TMI Tax Updates - e-Newsletter
October 7, 2017
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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GST:
Changes in GST Rates for Goods
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GST:
Changes in IGST EXEMPTION ON IMPORTS OF GOODS
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GST:
GST: Relief for SMEs, threshold for composition scheme raised
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GST:
GST to facilitate ease of doing business: EU
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Income Tax:
Disallowance u/s. 40(a)(i) - payment for maintenance of aircraft and engine/repairs - payee does not have PE in India - assessee is not required to deduct tax at source u/s 195
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Income Tax:
Disallowance of deduction u/s. 54B - Belated filing of return - Due date for furnishing the return of income as per section 139(1) is subject to the extended period provided u/s 139(4) - exemption allowed.
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Income Tax:
Allowability of interest expense - In absence of establishing the necessary nexus being between the borrowings and the investments in the mutual funds, it can safely be concluded that the investments in the mutual fund units have been made out of mixed funds.
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Customs:
The department cannot be compelled to follow an earlier interim order, which has merged with a simple closure of writ petitioner, without there being any adjudication on the merits - HC
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Customs:
Importer/actual user cannot be called upon to pay duty on negligible percentages of storage or transit loss etc.
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Indian Laws:
Recommendations made by the GST Council in its 22nd Meeting held today under Chairmanship of the Union Minister of Finance and Corporate Affairs, Shri Arun Jaitley in the national capital.
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Indian Laws:
Offence u/s 138 of the NI Act - it cannot be said that the cheques given by way of security are only an empty exercise and that the lender has no authority to present the cheques when there is default. - HC
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Central Excise:
Method of valuation - MRP based value or transaction value - on the pack no MRP mentioned and the packs also bore the mention that Free not for sale. Therefore, the provisions of Standards of Weights and Measures Act, 1976 and Rules made there under do not apply in such supplies.
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VAT:
Reversal of input tax credit - ITC availed of need not be reversed merely because goods purchased are sent temporarily outside the State for the purposes of job work. - HC
Articles
Notifications
Customs-
47/2017 - dated
6-10-2017
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ADD
Seeks to continue imposition of anti-dumping duty on imports of "Melamine" originating in or exported from European Union, Iran, Indonesia and Japan
GST - States-
28473-FIN-CT1-TAX- 0043/2017 - dated
25-9-2017
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Orissa SGST
Amendments in the notification of the Government of Odisha, in the Finance Department Notification No.19873-FIN-CT1-TAX-0022-2017, dated the 29th June, 2017 bearing S.R.O. No 306.
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28469-FIN-CT1-TAX-0043/2017 - dated
25-9-2017
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Orissa SGST
Amendments in the notification of the Government of Odisha, in the F.D. No.19877-FIN-CT1-TAX-0022-2017, dated the 29th June,2017 bearing S.R.O. No. 307/2017 under the OGST Act,2017.
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28062-FIN-CT1-TAX-0043/2017 - dated
22-9-2017
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Orissa SGST
Amendment to notification No. 19829-FIN-CT1-TAX-0022/2017 dated 29th June, 2017 (SRO No. 295/2017) relating to the exemption of certain goods such as cotton seed oil cake, Khadi fabric, idols made of clay etc.
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03/2017-Puducherry GST - dated
22-9-2017
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Puducherry SGST
Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 117 of the Puducherry Goods and Service Tax Rules, 2017.
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G.O.Ms. No. 36/CT/2017-18 - dated
20-9-2017
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Puducherry SGST
The Puducherry Goods and Services Tax (Seventh Amendment) Rules, 2017.
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G.O.Ms. No. 35/CT/2017-18 - dated
20-9-2017
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Puducherry SGST
Appointed date for Section 51 and persons liable to make TDS.
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G.O.Ms. No. 34/CT/2017-18 - dated
20-9-2017
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Puducherry SGST
Casual Taxable persons making taxable supplies of handicraft goods - Exemption from obtaining registration.
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G.O.Ms. No. 33/CCT/2017-18 - dated
20-9-2017
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Puducherry SGST
Waiver of Late Fee payable under section 47.
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F.No. 3251/CTD/GST/2017 - dated
19-9-2017
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Puducherry SGST
Proper officer relating to provisions of Registration and Composition under the Puducherry Goods and Services Tax Act, 2017.
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F.No. 3240/CTD/GST/2017/4 - dated
19-9-2017
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Puducherry SGST
Filing of Return in Form GSTR-3B from August to Decemmber 2017.
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G.S.R.042/P.A.5/2017/S.164/Amd.(3)/2017 - dated
20-9-2017
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Punjab SGST
The Punjab Goods and Services Tax (Third Amendment) Rules, 2017.
Income Tax-
F. No. 370142/25/2017-TPL - dated
6-10-2017
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IT
Draft - Framing of rules in respect of Country-by-Country reporting and furnishing of master file – comments and suggestions-reg.
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2017 (10) TMI 255
Input tax credit under the Central Goods and Services Tax Act, 2017 - e-auction - whether lessee can claim input tax credit? - Held that: - the G.S.T. payable on the sale value of the mineral purchased in the e-auction shall be paid by the buyer directly to the lessee and the lessee would be responsible for all compliances as may be required under Act - the Monitoring Committee directed to prepare appropriate proforma and also take steps for carrying proper Tax Identification Number of the respective lessees on the invoices as may be required.
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2017 (10) TMI 254
Composition Scheme - it appears that the system is not working upto the level and the same is required to be corrected & updated to meet requirements - Held that: - problem occuring in system must be immediately reported - no coercive action (penal interest, late fees and prosecution) against any of the client of the petitioners members who are referred in the petition and are informing by email, will be protected. The composition Scheme is extended upto 30.9.2017, therefore, desirous assessee can apply - those who could not apply under composition scheme upto 16.8.2017, their applications will be accepted and if their case does not fall under composition log-in, they will send it by email and their applications will be accepted w.e.f. 1.7.2017.
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2017 (10) TMI 253
Utilisation of CGST credit and SGST credit for payment of integrated tax in terms of Section 49 (5) of the Central Goods and Services Tax Act, 2017 - Held that: - A reference is made to Rule 86 (2) of the CGST Rules which states that ‘the electronic credit ledger shall be debited to the extent of discharge of any liability in accordance with the provisions of Section 49.’ It is also pointed out that under Section 146 of the CGST Act, the mandate of the Common Goods and Services Tax Electronic Portal is to facilitate the registration, payment of tax, furnishing of its returns, etc. It is also submitted that the system cannot be programmed so as to deny the utilization of CGST and SGST credit in a manner not envisaged either under Section 49 (5) of the Act or the Rules made under Section 49 (4) of the Act - some time sought for obtaining instructions.
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2017 (10) TMI 252
Migration or implementation of the GST - On the enforcement of the GST, Petitioner got itself migrated for the purpose of GST as partnership firm but instead of issuing registration as a partnership firm, it has been shown to have been registered as a sole proprietorship - Held that: - Department may take necessary steps and rectify the mistake within ten days - the Department is free to allot a new ID and password to the petitioner as a partnership firm as was existing prior to the migration or implementation of the GST.
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2017 (10) TMI 251
Challenge to the validity of the Goods and Services Tax (Compensation to States) Act, 2017 - Clean Energy Cess - claim of petitioner is that they have already paid the cess - Held that: - To facilitate the implementation of this interim order, it is necessary for the officers of the concerned Department, charged with the responsibility of levying and collecting Clean Energy Cess on coal to depute a team to the Petitioner’s business premises to verify on how much of the stock of coal Clean Energy Cess under the FA, 2010 already stands paid - Subject to the Petitioner furnishing to the satisfaction of the officers proof of such payment, the Petitioner will be given credit for such payment and will not be required to make any further payment under the impugned Act for effecting sales and clearances - Till such time the said exercise is completed, no coercive steps will be taken against the Petitioner to recover the levy under the impugned Act - matter on remand.
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2017 (10) TMI 250
Refund of amount of compensation cess paid under the impugned legislation - Appropriate directions are accordingly sought by the Petitioner in this application, to the Respondents to amend the Form Tran-I and simultaneously GSTR -3B and GSTR-1, GSTR-2 and GSTR-3 where utility of Cess is to be shown and/ or carried forward as cess or any other appropriate directions to the Respondents so that the Applicant/Petitioner could use the credit of cess already paid on the stock held on 30th June 2017 in terms of the order dated 25th August 2017 of this Court. Held that: - it is directed that the Petitioner will continue to pay the taxes as and when they fall due after availing and utilizing the credit for the cess already paid. This will, however, be subject to the final orders passed by this Court - As regards to the non-filing of returns by the Petitioner on the due dates, till such time an appropriate method/system is evolved by the Respondent which would facilitate utilization of the credit and provide for it in the returns filed electronically, the Respondents will not take any coercive steps against the Petitioner for the failure to file such electronic returns on time.
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2017 (10) TMI 249
GST rate for Sanitary Napkins - The petitioner enclosing the statistics regarding availability of sanitary napkins to women is a dire need, the matter books no delay and deserves to be heard - Issue notice to show cause as to why rule nisi be not issued.
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Income Tax
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2017 (10) TMI 248
Condonation of delay - reason of delay - delay of 2984 days - Held that:- In the circumstances and a perusal of the whole order does not indicate that the Tribunal terms the conduct of the assessee to be the sole factor responsible for the delay. The conduct is not termed as negligent, callous and lacking in bonafides either. In para 12 of the order under challenge, we find that the Tribunal holds that the assessee failed to show that there was sufficient cause. How that cause is not sufficient has been explained by the Tribunal in the earlier paragraphs. However, the explanation which the assessee provided was an advise from his Chartered Accountant. That is why the paragraphs are devoted to the conduct of the professional. The advice given is not only termed as wrong/absurd but the assessee is faulted for blindly accepting such an advice. He is termed as an imprudent man and who failed to verify the correctness of the advice given or apply his mind to it. Thus, the behaviour of the assessee, according to the Tribunal, is beyond the comprehension of human conduct and probabilities. The Tribunal though aware of these principles but possibly carried away by the fact that the delay of 2984 days is incapable of condonation. That is not how a matter of this nature should be approached. In the process the Tribunal went about blaming the assessee and the professionals and equally the Department. To our mind, therefore, the Tribunal's order does not meet the requirement set out in law. The Tribunal has completely misdirected itself and has taken into account factors, tests and considerations which have no bearing or nexus with the issue at hand. The Tribunal, therefore, has erred in law and on facts in refusing to condone the delay. The explanation placed on affidavit was not contested nor we find that from such explanation can we arrive at the conclusion that the assessee was at fault, he intentionally and deliberately delayed the matter and has no bona fide or reasonable explanation for the delay in filing the proceedings. The position is quite otherwise. In the light of the above discussion, we allow both the appeals. We condone the delay of 2984 days in filing the appeals but on the condition of payment of costs, quantified totally at ₹ 50,000/. Meaning thereby, ₹ 25,000/ plus ₹ 25,000/ in both appeals. The costs to be paid in one set to the respondents within a period of eight weeks from today. On proof of payment of costs, the Tribunal shall restore the appeals of the assessee to its file for adjudication and disposal on merits. We clarify that all contentions as far as merits of the claim are kept open. We have not expressed any opinion on the same.
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2017 (10) TMI 247
Tax appeal is admitted for consideration of following substantial question of law: Whether on the facts and circumstances of the case, Appellate Tribunal was justified in deleting disallowance made by Assessing Officer u/s 40(a) (ia) of the Act on payment of ₹ 70,18,471/- to M/s. Ashwin Chinubhai Broking Pvt. Ltd.? Disallowance u/s 40(a) (ia) on payment towards V-Sat expenses and other connectivity charges - Held that:- Such an issue has been decided by the Supreme Court in case of Commissioner of Income Tax vs. Kotak Securities Ltd. [2016 (3) TMI 1026 - SUPREME COURT] as held that the brokers make payment to the stock exchange for the facilities of faceless screen based transactions made available at the stock exchange which was compulsory for the brokers to use. In the opinion of the Supreme Court, this was not a payment of fee for technical service rendered by the stock exchange inviting deduction at source under section 194J of the Act. This being the position, second question is not admitted.
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2017 (10) TMI 246
Taxability of catering revenue - Held that:- Identical issue was considered by the co-ordinate bench in the assessee’s own case relating to AY 2007-08 wherein deleted this addition as held that the amount retained by the assessee from the bills raised by the caterers would not be taxable under the principles of mutuality, since the said receipt cannot be considered as amount received from outsiders. The Co-ordinate bench observed that the assessee has received money from its members and paid to the caterers at a lower rate by retaining its share and hence it cannot be said that the transaction involves non-members. In the instant case also, we notice that the facts are almost identical. The outside caterer has given assessee’s share by way of direct payment, the source of which is the collection from the members. Accordingly, consistent with the view taken by the coordinate benches, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the impugned addition. Interest income earned by the assessee from UTI and GOI tax free bonds - Held that:- It is well settled proposition that the AO is not entitled to assess an income, which is otherwise exempt under the Act, since the AO is required to determine the total income in accordance with the law. Since the assessee claims that the above said interest income of ₹ 51.69 lakhs would be exempt u/s. 10(15) of the Act, we are of the view that the same requires examination at the end of the Assessing Officer. Accordingly, we set aside the order passed by the learned CIT(A) on this issue and restore the same to the file of the Assessing Officer with the direction to examine the claim for exemption u/s. 10(15) of the Act and take appropriate decision in accordance with law. Addition of interest income - claim of the assessee is that it has been added by the Assessing Officer without taking notice of the fact that the assessee itself has offered the same as its income in its original return of income and it has resulted in double taxation of same income - Held that:- Since double taxation of same income is not permitted under the Act, we are of the view that this claim of the assessee also requires verification at the end of the AO. Accordingly we restore this issue to the file of the Assessing Officer. Determination of annual value of the property - Held that:- Identical addition has been made by the Assessing Officer in A.Y. 2006-07. However, the Tribunal has restored the same back to the file of the Assessing Officer with the direction to verify the applicability of provisions of Maharashtra Rent Control Act, 1999 to the assessee’s premises. Accordingly, consistent with the view taken by the Tribunal in A.Y. 2006-07, we set aside the order passed by the learned CIT(A) on this issue and restore the same to the file of the Assessing Officer with similar directions given by the Tribunal. Disallowance of payment of water charges made to BMC claimed by the assessee as part of municipal tax - Held that:- As in assessee's own case for AY 2008-09 the assessee is in need of water to maintain the ground and other collateral purposes and accordingly, concluded that the expenditure incurred on water charges is necessary one and allowable under the provisions of section 23(1) of the Act. Since a particular view has already been taken by the co-ordinate bench on this issue, consistent with the view so taken, we set aside the order passed by Ld CIT(A) on this issue and direct the Assessing Officer to allow deduction of water charges/tax paid to BMC u/s. 23(1) of the Act. Applicability of MAT provisions to the assessee - Decide against assessee. MAT credit - assessee cannot be denied the benefit of MAT credit allowable as per the provisions of the Act.
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2017 (10) TMI 245
Disallowance u/s. 40(a)(i) - maintenance of aircraft and engine/repairs and maintenance of aircraft and travelling and accommodation charges - PE in India - Held that:- The impugned expenditure has been incurred by the assessee in pursuance of maintenance contract between the assessee and M/s EAT, Germany. In the case of Kandla Port Trust (2011 (11) TMI 469 - ITAT RAJKOT ), it was held that the payment made for annual maintenance contracts would not fall under the category of fee for technical services within the meaning of provisions of sec. 194J of the Act. In the case of DDRC SRL Diagnostic (P) Ltd (2015 (10) TMI 2366 - ITAT MUMBAI) the co-ordinate bench has noticed that the CBDT has expressed the view in Circular No.715 (supra) that routine, normal maintenance contracts which includes supply of spares will be covered by sec. 194C of the Act. In the instant case no material was placed before us to show that the clarifications issued by the CBDT would not apply to the facts of the present case. Hence, consistent with the view taken in the above cited cases, we hold that the payment made towards annual maintenance contracts would fall under the category of works contract. In that view of the matter, the payment given by the assessee would constitute business receipts in the hands of M/s EAT and the same is not taxable in India, since it does not have PE in India. In that case, there is merit in the contentions of the assessee that it is not required to deduct tax at source u/s 195 of the Act, as no part of the amount paid to M/s EAT is chargeable in India in the hands of M/s EAT. - Decided in favour of assessee. Disallowance u/s. 40(a)(i) in respect of travelling and accommodation charges - Held that:- At the time of hearing, the assessee was asked to furnish break-up details of reimbursements duly describing the details of deduction of tax at source. However, till the date of finalizing this order, the same has not been received. In any case, the claim of the assessee requires verification at the end of the AO. Accordingly we set aside the order passed by the AO on this issue and restore the same to his file with the direction to examine this issue afresh by duly following the ratio of decision rendered in the case of ASK wealth advisors (P) Ltd (2015 (10) TMI 921 - ITAT MUMBAI ). - Decided in favour of assessee for statistical purposes.
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2017 (10) TMI 244
TDS u/s 194C not deducted - Revision u/s 263 - AO erroneously omitted to make addition in respect of payment as venue charges, payment to principals of schools and colleges and payment to examiners - non deduction of tds - Held that:- AO has chosen to make addition of TDS on foreign remittance but has not chosen to make any addition in respect of the payments made to resident in India because he was satisfied that each of the payments were less than the limits for which TDS has to be made in terms of section 194C of the Act. The presumption of the CIT in the impugned order is that the AO was satisfied that even the payments referred to in the show cause notice required compliance of Sec.194C of the Act, but were omitted to be disallowed u/s.40(a)(ia) of the Act. There is no basis on which the CIT has drawn such inference. Therefore we agree with the submissions of the ld. Counsel for the assessee that it was a conscious decision of the AO not to make any disallowance in respect of these payments by invoking the provisions of Section 40(a)(ia) of the Act. At best it can be said that two views were possible on the question whether TDS provisions were attracted to 3 payments as mentioned above to examiners by the Assessee. The AO has adopted one view which is permissible in law. The jurisdiction u/s 263 of the Act cannot be invoked in a case where two views are possible and the AO has taken one view with which the CIT does not agree. The decision of the Hon’ble Supreme Court in the case of Malabar Industries Ltd. (2000 (2) TMI 10 - SUPREME Court) clearly supports the plea of the assessee in this regard. - Decided in favour of assessee.
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2017 (10) TMI 243
Disallowance of deduction u/s. 54B - Belated filing of return - investments in purchase of agricultural land for claiming the benefit of exemption u/s 54B was made by the assessee after the due date of filing of return u/s 139(1) i.e. 31.10.2006 - Held that:- There is no dispute about the fact that the return of income has been filed by the appellant within sub section 4 of 139 of the IT Act. The Assessing Officer has erred in disallowing the exemption on the long term capital gain of the appellant uls 548 of the I.T. Act of ₹ 69,80,300/-. There is no dispute about the fact that the whole of long term capital gain of ₹ 1,65,27,403/- has been invested by the appellant in the purchase of another agricultural land within two year from the sale of the capital asset i.e. agricultural land. The sale of the asset having been taken place on 13-1-2006, falling in the previous year 2006-07, the return could be filed before the end of relevant assessment year 2007-08, i.e., 31-3-2007. Thus, sub-section (4) of section 139 provides extended period of limitation as an exception to sub-section (1) of section 139. Sub-section (4) is in relation to the time allowed to an assessee under sub-section (1) to file return. Therefore, such provision is not an independent provision, but relates to time contemplated under sub-section (1) of section 139. Therefore, such sub-section (4) has to be read along with sub-section (1). Due date for furnishing the return of income as per section 139(1) is subject to the extended period provided under sub-section (4) of section 139. Therefore, CIT(A) was of the considered opinion that the amount of ₹ 69,80,300/- has to be exempted uls 54B of the I T Act and therefore the Assessing Officer was rightly directed to delete the addition of ₹ 69,80,300/-., which does not need any interference on our part, hence, we uphold the same. - Decided against revenue
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2017 (10) TMI 242
Household expenses of assessee being an Ex-MP and Ex-MLA - Held that:- The agricultural land has been duly reflected in the Balance Sheet as on 31.03.2008 and drawings of ₹ 1,44,000/- shown by the Assessee in his Balance Sheet as on 31.03.2008 is not reflected in any of the Bank statements and Ld. CIT(A) has not considered the fact that the Assessee had adequate cash in hand of ₹ 3,87,000/- to meet his personal expenses. Even after meeting his personal expenses he has been left with cash of ₹ 3.87 lakhs in his hand during the relevant period. Keeping in view of the facts and circumstances of the case, we are of the considered view that ₹ 1,44,000/- is a meager sum considering the status of the assessee but it was ignored by the lower authorities that by virtue of the status of the Assessee most of his expenses are either free since he is eligible for such privileges and benefits as an Ex MP and Ex MLA or are reimbursed for the same reason. Hence the drawings incurred by him are adequate and the same have been duly shown in the Balance Sheet. We further find that no contrary evidence has been brought on record by the revenue to the averments made by the assessee. In view of the above, the addition in dispute is deleted and ground raised by the Assessee is allowed.
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2017 (10) TMI 241
Seeking approval u/s 80G rejected registration under section 80G is available to a charitable trust but not to a religious trust - whether organizing such melas are in the nature of religious activities or more in a form of a social gathering where people irrespective of their caste, creed, and religion gather and participate in various activities? - Held that:- On perusal of the order of the ld CIT(E), we donot see any basis for arriving at the conclusion that the activities of the assessee trust are predominantly religious in nature except for few expenditure heads which are held to include expenditure incurred towards religious activities. Useful guidance can be drawn from the decision of the Hon’ble Rajasthan High Court in case of Umaid Charitable Trust v. Union of India [2008 (5) TMI 232 - RAJASTHAN HIGH COURT] wherein held Revenue is not allowed to take a narrow approach that character of charitable trust was lost if one particular expenditure was made for such/above purpose and that too by way of contribution to another trust - No clause in the trust deed in the present case which indicates that income of the petitioner-trust was to be applied wholly or substantially for any particular religion. It is the dominant object of the trust which is important and contribution and expenditure incurred by the petitioner-trust has to be viewed in light of the objects with which charitable trust in question was constituted. In light of above discussions, we are setting aside the matter to the file of the ld CIT(E) to examine the same a fresh taking into consideration the legal proposition as above - Decided in favour of assessee trust for statistical purposes.
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2017 (10) TMI 240
Addition u/s 69C - assessee has allegedly made sales of gold bars during the impugned assessment year wherein sale proceeds have been stated to have been received in cash from undisclosed buyers which has been deposited by the assessee in the bank account of the assessee and hence sources of these cash deposit could not be satisfactorily explained by the assessee - Held that:- The assessee in the instant case as we have seen could not satisfactorily explain the sources of cash deposit of huge magnitude of more than ₹ 49 crores in his bank account which he claimed to be from cash sales from gold bars to the persons wherein the identity of the buyers are not revealed by the assessee. Thus, the assessee could not satisfactorily explain the sources of cash deposit in the bank account and consequently sources of incurring expenditure by way of purchases claimed by the assessee in its Profit and Loss Account of ₹ 48.78 crores could not be satisfactorily explained by the assessee and onus cast u/s 69C was not satisfied which will make amount covered by such expenditure represented by purchases of gold bars to be deemed income of the assessee under the deeming fiction of Section 69C. The said Section 69C is further controlled by proviso which has an overriding effect and provides that notwithstanding anything contained in any other provision of the 1961 Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income. Thus , Section 69C read with proviso makes it abundantly clear that the amount represented by expenditure incurred by the assessee towards purchases of gold bars constitute income within deeming fiction of 69C of the 1961 Act. Thus, we set aside the order of learned CIT(A) and confirm the addition to the tune of ₹ 49,17,69,925/- (Rs Forty nine crores seventeen lacs sixty nine thousand nine hundred and twenty five only ) for detailed reasons as cited above - Decided against assessee. Addition in respect of difference in closing capital of Meenakshi Enterprises (proprietary concern of the assessee) - addition proposed by learned CIT(A) based on remand report of the AO - Held that:- The said additions has been made by learned CIT(A) for the first time in his appellate order which has led to enhancement of the assessment. The assessee had contended that the assessee was never show caused by learned CIT(A) before such enhancement of income and the principles of natural justice are vitiated while as per learned CIT(A) orders the assessee was asked to explain the said difference in capital to which the assessee never replied. In fitness of things in the interest of justice, the assessee deserves one more opportunity and let the matter be restored to the file of the AO for fresh adjudication on merits after giving opportunity of being heard to the assessee and after considering the replies of the assessee.
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2017 (10) TMI 239
Addition u/s 14A r.w.r.8D - proof of sufficiency of own funds - Held that: The assessee has own available funds sufficient to cover the investments which yielded tax free income and therefore no disallowance is called for u/r 8D(2)(ii) of Rules. The assessee has share capital and reserves & surplus of ₹ 3.26 crores and ₹ 1.84 crores respectively as on 31.3.2010 whereas the investment were to the tune of ₹ 4.20 crores and thus the assessee’s own tax fee funds were sufficient to cover the amount of investments from the assessee yielding income by way of dividend. As held in the case of CIT V/s HDFC BANK LTD. [2014 (8) TMI 119 - BOMBAY HIGH COURT] where the mixed funds are available in the business both interest free funds as well as interest bearing funds and if the investments in the tax free securities are less than the tax free funds then the presumption would be drawn and that investments in the interest free security was made out of own funds. Accordingly, following the ratio laid down in the case of HDFC Bank (supra) we are inclined to delete the disallowance of ₹ 16,65,803/- by reversing the order CIT(A) on this issue. The AO is directed accordingly Disallowance on account of bad debts - Held that:- Respectfully following the precedent laid down by the Co-ordinate Bench of the Tribunal in the assessee’s own case, we direct the AO to allow the claim of the assessee as held assessee has satisfied the conditions stipulated in section 36(2)(i) since these are business debts which could not be recovered and written off. Following the principles laid down by the Special Bench in the case of Shreyas S. Morakhia (2010 (7) TMI 455 - ITAT MUMBAI ) we hold that assessee satisfied the conditions prescribed under section 36(2). - Decided in favour of assessee. Disallowance of research and processing fees - Held that:- We find a similar issue arose in the assessment year 2009-10 in which the addition was made by the AO to the total income of the assessee but in the proceedings before the FAA, the ld. CIT(A) deleted the addition made by the AO and the revenue has not challenged the decision of ld.CIT(A) before the Tribunal. Therefore, revenue’s plea cannot be raised at this juncture to rake up the same issue in the subsequent issue as the issue has been settled in the previous year. Moreover, even on merits the case of the assessee is very strong case as the payment is made to the same party viz M/s Key tone Corporate Solutions P. Ltd for providing data analysis and research on the stock market as well as commodity market. In view of the said facts and circumstances, we are inclined to direct the AO to delete the addition - Decided in favour of assessee. Addition on account of repairs and maintenance expenses - nature of expenditure - revenue or capital - Held that:- The assessee has incurred an expenditure on repairs and maintenance and renovation of office premises and therefore the same cannot be treated as capital in nature. We are, therefore, in complete agreement with the ld.CIT(A) that the said expenses are admissible as revenue expenditure. Accordingly we uphold the order of CIT(A) dismissing the ground raised by the revenue. - Decided in favour of assessee. Disallowance treating the share trading loss as speculation loss u/s 73 - Held that:- We find merit in the arguments of the ld.AR that if the income of the assessee is treated as speculation income in the trading division in terms of explanation (1) to section 73 of the Act then similar treatment has to be given to the income from F&O segment where the transactions are purely non-delivery based. The ld. CIT(A) has passed very detailed, comprehensive and reasoned order as has been reproduced herein in above. We are in agreement with the conclusion drawn by the ld.CIT(A) that set off of loss in cash division in shares trading from profit from F&O segment has to be allowed. Accordingly, we uphold the order of the ld.CIT(A) by dismissing the appeal of the revenue. - Decided in favour of assessee.
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2017 (10) TMI 238
Disallowance u/s. 40(a)(ia) - payment of various charges such as demurrage charges, handling charges paid to the Indian agents of non-resident shipping companies - Held that:- The non resident shipping companies have given two freight certificates w.r.t. each bill raised by Balaji Shipping Corporation, the first pertain to ocean freight which is already accepted by learned CIT(A) while granting relief to the assessee and Revenue is not in appeal against relief granted by learned CIT(A), and the second freight certificate is w.r.t. THC charges and documentation charges which are acknowledged to be received by non resident shipping companies, thus it leaves no doubt that these are merely reimbursement of expenses as also claimed by Shri Balaji Corporation vide debit note and are in the nature of payment referred to in Section 172(8) and hence are covered by provision of Section 172(2) and no income-tax was required to be deducted at source u/s 194C keeping in view special provisions relating to taxability of non resident shipping companies who have to discharge their liabilities towards income tax before leaving port or to make satisfactory arrangements for payment of taxes as are contained in Section 172 and Section 44B. The circular no. 723 issued by the CBDT on 19.09.1995 also supports the stand of the assessee that with respect to the ocean freight, demurrage charge, handling charges or other amount of similar nature which are paid to the Indian agents or authorized representative of non-resident shipping company who carry passengers, livestock, mail or goods shipped at port in India are not covered for deduction of tax at source under provision of 194C and 195 . Thus, keeping in view ratio of decision in the case of V.S Dempo & Company Ltd.( 2016 (2) TMI 308 - BOMBAY HIGH COURT) and in the light of the provision of section 172(8), explanation 2 to sub-section 2 to Section 44B read with afore stated circular no. 723 dated 19.09.1995, we hold that the issue is covered in favour of the assessee and we order deletion of the disallowance - Decided in favour of assessee TDS u/s 194C - TDS on clearing and forwarding charges paid to C&F Agents for clearing the consignments of import of goods - Held that:- No doubt these C & F Agents are independent contractors but once they deal with third party service providers such as custom authorities, port authorities, warehousing authorities, transporters and other service providers for clearance of import shipments, they only act as an agent on behalf of their principals i.e. the assessee and there action with third party service providers bounds the assessee done in the normal course of agency. This matter need to set aside and restore to the file of the AO to identify the disallowance u/s 40(a)(ia) which requires analysis of nature of each of the expenses covered by invoice raised by C&F agents and their coverage by provisions of Chapter XVII-B. Hence, in our considered the matter need to be set aside and restored to the file of the AO for necessary analysis of various such expenses incurred by agent on behalf of principal and applicability of provisions of deduction of income-tax at source to these expenses to work out disallowance u/s 40(a)(ia) read with provisions of Chapter XVII-B . The AO shall de-novo adjudicate the issue on merits in accordance with law . Interest paid on bank and unsecured loans - disallowance u/s 36(1)(iii) - Held that:- The assessee has contended that no interest bearing funds were utilised for advancing interest free loans and advances and interest free funds available with the assessee were utilised for advancing interest free loans and advances on which disallowance were made being loans and advances of ₹ 2,36,39,313/- advanced by the assessee and sundry debt owed by the sister concerns of ₹ 58,49,788/-. This contention of the assessee needs verification by the A.O. and hence the matter/issue is restored to the file of the A.O for necessary determination of the issue on merits in accordance with law and also with reference to books of accounts of the assessee. Both the parties have also fairly agreed that this contention of the assessee needs verification and matter can be restored to the file of the AO for necessary verification and enquiry. Amortisation of certain preliminary expenses - Expenditure incurred for increasing share capital allowable u/s. 35D - Held that:- The onus is on the assessee to prove that the said expenses fall within the ambit of allowability of Section 35D of the Act and all the conditions are met which are stipulated u/s 35D. The assessee has to bring on record cogent evidences strictly in accordance with provisions of Section 35D before its claim is allowed and the onus squarely lays on the assessee.These claims and contention of the assessee as to that there was a extension of undertaking and the said expenses are allowable u/s. 35D need verification by the A.O and hence the matter is set aside and restored to the file of the A.O for necessary de-novo determination of the issue on merits in accordance with law. Needless to say that proper and adequate opportunity of being heard shall be provided by the AO to the assessee in accordance with principles of natural justice in accordance with law.The assessee shall be allowed to submit the evidences and explanations which shall be admitted by the AO and adjudicated thereafter on merits in accordance with law.
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2017 (10) TMI 237
Disallowance u/s 40(a)(ia) - Held that:- Hon’ble Supreme Court in the case of Palam Gas Service v. CIT (2017) (2017 (5) TMI 242 - SUPREME COURT) has recently decided the issue against assessee by holding that disallowance u/s 40(a)(ia) shall be made even if the entire amount of covered expenditure are paid during the financial year and nothing remains to be paid at the year end, which decision of Hon’ble Supreme Court is binding on the assessee as it is now law of the land. Capital gain on sale of assessee’s share in the said flat - cost of acquisition of the flat and cost inflation index - Held that:- The assessee was not able to discharge burden of proof/onus of proof cast u/s 106 of 1872 Act as the assessee did not file documents for showing that the flat was exclusively owned by father of the assessee and payments for acquisition of the flat was exclusively paid by father of the assessee. The assessee could not rebut the presumption of ownership of the flat jointly with the mother and father of the assessee , with cogent evidences that the assessee name is merely included in the said flat for name sake . The assessee only filed one unsubstantiated accounts for assessment year 2003- 04 of father of the assessee which only showed general description ‘Office Premises’ without having any details of the said flat and verification from the Revenue that the total consideration was paid by the assessee’s father which was reflected in his statement of affairs/balance sheet filed with revenue. The father of the assessee had also not paid taxes on capital gain earned from the sale of the said flat and hence no taxes on this sale of flat is paid to Revenue. Contentions of the assessee cannot be accepted. The assessee has however filed purchase agreement for the purchase of this flat for the first time before the tribunal. We have perused both the sale agreement and purchase agreement which are placed on record in paper book filed with the tribunal. Thus the capital gain on sale of assessee’s share in the said flat (being 1/3 )is to be brought to tax in the hand of the assessee. However, the A.O. is directed to give relief for the cost of acquisition of the flat and cost inflation index, as per provisions of section 48 & 49 of the Act in accordance with law after verification of the purchase deed dated 29-11-1999 and other cogent and credible material brought on record by the assessee.
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2017 (10) TMI 236
Bogus purchases - addition at 4% of the purchases by CIT-A as against 8% of the purchases treated as non-genuine/bogus by the Assessing Officer - Held that:- In the absence of delivery challans, proper stock records and based on the depositions of the suppliers that they have provided only accommodation bills, the Assessing Officer has rightly concluded that the assessee has obtained only bogus bills and assessee might have purchased goods in gray market. We do not see any valid reason to interfere with the findings and the decision arrived at by the Ld.CIT(A) in estimating the Gross Profit at 4% of the bogus purchases as against 8% estimated by the Assessing Officer. Thus, we uphold the order of the Ld.CIT(A) for all these Assessment Years i.e. 2010-11, 2011-12 and 2012-13. - Decided against assessee.
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2017 (10) TMI 235
Disallowance of interest expenses incurred by the assessee on availing the bank overdraft facility - whether the bank overdraft account, out of which the funds have been withdrawn and invested in the mutual fund units during the year, is in the nature of loan account or not? - whether it is assessee’s own money which has been taken out of the FDR account temporarily and invested in the mutual fund units as contended by the ld. AR.? Held that:- In the instant case, the assessee has not brought on record any verifiable evidence which is contrary to above understanding. Infact, the assessee has shown interest on fixed deposits in his return of income as income under the head “Income from other sources” and interest paid on bank overdraft facility has been claimed as expenditure under the head “business income”. The said treatment in the financial statements doesn’t merely show the accounting treatment and reflection thereof but also underscore the basic essence and character of both the transactions being independent of each other. Therefore, we are unable to accept the contention of the ld AR that the assessee has incurred net interest cost of 0.25% and not 9.5% at which overdraft facility was availed from the bank. The bank overdraft account, out of which the funds have been withdrawn and invested in the mutual fund units during the year, is clearly in the nature of loan account and certificate issued by the Central Bank of India supports the case of the Revenue. Accordingly, we are unable to accede to the contention of the ld AR that it is assessee’s own money which has been taken out of the FDR account temporarily and invested in the mutual fund units. Whether the transactions in the bank overdraft account are limited to the borrowings and subsequent withdrawal for meeting expenditure and making the investments or it also includes other transactions in form of deposit of various business receipts including course fees as contended by the ld. AR? - Held that:- We find that there are deposits of ₹ 115.53 Cr and withdrawal of ₹ 120.85 Cr. The said numbers therefore supports the contention advanced by the ld. AR during the course of the assessment proceedings that all types of business receipts and all type of payments are routed through the bank overdraft account. It also proves the fact that the assessee was having mixed funds both in form of business receipts and borrowings in the form of overdraft from the bank from time to time. However, there is nothing which has been brought on record to prove that the investments have been made at the relevant point in time out of the borrowed funds. In absence of establishing the necessary nexus being between the borrowings and the investments in the mutual funds, it can safely be concluded that the investments in the mutual fund units have been made out of mixed funds. The funds in the FDRs accounts clearly reflect the interest free funds which are available with the assessee which is far in excess of the amount of investments which has been made in the Mutual Funds units amounting to ₹ 3 Cr. Accordingly, on appreciation of the said facts and in absence of anything to the contrary, as per the settled legal proposition, a presumption can be drawn that the investments in the mutual fund units have been made out of interest- free funds and not out of interest bearing funds. Addition u/s 14A - Where the amount is invested in such funds for less than a year, the maturity proceeds are taxable as short term capital gain @ 30% and where the amount is invested in such funds for the period exceeding one year, the maturity proceeds are taxable @ 10% with the indexation benefit and @ 20% without indexation benefits. In other words the investment in Mutual Funds schemes are not tax free investments. In support of its contentions, the ld. AR has also submitted a copy of the computation of income for the subsequent assessment year 2010-11 wherein the maturity proceeds amounting to ₹ 3,32,35,500 of all these Mutual Funds units wherein the assessee has invested ₹ 3,00,00,000 during the impunged assessment year have been offered to tax as long term capital gains. In light of the same, we do not think that the ld. CIT(A) was correct in invoking provisions of section 14A of the Act. The ld.AO completely failed to deny and disprove the facts as argued although vide first para at pg 9, he alleged that the assessee had used a part of the borrowed funds available in the OD a/c and worked out the disallowable amount of the interest yet however, he completely failed to prove/ to bring contrary material to disprove that the assessee was having sufficient interest free funds, as aforesaid. He wrongly confused the OD a/c with an interest bearing loan/borrowings. admittedly the assessee neither took any such loan in the past nor in this year, as evident from the Audited Balance Sheet as on 31.03.2009
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2017 (10) TMI 234
Disallowance u/s.14A - CIT(A) restricting the addition by applying Rule 8D - Held that:- After considering the submissions of ld. DR and the material on record, it is noticed that the ld. CIT(A) by following the judgment of the Hon’ble Jurisdictional High Court in the case of Joint Investment (P) Ltd. Vs CIT [2015 (3) TMI 155 - DELHI HIGH COURT] sustained the disallowance to ₹ 7,000/-. We, therefore, do not see any valid ground to interfere with the findings of the ld. CIT(A). Accordingly, we do not see any merit in this appeal of the department. - Decided against revenue
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2017 (10) TMI 233
Disallowance of foreign travel expenses - AO has disallowed foreign travel expenses on the ground that the assessee has not furnished any evidence in support of foreign travel of its employees and business connection with its clients - Held that:- We find force in the arguments of the assessee for the reason that merely because no evidence has been filed to establish foreign travel undertaken by its executives to attend meetings with its clients, foreign travel expenses incurred by the assessee cannot be disallowed on adhoc basis despite furnishing of evidences. The AO has not pointed out any incorrect claim made by the assessee. The AO has accepted the fact that the assessee has filed all documents to justify its expenses. The AO is only on the point that no evidence has been filed to prove foreign travel and business connection with its clients. We are of the view that the AO was incorrect in observing that the assessee has not filed any details to justify its foreign travel expenses, despite the assessee has filed its vouchers which clearly indicates the purpose of visits by its employees. The issue requires re-verification by the AO in the light of our above discussion. Hence, we set aside the issue to the file of the AO and direct him to re-consider the issue afresh and decide the same in accordance with law. Allocation of headquarter expenses to units claiming exemption u/s 10A / 10B - AO has allocated head office expenses proportionately for units claiming exemption u/s 10A / 10B, on the basis of the turnover of the units - Held that:- No merit in the arguments of the assessee for the reason that on perusal of the details of expenditure incurred by the assessee it is difficult to accept explanation of the assessee that head office expenditure has no relevance to the units claiming exemption u/s 10A / 10B. The assessee is having four units based at various locations which were controlled through its headquarter. The expenditure incurred by head office like travel and conveyance, communication expenses, legal and professional charges and rates and taxes definitely is having relevance to its total business. Therefore AO was right in allocating head office expenses to the units eligible for claiming exemption u/s 10A / 10B of the Act. We further observe that there is merit in the argument of the assessee that only net expenses of head office should be allocated to the units claiming exemption u/s 10A / 10B, because the assessee is generating other income like interest on fixed deposit and rent which may have some bearing on the functioning of its units claiming exemption u/s 10A / 10B. Therefore, we are of the view that the issue needs to be re-examined by the AO in the light of the submissions of the assessee. Appeal filed by the assessee is treated as partly allowed, for statistical purpose.
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2017 (10) TMI 232
Addition pertaining to recharge paid to the AE - TPA - Held that:- We found that in the A.Y.2011-12, exactly similar ground was raised by the assessee before Tribunal with regard to addition of ₹ 2,58,13,084/- on account of recharge paid to the AE. After discussing the issue in great detail, the Tribunal have deleted the addition. Exactly, similar ground has been raised in this year also. As the facts and circumstances during the year under consideration are same, respectfully following the order of the Tribunal in assessee’s own case for immediately preceding year, we delete the addition so made by the AO. Interest u/s.234A - Held that:- This issue is squarely covered by the decision of Delhi High Court in case of Dr. Prannoy Roy [2001 (12) TMI 68 - DELHI High Court] wherein Hon’ble High Court has held that no interest u/s.234A is payable in respect of amount of self assessment taxes which has been deposited prior to the due date of filing of the return. Accordingly, we direct the AO to recompute the interest u/s.234A by considering self assessment tax paid before filing of the return. We direct accordingly.
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2017 (10) TMI 231
Bogus purchases - Gross profit estimation - Held that:- Bogus purchases and after considering the facts observed that no uniform yardstick can be applied for estimating gross profit on bogus purchases which is dependent upon the facts of different cases. The co-ordinate bench of ITAT, in a number of cases has taken a consistent view and directed the AO to estimate gross profit of 12.5% on alleged bogus purchases. Keeping in view we are of the considered view that estimation of gross profit at 12.5% on total alleged bogus purchases would meet the ends of justice. Therefore, we direct the AO to estimate gross profit at 12.5% on the alleged bogus purchases. We are of the view that the issue needs to be reexamined by the AO in the light of the claim of the assessee that the purchases from Shree Ganesh Trading Co has been taken twice for the purpose of estimation of gross profit. If the claim of the assessee is found to be correct, then the AO is directed to exclude the name of Shree Ganesh Trading Co from the second list of entities considered for estimation of gross profit on alleged bogus purchases. Hence, we set aside the issue for the limited purpose of verification of purchases from Shree Ganesh Trading Co and direct the AO to consider the issue in the light of explanation of the assessee before estimating the gross profit on alleged bogus purchases.
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2017 (10) TMI 230
Capital gain - whether no “transfer” of a capital asset so as to trigger the provisions of Capital Gains tax? - contention of the assessee is that transfer of the flat jointly owned by him with his wife in Vandana Co-operative Housing Society, Andheri, Mumbai has not taken place in the instant year - Held that:- The plea sought to be raised by the assessee goes to the root of the jurisdiction of the Assessing Officer to assess the Capital Gains in the instant assessment year. Notably, the import of the expression “transfer” for the purposes of Sec. 45(1) of the Act is required to be adjudicated at the threshold itself, before proceeding to tax the income from Capital Gains. Since this plea was hitherto not before the lower authorities and, it being pertinent to arrive at the correct tax-liability of the assessee, we deem it fit and proper to admit such plea and restore the matter back to the file of the Assessing Officer who shall consider the plea of the assessee afresh, as per law. Needless to mention, the Assessing Officer shall allow the assessee a reasonable opportunity of being heard and only thereafter pass an order on the entire aspect relating to income under the head Capital Gains in accordance with law.
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2017 (10) TMI 229
Seeking extension of stay already granted of outstanding demand of tax and interest - Held that:- We have observed that the assessee is not in fault during the intervening period from the date of grant of stay on 10-03-2017 by tribunal till as of now and has complied with the terms and conditions of the stay order. Thus, keeping in view factual matrix of the stay petitions, we are inclined to extend the stay for both the assessment years 2009-10 and 2010-11 of the outstanding demand of tax and interest for a period of 180 days(one hundred and eighty days), or till the disposal of appeal whichever is earlier. The assessee shall not seek any adjournment except on cogent grounds in exceptional circumstances. In case the assessee seeks adjournment without any cogent reasons, the stay shall stand vacated. We would clarify that we have not commented on the merits of the impugned appeals. The AO is directed to verify the validity of corporate guarantee/undertaking issued by the assessee in terms of the order of the tribunal, in order to secure the interest of Revenue.
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2017 (10) TMI 228
FBT computation - determining the value of the chargeable FB - direction of the First Appellate Authority(FAA)to exclude FB declared by the assessee itself in the original and revised return of FBT, filed u/s.115W - Held that:- As decided in assessee's own case for previous years in all cases where a deduction/ exemption is not claimed by an assessee before the Assessing Officer would normally amount to giving up t he claim with regard to it. Nevertheless, this Court has held in Pruthvi Builders (2012 (7) TMI 158 - BOMBAY HIGH COURT ) it could be raised in appeal. Moreover, in the present facts, the claim had already been made by the Respondent in its Return of Fringe Benefit by way of note therein. Thus, it is not a new claim. In any case, on account of the decision of this Court in Pruthvi Brokers and Shareholders (supra), the Respondent Assessee is well entitled to raise the claim before the Appellate Authority even it not raised before the Assessing Officer Relief of Fringe Benefit Tax levied on expenses incurred as non-employees and gifts given to non-employees by following its order in CIT v/s. Tata Consultancy Services Ltd. (2013 (6) TMI 516 - ITAT MUMBAI) to hold that the relationship of employer and employee is a sine-qua-non of levy of Fringe Benefit Tax. Expenses incurred on non employees are outside the purview of FBT. Medical reimbursement, medical facilities and education facilities made available to its employees - liable to tax as perquisites in the hands of employees/individuals.
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2017 (10) TMI 227
Liability to deduct Tax at source u/s. 194C/194J - work contract - Held that:- In respect of agreement for the supply of equipments, no TDS is deductible u/s 194C of the Income Tax Act 1961 as it is amounts to a contract of sale. We note that M/ s. HCL Infosystems Ltd. supplied equipments as per the specifications of the assessee but the same have not been purchased from MTNL. M/s. HCL Infosystems Ltd. has purchased the said equipments from person other than such customer i.e. not from MTNL. Hence, TDS provisions would not fall applicable on the supply of equipments. Further since billing for the supply of equipments is separate from that of the services, TDS would not be deducted on the supply of equipments. TDS would not liable to be deducted on the supply of equipments as the same is not being covered under the purview of Section 194C of the Act. In the view of the above all it is clear that in respect of agreement for the supply of equipments, no TDS is deductible u/s 194C of the Income Tax Act 1961. We further find that, TDS would only be liable to be deducted on the value of professional services of installation, deployment and redeployment availed by the appellant company u/s 194J of Income Tax Act 1961 which the Assessee has already deducted and deposited. It is also clear that assessee is not liable to deduct TDS on the said transaction of supplying of equipments as per the provisions of Section 194C of the Act. In the view of the clear provisions of Section 194C of the Act, we are of the view that the assessee is not liable to deduct TDS amounting to ₹ 6,64,00,359/- on the supply of equipments by M/ s HCL Infosystems Ltd., therefore, the Ld. CIT(A) under the circumstances has rightly held that the action of Assessing Officer of holding assessee company as in default for amount of ₹ 6,64,00,359/- was without any cogent basis. Accordingly, Ld. CIT(A) has rightly gave the relief to the assessee in respect of the total amount, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on the issue in dispute and reject the grounds raised by the Revenue.
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2017 (10) TMI 226
Allowing only 50% of the depreciation - CIT(A) noted that since the business of the assessee was finally stopped in September, 2011, so depreciation is allowable only for half of the year - assessee become partner in some other concern though for the same activities - Held that:- It is an admitted fact that assessee is a Company and stopped its business activities on 20th September, 2011 when the assessee entered into the Limited Liability Partnership Agreement (LLP) with many parties and agreed to form the LLP in the name and style of “IILM Enterprise, LLP”, business would be carried out in the name of the new LLP. It was, therefore, proved that assessee company discontinued its business permanently and through the execution of LLP agreement dated 20th September, 2011, the assessee company has become partner in the new LLP. Therefore, the Ld. CIT(A) was justified in holding that the activities of the assessee were finally stopped in September, 2011 when the assessee become partner in some other concern though for the same activities. Therefore, the expenditure were rightly allowed in the case of the assessee company till the closure of the business i.e., September, 2011. The depreciation was also therefore, correctly allowed for half of the year i.e., up-to September, 2011 when business of the assessee company was completely stopped. Merely new LLP has started doing the same activity would not give any right to the assessee to claim depreciation for whole of the year because assessee completely stopped its business activities as a Company in September, 2011. - Decided against assessee.
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2017 (10) TMI 180
Rejection of revenue appeal by the Prothonotary and Senior Master for noncompliance with the procedural Rules - Ambit and scope of powers of the Prothonotary and Senior Master of this Court under Rules 985 and 986 of the Bombay High Court (Original Side) Rules, 1960 - Held that:- To avoid any controversy involving a senior official of this Court, we deem it fit and proper to set aside the orders of the Prothonotary and Senior Master of restoration of these Appeals and registering them. We place the Revenue's Notices of Motion seeking to quash and set aside the initial order of the Prothonotary and Senior Master invoking Rules 985 and 986 of the Bombay High Court (Original Side) Rules, 1960. We post the Chamber Orders of the Revenue and treat them as request to this Court to restore the Appeals to the file for consideration on merits by setting aside the conditional order of the Prothonotary and Senior Master. The request therein is also to condone the delay in moving such Chamber Orders.
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Customs
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2017 (10) TMI 225
Advance Authorization (AA) license - duty free exports - Held that: - The Petitioner will furnish to the Customs Department the entire list of its AAs that are valid as on 1st July, 2017 and a list of the export orders placed on the Petitioner prior to 1st July, 2017 - the above interim direction will only apply to those imports which are made by the Petitioner for fulfillment of its export orders placed with it prior to 1st July, 2017 and not to any export order thereafter.
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2017 (10) TMI 223
Provisional release of seized goods - Misdeclaration of export goods - finished leather - The department has contended that respondents have misdeclared the description and attempted to export the subject goods, by evading export duty at 60% as per Sl.No.26, of the Export Tariff by availing undue drawback of 6% and also by availing MEIS incentive of 2% on FOB value - seizure of goods u/s 110 of the Customs Act, 1962 with effect from the date of examination i.e. 14.10.2016, vide Seizure Memo dated 16.11.2016 - Section 110A of the Customs Act, 1962 - CBEC Circular No.01/2011 dated 04.01.2011. Held that: - an amount equivalent to the value of goods stipulated in Condition No.6(ii), with due respect, we are unable to subscribe to the views of the learned Single Judge that monetary value mentioned in the subsequent communication dated 10.01.2017 is in a sense diluted the very essence of the order dated 22.12.2016. Even taking it for granted, that in the earlier round of writ petitions, respondents therein have not articulated that the exporters have to offer security towards fine and penalty, in the form of a Bank Guarantee, that does not amount to a waiver of exercise of the powers conferred on the department by virtue of Clause No.4(a) of the Board's circular dated 04.01.2011. At the risk of repetition, when condition Nos.6(ii) & 6(iii) remain unaltered, as per the earlier orders made in W.P.Nos.43062 to 43070 of 2016 dated 22.12.2016, it cannot be contended that the department has erred in directing the exporters to offer Bank Guarantee as an appropriate security, in order to cover redemption, fine and penalty. In our view, the department cannot be compelled to follow an earlier interim order, which has merged with a simple closure of writ petitioner, without there being any adjudication on the merits. In State of Orissa Vs. Madan Gopal Rungta [1951 (10) TMI 19 - SUPREME COURT] the Hon'ble Apex Court held that interim orders are passed in aid of the main relief. The common orders passed in W.P.Nos.7429 and 7430 of 2017 dated 18.07.2017, requires interference - impugned orders set aside - appeal allowed by way of remand.
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2017 (10) TMI 222
Absolute Confiscation - Indian and Foreign Currencies - Baggage Rules - Held that: - on a specific query from the Bench, appellant’s counsel is not able to justify possession of such huge amount of Indian and foreign currencies and that also taking it abroad; he could not answer the query as to why such a huge amount of cash was being carried by the appellant to a place outside India. The provisions of Section 125 read holistically is very clear; in the case of goods which are not prohibited the adjudicating authority shall give the owner of the goods or the person from whom the said goods were seized, an option to pay a fine in lieu of confiscation, while the said section does not provide or mandate the adjudicating authority in respect of the prohibited goods - appellant is not able to justify the possession of such huge amount of Indian and foreign currencies, the impugned order of the adjudicating authority absolutely confiscating the Indian and foreign currencies is correct and legal. Appeal dismissed - decided against appellant.
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2017 (10) TMI 221
Quantification of imported Crude Palm Oil in bulk - whether the difference between assessed quantity of bulk Crude palm oil as quantified at the time of import and the actual quantity utilised as worked out from the appellant’s own records, and whether these shortfalls can be considered as quantities not utilised “for use” as intended by notification? Held that: - there is no allegation supported by evidence either in the show cause notices or in the orders of lower authorities, that the quantities as found short as per the records of the appellant, have actually been diverted or clandestinely or removed for sale or otherwise disposed of, without discharge of custom duty liability thereof. When department alleges that part of the imported quantity has not been “used for intended purpose”, some evidence will have to be put forth to prove that they have used such quantity for any other purpose, contrary to conditionalties laid down in the exemption notification, or have illegally disposed of such quantity. This is sine qua non. Assumptions and presumptions cannot take place of evidence. Higher appellate fora have consistently reiterated the view that importer/actual user cannot be called upon to pay duty on negligible percentages of storage or transit loss etc. Appeal allowed - decided in favor of appellant.
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2017 (10) TMI 220
Misdeclaration of description of imported goods - goods described as Colored Self Adhesive Paper tape under Chapter heading 48114900, whereas the goods were found to be radium tape Fluorescent Tape under Chapter Heading 3919 - rejection of Declared value - enhancement of value based on contemporaneous imports - Held that: - the Ld. Commissioner (Appeals) in his order upheld the charge of mis-declaration of the description of the goods but concluded that the rate of duty is same under the CTH 3919 and CTH 4811 - Ld. Commissioner (Appeals) has rightly rejected the enhancement value based on the proforma invoice which was the main foundation for enhancing the value in the adjudication order. From the submissions and documents placed on record by Ld. AR, it has become clear that there was no invoice at the rate of US$ 114.00 and there was only proforma invoices on the basis of which the value was enhanced by the adjudicating authority. Hence, the Ld. Commissioner (Appeals) has correctly concluded that the Department has not been able to adduce any evidence of contemporaneous import to support the value determined by the adjudicating authority. Appeal dismissed - decided against Revenue.
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Insolvency & Bankruptcy
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2017 (10) TMI 219
Corporate Insolvency Resolution Process - Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Held that:- It is now a matter of record that in subsequent development this bench in IDBI Bank Ltd. v. Jaypee Infratech Ltd. [2017 (10) TMI 147 - NATIONAL COMPANY LAW TRIBUNAL, ALLAHABAD] in respect of the same Corporate Debtor Company has already initiated Corporate Insolvency Resolution Process and appointed an Interim Resolution Professional Shri Anuj Jain by directing him to take over the management of Company and manage the affairs of the Company. In the light of aforesaid order, it is now not necessary to go into the merits of the Present Company Petition and to deal with and determine the status of applicants as of Financial Creditors / Operation Creditors as the case may be and their eligibility for filing the present application under Section 7 of the Insolvency and Bankruptcy Code, before this Court. Considering the above stated factual/legal position in the matter we feel the present Company Petition now becomes infructuous. The legal issue, which is subject matter of the present petition on the status of fixed depositors as 'Financial Creditors' can be dealt with by this Court in appropriate case on some other occasion. Hence, such issue is kept open. The present petition is being disposed of as become infructuous.
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Service Tax
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2017 (10) TMI 216
Condonation of delay - Services provided for maintenance and repair of power plant - Major Maintenance Reserve (MMR) - activities of operation of power plant to produce electricity - the decision in the case of M/s. Shapoorji Pallonji Infrastructure Capital Company Limited, M/s. Operational Energy Group of India Pvt. Ltd. Versus Commissioner of Service Tax, Chennai [2017 (6) TMI 225 - CESTAT CHENNAI] contested - Held that: - delay is condoned and appeal is admitted.
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2017 (10) TMI 214
Renting of Immovable Property Service - appeal dismissed on the ground of time limitation - whether the dismissal of the appeals by the lower appellate authorities is legally correct or otherwise? - Held that: - in terms of Section 85(3A) of the Finance Act, 1994, the appeal is required to be filed within two months from the date of the impugned order which was appealed against. Further period of 30 days for filing the appeal is allowed wide the proviso to Section 85(3A) - the appeals before the Commissioner (Appeals) had been filed in these cases only after 178 days (in respect of appeal No. ST/30571/2017) and 3 ½ years (in respect of appeal No. ST/30640/2017) - appeal was rightly dismissed - appeal dismissed - decided against appellant.
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2017 (10) TMI 213
Courier services - taxability - benefit of N/N. 9/2009-ST dated 3.3.2009 and 17/2011-ST dated 01.3.2011 - It is the case of the Revenue that the said exemption was eligible only if the services are “wholly consumed” within the SEZ and that the services rendered by the appellant are partly outside the SEZ and partly within the SEZ - Held that: - the said notification extends the benefit of non-payment of service tax to a person who renders services to developer or units in Special Economic Zone for consumption in special economic zone - Similar issue came up before the Tribunal in the case of Orix Auto Infrastructure Services Ltd Vs CST Mumbai [2015 (11) TMI 346 - CESTAT AHMEDABAD] wherein the benefit of similarly placed N/N. 4/04-ST was considered and the Bench took a view in favor of the appellant and held that There is no dispute that the appellant herein rendered service of tour operator for transportation of employees of a unit situated in SEZ - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 212
Business Auxiliary Services - GTA services - drying and threshing charges - Storage and Warehousing services - Held that: - similar issue has been decided by this Bench presided over by the President in the case of Green Leaf Tobacco Threshers Ltd Versus C.C.,C.E., & S.T. -Guntur [2017 (5) TMI 518 - CESTAT HYDERABAD] wherein the Bench dropped the demands raised under Business Auxiliary Services, confirmed the demands raised under GTA services and also confirmed the demands raised under various services rendered - decided partly in favor of appellant.
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2017 (10) TMI 211
GTA Service - Short payment of service tax - the department had observed that freight/material handling expenses incurred in respect of its various sites is not tallying with the ST-3 returns filed before the Service Tax authorities - Held that: - Since on perusal of the relevant documents, the Commissioner (Appeals) has held that there is no short payment of service tax by the respondent on account of GTA service, such findings cannot be disturbed at this juncture, since those findings were recorded based on the records maintained by the respondent - appeal dismissed - decided against Revenue.
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2017 (10) TMI 210
Rectification of mistake - Section 74 of Finance Act, 1994 - time limitation - first appellate authority rejected/dismissed the appeal holding that appeal was filed beyond period of limitation i.e. sixty days and further 30 days from the date of issue of Order-in-Appeal i.e. 20.11.2011 - Held that: - the findings of the first appellate authority seems to be erroneous as the provision of Section 74 of the Finance Act, 1994 mandates that assessee can prefer an application for Rectification of Mistake within a period of two years from the date of issuance of impugned order - the period of limitation will start from the date when an assessee receives an order/letter informing the view of the Revenue on the application made under section 74 of Finance Act, 1994. The impugned order which has dismissed the appeal only on limitation, is unsustainable and liable to be set side - matter is remitted to first appellate authority with direction to restore the appeal to its original number - appeal restored.
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Central Excise
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2017 (10) TMI 215
SSI exemption - use of brand name - Notification No. 8/2003-CE - exclusion of export turnover - the decision in the case of M/s Himgiri Plastics, Sh. Joginder Kumar Talwar, Partner, Sh. Sanjeev Talwar, Partner, M/s Himalayan Poly Colours, Smt. Neelam Talwar, Partner, M/s Himalayan Poly Colours, Smt. Rimmi Talwar, Partner - M/s Himalayan Poly Colours, Sh. Puneet Talwar Versus CCE, Delhi [2016 (11) TMI 228 - CESTAT NEW DELHI] contested, where it was held that The brand name apparently cannot belong to two different entities if the appellants arguments of HP and HPC are two different legal entities for SSI exemption then use of common brand bane will deprive atleast one of them from SSI exemption - Held that: - the decision in the above case upheld - appeal dismissed - decided against appellant.
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2017 (10) TMI 209
Valuation - revision of the value of goods supplied by the respondents to their own subsidiary - Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Held that: - The issue regarding the manner of assessment when part of the goods are sold to independent buyers and part are consumed or captively sold to related persons has been dealt with the Larger Bench of the Tribunal in the case of Ispat Industries Ltd. [2007 (2) TMI 5 - CESTAT, MUMBAI], where it was held that the provisions of Rule 8 of the Valuation Rules will not apply in a case where some part of the production is cleared to independent buyers and the provisions of Rule 4 are in any case to be preferred over the provisions of Rule 8 not only for the reason that they occur first in the sequential order of the Valuation Rules but also for the reason that in a case where both the rules are applicable, the application of Rule 4 will lead to a determination of a value which will be more consistent and in accordance with the parent statutory provisions of Section 4 of the Central Excise Act, 1944. The correct method of assessment in these circumstances would be adoption of the price at which the said goods were sold to independent buyers. In the instant case, the demand has been raised on the transaction value for sale to related buyers. The law of the land takes precedence over the circulars issued by the CBEC and also any letters issued by the Revenue by way of audit or by show-cause notice. CBEC Circular itself regarded the transaction value as irrelevant for the purpose of arriving at assessable value for sales to related persons. Time limitation - Held that: - the method of valuation was adopted by the appellants on the directions of audit. The CBEC Circular dated 01/07/2002 also prescribed the same method of assessment. Thus, not only the facts were known to revenue but the appellants acted on the direction of revenue. In these circumstances, the invocation of extended period is also not justified. Appeal dismissed - decided against Revenue.
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2017 (10) TMI 208
Valuation - Section 4 or 4A of the Central Excise Act, 1944? - The case of the department is that the upplies are for the direct consumption by the institution in case of supplies made to industries and not for retail sale, the same should be valued under Section 4 - Held that: - The judgment of Hon’ble Supreme Court in the case of Jayanti Food Processing (P) Ltd. [2007 (8) TMI 3 - Supreme Court] relied upon by the Commissioner squarely covers the issue involved herein, where SC prescribes the ruling for proper valuation in 14 different but identical appeals in a single judgement. The same goods which were supplied in the retail market has been supplied to the customers namely M/s. L&T, M/s. Berger Becker Coatings, M/s. Massline Engineering Constructions, M/s. Stenelac Pvt. Ltd., M/s. Hindalco Industries, M/s. Global Corrosion Company, M/s Poonam Paints Corporation Ltd. etc. Unit of package is also same which bear the MRP. Though the goods were supplied to the aforesaid customers but the respondent supplied the goods which is not distinguished from the goods supplied for retail sale. In such case there is no exemption from affixing the MRP on the package. In such situation, the goods are correctly liable to be valued in terms of Section 4A. Appeal dismissed - decided against Revenue.
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2017 (10) TMI 207
Clandestine removal - M/s. PEPL had taken modvat credit of the said raw material - Held that: - the appellants have admittedly manufactured and cleared the goods to PEPL without any documents and without payment of Central Excise Duty the appellants have cleared without M/s. PEPL had paid the duty on the same and in support of said argument. They have submitted the RT 12 returns of M/s. PEPL Ld. Counsel has argued that M/s. PEPL does not have manufacturing facility for the said transformers and therefore the duty paid by PEPL should be considered to be the duty paid by the appellant. The RT.12 return submitted do not by any where show how the goods cleared by the appellant can be treated as the same on which M/s. PEPL has paid the duty. No co-relation has been presented and in absence of the said co-relation the argument can only be rejected. In so far as demand of reversal of Cenvat Credit on clearance of 10,45,600 numbers by capacitors on which modvat credit was availed as inputs is concerned, the appellant have already reversed. This reversal however happened after a case was booked. In this regard we find the impugned order rightly confirmed the demand of reversal of cenvat credit. Confiscation of 89,800 Electrical Transformers which were seized from the premises of PEPL - Held that: - The said goods were offered for release on redemption on payment of fine of ₹ 90,000/-. Since the goods were the cleared without payment of duty, the same are rightly been confiscated. The fine imposed in such circumstances is justified. Penalty u/r 173Q of Central Excise Rules, 1944 - Held that: - there is sufficient cause for imposition of such penalty and uphold the same. Personal penalty of ₹ 50,000/- each has been imposed on Shri R.N. Garodia and Shri Arun N. Garodia. We find that these persons had acted in violation of Central Excise Rules and Act. The penalty of ₹ 50,000/- imposed on them is upheld. Appeal dismissed - decided against appellant.
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2017 (10) TMI 206
Valuation - sister units - valuation done on the basis of provisional assessment - Held that: - It is seen from the order dated 17.06.2002 wherein the provisional assessment was finalised, that the provisional assessment was sought stating that they are clearing the goods as such to their own unit. It is seen that the appellants have not cleared the goods to their own unit but they have cleared the goods to their sister unit. The provisional assessment ordered and finalised was for the purpose of clearance of their own unit but not to sister unit. When the goods are cleared to any unit which is not related then the transaction value is the value at which the assessment is done under Section 4 of Central Excise Act - the provisional assessment finalised by the order no. 106/DMD/02 dated 17.06.2002 cannot be applied to the value of clearance to sister units. In these circumstances, the relationship between the respondent and the sister units needs to be examined to arrive at the correct method for the purpose of arriving at the assessable value - appeal allowed by way of remand.
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2017 (10) TMI 205
Clandestine removal - Principles of Natural Justice - Held that: - various submissions and explanations on the basis of records made before the Commissioner was not considered - It is also observed that the entire demand is merely based on the submissions of the customers, which is without corroboration of any other evidence. The statements given by third party cannot be accepted when they are not cross-examined by the adjudicating authority, particularly, when the appellant had made specific request for the same - there is a gross violation of principles of natural justice on the part of the adjudicating Commissioner - the matter needs to be remanded to the Commissioner - appeal allowed by way of remand.
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2017 (10) TMI 204
CENVAT credit - denial of credit on the ground that no manufacturing activity was carried out by the appellants on the finished products and the appellant also not carried out any process specific under Rule 16 - Held that: - From Rule 16, it is seen that the assesee shall be allowed the Cenvat Credit in respect of duty paid on the goods received in the factory for the purpose of re-made, refined, re-conditioned or for any other reasons. As per sub-rule (2) of Rule 16, it is provided that when such duty paid goods is cleared by the assesee under two situations (i) the activity undertaken by the appellant does not amount to manufacture (ii) the activity undertaken by the appellant is amounting to manufacture. In both the above situation, the appellant can take Cenvat Credit on the duty paid goods - In the facts of the present case, the appellants have brought the duty paid goods from various vendors and the same were repacked as per the requirements of export and goods were exported, even though the activity was not amount to manufacture, they have discharged excise duty. Therefore, in our view, the appellants have complied with the provisions of Rule 16 (1) and (2) - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 203
Valuation - free sample given along with the main product - promotional pack of Maggi Noodles, which are not sold as such, whereas the same is supplied free of cost either by the appellant or by Tata Tea Ltd. - whether to be valued under Section 4 of the Central Excise Act, 1944 or under Section 4A? - appellant cleared Maggi Atta Noodles of pack size 96* 100 Gms as free packs with the Maggi Hot & Sweet Sauces manufactured and cleared by them. On the said free pack the appellants printed the words Free. Not for Sale. As regards the supplies made to Tata Tea on the agreement, on the pack no MRP was mentioned and declaration was made on the pack free with Tata Tea, and determined the assessable value under Section 4. Held that: - On the pack no MRP mentioned and the packs also bore the mention that Free not for sale. Therefore, the provisions of Standards of Weights and Measures Act, 1976 and Rules made there under do not apply in such supplies. Therefore, the valuation of such goods cannot be done under Section 4A of Central Excise Act, 1944. The appellants have correctly valued the goods under Section 4 - The very same issue has been considered by the Hon’ble Supreme Court in the case of Jayanti Food Processing (P) Ltd. [2007 (8) TMI 3 - Supreme Court], where it was held that SC prescribes the ruling for proper valuation in 14 different but identical appeals in a single judgement - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 202
Simultaneous availment of Depreciation as well as MODVAT credit on Capital goods - SCN dated 02.06.1998 issued in respect of years 94-95 to 96-97 - Held that: - in respect of repeated opportunities appellants had not produced the supporting evidences and documents for verification in the denovo proceedings - there is no favor to the appellants and for which reason that part of the impugned order disallowing the credit availed by the appellants on capital goods to the tune of ₹ 44,52,091/- and demanding the same under Rule 57U (3) of the Rules, along with interest liability thereof does not call for any interference and therefore sustained. Penalty - Held that: - the appellant had paid up the entire amount demanded before the adjudication proceedings. It should also be kept in mind that the matter is one related to interpretation on the quantum on which Income tax depreciation should not be claimed - penalty cannot be sustained and is set aside. Appeal allowed - decided partly in favor of appellant.
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2017 (10) TMI 201
CENVAT credit - duty paying documents - issue of fake invoices without receipt of duty paid goods - Held that: - it is established that dealer M/s Dhanlaxmi Steels has fraudulently issued fake invoices, therefore Cenvat Credit on such fake invoices cannot be allowed. It is settled law that fraud vitiates everything therefore whether there is involvement of Appellant in such fraud, Cenvat Credit on such invoices cannot be allowed - it is established that the Appellant was very much party to the fraud committed by M/s Dhanlaxmi Steels. In such situation, the Appellants submission regarding receipt of input and use thereof in production is of no help to them. Even if it is accepted that Appellant have received the input, since it has no linkage with duty payment by the manufacturer the credit on fake invoices cannot be allowed. Penalty u/s 11 AC read with Rule 15 of CCR, 2004 - Held that: - M/s. Mohit Ispat Ltd. indulged themselves in fraudulently availing Cenvat Credit. Therefore the proviso of section 11A is clearly invokable consequently section 11 AC which has almost same ingredients as in proviso, the penalty was rightly imposed. Personal penalty on the Appellants namely Shri Harshvardhan, Director and Shri Dayanand Shenai, General Manager of M/s Mohit Ispat Ltd. - Held that: - the penalty on these Appellants were imposed u/r 26(2)(ii) of CER, 2002. The said provision was inserted in Rule 26 w.e.f. 01.03.2007 vide N/N. 18/2007-CE (N.T.). The period involved in present case is October, 2006. It is a settled law that the penal provision, which was not existing at the time of committing offence and the same was enacted subsequently, cannot be invoked retrospectively - penalty set aside. Decided partly in favor of appellant.
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2017 (10) TMI 200
CENVAT credit - non-receipt of goods - The case of the Revenue is that, as the manufacturers M/s. Karan & Company has not received the HDPE Granules in their factory, on the basis of ICC check post records, at the entry point and as per the records of sales tax department, the goods have never crossed the border of Himachal Pradesh - Held that: - Revenue did not do any investigation with the transporters of the goods. Moreover, the manufacturer/ buyers has purchased the goods from Karan & Company against the duty paying invoices in which all the particulars, in terms of Rule 9(2) of CCR, 2004 were entered and manufacturer buyers have paid duty on such goods. In these circumstances, Cenvat credit cannot be denied. Moreover, no such allegation against the appellant that they have received inputs from illicit means under the cover of invoices and no investigation was conducted at the end of manufacturer-buyers to allege that there was shortage of inputs. In these circumstances, CENVAT credit to the manufacturer-buyers cannot be denied. Penalties - Held that: - Merely on the basis of the check point barrier report it has been alleged that the goods have not been received by M/s. Karan & Company. As no full-proof investigation has been conducted by the Revenue in the matter, the allegation is without any basis that M/s. Karan & Company has not received the goods - penalties set aside. Appeal allowed - decided in favor of appellant.
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2017 (10) TMI 199
CENVAT credit - input services - denial on the ground that the services were provided outside the registered premises of the appellant - Held that: - The definition of input service contained in Rule 2 (l) of the CCR, 2004 provides that “the activities relating to business” should also be considered as input service for availment of Cenvat benefit. It is not the case of Revenue that the disputed services were not used by the appellant for accomplishing its business purpose - In this case, since the appellant had received the services for its business purpose and paid the service tax in respect of the taxable service received by it, it cannot be said that the benefit of Cenvat Credit shall not be extendable to the appellant on the sole ground that the services were not received within its factory premises - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 198
Valuation - job-work - case of the department is that valuation in hand of the appellant should be equal to the landed cost of the raw material plus job work charges as laid down by Hon’ble Supreme Court in case of M/s. Ujagar Print [1988 (11) TMI 106 - SUPREME COURT OF INDIA] - Held that: - The valuation method as mentioned will be applicable only in case where the sale price of the goods is not available - In the present case there is no dispute that goods manufactured by the appellant in the capacity of the job worker for their principle M/s. TISCO, the same is sold by the M/s. TISCO to the independent customers. The said sale price has been adopted for discharging the excise duty by the appellant. Since in the present case sale price of the very same goods is available and same has been accepted by appellant for discharging excise duty there is no need to resort to valuation rules under Section 4(1)(b). Appellant have correctly applied the value on the basis of sale price at which principle had sold the goods - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 197
Refund claim - whether the assessee is entitled to refund of service tax paid on repo charges, haulage charges and terminal handling charges used for export of their goods as per the N/N. 41/2007 dated 06.10.2007 as amended? - Held that: - the Hon’ble Gujrat High Court in the appellants’ own case COMMISSIONER OF CENTRAL EXCISE Versus AIA ENGINEERING PVT. LTD. [2015 (1) TMI 1044 - GUJARAT HIGH COURT], for earlier period, considered the eligibility of benefit of N/N. 41/2007 dated 06.10.2007 as amended, in relation to very same services and held that these services fall under the scope of the said Notification - refund allowed - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 196
CENVAT credit - excise duty paid on TMT bars - service tax paid on gardening and maintenance services and painting of the plant - Held that: - appellant is eligible to avail the CENVAT credit in respect of all the three services received by him - the decision in the case of India Cement Ltd. [2013 (5) TMI 403 - CESTAT CHENNAI], and U.G. Sugars & Industries Ltd. [2011 (6) TMI 627 - CESTAT, NEW DELHI] relied upon - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 195
Refund of excess paid Central Excise Duty - price variation clause - denial on the ground that subsequent reduction of the value cannot be based to claim refund of duty already paid - Held that: - Since on an identical issue for overlapping period, in the case of M/s Sri Laxmi Venkateswara Electricals Versus CC, CE & ST, Nellore [2017 (2) TMI 530 - CESTAT HYDERABAD], this Bench has taken a view in favour of the appellant, there is no reason for me to deviate from such a view taken by the Bench - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 194
CENVAT credit - input services - vehicles on which insurance is paid - Held that: - availment of cenvat credit of the service tax paid on insurance post 01.04.2011 is not eligible to be availed as Cenvat credit, is the law which, is incorporated in the definition of input services. Since the definition of input services has undergone a change wherein eligibility to avail of Cenvat credit of the service tax paid on insurance premium is incorporated, I find that availment of such credit is wrong and correctly denied by the lower authorities - appellant has made out a case for setting aside the penalties imposed on them as there can be bonafide belief to entertain that they are eligible for availment of cenvat credit. CENVAT credit - services procured from CHA towards clearance of appellant’s goods - duty paying documents - invoice which was produced before the lower authorities for availment of cenvat credit is not in the name of the appellant - Held that: - In the absence of any other evidence to show that the said services were in fact received by the appellant, the lower authorities were correct in coming to a conclusion of denying the cenvat credit to the appellant - demand with interest upheld - penalty set aside as he was under the bonafide belief that they are eligible for availment of cenvat credit of the service tax paid on various services which are utilised for manufacturing of goods. Appeal allowed - decided partly in favor of appellant.
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2017 (10) TMI 193
CENVAT credit - input services - they started paying duty after availing SSI exemption - Held that: - appellant had produced the duty paying document before the first appellate authority, is eligible to avail the CENVAT credit of the tax paid by such input service providers, in accordance with the law - CENVAT credit has been set aside - penalty upheld - appeal allowed in part.
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2017 (10) TMI 192
Valuation - includibility - various charges like warehouse rent, transit insurance, clearing and forwarding charges, bank charges, 4.5% on money locked-up on the cost of filament yarn, handling charges, waste accrual and appropriation of sale proceeds on waste - Department was of the view that the appellant has not included certain expenses/costs to arrive at the cost of the raw materials/filament yarn for discharging duty - Natural Justice - Held that: - It is cardinal principal of law and jurisprudence that a defendant who is charged with infraction of law should not only be put to notice but also the documents relied upon for such charges should made be available to him. It emerges that higher assessable value including 18 elements in respect of goods cleared and manufactured by appellant to Dunlop India during the period of dispute was solely based on a telex message from the latter and which was apparently recovered from the latter during the course of investigation - It is evident that while some other documents were enclosed and provided to appellant at the time of issue of SCN, the said telex message had not been supplied. It is further seen that even after the appellant's request for copy of this purported telex message, the department could not provide the same - it transpired that the authorities concerned refused to take cognizance or rely upon the said letter of Dunlop. Even the request to allow cross examination of representative of M/s. Dunlop India Ltd. with reference to aforesaid telex message was turned down. The duty liability upheld in the impugned order, based on a purported telex message which was never provided to the appellant, will therefore not sustain and will have to be set aside - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 191
Transfer of goods from one unit to another - Rule 8 of Central Excise Valuation Rules - department was of the view that duty is required to be paid on the basis of the valuation of goods adopted for clearance to other independent buyers from the Pithampur unit - Held that: - goods have been cleared from Pithampur unit to Ambarnath unit. Both units are owned by the same company and there is no sale involved in the transfer of goods from one unit to another. Under such circumstances, Rule 8 of Central Excise Valuation Rules specifically prescribes that the valuation for purpose of charging of excise duty is required to be made on the basis of 110% of the value of the goods ascertained as per the CAS-4. Since the excise duty has been paid as prescribed under the Central Excise Valuation Rules, we are of the view that this is in order and there is no basis to adopt the valuation of goods cleared to independent buyers - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 190
Benefit of N/N. 6/2006 dated 01.03.2006 - sub-contract - supply of electric wires and cables under international competitive bidding to various thermal power plants without payment of duty - Held that: - identical issue has come up before the Tribunal in the case of Cords Cable Industries Pvt. Ltd. Vs. CCE, Jaipur I [2016 (9) TMI 1126 - CESTAT NEW DELHI], where it was held that the denial of exemption on the ground of classification shown under Customs Notification is 9801 is not sustainable - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 189
Application for substantial expansion - N/N. 56/2002-CE dt. 14.11.2002 - substantial benefit was denied for the period 01.09.2006 to 20.03.2007 by way of corrigendum without affording any opportunity being heard - Held that: - the impugned corrigendum has been issued after a period of 3 months. Admittedly, the corrigendum adversely affects the claim of the respondents and their date of eligibility to the notification undergoes change. In this background, the corrigendum cannot be said to be simply clarificatory - Besides, there is application of mind on the part of the adjudicating authority as to the date the benefit should be given. Without doubt it brings about a substantive change which is prejudicial to the interest of respondents. Such a material change could not be made by the adjudicating authority as being quasi-judicial authority it could not review its own order in the absence of express powers in the statute - appeal dismissed - decided against Revenue.
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2017 (10) TMI 188
Wrong Classification of products - CENVAT credit - inputs which had gone into manufacture of their final products - levy of penalty - Held that: - the entire issue was essentially in nature of classification dispute from the beginning and the issue has been going on since 1992 - the adjudicating authority has observed that the appellants mis-declared the description of the goods as the usage/utility was well known to them and they misclassified their product with intent to evade the duty. However, the issue is same in show cause notices in this appeal and before the Hon’ble Apex Court and the Hon’ble Tribunal. Since it was classification dispute, which attained finality in the Supreme Court judgment in 2005, and the classification declarations were being filed regularly and the issue was very much in the knowledge of the Department, allegations of mis-declaration of description/usage in these circumstances are unsustainable. In view thereof, the penalty in these show cause notices is also not justified. As a result of the classification of final products as decided by Hon’ble Supreme Court in O.K. Play (I) Ltd. vs. CCE, Delhi-III [2005 (2) TMI 114 - SUPREME COURT OF INDIA], the appellants would not be entitled to nil/concessional rate of duty and would be required to pay duty at the prescribed statutory rate in the Tariff during the relevant period. However, they would be entitled to the Cenvat Credit in respect of inputs used in manufacture of aforesaid final products on which duty has been paid. The matter is required to be remanded back to the adjudicating authority for quantification of the duty amounts on the final products and verification of proof of duty payment on the inputs - appeal allowed by way of remand.
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2017 (10) TMI 187
CENVAT credit - goods returned to the appellant under rule 16 of Central Excise Rules, 2002 - Held that: - The purpose of rule 16 of CER, 2002 is to enable reconditioning and further processing within the framework of legality without, in any way, compromising the rigor of maintenance of the CENVAT account. It, therefore, does not exclude the possibility of scrapping during the stage of re-manufacture and it is not in any way different from scrapping at the stage of original manufacture - appeal allowed - decided in favor of appellant.
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2017 (10) TMI 186
CENVAT credit - Courier Service pertaining to the period prior to 01.4.2011 - definition of ‘Input Service’ prescribed at Rule 2(l) of CCR, 2004 with effect from 01.4.2011 - Held that: - The present appellants are manufacturer of excisable goods and utilized the ‘Courier Services’ in sending the Samples, Documents and Finished Goods to their customers - A simple reading of the said amended provision, makes it clear that though the expression ‘activities relating to business, such as’ has been deleted, but the illustrative services viz., Accounting, Auditing, Financing, Recruitment and quality control, Coaching/training, Computer Networking, Credit Rating, Share Registry, Legal Services, Security, Business Exhibition etc., even though directly not related to manufacturing activity, being not used inside the factory premises, but continued to remain in the said definition of input service. Needless to mention that these services are even though not directly linked to the manufacturing activity in the factory premises of the assessee but connected or related to the business of manufacturing activity which also involve marketing/sale of the manufactured goods - credit allowed. CENVAT credit - CHA service - C&F Services - Held that: - The appellants’ had also availed credit of the service tax paid on CHA and C&F Services which held to be admissible by the Hon’ble Gujarat High Court in the case of Commissioner Vs. Dynamic Industries [2014 (8) TMI 713 - GUJARAT HIGH COURT] and CCE, Ahmedabad Vs Cadila Healthcare Ltd [2013 (1) TMI 304 - GUJARAT HIGH COURT] respectively. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (10) TMI 185
Reversal of input tax credit - Violation of Articles 14, 19(1)(g), 301 and 304(a) & (b) of the Constitution - petitioner has asserted that denial of ITC, in respect of bullion and raw material, purchased within the State of Tamil Nadu, which is converted into finished jewellery, albeit, outside the State and sold, thereafter, within the State of Tamil Nadu, is unlawful and violative of the provisions of Article 265 of the Constitution - petitioner's case is that upon payment of conversion charges, the final product, that is, jewellery, is returned to it for sale within the State of Tamil Nadu, once again, against tax invoices. The sale transaction within the State of Tamil Nadu is, thus, completed after paying the requisite tax, albeit, upon claiming set off qua tax paid on bullion and worn-out jewellery. Held that: - The facts which obtain in the present case, clearly, demonstrate, that ITC is not made available by the respondents, to those assessees who have had tax suffered raw materials such as bullion and / or worn out jewellery converted into final products (i.e. jewellery) by having them manufactured / processed in units situate outside the State of Tamil Nadu, even though, the final product is sold, upon payment of tax within the State of Tamil Nadu - Consequently, the final product (i.e. jewellery) manufactured by the assessee within the State from tax paid raw materials purchased within the State upon sale, within the State, gets the benefit of ITC, whereas, those goods which are manufactured outside the State, though by use of tax suffered raw materials purchased, within the State, do not get that benefit. Clearly, if the impact test is applied, goods manufactured outside the State, upon being brought within the State, for sale, would be costlier, as against those, which are, manufactured within the State. Section 19(4) of the 2006 Act provides intrinsic evidence that ITC cannot be disallowed merely because transfer of goods takes place outside the State. Section 19(4) allows for ITC on tax paid or payable, albeit, (in excess of 3%)* in respect of goods purchased in the State in two situations: (i) First, where transfer takes the goods to a place outside the State, otherwise than by way of sale; or (ii) Second, where goods are used in manufacture of other goods and are transferred to a place outside the State, otherwise than by sale - The provision, recognises the fact that goods purchased within the State, on which tax has been paid, can be transferred outside the State, for reasons, other than sale. However, while recognising this aspect, the provision grants credit of tax to the extent it is in excess of 3%. In other words, tax paid on purchase of goods, within the State, as rightly pointed out by the respondents is retained by the State to the extent of 3%, while the tax collected over and above 3% is passed on to the assessee, by way of credit. ITC availed of need not be reversed merely because goods purchased are sent temporarily outside the State for the purposes of job work. Section 19(2)(ii) of the 2006 Act is invalid to the extent that it denies availment of ITC in respect of those units which despatch tax suffered raw materials i.e. bullion / worn-out jewellery for conversion into final product (i.e. jewellery) outside the State which upon conversion are received back and sold within the State of Tamil Nadu. Thus, according to us, the mere fact that the manufacturing unit is located outside the State of Tamil Nadu, cannot be the basis, for denial of ITC, under Section 19(1) of the 2006 Act. Clause (ii) of Sub-Section (2) of Section 19 of the 2006 Act is, thus, declared bad in law. The respondents cannot retain ITC on goods purchased within the State, by invoking provision of Section 19(4) of the 2006 Act to the extent of rate of tax provided therein i.e., 3% (which was the rate provided therein at the relevant point of time), as that would make the relief inefficacious since the subject goods i.e. bullion / worn-out jewellery on which tax credit was sought by the writ petitioner was imposed at the rate of 1% - petition allowed - decided in favor of petitioner.
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2017 (10) TMI 184
Composition of offence - Section 71(3)(e) of the Tamil Nadu Value Added Tax Act, 2006 - detention of goods - petitioner's case is that the goods, being perishable in nature namely tea, had to be immediately moved and that therefore, they paid the compounding fees of ₹ 2,89,868/- and ₹ 2,86,085/- respectively, though no specific orders compounding the offence and issuing a demand were served on the petitioner - Held that: - in the instant case, no such compounding orders were issued. But, the Check Post Officer collected the said sum of ₹ 2,89,868/- and ₹ 2,86,085/- respectively. It is not known as to how the computation was done. If a compounding order is passed, then the petitioner could have challenged the same before the Revisional Authority and if that has not been done, obviously the revision petitions would have been within the period of limitation - taking note of the fact that no compounding orders were passed by the Authority concerned and only show cause notices for compounding the offence were issued, this Court is inclined to grant liberty to the petitioner to present the revision petitions before the Revisional Authority - petitioner directed to represent the revision petitions along with a copy of this order before the Joint Commissioner (CT), Coimbatore Division - petition disposed off.
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2017 (10) TMI 183
Attachment of bank accounts, stock and Finished Goods - it was alleged that the petitioner is engaged in the bogus billing activities and had been dealing with purchasers whose registration have been cancelled - Section 45 of the VAT Act - Held that: - Sub-section (2) of section 45 of the Act, in plain terms, ensures that the life of a provisional attachment order does not extend beyond a period of one year. Therefore, unless the order of provisional attachment is withdrawn, recalled, set aside or merges into some final order earlier, the same would cease to have effect at the end of a period of one year - the impugned orders of attachment were passed on 07.09.2016 and 08.09.2016. In terms of sub-section (2) of section 45, therefore they would become ineffective - appeal allowed.
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2017 (10) TMI 182
Validity of assessment order - power of Special Committee to reject an application - application rejected on the ground that petitioner did not appear for several hearings - Section 16-D of the Tamil Nadu General Sales Tax Act, 1959 - Held that: - it is evidently clear that the reason for rejection is utterly perverse. The Special Committee has no jurisdiction to comment upon the observation made by the High Court in the earlier writ petitions and the expressions used in the impugned order are condemnable. The Special Committee did not appreciate the observations made by this Court as to what is the power conferred on it u/s 16-D of the TNGST Act. Without reading the order passed by the High Court, the Special Committee, in a most arbitrary and perverted manner, has passed the impugned order - none of the three members of the Special Committee had applied their mind to the observations contained in paragraph-2 of the order passed in the earlier writ petitions. Under normal circumstances, when proceedings are quashed on such a ground, the matter would be remanded to the same authority for fresh consideration. However, in these cases, this Court does not propose to adopt such a procedure as in spite of an earlier direction, the Special Committee has failed to take into consideration of the merits of the matter. The order passed by the Special Committee impugned in these writ petitions are set aside. Consequently, the orders of assessment passed by the second respondent for the assessment years 2004-2005 and 2005-2006 under the TNGST Act dated 27.04.2009 and 29.04.2009 are set aside and the matter is remanded back to the second respondent for fresh consideration - petition allowed by way of remand.
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2017 (10) TMI 181
Amnesty Scheme - Validity of orders issued by the Designated Authority i.e. Additional Commissioner of Income Tax - Delhi Tax Compliance Achievement Scheme, 2013 - power and jurisdiction of the Designated Authority to issue the notice under clause 8 of the Amnesty Scheme - whether, in the present case, there has been any delegation of the said power which is vested in the Commissioner under the aforesaid clause 8? - Held that: - Clause 8(3) of the Amnesty Scheme will have no application to the present case where the initial show cause notice was issued within time and its legitimacy was not contested by the respondent-Assessee. Had such legitimacy been questioned at the stage of reply or even in the course of the adjudication proceedings, there would still have been room/ time for the revenue to correct the error that had occurred. A rectified Notice could even have been issued after the order of adjudication was passed on 11th February, 2015. The close proximity of time between the reply submitted by the assessee to the Show Cause Notice (27.01.2015) and the proceedings in adjudication Revenue on the one hand and the date of filing of the Writ Petition (4.3.2015) would permit us to infer that the conduct of the assessee in raising the issue in the writ petitions and not earlier was not entirely bonafide. Whether a fresh notice under the aforesaid clause of the scheme can still be issued by the competent authority i.e. the Commissioner or the delegatee of the Commissioner? - Held that: - The respondent-Assessee, cannot be allowed to take advantage of its own wrong. The courts exercising extraordinary jurisdiction cannot be understood to be helpless but concede to the assessee an undeserved victory over the Revenue. The power of the High Court under Article 226 of the Constitution, wide and pervasive as it is, should have enabled the High Court to appropriately deal with the situation and issue consequential directions permitting initiation of fresh proceedings, if the Revenue was so inclined. The High Court having failed to so act, we now correct the error and issue directions to enable the Revenue to issue a fresh notice to the assessee under clause 8 of the Amnesty Scheme, if it so desires and is so advised. Appeal allowed - decided in favor of Revenue.
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Indian Laws
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2017 (10) TMI 218
Compounding the offence under Section 138 of NI Act 1881 - compounding on payment of the cheque amount and in the alternative for exemption from personal appearance - Held that:- We hold that where the cheque amount with interest and cost as assessed by the Court is paid by a specified date, the Court is entitled to close the proceedings in exercise of its powers under Section 143 of the Act read with Section 258 Cr.P.C. As already observed, normal rule for trial of cases under Chapter XVII of the Act is to follow the summary procedure and summons trial procedure can be followed where sentence exceeding one year may be necessary taking into account the fact that compensation under Section 357(3) Cr.P.C. with sentence of less than one year will not be adequate, having regard to the amount of cheque, conduct of the accused and other circumstances. In every complaint under Section 138 of the Act, it may be desirable that the complainant gives his bank account number and if possible e-mail ID of the accused. If e-mail ID is available with the Bank where the accused has an account, such Bank, on being required, should furnish such e-mail ID to the payee of the cheque. In every summons, issued to the accused, it may be indicated that if the accused deposits the specified amount, which should be assessed by the Court having regard to the cheque amount and interest/cost, by a specified date, the accused need not appear unless required and proceedings may be closed subject to any valid objection of the complainant. If the accused complies with such summons and informs the Court and the complainant by e-mail, the Court can ascertain the objection, if any, of the complainant and close the proceedings unless it becomes necessary to proceed with the case. In such a situation, the accused’s presence can be required, unless the presence is otherwise exempted subject to such conditions as may be considered appropriate. The accused, who wants to contest the case, must be required to disclose specific defence for such contest. It is open to the Court to ask specific questions to the accused at that stage. In case the trial is to proceed, it will be open to the Court to explore the possibility of settlement. It will also be open to the Court to consider the provisions of plea bargaining. Subject to this, the trial can be on day to day basis and endeavour must be to conclude it within six months. The guilty must be punished at the earliest as per law and the one who obeys the law need not be held up in proceedings for long unnecessarily. It will be open to the High Courts to consider and lay down category of cases where proceedings or part thereof can be conducted online by designated courts or otherwise. The High Courts may also consider issuing any further updated directions for dealing with Section 138 cases in the light of judgments of this Court.
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2017 (10) TMI 217
Proceedings under Section 138 of the Negotiable Instruments Act - proceedings initiated by the complainant against the Director of the Company Held that:- The notice issued to the Directors of the Company would be sufficient for the purpose of attracting Section 138 of the Negotiable Instruments Act. In the words of the Supreme Court in M/s.Bilakchand Gyanchand Co. vs. A.Chinnaswami [1999 (3) TMI 620 - SUPREME COURT] too technical an approach on the sufficiency notice and the contents of the complaint is not warranted in the context of the purpose sought to be achieved by the introduction of Sections 138 and 141 of the Negotiable Instruments Act. Cheques were issued by the petitioner as a security - It is of the view that as the cheques were issued as a security, there is no legal bar in presenting the cheques for launching the prosecution after complying with the requisite procedures in the event of dishonour. What would be required is as to whether the cheques were presented for the outstanding liability or not. The very purpose for which the cheques issued, whether dated or undated, is only for the purpose of presenting them whenever there is a default on the part of the borrower. While that being so, it cannot be said that the cheques given by way of security are only an empty exercise and that the lender has no authority to present the cheques when there is default.
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