Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 24, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Registration u/s 12AA(3) cancelled - some of the objects hit by the first proviso to Section 2(15) - no prejudice will be caused to the legitimate interests of the revenue because, notwithstanding the status of registration and by the virtue of section 13(8), the assessee will not be eligible for exemption under section 11 in respect of such income - registration restored - AT
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Revision u/s 263 - In the instant case the order of the AO may be prejudicial to the interest of the revenue but it cannot be said to be erroneous since various judicial decisions support the case of the assessee that the assessee is entitled to deduction u/s.54F in respect of 2 adjacent units - order of revision set aside - AT
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Disallowance of pre-operating expense for a “Mawa Project” - revenue v/s capital expenditure - expenditure incurred for expansion of the dairy business of the assessee - allowed as revenue expenditure - AT
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Eligibility for deduction U/s.11 & 12 - The claim of the assessee to carry forward the excess application of fund cannot be entertained applying the commercial principles. However if the excess application of funds are from the borrowed fund or from the sundry creditors during the earlier years, the same shall be allowed as application in the year in which such loan or sundry creditors are repaid from the income of the trust. - AT
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When AO accepts purchases as well as payments made by assessee to the concerned parties, he cannot treat the outstanding closing balance of the concerned creditors as bogus on purely conjectures and surmises - AT
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TDS liability - u/s 192 or 194J - salary or professional fee - the benefits of an employer / employee relationship which are normally available, do not apply to the impugned consultants, for instance, provident fund, leave encashment, gratuity benefits, etc - TDS to be deducted u/s 194J - AT
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Disallowance of deduction of compensation paid to the tenant against capital gain within the ambit of section 48 - the main Director of both the companies is common. - failed to prove that the payment is genuine - no deduction - AT
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Disallowance u/s 40A(3) - cash payment - unloading maize from lorries and loading the same into railway wagons some times was done in the late evenings - impugned payments in cash were made by the assessee in the exceptional circumstances as specified in Rule 6D - No disallowance - AT
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Penalty u/s 271(1)(c) - the addition made by the Assessing Officer was specific and assessee had concealed the income and furnished inaccurate particulars of income. - the assessee's explanation is not bonafide - levy of penalty confirmed - AT
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Deduction u/s 80IB(8A) - nature of sample storage incomes - assessee conducts its clinical study and stores the relevant samples at its client’s behest till the license approval is obtained. The same can’t be held to be an activity not forming intrinsic part of its clinical studies conducted - Deduction allowed - AT
Customs
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Valuation - Revenue contends that value mentioned in MoA - there was nothing wrong on the part of the appellant to declare that price in the Bill of Entry which is lower than MoA - SC
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The fact that there is no prohibition for the capture of Sharks for domestic consumption, is no ground to hold the ban on export of Shark fins as arbitrary. If there is no prohibition for export, the total quantity of Shark captured, may increase manifold. - HC
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When goods were prohibited goods it was primary duty of vessel operator not to allow same to be loaded into vessel – Thus, vessel operator having conscious knowledge of mis-declaration and exporting prohibited goods - levy of token penalty of ₹ 10,000/- (Rupees ten thousand only) on the vessel operator sends a wrong message to the society as to weak tax administration and bonus to evasion - AT
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Benefit of Exemption – S.230 of Notification No.21/2002-Cus. - Import of Asphalt Mixing Plant – Importer is not the person who has been awarded contract by NHAI - they are only contractor or sub-contractor appointed by STPL(SPV/Concessionaire) - benefit of exemption allowed - AT
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Refund of SAD / Additional Duty of 4% - Validity of Sale transaction – Sales tax authorities accepted sale of goods on basis of invoices and confirmed payment of CST – Sale was completed as soon as titles were transferred to purchasers – AO cannot question basis of sales transactions - AT
Service Tax
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Classification - sale of savings bonds issued by RBI - assessee bank rendered custodial service by maintaining the Bond Ledger Account and services incidental thereto - appellant is liable to service tax for the consideration received from the Reserve Bank of India as handling commission, turnover commission and service charge in the category of Business Auxiliary service - AT
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Denial of CENVAT Credit - appellant cannot be denied Cenvat Credit availed by them in the absence of registration as input service distributor by the Head Office - AT
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CENVAT Credit - Common input service - Rule 6(3) - There is no bar for making payments as per prescribed percentages for the prior period also as it may not be feasible to segregate quantum of input service credit pertaining to dutiable and exempted services - AT
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Denial of refund claim - payment of service tax which was not leviable - Bar of limitation - that duty paid but not statutorily leviable has to be considered as a deposit with the Govt. and time limit specified in Section 11-B of the Central Excise Act, 1944 will not be applicable - AT
Central Excise
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Classification of goods - revenue filed appeal even after the clarification issued by the even the CBEC - a total mindless exercise on the part of the Revenue in filing such an appeal which is misuse and abuse of the process of law. - SC
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Valuation - Inclusion of royalty amount - when the assessee is paying the royalty to LNL (buyer) and that too for using the brand name `NOVINO' which belongs to the buyer, the question of treating the same as "additional consideration" - No addition to the value - SC
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Recovery of suo motu credit - amount paid is only a deposit during investigation, it is to state that once adjudication authority dropped the proceedings in this case the consequential benefit is automatic in so far as the deposits made by the appellant during pendency of adjudication proceedings. - AT
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Reversal of cenvat credit - removal of capital goods after use - the case of the Appellant was covered under the second proviso to Rule 3(5) and not under Rule 3(5A) of CENVAT Credit Rules, 2004 -after 10 years of use of the capital goods, the amount of credit required to be reversed becomes zero - refund, of amount paid wrongly, allowed - AT
Case Laws:
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Income Tax
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2015 (9) TMI 1013
Validity of proceedings u/s 153C - Held that:- The Assessing Officer of the person searched and such other person may be the same but these are two different assessees and, therefore, the Assessing Officer has to carry out the dual exercise, first as the Assessing Officer of the person searched in which he has to record the satisfaction, during the course of assessment proceedings of the person searched. After recording such satisfaction note in the file of the person searched, the same is to be placed in the file of such other person. Then, in his capacity as the Assessing Officer of such other person, he should take cognizance of such satisfaction note and thereafter issue notice under Section 153C. In this case, this exercise of recording the satisfaction during the assessment proceedings of the person searched has not been carried out. On the other hand, the Assessing Officer recorded the satisfaction in the case of such other person which does not satisfy the condition of assuming jurisdiction under Section 153C. Notices u/s 153C have been issued for Assessment Year 1999-2000 to 2004-2005. The only document on the basis of which the notices have been issued is an undated cheque found during the course of search at the premises of Kabhai Chauhan Group on 04.03.2005. An undated cheque found on 04.03.2005 cannot pertain to the previous years 1998-1999 to 2003- 04. It can pertain to previous year 2004-05 and thus, can be relevant only for Assessment Year 2005-06 and not in earlier years. Admittedly, there is no seized material in the years for which notices u/s 153C have been issued. the agreement between the tenant and the petitioner found from ‘S’ was held to be belonging to the assessee because it was not belonging to the person searched. However, cheque issued by the assessee was in the name of Vijay K. Chauhan i.e., the person of the Group which was searched. The cheque was found from the person upon whom the cheque was drawn. Therefore, in our opinion, the cheque “belongs to” the person upon whom it was drawn and cannot be said to be continued to “belonging to” the person who issued the cheque. Therefore, in our opinion, the conditions for issue of notice u/s 153C were not satisfied. - Decided in favour of assessee.
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2015 (9) TMI 1012
Registration u/s 12AA(3) cancelled - some of the objects hit by the first proviso to Section 2(15) - Held that:- As decided in Kapurthala Improvement Trust vs. CIT [2015 (7) TMI 77 - ITAT AMRITSAR ] if the status of registration is to be declined to an assessee only on the ground that some of the objects may be hit by the first proviso to Section 2(15) but the assessee’s receipts from such activities donot exceed specified threshold in a particular assessment year, the assessee will be subjected to undue hardship in the sense that while the assessee will be disentitled to exemption under section 11 due to denial of registration under section 12 A or 12AA which is sine qua non for admissibility of exemption under section 11. On the other hand, if the status of registration is granted to the assessee even when some of the objects may be hit by the first proviso to Section 2(15) and the assessee’s receipts from such activities do exceed specified threshold, no prejudice will be caused to the legitimate interests of the revenue because, notwithstanding the status of registration and by the virtue of section 13(8), the assessee will not be eligible for exemption under section 11 in respect of such income. It is only elementary that a statutory provision is to be interpreted ut res magis valeat quam pereat, i.e., to make it workable rather than redundant. The considerations about the possibilities of the first proviso to Section 2(15) coming into play affecting the grant, decline or withdrawal of registration under section 12AA will thus lead to wholly avoidable undue hardships to the assessee, will be unworkable in practice and be contrary to the scheme of the Act. In view of the above discussions, in our considered view, the considerations about the possibilities of first proviso to Section 2(15) into play are wholly extraneous in the present context. As the withdrawal of registration is solely based on these considerations, the very foundation of the learned Commissioner’s action is unsustainable in law and consists of reasons which are not at all relevant in the context of registration status under section 12A or 12AA of the Act. For this reason also, the action of the learned Commissioner is wholly devoid of any legally sustainable merits. - Decided in favour of assessee.
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2015 (9) TMI 1011
Levy of penalty u/s. 271(1)(c) - additional income admitted during search and returned u/s. 153A proceedings - Held that:- Furnishing of inaccurate particulars of income and concealing of income are two different expressions having different connotations. For initiating penalty proceedings, the Assessing Officer has to be very specific for the reasons of levying penalty, Whether it is for furnishing of inaccurate particulars of income or concealing of income or for both. In the present case, a perusal of notice issued u/s. 271(1)(c) r.w.s. 274 shows that the Assessing Officer has not specified the reasons for levying of penalty i.e. whether it is for furnishing of inaccurate particulars or concealment of income or both. A perusal of notices show that they are stereo type notices, with blank spaces. Specific reasons for levy of penalty u/s. 271(1)(c), whether it is for concealment of particulars or for furnishing inaccurate particulars or for both, have not been specified. The assessee in his written submission has pointed out that if the irrelevant columns of the printed form of notice u/s. 274 have not been stuck off by the Assessing Officer, the notice for levy of penalty u/s. 271(1)(c) shall be deemed to be invalid. The Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (2013 (7) TMI 620 - KARNATAKA HIGH COURT ) has held that where it is not clear from the notice u/s. 274 the reasons for levying of penalty the notice itself is bad in law and the penalty order passed on the basis of such notice is not sustainable - Decided in favour of assessee.
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2015 (9) TMI 1010
Revision u/s 263 - CIT-II, Pune directing disallowance of deduction u/s.54F alleging that deduction needs to be allowed on purchase of only one flat and not a house property containing 2 combined flats - Held that:- There is no dispute to the fact that the assessee in the instant case has invested her long term capital gain in acquisition of 2 adjacent flats bearing Flat Nos. 13 and 14 in the project Magnolia vide purchase deed dated 17-07- 2008 for a total consideration of ₹ 77,82,600/-. We find the AO, in the body of the assessment order, allowed deduction u/s.54F at ₹ 69,12,528/- being the proportionate deduction u/s.54. While allowing deduction u/s.54F at ₹ 69,12,528/- the AO had also rejected the claim of deduction u/s.54(2) made by the assessee at ₹ 77,82,600/-. A copy of the purchase deed was also before the AO. Therefore, it cannot be said that the AO has not applied his mind on the issue of applicability of deduction u/s.54F on account of 2 adjacent flats. Since at the prevailing time various decisions were available to the proposition that where more than one units are purchased which are adjacent to each other and are converted into one house for the purpose of residence by having common passage, common kitchen etc. then it would be a case of investment in one residential house and consequently the assessee would be entitled to deduction u/s.54F. It is the settled proposition of law that for invoking the jurisdiction u/s.263 the twin conditions namely, the order is erroneous and the order must be prejudicial to the interest of the revenue must be satisfied. In the instant case the order of the AO may be prejudicial to the interest of the revenue but it cannot be said to be erroneous since various judicial decisions support the case of the assessee that the assessee is entitled to deduction u/s.54F in respect of 2 adjacent units - Decided in favour of assessee.
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2015 (9) TMI 1009
Disallowance of deduction u/s. 80IA - eligibility to claim the benefit of deduction u/s.80-IA without first setting off notional brought forward losses against the current year’s profit of exempt unit - Held that:- This fact is not in dispute that business loss/depreciation of earlier years of the exempt unit have already been set off in earlier years against other income and accepted as such by the Revenue. This fact is also not in dispute that deduction u/s.80IA in the case of exempt unit has been claimed for the first time in the impugned year. In the aforesaid judgment of Shevie Exports [2013 (5) TMI 16 - ITAT MUMBAI], it has been observed that losses of earlier years could not be notionally carried forward in terms of section 80IA(5). Also see Velayudhaswamy Spinning Mills (P)Ltd. case [2010 (3) TMI 860 - Madras High Court] Thus, respectfully following these judgments as relied upon ld. Counsel of the assessee, we hold that the AO was not justified in denying the benefit of deduction u/s 80IA of ₹ 71,10,231/-. The AO is directed to grant the benefit of deduction claimed by the assessee. - Decided in favour of assessee.
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2015 (9) TMI 1008
Disallowance of pre-operating expense for a “Mawa Project” - revenue v/s capital expenditure - expenditure incurred for expansion of the dairy business of the assessee as held by CIT(A) in deleting the disallowance - what is the nature of the "Mawa‟? Is it a milk product or not and if fails in the scope of the assessee's business of not? - Held that:- The undisputed facts include that the "Mawa" is made up of the milk product and therefore, it is a dairy product and they same is covered within the scope of the declared business of the assessee. We have considered the Ld DRs argument is the preoperative expenditure incurred before a new product is launched constitutes a new business and reject the same. The ice-cream and the Mawa fall in the genus of the dairy/milk products and they are covered by the nature of declared business of the assessee. As such, the impugned expenditure claimed by the assessee does not include any expenditure of capital nature. The control and management, accounts, CEOs for both the dairy /milk products is one and the same. AO has not made out the absence of interlacing of the above. Under the factual matrix of the case, we find the claim of the assessee is allowable. Accordingly, the AO is directed to delete the addition. The order of the CIT (A) is thus, affirmed. - Decided in favour of assessee.
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2015 (9) TMI 1007
Addition on account of unexplained cash deposits in bank account - Held that:- AR has placed on record copy of the bank statement of account maintained with State Bank of India and Oriental Bank of Commerce and from he has also worked out the date-wise working of the peak credit of the cash deposited in his bank accounts. We also find that while deciding the appeal of the assessee for AY 2006-07, Ld CIT(A) has in principle partially accepted the addition based on the peak theory as he has directed the AO to accept the amounts which are re-deposited within 15 days of withdrawal. We also find that the decision of the CIT(A) for AY 2006-07 has been accepted by the Department and has not preferred appeal before the Tribunal though the facts of that year are similar to that of other years. Before us, Revenue has not controverted the working of peak credit furnished by the ld. A.R. In such a situation, we are of the view that in the present case the entire cash deposits cannot be added as income but the addition be made only to the extent of peak credit. We therefore restore the issue to the file of AO to restrict the addition on the basis of peak credit. - Decided in favour of assessee for statistical purposes. Addition of jewellery - Held that:- We find that Ld CIT(A) after considering the entire facts and the CBDT circular (supra) and by a well reasoned order had granted substantial relief to the assessee. Before us, ld. A.R. has not controverted the findings of ld. CIT(A) nor pointed any fallacy in the findings of ld. CIT(A) and therefore we find no reason to interfere with the order of ld. CIT(A) and thus dismiss the ground of Assessee. - Decided against assessee Unexplained cash found at the time of search - Held that:- Cannot accept the contention of the. appellant particularly when the mother of the appellant expired in 2006 and the search took place in the case of the appellant in October, 2008, Further, what was the source of the, cash in the hands of his mother has not been explained by the appellant. Similarly, the appellant has not given the details of withdrawals from his salary. Rather the appellant has tried to improve the cash deposits in his bank account out of the cash withdrawals. Therefore, no hesitation in holding that the appellant has failed to prove the acquisition of cash found from his residence. The addition made on this account is therefore, upheld. - Decided against assessee
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2015 (9) TMI 1006
Validity of assessment under Section 153A/153C - Held that:- In the present case, the assessment pertaining to Assessment Years 2003-04 to 2007-08 had not been abated. This fact is not disputed by the Revenue. Therefore, in these years, the assessment ought to have been made on the basis of incriminating material as per the decision of the Hon’ble Special Bench in the case of All Cargo Global Logistics Ltd. vs. Dy. CIT, Central Circle-44 (2012 (7) TMI 222 - ITAT MUMBAI(SB)). The Revenue has not pointed out what was the incriminating material available on the basis of which the impugned assessment orders had been framed. In the absence of such material, we cannot sustain the impugned assessment in view of the binding precedent as relied upon by the assessee. Therefore, we hereby quash the assessment orders pertaining to AYs 2003-04 to 2007-08 as challenged before us in this bunch of appeals. - Decided in favour of assessee.
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2015 (9) TMI 1005
Eligibility for deduction U/s.11 & 12 denied - assessee company registered U/s.25 of the Companies Act, though a non-profit institution for controlling and motor sports as per CIT(a) - Held that notification No.S.O.1246(E) dated 29.11.2002 wherein the Central Government has specified motor racing including motor cycle racing to be granted the benefit of section 80G of the Act which was not considered by the Ld. CIT (A). On perusing the order of the Ld. CIT (A) we find that these aspects were not being considered while denying the benefit of Sections 11 & 12 of the Act to the assessee. Therefore in the interest of justice we hereby remit back this issue to the file of the Ld. CIT (A) to re-consider the matter Disallowance of set-off of the earlier year's excess application for the succeeding assessment years - Held that:- The claim of the assessee to carry forward the excess application of fund cannot be entertained applying the commercial principles. However if the excess application of funds are from the borrowed fund or from the sundry creditors during the earlier years, the same shall be allowed as application in the year in which such loan or sundry creditors are repaid from the income of the trust. This ground is accordingly disposed off. Tax surplus at the maximum marginal rate by denying the exemption U/s.11 of the Act - Held that:- Since this issue is linked with the denial of exemption U/s. 11 & 12 of the Act which is the first ground raised by the assessee hereinabove and the same is remitted back to the file of the Ld. CIT (A), similarly this ground raised by the assessee is also remitted back to the file of the Ld. CIT (A) to decide the matter afresh. Disallowance of foreign travel expenses invoking the provisions of section 11(1)(c) - Held that:- We do not subscribe to this view of the Ld. CIT (A). If the assessee has incurred foreign travel expenses outside India in order to comply with the objects of the assessee company which if entitled for the benefit of Section-11 & Section-12 of the Act, the same shall be treated as the application of income. - Decided partly in favour of assessee for statistical purposes.
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2015 (9) TMI 1004
Addition made on account of disallowance u/s 40(a)(ia) - CIT(A) deleted the addition - submissions of assessee concluded that organsations to whom assessee has made payments are within the purview of section 194A(3)(iii) of the Act, hence, there is no requirement for assessee to deduct tax at source on the payments made to them - Held that:- the only reason on which disallowance u/s 40(a)(ia) was made is, Citi Corp and AB Builders Fund Co-op. Society are not covered under Banking Regulation Act. However, on perusal of the relevant statutory provision, it is seen that both the organizations to whom assessee has paid interest, but, are coming within the exception provided u/s 194A(3)(iii) of the Act. Therefore, ld. CIT(A) was correct in holding that there is no requirement for assessee to deduct tax at source on the payments made. Even otherwise also, it is the contention of assessee that the entire finace charges were paid by assessee during the relevant PY and nothing remained outstanding at the end of the PY. The aforesaid factual position has not been controverted by the department. That being the case, following the decisions cited by ld. AR as referred to by ld. CIT(A), no disallowance u/s 40(a)(ia) can be made. In view of the above, we uphold the decision of ld. CIT(A) on this issue - Decided against revenue. Bogus purchases - Outstanding closing balance in respect of three creditors - CIT(A) deleted the addition - Held that:- When AO accepts purchases as well as payments made by assessee to the concerned parties, he cannot treat the outstanding closing balance of the concerned creditors as bogus. If at all he had an doubt with regard to the transactions affected by assessee with the concerned parties, he should have treated the entire transactions as bogus and not part of it. Moreover, it is seen from the observations made by AO that he accepts the fact that bills/vouchers submitted by assessee to certain extent proves the genuineness of the transaction between parties. That being the case, in our view, AO cannot treat the outstanding balance due to the creditors as bogus purchases of the assessee on purely conjectures and surmises. In the aforesaid view of the matter, having not found any infirmity in the order of ld. CIT(A) in deleting addition made by AO in respect of the three creditors, we uphold the same by dismissing the grounds raised by the department.- Decided against revenue.
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2015 (9) TMI 1003
Deemed dividend u/s. 2(22)(e) - CIT(A) deleted the additions - Held that:- The opening balance of ₹ 5,35,396 is receivable by assessee from the said company as on 1st April 2006 and to the extent amount received back cannot be added as deemed dividend u/s 2(22)(e) of the Act as it is the return of loan given by assessee to Koradia Construction Private Limited. The assesee has produced statement of account as well bank statement of the assessee to prove his contention. Further the assessee has earned ₹ 2,00,000 as the salary from Koradia Construction Pvt. Ltd., which has already been offered for taxation by the assessee in the return of income filed for the impugned year. Thus, in view of above we hold that CIT(A) has rightly deleted the addition to the tune of ₹ 12,10,396 and we uphold the same. - Decided in favour of assessee. Addition on account of income from house property - CIT(A) deleted the additions - Held that:- Though the order of CIT(A) is short on details, so however, the factual matrix which has been brought out by the assessee, does not justify any interference in the ultimate conclusion drawn by the CIT(A). Moreover, we find that the assessee had brought to the notice of the Assessing Officer all the facts by way of a written communication dated 25/11/2009, copy of which has also been placed in the paper book at pages 110 to 111. Therefore, it is not a case where any fresh facts are being pleaded. Considering the entirety of the circumstances and in the background that the facts were already before the Assessing Officer, which have remained un-rebutted and also the precedent on similar issue in the case of assessee’s husband, Shri. Binal S. Koradia, we hereby uphold the ultimate decision of CIT(A) in deleting the addition under the head “income from house property”. The order of CIT(A) is hereby affirmed.- Decided in favour of assessee.
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2015 (9) TMI 1002
Addition on account of job charges income - fall in N.P. rate for job charges income - CIT(A) allowed part relief - Held that:- The Assessing Officer has applied the average net profit rate of 76.23% being average of last two years. In this regard, it was the claim of the assessee before learned CIT(A) that the assessee has not maintained the books of account of job work separately and selling of parts separately. Regarding the reason for fall in net profit rate, it was explained before the Assessing Officer that the assessee has not segregated the travelling and other expenses incurred during providing maintenance services of diesel engine and parts selling business. It is also very important to consider the nature of business of the assessee which is selling and service of diesel engine. In servicing of diesel engine, in the initial years, income may be high because the break-down are less but as the engine grows old, break-down are more resulting into fall in profit of the service provider. Apart from pointing out fall in net profit rate, the Assessing Officer has not pointed out any specific defect in the books of the assessee. It is not the case of the Assessing Officer that the expenses are not supported by bill and vouchers. Considering these facts, we are of the considered opinion that no interference is called for in the order of learned CIT(A) on this issue - Decided against revenue. Addition made on account of disallowance of Commission - CIT(A) allowed part relief - Held that:- A clear finding has been given by CIT(A) that the genuineness of the transaction is justified by the statement of the authorized persons who appeared on behalf of the commission agent. He has also noted that a statement on oath u/s 131 of the Act has been recorded by the Assessing Officer of the Accountant of the commission agent and he has confirmed the services rendered. The present director of the commission agent also appeared before the Assessing Officer but he could not throw any light on this aspect because he was not the director of the commission agent during the period when the transaction took place and the persons who were directors during the relevant period were not available, when te A.O. asked to appear. It is also noted by the Assessing Officer that the payment has been made under an agreement by way of account payee cheque after deducting TDS and the director of the commission agent company as well as accountant of that company have appeared before the Assessing Officer and the transaction was confirmed and no adverse material or adverse statement of these persons is the basis of the action of the A.O. Considering all these facts, we do not find any reason to interfere in the order of CIT(A) on this issue also. - Decided against revenue. Disallowances made under different heads of expenditure debited - CIT(A) allowed part relief - Held that:- Disallowance under the heading ‘travelling expenses’ was deleted by CIT(A) on the basis that nowhere in the order of the Assessing Officer, he has said that the expenses have either not been incurred for business purposes or are personal in nature or capital in nature and therefore, the same are allowable u/s 37 of the Act. We do not find any infirmity in the order of CIT(A) on this issue because there is no specific objection of the A.O. as has been noted by CIT (A) and this finding of CIT (A) could not be controverted by learned DR of the revenue. - Decided against revenue. Disallowance out of conveyance expenses was also deleted by CIT(A) by making the same observation. Similarly the disallowance under the head ‘repairs and maintenance’ was also deleted by CIT(A) by making the same observation. For the same reasons, we do not find any infirmity in the order of CIT(A) on these issues also. Hence, we decline to interfere in the order of CIT (A) on these issues also.- Decided against revenue. Disallowance under the heading repairs and maintenance – others expenses was deleted by CIT(A) by making same observation on page 10 of his order. So is the case regarding disallowance under the head office maintenance expenses. Similarly, the disallowance under the head sales promotion expenses was also deleted by CIT(A) by making same observation. For the same reasons, we do not find any infirmity in the order of CIT(A) on these issues also. Hence, we decline to interfere in the order of CIT (A) on these issues also.- Decided against revenue. Disallowance out of interest expenses made by the Assessing Officer by invoking the provision of ₹ 40A(2)(b) was deleted by CIT(A) on the basis that the interest rate paid by the assessee was 21% for 4 months and 15% for 8 months and it is noted by the Assessing Officer also that even the rate of interest allowable on partner’s capital u/s 40b was 18% up to 01/06/2002, which clearly gives an indication that the rates paid by the assessee did not give any excessive benefit to the person covered u/s 40a(2)(b) of the Act. On this issue also, we do not find any infirmity in the order of CIT(A).- Decided against revenue.
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2015 (9) TMI 1001
Addition on difference in the valuation of banked energy - change in method of valuation - CIT(A) deleted the addition - Held that:- Keeping in view the ratio of the said decision of Hon’ble Supreme Court in the case of CIT vs. Bilhari Investment (P) Limited (2008 (2) TMI 23 - SUPREME COURT), which is squarely applicable to the facts involved in the assessee’s case, the Ld. CIT(A) accepted the method followed by the assessee for valuation of banked power units and deleted the addition made by the A.O. by changing the method of valuation consistently followed by the assessee in the earlier years. In our opinion, the relief allowed by the Ld. CIT(A) to the assessee on this issue is well founded and since the learned D.R. has also not been able to dispute or controvert this position, we find no justifiable reason to interfere with the impugned order of the Ld. CIT(A) giving relief to the assessee on this issue. - Decided against revenue.
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2015 (9) TMI 1000
TDS liability - u/s 192 or 194J - whether the payment made to the Creative Consultants was in the nature of professional fee paid? - as per the Assessing Officer the terms of the employment of the consultant showed that it was a case of employer-employee relationship and, therefore, the payments made by the assessee were liable to be subjected to tax deduction at source in terms of section 192 - Held that:- The restrictive covenants which are sought to be interpreted by the Assessing Officer to mean that it establishes an employer-employee relationship between assessee and the consultants have to be understood in the context of the business realities in which the assessee operates. Such restrictions cannot imbibe an employer-employee relationship to the contract with consultants. It is also quite clear that that the benefits of an employer-employee relationship which are normally available, do not apply to the impugned consultants, for instance, provident fund, leave encashment, gratuity benefits, etc. In a similar situation, our Coordinate Bench in the case of DCIT vs. Madison Communication Pvt. Ltd (2015 (9) TMI 945 - ITAT MUMBAI) has also upheld the stand of the assessee that such payments are subject to deduction of tax at source under section 194J of the Act and not under section 192 of the Act. In conclusion, we therefore, uphold the plea of the assessee and set aside the order of CIT(A) and direct the Assessing Officer to treat the payments made to the Creative Consultants as liable for deduction of tax at source under section 194J of the Act and not under section 192 of the Act. As a consequence, the demand raised on account of shortfall of deduction of tax at source under section 201(1) of the Act and interest under section 201(1A) of the Act qua the aforesaid issue is hereby set aside. - Decided in favour of assessee.
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2015 (9) TMI 999
Disallowance of deduction of compensation paid to the tenant against capital gain within the ambit of section 48 - Held that:- There was clear cut clause in the agreement that on 30th November, 2000, the tenant will hand over the business asset to the assessee. It has not been shown before us that the assessee had entered into a further such agreement or such an agreement subsisted at the time of selling of the property. As noted by the CIT(A) before the date of the agreement of sale with the third party, the assessee already entered into a cancellation of tenancy agreement and paid the amount of compensation. This amount of compensation is definitely far high and excessive without bringing any material on record to show that how the tenant has been put to adverse situation or a huge loss have suffered to the tenant or tenant could have dictated the term for seeking such a huge compensation for vacating the premise. This is more so here in this case when the main Director of both the companies is common. Under facts and circumstances as noted by the AO & CIT(A), we find that such a compensation amount paid by the assessee cannot be claimed as deduction while computing the long-term-capital-gain, therefore, finding given by the CIT(A) is confirmed and accordingly ground raised by the assessee are dismissed. - Decided against assessee. Disallowance of interest - Held that:- The assessee’s interest income has already been held to be taxable under the head “income from other sources” and whatever amount which are attributable or is having direct nexus for earning of interest income has been allowed by the Assessing Officer. Over and above, we are of the opinion that so far as office expenses, telephone expenses and other expenses which are necessary for maintaining of corporate office, the same can be held to be allowable. Looking to the fact that overall interest income is less as compared to the expenditures claimed, therefore, in the interest of justice, we feel that out of the balance administrative expenses (after the disallowance by the Assessing Officer as well as CIT(A) at ₹ 7,48,108/-), we further allow the expenses of ₹ 2 lakhs, which can be held to be sufficient for the earning of the interest income. Accordingly, the balance amount of expenses of ₹ 5,46,000/- is confirmed - Decided partly in favour of assessee.
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2015 (9) TMI 998
Disallowance of claim of the assessee for shortage - claim of double deduction at the time of purchase and the shortage at the time of sale - Held that:- We are unable to accept the contention of the learned D.R. The shortage at the time of purchase and the shortage at the time of sale are two different issues and it cannot be said by any stretch of imagination that once the assessee has claimed shortage at the time of purchase, he cannot claim shortage at the time of sales. In the present case, the claim of the assessee for shortage at the time of sale was duly supported by the certificate issued by the concerned customer confirming the shortage and the Ld. CIT(A) in our opinion was not justified in confirming the disallowance made by the A.O. on account of such shortage. We, therefore, set aside his impugned order on this issue and direct the A.O. to delete the addition made on account of shortage. - Decided in favour of assessee. Disallowance under section 40A(3) - cash payment - Held that:- The work of unloading maize from lorries and loading the same into railway wagons some times was done in the late evenings and since the payments on account of Hamali Charges were required to be made by the concerned contractor to Hammals immediately after the completion of the work, he demanded payments in cash which the assessee was compelled to make. - In our opinion, this stand taken by the assessee before the Ld. CIT(A), which was duly supported by cogent evidence in the form of confirmation certificate issued by the concerned contractor, is sufficient to show that the impugned payments in cash were made by the assessee in the exceptional circumstances as specified in Rule 6DD of the I.T. Rules, 1962 and therefore, no disallowance under section 40A(3) is called for such cash payments.- Decided in favour of assessee.
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2015 (9) TMI 997
Penalty u/s 271(1)(c) - additions made on account of unverifiable purchases - CIT(A) deleted the penalty - Held that:- The addition made by the Assessing Officer was specific on account of unverifiable purchases on which G.P. @ 25% was applied and added in the income. However, the same was reduced by the ld CIT(A) and applied different G.P. rate. However, the additions were specific. The assessee has not been able to produce these parties for verification and also summons were returned back to the officer unserved. This Bench recently decided this issue in detail in the case of Shri Anuj Kumar Varshney Vs. I.T.O. and other cases in [2015 (4) TMI 533 - ITAT JAIPUR ] and gave detail findings on unverifiable purchases in number of cases. The department has been able to prove that in gems and jewellery business, some of the parties were giving accommodation entry and some of them accepting the accommodation bill to reduce the profit. The parties names figured in this case also were similar to those cases, therefore, we hold that the addition made by the Assessing Officer was specific and assessee had concealed the income and furnished inaccurate particulars of income. Further the assessee's explanation is not bonafide. The case laws referred by the assessee are not squarely applicable. In this case, the addition was specific with reference to unverifiable purchases. Therefore, we reverse the order of the ld CIT(A). - Decided against assessee.
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2015 (9) TMI 996
Commission/ brokerage @ 1.5% on the total bank entries determined by CIT(A) - Held that:- As the observations made by the AO in the remand report were replied by assessee. However, they have not been considered by ld. CIT(A). We have examined the case of M/s Joy Commercial Pvt. Ltd. (with which the assessee claimed to have business transactions), wherein AO in the remand report, inter alia, observed that, “a perusal of the details filed revealed that the bank statement for only a part of the year was filed and not the statement for the full year as specifically asked for in the summons issued”. In the reply filed by assessee, the assessee has categorically stated that, “AO never requisite the parties to whom he summoned to submit the copies of the bank statement for full year. He had merely asked the parties to show him the bank statement for financial year 2005-06, which had been duly perused by him during the course of attendance of the summoned parties wherein he asked from the party the relevant part of the copy of the bank statement wherein transaction had taken place with the assessee. He also perused the books of account and bills and vouchers which had been produced before him, but the AO had observed contrary to the same. Similar is the position in regard to other parties which we do not propose to go into detail - matter be restored to the file of AO for de novo consideration - Decided in favour of assessee for statistical purposes
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2015 (9) TMI 995
Rectification of mistake - interest u/s. 220(2) and 234D of the Act had not been charged - CIT (Appeals) deleted the charge of interest u/s.220(2) - Held that:- CIT (Appeals) has cancelled the charging of interest by placing reliance on the decisions which are not germane to the issue under consideration. We are also of the view that the decision of the learned CIT (Appeals) appears to have been based on facts which have not been placed in the proper perspective before him. It is also seen that the learned CIT (Appeals) has not dealt with and adjudicated on the specific grounds related to the issue raised before him. In view of all of the above, in our considered view, we feel that it would be in the fitness of things to remand the matter back to the file of the CIT (Appeals) to examine the issue afresh after affording the assessee adequate opportunity of being heard and make submissions and file details required in this regard. It is ordered accordingly. - Decided in favour of revenue for statistical purposes
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2015 (9) TMI 994
Entitlement to Section 80IB(8A) deduction - whether the assessee’s sample storage incomes are to be held as derived from the eligible business for granting the impugned deduction or not? - Held that:- There is no dispute about the fact that the assessee is in the research and development field duly approved by the competent authority and already held entitled for Section 80 IB (8A) deduction. It enters into Master Service Agreement with its clients for conducting the above stated clinical studies. The same is a comprehensive document for conducting trial and analysis of clinical samples. This agreement contains a specific clause for samples’ retention in case of pendency of license approval application. We find that such procedures sometimes take years to complete. One of such an instance placed on record reveals that the assessee completed research study in March 2011, its client applied for drug license in USA and the said authority inspected its premises storing samples in question in May 2014. This letter issued by Department of Health and Human Services, Public Health Service, Food & Drug Administration, Silver Suffering, MD 20993 to this effect is dated 01.07.2015. The Revenue fails to rebut this factual position. The case file further reveals that the assessee’s clients have to exercise an option of discarding, returning and retention of samples in lieu of paying the impugned storage studies. We put up a specific query to the Revenue as to whether the assessee stores such sample only after concluding clinical studies for its clients or it collects the same from outside as well. The replies received in favour of the first option only. All these discussions lead us to infer that the assessee conducts its clinical study and stores the relevant samples at its client’s behest till the license approval is obtained. The same can’t be held to be an activity not forming intrinsic part of its clinical studies conducted. Nor its sample storage income is of such a nature which can be held as not ‘derived’ from the eligible business. The Revenue’s argument is accordingly rejected. Thus the assessee’s sample storage income is very much derived from its research and development activity only. - Decided against Revenue.
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Customs
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2015 (9) TMI 1019
Valuation - Revenue contends that value mentioned in MoA dated 23.08.2000 should have been the valuation for the purpose of levying the import duty - Held that:- price was genuinely revised and a lesser price was agreed to be received by the owner of the vessel and therefore, there was nothing wrong on the part of the appellant to declare that price in the Bill of Entry. We, thus, are of the opinion that the duty should have been assessed on the basis of value declared by the appellant and the assessment made on 18.03.2002 by the assessing officer did not call for any interference. - Decided in favour of assessee.
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2015 (9) TMI 1018
Challenge to Notification bearing No.110(RE-2013)/2009-2014 dated 06.02.2015 - prohibition on the export of Shark fins of all species of Shark - Held that:- Convention by itself does not prohibit the adoption of more stricter standards by any Member country, depending upon the local conditions and the Municipal laws. Apart from the fact that the Convention itself gives a leverage to the Member countries, it is settled law in this country that an International Convention ratified by India is enforceable, only to the extent that it is not in conflict with the Municipal law of the country. In other words, the obligations of the State under an International Convention can be enforced subject only to the provisions of the Municipal law, even if the Municipal law contains lesser standards than those prescribed in the International Convention. If this is so, even with regard to a Municipal law which contains a lesser standard, it is needless to point out that a Municipal law which prescribes a higher standard, will prevail over the prescription contained in the Convention Domestic market and the foreign market does not deserve equal treatment. The parameters for including a species of animal or plant in the Wild Life (Protection) Act, are different from including the same in the Foreign Trade Policy. The scope, object and purpose of the Wild Life (Protection) Act and the Foreign Trade (Development and Regulation) Act, 1992 are completely different. As a matter of fact, if a species of animal or plant is prohibited of being hunted under the Wild Life (Protection) Act, it cannot also be exported and hence, any Foreign Trade Policy issued under the Foreign Trade (Development and Regulation) Act, 1992 cannot go contrary to the Wild Life (Protection) Act, 1972. But, the corollary is not true. If the hunting of something is not prohibited under the Wild Life (Protection) Act, it does not mean that even the export of the same cannot be prohibited. There is no conflict between the legal framework under the Wild Life (Protection) Act, 1972 and the Foreign Trade (Development and Regulation) Act, 1992. In fact, the legal framework has been developed in such a manner that the Ministry of Environment and Forests works in close coordination with the Ministry of Commerce. What is prohibited under the Wild Life (Protection) Act, 1972, cannot even be hunted and hence, there is no question of any export of such an item. But, what is not prohibited under the Wild Life (Protection) Act, 1972, can be exported, subject only to a total prohibition or a restriction under the Foreign Trade Policy issued in terms of the Foreign Trade (Development and Regulation) Act, 1992. Minutes of a Meeting of this nature need not necessarily be a transcript of whatever happens in the meeting hall. In any case, in the world of internet in which we live today, it is not difficult for anyone to find out whether the facts and figures relied upon by someone to propagate his view point is correct or not. The Food and Agriculture Organisation (FAO) of the United Nations has pointed out in their official website that an estimated 73 million Sharks are killed each year, at the rate of 10,000 sharks per hour. According to their statistics, 90% of the large Sharks have been wiped out regionally. - mere fact that the quantity of depletion is not mentioned is no ground to hold that the decision was arbitrary. The decision to prohibit the export of Shark fins, in the background of facts discussed at the meeting, should actually be traced to the Precautionary Principle. It is common knowledge that at times and in cycles, even normal fishing activities are prohibited, so as to enable the aqua life to get nurtured. Therefore, the re-introduction of the total prohibition, after a gap of 13 years cannot be taken exception to. In any case, the notification is amenable to amendment at any point of time. Very negligible percentage of population captures Shark for domestic consumption. The fact that there is no prohibition for the capture of Sharks for domestic consumption, is no ground to hold the ban on export of Shark fins as arbitrary. If there is no prohibition for export, the total quantity of Shark captured, may increase manifold. Therefore, the distinction that the respondents have made between domestic consumption and export, is actually a reasonable classification, which does not offend Article 14. - no merits in the writ petition - Decided against appellants.
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2015 (9) TMI 1017
Levy of Anti Dumping Duty - petitioner seeks a declaration that Note 3 of the Notification No.125/2010¬Cus. dated 16.12.2010 is ultra vires to the Customs Act,1962 and the Customs Tariff Act - Held that:- The petitioner is primarily raising the issue of construction and interpretation of the Notes and the Notification as a whole.The petitioner has placed their version and interpretation on the Notification and the Notes below the same. The impugned Note 3 is also sought to be interpreted by them and in the backdrop of a larger picture.The petitioner urges that anti-dumping duty cannot be imposed and recovered unless all pre¬conditions are satisfied. Secondly, the equipment as a whole comprises of several parts and components and has to be viewed accordingly. If the components and parts themselves are imported on standalone basis, then, the same are out of the purview of this duty, is equally its interpretation. This is a matter which involves the acceptance or otherwise version or interpretation of the petitioner and in relation to the duty, its levy, imposition and the cases in which same cannot be levied, imposed and recovered. - it is not necessary to express any opinion on the rival contentions. More so, when Mr. Jetly, on instructions, assures that the Authority adjudicating the show cause notice will pass an order by application of independent mind, uninfluenced by the version placed in the affidavit filed by Dr. Sumit Garg, Assistant Director of B¬Cell, Directorate of Revenue Intelligence, Mumbai Zonal Unit, Mumbai. - petition disposed of.
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2015 (9) TMI 1016
Appeal No. C/176 & 177/2007 Mis-declaration of port of discharge – Smuggling of red sander – Customs alleged that appellants had close intimacy to mis-declaration of port of discharge – Goods although was destined to Malaysia however shipping bill was made to show port of discharge as Colombo – As a result of mis-declaration appellants were penalized under section 117 of Customs Act, 1962 – Held that:- admitted case of mis-declaration of port of discharge as is revealed from documents filed to form part of EGM which connected both appellants – These two appellants did not detach themselves from smuggling of red sander – It cannot be said that they have no knowledge about port of discharge –When goods exported were prohibited goods and not permitted to be exported from India and appellants assigned themselves to such export, they are not immune from penal consequence of law – These two appellants having been intimately connected with red sander export had conscious knowledge of port of discharge – Therefore imposition of penalty on both is justified – Decided against Appellants. Appeal No. C/191/2007 Mis-declaration of port of discharge – Smuggling of red sander – Held that:- Appellant was actively involved in mis-declaration of port of discharge – In course of smuggling, whisper about modus operandi comes up – As member of racket this appellant had not isolated him – He was contributory to smuggling concealing material fact till discovery by investigation – Plea that appellant had given his evidence under section 108 under duress failed to lend any credence for reason that after seven months of recording of confessional statement, attempt was made to create fiction of duress – No doubt about knowledge of appellant as to actual port of discharge – Accordingly, adjudication against this appellant does not call for any interference – Imposition of penalty hereby confirmed – Appeal dismissed – Decided against Appellant. Appeal No. C/227 & 228/2007 Mis-declaration of port of discharge – Smuggling of red sander – Held that:- Law is very clear as to role of vessel operator when combined reading of section 41 and 42 of Customs Act is made along with contents of EGM in Form 66 – Clear from Form 66 that contents and nature of goods, weight thereof, description of shipping bills as well as details of consignor and consignee appearing in Form No. 66 was well within knowledge of commander of ship who certified description in that form – Shipping bill described port of discharge as Colombo but goods were loaded into vessel bound to Malaysia, which does not rule out breach of trust made by appellants – Appellant were concerned with goods described in shipping bill as bailee, therefore, it cannot be said that vessel operators were innocent and having no knowledge about goods which were shipped in their vessels for delivery in port of discharge of Kelang in Malaysia – When goods were prohibited goods it was primary duty of vessel operator not to allow same to be loaded into vessel – Thus, vessel operator having conscious knowledge of mis-declaration and exporting prohibited goods – Therefore, it is not at all proper to intervene to adjudication for which both appeals are dismissed – Decided against Appellants
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2015 (9) TMI 1015
Benefit of Exemption – S.230 of Notification No.21/2002-Cus. – benefit of notification was rejected both by adjudicating authority as well as by LAA on ground that appellant cannot be considered as person who has been awarded contract by NHAI and they are only contractor or sub-contractor appointed by STPL(SPV/Concessionaire) - Asphalt Mixing Plant – Held that:- At per letter, it is clearly stated that pursuant to Assignment Agreement, STPL has awarded contract to appellant for roadwork – STPL has been created as Special Purpose Vehicle (SPV) as per Concession Agreement between NHAI and Govt of Malaysia by virtue of Assignment Agreement and therefore Concession Agreement of NHAI is deemed to be agreement of SPV – As SPV contract was awarded to importer by entering into EPC agreement which is clearly explained in NHAIs letter – Therefore machines imported by appellants are eligible for exemption under Sl.No.230 of Notification No.21/2003 – Impugned order set aside – Decided in favour of Assesse.
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2015 (9) TMI 1014
Refund of SAD / Additional Duty - Validity of Sale transaction – Entitlement of Exemption benefit – Adjudicating authority sanctioned refund claim of 4% additional duty – Commissioner (Appeals) dismissed appeal against Adjudication order on ground that refund sanctioned was not in violation of condition of Notification No.102/2007-Cus as Respondents had made sale transactions only on paper – Held that:- from agreement to supply it was clear that Respondents passed title of goods and certificates to project authority by raising invoices – Sales tax authorities accepted sale of goods on basis of invoices and confirmed payment of CST – Sale was completed as soon as titles were transferred to purchasers – Thus, assessing officer cannot question basis of sales transactions – Exemption Notification stipulates condition for availing exemption and determined prescribed method which were fulfilled by Respondent – Supreme Court in case of M/s Vadilal Chemicals Ltd Vs State of Andhra Pradesh [2005 (8) TMI 121 - SUPREME COURT OF INDIA] held that eligibility to exemption determined by prescribed method should not be denied based on other criteria – No dispute that Respondents paid additional duty of customs and also paid VAT therefore, benefit of exemption notification cannot be denied – Decided against revenue.
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Service Tax
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2015 (9) TMI 1039
Waiver of pre-deposit - construction of residential complex - Valuation - Inclusion in the assessable value - the profit/loss on account of purchase and sale of the land - Held that:- The AA has in the order dated 29th November 2013 come to the conclusion, on an analysis of the two MOUs entered into between the Appellant and SI, that the Appellant was working as an agent for SICCL and further that it had rendered two kinds of taxable services: one as a real estate agent/real estate consultant under Section 65 (89) of the FA and the other relating to levelling of soil including filling of gorges/nallah, removing of shrubs, grass and rubbish etc. classifiable under the head 'site formation and clearance excavation and earth moving and demolition services', as defined under Section 65 (97a) of the FA. - It further prima facie appears that the AA overlooked the fact that even as per the SCN no land in Allahabad was purchased although the Appellant received ₹ 4 crores for that purpose. The Appellant's explanation that it returned the said sum to SICCL in the form of shares of 2 of its group companies does not appear to have been considered. A further question that would arise is whether the entire profit generated from the purchase of land in Jodhpur can be taken to be value of the taxable services, if any, rendered by the Appellant. Those questions cannot obviously be examined at this stage but will have to await the final determination in the appeal before the CESTAT. - Appellant has made out a prima facie case and that the balance of convenience at this stage in making a conditional order of pre-deposit is in favour of the Appellant. - Appellant shall make a pre-deposit of 5% of the demand - Partial Stay granted.
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2015 (9) TMI 1038
Wrongful availment of cenvat credit - outward transportation of the goods - no error has been committed by the Commissioner(Appeals) as per Section 85 of the Finance Act, 1994 - Held that:- Reasons cannot be presumed by the Commissioner (Appeals), much less reasonable reasons for condonation of delay. There ought to be an application for condonation of delay and thereafter the reasons can be appreciated by the concerned authority - the office of the Commissioner (Appeals) should have pointed an office objection or defect in filing appeal, that the appeal is filed without any delay of condonation application, and, as there was no office objection found out, the petitioner had not filed any delay of condonation application. “This type of convenient” argument is not accepted by this Court, because the petitioner is a company limited and is not an illiterate ignorant person. Always petitioner is arguing the case with the help of the lawyers. Even otherwise also ignorentia juris non excusate. Thus, ignorance of law is not excuse. The petitioner cannot say that there ought to have been office defect pointed out by the office of Commissioner (Appeals), otherwise the petitioner will never file delay of condonation application. Every body should know the law and should have filed the delay of condonation application, if there is only delay in preferring appeal. - no reason to interfere with the order passed by the Commissioner (Appeals) - Decided against assessee.
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2015 (9) TMI 1037
Availment of CENVAT Credit - disallowance of refund claim - export of BAS service - nexus of input service with output service - Rent-a-Cab Services, Courier Services, Management, Maintenance & Repair Service, Manpower Recruitment Service, Security Services, Cleaning Services, BSS Services (Summit), Legal Consultancy Services, Chartered Accountancy Services, Telecommunication Services and Renting of immovable property - Held that:- The credit of service tax on Courier Service has been denied for the reason that these were used for dispatch within India where as appellant is engaged in export of services. That therefore these services has no nexus with the output services. - The important documents have to reach the destination in time for which it is not possible to hand deliver them, and that these services are extremely necessary for the business of the appellant. They also relied upon the judgments rendered in CCE, Vapi Vs. Apar Industries - [2010 (8) TMI 407 - CESTAT, AHMEDABAD] which was affirmed in Commissioner Vs. Apar Industries - [2013 (2) TMI 276 - GUJARAT HIGH COURT]. Merely because the courier service was utilized within the country it cannot be assumed that the services does not have nexus with output services. - Further there is no dispute that these input services were received by the appellant. I hold that the appellants are eligible for refund of ₹ 6,670/- towards service tax paid on courier services. According to appellants Management, Maintenance & Repair Service was received for maintaining its' business premises from where the activities of output service are carried out. Following the ratio laid in the judgment [2014 (1) TMI 664 - CESTAT NEW DELHI] I find that appellants are entitled to credit of ₹ 37,048/- for Management, Maintenance & Repair Service. Appellant has availed the services of man-power recruitment and supply agency's service for hiring nurses for its' employees and also for hiring administrative and support staff which is required for carrying out its' day to day business activities. Therefore I find that the denial of refund on Manpower Recruitment Service, is unjustified. The same has to be allowed. The security service was used to provide safety to employees. The Commissioner (Appeals) has rejected the claim holding that the invoices show security guard for pickup and drop of employees and has no nexus with output service. Appellants are entitled to credit/refund on these services. The appellants have claimed credit on service tax paid for stay in hotel as renting of hotel/renting of immovable property. That rooms were availed by employees to stay for business activities. The appellants have claimed credit of tax paid by persons for stay in hotels on the guise of the heading 'Renting of Immovable Property'. Therefore the denial of credit/refund on these services, in my opinion is correct and therefore sustained. Appellant summits were conducted in which helped them improve their cliental. That such Summits helps the Company to meet potential clients and promote its' business and gain knowledge. I cannot differ with the submissions made by the learned advocate for the appellants as such summits do help the Company to promote and develop its' business. The credit and refund denied on these services in my view, is unjustified. The same is allowed. The rejection of claim on the ground that filing of appeal or reply is not mandatory requirement is baseless. Legal consultancy services are indispensable for any business to satisfy proper compliance of legal its' requirements. Therefore I hold appellants are eligible for refund of credit on these services. Allegation in SCN was with regard denial of credit was for only three invoices. It has been settled in a catena of decisions that non-mentioning of registration number of the service provider is only a procedural lapse and Credit cannot be denied on account of procedural lapse when substantive entitlement itself is not disputed. Further, the proviso to sub clause (2) of Rule 9 of Cenvat Credit Rules, provide that if documents do not contain full particulars the DC/AC has powers to condone the defects after satisfying whether properly accounted. In view thereof, the rejection of claim for the defects alleged in invoices is incorrect. The claim of credit on disputed invoices for those services which are eligible as input services are allowed. - Decided partly in favour of assessee.
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2015 (9) TMI 1036
Classification - sale of savings bonds issued by RBI - assessee bank rendered custodial service by maintaining the Bond Ledger Account and services incidental thereto - Banking and other financial services - Business Auxiliary service - "cum-tax" value has been adopted for determining the value of the taxable service - Held that:- It is clear that custodial services in relation to securities is primarily the safekeeping of the securities of a client; the secondary function is that of providing services incidental thereto - a few of such services are included in the definition. Sans client- custodian relationship and sans entrusting of securities for safekeeping, the incidental services are not relevant. Once a client has entrusted the safekeeping of securities to a custodian, the custodian may maintain accounts relating to the security and collect the benefits accruing to the client as incidental activities. Without such entrustment the relationship is not one of custodianship. There is no client-beneficiary relationship with the bond-subscriber. Without rendering of custodian services, it would not be correct to hold that the appellant is liable to service tax for the consideration received from the Reserve Bank of India as handling commission, turnover commission and service charge in the category of "banking or other financial service". - The claim of the assessee to be taxed as provider of "business auxiliary service is upheld. There being no differential tax to be collected, the departmental appeal on valuation and penalty is dismissed - Decided against Revenue.
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2015 (9) TMI 1035
Denial of CENVAT Credit - whether appellant is entitled to avail Cenvat Credit on the services which has been availed by their Head Office and the Head Office is not registered as input service distributor during the impugned period or not - Held that:- appellant cannot be denied Cenvat Credit availed by them in the absence of registration as input service distributor by the Head Office - relying on the case laws cited by the Ld. Counsel in the case of Demosha Chemicals Pvt. Ltd. (2014 (2) TMI 209 - CESTAT AHMEDABAD) and Doshion Ltd. (2012 (10) TMI 952 - CESTAT AHMEDABAD) we hold that appellant has correctly taken Cenvat Credit on the services namely Selling Commission, Royalty, Consultancy & Professional, Banking Charges, Audit Fee, AMC Charges, etc. - Therefore, impugned order is set aside - Decided in favour of assessee.
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2015 (9) TMI 1034
CENVAT Credit - Common input service - reversal of credit under Rule 6(3) - making payments as per prescribed percentages - Held that:- Appellant vide letter dated 21.04.2009 opted for payments at prescribed percentages on the value of exempted services under Rule 6 (3) of the CENVAT credit Rules, 2004 and also paid amounts for the earlier periods 2008-09 and 2009-10. First appellate authority has rejected appellant's appeal only on the ground that an option given cannot be effective for the earlier period. It is observed from CBEC Circular No. 868/6/2008-CX Dated 09.05.2008 that there are only following two procedures to be followed where CENVAT credit - There is no fact on record that appellant at any stage opted for opinion-(ii) . On a particular date he paid amounts @ prescribed as per option (i) above even for the past period. In the absence of any contrary fact it cannot be said that appellant changed the option in a financial year. Appellant has all through opted for payment of amounts as per prescribed percentage of the value of exempted services, may be at a later date. There is no bar for making payments as per prescribed percentages for the prior period also as it may not be feasible to segregate quantum of input service credit pertaining to dutiable and exempted services - Decided in favour of assessee.
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2015 (9) TMI 1033
Demand of service tax - Club service - Held that:- The appellant collected the membership fees from the member to promote club service which would clearly cover by the decision of Hon’ble Gujarat High Court [2013 (7) TMI 510 - GUJARAT HIGH COURT]. In view of that, the impugned order cannot be sustained and accordingly, it is set aside - Decided in favour of assessee.
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2015 (9) TMI 1032
Levy of penalty - service tax with interest was paid before SCN - Commodity Exchange Services - Interpretation of taxable service - Levy of tax on admission fees and annual subscription charges - Held that:- Definition of Taxable Service does not specifically mention Admission Fees or Annual Subscription Fees and appellant harbored a view that service tax on these amounts is not payable under Section 65 (105) (zzzzg). Appellant, therefore,-had reasonable case for not paying Service Tax. However the entire amount along with interest was paid by the appellant before the issue of show case notice. Penalties imposed against the appellant are, therefore, required to be waived as per the provisions of Section 80 of the Finance Act, 1994. - Decided in favour of assessee.
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2015 (9) TMI 1031
Denial of refund claim - payment of service tax which was not leviable - Bar of limitation - Unjust enrichment - held that:- Sanctioning of the amount of ₹ 76,400/- indicate that the issue of unjust enrichment and non chargeability of Service Tax on the activities of the appellants are not questioned by the Revenue. The only aspect which is required to be decided is whether limitations for filing refund claim, specified in Section 11-B of the Central Excise Act, 1944 will be applicable to the amounts paid under mistaken belief that Service Tax on the activities carried out by appellant was leviable. It is now well settled, as per the relied upon case laws, that duty paid but not statutorily leviable has to be considered as a deposit with the Govt. and time limit specified in Section 11-B of the Central Excise Act, 1944 will not be applicable. - Decision in the case of Natraj & Venkat Associates vs. Asst. Commr. of S.T., Chennai-II [2009 (10) TMI 36 - MADRAS HIGH COURT] - Decided in favour of assessee.
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Central Excise
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2015 (9) TMI 1030
Clandestine removal of goods - Non accounting of goods in RG-1 register - Held that:- Factual aspects were considered by the CESTAT in detail and more, particularly, the manner in which the matter was dealt with by, none else, but the officers of the Revenue themselves, a finding of facts was arrived at to the effect that the said yarn was treated as waste. - Finding does not suffer from any infirmity. We, thus, confirm the order passed by the CESTAT - Decided against Revenue.
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2015 (9) TMI 1029
Classification of goods - whether the product manufactured out of stone aggregates, cement, water, sand is 'dry mixture' or 'ready mix concrete' and the classification thereof is under Heading 3823 (now 3824) - Held that:- CESTAT in the case of 'Associated Cement Co. Ltd. v. Commissioner of Central Excise, Mumbai' by its decision dated 17.11.2000 reported in [2000 (11) TMI 970 - CEGAT, MUMBAI]. We, further, find that the aforesaid view of the CESTAT was affirmed by this Court holding that the classification of ready mix concrete was under Chapter Heading 68 for the period prior to 01.03.1997. After the affirmation of the view of the CESTAT by this Court as aforesaid, the Department not only accepted the said view but Central Board of Excise and Customs, New Delhi, issued Circular No. 601/38/2001-CX dated 20.11.2001 affirming the classification of this product - what was the necessity in preferring the present appeal which was filed in the year 2006, i.e., much after the clarification issued by the even the Central Board of Excise and Customs, New Delhi. It was, thus, a total mindless exercise on the part of the Revenue in filing such an appeal which is misuse and abuse of the process of law. - Decided against Revenue.
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2015 (9) TMI 1028
Valuation - Inclusion of royalty amount - Rule 5 of the Central Excise (Valuation) Rules, 1975 - Held that:- A bare reading of Rule 5 would demonstrate that the additional consideration which flows directly or indirectly from buyer to the assessee can be added to the price which is charged by the seller from the buyer. On the contrary, in the present case, the royalty, which is treated as additional consideration is paid by the seller to the buyer. - The very basis of the show cause notice, in fact, was untenable and when the assessee is paying the royalty to LNL (buyer) and that too for using the brand name `NOVINO' which belongs to the buyer, the question of treating the same as "additional consideration" within the meaning of Rule 5 and adding to the price charged from the LNL for sale of the product could not arise. - Decided in favour of assessee.
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2015 (9) TMI 1027
Condonation of delay - delay of about 175 days in filing the appeal - refund of the import duty wrongly paid - Held that:- Confusion arose due to the wrong-pasting of the speed post slips by the Office of the respondent to the Bollaram address instead of Bachupally address. The application was dismissed solely on the ground that though the order was received on 28.10.2010, no cogent explanation was given from 28.10.2010 to 04.02.2011 and the affidavit of the Officer, who received the said order, was not filed. The correspondence filed before us and admitted by the respondent in their reply thereto clearly shows that the appellant was diligent in pursuing its case. - order passed by the Tribunal is perverse and accordingly we set aside the same and condone the delay of about 175 days in filing the appeal - Delay condoned conditionally.
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2015 (9) TMI 1026
Condonation of delay - Appeal before the commissioner (appeals) was filed on 91st day of receiving the order - Held that:- Admittedly, there has been a delay in filing the appeal before the Appellate Commissioner. Such delay was beyond his power to condone. Statutorily it is recognized that the Commissioner could not have condoned delay beyond 30 days. However, the petitioner missed the deadline by one day, perhaps on a bonafide belief that such appeal could still be considered within the extendable period if it is presented not on the 90th day, but immediately preceding the 90th day. Be that as it may, the petitioner’s ground of no opportunity by the adjudicating authority also requires consideration. This Court has in the past taken a view that even though in cases where the Commissioner is powerless to condone the delay beyond the prescribed period, the High Court is not devoid of its jurisdiction under Article 226 of the Constitution of India in rare exceptional cases to examine the validity and legality of the order of the adjudicating authority. Very base order was passed without proper notice of hearing to the petitioner, such order is set aside. Proceedings are traced back to the adjudicating authority for fresh consideration and disposal in accordance with law.
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2015 (9) TMI 1025
Recovery of suo motu credit - credit of pre-deposit taken after a favorable decision without filing refund claim - demand differential duty - Re-classification of goods - Held that:- In the de novo proceedings, the adjudicating authority had limited his findings and ordered recovery by saying that appellants failed to produce any proof of filing refund claim as directed by the Commissioner (Appeals). There is a justification in Ld. consultant's submission that Tsunami attacked the East Coast in 2004 and caused calamity of huge loss of lives and damaged of house, property. That being a case, one cannot brush aside their plea that their office was totally damaged and ravaged by Tsunami and all their records damaged. I find this bonafide reason merits consideration as why they could not produce evidence before the authorities - amount paid is only a deposit during investigation, it is to state that once adjudication authority dropped the proceedings in this case the consequential benefit is automatic in so far as the deposits made by the appellant during pendency of adjudication proceedings. Therefore, the question of refund claim under Section 11B and time-bar and unjust enrichment does not arise. Both the original authority and LAA conveniently overlooked all the above vital facts and held that what is paid by them is duty not paid under protest and also held as time-barred. Amount paid by the appellant is only a deposit pending proceedings initiated by the department and once the said proceedings are dropped, the appellants are entitled for suo motu credit of such deposit. The only lapse of appellants is of not intimating the department of taking such re-credit by writing letter and it is only a procedural lapse and liable to be condoned. The reliance placed by the Revenue in the case of BDH Industries Ltd. (2008 (7) TMI 78 - CESTAT MUMBAI) is not applicable to the present case and clearly distinguishable as the issue referred to Larger Bench was on excise duty paid and taking credit suo motu whereas in the present case as already discussed above the amount paid is only deposit during investigation proceedings. - impugned order upholding the recovery of credit with interest and imposition of penalty is liable to be set aside - Decided in favour of assessee.
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2015 (9) TMI 1024
Emergence of waste, parings and scrap or by-product - whether the fatty acids, wax and gum are to be treated as waste - Exemption under Notification No. 3/06-CE dated 01/3/06 - the fatty acids, wax and gum are to be treated as waste Since on the issue involved in this case, there are two conflicting judgments of two coordinate benches, in our view, this matter would merit reference to Larger Bench, In view of this, the Registry is directed to place this matter before Hon'ble President for considering the Constitution of a Larger Bench for deciding the following point :- "Whether fatty acids, wax and gum arising in course of manufacture of refined vegetable oil are to be treated as "waste" for the purpose of exemption Notification No. 89/95-CE and would be exempt from duty under this notification and whether in this regard, the Apex Court's order [2012 (1) TMI 176 - SUPREME COURT] affirming the Tribunal's judgment in the case of CCE, Jalandhar vs. A.G. Fats Ltd. (2011 (7) TMI 968 - CESTAT, NEW DELHI) by dismissing the civil appeal filed against the Tribunal's judgment would be a binding precedent ". Matter referred to larger bench.
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2015 (9) TMI 1023
Valuation of goods – Deduction of freight from the assessable value - Held that:- freight shown in the invoices in addition to basic price of the goods. It is clear from the terms of the bid documents also that basic price and other components have to be indicated separately. Therefore, there is no dispute that basic price and the freight components are clearly indicated separately in the invoices and therefore criterion i.e. cost of transportation should be in addition to the basic price of the goods stand fulfilled. Since Revenue could not bring any material on record that the freight equated or actual, we have no option except to agree with the Ld. Counsel and also it can be seen from the amount of transportation shown in the invoices that the same is actual. - appellant are entitled for deduction of cost of transportation from the value of the goods hence the impugned order is not sustainable. – Decided in favour of assessee.
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2015 (9) TMI 1022
Denial of exemption claim - whether the bi-products Baggase and Press Mud arising during the process of manufacture of excisable goods i.e. Sugar should be considered as exempted goods for the purpose of reversing of an amount equivalent to 5% or 10% under the provisions of Rule 6(3) OF CENVAT Credit Rules, 2004 - Held that:- It is observed that in the case of Balrampur Chinni Mills Vs UoI [2013 (1) TMI 525 - ALLAHABAD HIGH COURT], Hon’ble Allahabad High Court, after considering the Apex Court decision [2010 (7) TMI 974 - SUPREME COURT] held that there was no manufacturing involved when the sugar is crushed leading to generation of Bagasse. - Similarly, in the case of Hindalco Industries Vs UoI [2014 (12) TMI 657 - BOMBAY HIGH COURT] also Bombay High Court set aside the CBEC Circular No.904/24/2009-CX, dt.28.10.2009 and Circular No.941/02/2011-CX dt.14.02.2011. - reliance placed by First Appellate Authority on CBEC Circular, dt.14.02.2011 is not sustainable and is required to be set aside - Decided in favour of assessee.
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2015 (9) TMI 1021
Reversal of cenvat credit - removal of capital goods after use - removal as waste / scrap or not - whether Appellant is entitled to refund of the duty paid at the time of clearance as wrongly reversal of credit - Held that:- First Appellate Authority has rejected the claim of the Appellant on the grounds that the capital goods were cleared as waste and scrap on which appropriate amount equal to the duty leviable on transaction value of such waste and scrap was correctly paid as per Rule 3(5A) of the CENVAT Credit Rules, 2004. No evidence has been brought on record by the Revenue to suggest that the capital goods, on which CENVAT Credit was taken in 1997, were cleared as waste and scrap. On the contrary, Appellant has furnished copies of the sale invoices under which the description of the goods is not shown as waste and scrap but as model of old machinery. In view of the factual matrix available on record, the case of the Appellant was covered under the second proviso to Rule 3(5) and not under Rule 3(5A) of CENVAT Credit Rules, 2004. Following the provisions contained in Rule 3(5), after 10 years of use of the capital goods, the amount of credit required to be reversed becomes zero. Accordingly, it is held that the Appellant was not required to reverse CENVAT Credit taken with respect to the capital goods when removed from the factory as capital goods and was not cleared as waste and scrap of capital goods - Decided in favour of assessee.
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2015 (9) TMI 1020
Wrongful availment of CENVAT Credit - availing credit while availing exemption - whether the goods namely lubricating oils, grease, articles of plastics (bobbins and plastic crates) etc. fall within the definition of capital goods or not - Held that:- As regards credit on lubricating oils and grease is concerned the appellants have contested that they are covered by the definition of capital goods, as held by the decision in the case of Vipras Castings Ltd. v. CCE - [2005 (1) TMI 470 - CESTAT, MUMBAI]. I have gone through the said judgment and I find that the same was passed in reference to the erstwhile Central Excise Rules, 1944 to allow Cenvat credit consequent to the amendment in Rule 57 to include lubricating oil/grease under the definition of Capital goods - Once, the goods in question were specifically covered under the definition of inputs it was not open to the appellants to seek credit of the same under capital goods. The obvious reason for their doing so was that the appellants were working under Notification No. 30/2004-C.E., dated 9-7-2004 and clearing their finished goods without payment of duties of excise, and therefore, they were not entitled to take credit of the duty paid on inputs, in terms of the notification ibid. I also observe that there is no claim of the appellants that they were eligible for the credit on the said goods as inputs. Hence, I hold that Cenvat credit on lubricating oil/grease was not admissible to the appellants and the same has been rightly denied by the adjudicating authority. As per definition of capital goods as provided under Rule 2(a)(A)(1) of the Credit Rules, credit is admissible on capital goods specified therein, which are used in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office. The only exclusion for eligibility of credit as provided under Rule 6(4) of the Credit Rules is that the capital goods should not have been used exclusively in the manufacture of exempted goods or in providing exempted services, other than the finals products which are exempt from the whole of duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made in a financial year. - appellants are eligible to Cenvat credit on plastic crates, bobbins under capital goods. Appellants plea that no mens rea to avail inadmissible credit was present in their case, is devoid of merits and accordingly, penalty imposed under Rule 15(3) of the Credit Rules read with Section 11AC of the Act, is upheld. However, the penalty would be restricted to the amount of demand arrived at after re-quantification of the demand by the jurisdictional Deputy/Assistant Commissioner. - Decided partly in favour of assessee.
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