TMI Tax Updates - e-Newsletter
September 2, 2016

Case Laws in this Newsletter:

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

Articles

1. Supply- Taxable Event under Model GST Law-Inclusive and Subjective

   By: Bimal jain

2. GENERAL PROCEDURE TO BE FOLLOWED IN A CASE BEFORE ‘NCLT’

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Coercive action including threat of arrest against officials for recovery of alleged service tax dues - power and jurisdiction of DGCEI

2. Want India to become a pensioned and an insured society – Arun Jaitley

3. Indian Postal Bank would be a game changer for the Banking & Financial system in the country: Secretary, DFS

4. Banking sector in India should focus on supporting Growth - Arun Jaitley

5. RBI Reference Rate for US $

6. Finance Ministry: Salient Features Emerging from Quarterly Estimates of GDP for Q1 of 2016-17 Released by CSO; Lower growth in Q1 of 2016-17, compared to Q1 of 2015-16 is attributable among others to increase in subsidies by 53 per cent which has resulted in lower growth of net indirect taxes

7. Streamlining the Process of No Objection Certificate (NOC), Port Clearance Certificate (PCC), Voyage Return and Voyage Assessment in case of Foreign Shipping Companies (FSCs)

8. Competition Commission of India (CCI) imposes penalties upon cement companies for cartelisation

Notifications

Customs

1. 119/2016 - dated 1-9-2016 - Cus (NT)

Rate of exchange of conversion of the foreign currency with effect from 02nd September, 2016

Income Tax

2. 10/2016 - dated 31-8-2016 - IT

Extension of due date for quarterly furnishing of 15G/15H declarations

Circulars / Instructions / Orders

DGFT

1. 15/2016 - dated 31-8-2016

Special Advance Authorisation Scheme for export of Articles of Apparel and Clothing Accessories

2. 27/2015-2020 - dated 31-8-2016

(A) Amendments in Hand Book of Procedures 2015-20 for incorporating Procedure to be followed for Special Advance Authorization Scheme for export of articles of apparel and clothing accessories under Chapter 61 and 62 of ITC(HS) Classification of Export and Import. (B) Amendment in Appendix 4 J relating to Export Obligation Period under Special Advance Authorization Scheme for export of Articles of Apparel and Clothing Accessories

Customs

3. F.No.450/146/2015-Cus-IV - dated 31-8-2016

Single Window Project — Implementation of Risk based selectivity criteria for clearance of consignments related to Participating Government Agencies (PGAs)

4. F. No.450/146/2015-Cus-IV - dated 31-8-2016

Single Window Project - clearance of food consignments by Customs officers at locations where FSSAI has provided delegation

5. 43/2016 - dated 31-8-2016

Rebate of State Levies on Export of Garments – Implementation by CBEC

6. 42/2016 - dated 31-8-2016

Courier bond executed CCSPs

7. 41/2016 - dated 30-8-2016

Admissibility of un-utilized cenvat credit of DTA unit converted into EOU

Highlights / Catch Notes

Income Tax

• High Court Rules in Favor of Extending DTAA Benefits; Revenue's Argument Against Singapore Certificate Rejected u/s 10.

  Case-Laws - HC : Applicability of Article 8 visavis Article 24 of DTAA - income assessable to tax at Singapore on the basis of accrual or remittance - The contention of the revenue that the certificate of the Singapore revenue authorities is opposed to provisions of section 10 of the Singapore Income Tax Act cannot be accepted. The Revenue does not question genuineness of the certificate - Benefit of DTAA to be extended - HC
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• Section 13(1)(c) allows normal trust transactions with specified individuals, ensuring income isn't used for personal benefit.

  Case-Laws - HC : Exemption u/s 11 - Section 13(1)(c) of the Act does not prohibit normal transactions between the trust and the persons referred to in sub-section (3) of the Act. What is relevant is the use or application of any part of the income of the trust directly or indirectly for the benefits of any such person referred to in subsection (3). - HC
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• Tribunal Deletes Addition Due to Discrepancies Between Bank Stock Statement and Book Records.

  Case-Laws - HC : Tribunal was right in law in deleting the addition made on account of difference in stock statement as furnished before the bank as compared to shown in books of account - HC
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• Assessing Officer to Determine Installation Permanent Establishment; Income Attributed Based on Installation Functions Performed.

  Case-Laws - AT : The matter regarding installation PE is to be verified by AO. If AO reaches a conclusion that there was installation PE, then the income has to be attributed considering the extent of functions performed in relation to installation. - AT
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• Losses from Repossessed Assets in Hire Purchase Agreements Allowable as Business Losses for Tax Purposes.

  Case-Laws - AT : Repossession of assets given on hire purchase - loss incurred by the assessee due to sale of repossessed assets are allowable as business loss - AT
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• No Penalty u/s 271(1)(c) for Unintentionally Omitting Salary in Income Return Due to Bona Fide Mistake.

  Case-Laws - AT : Penalty u/s 271(1)(c) - salary that was omitted to be declared in the return of income - assessee cannot be made liable for penalty as there is a bona fide mistake of omission in not showing the salary received from the previous employers. - AT
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• No Penalty u/s 271(1)(c) When Deemed Sale Consideration Used and No Extra Consideration Proven.

  Case-Laws - AT : Where there is no evidence of receipt of consideration over and above declared by the assessee and the assessment is either completed u/s 143(3) or even u/s 148 based on deemed sale consideration u/s 50C as per stamp duty authority invoking provisions of section 50C, the penalty u/s 271(1)(c) is not leviable. - AT
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• Interpreting Deemed Dividend u/s 2(22)(e) of Income Tax Act: Assessee's Rs. 25L Loan Taxed as Dividend.

  Case-Laws - AT : Deemed dividend as per section 2(22)(e) - when the assessee borrowed the money from the M/s. Chaitanya Packagings (P) Ltd. the creditor company i.e. M/s. Chaitanya Packagings (P) Ltd. is having an amount of ₹ 48,03,137/- and out of which loan advanced to the assessee of ₹ 25,24,796/-. It is clearly a deemed dividend - AT
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• Penalty u/s 271B Deleted Due to Assessee's Illness; Reasonable Cause for Non-Compliance with Section 44AB.

  Case-Laws - AT : Penalty u/s 271B - Failure to get the books of accounts audited u/s 44AB - assessee was himself ill due to which he could not maintain essential books, hence same constitutes a reasonable cause. Penalty deleted - AT
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• Indo-Russia DTAA Dispute: Income from PDPL Project Taxed at 10% Due to Lack of Evidence from Assessing Officer.

  Case-Laws - AT : Rate of tax under Indo-Russia DTAA - No case has been made out by the A.O. to show that Section 115A and Section 9(1)(vii) are not applicable in the present case as per which the income of the assessee with regard to PDPL project is liable to tax @ 10% as has been claimed by the assessee. - AT
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Service Tax

• Authority of DGCEI in Using Coercive Measures for Service Tax Recovery Examined: Threats of Arrest Against Officials.

  News : Coercive action including threat of arrest against officials for recovery of alleged service tax dues - power and jurisdiction of DGCEI
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• High Court Quashes DGCEI Actions for Coercion in Service Tax Case, Citing Lack of Jurisdiction and Authority.

  Case-Laws - HC : Coercive action including threat of arrest against officials for recovery of alleged service tax dues - power and jurisdiction of DGCEI - The DGCEI acted with undue haste and in a reckless manner - proceedings quashed - HC
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• Service Tax Exemption Denied for Jute Loom Machine Job Work Due to Principal Manufacturer's Existing Benefits Under Notification 25/2012-ST.

  Case-Laws - AAR : As the principal manufacturer is availing benefit of exemption on the manufacture of “Jute Loom Machine” on job work by the applicant, benefit of service tax exemption Notification No. 25/2012-ST dated 20.06.2012, as amended, cannot be extended to the applicant - AAR
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• Service Tax Exemption Applies to All Railways, Including Private Siding Constructions, Confirms Authority for Advance Rulings.

  Case-Laws - AAR : Exemption from service tax - no differentiation made on Government and Non-Government railway for providing exemption – exemption available on Construction of railway siding for private parties- AAR
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• Discrepancy in Service Values Due to Different Accounting Systems Not Malafide if Fully Reflected in Balance Sheet.

  Case-Laws - AT : When the Balance sheet entries and the value as reflected in ST-3 returns are based upon different accounting system, and when the entire value stands reflected in the balance sheet, the difference in the value of services cannot be attributed to any malafide on the part of the assessee - AT
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• Air Travel Tax Break: 90% Service Tax Exemption for Flights to/from Regional Connectivity Scheme Airports for One Year.

  Notifications : 90% exemption / abatement from service tax for a period of one year for Transport of passengers, with or without accompanied belongings, by air, embarking from or terminating in a Regional Connectivity Scheme Airport. - Notification
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Central Excise

• Appellant Challenges Double Taxation on Quantity Discount; Claims Duty Already Paid on Total Goods Cleared.

  Case-Laws - AT : Since the appellant has already paid the duty on the entire quantity cleared, which include free supply quantity and now demanding duty again on quantity discount would tantamount to subjecting the goods to duty twice, which is not permitted by law. - AT
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• Assessee's Cenvat credit claim on returned goods rejected for lack of proof of receipt; repayment demanded.

  Case-Laws - AT : Cenvat credit - rejected/returned goods - credit took on the RBA series invoices and linked to their own original invoices reference - assessee failed to establish or prove that the goods were actually received - Demand confirmed - AT
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• Duty Demand on Goods Discrepancy Set Aside After 3CD Returns and RG-1 Daily Stock Account Analysis.

  Case-Laws - AT : Demand - duty on difference between finished goods reported in their 3CD returns and the RG-1 daily stock account - less quantity of clearance has been shown in their ER-1 returns as compared to the quantity of sale mentioned in the Balance-sheet - demand set aside - AT
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• Duty Remission Granted for 4082 Metric Tons of Molasses Damaged by Auto-Combustion, Duty Demand Set Aside.

  Case-Laws - AT : Remission of duty payable on 4082 MTs of molasses - deteriorated due to auto-combustion and ultimately became unfit for consumption - demand of duty set aside - AT
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Case Laws:

• Income Tax

• 2016 (9) TMI 19
  Applicability of Article 8 visavis Article 24 of DTAA - income assessable to tax at Singapore on the basis of accrual or remittance - Held that:- The certificate dated 09.01.2013 issued by the Inland Revenue Authority of Singapore assumes significance. In the said certificate, as noted, it was certified that the income in question derived by ST Shipping would be considered as income accruing in or derived from the business carried on in Singapore and such income therefore, would be assessable in Singapore on accrual basis. It was elaborated that the full amount of income would be assessable to tax in Singapore not by reference to the amount remitted to or received in Singapore. In fact, the certifying authority went on to opine that in view of such facts, Article 24.1 of the DTAA would not be applicable and consequently, Article 8 would apply. As in absence of any rebuttal material produced by the Revenue, we would certainly be guided by the factual declaration made by the said authority in the said certificate and this declaration is that the income would be charged at Singapore considering it as an income accruing or derived from business carried on in Singapore. In other words, the full income would be assessable to tax on the basis of accrual and not on the basis of remittance. This certificate was before the Commissioner while he passed the impugned order. The contents of this certificate were not doubted. If that be so, what emerges from the record is that the income in question would be assessable to tax at Singapore on the basis of accrual and not remittance. This would knock out the very basis of the Assessing Officer and Commissioner for invoking clause1 of Article 24 of DTAA. Both the authorities considered the question of remittance of income as the sole requirement for invoking Article 24.1 of DTAA an interpretation which according to us does not flow from the language used. As noted the essence of Article 24.1 is that in case certain income is taxed by a contracting State not on the basis of accrual, but on the basis of remittance, applicability of Article 8 would be ousted to the extent such income is not remitted. This clause does not provide that in every case of nonremittance of income to the contracting state, Article 8 would not apply irrespective of tax treatment such income is given. When in the present case, we hold that the income in question was not taxable at Singapore on the basis of remittance but on the basis of accrual, the very basis for applying clause1 of Article 24 would not survive. The contention of Shri Mehta for revenue that the certificate of the Singapore revenue authorities is opposed to provisions of section 10 of the Singapore Income Tax Act also cannot be accepted. The Revenue does not question genuineness of the certificate. It cannot dispute the contention on the ground that the same are opposed to the statutory provision.

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• 2016 (9) TMI 18
  Benefit of exemption u/s 11 denied - education institution - profit motive - commercial activity - transaction with the specified persons - Held that:- Insofar as the lease rent is concerned, the revenue had not brought on record any evidence to suggest that such lease rent was either excessive or even higher than the normal market rate prevailing in the region at the relevant time. In fact, the assessee produced material to show that a part of the land belonging to the trustees was leased to one Max New York Life Insurance Co. Ltd. at the rate of 5/- per sq. ft. as against the rate of 1/- per sq. ft. being paid by the assessee. The CIT (Appeals) discarded such comparison on the ground that the area occupied by the Max New York Life Insurance Co. Ltd. was much smaller, as compared to the area leased to the assessee. The size of the land under occupation may have some bearing on the lease rent which the land may fetch, nevertheless, in the present case, the difference of rate between two cases was nearly five times. Without there being any further material on record, the Commissioner could not have come to the conclusion that the rent paid by the assessee to the trustees for the leased land, was excessive. Similarly, the assessee pointed out to the authorities that it needed to raise a fund of 2 crores by taking loan from the financial institutions for which permission was also granted by the Charity Commissioner. The Bank had offered loan at the interest rate of 12.50% per annum which would also require giving securities and executing documents. As against this the trustees offered unsecured loan at the interest rate of 9% per annum. Here again, the CIT (Appeals) discarded such comparison by contending that the trustees themselves would have fetched lower fixed deposit rate from the Bank. For multiple reasons, this was not a correct approach. First, we are trying to ascertain whether the trust was paying the interest at the rate higher than the market rate. What the trustees could have got from the Bank was not correct comparison. Secondly, the trustees were offering unsecured loan, which with inherent risks, invites higher interest than the bank loans. Last but not the least, if the trustees had parked their money in the Bank fixed deposits, the liquidities and security of such investment would be much higher than lending substantial amount to the trust without a collateral security. Section 13(1)(c) of the Act does not prohibit normal transactions between the trust and the persons referred to in sub-section (3) of the Act. What is relevant is the use or application of any part of the income of the trust directly or indirectly for the benefits of any such person referred to in subsection (3). Mere payment of lease rent or interest on borrowed funds, without there being any element of such payments being excessive or unreasonable compared to the normal rates prevailing, would not fall within the mischief of section 13(1)(c). - Decided in favour of the assessee

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• 2016 (9) TMI 17
  Addition on account of difference in stock statement as furnished before the bank and the stock recorded in the books of account - Held that:- As in the case of Riddhi Steel and Tubes (2013 (10) TMI 291 - GUJARAT HIGH COURT ) it is held by this Court that only on account of inflated statements furnished to the banking authorities for the purpose of availing of larger credit facilities, no addition can be made if there appears to be a difference between the stock shown in the books of account and the statement furnished to the banking authorities. Only on account of inflated statements furnished to the banking authorities for the purpose of availing of larger credit facilities, no addition can be made if there appears to be a difference between the stock shown in the books of account and the statement furnished to the banking authorities. If, for the purpose of fulfilling the margin requirements of the bank purely on inflated estimate basis, when the stock statement had reflected inflated value of the stock, in wake of otherwise satisfactory explanation, both - for the purpose of value as well as quantity and taking into account the actual non verification of stock, we find no reason to interfere with the order of the Tribunal. We hold that the Tribunal was right in law in deleting the addition made on account of difference in stock statement as furnished before the bank as compared to shown in books of account. Decided in favour of the assessee.

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• 2016 (9) TMI 16
  Income attributed to the offshore supply - Existence of PE in India - Held that:- Section 9(1)(i) of the Act provides that income shall be deemed to accrue or arise in India if such income has accrued or arisen through or from a business connection in India. Further, Explanation 1 to section 9(1)(i) of the Act provides that where a business, of which all the operations are not carried out in India, the income of the business deemed to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. Admittedly no portion of the offshore supplies involved any activities in India as all the activities in relation to the earning of income from offshore supplies took place outside India. Now even assuming that on account of contract being signed in India, a business connection had been established, still we have to examine the issue from India US DTAA point of view as the assessee was eligible to claim benefit under the treaty. As per Article 7(1) of the India US DTAA, the business income of a US entity can be taxed in India only if it had PE in India. The AO held that assessee had PE in India for installation and commissioning and supply which also included the indigenous supply and presence of its personnel/ entities for providing training to ONGC personnel. These observations are primarily with reference to the contract being treated as a composite contract and does not refer to which PE as per Article 5 of the India-US treaty was there. Admittedly the assessee had no fixed place of business in India and its employees only gave training for proper execution of the project. Further, assessee company did not take the services of any person in India except for supply of indigenous parts and, therefore, there was no dependent agent PE in India also. The AO has not brought on record any evidence to substantiate that the income from offshore supplies was attributable to alleged PE. Further, if we consider the AO’s view that there was installation PE, then too as per Article 5(2)(j)&(k), there should have been presence for more than 120 days then only installation PE could be considered. The AO has not commented on this aspect. Therefore, the entire findings of AO on the issue relating to PE are without any basis. Therefore, considered from all perspectives no income can be attributed to the offshore supply.

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• 2016 (9) TMI 15
  Allowable Business loss - Loss incurred by the assessee due to sale of repossessed assets - Held that:- When the appellant generate income out of hire purchase transactions, (on account of realisation of installments from the hirers) the same is treated as Business Income. Considering the same fact, when there is a loss on account of repossession of hire purchase stock, the same should be considered as a Business Loss since the main business of the company is to give assets on hire and as such, any loss arising out of sale of repossessed stock is incidental and inherent part of the business of hire purchase carried on by the company. Repossessed hire purchase assets constitute stock-intrade ("current assets") for the appellant and are classified as such in its accounts also. They are neither classified as fixed assets nor is any depreciation claimed thereon by the appellant. Stock-in-trade has been specifically excluded from the purview of 'Capital Assets' vide clause (i) of section 2(14) of the Act. Accordingly, the repossessed assets are not capital assets of the appellant. The above mentioned loss arose consequent to the repossession of assets given on hire purchase, following a default by the hirer's. The shortfall of the realizable value/sale proceeds vis-a-vis the amount recoverable from the hirers constituted the loss incurred by the Appellant is a Business loss. Respectfully following decision of Hon'ble Supreme Court in the case of CIT Vs Nainital Bank Ltd. (1964 (9) TMI 11 - SUPREME Court ), we hold that the loss incurred by the assessee due to sale of repossessed assets are allowable as business loss Loss on sale of debentures and Govt. Securities have been rightly claimed as business loss by the assessee.

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• 2016 (9) TMI 14
  Penalty u/s 271(1)(c) - salary that was omitted to be declared in the return of income - Held that:- As observed that the tax has been deducted by the previous employers of the assessee to the extent of 7,88,334/-. On perusal of the return of income filed by the assessee, it is observed that the assessee has not claimed the TDS so deducted by previous employers and has only claimed the TDS in respect of employer from whom he drew his last salary during the end of the financial year relevant to Assessment Year under consideration. In such a situation, the possibility of bona fide mistake cannot be overruled. Ld. Assessing Officer has also not made any case against the assessee in respect of TDS not being deducted against the salary drawn during the year under consideration being insufficient. It is also observed that the assessee had fully cooperated during the assessment proceedings and had submitted sufficient details to establish the bona fide mistake that was committed inadvertently. However, the Assessing Officer did not agree to the explanation of the assessee and he initiated penalty proceedings u/s 271(1)(c) of the Act for filing inaccurate particulars of income. In our considered opinion, the assessee cannot be made liable for penalty as there is a bona fide mistake of omission in not showing the salary received from the previous employers. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasicriminal proceedings and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. From the ROI filed by the assessee, it has been demonstrated that the assessee has failed to claim the TDS deducted by the earlier employers. The conduct of the assessee supports the explanation tendered and therefore, a deliberate omission to include the salary received from previous employer cannot be established.Accordingly, we delete the penalty levied by the Assessing Officer in respect of omission to disclose the salary received from the previous employers on which TDS had already been deducted by them. Interest on housing loan - Held that:- From the Paper Book filed before us, the assessee has referred page 22 which is the certificate of interest issued by HDFC bank. It has been submitted that the housing loan is in the joint name of his wife as the house property was purchased in the joint name. However Ld. A.R. submitted that the interest was paid by the assessee from his account; therefore the assessee has claimed deduction of total amount in his return of income. Ld. A.R. submitted that the assessee was under the bona fide belief that as he was paying the interest, the deduction should also be claimed by him alone. We find that explanation given by the assessee has not been accepted by the Ld. A.O. for which a penalty cannot believed u/s 271(1)(c) of the Act. Reliance has been placed on the decision of Hon'ble Supreme Court in the case of Reliance Petro Products Ltd. [2010 (3) TMI 80 - SUPREME COURT] which hold that mere disallowance of any claim will not automatically lead to levy of penalty u/s 271(1)(c) of the Act. Further, there is no material that has been brought on record by the Ld. A.O. to prove that the assessee has consciously concealed any particulars pertaining to his income or has supplied inaccurate particulars deliberately. We are therefore, inclined to delete the penalty levied by the A.O. in respect of interest on housing loan. In respect of interest earned by the assessee on saving bank account, the disallowance that has been made by the Assessing Officer is to the extent of 12,863/-. Ld. A.R. has submitted that the assessee has been filing his return without any professional assistance and was not aware about the interests so earned on saving bank is taxable in the hands of the assessee. Therefore, explanation advanced by the assessee cannot be accepted as such interest on saving bank accounts is credited to the assessee’s bank account during every financial year. It cannot be a case where assessee has been consistently filing his returns personally was ignorant that interest so earned from saving bank being taxable. The explanation tendered by the assessee is not acceptable for the simple reason that the assessee has been filing his return every year and interest on saving bank account accrues to assessee in every assessment year. We, therefore, upheld the penalty levied by the Ld. A.O. on such interest on saving bank account. Credit card expenses - Held that:- As observed from the assessment order that the assessee had made expenses of 3,12,137/- as seen from the AIR information, through credit card. On calling for the details by Ld. A.O., assessee submitted the bank account and was not able to submit the credit card statement for verification of such expenses. Ld. A.O. has verified the expense amounting to 1,50,843/- which appears in the bank statement. As the remaining expense have been 1,61,294/- for the expenses made through credit card which was not verifiable, the same was added to the income of the assessee. It has been observed that the addition had been made for want of evidence / explanation. As the assessee has not submitted proper explanation in support of expenses made through credit card. We do not find any infirmity in levying penalty on such amount. In view of above, we confirm the penalty levied by the Assessing Officer for submitting wrong explanation in respect of credit card expenses. Decided partly in favour of assessee.

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• 2016 (9) TMI 13
  Penalty u/s 271(1)(c) - addition u/s 50C on the amount of difference between sale consideration and valuation made by stamp duty authority - Reopening of assessment - Held that:- Coordinate Benches in various decisions starting from Renu Hingorani [2010 (12) TMI 795 - ITAT MUMBAI ] have held that where there is no evidence of receipt of consideration over and above declared by the assessee and the assessment is either completed u/s 143(3) or even u/s 148 based on deemed sale consideration as per stamp duty authority invoking provisions of section 50C, the penalty under section 271(1)(c) is not leviable. In light of above discussions and in the entirety of facts and circumstances of the case, we are of the view that the ld CIT(A) has rightly deleted the penalty levied by the AO u/s 271(1)(c) of the IT Act, 1961. - Decided in favour of assessee.

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• 2016 (9) TMI 12
  Deemed dividend as per section 2(22)(e) - Held that:- It is clear that as on the date of loan advanced to the assessee by the M/s. Chaitanya Packagings (P) Ltd. it has to be seen whether there is accumulated profit in the hands of the creditor company or not. In the present case as on 1.4.2007, M/s. Chaitayna Packings Pvt. Ltd. is having accumulated profit of 48,03,137/-. Not only that, the creditor company in its ledger folio account it is clearly mentioned that the assessee as the proprietor of M/s. Tulasi Digital Studio borrowed money as an advance from M/s. Chaitanya Packagings (P) Ltd. during the financial year 2007-08. It is also further found that from the loan account of the assessee company, there is an outstanding credit balance of 11,87,483.98 ps. as on 31.3.2008. From the above facts, it is very clear that when the assessee borrowed the money from the M/s. Chaitanya Packagings (P) Ltd. the creditor company i.e. M/s. Chaitanya Packagings (P) Ltd. is having an amount of 48,03,137/- and out of which loan advanced to the assessee of 25,24,796/-. It is clearly a deemed dividend in the light of section 2(22)(e) of the Act. So far as various case laws relied by the Ld. Counsel for the assessee is concerned, we have gone through each and every case and we find that the facts involved in those case laws are entirely different from the case in hand. In view of the above, we find no infirmity in the order passed by the Ld. CIT(A) and also no interference is called for.

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• 2016 (9) TMI 11
  Penalty u/s 271B - Failure to get the books of accounts audited u/s 44AB - illness of the assessee - Held that:- We are of the considered opinion that due to the illness of the assessee, he could not maintain proper books of accounts for the financial year 2009-10 relevant to assessment year 2010-11, which are essential for audit u/s 44AB of the Act. Therefore, the question that the books of accounts could be audited during the period in which the assessee attended personally before him cannot be said as irrelevant. Because the essential books of accounts required for audit could not be maintained due to illness of the assessee, hence there was no books of accounts, which could be produced before Chartered Accountants for getting them audited. Therefore, the contention of the AO is misplaced. Further, the ld. Authorized Representative of the assessee has relied in the case of ITO vs. Gayatri Coal Supply Company (1997 (6) TMI 76 - ITAT PATNA ), wherein it was held that the illness of Chartered Accountant constituted a reasonable cause and hence penalty u/s 271B could not be levied, whereas in the instant case, the assessee was himself ill due to which he could not maintain essential books, hence same constitutes a reasonable cause. Penalty deleted - Decided in favour of assessee.

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• 2016 (9) TMI 10
  Income derived from two pipeline projects - Rate of tax under Indo-Russia DTAA - business income OR fee for technical service - Held that:- The Tribunal decision rendered in the case of Voith Siemens Hydro (2010 (3) TMI 1112 - ITAT DELHI ) is squarely applicable in the present case and as per this decision of the tribunal in the light of the facts of the present case, the activities undertaken by the assessee does not fall within the exclusion category of Explanation (2) to Section 9(1)(vii) of the Income tax Act, 1961. Not justified on the part of the A.O. and DRP to say that with regard to the scope of activities of the assessee company, cooperation agreement is not valid and they have to go by consortium agreement. They have also not brought on record any evidence to show that the assessee has undertaken any extra activity in addition to the activities falling within its scope of work as per the co operation agreement. Hence, even if extra responsibility of the assessee is there as per the consortium agreement and as per the terms of contract awarded by GAIL to the consortium, the assessee has not done those extra activities and the consideration received by the assessee is as per the co operation agreement for the activities provided in the co operation agreement and having accepted by the A. O. the amount of consideration received by the assessee at 3% of gross receipts of the consortium, it has to be accepted that the same is for providing FTS as per the co operation agreement. No case has been made out by the A.O. to show that Section 115A and Section 9(1)(vii) are not applicable in the present case as per which the income of the assessee with regard to PDPL project is liable to tax @ 10% as has been claimed by the assessee. We, therefore, direct the A.O. to apply the provisions of Sub clause BB of clause (b) of sub-section (1) of Section 115A along with Section 9(1)(vii) of the Act. No reason to interfere in the CIT(A)’s order under challenge reversing Assessing Officer’s finding treating assessee’s income from the two pipeline projects as business income instead of that declared under the head fee for technical services. The Revenue’s sole substantive ground is declined.

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• 2016 (9) TMI 9
  Penalty levied u/s 271(1)(c) - assessee had furnished inaccurate particulars of the income - Held that:- The assessee – company was in its first year of incorporation subjected to survey operation. At the time when the due date for filing return had not expired. During the survey the assessee admitted certain bogus share application money to the tune of 5.86 crores. Before the expiry of the due date for filing return, assessee also filed a return making matching disclosures. The Assessing Officer made no additions in this income but, desired to levy penalty on the ground that the assessee had furnished inaccurate particulars of the income. To our mind, such penalty could not have been imposed as rightly held by the Tribunal. Section 271 of the Act provides for penalty. Clause (c) of sub-section (1) of Section 271 of the Act provides that if the Assessing Officer during the course of any proceeding under the Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct such person to pay by way of penalty which shall not be less than, but which shall not exceed three times the amount of tax sought to be evaded by the reason of concealment of particulars or furnish inaccurate particulars of such income. As noted, the revenue desired to bring in the element of the assessee having furnished inaccurate particulars of its income. The fact that the assessee did make a disclosure of such income in the return filed and the Assessing Officer was not dissatisfied by such disclosure is not in dispute. The assessee having filed the return by the due date for filing return, in which such income was also offered to tax, the question of assessee having furnished inaccurate particulars of the income would not arise. - Decided in favour of assessee.

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• 2016 (9) TMI 8
  Eligibility of registration u/s 12A - Whether the assessee trust is hit by section 13(1)(b) of the Act, as the trust is not created for the benefit of general public but is created for the benefit of a particular religious community i.e. ‘Jain Community'? - Tribunal allowed registration - Held that:- As per clause 4.1, the trust would engage itself in activities relating to education by maintaining and running education centers, infant schools, primary secondary and high schools, colleges etc., to run hostels, training centers for creating awareness in the common people and to make the education available for the public. It would also engage in imparting training in computers. As per clause 4.3, the trust would engage in doing all activities for medical help and to establish and administer dispensaries, hospitals and laboratories etc. It would also help the patients by supplying medicines and financial assistance. Likewise in clause 4.4 the trust could engage in rural development schemes. As per clause 4.5, the trust would engage in literary and cultural activities by making efforts for the development and protection of Indian culture. Clause 4.6 which pertains to other included activities such as running cow shelters, to provide food, cloth and financial help for economically weaker persons, to help during natural or other calamities, to serve humans and animals etc. Thus, very premise for the Commissioner to come to the conclusion that the objects of the trust were confined for the benefit of a religious community, is incorrect. Thereafter to suggest that the activities were carried out only for such purposes would be entering in the realm of granting exemptions in terms of Section 13 of the Act, which would be the task of the Assessing Officer to be undertaken at the time of assessment on the basis of material that may be brought on record. No question of law arises

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• 2016 (9) TMI 7
  Addition on profit from Suryarath Scheme - ITAT deleted the addition - Held that:- The assessee had already disclosed the receipts as per the sale and there is no scope for further additions. This view of the Commissioner of Incometax (Appeals) was confirmed by the Tribunal. Entire issue was thus based on facts and upon apprehension of materials on record with the Commissioner of Incometax (Appeals) and Tribunal concurrently held that the evidence on record do not suggest any income earned by the assessee, over and above which was disclosed which was in tune with the development agreement. - Decided against revenue.

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• 2016 (9) TMI 6
  Taxation on plantation income from Malaysia - DTAA between India and Malaysia - P.E. in India - Held that:- Tribunal have failed to note that the assessee had deliberately kept away the income from Malaysia. The fact that the plantation is in Malaysia, would be a permanent establishment, in terms of DTAA, through which, business is carried on, by the assessee and therefore, the income from such plantation, would be taxable only in Malaysia and not in India, has been substantiated by the assessee. - Decided in favour of assessee.

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• 2016 (9) TMI 5
  Disallowance u/s. 40(a)(ia) - assessee in default - Held that:- The assessee cannot be treated as a defaulter in view of the first proviso to section 201(1) r/w second proviso to section 40(a)(ia) of the Act if the concerned payee has taken into account the relevant sum for computing income in his return of income furnished u/s. 139 and has paid tax due on the income declared in such return. We, therefore, set aside the impugned order of ld. CIT(A) confirming the disallowance made by the AO u/s. 40(a)(ia) and restore the matter to the file of the AO for deciding the same afresh in the light of first proviso to section 201(1) r/w second proviso to section 40(a)(ia) which are held to be applicable to the year under consideration being retrospective in effect.

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• 2016 (9) TMI 4
  Penalty u/s 271(1)(c) - Held that:- In the show cause notice dated 01/12/2010 there was no specific charges as relates to concealment of income or furnishing of inaccurate particulars of income as relates to business advance as it was forfeited and the same were accepted in respective years. Therefore, there was no concealment on the part of the assessee. This was a simple case of disallowance of expenses under the head in which most of smaller expenses have been allowed during the year as well as in the earlier years. Thus, the authorities cited by the Ld. AR are applicable in the present case. In respect of miscellaneous expenses, the forfeitures were not produced since they were untraceable and the same was not concealed by the assessee before the Assessing Officer. Thus, there is no concealment. Thus, Section 271(1)(c) of the Act was not correctly invoked by the Assessing Officer. The CIT(A) also overlooked the actual intention of the penalty proceedings which clearly set out that when there is inaccurate particulars or concealment on part of the assessee, then the same should be proceeded. But in the present case, the assessee has disclosed all the factual aspects before the Assessing Officer which cannot be stated that there was concealment of particulars of income or the assessee furnished inaccurate particulars of income. - Decided in favour of assessee.

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• 2016 (9) TMI 3
  Gains arising on sale of shares - assessable as Short term capital gains OR business income - CIT(A) held that the assessee is an investor and not a trader during the year under consideration - Held that:- we are of the view that there is no reason to interfere with the order passed by Ld CIT(A) on this issue. We have earlier noticed that the Ld CIT(A) has analysed the facts prevailing in the instant year and has shown that the observations made by the AO on various criteria were not correct. Further the assessee’s income in the earlier years has been accepted by the AO in the scrutiny proceedings including the loss declared by the assessee. Accordingly the Ld CIT(A) has held that the principle of consistency should be applied in the present year also, since the assessing officer has not made out a case of change in facts. - Decided against revenue

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• 2016 (9) TMI 2
  Penalty u/s 271(1)(c ) - claim u/s 35D - Held that:- As find from the record that the assessee has made claim u/s 35D of the Act which was reduced during the course of assessment proceedings when the assessee filed revised calculation u/s 35D and thus the difference of 5,35,279/- was added to the income of the assessee. We find that the claim of the assessee was also certified by the Chartered Accountant of the assessee and find merit in the submissions of the ld. AR that it was claimed under bonafide belief. The case of the assessee find strong support from number of decisions as placed before the Bench during the course hearing. Thus direct the AO to delete the penalty. - Decided in favour of assessee

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• 2016 (9) TMI 1
  Disallowance u/s 40(a) - Held that:- Once the amount has been disallowed under the provisions of section 40(a)/40 (a) (ia) of the Act on the reason that tax has not been deducted, the AO cannot invoke the TDS provisions for holding the assessee as, “assessee in default” u/s 201 (1) of the Act. But, if the assessee subsequently claims deduction of the amount after payment of TDS, charging of interest u/s 201 (1A) of the Act for limited period during which TDS was not paid as per the provisions of the Act are applied and be charged accordingly. Accordingly, we direct the AO to verify the provisions made by the assessee towards contingent payments as narrated in the order of the CIT (A) chart filed by the assessee and reproduced by the CIT (A). In terms of the above, the AO will verify the details and will follow the decision of the Hon’ble Karnataka High Court in the case of Karnataka Power Transmission Company (2016 (2) TMI 412 - KARNATAKA HIGH COURT).

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• Customs

• 2016 (9) TMI 28
  Waiver of pre-deposit – 10% of penalty amount directed to be deposited or to furnish 100% bank guarantee of penalty amount – discretion of appellant authority to dispense with pre-deposit unconditionally or subject to some conditions – inability shown by petitioner to pay the pre-deposit amount – Held that: - There is nothing on record to prove that the petitioners are financially disabled to make pre-deposit of 10% of the penalty amount to have their appeal entertained by the appellate authority. The discretion that has been exercised by the appellate authority is neither arbitrary nor capricious and, therefore, no interference warranted - Petitioner to make pre-deposit failing which the appeal shall stand dismissed – petition dismissed – decided against petitioner.

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• 2016 (9) TMI 27
  Recovery of duty - section 28(1) of the Customs Act, 1962 – import of aluminum ingots - notification No.176/1980 dated 29.8.1980 – levy of additional duty to the extent of 12.5% of the value of goods – earlier notification rescinded by notification No.76-Cus dated 27.3.1981 with effect from 27.3.1981- issue of bank guarantee for recovery of the sums – non-renewal of bank-guarantee – proceedings under Sick Industrial Companies (Special Provisions) Act, 1985 – Held that: - the bank guarantee still in force and the bank will pay over the guaranteed amount to the appellant. Undertaking of payment of sum by the bank recorded – appeal disposed off – decided in favor of appellant.

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• 2016 (9) TMI 26
  Demand of duty – imposition of penalty under section 112 and 117 of the Customs Act, 1962 – import of various broadcasting equipment vide Bill of Entry 03.07.2010 – exemption Notification No. 13/2010-Cus dated 19.02.010 – Held that: - the goods have been imported for Commonwealth Games, 2010 and the importer name is specifically mentioned as “Doordarshan - Prasar Bharti/ Shaf Broadcast for Commonwealth Games, 2010”, New Delhi, thus, benefit of notification available. Further, there is no allegation of any misuse or diversion of the impugned goods for other then intended purpose. It is also recorded that all the goods imported, duty free in terms of the said notification, have been, in fact, exported out of country within the stipulated period of the said notification. Bill of entry needs to be amended to find out the position of appellant as the importer of goods - appeal allowed – duty and penalty not to be imposed – decided in favor of appellant.

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• 2016 (9) TMI 25
  Imposition of redemption fine - transmission of higher value to the exporter – flow of money to the exporter in China – mistake on the part of exporter – mistake detected, rectified and import made on actual value - Held that: - this is not a case of any innocence of the exporter but it was well within the knowledge of the exporter and the appellant was in the process of clearance of the goods. When it was detected, the undervaluation was noticed – redemption fine not justified. Imposition of penalty under section 112(a) of the Customs Act, 1962 – Held that: - The mis-declaration having been made is liable for confiscation, reduced amount of penalty imposed – order of appellate authority modified – decided partly in favor of appellant.

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• 2016 (9) TMI 24
  Withholding of Refund of custom duty paid under protest – Board’s Circular No. 572/9/2001-CX dt.22.02.2001 as amended by 695/11/2003-CX dt. 24.2.2003 - re-assessment of the bill of entry – Held that: - when the order confirming the duty has been set aside and appeal of the appellant has been allowed, there is no need of re-assessment of Bill of Entries because the assessment attained finality at least for the time being in terms of this Tribunal’s order dt. 14.5.2013. In absence of any stay order by the High Court / Supreme Court, refund cannot be withholded – refund to be made.

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• Corporate Laws

• 2016 (9) TMI 21
  Scheme of demerger - Held that:- Scheme of Demerger as proposed is in the interest of the company and its members and is not otherwise prejudicial to public interest. This Court doth hereby sanction the Scheme of Demerger set forth in the petition and this Court does hereby declare the same to be binding on the petitionerCompany and all the members and creditors of the petitionerCompany and all other concerned parties and does hereby approve the said scheme of the demerger with effect from the appointed date i.e. 1st April 2016. This Court doth further order :- A. That the scheme of demerger embodied in the petition is hereby sanctioned by this Court so as to be binding with effect from 1st April 2016 which is the appointed date, on the petitionerCompany and all their members and creditors and all other persons concerned pursuant to the provisions of Sections 391 to 394 of the Companies Act, 1956. B. That the petitionerCompany shall within 30 days after the date signing of this order or within such other time as may be permitted by this Honourable Court cause a certified copy of the order to be delivered to the Registrar of Companies, Gujarat at Ahmedabad for registration under Section 391 of the Companies Act, 1956. C. That any parties to the Scheme of Demerger and/or any person or persons interested shall be at liberty to apply to this Court for any directions that may be necessary in regard to the working of the arrangement embodied in the Scheme of Demerger as sanctioned herein; and D. This Court doth further order payment of 10,000/as costs of this petition awardable to learned Additional Solicitor General of India.

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• Service Tax

• 2016 (9) TMI 53
  Coercive action including threat of arrest against officials for recovery of alleged service tax dues - power and jurisdiction of DGCEI - it was submitted that, once the Petitioners admit that they collect the service tax, even on behalf of the hotels whose rooms are booked online, it is incumbent on the Petitioners to themselves deposit the entire service tax collected. - The failure to do so, according to the DGCEI, has resulted in violation of various provisions of the FA by the two Petitioners and deliberate evasion of service tax on their part, warranting initiation of the coercive measure of arrest of their respective officials. Held that:- The scheme of the provisions of the Finance Act 1994 (FA), do not permit the DGCEI or for that matter the Service Tax Department (ST Department) to by-pass the procedure as set out in Section 73A (3) and (4) of the FA before going ahead with the arrest of a person under Sections 90 and 91 of the FA. The power of arrest is to be used with great circumspection and not casually. It is not to be straightway presumed by the DGCEI, without following the procedure under Section 73A (3) and (4) of the FA, that a person has collected service tax and retained such amount without depositing it to the credit of the Central Government. Where an assessee has been regularly filing service tax returns which have been accepted by the ST Department or which in any event have been examined by it, as in the case of the two Petitioners, without commencement of the process of adjudication of penalty under Section 83 A of the FA, another agency like the DGCEI cannot without an SCN or enquiry straightway go ahead to make an arrest merely on the suspicion of evasion of service tax or failure to deposit service tax that has been collected. Section 83 A of the FA which provides for adjudication of penalty provision mandates that there must be in the first place a determination that a person is "liable to a penalty", which cannot happen till there is in the first place a determination in terms of Section 72 or 73 or 73A of the FA. For a Central Excise officer or an officer of the DGCEI duly empowered and authorised in that behalf to be satisfied that a person has committed an offence under Section 89 (1) (d) of the FA, it would require an enquiry to be conducted by giving an opportunity to the person sought to be arrested to explain the materials and circumstances gathered against such person, which according to the officer points to the commission of an offence. Specific to Section 89 (1) (d) of the FA, it has to be determined with some degree of certainty that a person has collected service tax but has failed to pay the amount so collected to the Central Government beyond the period of six months from the date on which such payment is due and further that the amount exceeds 50 lakhs (now enhanced to 1 crore). The Court is unable to accept that payment by the two Petitioners of alleged service tax arrears was voluntary. Consequently, the amount that was paid by the Petitioners as a result of the search of their premises by the DGCEI, without an adjudication much less an SCN, is required to be returned to them forthwith. Decided in favor of petitioners.

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• 2016 (9) TMI 52
  Coercive action including threat of arrest against officials for recovery of alleged service tax dues - power and jurisdiction of DGCEI - it was submitted that, once the Petitioners admit that they collect the service tax, even on behalf of the hotels whose rooms are booked online, it is incumbent on the Petitioners to themselves deposit the entire service tax collected. - The failure to do so, according to the DGCEI, has resulted in violation of various provisions of the FA by the two Petitioners and deliberate evasion of service tax on their part, warranting initiation of the coercive measure of arrest of their respective officials. Held that:- The scheme of the provisions of the Finance Act 1994 (FA), do not permit the DGCEI or for that matter the Service Tax Department (ST Department) to by-pass the procedure as set out in Section 73A (3) and (4) of the FA before going ahead with the arrest of a person under Sections 90 and 91 of the FA. The power of arrest is to be used with great circumspection and not casually. It is not to be straightway presumed by the DGCEI, without following the procedure under Section 73A (3) and (4) of the FA, that a person has collected service tax and retained such amount without depositing it to the credit of the Central Government. Where an assessee has been regularly filing service tax returns which have been accepted by the ST Department or which in any event have been examined by it, as in the case of the two Petitioners, without commencement of the process of adjudication of penalty under Section 83 A of the FA, another agency like the DGCEI cannot without an SCN or enquiry straightway go ahead to make an arrest merely on the suspicion of evasion of service tax or failure to deposit service tax that has been collected. Section 83 A of the FA which provides for adjudication of penalty provision mandates that there must be in the first place a determination that a person is "liable to a penalty", which cannot happen till there is in the first place a determination in terms of Section 72 or 73 or 73 A of the FA. For a Central Excise officer or an officer of the DGCEI duly empowered and authorised in that behalf to be satisfied that a person has committed an offence under Section 89 (1) (d) of the FA, it would require an enquiry to be conducted by giving an opportunity to the person sought to be arrested to explain the materials and circumstances gathered against such person, which according to the officer points to the commission of an offence. Specific to Section 89 (1) (d) of the FA, it has to be determined with some degree of certainty that a person has collected service tax but has failed to pay the amount so collected to the Central Government beyond the period of six months from the date on which such payment is due and further that the amount exceeds 50 lakhs (now enhanced to 1 crore). The Court is unable to accept that payment by the two Petitioners of alleged service tax arrears was voluntary. Consequently, the amount that was paid by the Petitioners as a result of the search of their premises by the DGCEI, without an adjudication much less an SCN, is required to be returned to them forthwith. Decided in favor of petitioners.

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• 2016 (9) TMI 51
  Job-work on contract basis at the premises of manufacturer - exemption from payment of Service Tax - Notification No. 25/2012-ST dated 20.06.2012 - section 66B of the Finance Act, 1994 – principal manufacturer - sub-clause 2(Z) of said notification - Notification No. 12/2012-CE (NT) dated 17.03.2012 – Held that: - As the principal manufacturer is availing benefit of exemption Notification No. 12/2012-CE (NT) dated 17.03.2012 (S. No. 251) on the manufacture of “Jute Loom Machine” on job work by the applicant, benefit of exemption Notification No. 25/2012-ST dated 20.06.2012, as amended, cannot be extended to the applicant – applicant not eligible for exemption – ruled against applicant.

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• 2016 (9) TMI 50
  Eligibility of exemption under Notification No. 25/2012-ST dated 20.06.2012 – construction of railway sidings for private parties - service of construction, erection, commissioning or installation of original works pertaining to railways exempted vide entry 14(a) of the said notification – Government railway and Non-Government railway - Section 2 (20) and (25) of the Railways Act, 1989 – railway - Section 2(31) of the Railways Act, 1989 – Held that: - It is admitted fact that construction of railway siding would be construction of original work pertaining to railways in terms of Notification No. 25/2012-ST. It is to be observed that subject Notification No.25/2012-ST does not differentiate between Government and Non-Government railway. Railway as per the Railways Act, 1989 inter-alia means a railway, or any portion of railway for the public carriage of passengers or goods. However, Notification No. 25/2012-ST dated 20.06.2012 vide entry at S.No.14 (a) grants exemption to “railways” and is not restricted to “railway”. Even if the definition of “railway” is taken from the Railways Act, 1989 for interpreting said Notification, as Revenue has resorted to do, the benefit of Notification would be available to “railways” including “railway” used for purposes other than for public carriage of passengers or goods – no differentiation made on Government and Non-Government railway for providing exemption – exemption available on Construction of railway siding for private parties – ruled in favor of applicant.

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• 2016 (9) TMI 49
  Business Auxiliary services / club or association services - Activities taken by the Federation for the promotion of agriculture - Held that: - federation not falling in definition of Section 65 of the Finance Act, merely on the basis of collecting the subscription amount. - The issue whether the activities of the respondent-federation would be considered as an activity for promotions of agriculture and therefore, would fall in disclaimer clause, was not addressed to by Ld. advocate. Therefore, this Court would not proceed to examine the facts in a Tax Appeal more particularly considering the smallness of the amount involved in the present appeal – no error found in decision of CESTAT – appeal dismissed – decided against the revenue.

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• 2016 (9) TMI 48
  Condonation of delay – evasion of service tax – SEZ – demand of tax and penalty under section 77 of the Finance Act, 1994 – delay of 152 days in filing the appeal – documents including tax paid challans missing in the course of change of work due to change of tax consultant – Held that: - there is a genuine difficulty on the part of the petitioner and the reason which has been assigned, was beyond the control of the applicant and it appears that there is no malafide intention on the part of the petitioner. The reason assigned in the application found to be just and proper and sufficient enough to condone the delay – petition allowed – delay condoned – decided in favor of petitioner.

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• 2016 (9) TMI 47
  Cenvat credit - service tax on various input services - credit has been availed are input services and are used either directly or indirectly for the manufacturing activities - CENVAT credit irregularly availed by the appellant on various services - Held that:- with regard to these three services namely association fee to traffic as well as gift vouchers and annual day function etc., I am of the view that the appellant is not entitled to CENVAT credit of service tax paid on these services as these are not directly related to the manufacture as well as business of the appellant. With regard to rest of the services the case of appellant is covered by various decisions and therefore following the ratios of the said decisions, the impugned order is set aside. - Decided partly in favour of appellant

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• 2016 (9) TMI 46
  Whether on the facts and circumstances, in calculating amount of the eligible Cenvat Credit of service tax paid on common input services margin / value addition on trading of goods is to be considered and not entire sale price / turnover of traded goods - findings of the Tribunal relating are purely and solely based on its decision in Mercedes Benz India Private Limited Vs. The Commissioner of Central Excise, Pune-1 [2014 (4) TMI 12 - CESTAT MUMBAI] while dealing with Rule 6(5) of Cenvat Credit Rules, 2004. Held that:- it may be stated that this Court has dealt with the order passed by the Tribunal in the Appeal of Mercedes Benz India Private Limited at length and coming to the conclusion that findings recorded in the said decision on this question of law cannot be sustained. Thus keeping open contentions of both the sides, this Court allowed the Appeal filed by Assessee - Mercedes Benz India Private Limited, set aside the findings of the Tribunal and remanded the matter back to the Tribunal for fresh finding on this question of law and on the other remaining questions of law raised therein, as they were arising out of the finding to this question of law. In the instant case, as the other questions of law are incidental and arising out of the finding to above question and as the finding to above question being based on the decision of the Tribunal in Mercedes Benz India Private Limited and the questions of law raised for consideration in the decision of Mercedes Benz India Private Limited (Supra) being remitted back, it becomes necessary to remit the questions of law raised in the present Appeals also to the Tribunal for its fresh decision. Therefore, keeping open contentions of both the sides, we allow these two Appeals by setting aside the impugned order of the Tribunal to the extent that the same fails to deal with above question raised. The remaining questions in the said Appeal, except those which are not pressed, being incidental and arising out of above question, they are also remitted back for the Tribunal to answer them as well. - Matter remitted back

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• 2016 (9) TMI 45
  Whether service tax credit with respect to outward transportation from the factory of the appellant to the buyer's premises is admissible to the appellant or not - Central Excise duty is paid on MRP basis - all elements of cost are included in the MRP and the delivery becomes an FOR destination basis transaction - fulfillment of all conditions prescribed under CBEC circular No. 97/8/2007-ST dt 23/8/2007 - Held that:- in the present proceedings transit insurance & outward freight is also borne by the appellant. Ownership of the goods till their delivery at the footsteps of the buyer remains with the appellant and service tax on freight is also paid by the appellant. Under the existing factual matrix deliveries of cement in the present proceedings have to be considered as on FOR destination basis and conditions of CBEC Circular No. 97/6/2007- ST dt 23/8/2007 are fulfilled as per the ratio laid down by P & H High Court in the case of Ambuja Cement Ltd. Vs. UOI [2009 (2) TMI 50 - PUNJAB & HARYANA HIGH COURT]. Therefore, as per settled proposition of law credit of service tax paid on the outward freight during the relevant period was correctly taken by the appellant. - Decided in favour of appellant

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• 2016 (9) TMI 44
  Differences in value appearing in balance sheet and returns - Authorized Service Station – Business Auxiliary Services – Demand of tax and interest – imposition of penalty under section 78 or 76 of the Finance Act, 1994 - waiver of penalty section 80 of the Finance Act,1994 – Held that: - When the Balance sheet entries and the value as reflected in ST-3 returns are based upon different accounting system, and when the entire value stands reflected in the balance sheet, the difference in the value of services cannot be attributed to any malafide on the part of the assessee. The appellant, by agreeing to the audit view deposited the tax immediately when objection raised – penalty not imposed – demand of tax and interest upheld which has been already paid by appellant – appeal allowed – decided partly in favor of appellant.

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• Central Excise

• 2016 (9) TMI 43
  Allowability of discount - removal of goods did not involve sale - assessee failed to produce the documents to arrive at the correct assessable value and had acted as an agent of the principal - Held that:- it is found that quantity of P or P medicine cleared from there as quantitative discount was known at the time of clearance of the goods at the factory gate. Also it is pertinent to note that the original adjudicating authority has observed that in respect of the same unit, for the earlier period, the Assistant Commissioner has held that job worker cannot be held to have acted as an agent/hired labour of the principal manufacturer or with agreement on principal to principal basis. Further, for the earlier period, the Assistant Commissioner has held that the method of valuation were in accordance with the Circular issued by the CBEC. The learned Assistant Commissioner by following the earlier view dropped the demand in the show-cause notice. On appeal by the department the learned Commissioner(Appeals) without any basis has held that there is no sale involved in this transaction and transaction was not on principal to principal basis and wrongly set aside the order-in-original. Therefore, we hold that the appellants have discharged their duty liability on the value arrived at in accordance with the well settled principles of law enunciated by the Hon’ble Supreme Court in the case of Ujagar Prints Pvt Ltd Vs UOI [1989 (1) TMI 124 - SUPREME COURT OF INDIA]. Since the appellant has already paid the duty on the entire quantity cleared, which include free supply quantity and now demanding duty again on quantity discount would tantamount to subjecting the goods to duty twice, which is not permitted by law. - Decided in favour of appellant

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• 2016 (9) TMI 42
  Cenvat credit - rejected/returned goods - credit took on the RBA series invoices and linked to their own original invoices reference - invokation of extended period of limitation - Held that:- wherever the appellant has been able to produce the documents correlating the return of the goods, he has been given benefit of the same and wherever the appellant has not been able to produce any document to substantiate their claim of return of the goods to the assessee as ordered by the Tribunal and the Commissioner (Appeals) and based on copies of the RBA invoices, this could not be established or proved that the goods were actually received by the appellant. Further, the extended period has rightly been invoked as the appellant has suppressed the facts from the department that he was availing credit on the RBA series of invoices. - Decided against the appellant

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• 2016 (9) TMI 41
  Demand - duty on difference between finished goods reported in their 3CD returns and the RG-1 daily stock account - less quantity of clearance has been shown in their ER-1 returns as compared to the quantity of sale mentioned in the Balance-sheet - Held that:- it is obvious that the criteria for recording sales production etc. in the Balance-sheet significantly different from that required in ER-1. In the present case, the appellants have produced a reconciliation figures which show the variance was on account of trading, labour charges and some short quantity received. The same has not been challenged. Therefore, by following the decision of Tribunal in the case of Composite Boards (P) Ltd. [2009 (7) TMI 410 - CESTAT, CHENNAI], where in similar circumstances relief was granted, the impugned order is set aside. - Decided in favour of appellant

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• 2016 (9) TMI 40
  Remission of duty payable on 4082 MTs of molasses - deteriorated due to auto-combustion and ultimately became unfit for consumption - Held that:- the issue is no longer res integra and stands covered by the judgement of the Hon’ble Allahabad High Court rendered in the case of CCE Allahabad Vs Balrampur Chini Mills Ltd. [2005 (7) TMI 30 - HIGH COURT ALLAHABAD]. The appellant had taken all pre-cautionary steps that can be taken and it was only due to excessive production and generation of molasses that State Government had not given permission to clear the said molasses; that the quantity under dispute became unusable which was destroyed and there was no dispute to the fact that the goods were unfit for human consumption. It is also found that, the molasses was susceptible for deterioration due to auto-combustion and due to long storage of molasses in the masonry tank, it quickly deteriorated and became unfit for consumption. Therefre, the impugned order is liable to be set aside and consequently the rejection of remission of duty by the adjudicating authority besides imposition of penalty of 1 lakh and the demand of interest are set aside as unsustainable in law. - Decided in favour of appellant

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• 2016 (9) TMI 39
  Invokation of extended period of limitation - Demand of duty alongwith interest and penalty - appellant procured certain inputs from 100% EOU - credit of duty availed in excess of additional duty leviable under Section 3 of the Customs Tariff Act equivalent to duty of excise specified in Clauses (i) (ii) (iii) (iv) (v) (vi) (via) of Rule 3(1) of CCR, 2004 is irregular. Held that:- the duty charged by an EOU is a duty of excise charged by 100% EOU and the amount of duty charged is one single amount and does not contain any bifurcation as to basic custom duty, additional duty of customs, etc. It is found that the invoices issued by the 100% EOU indicate excise duty as per the proviso to Section 3(1) of the Central Excise Act where only Central Excise duty has been prescribed to be calculated in a particular manner. It is also found that Revenue was wrong in further bifurcating the Central Excise duty paid into basic custom duty and education cess. Though the method used for calculating the measure of such excise duty was also to include element of customs duties but the entire duty paid on the invoices will have to be considered as Central Excise duty paid under Section 3(1) of Central Excise Act. Therefore keeping in view the various judgments cited which squarely covers the case of the appellant in his favour, the impugned order is set aside. - Decided in favour of appellant

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• 2016 (9) TMI 38
  Recovery of Cenvat credit and interest - irregularly taken on inputs which resulted in double benefit to the appellant - appellant submitted that removal of inputs under Rule 4(5)(a) for processing and return cannot be construed as removal of inputs as such under Rule 3(5) - Held that:- after considering the provisions of Rule 3(5) and 4(5)(a) of the Cenvat Credit Rules 2004 and the judgments of the Tribunal in the case of Southern Lubrication (P) Ltd. Vs. CCE, Bangalore [2012 (1) TMI 106 - CESTAT BANGALORE], I am of the considered opinion that appellant's case is squarely covered by the said decision wherein it has been held that the removal of input or capital goods to a job worker for further processing, testing, repair, reconditioning or any other purpose is governed by Rule 4(5)(a) of the Cenvat Credit Rules, 2004. Therefore, by following the same, the impugned orders are set aside. - Decided in favour of appellant with consequential relief

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• 2016 (9) TMI 37
  Extended period of limitation of five years - time barred demand - admissibility of Cenvat credit - MS Channels/Beams/Joists which are used for making support structures for the machinery/capital goods - Held that:- there were conflicting views given by the courts, during the relevant period, regarding admissibility of Cenvat Credit on the impugned items which was decided only by the larger Bench in the case of Vandana Global Ltd. v. CCE, Raipur [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)]. Appellant, therefore, had a bona fide belief that Cenvat Credit on disputed items was admissible. In the light of the above observations and the settled proposition of law it is held that extended period of five years is not applicable in the present case. - Decided in favour of appellant

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• 2016 (9) TMI 36
  Demand of duty and imposition of penalty - clandestine removal of goods - received 238 triplicate and quadruplicate copies of invoices used by the Appellant firm to remove goods without payment of duty - no further investigation appears to have been conducted - Held that:- we find that in spite of possession of 238 invoices, no investigation was conducted to ascertain the veracity of those invoices. We further find that the department has not disclosed the source of such invoices. It is not forthcoming on record as to whether such invoices were seized from the buyers or from the possession of any employee or director or from the office/ factory of the Appellant. Even if the invoices were received by the department, the officers could have conducted investigation from the buyers of the goods or the transporters as number of transport vehicles were appearing in invoices, but no investigation was conducted. Only on the basis of statement of Shri Sukumar Ghosh, who had stated that it indicates removal of goods, duty liability cannot be fastened against the Appellant's firm. The preparation of 238 invoices at the utmost can create a doubt that the goods have been removed under the cover of such invoices, however the same has to be corroborated by conduction of further investigation from the buyers/ transporter and other persons involved. In absence of any such investigation, demand cannot be substantiated against the appellant. In case of demand of 96,27,789/-, the same has arisen on the sole basis of statement of Shri Nizzamuddin Sheikh who has stated that the production of Sponge Iron was 1600 MT per month. We find that his statement is not supported by any evidence. No documents in the form of his production register or wage record or any production report are available on record for substantiating his statement. Once Shri Sukumar Ghosh in his statement dated 27.05.2008 had stated that his earlier statements were based upon records shown to him, the investigation officers should have brought on record of clearance of goods from the factory of Appellant firm with enquiries from buyers, transporters and the employees/ persons connected with the case. No such evidences or statements have been brought on record. In such case, we are of the view that demand cannot be made on the basis of statement of Shri Sukumar Ghosh or Shri Nizammuddin Sheikh. Also in case of demand based upon statement of Shri Nizzamuddin Sheikh, we find that apart from his statement no other documentary evidences are available on record. We, therefore hold that the demand of 95,28,055/- and of 96,29,789/- are not sustainable. In case of demand of 34,86,045/- on the basis of Process Department Log Book and Shift Log Sheet, the demand has been made on the basis of alleged consumption of raw material. We find that Shri Sukumar Ghosh and the Directors of the Appellant firm have pleaded ignorance about such documents. No identification of person who has prepared said documents has been done. In absence of scribe of such documents, the investigation does not lead to inference of having goods produced in the Appellant's Factory. No evidence of Appellant firm having procured the unaccounted raw material has come to the light. Nevertheless, we find that on the basis of such documents showing consumption of raw material, it cannot be said that the goods have been manufactured and cleared by the Appellant. We, thus hold that the duty demand is not sustainable in view of various judgments. Demand of 13,10,287/- and 2,58,764/- - on the basis of Despatch Advice and slip pad. Shri Sukumar Ghosh in his statement dated 27.05.2008 denied any knowledge about such papers. The adjudicating authority in his order has only held that the charges are established on the basis of documents. We find that no discussion has been done as to how the said records lead to inference of removal of goods. In absence of buyers of goods, transportation thereof and receipt of consideration, the charges of clandestine removal cannot be established. No effort has been undertaken to identify the author of said dispatch advice and slips pad. Thus, the demands cannot be made. Therefore, the demands are not sustainable. A demand of 14,94, 236/- has been confirmed against the Appellant firm on shortages of MS Ingots found during physical verification on 14.02.2007. We find that the denial of cross examination of Shri Sukumar Ghosh who was present at the time of physical verification has been wrongly denied. That they have been recording the production on estimation basis which has led to such shortages. That since there are no corroborative evidence of removal of goods, therefore demand is not sustainable. We find that except shortage, no other evidence has been brought on record concerning the removal of goods. The shortages of goods may lead to an inference of removal of goods without payment of duty and a starting point of investigation. However, no further investigation has been conducted to ascertain the material fact of removal of goods. Since there is no buyer of goods and no investigation on removal of goods, in such a case we hold that duty demand is not sustainable merely on the basis of shortages of goods. Hence, the impugned order is not sustainable and are set aside. Since we have held that there is no sustainable demand, consequential penalties on Shri Sukumar Ghosh and Shri Iqbal Razzak Hingora are also set aside. - Decided in favour of appellant with consequential relief

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• 2016 (9) TMI 35
  Capital goods CENVAT credit - HR Plates, MS Beams, Hot Rolled Plates, MS Billets - used for constructing the chimney attached to the furnace - Held that:- by following the decision of Hon'ble High Court of Chhattisgarh in the case of Union of India Vs. Associated Cement Company Ltd. [2010 (10) TMI 550 - CHHATTISGARH HIGH COURT] where credit has been allowed on steel material used in the fabrication of chimney for Diesel Generating set, the credit of steel material used for fabrication/construction of chimney is admissible as CENVAT Credit. Cenvat credit - Asbestos Cement Sheets - used for construction of roof of the factory - Held that:- by following the decision of Hon'ble High Court of Allahabad in the case of M/s. Daya Sugar Versus Commissioner, Central Excise, Meerut-1 [2014 (10) TMI 722 - ALLAHABAD HIGH COURT], the credit of asbestos sheet is not admissible. Refund claim - matter concerning admissible of credit is not finalized - refund is premature - Held that:- the Tribunal has finalized the admissibility of credit, therefore, I set aside the order of rejection of refund claim and direct the original adjudicating authority to grant consequential relief. - Decided partly in favour of assessee

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• 2016 (9) TMI 34
  Demand and redemption fine in lieu of confiscation - duty on difference between closing stocks recorded in the Balance sheet of the year 2006-07, 2007-08 and 2008-09 with reference to the closing stock reported in the ER-1 returns - Held that:- it is found that the demand is solely based on comparison of the data of financial accounts appearing in the Balance-sheet with ER-1 returns. The appellants have contended that the stage at which the goods are recorded as finished goods in the Excise records is different from the stage at which the goods are recorded in the financial records. There is no other evidence of clandestine removal produced by the Revenue. Moreover the closing balance of one year in the financial record is appearing in the opening balance in the next financial year. In these circumstances, I find that there is no evidence whatsoever to sustain the demand of duty and redemption fine in lieu of confiscation. - Decided in favour of appellant

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• 2016 (9) TMI 33
  Imposition of penalty - credit taken on the strength of invoice received from M/s. Nakoda Trading Corporation has been denied - M/s. Nakoda Trading Corporation had not received the imported goods at all - sale of imported goods to the appellants and the countervailing duty paid on the imported goods was transferred to the appellant by issue of invoices, on which the appellant had taken the credit - Held that:- it is found that earlier in the case of another noticee in the same proceedings, namely, Shri Satish Agarwal, Partner of M/s.Time 2.00 lakhs which is below the threshold limit prescribed in the litigation policy. In view of the above, the appeal filed by the Revenue in the case of Shri Pradeep Gaur is dismissed. Invokation of extended period of limitation - Demand - credit taken during 2005 has been raised in 2010 - Held that:- the order-in-original does not record any ground for upholding the extended period of limitation and also does not examine the documents submitted by the appellants to establish that they have indeed received the goods. In the impugned order also no suppression mis-declaration or fraud on the part of the appellant has been pointed out. No statements or other evidence has been shown to indicate any role of the appellant in the alleged fraud. The impugned order does not dispute that goods have been received by the appellants along with the said invoice. Therefore, in the absence of any specific allegation of mis-declaration, suppression, fraud or collision on the part of the appellant extended period of limitation cannot be invoked against the appellants. The demand is therefore set aside as barred by limitation. - Decided in favour of appellant

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• 2016 (9) TMI 32
  Refund claim - duty paid on differential value - supply of electrical transformers and accessories at contracted price containing a price variation formula - price reduced subsequent to the clearance of goods - Held that:- by following the various decisions of Supreme Court and Tribunal the respondents are not entitled to refund. Since the respondents are not entitled to refund the duty paid on differential value calculated by revising the assessable value, hence the question of unjust enrichment or otherwise become irrelevant. - Decided in favour of Revenue

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• 2016 (9) TMI 31
  Invokation of extended period of limitation - Demand for the period 21.05.1991 to 24.07.1996 - no suppression of facts or any wilful misrepresentation - utilization of duty-free molasses received under Chapter X procedure in the manufacture of cattle feed as per the declaration - Held that:- in all fairness the matter should be remanded back to the adjudicating authority to decide the matter afresh. We find that there are not many documents placed before us although the counsel for the appellant submitted photocopies of the index that was filed by them before this Tribunal in their previous round of litigation. We, accordingly, remand the matter to the adjudicating authority who shall look into all the aspects. It is needless to mention that the learned Commissioner shall pass an order after taking into account all the facts and circumstances of the case. - Appeal allowed by way of remand

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• 2016 (9) TMI 30
  Exemption from excise duty - Notification No. 23/2003 CE dated 31.03.2003 - egg shell waste - Held that:- the issue is settled in favour of the appellant assessee. by following the ratio of decision of he Tribunal in the case of M/s. SKM Egg Products Export (India) Ltd. Versus Commissioner of Central Excise, Coimbatore [2013 (11) TMI 991 - CESTAT CHENNAI] wherein it was held that egg shell waste is a waste from Food Industry and it is exempted from excise duty as per Sl.No. 21 of Notification No. 23/2003 CE, the impugned order is set aside. - Decided in favour of appellant

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• CST, VAT & Sales Tax

• 2016 (9) TMI 23
  Imposition of penalty – inspection of a vehicle at the checkpost - driver produced incomplete ST-18A Form on the seller / consignor's side – blank form sent by the seller – no intention to evade tax – seizure - Section 78(2) of the Rajasthan Sales Tax Act, 1994 read with Rule 53 of the Rajasthan Sales Tax Rules – Held that: - the issue involved is no more res integra and is covered in favour of the Revenue by the judgment of this Court in M/s. Guljag Industries v. Commercial Taxes Officer 2007 (8) TMI 344 - SUPREME Court – appeal allowed – decided in favor of Revenue

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• 2016 (9) TMI 22
  Reconciliation statement – non-consideration – opportunity of personal hearing - imposition of penalty under Section 27(3)(b) of the TNVAT Act – Held that: - when such complicated question of facts are involved, that too, when the assessments are sought to be reopened, based on the report submitted by the Enforcement Wing Officials', it is incumbent upon the respondent to afford an opportunity of personal hearing. Order passed without affording the opportunity of being heard. Objections – preliminary and final objections – non-consideration by assessing officer – Held that: - the matter would have attained finality before the respondent himself had the respondent given the opportunity of personal hearing and considered the reconciliation statement filed by the petitioner, when admittedly, the respondent has received the preliminary reply dated 08.06.2016 and final reply dated 14.06.2016 – replies to be considered – re-assessment to be done - petition allowed – matter remanded – decided in favor of petitioner.

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• Wealth tax

• 2016 (9) TMI 29
  Powers of Commissioner to revise orders of subordinate authorities - Held that:- As twice at the instance of the assessee, Commissioner, in exercise of powers under sub section (1) of Section 25, had directed the Assessing Officer to carry out fresh valuation of the lands of the petitioner on the basis of the directions given by CWT (Appeals) in case of the assessee himself for the assessment year 1992-93. It was pursuant to such directions that the Assessing Officer had carried out fresh valuation. This order, the Commissioner desired to take in revision under sub section (2) of Section 25. Essentially therefore, his exercise of such powers would encroach on the earlier directions given by the Commissioner while disposing of assessee's revision petitions under sub section (1) of Section 25. Surely sub section (2) of Section 25 does not envisage any authority in the Commissioner to revise his own order passed under sub section (1) of Section 25.

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• Indian Laws

• 2016 (9) TMI 20
  Validity of mortgage - Held that:- In the present case, the mortgage was created in favour of the predecessor-in-title of the second Respondent in 1992. That mortgage was declared as to be valid and binding by the Debt Recovery Tribunal-II, Mumbai on 5th September 2005 in its order passed in the Original Application No.1025 of 2001. There is no written document of tenancy. There is absolutely no registered instrument on record either. In these circumstances, a very vague submission as made by Mr. Purohit that there was a tenancy much prior to 1998, cannot be accepted. The relevant documents evidencing creation of such tenancy, which is, admittedly, after the mortgage in favour of the predecessor-in-title of Respondent No.2, therefore, should not be protected by this Court. Further, Mr. Thakkar submits that Petitioner No.2-Dhaval Dilip Jhaveri is a Director and Promoter of Respondent No.3. That the Petitioner No.2 is the son of Dilip Jhaveri. Dilip Jhaveri is the part-owner of the property and nephew of other two co-owners. The Petitioners have sought to establish the tenancy by filing a collusive Suit. That Suit was filed so as to defeat the measures in relation to the mortgaged property in favour of the Bank. Therefore, this Court should not accept the claim of the Petitioners.

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