Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 18, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Depreciation claim - since the ponds were specially designed for rearing/breeding of the prawns, they have to be treated as tools of the business of the assessee and the depreciation was admissible on these ponds. - SC
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Reopening of assessment - It cannot be disputed that the exemption claimed by the AO in respect of the profit on sale/redemption of investments was duly disclosed and the AO had also opined on the merits of the taxability of profits on sale/redemption of investments - outside the scope of Section 147 - HC
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Reopening of assessment - service of notice - The mere fact that an Assessee or some other person on his behalf not duly authorised participated in the reassessment proceedings after coming to know of it will not constitute a waiver of the requirement of effecting proper service of notice on the Assessee under Section 148 - Provisions of section 292BB also not applicable - HC
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Reopening of assessment - Merely, because the audit report has opined that certain expenses were not allowable does not entitle the Assessing Officer to issue a notice u/s 148 - HC
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Disallowance on account of weaving majuri expenses - cash expenditure - in the absence of any finding of the authorities that the expenses are bogus in nature, the addition is restricted to 10% of the expenses as against the 20% made by A.O. - AT
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Rectification of mistake - The correct rate of depreciation can be an issue of apparent mistake and it can be decided in the proceedings u/s 154 but whether the expenditure is capital or revenue is a highly debatable issue and such claim cannot be entertained and decided in 154 proceedings - AT
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Addition on on account of alleged inflated expenses - It is not the case where the assessee has booked bogus expenditure to a non-existent entity. Therefore, keeping in view the object of the provisions of section 40A(3) of the Act and intention of the legislation, no addition can be made - AT
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MAT - Book adjustments - provision for gratuity based upon acturial valuation was not an unascertained liability which could be added back while computing the book profit for the purpose of Section 115JB. - AT
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Income from house property - it is quite clear that the Municipal Ratable Value of the property is lower than the actual rent received by the assessee and in fact the actual rent received is almost seven times the Municipal Ratable Value - actual rent derived by the assessee is quite reasonable - AT
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Addition invoking section 69B - unaccounted investment - DVO’s estimation of fair market value cannot be accepted as a conclusive evidence for establishing that any additional consideration over and above the stated consideration has passed between a buyer and seller. - AT
Customs
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Duty drawback – Reversal of Cenvat credit, taken on input services, before utilization amounts to non-taking of credit that such reversal can be done subsequent to export of goods - drawback allowed @14.8 without reducing 3% - CGOVT
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Conviction u/s 20 of the NDPS Act - Having held that the mandatory requirement of Section 50 of the NDPS Act was not complied with, recovery itself would be illegal and consequent thereto the conviction and the order on sentence are liable to be set aside - HC
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Restoration of appeal - Non compliance of pre deposit order - the appellant has complicated the matters for themselves, but demonstrated their bona fides by first making a debit entry in the CENVAT book and next making a cash deposit - matter restored before tribunal - HC
Service Tax
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Health and Fitness services - activity of aerobics and yoga classes - meditation course and yoga classes would fall under Health and Fitness services - Demand invoking the Extended period of limitation confirmed - AT
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Revenue authority cannot invoke the extended period of limitation, when the records of the assessee were audited by the officers once but did not find any short payment from records. The 2nd audit party, doing the audit of same period or over lapping period, cannot allege that appellant has miss-stated or suppressed the facts from the departments - AT
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Prima facie view that the hiring of transponder capacity by the appellant in the satellite for the purpose of their business of providing up linking service to their customers would not be covered by the expression “Support Service of Business or Commerce” under Section 65(104c) - AT
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Once the Service Tax has been collected by the department from the appellants by treating their services as business auxiliary service at the time of considering the claim for rebate of the Service Tax so paid, the department cannot question the classification of the services - AT
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Refund - unutlized cenvat credit - export of goods - Where the exporter is not a manufacturer, he only has to satisfy that neither Cenvat credit has been taken by the manufacturer or by him not the manufacturer have separately applied for refund with respect to the same taxes, which the appellants have done in support of its claim - AT
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urisdiction - since the appellants are a manufacturer of bathroom fittings chargeable to Central Excise duty and are registered with Commissionerate of Central Excise, Delhi-I, the Commissioner of Service Tax, Delhi, could not go into the question of Cenvat credit - AT
Central Excise
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The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court - HC
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Waiver of pre deposit - large scale evasion of central excise duty - even if there is financial hardship, the same cannot be a ground in isolation to dispense with the condition of pre-deposit amount. - HC
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Denial of refund claim - the Commissioner has the power and discretion under proviso (i) to Rule 173L to entertain an application within a total period of two years. This is a case where the Commissioner should have at least exercised the said discretion in favour of the assessee - HC
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Principle manufacturer is not required to pay duty on waste and scrap generated at the end of job worker when the goods were sent to the job worker for processing under notification no. 214/86 - AT
VAT
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Validity of reassessment - limitation period of 6 years as reduced from 8 years - Effect from amendment in the UPTT - The legislative intent was not to enhance and increase the limitation period, regardless and notwithstanding the financial or assessment yea - SC
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Constitutional validity of levy of entertainment tax on the Direct To Home (DTH) Broad Casting Services - legislative competence of the State upheld - HC
Case Laws:
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Income Tax
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2015 (9) TMI 758
Depreciation claim - whether 'natural pond' which as per the assessee is specially designed for rearing prawns would be treated as 'plant' within Section 32? - Held that:- An attempt was made by the learned counsel for the Revenue to the effect that the pond in question was natural and not constructed/specially designed by the assessee. We do not find it be so. In the judgment of the High Court [2004 (10) TMI 84 - KERALA High Court], which is decided in favour of the assessee, the High Court has specifically mentioned that the prawns are grown in specially designed ponds. Further this very contention that these are natural ponds has been specifically rejected as not correct. Moreover, from the order passed by the Assessing Officer we find that this was not the reason given by the Assessing Officer to reject the claim. Therefore, finding of fact on this aspect cannot be gone into at this stage. See Commissioner of Income Tax, Karnataka vs. Karnataka Power Corporation [2000 (7) TMI 72 - SUPREME Court] We find that the judgment dated 14.10.2004 rightly rests this case on 'functional test' and since the ponds were specially designed for rearing/breeding of the prawns, they have to be treated as tools of the business of the assessee and the depreciation was admissible on these ponds. - Decided in favour of the assessee
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2015 (9) TMI 757
Reopening of assessment - Addition on account of income arising on sale of investments - disallowance of claim for “Investments Written Off” - Whether ITAT was correct in law in holding that the income earned on sale/redemption of investment is chargeable to tax? - Held that:- It is not disputed that the reasons that led the AO to reopen the assessment were factually incorrect. It is not disputed that the Assessee was carrying on only one business - General Insurance Business, which is regulated under The Insurance Act, 1938. Indisputably, the insurers cannot carry on any business other than the insurance business or any prescribed business. The business of General Insurance is regulated and there is no allegation that the regulatory authority has found the Assessee to be in default of any provisions of The Insurance Act, 1938. The learned counsel for the Revenue also did not dispute that the AO’s assumption that the Assessee was carrying on two streams of business was incorrect. Thus, this reason to believe that the Assessee’s income had escaped assessment is clearly without any factual basis. The assumption that the Assessee had not credited the profits in question to the Profit and Loss Account is also, admittedly, factually incorrect. Thus, the reasons which led the AO to form a belief that income of the Assessee had escaped assessment are admittedly based on palpably incorrect assumptions. It is well established that reasons to believe that income had escaped assessment is a necessary precondition for the AO to assume jurisdiction.There was no basis for the AO to assume that the Assessee had not credited the profits from the sale of investments, which are alleged to have escaped assessment in its Profit and Loss account. It cannot be disputed that the exemption claimed by the AO in respect of the profit on sale/redemption of investments was duly disclosed and the AO had also opined on the merits of the taxability of profits on sale/redemption of investments. The income from profit on sale/redemption of investments is now sought to be taxed as income which had escaped assessment. This, in our view, clearly represents a change in the opinion with regard to the taxability of the income in question. It is well settled that the power under Section 147 of the Act is not a power of review but a power to reassess. Permitting reopening of assessment on a change of opinion as to the taxability of the income of the Assessee is, thus, outside the scope of Section 147 of the Act. We find considerable merit in the contention of the Assessee that the AO did not have the jurisdiction to tax the profits and gains from sale/realization of investments under Section 147 of the Act - Decided in favour of assessee.
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2015 (9) TMI 756
Reopening of assessment - Whether the ITAT was correct in holding that since notice under Section 148 was not served on the Assessee in accordance with law, the re-assessment made consequent thereto was without jurisdiction and liable to be quashed? - Held that:- Under Section 148 of the Act, the issue of notice to the Assessee and service of such notice upon the Assessee are jurisdictional requirements that must be mandatorily complied with. They are not mere procedural requirements. For the AO to exercise jurisdiction to reopen an assessment, notice under Section 148 (1) has to be mandatorily issued to the Assessee. Further the AO cannot complete the reassessment without service of the notice so issued upon the Assessee in accordance with Section 282 (1) of the Act read with Order V Rule 12 CPC and Order III Rule 6 CPC.Although there is change in the scheme of Sections 147, 148 and 149 of the Act from the corresponding Section 34 of the 1922 Act, the legal requirement of service of notice upon the Assessee in terms of Section 148 read with Section 282 (1) and Section 153 (2) of the Act is a jurisdictional pre-condition to finalizing the reassessment. The onus is on the Revenue to show that proper service of notice has been effected under Section 148 of the Act on the Assessee or an agent duly empowered by him to accept notices on his behalf. In the present case, the Revenue has failed to discharge that onus. The mere fact that an Assessee or some other person on his behalf not duly authorised participated in the reassessment proceedings after coming to know of it will not constitute a waiver of the requirement of effecting proper service of notice on the Assessee under Section 148 of the Act. Reassessment proceedings finalised by an AO without effecting proper service of notice on the Assessee under Section 148 (1) of the Act are invalid and liable to be quashed. Section 292 BB is prospective. In any event the Assessee in the present case, having raised an objection regarding the failure by the Revenue to effect service of notice upon him, the main part of Section 292 BB is not attracted. On the facts of the present case, the Court finds that the ITAT was right in its conclusion that since no proper service of notice had been effected under Section 148 (1) of the Act on the Assessee, the reassessment proceedings were liable to be quashed. Decided in favour of the Assessee.
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2015 (9) TMI 755
Computation of capital gain - whether sale of the said land is not taxable because the land was agricultural land which did not fall within the definition of capital asset under Section 2(14)? - Whether distance up to the land should be considered or up to the village within which such land is situated? - Held that:- The Court is of the view that for the purposes of Section 2 (14) (iii) (b) of the Act, the distance had to be measured from the agricultural land in question to the outer limit of the municipality by road and not by the straight line or the aerial route. The distance has to be measured from the land in question itself and not from the village in which the land is situated. ITAT fairly concluded that the land had to be within the distance of 8 Kms. from the outer limit of the Gurgaon municipality and not from the outer limit of ITA 714/2015 Page 5 of 6 the village Ghata in which the land was located. On the strength of the certificate produced by the Assessee from the former Additional Director General, CPWD that the distance of the land from the outer limit of the Gurgaon Municipality was 10.4 Kms, the ITAT held that the land owned by the Assessee did not fall within Clauses (a) or (b) of Section 2 (14) (iii). - Decided against revenue.
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2015 (9) TMI 754
Income from undisclosed sources - assessee failed to offer any explanation whatsoever regarding the source of investment in such suppressed purchases - application of N.P. rate - ITAT deleted the addition - Held that:- 0nce the books of account were rejected, the best method of estimating the income of the appellant was to apply the net profit rate on the total purchases of the appellant. Since only the total purchases were verifiable the appellate authority found that the rate of 6% towards profit rate was fair and reasonable. We also find that the first appellate authority considered the practice adopted in this trading of rubber and held that person who intend to buy natural rubber, who do not have licence approaches the person who is having the licence, which in the instant case was the assessee who made the purchases on behalf of these unlicensed traders and consequently held, that in such a situation the addition on account of unexplained purchases made not be in order. This finding being based on appreciation of evidence requires no interference. In the light of the aforesaid, we are of the opinion, that the deletion of suppressed purchases was rightly made by the first appellate authority and was also justified in estimating the income by applying a net profit rate of total purchases made by the assessee. - Decided against revenue.
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2015 (9) TMI 753
Reopening of assessment - certain expenses were not allowable under Section 36(1)(viia) - reliance on opinion rendered by the audit party - Held that:- In the instant case, we find that there has been an assessment under Section 143(3) of the Act. The books of account were produced and the same were scrutinized. The profit and loss account was checked and only thereafter net loss of ₹ 66,70,410/- was determined. Merely, because the audit report has opined that certain expenses were not allowable under Section 36(1)(viia) does not entitle the Assessing Officer to issue a notice under Section 148 of the Act. We find from a perusal of the reasons to believe that the Assessing Officer had not applied its own mind and has not considered as to what would be the effect of the audit report nor had come to any conclusion which he could reasonably believe that an income had escaped assessment. Consequently, merely on the basis of the opinion rendered by the audit party, the Income Tax Officer could not assume jurisdiction to issue a notice under Section 148 of the Act. He must, on its own wisdom, come to a conclusion and hold a belief that an income had escaped assessment to tax. Since this belief was not recorded by the Assessing Officer the issuance of the notice was done mechanically without any application of mind. Such action amounts to change of opinion, which is not permissible. Since the foundational requirement for issuance of a notice was lacking and the condition precedent for initiating a valid reassessment proceedings were not existing, we are of the opinion that the impugned notice issued under Section 148 of the Act initiating reassessment proceeding for the assessment year 2007-08 could not be sustained and is quashed. The order dated 19.09.2011 rejecting the objections is also quashed. - Decided in favour of assessee.
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2015 (9) TMI 752
Estimation of GP - ITAT reducing the estimation of GP made by the AO and upheld the rejection of books of accounts - Held that:- Tribunal in the impugned judgment has found that the Commissioner (Appeals) has observed that the Assessing Officer had compared the appellant’s gross profit with four different turnovers and that in case of three of the companies, the turnover was comparable to the case of the assessee company and they were also in similar line of business. That the revenue had not controverted the said finding of fact and accordingly did not find any reason to interfere with the order passed by the Commissioner (Appeals). From the facts noted hereinabove, it is evident that the conclusions arrived at by the Tribunal as well as the Commissioner (Appeals) are based upon concurrent findings of fact recorded after appreciating the evidence on record and hence, do not give rise to any question of law. - Decided against revenue Unaccounted cash credit - addition u/s 68 deleted by ITAT - Held that:- This court finds substance in the submissions advanced by the learned counsel for the appellant, hence, admit. The following substantial question of law arises for consideration:- “Whether the Income Tax Appellate Tribunal has substantially erred in upholding the deletion of addition of ₹ 39,43,083/- made under section 68 of the Income Tax Act, 1961 in case of credits received from Abloom Investment Private Limited, even though the identity, genuineness and creditworthiness was not proved?”
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2015 (9) TMI 751
Attachment orders - Liability to release the balance amount after meeting the liabilities - Held that:- Once the provisions of Income Tax Act provide to release the balance assets/amount after satisfying the liability, there is no occasion for the respondents to retain the same under the executive Instructions. Therefore, at this stage, we feel it appropriate to issue direction to the Principal Commissioner of Income Tax (Central Circle), Lucknow to take decision on the petitioner's representation within fifteen days from the date of communication of this order.
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2015 (9) TMI 750
TDS on interest u/s 194A - whether cannot be pressed in service against the State Bank of India - refund seeked with interest - Held that:- Once I.T.A.T. has opined that Section 194A(i) of the Income Tax Act is not applicable against the Bank on SRF deposit, then the same legal position would be applicable in the subsequent assessment years as well, unless of course, Section 194A(i) is amended or is substituted by any new law. Therefore, submission of Mr. Bishwajit Bhattacharya, learned Senior Counsel appearing for the petitioner Bank that amount of ₹ 97,85,38,937/- has been deleted against the assessee/Bank seems to be correct. Since, it is not within the knowledge of Revenue, as to whether order dated 03.03.2015 has been passed by the Commissioner of Income Tax (Appeals), therefore, in the peculiar facts and circumstances of the case, direct that on the applications of the petitioner seeking refund, an appropriate decision shall be taken within two weeks positively and if it is found that vide order dated 03.03.2015 amount of ₹ 97,85,37,937/- has been deleted against the assessee, amount of ₹ 44,36,57,686/- shall be refunded to the petitioner Bank along with interest as provided under Section 240 read with Section 244 of the Income Tax Act. It is, however, clarified that unless and until order passed by the Income Tax Appellate Tribunal has been stayed or set aside by the higher Forum, refund shall not be denied to the petitioner.
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2015 (9) TMI 749
Condonation of delay - Tribunal proceeding to set aside the order of the Appellate Commissioner by condoning the delay of 331 days - Held that:- On having perused the order of Tribunal, we are satisfied with the reasons given by the Tribunal for condoning the delay after considering the averments made in the affidavit of the assessee filed in support of the application for condonation of delay and after holding that the assessee was under belief that filing an appeal, when there is no demand, would be a pointless exercise and that it was only after receiving the notice under Section 263 of the Act, the assessee found it necessary to challenge the order of assessment as also notice for reopening an already concluded assessment issued under Section 148 of the Act, held that there was sufficient reason for delay in filing the delay. No ground for interference with such order of the Tribunal. As such, we are of the opinion that the order of the Tribunal is perfectly justified in law - Decided in favour of the assessee.
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2015 (9) TMI 748
Validity of reopening of assessment - ITAT quashing the reassessment on the ground that the A.O has reopened the assessment on the same material which were in the records during the course of the original assessment proceedings - addition on account of Prior period expenses andunutilized CENVAT credit - Held that:- On the basis of the reply of the Assessee filed before A.O it is thus seen that the AO was aware of the method of accounting followed by the Assessee for valuation of closing stock and after having examined the issue and on being satisfied with the material produced and the explanation of the Assessee, the A.O did not make any addition on account of unutilized CENVAT credit. Similarly, the submission of the Assessee with respect to prior period expenses was also accepted by the A.O without making any addition during the course of original assessment proceedings and it can thus be said that A.O had formed an opinion during the scrutiny assessment. Thus, in the present case and on considering the aforesaid facts, we are of the view that the impugned notice for reassessing the assessment year 200809 is issued merely on change of opinion and seeks to review the assessment which is already completed and the same in not permissible as per law. We thus set aside the notice of reopening the assessment dated 28.03.2011 and also all consequential orders. - Decided in favour of assessee
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2015 (9) TMI 747
Under valuation of closing stock - Rejection of books of accounts - A.O has rejected books of accounts mainly on three grounds namely fall in GP ratio, non maintenance of stock register and quantitative details and under valuation of closing stock of yarn - Held that:- A.O in the order has noted that Assessee has earned a gross profit of 9.75% as against the gross profit of 6.69% in the immediate preceding year. However on perusing the particulars of accounting and the ratio which are Annexure to the Tax Audit Report it is seen that the auditor had shown the net profit ratio for the year under consideration at 9.75% and the gross profit ratio at ₹ 29.84%. We thus find that A.O has proceeded on an incorrect basis as he had compared the net profit of a year with the gross profit of another year whereas the correct way would have been that he should have compared the gross profit ratio for both the years. If the gross profit ratio for the year under consideration is compared with that of immediate preceding year, it appears that there is no fall in the gross profit ratio. Another submission of the ld. A.R. that due to typographical error the closing stock in quantitative terms of the raw material has been shown at 82,458 kg seems to be correct when seen in the light of the submission of the quantitative details which were submitted to the A.O. On perusing the statement it is seen that the closing stock of yarn is 57,369.865 kg whereas the closing stock which is erroneously shown as 82,458 kg. The mistake in quantitative terms has been reconciled by the ld. A.R. by demonstrating that the closing stock should have been derived after considering the sale of yarn of 25,088 kg which is also reflected in the profit and loss account. Before us, Revenue has not brought any material on record to controvert the submissions of ld. A.R. A.O has compared the gross profit with the net profit and computing the working of closing stock with the incorrect quantity and thereby making the addition therefore in the present case is uncalled for and therefore we are of the view that no addition on account of closing stock is called for. We thus direct its deletion. - Decided in favour of assessee. Disallowance on account of weaving majuri expenses - Held that:- In the present case, the A.O has disallowed labour expenses on adhoc basis. We further find that ld. CIT(A) has noted that Assessee did not produce register or records of the labour charges paid before the A.O. Before us, ld. A.R. has submitted that there is change in the constitution of the income and therefore the ratio of labour expenses as compared to earlier year would not be proper. He has also submitted that the disallowance of 20% made by the A.O is on a higher side and a reasonable disallowance may be made. Considering the totality of facts and circumstances we are of the view that in the absence of any finding of the authorities that the expenses are bogus in nature, we are of the view that the ends of justice shall be met if addition is restricted to 10% of the expenses as against the 20% made by A.O. We thus direct accordingly. - Decided in favour of assessee in part. Disallowance of interest expenses - Held that:- From the details of loans and advances which is reproduced by ld. CIT(A) it is seen that the amount (excluding the TDS receivable) which has been advanced by the Assessee is ₹ 41,36,507/-. Before us, it is Assessee’s contention that it has sufficient own interest free funds. During the course of hearing a specific query was put to ld. A.R. and he was asked about the date on which the aforesaid advances were advanced and also the availability of own funds in the year in which the amounts were advanced to which ld. A.R. submitted that the required information is not readily available and therefore could not furnish the information asked for. It was however submitted that it can furnish the required information later on. In view of these facts, the contention of the ld. A.R. about the availability of sufficient interest free funds could not be verified. However, in the interest of justice, we feel that the contention of Assessee needs re-examination. We therefore remit the issue to the file of A.O to verify the contention of Assessee about the availability of interest free funds vis-ŕ-vis the amounts advanced. In case the contention of Assessee about availability of interest free funds in excess of the amounts advanced is found correct then the addition made by A.O be deleted. The Assessee is also directed to cooperate by furnishing promptly the details called for by the A.O. Needless to state that A.O shall granted adequate opportunity of hearing to the Assessee. - Decided in favour of assessee in part.
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2015 (9) TMI 746
Rectification of mistake - assessee had claimed depreciation on Tools, Moulds with Shoe plates, Shoe Lasts @ 30% while depreciation should be allowed @ 15% - Held that:- When the A.O. issued show cause notice to the assessee in this regard, it was submitted by the assessee that the assessee wrongly claimed depreciation on this item but in fact, it is revenue expenditure. The A.O. did not find any merit in this contention and he made disallowance of ₹ 475,063/- being depreciation excess claimed and allowed. Learned CIT (A) upheld the assessment order and the assessee is in further appeal before us. Before us, this is not the claim of the assessee that depreciation on Tools, Moulds with Shoe plates & Shoe Lasts is allowable @ 30%. The claim is this that this expense is revenue expenditure. In our considered opinion, whether expenditure is capital expenditure or revenue expenditure is not an issue of apparent mistake, which can be decided u/s 154. This is admitted position that the assessee has itself treated this expenditure as capital expenditure and claimed depreciation thereon @ 30%. The correct rate of depreciation can be an issue of apparent mistake and it can be decided in the proceedings u/s 154 but whether the expenditure is capital or revenue is a highly debatable issue and such claim cannot be entertained and decided in 154 proceedings. Therefore, we find no merit in the contentions of the assessee. - Decided against assessee. Deduction u/s 80IB in respect of Duty Draw Back income - Held that:- Issue is covered against the assessee by the judgment of Liberty India, [2009 (8) TMI 63 - SUPREME COURT] - Decided against assessee. Treatment to subsidy - whether subsidy is capital subsidy for setting up plant in backward area and not part of actual cost as held by CIT(A) - Held that:- CIT(A) has followed two judgments of Hon’ble Apex Court rendered in the case of Sahney Steel [1997 (9) TMI 3 - SUPREME Court] and Raja ram Maize Products [2001 (8) TMI 13 - SUPREME Court] and assessee could not show as to what is the infirmity in the order of CIT (A) in following these two judgments or how these judgments are not supporting the case of the revenue. Now, we examine the Clause (v) of the Subsidy Sanction letter stating that if the unit of the assessee becomes non operational within two years, the assessee has to refund the subsidy. Now we are in the year 2015 and this is not the case of the assessee that the assessee has refunded the subsidy as per this clause and hence, in our opinion, this clause has no relevance in the facts of the present case. Hence, on this issue also, we do not find any reason to interfere in the order of CIT (A).- Decided against assessee.
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2015 (9) TMI 745
Addition on on account of alleged inflated expenses - Held that:- It is settled position of law that the assessee is required to prove veracity of the claim which it has made before the Revenue Authorities. In the case in hand, the assessee made purchases from three parties amounting to ₹ 12,69,880/-. It was found that such parties did not exist on the given addresses. Therefore, the genuineness of the claim could not be verified. The assessee was duly confronted with this finding and did not give any plausible explanation with regard to the same except that the GP declared by the assessee is quite reasonable and the assessee did not suppress any profit margins. In our considered view, it is incumbent upon the assessee to prove the genuineness of its claim in respect of the purchases made, but the assessee in the given case has grossly failed to do so. The AO pointed out that on the bills furnished by the assessee, there was no mention of VAP/ST Numbers. All the bills were computer-generated did not have detailed addresses of the parties and no contact numbers are mentioned in any of the Bill. - Decided against assessee. Confirmation of disallowance u/s.40A(3) - contention of the assessee is that the payment is made to the Electricity Company of the Government of Gujarat - Held that:- the payment was made in cash is not in dispute. The payment is made to a Company engaged in the business of distribution of power-supply. It is not the case where the assessee has booked bogus expenditure to a non-existent entity. Therefore, keeping in view the object of the provisions of section 40A(3) of the Act and intention of the legislation, we hereby direct the AO to delete the addition. - Decided in favour of assessee.
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2015 (9) TMI 744
Addition on interest taxed on accrual basis on Non Performing Assets(NPA) - CIT(A) deleted the addition - Held that:- As decided in CIT vs. Coimbatore Lakshmi Inv.& Finance Co.Ltd. [2009 (11) TMI 560 - Madras High Court] the principle of "accrual of income" comes into play only when the income was recognised. In the present case, the assessee has classified its assets on the basis of the notification issued by the Reserve Bank of India and found that the appellant under the category of nonperforming assets. From such non-performing assets, the assessee had not recognised any income in concealing the notification issued by the RBI. Therefore, the assessee was justified in not recognising the income as such. Once that was the case, there was no occasion to consider whether the principle of "accrual" would arise or not. Also see Shri Mahila Sewa Sahakari Bank Ltd Versus The Asst. CIT (OSD) [2015 (4) TMI 672 - ITAT AHMEDABAD ] - Decided in favour of assessee
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2015 (9) TMI 743
Disallowance of Employees’ contribution to PF paid beyond due date - CIT(A) deleted the addition - contention of the assessee is that the payments were made in advance and there was no delay in depositing the employees’ contribution to PF - Held that:- Tthe matter needs verification at the end of the AO. The ld.counsel for the assessee has placed on record a chart. The ld.counsel for the assessee has no objection if the matter is restored back to the file of AO for a limited purpose of verification with regard to deposit of employees’ contribution to PF authorities. In view of the submissions of the authorized representatives of the parties, we hereby set aside the order of the ld. CIT(A) and restore the issue to the file of AO for a limited purpose to verify the payment of the employees’ contribution. - Decided in favour of revenue for statistical purposes. Exclusion of provisions for gratuity for the computation of book profit u/s.115JB as directed by CIT(A) - Held that:- CIT(A) has referred the case of Bharat Earth Movers [2000 (8) TMI 4 - SUPREME Court] and certain decisions of the Tribunal and then came to the conclusion that the provision for gratuity was made on acturial valuation; hence, it was not an unascertained liability. In our opinion, there was no fallacy in the said verdict of learned CIT(A) because the assessee has demonstrated that the provision for gratuity was made on the basis of specific calculation and it was not an unascertained liability. In the case of EICHER MOTORS LTD. [2002 (5) TMI 221 - ITAT INDORE] it was held by the respected co-ordinate Bench that the provision for gratuity based upon acturial valuation was not an unascertained liability which could be added back while computing the book profit for the purpose of Section 115JB. Respectfully following this decision, no interference is required in the view taken by learned CIT(A). - Decided against revenue.
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2015 (9) TMI 742
Disallowance of expenses of fabric unit of the appellant company - whether there is no justification in rejecting the claim of expenses by treating the same to be in the nature of capital expenses? - Held that:- Regarding the nature of expenses, the assessee has filed copy of the ledger account on page 29 of the paper book and as per the same, an amount of ₹ 278,529/- was debited to pre operative expenses account during Financial Year 2007-08 with the narration that expenses are regarding the work in progress of Lifestyle Fabric as pre-operative expenses of new project. Similarly as per ledger account on page 28 of the paper book, further amount of ₹ 1,68,455/- was debited to pre-operative expenses during Financial Year 2008-09 with the same narration and total of both these amounts comes to ₹ 4,46,984/- which was written off by the assessee during the Financial Year 2009-10 with the narration “losses booked as unit closed”. Hence, it is seen that true nature of expenses is not available in paper book. None out of seven judgments cited by Ld. AR of the assessee is rendering any help to the assessee in the present case. We have also seen that the assessee has not provided the details and nature of expenses incurred in the present case. Therefore, we do not find any reason to interfere in the order of the Ld. CIT(A). - Decided against assessee.
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2015 (9) TMI 741
Revision u/s 263 - as per CIT(A) AO has omitted to cause enquiries in respect of business of buying and selling lands and development of lands by plotting them by the assessee and whether these activities are assessable under business income or under the head income from capital gains - Held that:- Assessing Officer neither called for any details with regard to the activities of the assessee nor made any enquiries before allowing the claims of the assessee while completing the assessment. Order passed by the Assessing Officer under section 143(3) allowing the claims of the assessee without application of mind, without examining the correct position of law is certainly an order passed erroneously and prejudicial to the interests of the Revenue. The case laws relied on by the counsel for the assessee are distinguishable on facts and have no application to this case. Therefore, we hold that the Commissioner of Income Tax rightly invoked the provisions under section 263 of the Act directing the Assessing Officer to do the assessment de novo examining all the issues. Accordingly, we uphold the impugned order of the Commissioner of Income Tax and dismiss the appeal of the assessee. - Decided against assessee.
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2015 (9) TMI 740
Determination of the Annual Value of the property for the purposes of assessment under the head ‘ income from house property’ - CIT(A) deleted the addition made by the Assessing Officer observing that the Annual Ratable Value of the property determined by the Municipal Corporation was lower than the actual rent received and; therefore, the income declared by the assessee under the head “Income from house’ was quite justified - Held that:- The precedents which have been referred by CIT(A) and also the decision of the Tribunal in the case of Shri Manish Ranbir Maker (2013 (8) TMI 895 - ITAT MUMBAI) clearly support the Annual Value of the property as determined by the assessee in his return of income. Factually speaking, it is quite clear that the Municipal Ratable Value of the property is lower than the actual rent received by the assessee and in fact the actual rent received is almost seven times the Municipal Ratable Value. This aspect of the matter, in our view, signifies that the actual rent derived by the assessee is quite reasonable. It is also evident that in case of Shri. Manishi Ranbir Maker (supra) the issue before the Tribunal related to the determination of Annual Value of the property located in the same building as that of the assessee before us. In the case of Shri. Manishi Ranbir Maker (supra) the property was admeasuring an area of 1800 sq. Fts. and the rent derived was ₹ 90,000/- per annum, which compares quite favorably with the rental of ₹ 1,80,000/- per annum being earned in the case of the instant property. The case of the Assessing Officer is based on a rent of ₹ 3.00 lacs per month purported to be earned by Mr. Puneet R. Gupta from a flat located in the same building as that of the assessee. This very comparable relied upon by the Assessing Officer has considered by the Tribunal in the case of Shri Manish Ranbir Maker (supra) for the assessment year 2008-09, which is also the year under consideration before us. CIT(A) has justifiably ignored the action of the Assessing Officer in relying on the rent earned by Mr. Puneet R. Gupta. - Decided against revenue.
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2015 (9) TMI 739
Addition invoking section 69B - unaccounted investment - CIT(A) deleted the addition - Held that:- Assessing Officer did not have any clinching evidence to suggest that the assessee has paid any consideration for purchase of property over and above the stated consideration. The reference made by the Assessing Officer to the value determined by the stamp valuation authority for the purposes of payment of stamp duty cannot be taken as an evidence to demonstrate that assessee has actually paid any consideration over and above the stated consideration. The reference by the Assessing Officer to valuation contemplated by the lender i. E. HDFC Ltd. is also of no consequence vis-ŕ-vis the controversy before us, in as much as the valuation by HDFC Ltd. is for its own purpose of examining the feasibility of lending money to the assessee for acquisition of the said property. Furthermore, a valuation report, by its very nature, is only an estimation of value, and, at best can be a source for further enquiries but the valuation report by itself cannot be construed as an evidence which establishes understatement of purchase consideration. DVO’s estimation of fair market value cannot be accepted as a conclusive evidence for establishing that any additional consideration over and above the stated consideration has passed between a buyer and seller. See Commissioner of Income-tax Versus Dinesh Jain HUF [2012 (10) TMI 158 - DELHI HIGH COURT] and CIT vs. Berry Plastics P. Ltd. [2013 (8) TMI 9 - GUJARAT HIGH COURT ]. In so far as limb of the Assessing Officer’s stand relating to the 55 Nos. car parking slots is concerned, we find that the assessee had clarified before the Assessing Officer also that parking slots were purchased as additional amenity in terms of the purchase deed itself and no separate consideration has been paid for the same. The aforesaid plea of the assessee is found to be in tune with the contents of the purchase agreement dated 24/3/2009, copy of which has also been placed before us in the Paper Book. Therefore, we find no error on the part of CIT(A) in negating the aforesaid stand of the Assessing Officer. Amar Kumari Surana (1996 (5) TMI 36 - RAJASTHAN High Court) does not apply to the facts of the present case. - Decided against revenue.
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Customs
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2015 (9) TMI 766
Benefit of exemption notification no. 29/1999 – Used in goods which are sold in domestic market – Department challenging impugned order of Tribunal by which benefit of exemption notification No.29/1999 was extended to imported goods, even if it is used in goods which are sold in domestic market instead of using them in export goods – Held that:- Admittedly neither in orders passed by Commissioner nor Tribunal, recorded relevant portions of Notifications required - There were contradiction between finding rendered by Adjudicating Authority and finding of Tribunal – Also statements given by persons concerned are also adverse to extent that there was intention on part of first respondent to use imported goods primarily for local sales – In view of contradiction between findings of Adjudicating Authority and Tribunal, present court do not think it fit to answer questions of law, except remanding matter to Tribunal to consider claim of first respondent in light of findings of Commissioner – Appeal allowed by way of remand to Tribunal – Order of Tribunal set aside – Decided against Revenue.
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2015 (9) TMI 765
Rate of duty drawback – Reversal of Cenvat credit – Applicants claimed duty drawback under All Industries Rate (AIR) of Drawback on their export – Department availed Cenvat credit of input services and therefore, it appeared that they were not eligible for drawback @ 14.8% but eligible for drawback at lesser rate of 3% – JS(RA) remanded matter back with directions to carry out verification – In remand proceedings, Commissioner (Appeals) rejected appeal filed by applicant, without carrying out any verification as directed by JS (RA) – Held that:- if any amount has been availed as credit on any inputs, used in manufacture of final product, then such Cenvat credit should be reduced from eligible drawback – Rate of drawback applicable for different exports are notified by Government by issuing Notification under Rule 3(1) of Drawback Rules after considering all relevant factors – Admittedly drawback claims sought to be reduced @ 3% instead of 14.8% @ as claimed by applicant on ground that applicant availed Cenvat credit on input services. Reversal of Cenvat credit before utilization amounts to non-taking of credit that such reversal can be done subsequent to export of goods – In present case applicant made proportionate reversal of Cenvat credit before utilization of same – There are no substantial material evidences to support allegation of mala fide intention on part of applicant –Since, applicant has reversed proportionate Cenvat credit availed on input services when dispute arose and claimed that said amount was not utilized and remained in balance, so this reversal has also to be treated as non-availment of Cenvat credit on input services – Therefore applicant entitled for drawback claims at higher rate @ 14.88% – Impugned Order set aside and revision application allowed – Decided in favour of Assesse.
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2015 (9) TMI 764
Conviction u/s 20 of the NDPS Act - Non compliance with section 50 of NDPS Act - Held that:- A careful examination of the notice would show that an option was given to the appellant that if the appellant so desired the search could be conducted in the presence of a gazetted officer or a Magistrate, however, he had responded by saying that he did not want his search to be carried out in the presence of a gazetted officer or a Magistrate. - In this case, a mere offer was made to the appellant that in case if he so desires, his search may be conducted in presence of a Gazetted Officer or a Magistrate. Thus a mere offer would not satisfy the mandatory ingredients of section 50 of the NDPS Act. In my view the judgment in the case of Ram Avatar (2011 (7) TMI 1105 - supreme court) is fully applicable to the facts of this case, as a similar offer was given to Ram Avtar and the Apex Court held that such an offer did not comply with the mandatory requirement of section 50 of the NDPS Act. Section 50 would be applicable even in those cases where the recovery was made other than from the person of a person. In this case also a notice was given to the appellant. - appellant was not made aware of his right and it seems that an offer was made to the petitioner as a mere empty formality without appreciating the seriousness and letter and spirit of Section 50 of NDPS Act. - Having held that the mandatory requirement of Section 50 of the NDPS Act was not complied with, recovery itself would be illegal and consequent thereto the conviction and the order on sentence are liable to be set aside - Decided in favour of appellant.
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2015 (9) TMI 763
Import of silk fabrics - Benefit of additional duty exemption in terms of Notification No.30/2004 CE dt 9.7.2004 - Held that:- petition is disposed of by directing the respondents to release the subject goods concerned in respect of the above said Bill of Entry subject to the condition that the petitioner furnishes bank guarantee to the entire value of Additional Duty of Customs (CVD) to the satisfaction of the second respondent, which should be kept alive till adjudication process is completed. It is made clear that as and when the bank guarantee is furnished, the respondents shall forthwith release the goods - Decided conditionally in favour of assessee.
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2015 (9) TMI 762
Restoration of appeal - Non compliance of pre deposit order - Held that:- In so far as the allegation of non compliance with the conditional order is concerned, the appellant appears to have complied with the conditional order twice over, but in a wrong account and after the time granted by the Tribunal. The appellant complied with the conditional order first on 24.7.2012 by making a debit entry in the CENVAT book. This compliance was, irrespective of whether it was proper compliance or not, made within the time stipulated by the Tribunal. The second compliance was on 28.2.2014 by way of cash, which was certainly beyond the period of time. Therefore, the appellant has complicated the matters for themselves, but demonstrated their bona fides by first making a debit entry in the CENVAT book and next making a cash deposit. In essence, the appellant has suffered to the extent of 100% of the duty levied. - orders of the Tribunal are set aside. The appellant shall be taken to have complied with the conditional order - Decided in favour of assessee.
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2015 (9) TMI 761
Demand of differential duty - Demand of CVD - Confiscation u/s 111(m) - Penalty u/s 112 - Held that:- Goods were seized by the Customs and provisionally released on execution of bond and bank guarantee. The adjudicating authority has come to the conclusion that the goods are undervalued and therefore, he re-determined the value and demanded a differential duty. He has also held that the importer is liable to pay CVD on the basis of MRP. No quantification of duty has been made by the adjudicating authority. Further, the issue of confiscability of the items and the imposition of penalty proposed in the show-cause notice has not been examined by the adjudicating authority. Thus, there are many infirmities in the impugned order. Therefore, we set aside the impugned order to the extent of non-confiscation of goods and non-imposition of penalty and remand the matter back to the adjudicating authority for consideration of these issues raised in the show-cause notice in accordance with law. Needless to say that the importer should be given an adequate opportunity of defending their case before the denovo order is passed. - Decided in favour of Revenue.
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2015 (9) TMI 760
Duty demand - Undervaluation of goods - Held that:- prima facie case in favour of the appellant- assessee for the substantive hearing of the several appeals and consider it appropriate to direct stay of further proceedings pursuant to the Orders-in-Original, on condition that M/s Euro Asia Global remits 25% of the cumulative demand of duty specified in the two Orders-in-Original, to the credit of Revenue within eight weeks. In default of deposit by the appellant within the time stipulated, the stay granted herein shall stand dissolved forthwith on the default without further reference to this Tribunal and the Revenue would be entitled to take appropriate steps in law for recovery of the entirety of the levy of customs duty, penalty or interest as assessed by the Order-in-Original impugned in the substantive appeals - Appeal disposed of.
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2015 (9) TMI 759
Validity of appeal - Authorization of Committee of Commissioner - one Member of the Committee has authenticated the order - absence of date under signature - Held that:- Revenue is not preferred to be non-suiter to protect interest of Revenue. But the casual approach of the Revenue makes it remediless by the review order of the aforesaid nature. Such negligence of Revenue were before Hon’ble High Court of Punjab and Haryana in the case of C.C.E., Delhi-III vs. B.E. Office Automation Products Pvt. Ltd. reported in [2009 (12) TMI 128 - HIGH COURT OF PUNJAB & HARYANA] and also before Hon’ble High Court of Delhi in the case of CCE, Delhi-I vs. Kundalia Industries reported in [2012 (8) TMI 789 - DELHI HIGH COURT] - Decided against Revenue.
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Service Tax
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2015 (9) TMI 790
Renting of Immovable Property - Co-owners / Joint property - SSI exemption upto 10 lakhs - notification no. 6/2005-ST dated 01/03/2005 - whether the respondent and his brothers are to be treated as association of persons or other wise and service tax liability on it arises; should be confined without the benefit of the notification No. 6/2005-ST - Held that:- the ownership of the Property and providing of taxable renting of immovable Property by the four appellants in this case is in their individual capacity and, therefore, their tax liability should have been determined by considering their individual rental receipts and not collective one - Benefit of exemption vide notification no. 6/2005-ST was rightly extended - Decided in favor of assessee.
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2015 (9) TMI 789
Health and Fitness services - activity of aerobics and yoga classes - Extended period of limitation - Held that:- the argument that the amounts collected for rendering aerobics and yoga classes are not covered under Health and Fitness services is incorrect and is to be rejected and this Bench in the case of Osho International Foundation Neo Sannyas Foundation [2015 (6) TMI 441 - CESTAT MUMBAI] has held that meditation course and yoga classes would fall under Health and Fitness services - Decided against the assessee. Extended period of limitation - Held that:- appellant had not co-operated with the lower authorities and did not produce any documents in order to arrive at the correct service tax liability. The appellant had been claiming that they had indicated the amount in their audited balance sheet which were produced before the lower authorities is also incorrect as they are not in a position to produce the acknowledgement copy of the letters vide which the balance sheets were handed over to the department. - Demand confirmed - Decided against the assessee.
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2015 (9) TMI 788
Imposition of penalty - Business Auxiliary Services - Whether the appellants are covered under the category of Business Auxiliary Services by virtue of being distributors and appointing further distributors for the sale of goods of M/s. RMP and getting paid a commission for the sale effected to chain of distributors below them - Held that:- There cannot be any dispute that the appellants are in receipt of commission/facilitation for the sales which were derived on the basis of purchase made by the distributors appointed by the appellant and further down line. Though it is a fact that there is a cap for payment to the appellant as a distributor, it cannot be denied that the arrangement is nothing but multilevel marketing scheme. At this juncture we have to hold that the issue involved in this case is now squarely covered by the Judgement of this Tribunal in the case of Shri Surendra Singh Rathore and Smt. Chandra Bohra (2013 (8) TMI 149 - CESTAT NEW DELHI). - Tribunal in the case of Shri Surendra Singh Rathore and Smt Chanda Bohra upheld the penalties imposed on the appellant therein on an identical case. We do not find any reason to deviate from such a view taken by the Tribunal. - Decided against assessee.
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2015 (9) TMI 787
Extended period of limitation - suppression of facts - assessee has charged service tax on invoice raised only to those clients who agreed to pay service tax - Held that:- Revenue authority cannot invoke the extended period of limitation, when the records of the assessee were audited by the officers once but did not find any short payment from records. The 2nd audit party, doing the audit of same period or over lapping period, cannot allege that appellant has miss-stated (sic) or suppressed the facts from the departments - Decision in the case of Rajkumar Forge Ltd. [2010 (8) TMI 796 - BOMBAY HIGH COURT] followed. - Demand set aside - Decided in favor of assessee.
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2015 (9) TMI 786
Availment of CENVAT Credit - Whether the CESTAT is correct in holding that the assessee is entitled to avail the CENAVT credit on management, maintenance or repair services provided on services provided to Windmills installed and situated away from factory and factory premises - Held that:- Input services provided in the present appeal were the same as discussed in the case law of the Hon'ble Bombay High Court [2015 (6) TMI 82 - BOMBAY HIGH COURT] - In view of the settled proposition of law, appeal filed by the appellant is allowed - Decided in favour of assessee.
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2015 (9) TMI 785
Support Service of Business or Commerce - hiring of the transponder capacity in the satellite - up linking services - Infrastructural Support Services - Held that:- Tribunal in the case of Air Liquid North India Pvt. Ltd. [2011 (12) TMI 412 - CESTAT, NEW DELHI], relying upon the Apex Court’s judgment in the case of Godfrey Philip India v. State of UP. [2005 (1) TMI 391 - SUPREME COURT OF INDIA] held that while interpreting the scope of the expression “Support Service of Business & Commerce” under Section 65(105c) and also of the term “Infrastructural Support Service” in Explanation to Section 65(104c), the principle of noscitura-sociis would be applicable and accordingly the expression “Support Service of Business or Commerce” as defined under Section 65(104c) would cover only the service which are of supporting nature to the main business like services relating to Custom relationship, evaluation of prospective customers, tele-marketing distribution and logistics, transaction, processing, office infrastructure, etc., and would not cover the servicer of renting of machinery and equipment for production or manufacture which is an activity relating to conduct of the main business. Prima facie view that the hiring of transponder capacity by the appellant in the satellite of M/s. B.T. Singapore Pte. Ltd. for the purpose of their business of providing up linking service to their customers would not be covered by the expression “Support Service of Business or Commerce” under Section 65(104c). - Stay granted.
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2015 (9) TMI 784
Nature of various activities done in Mining Area before 1.6.2007 - scope of Business Auxiliary Services - Cargo Handling services - Held that:- ld. Commr. has observed that the appellant was required to produce desired size and quantity of iron ore as required to be rendered against the said work order. The said services i.e. production of 10-30 mm size iron ore by means of Mechanical screening at Belkudi-Baglbaru iron ore Mines were not considered by him as resulting into ‘manufacture’ within the definition of Section 2(f) of Central Excise Act, 1944 and accordingly, it was held to come under the scope of Business Auxiliary Services, being the services of production or processing of the goods for and on behalf of the clients. We do not see any infirmity in the said observation and accordingly the same is also upheld. - Decided against the assessee. Regarding three work orders, the activities of shifting, loading, unloading of ores with the help of tippers, trucks, etc., into railway wagons are cargo handling service. - Decided against the assessee. Extended period of limitation and levy of penalty - Held that:- since the issue is that of interpretation of law and conflicting views are expressed by different judicial fora, therefore, penal provisions are not warranted in the present case and it is a fit case for invoking Section 80 of the Finance Act, 1994. - extended period of limitation is neither invocable, nor penalty is imposable on the assessee/appellant. - Decided partly in favor of assessee.
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2015 (9) TMI 783
Refund - Export of services - re-classification of services - engineering consultancy services, business auxiliary services, repair and maintenance services and renting of immovable property services were provided to foreign clients - Scope of Rule 5 of Export of Services Rules, 2005 read with notification No. 11/05-ST dated 19-4-2005 - Held that:- Once the Service Tax has been collected by the department from the appellants by treating their services as business auxiliary service at the time of considering the claim for rebate of the Service Tax so paid, the department cannot question the classification of the services. Therefore, the denial of rebate on the ground that in absence of service agreements, the nature and classification of services provided by the appellants, is not ascertainable, is not sustainable. However, for quantification of export rebate, the matter would have to be remanded, as the rebate would be admissible only of the Service Tax paid on the amount received by the Appellants for Services provided by them to their foreign clients. - Decided in favor of assessee. Period of limitation for claiming refund / rebate - Held that:- In case of export of Service, the services provider is in India and the services receiver is outside India. Therefore, in our view, a service transaction would be complete in case of export of service, when the service has been provided to the off-shore client and the payment for the service has been received and accordingly, the date on which the payment has been received has to be treated as the “relevant date” for the purpose of counting limitation period. Moreover, the terms of Rule 3(2) of the Export of Services Rules, 2005, the provision : of Services specified in Rule 3(1) shall be treated as export only when payment for such services has been received by the service provider in convertible foreign exchange and on this basis also, a transaction of service export is to be treated as complete only when the service has been provided and payment for the same has been received in convertible foreign exchange. - Decided in favor of assessee.
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2015 (9) TMI 782
Refund - unutlized cenvat credit - export of goods - Rule 5 of Cenvat Credit Rules, 2004 read with Notification No. 41/2007-S.T. - nexus of input services with export of goods - Held that:- As the documents are not generated at single point of time but are generated in the course of various stages of trade and as such if the same are taken together as a whole, the evidences of export and utilization of export service is established beyond doubt. Thus, the rejection of the claim on the basis of some information not available in some documents, is not tenable and also not a requirement of Rule 5 of Cenvat Credit Rules, 2004 read with Notification No. 41/2007. The evidence of export has not been doubted and what is doubted is that some information not available on some invoices like in the case of invoices of the exporter not bearing the shipping bill no. and exporter invoices no. - this not a discrepancy as such invoices are generated at the later point of time. Where the exporter is not a manufacturer, he only has to satisfy that neither Cenvat credit has been taken by the manufacturer or by him not the manufacturer have separately applied for refund with respect to the same taxes, which the appellants have done in support of its claim. - matter remanded back - adjudicating authority directed to reconsider the claim of refund - Decided iin favor of assessee.
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2015 (9) TMI 781
Cenvat Credit - duty paying documents - credit taken on the basis of debit notes - Rule 9(1) of Cenvat Credit Rules, 2004 - the debit notes do not contain the information which is required to be mentioned in the invoices issued by the service providers under Rule 4A of the Service Tax Rules, 1994 - Held that:- there is no dispute that these persons are dealers. On going through some of these debit notes placed on record, it is seen that all the debit notes mention the Service Tax registration number of the persons issuing the debit notes, which had been issued in respect of the Business Auxiliary Service. These debit notes also mention the full address of the service providers and have been issued to the appellant company. The debit notes mentioned the description of the service as “project commission” on various projects and the amount of the commission and also the Service Tax paid on the same. On perusal of the sample debit notes, it is clear that these debit notes are in respect of the Business Auxiliary Service for procuring orders provided by the dealers. The nature of the service is also clear from the Service Tax registration number, which is clearly for Business Auxiliary Service. In any case, when the appellant were paying the Service Tax and filing ST-3 Returns, such points could always have been clarified by the assessing officers. - Decided in favor of assessee. Jurisdiction - Held that:- since the appellants are a manufacturer of bathroom fittings chargeable to Central Excise duty and are registered with Commissionerate of Central Excise, Delhi-I, the Commissioner of Service Tax, Delhi, could not go into the question of Cenvat credit. - Decided in favor of assessee.
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Central Excise
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2015 (9) TMI 776
Reversal of cenvat credit - at proportionate rate or at 10%/5% as per Rule 6(3) - Non maintenance of separate inventory - Contravention the provisions of Rule 6(2) of the Cenvat Credit Rules, 2004 - Held that:- Neither there is any allegation in the memorandum of appeal nor it has been argued on behalf of the appellant that the findings of fact recorded by the Tribunal, are perverse. The Tribunal being the last fact finding authority, its findings of fact cannot be interfered unless it is alleged and established that the findings are perverse. Thus, no substantial questions of law as framed by the appellant arise for consideration - So far as the findings of the Tribunal with regard to "judicial discipline" is concerned, we find that it is undisputed that the earlier Final Order [2012 (2) TMI 438 - CESTAT NEW DELHI] as corrected by order, whereby the Tribunal remanded the matter to the present appellant with specific directions, was accepted by the appellant/ Central Excise Department and thus became final. Therefore, it was not open for the Commissioner of Central Excise, Kanpur to pass the order ignoring the remand direction and confirming the demand on the same grounds as taken in the first order in original which was set aside by the Tribunal. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws. - No merit in this appeal. No substantial question of law arises - Decided against Revenue.
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2015 (9) TMI 775
Waiver of pre deposit - large scale evasion of central excise duty - clandestine production of excisable goods and removal of the same without payment of excise duty - Held that:- all the facts were within the knowledge of the appellants and/or its Director and/or its employees vis-a-vis all incriminating documents were found in the possession of the appellants/Director/employees and such aspects certainly need to be considered at the appellate stage and the CESTAT in the order impugned, after considering the facts placed on record and submissions made by both the sides, prima-facie, has come to the conclusion that no undue hardship would be caused to the appellants if the amount of ₹ 4 crores + ₹ 10 lakhs is deposited by the appellants and simultaneously would safeguard the interest of the revenue-respondent. The CESTAT granted an opportunity initially of hearing on 01/07/2013 to counsel for the appellants to get proper instructions from the appellants as to the quantum of pre-deposit that shall be made by the appellants at the interim stage to protect the interest of revenue. CESTAT has also considered, while passing the order impugned, about the factors stated by counsel for the appellants and has, prima-facie, come to the conclusion that the respondent had thoroughly analyzed the material recovered from Jai Ambika Dharamkanta, records of Dharamkanta and slips recovered there from, do prove the nexus about the clandestine clearance and removal of the goods made by the appellants in collusion with others and which was based with Dharamkanta weighment slips of goods of the appellants. It has been further observed that even the Director, in the statement recorded under section 14, demonstrated that weighment slip containing details of truck No. RJ05G2289 and RJ21G1014 related to the appellants, which were used for clandestine removal of goods. All the assets are already pledged/mortgaged with the Banks and, therefore, the interest of revenue cannot be safeguarded merely by the submission of counsel for the appellant that the appellants will not dispose of the assets, to be sold or alienated. When the same are already mortgaged with the Banks and bank would have first charge as rightly submitted by counsel for the respondents. We have already observed the observations of Hon'ble Apex Court in the case of Indu Nissan Oxo Chemicals Ind. Ltd. (2007 (12) TMI 220 - SUPREME COURT OF INDIA) and in our view, even if there is financial hardship, the same cannot be a ground in isolation to dispense with the condition of pre-deposit amount. Appellants are granted further one months' time to deposit the amount fixed by the CESTAT. If the said amount is deposited by the appellants within the time granted, as aforesaid, the appeal would be considered by the CESTAT on merits and if it is not deposited within the aforesaid time, the appeal before the CESTAT shall stand dismissed - Decided partly in favour of assessee.
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2015 (9) TMI 774
Denial of refund claim - non-exercising of discretion by the commissioner - returned goods were subjected to a further process of reconditioning or remake - whether the period of one year stipulated under the proviso (i) is in conflict with the prescription contained in Section 11B or whether Rule 173L merely aids the implementation of the prescription under Section 11B with additional conditions - Held that:- Rule 173L(1) states under proviso (i) that the claim for refund on returned goods may be admitted only if such goods had been returned to the factory within one year of the date of payment of duty or within such further period not exceeding one year in the aggregate. - returned goods were subjected to a further process of reconditioning or remake and they were sold to a different customer - if a substantial provision of the statutory enactment contains both the period of limitation as well as the date of commencement of the period of limitation, the rules cannot prescribe over a different period of limitation or a different date for commencement of the period of limitation. In this case, sub-section (1) of Section 11B stipulates a period of limitation of six months only from the relevant date. The expression relevant date is also defined in Explanation (B)(b) to mean the date of entry into the factory for the purpose of remake, refinement or reconditioning. Therefore, it is clear that Section 11B prescribes not only a period of limitation, but also prescribes the date of commencement of the period of limitation. Once the statutory enactment prescribes something of this nature, the rules being a subordinate legislation cannot prescribe anything different from what is prescribed in the Act. Under the proviso (i) to Rule 173L, the Commissioner is given the discretion to extend the period of one year stipulated therein by a further period not exceeding one more year. In other words, the Commissioner has the power and discretion under proviso (i) to Rule 173L to entertain an application within a total period of two years. This is a case where the Commissioner should have at least exercised the said discretion in favour of the assessee. - Decided in favour of assessee.
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2015 (9) TMI 773
Quantification of demand of duty - Evasion of duty - Clandestine removal of goods - Held that:- Commissioner whilst making the demand of duty for both Polyester Yarn and Viscose Yarn had not indicated the duty separately on each of these products and, as such, as no duty was payable with regard to the Polyester Yarn, the demand with regard to the Viscose Yarn had to be re-visited on the basis of goods manufactured by the Respondent during the period in question. The said Order clearly shows that the claim of duty with regard to Viscose Yarn was ordered to be re-examined by the authorities. In such circumstances, the contention of the Appellants that there was no question of re-examining the said issue cannot be accepted on reading the said Order dated 19.07.2004 Appellant had failed to note that closing balance was 24.16 MTs. Taking note of the said closing balance which has not at all been considered by the Adjudicating Authority whilst holding that there was clandestine removal of 14.54 MTs, we find that the conclusion arrived at by the Tribunal cannot be faulted. The fact that the figures on the balance sheet have to be accepted has not been disputed by the Appellant. In fact the Tribunal has noted that there is no material on record produced by the Appellant to dispute the correctness of the figures shown on the balance sheet. These findings of fact by the authorities below cannot be reappreciated by this Court in the present Appeal. Thus, the Tribunal on the basis of the material on record rightly rejected the claim of Appellant that there was clandestine removal of the goods. - Decided against Revenue.
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2015 (9) TMI 772
Disallowance of MODVAT Credit - Whether Tribunal was justified in rejecting the alternative plea of the appellants that their claim ought to have been considered in terms of Rule 173H of the Central Excise Rules 1944, merely because the same was not taken earlier - Held that:- Findings recorded in the order in original and the order of the Commissioner (Appeals ) that the process being carried out by the appellants on the defective goods for rectification was not the same which were adopted by them in their manufacturing of final products, has been accepted by the appellants before the Tribunal. The appellants accepted the final order of the Tribunal dated 30.1.2001, whereby the case was remanded to the Adjudicating authority for limited purpose - The remand was made by the Tribunal vide its final order dated 30.1.2001 for limited purpose and that order has attained finality. It was not open for the appellants to raise altogether a new plea before the Tribunal in the second round of litigation and that too contrary to their own stand taken before the Adjudicating Authority. Thus, the Tribunal has not committed any error of law in rejecting the alternate plea of the appellants. The impugned order of the Tribunal suffers from no infirmity. - Decided against assessee.
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2015 (9) TMI 771
Contravention of the provisions of Rule 57 G - Availment of MODVAT Credit - Whether Modvat Credit can be allowed to the buyers based on the invoices of the suppliers showing particulars of duty, though in reality no duty was admittedly paid on the goods by the suppliers - Held that:- CESTAT failed to take note of the fact that there is an admission by the first respondent/assessee in their letter dated 26.09.2000 that on verification, it has been found that no duty had been paid by the M/s.Indian Oil Corporation Limited and they voluntarily reversed the Modvat credit of ₹ 2,47,406/- as per the details given in Show Cause Notice. This fact has not been considered by the CESTAT in proper perspective, while rejecting the Revenue's appeal. On this ground, we set aside the order of the CESTAT dated 03.02.2006 and the matter is remanded to Customs, Excise and Service Tax Appellate Tribunal for de novo consideration. - Decided in favour of Revenue.
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2015 (9) TMI 770
Duty demand - Concessional rate of duty - Demand of interest u/s 11AA - Held that:- During the reading of the said provisions, interest is payable after three months from the date of final determination of duty payable by the assessee. Admittedly in this case duty has been paid by the appellant before their actual determination by the Adjudicating Authority as directed by the Tribunal in remand proceedings. Therefore, relying on the decision of AEON’S CONSTRUCTION PRODUCTS LTD. VS. CCE, CHENNAI reported in [2007 (5) TMI 404 - CESTAT, CHENNAI], we hold that appellant are not required to pay interest for the intervening period from the date of initial assessment of duty till the re-quantification of the duty in the remand proceedings. Therefore, we set aside the impugned order - Decided in favour of assessee.
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2015 (9) TMI 769
Waste and scrap generated at the end of Job Worker - whether the principle manufacturer is required to pay duty on waste and scrap generated at the end of job worker when the goods were sent to the job worker for processing under notification no. 214/86 or no - Held that:- principle manufacturer is not required to pay duty on waste and scrap generated at the end of job worker when the goods were sent to the job worker for processing under notification no. 214/86. The said order of this Tribunal [2005 (6) TMI 184 - CESTAT, MUMBAI] has been affirmed by the Hon’ble High Court of Bombay reported in [2006 (6) TMI 66 - HIGH COURT BOMBAY]. As issue has been settled by the Hon’ble High Court of Bombay as cited herein above, therefore, issue is no more res integra. In these circumstances we hold that appellants are not required to pay duty on waste and scrap generated at the end of job worker and processed the goods under notification no. 214/86 - Impugned order is set aside - Decided in favour of assessee.
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2015 (9) TMI 768
Denial of CENVAT Credit - Rent a cab service - whether the appellant manufacturer is entitled to take CENVAT on Rent-a-cab service availed for transportation of workers from residence to factory. - Held that:- It have been decided in several rulings, including in Innovasynth Technologies (I) Ltd. - [2015 (3) TMI 127 - CESTAT MUMBAI] that Rent-a-Cab service is an eligible input service both for manufacturer as well as service provider - Decided in favour of assessee.
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2015 (9) TMI 767
Waiver of pre deposit - Held that:- First appellate authority has not decided the issue on merits and has dismissed the appeal filed by the appellant for non-compliance. The pre-deposit of ₹ 25,000/- made by the appellant is sufficient for hearing and deciding the issue on merits. As the Commissioner (Appeals) has not decided the issue on merits, therefore, order passed by the first appellate authority is set-aside - Matter remanded back - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (9) TMI 780
Validity of reassessment - limitation period of 6 years as reduced from 8 years - whether the amendment and introduction of the words "six years from the end of such year or March 31, 2002 whichever is later" either expressly or by necessary implication can be regarded as retrospective - Section 21(2) of the UPTT - Held that:- For the purpose of limitation under Section 21(1) and the first proviso, the period of limitation is to be counted from the end of the relevant assessment year i.e. 31.3.1991. Thus, the notice dated 13.3.2002 was beyond six years or even eight years of the end of assessment year i.e. 1990-91. The question is whether the notice is saved by the expression "six years from the end of such year or March 31, 2002. In the backdrop of the ratio laid down in Jyoti Traders [1998 (11) TMI 531 - SUPREME COURT OF INDIA], there can be no iota of doubt that period of six years would have the full effect in respect of fresh assessment or reassessment, where notice is issued or after the date the proviso came into force. It has to be borne in mind that law of limitation when affects substantial rights of a party, such subsequent amendment should not be read as retrospectively unless the amendment so stipulates or requires so by necessary implication. It has been held in Biswanath Jhunjhunwalla [1996 (8) TMI 511 - Supreme Court of India] when the intendment of the legislature is clear and the language is unambiguous or it impliedly follows, then full effect should be given and the provision be treated as retrospective. The amendment, as we perceive, is not only beneficial to the assessee but also intends to protect the interest of the revenue. Prior to this amendment, the period of limitation was eight years. There could be cases which were pending by virtue of issue of notice as the earlier limitation period was eight years under the pre-amended proviso. The intention of the latter part of the proviso is to save such pending assessments and that is why a specific date, that is, March 31, 2002 has been incorporated. While reducing the period from eight years to six years, time has been specified to complete the assessment or reassessment by 31.3.2002. The making of assessment is an extremely material facet. Had the said date, that is, 31.3.2002, is not treated as a saving factor, the pending reassessment cases covered by eight years period would have come under the sunset and reduced limitation period would have adversely affected the interest of the revenue. Therefore, the protective provision. If such construction is not placed, it would be rather inequitable, in a way incongruous, as on the one hand the period of limitation is reduced and by fixing a determinative date, a peculiar situation is created. The legislative intent was not to enhance and increase the limitation period, regardless and notwithstanding the financial or assessment year. If the stand of the revenue is to be accepted, then the effect of 2001 amendment would empower and authorise reopening of cases without reference to the financial year, provided the assessment order was made on or before 31.3.2002. Such an interpretation would be contrary to the legislative intendment for the reason, the same amendment has reduced the limitation period from eight years to six years. The appeals are allowed and the judgment and order passed by the High Court are set aside. Resultantly, the initiation of the re-assessment proceeding is set aside being barred by limitation - Decided in favor assessee.
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2015 (9) TMI 779
Constitutional validity of levy of entertainment tax on the Direct To Home (DTH) Broad Casting Services - legislative competence of the State - Gujarat Entertainment Tax (Amendment) Act, 2009 - Held that:- Applying the ratio of the law laid down by the Hon'ble Supreme Court in the case of Purvi Communication (P) Ltd. and Ors. [2005 (3) TMI 438 - SUPREME COURT OF INDIA] to the facts of the case on hand, providing Direct-To-Home (DTH) Broadcasting Service in the aid of set top box would certainly fall within the meaning of "entertainment", the provisions contained in Section 2(j)(iiia) read with section 6E of the Act. A plain reading of the said provision makes it clear that the tax or levy is on the receipt of "entertainment" i.e. the receipt of radio frequency signals for exhibition of films or moving pictures or series of pictures with the aid of a set top box or any other apparatus attached to it for securing the transmission through DTH Broadcasting services. The contention on behalf of the petitioners that the State cannot impose entertainment tax on DTH services, the field having been occupied by the Entry 97 read with Entry 31 of List I of the Constitution of India cannot be accepted. Regarding double taxation on the same transaction - Held that:- There seems to be some misconception on the part of the petitioners to assume that there is only one event involved in the present case i.e. the Direct-To-Home (DTH) Broadcasting Service. It is the "entertainment" derived from the content that is the subject matter of tax - entertain tax under the Act and not the service of enabling the flow of content to Direct-To-Home (DTH) system. In a given case two concepts may be intertwined, the strands can easily be separated by employing the Aspect Theory and in respect of the service aspect, the taxable event is entertainment from the content. The ration of the decision in the case of Bharat Sanchar Nigam Limited [2006 (3) TMI 1 - Supreme court], shall not be applicable in the context of "entertainment" and "service", which are present in the instant case. While applying the "Aspect Theory" in the present case, the subjects which in one aspect and for one purpose fall within the powers of a particular Legislature, may in another aspect and for another purpose, fall within another legislative power. Thus, the decision of the Hon'ble Supreme Court in the case of Bharat Sanchar Nigam Ltd. [2006 (3) TMI 1 - Supreme court] would have no applicability of whatsoever nature. Challenge to Gujarat Entertainment Tax (Exhibition by means of Direct-To-Home (DTH) Broadcasting Service) Rules, 2010 particularly Rules 3, 4, 5, 6, 7, 11, 12, 13, 14 and 16 and levy of entertainment tax on Direct-To-Home (DTH) Broadcasting services fail. - Decided against the assessee.
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2015 (9) TMI 778
Levy of vat / sales tax on Ice cream - classification - covered by the term “Sweet and Sweetmeats” or not - Bombay Sales Tax Act, 1959 - Held that:- in ordinary parlance as also considering the object of the notification entry 374, we are certain that the contention on behalf of the applicant that 'Ice-cream' can be included within the words “sweet and sweetmeats” as contained in notification entry 374 cannot be accepted. - Decided against the assessee.
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2015 (9) TMI 777
Documents not averted before assessment – Petitioner challenging assessment order on grounds that even though petitioner has given reply and also produced relevant documents, none of documents were adverted before completion of assessment – Petitioner also sought for personal hearing in objection and he was also not afforded with such opportunity – Held that:- assessing authority ought to have given such opportunity to petitioner before completion of proceedings – Impugned order hereby set aside on condition that, petitioner shall remit amount – Decided partially in favour of Petitioner.
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