TMI Tax Updates - e-Newsletter
September 28, 2016

Case Laws in this Newsletter:

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

TMI SMS

• Power to Conduct Audit under Service Tax - Scope of Rule 5A(2) of ST Rules, 1994 - SC stays the operation of the Delhi High Court judgment

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• Department directed to refund the taxes paid by the assessee in respect of additional income offered during the survey action - Tri

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• Deposit of amount of the firm in the bank a/c of partner- may be a violation of Indian Partnership Act but Not a violation of Income Tax Act

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• CBEC releases Draft Rules and Formats - Draft GST Registration Rules, GST Payment Rules and GST Invoice Rules with formats

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Articles

1. Power to Conduct Audit under Service Tax - Scope of Rule 5A(2) of service tax Rules, 1994 r.w.s. 94(1) and 94(2)(k) - Apex Court stays the operation of the Delhi High Court judgment and order

   By: Surender Gupta

2. Will anything and everything, done anywhere, for anybody, for business/no business, for money/without money will constitute supply under GST??

   By: Ranjan Mehta

3. GST COUNCIL IN ACTION

   By: Dr. Sanjiv Agarwal

News

1. CBEC releases draft Rules and Forms for GST refund and returns

2. RBI Reference Rate for US $

3. In order to facilitate the declarants, counters for receiving declarations under the Income Declaration Scheme - 2016 to remain functional till 12:00 midnight on 30th September, 2016

Notifications

Central Excise

1. 46/2016 - dated 26-9-2016 - CE (NT)

Seeks to amend Notification No. 20/2016-CE (NT) dated 01.03.2016 [Central Excise (Removal of Goods at Concessional Rate of Duty for manufacture of Excisable and other Goods) Rules, 2016]

SEZ

2. S.O. 3029 (E) - dated 21-9-2016 - SEZ

Consolidation of all Special Economic Zones of M/s. Adani Ports and Special Economic Zone Limited [earlier known as M/s. Mundra Port and Special Economic Zone Limited (MPSEZL)]

VAT - Delhi

3. F.3(11)/Fin(T&E)/2009-10/DSVI/317 - dated 23-9-2016 - DVAT

Appointment of Assistant Commissioner-cum-VATO

Circulars / Instructions / Orders

Income Tax

1. Press Release - dated 27-9-2016

CBDT Extends working Hours on 30th September, 2016 for IDS Declarations

Highlights / Catch Notes

GST

• CBEC Releases Draft Rules for GST Refunds and Returns; Seeks Stakeholder Feedback to Streamline Taxpayer Processes.

  News : CBEC releases draft Rules and Forms for GST refund and returns
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• CBEC Releases Draft Rules for GST Registration, Payment, and Invoice to Streamline Compliance Processes.

  News : CBEC releases Draft Rules and Formats - Draft GST Registration Rules, GST Payment Rules and GST Invoice Rules with formats
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Income Tax

• Cooperative Banks Not Required to Deduct Tax on Interest Payments to Members Before June 1, 2015, u/s 194A.

  Case-Laws - HC : TDS u/s 194A - a cooperative bank was not required to deduct tax from the payment of interest on time deposits of its members paid or credited before 1st June 2015 - HC
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• Foreign Exchange Gain from Japanese Plant Acquisition Deemed Capital Asset Transaction by Tribunal.

  Case-Laws - AT : Since the transaction was relatable to acquisition of capital asset, namely, plant and machinery by way of import from Japan, this Tribunal is of the considered opinion that the gain due to foreign exchange fluctuation would definitely be on the capital field. - AT
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• Partner's Bank Account Deposits from Firm Don't Breach Income Tax Act, Even if Violating Indian Partnership Act Sec 19(2).

  Case-Laws - AT : In deposit of trading receipts of the firm in the bank account of the partner, the assessee has not violated any of the provisions of the Income Tax Act, even if it may be a violation of the section 19(2) of the Indian Partnership Act, 1932, and further, there is no dispute that the money belonged to the partnership firm and after deposit, the money was transferred to the partnership firm, in such circumstances, no addition is called for in the case of partner of the firm - AT
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• Court Rules No Extra Income Addition if Declared Income Exceeds 8% Benchmark in Works Contract.

  Case-Laws - AT : Net profit computation - rejection of books of accounts - when declared income is more than the estimated income applying 8% of the works contract, no addition can be made - AT
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• Erroneous tax claim without evidence of concealment or inaccuracy does not justify penalty imposition.

  Case-Laws - AT : Mere erroneous claim in the absence of any concealment or furnishing of inaccurate particulars is not a ground for levying penalty especially when there is nothing on record to show that assessee has concealed any particulars or furnished any inaccurate particulars - AT
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• Commissioner of Income Tax (Exemptions) to focus on charitable aspects, can grant conditional registration to prevent misuse.

  Case-Laws - AT : CIT(E) should be considering only the charitable side of the institution and grant the registration. Of course, he chooses or expects the trust will misuse the registration, he is at absolute liberty to grant conditional registration by imposing conditions like, it is eligible to claim the exemption only on charitable activities, separate books to be maintained, both books be subject to audit etc. - AT
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• Tax Department Ordered to Refund Taxes on Additional Income Declared Under Coercion in Survey per Section 133A.

  Case-Laws - AT : Addition to additional income offered during the survey action - dumb document - relevance / validity of statement made u/s 133A - threat undue influence or coercion - Department directed to refund the taxes, if any, paid by the assessee in respect of additional income offered during the survey action - AT
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• Income Disclosure u/s 133A: No Contest on Coercion Claims After Tax Payment and Acceptance by Officer.

  Case-Laws - AT : Relevance / validity of statement made u/s 133A - Even if, for the sake of arguments, we assume it so, it is to be noticed that the assessee had paid taxes on the income disclosed and if the AO would have accepted his returned income as per the disclosure, the assessee would have got no chance or opportunity to claim that the disclosure made by him was under force, coercion or duress. - AT
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Customs

• Processed Cloves Defined: Only Recognized When Oil is Extracted from Natural Cloves, Minor Supplier Activities Excluded.

  Case-Laws - AT : Classification - import of processed cloves - minor activities done by the supplier will not make the goods as processed cloves and that such processed cloves come into existence only when oil is extracted from natural cloves. - AT
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• High Court Criticizes DRI for Assuming Tax Evasion Without Evidence; Stresses Reporting to Customs Authorities First.

  Case-Laws - HC : Valuation - demand of customs duty on license fee paid to the overseas licensor - payment of service tax on license fee - the DRI could not have proceeded on the footing and in the facts and circumstances of the present case that there is a definite evasion. It is their duty to bring such cases of alleged evasion to the notice of the customs - HC
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SEZ

• Consolidation of All Special Economic Zones Under Adani Ports & SEZ Limited Announced; Tax Implications Highlighted.

  Notifications : Consolidation of all Special Economic Zones of M/s. Adani Ports and Special Economic Zone Limited [earlier known as M/s. Mundra Port and Special Economic Zone Limited (MPSEZL)] - Notification
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Service Tax

• Supreme Court Halts Delhi HC Verdict on Service Tax Audit Powers u/r 5A(2) and Section 94 Provisions.

  Articles : Power to Conduct Audit under Service Tax - Scope of Rule 5A(2) of service tax Rules, 1994 r.w.s. 94(1) and 94(2)(k) - Apex Court stays the operation of the Delhi High Court judgment and order - Service Tax
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• Tribunal's dismissal of appeal deemed incorrect; doctrine of merger cited amid simultaneous legal remedies pursuit.

  Case-Laws - HC : Validity of CESTAT order - Tribunal dismissed the appeal on the ground that matter is pending before the High court - Doctrine of merger - It could not have been dismissed as not maintainable only because the petitioner in the writ petition and the appellant before the Tribunal were pursuing both remedies. - HC
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• Petitioner Must Use Appeal Remedy Under Relevant Act; Insufficient Grounds to Bypass CESTAT Appeal Process.

  Case-Laws - HC : Challenge to the show cause notice - this Court is of the view that the petitioner should avail the Appeal remedy available under the Act and no grounds have been made by the petitioner to justify their conduct in bypassing the remedy before the CESTAT - HC
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• Appellant pays service tax with interest after audit notification, avoids penalty due to genuine belief of non-liability.

  Case-Laws - AT : Appellant had bonafide believed that he is not liable to pay service tax but during the audit, the audit party informed him that he is liable to pay service tax, then he immediately paid the entire service tax along with interest - No penalty - AT
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• No Service Tax Liability on Income from Leasing Machines for Five Years, Court Rules.

  Case-Laws - AT : Service tax liability - banking and financial service - income earned towards leasing out of certain machines - agreement was for providing lease/ right by the respondent to the third party for use of plant and machinery for a period of five year - No service tax liability - AT
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• Commissioner Lacks Authority to Instruct Assistant Commissioner to Challenge Own Order Before Commissioner (Appeals.

  Case-Laws - AT : There were no powers or jurisdiction with the Commissioner to direct the Assistant Commissioner to challenge the order passed by him before the Commissioner (Appeals) - AT
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Central Excise

• Valuation of Cables: Duty Obligations Unaffected by Buyer's Payment Defaults, Ensuring Consistent Application Despite Payment Issues.

  Case-Laws - AT : Valuation - lesser payment of duty paid on the cables which were cleared for second time - Some amount has been defaulted by the buyer cannot result in reduction in duty incidence - AT
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• Supreme Court Clarifies Rule 14: Only Irregularly Availed Cenvat Credits Recoverable, Valid Credits Protected from Reclaim.

  Case-Laws - AT : Cenvat Credit - impact of subsequent decision of apex court - Rule 14 of Cenvat Credit Rules, 2004 provided for recovery of irregularly availed Cenvat credit and it is beyond the scope of said Rule 14 of Cenvat Credit Rules to recover the Cenvat credit which was validly taken - AT
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VAT

• High Court Upholds Penalty Under RVAT Section 76(2)(b) for Unfilled Material Columns and Failure to Punch VAT-47.

  Case-Laws - HC : Imposition of penalty u/s 76(2)(b) of RVAT - The material columns remained unfilled and equally important fact that VAT-47 was not at all punched is sufficient to hold that the AO was well justified in coming to the conclusion of imposition of penalty - HC
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• Petitioner Must Prove Input Tax Credit Legitimacy; Cannot Blame Selling Dealer Without Transaction Details.

  Case-Laws - HC : Input tax credit - with regard to the mismatch, the petitioner can very well establish through records, regarding the payment of sale price etc., and without furnishing specific details with regard to the transactions, the petitioner cannot say that the selling dealer alone has to be proceeded against. - HC
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• Court Classifies Coated Fabric as 'Textile' for Tax Purposes Under Haryana VAT, Aligns with Existing Case Law.

  Case-Laws - HC : Taxability - classification of goods - rexine cloth - HVAT - the product being manufactured by the appellant, namely, coated fabric also known as leather cloth/rexin falls in the term 'textile'. - HC
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Case Laws:

• Income Tax

• 2016 (9) TMI 1080
  Assessment of income - total income was determined by adding surcharge on sales tax under the Kerala General Sales Tax Act and turn over tax levied under the Kerala Surcharge on Taxes Act, 1957 - Held that:- According to us, irrespective of the controversy concerning Sections 240 and 245, the appellant is entitled to succeed. Admittedly, for the assessment years 2007-2008 to 2011-2012, the turn over of surcharge and turn over tax paid by the assessee were added to their total income and tax was levied on that basis. The correctness of that issue was decided by the Tribunal in the assessee's favour for one of the assessment years. That order was followed by the Commissioner of Income Tax (Appeals) before whom the appeals concerning the remaining years were pending at that time. The revenue carried those matters also before the Tribunal and the Tribunal followed its earlier order and upheld the order passed by the First Appellate Authority. All these orders were challenged by the revenue before this Court. This Court confirmed the order passed by the Tribunal and connected cases. As on date, there is no appeal against those judgments. This, therefore, means that the total income of the assessee could not have been determined by adding the surcharge and turn over tax paid by the assessee. If that be so, not only that the assessee was entitled to have the amounts found to be refundable in Exts.P2 and P10 series refunded to it, but also the addition of the surcharge and turn over tax to the total income in Ext.P1 assessment order for the year 2012- 2013 is also illegal. Therefore, despite the fact that an appeal filed against Ext.P1 is pending consideration of the Commissioner of Income Tax (Appeals), as of now, the department is not entitled to adjust the amount refundable to the assessee consequent to the orders passed by the Commissioner of Income Tax Appellate Tribunal and this Court. For these reasons, we are inclined to set aside the judgment under appeal and also Ext.P2 and direct the first respondent to refund the amount mentioned in Ext.P2 to the assessee forthwith.

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• 2016 (9) TMI 1079
  Notional loss of depreciation - whether set off against other income of earlier years prior to initial assessment year could not be carried forward to set off in the initial assessment year for the purpose of working out the deduction under Section 80 IA of the Act, when the same is permitted under Section 80 IA (5) of the Act” - Held that:- Hon'ble Division Bench of this Court in Velayudhaswamy Spinning Mills Pvt. Ltd.,'s case (2010 (3) TMI 860 - Madras High Court ), held that once the losses and other deductions are set off against the income of the assessee in the previous year, it should not be re-opened again, for the purpose of computation of current year income, under Section 80-I and 80-IA of the Act.

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• 2016 (9) TMI 1078
  TDS u/s 194A - Whether the interest paid to members of a Co-operative Bank above Rs. 10,000/- should be added to tax or not?? - Held that:- The provisions of the section 194(3)(v) of the Income-tax Act have been amended so as to expressly provide that the exemption provided from deduction of tax from payment of interest to members by a co- operative society under Section 194A(3)(v) of the Income-tax Act shall not apply to the payment of interest on time deposits by the co-operative banks to its members. As this amendment is effective from the prospective dated of 1st June, 2015, the co-operative bank shall be required to deduct tax from the payment of interest on time deposits of its members, on or after the 1st June 2015. Hence, a cooperative bank was not required to deduct tax from the payment of interest on time deposits of its members paid or credited before 1st June 2015 Gratuity payable to its employees - availability for deduction - Held that:- The counsel for the assessee would be quick to point out that even if it is not permissible to make a deduction, in such an event, on making payment as provided under Section 43-B (b), it would be permissible if the actual payment is made and these sections are mutually exclusive and therefore, the Karnataka Electricity Board case is no longer relevant, by virtue of the amendment to Section 40-A(7). Under Section 43-B, the assessee had not merely made a provision but payment was actually made and therefore, was entitled to deduction, would also answer this question as to whether the payment made towards a gratuity fund could be deducted. Interest receivable from non-performing assets, bad and doubtful debts - the actual expression used is interest payable and not reflected in the profit and loss account, could be deducted? - Held that:- the mere nomenclature adopted with reference to the bad loans and advances receivable, would refer to all non- performing assets of any nature, of whatever category it was placed as a non-performing asset and therefore, the decision of this court in Canfin Homes [2011 (8) TMI 178 - KARNATAKA HIGH COURT ]would squarely apply. Accordingly, the above question of law also stands answered

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• 2016 (9) TMI 1077
  Addition on account of carried forwarded unabsorbed depreciation - CIT(A) deleted the addition - Held that:- Perusal of provisions of s. 32(2) as substituted by the Finance (No. 2) Act, 1996 w.e.f. 1st April, 1997 (hereinafter called the "second period") says if income of the assessee under all heads is insufficient to absorb the unabsorbed depreciation allowance, then such amount is to be carried forward to the following assessment year to be set off against the income arising under the head ‘Profits and gains of business or profession’. Not only that, the business or profession for which the allowance was computed should continue to be carried on by the assessee during the previous year relevant to assessment year in which the set off is claimed. The exercise of carrying forward such unabsorbed depreciation allowance is to be continued upto eight assessment years immediately succeeding assessment year for which the aforesaid depreciation allowance was first computed. From here it follows that the amount of unabsorbed depreciation allowance which could not be set off against income under any head in the year in which the allowance was first computed, shall be eligible to be carried forward for set off only against income under the head ‘Profits and gains of business or profession’ to the following assessment year(s) not more than eight assessment years immediately succeeding the assessment year for which it was first computed. The provisions of Sec.32(2) as substituted by the Finance Act, 2001 w.e.f. 1st April, 2002, applicable for AY 2004-05 & 2005-06 ) Assessment years under consideration (hereinafter called the "third period") reads as under : "(2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-s. (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-s. (2) of s. 72 and sub-s. (3) of s. 73, the allowance or the part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years". The CIT(A) rightly accepted the stand taken on behalf of the Assessee and reversed the action of the AO. We are of the view that in the light of the decision of the Hon’ble Gujarat High Court in the case of General Motors India Pvt. Ltd. wherein held that carry forward of unabsorbed depreciation concerning AY. 2001-02 and assessment years prior thereto can be set off in subsequent which has the effect of overruling the decision of the Special Bench in the case of Times Gurantee (2010 (6) TMI 516 - ITAT, MUMBAI ) wherein it was held that unabsorbed depreciation prior to the period 1997-98 can be carried forward for set off against the income for a maximum of eight years starting from the A.Y. 1997-98 and also on the basis of other decisions referred to above, the order of the CIT(A) does not call for any interference - Decided in favour of assessee

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• 2016 (9) TMI 1076
  Disallowance of bad debts - applicability of condition laid down u/s 36(2) - Held that:- We are of the considered view that the only condition which required to be fulfilled by the assessee for claiming relief u/s 36(1)(VII) is to demonstrate that the amount claimed as bad debt should have been considered in the income of assessee of the year under consideration or in any earlier year. Ld. CIT(A) has pointed out that during assessment proceedings the assessee was not able to explain as to in which year the said amount claimed as bad debt was considered as the income of assessee. The said fact was however verified by CIT(A) by asking the assessee to furnish said details but the assessee could not furnish any such details even before CIT(A). Therefore, considering this factual position ld. CIT(A) has rightly come to the conclusion that the condition laid down u/s 36(2) of the I.T. Act has not been fulfilled. Therefore, the assessee claim of bad debts was rightly disallowed by CIT(A).Even before us no new circumstance have been brought on record in order to controvert or rebut the findings recorded by the learned CIT (A). Moreover, there is no reason for us to deviate from the findings recorded by the learned CIT (A). Therefore, we are of the considered view that the findings recorded by the learned CIT (A) are judicious and are well reasoned. Accordingly, we uphold the same.- Decided against assessee. Unexplained cash credit u/s 68 - Held that:- As in this respect no such explanation was furnished before AO even after availing several opportunities. We have also noticed that copy of letter dated 19/11/2009 relied upon by the assessee was also not filed during appellate proceedings and even before us no application for leading additional evidences has been moved. Therefore, the assessee’s claim had remained unsubstantiated that it had filed ledger accounts of the parties before the AO in support of its claim of reconciliation. From the facts and circumstances of the present case and after going through the impugned orders passed by CIT(A), we are of the considered view that since the assessee had failed to furnish explanation and reconciliation in respect of fresh credits appearing in its books of accounts and the assessee has also failed to discharge the onus of proving creditworthiness of the parties by not filing the confirmations of the parties. Therefore, ld. CIT(A) has rightly dismissed this ground of appeal.- Decided against assessee.

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• 2016 (9) TMI 1075
  Levy of penalty under section 271(1)(C) - whether the assessee firm had inflated the profits by introducing the income from undeclared sources to get maximum deduction under section 80IC? - Held that:- The facts in the present case, we find, are identical to that in the preceding year, being penalty levied on addition made of unproved cash sales. As in the preceding year, the assessee in the impugned year had maintained complete Books of accounts which were audited also. The Books of accounts alongwith purchase bills, sales bills and stock register were produced before the lower authorities and complete facts with regard to sales made to different parties was disclosed. Thus the factum of cash sales was not concealed by the assessee. The sales ,including the cash sales,had been accepted by the sales tax authorities. The authorities below disbelieved the explanation of the assessee with regard to cash sales because complete details of the parties to whom cash sales was made was not disclosed. Since on identical facts the Hon'ble I.T.A.T. has deleted penalty in the case of the assessee in the preceding year , respectfully following the same, we set aside the order of the authorities below and delete the penalty levied in the impugned year. Decided in favour of assessee

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• 2016 (9) TMI 1074
  Addition debiting the cost of appreciation as on 1.4.1981 - capital gain computation - Held that:- From the details of the sale instance of plots in the same area during the same period i.e. March, 1978 to 20.04.1981, it is noticed that the Market Value has varied between Rs. 371 per sq. yard to Rs. 1811 per sq.yard. Wide difference can be attributed to a number of factors such as location, extent of land and the taste of bidders. The area of plots considered for comparison is very less compared to the area of the plot contributed as capital by the assessee. As rightly pointed out by the learned counsel for the assessee the area is almost four times and therefore, the data relied upon by the AO cannot be relied upon in toto, more particularly, since the sale instances at Sl. No.1 to 6 are of the financial year 1978-79, the average of which is less than Rs. 1000/- per sq. yard while the average of the sale instances in 1981 is around Rs. 1780 per sq. yard. Since, the FMV of the land as on 1.4.1981 is to be adopted and the value adopted by the assessee @ Rs. 1000 per sq. yard is much less than this average, as convinced that the value adopted by the assessee is fair, reasonable and based on the relevant data. In view of the same, thus direct the AO to adopt the same for arriving at the cost of acquisition necessary for arriving at the capital gain. In view of the same, the assessment order is set aside. - Decided in favour of assessee.

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• 2016 (9) TMI 1073
  Grant the interest u/s 244A - Withhold amount of refund beyond the date of issuance of intimation/order u/s 143(1) - Held that:- We find that there was no proper justification on the part of the revenue to Rajashekhar 8 Swaminathan withhold the amount of refund beyond the date of issuance of intimation/order u/s 143(1). We can appreciate that upto the date of passing order/intimation u/s 143(1), no interest shall be payable by the department to the assessee because of clear provisions of law on the statute in this regard, but for the period of delay in issuing the refund after the date of passing of the order u/s 143(1), the assessee is entitled for interest and revenue is liable to pay it to the assessee. Thus, we direct the AO to grant the interest u/s 244A for the period falling between the date of passing of order u/s 143(1) and actual date of granting of refund, at the rate of interest as would have been applicable if the refund amount would have been for an amount more than 10% of the gross tax. - Decided in favour of assessee

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• 2016 (9) TMI 1072
  Proceeding of assessment u/s 153A - income from house property - Held that:- CIT(A) has mentioned in para 4.4 of his order that certain loose papers relating to house property under consideration showing details of map of each room, doors and windows were found and seized. Therefore, the assumption of jurisdiction by the AO u/s 153A of the Act is in accordance with law, which is also supported by the land mark decision in the case of CIT vs. Kabul Chawla, (2015 (9) TMI 80 - DELHI HIGH COURT) wherein it was held that completed assessment can be interfered with by the AO while making the assessment u/s 153A only on the basis of some incriminating material un-earthed during the course of search or requisition documents for undisclosed income or property discovered in the course of search, which were not produced or not already disclosed or made known in the course of original assessment. Since in the case of assessee, the renovation/construction of house was undertaken during the course of assessment year under consideration, therefore, assumption of jurisdiction u/s 153A by the AO is justified. Addition being the difference of valuation report and the investment shown in the books of accounts - Held that:- As it is seen that the DVO/A.O. has not provided proper opportunity to the assessee as only one day for filing the objection was allowed, which was also ignored by the AO and made ad hoc addition as per his whims. Since the report of Valuation Officer is also an estimate, though it is by technical person, it is noticed that the DVO has applied PAR 1992 rates as per C.B.D.T. Instruction No. 1671, which is claimed to be duly adjusted for Bhopal. However, the assessee has not been supplied with any working paper to verify the claim of the DVO. It is also noticed that PAR 1992 rates are relevant for very high class building in New Delhi or Metro areas, where cost of construction is 30% higher than the cost of material and labour in the small town like Bhopal. It has been held in several judicial cases that where the State PWD rates are published those rates should be applied in preference to PAR rates. The actual construction are awarded at rates 20 % to 30% below PAR rates. We are of the considered opinion that the addition can be made solely on estimated basis based on DVO’s report is not justified and proper. Therefore, in the interest of justice and fair play, it would be reasonable to restrict the addition of Rs. 5,61,761/- to Rs. 2,00,000/- for assessment year 2005-06 and addition of Rs. 4,43,473/- to Rs. 1,50,000/- for assessment year 2006-07, which was pronounced in the open court. Appeal decided partly in favour of assessee

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• 2016 (9) TMI 1071
  Validity of assessment - Notice served u/s. 143(2)(iii) - applicability of provisions of section 292BB - Held that:- In this case the assessee has filed the return of income, which was selected for scrutiny and assessment was completed u/s.143(3)(ii) of the Act. The undisputed fact in this case is that though the notice u/s.143(2) was issued on 26.09.2008 to the assessee, which is beyond the prescribed statutory time limit prescribed. Now the law is well settled that it is mandatory on the A.O. to issue the notice u/s.143(2) and served the same on the assessee within 12 months from the end of the month in which the assessee has filed the return of income. We, therefore, respectfully following the principles laid down by the Hon'ble Special Bench in the case of Kuber Tobacco Products (P) Ltd. [2009 (1) TMI 304 - ITAT DELHI] hold that even if in the present assessment year in i.e. A.Y. 2007-08, the assessee has fully participated in the assessment proceeding and even did not raise any objection till the completion of the said proceedings, yet the assessee can validly raised an objection for non service of the notice u/s.143(2) of the Act within the time limit prescribe vide proviso to said sub-section, as Sec. 292BB of the Act is applicable from the A.Y. 2008-09. In this case, admittedly, the A.O. has has served the notice u/s. 143(2) on 30.09.2008 i.e. after the expiry of twelve months from 24.07.2007 i.e. the date of filing of return of income. We find no merit in the plea of the Ld. D.R. that the notice was issued after 1.4.2008 hence provision of section 292BB are applicable as amendment is effective for AY 2008-09 onwards only as discussed above. We, therefore, hold that assessment order passed by the A.O. u/s.143(3) is bad in law and we accordingly cancel the same

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• 2016 (9) TMI 1070
  Treatment of foreign exchange gains earned on cancellation of forward contracts - revenue receipt or capital receipt - Held that:- The fact remains that the forward contract was taken to insulate / protect the assessee from the possible loss that may be suffered due to foreign exchange fluctuation in the course of purchasing of plant and machinery. It is not in dispute that the plant and machinery which was proposed to be purchased for the purpose of setting up of plant in the State of Tamil Nadu, which is a capital asset. When the assessee cancelled / suspended the setting up of plant in the State of Tamil Nadu and cancelled the forward contract, this Tribunal is of the considered opinion that the loss or gain would be relatable to the purchase of capital asset, namely, plant and machinery. Therefore, the loss or gain arose to the assessee due to cancellation of forward contract on account of foreign exchange fluctuation has to be treated as capital in nature. Merely because the assessee suspended the setting up of plant in Tamil Nadu and cancelled forward contract, that cannot be a reason to treat the gain arising on account of cancellation of forward contract as revenue receipt. Since the transaction was relatable to acquisition of capital asset, namely, plant and machinery by way of import from Japan, this Tribunal is of the considered opinion that the gain due to foreign exchange fluctuation would definitely be on the capital field. Therefore, this Tribunal is unable to uphold the order of the Assessing Officer. Accordingly, the orders of the Assessing Officer are set aside. The Assessing Officer is directed to treat the gain arising out of the foreign exchange fluctuation on account of cancellation of forward contract as capital receipt. Credit of advance tax denied - Held that:- When the assessee has paid advance tax to the extent of Rs. 54,61,897/-, the same has to be given credit while computing the tax payable by the Assessing Officer. Under normal circumstances, income-tax has to be paid on the assessed income. However, the Income-tax Act provides for payment of tax on income in advance before assessment of total income. When the assessee pays the tax in advance as per the scheme of Income-tax Act, this Tribunal is of the considered opinion that the Assessing Officer has to necessarily give credit to the advance tax paid by the assessee. Accordingly, the orders of the lower authorities are set aside and the issue of advance tax credit to the extent of Rs. 54,61,897/- is remitted back to the file of the Assessing Officer. The Assessing Officer shall verify the details of advance tax paid by the assessee and thereafter give necessary credit, if the advance tax was actually paid by the assessee. Interest under Section 234C - Held that:- Section 234C of the Act provides for payment of interest for deferment of advance tax. The assessee claims before this Tribunal that a sum of Rs. 54,61,897/- was paid as advance tax, however, the same was not given credit. While considering the failure of the Assessing Officer to give credit to the advance tax to the extent of Rs. 54,61,897/-, this Tribunal finds that the matter needs to be verified and the credit should be given if the assessee paid advance tax. Since the interest is levied for non-payment of advance tax and the assessee claims that the advance tax paid was not given credit, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside in respect of levy of interest under Section 234C of the Act and the issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall reexamine the issue afresh and thereafter decide the same in accordance with law after giving a reasonable opportunity to the assessee. Adjustment proposed by the Dispute Resolution Panel while determining the arm's length price - comparability - Held that:- Functional similarity is one of the relevant factors for the purpose of comparing the assessee’s transaction with that of transaction of comparable company. If the transaction of the assessee-company with its associate enterprise is totally different from comparable companies, then the same cannot be compared instantly for the purpose of determining the arm's length price. This Tribunal is of the considered opinion that for the purpose of comparing the comparable transaction with that of transaction of assessee for the purpose of determination of arm's length price, the TPO as well as the DRP have to find out the companies which are engaged in the same or similar functions. Since the TPO as well as the DRP have not selected the companies which are engaged in the same or similar functions as that of the assessee-company, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Transfer Pricing Officer. Accordingly, the orders of the authorities below are set aside and the issue of transfer pricing adjustment is remitted back to the file of Assessing Officer. The Assessing Officer shall refer the matter once again to the Transfer Pricing Officer. The Transfer Pricing Officer shall find out the companies which are performing same or similar functions as that of the assessee-company and thereafter decide the issue in accordance with law after giving a reasonable opportunity to the assessee. It is open to the assessee to file objection to the order of the Transfer Pricing Officer. When such an objection is filed, the matter shall be referred to DRP once again to determine in accordance with law.

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• 2016 (9) TMI 1069
  Addition made on account of cash deposit in bank account u/s 69A - assessmnet of partners share in partnership firm - Held that:- We find that as far as source of the cash deposit in the saving bank account of the assessee is concerned, it is explained as the cash sales of the partnership firm, namely, M/s Moti Mahal Restaurant, in which the assessee is one of the partners. The objection of the Revenue is, however, that the section 19(2) of the Partnership Act, 1932 prohibits opening of an account by a partner in his own name on behalf of the firm. Also as objected by the Revenue that opening of the account in the name of partner was not in accordance to the terms of the partnership deed of M/s Moti Mahal Restaurant. According to the section 19(2)(b) of the Indian Partnership Act, 1932, in absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to open a bank account on behalf of the firm in his own name. The implied authority of the partner binds the firm against the acts of the firm. This restriction on the implied authority of the partner is subject to the usage or custom of the trade, therefore, in absence of evidences of usage or custom of the trade, we cannot say that there was any violation of section 19(2) of the Indian partnership Act, 1932. In our opinion, what is important is that in deposit of trading receipts of the firm in the bank account of the partner, the assessee has not violated any of the provisions of the Income Tax Act, even if it may be a violation of the section 19(2) of the Indian Partnership Act, 1932, and further, there is no dispute that the money belonged to the partnership firm and after deposit, the money was transferred to the partnership firm, in such circumstances, no addition is called for in the case of partner of the firm. - Decided in favour of assessee

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• 2016 (9) TMI 1068
  Net profit computation - rejection of books of accounts - the work in progress included closing stock, which was shown on estimated basis, details regarding use of material at various sites were missing and cash vouchers for miscellaneous expenses were self made, which could not justify the connection of the same for the business purposes - Held that:- The business income of the assessee from the contract work of erection and fabrication has to be calculated by first applying 8% of the gross contract receipts and from this amount, the assessee should be allowed deduction of depreciation, remuneration to the partners and interest. The total income of the assessee to be calculated by adding interest to the figure of business income. Accordingly, the total income by way of this calculation will figure out at Rs. 2,26,83,539.67. We observe that the assessee has disclosed a net profit including bank interest at Rs. 2,49,82,620.84, which is more than the income calculated above at Rs. 2,26,83,539.67. We are, therefore, of the view that the net profit shown by the assessee at Rs. 2,49,82,620.84 to be accepted as total income of the assessee for assessment year 2010-11. Accordingly, the addition sustained by the ld CIT(A) is deleted and appeal of the assessee is allowed.

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• 2016 (9) TMI 1067
  Penalty u/s 271(1)(c) - deduction u/s 10A allowed - Held that:- There is no scope for levy of penalty on the given facts of the case. As far as the provisions of Section 10A are concerned, the Sub-Section 1 of Section 10A allows the deduction for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to inform or produce such articles or things or computer software as the case may be. Subsection 1A however, has certain restrictions on quantum of deduction and rest of the provisions pertain to computation of quantum and restrictions placed, if the units are transferred etc. Nowhere in Section 10A, it is specified that the deduction is not eligible, if the STPI does not continue the approval beyond the five year period. On a complete reading of the provision, anybody will come to a conclusion that once deduction of Section 10A is allowed in the first year, on the basis of satisfying the conditions, assessee would be eligible for deduction for consecutive ten assessment years. In this case, there is no dispute that assessee was eligible for deduction u/s 10A in earlier years. There is also no dispute that assessee has applied for renewal on STPI approval for the later five years which was however, not pursued. According to my understanding, assessee has made a claim of deduction on the strength of the provisions, even though it has accepted that the claim made cannot be substantiated in the absence of STPI approval. It may be assessee’s opinion and accepted the disallowance made in assessment proceedings. Mere erroneous claim in the absence of any concealment or furnishing of inaccurate particulars is not a ground for levying penalty especially when there is nothing on record to show that assessee has concealed any particulars or furnished any inaccurate particulars. Assessee simply made a claim u/s. 10A on the reason that having been eligible in earlier years, assessee would be allowed deduction in the impugned assessment year as well. This, in my view does not come into the purview as concealment of income or of furnishing of inaccurate particulars - Decided in favour of assessee

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• 2016 (9) TMI 1066
  Initiation of penalty proceedings u/s. 271(1)(c) - Held that:- We find that in the notice issued under section 274 r.w. sec. 271 of the Act, the AO has not specifically mentioned as to whether the penalty proceedings are initiated on account of concealment of particulars of income or furnishing of inaccurate particulars of such income.See CIT & Anr. V. Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT ] In the instant case, undisputedly the AO has not specifically stated the ground for which the penalty proceedings are initiated. We are of the view that the penalty proceedings are not properly initiated, therefore, deserves to be quashed. We accordingly set aside the penalty order and delete the penalty on account of wrong initiation of the penalty proceedings. - Decided in favour of assessee.

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• 2016 (9) TMI 1065
  Penalty under section 271(A)(c) - additions made on account of shortage of stock treated as unaccounted sales and disallowance of remuneration to partner paid to the private limited company - Held that:- So far the penalty levied on account of shortage of stock, it was incumbent upon the assessee to give true and fair picture of the stock. Since the assessee failed to do so, in our considered view, the penalty levied on this amount cannot be deleted. However, in respect of claim of remuneration paid to the working partner, in our considered opinion, the ld. CIT(A) was not justified in sustaining the penalty in view of the judgment of the Hon’ble Supreme Court in the case of Reliance Petroproducts (P) Ltd (2010 (3) TMI 80 - SUPREME COURT ). Respectfully following the ratio of decision of Hon’ble Supreme Court in the case of Reliance Petroproducts (P) Ltd (supra), we hereby direct the Assessing Officer to delete the penalty on the addition made on account of disallowance of remuneration paid to the working partner. Thus, this ground of the assessee’s appeal is partly allowed.

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• 2016 (9) TMI 1064
  Registration u/s.12AA rejected - trust has mixed objects - Held that:- There is no dispute that the assessee has mixed objects thereof charitable as well as religious. But the fact is that the CIT(E) has refused to grant registration because he has analysed only three initial objects of the society and came to the conclusion that the objects are not ascertainable and going further he observed that assessee had received certain donations and met some expenditure, which are purely religious. He observed that this trust is established mainly for promoting a particular religion. In the present case, CIT(E) has not disputed the fact that the trust can have mixed objects. CIT(E) has objected to the objects which are not ascertainable. Otherwise also, the concept of mixed objects are already settled issue, as held in the case of ACIT Vs. Surat Art Silk Cloth Manufacturers Association [1979 (11) TMI 1 - SUPREME Court ] wherein held that if the primary purpose and predominant object of a trust are to promote welfare of the general public, the purpose would be charitable purpose, any other object which might not be charitable, but which is ancillary or incidental to the dominant purpose, would not prevent trust or institution from being a charitable trust. In the given case, no doubt the trust has mixed objects but what is important, can it be distinguishable. Ld. CIT(E) himself observed that the trust has incurred expenditure towards charitable as well as religion. He even distinguished the income as well as relevant expenditure. Coming to the ascertainability of the object, in our view, we have gone through the objects and found that certain institutions formulate their objects in such a fashion that they try to address in global level, then comes down to their main objects. In the given case also, it appears unascertainable but they try to cover overall general objects, which may not look ascertainable. But in our considered view, CIT(E) should have looked at the whole objects and appreciated the overall aspects are charitable purpose in the creation of the trust. As long as it is beneficial to the society, it should be appreciated. With regard to objects of the religious purpose, wherever the objects or activities which are contravening the provisions of section 13(1)(b), the relevant income and expenditure can be eliminated at the stage of assessment, it should not be considered at the stage of granting registration. At this stage, CIT(E) should appreciate the purpose and objects relevant for charitable purpose. Mere presence of certain religious objects should not preclude the officer to doubt the functions of the trust. As explained above, CIT(E) should be considering only the charitable side of the institution and grant the registration. Of course, he chooses or expects the trust will misuse the registration, he is at absolute liberty to grant conditional registration by imposing conditions like, it is eligible to claim the exemption only on charitable activities, separate books to be maintained, both books be subject to audit etc. With the above observations, we remit the issue back to the file of CIT(E) with a direction to grant registration. - Decided in favour of assessee.

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• 2016 (9) TMI 1063
  Treatment of sale of land as agricultural land - nature of land - Held that:- In the present case, it is an admitted fact that the impugned land property is situated beyond 8 Kms of the Municipal Corporation limit of Chennai. The land is situated in a distance of 15 Kms from the nearest municipality/Panchayat i.e. Sriperumpudur Taluk, Kancheepuram District, Chennai and population of the village is around 3,000 as per the relevant census. The assessee also declared agricultural income from the said property and the same was assessed as agricultural income more specifically in assessment under consideration also. The AO accepted the agricultural income declared from said property at Rs. 65,300/- for assessment year 2010-11. Further, the land was classified as agricultural land in the Revenue records also. The property was also sold by the assessee as agricultural land only and the impugned land was never converted by assessee for any non-agricultural purpose. The land retained character of agricultural land only. Being so, in our opinion the above land is to be treated as agricultural land only and sale of said land cannot go rise to any taxable capital gains and it is to be considered as agricultural land in terms of Sec.2(14)(iii)(b) of the Act and Ld.CIT(A) has taken a correct view to hold that the said land is an agricultural land and in our opinion that the judgement relied upon by ld.A.R in the case of Mr.N.Jayamurugan (2016 (6) TMI 518 - ITAT CHENNAI) is squarely applicable to the facts of the case and we have no hesitation in confirming the order of CIT(A). - Decided against revenue.

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• 2016 (9) TMI 1062
  Addition to additional income offered during the survey action - dumb document - relevance / validity of statement made u/s 133A - threat undue influence or coercion - Held that:- The ld. CIT(A) thus disbelieved the part of the document which the AO had treated as depicting the unexplained investments of the assessee. Hence, out of the three parts of the document, one part has been ignored by the AO, the second part has been disbelieved by the CIT(A). However, the ld. CIT(A) has confirmed the additions only in respect of heading ‘profit’. However, the point which gains importance at this stage is that when the source of funds/ investments have been disbelieved by the CIT(A) , there left no reason for him to assume the alleged profits from such non existing source/investments. The ld. CIT(A), thus, made the impugned additions only because the assessee had made a declaration/offer of income of Rs. 4 crores during the survey action. Presumption u/s 292C - Held that:- - the section uses the word ‘may presume’ and not ‘shall presume’, hence the presumption of facts under section 292C is not a mandatory or compulsory presumption, but, a discretionary presumption; secondly, such a presumption is not a conclusive presumption but is a rebuttable presumption because it is a presumption of fact not a presumption of law. - No corroborative, correlating or circumstantial evidence has been found either during the survey action or during post survey investigations - Hence the nature of document seized does not point any strong/reliable or stanalone presumption under section 292C of the Act against the assessee. The fact that the assessee has not introduced any cash in his books of accounts on account of additional income, for which he had already paid tax also, together constitute good rebuttal to the initial presumption u/s 292C in this case. Relevance / validity of statement made u/s 133A - Held that:- Even if , for the sake of arguments, we assume it so, it is to be noticed that the assessee had paid taxes on the income disclosed and if the AO would have accepted his returned income as per the disclosure, the assessee would have got no chance or opportunity to claim that the disclosure made by him was under force, coercion or duress. - Once the assessee was forced into the litigation, then only he gathered courage to fight for his rights and to show that neither the alleged loose paper belongs to him nor he had any undisclosed income or profits and further that even the declaration taken from him during his statement was under threat and pressure. Power of tribunal to consider question of law - Held that:- The Hon’ble Supreme Court in National Thermal Power Co. Ltd. vs. CIT [1996 (12) TMI 7 - SUPREME Court] while answering the said question observed that, Tribunal is not prevented from considering questions of law arising in assessment proceedings although not raised earlier. CIT(A) though, rightly admitted the question of law as to whether the income offered by the assessee in the return of income consequent to offer made in his statement recorded during the survey action can be challenged before the appellate authority, but wrongly decided the same in favour of revenue. In view of our findings given above we have no hesitation to hold that the additional income was returned by the assessee perhaps under force, pressure, threat or coercion and under the mistaken belief. The assessee, in our view, was not liable to pay tax on the said additional income returned. We accordingly direct the Department to refund the taxes, if any, paid by the assessee in respect of additional income offered during the survey action.

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• 2016 (9) TMI 1061
  Disallowance of legal expenditure and travelling, hotel expenditure - Held that:- From the record we found that that the expenditure is incurred by the assessee in his character as a professional and is not an expenditure which is personal in nature. The assessee has in his professional capacity been a director of various limited companies has earned professional fees for the services rendered to these companies. He was a director of Nagarjuna Finance Limited (NFL) from 14-12-1982 to 28-04-1999. The assessee has earned professional income during all the years, he was, a director of NFL. The details of professional income earned during the said years are given in annexure ‘A’ which is placed on record. The assessee serves as an Independent Director on the Board of several leading Indian Companies such as Apollo Tyres Limited, Britannia Industries Limited, Deepak Nitrite Limited and KSB Pumps Limited and also a member of various Governing Boards of Centre for Policy Research, Indian Institute of Capital Markets, CII, SEBI etc. He regularly gets sitting fees and commission from many of these Companies. The assessee was also an independent Director on the board of Nagarjuna Finance Limited. Nagarjuna Finance Limited had collected Fixed Deposits from the public. Nagarjuna Finance Limited was charged with default in repayment of fixed deposits and interest thereon. Mr. Nimesh Kampani has been mentioned as one of the accused among several others, for non-payment of these fixed deposits by Nagarjuna Finance Limited. The Andhra Pradesh Government had since filed suit against directors of Nagarjuna Finance Limited including Mr. Kampani. To defend himself, Mr. Kampani has appointed various advocates to represent his case before various courts viz, District Court, High Court of Andhra Pradesh, Supreme Court of India. As the expenditure is incurred to protect his business interest the same is required to be allowed u/s. 37(1) of the Act. Accordingly we direct the A.O. to allow legal expenses. In respect of travelling expenditure, it appears that the assessee has filed details before the CIT(A) under Rule 46A, which was declined by the CIT(A) as additional evidence. Since the impugned expenditure also partake the character of professional expenses and which goes to the root of the issue while deciding allowability of hotel and travelling expenses, we restore the matter back to the file of the A.O. for considering the additional evidence filed with reference to expenditure incurred on travel and hotel and for deciding the same afresh after giving due opportunity to the assessee. - Decided partly in favour of assessee.

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• Customs

• 2016 (9) TMI 1093
  Revocation of CHA licence - forfeiture of security deposit - regulation no. 19(1) of the CBLR 2013 - imposition of penalty - Held that: - It is the responsibility of the CB to question the importer or exporter regarding the legal provisions and procedures. Also it is their duty to invite attention of the Department if they come across any fraud or duty evasion, any import or export related activity in stead of certifying as a trustful intermediate between department and trade, but facilitate the fraud as well as to safeguard Government s revenue. The CB in this case had violated rules and regulations stipulated in CBLR 2013. - the decision in the case Commissioner of Customs Versus M/s K.M. Ganatra & Co. [2016 (2) TMI 478 - SUPREME COURT] has been relied upon. Violation of Regulations of CBLR - revocation of licence and forfeiture of security deposit justified - imposition of penalties upheld - appeal rejected - decided against appellant.

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• 2016 (9) TMI 1092
  Scope of review in review petition - denial of deemed export benefits if the Bill of Entry is in the name of the project authority - monetary claim in the writ petition - review petition on the ground that decision is erroneous - maintainability - can the scope of the review to the extent desired by the senior counsel for the petitioner/review applicant be widened which may have far reaching ramifications affecting the justice delivery system? - Held that: - the decision in the case The State of West Bengal Versus Kamal Sengupta and another [2008 (6) TMI 578 - Supreme Court Of India] is relied upon. The counsel for the petitioner at the outset only sought permission to withdraw the Special Leave Petition with liberty to file review petition and which permission was granted. The fact that the petitioner was also granted liberty to, if remaining aggrieved, again question the judgment, does not entitle the petitioner/review applicant to a wider consideration than is permissible in review jurisdiction. No ground found for review - petition dismissed - decided against petitioner.

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• 2016 (9) TMI 1091
  Stay of interim order for a period of four weeks so as to enable the petitioner to challenge the order passed in higher court - encashment of Bank Guarantee - imported corn - entitlement to petitioner of equitable and discretionary interim relief - Held that: - When the encashment is by the authorities under the Foreign Trade Act, 1992 and the Central Government, no reason seen for the apprehension on the part of the petitioner that in the event they succeed, the amount would not be returned back by the authorities. The Government and such competent authorities can encash the bank guarantee - stay of interim order rejected - petition dismissed - decided against petitioner.

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• 2016 (9) TMI 1090
  Condition for provisional release of goods - quasi-judicial order - maintainability - demand of differential duty - execution of bank guarantee of 30% of the differential duty - Held that: - the condition for release is modified to the extent that instead of the entire differential duty the appellant be directed to deposit Rs. 15 lakhs. The other conditions would, however, remain undisturbed. The adjudicating officer should conclude the hearing at his earliest convenience and pass final orders - appeal allowed - decided partly in favor of appellant.

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• 2016 (9) TMI 1089
  Valuation - demand of customs duty on license fee paid to the overseas licensor - payment of service tax on license fee - reverse charge mechanism - import of set top boxes - multi-channel down-linking - distribution and transmission of technology - HITS operator - consignments of set top boxes stored in customs bonded warehouse - clearance of set top boxes for home consumption avoiding appropriate payments of customs duty and giving wrong declarations - seizure - confiscation under Section 111(m) of the Customs Act, 1962 - provisional release of goods on furnishing bank guarantee - Held that: - it is only on the investigation being concluded and appropriate steps taken, that the authorities can issue a show cause notice and demanding amounts now styled as a Customs Duty on the licence fee. The petitioners are relying on the principle that what is really embedded and as claimed, are not goods but it is intellectual property services. They are relying on the payment of Service Tax and in that regard, the DRI could not have proceeded on the footing and in the facts and circumstances of the present case that there is a definite evasion. It is their duty to bring such cases of alleged evasion to the notice of the customs, which they have after the outcome of the investigation, whenever they are concluded. It is thereafter for the Commissioner of the Customs and all authorities under the Customs Act to take appropriate steps and measures. Provisional release of goods permitted - petitioners to furnish a Bond for securing differential duty payable, on the licence fees and Special Additional Duty so as to secure the redetermined value - petitioners to furnish a Bank Guarantee to the extent of 25 %, to secure the amount of the alleged differential duty, on licence fees - petition disposed off - decided partly in favor of petitioner.

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• 2016 (9) TMI 1088
  Refund claim after adjustment of customs duty - demand of differential duty - mis-declaration of goods - imported paper - Held that: - Once the adjudication was completed and the true value determined, it is the differential duty which has to be deposited. That differential duty and no other amount can be recovered from the petitioner or even the deposit made by it. At the same time, since the petitioner has not disputed its Director’s liability, the Court is of the opinion that even the amount of Rs. 10 lakhs cannot be claimed at this stage given that a concession to that effect is made in the prayer clause. The respondents directed to process the petitioner’s refund and ensure that the excess amount after adjusting the differential duty and further adjusting the penalty of Rs. 10 lakhs, repay/refund the balance within three weeks along with interest as admissible. The respondents shall pass a speaking order in this regard. The bank guarantees furnished by the petitioner pursuant to the Court’s order during the pendency of adjudication shall also be discharged. Petition allowed - decided in favor of petitioner.

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• 2016 (9) TMI 1087
  Denial of benefit of Notification No.105/99-CUS dated 10.08.1999, as amended - imposition of penalty under Section 112(a) of the Customs Act, 1962 - confiscation of imported goods - classification - processed cloves - Notification No.73/95-CUS(NT) dated 07.12.2005 - The Customs Tariff (Determination of Origin of Goods under Agreement on SAARC Preferential Trading Arrangements) Rules, 1995 (SAPTA Rules) - Bangladesh origin - valuation of cloves - whether the main appellant is eligible to avail partial exemption under Notification No.105/99-CUS dated 10.08.1999 when read with SAPTA Rules? Held that: - As per the first Proviso to this Notification, the Assistant Commissioner/Deputy Commissioner/Joint Commissioner has to be satisfied that imported goods are in accordance with the Customs Tariff (Determination of Origin of Goods under the Agreement on SAARC Preferential Trading Arrangement) Rules, 1955- [SAPTA Rules]. As per Rule 4 of the SAPTA Rules read with its Schedule even products processed in the member countries are eligible for concessions under SAPTA Rules when the base goods are not produced/manufactured in the contracting countries. The only requirement under these Rules is that a certification of origin has to be produced for availing concessions as issued by the designated authority of Govt. of exporting contracting state and notified to the other contracting states in accordance with the certification procedures mentioned in the form annexed to SAPTA Rules. It is observed from various provisions of SAPTA Rules and Notification No.105/99-Cus dated 10.08.1999 that there is no discretion or power with the Customs authorities to reject the certificate of origin given by the concerned contracting state. Para 9 of the same Schedule does give power to the contracting states to review/modify the said Rules. The decision the case ZUARI INDUSTRIES LTD. Versus COMMISSIONER OF C. EX. & CUSTOMS [2007 (3) TMI 12 - SUPREME COURT OF INDIA] is relied upon - Certificates of origin produced by the Appellant cannot be discounted. There is no evidence on record that designated authority of Bangladesh under SAPTA Rules was maliciously involved with the supplier of cloves and the Appellant. Processing of cloves - Held that: - minor activities done by the supplier will not make the goods as processed cloves and that such processed cloves come into existence only when oil is extracted from natural cloves. Only an appropriate authority of Bangladesh can certify as to what would be the value addition, after satisfying about the nature of processing activities done by the supplier and the extent of expenses incurred by such supplier in carrying out the activities of cleaning, handling, storage, sorting, packing etc. The decision in the case Chandreswar Singh v. State of Assam [1978 (8) TMI 190 - GAUHATI HIGH COURT] is relied upon. Certificates of origin issued by the designated authority under SAPTA cannot be rejected which is the only requirement for the satisfaction of the Customs department under Notification No.105/99-Cus dated 10.08.1999 - confiscation of goods and imposition of penalties fails - appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2016 (9) TMI 1082
  Default of respondents directors of the company in liquidation - commission or omission and/ or negligence on the part of the directors - winding up proceedings - Held that:- The case as laid is based on the report dated 6-10-2008 prepared by the Chartered Accountant on the basis of last balance sheet as on 31-3- 1996 and the last annual return dated 30-9-1996. The said report duly proved in court by the Official Liquidator's evidence indicates that the respondent directors had acted totally against the interest of the company in liquidation and in contravention of the various provisions of applicable laws. They did not even care for the Residuary Non Banking Companies (RBI) Directions, 1987 and as against the capital base of the company to an extent of only Rs. 2,10,000/- collected deposits of huge amounts. The amount received from the depositors have not been accounted for. Thus the respondent directors misappropriated the amounts in the account of the company in eroding up and acted in breach of trust to cause loss to the company in liquidation to their corresponding enrichment/ benefits. The conduct of the respondent directors clearly fall within the definition of misfeasance, malfeasance and breach of trust. Further, from the evidence on record it can be gathered that the deeds and acts of the respondent ex-directors/others were of a nature not expected of prudent persons engaged in the business. On consideration of the pleadings and evidence on record, I am of the considered view that the case of misfeasance, malfeasance and breach of trust is made out against Dev Jeet Nag, Ahnish Kamal Bhatnagar and Yogesh Sharma, the respondents directors of the company in liquidation. Steps be taken jointly and severally for recovery from them of Rs. 1,02,57,288/- along with interest @ 6% per annum effective 17-12-2003 (sixty days following the winding up order dated 17-10-2003) till the date of recovery.

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• 2016 (9) TMI 1081
  Winding up petition - Held that:- If the company is unable to pay its debt, does not necessarily entitle the Court to order winding up of the company as the discretion to pass such an order, even in the case of the inability of a company to pay its debt, is by Section 433 vested in the Court and that discretion has to be exercised judiciously. While exercising the judicial discretion, apart from the non-availability of entire facts regarding the assets and liabilities of the current business of the company, it is also to be seen that in the stay application the company made a statement that an amount of Rs. 75,65,998/- has already been paid to the State Government, therefore, it is not a fit case where this Court should exercise its judicial discretion to proceed further in the company petition to direct publication or to appoint the provisional liquidator. As a sequel, the instant winding up petition (company petition) is liable to be and is hereby dismissed.

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• Service Tax

• 2016 (9) TMI 1112
  Power to Audit under Service Tax - Scope of Rule 5A(2) of service tax Rules, 1994 r.w.s. 94(1) and 94(2)(k) - Power to demand documents - Apex Court stayed the decision of the High Court [2016 (6) TMI 163 - DELHI HIGH COURT] wherein the hon'ble high court had declared the amendment to the Rule 5A and Circular No. 181/7/2014-ST dated 10th December 2014 as ultra virus and struck down these provisions.

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• 2016 (9) TMI 1111
  Service tax liability - banking and financial service - income earned towards leasing out of certain machines - agreement was for providing lease/ right by the respondent to the third party for use of plant and machinery for a period of five years - ownership of the assets and effective control is with the respondent - Held that:- a lease is classified as financial lease if the lesser transfers the owner of the assets to the lessee by the end of lease term. We note that the ld. Commissioner (Appeals) had examined the various terms of agreement to arrive at a conclusion that the leasing of equipment in the instant case cannot be regarded as a finance lease as per the Accounting Standards. We are in agreement with the said findings. We further note that the tax liability on the respondent was sought to be sustained on the ground that they are a “body corporate” and hence covered by the definition. We note that the definition mentions “banking company” or “financial institution” and / “non-banking finance company”. The principal objective of all these shall be financial dealings. An industrial concern is not covered by the scope of the definition. Reliance placed by the ld. Commissioner (Appeals) on the Board Circular dated 09.07.2001 and dt. 04.07.2006 is appropriate to apply the scope of other body corporate for service tax purpose under “banking and financial services”. Therefore, we find no reason to interfere with the impugned order. - Decided against the Revenue

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• 2016 (9) TMI 1110
  Cenvat credit - availment of Cenvat credit of Branch office by Head office - entire tax liability including the tax liability of the Branch office was being discharged by their head office - non-centralization of Delhi Head Office of the appellant - Held that:- in the light of the law declared by the Tribunal in the case of Manipal Advertising Services Pvt. Ltd. vs. CCE, Mangalore [2009 (10) TMI 434 - CESTAT, BANGALORE] and in the case of Raaj Khosla & Co. Pvt. Ltd. vs. CST, Delhi [2008 (7) TMI 122 - CESTAT NEW DELHI], the denial of credit cannot be appreciated. Accordingly, the impugned order is set aside. - Decided in favour of appellant with consequential relief

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• 2016 (9) TMI 1109
  Imposition of penalty without quantification of the penalty amount - Section 78 of the Finance Act, 1994 - contravention of the provisions of Finance Act, 1994 - non-discharge of service tax on the invoices raised in respect of Annual Maintenance Contracts (AMC) on their customers - service tax alongwith interest discharged before issuance of SCN - Held that:- Section 73(3) is very clear as it says that if tax is paid along with interest before issuance of show-cause notice, then in that case, show-cause notice shall not be issued. In this case, I find that the contention of the appellant that he bonafide believed that he is not liable to pay service tax but during the audit, the audit party informed him that he is liable to pay service tax, then he immediately paid the entire service tax along with interest. Except mere allegation of suppression, the Department did not bring any material on record to prove that there was suppression and concealment of facts to evade payment of tax. Consequently, in my opinion, the imposition of penalty under Section 78 of the Act is not justified and bad in law. Moreover, in the impugned order, the learned Commissioner (Appeals) has not recorded any finding on suppression of facts by the appellant with an intention to evade tax. In view of the above discussion, I set aside the impugned order. - Decided in favour of appellant

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• 2016 (9) TMI 1108
  Challenge to the show cause notice - Availment of appeal remedy available to petitioner in terms of Section 86 of the Finance Act, 1994 - petitioner was entitled to file an appeal before CESTAT but did not availed the same only for the reason that the impugned proceedings has been initiated by the second respondent by invoking the extended period of limitation which is not invocable in the petitioner's case - whether there is an allegation of fraud, collusion, mis-statement or suppression of facts or not - Held that:- the question of limitation in these matters, especially, in Central Excise and Service Tax matters is not essentially a pure question of law, but a mixed question of fact and law. Therefore, question whether extended period of limitation could be invoked or not is essentially a question of fact. The Appellate remedy provided under the Act before the CESTAT is not only an efficacious, but an effective remedy and the CESTAT is entitled to appreciate and reappreciate the facts and therefore, there is no justification on the part of the petitioner to bye-pass the Appeal remedy, more particularly, on the only ground raised by the petitioner before this Court which is purely a question of fact. Nevertheless, this Court examined the Order-in-Original as to whether any finding has been recorded in this regard. It is not in dispute that the basis of the show-cause notice was set-out in the impugned order that deliberately the petitioner did not disclose the fact of availment of Input Service Credit of exempted service. The record of the proceedings show that the second respondent has discussed the matter pertaining to the transaction done by the assessee and it cannot be disputed by the petitioner that the entire proceedings was on account of the investigation taken up by the SIT of the respondent Department. In the case on hand there is no allegation of fraud or collusion and the case against the petitioner is brought under Clause (c) to (e) in the proviso under Section 73(1), viz., wilful misstatement, suppression of facts, contravention of the provisions with intent to evade payment of service tax. To ascertain as to whether there was wilful mis-statement or suppression of facts or contravention of the provisions of the Act or the Cenvat Credit Rules with intent to evade payment of service tax is essentially and purely a question of fact, which has to be agitated before the Tribunal. Therefore, this is not a case where this Court can straight away interfere by exercising its power under Writ Jurisdiction, since disputed question of facts are to be examined while considering the validity and correctness of the impugned order. Therefore, this Court is of the view that the petitioner should avail the Appeal remedy available under the Act and no grounds have been made by the petitioner to justify their conduct in bypassing the remedy before the CESTAT. - Writ petition dismissed as not maintainable

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• 2016 (9) TMI 1107
  Validity of CESTAT order - Tribunal dismissed the appeal on the ground that matter is pending before the High court - Doctrine of merger - renting of immovable property service - Held that:- this Court is deciding the issue as to whether such a transaction would attract service tax or would it be liable and exigible to tax under the Maharashtra Value Added Tax Act, 2002. We are of the view that the Tribunal erred in law in dismissing the appeal as not maintainable. A statutory appeal or a statutory right to appeal was availed of by the appellant/assessee to challenge the Orders-in-Original. Such an appeal was maintainable in law. Once it was so maintainable under the scheme of the Central Excise Act, 1944, which also applies to the levy, imposition and assessment of service tax so also its recovery, then, the Tribunal was bound to decide the appeal on merits. It could not have been dismissed as not maintainable only because the petitioner in the writ petition and the appellant before the Tribunal were pursuing both remedies. The statutory appeal of the assessee, in the absence of any restraint order by the High Court, was maintainable and could have been decided on merits and in accordance with law. If there was no restraint against passing of an adjudication Order, surely, against such an adjudication Order all statutory remedies, including an appeal are available. That is precisely what the appellant/assessee has done and the appeal could not have been dismissed as not maintainable. - Decided in favour of appellant

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• 2016 (9) TMI 1106
  Valuation - includability - PSF charges and Airport Taxes in the value of Taxable services - service tax to be payable on the gross consideration collected from the International Passengers - Held that:- the issue involved in this case is squarely covered by the decisions of this Tribunal in the case of Lufthansa German Airlines vs. CST (Adjn.), New Delhi [2016 (4) TMI 780 - CESTAT NEW DELHI] and M/s. Continental Airlines Inc. vs. CST, New Delhi [2015 (7) TMI 1079 - CESTAT NEW DELH], wherein it was held that the charges collected by airlines are on behalf of airport and were paid to the airport, and as such, cannot be included in the assessable Value. In view of the co-ordinate Bench decisions, we are of the opinion that the impugned order cannot be sustained. - Decided in favour of appellant

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• 2016 (9) TMI 1105
  Invokation of extended period of limitation - Section 73 of the Finance Act, 1994 - Demand - Held that:- the charges of suppression, misstatement etc. have not been specifically made therein for confirmation of service tax demand beyond the normal period of limitation prescribed in the statute. Further, in the adjudication order, the proviso to Section 73 has also not been invoked, justifying confirmation of the demand. Therefore, the proceeding initiated by the Department is barred by limitation of time. - Decided in favour of appellant

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• 2016 (9) TMI 1104
  Waiver of pre-deposit - Classification - site clearance, excavation, earth/sand filling etc. - whether to be classified as pre-commissioning activities under Commercial and Industrial Construction service or to be classified under Erection, Commissioning and Installation service - Held that:- on perusal of the work order placed by HPCL, we find that the work assigned thereunder relate to civil construction, which fall under the category of Commercial and Industrial Construction service. We also find that in an identical case, this Tribunal in the case of Subhash Khandelwal & Sons vs. CCE, Jaipur - I [2011 (9) TMI 417 - CESTAT, NEW DELHI] has allowed the appeal holding that pre-commissioning activities should be categorised as civil construction work. Therefore, we are of the prima facie view that the appellant has made out a good case for waiver of pre-deposit. - Stay granted

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• 2016 (9) TMI 1103
  Power and jurisdiction of Commissioner - Commissioner directed the Assistant Commissioner to file an appeal before the Commissioner (Appeals) against the order of original adjudicating authority prior to 19.08.2009 - Held that:- Sections 84 clearly reveals that prior to 19.08.2009, it was the Commissioner himself who was having the power and jurisdiction to call for the records of proceedings before the adjudicating authority and was empowered to pass an order in respect of the same as he may deem fit. However, w.e.f. 19.08.2009 the provisions were changed and the Commissioner was empowered to examine the order of the adjudicating authority and if he was not satisfied, to direct the said authority to file an appeal before the Commissioner (Appeals). The impugned order of the Assistant Commissioner, in the present proceedings, was passed on 28.01.2009 and the order in review by the Commissioner directing the Assistant Commissioner to file an appeal was passed on 05.03.2009 i.e. well before 19.08.2009. As such, it can be safely held that, during the relevant period, there were no powers or jurisdiction with the Commissioner to direct the Assistant Commissioner to challenge the order passed by him before the Commissioner (Appeals). As such, the appeal filed by the Assistant Commissioner before the Commissioner (Appeals) in terms of the order-in-review dated 05.03.2009 is without jurisdiction and against the clear law laid down in the Act. Consequently, the order-in-original passed by the Commissioner (Appeals) is bad in law, being beyond jurisdiction. Refund claim - service tax paid on various service utilized for export of the goods - Notification No. 41/2007-ST dated 6.10.2007 - Held that:- we note that certain provisions of Central Excise Act, 1944 have been adopted for the disputes relating to service tax in terms of the provisions of Section 83 of the Finance Act, 1994. On going through the Section 83 of the Finance Act, 1994, we note that while adopting certain provisions of Central Excise Act, 1944, which stand mentioned in the said Section itself, Section 35-E does not stand adopted. In this view also, we find that the order directing the lower authority to file an appeal before the Commissioner (Appeals) is beyond the scope of Section 83 of the Finance Act, 1994 itself. Therefore, by following the various decisions, the impugned order of commissioner (Appeals) is without jurisdiction and the same is accordingly set aside. - Decided in favour of appellant

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• Central Excise

• 2016 (9) TMI 1113
  Imposition of penalty - Rule 25 of Central Excise Rules, 2004 - contravention of Rule 8(3A) of the Central Excise Rules, 2004 - duty liability for the month of July, 2010 and August 2010 were paid with delay ie. beyond the period of 30 days - acute financial constraints - Held that:- in view of the judgment of Hon'ble High Court of Gujarat in the case of Indsur Global Ltd Vs UOI [2014 (12) TMI 585 - GUJARAT HIGH COURT] which has struck down the said Rule 8(3A) as unconstitutional, the imposition of penalty for contravention of the said rule will not lie. Therefore, the impugned order to this extent is not sustainable. - Decided in favour of appellant

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• 2016 (9) TMI 1102
  Maintanibility - Impugned order regarding exemption under Notification No.14/2002-CE dated 01-03-2002, passed by Tribunal by relying upon its earlier order passed by a Larger Bench was challenged by the Department before the Gujarat High Court - Appeal held to be non maintainable vide order passed in the case of Commissioner of Central Excise Vs. Shanti Processors Ltd. [2015 (11) TMI 1164 - GUJARAT HIGH COURT] - Held that:- by considering the Shanti Processors Ltd. case (supra), the issue involved in the present appeal is same, the appeal being not maintainable before this Court under Section 35L of the Central Excise Act, 1944, the same is dismissed as not maintainable, however, with liberty to the appellant to avail of its appropriate remedy before the appropriate forum. - Decided in favour of Revenue

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• 2016 (9) TMI 1101
  Refund claim - seeking direction to refund a sum together with interest at the rate of 6% from the date of deposit till the date of payment - stay granted on the condition that the petitioner pays a sum of Rs. 15,00,000/- - Held that:- the amount which has been paid by the petitioner is not strictly in the sense of pre-deposit, but it may be akin to one, as the same has been done pursuant to the interim order granted by the Division Bench of this Court. Having succeeded before the Division Bench, the petitioner is entitled to refund of the amount deposited. So far as the interest portion is concerned, the petitioner has referred to circular which contemplates the payment of interest when pre-deposit is effected and the assessee succeeds in the appeal. There is no reason as to why such condition should not be imposed in the instant case also because what was deposited by the petitioner is akin to a pre-deposit as it has been done pursuant to the order passed by the Division Bench of this Court. Therefore, the present writ petition is disposed of by directing the respondent to consider the documents placed by the petitioner namely, the payment voucher and the information regarding the challan status as culled out from the website of the department and verify the records maintained by the department and thereafter, effect refund of the amount paid by the petitioner. So far as the demand for interest at the rate of 6% is concerned, the respondent is directed to take note of the law as pointed out in the preceding paragraphs and pass orders on merits and in accordance with law. - Petition disposed of

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• 2016 (9) TMI 1100
  Valuation - includability - ammortised tool cost - demand alongwith penalty - Held that:- the tooling agreement with M/s.Ford India was completed only on 13.7.2000 and that they paid the duty involved immediately thereafter on 14.7.2000 and 20.7.2000, indicated the reason why they could not pay the duty earlier. Furthermore, the Settlement Commission noted that there are no other mala fides. Thus, on facts, the Settlement Commission has taken a decision on the first respondent's application, wherein the first respondent has accepted the entire duty liability and also noted the fact that after the first respondent agreed for the appropriation, only after a period of about three years, show cause notice was issued. Thus, in the light of the factual finding recorded by the Commission, this Court exercising jurisdiction under Article 226 of the Constitution of India, will not act as if it is a Second Appellate Authority over the orders passed by the Commission, in the absence of an perversity in the order. - Decided against the Revenue

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• 2016 (9) TMI 1099
  Clandestine manufacture - 7072.978 MT iron and steel products without payment of duty - private records recovered from the residence of the appellants - licit clearances made by the main Appellant also find mention in the private records, indicating the correctness of the private records - Held that:- argument made by appellant that the quantities at Sl.No.18,19,24,25 & 26 of the same page which show marked differences between quantities shown in the private records and the Central Excise invoices has force. Accordingly it is held that private records recovered from the residential premises by the investigation is not the correct representation of the manufacture and clearance of the main Appellant even if accepted to be admissible evidences. Appellants have also argued that maximum capacity of their furnace/month is 1200 MT. No efforts were made by the department to know whether the recipient of finished goods indicated in the private records or those claimed by the main Appellant in their reply were actually existing or not. Similarly for manufacturing such huge quantities of finished goods, as alleged to be clandestinely manufactured and cleared by the main Appellant, there must be procurement of substantial quantities of raw materials. The entire investigation conducted does not throw any light as to how main Appellant clandestinely procured huge quantities of raw materials for manufacturing finished goods. There are allegations of not receiving of the raw materials, but no evidence of excess procuring raw materials without duty paying documents has been brought on record by the department. It is difficult to appreciate that on one hand Appellant will clandestinely divert the duty paid raw materials and on the other hand procure non-duty paid raw materials for clandestine manufacturing and clearances of finished goods when no stock variation either in the raw material stock or finished goods stock was detected during the course of investigation. The maximum capacity of manufacture of 1200 MT/month was not refuted by the department by carrying out any study that actual production per month could be more than 1200 MT . It was clear during the investigation that Appellants were not giving the correct picture in explaining the private records recovered from their residence. Under the circumstances it was incumbent upon the department to find out evidences for corroborating private records with other independent evidences to pin down such smart operators and not resort to presumption and surmises. Clandestine removal - Held that:- in the present case there is no indicator of clandestine removal. Though in the present proceedings a seizure of Rs. 2.00 Lakh was made during the investigation but the same has not been confiscated as sale proceeds of the alleged clandestinely removed finished goods. Therefore, in view of the above observations and the settled proposition of law in the relied upon case law, offence of clandestine removal of finished goods and duty demand against the main Appellant, is not sustainable and Appeal filed by the main Appellant is required to be allowed on this account. Cenvat credit - allowabilty - cross-examination of certain persons was sought by the main Appellant who confirmed duty paid raw materials to have been received by them - Held that:- Adjudicating authority while framing issues of the Order-in-Original neither made cross-examination of witnesses as the issue nor gave any findings as to why cross-examination of witnesses can not be allowed. It is now a well accepted legal principle that cross-examination of the witnesses, whose statements etc. are relied upon, has to be provided to the aggrieved party. On this ground the issue of rejection of credit is remanded to the Adjudicating authority to make efforts to provide the cross-examination of the relevant relied upon witnesses and decide this aspect afresh in denovo proceedings. Imposition of penalties - no findings have been given at all in the Order-in-Original as to why penalties are required to be imposed - Held that:- in the absence of any findings by the Adjudicating authority in this regard penalties imposed upon the Appellants are set aside. - Appeal partly allowed and partly remanded back

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• 2016 (9) TMI 1098
  Whether Appellant is required to discharge an amount under Rule 6(3)(1)(b) of the Cenvat Credit Rules, 2004 with respect to value at Spent Sulphuric Acid supplied by the Appellant under Notification No.6/2006-CE dated 01.03.2006 at NIL rate of duty - Held that:- by respectfully following the ratio of various case laws relied upon by the appellant that the CENVAT credit cannot be denied, nor the penalty can be imposed on the clearance of Spent Sulphuric Acid , as it is not a final product, which is manufactured along with Acid Slurry , attracting duty at 8% under Rule 57CC of the Central Excise Rules, 1944. Rule 57CC of the erstwhile Central Excise Rules, 1944 is comparable to Rule 6(3)(1) of the Cenvat Credit Rules, 2004. - Decided in favour of appellant

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• 2016 (9) TMI 1097
  Cenvat credit - availed on 836.99 MT of steels used for fabrication of misc. structures - Rules 12 and 13 of erstwhile Cenvat Credit Rules, 2001/2002 read with Section 11 A of the Central Excise Act, 1944 - three main categories of items viz., M.S. Beams, Angles, Plates and Channels used to support the various ducts and cyclones in the appellant's factory, iron steel items used for fabricating, attending platforms, which are generally erected around a machinery and staircases and ladders and fabricated using the angles, plates, etc. Held that:- the lower authorities denied the credit mainly on the ground that the M.S. items, on which credits have been taken are falling under Chapter 72, which is not covered under the category of capital goods . The second main objection is that these items were used for fabricating the structures, which become immovable upon fixing and hence, results in a non-excisable item. Hence, the credit is not eligible on any of them. We find that the denial of credit by the lower authorities is on the ground that the items are not used in the manufacture of capital goods as none of the items, as described above, arising after fabrication, can be considered as accessories of the capital goods. Further, they become immovable upon fabrication. We find both these arguments as un-sustainable. Much emphasis has been made on the requirement and necessity of emergence of excisable items after fabrication using the impugned goods. We do not find any such requirement specifically mentioned in the definition of either in the inputs or capital goods under Cenvat Credit Rules. In the present case, the lower authorities have not categorically established that upon fabrication, an immovable civil structure is emerged. Fabrication of structural as an accessory for necessary operation of capital machinery cannot be considered as creation of immovable property. It is relevant to note the Hon’ble Supreme Court’s observation in Rajasthan Spg. & Wvg. Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT OF INDIA]. The Hon’ble Apex Court allowed the credit on steel plates and M.S. channels used in the fabrication of chimney applying user test . In other words, the usage of a particular item in the appellant s premises will determine the credit eligibility rather than its classification alone. Hence, we find no merit in the impugned order and accordingly set aside the same. - Decided in favour of appellant

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• 2016 (9) TMI 1096
  Valuation - includability - additional consideration - debit notes raised to various buyers of excisable goods to compel them to return the durable packing - amount raised in debit note have not been received by the appellant - Demand - Held that:- any debit note issued with reference to sale transaction of excisable goods will necessarily be form part of the transaction value. The Central Excise duty is not levied only on the quantum of consideration actually received by the appellant. The invoice as well as debit note indicate the sale value of excisable goods. Some amount has been defaulted by the buyer cannot result in reduction in duty incidence. In other words Central Excise duty is not on receipt basis. The levy is on manufacture and the collection is at the time of clearance. As such, we find no merit in the appellant s plea for non-inclusion of the additional consideration admittedly raised in the form of various debit notes to the buyers. Valuation - includability - additional consideration - cost of raw material supplied free by the buyer of finished goods - Demand - Held that:- the raw material received free of cost has to be additional consideration over and above the amount received by the appellant towards sale of the finished goods. Admittedly the free raw material would have resulted in the lesser invoice value which does not duly reflect the normal transactional value for excise duty purposes. Demand - lesser payment of duty paid on the cables which were cleared for second time - appellants claimed that these goods were re-manufactured by using additional inputs as untenable - Held that:- the appellants received back the finished goods, did some processing to obtain similar finished goods and cleared to another customer. There is nothing on record to say that the second time clearance was of different goods resulting after a process of manufacture. In terms of Rule 16 (2) if the process to which the goods are subjected before being removed does not amount to manufacture the manufacturer shall pay an amount equal to the Cenvat credit taken under sub-Rule (1). In the present case, the appellant is liable to pay the Cenvat credit already availed on return of the said finished goods. Hence, we find no merit in the plea of the appellant against such demand. Demand - capital goods cleared to the other unit of the appellant - denial of credit was on technical ground and the machine was sent to their own unit for further maintenance - Held that:- it is found that the capital goods are no more available with the appellant for intended use and there is no record of their return after maintenance work. In such situation, the Original Authority is correct in demanding to recover the credit taken on such capital goods. Cenvat credit - misuse of provisions of Rule 16 - availed as a credit by the appellant upon return of duty paid final products back to the unit - defective goods returned back have been accounted for by the appellant - denial of such credit is on the ground of alleged motive of appellant to avail the credit and to keep the goods without clearance in the unit - Held that:- the duty paid goods when returned back with a purported intend of re-conditioning or for any other reason the appellant is rightly eligible for credit of duty already paid. The presumed motive or the retention of returned goods inside the premises for long time are not reasons for denial of credit under the said Rules. In fact it has to be noted that duty is only a portion of the sale value of finished goods which has got considerable economic value for the manufacturer and nobody will intend to keep such saleable goods only to avail credit on returned goods. The misuse of Rule 16 has not been demonstrated in the present case as per the original order. As such, we find the denial of credit by the Original Authority is not sustainable. Imposition of penalties - Held that:- the penalty imposed under Section 11AC has been justified as the various additional consideration, as discussed above, have escaped duty and the appellant's act of non-payment due to not disclosure of material facts cannot be denied. As such, we uphold the penalty imposed under Section 11AC. Regarding penalty under Rule 15 of Cenvat Credit Rules, 2004, since the main demand of Rs. 63,32,710/- in terms of Cenvat Credit Rules, 2004 was held unsustainable the penalty also required to be suitably reduced. Accordingly, we reduce the penalty to Rs. 1,00,000/- under Rule 15 of Cenvat Credit Rules, 2004. Since, penalty under Section 11AC has already been upheld, we find further penalty under Rule 25 is not warranted in the present case. Accordingly we set aside the penalty imposed under the said Rule. - Decided partly in favour of appellant

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• 2016 (9) TMI 1095
  Cenvat Credit - impact of subsequent decision of apex court - Rule 14 of Cenvat Credit Rules, 2004 read with proviso to Sub-section (1) of Section 11A of Central Excise Act, 1944 - procurement of plastic laminated packing pouches as their inputs for packing their finished goods - Hon’ble Supreme Court ordered that plastic laminated packing pouches should not be used for packing of Chewing Tobacco on 11th May, 2011 and cenvat credit availed was for the period from March, 2009 to March, 2011 - Held that:- it is found that the date on which Cenvat credit was taken by the appellant the inputs on which the Cenvat credit was taken were regularly in use for packing the finished product and therefore the Cenvat credit availed was eligible. I also find that Cenvat credit which is validly taken needs to be reversed only when the inputs are cleared as such. I, further, note that Rule 14 of Cenvat Credit Rules, 2004 provided for recovery of irregularly availed Cenvat credit and it is beyond the scope of said Rule 14 of Cenvat Credit Rules to recover the Cenvat credit which was validly taken. I, therefore, hold that the Show Cause Notice is misconceived and therefore, I set aside the Show Cause Notice, Order-in-Original and Order-in-Appeal. - Decided in favour of appellant

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• 2016 (9) TMI 1094
  SSI exemption - wrong availment of Exemption benefit - Notification No.175/86-CE and 1/93-CE - denial of SSI notification - clubbing of value of clearances - impugned order does not hold one person as the manufacturer and the others as dummies - Held that:- the manufacture and clearances made by the respective noticees/appellants - M/s Atlantic Chemical Industries, M/s Foamsil Chemicals (not appellant here) and M/s Arun Chemicals for the item namely RBA availing the benefit of Notification No.175/86-CE (1/93-CE later) have to be clubbed together as we hold that these units are one and the same, when their operations are under common management and financial control and have mutuality of financial interest with each other. When it is so, then we agree with the findings of the impugned order. The three units namely, M/s Atlantic Chemical Industries, M/s Foamsil Chemicals and M/s Arun Chemicals, whatever is their constitution, (these are proprietary concerns), are under common management and closely controlled by only one person Shri J.S. Jain, who is one of the appellants here. The facts and circumstances have warranted to examine the reality of these units; and after going behind the mask of these entities, it has been revealed that activities of these units i.e. manufacture, clearance etc. has to be clubbed together supported by the decision of Hon'ble Supreme Court in the case of Calcutta Chromotype Ltd. vs. C.C.E., Calcutta [1998 (3) TMI 138 - SUPREME COURT OF INDIA]. Regarding the submission that M/s Arun Chemicals had got no manufacturing activity, it may be mentioned that both M/s Foamsil Chemicals and M/s Arun Chemicals have been actively involved in the operations of wrongly availing exemption under Notification No.175/86-CE by -artificial fragmentation when there was no distinction in management of the firms’. Therefore, M/s Arun Chemicals (who is one of the appellants) deserves to be penalized under Rule 9(2) and 173Q of Central Excise Rules. We are giving no specific findings on M/s Foamsil Chemicals as they are not the appellant here. It is clear that noticee appellants M/s Atlantic Chemicals played a major role in the manufacturing of the item RBA. Many of the machinery items and facilities for manufacturing are available only with M/s Atlantic Chemicals. Therefore, after clubbing of clearances of the subject three units, liabilities for payment of duty of Central Excise is hereby fixed on M/s Atlantic Chemicals. Consequently, the appellant M/s Atlantic Chemicals is to pay total duty of Central Excise of Rs. 71,06,066/- (i.e. Rs. 38,45,363/- + Rs. 31,39,343/- + Rs. 1,21,360/-) for the RBA manufactured and cleared during 1989-90 to 1993-94. In this regard, corresponding penalty of Rs. 70,20,000/- is also imposed on M/s Atlantic Chemicals under Rule 2(2) and 173Q of C.Excise Rules. Further M/s Arun Chemicals have been involved in continuing this operation of wrongly claiming exemption Notification No.175/86-CE ; therefore, the penalty of Rs. 1,20,000/- imposed on them is hereby sustained. Demand and imposition of penalties - RBA manufactured and not accounted for - removed clandestinely in the guise of soda bicarbonate - Held that:- the retractions and modifications do not matter when overall evidences conclusively prove that appellants in fact cleared their product RBA in the guise of soda bi carb thus evading central excise duty. It has also come on record that soda bi carbonate cannot be technically used by the manufacturers concerned, who are using RBA as one of the raw materials for their products in Kerala. In other words, soda bi carb is not the substitute for the use of RBA in the respective rubber or other industries. In this regard, we entirely agree with the findings given by the Commissioner (Adjudication) in the impugned order. It also appears from the record that “the RBA cleared in the guise of Soda bi carb by Atlantic Chemicals and Arun Chemicals, were received for further disposal by the Ceyenar Chemicals, India Rubber & Chemicals and Lotus Chemicals. It is evident that Ceyenar Chemicals, Inda Rubber & Chemicals and Lotus Chemicals had sold the said goods to various hawai rubber sheets manufacturers and also collected the differential amount between the price of such supplied RBA and price of Soda bi Carb and arranged then remittance to Atlantic Chemicals and Sh. J.S. Jain. In their defence submissions dated 9.1.95, India Rubber & Chemicals, Ceyenar Chemicals & Lotus Chemicals have denied the allegations and contested the proposed penalty in the SCN. However, these submissions are not supported by any evidence. On the other hand, there is overwhelming evidence indicating the receipt and disposal of RBA transported under the garb of Soda bi Carb as discussed above. It is, therefore, held that they have been concerned in the receipt and disposal of the said offending goods and hence liable to penalty under Rule 209A of the CER”. Penalties imposed in the impugned order on M/s Atlantic Chemicals (of Rs. 29 lakhs) and on M/s Arun Chemicals (of Rs. 6 lakhs) are modified and we instead impose the penalty of Rs. 35,00,000/- (Rupees thirty five lakhs only) on M/s Atlantic Chemicals only in this regard under Rule 9(2) and Rule 173Q of the Central Excise Rules. Further, it is to be noted that M/s Arun Chemicals along with M/s Atlantic Chemicals and others has been actively involved in the clearance of RBA in the guise ofsoda bi carb and therefore, deserve imposition of penalties. Consequently, penalty of Rs. 6 lakhs imposed on M/s Arun Chemicals by the impugned order under Rule 9(2) and Rule 173Q of Central Excise Rules is hereby sustained. Demand and imposition of penalties - extra production of RBA (based on the test reports) - not accounted for in the production records and was removed clandestinely without payment of duty - Held that:- change of extra production is based solely on the ‘test reports’ and the Revenue has not been able to give any other corroboratory evidence to support this charge of extra production against the respective assesees. Further, when M/s Arun Chemicals do not have required manufacturing facility available with them there cannot be any production of RBA on record by them. Moreover, unless there are sufficient corroboratory evidences on records to support this charge of extra production of RBA (based on the test reports), we are of the considered view that there would be no sufficient justification to sustain the charge of extra-production of RBA (based on mere test reports), where the Revenue claims that central excise duty was not paid by the respective noticees/appellants. In other words, when we do not find any corroborative evidence(s) to sustain the charge of extra unaccountable production of RBA (based on test report), we have no option but to hold that this charge of unaccounted production of RBA (based on sample test reports) by the noticees namely, Atlantic Chemicals, M/s Foamsil Chemicals and M/s Arun Chemicals remain unsustainable and hereby dropped. Consequently, the penalties imposed on the respective noticees are also not sustainable and are hereby dropped. Imposition of penalties - Held that:- we are of the considered view that there is no reason to interfere with the above penalties. The impugned order has rightly imposed these penalties on the respective noticees appellants for the reasons mentioned in the impugned order. - Appeal disposed of

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• CST, VAT & Sales Tax

• 2016 (9) TMI 1086
  Imposition of penalty under section 76(2)(b)of the Rajasthan VAT Act, 2003 - Rule 53 of the VAT Rules - Form VAT-47produced, not duly filled, some columns left blank - suspection of the Assessing Officer that the form can be re-used - sunflower oil in transit from Punjab to Jaipur - other invoices and builties produced - is imposition of penalty is correct in the view that all documents were produced and only a few columns in the form VAT-47 remained unfilled? - Held that: - the decision in the case Assistant Commercial Taxes Officer Versus. Indian Oil Corporation Ltd [2015 (11) TMI 1078 - RAJASTHAN HIGH COURT] is relied upon. Also the provisions of section Section 76 of the VAT Act and Rule 53 of the VAT Rules was carried in detail. Rule 53 of the VAT Rules mandates that a declaration form is required to be carried with goods in movement for import within the State and the registered dealer shall furnish or cause to be furnished a declaration in Form VAT-47 completely filled in all respect in ink and ensure that the value, date and month of use of such Form shall be punched at the specified place provided for in the Form. The AO found that in Part A, the columns relating to name, place, date were blank and in Part B, the columns relating to name, place and date were blank and in Part C, the columns relating to place, status and signatures were not found to be filled in and neither the date, month nor value column was punched and there was no punching at all. The word "shall" having been used is mandatory. The material columns remained unfilled and equally important fact that VAT-47 was not at all punched is sufficient to hold that the AO was well justified in coming to the conclusion of imposition of penalty u/Sec. 76(2)(b) and the DC(A) as well as the Tax Board having upheld the finding of the AO, is just and proper. Petition devoid of merits - petition dismissed - decided against petitioner.

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• 2016 (9) TMI 1085
  Imposition of penalty @ 30% equivalent to the value of the goods under section 22-A(7) of the Rajasthan Sales Tax Act, 1954 - declaration in form ST-18-A - Sun Flower Oil carried from Shahbad to Jaipur - Held that: - section 22-A(7) of the Rajasthan Sales Tax Act Act, 1954 mandates that declaration form is required to be carried on by the vehicle in addition to the other documents. The decision in the case Assistant Commercial Taxes Officer Versus. Indian Oil Corporation Ltd [2015 (11) TMI 1078 - RAJASTHAN HIGH COURT] is relied upon. No question of law found to be involved - a finding of fact based on documents on record - imposition of penalty upheld - petition dismissed - decided against appellant.

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• 2016 (9) TMI 1084
  Validity of Assessment order - Tamil Nadu Value Added Tax Act, 2006 - business of promotion and construction of flats - the petitioner claims deduction on 30% of the total turnover in terms of Rule 8(5)(d) of the TNVAT Rules and pays tax at appropriate rate on the balance turnover after availing Input Tax Credit of the tax paid on the purchases. The petitioner is stated to have paid Service Tax on the labour portion of the contract - whether the procedure adopted by the petitioner for the purpose of availing the Input Tax Credit was justifiable, whether it confirms to the procedure under Section 5 or whether there is an infraction of Rule 8(5) etc? Held that: - The transactions appear to be complicated and there are several transactions, especially when the project consist of 148 flats, which is stated to have been completed and completion certificate was issued during March 2014. These complicated factual issues has to be adjudicated bearing in mind the legal principle enunciated in the aforementioned judgment. However to adjudicate the factual issues, the petitioner should first furnish adequate information. Input tax credit - with regard to the mismatch, the petitioner can very well establish through records, regarding the payment of sale price etc., and without furnishing specific details with regard to the transactions, the petitioner cannot say that the selling dealer alone has to be proceeded against. The initial burden of proof is on the petitioner and if he discharges the burden to the satisfaction of the Assessing Officer, then only the burden of proof shifts. Therefore, to decide this issue also, the petitioner has to necessarily place additional facts. With regard to the sale of fixed assets, wherein the petitioner's contention is that the Assessing Officer was wrong in construing the deletion of assets in the balance sheet, as sale of assets by the petitioner and ignored the FIR and the insurance documents submitted by the petitioner in support of their case that the deletion of assets in the balance sheet was due to theft of assets. With regard to transfer of construction equipment to the petitioner's group company, resulting in deletion of assets in the balance sheet, the petitioner has reported the same in its monthly returns and stated that they have discharged the appropriate tax liability and only the amount that was paid during the personal hearing, has been considered. Therefore, this issue also requires to be reconsidered. Petition partly allowed - the issues pertaining to deemed sale value, issue arising out of cross verification and issue relating to sale of fixed assets, remanded to the respondent for fresh consideration - The respondent is directed to afford an opportunity of personal hearing, take note of the law laid down by the Hon'ble Supreme Court decisions and redo the assessment under the above three heads in accordance with law after perusing the documents which shall be produced by the petitioner.

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• 2016 (9) TMI 1083
  Taxability - classification of goods - rexine cloth - Entry 51 of Schedule B of the Act - Entry 54 of Schedule 'B' of the Act - clarification sought from the Financial Commissioner and Principal Secretary to the Government of Haryana, Department of Excise and Taxation under Section 56(3) of the Haryana Value Added Tax Act, 2003 - Whether the product being manufactured by the applicant which is technically known as “Coated Fabric” and in common parlance known as “Rexin” falling under Central Excise Tariff Heading 5903 is covered under entry 51 of Schedule B appended to the Haryana Value Added Tax Act, 2003? - Held that: - the decision in the case Allahabad High Court in Commissioner, Sales Tax, U. P. , Lucknow v. Laxmi Leather Cloth Industries Pvt. Ltd. [2003 (12) TMI 619 - ALLAHABAD HIGH COURT] is relied upon. The product being manufactured by the appellant, namely, coated fabric also known as leather cloth/rexin falls in the term 'textile'. The process for manufacture of coated fabric by the appellant is noticed in the order of the Tribunal in the following terms: (i) PVC resin paste is prepared which is coated on a paper which is called 'release paper'. (ii) A cotton fabric is pasted on the release paper. (iii) This is passed through a heated oven and the resin paste due to the process of heating is coated on the textile fabric. (iv) The release paper is removed and the final product so manufactured is called 'PVC Coated Fabric'.” Whether the product being manufactured by the appellant falls in Entry 54 of Schedule 'B' of the Act, can still be exempted from taxation? - Entry 54 of Schedule 'B' of the Act is in two parts. First part mentions leather cloth and inferior or imitation leather cloth ordinarily used in book binding, whereas the second part mentions rubber used tissue or synthetic water tissue or synthetic water-proof fabrics whether single textured or double textured and book binding cotton fabrics. The condition that additional excise duty in lieu of sales tax is leviable is applicable only on the products mentioned in second part. The type of goods mentioned in two parts are altogether different. The same are separated by “colon”. - whether the condition regarding leviability of additional excise duty in lieu of sales tax is applicable? Held that: - Once a punctuation mark has a specific meaning, it has to be given effect to. It cannot be treated as otiose. Meaning thereby, there is a break in sentence at that stage. It is also evident from a plain reading of the entry itself, which uses the word 'and' in between “leather cloth” & “inferior or imitation leather cloth ordinarily used in book binding”. Thereafter, punctuation mark “colon” has been used, which is followed by other types of goods mentioned therein by using the word 'or' therein and finally using the word 'and' with a condition that additional excise duty in lieu of sales tax is levied on them. In case, there is a break in sentence, then certainly the condition of levy of additional excise duty in lieu of sales tax will not be applicable to the goods mentioned in the first part thereof - As leather cloth, which is manufactured by the appellant, is specifically mentioned in Entry 54 of the Act and that no condition of levy of additional excise duty in lieu of sales tax is applicable thereon, the appellant will be entitled to benefits arising therefrom. If a particular goods fall in two different entries, whether it is open for the dealer to invoke any of the entries, which is more beneficial? - Held that: - the principle that special will exclude general may have also to be considered - issue not considered. Appeal allowed - decided in favor of assessee.

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