Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 5, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
Notifications
Highlights / Catch Notes
Income Tax
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Once it has been held as deemed income of the assessee or an addition u/s.68, has been made the character of the said amount/addition will not remain as a loan or deposit and section 269-SS will not be applicable - No penalty u/s 271D - HC
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In between agricultural land and the nearest municipality, if there is a mountain, or lake or private lands or government properties, and in such other cases, where the public has no access to reach the municipality, the distance has to be measured only through the access road and not in a straight line or horizontal plane. - HC
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An order of assessment entails civil consequences. Therefore, under Judicial review, courts have to exercise due care and caution that no man is condemned, due to erroneous or arbitrary exercise of authority conferred. - HC
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Nature of Expenses - It is well settled law that results of the business activities or fruits of efforts to a business organisation may yield in the concerned year or in subsequent years or never. But that would not mean that the expenses incurred would not be expenses incurred during the course of business - AT
Customs
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Valuation - Once the transaction value was rejected and as the appellant did not want any show cause notice or hearing, nothing unsustainable found in the adjudication order which determined the value on the basis of value of contemporaneous imports of similar goods – enhanced value sustained. - AT
Service Tax
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Taxability of club membership fee - refundable security deposit should not be subjected to Service Tax as per provisions of the Finance Act, 1994. - AAR
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Taxability of club membership fee - The money/contribution received by company against shares from the prospective members for raising funds which can be used for achieving the sole object of the company i.e. establishing a luxurious club, is taxable as service - AAR
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Eligibility of input services related to Capital goods - input is different from input service. This being a major difference, the rulings relating to inputs and capital goods will not be applicable to the present case where we have considered the terminology “input service”. - AAR
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Where only service of Clinical Research is provided, then such service would be not taxable under the Act in light of Rule 3 of the Place of Provision of Services (POP) Rules, 2012 as the applicant renders said services to its customers and the place of provision is located outside India. - AAR
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The activities of undertaking Clinical Pharmacology liable to service tax in light of Rule 4 of the Place of Provision of Services (POP) Rules, 2012, as the services are proposed to be provided in respect of goods that are required to be made physically available by the service receiver to the service provider (applicant). - AAR
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The impugned amount of credit pertaining to charges on landline and mobile phones used by the employees of the appellant, being an eligible input service, requires to be considered as eligible input credit - AT
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Valuation - import of services - inclusion of reimbursement of expenses - the said amount being paid directly to the hotels and rent-a-cab operators, it cannot, by any stretch of imagination, be considered as an amount to be paid or payable to the foreigners who rendered the services of management consultancy and the hotel and rent-a-cab has already discharged their tax liability - service tax demand set aside - AT
Central Excise
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Cenvat Credit - providing residential accommodation to ex-pat employees voluntarily - the order holding that it as a voluntary service and has nothing to do with the business of the appellant is wrong and not sustainable in law - AT
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Classification - Residual Crude Petroleum Oil (RCPO)/ Residual Fuel Oil (RFO) / Residual Bottom Oil (RBO) - demands classifying the item as fuel oil 27101950 dropped - AT
Case Laws:
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Income Tax
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2016 (9) TMI 119
Income taxable in India - nature of activities carried on by the Applicant, which is a Singapore based company and a non-resident - P.E. in India - Held that:- The claim of the applicant more particularly is that out of three years, in only one year, there is more than 183 days of working. On this basis, the applicant wanted to know his tax liability for the years where it has not exceeded 183 days. The Department has filed its reply on dated 11.1.2016. In short, the Department contends that the applicant has a Permanent Establishment ('PE') in India. It has taken a stand in the reply that the installation of project was carried out by the applicant for 'G.R. Engineering Private Limited at BPCL, Kochi, Kerala commencing on 16.2.2015 and expected to end on 31.01.2016 constitutes a Permanent Establishment of the applicant in India in terms of Article 5 paragraph 3 of India-Singapore Double Tax Avoidance Agreement (DTAA) and hence, the business profits attributable to the said PE are the applicant's income arising in India under Section 9(1)(i) of the Act and assessable as such in India in terms of Article 7 of the said DTAA for Assessment Years 2015-16 and 2016-17, which are the years where the applicant has not exceeded 183 days. The Department has also taken a stand that for the purpose of computing the business profits, Section 44BB of IT Act is applicable to the case of the applicant. Such business profits are taxable at the rate of 40%. The learned counsel Shri K. Meenatchi Sundaram has very fairly submitted that he has no dispute with the inferences drawn by the Department. In that view, there would be no point in unnecessarily admitting this matter and keeping it pending. We, therefore, proceed to give the ruling on the basis of the contentions raised by the parties. Both the questions are, therefore, answered in terms of the conclusions drawn by the Revenue in their response dated 11.1.2016. The application is disposed of.
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2016 (9) TMI 118
Reopening of assessment - Held that:- Reason to strike down the notice for reopening. As noted, the Assessing Officer has recorded specific reasons for forming a belief that income chargeable to tax has escaped assessment. There was material before him suggesting that M/s. Bhumidev Credit Corporation Ltd had given bogus accommodation entries worth ₹ 75 lacs to M/s. Kutch Ginning and Spinning Pvt. Ltd. in form of share application money. This was confirmed by the Director of M/s. Bhumidev Credit Corporation Ltd, who, in his statement, accepted that the company was indulging in issuance of cheques on receiving equivalent cash amounts. It was found that the petitioner had also received ₹ 10 lacs from M/s. Bhumidev Credit Corporation Ltd. in form of share application money. Particularly, looking to the fact that during the original assessment none of these aspects came up for consideration before the Assessing Officer, in our opinion, these were sufficient reasons to enable him to form a belief that income chargeable to tax has escaped assessment. Counsel for the petitioner, however, vehemently contended that the material before the Assessing Officer was insufficient. He submitted that unless and until there was a specific reference to the assesseecompany in the statement of the Director, an automatic presumption would not arise that the investment made by the M/s. Bhumidev Credit Corporation Ltd in the petitionercompany was also bogus. However, we must remind ourselves that, at this stage, what is required for the Assessing Officer is to form a reason to believe that income chargeable to tax has escaped assessment. Whether such additions would be sustained or not is not a relevant consideration. In exercise of writ jurisdiction, therefore, we would not hamper further progress in the assessment.
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2016 (9) TMI 117
Penalty u/s.271 (D) - deemed income u/s 68 versus loan or deposits u/s 269SS - Held that:- If any sum is found credited in the books of account and the assessee fails to offer satisfactory explanation regarding the nature and source so offered by him or fails to tender satisfactory explanation, the said amount can be treated as deemed income of the assessee, in our view once it has been held as deemed income of the assessee or an addition u/s.68, has been made the character of the said amount/addition will not remain as a loan or deposit and section 269-SS will not be applicable. Although addition u/s.68 or provisions of sec.269-SS are independent provisions but if the alleged income is held to be deemed income of the assessee, the penalty u/s.271-D could not be invoked. - Decided in favour of assessee.
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2016 (9) TMI 116
Disallowance of deduction under Section 33(1)(iii) in relation to interest paid by the assessee - ITAT deleted the addition - Held that:- A perusal of the balance-sheet showed that the capital of the assessee included the profit earned during the year and that, therefore, both the closing capital and the profit earned during the year could not be considered as being available separately for advancing the interest free loans. Even assuming that to be so, it would make no difference. This is for the reason that even otherwise the assessee had sufficient amounts available to him to advance the interest free loan of Rs. 7.37 crores. As mentioned earlier, the assessee had available with him Rs. 11.78 crores on account of capital itself. Moreover, he also had an interest free loan of Rs. 1.18 crores from his wife. The CIT (Appeals) also observed that the assessee had not rebutted the Assessing Officer’s contention that he had also made investment out of his capital during the year which exceeded the capital of the assessee. However, Mr. Katoch was unable to invite our attention to any part of the record which established this assertion. He merely relied upon the observation. Further, the nature of this investment is also not indicated. Nor is there anything to indicate that such investment was made out of the capital. There is no co-relation of the investment made and the interest bearing loan and the capital available to the assessee. In these circumstances, the Tribunal’s appreciation of the facts to the contrary cannot be held to be absurd or perverse.
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2016 (9) TMI 115
Agricultural land - whether the agricultural land sold by the assessee, is situated more than the distance of 8 Kms from Avadi Municipality and as to whether, that the same falls within the definition "agricultural land" - Held that:- In the matter giving weightage to the evidence, report of the departmental inspection vis-a-vis certificates of the Village Administrative Officer, Deputy Surveyor, Ambattur Taluk and General Manager, Metropolitan Transport Corporation (Chennai) Ltd's, for the purpose of Section 2(14)(iii)(b) of the Income Tax Act, certificates of the Revenue Authorities and Public Transport Corporation Ltd., on the measurement of distance, by the approach road, should be given weightage and accepted, unless the contrary is proved. Therefore, it is not open to the revenue to contend that as per Section 11 of the General Clauses Act, 1857, the distance between the agricultural land and the nearest municipality, has to be measured, only in a straight line or a horizontal plane. In between agricultural land and the nearest municipality, if there is a mountain, or lake or private lands or government properties, and in such other cases, where the public has no access to reach the municipality, the distance has to be measured only through the access road and not in a straight line or horizontal plane.
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2016 (9) TMI 114
Addition with respect to on money payment by the assessee for the purchase of property - addition was made based on the statements recorded during the search from the assessee and his son and seller of the property - Held that:- As for deciding any issue, against the assessee, the Authorities under the Income Tax Act, 1961 have to consider, as to whether there is any corroborative material evidence. If there is no corroborating documentary evidence, then statement recorded under Section 132(4) of the Income Tax Act, 1961, alone should not be the basis, for arriving at any adverse decision against the assessee. If the authorities under the Income Tax Act, 1961, have to be conferred with the power, to be exercised, solely on the basis of a statement, then it may lead to an arbitrary exercise of such power. An order of assessment entails civil consequences. Therefore, under Judicial review, courts have to exercise due care and caution that no man is condemned, due to erroneous or arbitrary exercise of authority conferred. In the case on hand, statement recorded on 29.12.1999 from the son of the assessee under Section 132(4) of the Act is not corroborated by any material document. Admittedly, Revenue has also not confronted the assessee, with the said statement of his son. If that be the case, it can be safely concluded that, there was no material documentary evidence, to substantiate and corroborate the statement of Mr.Natarajan, son of the assessee. If the assessee makes a statement under Section 132(4) of the Act, and if there are any incriminating documents found in his possession, then the case is different. On the contra, if mere statement made under Section 132(4) of the Act, without any corroborative material, has to be given credence, than it would lead to disastrous results. Considering the nature of the order of assessment, in the instant case characterised as undisclosed and on the facts and circumstances of the case, we are of the view that mere statement without there being any corroborative evidence, should not be treated as conclusive evidence against the maker of the statement. Thus we are of the considered view that the Revenue has not made out a case for reversal of the orders impugned, on the grounds raised, and thus we hold that all the substantial questions of law, are answered in the negative against the Revenue, and in favour of the respondent/assessee.
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2016 (9) TMI 113
Calculation of deduction u/s. 80HHC - CIT (A) directing not to exclude 90% of Excise refund (Mfg.), Excise refund (Merchant), insurance claim from the profit of the business for calculation of deduction u/s. 80HHC - Held that:- Having considered the decision in case of ACG Associated Capsules (P) Ltd. (2012 (2) TMI 101 - SUPREME COURT OF INDIA ), issue with regard to insurance claim from the profit of the business for calculation of deduction under Section 80HHC is squarely covered and required to be answered in favour of the Department. While adopting the aforesaid principles of law and without giving any further elaborate reasons, we answer the above referred question in favour of the Department. So far as the question of excluding 90% of excise duty refund credited in the profit and loss account in respect of manufacturing and merchant division is concerned, the CIT (A) as well as the Tribunal has rightly come to the conclusion after considering material placed before them and various decisions. We are in complete agreement with the said finding directing the AO not to exclude the excise duty refund insurance claim while computing the deduction u/s. 80HHC.
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2016 (9) TMI 112
Allowability of expenditure - business expenditure of payment of commission to its agents of marketing and related services - Held that:- It is not in dispute, pursuant to notice issued by the Assessing Officer, both the agents confirmed in writing that they had rendered services to the assessee. The assessee has, before making payment, deducted tax at source. The Consolidated Construction Co. [Agencies] Pvt. Ltd. in its letter dated 15th February, 2006 addressed to the Assistant Commissioner of Income Tax has confirmed that they were appointed marketing agent of the assessee. They have also disclosed extract of their books of account in order to show the dealings and transactions between the assessee and the aforesaid agent. They have also disclosed their PAN card number. By their letter dated 20th March, 2006 they once again wrote to the Assistant Commissioner of Income Tax furnishing various information including that the amount of commission earned by them had been indicated in their books of account and had also been offered for taxation and assessment was made which was also disclosed by them. The other agent namely, SPS Metal Cast and Alloys Ltd. by its letter dated 22nd March, 2006 furnished to the Assistant Commissioner of Income Tax, a copy of the extract of the ledger from its books of account disclosing the dealings and transactions between the assessee and the aforesaid agent and the copies of their balance sheet for the relevant period together with their PAN card number. From the evidence disclosed by the assessee we are inclined to think that the assessee had adduced such proof as it was in its power to prove - Decided in favour of assessee.
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2016 (9) TMI 111
Reopening of assessment - beyond a period of 4 years - Entitlement to deduction under Section 80-IB(8A) - Held that:- Assessing Officer in the order of assessment had disallowed the entire claim of deduction, he had, thereafter, not made any observations with respect to parts of such claim including with respect to the interest income. When the Tribunal was thus examining the entire claim of deduction, it was perhaps open for the Revenue to argue by way of alternative contention that even though the assessee may be entitled to deduction under Section 80-IB(8A) of the Act the same may not be true for the entire claim put-forth by the assessee. Even if while giving effect to the order of the Tribunal, the Assessing Officer had attempted to restrict the claim on any reasonable ground, the situation would have stood on a different ground. However, in the present petition we are examining the validity of notice for reopening of the entire assessment on this ground that too in a case, where the notice has been issued beyond a period of four years from the end of the relevant assessment year. Despite strenuous efforts on part of the counsel for the Revenue, we are unable to see where in a situation like one on hand the condition of failure of true and full disclosure can be done away with when the Assessing Officer has resorted to reopening of the assessment beyond a period of four years.
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2016 (9) TMI 110
Entitlment to claim interest paid on borrowed capital - Held that:- No distinction in Section 36(1)(iii) between ‘capital borrowed for a revenue purpose’ and capital borrowed for capital purpose’ and an assessee is entitled to claim interest paid on borrowed capital provided that capital is used for business purpose irrespective of what may be result of using such borrowed capital. Allowabilty of payment of surtax - Held that:- This Court in the case of Gujarat State Export Corporation Ltd. (1993 (9) TMI 52 - GUJARAT High Court) has held that payment of surtax was not an allowable deduction and that by paying the entrance fee to the sports club the assessee had no intention to acquire any capital asset or take advantage for the enduring benefit of the business and that by common sense standards, it could be stated that it was for running the business or for bettering the conduct of its business and therefore the amount paid as entrance fee was deductible. In view of the said decision, we find that the question raised is required to be answered in favour of the assessee. Addition for provisions made for bad and doubtful debts - Held that:- As in the case of Yokogawa India Ltd. (2011 (8) TMI 766 - KARNATAKA HIGH COURT ), the Karnataka High Court has held that while computing book profits, provisions made for bad and doubtful debts cannot be added back in accordance with Explanation (c ) to Section 115JB(1) as same is not an ascertained liability. In that view o the matter, we are of the opinion that the Tribunal was justified in confirming the order of CIT(A) deleting the addition. We do not see any reason for interference and therefore we answer the question in favour of assessee and against the revenue MAT computation - payment to L & T towards excise duty - Held that:- CIT(A) directed to allow the expenditure on payment to L & T towards excise duty as revenue expenditure and the remaining expenditure incurred on payment to GAIL and expenditure on cell membranes were held as capital expenditure. On further appeal by the assessee before the Tribunal, the Tribunal directed to allow the entire expenditure as revenue expenditure but directed to allow the same on deferment basis as claimed by the assessee. The Tribunal also allowed deduction u/s 80HHC while computing the book profit u/s 115JA.
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2016 (9) TMI 109
Taxability of privilege in the form of advanced licence allotted to the assessee - Held that:- The Tribunal, after discussing the contentions advanced on behalf of the respective parties was of the view that income is to be taxed in accordance with the statutory provisions and not on the basis of the impression or the views which the assessee is supposed to have taken in the matter. On facts the Tribunal found that the assessee had advanced such a plea before the Assessing Officer also and was further of the view that the mere fact that the assessee had shown such amount as taxable receipt is not material and that the issue has to be examined as per the statutory provisions. Accordingly, it has remitted the matter to the Assessing Officer to reexamine the claim of the assessee under section 80HHC of the Act. In the opinion of this court, the approach adopted by the Tribunal in sending the matter back to the Assessing Officer for determination of the question as to whether benefit or privilege in the form of advance licence allotted to the assessee is taxable or not is a practical approach having regard to the facts and circumstances of the case. In these circumstances, it is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to warrant interference. The Appellate Tribunal has not erred in remanding the matter to the Assessing Officer for determination of the question as to whether the benefit or privilege in the form of advanced licence allotted to the assessee is taxable or not. The question stands answered accordingly, that is, in favour of the assessee and against the revenue. The appeal, therefore, fails and is, accordingly, dismissed.
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2016 (9) TMI 108
Disallowance made out of stores and spare expenses - CIT(A) allowed claim - Held that:- The assessee is following consistent accounting policy whereby insurance claim and recovery of cost towards accessories are accounted for on cash basis due to uncertainty of realization. The amount of insurance claimed received as per breakdown insurance policy taken for the D.G. set amounting to ₹ 32,76,485/- and realization from sale of scrap of damaged turbo charger amounting to ₹ 8 lacs has been received and offered to tax in the subsequent assessment year 1998-99. Hence we do not see that there is any loss which has been caused to the Revenue by not offering the said receipts in the year under consideration. It is not the case of the Revenue that any tax rates have changed in the subsequent year. In light of above, we do not see any justification in interfering with the order of ld. CIT(A). Hence we confirm the findings of the ld. CIT(A) and dismissed the ground of the Revenue. Disallowance of legal & professional charges treating the same as expenditure for getting a benefit of enduring nature - CIT(A) allowed claim - Held that:- An amount of ₹ 4,40,000/- has been incurred by the assessee towards the environmental study which was undertaken for converting its existing mercury plant into a technological better membrane cell plant. There is nothing on record to confirm that the assessee has actually converted the existing plant into the new plant and whereby the said cost should go and be added to the cost of the new plant. The expenditure therefore is clearly in connection with conducting a study to make the plant technological better plant. In our view, the said expenditure towards carrying out only the consultancy study cannot be characterized as a capital expenditure. Further the decision in case of Majestic Auto Ltd. [2009 (1) TMI 57 - PUNJAB AND HARYANA HIGH COURT ] quoted by the ld. AR support the said position. In light of above, we do not see any necessity to interfere to the findings of the ld. CIT(A) Addition in respect of collection of benevolent fund u/s 2(24)(x) - CIT(A) allowed claim - Held that:- The liability of the assessee towards its share of contribution to the benevolent fund for the welfare of the employees has not been disputed. Further the ld. CIT(A) has confirmed that the said contribution has been deposited before due date of filing the return of income, hence in light of the provisions of section 43B of the Act the said contribution has been rightly allowed by the CIT(A) Disallowance on account of entertainment expenses - CIT(A) allowed part claim - Held that:- The amount of ₹ 2,19,682/- has been incurred on boarding and lodging of Engineers who have been called upon to carry out repair of faults in the appellant’s plant. Further ₹ 75,000/- has been estimated by the AO towards entertainment expenditure which has been incurred on expenses of tea, coffee, cold drinks etc. for the visitors who have visited the office and factory premises of the assessee. In our view these are routine business expenditure which has been incurred to provide basic hospitality to the technicians and guests who have visited the office and factory premises. Disallowance in respect of guest house expenses - Held that:- CIT(A) has given a finding of fact that as per tax audit report submitted before him, an amount of ₹ 8,55,975/- which includes ₹ 7,19,965/- towards the guest house expenses for Delhi office has already been considered by the auditor for disallowance of the guesthouse expenses. The said findings of the ld. CIT(A) remain uncontroverted. In light of that, we donot see any justification for estimation of expenses as done by the AO. We accordingly confirm the order of the ld. CIT(A) and the ground of the revenue is dismissed. Addition made on account of payment to clubs - Held that:- The Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Groz Beckert Asia Ltd (2013 (2) TMI 375 - PUNJAB & HARYANA HIGH COURT ) has held that corporate membership does not bring in the existence an asset or an advantage for enduring benefit to the business. The corporate membership was obtained for running the business. Thus we confirm the order of the ld. CIT(A) who has rightly held that the expenditure incurred on payments to clubs is in the nature of business expenditure Addition of vehicle expenses - CIT(A) allowed part claim - Held that:- . The vehicle expenses have been disallowed on two accounts. Firstly on a/c of non-business use of the expenses and secondly, on a/c of provisions of ₹ 1,20,000. It is a settled position in law that in case of corporate entities, no disallowance can be made for personal use as corporate entities are distinct from directors and any payments/expenditure incurred for Directors are governed by their terms of appointment. In the instant case, therefore no disallowance can be made holding that expenditure has been incurred for the personal purposes. Secondly, the liability for ₹ 1,20,000/- has crystallized during the year and following the mercantile system of accounting, the same cannot be disallowed. In the result, we delete the disallowance ₹ 1,20,000/- towards vehicle disallowance made by the AO. In the result, the ground of the revenue is dismissed and the ground of the assessee is allowed. Addition made of difference in MODVAT value available in valuation of closing stock of raw material - Held that:- The appellant has submitted that as against Excise Duty of ₹ 3,64,438/- in respect of closing stock of raw material, the appellant had a MODVAT credit available in its books of accounts amounting to ₹ 2,98,099/- and further the balance amount of the Excise duty has been paid before the due date of filing of the return. The AO is accordingly directed to verify the said claim of the assessee and where the same is found to be in order, allow necessary relief to the assessee. Hence this ground of the revenue is dismissed. Addition on account of valuation of closing stock - Held that:- he ld. CIT(A) has given a finding of fact that the assessee is regularly following the consistent basis for the valuation of its closing stock and there is no deviation in the valuation method during the year. Further the ld. AR has submitted that for subsequent A.Y 1997-98 the AO has accepted the closing stock declared by the assessee for the year under consideration as opening stock for that year and also accepted the closing stock declared in that year. Further it is noted that there is no change in the rate of tax for the year under consideration and the subsequent assessment year, hence following the decision of Hon’ble Supreme Court in the case of Excel Industries Ltd.[2013 (10) TMI 324 - SUPREME COURT ] we hereby delete the addition of ₹ 10 lacs on account of valuation of closing stock. Disallowance of amount paid to RSEB - Held that:- The assessee has submitted that an amount has been paid to RSEB towards drawing excess power over and above the sanction capacity. It is therefore, a matter which falls within the realm of contractual relationship between the assessee and the RSEB and it is clearly in the nature of contractual payment rather than infringement of any law of the land. In light of that, we delete the disallowance of sum paid to RSEB. Disallowance on adhoc basis out of repairs and maintenance expenses - Held that:- AO has highlighted specific expenses amounting to ₹ 2,11,997/- incurred towards repair and maintenance of the guest house at 15 Friends colony, New Delhi. It is also noted that the assessee has already disallowed an amount of ₹ 1,68,707/- u/s 37(4) while filing its return of income. In light of that, we do not see any justification in AO making an estimation and disallowance at ₹ 19,00,000/-. We accordingly direct the AO to restrict the disallowance to ₹ 2,11,997/-. Given that the assessee has already disallowed ₹ 1,68,707/-, the balance disallowance of ₹ 43,290/- should be made in the hands of the assessee Disallowance of foreign travel expenditure - Held that:- The decision of Hon’ble Bombay High Court in case of Bralco Metal Industries Pvt. Ltd.(1993 (9) TMI 318 - BOMBAY High Court ) was brought to the notice of Bench in support of the contention that the expenditure on foreign travel of Managing Director to examine the suitability of machinery for a running business is not capital in nature where no machinery was purchased. In light of above, we set-aside the matter to the file of the AO to examine where any new capital assets were purchased by the assesse pursuant to foreign visits made during the year under consideration. Whether it is found that no new capital assets have been purchased by the assessee, the AO is directed to allow the foreign travel expenditure as a revenue expenditure Addition of publicity expenses - Held that:- It is not in dispute that the amount of ₹ 1 lacs has been paid to Equestrian Federation of India and other amounts have been paid to Shri Jawahar Jain education Institute and Puja Samiti and other trust to support their educational and social activities. The ld. AR has submitted its inability to submit the supporting documentation in view of the fact that the assessee has become a sick company and the matter is pretty old. Given that the genuineness of the expenditure has not been doubted and the payments has been made by cheque, we delete the disallowance of ₹ 2 lacs out of the publicity expenses. Disallowance of interest payment - Held that:- In light of decision of Hon’ble Supreme court in case of Hero cycles [2015 (11) TMI 1314 - SUPREME COURT OF INDIA ] the bank guarantee for ₹ 5 crores in favour of IDBI by depositing ₹ 5 crores with the bank as FD became imperative as a business expediency as part of the rehabilitation package of M/s Modi Cement which is one of the group companies. Similarly, the assessee has supported the other group companies which were also going through the financial and liquidity crunch in order to meet the statutory liabilities and dues towards salary of employees, workers and other expenses and has thus satisfied the test of commercial expediency in respect of other loan and advances as well. In light of that, we delete the disallowance of ₹ 21,96,755/-. In the result, ground of the assessee is allowed. Addition u/s 40A - Held that:- Exceptions contained in Rule 6DD are not exhaustive and the said rule must be interpreted liberally and taking into consideration the business expediency of making cash payment, we hereby delete the disallowance in the hands of the assessee. Addition of prior period expenses - Held that:- There is no dispute that the expenses have been incurred for the purposes of business and the genuineness of the expenses are not under question, we hereby delete the disallowance Addition on account of loss in transit - Held that:- CIT(A) while confirming the disallowance has held that the assessee did not file any evidence and justification in support of the transit loss of ₹ 4,73,264/-. Hence we do not see any justification to interfere in the order of ld. CIT(A) hence same is confirmed and the ground taken by the assessee is dismissed.
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2016 (9) TMI 107
TDS u/s 195 - Disallowance of commission expenses under section 40(a)(i) - taxability of a non-resident in respect of “income accruing or arising or deemed to accrue or arise, in India - Held that:- For application of Section 195, it is sine qua non that the payment to no- resident must have an element of income liable to be taxed under the Indian Income Tax Act, 1961. On the facts of this case, as we have already concluded, no part of the remittance to the commission agent was taxable in India. The assessee was, therefore, not under any obligation, on the facts of this case, to deduct any tax at source from the commission payments to the non-residents. Since there was no obligation to deduct tax at source, the very foundation of impugned disallowance under section 40(a)(i) ceases to hold good in law. Learned CIT(A) was, therefore, quite justified in deleting the impugned disallowance. We uphold his action, and dismiss the grievance raised by the Assessing Officer.
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2016 (9) TMI 106
Disallowance of part of the interest paid by the assessee - addition on the ground that the interest paid on Compulsory Convertible Debenture did not satisfy the arm’s length principle and application of LIBOR rate considering the rupee denominated Compulsory Convertible Debenture as External Commercial Borrowings instead of rupee denominated Compulsory Convertible Debentures - Held that:- The assessee had furnished the additional evidences for the first time before this bench of the Tribunal, those were not available at the time of proceedings before the TPO/AO/DRP. The new evidence now furnished by the assessee, go to the root of the matter and are very much relevant to resolve the present controversy i.e. as to whether the borrowing was the External Commercial Borrowings or not, it is also not clear as to whether the assessee claimed the deduction of the interest paid on issuance of Compulsorily Convertible Debenture in its return of income. In the present case, the assessee carried out analysis on BSE database which provides the details of the comparable instruments and submitted the same as additional/supplementary analysis vide letter dated 27.04.2016 which indicated that the average coupon rate of comparable instruments issued in Real Estate Industry was 14.50% as compared to the average coupon rate of 12.39% of all the instruments issued during the year, which is evident from Annexure 1 attached with the letter dated 27.04.2016. The assessee had also claimed to have collected the details of interest rate offered by nationalized banks in India to the borrowers having similar credit rating as that of the assessee vide Annexure 4 of the letter dated 27.04.2016, first time before this bench of the Tribunal and as per the said document the average lending rate was computed at 13.66%, the assessee claimed that the international transaction of payment of interest on CCD’s entered into by it was at arm’s length. Since the aforesaid documents furnished by the assessee first time before the Tribunal are relevant to resolve the present controversy and the assessee had reasonable cause not to furnish the same before the authorities below because those were not available at the time of framing the assessment or the proceedings before the DRP/TPO. Therefore, the additional evidences furnished by the assessee are admitted. However, these documents are to be considered by the authorities below. Thus we deem it appropriate to set aside this case back to the file of the AO/TPO to be decided afresh - Decided in favour assessee for statistical purposes.
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2016 (9) TMI 105
Eligibility of deduction u/s 35AC - Held that:- The assessee complied the twin condition. Ld. CIT(A) considered the contention of the assessee and the notification No. SO121(E) dated 12.01.2009 notifying the Institution as eligible Institution for health and protection activities for elderly persons for three Financial Year i.e. 2008-09, 2009-10 & 2011-12. The CIT(A) concluded that AO has recorded the statement of Dr. Sonia Sharma (Chairperson of MUS) which clearly established the fact that assessee has actually made the payment of ₹ 1,00,00,000/- to the MUS. The AO despite recording the statement confirmed the donation conveniently avoided referring to such evidence including statement while disallowing the claim of assessee in the assessment order. The CIT (A) concluded that the assessee satisfied both the condition enumerated u/s 35AC. The Ld. CIT(A) also considered the fact that even if any discrepancy or forgery has been occurred in case of Donee i.e. MUS, the AO cannot denied the claim of deduction and allowed the appeal of assessee. - Decided against revenue
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2016 (9) TMI 104
Disallowance of consultancy charges paid to the legal advisor firm - whether the said amount was not incurred for the purpose of business as the same was incurred prior to commencement of business of the assessee - Held that:- The business can be ‘set-up’ when the company is ready to discharge the function for which it is incorporated. It was also held that expenditure incurred after the setting up of business is deductible as revenue expenditure. It is also brought to our notice that one of the objects for which the company was incorporated was to make investment in other companies, and the assessee company had received funds in the form of share capital or other sources before 11-10-2006 and it had started making due diligence for potential investee companies immediately after getting NBFC registration certificate on 11-10-2006, then it can be said that assessee company was ready to commence its business and thus its business was set-up on 11-10-2006. Thus, we find that in principle, the expenses incurred after 11-10-2006 having been incurred after setting up of business are deductible as revenue expenditure. Expenses incurred on account of due diligence of a proposed investment - Held that:- It is clear that expenses incurred on account of due diligence of a proposed investment is clearly made as part of the business activities of the assessee and, therefore, the impugned expenses are expenses incurred in the ordinary course of its business. The other reasoning given by the Ld. CIT(A) was that no investment was made during the year under consideration and funds were parked in the bank. On this aspect also, we differ with the reasoning given by the Ld. CIT(A). Though, clear facts are not before us with respect to the making of investment in this year or next year, but even if investments were not made during the year under consideration, it cannot be said that these expenses were not incurred for the purpose of business. It is well settled law that results of the business activities or fruits of efforts to a business organisation may yield in the concerned year or in subsequent years or never. But that would not mean that the expenses incurred would not be expenses incurred during the course of business. Thus, we find that approach of the lower authorities in disallowing these expenses was contrary to law and facts.
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2016 (9) TMI 103
Applicability of section 50C - challenging the valuation done by stamp duty authorities - reference to dvo - Held that:- The assessee rightly exercised its right and invoked the provisions of Section 50C(2) of the Act to refer the matter to DVO albeit this plea was taken by the assessee for the first time on 23-12-2009 which was at the fag-end of the assessment proceedings u/s 143(3) read with Section 143(2) of the Act being getting time-barred on 31-12-2009 under the provisions of Section 153(1) of the Act. Hence, keeping in view the interest of justice and fair play, in our considered view this matter/issue needs to be set aside and restored to the file of the A.O. for de-novo determination of the issue on merits after referring the matter to DVO for valuation report and thereafter the AO shall complete the assessment de-novo on merits after considering the evidences/explanations submitted by the assessee in its defense, valuation report of DVO as well the value adopted by the stamp duty authorities to arrive at the full value of consideration to compute capital gains chargeable to tax under the head ‘Income from capital gains’ under Chapter IV-E of the Act. Needless to say that the A.O. shall provide proper and adequate opportunity of being heard to the assessee in accordance with the principles of natural justice in accordance with law.
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2016 (9) TMI 102
Penalty u/s 271AAA - undisclosed income was admitted during search - According to the AO, bifurcation of the income, head-wise and year-wise, was not given in this statement under section 132(4) of the Act. Year-wise and assessee-wise break up was given by the group subsequently - Held that:- Sub-section 2 provides that sub-section 1 of Section 271AAA would not be applicable upon an assessee if he fulfills the following conditions viz. (a) that the assessee in the course of search, in a statement under sub-section (4) of section 132 admits the undisclosed income and specifies the manner in which such income has been derived, and (b) substantiate the manner in which the undisclosed income was derived, and (c) pays the tax together with interest, if any, in respect of undisclosed income. As far as the fulfillment of clause (c) is concerned, there is not dispute between the parties. Similarly, assessee has disclosed the income during the course of search. The dispute between the parties is whether the assessee has specified manner in which such income has been derived and substantiate the manner in which undisclosed income was derived. The AO has simply observed that the assessee has not admitted the income himself and has not disclosed the manner. The income was disclosed by the son of the assessee. It is pertinent to say that the statement of Shri Rajesh M. Shah was recorded on behalf of group itself. He has specified the income of ₹ 25 crores not only assessable in his hand, but pointed out that it will be allocated between different entities and the persons. He has also disclosed the manner in which the income was derived. All these aspects have been specifically considered by the ld.First Appellate authority in the finding extracted supra. After perusal of the finding of the ld.CIT(A), see no reasons to interfere in it. - Decided against revenue
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2016 (9) TMI 101
Levying the penalty u/s 271(12)(c) - exemption u/s 10(22) - Held that:- It is observed that the assessee was registered under Societies Registration Act in the year 1968. The assessee was also granted exemption u/s 10(22) of the Act vide order dated 27.01.1994 issued by the Director of Exemption, the exemption u/s 10(22) was available to the assessee till Assessment Year 1998-99 as Section 10(22) stood deleted w.e.f. Assessment Year 1999-2000. From the records placed before us, it is observed that the assessee was under a belief that the exemption is available with the assessee under the Act. It was subsequently during the year under consideration that the assessee realized that the exemption is not available. It was during the assessment proceedings for Assessment Year 2004-05 that assessee realized the exemption being not available vide assessment order for the Assessment Year 2004-05 where the Ld. A.O. rejected the assessee’s claim. From the facts of the case, it does not appear that the assessee has deliberately abstained itself from presenting such application in time. In the application dated 31.10.2006 assessee has also claimed for condonation of delay and has requested for registration to be granted w.e.f. 01.04.1999. Considering the above facts, we are of the opinion that the imposition of penalty u/s 271(1)(c) is not justified as there was complete disclosure of facts and the claim made by the assessee was not found acceptable in law. We, therefore set aside the penalty order passed by Ld. A.O.
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Customs
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2016 (9) TMI 124
Assessment - Rule 5 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 read with Section 14 of the Customs Act, 1962 – mis-declaration of the thickness of import of PU leather cloth – waiver of the right to SCN and personal hearing – Held that: - It is evident that thickness of the impugned goods was found to be more than that declared and therefore rejection of transaction value is in conformity with Rule 12 of Customs Valuation Rules, 2007. Once the transaction value was rejected and as the appellant did not want any show cause notice or hearing, nothing unsustainable found in the adjudication order which determined the value on the basis of value of contemporaneous imports of similar goods – enhanced value sustained. Confiscation of goods - Section 111(m) of the Customs Act, 1962 – option to redeem the goods on payment of redemption fine - Section 125 of the Customs Act, 1962 - Imposition of penalty - Section 112(a)(ii) of the Customs Act, 1962 – Held that: - there is nothing to suggest that there was any deliberate mis-declaration of thickness. The invoice mentioned possible variation of up to 10%. There is no evidence that there was any deliberate design on the part of the appellant to mis-declare the thickness or that there was any collusion between the supplier and the appellant. Similar stand taken in the case M/s Sky International 2016 (6) TMI 67 - CESTAT NEW DELHI – redemption fine and penalty set aside – partly decided in favor of appellant.
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2016 (9) TMI 123
Restoration of CHA license - revocation in terms of the Regulation 22(7) of the Customs House Agent Licensing Regulations 2004 – forfeiture of security amount - SCN under Regulation 22(1) ibid – inquiry report to be submitted within 90 days of the SCN - CHA Regulation No. 22(5) – Held that: - Madras High Court in the case of A M Ahmad [2014 (9) TMI 237 - MADRAS HIGH COURT] in effect has clearly held that breach of the time limit prescribed in Regulation 22 is fatal to the order and set aside the order on that ground. The impugned order is unsustainable on account of time bar, as enquiry report submitted after prescribed time limitation – Also, Allahabad High Court in the case of Commissioner vs Monsanto Manufacturing Pvt. Ltd. [2014 (4) TMI 505 - ALLAHABAD HIGH COURT] decided that once it is held that the demand is time barred, there would be no occasion for the Tribunal to enquire into the merits of the case raised by Revenue – impugned order set aside – appeal disposed off – decided in favor of appellant.
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2016 (9) TMI 122
Excess stock of gold ornaments found in the registered premises of the appellant – confiscation under section 71 of the erstwhile Gold (Control) Act, 1968 – option to redeem on payment of redemption fine and penalty under section 74 of the Gold (Control) Act, 1968 – Held that: - In view of the material facts recorded and the stultifying of an appeal, if any, against the first order, the dismissal of the appeal by the first appellate authority is not tenable. Further, in view of the finding that option to redeem confiscated goods can be, and has been, legally exercised by appellant, there is no bar to release of the confiscated goods - impugned order is modified to direct the Assistant Commissioner to release the confiscated gold after confirming that the redemption fine has been paid by appellant – appeal disposed off.
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2016 (9) TMI 121
Refund claim - eligibility for concessional rate of additional duty of 5% - notification no. 21/2002-CE dated 1st March 2002 – ignorance of order of the Tribunal no. 1112/2008 dated 1st September 2008 by appellate authority - certificate by chartered accountant furnished that burden of duty not passed – principle of unjust enrichment – Held that: - It is surprising that a senior officer discharging functions as Commissioner (Appeals) appears to be bereft of knowledge of judicial hierarchies and comprehension of judicial discipline. The disposal of these matters by the appellate authority ignoring the decision of Tribunal reflects poorly on the first tier of the appellate mechanism in the scheme of tax administration leaving needless burden on the assesse – appeal disposed off – decided in favor of appellant.
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Service Tax
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2016 (9) TMI 145
Taxability of club membership fee – scope of the term service u/s 65(44) - is money / contribution received in form of shares and contribution is taxable as service as per the provisions of the Finance Act, 1994? - Held that: - provision of “service” by one person (service provider) to another person (service receiver) for the purpose of Section 65B (44) of the Finance Act, 1994 read with Sections 66B, 66D and Section 66E of the Finance Act, 1994 and accordingly, the Membership fee, Annual fee and other charges received from members from time to time liable for Service Tax. Explanation 3 (a) to said Section states that for the purposes of this chapter, an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons. The money/contribution received by company against shares from the prospective members for raising funds which can be used for achieving the sole object of the company i.e. establishing a luxurious club, is taxable as service as per the provisions of the Finance Act, 1994 - However, refundable security deposit should not be subjected to Service Tax as per provisions of the Finance Act, 1994.
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2016 (9) TMI 144
CENVAT credit – input service – Held that: - the applicant would be entitled to the expenses meant for input services and would be entitled to the cenvat credit only in respect of the input services. Similar issue held in the case [2015 (7) TMI 825 - Advance Ruling Authority]. Eligibility of input services related to Capital goods - Applicability of decision in the case M/s Bharati Airtel Vs Commissioner of Central Excise Act, Pune-III, Bomaby High Court [2014 (9) TMI 38 - BOMBAY HIGH COURT] and other rulings - Held that:- input is different from input service. This being a major difference, the rulings relating to inputs and capital goods will not be applicable to the present case where we have considered the terminology “input service”.
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2016 (9) TMI 143
Taxability – activity of clinical trials of the drugs of the customers situated outside India on volunteers in India – Rule 3 of the Place of Provision of services (POP) Rules, 2012 - Held that: - It is noticed that applicant’s proposed service of Clinical Pharmacology is study carried out for generic drugs. Further, study is proposed to be undertaken using formulations in the form of tablets, capsules, gels sprinkles, syrups, sprays, inhalers etc. provided by applicant’s customers located outside India, on eligible volunteers in India. Therefore, it is clear that the formulations in various forms (goods) shall be provided by applicant’s customers located outside India, who is recipient of service from the applicant - provider of service. The proposed activities of undertaking Clinical Pharmacology by the applicant are taxable under the Act in light of Rule 4 of the Place of Provision of Services (POP) Rules, 2012, as the services are proposed to be provided in respect of goods that are required to be made physically available by the service receiver to the service provider (applicant). Further, Clinical Research service provided in respect of goods that are required to be made physically available by the service receiver to the service provider (applicant) are also taxable under the Act in light of Rule 4 of the Place of Provision of Services (POP) Rules, 2012. However, where service of Clinical Pharmacology is not provided by the applicant and only service of Clinical Research is provided, then such service would not be in relation to formulation provided by the service receiver located outside India, to the applicant. Hence, it would be not taxable under the Act in light of Rule 3 of the Place of Provision of Services (POP) Rules, 2012 as the applicant renders said services to its customers and the place of provision is located outside India.
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2016 (9) TMI 142
Refund claim – CENVAT credit – STP - consulting engineer service - discipline of computer hardware engineering or computer software engineering - no unutilized CENVAT credit could have existed as the credit column in the ST-3 returns pertaining to the period of refund claim was blank – Held that: - The export of software, in a 100% EOU, at the relevant point of time was not a taxable service. However, the assessee had paid input tax on various services. The Tribunal has categorically held that even though export of software is not a taxable service but still the assessee cannot be denied the Cenvat credit. The assessee is entitled to the refund of Cenvat credit. This was held in the case mPortal India Wireless Solutions (P) Ltd v Commissioner of Service Tax, Bangalore 2011 (9) TMI 450 - KARNATAKA HIGH COURT – refund eligible. Re-classification – consulting engineer service - taxability – Held that: - there is no statutory provision by which a tax administrator can step in to rule that tax is not leviable, except on a claim by an entity to non-exigibility. There is no allegation of short-levy of tax against the appellant and the appellant has not made a claim that they are not liable to tax. The liability to pay tax having been accepted and the assertion that the taxable services are exempt only by reason of export having been accepted - Revenue cannot, take a stand that the service for which registration has been taken is not taxable – appeal disposed off.
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2016 (9) TMI 141
Rectification of mistake – maintainability – CENVAT credit – business auxiliary services – towers – BTS cabins – inputs – Passive Telecom Infrastructure – Held that: - once at the end of the ‘Supplier’ the Towers / BTS Cabins are assessed to Central Excise Duty by considering them as ‘excisable goods’ and the assessed Central Excise Duty has been collected, it is not open for the Central Excise authority at the end of the ‘recipient’ to question whether the goods are dutiable and excisable, for the purpose of denying cenvat credit of such duty collected by the department. Any subsequent determination of the issue as to whether or not such duty paid goods were ‘excisable’ or ‘dutiable’ can only be decided at the end of the ‘Supplier’ unit where the initial assessment had taken place and the Central Excise Duty was levied, assessed and collected. In this application for rectification of mistake there is no scope and jurisdiction to sit in appeal over the Final Order – rectification of mistake allowed – decided in favor of appellant.
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2016 (9) TMI 140
Refund claim – export of goods - 100% exporter - notification number 41/2007-ST – specified services – terminal handling charges – bill of lading charges – inland haulage services – clearing and forwarding agent services – time bar – Held that: - all the services are entitled to the refund of the service tax paid on them in terms of the notification number 41/2007-ST. The lower authorities would re-quantify refund amounts falling within the limitation period – matter remanded – appeal disposed off – decided in favor of appellant.
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2016 (9) TMI 139
Classification - Erection, Commissioning or Installation Services - Management, Maintenance and Repair Services – works contract services - tax under the category which were in existence before the introduction of Works Contract Services w.e.f. 01.06.2007 – Held that: - prior to the introduction of ‘Works Contract’ w.e.f. 01.06.2007, the services cannot be taxed under the individual category, which were in existence prior to the said date. This has been decided in the case Larson & Toubro Ltd. Vs CCE 2015 (8) TMI 749 - SUPREME COURT – matter remanded – appeal disposed off – decided in favor of appellant.
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2016 (9) TMI 138
Cenvat credit - service tax paid on the input services such as security services, maintenance services and construction services - Held that:- denying CENVAT credit by only relying upon the judgment of the Hon’ble Bombay High Court in the case of Manikgarh Cement [2010 (10) TMI 10 - BOMBAY HIGH COURT] on the ground that the views expressed in the said judgment was not considered in the case of Coca Cola India Pvt. Ltd. (supra) cannot sustain. The issue in the present case in hand and in respect of the very same assessee, being decided by the Division Bench, therefore, by respectfully following the same, I hold that the impugned orders are liable to be set aside. - Decided in favour of appellant
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2016 (9) TMI 137
Input service tax credit - allowability - telephone charges (landline and mobile etc.,) given to staff - documents on which input service tax credit taken were in the name of registered office/top management personnel - responsibility to discharge burden cast under Rule 9(6) of CENVAT Credit Rules, 2004 - duty paying documents - Held that:- the issue is adequately covered by the judgment of Hon'ble High Court of Gujarat in the case of CCE vs Excel crop care Ltd. [2008 (7) TMI 160 - HIGH COURT GUJARAT] and also by the judgment of Tribunal in the case of CCE, Kolkata VI Vs ITC Ltd. [2013 (3) TMI 44 - CESTAT KOLKATA]. Therefore, the impugned amount of credit pertaining to charges on landline and mobile phones used by the employees of the appellant, being an eligible input service, requires to be considered as eligible input credit. - Decided in favour of appellant with consequential relief
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2016 (9) TMI 136
Valuation - import of services - inclusion of reimbursement of expenses - Commercial training and coaching service – management consultancy services – stay and out of pocket expenses - travel, lodging and boarding expenses - reverse charge mechanism - Section 66A of the Finance Act, 1994 – Held that: - since the amounts paid by the appellant to the hotels and the rent-a-cab services, etc. are actual expenses, these amounts cannot be considered as an amount which are to be taxed under reverse charge mechanism. Further, the contractual obligations between the appellant and foreigners for payment of services provided by them is already taxed under reverse charge mechanism. There is no other amount which has been paid by the appellant to the foreigners as is evident from the records. Also, the said amount being paid directly to the hotels and rent-a-cab operators, it cannot, by any stretch of imagination, be considered as an amount to be paid or payable to the foreigners who rendered the services of management consultancy and the hotel and rent-a-cab has already discharged their tax liability – appellant not liable to pay any amount - appeal allowed – decided in favor of appellant.
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Central Excise
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2016 (9) TMI 135
Validity of impugned order of Revisionary Authority - passed by the officer of the same rank as is the appellate authority - Held that:- the impugned order was passed by the Joint Secretary to Government of India who was also Commissioner of Central Excise and Customs. Thus, the order in appeal as well as revisionary order had been passed by the officers of the same rank which is not permissible as per law. Adverting to the judgments relied upon by the respondents, it may be noticed that the said decisions were based on individual fact situation involved therein. Thus, the respondents cannot derive any advantage from the said pronouncements. Therefore, the petitions are allowed. The impugned order are set aside. However, liberty is granted to the State to proceed afresh in accordance with law but without prejudice to the rights of the parties.” - Petition disposed of
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2016 (9) TMI 134
Liability - reversal of proportionate CENVAT Credit - service tax paid in respect of GTA service - utilized for transportation of sugar cane - portion of GTA service involved is attributable to sugar cane used for manufacture of bagasse which is in turn is used for generation of electricity - Held that:- the issue involved is no more res integra in terms of the decision of the Hon'ble Allahabad High Court in the case of Balrampur Chini Mills Ltd Vs UOI [2013 (1) TMI 525 - ALLAHABAD HIGH COURT] wherein the Board Circular No. 904/24/2009-CX dated 28/10/2009 requiring reversal of credit or payment of amount in terms of Rule 6 stands quashed. Also this issue has been settled in favour of the assessee in many cases. Therefore, by following the same, the impugned order is set aside. - Decided in favour of appellant
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2016 (9) TMI 133
Chargeability - interest - Cenvat credit wrongly taken - reversed the same before utilization of the credit - Held that:- keeping in view the judgment of the Hon’ble Karnataka High Court in the case of CCE & ST, LTU Bangalore Vs. M/s. Bill Forge (P) Ltd. [2011 (4) TMI 969 - KARNATAKA HIGH COURT] and the Larger Bench decision of the Tribunal in the case of J.K Tyre & Industries Ltd., wherein it was held that interest is not to be paid on irregular cenvat credit if the same is reversed before utilization. Therefore, impugned orders are not sustainable. Cenvat credit - input service tax credit on Brokerage and Commission services - appellant providing residential accommodation to ex-pat employees voluntarily and has no direct and indirect relation to the manufacture of final products which are cleared on payment of duty - Held that:- in view of the decision of tribunal in the case of M/s. HEG Ltd. Vs. CCE, Raipur [2010 (6) TMI 306 - CESTAT, NEW DELHI], wherein it has been held that brokerage/commission paid is a business activity and eligible for input service tax credit, the impugned order holding it as a voluntary service and has nothing to do with the business of the appellant is wrong and not sustainable in law. - Decided in favour of appellant with consequential relief
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2016 (9) TMI 132
Classification - Residual Crude Petroleum Oil (RCPO)/ Residual Fuel Oil (RFO) / Residual Bottom Oil (RBO) - Whether it is to be classified as RCPO/ RFO / and RCBO under chapter heading 27101950 as per Revenue or as Petroleum Crude Oil under 27090000 as per appellant - Held that:- Revenue has completely failed to satisfy the definition and meaning given in supplementary note (g) to Chapter 27. The argument of the Revenue that goods are being used as fuel cannot satisfy the standard meaning given to the item in supplementary note (g). All the pleadings of the department that literature of the assessee indicates the item as fuel; and use of the item by the buyer is as fuel cannot override the definition and meaning given to the item in the Supplementary Note (8) to Chapter Note 27. Further, department has not made any efforts to go beyond the detailed classification 27101950 as fuel oil decided by the impugned order in favour of subject item. After having gone through the facts on record and submissions of both the sides, we find that the item is being used as a fuel but its mere use as fuel, when the parameters of the definition given in supplementary Note (g) to Chapter 27 are not fulfilled, cannot support the stand of the Revenue. Therefore, we are of the considered view that item cannot be held to be classified under Chapter sub-heading 27101950 of the Central Excise Tariff. Further, when the subject item is not fuel oil as per the definition given in note (g) to Chapter 27 and when it is neither Base oil/ nor jute batching oil and textile oil, nor lubricating oil, it may be in the other category, for which detailed classification is 27101990 or it may be further in the category of waste oil. However, from the facts on record, we refuse to confirm its classification under the category 27101990 or as waste oil also unless there is sufficient material and further both the sides are given opportunity to give their submissions on the said classifications. In the case record, there is no reference to any other classification, other than Chapter Heading 27101950 and 2709 0000. Revenue has failed to substantiate its stand for classification of the subject item in Chapter heading 27101950 as fuel oil especially in the face of the definition and meaning given for the item fuel oil in the supplementary note (g) to Chapter 27 as discussed above. In the result, all the demands classifying the item as fuel oil 27101950 are hereby dropped. When the original demands are dropped on this account, the penalties imposed under Section 11AC of Central Excise Act, 1944 and Rule 25 of Central Excise Rules, 2002 are also hereby set-aside. Demand - Confiscation in lieu of redemption fine - shortage/ excess of goods namely ligroin and RCPO/ RWO - Held that:- from the details in the show cause notice, it is clear that the appellant's pleading that it was actually shortage of the goods namely, Parsol, Parsol-20 and not the excess, is factually correct. In the SCN, the duty for said goods has also been mentioned as ₹ 11,833/-We find that the order-in-original has treated these goods as excess, which is factually wrong. Consequently, the impugned order in this regard is not sustainable. - Appeals disposed of
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2016 (9) TMI 131
Whether the appellant is required to pay differential Central Excise duty on the amount of transportation charges collected by debit notes - Held that:- it is the claim of the appellant that the transportation charges which are claimed by them by debit notes are actuals and on being informed by the customers while the findings recorded by the first appellate authority are not at all indicating that they have considered those submissions to arrive at a conclusion. It is also noticed that the first appellate authority in the impugned order has referred to some job conversion on behalf of SAIL and the valuation thereof. Therefore, the impugned order is totally in tangent to the issue which was raised before him. Hence, set aside. - Appeal allowed by way of remand
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2016 (9) TMI 130
Whether the goods have been manufactured in the premises of M/s Uniroyal Pharmaceuticals Ltd. as job worker who has paid the duty at the time of clearance of the goods from the factory or not - Held that:- The issue has been examined by this Tribunal in the case of M/s Dolphine Laboratories vs. C.C.E., Ahmedabad – [2005 (3) TMI 222 - CESTAT, NEW DELHI] and Remidex Pharma Ltd. vs. C.C.E., Bangalore [2005 (7) TMI 249 - CESTAT, BANGALORE] wherein it has been held that loan licensee has supplied the raw materials to the job worker who manufacture the goods as per the specification of the loan licensee on getting processing charges, therefore, the manufacturer is the job worker who carries out entire manufacturing process in their factory. Therefore, the job worker is the manufacturer and required to pay duty at the value on which they have cleared the goods to loan licensee. It is also found that the said decision in the case of Remidex Pharma Ltd. (supra) has been affirmed by the Hon’ble Apex Court reported in [2006 (8) TMI 590 - SUPREME COURT]. As the issue has attained finality, therefore, we find no infirmity in the impugned order. - Decided against the Revenue
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2016 (9) TMI 129
Revarsal of Cenvat credit - invokation of Rule 6(1) of the Cenvat Credit Rules, 2002 - appellant opted to avail exemption under Notification No. 30/2004-CE dated 9.7.2004 which provided exemption to the product manufactured by them - Cenvat credit availed on inputs lying in the stock, in process and contained in the final products, on the date of opting for exemption - Held that:- the Rule 9(2) of Cenvat Credit Rules, 2002 produced by the Revenue prescribed reversal of credit only in case where the exemption is based on value or quantity of clearances in a financial year. In the circumstance, we find that the decision of the larger bench of the Tribunals the case of Ashok Iron and Steel Fabricators [2002 (1) TMI 91 - CEGAT, NEW DELHI] is squarely, applicable to the instant case. Also it is found that the grounds of appeal do not contradict the averment made by the respondents before the Commissioner (Appeals). Therefore, if the respondent have used the inputs on which credit was taken only on dutiable finished goods, the question of invoking Rule 6 (1) does not arise. - Decided against the Revenue
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2016 (9) TMI 128
Imposition of penalty - Rule 25 & 26 of Central Excise Rules 2001 - appellants manufacturing excisable goods not registered with the department - clearance of excisable goods without payment of duty which were ultimately exported - Held that:- as the issue is no longer res integra and decided by the Hon’ble High Court of Gujarat in the case of C.C.E & Cus. Vs. Saurashtra Cement Ltd. [2010 (9) TMI 422 - GUJARAT HIGH COURT] which was affirmed by the Hon’ble Apex Court in [2014 (1) TMI 264 - SUPREME COURT OF INDIA] and as observed by the authorities below that there was no intention to evade payment of duty on the part of the respondent, the provisions of Rule 25 of Central Excise Rules, 2001 are not invokable and as such the penalties are not imposable. - Decided against the Revenue
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2016 (9) TMI 127
Validity of Commissioner (A) order - Commissioner (Appeals) could have given a finding on merits based on available evidence but remanded the matter further to the Assistant Commissioner - non-compliance of remand direction of CESTAT - Held that:- the action of the Commissioner (Appeals) is fully unjustified and beyond the scope of remand directions given by the Tribunal. The impugned order expressed total helplessness in performing a judicial work. The Jurisdictional Authorities have contributed to such unfortunate situation. Without further dwelling upon the impropriety or the sustainability of the findings of the Commissioner (Appeals) it is necessary that the finding on the merit has to be arrived at in this case in the interest of justice. The inability of Commissioner (Appeals) to appreciate and implement the directions of the Tribunal in their remand order by itself should not lead to closure of all proceedings. Appreciating this position, I find the matter has to reach a finality by a fresh decision by the Jurisdictional Original Authority who will examine all evidences keeping in mind the remand order already passed by the Tribunal and pass a fresh order within two months of the receipt of the order. - Appeal allowed by way of remand
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2016 (9) TMI 126
Refund / Rebate - Whether appropriation of rebate sanctioned in cash against the custom duty arrears in terms of Section 142(1) of the Customs Act 1962 is in order - As per Revenue, the appropriation is permitted in accordance with law whereas as per the appellants the appropriation of rebate of refund cannot be done against the customs duty arrears by invoking Section 142 of the Customs Act - Held that:- it is found that all the orders against which appropriation is made have been challenged by the appellant before this Tribunal and the stay has been granted by this Tribunal and they are pending for final disposal and the demand has not attained finality. Further it is a settled position of law as held in the various cases that the appropriation of refund amount towards duty demand pending in other cases which has not attained finality is not legal and proper. Therefore, the appropriation of refund claim against disputed pending custom appeals is not sustainable in law as the demands in those cases have not reached finality. - Decided in favour of appellant
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2016 (9) TMI 125
Cenvat credit - duty paid in respect of various iron and steel articles - used for construction of civil structures as supporting structurals - Held that:- in view of the decision of Larger Bench of Tribunal in the case of Vandana Global Ltd. Vs. CCE [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] which was considered by the Hon'ble Gujarat High Court in the case of Mundra Ports & Special Economic Zone Ltd. [2015 (5) TMI 663 - GUJARAT HIGH COURT] and stands over-ruled observing that the amendment issued on 7.7.2009 cannot be held to be clarificatory amendment and as such, would be applicable only retrospectively. As such, without going into the factual aspect as to whether the iron and steel articles were used for construction or as supporting structurals, we are of the view that the same would be entitled to credit inasmuch as the period in the present appeal is before 7.7.2009. Period of limitation - demand - Held that:- the lower authorities have invoked the extended period only on the sole ground that the appellant was aware of the fact that the credit is not admissible and still, they took the credit. We find no appreciable reasons for observing so. Admittedly, the credit was being availed after reflecting the inputs in the statutory RG-23-D Part I and Part-II records. The fact of availment of credit was also being reflected in the statutory returns being filed with the Revenue. Non-disclosure of a fact for which there is no column in the records or in the returns, does not ipso facto lead to the conclusion that such non-disclosure is with malafide intention, especially, when there is no legal obligation on the part of the assessee to disclose a particular fact. Therefore, in view of the abve mentioned decisions, no malafide can be attributed to the assessee and longer limitation period would not be available to the Revenue. - Decided in favour of appellant with consequential rerief
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CST, VAT & Sales Tax
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2016 (9) TMI 120
Demand of security deposit - detention of consignment – mandatory Form-15 was not accompanied – suspection that the consignment was for sale – Held that: - The statute clearly says that the transport has to be accompanied by either a tax invoice or delivery note or certificate of ownership containing such particulars as may be prescribed. The delivery note not produced. Reference is made to Rule 58(16) which insists for a delivery note in Form No.15 for stock transfer - the petitioner is a registered dealer and goods are being taken by way of stock transfer as evident from 8 F of Declaration, the goods can be released on condition of the petitioner remitting 25% of the amount – simple bond required for the balance amount.
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