Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 5, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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GIC decides to extend Date of GSTR 1, GSTR 2 and GSTR 3 for the month of July to 10th, 25th and 30th September 2017 respectively.
Income Tax
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Rectification of mistake u/s 254 - Where the issue sought to be rectified was not appealed before HC, application cannot be rejected on the ground of Doctrine of merger - HC
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Deduction u/s 80-IB - reconstruction of a business already in existence - assessee setting up of an industrial unit by purchase of old/used plant and machinery defeat the entire purpose of allowing deductions u/s 80-IB - ITAT has rightly denied the deduction - HC
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Reopening of assessment - It was contended that, though the return was filed in pursuance of notice u/s 148 dated 31.3.2012, no assessment was made - Therefore, fresh notice dated 15.3.2016 on the premise of non-filing of return is incorrect - Notice quashed. - HC
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Relation of "sole proprietor" and his "business concern" - Profits or gains arising from the transfer of capital assets - there cannot be any assessment separately for the "proprietor" and "proprietorship concern". - HC
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Rectification of order U/s 254 - Tribunal gave a certain verdict which may have aggrieved the department and may have also given rise to an arguable legal point. Nevertheless, that by itself would not enable the department to activate the rectification powers of the Tribunal.
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Income from house property (Rent) - if the loan taken has been used exclusively to repay the original/old loan for construction/acquisition of the property, interest paid on the second loan would be allowed as deduction u/s 24(1)(vi).
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It is mandatory for the AO to supply reasons for reopening of the assessment u/s 148 and this has to be done within a reasonable time.
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As per CBDT circular and section 45Q of the RBI and prudential Norms issued by the RBI interest income could not be accured on Non Performing Assets (NPA) by Banks as decided by Supreme Court in case of Shri Mahila Sewa Sahakari Bank Ltd.
Customs
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When once power of authorisation for confiscation of goods gets traced to the said Section 111 of the Customs Act, the physical availability of goods is not so much relevant. The redemption fine is in fact to avoid such consequences flowing from Section 111 only. - HC
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Principles of Natural Justice - a Superior Agency cannot initiate quasi-judicial proceedings, and an inferior Agency cannot finalize the same. - The inferior Authority cannot consider the explanation and make up his mind for and behalf of his superior agency - HC
Service Tax
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Management, Maintenance and Repair Service - commercial complex / shopping mall - providing services at no profit no loss - the assessee is a company having a separate legal entity and cannot be compared with that of a housing society or a club - demand of service tax confirmed.
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Import of service - Technical inspection and certification - the said technical and inspection service was admittedly provided by the foreign service provider at Russia on behalf of the respondent - no part of such service was performed in India - service is not taxable in the hands of the respondent under the reverse charge mechanism (RCM)
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CENVAT credit - prefabricated, buildings/shelters for telecommunication services - cenvat credit is not available on the above said items, as they have become immovable property and get affixed to the earth - demand upheld
Central Excise
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Manufacture - conversion of granules into moulding powder - as a consequence of new definition of manufacture in terms of Section 2(f), the activity which otherwise do not amount to manufacture, can now be termed as manufacture and thus liable to duty
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Classification Bio fertilizer (Shakti) - t is a mixture of different micronutrients and auxin and cytokinins, it cannot be termed as a chemically defined element or compound - the product is correctly classified under CTH 310100
Case Laws:
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Income Tax
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2017 (9) TMI 194
Rectification of mistake u/s 254 - Rejection of application on the ground of Doctrine of merger - addition made by AO u/s 40(a)(ia) - error apparent on face of the record had been committed- Held that:- It appears that though the department had filed appeals before the High Court, these appeals did not concern the issue which the Tribunal had decided in the department's appeals in case of respondent assessee. The Tribunal therefore, erroneously concluded that the order of the Tribunal having merged with that of the High Court, Misc. Applications for rectification were rendered infructuous. We do not intend to give final answer to this question in the present petition though prima facie it may appear that even without any specific powers under the statute, for example, as referred to in subsection( 2) of section 254 for rectification, it would appear that any judicial or quasijudicial authority would have inherent powers to correct an error which is plainly that of clerical, typographical, arithmetical or factual. If the Tribunal had proceeded on factual basis which was wholly and concededly erroneous, the Tribunal perhaps even in absence of specific provision of subsection( 2) of section 254, had the power to recall the order. - ITAT has rejected the application is incorrect on factual premise - Matter restored before ITAT
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2017 (9) TMI 193
Tribunal limited power of rectification u/s 254 - AO had never made addition on the ground of disallowance of purchases made by the assessee but the addition was based on Section 69 on the ground that the assessee had made unexplained investment in the form of stock - lapse of 3˝ years by the department for filing rectification application - Tribunal limited power of rectification under section 254 - Held that:- Under section 254 of the Act, an aggrieved party can approach the Tribunal within four years from the date of the order seeking rectification of an error apparent on the record. We may, therefore, not base our order on the Tribunal’s first observation regarding the department having allowed a delay of nearly 3˝ years to lapse before filing application for rectification. If the department was within the limitation in applying for rectification and if otherwise had made out a good ground for rectification, the Tribunal ought to have considered the same. On the merits of the order of the Tribunal, we are broadly in agreement with the view of the Tribunal that its earlier order did not call for rectification. It is well settled that the power of rectification are limited to correcting errors apparent on the record and cannot be equated with review powers. In the first round, the Tribunal was apprised of the controversy, rival stands and the findings of the Assessing Officer and the CIT(Appeals). The Tribunal gave a certain verdict which may have aggrieved the department and may have also given rise to an arguable legal point. Nevertheless, that by itself would not enable the department to activate the rectification powers of the Tribunal. Such powers are etched with serious limitations and cannot be exercised by way of appellate or review powers. There was nothing in the application of the department to point out an error in the order of the Tribunal which could have been rectified under exercise of powers under section 254 of the Act. Petition dismissed.
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2017 (9) TMI 192
Validity of reopening of assessment - Assessee was not given the copy of the reasons for issuing notice under Section 148 - procedure ought to be followed when the assessment is reopened - Held that:- In the present case the assessments of AYs 1999-2000 onwards for five years are sought to be reopened. The offer to consider the Assessee's objections to the reopening and pass an order thereon is being made after nearly two decades. Having contested these proceedings for all these years the revenue is not fair in making this offer after all these year.Therefore, there was a clear violation of the procedure laid down by the Supreme Court in GKN Driveshaft (India) Limited v. ITO (2002 (11) TMI 7 - SUPREME Court). The Court respectfully concurs with the view of the Bombay High Court and holds that in the present case the ITAT was right in coming to the conclusion that on account of failure by the AO to furnish reasons for reopening of the assessment under Section 148 of the Act to the Assessee, the reassessment proceedings stood vitiated in law.It is mandatory for the AO to supply reasons for reopening the assessment and this has to be done within a reasonable time. See Haryana Acrylic Manufacturing Company v. The Commissioner of Income Tax IV [2008 (11) TMI 2 - DELHI HIGH COURT] - Decided in favour of assessee.
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2017 (9) TMI 191
Deduction u/s 80-IB - reconstruction of a business already in existence - fulfillment of the criteria of an industrial undertaking - Held that:- There is transfer of plant and machinery of the unit Shri Ram Flour Mills of M/s. M.C. Roller Flour Mills Limited to the assessee company. The plant and machinery of the said unit was in use by the previous company. Therefore, the assessee company is not an industrial undertaking formed by the purchase of a new plant and machinery rather than by the transfer of previously used plant and machinery. Thus, transfer may not have amounted to splitting or reconstruction of business already in existence. Nonetheless, it amounts to constituting a new industrial undertaking by the transfer of used plant and machinery. The purpose behind the deduction u/s 80-IB of the Act is to promote setting up of a new industrial undertaking by purchasing new plant and machinery , but in present case of assessee setting up of an industrial unit by purchase of old/used plant and machinery defeat the entire purpose of allowing deductions u/s 80-IB of the Act The conclusion is therefore is assessee does not fulfil the conditions for claiming decduction u/s 80-IB - Decided in favour of revenue.
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2017 (9) TMI 190
Reopening of assessment - It was contended that, though the return was filed in pursuance of notice u/s 148 dated 31.3.2012, no assessment was made - Therefore, fresh notice dated 15.3.2016 on the premise of non-filing of return is incorrect - Long Term capital gain on sale of land - estimation of fair market value of the land - Held that:- The reasons recorded by the Assessing Officer proceeded on the basis that Takhiben had filed no return which was factually incorrect. He, therefore, proceeded on the entirely wrong premise and his reasons therefore, lacked validity. AO,in the very first paragraph of the reasons, has referred to the fair market value of the plot of land which was, according to the department's valuer, was estimated at ₹ 2,41,800/- as against ₹ 94,55,160/- estimated by the assessee. The reasons recorded do not refer to it as on which the estimation of fair market value of the land is taken. If his reference was, as would be presumed on the basis of later portion of his recording of reasons, to the crucial date of 01.04.1981 he has not said so in the reasons. More importantly, if the fair market value, according to him was ₹ 2,41,800/- for the plot of land while computing the possible value of the income having escaped assessment, he gives no benefit of indexation of such cost of acquisition from 01.04.1981 till the date of sale of land. Assessing Officer exhibited absolute non-application of mind to the facts and materials on record. The notice for reopening of assessment was, therefore, based on reasons which were the product of such non-application of mind. Notice must therefore be quashed. - Decided in favour of assessee.
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2017 (9) TMI 189
Disallowance under section 14A - Held that:- Assessee possesses own funds much more than the tax free investments, the disallowance u/s 14A read with Rule 8D cannot be made.The assessee had made investments earning tax free income and on the he also had borrowed funds paying interest of ₹ 75,02,592/-.AO is of the view to disallowed this interest with the aid of section 14A of the Act.Since it cannot be assumed that investments are made from borrowed funds rather than from assessee's own funds therefore no disallowance could be made. Therefore, no question of law arises.= Revenue's appeal is dismissed. Claim of deduction under section 80IA(4) - entitled to claim market value of the eligible unit - rate for computation of such benefit for purchase of electricity - Held that:- Claim allowed as relying on assessee's own case for preceeding AYs held that it is price at which assessee transferred electricity generated by it eligible business to its other business which would be considered for purpose of computation of profits and gains of eligible business in terms of section 80IA( 8) and not lesser price at which surplus electricity was sold to Electricity Board. Profit and gain from captive consumption of electricity supplied only to assessee by power plant of assessee will qualify for deduction under section 80IA.- Decided in favour of assessee. Treatment to assessee's income from trading of carbon credits - Held that:- Receipts of carbon credit are in nature of revenue receipts. See CIT v. Subhash Kabini Power Corporation Ltd. reported in (2016 (5) TMI 793 - KARNATAKA HIGH COURT) and Commissioner of Incometax v. My Home Power Limited [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT ] - Tax appeal is dismissed.
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2017 (9) TMI 188
Prerequisite for an application u/s 245C(1) - Application to settlement commission - proof of full and true disclosure of income - sufficient details available suggesting full and complete disclosure - dealing in land transactions on behalf of others - failure to establish the identity of the third parties - Held that:- In the order dated 26.09.2016, the Settlement Commission has found that there was no full and complete disclosure of income so as to entertain an application for settlement. Based on the report of the Principal Commissioner of Income Tax, it was found that though the applicant sought to disclose the income of ₹ 32 crores through the application, in fact the income that ought to have been disclosed was ₹ 85 crores (rounded off). The finding of fact was arrived at by the Commission holding that in absence of full and true disclosure at the hands of the assessee, the application did not merit consideration. We do not find any reason to interfere in view of the narrow scope of judicial review to substitute our wisdom for the one taken by the Settlement Commission. The petition is, therefore, dismissed.
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2017 (9) TMI 187
Accrued interest in relation to NPA - amount not brought to the tax by the assessee - applicability of section 145 - assessee is a cooperative bank - ITAT quashed and set aside order of AO - Held that:- Tribunal followed the decision of this Court in case of Principal Commissioner of Income Tax v. Shri Mahila Sewa Sahakari Bank Ltd. [2016 (8) TMI 377 - GUJARAT HIGH COURT] in which the assessee-cooperative bank had not recognized the interest on NPAs as per the section 45Q of the RBI and prudential Norms issued by the RBI in exercise of its statutory powers.. The Court was of the opinion that the bank was bound by such directives of RBI. The Court relied upon a CBDT circular in this respect and held that the interest was not taxable on the basis of accrual. The situation being identical, the issue is covered by the decision of this Court in case of Shri Mahila Sewa Sahakari Bank Ltd. (supra). Revenue however submitted that the Supreme Court in case of Southern Technologies Ltd. v. Joint Commissioner of IncomeTax reported in [2010 (1) TMI 5 - SUPREME COURT OF INDIA] has made a clear distinction with respect to the RBI directions holding that the said directives may apply for the purpose of drawing the accounts of the bank, nevertheless, the same cannot have effect on the computation of the assessee's taxable income. We however notice that the High Court in case of Shri Mahila Sewa Sahakari Bank Ltd. (supra) has considered such a contention and referred to the decision of Supreme Court in case of Southern Technologies Ltd. (supra) before coming to the above noted - Decided against revenue
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2017 (9) TMI 186
MAT Computation - Appeal deserves admission on the following two substantial questions of law: (i) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in deleting adjustment of ₹ 1,48,32,122/made in book profit u/s.115JB of the IT Act, 1961? (ii) Whether on the facts and in the circumstances of the case the Hon'ble Tribunal was right in its interpretation of the subclause (f) of Explanation 1 of Section 115JB wherein it has held that the provisions of Section 14AA cannot be imported into Section 115JB while computing book profits?
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2017 (9) TMI 185
Revision u/s 263 - valuation of stock - both the conditions namely order passed by the AO is erroneous and prejudiced to the interest of the Revenue must be satisfied- Held that:- Admittedly, in the present case earlier a survey action was carried out on the respondents on 20/02/2009 and thereafter regular assessment was made under Section 143(3) on 25/11/2011. It is also admitted that the physical stock as on 20/02/2009 was taken by the Assessing Officer, which is available on record. When such physical verification of stocks was carried out during the period of regular assessment the question of now valuing the stock and adding 10% for every annum is not at all justified. The manner of such estimate of stock on the basis of last year G.P. of 10% as again the books which were accepted by the Assessing Officer earlier cannot be accepted. The learned Tribunal as such rightly found that the question of taking the impugned action in terms of Section 263 of the said Act would not at all be justified. When an Assessing Officer has proceeded in a particular manner and the Assessing Officer has followed one of the permissible processes in law which has resulted in loss of revenue, it cannot be said to be prejudiced to the revenue and as such, we find there is no substantial question of law which arises in the present appeal.The learned Counsel appearing for the appellant was unable to point out in what manner the assessment by Assessing Officer was erroneous. - Decided in favour of assessee.
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2017 (9) TMI 184
Rejection of books of accounts - Estimation of GP ratio on basis of average of three years - fall in Sales over three preceding years - Held that:- There is no finding that there is sale outside books of account or that a part of sale proceed has not entered in the books of account. The submissions before the ld. CIT(A) that the turnover has drastically come down for assessment year 2010-11 as compared to assessment years 2008-09 and 2009-10 also could not be controverted by the ld. DR. A perusal of the various details furnished by the assessee shows that during assessment year 2008-09 the sale was ₹ 7.18 crores and in 2009-10 the sale was ₹ 10.30 crores where as during assessment year 2010-11 turnover had come down to ₹ 1.38 crores. The Director’s report mentions that the company had to suspend its business activity during the financial year 2010-11. Assessee had furnished item wise quantity and value details of stock, purchase and sale.We find that Assessing Officer has overlooked the loss on various items suffered by the assessee and had only gone for items on which the assessee had made profit. He has not pointed any other mistake in the books of account which were duly audited and produced before him. We, therefore, find merit in the argument for the assessee that merely because there is fall in the GP ratio, the Assessing Officer cannot reject the books of account and go for estimation of profit. - Decided against revenue
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2017 (9) TMI 183
Business promotion expenses and foreign travelling & conveyance - disallowance on adhoc basis - business expediency - Held that:- The assessee on the basis of the direction of the Assessing Officer has filed the details of foreign travelling expenses during the financial year 2011-12 giving the name of the person, his/her designation, country visited, the purpose for such visit and the duration of the visit. The assessee has also given the details of expenses incurred which includes cost of Tickets, Insurance, etc. The details of such foreign travelling expenses are also filed before the Assessing Officer. A perusal of the details shows that the Director, Mr. Deepak Kapoor has not visited any country with spouse or children. Similarly, the Director, Smt. Priyanka has also not visited any country along with her husband or family. The other persons namely Shyamjee Sudhakar and Shuchita Singhal are employees of the assessee company and they are not directors. Since full details are given regarding such foreign travelling expenses, therefore, under the facts and circumstances of the case, no ad-hoc disallowance, in our opinion, out of such expenses is called for. On account of business promotion expenses,assessee has given the full details of such expenses exceeding of ₹ 1,00,000/-. Therefore, we find no merit in the order of the Assessing Officer going for ad-hoc disallowance of 10% on account of non-submission of details. The assessee is not expected to file the detail which has not been asked for by the Assessing Officer. Further, the accounts of the assessee company are audited and the Auditors have not pointed out any irregularities in the books of account. Under these circumstances, we are of the considered opinion that the CIT(A) is not justified in upholding the ad-hoc disallowance 10% out of business expenses made by the Assessing Officer. - Decided in favour of assessee. Addition u/s 14A read with Rule 8D - disallowance of ₹ 25,200/-- Held that:- There is some computational error while computing the average investment for the purpose of calculating disallowance u/s 14A. We restore this issue to the file of the Assessing Officer with a direction to compute the average investment as per law after giving due opportunity of being heard to the assessee. We hold and direct accordingly.
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2017 (9) TMI 182
Deduction u/s 80IC declined - no substantial expansion of “Parwanoo unit” - contention of the learned CIT(DR) that the assessee has already been allowed deduction under section 80IB for five years and therefore, it should not be allowed deduction further - Held that:- As decided in assessee's own case the assessee has been able to justify the increase of plant and machinery to the tune of ₹ 18,35,423 (Rs.19,48,888 - ₹ 1,13,465) at Parwanoo unit. We are also in agreement with the conclusion that this amount of increase of plant and machinery during the year under consideration viz. ₹ 18,35,423 is more than 50% of the opening value of the plant and machinery for Parwanoo i.e. ₹ 34,63,220 (as on 1.4.2005) then the claim of expansion of Parwanoo unit was rightly held in favour of the assessee. We also note that the Director of Industries, H.P. also acknowledged the substantial expansion of Parwanoo unit as on 24.11.2005 by the certificate dated 8.2.2006 which has not been controverted by the AO which clarifies that after substantial expansion as on 24.11.2005, the investment in plant and machinery was increased from ₹ 33.32 lakh to ₹ 52.36 lakh during the year under consideration. CIT(A) also granted relief to the assessee for AY 2007-08 by following its order for AY 2006-07 which cannot be said to be an unjust or improper approach rather the CIT(A) rightly followed rule of consistency in the proceedings by following its order for immediately preceding year. As referring to subsection 6 of section 80IC which restricts deduction under section 80IB, section 80IC or section 10C for a total period of 10 years and beyond that no deduction is allowed. The arguments of Ld. CIT(DR) cannot hold ground, and the assessee is eligible for deduction under section 80IC(6) of the Act for at least 5 years. Since both the issues of substantial expansion at ‘Parwanoo’ unit and the activity of the assessee as manufacturing, have already been decided in favour of the assessee by the orders of the Tribunal and no contrary decision of any higher court has been brought to our notice by the learned CIT(DR), respectfully following the decision of the Tribunal in assessee's own case , we find no infirmity in the finding of the learned CIT(A) on the issue in dispute and uphold the same. - Decided against revenue Disallowance u/s 14A on account of exempt income earned u/s 10(33)/10(34)- Held that:- In the case of Joint Investment Ltd Vs. CIT [2015 (3) TMI 155 - DELHI HIGH COURT] is of the view that disallowance under section 14A of the Act should not exceed the exempted income claimed by the assessee. In the present case the assessee has already made disallowance suo motu exceeding the exempted income, therefore, no further disallowance is required and the same made by the Assessing Officer is upheld by the Ld. CIT- (A), and is hereby deleted - Decided against revenue
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2017 (9) TMI 181
Validity of reopening of assessment - addition accommodation entries of bogus purchases - Reasons for the belief that the income has escaped assessment - denial of principle of natural justice - List of accommodation entries received from another CIT - non independent use of mind by AO - Held that:- Addition made by the AO is untenable in the eye of law having been made without providing opportunity to cross examine the person on the basis of whose statement the allegations have been made against the assessee and without following the principle of natural justice. Assessing Officer was having nothing except the list provided by the CIT, Central-2, New Delhi about the list of accommodation entries. Beyond that he was not having the copies of the statement of any of these persons. He was not having copy of the assessment orders and other details or document which would have enabled the Assessing Officer to apply his mind and form a belief that income has escaped assessment. In fact this information was not with the Assessing Officer till fag end of the reassessment proceedings, a fact admitted by the Assessing Officer himself in the assessment order. Initiation of reassessment proceedings as well as issuance of notice u/s 147/148 of the Act was not valid and the same was void ab initio and thus, liable to be quashed along with assessment order passed in pursuance thereto. Also addition of 20% of the purchases sustained by the ld. CIT(A) need to be deleted. - Decided in favour of assessee.
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2017 (9) TMI 180
Interest payment on second loan is allowable expenditure u/s 24 - Income from house property (Rent) - loan taken for repayment of the old loan taken for the purpose of construction of the property - Held that:- Undisputedly, as per CBDT Circular No.28 dated 20.08.1969 if the loan taken has been used exclusively to repay the original/old loan for construction/acquisition of the property, interest paid on the second loan would be allowed as deduction under section 24(1)(vi) of the Income-tax Act, 1961. Thus the assessee company is entitled for deduction of amount of ₹ 45,95,00,961/- paid as interest on loan availed of from ICICI Bank to repay the old existing loan taken for the purpose of construction/acquisition of the property from M/s. DLF Limited and M/s. DLF Universal Limited, however subject to the verification of the facts by the AO. So, we hereby allow the appeal filed by the assessee by setting aside the impugned order.
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2017 (9) TMI 179
Addition u/s 69 - unexplained investment - Difference between the value of the property as per the Stamp Duty Act and the value of the property as per the purchase deed - application of section 50C - CIT-A deleted the addition as there was no merit- Held that:- There was no provision in the Act which could have helped the AO to reach a conclusion that the difference between the value of the property as per the Stamp Duty Act and the value of the property as per the purchase deed can be straight away construed to have been paid by the assessee in excess of what has been declared in the purchase deed. The Ld. CIT (Appeals) has noted that in absence of any specific incriminating evidence brought on record by the AO, the legally declared consideration has to be accepted. The substantial difference between the value as worked out by the registration authorities and the value of purchase as declared by the assessee can at best be a starting point for any further inquiry/investigation but cannot be the sole basis for any addition and as the AO has not proved any underhand dealing and, therefore, the addition was not tenable in the hands of the assessee purchaser. Thus in absence of any positive evidence that the assessee had actually paid more than the consideration shown in the respective sale deeds for the purchase of plots, addition under section 69 could not be made simply on the basis of higher valuation of the plots either by the DVO or the values adopted by the sub-registrar or the Revenue Board for the purpose of stamp duty. - Decided against revenue
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2017 (9) TMI 178
TPA - selection of comparables - Additions in respect of international transactions - MAM - suitability of CG-VAK Software & Exports Limited as comparable - Held that:- Assessee company has been providing research and information services and IT support services to its group companies being a captive contract service provider. When it is not in dispute that the comparable company, namely CG-Vak Software & Exports Limited is a listed company, its quarterly results are available in public domain and there is no need even for extrapolating the result. So, in these circumstances, we are of the considered view that this comparable company is a suitable comparable company and consequently, this issue is remanded to the ld. TPO to benchmarking the international transaction in question by including this comparable in the final set of comparables by verifying the quarterly results available in the public domain as this company is a listed company. Computational error in margins of assessee and comparables - exclude FBT while computing the margins of assessee - Held that:- Even application filed on 03.04.2013 has not been disposed off to exclude the FBT in case of assessee as the same has been excluded while computing the margins of comparable companies. Even, ld. Senior DR attending the case for the last three years has not preferred to direct the quarter concerned to comply with the directions issued by higher Revenue Authorities, the ld. DRP in this case. This is a case of complete lack of empathy and voluntarism on the part of lower Revenue Authorities by not complying with the order of the higher authorities. So, we hereby direct the TPO/AO to comply with the directions issued by the ld. DRP to exclude FBT while computing the margins of assessee as has been done in case of comparable companies to arrive at a correct computation of the margins of assessee as well as comparable companies. Computing the operating margin - Held that:- We consider the amount of foreign exchange gain/loss from foreign exchange fluctuation being non operating items as per Safe Harbour Rules while computing the operating margin of the comparable company as well as assessee company from provisions of IT Support services. - Decided in favour of assessee for statistical purposes.
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2017 (9) TMI 177
Jurisdiction of the assessment made u/s 153A - addition on account of unexplained investment - burden of proof - Held that:- The assessee has created an asset and the value of the same was not taken in the work in progress. Though the asset was constructed without the approval, the assessee has incurred the expenditure for construction of the shop and the asset created out of the same was not declared in the balance sheet which constitutes the asset outside the books of accounts. The value of Sri Ram Residency shop should to be brought to the books of accounts in the stock in trade or work in progress. In this case, the assessee failed to disclose the value of the asset in the balance sheet. The only evidence available which was found at the time of search was the loose sheet indicating the value of the shop at ₹ 10 lakhs. The loose sheets were found in the residence of the assessee and the burden is cast on the assessee to prove the contents of the loose sheets were not correct as per section 292C of the Act. The assessee has not established that the value of the asset was less than ₹ 10 lakhs and the fact that the assessee has constructed a shop in the Sri Ram Residency is an undisputed fact. The assessee has not furnished details of the expenditure incurred for construction of the shop. Therefore, in the absence of any evidence to show that the value of the asset was less than ₹ 10 lakhs, we do not find any reason to interfere with the order of the Ld. CIT(A) and the same is upheld. This ground of appeal is dismissed. - Decided against assessee. Addition towards unexplained creditors - Held that:- The issue dealt with by the AO in the assessment order u/s.153A of the Act, could not and ought not to have been examined by the AO in the assessment proceedings u/s.153A of the Act as the said issue stood concluded with the assessee's return of income being accepted prior to the date of search and no notice having been issued u/s.143(2) of the Act within the time limit laid down in that section. Such assessment did not abate on the date of search. In respect of assessments completed prior to the date of search that have not abated, the scope of proceedings u/s.153A of the Act has to be confined only to material found in the course of search. Since no material whatsoever was found in the course of search, the additions made by the AO in the order of assessment for both the Assessment years could not have been subject matter of proceedings u/s 153A of the Act. - Decided in favour of assessee. Unexplained cash credit - Held that:- Though the assessee has explained that the loans were wrongly categorized as unsecured loans instead of advances still the assessee has to prove the capacity, credit worthiness and the identity of the creditors since the credits were introduced in the books of accounts in the year under consideration. The assessee failed to establish that the amount outstanding was in fact advances and got adjusted against the sale of flats. In nutshell, the assessee failed to offer any explanation with regard to the credits introduced during the financial year. Therefore, the A.O. rightly brought the unexplained credits u/s 68 of the Act, which the CIT(A) has upheld the order of the A.O. and we do not find any infirmity in the order of the Ld. CIT(A) and the same is upheld. The appeal of the assessee is dismissed. Unexplained investment and jewellery - course of search investigation wing found the gold and jewellery weighing around 1044 gms and the Silver articles weighing 5840 gms in the premises of the assessee - Held that:- In this case, the assessee has stated in his statement recorded at the time of search and subsequently during the post search operation and enquiries during the assessment proceedings that the gold weighing around 640 gms. and silver articles were not belonging to him but belonging to his father and sister. The lockers from the gold and silver found were also not belonging to the assessee as stated by him. The assessing officer has not made any enquiry with regard to the ownership of the gold and silver articles found at the time of search and to rebut the claim made by the assessee that the articles were belonging to his father and sister. When the fact that lockers were not belonging to the assessee is accepted and the assessee explains that the gold and silver articles were not belonging to him but belonged to his father and sister the burden shifts to the department and the onus is on the department to prove that the articles were belonging to the assessee. In this case, the department has not discharged the onus by conducting the necessary enquiries. When assessee has given a submission that the gold and silver articles were belonging to his father and sister, the same required to brought to tax or examine the sources in the hands of his sister and father but not in the hands of the assessee. Accordingly, the addition made by the A.O. in the hands of the assessee cannot be sustained and we set aside the order of lower authorities and delete the addition made by the A.O. The appeal of the assessee is allowed.
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2017 (9) TMI 176
Computation of Capital Gains- Jurisdiction of AO in completing assessment both under sections 50C and 55A - reference to DVO - adoption of value - valuation procedure i.e. Department Valuation or Fair market Value - Held that:- Bombay High Court in the case of CIT Vs. Daulal Mohta (HUF) [2008 (9) TMI 890 - BOMBAY HIGH COURT] has held that reference to DVO can only be made in a case where value of asset shown by the assessee is less than its fair market value of the land. Following the same parity of reasoning, we hold that no reference can be made under section 55A of the Act in order to value the cost of acquisition of property as on 01.04.1981 at a figure lesser than the value declared by the assessee. Accordingly, the order of CIT(A) is reversed in this regard. The Valuation Officer has adopted the value of property at about ₹ 93 lakhs as against the value declared by assessee at ₹ 87 lakhs and the value so worked out by the Valuation Officer is less than 10% and hence, value shown by the assessee merits to be applied. Assessing Officer was not justified in substituting the value determined by the DVO for the sale consideration disclosed by the assessee. Accordingly, the Assessing Officer is directed to take the value declared by the assessee at ₹ 87 lakhs in order to work out the income from capital gains. - Decided in favour of assessee.
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2017 (9) TMI 175
Revision under Section 264 - scope of revision - Held that:- The order passed under Section 264 of the Act is a detailed order with reasons and after considering the law laid down by the Supreme Court in the various decisions as mentioned in the order itself, it cannot be said by any stretch of imagination that it is a cryptic order. From perusal of the order impugned, it is clear that despite several opportunities, the petitioner did not avail any opportunity to account for the deposit of ₹ 16,31,700/- in his saving account. As result, ex-parte assessment order was framed. Petitioner was also given notice to pay the penalty, this too was not also availed of by the petitioner and it is only when the penalty order was passed and recovery proceedings started, the petitioner filed a revision under Section 264 of the Act. If we acceed to submissions of Shri Purohit, then in each case assessee will allow to proceed exparte and after limitation for filing appeal is over ask for quashing of exparte assessment order by invoking Section 264 of the Act. This cannot be the lagislature in proving remedy Under Section 264 of the Act.
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2017 (9) TMI 174
Reopening of assessment - reason to believe - sum received by the assessee company by way of remuneration as a partner of one Zydus Healthcare, Sikkim - assessee claimed that the said income was exempt in terms of section 28(v) - nature of income - Held that:- Two things immediately become clear. First is that, there was no failure on the part of the assessee to disclose the relevant facts truly and fully. The claim was made in the return with full disclosures in the statement of income and the accounts maintained by the assessee. The fact that the claim was supported by an addendum in the partnership deed was pointedly brought to the notice of the Assessing Officer in reply to the queries raised by him. There was thus, true and full disclosure of all material facts. The second thing is that this very issue with all its elements had come up for consideration before the Assessing Officer during the original assessment for this very assessment year and we also believe the assessee's contention for the earlier assessment years also. The notice for reopening therefore must fail both on the ground of no failure on the part of the assessee to disclose truly and fully all material facts and also on the ground of attempt on part of the Assessing Officer to reexamine the claim which was originally scrutinized and therefore on the principle of change of opinion. - Decided in favour of assessee.
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2017 (9) TMI 173
Penalty u/s. 271(1)(c) - claim for full depreciation - Held that:- From the materials on record, it can be seen that the assessee had put a claim for full depreciation for the year under consideration suggesting that the windmills were installed and commissioned before 30.09.2004. A stand which was opposed by the Revenue. Even the Tribunal on the quantum appeal while accepting the Revenue’s stand noted that windmill along with the turbine generator was dispatched for delivery from Daman by the manufacturers M/s. Suzlon Energy Ltd. on 25.09.2004. The same had to be delivered to Jaisalmer, Rajasthan. The Tribunal accepted the department’s stand mainly on the ground that the assessee failed to produce the lorry receipts, octroi receipts and other proofs of transportation of goods to show that the machine did actually reach Jaisalmer before 30.09.2004. This is, therefore, a case where the assessee had put forth a claim making full disclosures with supporting evidence. The department, however, relied on the materials collected during the scrutiny assessment to come to the conclusion that the commissioning would not have been over before 30.09.2004. The Tribunal was correctly of the opinion that this would not give rise to penalty proceedings. Tax appeal is, therefore, dismissed.
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2017 (9) TMI 172
Income earned on sale/redemption of investment - insurance business - Whether investments could be considered as stock-in-trade? - Held that:- There is no option with a company carrying on general insurance business, like the Assessee, to treat any part of its investment as “stock-in-trade” as is sought to be contended by the Revenue before the Court. These investments are, at best, “floating assets”. The argument that these constitute “stock-in-trade” is ingenious but does not find resonance in the provisions of the IA. Profits on sale/redemption of investments - Held that:- As already noticed, Section 44 of the Act is specific to ‘Insurance Business’. It states that, notwithstanding anything to the contrary contained in the Act relating to the computation of income chargeable under different heads ‘interest on securities’, ‘income from house property’, ‘capital gains’ or ‘income from other sources’, the profits and gains of any business of insurance shall be computed in accordance with rules contained in the First Schedule of the Act. Therefore, in the case of the Assessee which is carrying on general insurance business, the profits and gains of its business have to be computed only in terms of the First Schedule. With the Assessee carrying on a general insurance business, it was bound by the provisions of the IA as well as the IRDA Regulations referred to hereinbefore. Even the CBDT, in its Circular No. 5/2010 dated 3rd June 2010, acknowledged that, after the introduction of the IRDA Regulations in 2002, non-life insurance companies are required to credit income from the sale of investments directly to the P&L Account. This requirement, which would make the income so earned amenable to tax, was made applicable only from AY 2011-12. Prior to 1st April 2011, there was no provision which required the Revenue to disallow the deduction of loss on sale of investments. The Court is, therefore, unable to subscribe to the submission of Mr. Manchanda that the Circular No. 528 has no application to the present case. The decision in J.K. Synthetics v. CBDT (1971 (4) TMI 3 - SUPREME COURT ) relied upon by him has no application to the facts of the case. Furthermore, it is not even the case of the Revenue that the said Circular is ultra vires of the Act. ITAT erred in holding that the income earned on sale/redemption of investment was chargeable to tax. - Decided in favour of assessee. Disallowance of investments written off - Held that:- Even the Assessee acknowledges that if it succeeds, as it has, in its plea that the profit from sale/redemption of investments must be exempt from tax, then it cannot seek deduction as a result of losses on the write off of such investments. Consequently the question framed is answered in the negative, i.e. in favour of the Revenue and against the Assessee. It is held that CIT (A) erred in deleting the addition by the AO on account of the investment written off. Applicability of Section 115JB to insurance companies - Held that:- It is plain, from a reading of Section 44 read with the First Schedule of the Act, that insurance companies are required to prepare accounts as per the IA and the regulations of the IRDA and not as per Parts II and III of Schedule VI of the Companies Act. The Assessee prepares its accounts as per the IRDA principles. The IRDA Regulations govern the preparation of the auditor’s report. Consequently, the question framed is answered in the affirmative, i.e. in favour of the Assessee and against the Revenue by holding that Section 115JB of the Act does not apply to insurance companies.
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2017 (9) TMI 171
Relation of "sole proprietor" and his "business concern" - Profits or gains arising from the transfer of capital assets - "proprietorship concern" had borrowed an amount from the "proprietor" - ITAT treating the amount in the current account of the proprietorship concern, as a "loan to the proprietor" - transfer u/s 2(47) - worth of the assets of the proprietorship concern transferred to the company by the assessee - whether the "sole proprietor" and his "business concern" can be treated as two separate entities in the realm of the assessment of long-term capital gain tax ? - Can, a person borrow from himself? - section 47(xiv)(c) applicability - value of the "goodwill" admittedly forming part of the assets transferred - revision u/s 263 Held that:- Since the value of the total shares amounted to only ₹ 1,52,94,900 (while showing ₹ 2,73,07,905 as unsecured loan), it was observed that section 47(xiv)(c) was not satisfied completely and the "good will" portion to an extent of ₹ 2,45,00,000 was also liable to be taxed. This is not an attempt on the part of the Commissioner "to generate some more revenue" by refixing the assessment, if two views were possible. It is not a question of two alternate views, but a case of only "one view", which came to be wrongly decided by the Tribunal. As it stands so, it is the correct view that can be sustained and not the impaired one. Non-satisfaction of the ingredient under section 47(xiv)(c) in toto is a major defect and as such, value of the "goodwill", i.e., ₹ 2,45,00,000 admittedly forming part of the assets transferred, required to be taxed under such circumstances. This being the position, the judicial precedents cited and sought to be relied on by the assessee (as relied on by the Tribunal) actually do not come to the rescue of the assessee. This court is of the firm view that the power exercised by the Commissioner under section 263 of the Act is correct and that the finding rendered by the Tribunal, to the contrary, is not sustainable. Coming to the reasoning given by the Tribunal, that "deficit" has to be treated as "loan" given by the proprietorship concern, to the proprietor; (in turn taken over by the company as "loan" to be cleared on demand), it is to be noted that, under no circumstances can a person borrow from himself and transpose as "creditor" and "borrower" at the same time. To this extent, "proprietor" and "proprietorship concern" are not two different entities. Whatever is pumped in by the "proprietor" to his proprietorship, is nothing other than investment and it forms part of the asset, which, when taken over by the company, will have to be compensated (after deducting the liabilities). The proprietorship concern could have borrowed any amount to have categorised as a "loan", only if it was procured from some other source, than himself/the proprietor. The finding and reasoning given by the Tribunal are not at all correct and it is liable to be intercepted. Part of the consideration was paid by the company to the "proprietor" pursuant to taking over the proprietorship concern with all the assets and liabilities; which included the cost of the "goodwill" as well, to an extent of ₹ 2,45,00,000. In so far as there is no dispute that the total number of shares transferred was only 1,52,949 (having face value of ₹ 100 each), with a total worth of ₹ 1,52,94,900, there was clear deficit, which was never paid or satisfied in the form of shares as envisaged under section 47(xiv)(c) of the Act. The value of "goodwill" of the proprietorship firm passed on to the company, having a value of ₹ 2,45,00,000 as part of consideration/benefit which has been indirectly/wrongly shown as "loan" from the "proprietorship concern, to the proprietor", taken over by the company, to be satisfied as and when demanded. Viewed in the above circumstances, the said consideration had legally come to the credit of the proprietor/assessee on October 1, 2000 itself, to have transposed the latter as a creditor of the company, who sought to show the said amount as a "loan" procured from the proprietor. The legal position applied correctly by the Commissioner to the given set of facts and circumstances, as per annexure B order, came to be disturbed by the Tribunal, as per annexure D order. It is true that in tax parlance, "partnership" is different from "partners" and both can be taxed, though partnership firm is not a legal entity. But coming to proprietorship concern, there is no identity to "proprietorship concern", leaving the "proprietor" and the assessee is always the proprietor in such cases. In other words, there cannot be any assessment separately for the "proprietor" and "proprietorship concern". There is absolutely no rhyme or reason to have interfered with annexure B order. The finding and reasoning given by the Tribunal is per se wrong and unsustainable in all respects. Annexure D order passed by the Tribunal stands set aside. Annexure B passed by the Commissioner is restored. The appeal stands allowed.
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2017 (9) TMI 170
Submission of return for losses u/s 80 - Set-off/carry forward losses of earlier years if the return had been filed after due date - section 80 creating an absolute bar debarring the assessee from claiming set-off/carry forward - bonafide reasons for delay - Held that:- The embargo in section 80 cannot be treated as a straitjacket one which could be applied without reference to different provisions included in section 139 of the Act and elsewhere to enlarge the time for filing the return. It will also be open to the assessee to take recourse to the powers of the Central Board of Direct Taxes in obtaining clarifications or directions and orders which may enable a particular assessee to seek indulgence where the returns were not filed in time for bona fide reasons. We are of the view that in the case in hand, the appellant which is a public sector body, stands to plead that its accounts would be audited only under the control of the Comptroller and Auditor General of India and without such exercise being carried out, it will be disabled from filing its return with the requisite documents including the auditor's certificate and audit statement. Ends of justice, therefore, requires that the appellant has to be given an opportunity to meet the situation by placing before the Assessing Officer appropriate application as may be permissible in law or by moving the Central Board of Direct Taxes within the time prescribed in terms of the circulars for relief as may be available to the appellant. To enable this process, the impugned decisions are liable to be set aside without expressing anything on the merits of the claim of the appellant's eligibility for carrying forward the losses. Appeal is allowed answering the question formulated as above and resultantly, setting aside the decision of the Tribunal and that of the Commissioner of Income-tax (Appeals) as also the Assessing Officer.
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2017 (9) TMI 169
Penalty u/s. 271(1)(c) - rejection of claim of deduction - inaccurate claim - Held that:- The assessee had raised a certain claim of deduction. Though this claim was rejected, it was found that the assessee had not supplied inaccurate particulars of the income. The Tribunal therefore referred to the decision of the Supreme Court in case of CIT vs. Reliance Petroproducts Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] and held that merely because a claim has been rejected, that by itself would not mean that penalty should also attach. - Decided in favour of assessee.
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2017 (9) TMI 168
Demand of outstanding tax - department uploaded in its e-portal the status of outstanding demand against the petitioner for several assessment years - roof of no scrutiny assessment - Held that:- No definite reference to any order of assessment, reassessment or revisional order for the assessment year 2006-07 under which the said demand can be stated to have arisen. In plain terms, the department is unable to produce any order giving rise to such demand. The department has not refuted the petitioner’s contention that the return filed by the petitioner for the said assessment year 2006-07 was not taken in scrutiny and simply accepted under section 143(1) of the Act giving rise to refund as claimed by the petitioner. There is nothing on the record to suggest that any order of reassessment was thereafter passed by the department or that any revisional order was passed by the Commissioner raising such substantial tax demand. In absence of any evidence produced by the department, atleast as of now we shall have to accept the petitioner’s contention that the return was accepted without scrutiny and that thereafter no order of reassessment or revisional order was passed by the competent authority raising such tax demand. The respondents are directed to delete the demand of ₹ 1,08,31,405/- for the assessment year 2006-07. - Decided in favour of assessee.
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2017 (9) TMI 167
Total turnover in Section 80 HHC - turnover relating to the export business of the assessee OR a turn over relating to other businesses of the assessee - Assessee was running two units - ITAT held that the Assessee would be entitled to deduction under Section 80 HHC only if after the setting off brought forward losses and unabsorbed depreciation, the Assessee was left with any income and the deduction under Section 80 HHC should be worked out on the basis of the turnover of the garments division only - Held that:- The judgment of the Supreme Court in IPCA Laboratories vs. Dy. Commissioner of Income Tax, Mumbai, (2004 (3) TMI 9 - SUPREME Court) where it has been categorically held that “a plain reading of Section 80-HHC makes it clear that in arriving at profits earned from export of both sel-fmanufactured goods and trading goods, the profits and losses in both the trades have to be taken into consideration. If after such adjustments there is a positive profit the assessee would be entitled to deduction under Section 80-HHC (1)”. Thus the question framed is answered in the negative, i.e. in favour of the Revenue and against the Assessee.
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2017 (9) TMI 166
Addition u/s 14A - interest paid on the borrowed funds utilized for making investment in shares yielding exempt income - Addition made on account of purported management/administrative expenses and other costs attributed towards earning dividend income - ITAT deleted additions - Held that:- A perusal of the impugned order passed by the ITAT reveals that both the disallowances were made by the AO on ad hoc basis. The ITAT relied on the order passed earlier by a coordinate Bench of the ITAT for AY 2000- 2001 deciding an identical issue in favour of the Assessee. The ITAT noted that there was no change in the facts and circumstances or the legal position requiring a different view to be taken. In any event, the Court finds that the disallowances were made by the AO on ad hoc basis. As explained by this Court in CIT v. State Trading Corporation Ltd. [2012 (8) TMI 1092 - DELHI HIGH COURT], even prior to Rule 8D, the disallowance under Section 14 A of the Act had to be on some reasonable basis. - Decided in favour of assessee.
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2017 (9) TMI 126
Depreciation on UPS - @60% OR 15% - Held that:- The issue is squarely covered by a decision of a coordinate bench of the ITAT in the case of SRL itself [2013 (4) TMI 814 - ITAT PANAJI]. The CIT followed that decision. It was on this limited ground that in paragraphs 9 and 10 the ITAT held against the Revenue on this aspect of the appeal. We see no defect in the reasoning of the Tribunal. Indeed we are unable to appreciate why, when there is a decision of a coordinate Bench on an identical point, the Tribunal should, or even could, take a diametrically opposite view. To do so would only add to uncertainty in tax proceedings, and the doctrine of precedent would apply just as much to the ITAT. This is by no stretch of the imagination a substantial question of law. Disallowance on interest expenditure on loans taken at interest and advanced to sister concerns interest-free - whether the loans in question and interest thereon were matters of commercial expediency - Held that:- This is admittedly not a case where the amount was either a donation (as in Madhav Prasad Jantia’s case - 1979 (4) TMI 2 - SUPREME Court) or even loan was given to an individual or to a director of the company in his personal capacity. Had that been so, the question might legitimately been asked as to prove the purposes of the loan. In other words, the question posed by the Revenue suggests its own answer. It postulates that when two commercial entities have between them a loan transaction, it is conceivable that the purpose is something other than a business purpose. Prima facie, it seems that the only possible other purpose, as oppose to a business purpose or commercial expediency, is a ‘personal’ one (such as a loan to a director for personal use or a commemorative loan), and a commercial entity can have no such personal purpose. The finding of the Tribunal in our view, cannot be faulted. It relied on a decision of a co-ordinate bench of the Tribunal in another matter where a decision of the Gauhati High Court in Highways Construction Co Pvt Ltd v Commissioner Of Income-Tax (1992 (11) TMI 86 - GAUHATI High Court) was considered. The finding there was that only the real income earned by the assessee could be brought to tax, not some notional income. The question suggested as a substantial of law seems to proceed on a basis that some notional interest might have been asked to be assessed. Current repairs to old vessels - Held that:- The expenditure was necessary to keep the vessel in good working condition and to keep them seaworthy. The increased expenditure did not result in an increase of the capacity of the vessels or any new advantage or capital asset coming into existence. Thus allowable business expenditure. Additional depreciation - ore extraction and processing - Held that:- Supreme Court in The Commissioner of Income Tax v Sesa Goa Ltd. [2004 (11) TMI 14 - SUPREME Court] held that mining for the purpose of production of mineral ore falls within the ambit of the word ‘production’. The Division Bench of this Court had held that in such a process, ore has to be extracted or raised from earth. This activity is ‘production’, entitling the assessee to the benefit of Section 32(A) of the Act. Thus, there would be an allowable depreciation deduction in respect of the machinery used in mining. It cannot be said that mining is neither production nor manufacture. That is no longer res integra.
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Customs
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2017 (9) TMI 139
Validity of SCN - Jurisdiction - challenge to SCN on the ground that it has been issued with a pre-meditated mind, contrary to the provisions of the Customs Act, 1962 - case of petitioner is that the second respondent has arbitrarily impleaded the petitioner as a party to the proceedings without any investigation or enquiry and therefore, continuance of the proceedings under the impugned notice will result in oppression and harassment to the petitioner - Held that: - the impugned proceedings is only a show-cause notice and not an order. The points which are canvassed by the petitioner to state that the impugned show-cause notice is without jurisdiction as against the petitioner, is not purely a question of law, but mixed questions of fact and law. It is relevant to note that the petitioner is not the only noticee, but there are 156 other noticees to whom the impugned show-cause notice has been issued. The question as to whether Section 28 or Section 28-AAA would stand attracted, is also not a pure question of law, but involves adjudication into facts. Therefore, at this juncture, this Court does not propose to interfere with the impugned show-cause notice as if it is done, it would be doing so at the very threshold, which is impermissible - petition dismissed being not maintainable.
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2017 (9) TMI 138
Jurisdiction - Penalty u/s 112(a) of the Customs Act - Whether the order of the Tribunal directing levy of penalty under Section 112(a) of the Customs Act, is without jurisdiction and amounts to trenching upon the powers of the adjudicating authority, inasmuch as the power to levy penalty is vested with the adjudicating authority under the Customs Act and the definition under Section 2(1) of the Customs Act, 1962, expressly excludes the Tribunal? - Whether the order of the Tribunal directing levy of penalty under Section 112(a) is bad for want of jurisdiction, inasmuch as the above direction amounts to enhancement, for which there is no power under Section 129-B of the Customs Act, 1962? - Held that: - the penalty under Section 114-A could not have been imposed on the appellant-assessee-Company, inasmuch as they did not file the Bill of Entry as required under Section 46 of the Act, but however, without levying any duty thereon at the first instance, the proper officer has allowed them to be cleared. It is the appellant-Company, the importer himself has discovered the error and brought it to the notice of the proper officer by way of written representation and they have made the payment of duty leviable on such goods together with interest under Section 28 thereon. Therefore, there is no manifest intention on the part of the importer to evade duty - The present case is not a case where the goods have been imported in excess of their numbers mentioned in the Bill of Entry. The import manifest has not been filed covering certain goods amongst other goods imported. However, they were cleared without levying any duty on them. The lapse is equally on the part of the proper officer, who cleared those goods, without verifying as to whether an appropriate Bill of Entry is lodged or not and then they have suffered the incidence of duty or not - The role and jurisdiction assigned to the Tribunal is specified under Section 129-B of the Act. It would be open for the Tribunal, if it thinks fit, to pass an order confirming or modifying or annulling the decision appealed against or may refer the case back to the authority with such direction as it may think fit for fresh adjudication or a decision, and hence, the power of determination or imposition of penalty on an importer under Section 112(a), is not available to the Tribunal. This jurisdictional limitation has not been borne in mind by the Tribunal while passing the impugned order - answered against Revenue. Whether the order of the Tribunal confirming the redemption fine in respect of goods which were not even available for confiscation, is contrary to the following decisions of the Tribunal, which are binding and thus bad for want of jurisdiction? - Held that: - insofar as the prohibited goods are concerned, they are prevented from being imported either absolutely or conditionally and consequently, the question of making an offer for payment of fine under Section 125 of the Act, would not arise, without studying the implication of such import - for improper importation of the dutiable goods or the prohibited goods, the importer is liable to be proceeded against under Section 112 of the Act by subjecting him to a penalty. Therefore, the fine proposed to be imposed under Section 125 of the Act is directed against the goods, in addition to the one that was already provided for under Section 112 of the Act. The fine contemplated is for redeeming the goods, whereas, the importer is sought to be penalised under Section 112 for doing or omitting to do any act which rendered such goods imported by him, liable to be confiscated under Section 111 of the Act and for that act or omission, the appellant is liable to be penalised - The power to impose redemption fine springs from the authorisation of confiscation of goods provided for under Section 111 of the Act. When once power of authorisation for confiscation of goods gets traced to the said Section 111 of the Act, we are of the opinion that the physical availability of goods is not so much relevant. The redemption fine is in fact to avoid such consequences flowing from Section 111 only. Hence, the payment of redemption fine saves the goods from getting confiscated. Hence, their physical availability does not have any significance for imposition of redemption fine under Section 125 of the Act. Appeal allowed - decided partly in favor of appellant.
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2017 (9) TMI 137
Principles of Natural Justice - EPCG scheme - in spite of granting extension of time for fulfilling the export obligations, the writ petitioner/Firm has failed to discharge those obligations satisfactorily - It is contended before us that the show cause notice has been drawn by a Superior Officer, viz., the Joint Director General of Foreign Trade, whereas, the order-in-original has been passed by the inferior Agency, called 'Deputy Director General of Foreign Trade' - Held that: - matter remitted back for consideration afresh by the Joint Director General of Foreign Trade, who drew the show cause notice, dated 31.12.2013, for the simple reason that, a Superior Agency cannot initiate quasi-judicial proceedings, and an inferior Agency cannot finalize the same. The provisional conclusion arrived at by a particular Authority must necessarily be considered, when responded to by the same Authority. The inferior Authority cannot consider the explanation and make up his mind for and behalf of his superior agency - appeal allowed by way of remand.
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2017 (9) TMI 136
Principles of Natural justice - Absolute confiscation - gold - the petitioners have an effective alternative remedy by way of an appeal to the Commissioner of Customs (Appeals), Chennai. However the petitioners, without availing such remedy, have approached this Court, challenging the impugned order on the ground of violation of principles of natural justice - Held that: - in the communication dated 27.02.2016, the Superintendent of Customs informed the petitioners' counsel that they can examine the documents referred to in the show cause notice at the time of personal hearing. This opportunity has not been given though the counsel pointed out that most of the documents requested from the department have not been supplied to them and this seriously hampers the defence of the case - the statement made in counter affidavit is of little worth and it does not substantiate that principles of natural justice have been complied with and thus for the above reasons the impugned order is liable to be set aside for De novo jurisdiction - the impugned order is set aside and the matter is remanded back to the second respondent for fresh consideration - petition allowed by way of remand.
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2017 (9) TMI 135
Advance licence scheme - appellant have exported MS angles on deemed export basis and have obtained intermediate licence for duty free import of various inputs including MS billets. They had imported MS billets duty free against these advance intermediate licence and they cleared them free of custom duty - N/N. 50/2000-Cus dated 27.04.2000, 51/2000 dated 27.04.2000 and 43/2002 dated 19.04.2002 - case of Revenue is that the appellant have not imported the goods whereas the said goods was imported by Maharashtra Steel Rolling Mills (MSRM), Mumbai and the appellant have purchased the same on high sea sale basis. The goods were further given to MSRM for job work and after manufacturing the said goods were sold to MSRM. In this fact department contended that right from import of goods to sale of finished goods it is MSRM who owns the goods, therefore the clearance of goods by the appellant under advance licence has been transferred to MSRM. Accordingly the condition of N/N. 51/2000 and 43/2002 was violated. Held that: - as per the record the material was initially imported by MSRM who subsequently sold on high sea sale basis to appellant M/s. Prakash Ispat Udyog and Sanvijay Rolling & Engg. Ltd. The appellants cleared the said imported goods on the basis of advance licence under notification 51/2000-Cus and 43/2002-Cus. The goods were directly sent from the port to MSRM for job work under a job work agreement and after processing, the goods were sold to MSRM only. Though on record it appears that the goods were cleared under advance licence by the appellant and till the processing of goods on job work basis the ownership of the goods remained with the appellants. The ownership of goods remains with the appellants from purchase of goods from high sea sales basis till the processed goods are sold. It is important to ascertain that whether the goods have been transferred or otherwise on the basis of payment transaction in every stage right from import of goods till sale of processed goods. The show-cause notice also relied upon the accounts ledger of the appellant but no verification was found to have been carried out by the adjudicating authority. The fact of payment in overall transaction of the imported goods as well as sale of processed goods is very vital. However, we have observed that the adjudicating authority has not properly examined the payment transaction issue from the records. The matter needs to be reconsidered by the adjudicating authority - appeal allowed by way of remand.
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2017 (9) TMI 134
Confiscation - smuggling - Cigarettes - redemption fine - penalty - case of appellant is that the investigation/inquiry on the smuggling of cigarettes is still pending and it is premature to conclude the issues raised by the Revenue - Held that: - the ld. Commissioner (Appeals) even though recorded that the inquiry relating to smuggling of cigarettes is still pending, but, proceeded to decide the issue on merit and later remanded the matter to the adjudicating authority to consider the confiscation of goods with appropriate redemption fine and imposition of penalty. This observation of the ld. Commissioner (Appeals), cannot be sustained, as it suffers from self contradiction and also premature - the inquiry by the DRI relating to the smuggling of cigarettes is on the last stage of completion and therefore, it is appropriate to direct the adjudicating authority to consider all issues relating to the allegation against the appellant, after completion of inquiry by the DRI on the issue of smuggling of cigarettes - appeal allowed by way of remand.
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Corporate Laws
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2017 (9) TMI 129
Defalcation and fraud by the appellant - appellant's motivation in infusing his personal funds to the company's liability towards the creditors - winding up proceedings - Held that:- The appellant, admittedly, even according to the learned Single Judge, enabled the settlement of dues, of more than ten thousand depositors. To achieve this end, concededly, the appellant brought in his personal funds. Clearly, by providing funds, the appellant has become a creditor of KOFL. That apart, the appellant is also a contributory of KOFL. The fact that the appellant enabled a settlement with the depositors by delving into his personal funds would not deprive him of the protection of limited liability. The KOFL liability towards the creditors cannot enable the creditors to latch on to the appellant's personal assets unless they are able to establish malfeasance, defalcation and fraud by the appellant. Though, in the Administrator's report, there is a reference to the factum of appointment of M/s.Rangan and Krishnan as auditors of KOFL, nothing has been placed before us to suggest that the appellant had defalcated KOFL's funds. Therefore, the appellant's motivation in infusing his personal funds cannot, to our minds, be the basis for coming to the conclusion that keeping the winding up petition in play works to his benefit. Whatever may have been the reasons for the appellant to infuse funds, the fact of the matter is that, claims of a vast majority of depositors were settled with help of funds brought in by him and therefore, if criminal proceedings initiated against the appellant were closed on account of settlement of dues of depositors is any issue on which, we cannot comment as that aspect of the matter is not within the scope of the present proceedings. What is clear though the motivation of the appellant to keep the company petition ongoing cannot impinge upon construction of the Rules adverted to above by us. Having said so we make it abundantly clear that nothing that we said above will come in the way of prosecution of the appellant in civil and criminal proceedings, if, otherwise they are tenable in law. Therefore, for the foregoing reasons, we are of the view that the impugned judgement and decree cannot be sustained. It is ordered, accordingly. The appeal is allowed. C.P.No.179 of 2001, is put back on board. The OL, who is, presently, acting as PL, will continue to prosecute the winding up proceedings under the supervision and as per the orders of the learned Company Judge. Resultantly, the consequential directions issued via the impugned judgement and decree shall also stand set aside.
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Insolvency & Bankruptcy
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2017 (9) TMI 128
No payment of unpaid operational debt by the Corporate Debtor - whether filing of a copy of the certificate from the 'Financial Institution', “maintaining accounts of the Operational Creditor confirming that there is no payment of unpaid operational debt by the Corporate Debtor” as prescribed under clause (c) of sub-section (3) of Section 9 of the I&B Code? - Held that:- Admittedly, the Bank in question is not a scheduled bank, nor is a 'financial institution' as defined under Section 45-1 of Reserve Bank of India Act, 1934 (2 of 1934). The Bank aforesaid also do not come within the meaning of 'Public Financial Institution' as defined in clause (72) of Section 2 of Companies Act, 2013 (18 of 2013). The Central Government has also not issued any Notification specifying the Bank in question for the purpose of sub-section (14) of Section 3 r/w Section 9 of 'I & B Code'. In the circumstances, we hold that the application preferred by the appellant was not maintainable in the absence of record of 'Financial Institution' as defined in sub-section (14) of Section 3 of the I&B Code.
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FEMA
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2017 (9) TMI 127
Interest on the amount of the Award - Payment of actual rate of interest earned by the respondent on the amount seized and confiscated from the petitioner - accretion to the amount seized from the petitioner - Held that:- In the present case it is admitted that the respondent had received interest amounting to ₹1,64,52,470/- on the separate fixed deposit created from the currency seized. However, it is seen that the respondent has paid only a sum of ₹1,19,09,803/- as interest. Thus, the respondent is directed to refund the balance amount of ₹45,42,667/- (₹1,64,52,470/- minus ₹1,19,09,803/-). The respondent has also provided no justification for not paying the amount of interest along with the amount seized. Even according to the respondent, a sum of ₹1,19,09,803/- was payable to the petitioner on 25.10.2012. However, this amount was paid by the respondent on 05.04.2013, and there is no explanation, whatsoever for retaining the amount. The petitioner has been deprived of the use of the said funds and, thus, is entitled to be compensated for the same. There are numerous decisions, where the Courts have awarded interest as compensation for denial of the right to utilise the money due. In Thazhathe Purayil Sarabi & Ors v. Union of India (2009 (5) TMI 966 - SUPREME COURT) the Supreme Court observed that “As has been frequently explained by this Court and various High Courts, interest is essentially a compensation payable on account of denial of the right to utilise the money due, which has been, in fact, utilized by the person withholding the same. Accordingly, payment of interest follows as a matter of course when a money decree is passed”. Thus, this Court is of the view that the respondent be also directed to pay interest at the rate of 6% per annum on the said sum of ₹1,19,09,803/- (which was concededly due to the petitioner on 25.10.2012) for the period from 25.10.2012 to 05.04.2013.
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Service Tax
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2017 (9) TMI 165
Scope of SCN - Whether the Tribunal, while remanding the matter, addressed any of the issues or questions which were not included in the show-cause notice? - Held that: - It would appear from the SCN that the allegations made were on disclosures by his client as required by the department upon having conducted inquiry and investigation. No part of the information furnished by his client could be demonstrated to be incorrect. The question of suppression cannot arise and accordingly the SCN carries only a bald allegation in regard thereto. On top of that by the impugned order the Tribunal purported to find that the adjudicating authority did not cause proper inquiry nor investigation, to cite that as reason for the directions of remand. By the impugned order there was remand of the issues for reconsideration on the aforesaid directions which amount to taking of additional evidence. The Tribunal being an appellate forum exercised its power to remand as well as give directions for taking additional evidence. Power of remand and directions for taking additional evidence by an Appellate Court is provided for in Order 41 Rules 23, 23A and 27 to 29 of the Code of Civil Procedure, 1908. The Code separately provides for remand and production of additional evidence in Appellate Court which is not so under section 35C of the Central Excise Act, 1944. The power of remand prescribed by the Code is that where the Court, from whose decree an appeal is preferred, disposed of the suit upon a preliminary point or the case was disposed of otherwise than on a preliminary point, the decree is reversed in appeal and a re-trial is or considered necessary, the Appellate Court will exercise the power of remand in both such instances. However, this power of remand requires the Court from whose decree appeal was preferred, to determine the suit; and the evidence (if any) recorded during the original trial shall, subject to all just exceptions, be evidence during the trial after remand. Penalty - Held that: - no part of the adjudicated demand can be said to be outside the purview of the scope of section 73 prior to its substitution. Before that authority no ground had been taken that the SCN did not disclose reason to believe omission or failure on the part of the assessee or that such omission or failure was not covered under clause(a) sub-section (1)in section 73 as it stood before substitution. There are specific findings of the adjudicating authority regarding omission, failure and suppression by the appellant on the allegations made in the SCN - On a reading of sections 73, 78 and 83A we are unable to hold that upon determination of a demand, where the extended period of limitation has been invoked, the adjudication of penalty that stand attracted is to be made by initiating a separate proceeding. The penalty adjudged and direction made in regard thereto by the adjudicating authority is clearly under the provisions of section 78 as it stood before substitution - suppression and imposition of penalties are in favor of the Revenue. Appeal allowed - decided partly in favor of appellant.
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2017 (9) TMI 164
Penalty u/s 78 - GTA services - reverse charge mechanism - payment of tax with interest on being pointed out - Held that: - Since appellant were aware about the taxability of GTA despite that they have consciously avoided to make payment of service tax on transport commission. No plausible reason given for non-payment of service tax. Merely because the appellants have paid the service tax and interest the penalty under Section 78 cannot be waived - also, the appellants have not disclosed the fact voluntarily without any enquiry by the department - penalty upheld - appeal dismissed - decided against appellant.
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2017 (9) TMI 163
Business Auxiliary services - N/N. 14/2004-ST dated 10/09/2004 - whether the services of harvesting and transportation of sugarcane and consideration received there against as Sanugraha Anudan (commission) is taxable under Business Auxiliary Service and whether the exemption Notification No.14/2004-ST dated 10/09/2004 exempts the said service? Held that: - notification says that the commission in relation to sale and purchase of agricultural produce are exempted from service tax - In the present case, the services of harvesting and transportation is in relation to supply of sugarcane, which is agricultural produce. As per the explanation the agricultural produce should not undergo the alter of its essential characteristics. The sugarcane which was harvested is supplied to sugar factory without bringing any alteration in its essential characteristics. Therefore, the services provided by the appellant is squarely covered by this notification - It is also observed that even the N/N.14/2004-ST dated 10/09/2004 also exempts the Business Auxiliary Services provided in relation to agricultural produce. The service provided by the appellant, i.e., harvesting and transportation of sugarcane for supply to sugarcane factory is exempted - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 162
Management, Maintenance and Repair Service - commercial complex / shopping mall - providing services at no profit no loss - case of appellant is that they are not liable to pay any service tax, for the reason that they are neither collecting any service charges and that there is no relationship of service provider and service recipient with regard to the assessee and the owners of the shops - pure agent - Held that: - it is clear that the assessee has collected charges over and above actuals (electricity, water) from the occupants of the plaza premises. Such charges have been collected for rendering management and maintenance activities of the premises. The common areas and lift facility etc. is managed / maintained by the assessee. Section 67 of the Finance Act does not mention that the consideration received should be with a profit motive or that the service provided should be a commercial activity. The section uses the word consideration and is not qualified by the words commercial or profit . Wherever the legislature wanted to exclude the charges collected on services rendered without profit motive, the same has been specifically taken care of. For e.g. in the case of education services, commercial coaching and training services are only within the purview of the levy of service tax. So the argument of the counsel that only if the charges received for services is in surplus it can be treated as consideration received for services is not acceptable. The Annual Finance Statement (P & L Statement) clearly shows that the assessees have collected maintenance charges. Therefore, even if we disregard this Bill, there is evidence that assessee have collected maintenance charges for the services rendered. Thus, we hold that assessee is liable to pay service tax on the charges collected for rendering management, maintenance or repair services of Spencer Plaza. Whether the contention of the assessee that they are acting as pure agent of the occupants and there is mutuality of interest is acceptable? - Held that: - The contention of the assessee that there is mutuality of interest is also not correct for the reason that the assessee is a company registered under the Companies Act, 1956 and is therefore a separate legal entity. Thus, the assessee as a separate legal entity having entered into contracts with third persons for providing services for and on behalf of occupants and collected charges especially for providing maintenance and upkeep of common area, common amenities, common facilities cannot be considered to be outside the purview of levy of service tax on the ground of mutuality of interest - the assessee is a company having a separate legal entity and cannot be compared with that of a housing society or a club. Whether the assessees are liable to pay service tax on the electricity / water and insurance charges collected? - Held that: - assessees are not liable to pay service tax on the actuals that is electricity / water and insurance charges collected and paid to the respective authorities. The demand on such amount is unsustainable and requires to be set aside which we hereby do - reliance placed in the case of Intercontinental Consultants & Technocrats (P) Ltd. [2012 (12) TMI 150 - DELHI HIGH COURT]. Whether the assessees are eligible for the CENVAT credit to the tune of ₹ 51,33,226/-? - The credit has been denied for the reason that the documents are not proper - Held that: - as per proviso to Rule 9 of CENVAT Credit Rules, 2004, if the Assistant / Deputy Commissioner is satisfied after verification of accounts that the assessee is eligible for credit, the same has to be considered and the benefit has to be given to the assessee. On mere deficiency in the document, the credit cannot be denied if the same is otherwise eligible and has been properly accounted - this issue requires to be remanded to the adjudicating authority for verification of documents. Time limitation - Held that: - It is seen from the records that they have collected maintenance charges and have not disclosed the same to the department. Even if we brush aside the specimen bill that is made part of the impugned order, the annual financial statements as well as other documents evidence that the assessee have collected maintenance charges from occupants - the show cause notice invoking the extended period is therefore sustainable. Appeal allowed in part and part matter on remand.
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2017 (9) TMI 161
Classification of services - Import of service - Consulting engineer services - technical and inspection service - services performed outside India - place of provision of service - reverse charge mechanism - Held that: - the learned Commissioner (Appeals) has conclusively decided the classification of the service under Technical inspection and certification services and held that it neither falls under Consulting Engineers Service as alleged in the show-cause notice nor under Management Consultancy Service as held in the order-in-original - As per the fact, the said technical and inspection service was admittedly provided by the foreign service provider based in Germany at Amur Shipbuilding Plant at Russia on behalf of the respondent. Therefore, the service was wholly performed by M/s.Schiffko GMBH, Germany at Russia, no part of such service was performed in India. Therefore, in terms of Rule 3 (ii) of Taxation of Services (Provided from outside India and received in India) Rules, 2006, service is not taxable in the hands of the respondent under the reverse charge mechanism. The service itself is not taxable, whether it is provided prior to 18/04/2006 or thereafter does not make any difference as the service remains non-taxable throughout the relevant period - appeal dismissed - decided against Revenue.
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2017 (9) TMI 160
Construction of complex service - non-payment of service tax - Held that: - the residential complexes built for married military troops is not liable to service tax as they do not require any approval from any authority. Further, we also note that the tax liability cannot be also sustained on the second ground that these complexes are built for personal use by the Ministry of Defence by allotment to married military personnel - there is no service tax liability for construction activities carried out by the appellant in connection with their contract with Ministry of Defence. CENVAT credit - duty paying documents - Held that: - the appellants have categorically explained each one of the objections raised against allowing credit - These documents can be re-verified by the Original Authority alongwith the explanations offered by the appellant - matter on remand. Preferential location charges - demand with interest paid before issuance of SCN - Section 73 (3) - Held that: - as the service tax amount with applicable interest has already been discharged even before the issue of show cause notice, the matter is fit for closure under Section 73 (3). Business exhibition service, availed outside India - export of services - Penalty - Held that: - expenditure towards business exhibition held outside India will not create liability as import of service - service tax liability of ₹ 54,384/- confirmed towards this service is not sustainable - Considering that these tax amount paid on reverse charge basis is eligible for credit to them, no penalty can be imposed in such revenue neutral situation - penalty set aside. Appeal allowed - part matter on remand.
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2017 (9) TMI 159
Valuation - C&F services - includibility - reimbursement of the expenses like electricity charges, freight charges, telephone, office staff and salary, collected by appellant from their client - Held that: - the so called reimbursement on account of various expenses such as electricity charges, telephone, freight charges, salary etc. are part and parcel of gross value of the C & F Agent Service, hence the same is chargeable to service tax. Penalty - Held that: - Larger Bench in the case of Sri Bhagwati Traders [2011 (8) TMI 430 - CESTAT, BANGALORE], has held that the appellant entertaining bona fide belief is reasonable, therefore they made out a case for waiver of penalty imposed under Section 78 by invoking Section 80 of the Finance Act - penalty set aside. Appeal allowed - decided partly in favor of appellant.
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2017 (9) TMI 158
Renting of immovable property service - the amount of rent was equally paid by the lessee to these three persons namely Pandurang Hulawale, Sambhaji Hulawale and Jaymala Sambhaji Hulawale - case of appellant is that entire rent amount cannot be clubbed and treated as income of one person i.e. the appellant - Held that: - As per the payment terms, all the three persons were paid different amount of rent to individual after deduction of TDS - The amount received by other two persons is their income and the same cannot be clubbed with the rent received by the appellants. As per the amount received by the appellants, it is very much below the threshold limit of ₹ 8 lakhs up to which the service tax is exempted - demand not sustainable - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 157
CENVAT credit - prefabricated, buildings/shelters for telecommunication services - Held that: - the Larger Bench of this Tribunal in the case of Tower Vision India Pvt.Ltd. and others [2016 (3) TMI 165 - CESTAT NEW DELHI (LB)] has held that cenvat credit is not available on the above said items, as they have become immovable property and get affixed to the earth - the appellant is not entitled to avail the cenvat credit on the items in question - demand upheld. Extended period of limitation - penalty - Held that: - the issue of Cenvat Credit in respect of telecom towers, PFB and parts thereof was debatable and could not have been said to be free from doubt during the relevant period and substantial question of law was the subject matter before the Division Bench of the Tribunal as well as Larger Bench and earlier Hon’ble High Court of Bombay. In these circumstances, the extended period of limitation could not apply, especially when both the members of referral bench had held that the extended period was not invokable - penalty is also not imposable - extended period of limitation and penalty not imposable. Demands within period of limitation along with interest are upheld - extended period not imposed - Penalties imposed are set aside - appeal allowed - decided partly in favor of appellant.
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2017 (9) TMI 156
Construction services - tax paid by principal - liability of sub-contractor to pay service tax - double taxation - Held that: - no double taxation is permissible under the law. The Constitution (Article 265) provides to take the exact amount of tax i.e. neither more nor less - In the instant case, if the principal has already paid the Service Tax, then the same cannot be demanded from the appellant. As per the clarification of the Board’s Circular dated 23-8-2007 as well as dated 7-10-1998, if the principal had not paid the Service Tax then the same can be charged. If the Service Tax has already been paid by the principal, then the same cannot be demanded again - For the purpose of computation pertaining to double taxation, the matter is remanded to the adjudicating authority - appeal allowed by way of remand.
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2017 (9) TMI 155
CENVAT credit - whether the appellant is entitled to Cenvat Credit on the Service Tax paid by M/s. Sapphire Consulting Group and whether such credit can be utilized by the appellant to pay service tax on their output service? - Held that: - Rule 2(l) of the Cenvat Credit Rules, 2004, defines “Input Service” as any service used by provider of taxable service for providing an output service. With regard to Management or Business Consultation Service, It is on record that the appellant has utilized the services of M/s. Sapphire Consulting Group for providing the output service to M/s. Koutons Retail India Ltd - As long as, the service is used to provide output service, Cenvat credit of such Service Tax will be admissible - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 154
Utilisation of CENVAT Credit - GTA Service - the decision in the case of Commissioner of Central Excise & Customs Versus M/s Godavari Sugar Mills Ltd. [2015 (10) TMI 2465 - KARNATAKA HIGH COURT] contested - Held that: - the SLP is dismissed for non-prosecution.
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Central Excise
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2017 (9) TMI 153
CENVAT credit - duty paying documents - Rule 9 of the CCR, 2004 - Held that: - No material has been placed before us to indicate that the original invoices or the copies thereafter were placed on record before the Assessing Officer - the CESTAT is justified in remanding the matter with regard to the admissibility of the Cenvat Credit to the assessee to be reconsidered and decided by the Assessing Officer on the verification of the documents. Penalty u/r 15(2) of the Rules read with Section 11-AC of the Central Excise Act, 1944 - Held that: - the CESTAT has manifestly erred in setting aside the order of penalty which infact ought to have been left open for decision of the adjudicating authority while deciding the issue of CENVAT credit. Appeal allowed - decided partly in favor of Revenue.
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2017 (9) TMI 152
Manufacture - conversion of granules into moulding powder - penalty - Held that: - the question of whether the powdering of Low Density Polyethylene (LDPE) and High Density Polyethylene (HDPE) granules into moulding powder would amount to manufacture went for determination right up to before the Hon’ble Supreme Court when it was determined by the Hon’ble Apex Court that as a consequence of new definition of manufacture in terms of Section 2(f), the activity which otherwise do not amount to manufacture, can now be termed as manufacture and thus liable to duty. This was with reference to Chapter Note 6(b) of Chapter 39 of the Central Excise Tariff Act, 1995 - the penalty not leviable - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 151
Benefit of N/N. 84/94 - Change of opinion - Revenue entertained a view that since M/s. Maccas Automotive was not a manufacturing unit but was a trading unit, they were not entitled to the benefit of the notification - Held that: - A manufacturing unit, who is in business, proceeds on the basis of documents produced before him and cannot be held to be a legal expert so as to come to a conclusion, on his own that the benefit of notification was not available to M/s. Maccas Automotive, being a trading firm, especially when an undertaking was produced before them and no objection was ever raised by the Revenue, prior to the period in question - Admittedly, the Assistant Commissioner is more knowledgeable about the legal position and having granted the permission to a trading unit to follow the procedure of exemption notification in question, the duty liability cannot be subsequently fastened on the manufacturing unit, who had acted according to the documents produced before him - such subsequent change in the opinion of the Revenue, resulting in confirmation of demand against the manufacturing unit or confiscation of the goods or imposition of penalties, cannot be appreciated - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 150
CENVAT credit - whether the appellants are eligible to avail cenvat credit on the duty paid viz; Structural Steel/ MS Beam, Base Plate, base Frame, Structure for creel loading system, Lighting Protection Mat etc. claimed to have been used as structures for capital goods? - Held that: - similar issue decided in the case of M/s. Singhal Enterprises Private Limited Versus The Commissioner Customs & Central Excise, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit. However, the Appellant should establish the said use by adducing evidences. In the result, the matter is remanded to the adjudicating authority to examine the claim of the appellant on the eligibility of credit on the aforesaid items - appeal allowed by way of remand.
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2017 (9) TMI 149
CENVAT credit - H.R. Coils, Plates, SS Sheets, M.S. Channels, Angle, Beam, Bars etc., used for repair and maintenance of Capital goods installed in the factory - Held that: - similar issue decided in the case of KISAN SAHKARI CHINI MILLS LTD. Versus COMMISSIONER OF C. EX. LUCKNOW [2013 (7) TMI 2 - CESTAT NEW DELHI], where it was held that the activity of repair and maintenance of plant and machinery is an activity which has direct nexus with manufacture of final products and the goods used in this activity would be eligible for Cenvat credit - these items were used in the factory for repair and maintenance of the capital goods, hence duty paid on these items are eligible to credit - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 148
CENVAT credit - H.R.S.Plates,H.R.S.S. Plate, H.R. Steel Sheets, H.R. Coils, etc., used for fabrication of support structure of capital goods installed in the factory - Held that: - similar issue decided in the case of M/s. Singhal Enterprises Private Limited Versus The Commissioner Customs & Central Excise, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit. Appellant should establish the said use by adducing evidences. In the result, the matter is remanded to the adjudicating authority to examine the claim of the appellant on the eligibility of credit on the aforesaid items and the Appellants are free to adduce evidence including the certificate from a Chartered Engineer on its use - appeal allowed by way of remand.
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2017 (9) TMI 147
CENVAT credit - inputs - MS Channels, MS Plate, MS Angle etc. used the same for repair and maintenance of the capital goods installed in the factory - Held that: - This issue has been considered in the judgements of the cases of Kisan Sahkari Chini Mills Ltd. Vs. Commissioner of Central Excise, Lucknow [2013 (7) TMI 2 - CESTAT NEW DELHI], where it was held that the activity of repair and maintenance of plant and machinery is an activity which has direct nexus with manufacture of final products and the goods used in this activity would be eligible for Cenvat credit - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 146
Whether the differential amount i.e. ₹ 8,17,408/- availed as excess credit on the imported inputs in discharging the transaction value cleared as such as confirmed in the orders are correct or otherwise and also whether imposition of penalty in the facts and circumstances of the case is justified or otherwise? Held that: - substantial evidence could not be placed to establish that the correct amount should have been ₹ 6,6,419/- instead of ₹ 8,17,408/-, demand upheld - penalty is unwarranted inasmuch as the appellant had cleared the imported inputs as such on payment of duty on the transaction value and disclosed in their monthly return, meticulously, and also keeping in view of the fact that the appellant is willing to discharge the differential credit along with interest - appeal allowed - decided partly in favor of appellant.
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2017 (9) TMI 145
CENVAT credit - capital goods - TMT Bars, Angles, Channel, HR Coils, CTD Bar and other items used in fabrication of structures for support of Capital goods - Held that: - issue is covered by the decision in the case of Singhal Enterprises Pvt. Ltd Vs CCE&C, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 144
CENVAT credit - capital goods - SS Plates, MS Billets and Joists etc., used in the factory with various capital goods - Held that: - From the use of aforesaid items with the capital goods/ various machineries viz., Rolling Mills, Kiln and Conveyor System, in the factory premises, it cannot be denied that the same are used as accessory/components of the main machines - in view of Clause (iii) of the definition of Capital Goods prescribed at Rule 2(a) of CCR, 2004, these items are eligible to credit - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 143
CENVAT credit - capital goods/inputs - HR Coils, CR/SS Sheets, MS Channel/Angles etc., which were used in the fabrication of Capital Goods - Held that: - the issue is covered by the decision of Principal Bench at Delhi in Singhal Enterprises Ltd case [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit - credit allowed - appeal dismissed - decided against Revenue.
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2017 (9) TMI 142
CENVAT credit - M.S. Channels, M.S. Angles, M.S. Plates, M. S. beam, and M.S. Sheets, TMT & CTD, Angles, FRP Sheets used for fabrication of capital goods - Held that: - issue is covered by the decision in the case of M/s. Singhal Enterprises Private Limited Versus The Commissioner Customs & Central Excise, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (9) TMI 141
CENVAT credit - Input Service - GTA Service (Inward and Outward freight) - CIPET Inspection Charges - Held that: - the admissibility of CENVAT Credit on GTA Service (outward freight) rests on the condition of sale - the present case is remanded to the Adjudicating authority for scrutiny of the necessary sales contract agreement, to ascertain the conditions of sale - matter on remand. CIPET Inspection Charges - Held that: - the case is covered by the decision in the case of Hon’ble Gujarat High Court in Cadila Healthcare Ltd case [2013 (1) TMI 304 - GUJARAT HIGH COURT], where it was held that services rendered by a technical inspection and certification agency fall under sub-clause (zzi) of clause (105) of section 65 of the Finance Act which is one of the clauses specified under sub-rule (5) of rule 6 of the Rules - credit allowed. Appeal allowed and part matter on remand.
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2017 (9) TMI 140
Classification of goods - Bio fertilizer (Shakti) - whether classified under CTH 380890 or under CTH 310100? - Held that: - As it is indicated in literature that it is a mixture of different micronutrients and auxin and cytokinins, it cannot be termed as a chemically defined element or compound as is required in Chapter Note 01 of Chapter 38 of Central Excise Tariff - the product is correctly classified under CTH 310100 - appeal dismissed - decided against Revenue.
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CST, VAT & Sales Tax
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2017 (9) TMI 133
Interpretation of statute - Reversal of Input tax credit u/s 19(2)(v) and 19(5)(c) of the TNVAT Act - with regard to the proposed reversal of input tax credit under Section 19(2)(v), the petitioner placed reliance upon the decision of this Court in the case of Everest Industries Limited v. State of Tamil Nadu and another [2017 (3) TMI 279 - MADRAS HIGH COURT] - Held that: - In the said decision, it has been held that a plain reading of the provisions of sub-sections (1) and (2) of Section 19 of the TNVAT Act would show that, as long as specified goods, which suffer tax are used for any of the purposes set out in clauses (i) to (vi) of sub-section (2) of Section 19, the dealer should be able to claim the input tax credit, with a caveat in so far as clause (v) is concerned encapsulated in the proviso to Section 19(2) of the TNVAT Act, and therefore, the limitation provided in the proviso would apply only vis-a-vis the purpose specified in clause (v) and not qua other purposes set out in clauses (i) to (iv) and (vi) of Section 19(2) of the TNVAT Act - the finding rendered by the respondent with regard to reversal under Section 19(2)(v), as made in the impugned order, has to be set aside. With regard to reversal under Section 19(5)(c), the petitioner has given factual explanation and their case is, immediately after manufacture, the value cannot be ascertained, as the market is fluctuating and only after the manufacture is completed, the value of the manufactured goods could be ascertained. But the petitioner has furnished all the other values. Further, the petitioner has also furnished the details of the closing stock value as on the relevant date item-wise and only the value that was not furnished is for the manufactured goods, which according to the petitioner could not be done immediately. This aspect has not been properly dealt with by the respondent while completing the assessment and the reason assigned for not considering the Stock-cum-Production Statement is not tenable. Therefore, the reversal made under Section 19(5)(c) also calls for interference. The matter is remitted to the respondent for fresh consideration who shall take note of the observations of this Court in the decision made in Everest Industries Limited's case (supra), apply the same to the petitioner's case and redo the assessment under Section 19(2)(v) and also under Section 19(5)(c) of the TNVAT Act - appeal allowed by way of remand.
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2017 (9) TMI 132
Classification of goods - Mileage Drinking Powder - Whether in the facts and circumstances of the case of Rajasthan Tax Board was justified in law in classifying “Mileage Drinking Powder” at general rate and not the rate of tax for the specific entry in which it falls? - the decision in the case of Asstt Commissioner Spl Circle-IV, Jaipur Versus M/s Cedilla Pharmaceuticals Ltd. And Asstt Commissioner, Commercial Tax, Circle-I, Rajasthan, Jaipur Versus M/s Cadbury India Ltd. [2017 (9) TMI 125 - RAJASTHAN HIGH COURT] contested, where it was held that the above products do not fall in entry 184/186 - Held that: - the decision in the above case upheld - SLP dismissed.
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2017 (9) TMI 131
Validity of assessment order - time limitation - Held that: - considering the fact that the plea of limitation is a technical plea and a legal plea and it could be raised at any stage of the proceedings and this Court also is entitled to look into the said plea, this Court is of the opinion that the petitioner should not be shut out without any remedy with regard to such plea, as the plea of limitation if found to be correct, will go to the root of the matter - the respondent shall examine the same on merits and in accordance with law and pass a speaking order after affording an opportunity of personal hearing to the petitioner - petition allowed by way of remand.
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2017 (9) TMI 130
Principles of Natural justice - input tax credit - movement of goods - Held that: - the respondent has disbelieved the lorry receipts which were produced by the petitioners and to that extent, the petitioners did not have an opportunity to contest the said finding by producing their evidence or cross-examining the parties whose cases were referred to by the Assessing Officer to disbelieve the receipts. In such circumstances, the respondent ought to have afforded an opportunity of personal hearing to the petitioners, before completing the assessment. Therefore, this Court is of the view that the assessment should be redone - petition allowed by way of remand.
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