TMI Tax Updates - e-Newsletter
September 17, 2015

Case Laws in this Newsletter:

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

TMI SMS

• VCES - service tax - A notice or SCN, which is merely issued but not served is not a valid ground for dismissing the VCES-I declaration -Tri

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Articles

• ACCESS TO PREMISES OF SERVICE TAX ASSESSEES
• SSI EXEMPTION – MULTIPLE UNITS OF SAME MANUFACTURER

News

• Government Approves Promotion of 153 IRS Officers of 1992, 1993 & 1994 Batches to the Rank of Commissioners of Income Tax;

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• Commerce and Industry Minister Reviews the Situation Arising Due to Death of Tobacco Farmers

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• Proposal for providing concessional financing scheme to support Indian companies bidding for strategically important infrastructure projects abroad

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• Ex-Post-Facto approval to capital infusion made in India Infrastructure Finance Company Ltd. during 2007-08 to 2012-13

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• Doubling of Hotgi-Kudgi-Gadag route (284 Km) of railways

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• Approval to promulgate the Negotiable Instruments (Amendment) Ordinance, 2015.

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• Creation of four posts of Directors for four new National Institutes of Design (NIDs)

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• INVITING APPLICATIONS FOR FILLING UP OF THE POST OF CHAIRPERSON IN THE COMPETITION COMMISSION OF INDIA.

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• 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

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• India’s Foreign Trade (Merchandise): August, 2015

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Circulars / Instructions / Orders

FEMA

• 14 - dated 16-9-2015
  Exim Bank's GoI supported Line of Credit of USD 26.24 million to the Government of Republic of Nicaragua

Highlights / Catch Notes

Income Tax

• Deduction u/s 80IA - for different months from April to March, the number of workers varies from eleven to thirteen, which are based upon the summary shit of muster book evidencing that during the relevant period, the assessee employed more than ten workers - deduction allowed - AT
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• Reopening of assessment - Since the notice u/s 148 was issued by an officer not having jurisdiction over the assessee, the notice itself is bad and invalid. Therefore, the assessment framed consequent thereto also deserves to be quashed. - AT
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• Income from the house property shown by the assessee on letting out the property on rent to her husband - the assessee’s income from letting out the property is to be taxed under the head “income from house property” - AT
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• Addition on account of accommodation entries received - AO had shifted entire burden upon the assessee and no material was brought by him to prove his allegation that impugned amount actually represent undisclosed income of the assessee. - AT
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• Depreciation - vehicles used in the business of transportation of municipal solid waste - @ 30% OR @15% - There is a commercial exploitation of the vehicles for transporting the goods on hire. Therefore, the assessee is entitled for higher rate of depreciation - AT
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• Addition of Preliminary expenses written off as deferred revenue expenses - treating the expenses are of capital nature - An AO, as indeed any other authority in the IT Act, cannot turn to the assessee and say that although he has authority to do something for the good of the assessee, it is not necessary that he must exercise that authority. - AT
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• Payment of remuneration and interest by the assessee firm to its partners - once the income was estimated at 15 of the gross commission amount by invoking the provisions of S. 144, no further deduction on account of interest and remuneration paid to the partners can be allowed as per the specific provisions of S. 184(5) - AT
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• Addition on account of cash found during the search - submission that cash belonged to other company - confirmation furnished after more than two years of search - even if it appears to be an after thought, the same cannot be the basis for rejection of confirmation without any further examination and verification from the assessment records of other person - AT
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Customs

• Import of designs and drawings - Designs and drawings contained in the CD were correctly classifiable under Heading 85238020 and attracts 'nil' rate of duty as per Customs Tariff. The requirements of supplementary note to Chapter 8523 are therefore satisfied - AT
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• Import of Crude Palm Oil - Benefit of Exemption notification-21/2002-Cus – Neither samples were drawn not stored as per required standard and in absence of prescribed apparatus for testing, Commissioner erred in relying upon test report of Dy. Chief Chemist - AT
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Corporate Law

• A Private Company can now accept unsecured loans apart from director or even from a relative with simple declaration saying the relative has not borrowed same from others. The relative need not be a shareholder of the company
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Service Tax

• Rejection of declaration under VCES - Any notice, which is merely 'issued' but not 'served' cannot be said to be within the knowledge of the person against whom it is 'issued' but not 'served' - dismissing the VCES-I declaration is not correct - AT
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• Short payment of service tax - MSO / Cable operator services - under-reporting of number of subscribers - The subscriber base as calculated by the revenue for this period is a notional one, theoretical without any basis - AT
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• Leased circuit service - leasing of dark fibre cables - telegraph authority. - the demand pertaining to leased circuit service is clearly sustainable on merit. - AT
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• Waiver of pre deposit - Mandatory pre deposit - amended Section 35F by requiring the appellant to deposit only 7.5%/10% of duty or penalty as the case may be, has in no way prejudiced the appellants right to appeal vis-à-vis their right to appeal as it existed prior to 6-8-2014 - AT
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Central Excise

• Refund claim - Duty paid under protest - tribunal allowed the refund claim on the ground that, no proceedings were issued under Section 11A - If this position is accepted then the provisions for adjudication in the Act and the Rules, the provision for appeal in the Act and the Rules will lose their relevance and the entire exercise will be rendered redundant. - HC
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• Disallowance of CENVAT Credit - the invoices in question are not in the name of the appellant. Hence, the appellant is not entitled to avail the credit - reversal of credit is justified - HC
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• Dismissal of appeal - non grant of adjournment by the tribunal - principle of natural justice - the question as to whether there is any liability to pay interest for the period of delayed payment of duty, has not been discussed in detail, more particularly, with regard to the facts in issue - matter remanded back - HC
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VAT

• Constitutional validity of levy of VAT on pure services like implementation, customization and other support services in respect of software - legislative competence - The contract for implementation, which is nothing but a service contract, is not liable to VAT - HC
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• It is astonishing that, Tribunal dismissed restoration application for such simple reason that, same has been filed by partner, who is not competent to file such application – Tribunal ought not have adopted such hyper-technical approach - HC
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Case Laws:

• Income Tax

• 2015 (9) TMI 712
  Addition under Section 68 - reopening of assessment under Section 147 - Held that:- The assessee in fact received the gold bullion on payment of ₹ 9,97,00,000/-. In the sale deed in which the payment was received, was shown as if the “Babu and Associates” is “Confirming Party”. The fact remains that the assessee is not the owner of the land and he has nothing to do with the land which was subject matter of transfer by the sale deed dated 27.02.2007. Therefore, it is for the assessee to explain why an amount of ₹ 10 Crores should not be treated as his income. The explanation of the assessee that he was accommodating on the request of Shri Elangovan for a commission ₹ 3 lakhs is not substantiated. The material available on record suggests that the assessee has received the gold bullion to the extent of ₹ 9,97,00,000/-. Therefore, this Tribunal do not find any infirmity in the order of the lower authority treating the entire amount of ₹ 10 Crores as income of the assessee The assessee filed a return of income on 13.11.2007 declaring a total income of ₹ 16,27,456/-. Initially, the return was processed under Section 143(1) of the Act. Consequent to a survey under Section 133A of the Act, the assessment was reopened by issuing a notice on 12.02.2010 and the same was completed on 31.12.2010. Consequently, the case was again reopened by issuing a notice under Section 148 of the Act on 22.07.2011. Since the Assessing Officer has not considered the credit of ₹ 10 Crores in the bank account and it is also not the case of the assessee that there was change of opinion, this Tribunal is of the considered opinion that the Assessing Officer has rightly reopened the assessment. We do not find any reason to interfere with the order of the lower authority and accordingly, the same is confirmed. - Decided against assessee.

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• 2015 (9) TMI 711
  Disallowance of exemption claimed by the assessee u/s 11 - CIT(A) confirmed the disallowance made by the AsO denying exemption u/s 11 as if there was a violation of sec. 13(1)(C) r.w.s 13(3) - Held that:- This Tribunal is of the considered opinion that if the funds were misappropriated and legal actions were initiated to recover the amount from Shri G. George and criminal prosecution is also initiated, then it cannot be said that the assessee-trust incurred expenditure on Shri G. George. Merely because an office bearer is misappropriated the funds in a dubious manner by misusing his position in the trust that cannot go against the assessee especially when legal actions were taken to recover the amount and criminal prosecution is also initiated. Since the facts were not examined by the lower authorities, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the entire issue of claim of exemption u/s 11 of the Act is remitted back to the file of the Assessing Officer to examine the material available on record and find out whether it is an expenditure incurred by the assessee on Shri G. George or the funds were misappropriated by Shri G. George as contended by the assessee before this Tribunal. Decided in favour of assessee for statistical purposes.

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• 2015 (9) TMI 710
  Disallowance under section 40(a)(ia) - non deduction of TDS - assessee has paid a sum as licence fee in respect of two softwares named MBIL Star Diagnostics and MBIL E-Deale - retrospectivity of amendment - Held that:- The view entertained by the assessee is supported by the decision of the hon'ble Delhi High Court in the case of Infrasoft Ltd. [2013 (11) TMI 1382 - DELHI HIGH COURT]. Since the assessee was held to be liable to deduct tax on the basis of subsequent amendment brought in with retrospective effect, in view of various decisions referred to above, we have to hold that the assessee cannot be held responsible for violation of TDS provisions on the basis of a subsequent amendment. Accordingly, we are of the view that the Assessing Officer was not justified in disallowing the licence fee/service charges paid for use of softwares by invoking the provisions of section 40(a)(ia) of the Act - Decided in favour of Assessee.

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• 2015 (9) TMI 709
  Deduction u/s 80IA denied - the assessee did not employ ten workers and further that the assessee did not produce any evidence of actually rendering of services by the labourers/workers, more specifically, when no disallowance was made to the expenditure claimed by the assessee - Held that:- We have perused the record and found that for different months from April to March, the number of workers varies from eleven to thirteen, which are based upon the summary shit of muster book evidencing that during the relevant period, the assessee employed more than ten workers. On another plea raised by the AO/CIT-DR that mere furnishing of names or proof of payment does not establish that these persons were employed by the assessee, at best, it can be said that since the assessee has already closed down the business in the year 1998, thus, at the relevant time (later stage) only such type of evidence is only possible. The Department has not disputed the payments made to such workers/agency, therefore, we are of the view, that the assessee has substantially complied with the conditions laid down in section 80IA(2)(iv) - Decided in favour of assessee.

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• 2015 (9) TMI 708
  Reopening of assessment - jurisdiction of Officer over the assessee issuing the notice - Held that:- In the instant case, the designated officer having received information from the AIR has issued notice under section 148 of the Act to the assessee without ascertaining the facts about his jurisdiction over the assessee. He has also made an attempt to frame assessment over the assessee without having jurisdiction over the assessee. The assessee has raised objection about jurisdiction before the Assessing Officer on receipt of notice under section 148 of the Act. Thereafter, the Assessing Officer has transferred the file to the concerned Assessing Officer, i.e., Income-tax Officer V having jurisdiction over the assessee. The Income-tax Officer V has not issued any notice under section 148 of the Act in order to assume jurisdiction to complete the assessment under section 147 of the Act. He has proceeded further on the basis of the notice issued under section 148 of the Act by a designated officer. Since the notice under section 148 of the Act was issued by an officer not having jurisdiction over the assessee, the notice itself is bad and invalid. Therefore, the assessment framed consequent thereto also deserves to be quashed. - Decided in favour of assessee.

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• 2015 (9) TMI 707
  Approval under section 80G(5)(vi) - DIT (E) granting approval subject to the condition that such approval shall be given effect only after the amendment to the trust deed is carried out through civil court - Held that:- Assessee has fulfilled all the conditions of clauses (i) to (v) of section 80G(5) and has also made necessary amendment to clause 3.2 of the trust deed confining its activity to India. That being the case, in our view, there is no occasion for the learned Director of Income-tax (Exemptions) to observe that the approval under section 80G(5)(vi) would be effective only from the date the amendment to the trust deed is effected through the civil court having jurisdiction over the matter. In our view, such observation of the learned Director of Income-tax (Exemptions) is not strictly in compliance to the directions of the Income-tax Appellate Tribunal in the order dated February 3, 2012. It is also relevant to note that the learned Director of Income-tax (Exemptions) is also satisfied that the assessee is eligible for approval under section 80G(5). As far as the decision of the hon'ble Supreme Court in the case of CIT v. Kamla Town Trust [1995 (11) TMI 1 - SUPREME Court] it is relevant to mention that the hon'ble Andhra Pradesh High Court in the case of DIT (Exemptions) v. Ramoji Foundation [2015 (2) TMI 900 - ANDHRA PRADESH HIGH COURT ] taking note of the said decision has held that in a case where the trust is empowered under the trust deed to make amendment there is no need to approach civil court. - Decided in favour of assessee.

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• 2015 (9) TMI 706
  Income from the house property shown by the assessee on letting out the property on rent to her husband - whether is a colourable transaction and therefore, the same is assessable under the head, “income from other sources” - Held that:- The entire finding of the AO as well as Ld. CIT(A), that it is a colourable transaction is without any merits and examining the case of the husband. If at all the revenue had any doubt about such arrangement, then both the cases of husband and wife should have been examined. If the money received by the assessee has been shown by letting out of the property, then it has to be taxed ‘as income from house property’ unless some material is brought on record to controvert the transaction. Further as brought on record by the learned counsel, the department itself in the subsequent year has accepted the rent received from husband as chargeable to tax under the head income from house property. Thus, on the facts of the case, the assessee’s income from letting out the property is to be taxed under the head “income from house property” - Decided in favour of assessee. Disallowance made u/s 14A read with Rule 8D - Held that:- Assessee has shown income under the head salary, income from house property, capital gains and interest income, which is mainly from saving bank account and FDR. From the perusal of the P&L Account, it is seen that assessee has debited ₹ 1,52,835/- on share transaction charges and STT charges of ₹ 2,89,148/- which can be said to be relatable for purchase of shares. The AO without examining the nature of expenditure and assessee’s claim, has resorted to Rule 8D mechanically. This is not mandate of the law under section 14(2). On these facts and in the interest of justice, we restore this matter to the file of the AO to examine the nature of expenses claimed by the assessee and whether any expenditure can be held to be attributable for earning of the exempt income or not - Decided in favour of assessee for statistical purposes .

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• 2015 (9) TMI 705
  Repairs and maintenance expenses incurred on building and theatres - revenue v/s capital expenditure - Held that:- As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to that of assessment years 2003-04, 2005-06 and 2006-07, we respectfully follow the order passed by the Tribunal for the said years, and uphold the impugned order of the learned Commissioner of Income-tax (Appeals), allowing the deductions claimed by the assessee on account of repair and maintenance expenses to the building and theatres treating the same as of revenue nature. - Decided in favour of assessee.

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• 2015 (9) TMI 704
  Addition on account of accommodation entries received - CIT(A) deleted the addition - Held that:- As decided in CIT vs. Pradeep Gupta [2006 (11) TMI 184 - DELHI HIGH COURT] from the very beginning Ld AO had shifted entire burden upon the assessee and no material was brought by him to prove his allegation that the impugned amount represented assessee company's undisclosed income. Therefore, on this ground alone the entire addition deserves to be deleted and may kindly be held so. AO did not bother to adjudicate the explanation of the assessee and simply noted that when the entry provider has accepted that they provided accommodation entries after receipt of cash from the parties who need entries and the AO further held that, therefore, the submissions of the assessee are not acceptable in view of admission of entry providers. AO had shifted entire burden upon the assessee and no material was brought by him to prove his allegation that impugned amount actually represent undisclosed income of the assessee. Thus CIT(A) has not erred in deleting the addition - Decided against revenue.

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• 2015 (9) TMI 703
  Validity of Reopening of assessment - Held that:- The reopening under section 147 is sought within four years from the end of the relevant assessment year. The department was having definite information in the shape of the statement of Shri Dilip J. Desai, who has denied to have made purchases of agriculture produce from the assessee in his statement recorded on oath by the department. Copy of the statement of Shri Dilip J. Desai was provided to the assessee and an opportunity to cross-examine him was also granted by the department to the assessee. In these facts of the case, it could not be said that the reopening of the assessment under section 147 is based on “no information” or it is a case of mere change of opinion on the part of the AO. Thus the action of the AO in reopening the assessment by issue of notice under section 147 was valid - Decided against assessee. Failure to discharge the burden of proving the agriculture income with substantive evidences - CIT(A) deleted the addition - Held that:- We find that the AO in the immediate succeeding Asstt.Year 2005-06 has accepted the agriculture income declared at higher figure of ₹ 9,39,660/- by the assessee in scrutiny assessment framed under section 143(3) of the Act vide order dated 22.2.2007. The assessee has filed a chart showing the details of gross agriculture income, expenses incurred on agriculture operations etc. for the Asstt.Year 2001-02 to 2006-07. The assessee has also filed copy of the agreement dated 1.5.2003 entered into by the assessee with Shri Dilip J. Desai. Copies of the affidavits of three neighborhood farmers confirming that Shri Dilip J. Desai has plucked mangoes from the land of the assessee were also filed. We find that the Revenue could not controvert single evidence filed by the assessee in this behalf. The issue is covered in favour of the assessee with the decision of the ITAT, Ahmedabad in the case of co-owner of the same agriculture land, Smt. Nirmalaben Ramanlal Shah for the same Asstt.Year 2004-05 wherein the agriculture income from the same agriculture land including the fruits from the orchard declared by the assessee, were accepted. - Decided in favour of assessee.

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• 2015 (9) TMI 702
  Deduction u/s. 35(2AB) - disallowance in the instant case are as the approval is not in the prescribed form (Form 3CM) and the approval is not by the prescribed authority - Held that:- In our clear view, except where and to the extent it leads to defeating the legislative intent, the assessee is obliged to comply with the prescription of the provision. The approval, the quantum of deduction being not the subject matter thereof, is to be in the prescribed form. Though apparently procedural, the same, it may be appreciated, has a substantive aspect to it in-as-much as the same only conveys that the in-house research and development facility under reference is an approved one. It is only this that would exhibit that all the conditions for granting the approval (which the tribunal in the assessee’s case for A.Y. 2008-09 lays emphasis on) are met, and which can only be regarded as an essential requirement for the claim of deduction u/s. 35(2AB). As regards the prescribed authority, we are again in agreement with the tribunal, i.e., that if the concerned body (DSIR) has itself assigned the relevant function, i.e., for granting approval to in-house R & D centres, to Scientist ‘G’, the said authority can or is to be considered as having signed the relevant form for and on behalf of the Secretary, DSIR, the prescribed authority. In view of the foregoing, we, under the circumstances, only consider it fit and proper that the matter is restored back to the file of the A.O. for an adjudication afresh after allowing the assessee to present its case. The assessee’s submissions dated 27.06.2011, 20.09.2011 and 12.10.2011 (PB pgs.121-128), we find relevant in this regard in-as-much as they do not bear any reference to any expenditure per payments to an outsider. Further, the assessee has, in pursuance of its application u/s.154 dated 21.11.2011, already secured deduction u/s.37(1) qua the revenue component of the relevant expenditure, so that we may not issue any separate direction/s qua the - Decided in favour of assessee by way of remand. Disallowance of deduction u/s.80-IB - profit of its new industrial undertaking set up in March, 2004 in the state of Himachal Pradesh - non-furnishing of the audit report in terms of section 80-IB(13) r/w s. 80-IA(7) - Held that:- Assessee had vide its statement of income clearly specified its’ claim for the impugned deduction u/s.80-IB for the current year, being the 6th year of its operations, adverting to Form-10CCB, the prescribed form, also stating that the same would though not impact its taxable income for the year in the absence of a positive gross total income (GTI). The letter dated 20.09.2011, vide which the claim is said to have been made for the first time, is only by way of abundantly clarifying matters in view of the eminent nondisallowance of its claim u/s.35(2AB) and, in result, a positive GTI. The said objection, which also found approval by the ld. CIT(A), would, therefore, be of no moment. As regards the furnishing of the audit report in the requisite form, as afore-said, reference thereto has already been made per the return of income. Reference thereto is also made at para 26 of Form 3CD, i.e., the audit report prescribed u/s.44AD. Even assuming that the report stood omitted to be filed along with the return of income, the same has since been made good - Decided in favour of assessee. Disallowance of deduction u/s.80-G, i.e., qua donation to Prime Minister’s National Relief Fund - denial of claim in the absence of the assessee furnishing the relevant receipt - Held that:- The authorities below have denied the claim on the ground of non-furnishing the relevant receipt, without appreciating that no claim toward the same has been made by the assessee per its return of income itself in the absence of any positive income. The consideration of the claim by the Revenue on merits, thus, itself shows that, in contradiction to its stand qua deduction u/s.80-IB, a claim could be pressed subsequently where the conditions justify the same. The relevant receipt (No.929069 dated 01.12.2008) stands adduced by the assessee along with its application for admission of additional evidence dated 23.09.2014. We, therefore, in the circumstances, accept the assessee’s prayer and admit the said additional evidence under Rule 29 of the Appellate Tribunal Rules, 1963. The matter would, accordingly, stand restored to the file of the A.O. to examine the assessee’s claim on merits, allowing it a reasonable opportunity of being heard - Decided in favour of assessee by way of remand.

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• 2015 (9) TMI 701
  Depreciation on the written down value of the vehicles used in the business of transportation of municipal solid waste - @ 30% OR @15% - Entitlment for higher rate of depreciation - Held that:- CIT (A) has failed to construe the circular in right perspective. According to the learned CIT (A) the circular is applicable if an assessee has used the motor vehicle for transporting the goods on hire or the higher rate of depreciation would be applicable or given on hire like Taxis. In the present case, the assessee has been transporting the solid waste of municipality on hire. Thus, the very nature of the assessee’s business is such which bring him in the ambit of the circular. It is not the case where a person is running any consultancy firm and used a motor car for himself. Here the vehicles are used for transporting the goods of third concern by virtue of a contract. There is a commercial exploitation of the vehicles for transporting the goods on hire. Therefore, the assessee is entitled for higher rate of depreciation. We allow the appeal of the assessee and delete the disallowance.- See Urmila and Co. Vs. DCIT [2011 (1) TMI 1227 - ITAT MUMBAI] - Decided in favour of assessee.

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• 2015 (9) TMI 700
  Rejection of registration u/s 12A - expenditure of non-charitable activity - Held that:- - DIT (E) held, out the total receipts, substantial amount was expended for administrative purposes. This observation of the DIT(E) is factually incorrect. On perusal of the balance sheet for the year ending 31st March 2012 it is evident that substantial receipt of ₹ 20.61 lakhs was lying in bank account and only the minuscule portion of the receipt was incurred as administrative expenses. The assessee society had received ₹ 30 lacs from India Medtronic Pvt. Ltd. and Boston Scientific India Pvt. Ltd. for medical education programme. It also received ₹ 3,75,000/- from Boston Scientific India Pvt. Ltd. as donation towards Newer Advance Intervention cardiology. DIT(E) has wrongly mentioned that it is professional receipt. The assessee society has conducted the activities /workshop/seminars.he assessee society has also enclosed paper cutting and photographs in support of said activities. From Income & Expenditure account, it is clear that the assessee society has spent a same 7,36,069/- on the above charitable activities. Therefore, DIT(E) is not correct in his conclusions and rejecting the assessee societies application in Form No. 10A. Hence, we direct that assessee society be granted registration u/s 12A of the Act. - Decided in favour of assessee. Application in form No. 10G seeking exemption u/s 80G rejected - Held that:- Since registration u/s 12A is granted, the DIT(E) shall examine whether the assesee has satisfied the necessary conditions u/s 80G, for grant of exemption in the said section - Decided in favour of assessee for statistical purposes.

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• 2015 (9) TMI 699
  Reopening of assessment - disallowance of expenditure - Held that:- As can be seen from the facts and materials on record, the entire expenditure of ₹ 2,79,48,884 was supported by bills and vouchers, except an amount of ₹ 97,224. In fact, in para 8.3 of the order, ld. CIT(A) has observed that except only one voucher of ₹ 97,224 all other vouchers are available. Therefore, when all the expenditure were supported by bills and vouchers, it is highly improbable that the assessee without incurring the expenditure has claimed the amount of ₹ 97,224. When assessee has meticulously maintained bills and vouchers for almost the entire expenditure incurred absence of one bill would not lead to the conclusion that assessee has not incurred the expenditure. So far as the amount of ₹ 49,38,363 is concerned, it is not in dispute that the expenditure incurred is towards labour charges. Only because the expenditures were supported by self-made vouchers a part of the expenditure cannot be disallowed unless it is proved that the expenditure incurred is unreasonable or excessive compared to the turnover of assessee. It is quite evident that ld. CIT(A) does not dispute the fact that assessee has incurred the expenditure towards labour charges. He is only disputing the quantum of expenditure. Therefore, considering the nature of expenditure and keeping in view the turnover of assessee we hold that disallowance of a part of the expenditure claimed is not justified. As we have deleted the addition sustained by ld. CIT(A), the issue relating to validity of proceeding u/s 147 is reduced to mere academic interest. - Decided in favour of assessee.

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• 2015 (9) TMI 698
  Entitlement to exemption u/s 54 - assessee contended that as the assessee had acquired the under construction flat within 3 years from the date of transfer of ancestral property thus she had rightly claimed exemption u/s 54 - Held that:- The assessee in this case had booked the under construction house and made the initial payment of ₹ 5 lakh to the developer before the expiry of stipulated period two years meant for the purchase of an already built up house and had further paid the entire capital gain money for the purchase of under construction house and the possession of the constructed house was also delivered to him within the stipulated period of 3 years, therefore the events in the intervening period are immaterial as the ultimate purpose of the beneficial provision is acquiring of a residential house by the assessee. The case of the assessee fits into the requirements of the beneficial provisions of section 54F read with the CBDT Circulars as noted above for treating the same as construction of the house, entitling her the benefit of exemption from tax. Our above view finds strength in the decision of the Hon'ble Karnataka High Court in the case of CIT & Anr. Vs. Sambandam Udaykumar [2012 (3) TMI 80 - KARNATAKA HIGH COURT]- Decided in favour of assessee. Assessee herself had withdrawn her claim before the AO as contented by DR - Held that:- As find from the record that the assessee before the AO had never stated that she had purchased an already built house. It was stated before the AO that she had purchased an underconstruction house. The date of allotment and that of the payments made and thereafter delivery of the possession of the house has never been disputed by the AO. Despite given all the explanation, the AO was not satisfied and therefore the assessee being a household lady and not aware of the provisions of the I.T. Act had withdrawn the claim, which seems to be under pressure. Even otherwise, the legal claim to which the assessee is otherwise entitled to, can not be denied to her when she had given sufficient explanation regarding the same before the AO, which, in our view, is quite convincing and justified. - Decided in favour of assessee.

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• 2015 (9) TMI 697
  Addition of Preliminary expenses written off as deferred revenue expenses - treating the expenses are of capital nature - Held that:- In view of the fact that the CIT(A) has admittedly given a finding to the effect that the bad debt claim is admissible in the year of actual write off, which is previous year relevant to the asst. yr. 2002-03, coupled with the fact that the AO has the powers to do assessment, reassessment or recomputation on the assessee in consequence of, or to give effect to, such a finding contained in an order passed by the CIT(A), the AO should have passed the order recomputing and correctly assessing the taxable income of the assessee for the asst. yr. 2002-03. By not doing so, the AO has not given effect to the ‘finding’ contained in the CIT(A)’s order for the asst. yr. 2001-02, and, to that extent, the AO’s inertia is clearly a mistake apparent from record. This inaction is clearly contrary to the scheme of the Act which permits any assessment, reassessments and recomputation orders to give effect to, or in consequence of, any findings or directions not only in the CIT(A)’s order but also orders of the Tribunal, Hon’ble High Courts, Hon’ble Supreme Court as well as of "any Court" in a proceeding otherwise than in appeal. An AO, as indeed any other authority in the IT Act, cannot turn to the assessee and say that although he has authority to do something for the good of the assessee, it is not necessary that he must exercise that authority. The inaction of the AO, therefore, is a mistake apparent from the record, and there cannot be any two reasonable opinions on whether or not the AO should give effect to the finding of the CIT(A). It is also important to bear in mind that any other view of the matter will result in a double jeopardy to the assessee which will constitute ‘absurdity’ besides being grossly inequitable and patently unfair. An interpretation which leads to such absurdities, as is the settled law, is to be avoided. In view of this legal position, and having noted that the Assessing Officer has accepted the CIT(A)’s order deleting similar disallowance for the assessment year 2007-08 by not challenging the same in further appeal, we are of the considered view that the impugned disallowances in each of the assessment years before us, indeed deserves to be deleted. - Decided in favour of assessee.

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• 2015 (9) TMI 696
  Registration u/s 12AA denied - assessee has undertaken very limited charitable activities and the funds available with the assessee was also very less - Held that:- In the case on our hand, it is not the case of the department that no activity was undertaken. The Commissioner claims that the assessee trust has undertaken very limited activity. Therefore, it may not be proper to say that no activity was undertaken by the assessee trust. The activity report said to be filed before the Commissioner is not available on the file of this Tribunal. Therefore, this Tribunal is unable to appreciate the activity said to be carried on by the assessee. Since the assessee claims that they have done little activity about the charity in the first year of its establishment, this Tribunal is of the considered opinion that it is not a case that no charitable activity was carried on. However, as observed earlier, in the absence of the activity report, this Tribunal is unable to appreciate the activities carried on by the assessee. In view of the above, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Commissioner in the light of the judgment of the Kerala High Court in the case of Self Employees Service Society (2000 (9) TMI 47 - KERALA High Court ). It is made clear that the trust cannot be used as a vehicle / instrument for collecting any money compulsorily from public. Though the assessee could receive voluntary donation, the Commissioner shall ensure that no money is collected compulsorily in the name of the trust. - Decided in favour of assessee for statistical purpose.

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• 2015 (9) TMI 695
  Addition on account of sale of shares of M/s Indian Realty Ltd - AO was of the view that the assessee merely claimed loss on assets and that the transaction was not genuine - CIT(A) deleted the addition - Held that:- In the present case it is noticed that the assessee itself disallowed all the expenses claimed in the computation of income. The said expenses also included loss of ₹ 6,75,00,000/- which clearly shows that the assessee had not claimed the loss of the shares in its computation of income and even no loss was carried forward. Therefore the addition made by the AO was without any basis, since the assessee never claimed the expenses or the loss of the share against the income. In that view of matter, we are of the view that the ld. CIT(A) has rightly deleted arbitrary addition made by the AO. We do not see any infirmity in the order of the ld. CIT(A) on this issue. - Decided in favour of assessee. Addition made by the AO u/s 68 - CIT(A) deleted the addition - Held that:- In the present case it is noticed that the ld. CIT(A) after verify from the record categorically stated that a sum of ₹ 13,50,000/- was outstanding as on December 2005 as against the said amount a sum of ₹ 5 lac was paid during the year under consideration and the outstanding balance as on 1.4.2008 was ₹ 8,50,000/- which clearly established that the assessee did not receive any amount as a loan from M/s Indian Realtors Pvt. Limited during the year under consideration. In the instant case nothing was brought on record to establish that the amount outstanding as on December 2005 was not genuine therefore, the addition made by the AO for the year under consideration was not justified. Accordingly, we are of the view that the ld. CIT(A) has rightly deleted the impugned addition - Decided in favour of assessee.

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• 2015 (9) TMI 694
  Deduction on account of remuneration and interest paid by the assessee firm to its partners from the profit estimated at 15% of the gross commission amount - whether there was no failure on the part of the assessee firm as mentioned in S.144 and therefore, the provisions of S.184(5) are not applicable in the case of the assessee? - Held that:- A perusal of the provisions of S.144 however shows that the case of the assessee is squarely covered by clause (v) of sub-section (1) of S.144 inasmuch as the assessee having made a return has failed to comply with the notices issued by the Assessing Officer under S.143(2) and this position clearly evident from the record is not disputed even by the learned counsel for the assessee. We therefore, agree with the stand of the revenue on this issue that the provisions of S.184(5) are clearly applicable in the case of the assessee for the year under consideration and the learned CIT(A) is not justified in directing the Assessing Officer to allow deduction on account of interest and remuneration paid to the partners from the profit estimated at 15% of the gross commission amount by invoking the provisions of S.144. We accordingly reverse the impugned order of the learned CIT(A) granting relief to the assessee on this issue, and allow ground no.2 of the Revenue’s appeal. As already noted above, when the provisions of S.184(5) are applied to disallow interest and remuneration paid by the assessee firm to its partners, such interest or remuneration shall not be chargeable to income tax under S.28(v)of the Act in the hands of the partners. - Decided in favor of revenue. Rejection of books of account - estimation of income - as assessee is unable to produce bills/vouchers in support of various expenses claimed, it is a case where expenses should have been disallowed instead of estimating the income - CIT(A) applying estimation @ 15% - Held that:- In the absence of books of account and other supporting evidence, the entire gross commission amount could not be taken as the income of the assessee by disallowing the entire expenditure. In our opinion, the proper course available in such a situation is to reject the books of account and estimate the income of the assessee on the basis of material available on record and the learned CIT(A) has taken a very fair and reasonable view on the basis of material available on record, including the past history of assessee’s case to estimate the income of the assessee from business at the rate of 15% of the gross commission amount. We therefore, find no justifiable reason to interfere with the the impugned order of the learned CIT(A) on this issue - Decided against the revenue.

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• 2015 (9) TMI 693
  Revision u/s 263 - direction of the CIT to the AO to reframe the assessment to disallow the expenditure for payment of reinsurance premium to associated enterprises u/s. 40(a)(i) - Held that:- It can be safely concluded that the assessment order has not been made on an incorrect application of law. On facts, a perusal of the questionnaire issued alongwith the notice u/s. 142(1) of the Act dt. 18th August, 2008 shows that vide Question No. 29 the AO had sought details of all payments/expenses on which tax was deductible at source as per the provisions of the Act. Question No. 35 was with respect to details of amount remitted/sent abroad supported by RBI prescribed certificate issued by C.A u/s. 195 of the Act, 1961 and Question No. 37 was in connection with the transactions reported in the Form 3CEB. The assessee had filed a detailed reply in respect of these queries raised during the assessment proceedings. Thus the observation of the CIT that the payment to its associated enterprise has not been considered and examined by the AO for disallowance u/s. 40(a)(i) of the Act is incorrect in the light of the facts stated hereinabove. AO has taken a view which may be different from the view of the Ld. Commissioner and assuming that the view taken by the AO is a loss to the Revenue but the Hon’ble Supreme Court in Malabar Industrial Co. Ltd. (2000 (2) TMI 10 - SUPREME Court ) has held that “ every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of the Revenue,” for e.g. when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and the Income Tax Officer has taken one view with which the Ld. Commissioner does not agree, it cannot be treated as an order which is erroneous or prejudicial to the interest of Revenue unless the view taken by the Income Tax Officer is unsustainable in law. The Bombay High Court in CIT Vs Gabrial India Ltd., (1993 (4) TMI 55 - BOMBAY High Court) has held that “the decision of the Income Tax Officer could not be held to be erroneous simply because in his order, he did not make an elaborate discussion in that regard”. Thus the assessment order is neither erroneous nor prejudicial to the interest of the revenue. We, therefore, set aside the impugned order passed by the Ld. Commissioner u/s. 263 and restore that of the Assessing Officer passed u/s. 143(3) of the Act. - Decided in favour of assessee.

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• 2015 (9) TMI 692
  Disallowance of purchases made by the assessee company - Held that:- We observe that the revenue authorities failed to appreciate the rectification and reconciliation given by the seller M/s Jindal Polyfilms Ltd. regarding revised sale amount of September 2004 in a proper and judicious manner. Thus, we are of the considered opinion that the quantification of amount of purchases of the assessee during F.Y. 2004-05 requires proper and detailed verification and examination at the end of AO and, therefore, the issue is restored to the file of AO with a direction that the AO shall examine and verify the amount of purchases of the assessee emerged from books of accounts, confirmation and bank statement etc., providing opportunity of being heard for the assessee and without being prejudiced with the earlier assessment order and impugned order. Accordingly, sole ground of assessee is deemed to be allowed for statistical purposes.

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• 2015 (9) TMI 691
  Addition on account of cash found during the search - Held that:- As during first appellate proceedings, the AO admitted that the assessee had furnished confirmation during the course of assessment proceeding to the effect that the impugned amount of cash belonged to M/s MGF Development Ltd. and the AO also alleged that the confirmation has been furnished after more than two years of search, therefore, it appears to be an after thought which cannot be the basis for rejection of confirmation without any further examination and verification from the assessment records of M/s MGF Development Ltd. We also note that the DR has not disputed the point that the impugned amount was returned by the assessee to M/s MGF Development Ltd. on 15.9.2007 which is clearly reflected from the books of accounts of the assessee as well as cash in hand and assessee’s account in the books of M/s MGF Development Ltd. Under these circumstances, we reach to a conclusion that the assessee also explained the amount of cash found during the course of search that an amount of ₹ 33,90,450/- belonged to M/s MGF Development Ltd. which was returned in due course of business. Hence, we are inclined to hold that the authorities below were not justified in making and confirming the addition on this amount in the hands of the assessee. - Decided in favour of assessee.

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• Customs

• 2015 (9) TMI 718
  Non-service of Notice – Storage of goods for extended period – Levy of duty – Through impugned communication, 1st respondent required petitioner to pay customs duty and interest – Petitioner states that impugned communication was not preceded by any notice and representations made by it were not taken into account – It is also pleaded that goods are covered by Section 85 of customs Act, 1962 and accordingly are exempted from customs duty – Held that:- Petitioner stored goods in customs godown by duly executing bonds but had not removed though substantial period has expired – Petitioner made representations for extension of warehouse period – From perusal of impugned order, evident that respondents wanted to levy customs duty and interest – Court of view that impugned communication can be treated as show cause notice by itself and petitioner can be granted reasonable time to put forward its contentions – Respondent-1 directed to pass appropriate orders – Petition disposed of.

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• 2015 (9) TMI 717
  Imposing condition on provisional release – Payment of interest - Whether order of settlement commission imposing condition on release of goods and payment of interest was justified – Held that:- Settlement Commission was well within its jurisdiction to examine matter in detail and to pass orders that it did so as to bring about settlement – Therefore no requirement to interfare with directions given by Settlement Commission by virtue of impugned order – Also directions given by Settlement Commission have to be complied with, otherwise, entire settlement would fall apart and all matters would have to be re-opened – Petitioner to comply with directions with regard to provisional release of seven vehicles – In view of aforesaid directions all writ petitions stand disposed of.

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• 2015 (9) TMI 716
  Fixation of Brand rate – Extension of drawback benefit to BCD – Adjudicating authority rejected applications for fixation of brand rate under Rule 6 of DBK Rules, 1995 observing that BCD on imported goods was not paid in cash but was debited in DEPB scrip treating it as exempted – Commissioner(A) decided case in favour respondent – Held that:- respondent’s application for fixation of brand rate was rejected by original authority while relied upon Board’s Notification No. 97/2009 -Cus., and Board’s Circular No. 41/2005-Cus. – As per notification entitlement of drawback is limited only up to additional duty leviable under Section 3 of Customs Tariff Act against amount debited in DEPB scrip – As such, said notification does not extend benefit of drawback of Basic Customs Duty (BCD) against debited DEPB scrip – Circular also does not speak about extension of drawback benefit to BCD paid through debit in DEPB scrip – Hence, it can be inferred that such benefit of drawback is not eligible for debit in DEPB against BCD – Therefore impugned order set-aside – Decided against revenue.

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• 2015 (9) TMI 715
  Computation of actual cost of 4 ADPA – Imposition of ADD – Authority found that exports from Korea were being made below their normal value and domestic industry had suffered material injury and thereby imposed anti-dumping duty – Authority constructed cost of production for 6PPD by considering international price of major raw material, 4 ADPA, instead of actual procurement cost of said raw material from China –Whether Authority was right in constructing cost of production of 6PPD, disregarding cost of 4ADPA – Held that:- cost of production of both 4ADPA and 6PPD was affected by non-market considerations – In such scenario, Authority rightly rejected export price for 4ADPA as not reliable – Act and Rules, envisage determination of normal value, which reflects true cost of production. In determining normal value, sales of like product in domestic market of exporting country at prices below per unit (fixed and variable) costs of production plus SGA costs will be treated as not being in ordinary course of trade by reason of price – when major input imported from non-market economy country, sale price reflected in record will have to be scrutinized to detect and correct distortion resulting from non-market economy price of input used, cost of which is required to be worked out in order to correct distorted cost of production of article – Authority is justified in rejecting domestic sales price shown as record when input in question was produced within non-market economy country, because price for such input would be distorted, as they do not reflect normal market economy purchase price – Apex Court in case of Reliance Industries [2006 (9) TMI 180 - SUPREME COURT OF INDIA], held that normal value is country specific not exporter specific, and hence accounts of exporter are to be considered only, where they reflect normal or ordinary cost of inputs. Authority rightly rejected price of 4ADPA and opted for construction of normal value, based on international price of 4ADPA – Domestic industry had brought on record evidence of import prices of 4ADPA from Germany to India, but Authority before recording Final Findings, did not give opportunity to comment on acceptability / appropriateness of such evidence – Authority has not observed due process and violated principles of natural justice – Designated Authority therefore directed to make disclosure of international price of 4ADPA adopted by Authority as well as methodology used for fixation of normal value, export price and dumping margin – Domestic industry and other interested parties, shall also be allowed to participate in such post-decisional hearing – Application allowed.

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• 2015 (9) TMI 714
  Import of designs and drawings - import in printed form as well as in CD - Benefit of exemption under serial number 271 of notification number 12/2012-CUS - Held that:- Appellants had in fact ordered for designs and drawings in hardcopy. Purchase orders placed clearly indicate for the supply of designs and drawings in hardcopy. When the goods were examined it was noticed that in addition to hardcopy, CD was found in the package. The said CD was opened on a laptop before the Customs authorities and it contained the designs and drawing in machine readable format - data on the CD imported is capable of manipulation as was demonstrated before us. We find that the design and drawings of the vessel on the CD can be manipulated in the computer to change the length and the breadth, repositioning of the machineries like engine, cabin, tank and a conclusion can be reached as to the correct design that needs to be presented to the clients and also for arriving at the conclusion as to how the ship or vessel will appear to a purchaser. The facts and circumstances of that case clearly indicate that what was brought in by the appellant therein was "CD ROM", is an indicator that the CD containing the designs and drawings of engineering goods was on a "read only memory"; in computer language ROM, that is to say the information on the CD Can only be read and is non-manipulatable. The judgment and the ratio of the Apex Court in the case of LML Ltd. [2010 (9) TMI 12 - Supreme Court of India] was considering the peculiar facts of that case; while in the case in hand before us, it is undisputed that the information contained on the CD is manipulatable and interactive with the user. Designs and drawings contained in the CD were correctly classifiable under Heading 85238020 and attracts 'nil' rate of duty as per Customs Tariff. The requirements of supplementary note to Chapter 8523 are therefore satisfied. Since designs and drawings in paper form as well as in the CD form attract nil rate of duty, the finding of the Commissioner about the applicability of section 19 of the Customs Act, 1962 becomes irrelevant since the rate of duty applicable to both goods even assuming them to be constituting a set, is 'nil' in view of the classification determined by us. The question whether a separate value could be attributed to the CD also becomes irrelevant in view of the classification under Heading 85238020 of the Tariff. - mpugned order is unsustainable and is liable to be set aside - Decided in favour of assessee.

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• 2015 (9) TMI 713
  Import of Crude Palm Oil - Benefit of Exemption notification-21/2002-Cus – Drawing and testing of sample – Appellant, to claim benefit of exemption notification no. 21/2002-Cus, produced test-report of load port issued by internationally acclaimed independent test laboratory – Revenue also drew samples in presence of representative from appellant company and found that as per report of private test agency, carotenoid content was above 500 mg/kg, whereas Dy. Chief Chemist found carotenoid content to be lower than 500mg/kg – Hence, exemption was denied – Held that:- Chemical Examiners admitted that they were not aware with method of drawing of samples –Samples were stored in plastic bottles although Indian Standards required samples to be stored in steel containers – Neither samples were drawn not stored as per required standard and in absence of prescribed apparatus for testing, Commissioner erred in relying upon test report of Dy. Chief Chemist – Test reports are also vitiated due to delay in testing, ranging from 25 days to 82 days, placing reliance on technical literature referred to hereinabove, which provides that carotene is unstable characteristic, which changes with exposure to light, air and atmosphere – Therefore, appellants have fulfilled condition of Notification No. 21/2002 (as amended) and they are accordingly entitled to exemption – Appeals allowed in favour of importer-assessee – Decided in favour of Assesse.

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• Service Tax

• 2015 (9) TMI 737
  Consulting Engineer service - assistance in finalising the kind of a ship - whether the services rendered by the appellant to Union Territory of Lakshadweep during the period 26/02/1999 to 26/01/2004 would amount to services rendered by a consulting engineer - Held that:- Appellant had been engaged by the Union Territory for finalising vessels/ships for movement of men and material from the island to mainland, overseeing of the progress of construction of the vessel and also undertook the tests that require to be done on the various machinery parts of the ship. - The appellant herein is not a consulting engineer. They are experts in the shipping business and were called upon by the Union territory of Lakshadweep to assist them in finalising the kind of a ship that may be required for movement of men and material from island to mainland. Secondly, a similar issue, as to whether a private limited company registered under the Companies Act gets covered under the definition of 'consulting engineer' during the period in question was decided by the Hon'ble High Court of Delhi in the case of Simplex Infrastructure and Foundry Works(2013 (5) TMI 336 - DELHI HIGH COURT) - the impugned order which upholds the service tax liability with interest and penalties imposed is unsustainable and liable to be set aside - Decided in favour of assessee.

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• 2015 (9) TMI 736
  Rejection of declaration under VCES - Architect Services - Show Cause Notice had already been issued to the appellant - whether the date of the show Cause Notice or the date on which it was served on the parson, has to be taken into consideration for interpreting the provisions of Section 106 of the Act, which places an embargo to the effect, that no declaration shall be made for the tax dues where the notice has been issued to the person before 01.03.2013 - Held that:- as Section 106 of the Finance Act, 2013 prohibits filing of VCES declaration, where the notice under Section 73 of the Finance Act, 1994 has already been issued. The intention for incorporating such an embargo in Section 106 of the Finance Act, 2013 is to dissuade persons against whom proceedings have been initiated, from taking the shelter of VCES. A person who wants to avail the option/benefit of VCES should not be disqualified to make a declaration as laid in the said provisions of law. To be able to decide whether one is disqualified as per the law, the notice/order must be put to the knowledge of the person. Any notice, which is merely 'issued' but not 'served' cannot be said to be within the knowledge of the person against whom it is 'issued' but not 'served'. Since the Show Cause Notice No. 28/213-ST dated 22.02.2013 issued under Section 73 of the Finance Act, 1994 has not been served on the appellant before 01.03.2013, the impediment of Section 106 of the Finance Act, 2013 regarding non-filing/non-consideration of declaration under VCES will have no application; and since the appellant otherwise fulfills the criteria of Finance Act, 2013, the benefits envisaged therein for availing the waiver of interest and penalties will be available to him. - Decided in favour of assessee.

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• 2015 (9) TMI 735
  Short payment of service tax - MSO / Cable operator services - under-reporting of number of subscribers - Held that:- the revenue has not produced any contrary evidence to indicate that appellant had larger subscriber base than as is declared in ST3 returns. The query from the bench as to any additional evidence being not noticed by the adjudicating authority, departmental representative was unable to show us any additional evidence gathered by the revenue. In the absence of any additional evidence that there being larger subscriber base, we find that the difference of service tax liability for the period January 2006 to September 2009 has been worked out based upon presumptions and assumptions. The subscriber base as calculated by the revenue for this period is a notional one, theoretical without any basis. - adjudicating authority was correct in dropping the proceedings initiated by the show cause notices for the period January 2006 to September 2009 - however demand for the period October 2005 to December 2005 confirmed - Decided substantially in favor of assessee.

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• 2015 (9) TMI 734
  Admissibility of Cenvat credit - Telecom towers - Held that:- there has been a difference of opinion between two ld. Members of a Division Bench in the case of Idea Mobile in the wake of which Division Bench has put up the matter to the Hon'ble President for reference to a third Member. - issue involved is the same as that involved in the case of Idea Mobile which the Ld Member of Division Bench expressed a difference of opinion which is to be resolved. If that matter is referred to a 3rd Member, then these appeals will not be able to be tagged therewith and as an intervener, the appellants will not be able to argue the question of fact In these circumstances, we are of the view that it will be more efficient if the difference of opinion is heard by a 3 Member Larger Bench in which case these appeals can also be heard by the same Bench.

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• 2015 (9) TMI 733
  Leased circuit service - leasing of dark fibre cables - telegraph authority. - leasing of space on microwave towers - Business Auxiliary service - Penalty u/s 78 - Held that:- Leasing of tower space does not fit under any limb of the definition of Business Auxiliary Service quoted above. The adjudicating authority’s observation that lease of tower space also promotes the service provided by the cellular telephone operator is not based on any sound logic or rationale. Further there is nothing in the Finance Act, 1994 to even suggest that there was a transplant of any part of BAS into telecom service with effect from 1.6.2007 which by implication means that the service was not taxable under Business Auxiliary Service prior to 1.6.2007. Thus we are of the view that the demand of ₹ 74,27,181/- confirmed under Business Auxiliary Service on the amount received for lease of tower space on its microwave towers to various cellular operators is not sustainable. - Decided in favor of assessee. Leased circuit service - The appellant has conceded that it has been granted a licence under Section 4(1) of Indian Telegraph Act, 1885). So it is clearly a telegraph authority as defined under Section 65(111) of Finance Act, 1994. It thus becomes clear that the dedicated dark fibre cable link was provided to a subscriber by a telegraph authority and therefore all the requirements of Section 65(105))(zd) (according to which the taxable service is “to subscriber by a telegraph in relation to a leased circuit”) are clearly satisfied inasmuch as leased circuits were provided by the appellant, whose is a telegraph authority, to a subscriber. Thus the demand pertaining to leased circuit service is clearly sustainable on merit. - Decided against the assessee. Extended period of limitation - Held that:- for the assessee as the appellant, it could not have been a bona fide belief on its part that the service rendered did not fall under leased circuit service because there was no scope of any confusion or ambiguity in that regard. Further, the appellant did not timely provide the information sought and had to be issued repeated reminders. Therefore we are of the view that the appellant is guilty of suppression of fact and therefore the extended period has rightly been invoked and mandatory penalty is clearly imposable. - Decided against the assessee.

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• 2015 (9) TMI 732
  Demand of service tax - Reverse charge mechanism - commission paid to the overseas agents sale of yarn - whether the term "textile processing" covers yarn - benefit of Notification No.14/2004-ST, dated 10.09.2004 - Held that:- the situation is revenue neutral exercise since service tax as demanded would become input service and eligible for cenvat credit - Decision in the case of Texyard International, Sree Angalamman Exports, Atlas Export Enterprises, M/s Kangaroo Impex Versus Commissioner Of Central Excise, Trichy [2015 (8) TMI 794 - CESTAT CHENNAI] followed - appellants are eligible for the benefit of exemption Notification No.14/2004-ST, dated 10.09.2004 - Decided in favour of assessee.

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• 2015 (9) TMI 731
  Waiver of pre deposit - Mandatory pre deposit - Held that:- even prior to 6-8-2004 the appellants did not have an “unfettered” right to appeal inasmuch as that right was fettered to the extent that the appellant was, pending appeal, required to deposit the duty demanded or penalty levied. In terms of the amended Section 35F, the appellant’s right to appeal is fettered only to the extent that the appellant is required to deposit seven and a half percent/ten percent of the duty or penalty as the case may be. Thus it can be nobody’s case that the amended Section 35F has fettered the appellant’s right to appeal to a degree higher than before. - amended Section 35F by requiring the appellant to deposit only 7.5%/10% of duty or penalty as the case may be, has in no way prejudiced the appellants right to appeal vis-à-vis their right to appeal as it existed prior to 6-8-2014. See in this light the amended Section 35F does not run foul of any of the case laws cited by the appellants even if the appellants interpretation of those case laws is accepted. Indeed CESTAT registry would have had no objection if these appeals were filed with full deposit of full duty or penalty. CESTAT cannot entertain any appeal filed on or after 6-8-2014 without the mandatory pre-deposit as per the provisions of Section 35F as amended w.e.f. 6-8-2014. - Decided against assessee.

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• Central Excise

• 2015 (9) TMI 727
  Scope of Section 11B - Refund claim - Whether Section 11B of the Central Excise Act, as amended, applies to cases where though an order has been passed directing refund, implementation of the order is pending - Held that:- applications for refund of excise which were preferred by the assessee had already been allowed finally by the orders of CEGAT dated 01.06.1989 and 06.06.1989. This obviously happened before the amendment in the Section in the year 1991. At the same time, the refund had not been actually paid to the assessee till 1991 when the provisions of Section 11B came to be amended. We now advert to the decision in the case of Mafatlal Industries Ltd. (1996 (12) TMI 50 - SUPREME COURT OF INDIA). In no unambiguous terms and with utmost clarity and certainty, the majority interpreted amended provisions of Section 11B including proviso to sub-section (1) thereof to hold that so long as refund proceedings are pending, the amended provision would get attracted and would disentitle the manufacturer/payer from claiming any refund contrary to the said proviso. However, in those cases where the refund proceedings had finally been terminated, in the sense – that the appeal period has also expired – before the commencement of the amended provision, these cannot be re-opened and/or governed by the amended provision. Only after amendment in Section 11B of the Act in the year 1991, any person applying for refund has to establish that incidence of such duty has not been passed on by him to any other person. The unamended provision did not contain any such stipulation. Therefore, under the old provision, the only obligation of the person claiming refund was to make such an application before the expiry of six months from the relevant date and to show how the refund was admissible to the applicant. In such a case, the Assistant Collector of Central Excise was to only examine as to whether excise duty was paid in excess etc. and was refundable to the claimant as a result of adjudication of the dispute or otherwise. It is only in the amended provision that additional stipulation is provided as per which the claimant is required to file, along with application for refund, such documentary or other evidence including documents referred to any Section 12A of the Act to establish that the amount of duty of excise was collected from the claimant or paid by the claimant and that “incidence of such duty had not been passed on by him to any other person”. Order on the refund application of the respondent had been passed on 06.06.1989, which was much before the amended provision came into operation. In fact, even after the order of refund was passed, the appellant had not refunded the amount and it is in these circumstances that writ petition was filed in the High Court for initiation of contempt proceedings against the defaulting officers. In such proceedings, the High Court had passed the order dated 18.07.1995. In this order, no doubt, the Court observed that the Assistant Commissioner would go into the question if the respondent should be granted the refund in spite of Section 11B of the Act. However, merely because of such observations, it cannot be said that the Assistant Commissioner was entitled to look into the issue of unjust enrichment when if, otherwise, he he was otherwise had no jurisdiction to do so in the facts of the present case. Thus, when the order of the Assistant Commissioner was challenged and the matter came before the Tribunal, the Tribunal was duty bound to apply the law laid down in Mafatlal Industries Ltd. (supra), which it did. - there is no scope to interfere with the impugned decision of the High Court - Decided against Revenue.

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• 2015 (9) TMI 726
  Refund claim - Duty paid under protest - tribunal allowed the refund claim on the ground that, no proceedings were issued under Section 11A of the Act - recovery of refund which was earlier paid to the assessee - Held that:- in view of operation of Rule 233B the duty as approved had become final. In the first place the refund application is misconceived and was not maintainable as the respondent failed to avail the remedies available under the Act. Sections 11A and 11B of the Act are two independent provisions and parameters which are required to be considered in the process of application under Sections 11A and 11B of the Act being totally different and independent there is no interconnection between the same. The orders passed under both the Sections 11A and 11B of the Act are amenable for appeal and further appeal to the higher forums. There is no warrant for one to conclude for implementing the orders passed under Section 11A of the Act recourse is to be taken to the provisions of Section 11A of the Act. We are not impressed with the argument of the learned counsel for the respondent that the authorities being bound by the circular and it is not open for the authorities not to implement the same. In view of the judgment of the Supreme Court in Minwool Rock Fiber Ltd case (2012 (2) TMI 289 - SUPREME COURT OF INDIA ), the departmental circulars are not binding on the Tribunal and at any rate, the Tribunal did not say that they are bound by the circulars. In the words of the Supreme Court in MADRAS RUBBER FACTORY LTD [1981 (1) TMI 68 - HIGH COURT OF MADRAS] Coming to the question that is raised there is little scope for doubt that in a case where an adjudicating authority has passed an order which is appealable under the statute and the party aggrieved did not choose to exercise the statutory right of filing an appeal, it is not open to the party to question the correctness of the order of the adjudicating authority subsequently by filing a claim for refund on the ground that the adjudicating authority had committed an error in passing his order. If this position is accepted then the provisions for adjudication in the Act and the Rules, the provision for appeal in the Act and the Rules will lose their relevance and the entire exercise will be rendered redundant. This position, in our view, will run counter to the scheme of the Act and will introduce an element of uncertainty in the entire process of levy and collection of excise duty. Such a position cannot be countenanced. Section 11A of the Act as amended by the Finance Act with retrospective effect may be noticed. By the time the appellate authority came to consider the appeal the amended provision came into existence. A careful reading of the amended provision sets out the scope of Section 11A of the Act. The short levy or short payment or erroneous refund, as the case may be, should be on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the Rules made thereunder. In the facts of the case the refund order was granted ignoring the fact that the duty payable as per the approved list became final on account of not pursuing the protest petition. - Decided in favour of Revenue.

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• 2015 (9) TMI 725
  Condonation of delay - delay in appeal filed before the commissioner (appeals) - exclusion of period spent in pursuing writ remedy before HC - writ was dismissed by the HC earlier for want of jurisdiction - Held that:- Prima-facie Section 14 of the Limitation Act 1963 is not applicable because there was no want of jurisdiction where the writ petition was preferred. Normally, the assesses are taking a chance by filing a matter directly in the High Court which is always at the peril and risk of the petitioner, specially when delay is not condonable. This petitioner is not exception to "chance taking petitioner." This aspects of the matter have been taken care of by deciding the matters in terms of reported decisions as stated hereinabove. Hence, this writ petition may not be entertained by this Court. - no error has been committed by the Commissioner (Appeals) in passing order - Decided against assessee.

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• 2015 (9) TMI 724
  Disallowance of CENVAT Credit - availment of cenvat credit on the strength of documents issued by Volvo India Private Limited, consigned to M/s.Nav Bharat Corporation - Held that:- Appellant had availed cenvat credit on the basis of the invoices issued by M/s.Volvo India Pvt. Ltd., consigned to M/s.Nav Bharat Corporation, who in turn, sent the materials to the assessee for remade, refined, reconditioned or for any other reasons. Admittedly, the invoices in question are not in the name of the appellant. - assessee had stated that the manufacturer sent the goods to M/s.Nav Bharat Corporation, who in turn sent the same to the assessee for remake. The assessee did not show any documentary proof that the said goods were actually received into their factory and used in the manufacture of final products. To avail cenvat credit, the goods should be endorsed to him by the consignee. Hence, the invoice, on which the credit is taken, should be specific to that consignee. Unless, the invoice is specific, credit should not be availed. Rule 7(1) of the Cenvat Credit Rules, 2002, specifies that the invoice, based on which credit is availed, should be in the name of the person, who availed the credit. In the present case, the invoices in question are not in the name of the appellant. Hence, the appellant is not entitled to avail the credit. Therefore, the Department was justified in reversing the credit, which was affirmed by the Tribunal correctly. Extended period of limitation - suppression of facts - Held that:- There is no reference to the document dated 15.1.2002 said to have been addressed to the Department. The Adjudicating Authority held that no proof has been placed before him to show that the Department was aware of the issue during the material period and no proof has been submitted to support the claim that the subject goods were actually received into the factory and put into use in the manufacture of the final products. This finding of the Adjudicating Authority was confirmed by the Commissioner (Appeals) as well as by the Tribunal - no reason to differ with the findings of the Authorities below. We find no question of law much less any substantial question of law arises for consideration in this appeal - Decided against assessee.

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• 2015 (9) TMI 723
  Dismissal of appeal - non grant of adjournment by the tribunal - principle of natural justice - levy of interest on differential duty due to Inclusion of charity amount known as 'Mahamai' collected at the rate of 1.3% in the value - Held that:- the question as to whether there is any liability to pay interest for the period of delayed payment of duty, has not been discussed in detail, more particularly, with regard to the facts in issue - order of the tribunal set aside on the ground of violation of principles of natural justice - matter remanded back - Decided in favor of assessee.

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• 2015 (9) TMI 722
  Benefit of exemption under Notification No. 58/2003-CE dated 22/7/2003 - SEZ - Held that:- Appellant was claiming exemption under Notification No. 58/2003-CE dated 22/07/2003. The said notification exempts Duty of Excise under Section 3 of the Central Excise Act and Additional Duty of Excise under sub-Section (1) of Section 3 of the Additional Duty of Excise (Goods of Special Importance) Act, 1957. Another Additional Duty of Excise on tobacco products was levied by virtue of Section 85 of the Finance Act, 2005. The appellant could not produce any record to show that their product cleared to SEZ need not suffer the said new levy. The only plea taken was that all clearances to SEZ should be considered as export and no duty need be paid. Further, since the clearances are as per procurement certificate and bond the Department cannot demand any additional duty. Except for general principal that clearances to SEZ units should be equated to export the appellant could not produce the legal basis for such assertion. The clearances to units in SEZ are to be considered as export as per the provisions of Special Economic Zone Act, 2005 is not applicable to the period in the present proceedings which were much earlier. - Decided against assessee.

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• 2015 (9) TMI 721
  Denial of CENVAT Credit - Capital goods - Whether the CENVAT Credit of items like Cement, Angles, Channels etc used for civil foundation work and support structure of the machinery will be admissible or not - Held that:- Issue of admissibility of CENVAT Credit on these items was decided by CESTAT Larger Bench in the case of Vandana Global Ltd Vs CCE Raipur (2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)). Once conflicting views were given by the Court on the issue and the issue got resolved by the Larger Bench, then it cannot be said that there was any intention to evade payment of taxes or in taking wrong credit. Accordingly, demand for the period prior to amendment of Rule 2(k) of CENVAT Credit Rules, 2004 has to be considered as time barred. On merit also, the jurisdictional High Court in the case of Mundra Port & Special Economic Zone Ltd Vs CCE & C (2015 (5) TMI 663 - GUJARAT HIGH COURT) held that such credit is admissible before amendment of Rule 2(k) w.e.f. 07.07.2009. Appeal filed by the Appellant with respect to CENVAT Credit of demand for the period prior to the amendment of Rule 2(k) of CENVAT Credit Rules, 2004 is allowed - Appellant had reversed the CENVAT Credit along with interest - Decided in favour of assessee.

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• 2015 (9) TMI 720
  Power of Commissioner (Appeals) to remand back the matter - Held that:- Bench in the case of Bacha Motors (P) Ltd (2010 (5) TMI 86 - CESTAT, AHMEDABAD) has held that the Commissioner (Appeals) has such power to remand. In this judgment of Bacha Motors (P) Ltd, the Bench has relied upon the judgment of Hon'ble Gujarat High Court in the case of CCE Ahmedabad-I Vs Medico Labs [2004 (9) TMI 108 - HIGH COURT OF GUJARAT AT AHMEDABAD]. In this case of Medico Labs, the Hon'ble High Court had held that even after the amendment of Section 35A(3) of Central Excise Act, 1944, the Commissioner (Appeals) continue to have power of remand. As the issue is no more res integra - Decided against Revenue.

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• 2015 (9) TMI 719
  Power of Commissioner (Appeals) to remand back the matter - Held that:- Bench in the case of Bacha Motors (P) Ltd (2010 (5) TMI 86 - CESTAT, AHMEDABAD) has held that the Commissioner (Appeals) has such power to remand. In this judgment of Bacha Motors (P) Ltd, the Bench has relied upon the judgment of Hon'ble Gujarat High Court in the case of CCE Ahmedabad-I Vs Medico Labs [2004 (9) TMI 108 - HIGH COURT OF GUJARAT AT AHMEDABAD]. In this case of Medico Labs, the Hon'ble High Court had held that even after the amendment of Section 35A(3) of Central Excise Act, 1944, the Commissioner (Appeals) continue to have power of remand. As the issue is no more res integra - Decided against Revenue.

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• CST, VAT & Sales Tax

• 2015 (9) TMI 738
  Constitutional validity of levy of VAT on pure services like implementation, customization and other support services in respect of software - legislative competence - Karnataka Value Added Tax Act, 2003 - packaged software 'Finacle' a banking solution - Scope of the work i.e. Project management of the pilot project, initial systems study to understand Bank's requirements, core team education for a team of up to 25 members of bank's core team and installation of software at the Data Centre. The pilot implementation phase shall be deemed to be complete when software shall Go Live in Data Centre and 15 number of branches. Held that:- in the instant case, as is clear from the invoice at Annexure-1, the price paid is for the customized Finacle software. The Annual Technical Support commences from the date of first branch GO LIVE. ATS fees specified is valid for 3 years from the effective date of the agreement and is subject to review thereafter. The contract also includes pilot implementation fees which is calculated for 2500 man days of customized efforts. Separate fee is also charged for core team education fee. This training fee includes the charges for two executive appreciation programme and one audit training. Professional services outside the scope of the agreed implementation can also be availed by the customer as per the assessee's professional services mentioned in the agreement. It is stated that, before pilot implementation programme commences, there should be installation of software. Therefore, the implementation of programme starts only after the installation of software which is the goods which is transferred under the agreement i.e., the customized copyrighted article 'finacle' of the assessee. As only after the supply of packaged and customized software, service is required to integrate the system to make the software functional or useable under the contract if that function is also entrusted to the assessee, the assessee renders services for implementation of the project. It is in the nature of post sale activity. As there is no transfer of any goods at the time of implementation of the project, there is no direct sale or deemed sale. It is in the nature of service simplicitor. Therefore, irrespective of the timing of the contract and the payment of the money as consideration of the contract, even if it includes consideration for implementation of the project, the said payment is for post sale activity and it is for service to be rendered to integrate the system and implement the project. No VAT is required to be paid on this aspect. Though there is one composite contract, it is in different parts - one part deals with the contract of sale of customized software and another deals with the services to be rendered for implementation. Yet another agreement speaks about the technical service which is in the nature of a works contract. The assessee has paid VAT on the contract for sale of customized software. The assessee has also paid VAT in respect of the goods aspect in the works contract. Whereas the service contract does not involve sale of goods nor it is exclusively a contract for sale of goods but on the contrary it is an exclusive contract for rendering service. The contract for implementation, which is nothing but a service contract, is not liable to VAT. In view of the provisions contained in the Finance Act, 1994, 'contract' for implementation specifically falls within the definition of service and is taxed, as such, under the said law. The same activity cannot be taxed under VAT, as rightly contended by the learned Counsel for Union of India. In that view of the matter, the order passed by the Assessing Authority is unsustainable. Accordingly, it is hereby set aside. - Decided in favor of assessee.

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• 2015 (9) TMI 730
  Abkari Dues – Recovery of Dues – Revenue recovery proceedings are initiated in respect of alleged dues from fourth respondent towards Abkari dues and sales tax dues – Petitioner alleged that they were never part of any transaction and had never given any surety nor mortgaged any property to facilitate fourth respondent to conduct foreign liquor shop, therefore submitted that revenue recovery proceedings are liable to be set aside – Held that:- statement has been filed by first respondent therein it was stated that second petitioner has signed Form 6 Bond before Sales Tax Officer and had sworn to affidavit before Sales Tax Officer stating that he and his brother, are liable to pay arrears due from fourth respondent –Detailed inquiry is necessary in this matter – Necessarily, signature of second petitioner is to be verified – Decided partially in favour of Petitioner.

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• 2015 (9) TMI 729
  Revision of Order – Imposition of penalty, tax and interest – Respondent - Authority visited premises of appellant - Society and seized certain books of accounts – Respondent issued notice, invoking Section 64(1) of Karnataka Value Added Tax Act, 2003and called upon appellant to file objections – Appellant did not avail of this opportunity and based on records, 1st respondent - Authority passed impugned order imposing tax, penalty and interest – Held that:- notice categorically stated that if appellant failed to file objections to said notice, 1st respondent proposed to revise orders of Authority – In considered view, Section 64(1) gives 1st respondent - Authority with ample power to modify assessment or cancel assessment or direct fresh assessment – thus, appeals do not merit consideration– Ends of justice will met if opportunity is granted to appellant on payment of partial amount – Decided against Appellant.

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• 2015 (9) TMI 728
  Rejection of Application – Filed by non-competent person – Petitioners have not received notice of posting of case before Tribunal and that, for said reason, they could not appear on that date – Respondent dismissed restoration petition as was filed by person not competent to prefer petition – Held that:- compendious personality like firm will be treated as entity for limited purpose for juridical identity and representation of such entity through competent person identifiable or verifiable as per law – It is astonishing that, Tribunal dismissed restoration application for such simple reason that, same has been filed by partner, who is not competent to file such application – Tribunal ought not have adopted such hyper-technical approach, while dealing with appeal which require substantial redressal warranting meritorious consideration – Therefore holding that there was no sufficient cause by petitioner is erroneous – Accordingly, impugned order set aside – Decided in favour of petitioner.

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