TMI Tax Updates - e-Newsletter
September 19, 2016

Case Laws in this Newsletter:

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

Articles

1. No Excise from Sept. 16, 2016 on goods other than Petroleum & Tobacco Products

   By: Priyesh Agrawal

2. Composition scheme under GST

   By: Venkataprasad Pasupuleti

3. Goods and Service Tax - Export of Goods & Services

   By: CSSANJAY MALHOTRA

Notifications

Central Excise

1. 44/2016 - dated 16-9-2016 - CE (NT)

Seeks to amend Form ARE-2-reg

DGFT

2. 29 (RE-2015)/2015-2020 - dated 17-9-2016 - FTP

Import policy of Worked monumental or building stone (except slate) and articles thereof, other than goods of heading 6801; mosaic cubes and the like, of natural stone (including slate), whether or not on a backing; artificially coloured granules, chippings and powder, of natural stone (including slate)

3. 28 (RE-2015)/2015-2020 - dated 17-9-2016 - FTP

Import policy of Worked monumental or building stone (except slate) and articles thereof, other than goods of heading 6801; mosaic cubes and the like, of natural stone (including slate), whether or not on a backing; artificially coloured granules, chippings and powder, of natural stone (including slate)

4. 27 (RE-2015)/2015-2020 - dated 17-9-2016 - FTP

Import policy of Rough Marble and Travertine Blocks

GST

5. F. No. 31011/07/2014-SO (ST) - S.O. 2986(E) - dated 16-9-2016 - CGST

All the remaining provision of The Constitution (One Hundred and First Amendment) Act, 2016 comes into effect w.e.f. 16-9-2016 - Whereas provisions of Section 12 has already come into effect w.e.f. 12-9-2016

Circulars / Instructions / Orders

Central Excise

1. 1047/35/2016-CX - dated 16-9-2016

Rebate of duties paid on raw materials used in manufacture or processing of export goods and admissibility of duty drawback in such cases

2. 1046/34/2016-CX - dated 16-9-2016

Supply of goods manufactured by EOUs without payment of Central Excise Duty against Advance Licence/Authorisation

Highlights / Catch Notes

GST

• The Constitution (101st Amendment) Act, 2016, implements GST in India, unifying state and central taxes into one system.

  Notifications : All the remaining provision of The Constitution (One Hundred and First Amendment) Act, 2016 comes into effect w.e.f. 16-9-2016
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Income Tax

• Court Rules Reopening Assessment Invalid if AO Reviewed Details in Original Process u/s 143(3) Due to Workload.

  Case-Laws - HC : Reopening of assessment - details have already disclosed before the AO and while framing the assesment, the Assessing Officer has considered the same. It is only because of pressure of work he could not incorporate the details in an order u/s 143(3) - when the records speak like this it would not be permissible for AO to reopen the assessment - HC
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• Foreign Entities' Rent, Ad, Exhibition Payments Exempt from TDS Tax in India Due to No Permanent Establishment.

  Case-Laws - AT : TDS u/s 195 - payments made to foreign entities in nature of rent, advertisement and exhibition expenses - foreign entities did not have PE in India and therefore payments were not chargeable to tax in India. - AT
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• Selling Land Quickly Isn't Always Taxable Profit: Understanding Trade-Related Income Classification Rules.

  Case-Laws - AT : Merely because of the fact that the land was sold in a short period of holding, it cannot be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade - AT
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• Sections 194C and 194J of Income Tax Act Not Applicable for Liaisoning Charges Payment by Taxpayer.

  Case-Laws - AT : Provisions of Sec. 194C and Sec. 194J were not applicable to the assessee as regards payment of liaisoning charges. - AT
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• Post-Assessment Year Data Invalid for Previous Year Purchase Estimates; Survey Statements Lack Evidence Value.

  Case-Laws - AT : The information gathered subsequent to the assessment year under consideration cannot be basis for estimation of inflation of purchases for the earlier assessment year. De horse, without prejudice to the fact that even the statement recorded during the course of survey have no evidentiary value - AT
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• Winning on Quantum Issue Previously Doesn't Justify Penalty Without Separate Appeal in Current Year.

  Case-Laws - AT : Once the assessee has succeeded on quantum issue in preceding assessment year, the mere fact that he has not preferred any separate appeal in the impugned assessment year is not to be taken as the sole reason for confirming the penalty in question - AT
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• Assessment Reopening Challenged: Non-Existent HUF Nullifies Jurisdiction u/s 147; Section 148 Notice Declared Void.

  Case-Laws - AT : Reopening of assessment - The fact of non existence of HUF is paramount and strikes to the very root of purported jurisdiction sought to be acquired by the AO u/s 147 - notice u/s 148 is void ab initio and bad in law. - AT
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• Assessing Officer to Verify Interest Liability from Past Year for Current Year Claims.

  Case-Laws - AT : Disallowance of Interest - liability to pay interest for earlier year was crystallized during this year only. - AO to verify the correctness of the interest so claimed with reference to actual amount due to earlier year. - AT
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• Penalty u/s 271(1)(c) Dismissed as Assessee Did Not Conceal or Misreport Income Details.

  Case-Laws - AT : As there is no finding the assessee had either concealed the particulars of its income or furnished particulars of income or furnished particulars of income penalty u/s 271(1)(c) of the Act cannot be held as sustainable and we dismiss the same - AT
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Customs

• Confiscation of Diamonds and Pendants Under Customs Act Sections 111(i), (j), (m) Due to Crime Severity.

  Case-Laws - AT : Absolute confiscation under section 111(i), (j) and (m) of the Customs Act, 1962 - cut and polished diamonds and pendants - The crime is of higher gravity - absolute confiscation justified. - AT
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• Ferrari Import Refund: Opportunity Granted to Prove Duty Incidence Not Transferred to Another Party.

  Case-Laws - AT : Refund of the amount paid as pre-deposit pending investigation along with interest - sanction of refund claim but credited to consumer welfare fund - import of branded Car, Ferrari 599-GTB - one more opportunity can be given to the appellant to prove whether the incidence of duty for which the refund is sought for, has not been passed to any other person - AT
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• Engineering Drawings Not a Pre-Importation Cost; Excluded from Customs Valuation Enhancement.

  Case-Laws - AT : Valuation - The value of ‘engineering drawings’ is a post-importation cost. No evidence has been adduced to show that the provision of these ‘drawings’ is conditional to placing order for equipment or that it is a pre-importation cost - value not allowed to be enhanced - AT
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Service Tax

• Court Dismisses Information Suppression Claims; Balance Sheets Deemed Publicly Accessible, No Grounds for Demand.

  Case-Laws - AT : Once information is declared in the balance sheets of the company, allegation of suppression of such information is not sustainable inasmuch as balance sheet of companies are publicly available documents. - Demand set aside - AT
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• Appellant's non-receipt of service tax from client doesn't excuse non-payment to government; Section 80 waiver not applicable.

  Case-Laws - AT : Non-receipt of amount of service tax from his client cannot be adopted as a excuse for non-payment of service tax to the exchequer when the liability lies heavily on the appellant himself. As such, we find no justifiable reason for invoking provisions of section 80 so as to set aside the penalty - AT
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• Reimbursements for Business Auxiliary Services via Agent in Myanmar Not Taxable, Service Tax Demand Set Aside.

  Case-Laws - AT : Reverse charge - Business auxiliary services - reimbursement of expenses to the agent appointed in Myanmar for procurement certain services - not taxable - Demand set aside - AT
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• Sugar Factory Exempt from Service Tax on GTA Services Due to Absence of Consignment Notes.

  Case-Laws - AT : Taxability of GTA services - no consignment notes were being issued - reverse charge - Liability does not arise on the sugar factory. - AT
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Central Excise

• Guidance on Duty Drawback for Export Goods: Procedures, Conditions, and Compliance for Rebates on Raw Materials.

  Circulars : Rebate of duties paid on raw materials used in manufacture or processing of export goods and admissibility of duty drawback in such cases - Circular
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• EOUs Can Supply Goods Duty-Free with Advance Licence: Boost for Exporters, Reducing Tax Burden on Manufacturers.

  Circulars : Supply of goods manufactured by EOUs without payment of Central Excise Duty against Advance Licence/Authorisation - Circular
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• Cenvat Credit Approved: EOT Crane and Gratings Deemed Essential for Machinery in Manufacturing Process.

  Case-Laws - AT : Cenvat Credit with respect to EOT Crane and Gratings availed by the Appellant is available - such platforms are essential for operating the machines used in the manufacture of finished goods - AT
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• Penalty Reduction Overturned: Original Penalty u/r 15 and Section 11AC Reinstated for April 2009-February 2011 Violations.

  Case-Laws - AT : Levy of penalty - The action of the Commissioner (Appeals) reducing the penalty under Rule 15 read with Section 11AC ibid for the period April .2009 to February 2011, trangresses the legal provisions as applicable during that period - penalty restored - AT
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• Court Rules Mould Provision Does Not Establish Business Interest Between KBX and PSML; Demand Set Aside.

  Case-Laws - AT : Valuation - interconnected / related parties - moulds which have been given by KBX to PSML cannot be a reason to state that they had interest in the business of each other. - Demand set aside - AT
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VAT

• Court Rules on Eligibility for Dual Benefits in Interstate Cement Sales; Circular from 1994 Withdrawn in 2001.

  Case-Laws - SC : Interestate sale of cement - whether the appellant is entitled to dual benefit of partial exemption under the notification dated 06.05.1986 and also the lower rate of tax @ 6% under notification dated 21.01.2000 - Once circular dated 15.04.1994 stands withdrawn vide circular dated 16.04.2001, the appellant-assessee cannot claim the benefit of the withdrawn circular. - SC
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Case Laws:

• Income Tax

• 2016 (9) TMI 712
  Disallowance of Telephone expenses - Held that:- It is an undisputed fact that the personal use of these Telephones cannot be denied as the expenses related to Mobile Phones and Telephone installed at the residence of partners. In earlier years, similar disallowance was made for A.Y.2005-06 which was accepted by the assessee firm as noted by Assessing Officer in his order.The arguments of learned AR that a nominal disallowance was made in various decisions of various Benches of ITAT do have some force. Thus we hold that a disallowance equal to 1/10th of expenses is a reasonable disallowance. The observation of Assessing Officer in the case of assessee that in Asst. Year 2005-06, the assessee had accepted 1/5th as disallowance do not hold much force as every year is a different year & moreover the Assessing Officer has not discussed the disallowance if any made in Asst. Years: 2006-07 & 2007- 08, therefore, we restrict the disallowance to the extent of 10%. Disallowance for Car expenses - Held that:- We find that personal use by partners and their family members of assessee cannot be ruled out and Assessing Officer has made disallowance car allowance of car expenses @ 1/5th car expenses after recording a finding that similar disallowance made in Asst. Year: 2005-06 was not contested by assessee. However, we hold that the disallowance equal to 1/10th of total expenses in the case of assessee is a reasonable disallowance as has been held in the case of disallowance of Telephone expenses. - Decided partly in favour of assessee. TDS u/s 194C OR 194J - Disallowance u/s 40(i)(ia) - payment of liaison/professional charges - Held that:- In the present case admittedly payee has not carried out any physical work resulting into tangible work and has only provided services to the assessee which cannot be categorized under the provisions of Sec. 194C for the purpose of deduction of tax at source. Therefore, the provisions of Sec.194C are not applicable to the assessee. Not all kinds of advisory could qualify as technical services. For any consultancy to be treated as technical services, it would be necessary that a technical element is involved in such advisory. Thus, the consultancy should be rendered by someone who has special skills and expertise in rendering such advisory. Now in the present case we find that the liaisoning services are provided by deductee were neither managerial nor consultancy nor technical in nature and therefore, in view of the above, the assessee was not required to deduct TDS on such payment u/s 194J also. In view of the above, we are in agreement with the learned AR that the provisions of Sec. 194C and Sec. 194J were not applicable to the assessee as regards payment of liaisoning charges. The Hon’ble Punjab & Haryana High Court in the case of CIT vs. Deputy Chief Accounts Officer, Markfed (2008 (2) TMI 260 - PUNJAB AND HARYANA HIGH COURT ) has held that where the material has not been supplied by assessee the TDS was not applicable. In view of the above, we hold that assessee was not required to TDS on this. - Decided in favour of assessee

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• 2016 (9) TMI 711
  Estimation of inflation of purchases - addition on the basis of statement collected during survey - Held that:- The assessee has categorically stated that it is maintaining collection centres and payments are made to the farmers from there. There is no third party evidence towards purchase cost of milk legally. Payments were made on the basis of own vouchers which are maintained by the assessee. Though the Assessing Officer estimated the inflation of purchase, he was not able to co-relate those inflation of purchases during the assessment year under consideration. Thus, the estimated inflation of purchases is based on the subsequent years’ figures. In our opinion, the information gathered subsequent to the assessment year under consideration cannot be basis for estimation of inflation of purchases for the earlier assessment year. De horse, without prejudice to the fact that even the statement recorded during the course of survey have no evidentiary value. Any admission during such statement cannot by itself be basis for addition. Being so, in our opinion, the addition on the basis of statement collected during survey cannot be basis for addition. There is a decline in gross profit rate as compared to assessment year 2010-11, 2011-12. The assessee is not able to explain decline on the gross profit at 14.03% as compared to earlier assessment years. In our opinion, to settle the dispute, it is appropriate to take average gross profit rate of assessment years 2010-11, 2011-12 and 2012-13 and to estimate the income of the assessee on the basis of average gross profit rate of last two assessment years since the past history is the best yardstick to estimate the income. Accordingly, we direct the Assessing Officer to recompute the income of the assessee by applying the average gross profit rate of immediate earlier two assessment years alongwith present assessment year and decide the issue afresh. The assessee shall provide details of gross profit rate of all the two immediate earlier assessment years to the Assessing Officer. The Assessing Officer shall consider the same and decide the issue in accordance with our findings as above. - Decided in favour of assessee for statistical purposes.

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• 2016 (9) TMI 710
  Penalty proceedings u/s. 271(1)(c) - unexplained investment in a property - Held that:- There is no dispute that the sole surviving issue in the instant appeal is qua correctness of section 271(1)(c) penalty in question arising from unexplained addition amount of Rs. 17 lacs. It has already come on record that this tribunal in quantum proceedings has already held the assessee to have included impugned assessment years unaccounted income in his disclosure of Rs. 31 lacs made during survey and assessed in assessment year 2007-08. We accordingly are of the opinion that the assessee deserves to be given telescoping effect as he has declared the impugned assessment year’ income remaining unaccounted in assessment year 2007-08. Learned co-ordinate bench in quantum proceedings has already adjudicated the relevant issue. The same has become final. We conclude in these peculiar facts that the above stated telescoping effect of the income declared in survey can be reasonably treated as source of assessee’s unexplained investments in question. We reiterate that quantum and penalty are separate proceedings and each and every disallowance/addition made in former does not lead to automatic application of the latter penal provision as held by hon’ble apex court in CIT vs. RELIANCE PETROPRODUCTS PVT. LTD. (2010 (3) TMI 80 - SUPREME COURT ). We accept assessee’s arguments accordingly. The impugned penalty stands deleted - Decided in favour of assessee Suppressed receipts from un-recorded tuition classes - Held that:- There is no dispute that merits of the issue forming backbone of the impugned penalty are the same in the impugned assessment year as well as those in the preceding assessment year 2004-05. The assessee has already succeeded in the said assessment year. He has not preferred any quantum appeal in the impugned assessment year. We conclude that quantum and penalty are separate proceedings (supra). We accordingly observe that once the assessee has succeeded on quantum issue in preceding assessment year, the mere fact that he has not preferred any separate appeal in the impugned assessment year is not to be taken as the sole reason for confirming the penalty in question - The impugned penalty stands deleted - Decided in favour of assessee

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• 2016 (9) TMI 709
  Reopening of assessment - transfer envisaged under section 2(47) has not taken place by virtue of such impugned development agreement - Validity of notice - notice issued in the name of HUF - Held that:- It is the case of the assessee that the notice under section 148 vesting jurisdiction with the Assessing Officer has been addressed to the HUF entity namely Shri Dnyaneshwar Govind Kalbhor (HUF) whereas the PAN Number mentioned in the notice pertains to the Dnyaneshwar Govind Kalbhor obtained in his individual capacity. We also note the contention of the Assessee that the entire basis to proceed for reassessment is founded upon the return of income belonging to the Individual. We observe that the contention put up on behalf of the assessee that the HUF was not in existence at all during the relevant assessment year 2007-08 and no return of income was filed by the HUF at all either before the initiation of reassessment proceedings or subsequent thereto remains un-rebutted. Further, the reasons have been recorded under section 148(2) in the name of the Individual ‘Shri Dnyaneshwar Govind Kalbhor’ whereas the notice has been issued in the name of HUF i.e. ‘Shri Dnyaneshwar Govind Kalbhor (HUF)’. The fact of non existence of HUF is paramount and strikes to the very root of purported jurisdiction sought to be acquired by the AO under S. 147 of the Act. In the background of these discernible facts, it is manifest that the notice issued under section 148 purporting to grant jurisdiction to the Assessing Officer is void ab initio and bad in law. Consequent order passed by the Assessing Officer without jurisdiction thus is a nullity. Assessing Officer has nowhere indicated the quantum of income which has escaped or is likely to have escaped assessment. Thus, the entire process so initiated appears to be vague and listless. The formation of ‘reason to believe’ is expected to be qua the quantum of income that has escaped assessment on prima facie consideration of relevant material. The escapement in generic terms stated to be in millions without formulating any belief thereon is bizarre & inexplicable. On this ground also, the action of the Assessing Officer in issuing notice under section 147 cannot be approved. Needless to say, the assessing officer does not enjoy unbridled or sweeping powers in the matter of reopening an assessment. The provisions of section 147 are structured with inbuilt safeguards and requirements of the provision need to be strictly complied with. From the recorded reasons, we may note that while purported sale proceeds of Rs. 5,76,15,000/- is referred to by the Assessing Officer, the corresponding cost of acquisition of property which is germane to determination capital gain allegedly escaped has not been referred to at all. Apparently, the Assessing officer has pre-supposed the existence of capital gains without acquiring objective knowledge about the cost of acquisition of assets. In the absence of cost of acquisition available, it is nearly impossible to visualize with some degree of certainty as to whether such transaction has resulted in any gain at the first place or not to allege escapement thereof. Thus, the action of the AO is marred on this score also. - Decided in favour of assessee

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• 2016 (9) TMI 708
  Disallowance of Interest - Accrual of interest liability - year of assessment - Held that:- Any liability for expenses can be claimed in the year of crystallization. In the instant case assessee had had not claimed interest expenditure in earlier years, however to settle the matter he entered into MOU with creditors to pay the same. The liability to pay interest for earlier year was crystallized during this year only. In view of all the contradictions pointed out by CIT(A), we restore the matter back to the file of Assessing Officer to examine the correctness of the interest so claimed with reference to actual amount due to earlier year. Assessing Officer is also directed to verify if assessee had actually made payment of interest in the subsequent year. If the Assessing Officer found that even after making provision in MOU, assessee has not made payment in subsequent year, because more that 7-8 years have been passed after the execution of the MOU, the Assessing Officer will be at the liberty to disallow the same. We directed accordingly. Penalty u/s.271(1)(c) - Held that:- The assessee claimed the interest to the tune of Rs. 53,76,200/- which was disallowed on the ground of that earlier to the relevant assessment year no provision of interest was retained in the account books and when the assessee claimed in the relevant assessment year then the same includes the interest payable to M/s. Sangam India Ltd. for the earlier year also i.e. 2000-01 to onwards. The MOU dated 29.07.2003 no doubt speaks the liability of the assessee to pay the interest but the figure did not match with the explanation of assessee in view of the letter dated 30.06.2011 as discussed above. The MOU never acted upon no payment was made the cheques issued by the assessee were bounced and the claim of the creditors went up to the Hon’ble Bombay High court as well as before the recovery Tribunal. Therefore, in the said circumstances it is a clear case of furnishing the inaccurate particulars just to evade the tax liability, therefore, in the said circumstances the law relied by the representative of the assessee has to no use.

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• 2016 (9) TMI 707
  Penalty levied u/s 271(1)(c) - addition made on account of stock written off - Held that:- As during the assessment proceedings the assessee filed letter of three different parties to whom impugned stock was shown and the same was rejected by them. Thereafter, the directors of the company took a conscious decision to write off stock considering the condition of the market and to save cost of storage etc. From the assessment order para (b) we note that the A.O has alleged that the ball pen could have been used by replacing the dried refills and HDPE bags could have been recycled but on this allegation we agree with the contention of the Ld. AR that the plastic body of ball pen has cracked and for recycling of bags the assessee is not a manufacturer but it is a simple trader who can’t recycle the absolute stock. On the issue of disallowance regarding other deprecation and expenses we note that in the impugned order the genuineness and incurrence of expenditure has not been doubted and this disallowances have been made on the allegation of non-existence at any business activity and disallowances on these counts have been made merely because not business activity was carried out during the A.Y by the assessee. However, the addition based on the said allegations have attained finality due to dismissal of appeal on account of non prosecution, but we may point out that the assessee being a private limited company, a legal entity, cannot be deprived from claiming the expenses incurred in running and maintaining the existence of a legal entity. On the basis of above, we are inclined to hold that there is no sustainable allegation by A.O in the penalty order that either the assessee has concealed particulars of its income or has furnished in accurate particulars of its income. As there is no finding the assessee had either concealed the particulars of its income or furnished particulars of income or furnished particulars of income penalty u/s 271(1)(c) of the Act cannot be held as sustainable and we dismiss the same - Decided in favour of assessee

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• 2016 (9) TMI 706
  Reopening of assessment - provision for bad debts undisclosed - Held that:- The petitioner was asked to furnish details regarding the claim of bad debt written off. It is also found from the record that the same has been cogently explained and replied and therefore, while completing the scrutiny assessment, this issue has been gone into by the Assessing Officer and the perusal of record further indicates that while assessment order came to be passed, the accountant of the petitioner did attend the hearing. The case was discussed at length and submitted by the detailed information as called for from time to time and therefore, considering this material which is available on record, it appears to this Court that the issue pertaining to provision for bad and doubtful debt has been gone into and only thereafter this scrutiny assessment came to be passed. To arrive at such conclusion, we have also gone through the stand taken by the respondent-revenue authority. We have taken note of the contents stated by the deponent on behalf of the revenue contained in additional affidavit submitted before the Court. It was categorically stated by the deponent on additional affidavit that on account of workload and pressure of various files getting time barred asessement of various assessees and on account of corporate assessees being under jurisdiction of that Assessing Officer he had categorically deposed that he could not incorporate the details of bad debts written off furnished by the petitioner assessee. This would clearly indicate that the details have already disclosed before the Assessing Officer and while framing the assesment, the Assessing Officer has considered the same. It is only because of pressure of work he could not incorporate the details in an order under Section 143(3) of the Act and therefore, considering this overall view of the matter we are of the opinion that if the records speak like this it would not be permissible for respondent-authority to reopen the assessment otherwise the same would be based on change of opinion There is no tangible material available to justify the reopening more particularly when the issue has been gone into in detail during the course of regular scrutiny assessment, it is hardly justify for the revenue to reopen the issue which has relied upon, examined and even if it is within a period of four years. The ratio laid down by the aforesaid decision referred to above would clearly clinch the issue and therefore, the action of revenue in reopening the assessment is not justified as it would tantamount to be on the basis of mere change of opinion which is not permissible as the conditions which has been retained under Section 147 is also not satisfied. Thus we are of the opinion that the action on part of the respondent authority is not in consonance with proposition of law laid down and the background of facts would not warrant the Court to allow and precipitate further on account of main action on part of the respondent authority. Hence, the impugned notice dated 16.12.2009 and letter dated 06.08.2010 are hereby quashed and set aside. Rule is made absolute. - Decided in favour of assessee.

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• 2016 (9) TMI 705
  TDS u/s 195 - P.E. in India - payments made to foreign entities in nature of rent, advertisement and exhibition expenses - Held that:- The details of payments and TDS as furnished by the assessee that the taxes have been withheld by the assessee after grossing up and taxes so withheld have been deposited into credit of central government. Therefore, pre-conditions as mentioned in section 248 of the Act are satisfied. Further, it is seen that payments made to foreign entities are in nature of rent, advertisement and exhibition expenses and therefore are in the nature of business receipts in hands of payee. Such business receipts are taxable in India only if payee had ‘PE’ in India within meaning of relevant DTAA. From the facts, it has been observed that foreign entities did not have PE in India and therefore payments were not chargeable to tax in India. Accordingly, the assessee was under no obligation to deduct taxes at source while making these payments. Accordingly, Ld. CIT(A) has rightly held that the taxes were not required to be withheld u/s. 195(1) of the Act on the impugned payments made by the assessee and allow the issue in dispute in favour of the assessee which in my considered opinion, does not need any interference on my part, hence, uphold the order of the Ld. CIT(A) on the issue in dispute - Decided against revenue

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• 2016 (9) TMI 704
  Capital gains arise for assessment on transfer of land by the assessee along with other person - Transfer in terms of Section 2(47)(v) - Joint Development Agreement (JDA) entered by the assessee on 09.07.2005 with the developer - Held that:- What was the intention of the assessees at the time of acquiring the land or interval action by the assessee between the period from purchase and sale of the land and the relevant improvement/development taken place during this time is relevant for deciding the issue whether transaction was in the nature of trade. Though intention subsequently formed may be taken into account, it is the intention at the inception is crucial. One of the essential elements in an adventure of the trade is the intention to trade; that intention must be present at the time of purchase. The mere circumstances, that a property is purchased in the hope that when sold later on it would leave a margin of profit, would not be sufficient to show, an intention to trade at the inception. In a case where the purchase has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding the property for himself or otherwise enjoying or using it, the presence of such an intention is a relevant factor and unless it is offset by the presence of other factors it would raise as strong presumption that the transaction is an adventure in the nature of trade. Even so, the presumption is not conclusive and it is conceivable that, on considering all the facts and circumstances in the case, the court may, despite the said initial intention, be inclined to hold that the transaction was not an adventure in the nature of trade. The presumption may be rebutted. In the present case, considering the facts and circumstances of the case it cannot be considered as an adventure in the nature of trade. The intention of the assessee from the inception was to carry on agricultural operations and even there was no intention to sell the land in future at that point of time. It was due to certain compelling circumstances came into picture at a later stages, the assessees were forced to sell the land. Merely because of the fact that the land was sold in a short period of holding, it cannot be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade. The period of holding should not suggest that the activity was an adventure in the nature of trade. Further, we make it clear that when the land which does not fall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by the assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, in such circumstances, in our opinion, such transfer like the case before us cannot be considered as a transfer of capital asset or the transaction relating to sale of land was not an adventure in the nature of trade so as to tax the income arising out of this transaction as business income. Accordingly, the ground raised by the Revenue is dismissed..

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• 2016 (9) TMI 703
  Revision u/s 263 - Whether the ITAT has erred in not considering that no appeal is maintainable before CIT(A) against the order passed by the A.O. under the provisions of Section 143(3) read with Section 263 of the Act when the assessee has not filed the appeal against the order u/s. 263 of the Act? - Held that:- It is undoubtedly true that if in the revisional order, the Commissioner has made any conclusive remarks or given directions which would finally decide the rights of the parties, the assessee without challenging such findings, cannot dispute the same when it comes to the Assessing Officer giving effect to such directions. However, if the order of the Commissioner merely remanding the proceedings before the Assessing Officer without specific directions for carrying out assessment in a particular manner, the Assessing Officer would be free to carry out the assessment in accordance with law and may be in a given circumstance, bearing in mind the observations made by the Commissioner in the revisional order. In such a situation, when the Assessing Officer is not merely giving effect to the order of the Commissioner but is re-framing the assessment in accordance with law, his order is always open to challenge by the assessee on merits. The assessee need not question the authority of the Assessing Officer to pass such order. He accepted the revisional order and its directions participated in the fresh assessment proceedings and carried a feeling that it had satisfied the Assessing Officer about the validity of the claims. If the order of assessment belied such feeling of the assessee, it was always open for the assessee to carry the issues in appeal. Nothing prevented the assessee from questioning the directions of the Assessing Officer. The Revenue's stand on this issue is, therefore, not correct.

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• 2016 (9) TMI 702
  TDS u/s 194C - non deduction of tds on payment of transportation or carriage of good - addition made by the Assessing Officer u/s. 40(a) (ia) - Held that:- As decided in Commissioner of Income Tax-I vs. Valibhai Khanbhai Mankad [2012 (12) TMI 413 - GUJARAT HIGH COURT ] the exclusion provided in sub-section (3) of section 194C from the liability to deduct tax at source under sub-section (2) would thus be complete the moment the requirements contained therein are satisfied. Such requirements, principally, are that the sub-contractor, recipient of the payment produces a necessary declaration in the prescribed format and further that such sub-contractor does not own more than two goods carriages during the entire previous year. The moment, such requirements are fulfilled, the liability of the assessee to deduct tax on the payments made or to be made to such sub-contractors would cease. In fact he would have no authority to make any such deduction. Once the conditions of further proviso of section 194C(3) are satisfied, the liability of the payee to deduct tax at source would cease. The requirement of such payee to furnish details to the income tax authority in the prescribed form within prescribed time would arise later and any infraction in such a requirement would not make the requirement of deduction at source applicable under sub-section (2) of section 194C of the Act. - no application of section 40(a)(ia) required - Decided in favor of assessee.

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• 2016 (9) TMI 701
  Reopning of assessment - where the Commission shifted the terminal date for calculation of interest under Section 234B - Held that:- Commission had no jurisdiction to reopen the matter for the purpose of shifting the terminal date. The observation of the Settlement Commission by extending terminal date upto 25.02.2000, calls for interference. Accordingly, the Writ Petitions are allowed to that extent and the terminal date as fixed by the Commission in its original order dated 25.02.2000, is confirmed

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• 2016 (9) TMI 700
  Deduction u/s 54F - assessee having not complied with the requirement of depositing the amount by the due date, namely before filing of the return under Section 139(1) - ITAT allowed the claim - Held that:- The alleged non-compliance of the provisions of Section 54F of the Income Tax Act, 1961 is that the amount was paid into the Special Capital Gain Account maintained by the respondent-assessee with the same branch of the Bank after a delay of one day, namely, on 31.07.2008 instead of on 30.07.2008. The Tribunal has recorded a finding of fact that the assessee had infact on the same day i.e. 30.07.2008 instructed the Bank to transfer the money from his saving account to Special Capital Gain Account maintained by him with the same branch. This finding of fact cannot be said to be perverse. As a matter of fact, the Bank transferred the money on the very next day. It is not the revenue's case that separate instructions were given on the next day either in writing or orally to the Bank to transfer the amount to the Special Capital Gain Account. Therefore, the same does not raise a substantial question of law. The appeal in this regard is dismissed. Addition on account of investment made in residential house by the company in which the assessee is one of the directors - ITAT allowed the claim - Held that:- The second question proceeds on the erroneous basis that the investment in the residential houses was made by the assessee. The Company had only lent money to the assessee to enable him to purchase the property.

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• 2016 (9) TMI 699
  Interest earned from the Salem Agricultural Producers Co-operative Marketing Society Ltd., for reduction under Section 80 P (2(a) (i) - Held that:- Department submittion that the Tribunal was not right in holding that the interest earned from the Salem Agricultural Producers Co-operative Marketing Society Ltd., for reduction under Section 80 P (2(a) (i) of the Income Tax Act, we are not inclined to accept the said contentions. For the reason that a District Central Co-operative Bank, is also a Society, in which event, the income by way of interest and dividend earned by the assessee/respondent Society from the investments made in Salem District Central Co-operative Bank, which is also a Co-operative Society is entitled for deduction under Section 80 P (2) (a) (i) of the Income Tax Act. Decision relied on by the assessee and considered by the Tribunal squarely applies to the facts on hand

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• 2016 (9) TMI 698
  Disallowance made u/s. 14A - Held that:- It can be noticed that own funds available with the assessee in each of the three years is more than investment made and hence disallowance u/r. 8D(2)(ii) of the I.T. Rules is not called for in view of the decision rendered by Hon'ble Bombay High Court in the case of HDFC Bank Ltd. (2014 (8) TMI 119 - BOMBAY HIGH COURT ). Accordingly, we set aside the order of learned CIT(A) passed on this issue and direct the Assessing Officer to delete the disallowance made u/r. 8D(2)(ii) of the I.T. Rules. Assessment of Service charges received from the tenants - Income from other sources or Income from house property - Held that:- In the instant case, the impugned property was let and the termination notice was given in July 2008 and it was stated that the tenant has vacated the property in that month itself. The Ld A.R also made a statement at bar that the assessee has offered the rent pertaining to the period from April, 2008 to July 2008. It is not the case of the AO that the assessee has let out this property during this year itself, after it was vacated by M/s Athma Productions P Ltd. The assessee has stated that the property was only let out in June 2009 and the same has not been proved to be wrong. In view of the above, we are unable to agree with the view expressed by Ld CIT(A) on this issue. Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the assessment made on notional basis.

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• 2016 (9) TMI 697
  Unexplained money u/s.69A - sale consideration of the subject property - beneficial ownership of the flat - Held that:- From the record we found that the said flat No.132/H in Raj Arcade was sold to M/s Karma Ispat Ltd, was belonging to the builder and not to the assessee. As per the evidence discussed by CIT(A) in his order, the builder has shown the sale of flat in its books of accounts and also offered profit arising thereon in respect of sale consideration so received by it. A finding has also been recorded to the effect that assessee or her husband has not received any other benefit under this arrangement. Therefore, the clear position emerges is that the beneficial ownership of the flat was always with the builder and the assessee was merely a front for executing the arrangement. The CIT(A) also recorded a finding that income arising from sale of said flat has already been included in the total income of the builder, which fact has not been rebutted by the AO, therefore, the same cannot once again be added in the hands of the assessee. The detailed finding recorded by CIT(A) are as per material on record, therefore, do not require any interference on our part. - Decided against revenue

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• 2016 (9) TMI 696
  Eligible for exemption u/s.11 denied - contention of the ld. Departmental Representative that the activities are not charitable - Held that:- Denial of exemption treating as Association of Person(AOP) is not appropriate considering the status and objects of this Sabha which is in existence for morethan three decades and rendering services to the society with Music and Arts, we are of the opinion that society is not be affected by the amendment to Sec. 2(15) of the Act effective from 01.04.2009 and on this issue of trade, business and commerce. We rely on the decision of Delhi High Court in the case of The Institute of Chartered Accountants of India & ANR vs. Director General of Income Tax (Exemptions) & ORS [2011 (9) TMI 77 - Delhi High Court ] where it was held that the Director General of IT(Exemptions) was not justified in refusing exemption u/sec. 10(23C) (iv) to the assessee ICAI by a cryptic order on the ground that by imparting education for free, it was engaged in ‘’business’’ without considering whether it was engaged in ‘’trade, commerce or business’’ within the meaning of first proviso to Sec. 2(15) and further without considering the plea of assessee that it had not violated Sec. 11(5) or third proviso to Sec. 10 (23C) (iv) of the Act. So, considering the judicial aspects and objectives, we are of the opinion that the activities are within the ambit of charitable purpose and we upheld the order of Commissioner of Income Tax (Appeals) who has dealt on subject and its implication and grounds viz-a-viz explanations of the assessee and allowed the assessee appeal and we upheld the order of Commissioner of Income Tax (Appeals) and dismiss the grounds of the Revenue. - Decided in favour of assessee

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• 2016 (9) TMI 695
  Penalty u/s 271(1)(c) - estimate income on sale of yarn - Held that:- In the present case, the assessee has taken a plea as stated above that addition was made on estimate basis. The Assessing Officer placed reliance on the survey report collected during the course of survey and also inspection report of sales tax authorities and central excise authorities. However, the material brought on record that the gross profit rate of every year is not constant, it depends upon various factors like demand and supply, inflation situation and production capacity, variable factors like change in direct labour cost and material cost. The lower authorities went on the premise that these facts which determine the gross profit is constant. Being so, various High Courts, held that whenever the addition is sustained on account of estimation basis, penalty cannot be levied. The judgments relied upon by the ld. AR laid down the same principles. In our opinion, since there is no concrete evidence of concealment of sale of yarn, levying penalty in this case cannot be sustained. Accordingly, this is not a fit case for levy of penalty u/s 271(1)(c) of the Act. We are inclined to delete the penalty in respect of estimate income on sale of yarn. Aaddition sustained u/s 68 - Held that:- After going through the explanation of the assessee, we are of the opinion that the explanation given by the assessee was a possible one though it was not satisfactory. The Tribunal has noticed these facts in the quantum appeal and confirmed the addition to that extent on account of unsatisfactory explanation given by the assessee in respect of the credits outstanding in the books of account. But it is not good enough for imposition of penalty because it relates to lack of tendering explanation to the satisfaction of the Assessing Officer and not disproving the contention of the assessee about the genuineness of the receipts. Accordingly, in our opinion, this issue is not a fit case for levy of penalty u/s 271(1)(c) of the Act. Disallowance u/s 40A(3) - Held that:- There is a judgment of the Delhi High Court in the case of CIT vs Vatika Construction Pvt. Ltd. [2012 (10) TMI 808 - DELHI HIGH COURT] wherein held that when there is addition u/s 40A(3) of the Act levy of penalty on this disallowance u/s 271(1)(c) of the Act is not justified. Further, in our opinion, disallowance u/s 40A(3) cannot be construed as concealment of income and furnishing inaccurate particulars of income. In view of the judgment of the Deli High Court, we are inclined to delete the penalty. Claiming wrong short term capital gain - Held that:- The assessee, while preparing the income tax return, adopted the cost of assets as per the book value instead of cost after WDV as per IT depreciation statement. This is an error committed by the assessee and this cannot be a reason for levy of penalty u/s 271(1)(c) of the Act as held by the Supreme Court in the case of Price Water Coopers Pvt. Ltd vs CIT, [2012 (9) TMI 775 - SUPREME COURT ], wherein held that imposition of penalty would be unwarranted in case the assessee has committed an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars of income. Merely because the assessee claimed deduction of interest expenditure which had not been accepted by the Assessing Officer, penalty u/s 271(1)(c) of the Act is not attracted, merely making a claim which is not sustainable in law by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. See CIT vs Reliance Petroproducts Pvt. Ltd [2010 (3) TMI 80 - SUPREME COURT ] - Decided in favour of assessee

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• 2016 (9) TMI 694
  Unexplained cash deposits - Estimation of income of the assessee - cash deposits made by assessee's brother in bank account - Held that:- The fact is that the Assessee being a salaried employee, allowed his brother to operate his bank account to run his business. The same was confirmed by his brother before the AO. In our considered view, we will have two ways to address the current issue. Either to assess the income in the hands of Assessee’s brother or assess the income in the hands of assessee on presumptive basis. The assessment in the hands of assessee’s brother may not feasible considering the fact that all the transactions done in the assessee’s bank account. It will put the AO in diffcult situation. The easiest way is to assess the income in the hands of the assessee on presumptive basis. We find it reasonable and appropriate to charge at 8% of the deposits as his income. Accordingly, we direct the AO to estimate the income of the assessee at 8% of the total deposit amounts as done in the case of Assessee’s brother. - Decided in favour of assessee

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• 2016 (9) TMI 693
  Allowability of interest as deductible expenses - applicability of provision of section 40(a)(ia) - Held that:- CIT(A) judicially taken into consideration that as per the facts and circumstances of the present case where the borrowers financial condition was not sound, the lenders might wish to postpone the recognition of interest income which may or may not be realized at all in future. Ld. CIT(A) has also appreciated that in the facts of the present case the said interest liability has been crystallized during the year, as earlier it was not certain whether the interest would be payable or not. Since the assessee has paid the interest after deducting TDS in current assessment year, and accordingly claimed the interest expenses in current assessment year as the assessee was in a position to pay the interest component and hence the same was provided and paid during the year under consideration. Ld. CIT(A) has rightly found no justification in disallowing such claim of the assessee for the payment of interest. It was also appreciated by ld. CIT(A) that since the assessee has deducted the TDS in AY 2009-10 under consideration therefore it would automatically be allowed in this year as per the provision of section 40(a)(ia). - Decided in favour assessee Interest attributable to loans - Whether the interest can be disallowed due to the closure of business/profession closure of one of the activities? - whether the interest expenses can be attributed to interest free loans given to sister concerns in present case? - Held that:- CIT(A) while dealing with the first issue has rightly considered the facts of the present case and observed that the loan was initially taken for textile business, which has been closed/suspended due to adverse business conditions but the assessee is still showing income from certain other sources such as rental income and profit on sale of shares though not under the head “ Profits or gains of business or profession”. Ld. CIT(A) while considering the latter judgement of Hon’ble Supreme court in the case of Veecumsees (1996 (4) TMI 6 - SUPREME Court) had rightly come to the conclusion that business of the assessee is a composite business during the period under consideration and expenditure is incurred for this composite business activities. Hence, the ld. CIT(A) has rightly held that the claim of the assessee of interest cannot be denied. The ld. CIT(A) has also considered the figures regarding advance of interest free loans out of interest free loans from family and partner’s capital and the ld. CIT(A) after considering the facts and figures and documentary evidences has correctly noticed that the interest free funds to the sister concerns during the period under consideration were out of interest free funds from the family members and it will not have any impact on the interest payment made by the assessee for the other business purposes. We have also found that as per assessment order the AO had not examined in detail to establish that the interest free loans to sister concerns were out of borrowed funds and therefore in the absence of proving any nexus between the borrowed funds and interest free loans given by the assessee, it was not justifiable for the AO to make any disallowance. - Decided in favour assessee

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• Customs

• 2016 (9) TMI 726
  Valuation - enhancement in assessable value - engineering information, drawing and design - post importation expenses or pre importation expenses - project imports - Project Import Regulations, 1986 - provisional assessment - rule 4(1) of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 read with Rule 9(1)(e) - rule 9(b)(iv) of the Rules - whether the declared value of imported goods necessarily has to be subject to enhancement merely on the ground that a contract with the overseas supplier incorporates a second and distinct transaction? - Held that: - rule 9 of the Rules does not confer a blanket mandate to add the value of elements of a contract merely because the supply of imported goods are covered in the same contract. The nature of each element of the contract that has a separate and distinct value, whether so segregated at the specific request of the importer or not, must be scrutinized for ascertainment as pre-importation component for addition to the assessable value. The value of ‘engineering drawings’ is a post-importation cost. No evidence has been adduced to show that the provision of these ‘drawings’ is conditional to placing order for equipment or that it is a pre-importation cost - mere supply of drawings at a value in the same agreement does not, ipso facto, have the support of law resort to rule 9 - cost of drawings and engineering services not included in the assessable value. Appeal of revenue dismissed - decided against Revenue.

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• 2016 (9) TMI 725
  Refund of the amount paid as pre-deposit pending investigation along with interest - sanction of refund claim but credited to consumer welfare fund - import of branded Car, Ferrari 599-GTB - denial of benefit of Sr. No. 344(2) of the Notification No. 21/2012 dated 1/3/2002 - seizure of car - voluntary payment of customs duty with interest by subsequent buyer - later on demand of duty and interest set aside - is the refund amount rightly credited to the consumer welfare fund? - whether the provision of unjust enrichment is applicable or otherwise? - Held that: - In the Section 27 clause(b) provisions of unjust enrichment is not applicable in case where duty and interest, if any, paid on such duty on imports made by an individual for his personal use. The issue raised by the appellant that though duty for which refund was sought for paid by the subsequent buyer of the car Shri. Sanjay Sunil Dutt, appellant is entitle for refund, we are of the view that irrespective whether duty was paid by a person other than the importer but in connection with the import made by the appellant, it has to be considered that duty was paid by the appellant only therefore only for the reason duty was paid by the Shri. Sanjay Sunil Dutt refund cannot be denied. It is also observed that appellant has not produced sufficient documents to establish whether the incidence of refund amount has not been passed on to any other person or otherwise. Therefore in the interest of justice one more opportunity can be given to the appellant to prove whether the incidence of duty for which the refund is sought for, has not been passed to any other person - matter remanded to original authority for limited purpose of verifying the factual aspect whether the incidence of duty has not been passed on to any other person or otherwise - appeal allowed - decided in favor of appellant.

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• 2016 (9) TMI 724
  Absolute confiscation under section 111(i), (j) and (m) of the Customs Act, 1962 - cut and polished diamonds and pendants - prohibited goods or not - Held that: - goods of commercial nature not allowed to be imported as part of passenger baggage. Also, the importer does not hold any Import Export Code - non-fulfillment of the restrictions imposed would bring the goods within the scope of prohibited goods. The decision of the case Molok Boloky [2004 (8) TMI 616 - CESTAT, NEW DELHI] is relied upon. Whether appellant is entitled to the option to pay redemption fine in lieu of confiscation under section 125 of the Customs Act, 1962 or the absolute confiscation imposed on him is justified? - Held that: - The crime is of higher gravity - absolute confiscation justified. Similar issue decided in the number of cases, one such being the case of Mohd. Akhtar [2011 (9) TMI 968 - PATNA HIGH COURT]. Appeal dismissed - decided against appellant.

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• 2016 (9) TMI 723
  Issuance of No Objection Certificate for the consignments for local consumption - rejection of consignments - date of manufacture/packing - absence of name and complete address of the manufacturer/packer - Held that: - an identical issue seen in the case of Kantilal N.Shah v. The Authorised Officer, FSSAI, Chennai, and others [2016 (9) TMI 661 - MADRAS HIGH COURT]. Petitioner to file an application before the Director of Imports, Food Safety and Standards Authority of India, New Delhi, seeking one time relaxation and the application shall contain all the details and supported by documentary proof. Petition disposed off - decided in favor of petitioner.

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• 2016 (9) TMI 722
  Cancellation of DEPB issued - withdrawal of benefits availed on the basis of DEPB - demand of customs duty and SAD - confiscation under section 111 of the Customs Act, 1962 - option to pay redemption fine of Rs. 1,00,000/- under section 125 of the Customs Act, 1962 - principle of "buyer be ware" - whether duty can be demanded from an importer who is not a party to fraud committed by an exporter ? - Held that: - similar issue decided in many cases one such being Commissioner of Customs, Amritsar v. Vallabh Design Products [2007 (4) TMI 274 - HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH], where it was held that the importer therein was not a party to the fraud and there was categoric finding that he had purchased DEPB from the open market in bonafide belief of its being genuine. There is a specific finding recorded by the first appellate authority and even by the Tribunal that the appellant was not party to the fraud with the seller of DEPB. DEPB was found to be a genuine document, though obtained by seller by producing some forged documents, to which the appellant was not a party - duty not demanded from the buyer - appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2016 (9) TMI 716
  Oppression and mismanagement - allotment of shares to new additional directors appointed - Held that:- The act of appointing new additional directors by altering the articles of association of the company with the object of completely upsetting the control and management of the company's affairs constitutes an act of oppression. It is settled law that it is not open to the directors of a company to issue and allot shares in a manner by which an existing majority of shareholders are reduced to a minority. The court will scrutinize with particular circumspection any such issue or allotment and unless it is satisfied beyond reasonable doubt that such issue was unavoidable and was resorted to as an express and emergency measure with an object of fundamental importance, e.g., saving the existence of the company, it will not allow the existing balance of power in the company to be disturbed. In Dale & Carrington Invt. (P) Ltd. v. P.K. Prathapan reported [2004 (9) TMI 385 - SUPREME COURT OF INDIA ] their Lordships with regard to oppression held that if a member who holds the majority of shares in a company is being reduced to the position of minority shareholder in the company by mala fide act of the company or by its Board of Directors, such act must ordinarily be considered to be an act of oppression against the said shareholder and what relief should be granted would depend on the facts of the case. The facts of the present case at hand are almost akin to the case referred to above. Allotment of additional shares to the respondent Nos.3 and 4 was made with the objective to gain control by becoming a majority shareholder. The said allotment is not in the interest of the Company and no legal procedure prescribed in the articles of association was followed. The Company Law Board although held that the removal of the petitioner Nos.1 to 8 as directors under Section 284 of the Act was done in contravention of the provisions of the Companies Act, 1956 and also against the principle of legitimate expectation dismissed the company petition. The allotment is also in violation of Article 6B of the Articles of Association. In view thereof the appeal succeeds. The Board Resolution dated May 31, 2013 and consequent allotment of shares in favour of the respondent Nos.3 and 4 are set aside. The judgment dated May 9, 2016 is set aside.

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• Service Tax

• 2016 (9) TMI 744
  Refund - payment of excess service tax on GTA service - unjust enrichment - Subsequently realizing that they have paid the excess service tax on the GTA services, they reversed the credit of such excess amount and claimed refund of the same from the authorities vide their refund application dated 27/2/2009. - appellants also contended that being manufacturer exporter of the goods, the service tax paid on the services utilized by them for export of the goods is, in any case refundable to them under Notification No. 40/2007-ST as amended, and in terms of Rule 5 of Cenvat Credit Rules, where the question of unjust enrichment would not arise. Held that:- Though the said contention of the appellants stand reproduced by Commissioner (Appeals) in his impugned order but the same does not stand adverted to and there is no finding on the same. As such, I am of the view that the matter needs to be re-examined, for which purpose I set aside the impugned order and remand the matter to original Adjudicating Authority. - Matter remanded back.

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• 2016 (9) TMI 743
  GTA services - reverse charge - It is the case of the appellant that after amendment to Notification No. 43/97-ST dated-05/11/1997 under the Finance Act, 2003 retrospectively the benefit ought to have been given by the first appellate authority. - Held that:- From the above ratio laid down by the Supreme Court, a notification has to be interpreted by the plain and clear meaning throwing out of a notification. None of the case laws relied upon by the appellant is with respect to Notification No. 43/97-ST dated 5/11/1997 amended retrospectively. Plain and clear meaning of Notification No. 43/97-ST as amended retrospectively has already been made by this Bench in the case of Pataka Industries (P) Ltd. Vs. Commr. of Central Excise, Bolpur (2008 (9) TMI 155 - CESTAT, KOLKAT). No other contrary judgment has been placed on record by the appellant with respect to Notification No. 43/97-ST dated 5/11/1997. Respectfully following the ratio laid down by this Bench, there is no reason to allow the appeal of the appellant on merits. So far as the issue of time bar is concerned, it is observed that this issue was never raised before the adjudicating authority or the first appellate authority, therefore, the same cannot be allowed to be raised at the second appellate stage. Decided against the assessee.

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• 2016 (9) TMI 742
  Business Auxiliary Services - receipt of brokerage - The assessee acted as an intermediary between the two working companies in connection with the transfer of title of equipment and machineries. - Extended period of limitation - Held that:- Supreme Court in the case of Coaltar Chemicals Manufacturing Co. Vs. Union of India [2003 (10) TMI 52 - SUPREME COURT OF INDIA] has held that for invoking the suppression clause for demand of duty under the time bar, there has to be something positive other than mere erection or failure on the part of the manufacturer or conscious or deliberate withholding of information. We find this not to be case in the present proceedings. The Tribunal has also held time and again that once information is declared in the balance sheets of the company, allegation of suppression of such information is not sustainable inasmuch as balance sheet of companies are publicly available documents. - Demand set aside - Decided in favor of assessee.

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• 2016 (9) TMI 741
  Levy of penalty - delayed payment of service tax - As per the appellant, the said service tax was not deposited as their customer had not given the tax amount and they were under the bonafide impression that if tax payment has not been paid by the customers, same need not be deposited. As soon as the Revenue pointed out that, they deposited the tax along with interest on 16.9.2008. - Held that:- Non-receipt of amount of service tax from his client cannot be adopted as a excuse for non-payment of service tax to the exchequer when the liability lies heavily on the appellant himself. As such, we find no justifiable reason for invoking provisions of section 80 so as to set aside the penalty. However, we take note of the appellants submission that amount of around Rs. 45 lakh deposited by them for the year 2007-2008 is without availing the benefit of abatement in terms of Notification No. 15/2004. As we have already observed that the benefit of said notification would be available to the assessee even if it has received free supply items from his clients, we are of the view that appellants duty liability is required to be requantified in terms of law declared by the Larger Bench in the case of Bhayana Builders (P) Ltd. [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] - Matter remanded back. - Decided partly in favor of assessee.

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• 2016 (9) TMI 740
  Manpower Recruitment and Supply Agency Services for the service rendered by them to the sugar factory which is harvesting of sugar cane, loading and unloading in the sugar factory - Held that:- Since an identical issue has been decided by the Jurisdictional High Court in the case of Godavari Khore Cane Transport Co. Pvt. Ltd. [2015 (3) TMI 1170 - BOMBAY HIGH COURT] holding that such service as rendered by the appellant herein are not liable to be taxed; respectfully following the same, we hold that the impugned order in the case in hand is unsustainable and liable to be set aside and we do so. - Decided in favor of assessee.

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• 2016 (9) TMI 739
  Reverse charnge - Business auxiliary services - Services availed in the interior parts of Myanmar and the expenses to be incurred for traveling tickets, telephone charges, postage, hotel accommodation, fooding etc. - reimbursement of expenses to the agent appointed in Myanmar - Held that:- the Revenue has no case on merits for more than one reason. Firstly, on perusal of the various e-mails sent by Shri S. Gupta to the appellant they clearly indicate that the said Shri Gupta has claimed tour expenses monthly and it indicates only the air fare, car hire, hotel charges and petrol charges incurred by him for a particular month. The said e-mails or the expenses statement seem to have been accepted by the Revenue authorities as they are claiming service tax on the amount claimed as reimbursement by Shri S. Gupta. If the amounts which are claimed by Shri S. Gupta, are actual expenses, we find that the said amounts cannot be considered as taxable under ‘business auxiliary services’, as under the category of BAS, the amount can be taxed as a commission paid by the appellant, if any, to Shri S. Gupta. On perusal of the agreement entered into by the appellant with Shri S. Gupta, we find that there is no mention of any commission payable to Shri S. Gupta by the appellant. Demand set aside - Decided in favor of assessee.

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• 2016 (9) TMI 738
  Manpower recruitment and supply agency services - supply of labour to the appellant’s customers - Held that:- Since the contract and the bills clearly indicate that the appellant is supplying labour and is getting paid for the supply of the labour in terms of the minimum wages, that portion of the demand needs to be upheld. The calculations of the correct tax liability needs to be reworked/requantified by the adjudicating authority on this issue by extending the benefit of cum tax liability. The service tax liability on this portion on the appellant is upheld with interest liability. Since the appellant has not discharged the tax liability for the entire period, the provisions of Section 78 also gets attracted and the penalty amount will be equal to the tax liability on requantification of the demand by the lower authorities. Demand of service tax on lump-sum works contract and demand beyond the period of 5 years set aside. Decided partly in favor of assessee.

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• 2016 (9) TMI 737
  Waiver of pre-deposit - Construction services - non-commercial use - they were primarily providing construction services to various institutions, which were either charitable institutions or being run on no profit no loss basis or were State Governments Educational Institutions or Societies. - Held that:- the appellant has deposited an amount of more than a crore either during the course of investigations or subsequent to the passing of the adjudication order. - Though the period in the present appeal is not post amendment to Section 35F, but in view of our observations, as regards nature of the constructions as also the limitation aspect, we are of the view that the deposits made by the appellant are sufficient to satisfy the condition of the provisions of Section 35F of Central Excise Act. - Stay granted.

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• 2016 (9) TMI 736
  Taxability of GTA services - no consignment notes were being issued - reverse charge - Rule 2(1)(d)(v) of Service Tax Rules, 1994 - Held that:- When the transports did not issue consignment notes or GRs or Challans or any documents containing the particular as prescribed in Explanation to Rule 4B of the Service Tax Rules, 1994, the Transporters cannot be called ‘Goods Transport Agency’ and, hence, in these cases, the service of transportation of sugarcane provided by the transporters would not be covered by Section 65(105)(zzp). In view of this we hold that there will be no Service Tax liability on the appellant sugarcane mills, as they have not received the service from a Goods Transport Agency. Liability does not arise on the sugar factory. - Decision in the case of Nandganj Sihori Sugar Co. Ltd. [2014 (5) TMI 138 - CESTAT NEW DELHI] followed - Demand set aside - Decided in favor of assessee.

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• Central Excise

• 2016 (9) TMI 735
  Levy of penalty - no challenge to the confirmation of demand of duty or confiscation of the seized goods - unaccounted stock - The godown search revealed presence of the lamination goods, including inner pouch and outer packing with the brand name of the Kuber Group of Companies - The godown keeper the could not produce any documents to show the stock of the goods in the godown - Held that:- as per proviso to Section 11AC if an assessee pays 25% of the penalty within a period of 30 days from the imposition of penalties, the penalty shall stand reduced to the said amount. Though the order of the Adjudicating Authority imposing penalty under Rule 25 cannot be faulted with though in normal circumstances penalty is required to be imposed in terms of Section 11AC, in which case the benefit of reduced penalty would have been available to the appellant, the said factor can be taken into consideration for reducing the penalty imposed under Rule 25. It already stand observed that Rule 25 does not require imposition of penalty to the extent of 100%. Further as a lot of time gap has passed between the date of passing of the order till date and the appellant had not deposited any penalty amount till date, I, by taking the interest factors into account reduce the penalty imposed upon M/s Jenith Laminators Pvt. Ltd. to 50% of the penalty imposed upon them. As regards penalty imposed on the Directors, it is seen that Director in his statement has admitted removal of the goods from its factory to godown, without payment of duty, and as such, he is also liable to penalty. - Penalty on director also reduced to 50% Decided partly in favor of assessee.

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• 2016 (9) TMI 734
  Cenvat Credit - eligible input - steel and bent - EOT Crane and Gratings - inputs or capital goods - Held that:- when structures like rollers, pulleys and guide rails are essentially required for the functioning of crane then the same have to be treated as an accessory of the machines for which Cenvat Credit under Cenvat Credit Rules is admissible. So far as Cenvat Credit on Gratings used for operating the furnace is concerned, it is observed that such platforms are essential for operating the machines used in the manufacture of finished goods. In the case of Rosa Sugar Works v. Commissioner of Central Excise, Lucknow (2005 (10) TMI 304 - CESTAT, NEW DELHI), CESTAT Delhi has held that ladders and gratings used for reaching different platforms of the machines, used for processing or procuring finished goods, are eligible to Modvat Credit under Rule 57A of the Central Excise Rules, 1944. Cenvat Credit with respect to EOT Crane and Gratings availed by the Appellant is available. However, Cenvat Credit with respect to steel and bent items is not agitated by the Appellant and is held to be inadmissible. - Decided partly in favor of assessee.

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• 2016 (9) TMI 733
  Cenvat Credit - bogus and fictitious invoices - allegation of non-receipt of imported goods into the factory premises - retraction of statement - import of scrap for manufacturing of M.S.Ingots & Cast iron rough castings - Held that:- Two different adjudicating authorities, one at the original stage and the second in de-novo proceedings ordered by the Tribunal, have concurred with the facts and allegations in the show cause notice and have inter-alia confirmed recovery of the Cenvat credit found thereto to have been taken irregularly. In the second round of litigation, the Tribunal had remanded the matter back to the Commissioner (Appeals) for the reason that authority had not recorded any reasons for his conclusion that 'the impugned order is upheld and the appeal is dismissed. In the impugned order resulting out of such de-novo proceedings, it is seen that the Commissioner (Appeals), out of the nineteen paras of his order, devotes a mere three paras to analyze and arrive at the conclusion reached, which in itself throws doubt on whether he has sufficiently applied his mind in the matter. It is further seen that the raison detre for setting aside of the order of original authority is the finding of the Commissioner (Appeals) that he "is inclined to agree with the appellants" with regard to the various apparent discrepancies pointed out by the latter. I do not thus find any independent application of mind by the Commissioner (Appeals). He has not weighed or analyzed the correctness of the contentions of the assessee, but only discovered an inclination to agree with them. "Inclinations to agree" with the submissions of the assessee cannot take the place of reasoned adjudication of issues that the Commissioner (Appeals), in the capacity of a quasi judicial authority is mandated to do. On the other hand, I find that the Department, in the grounds of appeal filed by them, have ably countered and demolished the presumptions which the Commissioner (Appeals) relied upon while setting aside the adjudication order of the original authority. In the cases of this nature involving illicit availment of Cenvat credit through false documents, the department is against heavy odds to unearth every stone of meticulously executed deception and innovative modus operandi. - Order of Commissioner (Appeals) cannot sustain - Demand confirmed - Decided in favor of revenue.

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• 2016 (9) TMI 732
  Levy of penalty - validity of order of commissioner (appeals) in reducing the penalty - wrong availing of ineligible Cenvat Credit - improper duty paying documents - credit was reversed with interest at the instance of audit party - Held that:- When the said appellate authority is satisfied that it is a clear case of suppression of material facts, he cannot then go beyond the intention of the legislature in Explanation 1 to Section 11A (2B) ibid, and will necessarily have to uphold imposition of penalty equal to duty as mandated for such situations in Section 11AC ibid. The action of the Commissioner (Appeals) reducing the penalty under Rule 15 read with Section 11AC ibid for the period April .2009 to February 2011, trangresses the legal provisions as applicable during that period. Hence that portion of the impugned order reducing the penalty amount of Rs. 31,11,108/- to Rs. 22,14,085/- for the period April, 2009 to February, 2011 is set aside and the order of adjudicating authority imposing penalty equal to duty demanded will stand restored. - levy of penalty restored - Decided in favor of revenue.

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• 2016 (9) TMI 731
  Valuation - interconnected / related parties - allegation of evasion of duty of excise by undervaluation where goods are sold through related persons - Held that:- there is nothing on record to show that PSML had interest in the business of KBX. PSML had no interest in the business of KBX but for selling of the products to them. The loans advanced by KBX to PSML were also on an interest which was higher than the bank rate, the fact undisputed in the proceedings before the lower authorities; moulds which have been given by KBX to PSML cannot be a reason to state that they had interest in the business of each other. - Demand set aside - Decided against the revenue.

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• 2016 (9) TMI 730
  Generation of waste during manufacturing process - allegation of clandestine removal of goods - It was submitted by the respondent that there was nominal burning loss of 1.15% and 1.19% during the said period. - Held that:- The whole investigation/ audit remained faulty and the show cause notices were issued to both the respondents in the wake to allege the respondent no.1 has cleared the goods clandestinely. In the show cause notice it was not considered that when the respondent no.1 has cleared waste and scrap on payment of duty therefore, on such quantity of waste and Scrap, further, duty was not required to be demanded. Accordingly, on the basis of assumption and presumption it was alleged that respondent no.2 has not received the goods. Accordingly, I find that whole investigation is faulty and the show cause notices were issued to the respondent without producing any evidence on records. - Demand set aside - Decided in favor of asssessee.

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• 2016 (9) TMI 729
  Refund of unutilized Cenvat Credit - eligible input services - export of taxable services - Technical Inspection and Certification Service - Renting of Immovable Property & Security service - Air Travel Agent - Held that:- Technical Inspection services play significant role in the export of services and hence, the credit availed by appellant is very much in order and consequently appellant would be very much eligible for the refund. Rent has been paid for maintenance of sales office which has a direct nexus with the output service provided by the appellants and hence are eligible for the credit. As long as the Travel Agency Service is not received for personal benefit of any employee but meant for travel of office personnel, credit is not deniable. This service is in connection with production, planning, marketing etc. Credit allowed - Decided in favor of assessee.

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• 2016 (9) TMI 728
  Reversal of Cenvat Credit - sale of plant and machinery (capital goods) - contravention of the Rule 3(5) of Cenvat Credit Rule 2004 - Held that:- the impugned order is set aside and the matter is remanded to the Adjudicating Authority to re-determine quantum of Cenvat Credit by taking into consideration the depreciation allowed under the relevant rules as laid down in Navodhaya Plastic Industries Ltd.'s case (2013 (12) TMI 82 - CESTAT CHENNAI). - Decided partly in favor of assessee.

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• 2016 (9) TMI 727
  SSI exemption - use of Brand Name belong to the assessee or not - similar “Brand Name” - Held that:- It is visible clearly and seen by the naked eye that the “Brand Name”; which is registered in the appellant’s name definitely is different than the Trade Mark registered in the name of M/s Navin Bharat Industries Pvt. Ltd. On this point and merits itself, we find that the impugned order is unsustainable and liable to be set aside and we do so; as there being no dispute that appellant is using only the Trade Mark assigned their products. The reliance placed by the learned Departmental Representative in the case of Rukmani Pakkwell Traders (2004 (2) TMI 69 - SUPREME COURT OF INDIA), will not carry their case any further, in as much as in that case; the registration was Brand in the name of more than one person. Registration with the Trade Mark Authority of the “Brand Name” in this case as reproduced herein is in the name of appellant. Accordingly when the “Brand Name” is in the name of appellant benefit of SSI exemption in accordance with law needs to be extended to appellant. Benefit of exemption allowed - Decided in favor of assessee.

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• CST, VAT & Sales Tax

• 2016 (9) TMI 721
  Interestate sale of cement - benefit of partial exemption - whether the appellant is entitled to dual benefit of partial exemption under the notification dated 06.05.1986 and also the lower rate of tax @ 6% under notification dated 21.01.2000. - while calculating the benefits under notification dated 06.05.1986 the appellant had not included the figure of sale of levy cement made in the base year, that is, 1984-85. Held that: - A dealer making inter-State sales under the notification dated 21.01.2000 is disqualified and not eligible to claim benefit under the notification dated 06.05.1986. The reason is to deny dual benefit and also the notification dated 06.05.1986 computes the benefit on the basis of turnover. Bifurcation and division of turnover would lead to distortion and cause anomalies. Both the assessee and the Revenue had understood the circular dated 15.04.1994 to mean that inter-State transactions would qualify and would be entitled to partial exemption under the notification dated 06.05.1986, when accompanied with Form C and D and for inter-State sale transactions without Form C and D, benefit of notification dated 07.03.1994 would apply. The principle of res judicata would have no application in spite of the understanding by the assessee and the Revenue, for the circular dated 15.04.1994, is not to the specific effect as suggested and, further notification dated 07.03.1994 was valid between 1st April, 1994 up to 31st March, 1997 (upto 31st March, 1997 vide notification dated 12.03.1997) and not thereafter. The Commercial Tax Department, by a circular, could have extended the benefit under a notification and, therefore, principle of estoppel would apply, though there are authorities which opine that a circular could not have altered and restricted the notification to the determent of the assessee. The decision in the case Commissioner of Central Excise, Bolpur v. Ratan Melting and Wire Industries [2008 (10) TMI 5 - SUPREME COURT OF INDIA] relied upon where it was held that circulars and instructions issued by the Board are binding on the authorities under respective statute, but when this Court or High Court lays down a principle, it would be appropriate for the Court to direct that the circular should not be given effect to, for the circulars are not binding on the Court. Once circular dated 15.04.1994 stands withdrawn vide circular dated 16.04.2001, the appellant-assessee cannot claim the benefit of the withdrawn circular. The circular dated 15.04.1994 was ambiguous and, therefore, as long as it was in operation and applicable possibly doctrine of contemporanea exposition could be taken aid of for its applicability. It is absolutely clear that the benefit and advantage was given under the circular and not under the notification dated 07.03.1994, which was lucid and couched in different terms. The circular having been withdrawn, the contention of contemporanea exposition does not commend acceptation and has to be repelled. It would certainly not apply to the notification dated 21.01.2000. Appeal dismissed - decided against appellant.

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• 2016 (9) TMI 720
  Legality - surprise inspection - recorded statement - jurisdiction of respondent - delegation of power - Commercial Tax Officer - Assessing Officer - Commissioner of Commercial Taxes - Section 48 of the Tamil Nadu Value Added Tax Act, 2006 - Section 65 of the TNVAT Act - Held that: - writ of certiorari cannot be issued, quashing the inspection report or the seizure mahazar or the statement recorded from the dealer. The petitioner would state that the officer does not posses the jurisdiction to record the statement or prepare the inspection report or seize the documents. But however, it appears that the documents were seized from the place of business of the petitioner. Therefore, if the petitioner has any reservations on the statement given by them before the Enforcement Officials, it is always open to the petitioner to raise contention before the assessing officer and it is a settled legal position that the assessing officer, while completing the assessment, cannot solely be guided by the statement recorded by the Enforcement Officials - petition disposed off - decided against petitioner.

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• 2016 (9) TMI 719
  Principles of natural justice - Section 25 (1) of the KVAT Act, 2003 - chance to cross exaimne the witness - right to demand the materials on which reliance can be placed - Held that: - it is for the assessing authority to decide whether the request seeking an opportunity for cross examination of other dealers is a move to drag on the assessment procedure or not. Purchase and sales suppression were detected by cross verification of purchase list and sales list uploaded with the data in KVTAIS and intercepting the vehicles of the petitioner thrice. Further, the finding is that petitioner was practicing parallel billing in order to evade tax. All the particulars have been mentioned in the order. Certain suppressions were even admitted by the petitioner. Perusal of the order indicates that the details of invoices in the purchase stock dealers alone were not the material relied upon and it is found that the request seeking opportunity for cross examination of other dealers is understood as a move to drag on the assessment procedure. Sufficient reasons had been stated to deny permission for cross examination. That apart, petitioner was unable to show that any prejudice has been caused on account of non providing such an opportunity. The Apex Court in CIT v. Chhabil Dass Agarwal [2013 (8) TMI 458 - SUPREME COURT] held that the High Court must not interfere if there is an adequate efficacious alternate remedy available to the petitioner. Before entertaining any such writ petition, it has to be considered whether the petitioner has made out an exceptional case warranting such interference or there exists sufficient grounds to invoke the extraordinary jurisdiction under Article 226 of the Constitution of India. Petition dismissed - decided against petitioner.

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• 2016 (9) TMI 718
  Tax liability - section 60 of the Gujarat Sales Tax Act, 1969 - sale of electricity and steam generated from its captive plant to its sister concern - Condition 6 of Notification dated 1st April, 1992 and Entry 69 - Final Eligibility Certificate - Permanent Premier Registration - Held that: - Every citizen has a right to seek protection of the courts in respect of his grievances. The respondents, therefore, as a condition precedent for processing the Final Eligibility Certificate, could not have called upon the petitioner to first withdraw the petition filed before this court. The petitioner gives up its challenge to the extent it had contended that it was open for it to transfer the power and steam to its associate company and the said transaction would be exigible to levy of sales tax. The condition which has been stipulated by the High Level Committee that the company should withdraw the case against the Government from the High Court, no longer survives. The respondents required to proceed further and consider the grant of Final Eligibility Certificate and Permanent Premier Registration - petition disposed off - decided in favor of petitioner.

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• 2016 (9) TMI 717
  Recovery of pending VAT dues - detention of truck - seizure of goods - Form No.403 - Held that: - a statutory authority vested with jurisdiction must exercise it according to its own discretion. Discretion exercised under the direction or instruction of some higher authority is failure to exercise discretion altogether - The respondents are directed to forthwith release the truck of the petitioner which has been unauthorizedly detained by them. Imposition of penalty - GVAT Act, 2006 - subsection (5) of section 68 of the GVAT Act - Held that: - there is a lack of application of mind on the part of the Commercial Tax Officer, as no reasons have been assigned for imposition of the maximum rate of penalty - while passing the order, the Commercial Tax Officer shall independently apply his mind to the question of penalty without in any manner being influenced by the instructions issued by the Deputy Commissioner - penalty imposed not sustainable - petition allowed - decided in favor of petitioner.

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• Indian Laws

• 2016 (9) TMI 715
  Demand of advertisement tax - whether Rules, 2005 after having been superseded and repealed by Rules, 2009 would not revive after Rules, 2009 are declared ultra vires and, therefore, any demand of advertisement tax for the period of 2010-11 and subsequent thereto would be illegal and without jurisdiction? - Held that:- The power of State Government to abolish or modify a tax imposed by Government has validly been recognized but advertisement tax imposed by Rules, 2009 by State Government has been struck down for not complying with Section 206 of Act, 1959 and also without following the provisions of Sections 199 and 203 of Act, 1959. Thus aforesaid judgment in Anurag Bansal (2011 (4) TMI 1416 - ALLAHABAD HIGH COURT) has nowhere declared that Rules, 2009, in so far as in initial part of notification, supersedes existing rules and orders, lacks authority and that part will not be operated. Legislative intention is clear that existing rules and orders in respect of advertisement tax were superseded. New set of Rules, which have been struck down, would not render revival of supersession already done by Rule framing authority and that be so in our view Rules, 2005 shall not revive. Sri Rahul Sahai, learned counsel appearing for respondent-Nagar Nigam, when confronted with aforesaid authorities, could not place any authority before us so as to pursue to take a different view in the matter.The authorities, therefore, committed a manifest error in proceeding to demand advertisement tax under Rules, 2005 on the assumption that after judgment in Anurag Bansal (supra) striking down Rules, 2009, earlier Rules, 2005 would stand revive. This is neither legally permissible nor otherwise valid. In view of above, all these writ petitions are allowed. The orders and demand notices impugned in all these writ petitions are hereby quashed. It is held that respondents shall not be entitled to realize any amount under orders impugned in this writ petition, which are quashed by this judgment. If any, amount has been deposited by petitioners pursuant to impugned orders or realized by respondents by coercive method or otherwise, same shall be refunded to petitioners without any further delay. However, we make it clear that this judgment shall not preclude Competent Rule making authority from promulgating new set of rules in accordance with law.

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• 2016 (9) TMI 714
  Charges against a chartered accountant - professional misconduct - Held that:- In the present case, the complainant appeared before the Committee - on 19.01.2011 and explained the circumstances under which the agreement, embodied in the MOU, were entered into. The complainant, in fact did not withdraw his allegations; he also deposed that the criminal proceedings against the respondents continued and that the amounts agreed to be paid to him had not been in fact paid. The complainant relies on a subsequent MOU, the terms of which appear to be different, inasmuch as the complainant did absolve the respondent of all misconduct and withdraw the allegations. These facts, i.e. the parties appearing to have entered into another MOU on 16.04.2012 were material and had to be investigated. The impugned order does not take that into consideration at all. Whatever the truth of that document, the Council should have gone into it and called the complainant to depose before it, in the light of the later development. This, in the Court’s opinion, is a serious infirmity with the impugned order. The next question is whether in the circumstances of the case, particularly having regard to the nature of evidence and the materials placed before it, the Council could have concluded that the respondent was guilty of cheating or indulging in fraud, causing loss to the complainant. No doubt, the complaint does mention the relative amounts, the challans, the amounts allegedly collected as due, and the amounts paid. However, the relative or corresponding demands from the Service Tax authorities or the assessment orders, or even the service tax returns, are not on the record. These would have substantiated to a large measure the complainant’s allegation. Likewise, there is no material to suggest that the amounts were deposited in some other concern’s account. Quite possibly the respondent has been charge criminally for an offence. However, that ipso facto does not transform into proof of such criminal misconduct; the prosecution or the complainant would have to establish his guilt. While disciplinary proceedings may not be in the nature of court proceedings, yet when a professional, such as a chartered accountant is arrayed for misconduct which has quasi criminal overtones, the Council has to be circumspect; some modicum of objective evidence- both documentary and oral (and not only the say of the complainant- possibly the relative bank records and relevant statement of bank officers, too have to be considered) evidence is necessary. The cumulative picture which emerges is that the Council appears to have acted with haste and great dispatch. While its zeal to complete proceedings is understandable, one is reminded of an aphorism “Swift justice demands more than just swiftness” (Justice Potter Stewart, US Supreme Court). It was obligatory on the part of the Council not only to investigate the truth of the later MOU, but also satisfy itself that the basis of the complaint, i.e., that amounts were appropriated and lower amounts were paid into the accounts of Service tax authorities, were established objectively through documentary material. The findings recorded - from the state of the record, are such that they cast a slur on the professional integrity of the respondent, without proof of essential foundational facts. In the light of the above discussion, this court is of opinion that the matter requires to be gone into afresh by the Council. Having regard to the gravity of the allegations, it is but appropriate that the Council considers all the relevant materials, including the documents and the deposition of the complainant before preparing a fresh report. Accordingly, this court hereby in exercise of its jurisdiction, under Section 21 (6) (d) refers the case to the Council for further inquiry and report. The Council shall complete its task expeditiously and in any case within 6 months. The respondent is directed to present himself before the Council for further proceedings within three weeks from today. The Council shall complete the task, firstly by summoning the complainant, recording his deposition, and, thereafter proceeding to inquire into the material documents.

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• 2016 (9) TMI 713
  Procedure followed by the bank in accordance with the statutory mandate of the SARFAESI Act and the Rules of 2002 - auction sale held by bank - Held that:- The 7th respondent/auction purchaser is put to loss owing to a lapse primarily attributable to the bank in following the mandatory procedure stipulated in the Rules of 2002. Be it noted that the judgment in MATHEW VARGHESE [2015 (1) TMI 461 - SUPREME COURT ] was delivered as long back as on 10.02.2014, but the bank chose to ignore the legal position as settled therein and resorted to its own procedure, nearly a year and a half later, in July, 2015. The 7th respondent/auction purchaser would therefore be entitled to be suitably compensated for the loss caused to it in this regard. We therefore direct refund of the amounts deposited by the 7th respondent with the bank along with interest thereon at the rate of 18% per annum from the date of each deposit. Significantly, this was the rate of interest awarded by the Supreme Court to the bidder in MATHEW VARGHESE1 who had also parted with his monies. The amount so determined shall be refunded by the bank to the 7th respondent within two weeks from the date of receipt of a copy of this order by way of a pay order/bankers cheque. The writ petition is accordingly allowed setting aside the order passed by the Debts Recovery Tribunal, Visakhapatnam. We further hold that the sale held by the Indian Overseas Bank on 15.07.2015 was illegal, being in utter violation of the statutory mandate of Rules 8 and 9 of the Rules of 2002. All steps taken by the bank pursuant to the said illegal sale are also set aside.

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