Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 2, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
TMI Short Notes
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Validity of attachment orders u/s 281B - tax liability of non-resident (FOWC) having PE in India was confirmed - Income tax department directed the Axis Bank to have the drawing of LCs restricted to the extent of the liability of Jaypee to deduct Tax Deducted at Source (TDS) of FOWC - order of attachment sustained with practical solution - SC
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Non deduction of TDS on payment to non-resident - disallowance u/s 40(a)(i) - a similar payment to a resident does not result in disallowance in the event of non deduction of tax at source. - Article 26(3) of Indo-US DTAA seeks to provide relief against such discrimination by saying that deduction should be allowed on the same condition as if the payment is made to a resident.
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Section 40(a)(ia) covered not only those cases where the amounts were payable but also those where it was paid.Supreme Court decision in the case of Palam Gas Services v. CIT [2017 (5) TMI 242 - SUPREME COURT].
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If there is no question of cessation and remission of sundry creditors liability and the same is shown in Balance Sheet of Assessee then it is not covered by the provisions of section 41(i) of the IT Act.
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No disallowance of trading loss of shares if transactions were done through Demat Accounts and payments were made through proper banking channel. -Confirmed by Tribunal and CIT (A).
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Trading Loss on Shares is not disallowed if transactions were through Demat accounts and payments were made through proper banking channel.- Tribunal and CIT (A) confirmed this view.
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Depreciation @60% is allowed on UPS instead of 15% being assumed it as part of Computer system.
Customs
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Clarification on difficulties related to recent amendments in Customs Act, 1962 - Difficulties in filing Bill or Entry - Due to connectivity issue, Number if not generated within the free period
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Subject: Operational problems being faced by EOU in GST regime consequent to amendment in Notification No. 52/2003-Customs dated 31.03.2003– reg. - Trade Notice
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Sub: Detailed Guidelines for Re-Testing of Samples- reg. - Trade Notice
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Subject: Issues related to Bond/letter of Undertaking for exports without payment of integrated tax - Reg. - Trade Notice
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EOU - refund of Central Sales Tax - An EOU purchasing goods from a SEZ will be entitled to reimbursement of CST - HC
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Demand of duty - confiscated goods - option to redeem not exercised by the appellants - Benefit of N/N. 64/88 dated 1.3.1988 - import of various medical equipments - demand and penalty set aside.
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Entering into high sea sale agreement based on the information provided by the original importer by itself, will not attract the penal provisions of Section 112 unless evidence are available to the effect that such high sea buyer had knowledge of possible undeclared item in the consignment and under-valuation
Service Tax
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Classification of services - Though the appellant did restoration, reconditioning servicing work of water pipelines, the same is not with reference to any goods. Since the scope of contract is clear, this will not fall under the category of a general “maintenance or repair of properties”
Central Excise
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SSI exemption - switchover from discharging normal excise duty - Their payment of duty upto 31/08/2005 clearly shows that they have not opted for exemption under the said notification. As such, they cannot switch over to SSI exemption, as per their choice, in the middle of the year.
VAT
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Constitutional validity of Section 52 of the Gujarat Value Added Tax Act, 2003 - Company is deemed to be in existence for the purpose of taxation under the VAT Act - merger / demerger - it cannot be said to be ultra vires to Articles 246 & 252 of the Constitution of India - HC
Case Laws:
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Income Tax
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2017 (9) TMI 53
Validity of attachment orders u/s 281B - High Court [2016 (12) TMI 123 - DELHI HIGH COURT] has confirmed the tax liability of non-resident (FOWC) having PE in India - SC confirmed the order of HC [2017 (4) TMI 1109 - SUPREME COURT OF INDIA] - Income tax department directed the Axis Bank to have the drawing of LCs restricted to the extent of the liability of Jaypee to deduct Tax Deducted at Source (TDS) of FOWC. - On the one hand, Axis Bank was restrained from remitting the amount under the LCs to the extent of tax liability of FOWC and, on the other hand, Confirming Banks had taken the position that once LCs were invoked, they had no option but to make the payment. Axis Bank, faced with this situation, filed Writ Petition in the High Court of Delhi. - HC dismissed the petition and confirmed the attachment orders. Held that:- There is only one methodology which can be adopted in breaking this impasse or deadlock viz. to direct FOWC to secure the amount. After all, this stalemate is the creation of FOWC. Even when judgment of the Delhi High Court had come on December 21, 2016 fastening liability of income tax on the income generated by FOWC, FOWC tried to play smart by invoking the LCs. This was done by FOWC even after it was made aware of the attachment orders dated December 1, 2016 passed under Section 281B of the Act. No doubt, FOWC had challenged the orders of the High Court by filing special leave petition in this Court. Such a challenge was laid by Jaypee as well. Least that was expected of FOWC was to await the decision of this Court and act thereafter, depending upon the outcome of those proceedings. Fact remains that this Court has upheld the judgment of the Delhi High Court dated December 21, 2016 thereby sustaining the liability of FOWC. The attempt of the FOWC was nothing less than trying to over reach the judicial orders. We, therefore, affirm the order of the High Court which has upheld the attachment order made by the Income Tax Department. Having upheld the attachment order, the important moot question that arises is as to how to secure the amount? Whether Axis Bank be restrained from transmitting the amount to the Confirming Banks? Here, we find that insofar as Confirming Banks are concerned, they are under legal obligations to make the payments under the LCs once these LCs are invoked. These banks cannot go by any disputes between FOWC and Jaypee or FOWC and Tax Department in India. Therefore, it may be difficult to restrain Axis Bank from reimbursing the Confirming Banks, notwithstanding attachment orders. Best solution to the whole controversy, in these circumstances, is to direct the FOWC to remit the amount which it has received under the LCs as it is the FOWC which is to discharge the tax liability. - FOWC directed accordingly.
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2017 (9) TMI 52
Reopening of assessment - entitlement of the Pune unit for deduction under Section 10B - reason to believe - proof of manufacturing activity by Pune unit - Held that:- The Pune unit being an export unit (as held by the Supreme Court in Yokogawa (2016 (12) TMI 881 - SUPREME COURT) is an eligible undertaking and is entitled to the benefit under Section 10B. All the material facts relating to the Pune and Delhi units and their respective businesses, having been filed with the AO, The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the Assessee there being nothing new, this reason is not tenable for reassessment. The reasons recorded seem to suggest that no sale proceeds are brought to India and that the Assessee is only providing the manufacturing services to its AEs and receiving the charges on a cost plus basis. This is not correct as per the record. The Assessee’s Pune unit is a 100 % export oriented unit carrying on manufacturing activities. The AO, during the assessment proceedings, had accepted this position and had assessed the income of the Assessee at ₹ 6,85,24,800/- after allowing the benefit under Section 10B of the Act. There was no reason for the AO to seek re-assessment on this ground. It is also held that the activities conducted by the Pune unit constitute `manufacture' and in the subsequent year, on a similar set of facts, the issue of benefit under Section 10B having attained finality, the impugned order deserves to be quashed. Accordingly, notice dated 25th March, 2014 issued under Section 148 of the Act is quashed and the order dated 11th June, 2014 passed by the Respondent, disposing of the objections of the Assessee for AY 2007-08, is set aside. - Decided in favour of assessee.
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2017 (9) TMI 51
Addition being provision for bad and doubtful debts to the book profit for computation of MAT liability - Held that:- Applying the findings of the Larger Bench, the question is answered against the Revenue. The assessee had made provision for bad and doubtful debts and the same has been charged to the Profit and Loss Account for the year ended 31st March 2003. In the balance sheet as on 31st March 2003 of the assessee, it can be seen that the provision of bad and doubtful debts has been reduced from the gross debtors and net sundry debtors are shown as asset in the balance sheet. This amounts to actual write off and would not be hit by clause (i) of the explanation to section 115JB. Thus the provision for bad and doubtful debts cannot be termed as a provision for liability but is in the nature of diminution in the value of asset.- Decided in favour of Assessee.
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2017 (9) TMI 50
Reassessment u/s 147/148 - computation of capital gain - valuation report received from the DVO relied upon - fair market value of the property determination - Held that:- Even in the original assessment order, the AO noted that the re-opening of the assessment order would depend on the valuation report received from the DVO. The reference to the DVO was made by him even during the course of original assessment proceedings. The order passed by the DVO under Section 55A of the Act further reveals that the Assessee had a full opportunity of pointing out to the DVO why the value proposed by him should not be finalized. For the reasons best known to her, the Assessee chose not to participate in the proceedings before the DVO. Consequently, it is too late in the day for the Assessee to question the determination by the DVO of the fair market value of the property in question. In the circumstances of the present case where the Assessee was fully conscious of a reference having been made to the DVO and chose not to participate in the resultant proceedings, the reopening of the assessment on that basis cannot be said to be erroneous. The AO was conscious that the valuation report would necessitate the re-opening of the assessment if it was found that what was declared by the Assessee as the value of the property was different than what emerged in the report of the DVO. The Assessee too was aware of this consequence. As is evident the value of the property in question as disclosed by the Assessee was far too less when compared to the fair market value as of that date as has been determined by the DVO. On merits, therefore, the re-opening of the assessment was entirely justified. Consequently, the Court sees no error having been committed either by the CIT (A) or the ITAT in confirming the addition. - Decided against assessee.
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2017 (9) TMI 49
Disallowance of loss in trading of shares - Sham or fake transactions - Tribunal confirmed view of CIT(A) and deleted the addition - transactions are off market transactions - Held that:- CIT(Appeals) found that the transactions were through Demat accounts. They were confirmed by the opposite parties and payments were made through proper banking channel. The entire issue therefore, revolves around appreciation of evidence on record. CIT(Appeals) and Tribunal having concurrently come to factual findings, no question of law arises. Counsel for the Revenue however, referred to the appeal memo and contended that in past SEBI had penalised the assessee for indulging into such off market transactions. Firstly, there is no reference to any such past deeds of the assessee in the order of assessment. Secondly, in any case, even as per the Revenue, the referred instance is relatable to earlier period. No substantial question of law.- Tax Appeal is dismissed Decided in favour of assessee.
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2017 (9) TMI 48
Disallowance of interest on borrowed funds on account of diversion by the assessee to its sister concern - Commercial expediency - Held that:- CIT (Appeals) as well as the Tribunal both, after examining facts on record, found that there was sound commercial expenses in the assessee financing activities of the sister concern, who was acting as sales agent of the assessee and was otherwise in dire financial constraint.Also Section 37 states that the expression "for the purpose of business" includes expenditure voluntarily incurred for commercial expediency See Hero Cycles P. Ltd vs. Commissioner of Income Tax [2015 (11) TMI 1314 - SUPREME COURT OF INDIA ] Advance to subsidiary pursuant to undertaking given to financial institution by the assessee to provide additional margin to subsidiary to meet working capital for meeting cash losses could not be disallowed as business expenditure. - Decided in favour of assessee
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2017 (9) TMI 47
Unexplained jewellery - Addition u/s 69A - - statements recorded u/s 131 - as per assessee jewellery belongs to the company M/s Prakash Gold Palace (P) Ltd. in which the assessee is an employee - failure to discharge the burden by assessee - Held that:- Contention raised by the assessee that the jewellery belongs to the company M/s Prakash Gold Palace (P) Ltd. in which the assessee is an employee is not at all acceptable. The assessee Shri.Karun Dutt Singh as well as the company M/s Prakash Gold Palace (P)Ltd. had never established at the time of surveys conducted and during the course of sworn in statements recorded u/s 131 of the IT Act, that the gold seized belongs to the company. In the circumstances, it is decided to assess the value of the gold of ₹ 63,64,123/- in the hands of the assessee, Shri. Karun Dutt Singh as his unexplained investments for the assessment year 2007-2008 after considering all the facts and circumstances of the case. These factual conclusions which were nullified by the First Appellate Authority on an erroneous appreciation of the evidence in the case and it was therefore that the Tribunal re appreciated the entire evidence before it and set aside the First Appellate Authority's order and restored the assessment order. A reading of the Tribunal's order shows that the Tribunal has discussed each and every piece of evidence before it and came to the factual conclusion that the assessee has failed to discharge his burden under section 69A of the Income Tax Act read with section 110 of the Evidence Act. These conclusions, as rightly contended by the learned senior counsel for the revenue, are completely factual and therefore, it does not give rise to any question of law for the consideration of this Court in an appeal filed under Section 260A - Decided against assessee.
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2017 (9) TMI 46
Initiating proceedings for re-assessment u/s 147 - extended period of limitation invoked - reason to believe - information received from the Investigation Wing - escaped assessment inter-alia for the reason of non disclosure of true and full material facts necessary for assessment Held that:- A perusal of the reasons to believe as supplied by the department reveals that though it has been contended that on the information received from the Investigation Wing, New Delhi, the income of the assessee had escaped assessment but it no where states that the assessee had failed to disclose the true and full particulars necessary for the assessment of income tax for the relevant year. In the absence of the averment that the assessee has failed to disclose fully and truly all material facts necessary for the assessment, the proceedings for re-assessment could not have been initiated under Section 147 of the Act in the extended period of limitation. - Decided in favour of assessee.
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2017 (9) TMI 45
Refund the tax demand along with interest as applicable under Section 244-A - Dispute Resolution Panel (D.R.P.) does not have the Corum - Held that:- Today, when the matter is taken up for hearing, the learned Standing Counsel for the respondents submitted that D.R.P. has sufficient corum and they are of the opinion that the order of remand could not have been passed. However, this issue is for D.R.P. to deal with and not for this Court to adjudicate upon at this juncture in the light of the submissions made by the learned counsel for the petitioner. A feeble attempt has been made by the learned Senior Counsel for the petitioner to state that arguments are to be advanced on merits of the matter. This would be impermissible in the light of the fact that this Court has already recorded as to what would be the scope of the direction to be issued in this Writ Petition while hearing the case on 07.07.2017. Thus there will be a direction to the first respondent/D.R.P. to finally decide the petitioner's application, filed before them, dated 28.09.2010, and pass appropriate orders on merits and in accordance with law, as expeditiously as possible, preferably, within a period of twelve weeks from the date of receipt of a copy of this order.
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2017 (9) TMI 44
Penalty u/s 271(1)(c) - Assessee had earlier not filed the return - subsequently filed return in response to notice u/s 148 - Return accepted by AO without any enhancement - Held that:- Unamended Explanation 3 to section 271(1) provides that when any person “who has not been previously assessed under this Act” fails without reasonable cause to furnish return within the time specified in sub-section (1) of Section 153 required to be furnished under section 139 and until expiry of such period no notice has been issued under sub-section (1) of section 142 or section 148 and the Assessing Officer or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has taxable income then such person shall for the purpose of clause (c) of sub-section (1) be deemed to have concealed the particulars of his income notwithstanding that such person furnishes a return at any time after the expiry of the aforesaid period, in pursuance of a notice under section 148 of the Act. Also with effect from 01.04.2003 said explanation omitted the group of words “who has not previously been assessed under this Act”. Assessee opens up his arguments in assessment year 2002-03 and his case is that he had not previously been assessed to tax since he had only agricultural income not taxable under the provisions of the Act. In absence of an explanation providing for a deeming fiction of concealment of income the case of the assessee would not be covered under the laid provision and since as held by the Tribunal, unamended Explanation 3 also did not cover the case of the assessee, the penalty was rightly deleted. - Decided in favour of assessee.
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2017 (9) TMI 43
Applicability of section 40(a)(ia) - TDS liability u/s 194C on amount payable and not on the amount actually paid - Held that:- Section 40(a)(ia) covered not only those cases where the amounts were payable but also those where it was paid. Accordingly, the question framed is decided in favour of the Revenue and against the Assessee in terms of the Supreme Court decision in the case of Palam Gas Services v. CIT [2017 (5) TMI 242 - SUPREME COURT]. The result whereof shall be that the view taken by the Assessing Officer of disallowance is upheld and is restored.
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2017 (9) TMI 42
Rejection of books of accounts - Enhancement of G.P. Ratio to 2% - Remanding the matter to AO for summoning and cross-examining Mr Garg - Re-adjudicating the matter afresh by ITAT - Held that:- Remanding the matter to the AO for the purpose of examining the above firms once again, when all details are already available on record, would not serve any useful purpose. The end result is that the ITAT has not examined the issues raised before it on merits and instead remanded the matter to the AO which, in the opinion of the Court, would interminably delay the matter.For the aforementioned reasons, the Court is of the view that the matter ought to have been considered by the ITAT itself particularly when all the relevant details were available with the AO. Accordingly, the question framed by the Court is answered in the negative, i.e., in favour of the Assessee and against the Revenue.
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2017 (9) TMI 41
Sundry creditors’ outstanding liability to be added to the income of assessee u/s 41(1) - issued notices u/s. 133(6) to sundry creditors - failed to give evidence regarding genuineness of creditors - Held that:- There is no question of remission or cessation of sundry creditors liability and the same is shown in the balance sheet of the assessee, then, facts and circumstances of the case would prove that the case of the assessee is not covered by the provisions of section 41 (i) of the IT Act. We, therefore, do not find any justification to interfere with the order of the learned CIT(A). We confirm his findings and dismiss this ground of appeal of the revenue - Decided against revenue Disallowance of business promotion and telephone expenses - Held that:- Authorities have made this disallowance without pointing out as to how much of such expenses were incurred by the assessee for personal benefit of assessee. Hence, the adhoc disallowance out of these expenses deserves to be deleted. Regarding car running expenses and electricity expenses, the AO has rightly made the disallowance, as the assessee could not be able to produce the log books of the vehicles run by him and that composite electricity expenses were found incurred on office cum residence of assessee. We accordingly confirm the disallowance made out of electricity and car running expenses as made by the authorities below.
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2017 (9) TMI 40
Exemption u/s 11 - Expenses incurred by the assessee outside India - Addition on no approval of the Board for exemption u/s 11(1)(c) - computation as per provisions of section 11 to 13 - Held that:- As from the order dated 08.02.2016 issued by Central Board of Direct Taxes (CBDT), the permission has been accorded to the assessee u/s 11(1)(c) of the Act and expenses to the tune of ₹ 11,43,35,344/- incurred by the assessee outside India for the purpose of international welfare are ordered to be not included in the total income of the assessee society. This factual position has not been controverted by the DR, hence, we find no illegality or perversity in the findings returned by the ld. CIT (A) on this ground. - Decided against revenue Transaction of 'foreign contribution' - foreign contribution from Government of France within the meaning of section 2(1)(j) of FCRA without filing return qua these contributions in FC-3 to Ministry of Home Affairs - Held that:- when a transaction is between Government of India and Government of any foreign country or territory, FCRA is not attracted. When undisputedly, the transaction of ₹ 9,45,28,000/- is a grant given by French Government to the assessee society which is a joint venture of French Government and Government of India, the transaction of transferring the grants is a transaction between both the countries as specified in the letter (supra). Furthermore, vide letter dated 08.06.1985, available at page 28 of the paper book, addressed to Secretary General, Ministry of External Relations, Government of France by Shri Ramesh Bhandari, the then Foreign Secretary, it is categorically made clear that, “the assessee society established for promotion of scientific research etc. will be exempt from payment of income-tax.” So, in these circumstances, we find no illegality or perversity in the findings returned by ld. CIT (A) in deleting this addition by treating the assessee society as a Government society. - Decided against revenue Addition under the head ‘interest income’ u/s 13(1)(d) - deposits in the French bank violates the provisions of section 11(5) read with section 13(1)(d) - Held that:- When the assessee society is a joint venture of Government of India and Government of France to promote scientific research in both the countries and funds are jointly contributed by both the Governments, the funds received as grant by the assessee from the French Government are deposited in the Credit Industrial Commercial Paris, French bank which are in accordance with the rules and regulations of society, interest thereon is not hit by provisions of section 11(5) read with section 13(1)(d) of the Act in any manner, the same being not an investment. So, we find no illegality or perversity in the findings returned by ld. CIT (A), hence this ground is also determined against the Revenue.
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2017 (9) TMI 39
Validity of proceedings u/s 153C r.w.s. 153A - additions to income and disallowances of expenditure - no incriminating material found during the course of search - Held that:- Though assumption of jurisdiction in framing assessment order u/s 153C of the Act by the ld Assessing Officer is correct, however, as all the additions made in these assessment years(i.e. 2004-05 to 2010-11) are not based on any incriminating material unearthed during the course of search the addition/ disallowances deserve to be cancelled. In view of this, additional ground raised by the assessee succeeds and reversing the order of the ld CIT(A), we direct the ld Assessing Officer to delete all the additions disputed before us for AY 2004-05 to AY 2008-09 - Decided in favour of assessee. Low household expenditure - Held that:- Since , assessee is living in his parental house and his wife is also working but however, no details about the expenses of the household was provided. Therefore, the ld CIT(A) confirmed the addition. - Decided against assessee. For AY 2010-11 - disallowance deduction u/s 80G on account of not submitting the donation receipt - Held that:- The assessee has not submitted the same therefore, we do not interfere in the disallowance. Therefore ground of the appeal of the assessee is dismissed. Difference in TDS certificate of commission earned - Held that:- When deductor itself has given a certificate that he has wrongly shown TDS in the name of the assessee but it belongs to a third party, the lower authorities has wrongly confirmed the disallowance. In view of this we reverse the finding of the ld CIT(A) and direct the Assessing Officer to delete the addition on account difference in income offered by the assessee and receipt shown in the TDS certificate - Decided in favour of assessee.
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2017 (9) TMI 38
Proceedings u/s 153A initiated and assessment completed - Penalty proceedings initiated u/s 271(1)(b) during assessment - Non-compliance of statutory notices by assessee - Filing of reasonable cause for such Non Compliance - venial breach - Held that:- The assessee is mainly aggrieved by the levy of penalty of ₹ 20,000/- u/s 271(1)(b) for all the impugned assessment years, which was on account of failure to comply with the 2 statutory notices/date fixed for hearing on 30.11.2012 and 27.12.2012. The assessee filed very detailed explanation, challenging the validity of initiation of penalty proceedings and explaining the reasonable cause for non-compliance on the appointed days firstly, the key person/group head, Shri Gopal Kumar Goyal who was entrusted with income tax matters and was looking after the entire working of the group was in judicial custody in some criminal proceedings and the entire group and family members were engaged in ongoing court proceedings for his early release and various employees were leaving the group further accentuating the problems; secondly, more than 300 group assessments were initiated in the wake of search proceedings which were simultaneously going on, therefore, it was difficult to comply to the various notices on short dates; lastly, it has been strongly pleaded before us, that the compliances had been made through replies filed through dak or registered post though belatedly. These facts have not been controverted by the AO or CIT (Appeals). Thus all it constitute reasonable cause falling within the scope and ambit of section 273B and accordingly, we are of the considered opinion that failure to comply with certain notices on a particular date was due to reasonable cause. Also demand in the quantum proceedings has been reduced to “nil”, after giving effect to the first appellate order and there has been no substantive non-compliance either during the course of the assessment proceedings or during the appellate proceedings. In such circumstances such an alleged breach or non-compliance is mere technical and venial in nature and therefore, penalty should not be levied for such venial breach - Decided in favour of assessee.
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2017 (9) TMI 37
Proceedings u/s 153A initiated and assessment completed - Penalty proceedings initiated u/s 271(1)(b) during assessment - Non-compliance of statutory notices by assessee - Filing of reasonable cause for such Non Compliance - venial breach - Held that:- The assessee is mainly aggrieved by the levy of penalty of ₹ 20,000/- u/s 271(1)(b) for all the impugned assessment years, which was on account of failure to comply with the 2 statutory notices/date fixed for hearing on 30.11.2012 and 27.12.2012. The assessee filed very detailed explanation, challenging the validity of initiation of penalty proceedings and explaining the reasonable cause for non-compliance on the appointed days firstly, the key person/group head, Shri Gopal Kumar Goyal who was entrusted with income tax matters and was looking after the entire working of the group was in judicial custody in some criminal proceedings and the entire group and family members were engaged in ongoing court proceedings for his early release and various employees were leaving the group further accentuating the problems; secondly, more than 300 group assessments were initiated in the wake of search proceedings which were simultaneously going on, therefore, it was difficult to comply to the various notices on short dates; lastly, it has been strongly pleaded before us, that the compliances had been made through replies filed through dak or registered post though belatedly. These facts have not been controverted by the AO or CIT (Appeals). Thus all it constitute reasonable cause falling within the scope and ambit of section 273B and accordingly, we are of the considered opinion that failure to comply with certain notices on a particular date was due to reasonable cause. Also demand in the quantum proceedings has been reduced to “nil”, after giving effect to the first appellate order and there has been no substantive non-compliance either during the course of the assessment proceedings or during the appellate proceedings. In such circumstances such an alleged breach or non-compliance is mere technical and venial in nature and therefore, penalty should not be levied for such venial breach - Decided in favour of assessee.
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2017 (9) TMI 36
Proceedings u/s 153A initiated and assessment completed - Penalty proceedings initiated u/s 271(1)(b) during assessment - Non-compliance of statutory notices by assessee - Filing of reasonable cause for such Non Compliance - venial breach - Held that:- The assessee is mainly aggrieved by the levy of penalty of ₹ 20,000/- u/s 271(1)(b) for all the impugned assessment years, which was on account of failure to comply with the 2 statutory notices/date fixed for hearing on 30.11.2012 and 27.12.2012. The assessee filed very detailed explanation, challenging the validity of initiation of penalty proceedings and explaining the reasonable cause for non-compliance on the appointed days firstly, the key person/group head, Shri Gopal Kumar Goyal who was entrusted with income tax matters and was looking after the entire working of the group was in judicial custody in some criminal proceedings and the entire group and family members were engaged in ongoing court proceedings for his early release and various employees were leaving the group further accentuating the problems; secondly, more than 300 group assessments were initiated in the wake of search proceedings which were simultaneously going on, therefore, it was difficult to comply to the various notices on short dates; lastly, it has been strongly pleaded before us, that the compliances had been made through replies filed through dak or registered post though belatedly. These facts have not been controverted by the AO or CIT (Appeals). Thus all it constitute reasonable cause falling within the scope and ambit of section 273B and accordingly, we are of the considered opinion that failure to comply with certain notices on a particular date was due to reasonable cause. Also demand in the quantum proceedings has been reduced to “nil”, after giving effect to the first appellate order and there has been no substantive non-compliance either during the course of the assessment proceedings or during the appellate proceedings. In such circumstances such an alleged breach or non-compliance is mere technical and venial in nature and therefore, penalty should not be levied for such venial breach - Decided in favour of assessee.
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2017 (9) TMI 35
Allowable business expenditure u/s 37 - sales promotion expenses - expenditure incurred for business purposes - Held that:- In absence of required documentary evidence, in our opinion the disallowance of 50% of the expenses for the sales promotion under section 37(1) of the Act was justified. Providing free air travel, stay and food in hotels, local car conveyance etc. for prescribing medicines of the assessee is akin to giving commission and certainly in contravention of the public policy. Thus, respectfully following the decision of the Hon’ble Punjab and Haryana High Court in the case of CIT Vs. Kap Scan and diagnostics Centre (p) Ltd (2012 (6) TMI 620 - Punjab and Haryana High Court ), the 50% expenses out of the sales promotion expenses disallowed by the Assessing Officer was justified. Here we find that the expenses toward sponsoring to doctors appears to be exceeding 50% of the sales promotion expenses and therefore the Assessing Officer is more than liberal in disallowing 50% of the sales promotion expenses of the assessee. - Decided partly in favour of assessee. Disallaowance of expenses for delay in contribution made towards Provident Fund payments - Held that:- The payment by an employer of employees’ contributions to Provident Fund are not governed by the provisions of section 43B as stated by the appellant. Rather, the employees’ contributions to PF are included in the income of an assessee as per the provisions of section 2(24)(x) of the Act and only if an employer deposits these contributions received by him, by the specified date given in the Provident Fund Act (which is the 20th of the month following the month to which the contributions pertain) are these payments allowed as a deduction from the income in view of the provisions of section 36(1 )(va) of the Act.Since the payment of ₹ 5,94,741/-is paid after the prescribed time The disallowance of ₹ 5,94,741/- made by the Assessing Officer is, accordingly, upheld. This ground of appeal is dismissed.” Disallowance of depreciation claimed on the UPS, Rack, switch and battery etc. - 15% or 60% - Held that:- Depreciation at the rate of 60% on UPS allowed. See Steel Authority of India Vs. Addl. CIT [2013 (2) TMI 67 - ITAT DELHI]
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2017 (9) TMI 34
Revision u/s 263 - declining the claim and set off of additional depreciation in next year - machinery was installed and worked for less than 180 days - assessee has claimed 50% of additional depreciation in A.Y.2011-12 and carry forward balance 50% in next year - Held that:- The eligibility to carry forward and set off 50% of the additional depreciation to the subsequent year on the plea of machinery having been worked for less than six months has been decided by Madras High Court in case of T.P.Textiles Pvt. Ltd. [2017 (3) TMI 739 - MADRAS HIGH COURT ] stating upon a plain reading of the unamended provision, it could not be said that the Assessee could not claim balance depreciation in the A.Y., which follows the A.Y., in which, the machinery had been bought and used for less than 180 days. we do not find any merit in the action of CIT for declining the claim of additional depreciation to be carried forward. - Decided in favour of assessee.
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2017 (9) TMI 33
TDS u/s.195 - addition u/s.40(a)(i) - belated remittance of the TDS made u/s.195 - non-discriminating Clause provided in DTAA with Indo-US Treaty - PE in India - Held that:- Similar payments in residents does not attract the disallowance in the event of non-deduction of tax at source. Thus, taxing the amount u/s.40(a)(i) for non-deduction of tax at source on similar amounts tantamount to discrimination. Therefore, the DTAA and the decision relied upon by the assessee in in the case of Millennium Infocom Technologies Ltd. vs. ACIT [2008 (1) TMI 437 - ITAT DELHI-E] for non-discrimination clause squarely applicable in the assessee’s case and accordingly, we held that the disallowance u/s.40(a)(i) would not be applicable in the case of the assessee. - Decided in favour of assessee. Server maintenance and testing and development charges - permanent establishment - DTAA - whether payment made not for FTS? - Held that:- AO and Ld.CIT(A) did not bring any material to show human involvement in the activities explained by the assessee. From the above facts it is observed that the assessee is merely using the technology provided by the parent company and no managerial, consultancy and technical services are provided by the parent company. Therefore, we are of the considered opinion that the payment made is not for FTS and the decisions cited in the above cases relied upon by the Ld.AR are squarely applicable in the assessee’s case and we agree with the assessee that the payment was for reimbursement of expenses and in reimbursement of expenses, no tax is deductible u/s.195 of IT Act as held by this Tribunal in Cairn Energy Pvt. Ltd. v. Assistant Commissioner of Income tax [2009 (2) TMI 259 - ITAT CHENNAI]. Accordingly, we delete the addition made by the AO and set-aside the orders of lower authorities. The assessee’s appeal on server maintenance charges is allowed. In respect of testing and development charges, the payment was made to Hutchinson Italy for the services rendered in the Vendor location in Italy. For establishing such territorial nexus, the services have to be rendered in India as well as utilized in India. The explanation to section 9(2) was introduced by Finance Act 2007 w.e.f.1976 and as on the date of assessment there was no provision to tax the FTS rendered outside India and hence we agree with the Ld.A.R that no tax is deductible u/s 195 and consequent disallowance is not called for. We hold that the payment made by the assessee for FTS for the services rendered outside India are not taxable under section 9(1)(vii) of I.T. Act in the assessment year under consideration and the disallowance is not called for and we delete the addition made by the AO and set-aside the lower authorities orders. The assessee’s appeal on this issue is allowed.
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Customs
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2017 (9) TMI 12
EOU - refund of Central Sales Tax - case of Revenue is that the first petitioner is not entitled to CST reimbursement in view of the fact that, the petitioner has purchased material from a SEZ Unit - Held that: - There is no reason as to say that, purchases from SEZ by an EOU will not be entitled to reimbursement of CST in terms of FTP of 2009-2014 - An EOU purchasing goods from a SEZ will be entitled to reimbursement of CST in terms of FTP, 2009-2014. The first petitioner was allowed such reimbursement - petition allowed - decided in favor of petitioner.
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2017 (9) TMI 11
Valuation of imported fabrics declared as Polyester Knitted Fabrics under CTH 6006 9000 - enhancement of value - the original authority redetermined the value of the goods as USD 59845.30 (Rs.27,64,853/- CIF) and classified the goods to be under CTH 60063300 - Held that: - though the test report has been conducted, it is seen that the rate of duty in respect of both the classifications are same and therefore the contention of the appellant that they had any malafide intention to mis-declare or mis-classify the goods is not without force. Further, a certificate has been produced from the supplier and also bank statement to the effect that the appellant has paid only 4848 USD to the foreign supplier - reliance placed in the case of SAI IMPEX Versus COLLECTOR OF CUSTOMS [1992 (7) TMI 162 - CEGAT, NEW DELHI], where it was held that the transaction value is not enhanceable in the absence of evidence of contemporaneous import of identical or similar goods and that if the manufacturer's invoice is available and genuine, is the best evidence of the price of imported goods - the enhancement of value is unjustified - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 10
Demand of duty - confiscated goods - option to redeem not exercised by the appellants - Benefit of N/N. 64/88 dated 1.3.1988 - import of various medical equipments - violation of condition of notification - section 124 of Customs Act, 1962 - Held that: - it is not clear whether the show cause notice was issued under section 124 since the copy of the same is not part of the records - The issue whether the department can demand duty under section 124 of the Customs Act, on identical facts, has been analyzed by the Hon’ble Supreme Court in the judgment of Fortis Hospital [2015 (4) TMI 348 - SUPREME COURT], where it was held that It is clear that when such an action was not contemplated, which even otherwise could not be done while exercising the powers under Section 124 of the Act, in the final order there could not have been direction to pay the duty. Penalties - Held that: - the certificate has been withdrawn by DGHS in 2000/2002 much later after import. It does not show the period during which the condition was not fulfilled. Hence, in our opinion, the penalty cannot sustain. It is required to be verified whether the show cause notice is issued under section 124 of Customs Act, 1962 - Appeal allowed in part and part matter on remand.
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2017 (9) TMI 9
Penalty - main pleading of the appellant is that the finished goods did not belong to them - Held that: - the Revenue has failed to discharge its responsibility to prove charge of illegal import against the appellant - The original adjudicating authority makes a mention that “despite their being no direct inquiry from Shri Jeevan Jain as regards his role, in this case, his culpability is speaking out for itself”. This finding is more in the nature of mere statement, which is without sufficient evidence to sustain the same - penalty set aside - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 8
Mis-declaration of imported goods - goods were declared as glass sets, but on verification, a total of 857 cartons of glass sets along with 248 cartons of glass chatons, of different marks and sizes, were found in the container - whether or not there is a violation of provisions of Customs Act on the part of the importer, M/s Parth Corporation? - Held that: - The QR code on the packages as well as the manner of storage of, initially undeclared, items (chatons) in the consignment clearly established that M/s Parth Corporation were aware of the contents of the shipment and also under-valuation of the imported goods - the impugned order is sustainable and accordingly we hold that M/s Parth Corporation have violated the provisions of Customs Act by their act of attempted clearance by mis-declaring the import item as well as value, in the bill of entry. Penalty u/s 112 of CA - Held that: - We find no supporting evidence recorded in the impugned order to conclude that M/s Pajil & Co. had tried to aid the original importer in execution of wrong high sea sale agreement and had been an active member of this conspiracy - We find no support, by way of evidence, discussed in the impugned order - Entering into high sea sale agreement based on the information provided by the original importer by itself, will not attract the penal provisions of Section 112 unless evidence are available to the effect that such high sea buyer had knowledge of possible undeclared item in the consignment and under-valuation - penalty not sustainable. Valuation of the imported consignment - whether the original authority is right in rejecting the declared value in terms of Rule 12 of the Valuation Rules? - Held that: - it is to be noted here that the person behind the import clearly stated that the value declared is not correct and they are agreeable to enhancement of value. In fact, the importer stated that they were willing to pay the differential custom duty, as per enhancement proposed by customs along with the penalty and fine. It is clear, that based on such facts and evidences, that the original authority is correct in invoking Rule 12 for rejection of declared value. Whether or not the original authority followed the provisions of valuation rules for fixing the correct assessable value? - Held that: - The rules, which were reproduced in para 14 of the impugned order, clearly stipulate that when the transaction value is fixed either in terms of Rule 4 or Rule 5, if more than one transaction value of such goods is found, the lowest such value shall be used to determine the value of imported goods. The methodology adopted in the impugned order is contrary to the said legal provisions - the valuation of the imported goods requires re-examination by the original authority in line with the applicable provisions of valuation rules - also, the aspect of confiscation and quantum of redemption fine needs re-examination - matter on remand. Appeal allowed - decided partly in favor of appellant, partly decided against appellant, and part matter on remand.
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Corporate Laws
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2017 (9) TMI 3
Voluntary winding up - dissolution of the company - Held that:- The Registrar of Companies, NCT of Delhi and Haryana vide its letter No.15817 dated 09.03.2016 has stated that it has no objection for dissolution of the company in voluntary liquidation. From the scrutiny of the records submitted by the voluntary liquidator, the Official Liquidator attached to this Court is satisfied that the necessary compliances of Section 497 of the Act and other related provisions of the Companies Act, 1956, as applicable thereto have been made and the affairs of the Company have not been conducted in any manner prejudicial to the interest of its members and public at large and thus requested for the winding up of the petitioner company. All relevant documents are annexed to the petition. The petition of the Official Liquidator is taken on record and the petitioner company is ordered to be wound up and dissolved from the date of filing of this petition.
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2017 (9) TMI 2
Shifting of the registered office - scheme of amalgamation approved - Held that:- Once the Company Court has approved the scheme of amalgamation it has to be given effect to. Therefore, when the amalgamation is permitted as per the Company (incorporation) Rules 2014, it will be the registered office of the company which will have to be mentioned. The applicant company is required to meet with the deadline for filing income tax return and finalizing the assessment proceedings. It is also stated that non shifting of the registered office from the State of Gujarat to the State of Karnataka would cause serious prejudice and therefore, the present application has been filed. Therefore, the impugned order at Annexure-A, cannot be sustained in light of discussion made hereinabove and therefore, it deserves to be quashed and set aside. The only ground mentioned is that the Company Application Nos.79 to 81 of 2014 has been filed in the respective Company Petitions regarding the scheme for arrangement and amalgamation. However, as stated, once the review applications have been dismissed for default, there is no justification for not considering the application filed by the petitioner company under Section 13 of the Companies Act, 2013. The application as provided in the Act for shifting of the registered office and/or alteration of the memorandum has to allow as a necessary corollary. Therefore, the impugned communication/order at Annexure-A passed by the Deputy Director for Regional Director, dated 21.03.2017, office of the Regional Director, North-Western Region, Ahmedabad deserves to be quashed and set aside and accordingly set aside.
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Service Tax
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2017 (9) TMI 32
Supply, erection and commissioning of lifts / elevators for residential and commercial buildings - Works contract service - Levy of service tax prior to 1.6.2007 - Held that: - In the case of Larsen & Toubro [2015 (8) TMI 749 - SUPREME COURT], the Hon’ble Apex Court as held that works contract prior to 1.6.2007 are not subject to levy of service tax - Following the principles laid down, the demand prior to 1.6.2007 is unsustainable and therefore requires to be set aside. A small portion of the demand pertains to 1.6.2007 to 31.7.2007 - Since the appellant has paid service tax on 15% of the contract value and has discharged VAT on the remaining portion, we are of the view that any differential service tax demand beyond that already discharged for the period 1.6.2007 to 31.7.2007 is unsustainable and requires to be set aside, which we hereby do. The demand of CENVAT credit to the tune of ₹ 2,51,202/- also is seen to have been utilized by the appellant for payment of service tax prior to March 2007, during which period works contract service was held not to be liable to service tax, demand set aside. Penalties - Held that: - The demands for differential tax liability / recovery of credit having been set aside, the penalties imposed will also not sustain. Appeal allowed - decided partly in favor of appellant.
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2017 (9) TMI 31
Consulting Engineering Services - levy of service tax - Held that: - in the case of L&T Ltd, [2015 (8) TMI 749 - SUPREME COURT] the Hon’ble Apex Court has held that Works Contract Services prior to the period 1.6.07 are not subject to levy of service tax - the appellants are not liable to pay service tax under the category of Consulting Engineering Services - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 30
Banking & Other Financial Services rendered by service providers outside India in connection with raising Foreign Currency Convertible Bonds - fees paid to foreign agents - other charges like, Commitment charges, Out of pocket expenses, Trusteeship fees, Processing fees, Listing fees, Printing fees etc - reverse charge mechanism - Held that: - Such services have become taxable only with effect from 1.9.2009 and therefore the demand on legal fees in our view is unsustainable - for the limited purpose of requantification of the demand eliminating legal fees, the matter requires to be remanded to the adjudicating authority. Penalties u/s 76 and 78 - Held that: - there was much controversy as to the liability to pay service tax under reverse charge mechanism during the relevant period. Prior to introduction of Section 66A in Finance Act, only the Rules provided for such levy and the doubt was whether there can be levy of service tax merely by providing in the Rules, without having a charging section in the Act - penalties imposed are unwarranted. Appeal allowed in part and part matter on remand.
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2017 (9) TMI 29
Business Auxiliary Services - whether the activity of blending and packing of tea on behalf of client would fall within the definition of Business Auxiliary Service? - Held that: - reliance placed in the case of COMMISSIONER OF INCOME TAX, KERALA Versus TARA AGENCIES [2007 (7) TMI 4 - SUPREME COURT OF INDIA], where it was held that the respondent's activity amounts to processing only and the activity does not amount to either production or manufacture - the activity of the appellants would not amount to manufacture - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 28
100% EOU - refund of unutilised CENVAT credit - rejection of refund on the ground that appellants on their own volition had apportioned certain amount of service tax initially claimed by them under the head “Telephone and Erection” under a totally new head “Manpower Supply Service”, which was not claimed by them at any point of the proceedings starting from the initial refund claims till the end of the proceedings - Held that: - Both the original authority and the ld. Commissioner (Appeals) have very correctly rejected the claims of refund of service tax initially claimed by the appellants under the head “Telephone and Erection”, when the appellants have subsequently changed the head to new “Manpower Supply” service on their own volition that after conclusion of the appeal proceedings, which by the act of not challenging it, they are deemed to have accepted the same - appeal dismissed - decided against appellant.
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2017 (9) TMI 27
Classification of services - appellants are engaged in providing certain services with reference to water pipelines of Delhi Jal Board - whether the said service falls under the category of Management, Maintenance or Repair Services? - Held that: - the definition of Management, Maintenance or Repair Services covers “reconditioning or restoration or servicing of any goods” - Though the appellant did restoration, reconditioning servicing work of water pipelines, the same is not with reference to any goods. Since the scope of contract is clear, this will not fall under the category of a general “maintenance or repair of properties” - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 26
Condonation of delay - the decision in the case of Fulchand Tikamchand Versus Commissioner of Central Excise & Customs, Nagpur [2016 (2) TMI 772 - CESTAT MUMBAI] contested - Held that: - The appeal(s) is dismissed on the ground of delay.
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2017 (9) TMI 25
CENVAT credit - input services - construction of a Dormitory - Whether the CESTAT is correct in allowing Cenvat credit in respect of construction services used in constructions of dormitory even when there is no co-relation between such input services and manufacture/clearance of finished goods as these services are more closely associated to welfare activity? - Held that: - It is a jurisdictional issue which ought to have been examined by Revenue authorities, but not done - Tribunal has committed manifest error by misreading order of Commissioner as we find that with regard to situation of Dormitory, whether it is within precinct of factory or not, though there is contradictory stand taken by assessee and Revenue, but no specific finding has been recorded by Commissioner and Tribunal has proceeded on assumption that it is within the premises of Factory. This observation of Tribunal is patently erroneous - matter remanded for fresh consideration - appeal allowed by way of remand.
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Central Excise
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2017 (9) TMI 24
Stay/waiver of the pre-deposit - Section 35F of the Central Excise Act, 1944 - Whether the CESTAT is justified in rejecting the stay/waiver application of the appellant to waive the condition of pre-deposit of the entire disputed amount of the duty for entertaining the appeal under Section 35F of the Act? - Held that: - deposit of the duty demanded under the impugned order or the penalty levied is a condition precedent for adjudicating the appeal but the said condition in a given case may be waived by the Appellate Tribunal - The second proviso to Section 35F of the Act, as amended, is very clear and it specifically excludes the appeals already filed and pending before the Appellate Authority from the applicability of the amended provisions of Section 35F of the Act - In view of the second proviso to the Section 35F of the Act would not apply to appeals which were filed prior to the enforcement of the amending Act and were pending on the date of its enforcement. There is no dispute to the fact that the appeal before the Tribunal was filed on 9.1.2014 much before Section 35F of the Act was amended and enforced. Therefore, the appeal filed by the appellant is to be governed by the un-amended provisions of Section 35F of the Act, which provides for the deposit of the entire disputed amount. Since the petitioner has not deposited the same, his appeal could not be heard on merits - t no case for any ground of stay/waiver of the deposit of the disputed amount is made out as the Revenue has a strong prima facie case in his favour meaning thereby that the chances of the success of the appellant in appeal are weak - appeal dismissed - decided against appellant.
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2017 (9) TMI 23
Penalty u/s 11AC - Whether the penalty under Section 11AC which is mandatory in nature can be reduced or waived by the Hon'ble CESTAT? - Held that: - This provision provides for a penalty wherein duty of excise has not been levied, paid or short paid or erroneously rejected by reasons of fraud, collusion or any willful misstatement or suppression of facts, or contravention of any of the provisions of the Act or rules with intent to evade payment of duty. In such a case person liable to pay duty shall also be liable to pay a penalty equal to duty so determined. Penalty was mandatory and the Tribunal did not have discretion to reduce the amount as held by the Supreme Court in case of Dharamendra Textile Processors [2008 (9) TMI 52 - SUPREME COURT] - appeal allowed - decided in favor of appellant-Revenue.
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2017 (9) TMI 22
Cenvat Credit - Cement as inputs - Benefit of N/N. 67/95-CE dated 16.3.1995 - department was of the view that the cement has been utilized for construction activities and therefore is not utilized in or in relation to the manufacture of final products - whether the cement used for setting up of the new plant and machinery installed by the appellant can be considered as an input? - Held that: - the definition of input says that input means goods used in or in relation to manufacture of final products or for any other purpose within the factory of production, whether or not it is contained in the final product. This being so, the demand raised is without basis - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 21
Refund of eligible abatement of quantity discounts - department was of the view that the appellants are not eligible to claim any abatement as quantity discounts from the sales effected at the depot and a show cause notice was issued proposing to reject the refund claim - Held that: - issue whether appellants are eligible for such quantity discount has been settled by the Larger Bench of the Tribunal in the case of India Laboratories Pvt. Ltd. [2007 (5) TMI 19 - CESTAT,AHMEDABAD], where it was held that Quantity discount not available on goods contained in Multi-pack - demand upheld - appeal dismissed - decided against appellant.
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2017 (9) TMI 20
Validity of SCN - differential duty with interest paid on being pointed out - penalty - job-work - Held that: - after being pointed out by the audit, the appellants have paid the duty along with interest. In such a case, the show cause notice ought not to have issued - So also the intention to evade payment of duty cannot be alleged when the job worker / vendors/ HLL is eligible to take CENVAT credit on the duty paid. Thus, the situation would give rise to revenue neutral - penalty set aside - duty with interest paid is upheld - appeal allowed - decided partly in favor of appellant.
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2017 (9) TMI 19
CENVAT credit - structural items like Angles, H.R. Sheets, Shapes and Sections, Channels, H.R. Plates, etc - case of Revenue is that according to the Budget 2009-10 exclusion of Cement, Angles, Channels, Centrally Twisted Deformed Bass (CTD) or Thermo Mechanically Treated Bar (TMT), etc. were excluded from definition of Rule 2(k) of the Cenvat Credit Rules, 2004 - Held that: - the Order-in-Appeal dated 31/03/2015 was decided relying on the decision of Larger Bench of this Tribunal in the case of Vandana Global Limited [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)], where it was held that the clarificatory amendment made to Explanation 2 to Rule 2(k) in 2009 has to be held to be retrospectively applicable, is not sustainable - credit allowed - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 18
CENVAT credit - input services - depository/demat charges - membership/subscription charges - Input Service Distributor (ISD) invoices issued based on the invoices addressed to other units - Held that: - reliance palced in the case of M/s. Bharat Fritz Werner Ltd. Vs. CCE [2011 (2) TMI 1276 - CESTAT, BANGALORE] wherein it has been held that CENVAT credit on service tax on operating Demat Account for the business purpose is permissible - Further, membership/subscription charges have already been allowed by this Tribunal in the appellant's own case BAL PHARMA LTD. Versus COMMR. OF C. EX., CUS. & ST., BANGALORE-I [2014 (10) TMI 564 - CESTAT BANGALORE] - all the services are covered under the ‘input service’ definition - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 17
CENVAT credit - input/capital goods - welding electrodes used in the factory for fabrication - Held that: - welding electrodes are playing important part in the manufacturing process of the respondent-assessee, therefore, welding electrodes are eligible for CENVAT credit as input as per Rule 2(k) of CCR, 2004 - reliance placed in the case of AMBUJA CEMENTS EASTERN LTD. Versus COMMISSIONER OF C. EX., RAIPUR [2010 (4) TMI 429 - CHHAITISGARH HIGH COURT], where it was held that welding electrodes used in repair and maintenance of plant and machinery are inputs as defined under Rule 2(g) defined in the rule, and thus entitled for cenvat credit - credit allowed - appeal dismissed - decided against Revenue.
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2017 (9) TMI 16
Intermediate product - captive consumption - N/N. 50/2003-CE dated 10/06/2003 - resins manufactured by the appellants are consumed captively - excisability/marketability - Held that: - the Tribunal, Allahabad Bench have dealt with the very same issue for the earlier period in the appellant’s own case vide final order No.70520 of 2017 dated 19/05/2017, where it was held that learned Commissioner have erred in holding that the appellant’s goods are also capable of being bought and sold without any chemical composition comparison alongwith competitive shelf life study - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 15
Clandestine removal - cotton cone yarn of various counts - Revenue entertained a view that the said manufacturing unit must be raising the invoices but have not accounted the same in the statutory records - Held that: - It is for the Revenue to prove by production of tangible evidence that the appellant had been indulging in clandestine activities. Needless to observe that such corroboration cannot be by mathematical precision but should be atleast to an extent so as to inspire confidence even in the theory of preponderance of probabilities - In the present case, apart from the entries in the yarn broker's diary and the transporter's records, there is virtually no evidence establishing manufacture of such a huge quantity of yarn, their clearance etc - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 14
SSI exemption - N/N. 9/2003 dated 01/03/2003 - switchover from discharging normal excise duty to small scale exemption - the appellants were discharging Central Excise duty for the year 2004-2005 in terms of N/N. 9/2003 dated 01/03/2003. The said notification was rescinded w.e.f. 01/04/2005. During the financial year 2005-2006, for the period 01/04/2005 to 31/08/2005, the appellants had paid duty on the goods. However, the appellants started availing exemption under N/N. 8/2003-CE from 01/09/2005 to 31/03/2006 and surrendered the Central Excise registration - case of Revenue is that when the appellant continued to pay duty at the normal rate even in the new financial year 2005-2006, they cannot switch over to the SSI exemption in the middle of the year. Held that: - Evidently, the appellants did not opt for availing exemption available to small scale industries in terms of Notification 8/2003. We are not convinced by the argument of the appellant that they have never given in writing their option not to avail exemption under this notification. Clearly, the appellants paid duty at the normal tariff rate for 5 months from 01/04/2005 without opting for SSI exemption under Notification 8/2003. It is clear that they have specifically opted not to avail the exemption during this period. Their plea that they have not filed written option in this regard will not help their case. Their failure to file a written letter cannot add to the benefit of the appellant. Their payment of duty upto 31/08/2005 clearly shows that they have not opted for exemption under the said notification. As such, they cannot switch over to SSI exemption, as per their choice, in the middle of the year. The appellants pleaded for recalculation of duty demand considering the gross receipt as cum duty value. We hold that the same can be done on submission of evidence by the appellants to the effect that they have not indicated in their sales invoice or collected Central Excise duty separately - The eligibility of Cenvat credit on various inputs claimed to have been used during the period for clearance of final products can also be verified by the Jurisdictional Authority - appeal allowed by way of remand.
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2017 (9) TMI 13
Sub-contract - the main appellant paid service tax on the work executed by them as a sub-contractor to the second appellant - fabrication of CW liners, pipes and bends, in terms of work order dated 15.07.2009 - whether the main appellant is required to pay Central Excise Duty on manufacture of pipes? - Held that: - On careful consideration of various provisions of the said work order, we find that the main appellant cannot be considered as a labour contractor, simply providing labourers for certain work. It is clear that they have undertaken various fabrication work in terms of work order in their own account using the material supplied by the main contractor - we uphold the findings of the original authority regarding the duty liability of the main appellant with reference to manufacture of pipes and bends. Time limitation - Held that: - the main appellant has undertaken manufacture of excisable goods and are liable to pay duty. The demand for an extended period is sustainable. However, the quantification of duty demand as well as the correctness of finding regarding confiscation and consequent redemption fine has to be re-examined by the original authority. Penalty u/r 26 of CE Rules, 2002 - Held that: - we note that the second appellant is a limited company. In various decisions, the tribunal has held that penalty under Rule 26 can be imposed only on individuals and not on companies - the order has been passed exparte and the appellant had claimed that due opportunity has not been provided to them to defend their case. In fact they claimed that they have filed reply to the SCN 24.12.2011 which was not considered. The original authority is required to decide the case of penalty, afresh. Appeal decided against appellant in part and part matter on remand - Appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2017 (9) TMI 7
Validity of assessment order - sales details have been noticed as mis-match, based on which input tax credit has been taken - Natural Justice - Held that: - The respondent, unfortunately, did not even make an attempt to verify as to which of the dealers are within the same assessment circle. It appears that the Assessing Officer was not at all aware of the same, because while issuing notices, dated 22.08.2016 and 24.08.2016, the respondent has stated that the petitioner should produce the monthly return copies of the sellers with payment and adjustment details in the concerned notices/circulars. If the other end dealers are registered within the same circle, the respondent should be aware of the same and should have made an attempt to verify the facts. When completing the assessments based on mis-match between the details shown in the dealers returns and the details of the dealers at other end, this Court, in the case of J.K.M. Graphics Solutions Private Limited v. Commercial Tax Officer [2017 (3) TMI 536 - MADRAS HIGH COURT] has considered the matter and had given certain broad guidelines as to how the Assessing Officer have to undertake the exercise, by conducting thorough enquiry in consultation with the Assessing Officer of the other end - The Assessing Officer has also not followed the directions issued by this Court in the said decision in J.K.M.Graphics Solutions Private Limited's case. The impugned orders, having been passed without due application of mind and without proper verification, deserve to be set-aside - the matters are remanded back to the respondent for fresh consideration, who shall afford an opportunity of personal hearing to the petitioner - appeal allowed by way of remand.
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2017 (9) TMI 6
Ultra vires of Section 52 of the Gujarat Value Added Tax Act, 2003 - Company is deemed to be in existence for the purpose of taxation under the VAT Act - merger / demerger - levy of VAT - consideration received by the Merging Entities/Transferor Companies with respect to the transactions undertaken under the Indefeasible Right to Use Agreements with the Transferee Company - It is the case on behalf of the petitioners that having received the aforesaid show causes notices, the petitioner-Transferee Company filed a letter before the respondent no. 2 duly informing that the Merging Entities/Transferor Companies to whom the said show cause notices have been issued have ceased to exist from 1st April 2009 by virtue of High Court orders - scope of SCN - it is also case of petitioner that Section 52 of the VAT Act cannot be given effect beyond the competence of State as it stands in that case, it would be beyond the powers conferred under Entry 54 of List II of the Constitution of India. Held that: - the pith and substance of enactment of Section 52 of the GVAT Act is to bring within the net of tax in case sale has taken place within definition of Section 2 [23](d) of the GVAT Act. While considering the doctrine of pith and substance with reference to the State Legislation viz., Section 52 of the Act, one is to ascertain the true nature and character thereof by examining its object, scope and effect of its provisions and the legislation as a whole. If, on doing so, it appears that the State Legislation substantially falls within any Entry under List II of the Seventh Schedule to the Constitution, then in that case, such a State Legislation cannot be invalidated merely because it has incidentally dealt with some aspect already covered by a Central Legislation, relateable to any Entry under List I. As observed hereinabove, Entry 54 of List-II of Seventh Schedule authorizes and/or permits the State to legislate the law in respect of tax on sale or purchase of goods. Under the circumstances, in respect of anything with respect to tax on sale or purchase of goods, the State would have a legislative competence under Entry 54 of List II to Seventh Schedule. Such an “incidental encroachment” by the State Legislation into the exclusive field of the Central Legislation is permissible. While considering the constitutional validity of a particular statute, the true nature and character of the Statute enacted by the State shall have to be considered and borne in mind, more particularly, when it is alleged that the State Act is encroaching upon field/authority of the Parliament to enact the law, as per List I to Seventh Schedule tot he Constitution of India. There is no need for any amendment in the Constitution by the Parliament for certain non sales transactions as “sale” by amending Article 366 [29A] cannot be accepted more particularly when, as observed hereinabove, the State legislation/Act is not repugnant to the Central legislation and both operate in different fields. Article 366 [29A] of the Constitution is with respect to extending definition of “Sale” and is with respect to “deemed sale” - In the present case, Section 52 of the GVAT Act cannot be said to be with respect to “deemed sale”. It can be said to be with respect to recovery of the tax on the eventuality of sale, as contained in Section 2 [29] of the GVAT Act for which the tax eventuality had already occurred and/or taken place. Section 52 of the Gujarat Value Added Tax Act cannot be said to be beyond legislative competence, and therefore, the same cannot be said to be ultra vires to Articles 246 & 252 of the Constitution of India. It is held that Section 52 of the GVAT Act is within the State legislative competence under Entry 52 of List II of Seventh Schedule and the same cannot be said to be encroaching upon the powers of the Union legislation. Therefore, challenge to the constitutional validity of Sections 2 [23] (d) and 52 of the to the GVAT Act fails. Petition dismissed - decided against petitioner.
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2017 (9) TMI 5
Validity of notice dated 28.10.2009 (Annexure P-5) - Section 26 of the Chhattisgarh Value Added Tax Act, 2005 - petitioners claim that it is not a case where the Petitioners have failed to deposit the return which is one of the most essential ingredient. Further necessary ingredient is that apart from there being a failure in furnishing the return, the assessee should also fail to pay the tax payable, which is not the case so far as the Petitioners are concerned as they have timely deposited their return showing nil return for the assessment years on account of there being an exemption in their favour for the relevant period. Held that: - what stands admitted from the reply of the State Government is that the Petitioners had submitted their return showing nil return, which establishes the fact that the returns had been submitted. Thus, the requirement under Section 26 of the Act of 2005 regarding failure to furnish any return is not available against the present Petitioners. The exemption was withdrawn only on 26.10.2009 and the notices for demand of advance tax were issued on the very second day i.e. on 28.10.2009. From this itself it clearly reflects that the return of the Petitioners must have been filed much before the date of exemption being withdrawn by the respondent authorities. If that be so, it appears to be a case where the necessary ingredient required for initiating a proceeding under Section 26 of the Act of 2005 was not available for the department at the time of issuance of Annexure P-5. This Court has no hesitation in reaching to the conclusion that the notice (Annexure P-5) issued by the State Government was uncalled for at this stage, for the reason that when the State Government itself has admitted in their reply of the returns having been submitted by the Petitioners, the provisions of Section 26 of the Act of 2005 could not have been invoked by the State - impugned Annexure P-5 deserves to be and is accordingly set aside - petition allowed - decided in favor of petitioner.
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2017 (9) TMI 4
Inter-State sale - error apparent on the face of the assessment order - Section 84 of the Tamil Nadu Value Added Tax Act, 2006 - Held that: - the second respondent is vested with sufficient powers to examine a petition filed under Section 84 of the TNVAT Act to see as to whether any error which is apparent on the face of the assessment order - the proper course to be adopted by the second respondent is to consider the petition and take a decision on the same and by passing a reasoned order - only issue to be seen is whether the petitioner had produced the original Form-C and Form-F declarations before the learned Departmental representative, who is stated to have verified - petition allowed by way of remand.
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Indian Laws
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2017 (9) TMI 1
Offence under Section 138 - sufficient cause for not filing the complaint against DAKSHIN within the period prescribed - Condonation of delay - sufficient cause of delay - cause of action for prosecution - Held that:- Parliament declared under Section 142 that the provisions dealing with taking cognizance contained in the CrPC should give way to the procedure prescribed under Section 142. Hence the opening of non-obstante clause under Section 142. It must also be remembered that Section 142 does not either contemplate a report to the police or authorise the Court taking cognizance to direct the police to investigate into the complaint. The question whether the respondent had sufficient cause for not filing the complaint against DAKSHIN within the period prescribed under THE ACT is not examined by either of the courts below. As rightly pointed out, the application, which is the subject matter of the instant appeal purportedly filed invoking Section 319 CrPC, is only a device by which the respondent seeks to initiate prosecution against DAKSHIN beyond the period of limitation stipulated under the Act. No doubt Section 142 authorises the Court to condone the delay in appropriate cases. We find no reason to condone the delay. The justification advanced by the respondent that it is during the course of the trial, the respondent realized that the cheque in question was drawn on the account of DAKSHIN is a manifestly false statement. On the face of the cheque, it is clear that it was drawn on account of DAKSHIN. Admittedly the respondent issued a notice contemplated under clause (b) of the proviso to Section 138 to DAKSHIN. The fact is recorded by the High Court. The relevant portion is already extracted in para 16.
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