TMI Tax Updates - e-Newsletter
October 17, 2017

Case Laws in this Newsletter:

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

Highlights / Catch Notes

• GST:

  Taxability and ITC availability on Gifts under GST
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• Income Tax:

  The income from the contributions made by the beneficiaries of the trust is taxable only in their hands and not in the hands of the assessee
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• Income Tax:

  Amount which was credited in books of accounts of the assessee in the preceding year cannot be treated as unexplained cash credit u/s 68 in the relevant assessment year.
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• Customs:

  Levy of CVD on imports - As the additional duty is to counterbalance and to safeguard the interests of the manufactures in India, if the manufactures in India are not liable to pay duty on the goods of the like category, then on import of such goods the additional duty cannot be levied - HC
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• Service Tax:

  The imposition of penalty u/s 78 cannot be set aside on the ground of the appellant having deposited the entire service tax and interest prior to the issuance of the show-cause notice
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• Central Excise:

  The odoriferous compound has got a shelf life and capable of being stored/transported/sold and bought by agarbathi industries - it is an excisable product falling under Chapter Sub-Heading 3302.90 - SC
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• Central Excise:

  The limitation prescribed u/s 11B to be not applicable to refund claims for service tax paid under a mistake of law. - HC
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Articles

• Taxability and ITC availability on Gifts under GST by CA Ragini Goyal & Adv. Rakesh Chitkara
• Gist of various GST notifications/ order giving effect to recommendations made in 22nd GST Council meeting
• Summary of Notifications issued on 13.10.2017 in respect to recommendation made by the GST Council in its 22nd Meeting
• DISRUPTIONS UNDER GST ON ALCOHOLIC BEVERAGES

Notifications

• DGFT

• 33/2015-2020 - dated 13-10-2017 - FTP
  Amendments in Foreign Trade Policy 2015-20 -reg.

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• GST - States

• S.O. 225.-37/2017-State Tax (Rate) - dated 13-10-2017 - Bihar SGST
  Notifies the State tax on intra-State supplies of goods - regarding "Motor Vehicles"

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• S.O. 223.-36/2017-State Tax (Rate) - dated 13-10-2017 - Bihar SGST
  Amendments in the Notification No.04/2017-State Tax (Rate), dated the 29th June, 2017,

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• S.O. 221.-35/2017-State Tax (Rate) - dated 13-10-2017 - Bihar SGST
  Amendments in the Notification No.02/2017-State Tax (Rate), dated the 29th June, 2017

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• S.O. 219.-34/2017-State Tax (Rate) - dated 13-10-2017 - Bihar SGST
  Amendments in the Notification No.1/2017-State Tax (Rate), dated the 29th June, 2017.

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• S.O. 217.-33/2017-State Tax (Rate) - dated 13-10-2017 - Bihar SGST
  Amendments in the Notification No.13/2017- State Tax (Rate), dated the 29th June, 2017.

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• S.O. 215.-32/2017-State Tax (Rate) - dated 13-10-2017 - Bihar SGST
  Amendments in the Notification of the Commercial Taxes Department No.12/2017- State Tax (Rate), dated the 29th June, 2017

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• S.O. 213.-31/2017-State Tax (Rate) - dated 13-10-2017 - Bihar SGST
  Amendments in the Notification of the Commercial Taxes Department No.11/2017- State Tax (Rate), dated the 29thJune, 2017.

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• S.O. 211.-30/2017-State Tax (Rate) - dated 13-10-2017 - Bihar SGST
  Amendments in the Notification of the Commercial Taxes Department No.12/2017- State Tax (Rate), dated the 29th June, 2017

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Circulars / Instructions / Orders

• GST - States - Order No. 01/2017- State Tax - dated 13-10-2017
  THE BIHAR GOODS AND SERVICES TAX (REMOVAL OF DIFFICULTIES) ORDER, 2017
• Customs - 131/2017 - dated 12-10-2017
  SUB : Clarification on issues related to furnishing of Bond/Letter of Undertaking for exports –reg.
• Customs - 132/2017 - dated 12-10-2017
  SUB : Amendment to Customs Valuation Rules – Notification No. 91/2017 (NT) dated 26.9.17 –reg.
• Companies Law - 12/2017 - dated 16-10-2017
  Transfer of Shares to IEPF Authority

News

• First Investment Agreement signed between NIIF and a wholly owned subsidiary of Abu Dhabi Investment Authority

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• Over 69 lacs subscribers join Atal Pension Yojana with contribution of ₹ 2690 crores

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• RBI Reference Rate for US $

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• The Union Finance Minister Shri Arun Jaitley participates in the IMFC sessions and Development Committee Plenary of the World Bank; Holds bilateral Meetings too with counterparts From UK and Sri Lanka

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Case Laws:

• GST

• 2017 (10) TMI 693
  Relief package for exporters - import of Gold bars - Advance Authorisation Scheme - Held that: - in view of the press release dated 6th October 2017, which prima facie makes no distinction as regards the Advance Authorisations (AA) issued prior to or after 1st July 2017, the Petitioner will not hereafter be required to pay IGST in respect of the imports of gold bars made by it Petitioner in terms of the AAs issued to it - interim relief is granted subject to the Petitioner furnishing to the Respondent authorities a letter of undertaking that the clearance of the imported goods in terms of the AA will be subject to the final result of the present petition.

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• Income Tax

• 2017 (10) TMI 692
  Penalty u/s 271(1)(c) - revision downwards could not be justified - Held that:- SLP dismissed. HC Order confirmed [2016 (10) TMI 1117 - DELHI HIGH COURT] stating the assessee is guilty of furnishing inaccurate particulars of income is inappropriate as the Assessing Officer at any point of time has not scrutinized 2003-2004 of the assessment on records and issued any notice before the filing of revised return. Thus, when the error was known to the assessee, the assessee itself has filed the revised return. This act shows that it is not intentional furnishing of inaccurate particulars of income on behalf of the assessee. - Decided against revenue

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• 2017 (10) TMI 691
  Limitation prescribed under Section 254(2) - application under Section 254(2) stating that he was not able to attend the date of hearing in respect of his appeal preferred before the Tribunal as the authorized representative of the assessee was not well - scope of amendment in respect of limitation - Held that:- Keeping in view the judgment delivered by their lordships in the M.P. Steel Corporation [2015 (4) TMI 849 - SUPREME COURT] in the present case also the new law of limitation providing a shorter period cannot certainly extinguish a vested right of action. The amendment has been made effective virtually in case of assessee with retrospective effect though the amendment does not show that it is applicable with retrospective effect, however, the existing right has been extinguished with retrospective effect in case of the assessee. In the considered opinion of this Court, the legislature should have granted some time to the assessees who could have filed an appeal within a period of four years and the same has not been done till the amendment came into force extinguishing the right to file an appeal. In the considered opinion of this Court, application preferred by the assessee should not have been dismissed by the Tribunal on account of the amendment which has reduced the period of limitation of four years to six months. Resultantly, the impugned order passed by the respondent on 23/12/2016 is hereby quashed and the writ petition stands allowed. The Income Tax Appellate Tribunal is directed to decide the application preferred under Section 254(2) on merits within a period of three months from the date of receipt of certified copy of this order.

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• 2017 (10) TMI 690
  Disallowance of business expenses - no business activity was carried out during the year - ITAT deleted the addition - Held that:- The Tribunal has reached a factual finding that though the assessee did not carry out any actual business activity during the year under consideration, the same was due to litigation for the brand name/trademark, however, the business was not discontinued. In the meantime, the assessee had to incur expenditure towards the statutory charges and for employment. Such being the facts, in our opinion, no question of law arises.

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• 2017 (10) TMI 689
  Addition on account of payment of royalty - seminar expenditure - Assessing Officer had held that the expenditure was a capital expenditure - nature of expenditure - Tribunal allowed it as revenue expenditure - Held that:- No question of law arising. When it is found that the expenditures were for the purpose of augmenting the business of the assessee and did not result into any enduring benefit such expenditures were correctly allowed as revenue expenditures. We are not unmindful of the decision of the Supreme Court in case of Honda Siel Cars (I) Ltd. vs. Commissioner of Income – Tax reported in [2017 (6) TMI 524 - SUPREME COURT OF INDIA] in which on facts it was held that the royalty payment for obtaining technical knowhow for the entire period of agreement was a capital expenditure. The Supreme Court confirmed the view of the High Court that such acquisition resulted into an enduring benefit to the assessee. Disallow the expenditure same was in the nature of penalty - Held that:- CIT(Appeals) and the Tribunal both noted that the amount had to be paid since the assessee failed to achieve the pre-set targets. This was just a contractual liability and not strictly speaking of, penal liability. No question of law therefore arises.

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• 2017 (10) TMI 688
  TPA - selection of MAM - addition by applying RPM instead of TNMM - Held that:- DRP rightly directed the AO/TPO to consider the RPM as the most appropriate method instead of TNMM proposed by the TPO. Accordingly, we do not see any merit in this appeal of the department.

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• 2017 (10) TMI 687
  TPA - ALP determination - Comparable selection procedure - Held that:- Stryker Technology started its business from October 1, 2006 as a global technology centre for the Stryker Group in India. The taxpayer operates as a technology support centre for the group and provides Computer Aided Designing (CAD) / engineering, contract software development, and IT Enabled back office support services to the Stryker Group. According to TP report, Stryker Technology has been characterized as a routine CAD / engineering contract software development and IT enabled back office support services provider and stated to use all the valuable intellectual property rights (know-how, copyrights etc.) and other commercial or marketing intangibles (brand names, trademarks etc.) owned by the Group. Transactional Net Margin Method (TNMM) used by the assessee for benchmarking its international transaction as most appropriate method has been accepted by the TPO/DRP. Thus Companies functionally dissimilar with that of assessee need to be deselected from final list of comparable. Adding back the amount of Rent equalization reserve to the book profits of the Appellant, declared under section 115JB - Held that:- AO has rightly added back the rent acquisition reserve debited to profit & loss account while computing the book profit for the purpose of section 115JB of the Act

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• 2017 (10) TMI 686
  Computation of long term capital gain on sale of a property at Koramangala, Bangalore by the assessee - determination of FMV as on 01.04.1981 - Held that:- We find lot of loose ends in the statement given by the approved valuer before the AO. In this regard the Assessee has in her submissions dated 30.9.2013 specifically pointed out that the AO did not afford opportunity of cross-examination of the Registered Valuer and therefore the evidence in the form of statement of the Registered valuer has to be ignored. In arriving at the value on the basis of statement of Registered Valuer, the AO has not taken cognizance of the existence of the building and the cost to be attributed to the value of building as on 1.4.1981. Keeping these facts in mind and also taking note of the fact that the AO has not chosen to make a reference to the valuation officer u/s. 55A of the Act and also keeping in mind the fact that estimation of FMV as on 01.04.1981, in the absence of a good comparative sale instance, would be only an approximation, we deem it proper to conclude that the FMV as on 01.04.1981 should be fixed at ₹ 75/sq.ft. We hold and direct accordingly. The relevant grounds of appeal of the revenue are accordingly dismissed while that of the assessee is partly allowed. Interpretation of Explanation (iii) to Sec.48 of the Act, which defines the expression “Indexed Cost of Acquisition” - Whether indexed cost of acquisition has to be computed by taking 1.4.1981 or the year 1994 when the Assessee succeeded to the property as legal heir of her deceased husband? - Held that:- As per the CBDT Circular No. 636 dt. 31st Aug., 1992 a fair method of allowing relief by way of indexation is to link it to the period of holding the asset. The said circular further provides that the cost of acquisition and the cost of improvement have to be inflated to arrive at the indexed cost of acquisition and the indexed cost of improvement and then deduct the same from the sale consideration to arrive at the long-term capital gains. If indexation is linked to the period of holding the asset and in the case of an assessee covered under s. 49(1), the period of holding the asset has to be determined by including the period for which the said asset was held by the previous owner, then obviously in arriving at the indexation, the first year in which the said asset was held by the previous owner would be the first year for which the said asset was held by the assessee. The Hon’ble Court in the case of CIT Vs. Manjula J.Shah [2011 (10) TMI 406 - BOMBAY HIGH COURT] finally concluded that while computing the capital gains arising on transfer of a capital asset acquired by the assessee under a gift, the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of the asset. In view of the aforesaid decision of the Hon’ble Bombay High Court, we are of the view that the CIT(A) was fully justified in allowing the benefit of indexation on FMV as on 1.4.1981 from 1.4.1981. We confirm the order of the CIT(A) and dismiss the relevant grounds of appeal of the Revenue.

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• 2017 (10) TMI 685
  Addition of expenditure on subscription deposit scheme - addition as sales with regard to the magazine were not included on credit in the profit and loss account - Held that:- It is not denied that such deposits are refundable. These are refundable as and when demanded by the subscribers and from that date the supply of magazine is discontinued. Merely because the relevant income on receipt according to the ld Assessing Officer is not credited to the profit and loss account such disallowance is made. According to us the assessee is getting a benefit of interest free deposit for the purposes of the business of the assessee in lieu of the cost of the above magazine. It is not the case of the Revenue that money is utilized for other than business purposes and expenditure incurred and claimed against business income. The ld CIT(A) has held that assessee is saving interest cost by collecting this deposit and therefore such saving of interest has definitely gone in increasing the profit of the assessee. In view of this no infirmity in the order of the ld CIT(A) in deleting the disallowance on account of expenditure made under subscription deposit scheme. - Decided in favour of assessee. Addition u/s 40A(2) - AO disallowed payment pertaining to 33 parties out of 34 parties @2% of such expenditure holding it in excess of the prevailing market rate - CIT(A) deleted the above disallowance - Held that:- Assessing Officer is not authorized to disallow 2% of the total expenditure but to disallow only the expenditure which is unreasonable and excessive after considering the circumstances provided u/s 40A(2) of the Act. Thus we set aside the whole issue back to the file of the ld Assessing Officer to examine the payment made to the related parties after considering the nature and rate of services provided by them to the assessee and then compare their fair market value, legitimate need of the assessee and benefit derived by the assessee and then if there is any amount found to be unreasonable or excessive then only disallow to that extent. The assessee is further directed to submit before the Assessing Officer above details. The AO is further directed to examine the matter in a fair and reasonable manner bearing in mind that the provision is intended to check, evasion of tax through excessive and unreasonable payment to related parties. In the result ground No. 2 of the appeal of the revenue is allowed with above direction.

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• 2017 (10) TMI 684
  Failure by the AO to adhere to the mandatory requirement of Section 144C (1) - non passing the draft assessment order - Held that:- Passing assessment order straightway without passing the draft assessment order would take away the enforceable right of the assessee company to approach the ld. DRP by way of filing objection to the draft assessment orders. Since the factum of not passing a draft assessment order by the AO as required u/s 144C is a curable defect, the case is again remitted back to the file of AO to decide afresh in the light of the order passed by the Tribunal dated 15.03.2012 in accordance with provisions contained u/s 144C of the Act, and also after providing an opportunity of being heard to the assessee. See JCB India Ltd. vs. DCIT [2017 (9) TMI 673 - DELHI HIGH COURT]. In view of what has been discussed above, present appeal filed by the assessee is allowed for statistical purposes.

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• 2017 (10) TMI 683
  Admission of additional evidence - valuation of property - Held that:- The powers are vested in Tribunal in the matter of admission of additional evidence and the additional evidence produced by the assessee is crucial to decide the appeal as discussed in detail in the submissions of the Ld.A.R. From computation of the capital gains of assessee’s share was ₹ 6,47,86,542/- and the tax demanded was at ₹ 1,78,32,460/- against actual sale consideration of ₹ 1,38,33,000/- as per the sale deed. It appear to us that the assessee had agreed by sheer ignorance without understanding the tax implications and we are also under the impression that the Representative and the AO has not explained the tax implication to the assessee properly. There was no information with the department that the assessee had received the consideration over and above consideration recorded in the sale deed. The assessing officer also had not considered the above impediments in sale of the property while adopting the 50C value. As pointed out by the Ld.A.R if the additional evidence is not considered it would cause not only financial injury to the assessee but also injustice and it had direct impact on the market value of the property. Therefore, in the interest of justice we admit the additional evidence and remit the entire matter back to the file of the assessing officer to consider the additional evidence submitted by the assessee and to redo the assessment denovo. Assessing officer may take the help of DVO and decide the issue afresh on merits. Appeal of the assessee on this ground is allowed for statistical purpose.

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• 2017 (10) TMI 682
  Penalty u/s 271(1)(c) - non-deducting and non-depositing the TDS - Held that:- Omission for non-deduction of the TDS was not intentional rather due to bonafide mistake as immediately after pointing out by the tax auditors, TDS was deposited by the assessee company out of its own pocket without collecting it from the deductee. Assessee company has even deposited the TDS even before deduction made by the revenue authorities. So, we are of the considered view that it was a reasonable cause for the assessee company not to deposit the TDS within time. Furthermore, penalty order u/s 271(1)(c) of the Act has been passed without declaring the assessee in default by passing order u/s 201(1) of the Act. So, when AO has not recorded his satisfaction for initiation of the penalty u/s 271(1)(c) in the order required to be passed u/s 201(1) of the Act, the penalty order is not sustainable. - Decided in favour of assessee.

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• 2017 (10) TMI 681
  TDS treatment given in respect of categories of doctors as Consultants - deduction of tax at source has been made u/s 192 in respect of employee doctors while the tax deduction u/s 194J has been made in respect of five categories of medical consultants - Held that:- The issue has been decided by the ITAT for financial year 2009-10, in favour of the assessee, therefore, the tax has been deducted under the correct provisions of law. In view of the order of Tribunal, the order of A.O dated 10.02.2012 relates to financial year 2010- 11 under appeal is not sustainable.

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• 2017 (10) TMI 680
  Interest earned on fixed deposit - whether to be treated as capital receipt, hence, not taxable? - assessee claimed such interest as capital receipt and set it off against pre–operative expenditure - Assessing Officer assessed the interest as income from other sources - Commissioner (Appeals) having found that interest earned was inextricably linked with the setting–up of the power plant allowed the claim of the assessee - Held that:- Undisputedly, in case of assessee, the funds invested temporarily in the fixed deposit were for the purpose of setting–up of the power project. Therefore, the interest earned is inextricably linked with the power project. The other decisions relied upon by the learned Sr. Counsel including the decision in case of CIT v/s Karnal Co–operative Sugar Mills Ltd. (1999 (4) TMI 7 - SUPREME Court) express similar view. That being the case we hold that the interest earned on fixed deposit is capital receipt and has to be set–off against pre–operatives expenditure thereby will go to reduce the cost of CWIP. Ground raised by assessee is allowed.

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• 2017 (10) TMI 679
  Validity of the notice u/s 147 & 148 - income accrued in India - PE in India - whether Assessee company has established the permanent establishment and the office of the Assessee was attribution of the income to the Assessee company - Held that:- The activity of the Assessee company was commercial in nature and these companies were paying consultation fees while in the instant case, nothing was found contrary to the subject approved by the RBI in its letter dated 19.05.1995. In view of the said discussion we arrived at this conclusion that the no activity was done by the Assessee out of the purview of the sanction of the RBI dated 19.05.1995 and there is no income of the Assessee accrued which is taxable in India. Nothing came into notice that the objection was disposed of by the relevant assessing authority, therefore, view of the said law settled in KSS Petron Pvt, Ltd. Vs. ACIT Circle-10-Mumbai [2016 (10) TMI 1112 - BOMBAY HIGH COURT] we are of the view that notice u/s 147/148 is not liable to be sustainable in the eye of law, therefore, we set aside the same and accordingly this issue is the decided the appeal against the Revenue.

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• 2017 (10) TMI 678
  Assessment proceedings u/s. 153A - deduction u/s 80IB (10) claim - JDA copy relied upon - Held that:- The JDA copy found in the course of search was the basis of deduction claimed by the assessee u/s 80IB and this claim was very much examined by the AO by making belated enquiry as per the enquiry letter available in respect of the claim of the assessee for deduction u/s. 80IB. Hence in the present case, we are of the considered opinion that the JDA copy cannot be considered as an incriminating material found in the course of search and there is no reference to any other seized material in the assessment order and therefore, in the absence of any incriminating material found in the course of search, the assessment proceedings u/s. 153A of IT Act is bad in law as per this judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Lancy Constructions (2016 (2) TMI 797 - KARNATAKA HIGH COURT) on which reliance is placed by the ld. AR of the assessee. Deduction u/s 80IB (10) eligibility - Held that:- The assessee should be able to establish that the assessee was jointly engaged along with the other JDA partner in actual development activities also in addition to holding the land. Keeping this in mind, we examine the facts of the present case and we find that as per the JDA, several activities are to be done by the assessee but what is more important is the doing of actual activity and not that what was agreed to be done by the assessee. In this regard, we find that the assessee has brought on record the evidence regarding land leveling activity undertaken by the assessee. The assessee also had undertaken the activity of obtaining khata etc. Hence the only aspect which is not established by the assessee is regarding joint supervision of the construction activity but this is very important because mere certificate by JDA partner cannot be a basis to hold that the assessee was actually involved in joint supervision of the construction activity. Hence in our considered opinion, the matter should go back to the file of the AO for limited purpose of examining this claim of the assessee that the assessee was jointly supervising the construction activity along with SPL and if it is found that the assessee is able to establish this then the deduction u/s 80IB (10) should be allowed to the assessee to the extent it is allowable i.e. after excluding those flats where the area is more than 1500 sq. feet. We held so by respectfully following this judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Shravanee Constructions (2012 (7) TMI 88 - KARNATAKA HIGH COURT ).

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• 2017 (10) TMI 677
  Interest expenditure proportionately addition u/s. 36(1)(iii)/37(1) - advances given to subsidiary companies - Held that:- All advances given to subsidiary companies cannot be considered as diversion of interest bearing funds. We further observe that the assessee has sufficient interest free funds in the form of share capital to explain the advances given to its subsidiaries. Though assessee is having borrowings from banks and financial institutions, during the financial year its borrowings have substantially come down. Therefore it is clearly evident that the assessee has not diverted its interest bearing funds to its subsidiaries. We further observe that if there are funds available, both interest free funds and interest bearing funds, then the presumption would arise that its advances would be out of interest free advances generated or available with the assessee, if the interest free funds were sufficient to meet the advances given to the subsidiaries. In this case, on perusal of facts available on record, we find that the assessee has demonstrated with evidence that it has sufficient interest free funds to cover the advances given to its subsidiaries. Therefore, considering the facts and also relying upon the judgment of the Hon’ble Bombay High Court in the case of Reliance Utilities & Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT) we are of the view that the AO has erred in disallowing interest expenditure u/s. 36(1)(iii) / 37(1) of the Act towards advances given to assessee’s subsidiaries companies. Therefore, we direct the AO to delete the additions made towards disallowance of interest expenditure u/s. 36(1)(iii) / 37(1) of the Act. Appeal filed by the assessee is allowed.

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• 2017 (10) TMI 676
  Treatment to the assessee as a determinate Trust or A.O.P - CIT (Appeals) held that the assessee is a revocable trust and not the A.O.P. - Held that:- We find that the Ld. CIT(A) was satisfied from the fact that the assessee possessing all the ingredients that constitute the assessee as a trust. The Ld. CIT(A) while coming to the conclusion had relied upon the order passed by Hon’ble ITAT in the case of M/s India Advantage Fund-VII [2014 (10) TMI 614 - ITAT BANGALORE ] wherein it has been held that the income earned by a fund set up as a revocable trust is to be taxed only in the hands of the beneficiaries as per the provisions of section 61 to 63. It was further held in the said order that the trust could not be regarded as an AOP, as the beneficiaries had not set up the trust, they had not come together with the object of carrying on investment in a mezzanine fund, which was the object of the trust and there was no inter se agreement between the beneficiaries of the fund. The Ld. CIT(A) while appreciating the facts of the present case has rightly held that the trust deed mentions that units shall be issued to the contributors who are entitled to the specific share of the profits. No new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Since the Ld. CIT(A) while deciding these grounds have relied upon the orders passed by Hon'ble ITAT in identical circumstances and even on the principle of consistency also, the Ld. CIT(A) has rightly held that the income from the contributions made by the beneficiaries of the trust is taxable only in their hands and not in the hands of the assessee. Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned Whether income of the assessee is taxable in the hands of contributors/beneficiaries as per section 161(1) of the I.T. Act, 1961, and not in its own hands in status of an A.O.P.? - Held that:- CIT(A) has categorically held that as per the facts of the case , the assessee was having ideal funds which were temporarily earning interest income, therefore Ld. CIT(A) after appreciating the facts of the case had concluded that such interest ought to be taxed under the head income from other sources. In support of its finding, Ld. CIT(A) relied upon section 161(1A) and held that this section does not create a charge of tax on the representative assessee, but only provides the rate of tax on its income where the same consists of business income and since it was held that the income is taxable in the hands of the contributors/beneficiaries, so the treatment of interest income as business income or income from other sources is not relevant. No new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. Decided against revenue

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• 2017 (10) TMI 675
  Addition on account of unsecured loan - Held that:- It is a fact that assessee had got financed a JCB in earlier years from M/s Srei Infrastructure and Finance Company Ltd. against which an amount of ₹ 1,53,458/- was outstanding. The fact of secured loan outstanding to the tune of ₹ 1,53,458.22 is apparent from copy of balance sheet placed at PAPER BOOK-44. The Assessing Officer himself had stated in his assessment order that amount was outstanding since 2008-09 and no interest was being paid on this loan. He merely made the addition as the Accountant of Firm was unable to provided information like PAN and IT particulars. While making addition the Assessing Officer overlooked the fact that the assessee had not obtained loan during the year under consideration but it was outstanding from the earlier years which remained payable due to a dispute between the parties. The Ld. CIT(A) has taken a correct view and has rightly deleted the addition. Addition of account of the purchase of second hand Car - Held that:- The assessee had purchased a second hand Car for a sum of amount of ₹ 2,75,000/- which it had reflected in its balance sheet and for which he made entries in the books of accounts. The copy of ledger account of Car is placed at PAPER BOOK-4. The Assessee had claimed an amount of ₹ 20,625/- as depreciation and was allowed deprecation on this amount. Moreover, we find that assessee in its balance sheet in the schedule to fixed assets had declared the purchase of Car under the heading Car for purchase of second hand Car. The sale agreement placed at PAPER BOOK-2 is a sufficient document which along with other evidences in the form of entries in the books of accounts and balance sheet proves that assessee did purchase the car, therefore, Ld. CIT(A) has rightly deleted the addition Addition on account of Work Contract Tax Payment - Held that:- The list of sundry debtors placed at PAPER BOOK-5 clearly shows that assessee was to receive this amount from the company. The assessee had neither debited or credited the WCT received from the M/s U Flex Industries. The finding of the Assessing Officer that the M/s U Flex had paid the amount of WCT to assessee and which he was supposed to deposit in the Govt. Accounts is not correct as the facts recorded in the books of account and balance sheet clearly shows that assessee was to receive an amount of more than ₹ 85 Lacs which is more than the amount of WCT payable. Before the Ld. CIT(A), the assessee submitted the complete calculation of bills raised against U Flex and also made the details of amount received and accordingly on the basis of amount received the liability of WCT was worked out to be ₹ 64,71,956/- out of which there is no dispute about deposit of ₹ 46,50,000/- and in view of these calculation the liability of the assessee was worked out to be ₹ 18,21,956/- and therefore, the Ld. CIT(A) has rightly restricted the addition on account of WCT remaining unpaid to the extent to ₹ 18,21,956/- Therefore, we do not see any infirmity in the order of Ld. CIT(A) to this extent Addition on account of purchase of construction material from M/s Raizada Brick Kiln - Held that:- In this respect, we find that that this addition was deleted by Ld. CIT(A) as the partner of the assessee had submitted an affidavit claiming therein that the bill raised by Raizada Brick Kiln to the extent of ₹ 2,14,000/- was not claimed by him in his individual books of accounts. The partner of the assessee firm was also engaged in the construction business and the seller issued the bill in the name of partner. In fact this bill belonged to the assessee firm as the payment was also made from the books of accounts of assessee and it was not claimed as expenditure in the proprietorship business of the partner and therefore, the Ld. CIT(A) has rightly deleted the addition. Addition on account of Static Creditors - Held that:- The assessee cannot be fastened with the liability U/s 41(1) unless the creditors had stated that liabilities had seized to existence . See CIT Vs Jain Exports [2013 (5) TMI 690 - DELHI HIGH COURT] TDS u/s 194C - Addition on account of non deduction of tax (TDS) - payments made to various persons who were employed by assessee as labour mates and Assessing Officer held that these were contractors and therefore, assessee was required to deduct TDS - Held that:- Sec.194C is attracted only when there is a contract between contractor and the person responsible of executing the work and he has held that in the case of appellant there was no contract between the assessee and the alleged petty contractors. The Assessing Officer during the assessment proceedings did not find any discrepancies in the payments and before making any addition on account of non deduction of tax, the Assessing Officer should have examined some of the so called petty contractors. The assessee had also produced Muster Rolls showing the detail of wages /labour paid by assessee and therefore, the Ld. CIT(A) has taken a correct view and has rightly held that assessee was not liable to deduct the TDS as there was no contract or sub-contract. Addition on account of interest on capital - Held that:- As per partnership deed placed there is no clause for making any interest to be paid to partners. However, before the Ld. CIT(A) the assessee furnished an affidavit that the capital of the partners shall carry interest @ 12% with effect from 1.4.2007. However, we find that it is not a supplementary partnership deed as it has not been signed by all partners and has been signed only by one partner and that too in the form of an affidavit. As per provisions of Sec. 40(b)(v) the partners are entitled to receive interest on their capital which is in accordance with terms of partnership deed and relates to any period following after date of such partnership deed. Since in the original partnership deed there is no provision for making payment of interest to partners capital the assessee did not enter into any supplementary partnership deed signed by all the partners, the payment of interest to partners was not permitted as the payment of interest was not in accordance with the said provisions. The Ld. CIT(A) has overlooked this fact that supplementary partnership deed placed at PB-8 was in fact no partnership deed but was an affidavit signed by one partner, therefore, the order of Ld. CIT(A) in this respect is reverse. Addition on account of Sec.68 - Held that:- We find that Assessing Officer made the addition after examining M/s Ruchi Infotec System, by issuing notice U/s 133(6) of the Act. The Assessing Officer observed that the last transaction was recorded on 22.12.2008. The Assessing Officer held the same to be unexplained credit U/s 68 and did not allow the opportunity to assessee to Cross Examine the statements of Ruch Infotec System Ltd. We further find that appellant had not entered into any transaction with this party after 27.12.2008 which means that this credit represents the credit for earlier year and therefore, no addition can be made in this year u/s 68 of the Act. The Hon'ble Rajsthan High Court in the case of CIT Vs. Prameshwar Bohra [2007 (1) TMI 105 - RAJASTHAN HIGH COURT] held that amount which was credited in books of accounts of the assessee in the preceding year cannot be treated as unexplained cash credit u/s 68 in the relevant assessment year. The Ld. CIT(A) has rightly deleted the addition.

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• Customs

• 2017 (10) TMI 674
  Classification of goods - Stainless Steel Articles - Duty Drawback - whether the “Stainless Steel Bright Bars of Austenitic Variety” is classifiable as “Bright Steel Bars” for the purpose of drawback schedule under the Customs and Central Excise Duties Drawback Rules, 1972? - whether the same will go under sub serial No.3606 or 3803 of schedule 'F' of the Rules? - Held that: - “Stainless Steel Bright Bars of Austenitic Variety” had been treated in a manner differently from that of bright steel bars and shafting at the relevant time. Stainless steel comprises of ingredients which are Nickel and Chromium, both imported items used in manufacturing of stainless steel. The duty drawback has also been treated differently for stainless steel articles from that of all types of bright steel bars and shafting. The duty drawback of stainless steel articles of “Austenitic Variety” was ₹ 8.90 per kg. as against ₹ 395/- PMT for bright steel bars and shaftings. This distinction has also been carried forward in the change effected in the schedule of duty drawback of the Rules from 1st June 1989. The duty drawback of stainless steel with effect from 1st June 1989 was ₹ 1090 PMT as against ₹ 540 PMT for other varieties of bright bars and shafting. Item No. 3803 subsequent to the change has been kept vacant. This only goes to show that at the relevant time there was a clear distinction made between stainless steel articles of “Austenitic Variety” as against bright steel bars both in terms of the classification and the duty drawback rate. The headings under which sub-serial No. 3606 and sub-serial No. 3803 comes, along with the entries at the relevant time. In the duty drawback rate prescribed, there was a substantial difference between stainless steel of austentic variety and bright steel bars - the words “all types of bright steel bars” would necessarily to apply to the dimensions of steel bars such as round, hexagon, octagon, flat but would not mean include all grades / variety of steel. This would therefore, not include stainless steel at the relevant time. “Stainless Steel Bright Bars of Austenitic Variety” could classify only for inclusion in subserial No. 3803 at the relevant time. It is a settled law that where there are two views possible, the one favourable to the assessee in the matter of taxation has to be preferred. We are of the view that the impugned order of the first Respondent has incorrectly arrived at a finding that the scheme of drawback schedule at the relevant time was such that the words “Steel” mentioned in sub-serial No. 3606 would include stainless steel also. We are of the view that the first Respondent has erroneously held in the impugned order that the goods exported are bright stainless steel bars and are appropriately classifiable under sub-serial No. 3606. We are not going into issue as to whether the first Respondent has validly exercised power under Section 129DD of the Customs Act 1962 in reviewing an order of the Commissioner (Appeals) pursuant to an application made by the Collector Customs (Judicial) as we find on merits itself that the impugned order is unsustainable and is required to be quashed and set aside. Appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 673
  Additional Duty of Customs - interpretation of statute - subsection (1) of section 3 of the CTA Act, 1975 - transformer oil - case of petitioner is that the transformer oil has been exempted under the N/N. 5/84 C.E. dated 1st March 1984 and, therefore, the additional duty under subsection (1) of section 3 of the said Act of 1975 is not payable - Held that: - The Apex Court had an occasion to interpret subsection (1) of section 3 of the said Act of 1975 in the case of Khandelwal Metal & Engineering Works v. Union of India [1985 (6) TMI 178 - SUPREME COURT OF INDIA], where the Apex Court has held that subsection (1) of section 3 of the said Act of 1975 does not require that the imported article should be such which is capable of being produced or manufactured in India. The assumption has to be that the article imported into India can be manufactured in India and upon that basis, the duty has to be determined under subsection (1) of section 3 of the said Act of 1975. If like article is not produced or manufactured in India, the duty levied within the meaning of subsection (1) of section 3 would mean the duty which would be leviable on the class or description of the articles to which the imported article belongs. The levy under subsection (1) of section 3 is permissible, provided the imported article is liable to excise duty if manufactured in India. If goods of class A are imported and if excise duty is not payable on the goods manufactured in India of that class, there is no question of levy of additional duty under subsection (1) of section 3 - it is not disputed that exemption notification dated 1st March 1984 will apply to the transformer oil imported by the first petitioner. The provision of section 3 is basically enacted to safeguard the interests of the manufactures in India. In fact, the provision for levy of additional duty on the imported articles is to counterbalance the excise duty leviable on like articles made indigenously. As the additional duty is to counterbalance and to safeguard the interests of the manufactures in India, if the manufactures in India are not liable to pay duty on the goods of the like category, then on import of such goods the additional duty under subsection (1) of section 3 of the said Act of 1975 cannot be levied for the reason that so far as Indian manufactures are concerned, the goods are exempted. Petition allowed - decided in favor of petitioner.

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• 2017 (10) TMI 672
  Refund claim - unjust enrichment - duty paid and duty benefit claimed under the notification dated 19th May 2002 for import of goods under advance licences dated 23rd January 1995 and for import of goods under advance licences dated 7th February 1995 - denial of refund on the ground that the respondent did not comply with the mandatory requirement of furnishing documents as set out in clause 9 - Held that: - no statutory provision or a provision of statutory rules is shown to us which makes the production of documents listed in clause9 of the prescribed form of refund as mandatory. On the contrary, perusal of clause9 would show that the requirement is not mandatory. Clause9 only contains the list of enclosures which could be submitted along with refund application. Clause9 merely requires the applicant to tick mark against the documents showing that the said documents have been produced with refund application. By no stretch of imagination, it can be said that the requirement of production of documents listed in clause9 of the refund application form is mandatory. The Appellate Tribunal has held that the exempt material was not sold in the local market and was used in the manufacture of exported goods and, therefore, question of passing the incidence does not arise - there is a finding of fact recorded that balance sheet of the respondent produced on record with corresponding ledger accounts clearly show that the amount of deposit is shown in the books of account of the respondent - the findings of fact recorded by the Appellate Tribunal are on the basis of admitted position recorded by the Appellate Tribunal and in any event, the findings are supported by the documents on record. Refund to be allowed - appeal dismissed - decided against Revenue.

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• 2017 (10) TMI 671
  Benefit of transitional arrangement - issuance of LC - N/N. 41 (RE-2008) dt. 18.09.2008 of DGFT - case of Revenue is that the said LC was not issued by Respondent but by M/s Asian Granito India Ltd., the respondent being High Seas Buyer there is no question of LC being opened by the respondent buyer for the foreign supplier - Held that: - The objective of allowing transitional arrangements is only on the basis that if LC issued before issuance of Notification to avoid the retrospective effect of such Notification. It is not significant who has opened the LC, the important aspect is the LC in respect of subject Import. It is also pertinent to note that LC in normal course is never opened by High Seas Buyer for the reason that High Seas Buyer has no Locus Standi as regard payment of transaction of imported goods. It is between foreign supplier and original importer (High Seas Seller) of the imported goods - the benefit of transitional arrangement in terms of para 1.5 of Foreign Trade Policy was clearly available to the Respondent - appeal dismissed - decided against Revenue.

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• 2017 (10) TMI 670
  Smuggling - assorted Foreign currencies - Baggage Rules - Held that: - appellant has not come out with clean hands to prove his innocence except technically challenging veracity of the statements recorded without dissociating himself from the smuggling racket and a carrier of foreign currency. He was also arrested for such smuggling and produced before the Magistrate Court - there is no necessity to interfere with the adjudication for which that is upheld - appeal dismissed - decided against appellant.

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• Corporate Laws

• 2017 (10) TMI 669
  Winding up the Company voluntarily - Held that:- Voluntary Liquidator is directed to submit the copy of the publication of final meeting in Gazette to the Official Liquidator as early as possible. The explanation rendered by the learned counsel appearing for respondent that there is a obvious mistake in the chart of assets, the said explanation is accepted. From the facts and details stated hereinabove, it transpires that all necessary formalities have been completed and it is found that there is no objection to winding up the Company voluntarily and therefore, it is hereby directed that the Company shall stand dissolved from the date of this order. The voluntary liquidator shall preserve the books of accounts of the Company for the period of 5 years from today.

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• 2017 (10) TMI 668
  Oppression and mismanagement - Arbitral Award eligibility - Held that:- In the interest of the shareholders of KSPL, in the interest of SPK group, JPK group and taking into consideration the Arbitral Award has not reached finality and not yet implemented, the following order is passed by this Tribunal. (i) Hon’ble Justice Mr. K.K. Lahoti who is functioning as Observer cum Facilitator is appointed as Interim Administrator of the first respondent company without superseding the existing Board of Directors of KSPL. (ii) Interim Administrator Hon’ble Justice Mr. K.K. Lahoti is empowered to propose names of two Independent Directors in the Board of Directors of the first respondent company within three weeks for approval of this Tribunal. Independent Directors must be having experience in management of company affairs with special knowledge in seeds business. (iii) Interim Administrator Hon’ble Justice Mr. K.K. Lahoti shall, within one month, after appointment of two Independent Directors shall conduct meeting of the Board of Directors of the 1st respondent company following the provisions of the Companies Act, 2013 and Articles of Association of KSPL with the following agenda: - (a) Appointment of independent Chartered Accountant firm to assess the fair market value of the shares of the first respondent company as on the date of filing of Company Petition No. 17 of 2014 and to fix the remuneration of Chartered Accountants so appointed. (b) Appointment of Special Auditors team to audit accounts of the first respondent company for the financial years 2013-14 to 2016-17 and to fix remuneration of the Chartered Accountants. (iv) Agenda of all kinds of meeting of KSPL shall be approved by Interim Administrator before notice of meeting is given. (v) All meetings shall be conducted in accordance with interim orders in force and the directions given in this order, in the presence and as per the instructions of Interim Administrator. (vi) There shall not be any change in the shareholding pattern and Directors of the first respondent company until further orders except as provided in this order regarding appointment of Independent Directors. (vii) Sale of Akola properties of KSPL by the first respondent company shall be according to the order of the Company Law Board dated 25.04.2014 and under the supervision of Interim Administrator and as per the resolutions of the Board of Directors of KSPL. (viii) The resolutions that had already been passed which are sub-judice in the Company Petition shall not be taken up in the Board Meetings of KSPL. (ix) There shall not be any resolution which goes against the resolutions passed on 26.03.2016 and 01.04.2016 and the resolutions passed on the basis of which Akola properties were sold, since they are sub-judice in Company Petition No. (17 of 2014) (TP No. 62 of 2016) and this Tribunal has to take final decision on it. (x) Respondent No. 3 shall not exercise the authority given to him under Section 113 of the Companies Act in the meeting of Board of Directors held on 01.04.2016, till further orders by this Tribunal. (xi) All interim orders that are in force shall be followed. (xii) The proceedings of all the meetings of KSPL shall be recorded by video and audio and send the same to this Tribunal. (xiii) Interim Administrator Hon’ble Justice Mr. K.K. Lahoti shall file a report in respect of each meeting conducted separately before this Tribunal. (xiv) Interim Administrator Hon’ble Justice Mr. K.K. Lahoti shall see that all the statutory obligations that are required to be carried out as per the provisions of the Companies Act and other acts and Articles of Association, shall be carried out within the period prescribed under the relevant Acts and Articles of Association. (xv) Interim Administrator Hon’ble Justice Mr. K.K. Lahoti is at liberty to seek further instruction(s) in case of any controversy in respect of which he feels the order of the Tribunal is necessary. (xvi) Interim Administrator Hon’ble Justice Mr. K.K. Lahoti is entitled for a remuneration of ₹ 1.00 lac (Rupees one lac only) for each meeting subject to maximum of ₹ 3.00 lacs (Rupees three lacs only) per month besides all facilities to which he is entitled as Judge of High Court in respect of transport, accommodation and ministerial assistance as and when meetings of KSPL are called for/ or conducted. Interim Administrator Hon’ble Justice Mr. K.K. Lahoti shall continue to act in that capacity till disposal of TP No. 62 of 2016. (xvii) Remuneration of Independent Directors shall be fixed by Interim Administrator. (xviii) Expenditure incurred in respect of remuneration of Interim Administrator, Independent Auditor appointed for determination of fair market value of the shares of the first respondent company (KSPL) and Special Audit team appointed to audit the accounts of the first respondent company (KSPL) and remuneration of Independent Directors shall be borne by KSPL for the time being and it is subject to final order passed in TP No. 62 of 2016. (xix) Interim Administrator and Independent Directors appointed are given immunity from all Civil, Criminal and other regulatory actions under the laws applicable in the conduct of the affairs of KSPL.

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• Service Tax

• 2017 (10) TMI 664
  Refund of Service Tax erroneously paid - unjust enrichment - the service tax was erroneously paid on gross amount of bills before the discount was allowed of 15% on the gross bill irrespective of the discount allowed to the advertisements - Denial of refund on the ground that the respondent has failed to furnish documents to establish that the amount of service tax for which the refund is claimed has been collected by the respondent from its clients and that incidence of such tax has not been passed on to any other person - Rule 6 of the Service Tax Rules. Held that: - There is no finding recorded by the Appellate Tribunal that M/s.Emami Limited did not pass on incidence of service tax on the 15% amount to its customers or buyers of the products. The burden was on the respondent to establish that M/s.Emami has not passed on the incidence of service tax to any other person including its customers or purchasers of the products. Thus, even going by the finding of fact recorded by the Appellate Tribunal and the finding of fact recorded by the Deputy Commissioner, the respondent did not establish that the incidence of service tax has not been passed by M/s.Emami Limited to any other person. The finding recorded by the Commissioner (Appeals) has not been disturbed by the Appellate Tribunal. Appeal allowed - decided in favor of Revenue.

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• 2017 (10) TMI 663
  Utilization of CENVAT credit - GTA services - Sub-Rule (4) of Rule 3 of CCR, 2004 - penalty reduced to 25% - Held that: - As per the explanation to the Rule 3 of the CCR, 2004, it has been specifically incorporated w.e.f. 01.07.2012 that CENVAT credit cannot be used for payment of service tax on GTA as service recipient and if there is a violation of this rule, then, the assessee attracts penal action u/r 15 of CCR, 2004 for payment of GTA services as service recipient. But despite that, the assessee utilized the credit for payment - there is a clear violation of the rule inspite of the knowledge on the part of the assessee. Therefore, in view of such circumstances, the reduction of penalty to the extent of 25% of the wrongly utilized cenvat credit is not sustainable in law - appeal allowed - decided in favor of Revenue.

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• 2017 (10) TMI 662
  Penalty u/s 78 - non-payment of service tax - whether such non-payment of service tax by the appellant was on account any one of the ingredients mentioned in the said Section 78? - Held that: - there is a clear mandate of law provided under Section 78 of the Finance Act, 1994 that any person, who has not paid or short-paid the tax on account of any fraud; collusion; willful mis-statement; or suppression of facts or has evaded any tax provisions with an intent to evade payment of duty would be liable to equal amount of penalty. The appellant was registered and was paying service tax but for the period involved in the present appeal. The said non-payment was detected by the department on investigations made against them. It cannot be held that such non-payment of service tax or even non-disclosure of the value of the same in the return was on account of the non-receipt of compensation from the clients as they were collecting service tax from their customers, Even otherwise, the payment of service tax is the legal obligation of the service provider, irrespective of the fact of receipt of value of the service from service recipient All these factors lead to an inevitable conclusion that there was malafide on the part of the appellant to suppress the value of the services and not to pay service tax on the same - penalty u/s 78 upheld. Appeal dismissed - decided against appellant.

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• 2017 (10) TMI 661
  Non-payment of service tax - Security Services - penalty - whether such non-payment of service tax by the appellant was on account any one of the ingredients mentioned in the said section 78? - Held that: - reliance placed in the case of Union of India Vs Rajasthan Spinning Mills [2009 (5) TMI 15 - SUPREME COURT OF INDIA] laying down that when the statute provides mandatory penalty, the question of payment of duty before or after notice cannot alter liability to penalty. Inasmuch as, the conditions of section 11AC of Central Excise Act in that case were found to be satisfied, the Hon'ble Supreme Court observed that payment of differential duty before the issuance of the show-cause notice cannot be adopted as a reason for setting aside the imposition of penalty - In the present case, it already stands observed that non-payment was on account of malafide, the imposition of penalty under section 78 cannot be set aside on the ground of the appellant having deposited the entire duty and interest prior to the issuance of the show-cause notice - penalty upheld - appeal dismissed - decided against appellant.

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• Central Excise

• 2017 (10) TMI 660
  Excisability - agarbathi perfume also called as odoriferous compound which is used in manufacture of agarbathis sold in the market - Whether the Board’s Circular No.495/61/99-CX.3, dated 22.11.1999 exempts payment of excise duty on perfumery compound manufactured by the respondent? - Held that: - The Board vide its circular clarified that such odoriferous compound mixed with dough is not excisable - The circular clarifies that odoriferous substances are not marketable because these products are not sold by manufacturers in order to protect their trade secret. The circular by way of illustration also stated that the whole process of manufacturing agarbathi, that is preparation of the odoriferous compounds and their mixing with the dough or agarbathi is normally carried out in a continuous manner since the whole process is continuous. These odoriferous substances do not remain with the manufacturer to be sold in the market - it is evident that the clarification is applicable to the product which comes into existence, at intermediate stage in the form of paste/dough in a continuous process of manufacture and not to the manufacture of odoriferous perfume, which is in liquid form and transported/stored in barrels/drums. The said circular cannot be made applicable to cases beyond its scope - it cannot be said that the agarbathi compound manufactured by the respondent is covered under the aforesaid circular. Whether actual marketing of the perfumery compound manufactured by the respondent is necessary for the levy of excise duty? - Held that: - It is settled that to hold the product as excisable/dutiable, actual marketing/sale of goods is not necessary. What is required to be proved is that the capability of marketing the product. Marketability is decisive test for dutiability. Whether the goods are, in fact, marketed or not is of no relevance. It is also not necessary that goods in question should be generally available in the market. Even if the goods are available from only one source or from a specified market, makes no difference so long as they are available for purchasers. The assessee manufactures agarbathi perfumes (odoriferous compound) by mixing inputs, aromatic chemicals, perfume oil and acids according to the pre-determined formula. It is prepared by the respondents in their Bangalore factory and then transferred to their Mysore factory where finally it is applied on raw agarbathis. In this process of manufacturing the perfumery compounds are capable of being sold in the open market. The odoriferous compound has got a shelf life and capable of being stored/transported/sold and bought by agarbathi industries. The assessee had sold certain quantity of perfumery compound to M/s. Tibetan Handicrafts Centre Bylkuppe, Mysore District - it is an excisable product falling under Chapter Sub-Heading 3302.90. Appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 659
  Refund of service tax which was paid under mistake of law - denial on the ground of time limitation - Section 11 B of the CEA, 1944 - whether limitation prescribed under Section 11 B of the said Act applies to a refund claimed in respect of service tax paid under a mistake of law? - Held that: - the issue is no more res-integra - the Division Bench of this Court in Hindustan Cocoa [1994 (6) TMI 18 - HIGH COURT OF JUDICATURE AT BOMBAY] has held that the limitation prescribed under Section 11 B of the said Act to be not applicable to refund claims for service tax paid under a mistake of law. The impugned order is erroneous in that it applies the limitation prescribed under Section 11 B of the Act to the present case were admittedly Appellant had paid a service tax on Commercial or Industrial Construction Service even though such service is not leviable to service tax - appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 658
  SSI Exemption - use of brand name of others - N/N. 8/2002 dated 1 March 2002 as amended by the N/N. 8/2003 dated 1 March 2003 - case of Revenue is that the exemption in the Notification could not be availed of by the Respondent as they had used the brand name of another person viz. SAMS Machine Private Limited - Held that: - the label affixed on the machines contained the manufacturer i.e. the Respondents' own name and has no relation to the words “SAMS” which belongs to M/s. SAMS Machine Private Limited - the Appellate Tribunal has arrived at a correct findings that the label on the machine clearly reveals that the machine is manufactured by the Respondents - the exemption from excise duty is admissible as the said Notification would be applicable in the facts of the present case. The Respondents are not using the branded name of another person and the name used on the label affixed on the machines was that of the Respondents themselves. The decision in the case of Commnr. of Central Excise, Pune-II Versus M/s. Pethe Brake Motors Pvt. Ltd. [2015 (5) TMI 491 - SUPREME COURT] is clearly applicable to the facts of the present case. Appeal dismissed - decided against Revenue.

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• 2017 (10) TMI 657
  Whether the Appellate Tribunal was right in deciding the Appeal preferred by the Appellant on merits in absence of the Appellant or its Advocate especially in the light of the facts pleaded in the Memorandum of Appeal? Held that: - It is true that the Appellate Tribunal could have decided the Appeal in absence of the Appellant. However, the Appellate Tribunal was required to record reasons by applying its mind to the grounds of challenge in the Memorandum of Appeal. On plain reading of the impugned judgment, the Appellate Tribunal has not adverted itself to the grounds of challenge incorporated in the Memorandum of Appeal filed before it and in any case, there are no elaborate findings recorded in the impugned judgment - In any case, the Appellate Tribunal has not done its duty by adverting to the grounds in the Memorandum of Appeal and by recording the reasons for dismissing the Appeal. The impugned judgment is quashed and appeals are restored to the file of Appellate Tribunal - appeal allowed in part.

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• 2017 (10) TMI 656
  CENVAT credit - base oil - it was alleged that the appellant had availed of cenvat credit on duty of full quantity of base oil as shown in the invoice/bill but the scrutiny of documents shows that in fact the appellant has received base oil of a shorter quantity - the contention of the learned counsel for the appellant before this Court was that the submissions have not been correctly recorded by the Appellate Tribunal. If that be so, the appellant had a remedy available. Held that: - The law is very well settled. If the case of the appellant was that either the submissions have not been correctly recorded or that some of the submissions actually made before the Appellate Tribunal were not recorded and not dealt with, the remedy available for the appellant was before the Appellate Tribunal. Only on the basis of the letter addressed by the Cen Ex Services, the Consultants appointed by the appellant, we cannot accept the contention that what is recorded in paragraph 2 of the Judgment is not correct. Before the Appellate Tribunal, the appellant never relied upon the letter addressed by the Cen Ex Services - Also, the said letter specifically refers to the mineral oil. If the appellant wanted to rely upon the said letter, it was for the appellant to produce the said letter before the Appellate Tribunal and satisfy the Tribunal that the lubricating base oil is also a mineral oil. The question of fact whether the lubricating base oil is mineral oil or not cannot be adjudicated upon in this appeal for the first time. Appeal dismissed - decided against appellant.

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• 2017 (10) TMI 655
  Rejection of Registration application - Section 6 of the CEA, 1944 - liability of predecessor - Held that: - the show cause notice issued to the predecessor of the Respondent is pending adjudication and there was no enforceable demand against the predecessor of the Respondent - the issue of alleged liability of the predecessor of the Respondent to pay demand was completely irrelevant for the consideration of Application made by the Respondent under Section 6 of the said Act and Rule 9 of the said Rules. If the Respondent had complied with all the requirements of law, there was no impediment in the way of granting registration to the Respondent notwithstanding pending proceedings against its predecessor for adjudication of the demand made from the predecessor - the Appellate Tribunal was right in holding against the Appellant - appeal dismissed - decided against appellant.

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• 2017 (10) TMI 654
  Clandestine manufacture and removal - dutiable cotton cone yarn - opportunity to cross examine - Held that: - the Tribunal made it very clear that sustenance or otherwise of the allegations and charges made against the appellant in the SCN will be dependent on the evidence drawn up in the cross examination of Shri P. Duraisamy. It is interesting to note that this final order, dated 30-08-2006 of CESTAT was not appealed against by the department, from which it can be inferred that the department did not have any grievance against these findings and directions of the Tribunal. The entire de novo proceedings will therefore have to be viewed through the lens of the Tribunal's earlier final order. The facts on record indicate that in the cross examination Shri P. Duraisamy has retracted the entire statements given by him. He has also categorically denied ever having been the Technical Director of the company. He has informed that he was only Technical Consultant which at the most, would make him a third party to the proceedings. Statements made by other persons have also been retracted either by way of retraction or in their cross-examination - the entire bed rock of the department s case against the appellant namely, the statement of Shri Duraisamy and the documents allegedly authored by him, have crumbled in the aftermath of the cross examination of the said person. The allegations and charges made against the appellant will not sustain - appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 653
  Manufacture - base frame fitted with engines or alternators, fuel tank and acoustic enclosures and base frame fitted with engine, alternator fuel tank and acoustic enclosures cleared to 100% EOU - According to department, the goods have been procured on the basis of invoices and the goods have been cleared as such since the activity of fitting of the base frame with acoustic enclosure etc. does not amount to manufacture - Held that: - since for the very same goods, after visit to the factory for the period 2006 07, the department having accepted that the process in the factory amounted to manufacture and also for the reason that clearances of the subject goods to independent buyers and DTA units are undisputedly made on payment of duty, the allegation that the activity does not amount to manufacture when very same goods are cleared to 100% EOU is not justified. Extended period of limitation - Held that: - there is no evidence to establish any suppression of facts or willful mis-statement with intent to evade payment of duty on the part of the respondent - the demand invoking the extended period is unsustainable. The respondent has vehemently argued to award damages basing upon the CBEC Circular F. No.390/CESTAT/69/2014-JC dated 22.12.2015 for awarding cost to the respondent as the respondent has been dragged to frivolous litigation by the department. The issue that has arisen for determination is on the basis of a show cause notice and the fact does not disclose any vexatious action on the department - the said plea is without basis. Appeal dismissed - decided against Revenue.

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• 2017 (10) TMI 652
  Benefit of N/N. 108/95-CE dated 28.08.1995 - denial on the ground that the goods were not supplied to the project or Project Implementing Authority but to the contractors who continued to the owner of the said goods even after the completion of the project - Held that: - in appellants own case M/s Escorts Construction Equipment Ltd. (ECEL) Versus CCE, Delhi-IV [2017 (1) TMI 1352 - CESTAT CHANDIGARH], for the earlier period it was held that ultimately, as the machineries had been put in use by the sub contractors, who were given the job of execution the claim for exemption cannot be denied - the appellant is entitled for the benefit of exemption N/N. 108/95-CE dated 28.8.1995 - appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 651
  CENVAT credit - job-work - denial of service tax taken by the appellants in respect of services provided to their job workers while doing their job work - Held that: - It is not in doubt that the said services are used in the premises of the job worker who is doing job work on the goods being manufactured by the appellant. Thus it is apparent that the said services have been used for the manufacture of the final product cleared by the appellant though indirectly - credit allowed - appeal dismissed - decided against Revenue.

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• 2017 (10) TMI 650
  CENVAT credit - items like motors, generator, engine, remnant oil etc cleared by them after breaking of the ship - demand has been raised holding the activity of selling motors, generator, engine, remnant oil etc as trading - Rule 6 of CCR - Held that: - what the appellants are purchasing is a ship for the purpose of breaking. The appellants are breaking the ship and as a result certain items are recovered. The scrap so generated is sold by appellants on payment of central excise duty. Other items generated are sold by them as it is. The items in respect of which demands for revenue under Rule 6 of Cenvat Credit Rules have been made are not purchased by appellants but are part of the ship when it is imported. In this regard, the activity of the appellants cannot be considered as trading activity - appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 649
  CENVAT credit - input services - services of commission agent - Held that: - CBEC is of the view that credit on said services should be allowed and was advisable prior to deletion of “activity related to business - even revenue is of the belief that the credit of such services is admissible. Under these circumstances, it cannot be said that the appellants could not have held a bonafide belief that the said credit is admissible. Extended period of limitation - Held that: - the show-cause notice was issued on 14.11.2013 in respect of period 22.08.2005 to 09.04.2011 - notice has been issued invoking the extended period of limitation and therefore in absence of any evidence of malafides the same cannot be sustained. Appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 648
  CENVAT credit - parts manufactured by appellant and supplied to their own office and parts purchased by them - Held that: - It is seen that the total cenvat credit claimed by the appellants is higher than the total duty demanded from the appellants. This situation clearly points to the fact that the figure of cenvat credit claimed by the appellants is inflated. In normal circumstances, the value of input is only a fraction of the price of the final product as there is an element of value addition. Moreover in industry, there is always a factor of non-excisable goods which are used in the final product. As a result the amount of cenvat credit is usually much lower than the amount of duty payable on the finished goods - the claim made by the appellants is inflated and onus is on the appellants to substantiate the claim. The appellants have not given any evidence of actual receipt of goods in respect of which cenvat credit has been claimed. In absence of the same the cenvat credit cannot be allowed. It is the responsibility of the appellants to produce the evidence that the items in respect of which cenvat credit have been used in the manufacture of final products. As a matter of abundant precaution and in the interest of justice, the appellants are given an opportunity to produce evidence of receipt of these inputs before the original adjudicating authority - appeal allowed by way of remand.

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• 2017 (10) TMI 647
  CENVAT credit - Rule 16 of the Central excise Rules - denial of credit on the ground that the goods brought back to the Nagpur factory was not originally manufactured by the said factory and also on the ground that the documents on which the credit is sought to be availed is not addressed to the Nagpur factory but to their office at Thane - Held that: - CBEC in its Circular dated 13/12/2001 has clarified that Receipt of duty paid goods in the factory of manufacturer for the purpose specified in said rule may be allowed even in respect of goods not manufactured by them subject to adherence of other conditions prescribed therein - rejection cannot sustain - credit allowed. Further, the receipt of goods at Nagpur factory has not been challenged by the Revenue - the objection regarding endorsement of documents and address of Thane office in the documents becomes a procedural lapse. Substantive benefit cannot be denied for procedural reasons - credit allowed. Appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 646
  Valuation - price-variation clause - Colour Television of various sizes and models - demand was raised on the assumption that the price difference between the branch of the appellant and the dealer has varied - Held that: - There is no investigation, as regards whether there is an increase in the MRP at the time of sale of the CTVs from the dealers to the customers - Revenue could not establish that the appellants have sold the goods at a price and MRP which is more than the MRP declared on the products - demand does not sustain - appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 645
  Simultaneous availment of Depreciation and CENVAT credit - Held that: - since during the period 2000-2001 to 2004-2005, the appellants had been suffering heavy losses, which was much more than the depreciation, the depreciation did not affect the profitability and the same stood unabsorbed depreciation - Since there was no profit in the books of accounts of the appellant during the relevant period, the appellant did not avail double benefit i.e., Cenvat Credit as well as benefit of IT - appeal allowed - decided in favor of appellant.

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• 2017 (10) TMI 644
  CENVAT credit - Excisability - Ethyl alcohol - N/N. 3/2005-CE (Serial No. 14) - case of Revenue is that the said product is not at all covered for Central Excise levy and hence, the Cenvat Credit Scheme itself is not available to the appellant - Held that: - similar matter came up for discussion by the Tribunal in the case of Rajshree Sugars [2014 (11) TMI 919 - CESTAT CHENNAI], where it was held that rectified spirit and extra neutral alcohol are non-excisable goods w.e.f. 01.03.2005, and therefore, the appellants are not eligible to avail the benefit of exemption N/N. 67/1995-CE on the molasses captively used in the manufacture of the said goods - The Tribunal held that after restructuring of Central Excise Tariff from 6 digit to 8 digit w.e.f. 01.03.2005, rectified spirit and extra neutral alcohol are exempted by Notification 3/2005-CE and the appellants had correctly discharged their obligation under Rule 6 of Cenvat Credit Rules, 2004. The reliance placed by the Revenue on the entries made in HSN in order to understand the scope of Central Excise Tariff is not proper in the context of the present case. It is clear that in Central Excise levy, there are certain restrictions placed by the Constitution with reference to the powers of Union Govt. to tax on alcohol for human consumption. With this background, the Central Excise Tariff is structured and it is not equivalent or comparable to the HSN to that extent - as such there is no dispute about the nature of product cleared by the appellant. The reliance by original authority on the comparison with HSN is misplaced. The finding that the entry 2207.20 does not cover undenatured ethyl alcohol having strength at 80% and above and hence the same is non-excisable, is not legally and factually sustainable. Ethyl alcohol/ rectified spirit which is not for human consumption is finding place in tariff item 2207 2000. The impugned order holding ethyl alcohol as non excisable product is not legally sustainable - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2017 (10) TMI 643
  Levy of purchase tax - purchases made by the Branch Office effected within the State of U.P - separate legal entity of Branch Office and the Head Office - Held that: - A Branch Office does not of its own have a separate and distinct legal existence. Be it a Head Office or a Branch Office, they are only arms of the one singular entity which is the concern. This issue need not detain the Court as it has been authoritatively ruled upon in English Electric Company. That there can possibly be no contract of sale between the offices of one entity/concern is a proposition which cannot be open to doubt or debate. Both the authorities below lost sight of the unambiguous and undisputed declaration made by the revisionist that all purchases which were being effected within the State of U.P. were exclusively for being transmitted outside the State where its Head Office was situate. There was thus, an unbroken and inextricable link between the purchases made in the State of U.P. and their consequential dispatch to the State of Jammu & Kashmir - no evidence was relied upon to establish a disconnect between the purchase of goods and their dispatch outside this State. This was therefore clearly a purchase in the course of inter-State trade and commerce referable to Section 3(a) of the 1956 Act. There is no material to establish that the purchase of goods and their dispatch to the State of Jammu & Kashmir were not part of the same transaction. The movement of the goods from this State to the State of Jammu & Kashmir was occasioned by and directly linked to the purchases effected by the revisionist within the State - revision allowed.

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• 2017 (10) TMI 642
  Refund of wrong reversal of input tax credit - Rate of VAT - inter-state sale - Natural Gases - Appellant purchases Natural Gases from Oil and Natural Gas Commission (ONGC) and would re-sell the same to various customers - rate of tax 4% or 12.5%? - C-Form - According to the appellant, rejection of refund is in violation of Article 265 of the Constitution, which mandates that no tax shall be levied or collected, except by authority of law - Section 41 of the TNVAT Act, 2006, as amended with effect from April 1, 2012 - Held that: - The learned Single Judge while disposing of the Writ Petition has directed the appellant to avail the Appeal remedy and to prefer an Appeal as against the impugned order dated 26.06.2015 passed by the Commercial Tax Officer within a period of 30 days. The learned Single Judge, while disposing of the Writ Petition, has also taken into consideration the submission made by the respondent counsel with regard to the reference made under Section 27 of TNVAT Act, and came to the conclusion that when there is an alternative remedy available, bypassing the same, the Writ Petition filed by the petitioner cannot be entertained. Despite there being an alternative remedy, Writ remedy under Article 226 of the Constitution can be invoked only under such circumstances when principles of natural Justice is violated on the face of the record. In the present case, the appellant has to avail the appeal remedy under the statute, which cannot be given a go-by, by invoking the Writ Jurisdiction directly. Therefore, no interference is warranted against the order passed by the learned Single Judge. Appeal dismissed - decided against appellant.

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• Indian Laws

• 2017 (10) TMI 667
  System of designation of Senior Advocates in the Supreme Court of India - whether system is flawed and the system needs to be rectified - Held that:- We proceed to venture into the exercise and lay down the following norms/guidelines which henceforth would govern the exercise of designation of Senior Advocates by the Supreme Court and all High Courts in the country. The norms/ guidelines, in existence, shall be suitably modified so as to be in accord with the present. I. All matters relating to designation of Senior Advocates in the Supreme Court of India and in all the High Courts of the country shall be dealt with by a Permanent Committee to be known as “Committee for Designation of Senior Advocates”; II. The Permanent Committee will be headed by the Hon’ble the Chief Justice of India and consist of two senior-most Judges of the Supreme Court of India (or High Court(s), as may be); the learned Attorney General for India (Advocate General of the State in case of a High Court) will be a Member of the Permanent Committee. The above four Members of the Permanent Committee will nominate another Member of the Bar to be the fifth Member of the Permanent Committee; III. The said Committee shall have a permanent Secretariat the composition of which will be decided by the Chief Justice of India or the Chief Justices of the High Courts, as may be, in consultation with the other Members of the Permanent Committee; IV. All applications including written proposals by the Hon’ble Judges will be submitted to the Secretariat. On receipt of such applications or proposals from Hon’ble Judges, the Secretariat will compile the relevant data and information with regard to the reputation, conduct, integrity of the Advocate(s) concerned including his/her participation in pro-bono work; reported judgments in which the concerned Advocate(s) had appeared; the number of such judgments for the last five years. The source(s) from which information/data will be sought and collected by the Secretariat will be as decided by the Permanent Committee; V. The Secretariat will publish the proposal of designation of a particular Advocate in the official website of the concerned Court inviting the suggestions/views of other stakeholders in the proposed designation; VI. After the data-base in terms of the above is compiled and all such information as may be specifically directed by the Permanent Committee to be obtained in respect of any particular candidate is collected, the Secretariat shall put up the case before the Permanent Committee for scrutiny; VII. The Permanent Committee will examine each case in the light of the data provided by the Secretariat of the Permanent Committee; interview the concerned Advocate; and make its overall assessment on the basis of a point-based format VIII. All the names that are listed before the Permanent Committee/cleared by the Permanent Committee will go to the Full Court. IX. Voting by secret ballot will not normally be resorted to by the Full Court except when unavoidable. In the event of resort to secret ballot decisions will be carried by a majority of the Judges who have chosen to exercise their preference/choice. X. All cases that have not been favourably considered by the Full Court may be reviewed/reconsidered after expiry of a period of two years following the manner indicated above as if the proposal is being considered afresh; XI. In the event a Senior Advocate is guilty of conduct which according to the Full Court disentitles the Senior Advocate concerned to continue to be worthy of the designation the Full Court may review its decision to designate the concerned person and recall the same;

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• 2017 (10) TMI 666
  Conviction for the offence under Section 20 (b)(ii)(C) & Section 28 read with Section 23(c) of NDPS Act - Held that:- The prosecution evidence is completely reliable and trustworthy. The aforementioned events clearly depict that the arguments advanced by the learned counsel for the appellant are without merits and on mere conjectures and surmises and hence are rejected. On perusal of the statement of the witnesses who recovered and deposited the sample to the CRCL, it is clear that out of the recovered charas, three samples of 30 grams each were taken and placed in small polythene wrapped with tape and kept in three brown colour paper envelopes marked as ‘A-1’,’ A-2’ and ‘A-3’. The remaining substance was kept in a transparent polythene bag and then packed in a tin box which was converted into cloth pulanda and sealed with custom seal No.6. The sealed material including the suitcase were seized under NDPS Act, the documents of the appellant were also seized and his statement was recorded under Section 67 NDPS Act. The impugned judgment of the learned Special Judge, NDPS for convicting the appellant under Section 20 (b)(ii)(C) and Section 28 read with Section 23(c) of NDPS Act for ten years rigorous imprisonment together with a fine of Rs. two lakhs (cumulatively) cannot be interfered with. I find no merit in the appeal and the same is dismissed.

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• 2017 (10) TMI 665
  Conviction for the offence u/s 138 of the Negotiable Instruments Act - nature of offence - Held that:- The notice intimated to the petitioner about the dishonour of the cheques and his duty to discharge the loan which was taken by him from the complainant. The issuance of cheques by the petitioner in favour of the opposite party no. 2 is an admitted fact. Therefore, it was a burden upon the petitioner to prove that the cheques were misused or that he had paid the amount. The petitioner failed to prove either and, therefore, presumption has to be drawn against the petitioner. The witnesses have categorically stated about the taking of friendly loan from the complainant by the petitioner for which five cheques were given and which got dishonoured due to insufficiency of founds. On such admitted facts the issue raised by the petitioner with respect to instituting a separate case appears to be hyper technical and a ploy to thwart the complainant from getting the legitimate claim. The complainant has been able to prove his case beyond all reasonable doubts and, therefore, the learned trial court had rightly convicted the petitioner for the offence punishable under Section 138 of the Negotiable Instruments Act which was subsequently affirmed in appeal. There being no reasons to conclude otherwise the judgment of conviction passed by the learned trial court and upheld by the learned appellate court is, hereby, sustained. So far as the sentence imposed upon the petitioner is concerned, it seems that he has remained in custody for more than six months. Therefore, there is no question of reduction in the sentence of imprisonment imposed upon the petitioner.

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