TMI Tax Updates - e-Newsletter
September 26, 2017

Case Laws in this Newsletter:

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

TMI SMS

• Reversal of ITC - Whether it is by-product or mfd. product is immaterial & irrelevant - what is relevant is sale of exempted goods - SC

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TMI Short Notes

1. Reversal of Input Tax Credit - In GST / VAT era, emergence of by-product which is exempt during manufacturing process is not relevant, what is relevant is sale of goods.

  VAT / Sales Tax:

Articles

1. Can the filling of GSTR-3B be avoided by filing GSTR-1, 2 & 3?

   By: CA.VINOD CHAURASIA

2. AGGREGATE TURNOVER

   By: DR.MARIAPPAN GOVINDARAJAN

3. GST on Hotel industry

   By: CA.VINOD CHAURASIA

News

1. India and Republic of Korea review progress of CEPA during visit of Commerce and Industry Minister, Shri Suresh Prabhu to Seoul

2. Government to Launch Mudra Promotion camPaigns on Pan India Basis; Union Ministers to Participate in the Events being Organised on this Occasion

3. RBI Reference Rate for US $

Notifications

GST

1. 29/2017 - dated 22-9-2017 - UTGST Rate

Seeks to amend notification no. 5/2017- Union Territory Tax (Rate) dated 28.06.2017 to give effect to gst council decisions regarding restriction of refund on corduroy fabrics

2. 28/2017 - dated 22-9-2017 - UTGST Rate

Seeks to amend notification no. 2/2017- Union territory Tax (Rate) dated 28.06.2017 to give effect to gst council decisions regarding gst exemptions

3. 27/2017 - dated 22-9-2017 - UTGST Rate

Seeks to amend notification no.1/2017-Union territory Tax (Rate), dated the 28th June, 2017 to give effect to gst council decisions regarding gst rates

GST - States

4. S.O. 181. - dated 21-9-2017 - Bihar SGST

Recommendations of the Council, deduct tax from the payment made or credited to the supplier of taxable goods or services or both.

5. S.O. 179. - dated 21-9-2017 - Bihar SGST

Exemption of handicraft goods.

6. S.O. 177. - dated 21-9-2017 - Bihar SGST

State Level Screening Committee.

7. S.O. 175. - dated 21-9-2017 - Bihar SGST

Constitutes the Bihar Appellate Authority for Advance Ruling for Goods and Services Tax.

8. S.O. 173. - dated 21-9-2017 - Bihar SGST

Consisting of the following members for Advance Ruling.

9. S.O. 171. - dated 21-9-2017 - Bihar SGST

The Bihar Goods and services Tax (Fourth Amendment) Rules, 2017.

10. S.O. 169. - dated 21-9-2017 - Bihar SGST

Date for filing of GSTR-3B

11. S.O. 167. - dated 21-9-2017 - Bihar SGST

Registered person shall be eligible for submission of letter of UT Bond

12. S.O. 165. - dated 21-9-2017 - Bihar SGST

Modes of verification.

13. S.O. 164. - dated 21-9-2017 - Bihar SGST

Common Goods and Services Tax Electronic Portal

14. 29/2017-State Tax (Rate) - dated 21-9-2017 - Bihar SGST

Amendments in the Notification No. 5/2017- State Tax (Rate), dated the 29th June, 2017, (S.O. No. 73)

15. 28/2017-State Tax (Rate) - dated 21-9-2017 - Bihar SGST

Amendments in the Notification No.2/2017- State Tax (Rate), (S.O. No. 67) dated the 29th June, 2017

16. 38/1/2017-Fin(R&C)(17)/2408 - dated 21-9-2017 - Goa SGST

Exemption of handicraft goods.

17. 38/1/2017-Fin(R&C)(16)/2407 - dated 21-9-2017 - Goa SGST

Recommendations of the Council, deduct tax from the payment made or credited to the supplier of taxable goods or services or both.

18. 38/1/2017-Fin(R&C)(14)/2406 - dated 21-9-2017 - Goa SGST

waives the late fee who failed to furnish the return in FORM GSTR-3B.

19. CCT/26-2/2017-18/12 - dated 15-9-2017 - Goa SGST

Last date for filing of return in FORM GSTR-3B.

20. 29/2017-State Tax (Rate) - dated 22-9-2017 - Gujarat SGST

Amendments in the Notification, No.(GHN-44) GST-2017/S.54(3)(1)-TH:- Dated the 30th June, 2017, Notification No.5/2017- State Tax (Rate), - No Refund of Unutilised Tax Credit on Corduroy Fabrics.

21. 28/2017-State Tax (Rate) - dated 22-9-2017 - Gujarat SGST

Amendments in the Notification, No.(GHN-36)GST-2017/S.11(1)(1)-TH, Dated the 30th June, 2017, Notification No.2/2017- State Tax (Rate), - Exemptions on Certain Goods.

22. 27/2017-State Tax (Rate) - dated 22-9-2017 - Gujarat SGST

Amendments in the Notification, No.(GHN-31)GST-2017/S.9(1)(1)-TH, Dated the 30th June, 2017, Notification No.1/2017- State Tax (Rate)-Changes In Rates Of Tax On Certain Goods.

23. 26/2017-State Tax (Rate) - dated 21-9-2017 - Gujarat SGST

Exemption on heavy water-nuclear fuels.

24. 25/2017-State Tax (Rate) - dated 21-9-2017 - Gujarat SGST

Amendments in the Notification, (GHN-41)GST-2017/S.11(1)(7)-TH, dated the 30th June, 2017, Notification No.12/2017-State Tax (Rate), - Exemption on services-FIFA world cup.

25. 24/2017-State Tax (Rate) - dated 21-9-2017 - Gujarat SGST

Amendments in the Notification, (GHN-32)GST-2017/S.9(1)(2)-TH, dated the 30th June, 2017, Notification No.11/2017-State Tax (Rate), - Reduction in rate of works contract to Government

26. 03/2017-GST - dated 21-9-2017 - Gujarat SGST

Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 117 of the Gujarat Goods and Services Tax Rules, 2017.

27. S.O. No. 082 - dated 22-9-2017 - Jharkhand SGST

State level Screening Committee on Anti-Profiteering is constituted.

28. Va Kar/GST/04/2017-S.O. No. 081 - dated 19-9-2017 - Jharkhand SGST

Supercession of notification S.O 79 dated 19 September, 2017 - Extends the time limit for furnishing the return by an Input Service Distributor.

29. Va Kar/GST/04/2017-S.O. No. 080 - dated 19-9-2017 - Jharkhand SGST

Supercession of notification S.O 76 dated 13 September, 2017. - Notification related to GSTR 1, 2 and 3.

30. Va Kar/GST/04/2017-S.O. No. 077 - dated 13-9-2017 - Jharkhand SGST

Recommendations of the Council, hereby waives the late fee FORM GSTR-3B.

Income Tax

31. 9/2017 - dated 19-9-2017 - IT

Procedure for filing Statement of income from a country or specified territory outside India and Foreign Tax Credit

Circulars / Instructions / Orders

FEMA

1. 06 - dated 22-9-2017

Issuance of Rupee Denominated Bonds (RDBs) Overseas

Customs

2. 32/2017 - dated 12-9-2017

Sub: Launch of Indian Customs EDI System- (ICES 1.5) for Imports and Exports, at Karwar Port, Baithkol, Karwar(INKRW1), Old Port, Bunder, Mangaluru(INIXE1), and Air Cargo Complex (ACC), Mangalore(INIXE4) – reg.

3. 30 /2017 - dated 1-9-2017

Subject: Implementing Electronic Sealing for Containers by exporters under selfsealing procedure prescribed vide circular 26/2017-Customs dated 1st July 2017–Reg.

4. 29 /2017 - dated 30-8-2017

Subject: Continuation of Pre-GST rates of Rebate of State Levies (RoSL) for transition period of three months i.e. 01.07.2017 to 30.09.2017 for Export of Garments and textile made up articles–reg.

5. 31 /2017 - dated 29-8-2017

Subject: Leviability of Integrated Goods and Services Tax (IGST) on High Sea Sales of imported goods and point of collection thereof-reg.

6. 109/2017 - dated 21-8-2017

Sub: Digitization of Refund claims at JNCH, Nhava Sheva; Creating electronic database of all refund claims, optional procedure; reg

7. 20 /2017 - dated 17-7-2017

Subject: Export procedure and sealing of containerized cargo-regarding.

Highlights / Catch Notes

Income Tax

• New Guidelines for Filing Foreign Income Statements to Claim Tax Credits in India: Forms, Deadlines, Documentation.

  Notifications : Procedure for filing Statement of income from a country or specified territory outside India and Foreign Tax Credit - Notification
  Visit to Get Source

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• High Court Confirms Interest Liability u/s 234C, Rejects Company's Plea on Income Accrual u/s 115JB.

  Case-Laws - HC : Petition u/s 119(2)(a) seeking waiver of interest u/s 234C - assessee-Company could not have contended that it could not anticipate the accrual of income u/s 115JB - interest liability confirmed - HC
  Visit to Get Source

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• Section 145(3) Income Tax Act: Assessees Cannot Request Assessing Officer to Reject Their Books of Accounts.

  Case-Laws - AT : Can rejection of books of accounts u/s 145(3) be at the instance of the assessee? - There is nothing in the said provisions when empower the assessee to request the AO to reject his books of accounts.
  Visit to Get Source

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• Court Rules Transfer Pricing Agreement as Pure Expense Reimbursement; No Financial Adjustment Required by AO/TPO.

  Case-Laws - AT : TPA - recovery of expenses - it is pure reimbursement of expenses incurred and no service element is involved - AO/TPO is directed to treat the transaction to be at ALP and adjustment to be made at Rs. Nil.
  Visit to Get Source

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• Penalty Imposed for Not Filing Form 3CEB u/s 271BA; Ignorance Not Accepted as Reasonable Cause to Waive Penalty.

  Case-Laws - AT : Levy of penalty u/s 271BA - failure to furnish report in form No. 3CEB as required u/s 92E r/w rule 10E - Mere ignorance and bonafide belief that will not be considered as reasonable cause to delete the penalty.
  Visit to Get Source

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Customs

• Refund Approved for Duty Paid on First Bill of Entry Due to Bill of Lading Error.

  Case-Laws - AT : Refund claim - amount paid under the first bill of entry - the filing of advance bill of entry with deposit of duty amount, did not materialize inasmuch as, on account of some mistake in respect of bill of lading, the goods were not cleared against the said bill of entry - refund allowed.
  Visit to Get Source

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Service Tax

• Court Rules Organizations Must Appear Before Authority to Contest Service Tax Liability; No Unilateral Exemptions Allowed.

  Case-Laws - HC : Challenge to the communication from the department regarding service tax liability - such Organizations cannot claim exemption or immunity from such payment of tax on their own, nor they can refuse to appear before the concerned competent authority and make out their case - HC
  Visit to Get Source

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• Interpreting Intellectual Property Rights for Service Tax: Legislative Intent and Current Law Scope Explained.

  Case-Laws - AT : Intellectual property service - If an intangible property right was to refer to a right which is recognised by any country, then the legislature would not have used the expression under any law for the time being in force.
  Visit to Get Source

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Central Excise

• Factory Disqualified from Duty Exemption on Waste and Scrap Due to Producing Multiple Goods Under Notification No. 89/95-CE.

  Case-Laws - AT : Duty on Waste and scrap - N/N. 89/95-CE - Since in this case, the factory is producing both type of goods, the benefit of exemption is not available to the appellant.
  Visit to Get Source

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VAT

• Reversal of Input Tax Credit Applies to Exempt De-Oiled Cake as Goods u/s 17 of KVAT Act.

  Case-Laws - SC : Reversal of Input tax credit on exempted by-product - de-oiled cake fits into the definition of “goods” and this commodity is exempt from payment - it is the sale of goods which triggers the provisions of Section 17 of KVAT Act. Whether it is by-product or manufactured product is immaterial and irrelevant. - SC
  Visit to Get Source

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• Courts Should Not Interfere with Legislative Decisions on Input Tax Credit Determination and Circumstances.

  Case-Laws - SC : Input tax credit (ITC) - Legislature has intended to give tax credit to some extent - However, how much tax credit is to be given and under what circumstances, is the domain of the Legislature and the courts are not to tinker with the same - SC
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• Aloe Vera Juice Classified as "Processed or Preserved Vegetable" for VAT and Sales Tax by High Court Decision.

  Case-Laws - HC : Classification of goods - aloe vera juice - whether aloe vera juice is covered by the expression "processed or preserved vegetable"? - Held Yes - HC
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Case Laws:

• GST

• 2017 (9) TMI 1357
  Alternative system of filing the applications - the web portal for uploading an application seeking an advance ruling is not going to be ready till 15th January 2018. As an alternative, the GSTN has decided to accept all such applications, including applications from ‘unregistered persons’, manually with the facility to deposit the prescribed fees through the GST Portal - Held that: - it is not clear under what authority of law, the GSTN has decided to postpone the availability of this alternative system of filing the applications seeking advance ruling manually till 20th October 2017 when the provisions of law are already in force. Neither the counsel for GNCTD nor the counsel for the Union of India UOI is able to provide an answer - Notice will now be issued to the GSTN/Respondent No. 5 by all modes.

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• Income Tax

• 2017 (9) TMI 1356
  Reopening of assessment - notice issued to minor daughter of assessee - notice sent for personal service - Held that:- CIT (Appeals) after examination of the entire material and on consideration of the above report returned a finding that Assessing Officer had sent the notice through speed post, which was not returned by postal authorities, which means the same was served upon the assessee. The aforesaid service of notice upon the assessee by post is in accordance with the procedure provided for service under the Code of Civil Procedure, 1908. Section 27 of the General Clauses Act, 1897 raises a presumption that a notice sent by the registered post to the addressee at his correct address, if not returned undelivered, would be presumed to be served. In view of the above presumption, which had not been rebutted by the assessee, the authorities below have rightly treated the service of notice upon the assessee to be sufficient.The contention of Sri S.O.P. Agarwal that there could be no valid service of the notice upon the minor cuts no ice in the light of deemed service of notice by post. - Notice issued under Section 148 of the Act was validly deemed to be served upon the assessee. - Decided answered against the assessee Notices issued after the expiry of the limitation period - Held that:- Applying the limitation as provided by Clause (b) of unamended Section 149 of the Act as in all the three assessment years, the income chargeable to tax escaping assessment was over Rs. 25,000/- and in one of the years above Rs. 50,000/-, the limitation to give notice under Section 148 of the Act would be a maximum of 7 years and 10 years. Thus, for the assessment year 1992-93, wherein the income chargeable to tax escaping assessment happens to be Rs. 35,052/- and for the assessment year 1993-94, where the income chargeable to tax escaping assessment happens to be Rs. 48,385/-, notice under Section 148 of the Act would have been given within 7 years from the end of the relevant years, which in the above cases would be 31st March, 2000 and 31st March, 2001. Similarly, in respect of the assessment year 1994-95 as the income chargeable to tax escaping assessment happens to be Rs. 55,440/-, the limitation for giving notice under Section 148 of the Act would be 10 years from the end of the relevant assessment year i.e. 31st March, 2005. Admittedly, the notice under Section 148 of the Act for all the three years was issued on 26.03.2001. Therefore, the notice was beyond time in so far as the assessment year 1992-93 is concerned but it is within limitation for the assessment year 1993-94 and 1994-95. The notice under Section 148 for the assessment year 1992-93 was barred by time and that for the assessment year 1993-94 and 1994-95 to be within time. - Decided partly in favour of assessee.

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• 2017 (9) TMI 1355
  Allowability of high expenditure as business is sold - ITAT deleted the addition - Held that:- This Court is of the opinion that since the findings of the lower appellate authorities, especially the CIT(A) and the ITAT are concurrent on the facts, it cannot be said that any substantial question of law arises. Even otherwise, the AO’s order presumed that the levels of expenditure necessarily had to drop, since the internet based business had been sold by the assessee. Such a conclusion could not have been arrived at unless the AO had considered all other factors including the nature of commercial activities that subsisted without such activity. AO made disallowance of Rs. 16.12 crore simply by means of a mathematical exercise carried out by him. If he found the expenditure incurred by the assessee to be on higher side, it was incumbent upon him to specifically point out as to which expenses were not incurred for the purposes of business. - Decided against revenue Treatment given to the website expenditure - revenue or capital expenditure - nature of expenditure - Held that:- in view of the judgment of the Hon’ble jurisdictional High Court in CIT vs. India Visit.com (P) Ltd. (2008 (9) TMI 8 - DELHI HIGH COURT) in which it has been held that the expenditure on development of website is a revenue expenditure. Similar view has been taken by the Tribunal in the assessee’s own case for the immediately preceding year.- Decided against revenue

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• 2017 (9) TMI 1354
  Claim of bad debt - claim allowed as an expenditure in the year in which it was written off - Held that:- Section 36 provides other deductions and in terms of this provision, deductions provided for in the Section shall be allowed in respect of the matters dealt with therein in computing the income referred to in Section 28, and Clause-(vii) of Section 36(1) provides that, subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year shall be allowed as a deduction in computing the income referred to in Section 28. However, Clause-(i) of sub-section-(2) provides that, in making any deduction for bad debt or part thereof, no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year. This therefore, means that the assessee has to prove satisfaction of both Section 36(1)(vii) and Section 36 (2)(i), viz. that the bad debt has been written off and that the bad debt has been taken into account in computing the income of the assessee in any one of the years mentioned in Clause-(i) of sub-section (2) of Section 36. A reading of the order passed by the Tribunal does not show that an enquiry in that regard has not been undertaken and therefore, we are of the view that the matter requires reconsideration by the Tribunal and the Tribunal should decide the matter afresh giving the assessee an opportunity to substantiate his case, if necessary, by production of additional materials. Remit the matter to the Tribunal for fresh consideration

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• 2017 (9) TMI 1353
  Petition u/s 119(2)(a) seeking waiver of interest u/s 234C - non-payment of installment of advance tax - due to receipt of extra-ordinary item of income, the company has become liable to pay tax u/s.115JB - Held that:- In the present case, the moment an order favourable to the petitioner-assessee was passed by the Hon'ble Supreme Court on 15-07-2013 directing the HSBC to pay the amount of Rs. 102,59,36,115/- which was deposited by the HSBC Bank with the Registry of the Hon'ble Supreme Court followed by order dated 05-08-2013 to release the amount and which fund was released to the petitioner-assessee on 03-10-2013, that amount of Rs. 102,59,36,115/- became assessable to tax under Section 115JB of the Income Tax Act, 1961. After the said order passed by the Hon'ble Supreme Court on 15-07-2013 followed by order dated 05-08-2013, the assessee-Company could not have contended that it could not anticipate the accrual of income under Section 115JB of the Act and therefore, it ought to have paid advance tax installments taking into account such accrued income for the quarter ending 15-09-2013. Having not paid that amount, the interest liability under Section 234C of the Act automatically stood attracted. Chief Commissioner has already granted 100% waiver for non-payment of advance tax on this amount for the quarter end of 15-06-2013 amounting to Rs. 5,05,359/- which the assessee perhaps deserved in the facts and circumstances of the case. But thereafter, merely because the review petition came to be filed by the HSBC Bank which was ultimately dismissed by the Hon'ble Supreme Court vide Annexure-3 dated 03-12-2013, the assessee-company could not have prayed for waiver of interest under Section 234C of the Act for the quarter ending 15-09-2013. Therefore, the impugned order passed by the respondent-Chief Commissioner appears to be perfectly just and legal and does not require any interference by this Court.

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• 2017 (9) TMI 1352
  Penalty u/s 271(1)(b) - reasonable cause for failure to comply with the notices - proceedings u/s 153A - proof of meaningful compliance of notices at the assessment proceedings u/s 153A - Held that:- CIT(A) instead of considering the explanation of assessee in proper perspective, proceeded on different reasoning to reject the appeals of the assessee that settlement applications have been subsequently on 25.02.2014 after issue of the above two notices. When complete seized documents have not been provided to assessee and some of the seized documents provided were not legible, the assessee may not be able to file return of income u/s 153A of the Income Tax Act. Therefore, there is no question of assessee making meaningful compliance of notices at the assessment proceedings u/s 153A read with section 143(3) of the Act Income Tax Act. The explanation of the assessee have not been appreciated by the Ld. CIT(A), therefore, explanation of assessee shall be considered favourable to hold that there appears reasonable cause for the assessee for the non compliance of both the notices. Section 273B of the Income Tax Act provides that no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to section 271(1)(b) of the Act, if assessee proves that there was a reasonable cause for the said failure. The explanation of assessee clearly proves that there were a reasonable cause for failure to comply with the notices. Therefore, on such circumstances the penalty u/s 271(1)(b) for all the years cannot be sustained. We set aside the orders of authority below and cancel the penalty in all the assessment years. - Decided in favour of assessee.

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• 2017 (9) TMI 1351
  Claim of the liquidated damages - in case of delay in delivery the contract intra parties prescribes liquidated damages - assessee is a manufacturer of underground cable and its major customers are State Electricity Boards - Held that:- As brought to the notice of the Ld. CIT(A) that even though the liquidated damages are deducted by the customers, the assessee takes up the matter with the customer for waiver of liquidated damages and whenever the customer agrees and waives the liquidated damages then the assessee credited the same to the P&L Account as has been done in the relevant previous year as well and brought to the notice of the Ld. CIT(A) that Rs. 5,95,864/- out of Rs. 7,68,775/- for ‘provision no longer required written back’ in other income and drew our attention to Schedule 10 page 33 of the Annual Report which relates to the liquidated damages deducted in the earlier years as confirmed by the Note no. 2 of Schedule 10. It was brought to the notice of the Ld. CIT(A) that out of total sum of Rs. 5,48,012/- being the liquidated damages deducted during the year, the biggest deduction of liquidated damages during the relevant year is Rs. 3,70,501/- which was done by Himachal Pradesh State Electricity Board. Taking into consideration all these facts, the Ld. CIT(A) has given relief to the assessee which order we find to be just and reasonable and, therefore, we do not find any reason to interfere with the same. Therefore, we confirm the order of the Ld. CIT(A) and dismiss this ground of appeal of revenue. Addition on suppressed sales - AO has not specifically rejected the books - Held that:- It is well settled that even if it is proved that the suppression of sales has taken place, then also the entire suppressed sales cannot be taxed and only the profit component can be taxed. In any event without finding defects in the books of account maintained by the assessee and without rejecting the books, which is audited, the AO erred in making estimation without giving any credence to the assessee’s explanation why the profit margin decreased, so the action of the Ld. CIT (A) is upheld. Therefore, we do not find any infirmity in the action of the ld. CIT(A) in deleting the addition and we uphold the same Addition u/s 68 - Held that:- The assessee is a company which is having business with the PSUs and big corporate and all the transactions are accounted, audited and through banking channels and just because assessee could not produce the confirmation from the parties, its claim for deduction of Rs. 45,21,363/- as payment towards bill discounting was not accepted by both the authorities below. Since now the assessee is able to get hold of the confirmation from the parties, albeit late the claim if found to be true cannot be disallowed and therefore in the interest of justice, we are inclined to admit the additional evidence filed before us to substantiate the claim. In the interest of justice and fair play we set aside the order of Ld. CIT(A) and remand the matter along with the entire evidence to the AO to adjudicate this issue afresh. Addition being 10% incurred on account of car hire charges, car maintenance and fuel expenses - addition u/s 40A - Held that:- AR before us could not bring any evidence to counter the finding made by the Ld. CIT(A) as to the related party transaction which made him disallow 10% and thereby sustaining Rs. 88,722/-. We do not find any evidence to contradict the finding made by the Ld. CIT(A) which made him sustain the disallowance. In the light of the above, we dismiss this ground of cross objection of the assessee and confirm the Ld. CIT(A)’s order.

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• 2017 (9) TMI 1350
  Addition u/s 14A - non satisfaction by AO before making addition - Held that:- The satisfaction u/s 14A before applying Rule 8D had to be recorded with reference to the books of accounts that the assessee has not made the claim correctly. We noted the Assessing Officer has not recorded any satisfaction in this manner, and a similar view has also been taken by the Panaji Bench of the Tribunal in the case of Sesa Goa Ltd. vs. JCIT (2013 (9) TMI 233 - ITAT PANAJI) following the decision of Mumbai High Court in the case of Godrej & Boyce Mfg. Co. Ltd. vs. DCIT & Another (2010 (8) TMI 77 - BOMBAY HIGH COURT) which was subsequently confirmed by Hon’ble Supreme Court, we noted that no contrary decision was brought to our notice. Therefore we confirm the order of Ld. CIT(A) deleting the said disallowance. - Decided in favour of assessee Depreciation @ 60% on UPS confirmed - See CIT vs. BSES Yamuna Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT ] Claim of depreciation u/s 32(1)(ii) - treating the non computation right as intangible capital assets - Held that:- After hearing the rival submissions, we do agree that each decision has to be applied on the facts and context therein. In the case of the assessee, we noted that the terms and conditions of the agreement has not been examined by A.O. to the right perspective and has not been compared with the facts and circumstances in the case of Sharp Business Systems(2012 (11) TMI 324 - DELHI HIGH COURT ). We, therefore, in the interest of justice set aside the order of Ld. CIT(A) and restore this issue to the file of the Assessing Officer with the direction that the Assessing Officer shall redecide this issue afresh after comparing the facts in the case of the assessee with the case of Delhi High Court in Sharp Business Systems (supra) in accordance with law

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• 2017 (9) TMI 1349
  Disallowing the interest - whether it is a normal business expenditure - Held that:- Undisputedly during asstt. Year 2012-13 Ld. CIT(A) has allowed the interest being interest on the loan from Govt. of India by following the decision rendered by coordinate bench of the Tribunal in assessee’s own case for asstt. year 2005-06. When the interest on the same component of loan taken by the assessee company from Govt. of India for day to day running of the company and the loan repayable on interest has been allowed in asstt. year 2005-06 and 2012-13, there is no ground to disallow the interest claimed by the assessee during the year under assessment. Furthermore when winding up proceedings are undisputedly pending before the Hon’ble High Court loan taken by the assessee company is to be treated as a loan to run the entire business and the interest component can not be restricted to BFF unit as has been done by AO/CIT(A). So there is not iota of evidence of record that the loan taken on which interest has been claimed and disallowed by the revenue was not utilized for running day to day business of the company and the loan is repayable alongwith interest and as such are revenue expenses for all intents and purposes so we hereby delete the addition on account of interest - Decided in favour of assessee. Revision u/s 263 - Addition on account of capital gain - Held that:- In the instant case the revenue has neither invoked provisions contained u/s 147/148 nor provisions contained u/s 263 to tax the new source of income and as such the order passed by Ld. CIT(A) to the extent of making addition on account of long term capital gain is beyond jurisdiction and as such is not sustainable.So without entering into the merits of this issue we are of the considered view that the addition made by Ld. CIT(A) to the tune of Rs. 92,52,933/- on account of long term capital gain is not sustainable.

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• 2017 (9) TMI 1348
  Referring the matter to the special auditor - Rejection of books of accounts - Held that:- No specific finding which has been recorded by the Assessing Officer in the assessment order recording his satisfaction as to rejection of the books of accounts and the result so declared by the assessee. It is true that the matter was referred for special audit u/s 142(2A) but that by itself will not result in an implied finding of the AO about his non-satisfaction about the books of accounts and rejection thereof. The defects so pointed out by the special auditor have been incorporated in the recasted books of accounts effectively means taking into consideration the results already declared by the assessee in respect of its declared transactions and the results as per unrecorded transactions relating to purchase and sales and other income, presenting an overall position regarding the business results in relation to activities carried out by the assessee. Therefore, we are of the considered view that merely because the matter was referred for special audit and the AO has made certain additions based on the observations of the special auditor, it cannot be held that the AO has rejected the books of account of the assessee. There has to be a specific finding given by the AO in terms of satisfaction of any or all of the conditions as specified under section 145(3) before he rejects the books of accounts of the assessee. Further, the AO has to specify the reasons as to why he feels that the results declared by the assessee as per the books of accounts are not acceptable. All the AO has done is that he has accepted the book results in respect of recorded transactions and in addition, the unrecorded transactions relating to sales/income, unrecorded purchase and other expenditure have also been brought to tax. In any case, there cannot be a presumption regarding rejection of books of accounts in absence of specific exercise of powers under section 145(3) of the Act. Can rejection of books of accounts be at the instance of the assessee? - Held that:- It is for the assessee to declare its results and offer its books of accounts for verification and then, it is for AO to determine whether the book results so declared are correct or not or the books of accounts have to be rejected as not depicting correct state of affairs of the assessee. In our considered view, there is nothing in the said provisions when empower the assessee to request the AO to reject his books of accounts. Further, each year is separate year and the principle of res-judicata doesn’t apply in the income tax proceedings. And we agree with the view of the AO that the contention of assessee for rejection of books on the basis of the past decisions of the Coordinate Bench also not seems correct because the judgment of the Coordinate Bench is not applicable on this assessment as AO has not rejected the books of the assessee and has made the additions on the basis of regular books of account of assessee as well as taking into consideration documents impounded during the course of survey and the report of the special auditor thereon. In light of above we are of the view that the books of accounts have not been rejected in the instant case. The findings of the ld CIT(A) to this extent is set-aside and the findings of the AO are confirmed. Estimation of net profit vis-a-vis specific disallowances/additions - Held that:- In view of lack of explanation on the part of the assessee regarding the source of expenditure as per specific provisions of section 69B and 69C and violation of provisions of section 40(a)(ia) on account of non-deduction of TDS and section 40A(3) of the Act on account of payment in cash beyond the prescribed threshold, the additions so made by the AO are hereby confirmed. Regarding other expenses namely excessive/ bogus expenses, unrecorded marble and granite purchases, unrecorded purchases/labour and transportation charges of lime, unexplained expenses, unexplained expenses being repair & maintenance of plant and machinery, unexplained transportation expenses, the assessee has again failed to offer any explanation in spite of specific show-cause by the AO and the additions have rightly been made by the AO which are hereby confirmed. - Decided in favour of revenue Suppressed production and unrecorded sales/receipts/income - addition on account of suppressed production of ballast from Dabora and sales thereof - Held that:- Taking the value of sale at Rs. 367.5 per metric ton, the suppressed sale figure comes to Rs. 36,01,132/-. The same is considered as undisclosed turnover of assessee and used for computing the income of assessee. Addition on account of unrecorded sales of grit - unrecorded loading receipts from Railways - Held that:- Taking into consideration the suppressed sales on account of undisclosed production of Rs. 36,01,132/- as decided above, has given a benefit of telescoping to the assessee and has brought to tax the undisclosed sale figure at at Rs. 36,01,132/- being higher of the two. We donot see any infirmity in the same and the said finding of the ld CIT(A) is hereby confirmed. Ground no. 3 to this limited extent is dismissed. Undisclosed receipt of lease rent - Held that:- As per ld. CIT(A), as the assessee has already shown lease rent in the profit & loss account, there is no need for making any separate addition and the A.O. was directed to delete the addition. We donot see any infirmity in the order of ld CIT(A) and the same is hereby confirmed and the ground of appeal is dismissed. Undisclosed interest income on loan - Held that:- As there was a typographic error in the agreement instead of 3, a figure of 30 was wrongly typed. The amount of loan is clearly mentioned in figure and words and the same stood at Rs. 30,000/- only. Therefore the A.O. is directed to delete addition of Rs. 72,000/-. This ground of appeal is therefore allowed. Addition on account of loss in Marble & Granite trading - Held that:- As we have held above, books of accounts have not been rejected in the instant case, therefore there is no basis to estimate net profit. We have pursued the material available on record. The findings of the AO remain uncontroverted before us and the same are hereby confirmed. Addition on account of peak of negative cash balance - Held that:- The assessee is allowed the benefit of telescoping on account of additions sustained above which is higher than the addition of Rs. 8,67,670/-. In the result, ground of appeal no 10 is dismissed. Unexplained differences in opening balances of debtors and creditors on protective basis - Held that:- As per the ld CIT(A), the AO has not gone into merits of the case and as the difference did not relate to the year under consideration, the A.O. was directed to delete the addition. We donot find any infirmity in the order of the ld CIT(A) and the same is confirmed. The ground of appeal no 1 is dismissed. Addition on account of different in dates of entries of cash in Bank Statements vis-a-vis cash book - Held that:- Regarding entry of Rs. 2,45,000/-, agree with the submission of assessee that this entry was wrongly entered on 02.03.2009 in place of actual date of 03.03.2009, however, it did not make any difference as assessee had sufficient cash balance of Rs. 3,72,111/- on 02.03.2003 and even if entry of Rs. 2,45,000/- was corrected the cash balance did not go in negative. However, the assessee failed in explain the entries of Rs. 1,71,000/-. Therefore, addition of Rs. 1,71,000/- is confirmed

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• 2017 (9) TMI 1347
  Unexplained cash credits - addition u/s 68 - Held that:- Appellant has discharged the onus placed upon him u/s 68 as filed complete details of confirmation of the creditors, copy of the bank account, copy of the ledger accounts and other details etc. - Decided in favour of assessee Disallowance of depreciation on air conditioners - use for non business purposes - Held that:- It is sufficient to place on record the purchase bills but some evidence suggesting that assets was to be use for business purpose in the absence of such evidence in our view, no depreciation cannot be allowed. Therefore, the finding of the Ld. CIT(A) on this issue is reversed and the finding of the AO is restored. Thus, Ground of the revenue is allowed. Disallowance on account of building repair expenses - Held that:- Appellant has been able to prove that expenses were incurred on repairs, payments have been made through the banking channels and TDS was made on such payments and therefore, there is no justification in making a disallowance under this head. As regards, the value of opening WDV of the block is concerned it is only a depreciated book value and thus, the amount of repairs being too high cannot be a ground for making the disallowance - Decided in favour of assessee Disallowance made by the AO on account of unexplained cash deposits -Held that:- Entries have been made in the capital account of Smt. Kamla Lamba of Rs. 19,41,192 and also the corresponding entries were made in the cash account and of M/s K.C. Industries, a sundry creditor. Therefore, the availability of cash in hand was increased on 01.04.2010 after reversing these entries in the books of accounts. In view of these facts, hold that cash deposits were made out of the balance available in the books of accounts. Thus,find no justification in the action of the AO and delete the addition - Decided in favour of assessee

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• 2017 (9) TMI 1346
  Treating the STCG and LTCG as “Business Income” - nature of income - Held that:- Considering the fact, the assessee is allowed Capital Gain for AY 2007-08, on the basis of which ld. PCIT revised the assessment passed under section 143(3) rws 147 order for directing the AO to treat the Capital Gain as Business income. Further, the AO allowed Capital Gain for AY 2014-15in assessment order passed under section 143(3) dated 26.11.2016. Thus, respectfully following the decision of the coordinate bench of the Tribunal and the principle of consistency the Ground No. 2 & 3 are allowed. Addition u/s 68 - genuineness of claim - Held that:- AO instead of identifying the discrepancy in the confirmation of gifts concluded that assessee has not been able to discharge her onus. The assessee filed copy of confirmations, copy of ITR returns and the details of transaction through banking channels. We have noted that the assesses has discharged her primary onus to prove the identity, capacity and genuinity of transaction. Considering the facts that the assessee has discharged its primary onus lie upon her. The AO has not disputed the identity of the person or the capacity of the donor. The AO has not brought any material on record. Thus, this ground of appeal is allowed in favour of assessee. Denying the benefit of set off of Short Term Capital Loss (STCL) against LTCG - assessee argued that the assessee is an Investor and is entitled for setting off of loss on STCL against STCG in accordance with section 74 - Held that:- Considering the facts that we have allowed the appeal of the assessee and allowed the gain on sale of share as STCG or LTCG as the case may be instead of Business Income. Thus, the AO is directed to verify the loss and set off of the claim in accordance with law. Thus, this ground of appeal is allowed for statistical purpose. Addition on account of dividend stripping u/s 94(7) - Held that:- AO disallowed the dividend without verifying the fact. The AO made the addition only on the observation of ld PCIT. Before us, the ld. AR of the assessee has placed on record the copy of statement showing the record and date of scripts (page No. 47-49) Considering the fact that the assessee has provided the specific details of shares of M/s Kamala Dials and M/s Hemadri Chemicals before the AO. Hence, this ground of appeal is restored to the file of AO to verify the facts and pass the order in accordance with law. Needless, to say that the AO shall provide opportunity to the assessee before passing the order. In the result this ground of appeal is allowed for statistical purpose.

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• 2017 (9) TMI 1345
  Bogus purchases - computation of bogus amount - Held that:- Disallowance on account of bogus purchase is on higher side. In view of the fact that the AO has not disputed the sale/consumption of the material nor rejected the books of account. The addition was made on the basis of third party information. In our view, under the Income-tax Act only the real income can be taxed by the Revenue. Even if the transaction is not verifiable, the only taxable is the taxable income component and not the entire transaction. We are of the considered view that in order to fulfill the gap of revenue leakage, the disallowance of reasonable percentage of alleged bogus purchases would meet the end of justice. Considering the facts of the present case, we restrict the addition @ 12.5% of alleged bogus purchases (Rs. 69,60,124/-). The AO is directed accordingly.

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• 2017 (9) TMI 1344
  Allowability of broken period interest as deduction - Held that:- Respectfully following the ratio laid down in Citi Bank N.A [2012 (9) TMI 523 - SUPREME COURT] and in assessee’s own case for assessment year 2001–02 [2011 (6) TMI 812 - ITAT MUMBAI] allowed deduction claimed on account of broken period interest - Decided in favour of assessee. Claim of depreciation on different category of securities - whether the claim of depreciation on different categories of securities viz., ASF, HFT and HTM is allowable by holding them as stock–in–trade or whether, as held by the Assessing Officer they are to be treated as investments of the assessee? - Held that:- We find the issue is no more res integra in view of the decisions referred to by the learned Commissioner (Appeals). In case of Yes Bank Ltd. (2015 (1) TMI 1012 - ITAT MUMBAI), the Co–ordinate Bench allowed depreciation claimed on AFS and HFT categories of securities by holding them as stock–in–trade. Further, in case of HDFC Bank Ltd. (2014 (8) TMI 119 - BOMBAY HIGH COURT) while dismissing the Revenue’s appeal on the issue has upheld the decision of the Tribunal in allowing deduction claimed on diminution in value of securities. Learned Departmental Representative has not brought any contrary decision to our notice to defer from the ratio laid down in the decisions relied upon by the learned Commissioner (Appeals). In view of the aforesaid, we uphold the order of the learned Commissioner (Appeals) on this issue by dismissing the grounds raised. - Decided against revenue

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• 2017 (9) TMI 1343
  Disallowance of bogus purchases - Held that:- Revenue is not entitled to bring the entire sales consideration to tax, but only the profit attributable on the total unrecorded transaction can be subject to income tax. After considering the facts and rival contentions of the parties, we are of the opinion that in order to fulfil the gap of revenue leakage the disallowance of reasonable percentage of impugned purchase would meet the end of justice. Thus, we are of the opinion that disallowance @ 3% on all bogus purchases shown from the alleged hawala dealer would meet the end of justice. We direct the assessing officer accordingly. Addition on account of Foreign Exchange Forward Contract - Held that:- We have seen that the ld Commissioner (Appeals) has allowed foreign exchange fluctuation loss by following the decision of DCIT versus Bank of Bahrain [2010 (8) TMI 578 - ITAT, MUMBAI ]. We have seen that the finding of branded Commissioner (Appeals) is based on the various decision of Tribunal. Hence we do not find any illegality and infirmity in the order passed by ld Commissioner (Appeals). In the result the ground of appeal raised by revenue is dismissed.

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• 2017 (9) TMI 1342
  Validity of reopening of assessment - Held that:- We notice that the AO has listed out various points in the reasons for reopening, which show that the assessing officer has prima facie case of escapement of income. As submitted by Ld D.R, the audit objections can be the source of information. Accordingly we are of the view that the Ld CIT(A) was justified in upholding the reopening of assessment. Disallowance made u/s 40(a)(ia) - assessee submitted that the above said payments includes reimbursement of expenses - Held that:- We notice that copy of the letter dated 04-12-2012 addressed to the AO which show that the assessee had explained the nature of every payment. We notice that the tax authorities have made the addition u/s 40(a)(ia) of the Act without considering the reply given by the assessee. In our view, this is not justified. Also the assessee has explained that the payment of Rs. 3.00 lakhs made to M/s Eskay Elevators (India) Ltd is payment for purchase of materials. A perusal of the same would show that it was for supply of materials and the VAT has also been collected at 8%. Hence the same would not attract the provisions of TDS. The payment made to Mr. Ajay Mishra was pertaining to two bills of Rs. 17,000/- each, i.e., each payment did not exceed the limit of Rs. 20,000/- and the aggregate payment did not exceed Rs. 50,000/-. Hence these payments would also not attract TDS provisions. Accordingly we direct the AO to delete both these additions. The order passed by Ld CIT(A) on these two payments stands set aside. Disallowance of purchases - Held that:- We notice that the assessee has furnished full details of miscellaneous purchases and the tax authorities have made the addition without examining the same. Hence we are of the view that this addition has been made on surmises and conjectures. Accordingly we are of the view that this addition needs to be deleted in entirety. Accordingly we set aside the order passed by Ld CIT(A) and direct the AO to delete the entire amount of addition relating to miscellaneous purchases. Addition of sunder creditors - Wrong entry on purchases - Held that:- In its letter dated 31-12-2012, the assessee has explained that the purchases of Rs. 3,26,019/- was made from M/s Newspark Trading Co. P Ltd and it was wrongly credited to the account of M/s Parasprabhu Grani Marmo P Ltd. It was further submitted that the said mistake was rectified in the succeeding year. The assessee also furnished ledger account copies of the succeeding years to substantiate its contentions. The Ld A.R invited our attention to the copy of letter dated 31.12.2012 and also the copies of ledger accounts. Since it was a case of accounting error, we are of the view that the addition of Rs. 3,26,019/- is not called for. Accordingly we are of the view that the Ld CIT(A) was justified in deleting this addition. Addition pertaining to unaccounted sale of flats - Held that:- We notice that there is no question of unaccounted sales as the difference pointed out by the AO refers to the difference between the “Agreement for sale” and the amount shown as actually received. We notice that the assessee has been receiving agreed amount in installments. As rightly pointed out by Ld CIT(A), the income shall accrue in accordance with the method of accounting followed by the assessee and the same would not accrue upon entering “agreement for sale”. Accordingly we are of the view that the decision rendered by Ld CIT(A) on this issue does not call for any interference.

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• 2017 (9) TMI 1341
  Addition on bogus purchases - profit element embedded in the alleged bogus purchases - CIT(A) confirming the addition to the extent of 10% - Held that:- Considering the fact that there is a possibility for the assessee to source the materials at a lower rate also, we are of the view that the profit element embedded in the alleged bogus purchases may be fixed at 8%. Accordingly we modify the order passed by Ld CIT(A) and direct the AO to estimate the profit element at 8% of the value of alleged bogus purchases. As A.R submitted that all the purchases have been included in the Work in Progress, since the concerned project was under construction. In that case, there is merit in the submission of the assessee that the profit amount computed at 8% of the value of alleged bogus purchases should go to reduce the value of work in progress. Accordingly we direct the AO to reduce the profit amount so computed from the value of work in progress, instead of assessing the same during the year under consideration. Appeal filed by the revenue is dismissed and the cross objection of the assessee is partly allowed.

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• 2017 (9) TMI 1340
  TPA - selection of comparable - Held that:- The assessee company, engaged in the business of providing Information Technology Enabled Services and Software Development services to its AE’s, thus companies functionally different with that of assessee need to be deselected from final list. International transaction of recovery of expenses - assessee prayed for deletion of 5% mark-up while the Revenue wants it to be recomputed at 25.73% as done by the TPO - Held that:- The expenses reimbursed are travel and visa processing charges. In our opinion, there could not be any markup on such expenses and particularly in the absence of any material on record that unreasonable credit facility has been extended to the AEs of the assessee for such reimbursement of costs. Further, the assessee has also adopted the CUP method to hold the transactions to be at ALP. Except for aggregating both the transactions at TNMM, the TPO has not been able to bring out any material on record to show that the reimbursement of expenses are excessive and therefore, at a markup. Further, in the case of Kirby Building Systems India Ltd [2014 (11) TMI 728 - ITAT HYDERABAD], the issue was of cost sharing exercise in implementing ERP systems in the group and ITAT held that it involves services by the said company, but in the case of the assessee, it is pure reimbursement of expenses incurred by the assessee and no service element is involved. Thus, DRP’s reliance on the said decision is clearly misplaced. Assessee’s ground of appeal is allowed and the AO/TPO is directed to treat the transaction to be at ALP and adjustment to be made at Rs. Nil.

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• 2017 (9) TMI 1339
  Levy of penalty u/s 271BA - assessee did not furnish report in form No. 3CEB as required u/s 92E r/w rule 10E - assessee has pleaded that the non-submission was not intentional but bonafide belief and ignorance of Finance Manager in complying the provision u/s 92E - Held that:- Mere ignorance and bonafide belief that will not be considered as reasonable cause to delete the penalty. It is clearly the obligation on the part of the assessee to comply with the provisions of section 92E. Hence, the action initiated by the AO in levying penalty u/s 271BA is proper in these cases. Accordingly, we uphold the order of the CIT(A) in confirming the penalty levied by the AO. - Decided against assessee. Levy of penalty u/s 271G - non comply with the requirements laid down under Rule 10D - Held that:- The assessee has filed the relevant information during assessment proceedings and accordingly, AO completed the assessment. On careful reading of section 271G & 92D(3), penalty can be levied only when AO issues notice u/s 92D(3) and assessee fails to furnish information for completing the assessment. Further, on application by the assessee, the AO can extend the period for submission by further period of 30 days. In the given case, AO has not issued any notice, however, AO opined that it is not necessary to issue notice but order sheet notice/entry also amounts to notice issued u/s 92D(3). We find that the assessee has in fact filed the relevant information as soon as it is brought to the notice and AO has completed the assessment without making any adjustment. It shows that the assessee has complied with the provisions of section 92D(3). Considering the facts on record and other judicial pronouncements relied on by the assessee, we are inclined to accept the contention of ld. AR and in our opinion, penalty u/s 271G is uncalled for and accordingly, it is deleted. - Decided in favour of assessee.

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• Customs

• 2017 (9) TMI 1338
  Project Import - reinforced/filled thermo plastic compound - eligibility for the purpose of availing benefit of project import to be considered as a project import falling under Chapter 9801 and read with Project Import Regulations, 1986 - Held that: - the provisions of the PIR 1986 themselves do not bar the import of machine in question - the chapter is to be taken to apply to all goods which satisfy the conditions prescribed therein even though they should be covered by a more specific heading elsewhere in the schedule. Chapter Note 2 lays down that Heading 9801 is to be taken to apply to all goods which are imported in accordance with PIR. The Project Import Regulations are beneficial provisions to facilitate persons for setting up substantial expansion of an existing unit. The definition of industrial plant excluding industrial system having a single machine or a composite machine is relevant. True, the definition is to identify whether industrial plant project per se falls within scope and purpose of CTH 9801 and the PIR 1986. Certainly, that is not the dispute here. There is no allegation that the project per se cannot be industrial plant project because there will be installation of only one machine or a composite machine - what is relevant is whether the goods imported are for a project having only a single machine or a composite machine. Such an allegation is not forthcoming from the records. In any case, the importers as evidenced from the replies during the adjudication proceedings etc. have been crying hoarse that importer had already made an investment of Rs. 8.32 crores in plant and machinery before the importation. The imported machinery is only meant for substantial expansion of installed capacity to the extent of 100% as certified by the Chartered Engineer. The imported goods qualified for classification under CTH 9801 and read with PIR 1986 - appeal allowed - decided in favor of appellant.

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• 2017 (9) TMI 1337
  Validity of SCN - Time limitation - Advance License Scheme - case of Revenue is that amount of Rs. 10,69,643/- confirmed in the impugned order had already been paid by them under protest on 17.10.2003. In the circumstances, the SCN ought to have been issued within the period of limitation from that date. However, the same having been issued more than one year i.e. on 29.12.2004, is therefore hit by limitation. Held that: - appellant had exported substantially fulfilling the export obligation and in fact had been seeking extension of time to complete the quantitative obligation also - It is not the case of the department that they were involved in any diversion of imported raw material clandestinely for purposes other than that intended - The SCN therefore should have been issued within a period of six months provided for normal period of limitation under section 28 of the Customs Act, 1962 as was in force at the relevant time. However, this was not done and the show cause notice was issued only after six months period i.e. on 29.12.2004. Reliance placed in the case of Commissioner of Customs, Chennai Vs. Lalchand Bhimraj [2013 (7) TMI 797 - MADRAS HIGH COURT] wherein duty was paid on 1.6.2000 and the SCN was served on imported on 2.12.2000. It was held that the notice was time-barred. Appeal allowed - decided in favor of appellant.

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• 2017 (9) TMI 1336
  Valuation of imported goods - Re-Rollable Material - mis-declaration of goods - whether classified under CTH 72044900 or under CTH 72089000? - Held that: - heading 7208 requires that the width of product should be 600 mm or more to be classified under the said heading - In the instant case, it is nowhere coming out in either the examination report or the market opinions as to what is width of these cuttings. Hence, classification under this heading as has been held in the adjudication order and in the order of Commissioner (Appeals) is without any basis and hence incorrect. The reports are conflicting - the basis of classification as well as loading the value is fallacious. Appeal allowed - decided in favor of appellant.

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• 2017 (9) TMI 1335
  Refund claim - amount paid under the first bill of entry - amendments in the first bill of entry by rectifying the mistake - rejection of refund claim on the ground of time limitation - Held that: - there is no taxable event i.e., import of goods into India relatable to the first advance bill of entry and as such, the deposits made by the appellants, under the advance bill of entry cannot acquire the characteristics of duty of Customs. The same would remain only a deposit with the Revenue. If the said deposits do not adopt the nature of duty, the provisions of section 27(1) would not get attracted. The Hon'ble Gujarat High Court in the case of Swastik Sanitarywares Ltd. Vs Union of India [2012 (11) TMI 149 - GUJARAT HIGH COURT] has held that second-time deposit of the same amount on clearance of the same goods did not amount to deposit of excise duty and was a pure mistaken deposit of the amount with the department which the Revenue cannot retain or withhold. Such claims would not fall under section 11B of the Central Excise Act - Admittedly, the filing of advance bill of entry with deposit of duty amount, did not materialize inasmuch as, on account of some mistake in respect of bill of lading, the goods were not cleared against the said bill of entry. As such, it can be successfully concluded that no event of import took place so as to fix the duty liability against the importer. Appeal allowed - decided in favor of appellant.

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• 2017 (9) TMI 1334
  Refund of amount deposited in Customs House Treasury, where no export took place - rejection on the ground of time limitation - Held that: - the lower authorities had not examined the facts of the case particularly the assessment of the shipping bills as contended by the ld. Counsel on behalf of the appellants - The matter is remanded to the Adjudicating Authority to decide afresh after considering the facts and the case laws after observing the principles of natural justice - appeal allowed by way of remand.

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• 2017 (9) TMI 1333
  Penalty u/s 117 of CA, 1962 - EPCG scheme - non-fulfillment of export obligation - Held that: - Section 117 of the Act, 1962 provides any person who contravenes any of the provisions of this Act or who fails to comply with the provisions of this Act, etc., where no express penalty is elsewhere provided for such contravention or failure, shall be liable to penalty - the appellant failed to comply with the provisions of the Act by way of non-fulfillment of the obligations of the Act, the imposition of penalty u/s 117 is warranted. As the appellant failed to fulfill the export obligations due to the manufacture of sub-standard materials, the quantum of penalty should be reduced. Appeal allowed - decided partly in favor of appellant.

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• 2017 (9) TMI 1332
  Smuggling - Gold bars - confiscation - Whether Commissioner of Customs (Appeals) was legally correct to pass an order for Denovo Adjudication by lower authority after verification with the records of M/s. Anand Silver Pvt. Ltd. for the gold bar which was already tempered and when it is not clear how verification will bring out the truth? - Held that: - the Commissioner(Appeals) had given an opportunity to establish the truth on the basis of records, if available and thereafter the question of further investigation would arise, which cannot be treated as unreasonable. Release of Gold Bars - Held that: - there is no indication in the Panchnama that these goods have foreign markings. The Revenue had not disputed this fact - there is no material available on record that the cue pieces were not bearing any foreign markings. So, there is no reason to interfere with the order of First Appellate Authority. The confiscated gold has already been disposed by the department. The Commissioner(Appeals) observed that the appellants are entitled to the sale proceeds minus the fine etc., if any, as provided under section 150 of the Customs Act, 1962 - appeal dismissed - decided against Revenue.

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• Corporate Laws

• 2017 (9) TMI 1331
  Alleged acts of forgery - Seeking relief of investigation into the affairs of the Company - Investigation of company's affairs in other cases - unlawfully doing the illegal business in the Company premises - transfer of shares - Held that:- The petitioner has challenged the share transfer by Respondent No.2 in favour of his wife as his consent was not taken. But evidence is produced to show that he was a party to the Board resolution. Article 7 of the Articles of Association of the Company provides for transfer of shares to the wife of a member. So, there is no illegality committed by the member- Respondent No.2 in transferring the shares to his wife Minutes book of Board meeting, original attendance Register, statutory registers, minutes book of AGM and after going through the records produced by the respondents, the petitioner could not make out anything. One thing is that the Company is not at all doing any business. So, the question of tampering with the accounts does not arise. It is a mere apprehension of the petitioner that something has happened with reference to the books of account. The expenditure incurred for obtaining power connection was done only with a view to do his unauthorised business in the Company premises. The Respondents cannot be held responsible for the same. Thus, the petitioner had utterly failed to establish any of the clauses of Section 237(b) of Companies Act, 1956 corresponding to Section 213 of Companies Act, 2013 to order for any investigation into the affairs of the Company as no business is carried out by the Company. Thus, the petitioner has also utterly failed to prove any fraud committed by the Respondents towards the creditors and members in the affairs of the Company. Therefore, the petition is liable to be dismissed.

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• Service Tax

• 2017 (9) TMI 1330
  Challenge to the communication from the department regarding tax liability - Royalties - mining services - N/N. 30/2012 ST dated 20.06.2012 as amended by N/N.18/2016 ST dated 01.03.2016 - Held that: - If the Union of India has thought it proper to impose service tax by these Notifications referred, even on the Government Undertakings or Local Authority, such Organizations cannot claim exemption or immunity from such payment of tax on their own, nor they can refuse to appear before the concerned competent authority and make out their case - Such an attitude on the part of the Government Undertakings to take the cause straightaway before the Court of law, without even getting the claim adjudicated by the competent authority of the Respondent Department, is indeed unfortunate and deserves to be deprecated. This Court does not find any material on record to hold that the petitioner is not liable to pay Service Tax ex-facie but, on the contrary, the Notifications referred to in the impugned communication prima facie, may enjoin the said liability of Service Tax on the petitioner company. The exigibility of the Service Tax on the petitioner company on such Royalties paid by the petitioner company to the State of Karnataka, at this stage and would dismiss this petition as premature - petition dismissed - decided against petitioner.

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• 2017 (9) TMI 1329
  Cargo Handling Services - the Commissioner (Appeals) dropped the demand on the ground that the activity undertaken by the appellant is mining service and the same is taxable only w.e.f. 1/6/2007 - Held that: - the activity mentioned in Sl. No. (2) above is for loading and transportation of coal from one point to another point within the mines. The contract is mainly for transportation of raw coal for further processing and involves, loading and unloading of the dumpers/tippers - the activity has been decided in the appellant s own case in their favour as reported in Sainik Mining & Allied Services Ltd. Vs. Commr. of Central Excise, Customs & Service Tax, BBSR [2007 (11) TMI 90 - CESTAT, KOLKATA], where it was held that the transportation of coal within the mining area is not covered under the category of Cargo Handling Services - there is no justification to uphold the demand of Service Tax under the category of Cargo Handling services for the work carried out in respect of transportation of coal within the Mining area. Activity of hiring pay loaders for mechanical transfer of finished goods from Railway siding inside the Mines into Railway wagons for outward transportation - demand - Held that: - the issue is covered against the appellant in the case of M/s. Gajanand Agarwal Vs. CCEx, BBSR [2008 (6) TMI 163 - CESTAT KOLKATA], where it was held that any activity incidental to freight of cargo is liable to be taxed under “cargo handling service”. Mode of transport is irrelevant for incidence of levy once the service provided meets the test of handling of cargo in the manner envisaged by law - demand upheld. Appeal allowed in part and part matter remanded to the adjudicating authority only for the purpose of re-quantifying the demand and the associated penalties.

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• 2017 (9) TMI 1328
  GTA service - non-payment of service tax on GTA - claim of appellant is that appellant being proprietarship concern is not a person liable for paying service tax - abatement - Specified person under Rule 2 (1) (d) (v) of Service Tax Rules in relation to services under GTA - Held that: - if the consignee to be liable to pay freight, it has to be a factory registered under Factories Act, or any company established under Companies Act, or any corporation established by or under any law or any society registered under the Societies Registration Act etc. or any cooperative society established by or under any law or any dealer of excisable goods who is registered under the Central Excise Act, 1944 or the Rules made therein or any body corporate established or a partnership firm registered by or under any law - Being a proprietary concern, the appellant as a consignee of GTA services will not fall under the category of corporation, society or cooperative society. They are also not partnership firm or body corporate established by or under any law - there can be no tax liability at all on them since they will not be covered under Rule 2(1)(d)(v) of Service Tax Rules, 1994 or either in any of the guidelines listed therein in the capacity of a consignee of goods by Piaggio Vehicles (P) Ltd. - appeal allowed - decided in favor of appellant.

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• 2017 (9) TMI 1327
  Cargo Handling Services - Site Formation Services - composite contract - Held that: - The service tax have been demanded under the category of Cargo Handling Services for the work carried out by the appellant for moving Iron Ore Lumps from mines to the crusher plant. The appellant also appears to have carried out the incidental loading and un-loading of Iron Ore - the Tribunal in the case of Sainik Mining & Allied Services Ltd. vs. Commr. Of C.Ex., Cus. & S.T., BBSR [2007 (11) TMI 90 - CESTAT, KOLKATA] has held that the transportation of coal within the mining area is not covered under the category of Cargo Handling Services - there is no justification to upheld the demand of service tax under the category of Cargo Handling Services for the work of transportation of iron ore carried out within the mining area. Removal of over burden carried out by the appellant - whether classified under the category site formation services for the period prior to 01.06.2007 when the category of mining services was introduced separately? - CBEC Circular dated 12.11.2007 - Held that: - Tribunal in the case of M.Ramakrishna Reddy vs. Commr. Of C.Ex. & Cus, Tirupathi [2008 (10) TMI 115 - CESTAT, BANGALORE] has held that removal of overburden and excavate of ore undertaken as per mining contract cannot be covered under the category of Site formation - Since the period of duty in the present case is prior to 01.06.2007, the demand of service tax under the category of Site Formation Services is not justified and is set aside. Appeal allowed - decided in favor of appellant.

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• 2017 (9) TMI 1326
  Mining services - the appellant is described as Contractor for the mines owner and was required to undertake mining, crushing, screening and transportation of different materials from the mines making use of their technical, commercial and managerial expertise - Department was of the view that the activities carried out by the appellant for the mine owner are to be considered as taxable service classifiable under the category of mining of mineral, oil or gas falling under Sub-clause (zzzy) of Section 65 (105) - Held that: - the nature of activity carried out by the appellant for the mine owner is covered by the definition of mining service under Section 65 (105) sub-clause (zzzy).It is further seen from the agreement that the appellant is required to employ workmen, providing tools etc. and required to undertake mining activity of individual mines - Sub-clause (zzzy) of Section 65 (105) of the Finance Act, 1944, defines the taxable service under the category of Mining of Mineral Oil and Gas service as the service to be provided to any person in relation to mining of mineral oil or gas. It is further seen that the mine owner (who can be considered as service receiver) pays consideration to the service provider. Consequently, the appellant will be liable to pay service tax on the value of taxable service received by them during the period - appeal dismissed - decided against appellant.

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• 2017 (9) TMI 1325
  Intellectual property service - Technical Collaboration Agreement - the appellant would manufacture their product in India using Technical information, know-how and Patent rights of M/s.SICPA Holding Switzerland - demand of Service tax on Right to use Technical information - Held that: - identical issue came up before the Tribunal in the case of Reliance Industries Ltd. v. CCE & ST, LTU, Mumbai [2016 (6) TMI 1108 - CESTAT MUMBAI], where it was held that If an intangible property right was to refer to a right which is recognised by any country, then the legislature would not have used the expression under any law for the time being in force. The legislature would have merely stated that an intellectual property right would mean any right to an intangible property. There would have been no need for it to qualify the same with a recognition under any law for the time being in force - appeal allowed - decided in favor of appellant.

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• 2017 (9) TMI 1324
  Refund claim - GTA srevice - reverse charge mechanism - N/N. 03/2013-ST dated 01/03/2013 - rejection on the ground of time limitation - Section 11B of the Central Excise Act, 1944 - whether the tax collected by the revenue without the authority of law, can be retained by them and the limitation under section 11B would apply? Held that: - the Hon’ble Supreme Court in the case of Mafatlal Industries [1996 (12) TMI 50 - SUPREME COURT OF INDIA] held that any and every claim for refund of excise duty can be made only under and in accordance with Rule 11 or section 11B as the case may be - if the amount is not duty or tax at all, the provisions of section 11B would not apply. In the present case, there is no dispute that the amount claimed as refund is not tax and therefore, it cannot be governed by section 11B of the Act. The amount of refund as claimed by the appellant had lost its identity of Service Tax and cannot be rejected as barred by limitation. Hence, the appellant is entitled to refund of the amount as claimed by them and the impugned orders cannot be sustained. Appeal allowed - decided in favor of appellant.

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• 2017 (9) TMI 1323
  Cargo Handling service - short payment of service tax - tax with interest paid before issuance of SCN - penalty - Held that: - the assessee has paid the entire duty demand along with interest before issuance of SCN and the same has been appropriated as per the order-in-original passed by the adjudicating authority. In such circumstances, the adjudicating authority ought not to have imposed penalty u/s 78 of the Act, as sub-section 3 of Section 73 states that no penalty is to be imposed when the demand, interest has been paid before issuance of SCN - imposition of penalty is unwarranted and the same is set aside - appeal allowed - decided in favor of appellant.

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• 2017 (9) TMI 1322
  Penalty u/s 77 and 78 - GTA service - reverse charge mechanism - amount of tax with interest paid before issuance of notice - Held that: - the appellants were entertaining a bona fide belief and no malafide can be attributed to them as the receipt of GTA services were duly reflected in their statutory records and law on the issue was also clear. As such, this is a fit case for granting relief under section 80 of the FA, 1994 - Further, the provisions of section 73 (1A) also is to be made applicable - penalty set aside - appeal allowed - decided in favor of appellant.

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• 2017 (9) TMI 1321
  Penalty u/s 76 - Belated payment of tax - payment of 50% of interest liability - mandap keeper service - Held that: - there was a reasonable cause for the failure on the part of the appellant to have discharged the tax liability in time and instead pay up the same with delay - the provisions of section 80 ibid, as it was in force during the relevant period, can be invoked in their case and accordingly, there is a case for complete waiver of the penalty imposed under section 76 ibid - demand of balance 50% interest upheld - appeal allowed - decided partly in favor of appellant.

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• 2017 (9) TMI 1320
  Penalty u/s 78 - reverse charge mechanism - works contract service - non-payment of tax - Held that: - Both the authorities below observed that the appellant paid the tax upon detection by the Central Excise officers and therefore, it would be treated as suppression of facts with intent to evade payment of tax etc. Section 78 of Finance Act, 1994 provides imposition of penalty for failure to pay Service Tax for reasons of fraud or collusion or suppression of facts with intent to evade payment of Service Tax etc. - The ingredients namely fraud or collusion etc., as mentioned in Section 78 are positive act - In the present case, there is no materials on record and therefore, the imposition of penalty u/s 78 is not warranted. Penalty set aside - appeal allowed.

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• 2017 (9) TMI 1319
  Penalty u/s 78 - services imported from outside India - Reverse charge mechanism - Held that: - the appellant had conveniently forgotten to either pay the Service Tax or to bring the fact of receiving service from outside India to the knowledge of the department, until investigation was carried out against them - the appellant submitted all the documents with the statement of the amount received from outside India in response to the letter received from the department. There is no material available on record of suppression of fact with intent to evade payment of tax, or fraud or collusion etc., to invoke the penal provisions under Section 78 of the Finance Act, 1994 - penalty set aside - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2017 (9) TMI 1318
  MODVAT/CENVAT credit - capital goods/spares namely carding and combing machines producing final products, viz., sliver/combed/carded cotton - Held that: - similar issue decided in the case of Commissioner of Central Excise v. Thuran Spinning Mills Pvt. Ltd., Vadasandur and another [2013 (12) TMI 1608 - MADRAS HIGH COURT], where it was held that relief should not be denied on the capital goods used in the manufacture of intermediate products exempt from payment of duty which were used captively in the manufacture of finished goods chargeable to duty - credit allowed - appeal dismissed - decided against Revenue.

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• 2017 (9) TMI 1317
  CENVAT credit - input services - mounting activities on the vehicles at the premises of M/s.Tata Motors Ltd. - Held that: - The erection and commissioning of the machine is different from the mounting activities of body for motor vehicles. The agreement between the parties to engage the assessee for mounting activities is at the convenience of M/s.Tata Motors Ltd., which cannot be the basis for admissibility of the Cenvat Credit ignoring the provisions of Cenvat Credit Rules, 2004 - the mounting activities at the premises of M/s.Tata Motors Ltd., has no relation with the process of manufacture of the finished products of the assessee. Hence, the assessee is not eligible to avail credit on the input service. Extended period of limitation - Penalty - Held that: - the demand of Cenvat Credit for the extended period of limitation cannot be sustained - As the issue involved in this case is interpretation of the provisions of the Rules, imposition of penalty is not justified. Appeal allowed - decided partly in favor of Revenue.

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• 2017 (9) TMI 1316
  CENVAT credit - duty paying invoices - credit taken on the basis of false TR-6 Challans - penalty on Director - Held that: - allegation of producing false or fake TR-6 challans was not disputed. Hence, the appellant is not entitled to any relief on penalty as it is a clear case of payment of duty on false/fake challans and the imposition of penalties are justified - The plea of the appellant to shift the entire blame on the employee is without any substance cannot be accepted - the director of the appellant company is rightly penalized - appeal dismissed - decided against appellant.

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• 2017 (9) TMI 1315
  Manufacture - The appellant was supplied both steel and lead free of cost for fabrication of 42 Nos. of ‘Base Trans receiver Stations’ involving cutting, bending, slitting, drilling and galvanizing - Department took the view that process carried out by the appellant including that of galvanization amounts to manufacture - Held that: - the said fabricated structure was required to be supplied to M/s. Reliance Engineering Associates Pvt. Ltd., after galvanizing. This being so, the entire processes undertaken on the steel and lead received free of cost by the appellant, including that of galvanization will amount to manufacture - demand upheld. Penalty - Held that: - the appellant had not informed the department about the receipt of the raw materials nor did they make any intimation concerning the fact of getting the fabricated structures galvanized through their own job worker. Such an omission on their part will definitely take the color of suppression of facts with intent to evade payment of duty - penalty upheld. Appeal dismissed - decided against appellant.

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• 2017 (9) TMI 1314
  CENVAT credit - duty paying invoices - denial of credit on the ground of wrong mention of the vehicle nos. in the invoices issued by the registered dealers - Held that: - Admittedly, the appellant has manufactured their final product which stands entered in their RG-I records and cleared under Central Excise invoices on payment of duty. If the appellant has not received the raw material, the manufacture of final product is impossible. Further, the Revenue has not produced any corroborative evidence to show that if the raw material has not been received from the said two registered dealers what is the alternative source of such receipt of raw materials. Neither of the representatives of the appellants have deposed that the inputs were not actually transported from dealers to the manufacturing Unit. Tribunal in the case of Jyoti Industries Vs Commissioner of Central Excise & Service Tax Ludhiana [2015 (4) TMI 1158 - CESTAT NEW DELHI] has held that the Cenvat credit cannot be denied on statement of suppliers and allegations that vehicle nos. mentioned in the invoices cannot transport the goods, in the absence of any other corroborative evidences produced by the Revenue indicating as to from where inputs used were procured. Appeal allowed - decided in favor of appellant.

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• 2017 (9) TMI 1313
  CENVAT credit - process loss - the appellant sent the duty free inputs to job workers, but the full quantity was not received back in violation of Rule 4(5) (a) of the Cenvat Credit Rules, 2004 - appellant contended that it is a case of process loss - Held that: - the appellant failed to produce any evidence before the lower authorities in respect of the processing loss and/or the duty was discharged on waste and scrap. It is noted that the appellant had not informed that they were not receiving the entire quantity of the job-worked material and therefore, extended period of limitation would be invoked - demand upheld - appeal dismissed - decided against appellant.

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• 2017 (9) TMI 1312
  CENVAT credit - job-worked material - Rule 3(1) of the Central Excise Rules - Held that: - the adjudicating authority has discussed the statement of the appellant, case laws. But, it has not discussed the facts of the case as based on the records of the transaction under the provisions of erstwhile Central Excise Rules and present Central Excise Rules, as contended by the appellant - it is required to examine the facts of the case on the basis of the records and thereafter the applicability of law and case law could be decided - appeal allowed by way of remand.

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• 2017 (9) TMI 1311
  Penalty u/r 26 - case of appellant is that appellant being the eldest daughter of the Managing Director, had no other option but to sign all the documents of the Company including the Central Excise related documents - Held that: - In the statement of facts, it is mentioned that the concerned employees of the Company not only cheated her by mis-using their position, the Company also had to suffer embezzlement resulting in considerable financial loss as well as loss of reputation - the Adjudicating Authority had already penalized the Company by imposition of penalty under Section 11AC of the Central Excise Act, 1944. There is no material available on record to show that the appellant had conscious knowledge of the alleged irregularity. Therefore, the imposition of penalty on the appellant is not justified - appeal allowed - decided in favor of appellant.

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• 2017 (9) TMI 1310
  Credit of CVD - duty paying invoices - Respondent failed to produce the original/duplicate/triplicate copies of the Bill of Entry amounting to Countervailing Duty credit of Rs. 17,28,847/- - Held that: - It is contended by the Revenue in their appeal that the respondent had not produced any evidence before the Adjudicating Authority to prove that the inputs were actually received in the factory of the respondent - the Revenue had not disputed the above finding categorically. Hence, the appeal of the Revenue on this issue is without any substance. CENVAT credit - P.P. Woven Sacks which is similar to the final product manufactured by the Respondent - Held that: - there is no bar to avail Cenvat Credit on receipt of the duty paying goods under Rule 16(2) of the Rules, 2002. Therefore, there is no force in the grounds of appeal of the Revenue on this issue. Appeal dismissed - decided against Revenue.

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• 2017 (9) TMI 1309
  Waste and scrap arising in the course of manufacture of exempted goods - N/N. 89/95-CE dated-18/5/1995 - manufacture of Wagons - Held that: - the appellants are manufacturing dutiable as well as exempted railway wagons - It is clear from the wording of N/N. 89/95-CE that the exemption does not apply if the goods cleared from the factory are exempted goods and dutiable goods - Since in this case, the factory is producing both type of goods, the benefit of exemption is not available to the appellant. Penalty - Held that: - appellant were repeatedly told by the Department, still they were not maintaining any record nor following any excise procedures. The appellant’s plea that the issue involves interpretation of Notification is not correct as the wording of the notification is clear and unambiguous - penalty rightly imposed. Appeal dismissed - decided against appellant.

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• CST, VAT & Sales Tax

• 2017 (9) TMI 1308
  Input tax credit - partial credit / rebate - sale of by-product which is exempt - Section 17 of the Karnataka Value Added Tax (Act), 2003 - credit on Sunflower oil cake, which is input - when the sunflower oil is extracted, by-product in the form of de-oiled sunflower oil cake also becomes available. This by-product is sold by the respondent but on the sale of this by-product, no VAT is payable as it is exempted item under the KVAT Act - the appellant - State has taken the view that the assessee would be entitled to only partial rebate of input tax because of the reason that though output tax is paid on sunflower oil, it is not paid on the sale of de-oiled cake - assessee, on the other hand, contends that Section 17 of the KVAT Act would not be applicable in the instant case because of the reason that sunflower oil cake, as an input, is used in its entirety in the extraction of sunflower oil. De-oiled cake is not the result of any manufacturing process but is only a by-product. Held that: - The first mistake which is committed by the High Court is to ignore the plain language of sub-section (1) of Section 17. This provision which allows partial rebate makes the said provision applicable on the sales of taxable goods and goods exempt under Section 5. Thus, this sub-section refers to sale of the goods , taxable as well as exempt, and is not relatable to the manufacture of the goods. The High Court has been swayed by the fact that while extracting oil from sunflower, cake emerges only as a by-product. Relevant event is not the manufacture of an item from which the said by-product is emerging. On the contrary, it is the sale of goods which triggers the provisions of Section 17 of KVAT Act. Whether it is by-product or manufactured product is immaterial and irrelevant. Fact remains that de-oiled cake is a saleable commodity which is actually sold by the respondent assessee. Therefore, de-oiled cake fits into the definition of goods and this commodity is exempt from payment of any VAT under Section 5 of the KVAT Act. Thus, provisions of Section 17 clearly get attracted when sale of these goods takes place. Also, the High Court has not considered the import and effect of sub-rule (3) of Rule 131 of the KVAT Rules - After perusing Rule 131 in its entirety, it becomes clear that sub-rule (1) pertains to input tax directly relatable to sales of exempt goods which is non-deductible. Likewise, sub-rule (2) mandates that input tax directly relating to sale of goods shall be deductible. On the other hand, sub-rule (3) covers those cases where input tax is not directly relatable to exempt goods and taxable goods. It is therefore, applied in those cases where input tax relating to both sale and taxable goods and exempt goods is known. In that situation, formula is given under this sub-rule to work out the partial deduction. The High Court has neither take note of nor discussed sub-rule (3). Literal interpretation to Section 17 - there was no reason for departing from the principle of literal construction in a taxing statute. The entire scheme of the KVAT Act is to be kept in mind and Section 17 is to be applied in that context. Sunflower oil cake is subject to input tax. The Legislature, however, has incorporated the provision, in the form of Section 10, to give tax credit in respect of such goods which are used as inputs/ raw material for manufacturing other goods - how much tax credit is to be given and under what circumstances, is the domain of the Legislature and the courts are not to tinker with the same. On literal interpretation of Section 17 it can be gathered that it does not distinguish between by-product, ancillary product, intermediary product or final product. The expressions used are goods and sale of such goods is covered under Section 17. Both these ingredients stand satisfied as de-oiled cakes are goods and the respondent assessee had sold those goods for valuable consideration - Section 17 gets attracted in the instant case and the view taken by the High Court is erroneous. Appeal allowed - decided in favor of revenue.

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• 2017 (9) TMI 1307
  Input tax credit - Section 11 of the VAT Act - whether the tax credit is to be reduced at the rate of 4% under sub-clause (ii) and again at the same rate under sub-clause (iii) as well or deduction permissible is only once? Held that: - The Assessing Officer had held that in respect of such goods tax credit is required to be reduced at the rate of 4% under sub-clause (ii) and again at the rate of 4% under sub-clause (iii) - the legislative intent of Section 11(3)(b) can be gathered from proviso thereto which provides that where the rate of tax of taxable goods is less than 4%, then the amount of tax credit in respect of such dealer shall be reduced by the amount of tax calculated at the rate of tax set out in the Schedule of such goods, meaning thereby, if the tax credit available to a dealer is less than 4%, the reduction should be limited to such credit and no more. From this, the High Court has observed that the Legislature envisaged that in no case reduction of tax credit under Section 11(3)(b) would accede 4%. It is a mega tax credit scheme which is provided under the VAT Act meant for all kinds of manufactured goods. The material in question, namely, furnace oil, natural gas and light diesel oil are admittedly subject to VAT under the VAT Act. The Legislature, however, has incorporated the provision, in the form of Section 11, to give tax credit in respect of such goods which are used as inputs/ raw material for manufacturing other goods. Rationale behind the same is simple. When the finished product, after manufacture, is sold, VAT would be again payable thereon. This VAT is payable on the price at which such goods are sold, costing whereof is done keeping in view the expenses involved in the manufacture of such goods plus the profits which the manufacturer intends to earn. Insofar as costing is concerned, element of expenses incurred on raw material would be included. In this manner, when the final product is sold and the VAT paid, component of raw material would be included again. Keeping in view this objective, the Legislature has intended to give tax credit to some extent. However, how much tax credit is to be given and under what circumstances, is the domain of the Legislature and the courts are not to tinker with the same. Reduction of 4% would be applied whenever a case gets covered by sub-clause (ii) and again when sub-clause (iii) is attracted - This, however, would be subject to one limitation. In those cases where VAT paid on such raw material is 4%, as in the case of furnace oil, reduction cannot be more than that. After all, Section 11 deals with giving credit in respect of tax that is paid. Appeal allowed - decided in favor of appellant.

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• 2017 (9) TMI 1306
  Rectification application - refund claim - The petitioner seeks for a direction upon the respondent to modify the orders of refund dated 23.11.2015 and the orders of rejecting the applications filed by the petitioner for rectification dated 25.11.2016 and consequently to sanction refund of the value of 'Capital Goods' in terms of Section 18(1) of the TNVAT Act and the refund pertaining to wastage - time limitation - Held that: - It is no doubt true that the petitioner did not immediately file the applications but preferred the applications after about a period of 10 months. Be that as it may. The respondent was bound to consider the said applications, since the TNVAT Act does not prescribe an outer time limit for filing applications under Section 84 of the Act - the reason assigned by the respondent in the orders dated 25.11.2016 for rejecting the applications filed under Section 84 of the Act is incorrect. Admittedly, in the order dated 23.11.2015, while granting partial relief to the petitioner, the respondent disallowed the substantial portion of the refund claim. The order does not stated as to why such disallowance has been made. There is no explanation in the order dated 23.11.2015 as to how, the respondent adopted uniform percentage of wastage at 2%. When the respondent has not assigned reasons for disallowing part of refund claim while passing order dated 23.11.2015, it is sufficient to hold that the order suffers from error apparent on the face of the record and necessarily rectifiable under Section 84 of the Act. Therefore, the respondent was bound to exercise the power in a judicious manner and consider the case of the petitioner, as putforth by them, in their applications filed under Section 84 of the Act dated 28.10.2016. The orders passed by the respondent dated 25.11.2016 and the orders of refund dated 23.11.2015 in so far as it disallow the part of the refund claim under the heads Wastage as per Section 19(9) of the Act at 2 % and Less Capital Goods are set aside and the matter is remanded to the respondent for fresh consideration - petition allowed by way of remand.

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• 2017 (9) TMI 1305
  Liability of interest - relevant date - whether the first respondent was justified in demanding interest from the due date for re-payment of the loan or the petitioner is liable to pay interest only from the date of the returns? Held that: - the liability to pay penal interest can be only from the date on which repayment is due and not on the date on which return has been filed. The interpretation sought to be given by the first respondent in the impugned notice is incorrect interpretation - matter is remanded to the first respondent for fresh consideration - petition allowed by way of remand.

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• 2017 (9) TMI 1304
  Levy of purchase tax - Section 7(A) of the TNGST Act - sale of Turmeric and Turmeric Powder - The case of the petitioners is largely based on the decision of the Hon'ble Division Bench in the case of Hotel Shri Kannan Vs. State of Tamil Nadu [2007 (4) TMI 623 - MADRAS HIGH COURT], where it was held that Section 7(A) should be a charging section as well as a remedial one, in as much as it levies a tax on the purchases of goods by a dealer from a registered dealer or from any other person who may be either unregistered dealer or other persons such as agriculturists and other producers who are not liable to pay tax under the TNVAT Act on the sales or purchases. Held that: - it would be improper to interdict the proceedings at the very threshold, namely, at the stage of show cause notice. Admittedly, the respondent has jurisdiction to issue the impugned show cause notices and what has now been contested by the petitioners is that they have no power to levy purchase tax. This issue involves adjudication of disputed questions of facts and therefore, the petitioners have to necessarily submit their objections to the impugned notices. The writ petitions are held to be premature and not maintainable - petition dismissed.

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• 2017 (9) TMI 1303
  Classification of goods - aloe vera juice - whether aloe vera juice is covered by the expression "processed or preserved vegetable"? - Held that: - The case of the Revenue is not as to whether aloe vera is a vegetable or "Sabji" but aloe vera juice is not "fruit juice" nor covered under the expression "processed or preserved vegetables". It is settled principle of law that if an entry had been interpreted consistently in a particular manner for several assessment years, then in that event it is not permissible for the Revenue to depart therefrom, unless there is any material change - It is not disputed by the Revenue that aloe vera juice is being sold by the dealer at lower rate of tax since 2007-08 and even after the enactment of the U.P. Value Added Tax Act, 2008. Tribunal was justified in holding that the entry "processed vegetable" is of wide amplitude and would within its ambit include aloe vera juice which can only be sold upon being processed - appeal dismissed - decided against Revenue.

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• Indian Laws

• 2017 (9) TMI 1302
  Practiced modes of ‘talaq’ amongst Muslims -‘talaq-e-biddat’ – triple talaq - polygamy and ‘halala’ - relevancy of Dissolution of Muslim Marriages Act, 1939 - Held that:- The Holy Quran has attributed sanctity and permanence to matrimony. However, in extremely unavoidable situations, talaq is permissible. But an attempt for reconciliation and if it succeeds, then revocation are the Quranic essential steps before talaq attains finality. In triple talaq, this door is closed, hence, triple talaq is against the basic tenets of the Holy Quran and consequently, it violates Shariat. To freely profess, practice and propagate religion of one’s choice is a Fundamental Right guaranteed under the Indian Constitution. That is subject only to the following- (1) public order, (2) health, (3) morality and (4) other provisions of Part III dealing with Fundamental Rights. Under Article 25 (2) of the Constitution of India, the State is also granted power to make law in two contingencies notwithstanding the freedom granted under Article 25(1). Article 25 (2) states that “nothing in this Article shall affect the operation of any existing law or prevent the State from making any law- (a) regulating or restricting any economic, financial, political or other secular activity which may be associated with religious practice; (b) providing for social welfare and reform or the throwing open of Hindu religious institutions of a public character to all classes and sections of Hindus.” Except to the above extent, the freedom of religion under the Constitution of India is absolute and on this point, and in full agreement with the learned Chief Justice. However, on the statement that triple talaq is an integral part of the religious practice, it is respectfully disagreed. Merely because a practice has continued for long, that by itself cannot make it valid if it has been expressly declared to be impermissible. The whole purpose of the 1937 Act was to declare Shariat as the rule of decision and to discontinue anti-Shariat practices with respect to subjects enumerated in Section 2 which include talaq. Therefore, in any case, after the introduction of the 1937 Act, no practice against the tenets of Quran is permissible. Hence, there cannot be any Constitutional protection to such a practice and thus, my disagreement with the learned Chief Justice for the constitutional protection given to triple talaq. As also have serious doubts as to whether, even under Article 142, the exercise of a Fundamental Right can be injuncted. When issues of such nature come to the forefront, the discourse often takes the form of pitting religion against other constitutional rights. As believe that a reconciliation between the same is possible, but the process of harmonizing different interests is within the powers of the legislature. Of course, this power has to be exercised within the constitutional parameters without curbing the religious freedom guaranteed under the Constitution of India. However, it is not for the Courts to direct for any legislation. What is held to be bad in the Holy Quran cannot be good in Shariat and, in that sense, what is bad in theology is bad in law as well. In view of the different opinions recorded, by a majority of 3:2 the practice of ‘talaq-e-biddat’ – triple talaq is set aside.

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