Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 23, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Frequently Asked Questions (FAQ) on GST - as released by CBEC as on 21.09.2016
Income Tax
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Order under section 119 of the Income-tax Act, 1961 - Income Declaration Scheme, 2016 - Order-Instruction
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Eligibility for registration u/s 12AA - “Charitable purpose - objects of trust - while granting registration, it would be open to the Registering Authority to grant the same by imposing any condition, which would bind the Company to indulge in only charitable activities. It will also be subject to an affidavit or undertaking to be filed by the Company - HC
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Unexplained cash credits - addition u/s 68 - The extra-ordinary circumstance forming primary reason of cash payment is that there were some DRT proceedings wherein the assessee was in urgent need of money - no additions - AT
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Disallowance of loss claimed - sale of shares - It is quite difficult for the assessee to comment on the nature of the evidence collected from the NSE, because according to the assessee it has carried out the transactions through broker. Now, if some ambiguity has come on the record, such ambiguity could be explained by the broker - AO to re-adjudicate the issue - AT
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TDS u/s 192 - Since consultant doctors were paid fixed remuneration and the working conditions are under supervision and control of the hospital authorities, in our considered opinion, services are rendered in the nature of employee. - AT
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MAT computation - The disallowance made u/s 14A of the Act read with Rule 8D is only artificial disallowance and obviously the same is not debited in the profit and loss account and the same cannot be imported into clause (f) of Explanation to Section 115JB - AT
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Addition u/s 68 - advance received from 469 parties by the assessee - the monies received by the assessee are only trade advances and the same has been proved by the assessee as a genuine credit and in any case cannot be the subject matter of addition u/s 68 - AT
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When the assessee had determined the realizable value of stock, the difference, has to be written off from the books. For the purpose of section 115JB, the book profit will be ascertained after making certain adjustments to the profit declared in the profit & loss. - AT
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Penalty 271AAA(2) - disclosure of undisclosed income - money found during search u/s 132 - assessee has fulfilled the requirement of sub-section (2) of section 271AAA - no penalty - AT
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Registration u/s 12A denied - religious trust - Even if the objects are mixed in the sense, there are charitable and religious objects, still the trust is entitled for registration - AT
Customs
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Valuation under section 14 of Customs Act, 1962 - inclusion of royalty payable to overseas entity in the assessable value - royalty is hinged upon post-importation manufacture and not on the imported goods per se. - Demand set aside - AT
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Enhancement of assessable value of export - The variations in Fe content were very minor, within tolerance limits, did not impinge upon the declared values since the invoice amount in each case was realized as per the BRCs - the loading of assessable value found to be arbitrary and without any basis. - AT
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Imposition of redemption fine - provisional release of goods - The applicants wish to enjoy the benefit without fulfilling their obligation of paying redemption fine. Therefore more stringent conditions need to be put for allowing further use of the asset. - AT
DGFT
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Refund of Terminal Excise Duty (TED) under Deemed Exports where Duty has been paid from CENVAT Credit and ab-initio waiver is not available. - Trade Notice
Service Tax
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Cenvat credit - distribution of credit - The proper assessee against whom such proceedings, if at all, ought to have been initiated against is the input service distributor. - AT
Central Excise
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The onus to prove clandestine removal is admittedly on the Revenue and is required to be discharged with production of sufficient evidence, which at least may lead to the probability of having removed the goods. - AT
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Manufacture - marketability - fabrication of gates and gate parts for irrigation project using M.S. Sheets, Plates, Angles etc. - items were made as per specifications of the project and are not regularly traded items - test of marketability fails - not liable to duty of excise - AT
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Whether the process of fitting electric motors to imported sewing machines amounts to manufacture within the meaning of 2 (f) of the Central Excise Act 1944 read with section note 6 to section XVI of the Central Excise Tariff Act - Held No - AT
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Job-work - valuation - activity of building body at their factory on the duty paid motor vehicles' chassis supplied to them - the value of the goods supplied by the appellants is to be determined under Rule 10A of the Central Excise Valuation Rules, 2000 and not under Rule 6 - AT
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Encyclopedia and dictionaries will fall in the Tariff heading No. 49.01 for the purpose of exemption under the notification No. 21/2002-Cus - demand set aside. - AT
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Valuation - manufacture of Footwears falling under Tariff sub-heading No. 64041910 of CETA, 1985 - at for the period covered under the said show cause notices impugned goods were eligible for benefit of such Notification - AT
Case Laws:
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Income Tax
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2016 (9) TMI 920
Eligibility for registration u/s 12AA - “Charitable purpose - objects of trust - Held that:- The Tribunal rightly held that the registration granted under section 25 of the Companies Act is a recognition of the fact that the respondent is essentially established for the purpose of education. It was further held that the status granted by the Government by virtue of licence under section 25 itself recognises the fact that the respondent was essentially established inter-alia for the purpose of education. Even assuming that the licence is not conducive of the matter under the Income Tax Act, it is certainly an important factor in favour of the applicant for registration. There can be no doubt that the main objects read by themselves entitle the respondent to registration under section 12AA of the Act. It was rightly not even contended otherwise. It was, however, contended that in view of the objects incidental or ancillary to the attainment of the main objects, the respondent is not entitled to registration under section 12AA of the Act. There are 28 incidental or ancillary objects. To allay Mr. Goel’s objections and apprehensions, Mr. Rohit Jain, learned counsel appearing on behalf of the respondent stated that all the ancillary and incidental clauses are those that are merely ancillary and incidental to the main objects and for no other purpose. He further stated that powers conferred by every clause in part-B would be subject to and solely for the purpose of, in connection with and in relation to the main objects of the respondent. We accept the statement and it is so ordered. The clauses also must be read as a part of the entire memorandum of objects and not in isolation. We are satisfied that they confer powers only for the purpose of attaining the main objects and for no other reasons whatsoever. We, however, do not wish to leave anything to chance and provide two safeguards - firstly by accepting the statement made by Mr. Rohit Jain as aforesaid and secondly by permitting the appellant to obtain such clarifications and to impose such conditions as they desire upon the respondent to ensure that there is no misuse of any of the incidental and ancillary objects. A perusal of the order of the Commissioner shows that he declined to register the Company by reading its ancillary objects as its main objects as also on the basis that in the future the Company may, under its ancillary/incidental objects, indulge in activities, which would be of noncharitable character. As of today, there is nothing on the record that the Company is indulging in any activity which is not in the nature of charity. Thus, at this stage, the order of the Commissioner can only be termed as presumptuous. There is also nothing on record to show that the Company does not meet any of the conditions prescribed under the Act for the grant of registration to make it eligible for the grant of exemption under Section 11 and consequently under Section 80-G of the Act. Thus, we find that the order of the Commissioner was rightly set aside by the Tribunal in the order impugned before us. In view of the above, we order dismissal of the appeal. However, while granting registration, it would be open to the Registering Authority to grant the same by imposing any condition, which would bind the Company to indulge in only charitable activities. It will also be subject to an affidavit or undertaking to be filed by the Company that it would not breach any of the imposed conditions and further that surplus funds would be utilized only for educational purposes and would not be diverted to any other non-educational objectives. - Decided against revenue
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2016 (9) TMI 919
Unexplained cash credits - addition u/s 68 - Held that:- It has come on record that four out of these six persons had agricultural land ownership in their names since they placed on record their 7/12 and 8A certificates to name a few. The Assessing Officer took note of the fact that two persons could not prove their land title. The assessee proved in the course of lower appellate proceedings that these two farmers were joint owners of the land. There is further no dispute that the assessee duly accounted for land purchases in financial year 2006- 07 and there is neither any purchase agreement nor cancellation thereof in writing. It is therefore clear that these six vendors have returned their advances to the assessee in the impugned assessment year. Ld. CIT(A) further records a finding a fact that the assessee successfully linked the payment in question in case of each party. The extra-ordinary circumstance forming primary reason of cash payment is that there were some DRT proceedings wherein the assessee was in urgent need of money. We notice that all the relevant evidence forms part of the case file. Revenue fails to rebut any of the CIT(A)’s findings with the help thereof. We find no reason to interfere in well reasoned lower appellate findings. This first substantive ground fails accordingly. Learned Departmental Representative takes us to Assessing Officer’s findings wherein Shri Amit Patel was found to have deposited the same amount in his bank account on the very day of issuing relevant cheque to the assessee after having received the same from two persons Shri Sandeep and Chhotubhai Patel to the tune of ₹ 5 lacs and ₹ 1 lacs; respectively. This argument fails to impress upon us as the same rather proves source of the assessee’s source wherein all other evidence supports his case. We come to latter sum of ₹ 7 lacs. This case file reveals that the same amount came from one Shri Ramesh Narottam Patel as land advances received back. This also explains source of source in assessee’s case. We further notice that the assessee in the instant case has already filed all income tax statements/returns along with their bank account. Both these persons are related to the assessee (supra). The Revenue does not controvert all these findings in the course of hearing before us. We conclude in these facts that the assessee has been able to prove identity, genuineness and creditworthiness of its eight payers in question. We find no reason to reverse CIT(A)’s order under challenge - Decided against revenue
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2016 (9) TMI 918
Gain arisen on account of sale of agriculture land - distance of geographical situation of the assessee s land - Held that:- The distance is to be measured by roads in this accounting year. The land sold by the assessee is situated beyond 8 KMs. of the municipal limit. Perusal of sub-clause (b) of section 2(14)(iii) would indicate that the municipal limit is to be taken from the area which has been notified by the Central Government in its gazette notification. Central Government has notified the area on 6.1.1994, and from that notification, the agriculture land of the assessee was situated beyond a distance of 8KMs. This aspect has been lucidly considered by the ld.CIT(A) in the finding extracted supra. We do not see any reason to interfere in this finding. In view of the above discussion, we do not find any merit in the appeal of the Revenue. It is dismissed. - Decided in favour of assessee Disallowance of loss claimed - Held that:- For rejecting the claim of the assessee, both the Revenue authorities have primarily relied upon the alleged information collected from the National Stock Exchange. The ld.CIT(A) has made reference to the letter of Additional CIT, Range-I, Ahmedabad dated 27.7.2012. According to the ld.CIT(A), in this letter the Addl.CIT has brought to his notice that Goldstar Finvest P.Ltd. was not registered as member of the Stock exchange. The contract notes are fictitious, SEBI registration of Goldstar Finvest P.Ltd. is IN241146233 and the SEBI has canceled the registration on January, 20, 2005. On the other hand, case of the assessee is that it has made payments through account payee cheque. It has received payment through account payee cheque. Broker has issued contract notes. The assessee has produced copy of the ledger account maintained by him as well by the broker. The assessee has produced all details exhibiting number of shares, date of purchase and date of sale. The AO has not collected any information from the broker. If the AO has made any error in reference of particulars or details about the broker or the assessee, then the NSE will not be in position to give complete details. We find that SEBI registration quoted by the assessee in contract note of the broker is 230932431/23-10777. The PAN of the said broker is AABCA 6683 M. These very numbers have been communicated by the assessee to the AO. In the letter of ACIT dated 27.7.2012, which is a development after the assessment order, the SEBI registration of Goldstar Finvest P.Ltd. is mentioned as INB241146233. It is a different number. Information is that it was canceled in January 20, 2005. What is the status in the accounting year 2009-10 has not been referred to. The AO ought to have verified from the broker also whether broker had carried out transactions of the assessee or not. The broker should have been confronted with the information collected from the NSE, only then, clear picture would come out. It should have been collected whether the broker has carried out the transactions with help of some other broker or this is some paper transactions. Considering all these aspects, we are of the view that the issue deserves to be re-investigated at the level of the AO, because, the ld.AO has not cross-verified the details with the National Stock Exchange as well as broker, through whom the assessee alleged to have carried out its transaction. It is quite difficult for the assessee to comment on the nature of the evidence collected from the NSE, because according to the assessee it has carried out the transactions through broker. Now, if some ambiguity has come on the record, such ambiguity could be explained by the broker. Therefore, we allow the appeal of the assessee for statistical purpose, and set aside this issue to the file of the AO for fresh adjudication - Decided in favour of assessee for statistical purpose.
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2016 (9) TMI 917
TDS u/s 192 - whether consultant doctors are also salaried employees of the assessee? - relationship of an employer and employee on construction of the terms of agreement entered by the assessee-company with consultant doctors - Held that:- As from the terms of contract entered by the assessee with consultant doctors it is clear that remuneration is fixed irrespective of number of patients attended by the consultant doctors. The timings are fixed. Clause 7 of the said agreement also stipulates that consultant doctors are working with hospital for a minimum period of 5 years from the date of joining the organization. Further, it is submitted that in case consultant doctor leaves hospital within a period of 2 years and such doctor is barred from working in Bangalore District for a period of 2 years from the date of leaving. It is further submitted that in case consultant doctor shall not undertake any professional work or assignment in any other hospital without prior consent of the assessee-company. All these conditions go to prove that it is a case of contract of service. It is also clear from clauses of the agreement placed at page 26 of the paper book that there is no independence to the consultant doctors, their working hours and service conditions are under the direct control and superintendence of the assessee. All these circumstances go to prove that the assessee is only making an attempt to camouflage real nature of the transaction by using clever phraseology. It is not the form but the substance of the transaction that matters. The nomenclature used may not be decisive or conclusive to determine the nature of transaction. Since consultant doctors were paid fixed remuneration and the working conditions are under supervision and control of the hospital authorities, in our considered opinion, services are rendered in the nature of employee. Hence, payments are subject to tax deduction at source u/s 192 of the Act. The assessee has failed to controvert the findings of the TDS officer that the terms and conditions of consultant doctors are same as that of salaried doctors. The fact that consultant doctors have declared their income under the head ‘professional charges’, has no bearing on the issue on hand. Accordingly, the assessee’s appeals are dismissed.
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2016 (9) TMI 916
Addition u/s 68 - Held that:- The entire details of the share applicants were duly produced by the assessee and were also confirmed by them before the ld AO in response to notices issued u/s 133(6) of the Act and extensive verification of those details were also carried out by the ld AO during the course of scrutiny assessment proceedings completed for Asst Year 2011-12. We find that none of the documentary evidences filed by the assessee or by the share applicants were treated by the ld AO as ingenuine or the applicants were non-creditworthy. We do not deem it fit and appropriate to get into any case laws on the impugned subject as the facts are staring on us wherein the extensive verifications were duly carried out by the ld AO and no adverse inferences were drawn by him. Disallowance u/s 14A - Held that:- The instant case as the assessee had duly proved that the investments in the earlier year were made out of own funds and not out of borrowed funds. Hence we find that the ld CITA had rightly deleted the disallowance made by invoking Rule 8D(2)(ii) of the Rules. MAT computation - Whether the disallowance made u/s 14A of the Act could also be imputed in the computation of book profits u/s 115JB? - Held that:- Unless an item is debited in the profit and loss account, the same cannot be the subject matter of addition to book profits under clause (f) of Explanation to section 115JB of the Act. Section 115JB of the Act is a deeming provision and its provisions are to be strictly construed. The scope of clause (f) cannot be enlarged to bring within its ambit the provisions of section 14A(2) and 14A(3) of the Act thereby also encompassing the provisions of Rule 8D by which disallowance is made on subjective application of a mathematical formula contained in the Rule. The disallowance made u/s 14A of the Act read with Rule 8D is only artificial disallowance and obviously the same is not debited in the profit and loss account and the same cannot be imported into clause (f) of Explanation to Section 115JB of the Act.
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2016 (9) TMI 915
Addition u/s 68 - advance received from 469 parties by the assessee - Held that:- In the instant case, from the aforesaid findings , it could be safely concluded that the amounts received by the assessee were only trade advances and the same were duly squared up by supply of sand by the assessee to those customers and sales were booked in the Asst Year 2007-08 which was also accepted by the ld AO in the rectification proceedings u/s 154 of the Act while granting credit of TCS u/s 206C(4) of the Act. Thus we hold that the monies received by the assessee are only trade advances and the same has been proved by the assessee as a genuine credit and in any case cannot be the subject matter of addition u/s 68 of the Act. - Decided in favour of assessee
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2016 (9) TMI 914
Disallowance of proportionate interest - making advance to the sick company - Held that:- It is a fact that assessee has lent advances to a company, which has become sick as per the BIFR norms subsequently. It is outside the control of the assessee company and as per prudence, the interest and advances are unrealizable. The interest being revenue in nature not provided in the books. From the record, it is not established there is a link between the advance made and funds borrowed by the assessee. In absence of such information, we also hold that they are distinct transaction and cannot be considered for any comparison. As interest is not recoverable in fact and only the realizable income alone can be brought to books. Hence, the assessee has actually incurred interest expenses, which cannot be disturbed with the above said unrealizable interest income. When the AO has not brought anything on record to show that the actual borrowings were made only for the purpose of making advance to the sick company, in absence of such findings, interest disallowance on notional basis is not justified. Hence, grounds of appeal of the assessee on this issue are allowed. Addition for provision for non moving stores - determination of book profit - Held that:- From submissions of ld. AR, the assessee had written off the value of non-moving stock as per the valuation policy of the company. This write off cannot be considered as unascertained liability for the purpose of section 115JB. The assessee has not submitted any valuation report before us, as the company has become sick and details of records are not traceable. Considering the facts of the case, we are in agreement with assessee that the stock will be valued at cost or market value, whichever is less. This is the recommended method of valuation. When the assessee had determined the realizable value of stock, the difference, has to be written off from the books. For the purpose of section 115JB, the book profit will be ascertained after making certain adjustments to the profit declared in the profit & loss. The adjustment involves the addition of certain unascertained liabilities. In the present case, the loss written off due to write off of stock cannot be termed as unascertained liabilities. The adjustment made by the AO to determine book profit u/s 115JB is not proper. Hence, the ground raised by the AO on this issue is allowed.
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2016 (9) TMI 913
Penalty 271AAA(2) - disclosure of undisclosed income - money found during search u/s 132 - Held that:- As per the provision, to avoid penalty, assessee had to admit the undisclosed income and specify the manner in which income was derived, he has to substantiate the manner in which income was derived and pay tax, together with interest in respect of the undisclosed income. In the present case, the assessee had disclosed the income and specified as well as disclosed the manner in which the undisclosed income was arrived and also paid the tax with interest. The cash was very much with the department as can be seen from the assessment order. He has fulfilled the requirement as per section 271AAA(2) of the Act. Even though, in the Lok Adalat order, there is no mention about the details of the compromise, the circumstantial evidence points to the claim of the assessee, we have to consider the submissions of the assessee in this case. Accordingly, we are of the view that the assessee has fulfilled the requirement of sub-section (2) of section 271AAA. Hence, the penalty levied u/s 271AAA is accordingly deleted. - Decided in favour of assessee
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2016 (9) TMI 912
Registration u/s 12A denied - religious trust - Held that:- While registration in accordance with the provisions of Section 12AA of the Act is a condition precedent for claiming the benefits u/s. 11 and 12 of the Act, registration as per Section 12AA by itself will not automatically confer the benefits of Section 11 and 12 of a trust, but the trust will get the benefit only on complying with the requirements of Section 11 & 12 of the Act, which compliance can be examined by the assessing authority while processing the return filed by the trust. So long as the trust has objects which are charitable in nature, it satisfies for registration u/s. 12AA of the Act, unless there is a finding that the trust is not genuine. Even if the objects are mixed in the sense, there are charitable and religious objects, still the trust is entitled for registration as held by various decisions of the judicial authorities. Here, there is no objection on the reason that the trust is a religious trust. So long as the objects are charitable in nature, assessee deserves registration u/s. 12AA of the Act. Just because the reply is not given as desired by the DIT, it does not mean that the trust is not genuine. Moreover, as submitted by the Ld. Counsel, various clauses of the trust operate independently and there is no confusion as made out by the DIT. In fact the DIT himself got confused in understanding the irrevocability of the trust and power of the trustees in dissolving the trust while administering the same. With reference to number of trustees also there is no confusion as trustees are empowered to enhance the initially constituted trust members to a maximum number of 18, which does not mean that there is no clarity at any given point of time. There can only be trustees as specified in the original trust deed or as enhanced by the Board keeping in view of the requirements. With reference to the foreign national being member of the trust, Ld. DR did not specify any of the law under which it is prohibited. So long as the trust objects are charitable in nature and trust activities/benefits claimed are within India, the trust can get the registration. . Considering the principles laid down on the subject and the fact that assessee’s objects are charitable in nature, we direct the DIT to grant registration u/s. 12AA - Decided in favour of assessee
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2016 (9) TMI 911
Liability of directors of private company in liquidation - whether the company was converted into a public limited company for the purpose of avoiding statutory liability benefiting the petitioners - Held that:- We do not wish to express any opinion as to whether the corporate veil ought to be lifted in the present case even assuming that it is permissible to do so in matters under the Income Tax Act. Suffice it to state that even assuming that it is permissible to do so, there are several issues which ought to be taken into account before deciding whether or not to lift corporate veil. Neither the show cause notice nor the impugned order refers to certain crucial facts including as to the extent of share holding of the directors, the extent of control exercised by them regarding the affairs of the company and the extent of their representation on the board of directors. It would also be necessary to consider the Articles of Association of the company and any other agreements that may exist between the share-holders inter se. There are several other factors also which must be taken into consideration including as to whether the company was converted into a public limited company for the purpose of avoiding statutory liability benefiting the petitioners alone and/or conferring any other benefits upon the petitioners or any one or more of them alone. Lifting the corporate veil in a case such as this has drastic consequences. The impugned order does not consider the same in any detail. 12. The impugned order is, therefore, set aside and the matter is remanded to respondent No.2 for taking a fresh decision in accordance with law. It will be open to respondent No.2 to issue a fresh show cause notice or to furnish further particulars in respect of the same show cause notice. It is also open to respondent No.2 to base its claim on any other cause of action including by way of a tracing action. All the contentions of the parties are kept open.
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2016 (9) TMI 910
Income arising out of the leasing out of the business assets - business income or income from other sources - Held that:- Clause-7 clearly indicates that the assessee did not intend the lease arrangement to continue for an indefinite period of time. That as a matter of fact the lease is now terminated is a different matter. We cannot base our decision on that fact for it has not been brought on record. However, even otherwise, clause-7 is in favour of the assessee. The Tribunal has merely speculated that the clause could be a conscious decision to avoid legal difficulties and financial loss on account of the termination of the employment and reemployment by UB Ltd. If it was the assessee’s intention to make this a permanent arrangement or an arrangement for an indefinite period, there was no reason for it to insist upon UB Ltd. continuing with its employees. Indeed, if UB Ltd. terminated the services of the employees in accordance with law, it would not have affected the assessee’s rights or interest in its property in any manner whatsoever if the assessee intended continuing with the system indefinitely. The fact that the assessee insisted upon its employees being retained is a strong indication that it intended coming back into the business using the same assets and properties. This was an important term of the contract. There are other factors also which together with clause-7 support the assessee’s case. For instance, the second paragraph of clause-1 provides that after completion of two years the parties would discuss the revision of the annual consideration of ₹ 30 lakhs for the year 2005-06 onwards. If the parties had not agreed to the revised consideration, the agreement would have come to an end. In the normal course of events, a party intending to continue such an arrangement for an indefinite period of time, would have finalized the consideration payable and not have left such a crucial aspect open-ended. The second paragraph of clause-1 read with clause-4 makes this clearer. Clause-4 requires the parties to mutually decide regarding the capital expenditure for upgrading the technologies and the facilities. Clause-2 also indicates that the assessee retained an interest in the plant and machinery and the property for otherwise it would not have agreed to expand the installed capacity at its costs. It was contended on behalf of the Revenue that clause-2 indicates that there was no necessity on account of financial hardship for the assessee leasing the property. However, as Mr. Abhishek Sanghi, the learned counsel appearing on behalf of the appellant pointed out, the financial difficulties faced by the assessee would have been alleviated on account of the lease rentals that it was to receive under the agreement. The construction of a term in an agreement is a question of law. Moreover, as we indicated, the Tribunal proceeded on an erroneous presumption, namely, that UB Ltd. and the assessee are sister concerns. In any event, the Tribunal ought to have considered the agreement as a whole. The findings of the Tribunal, therefore, are perverse. We, however, confirm the finding of the Tribunal that the decision of the Department to treat the income for the previous years in respect of the first lease deed as business income does not bind the Department with respect to the income received under the second lease deed.In the circumstances, the question of law is answered in favour of the assessee and against the Revenue.
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2016 (9) TMI 909
Entitlement to deduction under Section 80P(2)(a)(i) - assessee is a Co-operative Bank mainly involved in lending credit facilities to its members - Held that:- As decided in THE COMMISSIONER OF INCOME TAX vs. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGALKOT [2015 (1) TMI 821 - KARNATAKA HIGH COURT ] if a Co-operative Bank is exclusively carrying banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A Co- operative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co- operative agricultural rural development bank. The Legislature did not want to deny the said benefit to a primary agricultural credit society or a primary co-operative agricultural and rural development bank. They did not want to extend the said benefit to a co-operative bank which is exclusively carrying on banking business i.e., the purport of the amendment. If the assessee is not a Co-operative bank carrying on exclusively banking business and if it does not possess a license from the Reserve Bank of India to carry on business, then it is not a Co-operative bank. It is a Co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e., carrying on the business of banking for providing credit facilitates to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(i) to the society. - Decide in favour of assessee.
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2016 (9) TMI 908
Section 10A deduction computation - Held that:- ITAT is justified in law in allowing the appeal of the respondent by directing the Assessing Officer to exclude reimbursement of certain expenditure incurred in foreign currency, both from the Export Turnover and Total Turnover. See Commissioner of Income Tax And Another Vs. Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT ]
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2016 (9) TMI 907
Royalty payable to the Associated Enterprise - whether was to be restricted to 1 % of the qualifying Net Sales as against the rate of 50/0 of the qualifying et Sales as computed by the appellant - TPA - Held that:- From the record we found that the assessee did not bench mark the royalty payment separately. On enquiry by TPO, it has relied on RBI approval given in 1995 and also on the fact that the assessee earned a gross profit of 41.6%. TPO applied Press Note 9(2000 series) and restricted it to 1% on the plea that the payment was for use of trademark without transfer of technology. The assessee has not separately benchmarked the Royalty transaction at the time submission of Form 3CEB or at the time of preparation of Transfer Pricing Report. It is settled proposition of law that it is the onus of the assessee to prove that the transactions were taken at arm's length. Going by the relevant TP provisions as enshrined under the Act and relevant Rules, it is mandatory that the appellant has to independently benchmark its international transaction with independent comparables so as to arrive at arm's length price, which has not been made in this case. The comparability analysis is the substratum of determining the ALP, which has not been done by assessee at any stage. At the very same time we found that the revenue authorities have not properly appreciated the relevant clauses of the trademark licence agreement, precisely the clauses which were highlighted by ld. AR during the course of hearing before us. Therefore, in the interest of justice and fair play, this case should be restored back to the file of AO, ho shall require the assessee to bench mark its international transaction of 'royalty' with independent comparables following suitable methods prescribed under the Act and on its compliance, the AO after giving adequate opportunity to the assessee shall decide this issue in accordance with the TP regulations. - Decided in favour of assessee for statistical purposes.
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2016 (9) TMI 906
Penalty u/s.271(1)(c) - denial of claim of deduction u/s.80IB and u/s.80HHC & 80IA - Held that:- There is nothing on record to demonstrate that assessee had filed inaccurate particulars of income or had concealed the particulars of income. We also get support from the judgement of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt.Ltd. reported at (2010 (3) TMI 80 - SUPREME COURT ), wherein the Hon’ble Apex Court has held that a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars.- Decided in favour of assessee
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2016 (9) TMI 905
Disallowance under Sec. 14A Rule 8D - Held that:- We have considered the business activities, financial statements and judicial decisions, there seems to be a realistic approach on acquisition of shares by the assessee company and the above expenditure was incurred purely on the investment strategies of the Business. Therefore, the ld. Assessing Officer should have considered the expenditure from the assessee business objects and activities and the calculate the disallowance under Sec. 14A Rule 8D. We, therefore are of the opinion that the disputed issue has to be re-examined in line with the investment activity by the ld. Assessing Officer and we set aside the order of the Commissioner of Income Tax (Appeals) to the file of the ld. Assessing Officer for examination and the assessee shall be provided adequate opportunity of hearing before passing the orders on merits and the ground of the assessee is allowed for statistical purpose. Short Term Capital Loss on claim of forfeiture of warrants - Held that:- All documents or transactions have to be given effect to even though they resulted in reduction of tax liability, provided that they are genuine and bona fide and it cannot be called as colourable device. In case, a transaction took place with the sole intention to defraud Revenue and that resulted in deduction of tax liability, it can be called as a dubious method followed by the assessee, as the parties involved therein have no right to indulge any tax evasion and it cannot be taken away by any judgment of the Court. This has to be considered and in fairness, it should be appreciated that all transactions, which resulted in evasion of tax liability, can be considered as a device or subterfuge or colourable transaction. We found on perusal of the share warrant certificate and the financial statements and the assessment order, the ld. Assessing Officer in his order is silent on this transaction of financial statement of Shriram City Union Finance Limited and accounting system. Therefore, we set aside order of the Commissioner of Income Tax (Appeals) order and remit the disputed issue to the file of ld. Assessing Officer for re-examination based on the information submitted on warrants and financial statement of Shriram City Union Finance Limited and the Assessing Officer shall pass the order on merits after providing opportunity of being heard in accordance with law. The ground of the assessee is allowed for statistical purpose. Exclude addition u/sec. 14A for calculating of Book profit u/s.115JB of the Act and allow the appeal of the assessee.
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2016 (9) TMI 904
Penalty proceedings u/s 271C - non deduction uf tds u/s 194J on the payment made to hospitals nursing homes - Held that:- While deleting the penalty the CIT(A) has mentioned that the penalty u/s 271C was not leviable in the case of assessee for the reasons that the assessee did not deduct tax following “favourable decisions” available to them at “that time”. According to which no tax was deductible by them for being TPA u/s 195J. Therefore, the CIT(A) while passing the impugned order has held that “this being a reasonable cause itself, in view of provisions of sec.273B” the penalty levied u/s 271C of the Act, upon the assessee was deleted. The ld. CIT(A) has no where mentioned what were those favourable decisions at that time available to the assessee according to which the assessee was not liable to deduct tax being TPA u/s 194J of the Act and this particular stand taken by CIT(A) is the basis for reaching to the conclusion. However, the orders passed by the ld. CIT(A) lacks mentioning or discussion of ‘any such favourable decisions’, while reaching to a conclusion regarding deletion of penalty. Therefore, in our considered view, the ld. CIT(A) has reached to a conclusion without mentioning its basis. Hence, the order of ld. CIT(A) is nonspeaking to that extent. Considering the facts of the present case, in our considered view the present appeal is to be remanded back to the file of the CIT(A) with a direction to pass speaking order, while mentioning the basis or the details of ‘favourable decisions’ which were available at ‘that time’ before the assessee, according to which no tax was deductible. Needless to mention that the ld. CIT(A) would give a fresh opportunity of hearing to both parties before passing a fresh order in accordance with law. - Decided in favour of revenue for statistical purposes.
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2016 (9) TMI 903
Unexplained deposits in the bank account - Unexplained income of the assessee - whether the assessee is not a dealer in nuts and bolts ? - Held that:- CIT(A) correctly observed that there is no evidence to prove that assessee was engaged in business of purchase and sale of nuts and bolts whereas there were sufficient deposits in the bank account. Since assessee could not prove the source of this amount the Assessing Officer was justified in making the addition. Thus, he confirmed the action of the Assessing Officer. - Decided against assessee
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2016 (9) TMI 902
Profit arising out of sale & purchase of shares - business income OR short term capital gain - Held that:- We find that the assessee has maintained the investment portfolio and all the sales and purchase of shares are routed through the same portfolio as noted above. The assessee has kept the entire investment of shares as an investment and not in the trading account. The assessee is not in the business of share trading rather he is partner in firm and doing share transactions as part time. We find that the AO considering the volume and frequency and considering that the assessee has applied for borrowed funds for making investment in shares, treated the activity of purchase and sale of shares as business activity and assessed the profits arising there from as business income as against declared by the assessee as Short Term Capital Gain. We find that the allegation of Revenue that the assessee is indulging into high frequency transactions but this itself could not mean that the trading activity has been carried out by the assessee because the assessee has kept the entire investment in shares in investment portfolio and his intention is clear that he has to earn capital appreciation on the same. The assessee acted accordingly. The assessee has also kept these shares in DEMAT after taking delivery of the same. Even otherwise in earlier years and future years the assesses transaction of sale and purchase of shares was treated by Revenue as investment and profit or loss arising out of the same was assessed as capital gain i.e; either Long Term Capital Gain or Short Term Capital Gain as the case may be. In view of the precedent cited by Ld. Counsel in the case of Gopal Purohit [2010 (1) TMI 7 - BOMBAY HIGH COURT] we allow the claim of the assessee holding that the income / profit arising out of sale purchase of shares is capital gains and not business income. - Decided in favour of assessee Disallowance of interest expenditure - Held that:- We have gone through the documents and noticed that assessee has earned interest income on the FDR’s, which were made out of loan taken from Deepika Dharia. There is a direct nexus between the loan taken and amount invested in FDR’s and it has not gone into interest free advances. Once it is a case, the disallowance made by AO cannot be sustained. Accordingly, we are of the view that the assessee has explained the nexus of interest bearing loans invested in income earning instruments and not in the interest free advances. In view of this fact, we delete the disallowance and allow this issue of assessee’s appeal.
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2016 (9) TMI 901
Deduction under Section 80HHC - whether the ITAT was right in holding that interest from others and also from IDBI constitute profit from the business for the purpose of computing deduction? - Held that:- Firstly, the assessment order must reflect the correct position. Secondly, it is not always that a computation under the wrong head would have no tax effect. For instance, a loss under one head may not be permitted to be carried forward and adjusted against the loss under another head. Further, an error in including the income under the wrong head would result in multiple errors as the case before us itself demonstrates. On account of the income being computed under the wrong head of income in the computation of income, the error is carried forward while computing the deductions under sections 32AB and 80HHC. Moreover it is possible that the assessment could have an impact in the event of there being any amendment to the law. It is desirable, therefore, that the assessment order should reflect the correct position. This view is not contrary to or in conflict with the judgment of the Division Bench in CIT vs. Avery Cycles Industries Limited ( 2006 (9) TMI 96 - PUNJAB AND HARYANA HIGH COURT ). At the cost of repetition, the Department in that case did not make an application similar to the one made by Mr. Klar before us. Nor did the Department in that case agree that a fresh assessment order would be passed in accordance with the correct position in all respects relating to the assessment. There is no warrant for knowingly including amounts under a wrong head. To insist upon an error being continued invites the authorities and the court to endorse the error. There is nothing in law or in principle that requires or even permits this. There is nothing in law or in principle that prohibits the authorities under the Act or the Court from returning a finding regarding the correct head under which the income ought to be assessed and then directing the Assessing Officer to pass a fresh assessment order in accordance with the finding for all purposes. This course commends itself to us. Mr. Mittal submitted that under sub-section (3) of Section 80HHC the profits derived from export of goods or merchandise out of India shall be the amounts which bear to the profit of the business as computed under the head “Profits and gains of business or profession”. He submitted that the Assessing Officer has computed the interest under the head “Profits or gains of business”. He was bound by the terms of sub-section (3) itself to consider the same as business income. The argument begs the question it must first be determined as to whether the income is business income or not and thereafter consider the same for the purpose of section 80HHC. What sub-section (3) requires is a consideration of the profits of the business as rightly computed under the head “Profits and gains of business”. It cannot possibly require a consideration of the amounts wrongly computed under the head “Profits and gains of business”. Question answered in favour of the appellant/Revenue. Computing deduction u/s 32AB - whether all the receipts including non-business receipts viz the interest from others, the interest from IDBI, the rent receipt and the dividend income form part of the “Profit of eligible business”? - Held that:- The assessee’s case admittedly falls under clause (b) of sub-section (3) and not clause (a). Clause (b) does not provide for the profits to be computed in accordance with the requirement of Parts-II and III of the Sixth Schedule to the Companies Act. These words are missing in clause (b). We see no reason then to read these words into clause (b). That would amount to re-writing clause (b) which is not permissible. The legislature having, in the same sub-section, provided for a particular manner of computation of profits in one clause but not in the other must be deemed to have intended the profits to be calculated differently in these sub-clauses. Mr. Mittal’s submission is, therefore, rejected.It is true, as Mr. Mittal pointed out, that unlike as in Section 80HHC the words in clause (b) are not “profits of the business as computed under the head ‘Profits and gains of business’”. That, however, would make no difference. It was not necessary for the legislature to use the entire expression in clause (b) for sub-section (1) itself refers to income as including income chargeable to tax under the head “Profits and gains of business or profession”. The second question is, therefore, also answered in favour of the appellant/Revenue.
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Customs
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2016 (9) TMI 931
Valuation under section 14 of Customs Act, 1962 - inclusion of royalty payable to overseas entity in the assessable value - master tapes - rule 9 of Customs Valuation Rules, 1988 (or rule 10 of Customs Valuation Rules, 2007) - rejection of declared value under rule 10A of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 - transaction value - cost and services - Held that: - the case Collector of Customs (Preventive) v. Essar Gujarat Ltd [1996 (11) TMI 426 - SUPREME COURT OF INDIA] can be referred to, where the decision does not impact upon such imports which can draw a distinction between royalty on goods imported and royalty as a post-importation condition. Of particular import are the propositions that mere existence of royalty clause in a contract which also covers import of goods does not, ipso facto, mandate adjustment of transaction value. The connection with imported goods must conform to the prescriptions in rule 9 of Customs Valuation Rules, 1988 (or rule 10 of Customs Valuation Rules, 2007). It is abundantly clear from the above narration that royalty is hinged upon post-importation manufacture and not on the imported goods per se. The impugned order has erred in including the royalty amounts in the valuation of the ‘master tapes’ that were imported. Appeal allowed - decided against Revenue.
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2016 (9) TMI 930
Enhancement of assessable value of export - Fe percentage content in the ore - Fe content as per invoice - Fe content as per Customs Laboratory Report - rule 6 of CVR - CBEC Board issued Circular no. 12/2014 Cus-dated 17.11.2014 in respect of valuation of Iron Ore - Held that: - the test reports of Custom House laboratory have been issued around a month after filing of the shipping bills. It is been consistently held that time factor is important in testing such samples, since there would result increase in Iron content due to evaporation of moisture. The decision in the case Steer Overseas Pvt. Ltd Vs Commissioner Cus & CE, Vizag [2009 (4) TMI 369 - CESTAT, BANGALORE] have been followed. It is also noted that the declared contractual values of such Iron Ore exports are accepted in other ports like Kolkatta, Paradeep etc., as per the documents submitted by the appellant. The variations in Fe content were very minor, within tolerance limits, did not impinge upon the declared values since the invoice amount in each case was realized as per the BRCs - the loading of assessable value found to be arbitrary and without any basis. Appeal allowed - decided in favor of appellant.
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2016 (9) TMI 929
Imposition of redemption fine - provisional release of goods on payment of full differential duty and furnishing Bank Guarantee of ₹ 65 lakhs, besides executing a Bond of ₹ 33 crores - Barge - Section129E of the Customs Act, 1962 - relief sought under Section 35F - The asset has been confiscated and has been offered for redemption on payment of redemption fine. The same has been released on execution of bond and a bank guarantee. In these circumstances can the appellant continue to use the provisionally released asset without executing option of redemption? Held that: - Ideally the offer of redemption should be valid for a limited period and cannot be enjoyed for unlimited period. After confiscation the ship is a property of the state. Before it was confiscated it was released to the appellant provisionally. Till confiscation the applicants could have enjoyed the benefits of the seized property provisionally released to them. After confiscation the property of the confiscated goods vests in the state. The applicants wish to enjoy the benefit without fulfilling their obligation of paying redemption fine. Therefore more stringent conditions need to be put for allowing further use of the asset. The applicants to execute bank guarantee of ₹ 2,85,00,000/- in addition to existing bank guarantee. On furnishing of such guarantee the respondents will permit the applicant’s to sail out of India the barge subject to condition that the applicant shall file an undertaking before authority stating the purpose of taking out the vessel and to bring back within a period of four months from the date of release of the vessel. Petition disposed off - decided against petitioner.
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2016 (9) TMI 928
Jurisdiction to issue show cause notice - proper officer - confiscation under Section 11(l)(m) & (d) of the Customs Act - imposition of penalties - bank guarantee of ₹ 2 lakhs submitted at the time of provisional release, appropriated towards reduction fine of equal amount - mis-declaration of goods - lighting fixture - Section 28(1)(b) read with Section 124 of the Customs Act, 1962 - Held that: - the decision in the case Mangali Impex Ltd. Vs. Union of India & others [2016 (5) TMI 225 - DELHI HIGH COURT] is relied upon. The show cause notice is issued prior to the amendment of Act of 2011, with effect from 08.04.2011. The show cause notice issued by the Joint Director-DRI is without jurisdiction - appeal allowed - decided in favor of appellant.
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2016 (9) TMI 927
Restoration of CHA license revoked - forefeiture of security deposit - regulation 22(7) and 20(1) of then CHLR 2004( now Regulations 20(7) and 18 of CBLR, 2013) - drawback - mis-declaration - classification - Customs Tariff Item No. 6109.9090 - drawback @ 7.8% of the FOB value - Customs Tariff item No. 6109.1000 - drawback @ 6.7% of the FOB value - Held that: - Appellant, being CHA, acted as a CHA of the exporter on the basis of documents submitted to him. As per the document, description declared was not incorrect i.e. readymade garment /T shirt. Further, the appellant were paid ₹ 500/- per document for their clearance in respect of exports of the impugned goods, there is nothing on record to show that the appellant have benefited extraneously over and above the actual CHA fees i.e. ₹ 500/- per document. In view of this position also there is no doubt that appellant CHA was nowhere involved in any mis-declaration of the goods made by the exporter - CHA not responsible for mis-decaration. Authorisation letter - Held that: - once the exporter gave the authority letter and thereafter the business is continuing, the same authority letter will be sufficient for carrying out the business in future also. Therefore, in each and every consignment, or each and every shipping bill separate authorization is not required. Once the authorization was given by the exporter it is sufficient compliance of regulation 13(a) of CHARL, 2004. when the shipping bill was filed by the CHA and it has been accepted by the exporter, this fact itself shows that appellant has been duly authorized by the exporter for carrying out clearance work of exports consignments. It is general practice in the CHA business that CHA work is brought by the various intermediary but ultimately it is CHA and importer or exporter which are under contract regarding the CHA clearance as well as payment term. Therefore, merely because some shipping line brought client to the appellant does not lead to any conclusion that there was no relation between appellant and exporter. Advise to client - Held that: - Even after detection of different nature of the goods, the description of the goods remained same. Therefore there was no occasion for CHA to advise client. Performance of CHA - delay and deficiency - Regulation 13(n) - Held that: - the appellant have performed their clearance work of export consignment in usual course and nothing brought on record that appellant as CHA have delayed in the clearance work or there is any deficiency in the performance of clearance work on the part of the appellant. Appeal allowed - decided in favor of appellant.
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Service Tax
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2016 (9) TMI 944
Cenvat credit - service tax paid on services relating to insurance and handling of final products after their removal from the factory and insurance of motor vehicles and transit insurance of goods beyond the place of removal - credit was availed by the appellant on the basis of the invoices issued by their Head Office as ISD - services such as CHA, terminal handling and insurance, banking etc. have been availed for export of goods after their clearance from the factory - Held that:- appellant has submitted copies of the ISD invoices on the basis of which they have availed the Cenvat credit on various services. I find that copies of these invoices were also submitted before the First Appellate Authority but no specific findings has been recorded by the Commissioner (Appeals) on this important issue. From the perusal of some of these sample invoices, I find that the credit on various services such as CHA, handling charges, insurance etc. have been availed for export of goods at the port of export. The credit for these services stand availed at the hands of the input service distributor. I find that no such proceedings is on record against the ISD. The dispute in the present proceedings has been initiated by the Revenue against the appellant for availing Cenvat credit on the basis of ISD invoices, on the allegations that the services for which such credits have been availed are not covered by the definition of input services. The proper assessee against whom such proceedings, if at all, ought to have been initiated against is the input service distributor. The proceedings for disallowing the credit would have to be set aside. - Decided in favour of appellant
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2016 (9) TMI 943
Refund claim - accumulated unutilised CENVAT credit - service tax paid on input services - Rule 5 of CENVAT Credit Rules (CCR), 2004 read with Notification No.5/2006-CE-NT dated 14.3.2006 - nexus between the input services and output services - provider of information technology software services to the parent company abroad - Held that:- it is found that in respect of these services reliance of the appellant on the decisions of the Tribunal in the case of Commissioner of Service Tax vs. Convergys India Pvt. Ltd. [2009 (5) TMI 50 - CESTAT, NEW DELHI] which has been upheld by the Hon'ble High Court reported in [2010 (8) TMI 47 - PUNJAB AND HARYANA HIGH COURT] is squarely applicable and appropriate. Moreover, the submission regarding the nature of service received and its use also shows that the stand taken by the Revenue that there is no nexus between the input service and output service is not correct. Therefore, by following the ratio of above case laws, the appellant is entitled for the refund and there is nexus between the input services and the output services. - Appeals allowed by way of remand
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2016 (9) TMI 942
Cenvat credit - Structural Fabrication and water proofing - used for repair, replacing and maintaining of plant and building on a regular basis - Held that:- in view of the decisions of Tribunal in the case of Cargill India Pvt. Ltd. vs. CCE & ST, Bangalore - I [2015 (3) TMI 336 - CESTAT BANGALORE] and Triveni Engg. & Industries Ltd. vs. CCE, Meerut I [2015 (7) TMI 546 - CESTAT NEW DELHI], the appellant is entitled to the Cenvat credit on services used in maintenance, repair and replacing of structures of the building. Cenvat credit - Construction service - used in the construction of residential accommodation for employees near factory - the issue is no more res-integra and stands settled in favour of the appellant by the Tribunal in the case of Reliance Industries Ltd. vs. CCE, (LTU) Mumbai [2015 (11) TMI 100 - CESTAT MUMBAI] wherein it was held that such services have been allowed as input services since the residential colonies near the factories to accommodate employees are required for smooth functioning of the factories in remote areas. Moreover such expenses incurred for construction of township for the employees is in relation to the business activities of manufacturing final products. Similar views have been taken by the Hon’ble High Court of Andhra Pradesh in the case of CCE, Hyderabad III vs. ITC Limited [2011 (11) TMI 516 - ANDHRA PRADESH HIGH COURT] and also by the Tribunal in the case of Ultratech Cement Ltd. vs. CCE, Jaipur II. Therefore, the credit of service tax paid for construction of residential facility is allowed. Cenvat credit - Construciton of road within the factory premsies - roads constructed within the factory premises are used for transportation of inputs, semi-finished and finished goods within the factory - Held that:- the definition of input service covers services used by the manufacturer whether directly or indirectly in relation to the manufacture of final products. In as much as the roads are constructed within the factory premises, they are used for the movement of inputs semi-finished and finished goods within the factory and, hence, are covered within the definition of input service, as has been held by the Tribunal in the case of CCE, Salem vs. ITC Ltd. [2011 (2) TMI 656 - CESTAT, CHENNAI]. Cenvat credit - Outdoor Catering - maintenance of canteen for their employees - Held that:- the issue stands settled in their favour in their own case. Therefore, the credit of service tax on outdoor catering used for canteen meant for the employees, which is a statutory obligation under Factories Act, cannot be denied. Cenvat credit - Rain Water Harvesting - Held that:- it is found that in the State of Rajasthan, it is a statutory obligation to make arrangements for conservation of rain water make water available within the factory. Accordingly, it will be a service used in relation to manufacture and, hence, allowed as an input service. Cenvat credit - Other services - demand of service tax of ₹ 13,904/- has been pressed by Revenue without specifying the service for which it has been availed - Held that:- in as much as the demand is not attributable to any specific service and no specific grounds have been discussed by the authorities below for denying such credit, I find no reasons to sustain the demand and, hence, it is set aside. - Decided in favour of appellant
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2016 (9) TMI 941
Classification - whether loading unloading (chute and manually), breaking of boulders and transportation of lead-zinc ore and spillage from different adits and dumps of Zawarmala and Barol Mines to specified site / mill crusher stockpile, transportation of waste rocks from cute of old crusher / Balaria Chute / Mochia chute to Baroj tailing dam would come under the category of transportation of goods as per appellant or under cargo handling services as per Department. Held that:- the issue is no more res integra and has been the subject matter of various decisions of the Tribunal. One such reference can be made to the latest decision of the Tribunal in the case of Arjuna Carriers Pvt. Ltd. vs. CST, Raipur [2014 (11) TMI 1048 - CESTAT NEW DELHI] wherein it was held that movement of coal from quarries, mine surface etc. to railway sidings, dumps/ stock yards will not be covered by the cargo handling services and the assessee would not be liable to pay any service tax under the said category. Therefore, by following the same, the impugned order is set aside. - Decided in favour of appellant with consequential relief
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Central Excise
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2016 (9) TMI 940
Imposition of penalty - Section 11AC of Central Excise Act, 1944 - raw materials and finished goods - found short in the appellant premises - clandestine removal of goods - Held that:- it is a fact that Revenue is solely relying upon the shortages. There is virtually no other evidence to reflect upon the manufacture of appellant s final product, their transportation, recognition of the buyers and receipt of sales proceeds by allegedly clandestine removed goods. In the absence of such evidence and in the light of precedent decision of the Tribunal, which stand discussed in detail by the Commissioner (Appeals), the charges of clandestine removal cannot be held to have been established. The onus to prove clandestine removal is admittedly on the Revenue and is required to be discharged with production of sufficient evidence, which at least may lead to the probability of having removed the goods. As such, I am of the view that the findings arrived at by the lower authorities that shortages by itself cannot held to be clandestine removal of goods is appropriate decision, thus not requiring any interference with. Confiscation - Rule 15 of the Cenvat Credit Rules, 2004 and Rule 25 of the Central Excise Rules, 2002 - raw materials and scrap - found in excess quantity - Held that:- it is found that it stand recorded by the authorities below that there was no evidence to show that such non-recording in the statutory records was on account of any malafide. Neither were the goods in process of being removed nor is there any sufficient material to show that same were meant for removal without payment of duty. As such, I find no justification for the confiscation of the same as prayed for by the Revenue. - Decided against the Revenue
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2016 (9) TMI 939
Manufacture - marketability - Duty liability - goods got fabricated by the appellant from the job workers - appellants engaged in fabrication of gates and gate parts for irrigation project using M.S. Sheets, Plates, Angles etc. - items were made as per specifications of the project and are not regularly traded items - Held that:- the original authority presumed marketability on the basis that even a single buyer will constitute the market. We find in the present case the specified parts of irrigation gates which are ultimately installed into immovable structure are not bought and sold. These specific parts were fabricated as intermediate parts to create a final structure.It is found that the facts of the case are similar to the one decided by the Karnataka High Court which was affirmed by the Hon’ble Supreme Court. It is also noted that the Hon’ble Supreme Court in Board of Trustees vs. Collector of Central Excise, A.P. [2007 (8) TMI 350 - SUPREME COURT OF INDIA] held that in order to constitute goods twin tests have to be satisfied, namely, process constituting manufacture and secondly marketability. It is well-settled that goods are manufactured with the object of being sold in the market. If the goods are not capable of being sold then the test of marketability is not fulfilled. Further, the burden is on the Department to prove whether there is the process which constitutes manufacture and secondly whether the product is marketable. The Hon’ble Supreme Court concluded that the impugned goods in that case is made of particular specification and cannot be used anywhere else. There is no evidence coming from the department to show that said specified products are bought and sold in the market as a commodity. Accordingly, the impugned order is set-aside. - Decided in favour of appellant
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2016 (9) TMI 938
Manufacture - Whether the process of fitting electric motors to imported sewing machines amounts to manufacture within the meaning of 2 (f) of the Central Excise Act 1944 read with section note 6 to section XVI of the Central Excise Tariff Act and if the process amounts to manufacture, whether the resultant sewing machines are eligible for exemption under serial No. 201 and of notification No. 6/2002 - Held that:- what has been imported is sewing machine even though the motor has not been fitted. After fitment of the motor it remains sewing machine. It cannot be said that the addition of motor has brought into existence any new article which has a character, name or use which is different from the components which have gone into it. Accordingly, it cannot be said that the addition of motor has brought into existence any new product and consequently no manufacture has taken place and hence, no liability for payment of Central Excise Duty arises in this case. Even if a view is taken that addition of motor results in a complete article liable for payment of excise duty, we find that it will be covered by the exemption given in serial No. 201 of notification 6/2000-CE. The exemption is available to those sewing machines which do not have an inbuilt motor. The concept of what constitutes a sewing machine with inbuilt motor has been examined by the Tribunals in many cases referred to the case of Gabbar Engineering Co. Vs. CCE, Ahmedabad [2009 (8) TMI 255 - CESTAT, AHMEDABAD]. - Decided in favour of appellant
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2016 (9) TMI 937
Demand and imposition of penalty - excess stock of molasses found in the storage tanks, unaccounted in the statutory records - clandestine removal of molasses - regular statement of MF-1 submitted by the parties to the State Excise Department - Held that:- the variation found in the stock of molasses on 14/07/98 upon inspection by the Central Excise authority is a normal variation and no adverse inference is called for. Further, I take notice of the fact that the State Excise authority, who are in physical control of the stock of molasses of production, storage and dispatch in the appellant's factory have excepted the recorded stock and at the end of the molasses season have accepted the net excess at 961qtls. Therefore, I hold that the whole demand is based on assumption and presumptions and is fit to be set aside. The appellant informs that the duty and penalty in dispute have been appropriated by the Central Excise authority during the pendency of the appeals with the refund payable to the appellant. Accordingly, I direct the adjudicating authority to refund the amount adjusted, being in the nature of pre-deposit as the same have been adjusted out of refundable amount during pendency of the appeal, with interest as per Rules.
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2016 (9) TMI 936
Job-work - valuation - activity of building body at their factory on the duty paid motor vehicles' chassis supplied to them - appellants were acting as job worker to MIL - Held that:- the value of the goods supplied by the appellants is to be determined under Rule 10A of the Central Excise Valuation Rules, 2000 and not under Rule 6. The identical issue involved in these appeals has already been analysed at length in the various judgments of Tribunal upholding the stand of the department, and in fact the Tribunal view has also been sustained by the Hon'ble High Court of Bombay in in Hyva India Vs Union of India [2015 (5) TMI 25 - BOMBAY HIGH COURT]. This being the case, notwithstanding the Learned Advocate's valiant, but vain, efforts to convince us that the judgments are per incuriam and his other arguments that valuation rules has to be read with charging section, his reference to Committee set up by CBEC and report thereof on provisions for job work valuation etc., judicial discipline and judicial propriety requires us to follow and apply the ratio of the judgments cited supra especially when it is not the case of appellant that the same has not been stayed or overturned by higher courts. - Decided against the appellant
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2016 (9) TMI 935
100% EOU - encyclopedia and dictionary, clearances made in the DTA during the period 2001-02 to 2004-05 and catalogue, brochures, Address/year book, folders printed sheets, etc. cleared in the DTA during the period from 2001-02 to 2003-04 - Invokation of extended period of limitation - declarations were made in the periodical returns - Held that:- the Tariff heading 49.01, includes printed books, newspapers, brochures and other products of the printing industry, typed manuscripts and plans. We further observe that this Tribunal in Tata Press Ltd. Vs. CC [2001 (7) TMI 615 - CEGAT, MUMBAI], wherein the same tariff Entry No. 49.01 was interpreted in respect of predecessor Notification No. 25/95-Cus wherein the similar exemption was granted and it was held that the specification in exemption notification of books classifiable under Chapter- 49 clearly shows that it applies to books (as commonly understood) which fall for classification anywhere in chapter. Accordingly, we hold that the Id. Commissioner has erred in holding that encyclopedia and dictionaries will not fall in the Tariff heading No. 49.01 for the purpose of exemption under the notification No. 21/2002-Cus. Thus, the demand of ₹ 94,69,300/- is set aside. We, further, hold that no case of any suppression or any misstatement on the part of the appellant is made out. Accordingly, we hold that the extended period of limitation is not invokable. We also set aside the demand of ₹ 98,72,182/-. - Decided in favour of appellant
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2016 (9) TMI 934
Imposition or otherwise of penalty - Section 11AC of the Act - original adjudicating authority did not imposed the penalty under Section 11 AC on the appellant but in appeal to Commissioner (A), Comm. (A) imposed such penalty - Held that:- the reasoning adopted by the Commissioner (Appeal) to reinstate Sec. 11AC penalty are flawed. He has not given convincing grounds as to how he concludes that the qualifying ingredients for attracting Sec. 11AC have been satisfied, at the same time ignoring the submissions of the appellant on absence of mensrea and not disproving the detailed findings of the original authority. It is also to be noted that on query from the Department only, the Controller-Legal Metrology, Government of Andhra Pradesh vide letter dated 04-03-2009, clarified that the supplies to APHB is covered by the definition of Institutional consumers; that the sale is not retail and that printing RSP was not required. By this time, the appellant had already paid up the duty liability of ₹ 2,79,330/- along with interest three months earlier, in December, 2008. Yet, the Show Cause Notice was issued only in 18-01-2012. It is also not disputed that there was evident doubt on the applicability of Notification 4/2006 CE. The Honourable Apex Court has consistently held, in a number of land mark judgments, that when all facts were in the knowledge of the Department, or when there was genuine confusion on the leviability per se etc., penal provisions of Sec. 11AC cannot be imposed. For example in Pahwa Chemicals Pvt Ltd V/s CCE [2005 (9) TMI 92 - SUPREME COURT OF INDIA]. Even in the Rajasthan Spinning and Weaving Mills judgment [2009 (5) TMI 15 - SUPREME COURT OF INDIA], the Apex Court has laid down that penalty under Sec.11AC, as the word suggests, is punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the Section. Therefore, by respectfully following the ratio set out in the above judgments, I have no hesitation in holding that the impugned order as unsustainable and bad in law. - Decided in favour of appellant
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2016 (9) TMI 933
Valuation - manufacture of Footwears falling under Tariff sub-heading No. 64041910 of CETA, 1985 - availment of benefit of Notification No. 6/2002-CE, dated 01-03-2002 - whether the goods manufactured were to be assessed under Section 4 of Central Excise Act, 1944, and as provided under Chapter V of the Weights and Measures (Packaged Commodity) Rules, 1977 or under Section 4A of Central Excise Act, 1944. Held that:- it is found that in the said Notification, the condition required to be fulfilled was that the Footwear did not have a retail sale price exceeding ₹ 125/- per pair till 8/7/2004, and did not have retail sale price exceeding ₹ 250 per pair w.e.f. 9/7/2004 and that the retail sale price was defined in the said notification as the maximum price at which the excisable goods in the packaged form are sold to the ultimate customers and the price to be the sole consideration for such sale. We also find that in show cause notice it is contended by Revenue that MRP was printed by M/s N.G. Enterprises on the goods itself intentionally to take the undue benefit of Notification just to evade Central Excise duty. Also it is stated that from the statements of Shri Vishal Gupta and Shri Pawan Chadha, it is confirmed that they had received the said Footwear in wholesale bulk quantity and no MRP was printed on the Footwears received from M/s N.G. Enterprises and both the statements are relied upon documents for the issue of said show cause notice. It is found that there are contrary contentions by Revenue. We further, find that the show cause notice has failed to established either the facts that the MRP more than requirement in the Notification was printed on Footwear or the retail sale price was not the sole consideration for sale or the goods were sold at the price higher than the retail sale price declared by them for the relevant period. It is clear from the submissions of the appellant that the appellant has fulfilled all the conditions required for availing benefits of the notifications stated in foregoing paras. We, therefore, hold that the three show cause notices dealt with in seven appeals in hand are not sustainable. Therefore, we set aside all the impugned orders by holding that for the period covered under the said show cause notices impugned goods were eligible for benefit of such Notification stated in the earlier paragraphs. - Decided in favour of appellant
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2016 (9) TMI 932
Cenvat credit - aluminum profiles, channels, wire rods, sheets - not issued for or utilized in the manufacture of the final products - shortages of inputs and wrong availment of Cenvat credit without receiving inputs - whether the conclusions in the impugned order confirming the culpability of the appellant and the allegation that they had wrongly availed credit on goods which were found not issued or utilized in the manufacture of final products are correct or not. Held that:- it is seen that the investigations have conclusively proved that the appellants received aluminium scrap in the form of broken scrap, end pieces of sections, wastage of sheet cutting etc; from local dealers and bus body manufacturers, however, the appellants did not actually receive new aluminium pipes, sheets tubes, coils etc. It is also evidenced that the said material received under cenvatable invoices were never used in manufacture of finished goods. The denovo adjudicating authority has made an in depth analysis concerning shortages noticed of aluminium extrusion hollow profiles and aluminium scrap etc. These shortages have been accepted by the appellant; they have made deposit and further Managing Director of the appellant attributed the shortages to mismanagement in the factory. It is seen that the lower authority has after detailed analysis, satisfied himself that the show cause notice allegations are indeed correct. The appellants have not been able to adduce proof to the contrary. In fact in both the two rounds of original adjudication, the two different adjudicating authorities have arrived at the same conclusions and have also confirmed the proposals in the show cause notice. We are also satisfied that the directions of Tribunal in its earlier Remand Order dated has been followed by the denovo adjudicating authority. Therefore, the impugned order does not call for any interference. - Decided against the appellant
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CST, VAT & Sales Tax
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2016 (9) TMI 926
Recovery of arrears of sales tax - TNGST Act, 1959 - assessment without hearing - opportunity of being heard - Held that: - the petitioner directed to file written objections within a period of two weeks, along with supportive documents, and, on receipt of the same, the Assessing Officer shall afford an opportunity of hearing to the petitioner and redo the assessment in accordance with law, after considering the available documents with the petitioners - matter remanded for fresh consideration. Order of attachment - Held that: - petitioner granted an opportunity to file a representation before the Assessing Officer/competent Authority, within a period of two weeks, setting out clearly as to how the property is not liable for attachment, and on receipt of the representation, the Assessing Officer/Competent Authority shall consider the petitioner's representation and after conducting enquiry and affording opportunity of personal hearing, pass appropriate orders in accordance with law - matter remanded for fresh consideration. The amounts, which have been paid by the petitioner, pursuant to the interim orders granted by the Court shall be adjusted towards the tax dues after the assessment is redone in terms of the direction issued hereinabove, and till orders are passed, the properties in question shall not be brought for sale. Writ petitions disposed off - decided in favor of petitioner.
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2016 (9) TMI 925
Validity of Assessment order - TNVAT Act, 2006 - completion of assessment solely placing reliance on the Advance Ruling, given by the Authority for Clarification and Advance Ruling - Entry 51 of Part-B of the First Schedule - sale of batter in loose condition taxable at 5% - Idli Wet Maavu - Dosai Wet Maavu - Vada wet Maavu - Addai Wet Maavu - Is the decision of advance ruling applicable to the petitioner? - Held that: - the proceedings, dated 2.12.2013, is not a Clarification issued by the Commissioner nor a Circular, but it is a proceedings of the Authority for Clarification and Advance Ruling, exercising power under Section 48-A of the TNVAT Act, 2006. Therefore, if the product is of the same nature, then obviously the assessing officer will apply the Advance Ruling. If according to the petitioner, the product manufactured by them is slightly different and the Advance Ruling is not applicable, then they have to file a revision petition before the concerned authority, in terms of Section 48-A(4) of the TNVAT Act, 2006. The Advance Ruling Authority has power to review, amend or revoke its Clarification or advance ruling at any time for good and sufficient cause, after giving an opportunity of being heard to the affected parties. If the petitioner's case is that the Clarification would not apply to their case, or if it is erroneous, then, they have to approach the authority by seeking for review of the orders. The petitioner is directed to file a petition to review the Clarification, dated 2.12.2013, in A.C.A.A.R 11/2013-14, before the authority for Clarification and Advance Ruling. Along with the petition, the petitioner should produce necessary proof to show as to how the Clarification would not be applicable to them, vis-a-vis, the products manufactured by them. Till orders are passed by the Advance Ruling Authority, further proceedings, pursuant to the impugned assessment orders, shall be kept in abeyance. Petition disposed off - decided in favor of petitioner.
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2016 (9) TMI 924
Imposition of penalty under Section 54 (1) (19) of the U.P. VAT Act 2008 - false claim of an amount as input tax credit - Held that: - The words "false" and "fraudulent" have a specific connotation insofar as legal proceedings are concerned. Tribunal failed to consider tax invoices and transportation bills. This material, in the opinion of the Court, was clearly relevant for the purposes of arriving at a conclusion as to whether the claim of input tax credit was a false or fraudulent one - genuinity of transactions could not be established. Matter remanded back to the Tribunal for fresh consideration.
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2016 (9) TMI 923
Pendency of writ petition - Bombay Sales Tax Act - revival of petitioner's registration from 1st April, 1998 - principles of natural justice - Held that: - The legal questions and issues are kept open for decision in an appropriate case. In terms of the affidavit filed by the Joint Commissioner of Sales Tax, the matter should be reexamined by the competent authority. If that competent authority is of the level of Deputy Commissioner or above, he shall proceed on the footing that the registration of the petitioner has been validated with effect from 1st April, 1998. He should also abide by the order dated 24th March, 2011. If the matter goes to the Assessing Officer as well, the Revenue has no objection and it will not raise the issue of its competence and jurisdiction. The matter being fairly old, the proceedings shall be disposed of as expeditiously as possible and within a period of three months from the date of receipt of a copy of this order - writ petition disposed off - decided in favor of petitioner.
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2016 (9) TMI 922
Order of assessment - maintainability - alternative remedy of appeal - UPVC Window - TNVAT Act, 2006 - SEZ - eligibilty of exemption from tax on sale of UPVC Doors and Windows made to M/s.Mahindra Residential Developers Limited, an approved co-developer, in Mahindira World City, Special Economic Zone (SEZ) with authorized operations of providing infrastructural facilities in SEZ, by developing residential facilities, as per the approval granted by the Government of India, during April, 2008 - Held that: - sans facts the legal provisions, the decision rendered by the Court cannot be made applicable. If done so, it would amount to “putting the cart before horse”. The contentions raised by the petitioner not acceptable that they should be permitted to bypass the statutory appellate remedy - Writ Petition not maintainable. Liberty granted to the petitioner to file Appeal before the Appellate Authority. If the petitioner files Appeal within 30 days, the Appellate Authority shall entertain the same without reference to limitation - petition dismissed - decided against petitioner.
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Indian Laws
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2016 (9) TMI 921
Summary trial procedure to be followed for offences under Section 138 N.I. Act - Held that:- A perusal of the decision in Rajesh Agarwal (2010 (7) TMI 279 - HIGH COURT OF DELHI) itself shows that this Court was of the view that the trial under Section 138 NI Act cannot be carried out like any other summons trial under IPC offences which frustrate the very purpose of summary disposal of these complaints. This Court held that thus in all cases under Section 138 NI Act once evidence is given by way of affidavit at the stage of pre-summoning, the same be read in evidence by the Court at post summoning stage as well and the witnesses need not be recalled unless Court of learned Metropolitan Magistrate for reasons, considers it necessary. The guidelines laid down by this Court in Rajesh Agarwal (supra) were obviously prospective in nature and did not lay directions that in all cases where witnesses were under cross-examination, the evidence so recorded be scrapped and de novo trial started after filing an application under Section 145(2) NI Act.
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