delay. As during the period when under subsection( 1) of section 143, the Assessing Officer had the power of making prima facie adjustments, the legislature provided for an explanation that an intimation sent to the assessee under subsection( 1) would be deemed to be an order for the purposes of section 264 with effect from 1.6.1999. Such explanation has been deleted giving a clear indication that such deeming fiction would no longer apply. In other words, as long as the Assessing Officer had the power to make prima facie adjustments while processing the returns of the assessee under section 143(1) of the Act, by a deeming fiction, it was considered as an order for the purpose of section 264 of the Act and, therefore, revisable. Once with amendment of section 143, such powers were rescinded, it was thereafter, no longer necessary to provide for any refund against a mere intimation under section 143(1) and a corresponding change was therefore, made by deleting the explanation and withdrawing the deeming fiction. We therefore, accept the view of the Commissioner that against the intimation under section 143(1) of the Act, the revision petition was not maintainable. In terms of section 154 of the Act, it may have been possible for the assessee to seek rectification of intimation under section 143(1) of the Act but when the assessee rather belatedly sought revision which was not maintainable, it cannot maintain the claim for refund dehors such proceedings. There is an additional reason why we cannot accept the stand of the petitioner and it is this. In the return filed, the assessee offered to tax a sum of Rs. 1.18 crores by putting a note that “The same has been disallowed and will be claimed when actual payment with necessary documents will be made as the company is still in the process of negotiating the same.” The claim of expenditure putforth by the Assessing Officer would be open to verification by Assessing Officer during the assessment before the same can be granted in terms of section 37 of the Act. If the assessee was following mercantile system of accounting, such claim could be processed on the basis of accrual. These aspects had to be examined before such claim could have been allowed. The assessee itself harbored an opinion that since the expenditure is still under the process of negotiation, the liability had not accrued during the previous year relevant to the assessment year 2003-2004. All these aspects had to be examined before it could be held that the claim of deduction of expenditure was required to be granted. This is therefore, not a case where an apparent clear cut error of airthematical, typographical or clerical nature has crept in which has robbed the assessee of a rightful claim. This is a case where the assessee wanted to shift its stand from the liability not having accrued to having crystalized. Not allowing refund under such circumstances would not shake the credibility of the department.

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• 2016 (9) TMI 607
  Allowable business expenditure u/s 37 - overseas trips for Doctors and their spouses - expenditure on seminars - Held that:- Overseas trips for Doctors and their spouses were organized by the assessee whereby no details of the contents of seminar, if any conducted by the assessee overseas has been brought on record and also even the spouses accompanied the Doctors to the overseas trip which included cruise visit to island, gala dinners, cocktail, gala entertainment etc. rather than being directed towards seminar for product information dissemination or directed towards knowledge enhancement or knowledge sharing oriented as no details of seminar and its course content is brought on record rather the trip is directed towards leisure and entertainment of Doctors and their spouses which in our view appears to be clearly a distinguishable feature in this year enabling us to take a divergent view and the expenses incurred by the assessee cannot be allowed as business expenditure u/s 37 of the Act as it is clearly hit by explanation to Section 37 of the Act being against public policy as unethical prohibited by law. Even otherwise, these expenses cannot be considered to be incurred wholly and exclusive for the purpose of the business as the same were incurred to create good relations with the doctors in lieu of expected favours from doctors for recommending to patients the pharmaceutical products dealt within by the company to generate more and more business and profits for the assessee company. For claiming the expenses u/s 37 of the Act which is a residuary section, it is essential that the expenses are not covered under clauses of Section 30 to 36 of the Act of 1961 and are incurred wholly and exclusive for the purposes of business and it is not sufficient that it has some connection with the business of the assessee. No details of the seminars conducted abroad are brought on record as also spouses of the Doctors also travelled overseas along with Doctors and the expenses of the spouse on air ticket as well stay abroad are charged as an business expenditure u/s 37 of the Act which cannot be called as being incurred wholly and exclusively for the purposes of business of the assessee. - Decided against assessee. Expenses towards free samples distributed to the physicians - Held that:- Explanation to Section 37 of the Act and regulation 6.4.1. of The Indian Medical Council (Professional conduct, Etiquette and Ethics) Regulations, 2002 makes it clear that such free samples granted post introduction of pharmaceutical products in market when its end use stood established will be hit by explanation to Section 37 of the Act and shall not be allowable as deduction . The other decisions relied upon by the assessee as set out in the assessment order are all related to the assessment years prior to insertion of explanation to Section 37 of the Act of 1961 by Finance Act, 1998 w.e.f. 01-04-1962. Thus, keeping in view our detailed discussions and reasoning as set out above , we set aside and restore the issue to the file of the AO for de-novo determination of the issue on merits in accordance with our detailed reasoning and discussions as set out above. Needless to say proper and adequate opportunity of being heard shall be provided to the assessee in accordance with the principles of natural justice in accordance with law and the assessee will be provided sufficient and proper opportunity of being heard by the AO in accordance with principles of natural justice in accordance with law. The assessee shall be allowed by the AO to submit relevant evidences and explanations in support of its contentions. We order accordingly.

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• 2016 (9) TMI 606
  Penalty imposed u/s. 221(1) r.w.s. 201(1) - no reasonable and sufficient reason for delay in payment of the TDS - financial stringency - Held that:- What needs to be examined in the present case is as to whether there was any ‘good and sufficient reason’ with the assessee for having defaulted in the deposit of the requisite TDS into the Government exchequer within the stipulated period. Before us, assessee has pleaded good and sufficient reason for the delay in deposit of tax on two grounds. Firstly, it is sought to be made that there was absence of adequate cash liquidity at the relevant point of time, which lead to the delay in deposit of tax into the Government Exchequer. Absence of adequate cash liquidity or financial crunch, in our view, is not a good and sufficient reason to mitigate the rigors of section 221(1) of the Act , as has been held by the Hon’ble Calcutta High Court in the case of Jubilee Investments & Industries Ltd. (1999 (5) TMI 574 - CALCUTTA High Court ) as held any loss or profit in the business of the assessee has nothing to do with the deposit of the TDS amount, therefore, the plea of financial stringency cannot be a ground to mitigate the rigors of section 221(1) of the Act.Therefore, following the aforesaid decision, we reject the plea of the assessee based on the financial stringency. Second ground as canvassed as ‘good and sufficient reason' the Explanation below section 221(1) of the Act, in our view, is distinguishable, having regard to the facts of the present case. Notably, the Explanation refers to a situation where the tax has been paid “before the levy of such penalty”, whereas the situation before us is qualitatively different inasmuch as in the instant case, assessee has deposited the requisite TDS along with applicable interest into the Government Treasury even before any proceedings under section 201(1) of the Act were initiated by the Assessing Officer. In our considered opinion, considering the penal nature of section 221 of the Act, it would be in the fitness of things to make a distinction between a case where the TDS is deposited suo-motu before any proceedings are initiated by the Assessing Officer and a case where the deposit of the TDS is made after initiation of proceedings by the Assessing Officer but before levy of penalty. Considered in the aforesaid light, in our view, the said Explanation would not militate against the assessee in the present case, because of the aforesaid distinction. Having considered the entirety of circumstances canvassed by the assessee, which are based on bonafide considerations, it deserves to be construed that there existed ‘good and sufficient reasons’ to mitigate the default in question, and thus, the first proviso to section 221(1) of the Act clearly comes to the rescue of the assessee, and the penalty levied under section 221(1) r.w.s. 201(1) of the Act by the Assessing Officer deserves to be set-aside. - Decided in favour of assessee

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• 2016 (9) TMI 605
  Unexplained cash credit u/s 68 - cash deposits made in the joint bank account of assessee husband and wife - bank Pass Book is not an account book maintained by the assessee so as to fall within the ambit of section 68 - Held that:- In the present case the addition has been made by the income tax authorities by treating the cash deposits in the bank account as an unexplained cash credit within the meaning of section 68 of the Act. The legal point raised by the assessee is to the effect that the bank Pass Book is not an account book maintained by the assessee so as to fall within the ambit of section 68 of the Act. Under section 68 of the Act, it is only when an amount is found credited in the account books of the assessee for any previous year that the deeming provisions of section 68 of the Act would apply in the circumstances mentioned therein. Notably, section 68 of the Act would come into play only in a situation “where any sum is found credited in the books of an assessee ”. The Hon'ble Bombay High Court in the case of Shri Bhaichand Gandhi (1982 (2) TMI 28 - BOMBAY High Court ) has approved the proposition that a bank Pass Book maintained by the bank cannot be regarded as a book of the assessee for the purposes of section 68 of the Act . Factually speaking, in the present case, assessee is not maintaining any books of account and section 68 of the Act has been invoked by the Assessing Officer only on the basis of the bank Pass Book. The invoking of section 68 of the Act has to fail because as per the judgment of the Hon'ble Bombay High Court in the case of Shri Bhaichand Gandhi(supra), the bank Pass Book or bank statement cannot be construed to be a book maintained by the assessee for any previous year as understood for the purposes of section 68 of the Act. - Decided in favour of assessee

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• 2016 (9) TMI 604
  Refund or adjustment of any amount deposited pursuant to the filing of the return of income in response to the notice U/s 153C - addition on account of adopting the revised return - withdrawal of admitted tax liability accepted by filing the revised return - Held that:- It is admitted case that the assessee received the notices for filing the return of income for the A.Y. 2003-04 to 2009-10 U/s 153C of the Act. The assesse filed the return of income for an amount of Rs. 12,57,412/- for the A.Y. 2003-04 and has also deposited the tax with the department. However, the A.O. instead of accepting the return of income had made the addition of Rs. 20.00 lacs which was restricted to an amount of Rs. 10.00 by the ld. CIT(A). In the proceedings before us, the ld AR has submitted that even the addition sustained by the ld CIT(A) is required to be deleted as there was no satisfaction in the eyes of law and the amount of addition of Rs. 10.00 lacs on account of adopting the revised return in pursuant to the notice U/s 148/153C of the Act was incorrect/unsustainable. In our view, the revised return of Rs. of Rs. 12,46,130/- was filed by the assessee in response to the notices issued by the A.O. under the provions of the Act. The ld CIT(A) has upheld the addition to the extent of Rs. 10.00 lacs by accepting the revised return filed by the assessee. In our view, the assessee has admitted the tax liability by filing the revised return and now therefore the assessee cannot be permitted to withdraw the admitted tax liability accepted by him by filing the revised return of income. Though the assessment proceedings U/s 153C are cancelled on account of lack of satisfaction in accordance with law but the assessee is not entitled to refund or adjustment of any amount deposited by him pursuant to the filing of the return of income in response to the notice U/s 153C of the Act, in view of the judgment of the Hon’ble Supreme Court in the case of CIT vs. Micro Nova Pharmaceutical (P.) Ltd. [2014 (2) TMI 948 - SUPREME COURT OF INDIA ].

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• 2016 (9) TMI 603
  Exemption U/s 80IB computation - inclusion of items for the purpose of arriving at the profits for working out deduction U/s 80IB(10) - Held that:- For the interest on FDR in our view, the income arising out of such FDRs are not derived from the business of the housing development and therefore, the assessee is not enetitled for the benefit U/s 80IB of the Act. See Liberty India Vs CIT [2009 (8) TMI 63 - SUPREME COURT] Forfeited amount and interest from customers - The amount was received by the appellant on cancellation booking in accordance with the clause 6.1 of the charges. It was contended that the said amount was accrued to the assessee on account of the failure of the customers to honor their commitment in terms of the agreement. Similarly the interest was received by the assessee on account of delayed payment of installment. In our view, for the purposes of claiming of forfeiture of the amount amd charging of interest has by the assessee from the customer has a direct nexus of first degree with the business of the assessee there it comes with the definition of “income drawn” therefore the assesse is an eligible under Section 80IB of the Act. In our view, the forfeiture of the amount was an income flowing under the first degree of nexus with the eligible business. The forfeiture of the amount is result of the failure on the part of the customer to cancel the booking, which in our view, is an income directly drawn from the business of the assessee. However, we are remanding the matter to the file of the A.O. for the purposes of verification of the forfeiture amount and calculation of the interest charged from the customers on account of delayed payment. Miscellaneous income - The assessee has shown the income of Rs. 2,99,948/- on account of the room rental charges retained by it from the charges payable to its labourers to the work contract labourers. The assessee has shown the income being incidental to the business of the assessee. In our view, the assessee for the purposes of smooth functioning and early completion of project was duty bound to provide housing facility, electricity and water connection at a place near to the work site of the assessee to its employees and if the assessee do not provided such facilities to its employees then the labours would be living in the remote area and for that purposes, the assessee would be required to pay the additional cost for accommodation and transport charges. Instead thereof, the assessee has provided housing accommodation at the work site and had charged room rental and other incidental charges like electricity and water for the labourers. In our view, the assesse is already claiming expenses for construction of accommodations and providing other incidental services like electricity and water. there is no direct relationship between the business of the assessee and the income derived on account of lodging, electricity and water charges and therefore, the order passed by the ld A.O. as well as the ld CIT(A) are required to be uphold. Appeal decided partly in favour of assessee

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• 2016 (9) TMI 602
  Suppression of income/profit from C.T. Scan/USG films - Held that:- The addition was on account of the fact that assessee claimed huge wastage of X-Ray films and CT Scan in respect whereof proper account showing extent of damage, claimed by assessee, was not substantiated and it is for this reason, entire damage claimed by assessee was not accepted. Though Assessing Officer made an addition of Rs. 3,40,000/- but substantial relief was given by CIT (A) by reducing it to Rs. 20,000/- which was enhanced to Rs. 50,000/- by Tribunal. It is a pure finding of fact and despite query, learned Counsel for appellant could not show that aforesaid finding is perverse. So far as question of remand is concerned, Tribunal has found that CIT (A) has not properly looked into the matter and is required deeper scrutiny. No perversity in the matter so as to justify an order of reversal in this appeal

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• 2016 (9) TMI 601
  Reference to Dispute Resolution Panel - DRP jurisdiction to pass an order - Held that:- Sub-section (12) of Section 144C, on the face of it, appears to pose an obstacle. Under sub-section (12), no direction can be issued by the DRP under sub-section (5), after the expiry of nine months from the end of the month in which the draft assessment order was forwarded to the eligible assessee. In this case we have found the date of forwarding of the draft assessment order to be 22-8-2014. Hence, the period stipulated under sub-section (12) would expire by 31-5-2015. But the DRP passed an order on 22-6-2015 holding that it had lost jurisdiction to pass an order on 31-12-2014 itself. Even though the date mentioned is not correct, the fact remains that the DRP could not have issued any direction after 31-5-2015, even on undisputed facts. It is possible for this Court to set aside the order of the Dispute Resolution Panel and remit the matter back to them for a consideration on merits, inspite of the fact that the period stipulated in sub-section (12) would have expired by 31-5-2015. In view of the above, the writ petition is allowed, the order of the Dispute Resolution Panel, Bengaluru, dated 22-6-2015 is set aside and the DRP, Bengaluru is directed to take up Form 35A filed by the petitioner along with the annexures and the evidence for a consideration on merits. The DRP shall give opportunity of hearing to both parties, follow the procedure prescribed in Section 144C and issue appropriate directions under sub-section (5), within a period of three months from the date of receipt of a copy of this order. As a consequence of our setting aside the DRPs order dated 22-6-2015, the final assessment order passed by the Assessing Officer on 28-8-2015 is set aside. The Assessing Officer shall pass a final assessment order, after and on the basis of the directions issued by the DRP, as per our directions. The miscellaneous petitions, if any, pending in this writ petition shall stand closed. There will be no order as to costs.

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• 2016 (9) TMI 600
  Rejection of accounts - false information - Held that:- For all the facts and circumstances and considering the fact that Assessee concealed certain things, furnished wrong informations, transaction were made in cash, Assessing Officer found a justification for rejection of accounts and this has been up held by Tribunal holding that CIT (A) has taken a wrong view in reversing findings of Assessing Officer on this aspect. Since all these facts noticed above are not shown to be incorrect and no error or misreading of documents or factual error has been pointed out, we are of the view that Tribunal was justified in upholding Assessing Officer's findings for rejection of accounts of Assessee and otherwise view of CIT(A) has rightly been reserved by Tribunal. - Decided in favour of Revenue.

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• 2016 (9) TMI 599
  Addition u/s 41 - whether Tribunal was justified in holding that the amount raised by the assessee by way of loan and interest expenditure pertaining thereto is for the purpose of business of the assessee being in nature of commercial expediency? - Held that:- It is not disputed before us in the present facts that issue of debenture was a loan and discount, was in the nature of interest / expenditure for the loan. We find that the decision of the Apex Court in S.A. Builders (supra) still holds field as its operation has not been stayed. Therefore, the Tribunal was justified in relying upon a binding decision of the Apex Court in S.A. Builders (2006 (12) TMI 82 - SUPREME COURT ) to examine the case of the respondent assessee before it to determine whether the expenditure was on account of commercial expediency and on facts held it to be so. This on account of undisputed position that the debentures were issued to a sister concern in the same line of business having business connection with each other. Disallowance u/s 14A read with Rule 8D - Held that:- The issue stands concluded against the Revenue by the decision of this Court in Godrej & Boyce (2010 (8) TMI 77 - BOMBAY HIGH COURT ). In the above case, this Court has held that disallowance under Section 14A of the Act on application of Rule 8D of the Rules would only apply from A.Y. 2008-09, prior thereto it has to be by a reasonable method.

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• 2016 (9) TMI 598
  Depreciation of depreciation on windmill - Held that:- Tribunal was right in holding that the assessee is entitled to depreciation, as the assessee had taken over the possession of the wind mill, and that the same was put to use and started generating electricity, before 31.03.2008, during the financial year, relevant to the assessment year 2008-09. Hence, the first substantial question of law raised, is answered against the revenue.

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• 2016 (9) TMI 597
  Reimbursement received from Holding company of the expenses with respect to salaries and other related costs thereto w.r.t. ‘CFG management employees’- Expenses allowance against only interest income on FD and escrow balance - assessee is a wholly owned subsidiary of AIG Capital Corporation, USA(AIGCC) and registered with the Reserve Bank of India as non-deposit taking non-banking financial companies Held that:- The assessee is entitled for deduction as revenue expenditure with respect to the claim of expenses in the instant assessment year 2009-10 as the said expenses were duly incurred towards salary and other expenses related there to ‘CFG Management employees’ in the impugned assessment year 2009-10 wherein the said liability being an ascertained and accrued liability got crystallized and fastened against the assessee on accrual basis in the instant assessment year 2009-10 itself and the assessee following mercantile system of accounting rightly debited the same as an revenue expenditure being an accrued and ascertained liability and claimed the same as deduction while filing return of income with the Revenue for the assessment year 2009-10 . It is not the case of the Revenue that the assessee has not incurred the aforesaid expenses of Rs. 3,12,27,390/-. The assessee entered into an ‘expenses reimbursement agreement’ with parent company AIGCC for reimbursement of the salary and other expenses with respect to ‘CFG Management employees’ at cost without any mark up subsequently on 13-05-2010 albeit the said expenses reimbursement agreement was effective from 01-04-2008 meaning thereby right to receive reimbursement of expenses from parent company AIGCC got vested and accrued in favour of the assessee only when the said ‘expenses reimbursement agreement’ was entered into by the assessee on 13- 05-2010 albeit to claim reimbursement w.e.f.01-04-2008 , but that does not mean that the assessee liability to pay these expenses towards salary and other expenses related thereto ‘CFG management employees’ did not get fastened and accrued against the assesssee in the previous year ended 31-03- 2009 itself rather in-fact it was assessee who was liable to pay said ‘CFG management employees’ salaries and other expenses related thereto of it own account in the previous year ended 31-03-2009 and it is an subsequent event happening on 13-05-2010 wherein ‘expenses reimbursement agreement’ was entered into with AIGCC which entitled assessee to claim reimbursement of said ‘CFG management employees’ salaries and other related costs from AIGCC under expenses reimbursement agreement dated 13-05-2010 as the right to receive reimbursement of said ‘CFG management employees’ salaries and other related costs from parent company AIGCC got vested in favour of the assessee only on signing of ‘expenses reimbursement agreement’ on 13- 05-2010. The assessee has rightly offered as income the reimbursement received from AIGCC of the expenses with respect to salaries and other related costs thereto w.r.t. ‘CFG management employees’ received in the previous ended 31-03-2010 for taxation in the return of income filed with Revenue for assessment year 2010-11. In our considered view the said expenditure of Rs. 3,12,27,390/- towards salaries and other expenses related thereto w.r.t. ‘CFG management employees’ incurred by the assessee during the previous year ended 31-03-2009 is an allowable revenue expenditure for the assessment year 2009-10 which is hereby directed to be allowed as revenue expenditure for the assessment year 2009-10 subject to verification by the A.O. that the assessee has duly offered the reimbursement of the aforesaid expenses to the tune of Rs. 3,12,27,390/- received from AIGCC as income for taxation in the return of income filed with the Revenue for assessment year 2010-11 . Chargeability of interest income on fixed deposit under the head income from profit and gain of business or profession - Held that:- As observed that the assessee is contending that it is engaged in the business of NBFC whereby it is engaged in activities of financing as an NBFC and hence interest income received on FD should be brought to tax as income under the head profit and gains of business or profession . In our considered view, this claim of the assessee that it is engaged in business of financing as an NBFC needs verification and accordingly we set aside and restore this ground to the file of the A.O. for de-novo determination of the issue after verification of the claim of the assessee that the assessee is an NBFC engaged in the business of financing. Needless to say that the assessee may be given proper and sufficient opportunity of being heard in accordance with principles of natural justice in accordance with law and the relevant evidences and explanations submitted by the assessee will be admitted by the AO before de-novo determination of the issue on merits.

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• 2016 (9) TMI 596
  Unexplained cash credit u/s. 68 - search proceedings -share transactions - Held that:- The transactions of purchase and sale of RFL shares is done through the stock exchange involving registered brokers in stock. The payments are made through banking channels. We find that the transaction of purchase and sale of shares are executed without violating any procedures prescribed by any law. So far as the assessee is concerned, the documentation involving the said purchase and sale of shares is without any criticism by the AO. The assessee maintained relevant papers properly. In our view, the AO proceeded to invoke the provisions of section 68 of the Act despite the clarity with reference to the issues relating to identity and credit worthiness of the assessee. It appears that the AO is predominantly influenced by the penny stock related issues on the shares of RFL and treated the said transactions as sham. In our view, the decision of the AO is not valid and appropriate as there is no adverse criticism on the relevant documentation involving these share transactions. There is no allegation against the assessee individually as involved in price rigging. Unlike in the shares of Eltrol Ltd., there are no adverse witnesses or statements given by third parties questioning the genuineness of the transactions. In this case, the transactions are done very much through the exchange and the payments are made involving banking channels. No evidence is gathered by the search team during the proceedings u/s. 132 to support the allegation about the genuineness of the transactions. No evidence is gathered about the cash transfers if any either at the purchase point or at the sale point of share transaction. Nothing adverse was brought about by the search team that the assessee is personally involved in price raising of shares from Rs. 2.5/- to Rs. 185/- per share. There is no adverse inference about the bona fides of the assessee in buying and selling of the said shares of RFL. In such circumstances when there is no evidence against the assessee on the transactions involved, we are of the opinion that why not the assessee should be one genuine investor and, therefore, there is no case for invoking the provisions of section 68 for making the additions on account of transactions involving the shares of RFL. - Decided in favour of assessee

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• 2016 (9) TMI 595
  Penalty u/s.271(1)(c) - defective notice - Held that:- The show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. As find from the show cause notice that the AO has not even indicated the section under which penalty is sought to be levied on the assessee. The show cause notice also does not indicate as to whether penalty was sought to be levied on the assessee for concealing or furnishing inaccurate particulars of net wealth. - Decided in favour of assessee.

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• 2016 (9) TMI 594
  Addition on account of sale of gold/silver jewellery - Held that:- Assessee, in the instant case, failed to produce documents regarding the purchase / possession of silver and gold ornaments. In the absence of supporting evidence, it is inferred that assessee was having undisclosed income which was accounted in the form of sale purchase of gold and silver. We find that there is no substance in the transactions as claimed by assessee. Accordingly, we find no reason to interfere in the order of Authorities Below. We uphold accordingly and ground raised by assessee is dismissed. Addition on account of unexplained income - Held that:- We find that assessee failed to furnish any documents in support of gift received from the above stated parties. In the absence any documentary evidence, we find no reason to interfere in the order of Ld. CIT(A). Estimating a profit @ 7% on the turnover - Held that:- Nature of business of assessee has not been doubted by the lower authorities. We understand that if assessee is carrying on his business, there will be several indirect business expenses besides the direct cost. The lower authorities have not doubted the amount of loan which assessee has borrowed for the purpose of his smooth running of business. If we analysis the balance-sheet of assessee we find that loan amount has been utilized exclusive for the business. However, at the same time, we cannot ignore the fact that assessee has failed to produce his books of account which was very important aspect for making the scrutiny assessment. We find that assessee has claimed total indirect expense for Rs.2,77,086/- which is inclusive of interest element of Rs.1,58,833/-. So it means only indirect expense of Rs.1,18,253/- has been claimed by assessee. In view of the mater and after considering the facts in totality of the case and in the interest of justice and fair play, we are inclined to limit the net profit @ 4% of assessee’s turnover.

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• 2016 (9) TMI 593
  Deduction u/s 80HHC - violation of provisions of Rule 46A by allowing the claim of the assessee without due verification of the facts & figures required to arrive at the correct amount of allowance - DR was of the view that even the action of CIT(A) in coming to the conclusion that it is only the profit arising out of sale for transfer of DEPB which is covered u/s 28(iii) of the Act - Held that:- We are of the view that even if the contention of the DR is accepted the same is without any merit in view of the decision of the Hon’ble Supreme Court in the case of Topman Exports [2012 (2) TMI 100 - SUPREME COURT OF INDIA ] the computation of deduction u/s.80HHC as done by the CIT(A) is in order and calls for no interference. As far as violation of the provision of Rule 46A of the IT Rules as raised by the revenue is concerned, the ld. Counsel for the asessee had no objection if the figures which have been considered by CIT(A) and the statement in support of the same are re-considered by the AO. In view of the above, we set aside the order of CIT(A) in so far as it relates to the computation of the quantum of deduction u/s 80HHC of the Act in the light of the decision of the Hon’ble Supreme Court in the case of Topman Exports (supra). For statistical purposes the appeal of the revenue is treated as allowed. Depreciation claim at 100% on pollution control equipment - Held that:- Test of emission after installation of pollution control equipments was conducted by one M/s. Envirochek and a copy of the said report was filed before the AO. Order of the AO is silent on all these facts. The reasons assigned by the AO for rejecting the claim of 100% depreciation by the Assessee was, a mere observation that the assessee did not justify the claim for depreciation on pollution control equipments. There is no finding of the AO that the assessee did not manufacture pollution control equipments by utilising the raw materials which it had purchased. In the given circumstances we are of the view that the equipments in question on which the depreciation at 100% was claimed was pollution control equipments and the assessee was entitled to the claim of depreciation at 100% as claimed by it. We do not find any ground to interfere with the order of CIT(A) on this issue. Disallowance u/s 14A - Held that:- As far as the disallowance on interest expenses is concerned the available funds available with the assessee were much more than the investments made by the assessee. Further there was short term capital gain of Rs. 460893/- on above investments, on which tax is duly paid.The deletion of the addition made on account of disallowance of interest expenses is therefore held to be proper and order of the CIT(A) on the same is confirmed. As far as the disallowance of other expenses is concerned it has been held by a co-ordinate Bench of this Tribunal in the case referred to by the CIT(A), that prior to A.Y.2008-09 Rule 8D was not applicable and disallowance u/s 14A of the Act had to be made on a reasonable basis. The Tribunal in several cases has applied 1% of the tax free income has amount which can be disallowed under the head “Other Expenses” This view of this tribunal has also been approved by the Hon’ble Calcutta High Court. We therefore confirm the order of the CIT(A) on this issue also. Addition made on account Bad Debt - Held that:- As rightly held by CIT(A) the deduction on account of bad debts had to be allowed if the debt in question or part thereof is written off as bad in the books of accounts of the assessee. There are other conditions for allowing the claim for deduction on account of bad debts but the existence of those conditions in the case of the assessee has not been disputed by the AO. The only dispute raised by the revenue is that the only part of the debt written off is bad and therefore it cannot be said that the debt itself has become bad. In our view this inference drawn by the AO is not correct and in the light of the decision of the Hon’ble Supreme Court in the case of T.R.F. Limited vs CIT (2010 (2) TMI 211 - SUPREME COURT ) it is not necessary after the amendment to the law w.e.f. 01.04.1989 provision of section 36(1)(vii) of the Act that the assessee is no longer required to establish that the debt in question which is written off as bad has in fact become bad and irrecoverable

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• 2016 (9) TMI 592
  Addition on account of inflation of purchase price of 1.60 lakh equity shares - Held that:- The transactions of sale-purchase was duly recorded in the books of account of the respective parties, the allegation by the Assessing Officer that the off market transactions cannot be accepted under SCRA is factual incorrect relating in the aforesaid appellate order. We also find that the exception has been provided in the SCRA Act under section 14(2) of the SCRA Act - Decided against revenue Addition made on account of payment made for Keyman’s Insurance Policy (KIP for short) for the director - AO disallowed the payment of KIP premium on the ground that the directors of assessee-company are not actively engaged in the day-to-day affairs - Held that:- On a bare reading, we find that said Section 10(10D) Explanation-I requires the connection between the assessee and person to be covered under insurance. It is not necessary that he should be aware of all the affairs of business of assessee. In view of above, we find no reason to interfere in the order of Ld. CIT(A) in deleting the addition - Decided against revenue

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• 2016 (9) TMI 591
  Claim of bad debts and advances written off - trading loss u/s 28 - Held that:- It is not in dispute that the assessee had advanced the monies to them in the normal course of business and had offered interest income in the earlier years as income from business which has also been accepted as such by the ld AO in the assessment proceedings u/s 143(3) of the Act for the Asst Year 2001-02. We find that the assessee had preferred civil suits against these two parties which are pending in the courts. In case any amount that could be recovered out of the outcome of the civil suits, the same would get taxed as bad advances recovered as income in the year of receipt. We find that the assessee had discharged its onus from all aspects and hence the write off of these advances which were given in the normal course of business and accepted as such by the revenue is allowable as a trading loss u/s 28 of the Act. With regard to debts due from Ameri Gas Pvt Ltd, we find that the assessee had offered the sales in the year of supplies made to that party and had written off as irrecoverable in the year under appeal. The assessee had duly complied with the provisions of section 36(1)(vii) read with section 36(2) of the Act and accordingly we hold that the ld CITA had rightly deleted the disallowance made on that count. With regard to amounts due from Pennzol Investment & Trading Co Pvt ltd, we find that the trade advances against supplies given by the assessee to such party could not be recovered and remaining outstanding for quite a long period of time and hence the assessee decided to write off the same as irrecoverable. We find that the advance was given in the nature of trade and in the normal course of business of the assessee for supply of industrial gases and loss arising on account of irrecoverabilty of the same is a trading loss allowable u/s 28 of the Act. With regard to write off the earnest money deposits, the same was paid in the normal course of business and write off of the same is an allowable trading loss u/s 28 of the Act.

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• 2016 (9) TMI 590
  Disallowances of bad-debts and other expenses - application of explanation 1 to section 37 (1) - assessee is a NRI, citizen of USA and claimed to have carried on money lending as business activity in India - Held that:- We find merit in the contentions of the ld. DR. As observed that:- (1) The assessee himself offered the interest from private loans under the head “income from other sources”. The assessee having filed the return and not filed the revised returns, the Assessing Officer while accepting his income has acted perfectly in accordance with law; (2) The assessee’s contention that it was into illegal money lending business apart from being unbelievable is highly deplorable as a US citizen cannot be supposed to violate Indian Laws, i.e., Gujarat Money-Lenders Act and FEMA regulations. The Assessing Officer has been more than reasonable in not intimating these facts to concerned authorities; otherwise, the assessee would have been in deep trouble. (3) Assuming the assessee was into illegal money lending business then also in view of the Explanation 1 to Section 37, the assessee’s business being an offence and prohibited by law, the expenditure cannot be allowed. In view of the above, I have no hesitation to uphold the orders of the authorities below. - Decided against assessee.

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• 2016 (9) TMI 589
  TDS u/s 194C - default in deducting and paying proper TDS as per law - Disallowance under section 40(a)(ia) - retrospectivity - Held that:- Hon'ble Delhi High Court in the case of CIT vs. Ansal Land Mark Township Private Limited (2015 (9) TMI 79 - DELHI HIGH COURT ) has categorically held that “Second proviso to section 40a(ia) is declaratory and curative in nature and has retrospective effect from Ist April, 2005”. We, therefore, in the interest of justice and fair play, restore this issue to the file of the Assessing Officer for the purpose of limited verification on the aspect as to whether Dainik Bhaskar has included the receipt in its profit and loss account in computing the business income offered to tax and if it is found to be so, the Assessing Officer is directed to delete the disallowance. Needless to say that the Assessing Officer shall provide adequate opportunity of being heard to the assessee.

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• Customs

• 2016 (9) TMI 622
  Detention of goods - Heavy Melting Scrap - Re Rollable Steel Scrap - inspection by chartered engineer - the goods fall in the category of Seconds & Defective CRGO Silicon Steel Strips in Slit Coil Form and Seconds and Defective Cold Rolled Grain Oriented Steel Sheets/ Strips cut to different shapes and sizes - are all goods capable of being re-used? - Held that: - To take care of the apprehension expressed by the Department that the material can be re-used, the petitioner had offered its mutilation at his own cost before it is released. Even part of scrap also can be used as such or with some modification. The petitioner should be permitted to do that - the goods released on provisional basis. The Department shall be at liberty to issue show cause notice to the petitioner for any alleged violation of the provisions of the Customs Act. The petitioner will pay the duty on the material imported as scrap and further furnish surety and undertaking to pay the duty, penalty and interest, if any, as may be leviable on such goods, if these are found to be other than scraps - petition disposed off - decided partly in favor of petitioner.

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• 2016 (9) TMI 621
  Confiscation of consignments - Section 111(o) of the Customs Act, 1962 - imposition of penalties - exemption notification No. 111/95-Cus., dated 5.6.1995 - a self contained code - sub-section (1) of Section 25 of the Customs Act, 1962 - sub-section (2A) of Section 25 of the Customs Act, 1962 - assets of the respondent-company were taken over by the financial institution and sold, is under challenge - closure of respondent's business - Held that: - the decision in the case Commissioner of Central Excise, Nagpur v. Vidarbha Veneer Industries Ltd. and others [2016 (8) TMI 707 - SUPREME COURT] is followed - appeal disposed off with liberty to the department to get the same revived, in case the respondent-company succeeds in challenge to the sale of assets and revives its business.

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• 2016 (9) TMI 620
  Refund of duty along with interest - benefit under Notification No.12/2012 - benefit under Notification No.21/2012 - an appeal from the order of the Commissioner is pending before the learned Tribunal - Held that: - The Commissioner has allowed the appeal preferred by the writ petitioner. Therefore, the revenue is liable to carry out that order. The revenue has to make payment. The learned Writ Court has directed the revenue to make such payment. It is clarified that such payment to be made by the revenue shall be subject to result of the appeal pending before the learned Tribunal. Direction to pay cost set aside. Appeal disposed off - decided against Revenue.

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• 2016 (9) TMI 619
  Short-landing of goods - Acid Grade Flurospar - is tolerance limit of 6.47% justified? - Imposition of penalty - Held that: - The experts say the Acide Grade, which shipped routinely in the form of damp filtercake, contains 7% to 10% moisture. Adoption of the tolerance limit at 6.47% is correct. If 6.47% is adopted as tolerance limit on the entire manifested cargo, then there will be no shortlanding. The respondents are directed to adopt the tolerance limit of 6.47% on the entire manifested quantity and redo the assessment to ascertain as to whether there is any penalty leviable on the petitioner. Amount of refund of the amount already collected, if any, after assessment, should be duly made with appropriate orders - writ petition allowed - decided in favor of petitioner.

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• 2016 (9) TMI 618
  Maintainability of appeal - Section 35G of the Central Excise Act, 1944 - Demand of differential duty - denial of Exemption Notification No.08/1996 dated 23.07.1996 - tenacity with 14% variance - Nylon Filament Yarn - Chapter 54 of the Central Excise Tariff Act, 1985 - test of samples - denier range of yarn above permissible limit - Whether the appeal filed by the appellant under Section 35G of the Central Excise Act 1944, is maintainable when the same relates to the rate of duty of excise, as raised in the substantial question of law by the appellant? - Held that: - Section 35G makes it clear that an appeal to High Court shall lie, provided it not being an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purpose of assessment - the issue relates to the claim for exemption under the exemption notification, whether exemption applicable to the appellant or not. The conditions in the notification for the tolerance limit of nylon yarn have not been fulfilled by the appellant. Any dispute relating to rate of duty, cannot be decided under Section 35G of the Act - appeal not maintainable. Maintainability - appeal pending for a period of 10 years - want of jurisdiction - Held that: - where there is a lack of inherent jurisdiction of the Court, the decree is then said to be a 'nullity'. Just because the case pending for a period of 10 years, it cannot be made maintainable as any judgement made in the lack of jurisdiction will be a nullity anyway - appeal not maintainable. Merits of the case need not be considered - appeal dismissed - decided against appellant.

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• 2016 (9) TMI 617
  Processing of drawback application - denial of deemed export drawback - All Industry Rate of Duty Drawback - customs duty components paid on inputs/components - Column-B, “Sr No.540203” of Schedule of All Industry Duty Drawback Rates 2011-2012 - EOU - DTA - principles of natural justice - information by letters and no personal hearing - whether the decision given by Development Commissioner on supplies made from the domestic tariff unit to the export oriented unit not eligible for refund on All Industry Draw Back Rate without providing any opportunity of being heard to the petitioner is tenable in law? - Held that: - it was expected from the Development Commissioner that he would apply his mind to the whole case and after a oral hearing to the Petitioner pass a reasoned order in accordance with law. The Development Commissioner SEEPZ, Special Economic Zone, Mumbai himself will now grant a personal hearing to the Petitioner and on perusal of all the records pass a proper reasoned order on the draw back application within three months from the date of receipt of a copy of this order - petition disposed off - decided in favor of petitioner.

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• 2016 (9) TMI 616
  Maintainability - territorial jurisdiction of the court to entertain the writ petition - reliance placed on the decision of the case Zeenath International Supplies V. Commissioner of Customs, Visakhapatnam, [2014 (3) TMI 676 - MADRAS HIGH COURT] - Held that: - when there is a conclusion that the litigation amounts to forum shopping, the Court would refuse to exercise discretion to entertain a writ petition - writ petition not maintainable and dismissed - liberty granted to the petitioner to approach the CESTAT, Bangalore and the CESTAT shall exclude the period from 23.06.2004, till the receipt of the certified copy of this order, while computing limitation in the appeal to be filed by the petitioner - decided against petitioner.

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• 2016 (9) TMI 615
  Whether the Tribunal is justified in holding that “Para 9.9 (a) of the policy provides that unless specifically prohibited in the LOP/LOI, rejects may be sold in the Domestic Tariff Area on the basis of records maintained by the unit and on prior intimation to the Customs Authority” and that “only sale of rejects above 5% of the FOB value of exports shall be counted against DTA sales”, when the facts and law is otherwise? - Held that: - assets of the respondent taken over by financial institution and were sold. The company, presently, existing only on papers. Thus, it is not appropriate to go into the issue raised by the revenue in the present appeal - appeal dismissed. In case the stand taken by the counsel for the respondent is found to be incorrect, the revenue shall be entitled to get the present appeal restored within 3 months.

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• Service Tax

• 2016 (9) TMI 636
  Refund claim - service tax paid on the transport of goods by road (GTA) services - Notification No.41/2007-ST, dated 6-10-2007, for the exports made during the period from January, 2008 to March, 2008 - non-fulfilment of condition no. 3 imposed under amendment Notification No.3/2008-ST, dated 19-2-2008 - Whether any one or more of the conditions stipulated in an exemption Notification can be said to be a mere matter of procedure, on which some amount of laxity can be given. Held that:- the Assessee, have satisfied the substantial requirements (1) of export of iron ore; (2) of payment of service tax on the service of transportation of material from the place of removal to the port; and (3) of actual export of the material. Therefore, the failure to have the details of the exporters invoice mentioned in the lorry receipt and corresponding shipping bill, on account of the peculiar nature of the trade, cannot be a ground for denying the benefit of the exemption notification. But unfortunately for the Assessee, condition No.3 cannot be construed as a mere matter of procedure. It is a matter of evidence. The original notification dated 6.10.2007 did not make the applicability of exemption, conditional. But by an amendment to the original notification, the grant of exemption was made conditional. Therefore, the object of the amendment is very clear to the effect that proof of eligibility to claim exemption was made equivalent to the eligibility for exemption. The object of requiring the details of exporters invoice to be mentioned in the lorry receipt and the corresponding shipping bill is to ensure that what had reached the port was actually the consignment of that exporter and that there was no duplication of the claim. Therefore, the relaxation of such a condition would tantamount to the removal of the very life breath of the notification. Hence, the first question of law is to be answered in favour of the Revenue and against the Assessee. Whether the theory of substantial compliance can be applied to the conditions stipulated in exemption Notifications - Held that:- the answer to the above question is to be found very clearly in the decision of the Constitution Bench of the Supreme Court in Commissioner of Central Excise v. Hari Chand Shri Gopal (2011) 1 SCC 236. If we look at the facts of the case decided by the Constitution Bench, it is seen that the Assessees in the case before the Supreme Court were engaged in the manufacture of excisable goods, which became chargeable to the duty of excise with effect from 01.03.1994. The Assessee was transferring a major portion of the manufactured goods to certain companies, under the cover of transfer challans, describing them in a particular manner. The factory of the Assessee was raided by the Preventive Wing of the Excise Department and on the basis of what was found out, notices were issued. The Assessee claimed the benefit of exemption under a notification. But the claim was rejected and the demand was confirmed. On appeal, the Tribunal confirmed the findings of the adjudication officer, but directed re-examination of the question of applicability of the notification. At the time of re-examination by the adjudicating Commissioner, the Assessee contended (1) that they despatched the goods to their final manufacturing units through transfer challans, and receipts were also recorded in Form-IV register and the utilisation of the goods was recorded in RG-12 register; and (2) that the manufacture of final products could be ascertained through RG-1 register maintained at the recipient end. These, according to the Assessee, established substantial compliance with the procedure set out in Chapter-X for duty exemption. The Constitution Bench pointed out that the doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably be expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the essence or substance of the requirements. The Court pointed out that the acceptance of a plea of substantial compliance depended upon two things, viz., (a) facts and circumstances of the case and (b) the purpose and object sought to be achieved and the context of the prerequisites which are essential to achieve the object and purpose. The Supreme Court went on to point out that substantial compliance is insisted where mandatory or directory requirements are lumped together and that in cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. Therefore, what can be condoned, is that which is not the essence of the thing to be done, but that which is prescribed merely for the orderly conduct of the business. In the case on hand all the four conditions stipulated in the amended notification, are intended to ensure that there are checks and balances for the authority conferred with the power of processing the application for exemption to arrive at a subjective satisfaction that the requirements are fulfilled. If the Courts recognise some amount of latitude for the authorities, who are vested with the power to process the application for exemption, then the same may tantamount to enlarging the scope of the discretionary power on the part of those authorities. Many times the exercise of discretion, one way or the other, leads to complications, when there are no guidelines for the exercise of the power of discretion. Once a full-fledged system is put in place, for the exercise of discretion, the compliance with the requirements of such a system alone will remove any kind of arbitrary exercise of power. The Courts are obliged to interpret notifications of this nature, in such a manner that the power of discretion is reduced to the minimum. Therefore, the second substantial question of law is also to be answered in favour of the Revenue by holding that condition No.3 in the exemption notification, is also the substance or essence of the exemption notification and the compliance with the same is mandatory. - Decided in favour of Revenue

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• 2016 (9) TMI 635
  Period of limitation - Refund claim - Service tax paid on Business Support Service provided to associated enterprise which was later on amalgamated with the appellant - non-production of documentary evidences, the claim appeared to be for the period prior to date of amalgamation, on the principle of unjust-enrichment, limitation etc. - Held that:- The adjudicating authority and the first appellate authority have not considered the matter on merits and have rejected the refund claim only on limitation without going into merits of the case. Further, it is alleged that the said claimant had not submitted any evidence whatsoever to prove that the service tax claimed as refund has been paid by the said claimant. It is also observed that the original adjudicating authority or the first appellate authority had no opportunity to examine the case law, now submitted by the appellant with regard to limitation as well as merits. Hence, we find that this matter has to be remanded back to the adjudicating authority for fresh decision after giving reasonable opportunity of hearing to the appellants. - Appeal allowed by way of remand

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• 2016 (9) TMI 634
  Demand alongwith interest and penalty - differential tax - works contract entered by appellants in April, 2007 but providing commercial and industrial construction service to their clients prior to April, 2007 also - discharged their duty liability under composite scheme at the rate of 2% in the month of April, 2007 on the advance received by them from their client - Held that:- the work contract was introduced as a taxable service with effect from 1.6.2007. The Hon’ble Supreme Court in the case of Commissioner of Central Excise, Kerala vs Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] has held that works contract were not taxable prior to 1.6.2007. Therefore, prior to the said date, there was no requirement under the law to pay any service tax. Hence, the demand of differential tax, when there was no obligation to pay any tax during the relevant period would not be sustainable. For the period subsequent to 1.6.2007, the appellant has already discharged their tax liability correctly in accordance with the composite scheme. Therefore, impugned order confirming the differential demand and interest and imposing penalty is required to be set aside. - Decided in favour of appellant

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• 2016 (9) TMI 633
  Refund claim - service tax paid on technical testing and analysis services used for export of final product - Notification No. 41/2007-ST dated 06.10.2007 - Held that:- the issue stands discussed in detail by the Appellate Authority. It is not the Revenue’s case that technical testing and analysis is not one of the specified services in the notification in question. The only ground raised in the appeal is that Commissioner (A) has not discussed various grounds raised before him by the Revenue, which claim we find to be not substantiated. - Decided against the Revenue

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• 2016 (9) TMI 632
  Service Tax - Member-ship Fees and Business Exhibition Services outside India - Held that:- the issue regarding tax on Membership Fee is decided by the CESTAT in the case of FICCI Vs. CST, Delhi [2014 (5) TMI 183 - CESTAT NEW DELHI] and the tax on Business Exhibition Service Outside India has also been decided by CESTAT in the case of Cox & Kings India Ltd. Vs. CST, Delhi [2013 (12) TMI 1024 - CESTAT NEW DELHI]. The impugned order was issued on 30.11.2009 makes it obvious that above decisions of CESTAT could not have been considered by the adjudicating authority as these judgements were delivered subsequently. Therefore, we are remanding the matter to the primary adjudicating authority for de novo adjudication in the light of the CESTAT judgements. Cenvat demand for excess utilisation and Short payment of service tax May-Oct, 2003 - appellant made a mistake in ST-3 returns and filed the corrected and revised ST-3 returns which was not taken into account by adjudicating authority - Held that:- the appellant’s submissions regarding filing of corrected and revised ST-3 returns, which would have had a direct bearing with regard to the impugned demand of Cenvat credit for excess utilisation and short payment of service tax during the period May to October, 2003 is also not without substance. - Appeal allowed by way of remand

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• 2016 (9) TMI 631
  Invokation of extended period of limitation - Demand alongwith interest and penalty - Commercial or industrial construction service for the period upto 31-05-2007 and Works Contract service for the period 01-06-2007 to 31-03-2011 - Held that:- the appellant has contended that service provided by them has been correctly classified as WCS for the period from 01-06-2007 and that same service cannot be classified under CICS for the period prior to 01-06-2007. This contention is correct and any dispute in this regard has been settled by the Hon'ble Apex Court in the case of Commissioner CE that demand has ignored and not taken into account that their abated value of turn over during impugned period was below threshold limit of taxability. Therefore, the demand in show cause notice beyond the normal period is unsustainable being barred by limitation. The matter requires to be remanded to original authority for re-quantification. - Appeal partly allowed by way of remand

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• Central Excise

• 2016 (9) TMI 630
  Job-work - Valuation - includability - value of scrap retained by the appellant, who is a job worker - appellant clears the scrap so retained by them and discharges the duty liability on it - Held that:- the appellant has discharged the duty liability on the scrap and again, demanded duty by including the value in job work charges, which will amount to double taxation. Also an identical issue came up before the Bench of the Tribunal in the case of P.R. Rolling Mills Pvt. Ltd. [2009 (3) TMI 444 - CESTAT, BANGALORE] wherein it was held that adding the value of scrap in the assessable value after payment of duty on the same would amount to addition of the value of the scrap twice. Therefore, the impugned order is unsustainable. - Decided in favour of appellant

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• 2016 (9) TMI 629
  SSI Exemption - Imposition of penalty - clandestine removal of goods - goods cleared during February and March 2004 have not been accounted for in the books of accounts and no Central Excise duty have been paid on removal of those goods from the factory - duty deposited on information from the department - Held that:- it is found that immediately on detection of mistake by the Central Excise Department regarding alleged removal of goods, the appellant had voluntarily deposited the duty. It is also found that though the appellant had not contested the duty demand but the same cannot be accepted as the duty paid towards clandestine removal of the goods. Thus, in the interest of justice, the quantum of penalty imposed in the adjudication order can be reduced. Therefore, the penalty imposed on the appellant company is reduced to Rs. 10,000/- and personal penalty to Rs. 5000/-. No duty benefit shall be extended to the appellant. - Appeal disposed of

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• 2016 (9) TMI 628
  Whether the provisions of Rule 6(3) of the cenvat Credit Rules are applicable or not and whether the Cenvat Credit shall lapse on 29.04.2008 when e-bikes became exempted from levy of duty or not - manufacture of exempted i.e. e-bikes and dutiable i.e. its parts - import of e-bikes in CKD condition and clearing the same alongwith indigenously procured battery and paying 10% of duty thereon - e-bikes are exempted from levy of duty as per Notification No.25/2008 dt. 29.04.2008 - non-maintenance of separate account of inputs of dutiable as well as exempted final products. Held that:- We do agree with the observations made by the ld. Commissioner (appeals) and hold that as assessee was not maintaining separate account for inputs used in manufacturing of e-bikes and parts thereof, therefore, provisions of Rules 6(3) are squarely applicable to the assessee as the assessee are manufacturing both dutiable and exempted final product and assessee is liable to pay 10% of the value of e-bikes at the time of their clearance and the cenvat credit lying in their cenvat account shall not lapse wholly but the cenvat credit lying in their cenvat account attributable to inputs, work in progress and finished e-bikes shall lapse. As we hold that the provisions of Rule 6(3) are applicable to the facts of the present case, therefore, the provisions of Rules 11(3) of the Cenvat Credit Rules are not applicable. - Decided in favour of appellant

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• 2016 (9) TMI 627
  Cenvat credit - recovery as wrongly availed in respect of capital goods used exclusively for R&D purposes - machines/ equipments/ apparatus installed in engineering Research Design and Development laboratory was located in the buildings separately from the production area - Held that:- the assessee’s R&D facility is located within the factory premises registered with the Central Excise Department, housed in buildings which are different from the factory sheds. When considered with reference to the definition of capital goods, we are of the view that there is no bar in using the capital goods in the buildings earmarked for R&D activities as long as it is situated within the factory premises registered with the Central Excise Department. The definition as it stands now does not make it mandatory that the capital goods should be used in or in relation to the manufacture of final products as was the case in some earlier periods. Therefore, the demand for reversal of cenvat credit is not sustainable inasmuch as it is allowable under the definition of capital goods under the Cenvat Credit Rules in view of the various decisions of Hon'ble Supreme Court, High Court and Tribunal. - Decided in favour of appellant

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• 2016 (9) TMI 626
  Whether the appellant would be entitled to utilize the cenvat credit of duty accumulated prior to opting for Notification No. 30/04-CE dated 09.07.2004 - appellant paid duty on their final products making use of Cenvat Credit - opted to avail exemption under Notification 30/2004-CE w.e.f. from 03.08.2004 - appellant argued that cenvat credit forward from 2004 has been rightly earned by them and that the amendment introduced by the provision of Rules 11(3) of the Cenvat Credit Rules, 2004 will have only prospective effect and cannot be used to lapse the credits accumulated by them - Held that:- the judgment of Hon’ble High Court of Karnataka in the case of Commissioner of C. Ex. Vs. Gokldas Intimate Wear [2011 (4) TMI 1123 - KARNATAKA HIGH COURT] squarely covers the issue and it stands decided in favour of the appellant. Therefore, the appellant will be entitled to utilize the cenvat credit of duty accumulated prior to opting for Notification No. 30/04-CE dated 09.07.2004. - Decided in favour of appellant

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• 2016 (9) TMI 625
  Refund claim - Cenvat credit reversed on P.P. Bags under protest - imported sugar packed in P.P. Bags in the godown situated outside the premises or factory and as packed or bags used outside the factory - packing cost includes the cost of P.P. Bags, and forms component of the raw material and that is raw sugar - Held that:- it is found that packing cost of raw sugar for transportation from the Port of import, to the factory of production, is an element of cost of the raw material and as such forms part of the input cost. Such input or raw sugar have been utilized in the manufacture of taxable outputs. Both the rulings of the coordinate of this Tribunal in the case of Ponni Sugars Ltd. Versus Commissioner of C. Ex. [2008 (2) TMI 158 - CESTAT, CHENNAI] and Universal Cables Ltd. v. CCE [2002 (10) TMI 206 - CEGAT, NEW DELHI] to be per in-curium as they have not considered the principle of costing wherein packing cost of raw material forms part of the input price of the raw material, which is a direct cost for the manufacture of excisable output. Therefore, refund is granted with interest. - Decided in favour of appellant

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• 2016 (9) TMI 624
  Period of limitation - Refund claim - payment of differential duty on re-valuation - 10%/15% of the cost of production whether required to be added to arrive at the assessable value or not - unjust enrichment - goods not sold to any person - Held that:- once it was finally settled by a quasi-judicial process in the appellant's own case that the assessable value of the impugned goods was to be arrived at by adding 10%/15% to the cost of production, the very basis of claiming the impugned refund crumbles rendering the appeal unsustainable. Therefore, it is no longer necessary to swell at the other contentions. - Decided against the appellant

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• 2016 (9) TMI 623
  Cenvat credit - playing cards supplied as free gift alongwith final product - playing cards purchased on payment of duty - Held that:- the playing cards even though it does not participate directly in the manufacture of final product i.e. spray guns but undisputedly the same is purchased by the appellant and expenditure of the same stands absorbed in the cost of the final product which ultimately suffered the duty as a whole, therefore, the playing cards which is supplied along with final product should be eligible for input credit. The definition of input also clearly suggest that the input need not to be used directly in the manufacture and also not required to be contained in the final product but if it is used even in relation to the final product credit should be allowed. In the present case the playing cards indeed supplied along with final product it fulfilled the criteria of inputs, therefore credit cannot be denied of the duty paid on playing cards followed by the judgment of Hon’ble Gujarat High Court in the case of Commr. of C. Ex. Cus. & S.T. Daman Vs. Prime Health Care Products [2010 (10) TMI 881 - GUJARAT HIGH COURT]. - Decided in favour of appellant

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• CST, VAT & Sales Tax

• 2016 (9) TMI 614
  Release of attachment of goods - Section 45(1) of the VAT Act - non-ferrous metals - aluminium - lead - zinc - copper - nickel - customs bonded warehouse - VAT liability - Held that: - In terms of Section 45(1) of the VAT Act, the competent authority undoubtedly has the power of provisional attachment where during the pendency of any proceedings of assessment or re-assessment of turnover escaping assessment, he is of the opinion that for the purpose of protecting the interest of Revenue, it is necessary to do so. However, such powers being in the nature of attachment before judgement need to be exercised with due care and caution and only in appropriate cases, where the material is available justifying exercise of such extreme power. In the present case, it would prima facie appear that the goods stored by the petitioner in the bonded warehouse being sold before the import is completed, there would be no liability to pay value added tax on such transaction. Classification - Nickel Cathode - Nickel Full Plates - Held that: - there is no mismatch in the goods brought by the petitioner from abroad and that is sold to the Indian customers. Minor difference in description of the goods in two sets of documents can be attributed to different but synonymous terms being used by the same set of goods. The petitioner keeping the bank guarantee of Rs. 30 crores in favour of the department alive till the assessments are framed and subject to the orders contained therein, the petitioner would be free to deal with the goods in question without there being any further attachment - petition disposed off - decided in favor of petitioner.

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• 2016 (9) TMI 613
  Attachment of 14 bank accounts - whether the attachment of bank account would not amount to harsh action against petitioner when the immovable properties are already attached and tax yet to be determined? - non-disclosure of certain facts - Held that: - apart from conscious and blatant non-disclosure of most material facts by the petitioner which led the Court into passing of interim order, which but for such suppression the Court would not have passed, even otherwise in facts of the case the petitioner has not made out any case for interference. When the petitioner is in debt to nationalized banks to the tune of Hundreds of Crores of Rupees and when the department has also material to suggest that the petitioner had evaded payment of duty worth sizable amounts, the Commissioner was well within his rights to exercise power of provisional attachment under Section 45 of the Act - attachment of bank account justified - petition dismissed - decided against petitioner.

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• 2016 (9) TMI 612
  Revisional powers of Assistant Commissioner of Sales Tax - period of limitation - section 67 of the Gujarat Sales Tax Act - manufacture and resale of oil, oil cakes deoil cakes etc - did the Assistant Commissioner exercise revisional powers within the period of limitation prescribed? - Held that: - the Commissioner on his own motion may exercise revisional powers within three years from the date of the order passed by a subordinate officer by calling for and examining the record of such order and can pass such order as he thinks fit and proper within 12 months from the date of service of notice for revision. This additional requirement of passing such order as he thinks proper within 12 months from the date of service of notice of revision has been inserted by virtue of Amending Gujarat Act 10 of 1992. The Commissioner had not exercised the revisional powers under subsection (1) of section 67 within the period of limitation prescribed - revisional order of the Commissioner quashed - petition allowed - decided in favor of petitioner.

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• 2016 (9) TMI 611
  Levy of tax - Section 28-B of the U.P. Trade Tax Act, 1948 - imposition of penalty - Section 15A(1)(g) of the 1948 Act - sale of vehicle on hire-purchase - Form - 34 - whether the rebuttable presumption which stood raised under Section 28-B stood discharged or not? - Held that: - Under a rule of rebuttable presumption all that a person is obliged to do is to establish by way of evidence that the real fact is not as presumed. The respondents had before them not just the invoices of sale executed by the revisionist in favour of Motor and General Sales Limited but also the delivery and sale invoice executed in favour of Naseem Ahmad. These documents evidenced a sale by way of hire purchase outside the State of U.P. The documents and evidences so led clearly tended to dislodge the rebuttable presumption raised. Whether the test of "tending to show" is applied or the test of "preponderance of probability", it is apparent that the presumption raised against the revisionist stood clearly discharged. Whether Naseem Ahmad is treated to be the owner of the vehicle for all practical purposes or is viewed as the person in charge of the vehicle, the liability of tax and penalty foisted upon the assessee is unjustified and cannot be sustained. Revision set aside - decided in favor of assessee.

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• 2016 (9) TMI 610
  Set-off on purchase of spares of electrical motors - manufacture of pumping sets - prohibited goods - Section 2(21) of the Act - the raw material used for manufacturing of electric motors were not directly sold by the assessee but, were sold after manufacturing pump sets - Whether the Gujarat Value Added Tax Tribunal was justified in holding that the dealer was entitled to set off under rule 42 of the Gujarat Sales Tax Rules, 1970 on purchase of prohibited goods as defined in clause 21(2) of the Gujarat Sales Tax Act, 1969 namely, spare parts and accessories of electric motors used in the manufacture of water pumps? - Held that: - The 4th condition has a direct relation to the main body of the rule which provides that in assessing the tax payable by a manufacturer, the Commissioner shall subject to conditions grant him drawback, set off or refund of the whole or any part of the tax in respect of purchase of goods used by him in manufacture. The moment therefore the raw material is used for manufacture by an assessee and subject to other conditions being fulfilled, has been sold in the State of Gujarat or in the course of inter-State trade etc., Rule 42 would enable him to claim drawback, set off or refund as the case may be at prescribed rate on the tax paid on such purchases - appeal dismissed - decided against appellant.

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• 2016 (9) TMI 609
  Serving of notice - Held that: - apart from the signature acknowledging the receipt of the notices and orders, round seal of the Company has been affixed. Therefore, when the seal of the Company is affixed and the concerned officer has signed, it is presumed that the notices were received by the petitioner. Assessment order - imposition of penalty - TNVAT Act, 2006 - CST Act, 1956 - Held that: - there are several issues involved in the assessment process and the assessment has been completed on the ground that the petitioner has not been able to satisfy their case. The Court is inclined to grant liberty to the petitioner to go before the Assessing Officer, but, subject to certain conditions - the petitioner is permitted to pay 15% of the disputed tax - If the petitioner effects payment, then they are entitled to treat the impugned orders as show cause notices and submit their objections, along with the documents and on receipt of the objections, the respondent shall afford an opportunity to the petitioner and redo the assessment in accordance with law. If the petitioner fails to comply with the above condition within the time stipulated, the benefit of this order will not enure to the petitioner and the Writ Petitions will stand dismissed, leaving it open to the respondent to levy 20%, as ordered in the impugned order. Petition allowed - decided in favor of petitioner.

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