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TMI Tax Updates - e-Newsletter
September 7, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Wealth tax
TMI SMS
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Speculation business - there is a vital difference between "creation" and "transfer" of shares - allotment of shares cannot be termed as purchase - the assessee cannot be said to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares. - HC
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The foreign party broadcasts the contents through its satellite and in lieu of such broadcasting, foreign party was paid various sums from time to time - The payment made by the assessee does not partake the character of royalty - HC
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Registration of the assessee society u/s 12AA(3) & (4) cancelled - allegations of the ld. Pr. CIT that the funds were siphoned off for the purpose other than the activities to achieve the objects of the assessee Society - Allegation not proved - cancellation of registration is not proper - AT
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Reopening of assessment - accommodation entries - AO has not applied his independent mind while recording the reasons in this case and, therefore, proceedings under section 147 of the Act initiated by way of issue of notice under section 148 of the Act are quashed - AT
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CIT may not agree with the view taken by the ld AO. Anyway, this does not make the order passed by the ld Assessing Officer unsustainable in law as on the issue of deductibility of advertisement and sales promotion expenditure, nothing was brought on record to show that any enduring benefit has resulted in favour of the assessee which makes it capital expenditure - AT
Customs
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Import of car for use by the company - The appellant chose the second route and have failed to produce necessary certificate to avail the benefit of said notification. In these circumstances, the import of car is in violation of import export policy. - confiscation is valid - AT
Service Tax
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Preparation of photo identify card cannot be considered to fall within the ambit of photography service as per ambit of Section 65(78) as well as Section 65(79) of the Finance Act, 1994 - AT
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Demand of duty – transportation of the goods from pit head to Railway siding within the mining area - tax discharged by service receiver under reverse charge mechanism is correct – demand of duty dismissed - AT
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CENVAT credit - Registration is mere technical formality to bring the taxpayer to the fold of law without curtailment of the right of the taxpayer to be subject to other provisions of law which grants benefit. - ENVAT credit is admissible to the extent verifiable from records - AT
Central Excise
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Whether under the facts and circumstances of the case, labelling and packing of ‘handmade Biri’ in printed plastic wrappers with the aid of power–operated machine to bring into existence ‘retail pack’, having brand name, meant for ultimate consumer, comes within the purview of the definition of ‘manufacture’ as defined in Section 2(f) of the Central Excise Act, 1944. - Held No - HC
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Valuation - Permissibility of various types of discounts when goods are cleared from the Depot after payment of duty from the factory gate - the place of removal is not the factory gate but the depot of the appellant - the discounts allowed in the price contracted for sale from the depot would be allowable as a deduction from such price - AT
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SSI Exemption - use of brand name of others - No effort has been made to investigate and ascertain the actual transaction value - In the absence of a thorough investigation going into the aspects of manufacture as well as the clearance of the goods, the demand cannot be upheld. - AT
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SSI exemption - two appellants are two units only on paper but in practice and as per ground realities, they are one business only, which is very much evident - not eligible for SSI exemption - AT
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Cenvat credit - structural items such as M.S. angles, M.S. Channels, CTD Bar, TMT Bar, etc. and welding electrodes - 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. - AT
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Valuation - includability - amount of royalty paid by customers in the assessable value of CD-ROMs manufactured - SCN is presumptive and hence, the same is not sustainable. - AT
Case Laws:
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Income Tax
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2016 (9) TMI 215
Royalty payment - whether the payments made by the assessee to the foreign company, Shin Satellite Company of Thailand, are in the nature of the royalty within the meaning of Article 12(3) of the DTTA between India and Thailand? - Held that:- What is important is the permission to take the benefit of a copyright either in the film or in the television broadcasting. In case, the assessee had paid any amount in consideration of exploitation of any copyright of the foreign party, the payment in that case would have taken the character of royalty. But payment was made because the television programmes produced by the assessee were digitally broadcast through the satellite of the foreign party. The foreign party appears to be in the business of broadcasting television programmes through its satellite. The assessee who is a producer of the tele-programmes provides the contents in the form of tapes. The foreign party broadcasts the contents through its satellite and in lieu of such broadcasting, foreign party was paid various sums from time to time. We are, as such, unable to agree with Mr.Agarwal that the payment made by the assessee partakes the character of royalty. - Decided in favour of assessee
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2016 (9) TMI 214
Speculation business - Getting the shares by allotment on application in Public Issue is purchase within the meaning of the word `purchase' under Explanation to Section 73 - Tribunal held that the sale of such shares becomes the speculation business under the said Explanation - Held that:- Allotment of shares by way of application in Public Issue has been held in Khoday Distilleries Ltd. Versus Commissioner of Income Tax and Anr. [2008 (11) TMI 16 - SUPREME COURT] under the Gift Tax Act which is a direct tax not amounting to be a transaction. Thus, the Apex Court has held that the same shall not amount to be purchase. The Tribunal has wrongly relied upon the decision of the Apex Court in the case of T.N. Arvinda Reddy (1979 (10) TMI 1 - SUPREME Court) which has nothing to do with the point at issue. As held in the decision in the case of Khoday Distilleries (supra) there is a vital difference between "creation" and "transfer" of shares. As stated hereinabove, the words "allotment of shares" have been used to indicate the creation of shares by appropriation out of the unappropriated share capital to a particular person. We are of the view that whichever rule of interpretation is followed, whether literal or object wise or purposive, the transactions of the assessee cannot imaginably be deemed to be a speculative business. Therefore the first question is answered in favour of assessee and against the revenue. When we have come to the conclusion that the allotment of shares cannot be termed as purchase, then the assessee cannot be said to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares. Thus it shall not be covered under Explanation to Section 73 and therefore the second question is also answered in favour of assessee.
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2016 (9) TMI 213
Registration of the assessee society u/s 12AA(3) & (4) cancelled - allegations of the ld. Pr. CIT that the funds were siphoned off for the purpose other than the activities to achieve the objects of the assessee Society - Held that:- No verification was made from the students to substantiate that laptops/computers claimed to be distributed amongst the students were not given to them and even the recovery from the students towards the cost of the said laptops/computers has not been doubted. In the present case, the trustee of the assessee Society namely Sh. Sanjay Bansal surrendered the undisclosed income detected during the course of search in his individual capacity which has been accepted by the department, in view of the above it cannot be said that funds of the assessee society were used for non-charitable purposes. In the instant case, there is no denial by the various concerns from which the assessee made the purchases for the building material or computers or laptops etc. Therefore, the allegations of the ld. Pr. CIT that the funds were siphoned off for the purpose other than the activities to achieve the objects of the assessee Society are not sustainable. In the present case nothing is brought on record to substantiate that the assessee was not running the educational institutions for imparting the education which is a charitable activity. In the present case, it is an admitted fact that the assessee had been granted registration u/s 12A of the Act, since the assessee Society is engaged in running of educational institution and it is not brought on record at any stage that the assessee was not engaged in educational activity through various educational institution established by it and if the ld. Pr. CIT or the AO was not satisfied for various expenses incurred by the assessee than proper action would have been taken u/s 11 or 13 of the Act. A search was conducted at the assessee’s premises, however, no evidence of receipt of donation or capitation fee was found during the search and the presumption u/s 292C of the Act were rebutted by denial of the assessee that the purchases of the material for construction of the building and computers/laptops for distribution amongst the students were made through some of associated concerns of the trustees at the reasonable rate which were even lower than the market rate. The Banks granted the term loans to the assessee trust for the construction of building and purchase of the computers/laptops after proper verification. The assessee also repaid the term loan by making the payments of the installment and no finding has been recorded by the ld. Pr. CIT that the activities of the assessee trust were not genuine or not being carried out in accordance with the objects of the assessee trust. Therefore, the ld. Pr. CIT was not justified in cancelling the registration already granted u/s 12A of the Act, by invoking the provisions of Section 12AA of the Act. - Decided in favour of assessee
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2016 (9) TMI 212
Reopening of assessment - investigation by Directorate of Income Tax (Investigation), New Delhi - accommodation entries provided - Held that:- Directorate of Income Tax (Investigation), New Delhi, has carried out enquiries in respect of the persons/companies engaged in the business of providing accommodation entries to various companies and these persons used to issue cheques in lieu of cash received after deducting their commission and the cheques were generally issued as share application money/unsecured loan. This was a general description of the modus operandi of accommodation entry but the Assessing Officer nowhere mentioned in the reasons recorded as what was stated by those entry operators in respect of the assessee. We find that even in the assessment order also the Assessing Officer has not given details what was stated by the so-called entry operators in respect of the entries related to the assessee. It was submitted by the assessee that no opportunity to cross-examine the entry operators was provided by the Assessing Officer. Further, from the table of the accommodations entries, which the assessee is said to have received, reproduced in the assessment order, we find that there are five instances, where the entries have been repeated. Assessing Officer has not applied his independent mind while recording the reasons in this case and, therefore, proceedings under section 147 of the Act initiated by way of issue of notice under section 148 of the Act are quashed.
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2016 (9) TMI 211
Revision iu/s 263 - allowance of advertisement and publicity expenditure - Held that:- As decided in CIT V Vodaphone Essar South Limited [] CIT Could not chose to follow route of section 263 of the act to treat an expenditure as capital expenditure when ld AO has allowed these expenditure as revenue expenditure after due inquiry. Further, the assessee has stated that expenditure on publicity and advertisement is to be treated as revenue in nature and is allowable fully in the year in which it is incurred. The above proposition is also supported by several judicial pronouncements. Therefore, the view taken by the Assessing Officer in allowing this expenditure cannot be said unsustainable in law. In view of the above facts and also the decision of Honourable jurisdictional high court, we hold that order of the ld AO is not erroneous on this count. Therefore, when there is no element of un-sustainability in the order of the ld Assessing Officer in allowing the deduction of advertisement and sales promotion expenditure, we are of the view that ld CIT is no justified in invoking jurisdiction u/s 263 of the Act on this count. CSR expenditure - Held that:- CSR activities of the assessee cannot be held to be disallowable. It was not shown before us that the view taken by the Assessing Officer is erroneous in allowing these expenditures. In view of above discussion it is apparent that the order of ld AO is not unsustainable in law, there are judicial precedents where in such claim is allowable in case of assessee, Therefore, and on this count the jurisdiction invoked by ld CIT u/s 263 of the Act is not sustainable. CIT may not agree with the view taken by the ld AO. Anyway, this does not make the order passed by the ld Assessing Officer unsustainable in law as on the issue of deductibility of advertisement and sales promotion expenditure, nothing was brought on record to show that any enduring benefit has resulted in favour of the assessee which makes it capital expenditure and further no contrary decision was pointed out which suggests that CSR expenditure are not deductible u/s 371(1) for the respective assessment year. - Decided in favour of assessee
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2016 (9) TMI 210
Entitled to the deduction u/s 80-IB in respect of Unit No.II - Held that:- Merely because the relief granted for a previous assessment year is not withdrawn, it does not follow that the assessee is entitled to the relief for the subsequent years even if during the subsequent years the assessee fails to comply with the provisions of Section 80-IB or a condition precedent to a claim for deduction under Section 80-IB ceases to exist in the subsequent years for any reason. The mere fact that there is no power connection in Unit-II would make no difference. That by itself would not disentitle the assessees to the deduction. It is important to note that there is no suggestion, much less a finding, that Unit-II used the power supplied to Unit-I. Had that been even suggested, the assessee could have met the case. In fact, the assessee’s case before us was that both the units were using generators. It is important to note in this regard that while dealing with the point that arises under the second question of law framed by us, it was noted by the Tribunal that the assessee had explained that the manufacturing process required uninterrupted regulated electric power supply and that, therefore, the assessee had not availed of any regular power connection but was entirely dependent on the power supplied by its own generator. The assessee also explained that the prices of the diesel had increased. The attention of the Tribunal was also invited to the paper books wherein an analysis of the factors reflecting upon the GP rates were mentioned. For administrative convenience, it is understandable that the assessees would maintain the same bank account in respect of both the units. The section does not make it mandatory to maintain separate bank accounts. For the same reason, the assessee cannot be denied a deduction merely because the telephone numbers are common. There is no reason for the assessees to have separate telephone connections in respect of each unit, if they can otherwise function with common telephone numbers. The section does not require the same either. The Assessing Officer also disallowed the deduction on the ground that the workers/employees were common in respect of Unit-I and Unit-II and that there was no demarcation of employees/workers as per the attendance register produced. As per Section 80-IB(2)(iv), where the industrial undertaking manufactures or produces articles or things, the section would apply if the undertaking inter alia employs ten or more workers in a manufacturing process carried on with the aid of power. The assessees, admittedly, carry on their activities with the aid of power. The Assessing Officer and the CIT(Appeals), however, denied the deduction in respect of the assessment years 2006-07 to 2009-10 only on the basis of the assessment order for the assessment year 2003-04. That could not be so on the force of Mr. Putney’s argument itself that each assessment year is to be considered separately. The assessee seeks the deduction. It would, therefore, have been for the assessee to produce evidence that the undertaking employs ten or more workers provided it was called for. The Assessing Officer did not seek any information regarding the number of workers employed by the assessee for these years. Mr. Kapoor infact stated that separate wage registers were not maintained only in the initial years but that, thereafter including for the assessment year 2006-07 onwards separate wage registers were maintained. It would be unfair then in any event to hold against the assessee with respect to the assessment year 2006-07 onwards on the basis of the finding for the assessment year 2003-04. The deduction, therefore, was wrongly denied on this ground for the assessment year 2006-07 onwards. - Decided in favour of assessee Trading addition - rejection of books of accounts - Held that: The Tribunal took into consideration various aspects including the assessee’s explanation for the fall in the GP rate. The assessee had explained, as is evident from the assessment order itself, that the fall in the GP rate was on account inter-alia of stiff competition from China. Sales bills of the respective years showing a fall in the prices of the assessee’s finished products were filed. Further it was also contended that there was an increase in proportionate generator expenses, manufacturing expenses and job work charges. A detailed summary of these expenses was furnished. Moreover the assessee also drew the attention of the authorities to the effect that they were maintaining an excise register for the excisable stock. These were undoubtedly relevant factors and the Tribunal cannot be faulted for having relied upon the same. The decision of the Tribunal relying upon the fact that there were no adverse findings by the Excise Authorities cannot be said to be absurd either. The Tribunal’s satisfaction was based on the material on record. The Tribunal’s finding that the GP rate as suggested by the assessee is plausible warrants no interference. This was essentially a question of fact and not a substantial question of law.
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2016 (9) TMI 209
Power of compounding of offences - Held that:- The power of compounding is exercisable when proceedings are pending. In the case on hand, the sentence imposed on the petitioner has been suspended by the Appellate Court and the appeal is still pending. Therefore, it has to be seen as to whether that conviction by the Criminal Court should be the only reason for rejecting the petitioner's application for compounding the offence. Clause 4.4 of the guidelines states that cases not to be compounded. It commences with a non obstante clause stating that notwithstanding anything contained in the guidelines, the category of cases mentioned in clauses (a) to (g) should normally not be compounded. Thus, the guidelines does not specifically place an embargo on the competent authority to consider the application for compounding merely on the ground when the assessee has been convicted by a court of law. The expression used in the guidelines "should normally not be compounded", as pointed out earlier Clause 4.4 commences with a non obstante Clause. Therefore, the competent authority is entitled to examine the merits of each matter and to take a decision as to whether the facts make out a case for compounding even in cases where there is a conviction by a Court of law. Thus the guidelines did not place any fetters on the power of the competent authority to examine cases for compounding. However, this cannot be an universal yardstick and these observations are made by this court considering the peculiar facts and circumstances of the case as pointed out earlier. The petitioner is a senior citizen aged more than 70 years, she has lost her husband and she lost her son and she is the sole proprietrix of the small firm dealing in Electrical and Electronic Appliances. Thus considering the overall factual position, the competent authority, namely, the Chief Commissioner, Income Tax Department, Chennai should consider the petitioners case taking note of the peculiar facts and take a decision on merits uninfluenced by any observations or findings rendered by the authorities on an application moved by the petitioner before the Hon'ble Finance Minister. The above direction shall be complied with within a reasonable time and the petitioner may be permitted to appear for personal hearing through her authorised representative as it appears that she is not very illiterate.
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2016 (9) TMI 208
Reopening of assessment - Held that:- The respondents cannot shy away from the fact that there was a full and true disclosure of all material facts necessary for assessment. This case will not fall under the category of mere production of books of accounts and other records. This case very clearly falls under the category of true and full disclosure, upon which the first assessment order was passed on the opinion that the lands sold were agricultural lands. Therefore, to say after 4 years that the lands were sold to a Real Estate Company for the purpose of forming a Special Economic Zone, would undoubtedly tantamount to a change of opinion, which is not permitted by law.
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2016 (9) TMI 207
Disallowance u/s 14A - Held that:- As assessee was having own funds which were more than the investment made and therefore, no disallowance under section 14A is sustainable in the eyes of law. - Decided in favour of assessee. Adhoc disallowance made by the AO in respect of 1/6th of expenses - Held that:- CIT(A) while recording his finding has pointed out that AO had made the disallowance without pointing out any specific defects in the books of accounts. Despite that he only allowed the claim of depreciation on vehicle and rest of the disallowance affirmed, which is not sustainable in the eyes of law and against the well settled law.- Decided in favour of assessee.
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2016 (9) TMI 206
Revision u/s 263 - exemption under section 54EC - Held that:- Commissioner in the present case has purported to act in exercise of power under section 263 on the ground that the order of the Assessing Officer in granting exemption under section 54EC to the extent of ₹ 1 crore is without any enquiry and therefore erroneous in so far as prejudicial to the interests of the Revenue. We notice that there are several judicial precedents on the issue of allowability of exemption to the extent of ₹ 50 lakhs each in one or more financial years under section 54EC of the Act. The action of the assessee in making investments of ₹ 50 lakhs each in two different financial years is therefore not out of sync with these judicial precedents. Hence, there is an apparent plausibility in the action of the Assessing Officer in accepting the claim of ₹ 1 crore under section 54EC. Thus, the action of the Assessing Officer in adopting a view expressed by the superior forum cannot be viewed as arbitrary or unreasonable. The issue involved is pre-dominantly legal in nature and does not require any factual enquiry. On objective consideration of the facts on record, it is difficult to hold that action of the Assessing Officer was erroneous per se and hostile to the interest of the Revenue. Thus, source of power to set-aside the assessment order is not traceable to section 263 of the Act. In view of upholding the exemption to the extent of ₹ 50 lakhs each invested in long term specified asset in two different financial years for the purposes of section 54EC and in the light of subsequent amendment carried in the Act, the action of the Assessing Officer is clearly plausible in law. Accordingly, no error can be inferred in the assessment order per se. Resultantly, we find merit in the plea of the assessee on this issue and hence the order of the Commissioner under section 263 dated 10.10.2014 is set-aside and quashed. - Decided in favour of assessee.
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2016 (9) TMI 205
Disallowance of interest payments and other general and administrative expenditure - disallowance as there is no business activity - Held that:- The factual matrix of the case supports the plea of the assessee that it is not a case of discontinuation or closure of business, but temporary lull in activity. During this period of lull or interregnum, the assessee is expected to continue maintenance of its business apparatus and for that purpose the expenses of general and administrative nature claimed by the assessee deserve to be allowed. In this context, we find that the ratio of the judgment of the Hon’ble Delhi High Court in the case of Anita Jain (2009 (1) TMI 774 - DELHI HIGH COURT ), which was relied upon by the assessee before us, supports the allowability of such expenditure. Therefore, on this count we allow the plea of the assessee. Insofar as the payment of interest is concerned, the dispute raised is similar to what was considered by the Tribunal in assessee’s own case for Assessment Year 1998-99. On this aspect, assessee had pointed out before the lower authorities that since the past investments have been made in stock-in-trade of shares and such investments were made out of funds available from Partners Capital and other loan funds, on such loan funds assessee had incurred interest expenditure which has been disallowed. In Assessment Year 1998-99 similar claim for deduction of interest expenditure was disallowed by the Assessing Officer, which was allowed by the Tribunal. Following the said precedent, in the present year also, such a claim of the assessee deserves to be allowed. In fact, in Assessment Year 2002-03, as also in Assessment Years 2007-08 and 2008-09, interest expenditure incurred by the assessee has been allowed. Therefore, considering the aforesaid precedents, we find no reason to deny assessee’s claim for deduction on account of interest expenditure in the instant year.
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2016 (9) TMI 204
Default on the part of the assessee to collect tax - licensee on the income from parking lots - Held that:- It is apparent that only one month time was granted to the assessee to furnish the relevant details and evidence to show that the licensees have paid the tax on the income from parking lots. It is pertinent to note that except one year i.e. A.Y. 2012-13, all other five assessment years are past period and since the earlier year licensee at relevant point of time might have left and discontinued to operate the parking lots therefore, it was very difficult for the assessee to collect the information and evidence from those licensees within such short period allowed by the Assessing Officer. Having regard to the facts and circumstances of the case, where relevant details of the payment of tax by the licensee pertains to the earlier five years, we are of the view that the assessee was not given sufficient time to do the needful. Accordingly, in the interest of justice we set aside the impugned orders of the authorities below and direct the Assessing Officer to give one more opportunity to the assessee to furnish the relevant details and evidence of payment of tax by the licensee and thereafter reconsider the matter afresh.
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2016 (9) TMI 203
Deduction u/s 80IC - Held that:- As for the year under consideration the assessee is eligible for claim of deduction under section 80IC of the Act at the rate of 100% in view of substantial expansion made in assessment year 2008-09.
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2016 (9) TMI 202
Penalty u/s 271(1)(c) - exemption from the capital gain claimed - compensation received against tenancy rights - Held that:- The assessee has disclosed all particulars of income in respect of the claim of exemption from the capital gain as well as income from interest on FDR and the expenses claimed against their on and no particulars filed has been found to be incorrect or inaccurate by the authorities below. Further, the assessee has offered explanation as why it claimed exemption from the capital gain, under bona fide belief that the alternative land would be allotted to the assessee and the amount of compensation would be utilized against that within the time prescribed. This explanation has been not found to be false by the authorities below. Further, the assessee has proved that the explanation is bonafide and all the facts relating to same and material to the computation of total income, have been disclosed by the assessee. In such circumstances the Explanation-I to section 271(1)(c) of the Act is also not attracted in the case of assessee. - Decided in favour of assessee
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2016 (9) TMI 201
Clam of non-taxability of the reimbursement of service tax in computing income u/s 44BB of the Act denied - Held that:- Service tax received by the assessee cannot be included in the gross receipt for the purpose of computation of deemed profit. Consequently, this ground is determined in favour of the assessee. Reimbursement of loss of equipment in the well - whether includible in the gross revenue received from M/s. ONGC Limited for the purpose of computation of profits under the presumptive provisions of section 44BB? - Held that:- This issue has already been decided against the assessee in assessee’s own case cited as ACIT vs. Pride Foramer France SAS [2008 (2) TMI 465 - ITAT DELHI-G ] qua AY 2002-03 wherein it is categorically decided that reimbursement of the loss of equipment in hole/well forms the part of gross receipts and as such falls within the presumptive provisions of section 44BB of the Act for the purpose of computation of profit. So, consequently ground no.1 is determined in favour of the revenue. Deducution u/s 44BB computation - inclusion of amount received by the assessee on account of “Communication Immersat Charges” - Held that:- This issue has already been decided in assessee’s own case [2008 (2) TMI 465 - ITAT DELHI-G ] qua AY 2002-03 and as such, we hold that reimbursement of Communication Immersat Charges are not in the nature of reimbursement and as such are not liable to be taxed under the provisions contained u/s 44BB of the Act. Eligible for benefit of section 44BB of the Act - Whether assessee is entitled to treat the payment received by the assessee from leasing of oil drilling rig as royalty? - Held that:- As relying on assessee's own case for AY 2008-09 grounds raised by the revenue by way of present appeal are not sustainable and the findings returned by the DRP directing the AO to apply the deemed profit rate of 10% u/s 44BB of the Act on the revenue earned by the assessee from a nonresident company, M/s Pride Foramer on account of provision of offshore drilling rig on hire for executing contracts with M/s. ONGC; and treating the amount received by the assessee from M/s. Pride Foramer on account of the provisions of drilling rig under Charter Agreement not in the nature of royalty as defined u/s 9(1)(vi) of the Act and not taxable under the provisions contained u/s 44DA read with section 115A of the Act and that DRP has rightly not applied the distinct scheme of taxation of royalty/fee for technical services while entering the provisions contained u/s 44BB / 44DA / 115A, hence appeal filed by the revenue is hereby dismissed.
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2016 (9) TMI 200
Reopening of assessment - addition u/s 41 - Held that:- From the copy of notice u/s 154 of the Act available it is amply clear that the A.O on 31.3.2010, issued notice to the assessee showing his intention to convert head of income from business income to income from other sources pertaining to impugned amount of ₹ 15 lakhs comprising loans written off of Pearl Global Limited and the assessee had also filed reply on 20.4.2010 explaining that the loan was given for business consideration and the amount written off was treated as profit u/s 41(1) of the Act. Therefore, in the original assessment order, the A.O rightly treated the same as business income and consequently it was adjusted against brought forward business losses. In view of the above, we are satisfied that the A.O initiated reassessment proceedings beyond four years passed on erroneous facts that the impugned amount had already been offered for tax by the assessee as business income whereas the A.O noted that income to the tune of ₹ 50 lakhs has escaped assessment. We may also point out that the main dispute was regarding charging of the said amount as in the original assessment proceedings the A.O taxed the same as business income whereas in the reassessment proceedings the A.O has shown his intention to tax the same as income from other sources and we may also point out that the rectification proceedings u/s 154 of the Act initiated by the A.O earlier were dropped after considering the reply of the assessee. Therefore, we decline to accept the allegation of the A.O that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Therefore, initiation of reassessment proceedings and issuance of notice u/s 147/148 of the Act cannot be held as sustainable and valid and we have not hesitation to hold that the same was not a valid assessment of jurisdiction and it was bad in law and not sustainable and consequently, legal Ground is allowed in favour of assessee.
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2016 (9) TMI 199
Treatment to rental income - “Business Income” OR “Income from House Property” - Held that:- As decided in assessee's own case we are of the view that Ld. CIT(A) has rightly held that the rental income should be assessed as Income from House Property. Therefore, AO is not justified in treating the above income as business income and CIT was rightly directed to allow deductions claimed by the appellant u/s. 24. - Decided against revenue
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2016 (9) TMI 198
Assessment u/s 153A - addition on account of sale of scrap and on account of disallowance u/s 14A - Held that:- No incriminating material has been found during the course of search relating to the assessee for A.Y. 2008-09 to justify additions made by the AO on account of sale of scrap and on account of disallowance u/s 14A r.w.r 8D and that too, that the assessment order based on the original return filed u/s 139 of the Act has not been pending and the same has been completed on the date of the search. Therefore, assessment framed u/s 153A r.w.s 143(3) of the Act for ay 2008-09 is not valid and we hold the same as null and void. Grant deduction u/s 80IB - amount received from sale of scrap - Held that:- In the present case, undisputedly the impugned amount received by the assessee has been derived from sale of scrap generated from the activities carried out by the assessee which are part and parcel of the manufacturing process of industrial undertaking and scrap was general from carrying out the said activities has been sold. Thus, in view of the above noted factum, the issue is squarely covered in favour of the assessee by the said decision of the Hon’ble Jurisdictional High Court in the case of CIT Vs. Sadhu Forging Ltd [2011 (6) TMI 9 - DELHI HIGH COURT ]
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2016 (9) TMI 197
Penalty u/s 271(1)(c) - penalty proceedings on the legal representative - penalty order passed against a dead person - Held that:- The revenue has not controverted the fact that the notice for initiation of penalty proceedings was issued after the death of Shri Vinod Kumar Agarwal. It is also not rebutted that the penalty order was passed in the name of Shri Vinod Kumar Agarwal on 27.04.2011 when Shri Vinod Kumar Agarwal had already expired on 24.05.2010. The order of Coordinate Bench of ITAT Jaipur relied by the assessee in the case of Shri Kishan Agarwal vs. DCIT [2016 (6) TMI 799 - ITAT JAIPUR] is squarely applicable in the case of the assessee, wherein it has been held that the decision of Mumbai ITAT Bench in the case of Bhagwansingh Shriramsingh L/H Dinesh Bhagwan Singh vs. ITO (2006 (5) TMI 270 - ITAT MUMBAI ) is squarely applicable as any sum referred in section 159(1) does not include the penalty proceedings on the legal representative u/s 159(2) of the Act. Therefore, penalty imposed on legal heir is not justified. Accordingly, we reverse the order of the ld. CIT (Appeals). - Decided against revenue
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2016 (9) TMI 196
Transfer pricing adjustment - selection of comparable - Held that:- Direction to the Assessing Officer (‘AO’) to include certain companies for consideration of the Transfer Pricing Officer (‘TPO’) as a comparable while excluding certain other companies which were considered by the TPO stands covered by decision in assessee's own case for AYs 2004-05 and 2005-06. Adjustment for interest no receivables - Held that:- The Court finds that the ITAT has returned a detailed finding of fact that the Assessee is a debt free company and the question of receiving any interest on receivables did not arise. Consequently, no substantial question of law arises for consideration as far as this issue is concerned.
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Customs
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2016 (9) TMI 223
Demand alongwith interest - Section 28(2) of the Customs Act, 1962 - clearance of consignment as project contract, but failure to produce the required documents as per section 7 of the Project Import Regulations, 1986 for finalisation of the project - goods were bonded in the warehouse and a Bank Guarantee was given by the petitioner - goods having not been cleared within the statutory period, the Customs Authorities have brought the goods for sale and the sale was completed and taken delivery by the bidder. Held that:- an interim order was granted on the ground that the petitioner had furnished a Bank Guarantee covering the entire amount. However, it was subsequently, brought to the notice of the Court by the third respondent that the petitioner's Bank Guarantee dated 06.07.1990 was valid only upto 26.01.1991 and the same stand cancelled on 28.01.1993. Thus, the respondent Department cannot make a claim against the third respondent Bank and this observation would protect the interest of the third respondent Bank. Therefore, this Court is inclined to issue appropriate directions to the second respondent to take note of the subsequent events, the fact that the goods in question were sold and the sale proceeds have been remitted to the Customs Department, for which purpose the order passed by the second respondent requires to be set aside. - Matter remanded back
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2016 (9) TMI 222
Validity of the demand for the period prior to the deletion of Rule 6-C of the Rules, 1989 - deletion of rule of Section 6-C to the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989 - Notification dated 20th May, 2002, published in Orissa Gazette on 6th July, 2002 - Held that: - the actual repeal of Rule 6-C of the Rules, 1989 did take place vide Notification dated 30.05.2002 but, much prior thereto i.e. 31.03.2001, the State Government had created a State monopoly of wholesale trade for distribution of foreign liquors i.e. OSBC. Since no demand of the alleged shortfall of MGQ had ever been raised prior to 30th May, 2002, the date of which the State of Orissa deleted Rule 6-C from the Rules, 1989 and first time the demand was raised only on 27th December, 2002 effectively much after the date of repeal/deletion - Demand after the date of deletion not justified - demand of the alleged shortfall of MGQ dated 27th December, 2002 quashed.
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2016 (9) TMI 221
Challenge to conviction and sentence order passed by the courts below under Section 135(1)(i) of the Customs Act, 1962 - import of 560.32 gram of gold from abroad without remitting the duty and filing false declaration - petitioner submitted that the market value fixed by the Department was not in accordance with the then existing market value - Held that:- it is revealed from the records that the gold found in possession of the revision petitioner was having a purity ranging from 99.78% to 78.90%. The market value of the gold would, no doubt, vary with the purity of the gold. What was the yardstick taken by PW1 to ascertain the market value of the gold involved in this case is not revealed from the evidence on record. Apart from the oral evidence of PW1, there is absolutely no material before the court to prove the market value of the gold involved in this case. Therefore, I am of the view that it is only just and proper to grant an opportunity to both sides to adduce evidence regarding the market value of the gold involved in this case during the relevant period. For the said reason, I am inclined to set aside the conviction and sentence passed by the appellate court under Sec. 135(1)(i) of the Customs Act and remit the matter to the appellate court. - Appeal allowed by way of remand
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2016 (9) TMI 220
Demand of interest - Section 28 AA of the Customs Act, 1962 – manufacture of railway wagons and parts thereof – import of goods falling under CTH 8607 of the Customs Tariff from USA – payment of duty made under section 28 of the finance act, 1962 – Held that: - once the appellant has paid the amount under section 28, the payment of interest is automatic. Section 28AA of the Customs Act, 1962 mandates the appellant to pay interest. Period for which interest required to be paid – interest payable from the date when DRI pointed out the applicable rate of interest or from the first date of the month succeeding the month in which duty was expected to be paid by the appellant? – Held that: - Section 28AA (2) of the Customs Act, 1962 mandates the appellant to pay interest from the first date of the month succeeding the month in which duty was expected to be paid by the appellant. This is held in view of the statutory mandate provided under Section 28 AA(2) of the Customs Act, 1962, substituted w.e.f. 18.04.2011 under Section 43 of the Finance Act, 2011 – appeal rejected – decided against appellant.
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2016 (9) TMI 219
Demand of amount availed as drawback - Fraudulent claim of drawback – mis-delaration of goods – goods shipped to non-existent consignees – Held that:- Under the drawback provision it is not provided that the demand of drawback can be made jointly from various persons. Therefore in our view it is necessary for the adjudicating authority to decide who is actually liable for return of drawback availed. If at all the drawback is recoverable from various persons in such case the adjudicating authority must specify the amount of drawback to be recovered from each individual – matter remanded back to original authority for fresh adjudication of person responsible and the amount of drawback – appeal disposed off – decide in favor of appellant.
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2016 (9) TMI 218
Rectification of mistake – quantification of demand – non-fulfillment of export obligation – demand of tax – Held that: - there is an apparent error in mentioning the total duty foregone ₹ 23,86,928/- in notice dt. 23.8.2002 which should be ₹ 13,58,935/-. Accordingly the correct balance duty recoverable should be ₹ 12,23,041/- whereas incorrect amount of ₹ 22,51,034/- was proposed in the same was confirmed in the original order which appears to be incorrect and the same needs reconsideration – matter remanded for re-quantification of the demand of duty and interest and also for appropriation of the duty already paid by the appellant after verification thereof - opportunity of personal hearing to be provided to the appellant. Demand of interest – interest chargeable on the amount for which the Bank Guarantee was lying with the department – Held that: - in case of non-fulfillment of export obligation it is the appellant who was supposed to discharge the duty. It is also fact that the Bank Guarantee amount was not encashed by the department. The duty amount was not paid to the Government Exchequer - the interest chargeable on the entire amount of duty stand unpaid from the due date till the date of payment – no relief from the payment of interest. Period of limitation – section 28 of the Customs Act, 1962 - Held that: - the goods were imported under EPCG Scheme for which the appellant executed the bond with bank guarantee, whereunder it was undertaken to fulfill the export obligation which is to be discharged in next five years from the import of the capital goods. Therefore, till the validity of the bond the demand does not get time barred as the obligation is continuous till it is fulfilled or as the case may be till the bond is alive – section 28 does not apply – demand not hit by limitation. Appeal allowed – matter remanded.
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2016 (9) TMI 217
Confiscation in lieu of redemption fine - Import of car for use by the company - appellant failed to satisfy the conditions of the Notification No.4/97-2002 dated 31/03/2001 - car provisionally released on ITC Bond - Held that:- it is found that the import of car is restricted. Anyone wishing to import a car has alternate route. The first route is to obtain a licence from the ministry of commerce and the 2nd route is to fulfill the conditions of Notification No.4/97-02. The appellant chose the second route and have failed to produce necessary certificate to avail the benefit of said notification. In these circumstances, the import of car is in violation of import export policy. Therefore, the impugned order rightly confiscated the car and imposed penalty. - Decided against the appellant
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Corporate Laws
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2016 (9) TMI 216
IPO - failure to disclose items which amounted to material information and ought to have been disclosed in the offer documents - Held that:- Appellant has partially failed to ensure proper disclosure of material information which was required for the investors in order to enable them to take an informed decision to invest or not to invest in the IPO in question. However, there are certain facts which remain undisputed. One, that there is no connivance or connection for that matter which has been established between the Appellant itself and entities further down in the line of transfer which eventually purchased the Appellant’s shares and dealt in its scrip once it was listed on the stock exchange. There is no commonality of directors, or registered addresses or any other incidents which can lead to such an inference that the Appellant was involved in the transfer of funds to certain such entities which, inter-alia, bought the Appellant’s share in the IPO. Further, invoices and other documents have been produced by the Appellant for the purchase of raw materials and equipments required to run the business, and their validity is not in question. It is pertinently noted that most of the money which the Respondent alleges to have been transferred has been returned to the Appellant. The Respondent has fairly submitted that the Auditor appointed by SEBI itself has in its report dated January 25, 2016 noted that an amount of ₹ 80 crore has been successfully recalled by the Appellant and the Respondent has scrutinized the utilization thereof. It is also a fact that the Appellant has already recalled moneys recoverable owing to ICDs, cancelled contracts pertaining to land purchase, except an amount of ₹ 3.77 crore as explicated hereinabove with respect to which the Appellant has initiated the winding up of the company called Supreme. It shows the respect for and earnest desire of the Appellant to abide by SEBI’s regulatory directions. Further, it remains undisputed that ICDs which were given out of the IPO Proceeds to the tune of ₹ 32 crore given as ICDs to Saptrishi, Raw Gold and Wattkins. Today, however, this amount of ₹ 32 crore has been received by the Appellant, albeit with certain amount of delay. It is also to be noted that minutes of the annual general meeting held on September 12, 2012, attached as Exhibit F2 of the Appeal clarify that unequivocal permission was granted to the Board of the Appellant, as per Section 61 of the Companies Act, 1956, to alter the utilization of the IPO Proceeds and to use the proceeds as the directors deemed fit. Therefore, looking into the totality of the facts and circumstances of the case in hand, the Respondent should not have imposed the punishments of debarment from the market for a long period of one decade. Given that, some of the Respondent’s allegations levelled in the Impugned Order, and particularly dealt with in this order in paragraphs no. 40, 45, and 50 cannot be sustained in law or on fact as elucidated, this Tribunal is of the opinion that in order to meet the ends of justice the period of debarment from the securities market of ten years imposed upon the Appellant should be reduced to seven years as the Appellant has already suffered by remaining out of the market for a period of more than four and half years by now. Ordered accordingly. As far as the money lying in the escrow account is concerned, the Appellant shall be at liberty to use for the objects of the IPO as per law.
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Service Tax
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2016 (9) TMI 242
CENVAT credit – input service – GTA service – place of removal - Section 4(3)(c) of Central Excise Act, 1944 – input service - Rule 2(l)(ii) of Cenvat Credit Rules, 2004 - credit of service tax on the outward transportation is admissible up to the place of removal, from where the sale of goods took place – Held that: - When the ownership of the goods was passed over to the buyer only after the sale had been made and it is over / completed at the depot; then the place of removal in terms of definition of input service given in Rule 2(l) of CCR, 2004 would be depot of the appellant only. The sale of appellant took place from the depot only . Further, the appellant has included the outward freight charges in the value of the goods being sold to their buyers for the purpose of payment of duty of Central Excise – appellant entitled to CENVAT credit – appeal allowed – decided in favor of appellant.
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2016 (9) TMI 241
Demand of duty – transportation of the goods from pit head to Railway siding within the mining area - classification of services – GTA service – cargo handling services – reverse charge mechanism – Held that: - the decision followed as held in the case Arjuna Carriers P Vt. Ltd. vs. CCE & ST, Raipur vide Final Order No. 54920/2014-Cu(DB) dated 20.11.2014. the appellant’s activity would fall under GTA service – tax discharged by service receiver under reverse charge mechanism is correct – demand of duty dismissed – appeal allowed – decided in favor of appellant.
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2016 (9) TMI 240
Imposition of penalties - Valuation – mandap-keeper services – catering services – suppression of assessable value and short payment of service tax – payment of short paid tax with interest on demand – bonafide belief – section 80 of the Finance Act, 1994 – Held that: - the definition of ‘mandap-keeper’ was amended in 2007 to include social functions which included marriage and religious functions, the appellant could have entertained a bona fide belief that marriage is a religious function, and thus erred in payment of tax. Also, the tax liability was not contested by the appellant, and was duly paid with interest when demanded – no malafide intention to evade tax – section 80 applies – penalty not imposed – demand of tax with interest upheld – appeal disposed off – decided partly in favor of appellant.
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2016 (9) TMI 239
Demand of interest - Section 75 of the Finance Act, 1994 - construction service in respect of commercial or industrial building or civil structures – discharge of service tax when demanded as ascertained by himself – failure to pay interest on demand – SCN for the demand of interest – Held that: - provisions of Section 75 would apply even in the case wherein an assessee deposits service tax liability on his own ascertainment and there is no need to issue any show cause notice to an assessee for the demand of the interest as in the case in hand - the appellant himself should have calculated and paid the interest on service tax amount, ascertained by him. Imposition of penalties - Section 77(2) and Section 76 of the Finance Act, 1994 – Held that: - the first appellate authority has already extended the possible relief under the law to the appellant by reducing the penalty imposable under section 76. No further relief granted – penalty imposed under section 77(2) of the Finance Act, 1994.
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2016 (9) TMI 238
Levy of penalty - delay in payment of service tax - Business auxiliary services – supervision of the loading work of coal into wagon as per contract with various Electricity Boards – waiver of penalty section 80 of the Finance Act, 1994 – Held that: - there is no delay in discharging service tax liability on being pointed out and justifiable reason as to non-receipt of payments from the State Electricity Board is given. The appellant carried a bonafide belief that these services would not be covered under ‘business auxiliary service’, thus invocation of section 80 justified - lower authorities should not have issued the show cause notice to the appellant for the demand of the service tax and appropriation thereof and for imposition of penalties. Provisions of Section 73(3) of the Finance Act, 1994 applies – demand of tax and interest justified – imposition of penalties set aside – appeal allowed – decided partly in favor of appellant.
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2016 (9) TMI 237
Demand of credit availed with interest – imposition of penalty - Denial of CENVAT credit – GTA service – handling of export cargo – Held that: - the issue has been covered in the case Panchmahal Steel Ltd v. Commissioner of Central Excise & Service Tax, Vadodara [2014 (4) TMI 490 - CESTAT AHMEDABAD]. It has been decided that service tax credit of the GTA services was for movement of export cargo, being input services, allowing CENVAT credit on the same. Auctioneer service – export survey - survey of export cargo services used for setting up of container freight station – barred by limitation – Held that: - appellant had always indicated in their ST-3 returns, the availment of CENVAT credit and they acted bonafidely on an understanding that all the services were utilised in connection with the output services rendered by them which is ‘cargo handling services’, ‘storage and warehousing services’ – credit allowed. Setting up of new CSF outside the registered premises – retainership – consultancy - architect - soil investigation services – Held that: - the issue has been decided in the case of Sai Samhita Storages [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT] where the decision taken is in favor of appellant – credit allowed – appeal disposed off – decided in favor of appellant.
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2016 (9) TMI 236
CENVAT credit – registration of parties under service tax – Held that: - Registration is mere technical formality to bring the taxpayer to the fold of law without curtailment of the right of the taxpayer to be subject to other provisions of law which grants benefit. The input services have been utilized by the appellant in providing output service and in absence of any contrary finding, there cannot be denial of CENVAT credit of the service tax paid on input service – CENVAT credit is admissible to the extent verifiable from records – appeal allowed – decided partly in favor of appellant.
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2016 (9) TMI 235
Activity of preparation of identity cards for the primary school students – is service tax payable on photo printing cost only or on full cost of preparation of identity cards? - photography service - Section 65(78) as well as Section 65(79) of the Finance Act, 1994 – Held that: - the Tribunal in the case of M/s CS Software Enterprises Ltd. [2007 (12) TMI 136 - CESTAT BANGALORE (Tri)] held that preparation of photo identify card cannot be considered to fall within the ambit of photography service as per ambit of Section 65(78) as well as Section 65(79) of the Finance Act, 1994 - preparation of elector photo identify card is an activity not covered under the ‘Photography Services’ – demand of service tax and interest not justified – penalty not imposable – appeal rejected – decided against Revenue.
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Central Excise
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2016 (9) TMI 234
Manufacture - Whether under the facts and circumstances of the case, labelling and packing of ‘handmade Biri’ in printed plastic wrappers with the aid of power–operated machine to bring into existence ‘retail pack’, having brand name, meant for ultimate consumer, comes within the purview of the definition of ‘manufacture’ as defined in Section 2(f) of the Central Excise Act, 1944. Held that:- packing or re-packing of goods is also included by the legislature within the manufacturing activity in respect of the goods specified in the Third Schedule. Admittedly, biri is an item, which has been kept in the First Schedule. Therefore, it is more than clear that the legislature has made a distinction as to in which cases packing or repacking is an activity which can be included to be construed as in aid of manufacture of the item. When the legislature itself has made a distinction, there is no reason why any separate meaning could be given to that. Therefore, no substantial question of law is involved and we refuse to admit the appeal. - Revenue's appeal dismissed
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2016 (9) TMI 233
Valuation - Permissibility of various types of discounts when goods are cleared from the Depot after payment of duty from the factory gate - valuation rules do not debar the grant of cash discount, quantity discount etc. even under above situation - Held that:- there is no dispute that the fact that various types of discounts are being allowed is very well-known. The fact that the discounts are being given is known but the quantum is not determinable at the time of clearance of goods from the factory. This is the main reason why provisional assessments have been resorted to. We also see that this issue is fairly well settled through various decisions of the Tribunal, Hon’ble High Courts and even the Apex Court. In the present case the place of removal is not the factory gate but the depot of the appellant. Under such circumstances the discounts allowed in the price contracted for sale from the depot would be allowable as a deduction from such price. - Decided in favour of appellant with consequential relief
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2016 (9) TMI 232
SSI Exemption - manufacture and clearance of finished goods with the brand name belonging to M/s. Gulshan Metal Works - availing benefit of exemption small scale industries and not paying any excise duty - Held that:- no effort has been made by Revenue to establish with documentary evidence, the manufacture of such goods in the assessee's premises. What has been done in the quantification of demand is to simply consider all goods seized from various premises with the brand name belonging to M/s. Gulshan Metal Works as having been manufactured in the assessee s premises. This stands effectively countered by the Commissioner (Appeals) in his findings that based on sales tax records, M/s. Gulshan Metal Works has been found to have two manufacturing premises including sharing a part of the machines found installed in the premises of the assessee. We also find that the entire valuation of the goods alleged to have been manufactured and cleared from the assessee's factory with the brand name belonging to M/s. Gulshan Metal Works has been arbitrarily valued on the basis of a price list found during the search at one of the premises. No effort has been made to investigate and ascertain the actual transaction value. The Commissioner (Appeals) has concluded, on the basis of the transaction value claimed by the assessee, that there is no case for demand in-as-much-as the total value is well within the SSI limit during the relevant financial years. The impugned order passed by the Commissioner (Appeals) is a well reasoned order and has given considered findings on all points. In the absence of a thorough investigation going into the aspects of manufacture as well as the clearance of the goods, the demand cannot be upheld. - Decided against the Revenue
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2016 (9) TMI 231
SSI exemption - Notification no.175/86-CE - eligibility for entitlement to benefit - impugned order has held that these two appellants are not independent units during 2000-2001 and their value of clearances is to be clubbed for deciding on the eligibility of SSI exemption during the said period of 2001-2002 - Held that:- even after April, 2001, there is no change in the ground realities. May be on paper, these two appellants are separate but in practice there is mutuality of interest in each other, which the facts as pointed out in the impugned order makes very clear. The impugned order points out that their separation has been created artificially with an intention to avail the benefit of SSI exemption only. The impugned order points out that the MOU signed between the two appellants does not have vital details. Therefore, we are of the considered view that both the appellants are only one unit for deciding on the eligibility of SSI benefit. These two appellants are two units only on paper but in practice and as per ground realities, they are one business only, which is very much evident and has been clearly pointed out by the Commissioner's impugned order. - Decided against the appellant
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2016 (9) TMI 229
Double taxation - Taxability under Additional Duties of Excise in lieu of sales tax - branded ghutka manufactured and cleared - both the lower authorities have held that the goods manufactured by the appellant would fall under Chapter 24 while the respondent has classified the products under Chapter 21 - Held that:- it is seen from the records that if the products are classified under Chapter 24, the respondent has to discharge the additional duty of excise in lieu of sales tax, while if the products are classified under Chapter 21, there is no requirement of discharging additional duties of excise in lie of sales tax. Since the classification of the product has been settled by the judgment of the Tribunal in the case of Gahoi Foods Pvt. Ltd. Vs. CCE, Indore [2010 (8) TMI 241 - CESTAT, NEW DELHI] nothing survives in this appeal as the respondent had classified the products under Chapter 21 and paid the applicable sales tax. The requirement of paying 10% additional duty of excise would arise only if the products are classified under Chapter 24. - Decided against the Revenue
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2016 (9) TMI 228
Demand and imposition of penalty - clandestine removal of goods - each B.P Sets is used for each heat, thus the number of B.P.sets used in a day reveals the number of heats materialized - suppression of 5435.934 MT of M.S. Ingots - wherever information of B.P. sets is not available in Daily store report, the data of issue of silico magnese and Ferro Silicon available in the issue register has been considered for calculation of heat materialised and from these figures, the production suppressed was of 380.980 MT. Held that:- though the said documents were seized from the factory of the Appellant, but no efforts were undertaken to check the veracity of the said documents. None of the documents seized from the premises has been investigated to know the author/ person who had prepared such documents. The Ld. Counsel for the Appellant has pointed out that even Shri Ketki in his statement had stated that the capacity of the furnace is 6 MT. In that case, the log sheet appears to be contrary to his statement and if the department had any doubt, they should have conducted practical test of the heat. No actual practical test was conducted to ascertain the capacity of the furnace which was the easiest thing to do. Further, the purchase invoices clearly show that the capacity of furnace is 6 MT each. We therefore, find that there is no force in the allegation that the capacity of furnace is 7.9.MT. Even the capacity of the furnace cannot be a criteria to allege clandestine removal. The excess or unaccounted consumption of raw material together with its production, removal and transportation has to be shown to substantiate the charges of clandestine removal. We find that the allegation of suppressed production is based merely upon use of B.P. Sets considering that one B.P. Set is used for one heat and thus the number of B.P. Sets means the number of heat materialized. We are not inclined to accept this logic made by the revenue for the reason that the consumption of consumables cannot be a criteria to determine the production of goods. It would be more farfetched imagination to assume that only on the basis of use of consumables, which is a refractory material in multiple piece and prone to breakages/ defect, can be ground to allege clandestine production and clearance of goods. Further no practical test of its use has been carried out. In this case, reliance has been placed on use of Ferro Silicon and Silicon Maganese, we find that it is used in very small percentage and the use depends upon the composition of major raw materials, and therefore, the number of times it was issued for production cannot be considered as equal to number of times the heat were materialized. In case of M. VEERABADHRAN Vs. CCE EXCISE, CHENNAI-II [2004 (10) TMI 488 - CESTAT, CHENNAI] as upheld in COMMISSIONER Vs. M. VEERBADHRAN [2005 (12) TMI 574 - SUPREME COURT], the demand based on formula was set aside and we find that the judgment is applicable in the present case. Further, the most important aspect for alleging clandestine removal is that there has to be extra consumption of major raw material which are Sponge Iron and Pig Iron and their production. Even there is no evidence of a single consignment cleared from the Appellant's unit without payment of duty. No buyer or transporter of alleged suppressed production has been brought on record. Nor any evidence in the form of receipt of consideration has been brought on record. We agree with the submissions and various judgments cited by the Appellant and hold that the demand on the basis of log sheet or use of B.P. Sets or Ferro Maganeese and Silicomn Magnese are not sustainable. Our view is also based upon the fact appearing in the show cause notice that at the time of visit to the factory of the Appellant, no discrepancy in stock of raw material and finished goods was found which could indicate any clandestine removal of goods. We accept the contention of Appellant that no practical test was conducted to ascertain the actual consumption coupled with fact that the consumption of electricity is not the criteria to allege clandestine removal. Moreover, it is not knows as to from where the consumption of 911 units and industry average of 850 MT has been derived. In the case of CCE, MEERUT-I Versus R.A. CASTINGS PVT. LTD. [2010 (9) TMI 669 - ALLAHABAD HIGH COURT] as upheld in COMMISSIONER Vs. R.A. CASTINGS PVT. LTD. [2011 (1) TMI 1302 - Supreme Court of India], SAVITRI CONCAST LTD. Versus CCE, JAIPUR [2015 (11) TMI 1032 - CESTAT NEW DELHI] cited by the Appellant, it has been held that the consumption of electricity cannot be a ground to uphold allegation of clandestine removal. We therefore, hold that the said alleged consumption of electricity can not be the defensible ground to allege clandestine removal of goods. The revenue has also relied upon certain investment made in the Appellant's Unit in the year 2003 on the ground that the same pertains to amount of clandestine clearances made by the Appellant. We find from the appeal memo that such investments were properly explained and pertain to subscription of shares in Appellant's company. In such a case, there is no reason to link said amount with clandestine clearances. Even assuming to be so, we find that the investment pertains to the year 2003, whereas in the present case, the period involved is 2005. Thus, there is no reason to hold that the said investments support the allegation of the revenue. Therefore, the demand against M/s Balajee Structural, is not maintainable and the impugned order is set aside. Also as there is no sustainable demand, consequential penalties on Shri Jaiprakash Agarwal, Commercial Executive is also set aside. - Decided in favour of appellant with consequential relief
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2016 (9) TMI 227
Period of limitation - Demand alongwith interest and penalty - evasion of Central excise duty - clearance of superior branded PVC pipes (Sri Vasavi brand) in the guise of inferior brand (Sri Devi brand) to their marketing agency - apparent inter relationship between VPPL and SVA - adoption of incorrect assessable value - Order-in-Original dated 22.02.2005 and Order-in-Original dated 20.04.2006 both relate to SCNs for overlapping period and listing out same set of facts and circumstances - Order-in-Original dated 22.12.2005, which was passed earlier by same adjudicating authority had set aside the allegations and proposals of related SCN dated 25.02.2005. Held that:- adjudication of any one of the aforesaid notices will not be an impediment for adjudication of the other notice on the grounds of res judicata. Neither can it be held, like the appellant vehemently argued, that adjudication of 2005 notice and its setting aside will obstruct adjudication of the 2004 notice on the grounds of “limitation”, we find this argument, to say the least, is frivolous. While it is settled law that subsequent SCN on identical issue to identical notice cannot invoke extended period of limitation, there is no such estoppel for issue of simultaneous or subsequent SCNs invoking extended periods, for identical noticees, even for identical periods, when the issues alleged in both SCNs are different. Possibly because of misconception and inadequate appreciation of the two aforesaid orders, the appellant sought to convey that both the notices are on same issue and hence dropping of demand in one notice will be a limitation to the adjudicating authority to take any other view in the second one. We further find that even in the course of hearing related to the Tribunal's earlier order dated 05.02.2007, appellant had made the same albeit misconceived argument. The adjudicating authority has carefully considered all the evidences that have emerged during investigation and narrated in the notice. In any case the appellant has submitted that he is contesting the impugned order only on the grounds of limitation. In fact the earlier Tribunal order had set aside the impugned order on the ground of limitation and res judicata. However, based on the ROM application filed by Revenue, the Tribunal vide Misc. Order held that the impugned order had not reached finality and hence ordered recall of its earlier order. Therefore, we hold that the impugned order cannot at any stretch of imagination be set aside on the grounds of limitation or res judicata. This appeal is liable to be dismissed. Imposition of penalty on Sri G. Bhaskar Rao ,Managing Director of VPPL - Rule 26 of Central Excise Rules, 2002 - Held that:- t is his case that to fasten vicarious culpable mental state in relation to the offence would have to be established; that there is no finding recorded by the lower authority to impose penalty. On perusal of records we find that though he is the managing Director, there is no finding or conclusion in the order establishing his guilt in the matter. We therefore hold that the imposition of the said penalty on Shri G. Bhaskar Rao is not justifiable and requires to be set aside. Imposition of penalty on SVA - Rule 26 of Central Excise Rules, 2002 - Held that:- appellant submitted that the penalty under Rule 26 of the CER, 2002 is not imposable on the SVA, partnership firm, since penalty envisaged in the said rule is only for individual persons - Held that:- by following the dictum of various case laws, we hold that the imposition of penalty on the appellant being a partnership firm requires to be set aside. Maintainability - authorization by Committee of Chief Commissioners has members on different dates, and therefore done in a manner which law does not approve, being in violation of the provisions of Section 35(1B) and 35 E of Central excise Act, 1944 - grounds of appeal are largely verbatim reproduction of the authorization order and further, it does not contain the premises on which revenue challenges the order - Held that:- wWe find ourselves in agreement with the contentions of the Revenue. It for a fact that there is no statutory impediment in Section 35B (1B) or for that matter in Section 35E ibid for the two Chief Commissioner members of the Committee to form opinion and issue authorization order by circulation. It is also not specifically mandated that the said committee should issue such order only after jointly conferring and holding their meeting at one place and on one date/time. As regards the second ground, we find that indeed the appeal contain: 'grounds of appeal". It is upto the appellant, whether assessee or Revenue, to choose and put forth the grounds of appeal that such appellant may find appropriate. These arguments are too flimsy and we hold that the objections of the appellant regarding maintainability of appeal No.E/109/2007 per se are not tenable or acceptable. Demand - evasion of Central excise duty during the period July 2001 to June 2004 - adjudicating authority has discounted overall demand by 5% and accordingly demanded only an amount of ₹ 18,72,890/ apparently under the impression that the demand is based on the highest value of the highest quality brand ,namely "Sri Vasavi" - Held that:- the lower authority has arrived at this conclusion as per details in the chart extracted from the sales records and sales invoices of SVA. On the other hand the department cannot also claim its calculation is unimpeachable in the face of the aforesaid findings of the lower authority. This being so, we are of the considered opinion that 5% of reduction in the demand proposed in the SCN and limiting the confirmed demand to ₹ 18, 72,890/ is just and reasonable and therefore does not call for any interference. Hence dismissed.
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2016 (9) TMI 226
Valuation - includability - amount of royalty paid by customers in the assessable value of CD-ROMs manufactured - Held that:- it is found that Annexure-D to the SCN is relevant to be examined, to find out whether the quantification is presumptive in nature. We find that the agreements subsequent to the period of dispute in the SCN were taken into consideration to arrive at the amount of royalty charges paid by third party per CD for the period, subsequent to the period covered by the SCN and those were applied to the number of CD recorded by the appellant during the period from 01-04-2001 to 18-02-2002 to arrive at the assessable value for the period involved in SCN which represents the presumptive assessable value arrived at, due to inclusion of royalty charges of subsequent period to the clearance of earlier period and such assessable value was worked out at ₹ 86,16,596/- and duty demand of ₹ 13,78,655/- was calculated on said presumptive assessable value of ₹ 86,16,596/-. Therefore, the SCN is presumptive and hence, the impugned SCN is not sustainable. - Decided in favour of appellant
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2016 (9) TMI 225
Classification - mixed spices (masala powder) - whether to be classified under Chapter 9 or under Chapter 2103 of CETA'1985 - period involved is from 1.4.2010 to 30.9.2014 - Held that:- by following this Bench order in appellant's own case reported in [2015 (6) TMI 1014 - CESTAT CHENNAI] where the classification dispute was extensively for an earlier period and held that mixtures of spices with other substances (masala powder) manufactured and cleared under various brand names by the appellants herein are rightly classifiable under 0910 9100 of CET and the demand of excise duty and penalties were set aside by allowing the appeals, the impugned orders are set aside. - Decided in favour of appellant with consequential relief
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2016 (9) TMI 224
Refund - unjust enrichment - Whether the revenue is justified in refusing refund for the period September 2000 to February 2001 on the ground of unjust enrichment or not, when the amount of duty paid by the appellant under protest, during pendency of the appeal before the Honourable Supreme Court, when the issue was sub-judice and admittedly no duty was collected from the buyer of the products - Held that:- the Id. Commissioner have misconceived the concept of unjust enrichment and failed to understand the provisions of Central Excise as well the basic principles of accounting. The appellant have not raised any supplementary invoice for the Dabur Lal Tail cleared during the period September 2000 to February 2001, so, there can be no question of passing of duty on the buyer. Secondly no duty can be passed on to the same buyer for an earlier clearance of some different product, by clearance of some different product in the future time. Further the appellant have deposited the amounts by TR-6 Challans and debited the duty during pendency of their appeal before Honourable Supreme Court, by way of debit entry made in the PLA (Personal Ledger Account). Accordingly there is no question of unjust enrichment involved under the facts and circumstances of the case. Therefore, I direct the Adjudicating Authority to disburse the refund of ₹ 1,86,40,263 within a period of 30 days from the date of receipt of this order along with interest, from 3 months after the date of application for refund, being 3/5/05. - Decided in favour of appellant with consequential benefits
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Wealth tax
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2016 (9) TMI 243
Nature of land - wealth assessment - “urban land” - Held that:- We find that the asset considered for wealth tax by the AO is claimed to be agricultural land by the assessee. Before the CIT (A), assessee has allegedly filed copies of the sale deeds and also pahanis for the relevant A.Ys. However, we find that the CIT (A), has neither verified the veracity and authenticity of the said documents by herself, nor has she called for a remand report from the AO. We find that she has accepted the assessee’s contentions without any verification. The assessee has also filed before us the statement of the total income over the A.Ys 2006-07 to 2015-16 wherein the assessee has been declaring agricultural income also. In our opinion, all these documents need verification by the AO in view of the provisions of Rule 5A(3) of the Wealth Tax Rules, 1957. In view of the same, we deem it fit and proper to remand the issue to the file of the AO only for verification as to whether the said land is agriculture land and falls within the meaning of “urban land” u/s 2(ea) of the W.T. Act or not. Needless to mention that the assessee shall be given a fair opportunity of being heard - Decided in favour of revenue for statistical purposes.
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