TMI Tax Updates - e-Newsletter dated: November 13, 2017 - with Direct Tax, Indirect Tax and GST Updates and Updates on FTP, FEMA, IBC & Corporate Laws etc. published on TMI with Latest Case Laws

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TMI Tax Updates - e-Newsletter November 13, 2017 Case Laws in this Newsletter: Income Tax Customs FEMA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Highlights / Catch Notes Income Tax: As a charitable institution the assessee should return the money suo-moto after adjusting the dues, but the assessee is not carrying out this exercise and retaining the fund over and above the fees which is due from the students. This again goes to show that the assessee is running the institute from a commercial angle, hence, it is also a ground for rejecting the benefit of section 11 - AT Visit to Get Source Income Tax: Approval u/s 80G(5)(vi) - only one object out of several objects cannot give a religious or communal colour to the assessee society. The rest of the objects aimed at developing the moral fabric of the society, help poor and needy children in their education and running charitable dispensaries and hospitals for the public at large are all charitable activities for the benefit of the general public. - AT Visit to Get Source Income Tax: Penalty order u/s 271(1)(c) - wrongly claiming deduction of rental payments in violation of the provisions of section 40(a)(ia) - non deduction of TDS on the rental payments - levy of penalty confirmed - AT Visit to Get Source Income Tax: LTCG or STCG - AO was right in treating the holding period of the property from the day on which the assessee has got right over the property by virtue of a valid sale agreement, according to which the holding period of the property is less than 36 months and hence, the AO has rightly computed income from sale of house property as short term capital gain - AT Visit to Get Source Income Tax: Rejection of books of accounts - There cannot be negative onus on assessee to prove it has not made purchases from NSEL in dispute. No evidence of any sham purchases/transactions have been brought on record. No evidence of any purchase made by assessee from NSEL have been brought on record. - AT Visit to Get Source Customs: ADD - Initiation of Sunset Review - continuation of the notification issued by the Central Government of the anti-dumping duty - imports of Cellophane Transparent Film (CTF) - import from China - HC uphold the decision of DA Visit to Get Source FEMA: Non-realisation of export sale proceeds - The Appellant was neither part of the management managing the affairs of the MVR group of companies nor was he in any way concerned with the company - the Adjudicating Authority ought not to have imposed the penalty. - AT Visit to Get Source Central Excise: Classification of the product Reishi Gano and Ganocelium - goods are definitely products sold and known only as food supplements and certainly not as a drug and most certainly not as an ayurvedic drug - meriting classification only under chapter 21 of the CETA - AT Visit to Get Source Central Excise: Cenvat Credit - In sub clause (iii) of Rule 6(3A)(c), it is stated that P denotes total Cenvat credit taken on input services during the financial year. There is no ambiguity in the words or in the formula prescribed therein. The rule uses the words total credit on input services and the same cannot be stretched to read as total common credit on input services. - AT Visit to Get Source Central Excise: Classification of leftover goods after manufacture - Residual Crude Petroleum Oil’ or ‘Reduced Crude Petroleum Oil’ - ‘Reduced Crude Oil’ was in fact crude oil - classifiable under Tariff Item No. 2709.00.00 - AT Visit to Get Source Central Excise: Clearance to 100% EOU - Refund claim - deemed export - when the claim was to be filed quarterly, the date of filing was to be computed from the last date of quarters - refund filed is within time limit. - AT Visit to Get Source Articles GST Update on "Saved", "Submitted" and "Filed" in various GST Returns Analysis of Clarifications issued by the C.B.E. & C. Notifications GST - States FA-3-70/2017-1-V-(127) - dated 13-10-2017 - Madhya Pradesh SGST The Madhya Pradesh Goods and Services Tax (Amendment) Rules, 2017, FA-3-69/2017-1-V-(122) - dated 13-10-2017 - Madhya Pradesh SGST Extends the time limit for declaration, in FORM GST ITC-01. FA-3-67/2017-1-V-(124) - dated 13-10-2017 - Madhya Pradesh SGST Authorized to be the proper officers for the purpose of sanction of refund. FA-3-47/2017-1-V-(131) - dated 13-10-2017 - Madhya Pradesh SGST Amendment in the Notification No. F. A.-3-47-2017-1-V (59), dated the 30th June, 2017. FA-3-41/2017-1-V-(123) - dated 13-10-2017 - Madhya Pradesh SGST Amendment in the Notification No. FA-3-41-2017-1-V(47), dated the 30th June, 2017. FA-3-37/2017-1-V-(121) - dated 13-10-2017 - Madhya Pradesh SGST Amendment in the Notification No. F-A-3-37-2017-1-V-(65), dated the 30th June 2017. FA-3-35/2017-1-V-(130) - dated 13-10-2017 - Madhya Pradesh SGST Amendment in the Notification No. F-A-3-35/2017-1-V(63), dated the 30th June, 2017. FA-3-32/2017-1-V-(129) - dated 13-10-2017 - Madhya Pradesh SGST Amendment in the Notification No. F-A-3-32-2017-1-V-(41), dated the 29th June, 2017. FA-3-23/2017-1-V-(128) - dated 13-10-2017 - Madhya Pradesh SGST Amendment in the Notification No. F.A.-3-23-2017-l-V-(50), dated the 30th June, 2017. Income Tax 95/2017 - dated 9-11-2017 - IT U/s 10(46) of the Income-tax Act, 1961 Central Government notifies ‘Telangana Building and Other Construction Workers Welfare Board’, a board established by the Government of Telangana, in respect of the following specified income arising to that board 94/2017 - dated 9-11-2017 - IT U/s 10(46) of the Income-tax Act, 1961 Central Government notifies Haryana State Legal Services Authority, constituted by the Government of Haryana under the Legal Services Authorities Act, 1987, in respect of the following specified income arising to that Authority Circulars / Instructions / Orders GST - States - FA-3-71/2017-1-V-(126) - dated 13-10-2017 THE MADHYA PRADESH GOODS AND SERVICES TAX (REMOVAL OF DIFFICULTIES) ORDER, 2017 News GOI floats Series-III of Sovereign Gold Bonds 2017-18 for the period from October 09, 2017 to December 27, 2017 Case Laws: Income Tax 2017 (11) TMI 644 Determination under Section 92CA - comparable selection - Held that:- TPO has taken the comparables with the financial data for the year 2002-03 instead of for the financial year 2003-04. He has not given any reason for not taking the contemporary data as per Rule 10B(4) of the Income Tax Rules, 1962. There are various judgments in support of taking the current year data. Allocations of expenses - Held that:- AO did not rejected the books of accounts of the appellant. He has not given any finding regarding the reliability of the books of accounts maintained by the appellant. There is no reason for the AO to make an addition on an estimation basis when the books of accounts of the appellant were not rejected. The AO has not analyzed the reason for loss suffered by the appellant. Therefore, in view of the submission of the appellant, it is clear that the appellant is incurring losses on account of business reasons and hence the arbitrarily estimated GP addition is not sustainable. Appellant gets relief under this ground of appeal. 2017 (11) TMI 643 Revision u/s 263 - Claim for deduction made under Section 80IB - SCN issued by the DIT - variance between what is stated in the SCN, and that, which was noted in the order of DIT - Held that:- While, there was, clearly, a variance between what is stated in the SCN, and that, which was noted in the order of DIT, that by itself would not render the order passed under Section 263 of the 1961 Act illegal, as long as at the stage of hearing, the Assessee was given due opportunity to rebut the concerns and/or the material that the DIT had in his possession, based on which, he had reached the conclusion that the assessment order was erroneous and prejudicial to the interest of the Revenue. Therefore, this question is answered in favour of the Revenue and against the Assessee. Though no SCN was issued with regard to the admissibility of the deduction claimed by the Assessee under Section 80IB(9), opportunity, in that behalf, ought to have been given by the DIT at the stage of conducting the hearing and prior to passing an order under Section 263 of the 1961 Act. Accordingly, question No.2 is also answered in favour of the Revenue, and against the Assessee. Nothing on record to suggest that at any stage, which is at the show cause stage or at the time, when, hearing was held before the DIT, adequate opportunity was given to the Assessee to rebut the concerns and/or underlying material, if any, that the DIT, had in his possession. - Decided in favour of assessee. Tribunal could not have come to a conclusion that the Assessee had not worked out the deductions in accordance with the provisions of Section 80IB(13), without the DIT giving adequate opportunity to the Assessee. As noted by the Tribunal and also by us, the relevant material required for claiming deduction under Section 80IB had been placed on record by the Assessee before the Assessing Officer. The only reason that the DIT and the Tribunal came to the conclusion that the assessment order was erroneous and prejudicial to the interest of the Revenue, was, that, according to them, the Assessing Officer had not applied his mind to the materials placed on record by the Assessee. In so far as the Assessee was concerned, it claimed that it had worked out the deduction in accordance with the provisions of Section 80IB(13) of the 1961 Act, which, in turn, referred to sub-section (7) to (12) of Section 80IA of the very same Act.- Decided in favour of assessee. The Tribunal was, clearly, in error in making a reference to the provisions of Section 80IB(5) of the 1961 Act, which had no relevance in the facts and circumstances obtaining in the instant case. The position was no different in respect of Section 292B of the 1961 Act.- Decided in favour of assessee. 2017 (11) TMI 642 Disallowance u/s. 14A - did the Tribunal commit an error in deleting the disallowance concluding that interest free funds, far in excess of the amounts invested for earning exempt income, were available with the assessee - Held that:- We see no reason to take a different view from Tribunal. Revenue tried strenuously to contend that the Tribunal's findings are perverse. Our attention was drawn to the order of the Assessing Officer and that of the Commissioner (Appeals). Neither of these orders, however, dislodge the Tribunal's finding of fact that at the command of the assessee interest free funds in excess of investment in tax exempt income were available. That being the position no question of law arises. 2017 (11) TMI 641 Condonation of delay - Held that:- This application is filed by the revenue seeking condonation of delay of two days in filing the Tax Appeal. Looking to the miniscule nature of delay and the explanation rendered in Civil Application, we are inclined to condone the delay. Issuing notice to the respondent would only cause unnecessary and avoidable inconvenience and possible cost. Delay is, therefore, condoned. 2017 (11) TMI 640 Disallowance of vehicle running and maintenance expenses - allowable business expenses - Assessee argued that it is an adhoc addition - Held that:- We do not agree with the contention of the Learned Counsel for the Assessee. The A.O. has given specific finding that assessee did not file copy of the account of these expenses and has not justified that entire expenditure having used for the purpose of business. The Ld. CIT(A) also found that if the total claim of assessee is considered, then the vehicle must have been used excessively atleast for 300 KM per day. Considering the nature of business of assessee i.e., Consultancy Services carried out from the residence of the assessee, the authorities below were justified in disallowing part of the expenditure. - Decided against assessee. Addition on account of travelling expenses - personal expenditure incurred by assessee for visiting Dubai - Held that:- The assessee did not file specific reply before A.O. as per his query. The assessee has not established that the travelling expenses have been incurred for the business use. The Ld. Counsel for the Assessee admitted before Ld. CIT(A) that assessee has visited Dubai and the entire expenditure pertains to her Dubai visit. It was found that assessee had no business activities in Dubai and did not produce any evidence or material before A.O. to show that expenditure was incurred for the purpose of business. Since the assessee failed to justify that these expenses were incurred for the purpose of business, there were no justification to interfere with the orders of the authorities below. Further, it was found that during the year assessee was working for an American principal and had no business interest in Dubai. Learned Counsel for the Assessee during the course of arguments could not satisfy as to what business purpose have been served by visiting Dubai.- Decided against assessee. Addition on account of purchase of jewellery - A.O. found that the credit card statement did not show any entry of purchase of jewellery - Held that:- Assessee referred to a bank statement of Citi Bank to show the entry of ₹ 32,871 through card. It is an account maintained by assessee. Therefore, this needs verification at the level of the A.O. I, accordingly, set aside the orders of the authorities below and restore this issue to the file of A.O. with a direction to re-decide this issue by verifying the fact of payment through bank statement of Citi Bank. Assessee is directed to produce copy of this bank statement before A.O. for his verification. The A.O. shall give reasonable, sufficient opportunity of being heard to the assessee. Accordingly, part of Ground No.4 of appeal of assessee is allowed for statistical purposes. Addition on account of purchase of two cars - Held that:- As per statement of assessee and letter issued by the Financier on 26th October, 2005, the assessee has paid entire outstanding amount to M/s. Kotak Mahindra Primus Ltd., in respect of purchase of the vehicle and from the account submitted by the assessee it was seen that assessee paid total of ₹ 4,93,085 to M/s. Kotak Mahindra Primus Ltd., and no source have been explained. Assessee through his synopsis submitted that Hyundai Car was purchased on 13th April, 2005 for ₹ 5,80,417 and loan was taken from M/s. Kotak Mahindra Primus Ltd., on 04th October, 2005 for ₹ 4,50,000 and there are withdrawals of ₹ 1,40,000 from the Bank on 17th March, 2015. CIT(A), therefore, correctly did not accept the explanation of assessee because the car is purchased in April, 2005 but assessee had taken loan for purchase of car in October, 2005. The claim of assessee was therefore, wholly incorrect and an afterthought. No evidence was furnished by the assessee before the authorities below that vehicle was sold to her without payment. It is also highly improper that seller would sold the car to assessee without any payment. When loan was granted in October, 2005 for purchase of car, there is no question of purchase of car by assessee in April, 2005 without any payment. No evidence of withdrawal from the Bank connected with the purchase of the car in April, 2005 have been submitted before the authorities below. Therefore, authorities below were justified in holding that assessee made purchase of car from undisclosed source. Therefore, addition was correctly made against the assessee. Repayment of loan to M/s. Kotak Mahindra Bank, Assessee filed letter of Kotak Mahindra Bank to the assessee (PB-3) to show that amount have been returned to them. In this letter, column-4 have been mentioned “cheque no.” the next column-5 is “receipt reference no.”. Both these columns are blank and have not been filled-in. However, rest of the columns are filled-in to show payment of ₹ 4,93,085 on different dates. The assessee shall have to explain the source of the repayment of the loan to M/s. Kotam Mahindra Primus Ltd., However, assessee failed to explain the source of repayment of loan before the authorities below as well as before the Tribunal. Therefore, Ld. CIT(A) was justified in holding that payment is made from unaccounted income. Therefore, enhancement to the extent of ₹ 4,93,085 is wholly justified. As regards the second vehicle purchased by assessee on 15th October, 2005, the assessee claimed that part of the amount is invested after selling the first vehicle in February, 2006. No material has been brought on record by the assessee to show that the alleged sale consideration was received by her prior to the sale of the first vehicle on 18th February, 2006. No satisfactory evidence of withdrawal of the cash prior to purchase of the vehicle have been filed and explained. In its chart the assessee has mentioned certain dates of December, 2005 and January, 2006 of payment for purchase of second vehicle which were after the purchase of the second vehicle on 15th October, 2005. Therefore, would not able to explain the source of purchase of the car. 2017 (11) TMI 639 Addition on account of the International Transaction in the nature of interest on loans granted to Associated Enterprises - contentions of the assessee about non-chargeability of interest is that such AE was running into losses, thereby necessitated the assessee in the capacity of a parent to pump funds - Held that:- On a perusal of the financials of the Multination Textile Group Limited, Ld. CIT (A) found that the claim of the assessee was factually incorrect, inasmuch as the dividend payment from AE at 10,20,000 USD is more than the profit earned at 9,78,780 USD meaning thereby that there is no correlation between the profit and the amount of dividend received. Further Ld. TPO rejected this contention of the assessee by placing reliance on the decisions of a coordinate Bench of this Tribunal in Perot Systems TSI (India) Ltd. vs. DCIT (2009 (10) TMI 638 - ITAT DELHI) wherein the contention of the assessee that they have not earned any interest and it was commercially expedite to earn interest free loans was rejected holding that international transactions can not be equated with ordinary business transactions. Thus having regard to the facts and circumstances of the case, we do not find any merit in the argument that no ALP interest could be added on account of the loan advanced to Multination Textile Group Limited, Mauritius. Rate of interest - according to the assessee 6% offered in respect of House of Pearl Fashions Limited, USA is proper, whereas in respect of Multination Textile Group Limited a nominal interest at LIBOR plus 200 basic points may be charged - Held that:- There is an inherent inconsistency in the view taken by the TPO because, if at all the ALP interest in so far as the assessee is concerned is the interest rate expected by an Indian lender, then irrespective of the fact of Nor Pearl Knitweard Limited, Bangladesh obtained loan at Bangladesh at any rate less than this expected rate, he should not have accepted. The tested party in the case of Nor Pearl Knitwear Limited, Bangladesh and in the case of other two concerns is the assessee only. In respect of the same tested party the TPO cannot adopt two different yardsticks. Shifting of the testing parties in the same breath is not permissible. We, therefore, in this set of circumstances agree with the Ld. AR that since loans or advances in case of the two other concerns also in foreign currency, and all the three persons stand in the same footing, as such, the same treatment has to be given to them equally. With this view of the matter, we direct the AO to re-compute the ALP of the interest at 6% in respect of House of Pearl Fashions Limited, USA AND Multination Textile Group Limited, Maritius also. These grounds of appeal are allowed in part accordingly. Addition made by making disallowance u/s 14A read with Rule 8D - Held that:- In view of this establish principle of law laid down by the Hon’ble Jurisdictional High Court in a number of cases including HT Media (2017 (8) TMI 962 - DELHI HIGH COURT) and Godrej & Boyce Manufacturing Company Limited vs. DCIT (2017 (5) TMI 403 - SUPREME COURT OF INDIA), we find that the enhancement of the disallowance made by the AO by invoking Section 14A read with Rule 8D of the Rules is bad and cannot be sustained. We, therefore, direct the AO to delete the same. 2017 (11) TMI 638 Denying the benefit of exemption u/s. 11 and 12 - appellant had made payment to specified persons within the meaning of Sec. 13(3) in violation of Sec. 13(1)(c) - payment of salary to Mrs. Malvika Rai - Held that:- Mrs. Malvika Rai is related to the Trustee and is being given a hefty salary of ₹ 16,20,000/- p.m. despite the fact that she is just a graduate and the assessee had not furnished any details as to how the educational qualification of Mrs. Malvika Rai is commensurate with the salary which she is drawing. Thus the Ld. CIT(A) was correct in upholding the action of the AO in invoking the provision of section 13 and denying the benefit of exemption u/s. 11 & 12 of the Act, which does not need any interference on our part, hence, we uphold the same and reject the grounds raised by the assessee. Treating the scholarship given to Ms. Aarti Rai, as being in violation of provisions of section 13(1)(C) - Held that:- The assessee has failed to furnish the names of other students who had been sent abroad to pursue higher studies on scholarship being awarded by the trust. No such resolution of the trust has also been placed either before AO as well as Ld. CIT(A). It is futile exercise on the part of the assessee to justify the benefit given to the persons specified u/s. 13. If the conscience of the assessee was clear then why it had not disclosed this fact in the audit report. Hence, there is a clear cut violation of the provisions of section 13 and accordingly, AO as well as Ld. CIT(A) has rightly denied the benefit of section 11. We note that scholarship given to Ms. Aarti Rai has been incurred in foreign currency and has been paid in UK i.e. to say the application of money has taken place outside India. For claiming exemption u/s. 11 the application of funds has to take place within India. Otherwise the approval of the Board is required which can grant exemption on the facts of each case. Thus in any case this income has not been applied in India and therefore not exempt. Further the trust is also hit by the provision of Section 13(1)(c). In view of the above, we are of the considered view that action of the Ld. CIT(A) in upholding the action of the AO in treating the scholarship given to Ms. Aarti Rai, as being in violation of provisions of section 13(1)(c) of the Act is correct one and the same does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) and reject the ground raised by the assessee. Assessee exists for the sole purpose of profit making and not for the purpose of charity - Held that:- Supreme Court in TMA Pai Foundation case [2002 (10) TMI 739 - SUPREME COURT] held that every institution is free to advise its own fee structure subject to the limitation that there can be no profiteering and no capitation fee charged directly or indirectly, or in any form. The Court further held that no profiteering does not imply that the institutions cannot have reasonable surplus for future sustenance and expansion of the institute. It was held that upto 15% of profit could be considered as reasonable and legitimate. Thus, the Hon’ble Supreme Court of India has observed that the profit rate upto 15% is reasonable for charitable organization. However, in this case it was observed that the profit rate is varying between 44.6% for the assessment year 2006-07 and 48.43% for the assessment year 2007-08. From this it goes to show that the organization is existing for the purpose of profit and not for charitable activities and therefore, the Ld. CIT(A) has rightly upheld the action of the AO by observing that assessee exists for the sole purpose of profit making and not for the purpose of charity, which does not need any interference on our part, hence, we uphold the same and reject the ground raised by the assessee. Addition of refundable security deposit of the students - Held that:- It is true that the liability to refund the money does not cease and it is obligatory on the part of the assessee to return the money which is lying with it in the form of security deposit, hence, the same cannot be regarded as income of the assessee. But the fact remains that this attitude of the assessee in not returning the security deposit of former students goes to show that it is running the school/ institute on commercial principles. As a charitable institution the assessee should return the money suo-moto after adjusting the dues, but the assessee is not carrying out this exercise and retaining the fund over and above the fees which is due from the students. This again goes to show that the assessee is running the institute from a commercial angle, hence, it is also a ground for rejecting the benefit of section 11 of the Act. Addition of ₹ 34,41,987/- out of refundable security deposit of the students confirmed Adhoc addition of 50% of repairs and car maintenance expenses - no log book was maintained by the assessee - Held that:- We find that AO observed that assessee is maintaining luxury cars like Toyoto Camry, Hyundai Sonata and Honda Accord and has claimed expenses of ₹ 14,18,836/-. No log book was maintained, which establish that the said cars were being used by the trustees for their own benefit, hence, 50% of such expenditure was rightly upheld by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the same and reject the ground raised by the assessee. Disallowing scholarship expenses paid to Ms. Aarti Rai - Held that:- We find that this expenditure cannot be regarded as an expenditure incurred to run the business nor can the same be allowed as discussed in preceding paras in the case of Trust, hence, the addition of ₹ 13,35,905/- was rightly upheld by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the same and accordingly, reject the ground raised by the assessee. Affirming disallowance on account of donation paid - Held that:- We find that since the assessee has already been disallowed the benefit of section 11 and the income has to be computed as business income therefore the donation of ₹ 37,900/- cannot be regarded as business expenditure and the action of the Ld. CIT(A) is a correct one and therefore, we uphold the same and reject the ground raised by the assessee. 2017 (11) TMI 637 Disallowance of depreciation in respect of furniture and fixtures in the office and interest - addition of property was found residential and was not used for the purpose of office/profession - Assessee relied upon the assessment order for A.Y. 2010-2011 to show that A.O. did not disallow depreciation and interest - Held that:- As noted here that the A.O. did not consider the issue of interest on depreciation in his order under section 143(3). It is a brief order passed by him without reference to deduction of the interest and depreciation. Further, the facts are totally different in assessment year under appeal because A.O. was deputed to make factual inspection of the property in question to justify the claim of the assessee of use of the residential property for business purpose only. This fact was not considered in A.Y. 2010-2011. Therefore, when new facts have been brought on record, the rule of consistency would not apply in the facts and circumstances of the case. Considering all CIT(A) correctly disallowed the balance amount of interest of ₹ 33,84,098 as having been incurred for purpose other than that of business. The depreciation on same analogy for sum of ₹ 2,54,511/- was rightly disallowed. The Ld. CIT(A) also noted that assessee did not produce any evidence that Ranikhet premises is used for the purpose of business. Therefore, depreciation have been correctly disallowed - Decided against assessee. Disallowance of service tax - assessee did not produce any evidence before authorities below to justify his claim of deduction - Held that:- Claim of assessee cannot be verified whether service tax is paid for professional receipts earned by the assessee in assessment year under appeal. A.O. also noted that the total service tax payable by the assessee comes to ₹ 5,57,360 but assessee claimed payment of ₹ 1,83,856. Therefore, facts were not verifiable from the explanation of assessee. The assessee filed copy of the bank certificate of Axis Bank before Ld. CIT(A) which also did not reveal anything in favour of the assessee. The assessee has filed copy of the bank certificate from Axis Bank which only confirm that assessee paid service tax payment. But it is not clarified as to on which professional income assessee has paid the service tax. In the absence of clarification of the payment of service tax for earning professional income, no interference is called for in the matter. - Decided against assessee. 2017 (11) TMI 636 Jurisdiction of the A.O. for non-service of the notice under section 143(2) within the statutory time limit - modes of service of notice - Held that:- When the only notice under section 143(2) dated 06th August, 2012 have been returned to the A.O. unserved in August, 2012 itself, the A.O. could have made some efforts to serve the notice to the assessee upto 30th September, 2012 through other mode of service prescribed under law. However, the A.O. did not make any effort to serve the notice under section 143(2) of the I.T. Act upon the assessee. It clearly show that A.O. never wanted to serve the assessee with jurisdictional notice under section 143(2) of the I.T. Act. It stands proved on record that no notice under section 143(3) have been served upon the assessee within the time prescribed under the law or thereafter. Therefore, the entire assessment order got vitiated due to non-service of the notice under section 143(2) of the I.T. Act. The A.O. therefore, did not get valid jurisdiction to proceed to make scrutiny assessment against the assessee. The assessment order is null and void abinitio - Decided in favour of assessee. 2017 (11) TMI 635 Disallowance of deduction u/s. 80-IAB - whether the action of the assessing officer in disallowing deduction u/s.80IAB for the forfeiture of the security deposit was in accordance with law? - Held that:- By no stretch of imagination a short period of lease rental can be given any different treatment then the longer period of lease rental. We find that the Settlement Agreement was only a means of giving proper exit of the lessee under the premises of the lease agreement. Infact, the assessee has also received arrear lease rental under the Settlement Agreement which has been allowed by the authorities below as qualified for deduction u/s. 80IAB. Hence, it is abundantly clear that the Settlement Agreement is nothing but adjunct to the lease agreement which facilitated exit of assessee in term of lease. Hence, no different treatment can be given to this impugned amount received. Hence, in our considered opinion, the assessee’s contention is very appropriate that 9 month lease rental receipt by way of forfeiture of security deposit cannot be given any different treatment then the lease rental receipt which qualify for deduction u/s. 80IAB. Hence, the distinction brought upon by the Revenue authorities that this amount is not derived from the business of the assessee, is not sustainable. Lease rental for approx 9 months received by the assessee in the shape of forfeiture of security deposit as against the balance lease rental for the lock-in-period which was much larger, is certainly an income derived from the business of the assessee and the same relates to the source of first degree and, hence, the income from this source qualifies for deduction u/. 80IAB. - Decided in favour of assessee. Receipts eligible for deduction u/s. 80IAB - Held that:- The ld. Counsel of the assessee conceded that the following receipts cannot be treated as business income, eligible for deduction u/s. 80IAB. i.e. interest on margin money deposit with State Bank of India, interest on security deposit with MIDC, interest on security deposit with MSEB, Pune and Recovery of damages from vendors. For rest of the receipt like Sale of scrap, Discount received on electricity charges and Cabling and other charges for cell phone towers we note that item have rightly been held by the ld. CIT(A) as not derived from the business of the assessee but may be attributable thereto. Hence, they don’t quality for deduction u/s. 80IAB. We further note that the similar disallowance made earlier was accepted by the assessee. Hence, we confirm the order of the ld. CIT(A) on this issue. 2017 (11) TMI 634 Transfer pricing adjustment towards interest on receivables - whether ‘interest on receivables’ is an international transaction? - Held that:- As going by the ld. CIT(A)’s version, there would have been no transfer pricing addition if the assessee had received the amount from one AE and paid to other AE, which would have been only an internal arrangement between the AEs. Since the balances with these three AEs are, admittedly, on account of trading transactions, which belong to the same ‘class of transaction’, we fail to comprehend as to why transactions with AVL Fahrzeugdiagnose GmbH and AVL Zollner Marine GmbH should not be aggregated with transactions with AVL List Graz. When the ld. CIT(A) was satisfied that interest on payables to AVL List Graz called for set off against interest on receivables from the same party for the purpose of determining the amount of transfer pricing adjustment, which position has also been accepted by the Department, then he ought to have considered similar transactions with AVL Fahrzeugdiagnose GmbH and AVL Zollner Marine GmbH as also part of the same international transaction. We, therefore, set aside the impugned order on this score and hold that the international transactions of trade receivables and trade payables with all the three AEs should be aggregated and processed as a single transaction of interest on receivables/payables. If the position is viewed in such a manner, there remains no amount of interest receivable from the AE liable to be added to the assessee’s total income as a transfer pricing adjustment. Disallowance u/s 14A - Held that:- An admitted position that the assessee did not earn any exempt income during the year and, still, the disallowance has been made u/s 14A. The Hon'ble Delhi High Court in Cheminvest Ltd. vs. CIT (2015 (9) TMI 238 - DELHI HIGH COURT), has held that if there is no exempt income, there can be no question of making any disallowance u/s 14A of the Act. In view of the binding precedents mandating for not making any disallowance u/s 14A of the Act in the absence of any exempt income, which are squarely applicable to the facts of the instant case, we overturn the view taken by the ld. CIT(A) and order for the deletion of disallowance sustained u/s 14A of the Act. International transaction of interest on receivables - Assessment Year 2010-11 - Held that:- We find from the assessee’s Profit & Loss Account there is an item of ‘Other income’ with the value of ₹ 22,33,35,416/-. The last item of this Schedule is ‘Interest.’ In addition to interest from bank, the assessee also declared to have earned interest from ‘Others’ to the tune of ₹ 37,95,288/-. This shows that the assessee did earn interest from ‘Others.’ It is not clearly borne out as to whether such interest was received on account of trade receivables from unrelated parties or on some other account. Under such circumstances, we are of the considered opinion that interest of justice would meet adequately if the impugned order is set aside and the matter is restored to the file of the Assessing Officer/TPO for benchmarking the international transaction of ‘Interest on receivables’ on the basis of the internal CUP as discussed above and thereafter, to determine the amount of transfer pricing adjustment, if any. Needless to say, the assessee will be allowed a reasonable opportunity of hearing. 2017 (11) TMI 633 Revision u/s 263 - AO by following the Tribunal Order for the assessment years 2010-11 and 2011-12 held that the disallowance u/s 14A r.w.8D on 5% of the exempt income - Held that:- AO during the course of assessment proceedings, has raised the specific query on the issue of disallowance u/s14A r.w.r 8D which was replied by the assessee. Another factor which is worth mentioning is that the assessee has not made any investments in the security yielding the tax free income but was holding the shares as stock-in-trade as the assessee was making purchase of shares for the purpose of trading in shares and securities. Having all the facts of the case and in the light of various decisions as cited by both the parties, we are not in agreement with the ld. PCIT that the order of the AO is erroneous and prejudicial to the interest of revenue as the AO after calling for information from the assessee on the issue of disallowance u/s 14A r.w.r 8D has taken a conscious view which is a possible view out of two views and applied the decision of the Tribunal in assessee‟s own case in the earlier years. The mere fact that the revenue has challenged the decision of the Tribunal in assessee‟s own case for the assessment years 2010-11 and 2011-12 is not rendered the decision of the AO as erroneous and prejudicial to the interest of revenue as the AO has taken a possible view after examining and considering the reply and arguments of the assessee as rendered during the course of assessment proceedings. The assessment order passed by the AO after considering of all the facts is neither erroneous nor prejudicial to the interest of revenue. Therefore, the ld.PCIT is wrong in assuming the revisionary jurisdiction u/s 263 - Decided in favour of assessee. 2017 (11) TMI 632 Disallowance of (proportionate) interest (premium) on debentures - the issue of the debentures to the directors of the assessee-company, who, as it transpires, are the erstwhile partners of the successee-firm - Held that:- It is only the partner’s capital, which is by definition the positive difference between the firm’s assets and liabilities, which could be regarded as the firm’s capital, on which deduction of interest, subject to the relevant conditions, is allowable under the Act (s. 36(1)(iii) r/w. s. 40(b)(iv)). The firm’s assets are recorded at cost, defined u/s. 43(1), subject to the exceptions laid u/s. 43A and proviso to s. 36(1)(iii). The same, as shall be noted, are largely in agreement with the accounting standards, being AS-10. It is in view of this settled position of law that we also endorse the AO’s construing the assessee’s claim, referring to McDowell & Co. Ltd. (1985 (4) TMI 64 - SUPREME Court), as largely an exercise in tax evasion. The revaluation in the present case has no purpose except to claim tax deduction on interest on a higher level of borrowings. An analogy, to our mind, would be a firm (or any entity) claiming depreciation on the enhanced value of an asset, otherwise eligible for depreciation under the Act, using the tax neutral event of succession, as u/s. 47(xiii), for the purpose. The ld. CIT(A) clearly has misdirected himself in the instant case. We, in view of the foregoing, accordingly, uphold the AO’s action qua the disallowance of the interest (premium) on the debentures, i.e., as relatable to the revaluation of land by the successee firm, Kali Material Handling Systems. Reopening of the assessments - Held that:- In the facts of the case, the returns for the relevant years, i.e., AYs. 2008-09 and 2009-10, were only processed u/s. 143(1), which procedure bars the examination of the assessee’s return or the claims preferred thereby, with as much as even the prima facie adjustments, i.e., on the basis of a return and the accompanying material, also barred w.e.f. 01.06.1999. The disallowance under reference, as afore-stated, is even otherwise not a subject matter of a prima facie adjustment, entails as it does, a complete understanding and knowledge of the primary facts leading to the issue of the debentures to the directors of the assessee-company, who, as it transpires, are the erstwhile partners of the successee-firm. And, accordingly, there is no question on either formation of reason to believe or an opinion by the AO in the matter, and which, as apparent from its’ reading, guided the decision in TANMAC India (supra). Rather, as afore-stated, any issue of notice u/s. 148 without the knowledge of the relevant facts would be violative of s.147, being not supported by any reason/s to believe. The charge of change of opinion, which is the basis of the assessee’s legal plea, is misplaced in view of the admitted position that the relevant facts along with the materials came to light only during the course of the assessment proceedings for AY 2010-11. And, further, a failure to take steps u/s. 143(3) would not render the AO powerless to initiate reassessment proceedings when the return had been earlier subject to processing u/s. 143(1). The ambit of the two procedures is completely different.The assessee’s legal plea is without merit and, accordingly, not maintainable. We decide accordingly, rejecting the assessee’s legal issue, and answering thus the third question arising in the present case by validating the initiation of reassessment proceedings - Appeal Decided against assessee. 2017 (11) TMI 631 TDS u/s 194H - TDS liability on commission paid to the distributor - applicability of section 201(1) and consequent interest u/s 201(1A) - whether assessee has furnished basic details in discharging its primary onus to show that assessee can no longer be considered as defaulter and interest can only be charged till date of payment, if any, by the distributors - Held that:- We are of the opinion that expecting assessee to obtain a certificate in Form 26A, at this juncture, is not practicable. At the time of filing of its returns, the issue of applicability of section 194H, on payments received by the assessee in the form of discount was under challenge and there are few decisions in favour of the assessee holding that the amounts received from the distributors by the assessee cannot be treated as commission, but, it has to be treated as discounts since the relationship between the distributor and the assessee is on ‘principal to principal’ basis. Thus, at the relevant point of time, the assessee has not obtained minute details from the distributors, since the assessee was under bonafide impression that it could not be treated as a defaulter u/s 201(1) of the Act. ITAT Hyderabad Bench in the case of Idea Cellular Ltd.(2009 (2) TMI 246 - ITAT HYDERABAD-B) had taken a view in favour of the assessee. This aspect has to be taken into consideration while considering as to whether the material filed before the AO is sufficient to prove that the assessee cannot be treated as a defaulter, u/s 201(1A) of the Act. Expecting the assessee to file a certificate of CA at this juncture creates “force majeure” situation, as held by the Hon’ble Madras High Court in the case of S. Hastimal Vs. CIT, [1962 (12) TMI 60 - MADRAS HIGH COURT] wherein observed that assessee cannot be put on the neck, after a lapse of more than 10 years, to furnish details beyond a particular point. Assessee having furnished the basic details i.e. list of declarations collected from the concerned distributors for the above AYs along with turnover and income-tax returns filed by them, it should be treated as sufficient compliance and interest should not have been charged u/s 201(1A) of the Act from the dates when the recipients have filed returns. 2017 (11) TMI 630 Denying approval u/s 80G(5)(vi) - CIT(E) stated that atleast 3 of 5 purposes for which the assessee had been established had religious contours, which was in contravention to the provisions of section 80G(5)(iii) of the Act and was also hit by Explanation-3 to sub-section (5) of section 80G, which precludes purposes of religious nature from the coverage of charitable purpose and also the assessee trust was spending meagre amount on its charitable activities - Held that:- Propagating and inculcating religious feelings, brotherhood and nationalism among Aggarwal community only aim at bringing together members of the Agarwal community and developing feeling of nationalism amongst them which benefits the society at large and cannot be said to be either benefiting Aggarwal community only nor being in the nature of religious purpose. As for the object of celebration of Agarsain Jayanti , it definitely does not have a religious contour and the Ld.Counsel for the assessee has emphasized that the celebrations involve the public at large therefore we fail to understand as to how the said object is for the benefit of a particular community only. Moreover only one object out of several objects cannot give a religious or communal colour to the assessee society. The rest of the objects aimed at developing the moral fabric of the society, help poor and needy children in their education and running charitable dispensaries and hospitals for the public at large are all charitable activities for the benefit of the general public. Also on perusing the financial statements of the assessee society for the preceding three years i.e. year ending on 31-03-13,31-03-14 & 31-03-15 that all expenditures incurred are only in the context of running its chariable dispensary by way of purchasing medicines, paying staff salary and incurring misc. expenses only. No expenditure explicitly benefitting the Aggarwal community has been incurred by the assessee. Therefore we find no merit in the contention of the Revenue that the objects of the assessee society had religious contours and were benefitting a particular community only. Further the contention of the Revenue that the assessee was spending only a small portion of its receipts on the stated charitable activities is again we find factually incorrect. The said finding, we find, has been arrived at after excluding the spend on salary, which as per the Ld.CIT(E) is not a charitable activity. But considering the fact that the assessee is carrying out number of charitable activities as stated in its objects which includes running the charitable dispensaries and hospitals for the public in general, the manning of the said dispensaries by adequate personnel and also the requirement of staff for managing the affairs of the society are basic and essential expenditure which are to be considered to have been incurred in the course of carrying out its charitable activities alone and, therefore, staff salary paid on account of the same cannot be treated as being expenses not related to the charitable activity of the assessee concern. Thus the expenses incurred on staff salary are also to be treated as part of charitable activities carried out by the assessee and considering the same, therefore, the quantum of expenditure incurred by the assessee on its activities takes a quantum jump and thus the findings of Ld.CIT(E) that the assessee has incurred meagre income on its stated charitable expenses gets negated. - Decided in favour of assessee. 2017 (11) TMI 629 Penalty order u/s 271(1)(c) - wrongly claiming deduction of rental payments in violation of the provisions of section 40(a)(ia) - non deduction of TDS on the rental payments made during the previous year relevant to impugned assessment year - Held that:- The only explanation which is now forthcoming before us is that this was the first year of compliance and it was due to oversight that the amount escaped the notice of management. The question is even if we believe the said explanation, the question remains is why it took so many years from AY 2009-10 to AY 2012-13 to deposit such taxes. The oversight could be for one year and cannot be overlooked where the oversight continues for so many years. The reality of the situation is that only when the AO in the instant assessment year noticed this transaction and passed the assessment order on 28.12.2011 disallowing the rental expense then the assessee realised its mistake and deposited the taxes. The same is apparent from the TDS voucher placed at APB 4 where the TDS on rent has been debited and Union Bank has been credited with ₹ 2,52,000 and the narration which has been provided is that “Being online TDS paid vide challan no. 92388 dated 14.03.2012 paid for FY 2008-09 as per assessment order dated 28.12.2011.” In light of the same, we are unable to accede to the explanation so offered by the assessee and found the same devoid of any bonafide. In the case of Pricewaterhouse Coopers Pvt Ltd (2012 (9) TMI 775 - SUPREME COURT) held that the facts of the case are rather peculiar and somewhat unique. It was further held that the assessee made a bonafide and inadvertent computational error while filing its return of income and the fact that the disallowance was reflected in the tax audit report which was filed along with the return of income shows that it was not a case of furnishing inaccurate particulars of income or concealment of income. The said decision therefore was rendered in the context of its peculiar facts and the bonafide of the assessee was established which apparently is not satisfied in the instant case. - Decided against assessee. 2017 (11) TMI 628 Additions to the tune of 2% of bogus purchase - bogus transactions being accommodation entries - Held that:- We have observed that the assessee has made bogus purchases from Sthapna Trade Impex P. Ltd. and Ritesh Corporation to the tune of ₹ 96,84,465/- which has been confirmed by the said suppliers to be bogus transactions being accommodation entries wherein only paper invoices were issued without supplying goods physically. The assessee could not produce said parties before the A.O. nor the assessee could prove utilization / consumption of the said material . Thus, quantitative reconciliation of the stock/material was not done by the assessee before the authorities below. Nor any paper book is filed before the tribunal to support the contentions of the assessee. The assessee also could not produce evidence as to the delivery of material to the assessee such as lorry receipts, delivery challans, octroi receipts etc. to prove delivery of material by the supplier to the assessee. A.O has made random verification with respect to the sales and has come to the conclusion that sales are genuine and business losses were disallowed by the AO. We have observed that there is categorically finding by the AO that assessee has not proved utilization/consumption of the material purchased by the assessee and corresponding quantitative reconciliation with the said sales entries were not produced by the assessee before the AO . The learned CIT(A) has restricted disallowance to 2% of bogus purchases without brining on record as to how deficiencies as pointed out by the AO were met. Thus the appellate order of learned CIT(A) cannot be sustained and is hereby order to be set aside and in our considered view this matter need to be set aside and resorted to the file of the A.O for denovo determination of the issue - Decided in favour of revenue for statistical purposes. 2017 (11) TMI 627 Interest paid or payable on borrowings in respect of the unit no. 2 which could not be put to use till 31.03.2010 was to be capitalized without set off of interest earned - Held that:- Interest during construction has to be allowed as set off as decided in favour of assessee NTPC SAIL Power Co. Pvt. Ltd. vs. CIT [2012 (10) TMI 524 - DELHI HIGH COURT]. Allowability of provision of other retirement benefits - Held that:- Liability providing for service awards payable in future is an allowable liability. See CIT vs. Insilco Ltd. [2009 (2) TMI 31 - DELHI HIGH COURT]. 2017 (11) TMI 626 Gains on sale of property - Short Term Capital Gain OR Long Term Capital Gain - Held that:- In the sale agreement dated 05-07-2006 for conveying the title of the property to the seller, in the preamble of the sale deed it was categorically stated that the original licencee Sheth Akshay Harshadrai has transferred and assigned flat No.28 to M/s Keki Consultants Pvt Ltd through its directors, Mr. Anu D Lohana and others by tripartite agreement dated 27-10-2004 and deed of confirmation dated 05-08-2005 duly registered with Sub Registrar, Thane. Though assessee claims that she had got right over the property in the financial year 1995-96 by virtue of an allotment letter from M/s Sheetal Builders Pvt Ltd, the said arrangement between parties is a mere willingness to purchase properly under an agreement for conveying the title in the property to the assessee. Therefore, we are of the considered view that the AO was right in treating the holding period of the property from the day on which the assessee has got right over the property by virtue of a valid sale agreement, according to which the holding period of the property is less than 36 months and hence, the AO has rightly computed income from sale of house property as short term capital gain - Decided against assessee Cost of acquisition of the property - sum paid by assessee’s husband towards purchase of property - Held that:- Once addition has been made towards unexplained investment in the hands of the assessee’s husband, the source available in the form of investment towards property cannot be denied as cost of acquisition. Insofar as balance amount of ₹ 4,24,900 the assessee has paid cash for purchase of property out of cash balance available in the books of account which fact has not been disputed by the lower authorities. The CIT(A) has though accepted the fact that the ITAT has accepted as such in its order, disallowed the cost incurred by the assessee by holding that the additions made in the hands of the assessee during block period on protective basis has already been deleted, cannot again be claimed by the assessee now. We do not find any merit in the findings of the CIT(A) for the reason that since substantive addition has been made in the hands of the assessee’s husband, addition made on protective basis in the hands of the assessee cannot be a ground for denying the sources available in the form of cash. Therefore, we are of the view that the issue needs to be examined by the AO in the light of the claims of the assessee that ₹ 8,51,835 has been paid by the assessee’s husband for which a separate addition has been made for the block period and also availability of source for ₹ 4,24,900, as per the order of the ITAT. Hence, we set aside the issue to the file of the AO and direct him to verify the cost of acquisition of the assessee and recompute the capital gain. Addition towards unexplained cash credit u/s 68 - Held that:- The assessee has shown cost of improvement of ₹ 6 lakhs towards property and shown the same as payable in the balance-sheet. The AO has disallowed cost of improvement shown by the assessee on the ground that the assessee has not filed any evidence to justify cost of improvement. Once cost of improvement has been disallowed while computing capital gain, the credit shown in the balance-sheet against cost of improvement automatically nullifies. Therefore, the AO was incorrect in making additions towards payables u/s 68. However, we set aside the issue to the file of the AO for verification of the fact with regard to the cost of improvement and payables shown by the assessee in the balance-sheet. Hence, we direct the AO to verify the claim of the assessee and if the payable shown in the balance-sheet is on account of cost of improvement already disallowed while computing capital gain, then addition made u/s 68 cannot be sustained in the eyes of law and it should be deleted. Addition towards difference in capital account as per balance-sheet enclosed - Held that:- There is no merit in the argument of the assessee that addition cannot be made u/s 68 of the Act, in the absence of books of account. The AO has made addition towards difference in capital account which is apparently from the books of account of the assessee and hence, we uphold the additions made by the AO and dismiss grounds raised by the assessee 2017 (11) TMI 625 Rejection of books of accounts - Addition on account of the recoveries to be made by NSEL - Held that:- No specific defects in the maintenance of books of accounts by the assessee have been pointed out. The assessee filed copy of the ledger account of the assessee in the books of accounts of NSEL showing assessee has to recover margin money of ₹ 44.56 crores from NSEL and some amount is mentioned in the trail balance as due to the assessee, so there is no question of making any recovery against the assessee. The authorities below have made and confirmed the addition against the assessee because the assessee could not file confirmation accounts from NSEL as on the date. When the assessee was not Member of NSEL during the period from 01.08.2013 to 31.08.2013, the period the recovery, where is a question of filing confirmation from NSEL in this regard. If the AO wanted to make the addition of impugned amount against the assessee, the AO should have examined NSEL and M/s Sharp and Tannan Associates. However, the AO did not make any investigation from them so as to make any addition of the impugned amount against the assessee. Since the AO failed to make proper investigation into the matter and no basis have been shown for making the addition on account of the recoveries to be made by NSEL, the AO failed to discharge the onus upon him to make the addition of the aforesaid nature. There cannot be negative onus on assessee to prove it has not made purchases from NSEL in dispute. No evidence of any sham purchases/transactions have been brought on record. No evidence of any purchase made by assessee from NSEL have been brought on record. The above discussion clearly prove that the AO without any basis rejected the books of accounts of the assessee and without bringing any evidence or material on record, made the addition of the impugned amount. Even during the course of hearing of the appeal, the AO was present in the Court but could not provide any evidence or material so as to sustain the orders of the authorities below. In such circumstances, we do not find it appropriate to remand the matter to the AO for fresh investigation as is argued by the Ld. DR. No justification for the authorities to have rejected the books of accounts of the assessee u/s 145(3) of the Act or to make an addition of ₹ 338.40 crores. We accordingly, set aside the orders of the authorities below and delete the addition of ₹ 338.40 crores. Appeal of the assessee is allowed. Customs 2017 (11) TMI 624 ADD - Initiation of Sunset Review - continuation of the notification issued by the Central Government of the anti-dumping duty - imports of Cellophane Transparent Film (CTF) - import from China - extension of the imposition of the ADD during the pendency of the SSR in terms of the second proviso to Section 9A (5) of the CTA - The case of the Petitioners before the DA was that the very fact that there were no known imports of the subject good from Israel while the ADD notification was in force indicated that there was a likelihood of dumping and injury in the event of revocation of duty. Whether the DA was justified in declining to initiate the SSR in the cases where ADD was in place and declined to initiate the investigation where the SGD was in place? - Held that: - it is plain that the DA can initiate the SSR either on its own initiative or upon the request of an interested party. In all these cases, there was a request by the interested party, namely the Domestic Industry, for initiation of the SSR for the ultimate purpose of continuing the ADD. Rule 23 (1A) further requires such party to submit “positive information substantiating the need for such review” and upon such review, the DA shall recommend to the Central Government the withdrawal of the ADD where it comes to a conclusion that injury to the domestic industry “is not likely to continue or recur if the said ADD is removed or varied and is, therefore, no longer warranted.” This is an instance where the DA decides not to continue the ADD. Rule 6 sets out the principles governing the investigations. That procedure, however, envisages that the DA shall, “after it has decided to initiate investigation to determine the existence, degree and effect of any alleged dumping of articles,” issue a public notice notifying its decision and such public notice shall, inter alia, “contain adequate information on the following.” Rule 6 (1), therefore, does envisage the DA first deciding to initiate investigation. As already noticed, in Rule 23 (3) of the ADD Rules, Rule 6 will mutatis mutandis apply to an SSR. On this interpretation, the Court is therefore inclined to agree with the learned counsel for the Respondents that it is indeed a two-stage process where the DA has to first be satisfied that it requires to initiate an SSR and after it so decides then it proceeds to issue a public notice and then the entire procedure as envisaged in Rules 6 to 11 and 16 to 20 would then apply - The Court is, therefore, unable to accept the submission put forth on behalf of the Petitioners that there is no two-staged procedure involved in this determination and that once a request for initiating an SSR is made, the DA is left with no option but to go through the entire process of following the procedure under Rules 6 to 11 and 16 to 20 and only thereafter, comes to a conclusion as to whether the ADD requires to be continued. This, therefore, answers the first question. Even if it is held that an SSR had to be initiated, whether the DA is justified in not issuing a notification extending the ADD or the SD, as the case may be? - Held that: - Merely because it is possible to take another view based on the same material which was placed before the DA does not mean that the Court will interfere with the ultimate decision reached by the DA. It is trite that while the scope of a judicial review will extend to examining the process of the decision-making in order to ensure that it is in conformity with the ADD Rules and the general principles of natural justice, the Court will not, in exercise of its jurisdiction under Article 226 of the Constitution, sit in appeal over the decision of the DA on merits, unless the decision is shown to be either mala fide or so utterly perverse and shocking to the judicial conscience that no reasonable person could have arrived at such a conclusion. That threshold has not been met by any of the Petitioners. While the Court does agree that it is ultimately the public interest and the purposes and objects for which the ADD provisions have been introduced in the CTA that have to govern the decision-making exercise, the Court would not like to interfere with such a decision arrived at by the DA unless it is shown to be utterly perverse and shocking to the judicial conscience. From the Court’s point of view, if the Court failed to take a decision one way or the other on whether the SSR should be initiated, then precious time would be lost as a result of judicial delays. That was perhaps what weighed with the Court when, on 11th January 2017, it decided by an extraordinary interim order, to direct the DA to initiate SSR. This was, of course, subject to the final outcome of the writ proceedings - If these writ petitions are not dealt with within a short time period, then they may all be rendered infructuous. This is the danger that exists in such matters. Some procedure will have to be devised to ensure that the entire exercise is completed much before the expiry of the initial ADD notification. How that should be done has to be left to the authorities to determine and perhaps that would require a further refining of the existing ADD Rules and Safeguard Rules. The Court, however, would not like to opine any further on this aspect. Extension of notification imposing ADD - Held that: - considering the question of extending the notification imposing the ADD is not an easy task to perform at the interim stage with all the relevant materials that are placed before the Court. Where the Petitioners are compelled to approach the Court at virtually the “last minute”, the Court has to proceed on the basis of the materials placed before it by the Petitioners without the benefit of the detailed reports and analysis undertaken by the DA. It is in those circumstances, like for instance in the case of ADL [the Petitioner in W.P. (C) 7464 of 2017], that the Court had passed an interim order directing that the ADD should be continued - having had the benefit of the reports of the DA, the Court is now satisfied that the DA was not in error in declining to initiate the SSR. Consequently, regardless of whatever stage the SSR has reached, it will have to now be terminated by virtue of the Court not agreeing with any of the Petitioners in these cases. Likewise, the Court’s interim order by which the ADD was asked to be continued will also hereby stand terminated. The consequential refunds would be made available to the persons who in fact paid the ADD, without passing on the burden, in accordance with law. Petitions dismissed - decided against petitioner. 2017 (11) TMI 623 Classification of goods - Traction Control Cabinet (TCC) - whether TCC imported vide Bill of Entry dated 26.07.2013 was classifiable under the heading “8537” which covers Boards, panels, consoles, desks, cabinets and other bases equipped with two or more apparatus of heading “8535” or “8536”, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90 and numerical control apparatus other than switching apparatus of heading “8517”? - condonation of delay. Held that: - We fail to understand as to how the appellant can be aggrieved and prefer an appeal, when their stand and stance stands affirmed in appeal. In the aforesaid circumstances, we do not think that any ground or reason for condonation of delay is made out - the impugned order and the present order would not be construed as an order which would constrain or bind the Revenue from taking a stand that TCC, i.e., “traction control cabinets” are classifiable under the heading “8537” in any other case relating to a separate Bill of Entry, if permissible in law. We also clarify that in case the appellant/revenue takes this stand, it will be open to the assessee/importer to contest the said position - appeal dismissed - decided against appellant. 2017 (11) TMI 622 Condonation of delay of 248 days in filing appeal - Whether the tribunal was justified and correct in law in rejecting application and refusing to condone delay of 248 days? - Held that: - the appellant has been saddled with a fairly substantial demand. The matter does require consideration. The appellant had, as per the respondents as noticed above, waived his right to show cause notice and hence he did not have copy of the entire RUDs. It is per se evident that there would have been difficulty in filing of an appeal without relevant documents. Be that as it may, learned counsel for the appellant has stated that the appellant would be ready and willing to pay costs, but the appeal should be heard and disposed of on merits - delay condoned, subject to payment of costs of ₹ 35000/- to the respondents within a period of four weeks from today - appeal allowed in part. 2017 (11) TMI 621 ADD - faulty initiation of Anti-Dumping investigation - import of various jute products from Bangladesh or Nepal - case of appellant is that Rule 5 of AD Rules has not been strictly followed by the DA. It is submitted that Rule 5 (3) mandates that unless the DA determines that the application has been made by or on behalf of DI and accuracy and adequacy of the evidence provided in the application satisfies regarding dumping, injury and causal link between dumped imports and alleged injury no investigation can be initiated. Held that: - The term “jute products” comprises of more than one article and the DA has fallen in error in identifying three different products and clubbing them under the category of jute products. We, on careful examination of the facts of the case, note that the only source of these products is raw jute. There is no substantial transformation in the formation of jute yarn/twine to fabric or sacks. In our considered opinion the definition of “like article” under Rule 2 (d) of AD Rules, 1995 rightly covers the determination as done by the DA. The products under consideration need not be identical or homogenous with each other - there is no infirmity in defining the scope of product under consideration in the present investigation. It is not tenable to have a separate investigation for jute yarn, fabric and bag. Such type of action, apart from being impractical, will result in certain anomalous results as these products are closely interlinked in trade and usage. As such, to consider them together as jute products for the purpose of Anti-Dumping investigation is proper and justified. In any case, we note that the conclusion arrived at by the DA in the final finding specified different description of goods like yarn, bag, fabric and recommended different duty rates for imposition with justified reasons. Accordingly, we find no merit in the submissions of the appellants against the process adopted by the DA. Regarding the submission of the appellants that the DI is importing jute products we note that the DA examined the scope of DI and acted within his discretion in terms of Rule 2 (b) of the AD Rules. Even if some of the entities in DI were importing or related to importers of jute products, the DA is not prevented in considering those entities in DI while arriving at the overall scope of DI. The DA also examined this aspect and recorded his finding at paras 38, 40 and 45. It is specifically recorded that the imports made in investigation period alone are relevant. In cases where domestic producer has bought jute from a trader who procured the same from Bangladesh or Nepal, such procurement by the producer does not disqualify them from being treated as DI. We find that the DA has examined at length the submissions of all the interested parties including the DI and proceeded as per the mandates of AD Rules, 1995. As noted already, we can examine only specific areas which are contested with contrary facts. In the absence of the same, we find that the detailed findings based on the established procedure cannot be interfered with. Accordingly, we are of the considered view that there is no merit in the present appeal by the DI also. Appeal dismissed - decided against appellant. 2017 (11) TMI 620 Duty Drawback - the department got the information and goods were reopened for examination and it was found that in the name of export goods, old/torn cloths were packed in the boxes. It is the allegation that this exercise was done by the appellant to get the excess duty drawback - Held that: - the justice should not only be done but, it appears that it has been done. In the instant case, when appellant is ready to bear the cost of the independent authority then seized goods need to be re-examined in the presence of both the parties but under the supervision of the independent authority - matter remanded to the original authority to decide the issue denovo, after clubbing the pending issue pertaining to the mis-declaration and valuation of the goods and on the basis of the report of the independent authority - appeal allowed by way of remand. 2017 (11) TMI 619 Smuggling - Cigarettes - fake and forged documents - forged Bills of Entry and gate passes - confiscation - penalties. Held that: - Regarding the sale of cigarettes, it may be mentioned that cigarette is a perishable items which was rightly sold by the Department as there was no claimant for the same. It is claimed that the duty was paid on cigarettes, but in the impugned order it is mentioned that duty was never paid. Further, the Appellant claimed that he was not the importer. It appears that there was a syndicate of smugglers where the Departmental persons were also involved. It is surprising that eight containers have been removed from the Tukhalabad Dry Port on forged documents without paying any duty, even duty payment challan was forged. This is a glaring example of smuggling. Smuggling is a cancer impacting national economy for which all the Appellants were making their contribution directly or indirectly, as briefly discussed above. The forged ID was used, false documents were prepared. Confiscation and penalties upheld - In fact, the Department has taken a lenient view by imposing lesser penalty/punishment. Unfortunately, the Tribunal has no power to enhance the penalty/punishment. So, we uphold the impugned order in toto for the reasons mentioned therein. Appeal dismissed - decided against appellant. FEMA 2017 (11) TMI 618 Non-realisation of export sale proceeds - Proceedings as contemplated under Section 18(2) & 18(3) read with Section 68(1) & 68(2) of FERA - Held that:- It is evident that the Appellant joined as Director solely in the capacity of advisory role and was specifically excluded from the day to day operations of the company as evidenced from the correspondence. There cannot be any adverse inference against the Appellant‟s role as to its involvement in the exports or realization of the proceeds. Unless country is established particularly when Noticee No. 14‟s being not above suspicion has been given the benefit and no penalty imposed upon him. Rule of equality would apply in this matter. Discrimination of the department cannot be accepted. The impugned order deals with the violations committed by the persons in charge of MVR Group of companies. The Appellant was neither part of the management managing the affairs of the MVR group of companies nor was he in any way concerned with the company. This fact has been clearly acknowledged by the Adjudicating Authority while passing the impugned order. Yet the Adjudicating Authority chooses to impose the penalty on the Appellant. Having found nothing against the Appellant, the Adjudicating Authority ought not to have imposed the penalty. In the impugned order the Adjudicating Authority found nothing against the Appellant, however, the Special Director observes erroneously that the Appellant ought to have exercised due diligence in knowing the details of the company and his responsibilities which he failed to do so and thereby rendered himself responsible to the non-realisation of export sale proceeds and thus contravened the provisions of Section 18(2) & 18(3) of FERA.The impugned order suffers from legal infirmities and the same is liable to be set aside. Service Tax 2017 (11) TMI 616 Business auxiliary service - Since, the appellant did not register with the Department and did not pay the Service Tax on the commission amount received from the service receiver M/s. LIC Housing Finance Ltd., the Department proceeded against the appellant for confirmation of the Service Tax demand - Held that: - the Service Tax demands raised by the Department are not entirely barred by limitation of time. Some of the demand is within the normal period prescribed under Section 73 ibid. Since, the demands within the normal period has not been quantified by the authorities below, the matter should go back to the original authority for quantification of the Service Tax demand within the normal period, which should be paid by the appellant. Penalty - Held that: - the appellants had no intention to defraud the Government revenue, the penalties cannot be imposed on the appellant. Accordingly, this is a fit case for invocation of Section 80 ibid. Thus, the penalties imposed against the appellant are set aside. Appeal allowed by way of remand. 2017 (11) TMI 615 Construction and erection activities in terms of contract entered into with oil companies - tax liability - the SCN made a general allegation for tax liability. It referred to two different tax entries but with no separate demand - Held that: - as per the law laid down by the Hon’ble Supreme Court in Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] no service tax liability will arise in respect of composite works contract prior to 01.06.2007 - it is necessary for the original authority to have a fresh look into the facts of the case and to apply the correct legal position for a fresh decision - appeal allowed by way of remand. 2017 (11) TMI 614 GTA service - non-payment of service tax - validity of appeal before the Commissioner (Appeals) against the adjudication order - Held that: - Revision proceedings are not permitted when the issue in question is pending in appeal before the Commr. Of Central Excise (Appeals). Penalty u/s 76 - Held that: - There is no attempt on the part of the appellant to distinguish the facts of the case in respect of imposition of penalty under Sec. 76 as imposed by the Commr. Of Central Excise. Therefore, I do not find any reason to interfere with the impugned order. Appeal dismissed - decided against appellant. 2017 (11) TMI 613 Clearing & Forwarding Agent Services - case of appellant is that Since clearing activities by the appellant is absent in the present case, the activities undertaken by the appellant for its client will not fall under the ambit of such service for the purpose of levy of service tax - Held that: - the appellant is only engaged in forwarding the goods received at DEWS Unit by diverting the materials to different depots located within such zone/area. Since the appellant is not involved in clearing the goods from the factory of its principal, M/s. Grasim Industries, it cannot be said that the appellant is providing both clearing & forwarding service to its principal - the activities of only “forwarding” without involvement of any clearing activities will not subject to levy of service tax under the category of “clearing & forwarding agent service”. In an identical set of facts, this Tribunal in the case of Commissioner of Central Excise, Meerut-II Vs. Rakesh Ahuja & Others [2016 (12) TMI 596 – CESTAT-Allahabad], while dismissing the appeal filed by the Revenue, has held that in absence of any provision of clearing service, other services of receiving /storing of goods and delivering the same on the direction of the principal would not fall under the purview of taxable service as defined under Section 65(105) ibid. Appeal allowed - decided in favor of appellant. 2017 (11) TMI 612 Construction of complex service - case of appellant is that service rendered by them are composite in nature involving supply of materials and provisions of service. Such composite contract are not liable to tax prior to 1.6.2007 - Held that: - the submissions of the appellant are based on the nature of contract and also judicial pronouncements, many of them are after issue of the impugned order - we deem it fit and proper that these factual matters along with the law laid down by the Hon’ble Supreme Court in the case of Commissioner, Central Excise & Customs Versus M/s Larsen & Toubro Ltd. and others [2015 (8) TMI 749 - SUPREME COURT] requires examination by the original authority - appeal allowed by way of remand. 2017 (11) TMI 611 Rectification of error - maintainability of appeal - Held that: - though the Registry has pointed out the defects, the appeals which have been filed by the appellant before this Tribunal under Diary Nos. 30581-30593/2017 are not maintainable; as I find that the provisions of Section 74 of Finance Act, 1994 which has been invoked by the appellant seeking modification of the order-in-original, were dismissed by the Principal Commissioner, is not an adjudication order challengeable under Section 86 of the Finance Act, 1994 - in the absence of any provisions to consider the appeal against an order passed under provisions of Section 74 of the Finance Act, 1994, I am not able to go into the matters statutorily. Accordingly whether there are defects or not these appeals are not maintainable before this Tribunal - appeal not maintainable. 2017 (11) TMI 610 Rent-a-cab service - Held that: - in the present case, the appellant is not primarily engaged in the business of rent-a-cab operator. He is only arranging vehicles for their clients from outside agencies for which he is only getting a commission and that amount of commission has been shown in his ledger which is produced on record. Further, the learned Commissioner (Appeals) has mis-construed the definition of rent-a-cab operator service as provided in Section 65(76) of the Act because the appellant is not engaged in the business of “rent-a-cab service” - appeal allowed - decided in favor of appellant. 2017 (11) TMI 609 Refund claim - consumption of services in the course of export mainly port services - N/N. 41/2007-S.T. (as amended) - which is the date of export order or till which stage the services received by the appellant are allowable for the purpose of refund under the N/N. 41/2007-S.T. (as amended)? - Held that: - all the services received till the goods reached the gateway, port or the port of export and/or loaded on the ship or aircraft for the purpose of export till such time, are allowable for exemption/refund under the provisions of N/N. 41/2007-ST (as amended) - refund allowed - appeal allowed - decided in favor of appellant. Central Excise 2017 (11) TMI 608 Classification of goods - whether the product Reishi Gano and Ganocelium are classifiable under chapter 3003.39 of the First Schedule to the Central Excise Tariff Act, 1985, as contended by appellants or as food supplements under 2108.99 of CETA?. Held that: - the appellants were taking great pains to emphasize the distributors that they should sell the items as food supplements only and not to misrepresent it as a drug. From the facts on record, it also emerges that the statements of various stockists had been taken who have admitted that the impugned goods were sold only as food supplement. Appellants have themselves registered the trade mark REISHI and GANO with the Trade Mark Registry under the category of food supplements even while they have obtained license for manufacture of Ayurvedic drugs. All these facts go to prove that inasmuch as in common parlance test, the impugned goods are definitely products sold and known only as food supplements and certainly not as a drug and most certainly not as an ayurvedic drug. The second clinical trial report which was submitted for issue of Drug Licence was in the name of Dr. S.S. Raviselvan, AMO, Aringnar Anna Government Hospital, Chennai. It emerges that the said Dr. Raviselvan though admits having issued such report nonetheless also admitted that the report was issued at the request of Daeshan without conducting any clinical test. Appellant did not seek examination of any of these two doctors. At the cost of repetition, it is to be noted that even Dr. Athisayaraj has confessed that he had wrongly recommended issuance of drug license to the appellant for manufacture of the impugned products as Ayurvedic medicine. We find from the record that Dr. Athisayaraj even wrote to the Drug Control Authority to cancel the license - The Drug Licence by itself cannot be the basis for classification. The classification for the purpose of collection of revenue is to be on the basis of Excise / Customs legislations. The primary object of Excise Act being to raise revenue, the classification of the product so as to determine the rate of duty has to be considered independent from the Drugs and Cosmetics Act, 1940 and like legislations. Correct classification of goods - Revenue have contended that said goods merit classification under sub heading 2108.99 of the CETA as food supplement requiring assessment of the goods under Section 4A for the purpose of payment of duty of excise in view of N/N. 13/2002-CE (NT) dt. 1.3.2002 notifying the goods falling under that sub heading for assessment under Section 4A - Held that: - As per chapter Note 9 (b) of Chapter 21 of the CETA 1975, the Heading No. 21.08, inter alia, includes "preparations for use, either directly or after processing (such as cooking; dissolving or boiling in water, milk or other liquids), for human consumption". From the HSN Chapter Note 16 of the Harmonised System of Nomenclature (HSN), it is indicated that "Preparations often referred to as food supplements, based on extracts from plant, fruit concentrates, honey, fructose etc. and containing added vitamins and sometimes minute quantities of iron compounds often put up in packagings with indication that they maintain general health or well being" would be included within that entry "FOOD PREPARATIONS NOT ELSEWHERE SPECIFIED OR INCLUDED.HSN further goes on to elucidate that such similar preparations however intended for the prevention of treatment of diseases or ailments are excluded from that entry and would feature in 30.03 or 30.04 - From the facts and the findings and discussions herein above, both the impugned goods fail both the twin tests for being considered as Ayurvedic Medicament. On the other hand, from application of both these tests, the indubitable conclusion that has resulted is that the products in question are nothing but a food supplement promoted mainly only for general health or well being and therefore meriting classification only under 2108 of the CETA and more specifically in 2108.99 as it stood at the appointed time, and assessed accordingly under Section 4A of the Act for discharge of duty liability. The issue of classification is thus held in favour of Revenue and against assessee. Extended period of limitation - Held that: - the intention of changing the classification and claiming the products to be Ayurvedic Proprietary Medicines was only to evade payment of duty. The appellants have consciously declared on the labels that the products contain Chatrakh & Bhuchatra as an endeavour to create an impression that the products are different from that what was earlier imported by them - But for the investigation conducted by department, the misdeclaration and undervaluation would not have come to light. Hence in our view, the invocation of extended period is not without grounds. The argument of the appellants on this count fails - extended period rightly invoked. Penalty - Section 11AC - Held that: - Having found that the invocation of extended period is justified, the provisions of Section 11AC will statutorily require to be invoked and hence penalty equal to the duty or differential duty determined will necessarily have to be imposed - penalty upheld. Penalty u/r 25 - Held that: - as the equal penalty under Section 11AC has already been imposed, we hold that the same will meet the ends of justice and further penalty on DXN under Rule 25 is uncalled for - penalty u/r 25 set aside. Appeal allowed in part. 2017 (11) TMI 607 CENVAT credit - input services - outward transportation of finished products for clearances within India as well as for export - place of removal - Revenue's case is that Since the place of removal is factory gate, the appellant is not eligible for credit for clearances of goods beyond the place of removal/factory gate - whether the appellant is eligible for credit on service tax paid on outward transportation services availed for domestic clearances of finished products upto the buyer's premises? - Held that: - The Board vide Circular No.97/8/2007-ST dt.23.8.2007 has clarified that credit is admissible for outward transportation upto buyer s premises if the sale is on FOR basis - credit would be admissible upto the buyer s premises, if the condition in the Circular No.97/8/2007-ST dt.23.8.2007 is satisfied or sale is on FOR basis or the ownership rests with the manufacturer till the goods are delivered to the buyer s premises. The evidences in this regard having not dealt with in the impugned order, the matter requires to be remanded to the Commissioner (Appeals) who shall look into the evidence / documents furnished by the appellant and consider the eligibility of credit - appeal allowed by way of remand. 2017 (11) TMI 606 CENVAT credit - the gist of the contention in the appeal is that for applying the formula in Rule 6 (3A) (c) (iii) the department has taken the total credit availed on input services, whereas, only the total common credit should have been taken - The department was of the view that in the formula, the total credit availed on input services has to be applied and not the total common credit on input services. Held that: - The appellant is using input services exclusively for dutiable goods and are availing entire credit on such input services. They are also availing certain other input services which are used commonly for manufacture of dutiable goods and trading (exempted service). They are not maintaining separate accounts. The first contention of the appellant is that Rule 6 provides for the procedure to avail credit when common inputs/input services are used and therefore this entire Rule i.e., Rule 6, has to be interpreted so as to pertain to areas where common credit is availed. I am not able to agree with this argument of the Ld.Counsel for appellant. The Rule provides for obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services. Therefore a manufacturer who manufactures both dutiable goods and exempted goods and provider who provides taxable and exempted service would come within the ambit of the said Rule. The appellant has sought to be outside the purview of Rule (6) for the input services used exclusively for dutiable goods, and then seeks to apply the formula prescribed in sub-rule (3A) in respect of common input services used for dutiable and exempted service (trading). In sub clause (iii) of Rule 6 (3A) (c), it is stated that P denotes total Cenvat credit taken on input services during the financial year. There is no ambiguity in the words or in the formula prescribed therein. The rule uses the words total credit on input services and the same cannot be stretched to read as total common credit on input services. Appeal dismissed - decided against appellant-assessee. 2017 (11) TMI 605 Valuation - removal of input to sister unit - whether valuation of removal of input as such to sister unit should attract payment of duty equal to Cenvat credit availed thereon or under Section 4 of Central Excise Act, during the period 1-4-2001 to 31-12-2003 in terms of Rule 57AB(1)(c) of the Central Excise Rules, 1944 and Rule 3(4) of Cenvat Credit Rules, 2001/2002? Held that: - issue and facts of the present case is squarely covered by the Hon’ble Apex Court in case of Ispat Metallics Industreis ltd [2016 (5) TMI 306 - SUPREME COURT], where it was held that post removal expenses in respect of removal of input as such cannot be added to calculate the excise duty - appeal dismissed - decided against Revenue. 2017 (11) TMI 604 CENVAT credit - exempt final products - whether on payment of duty on exempt goods, the assessee is further required to reverse the credit? - Held that: - the First Appellate Authority’s view as to discharge of duty liability on the finished goods which are exempted, cannot be considered as reversal of Cenvat credit is contrary to the law settled by the judgment of Hon’ble High Court of Bombay in the case of Ajinkiya Enterprises [2012 (7) TMI 141 - BOMBAY HIGH COURT], where it was held that the assessee paid duty on decoiled HR/CR coils knowing fully well that the same were not manufactured goods. If duty on decoiled HR/CR coils was paid bona fide, then availing credit of duty paid on HR/CR coils cannot be faulted - appeal allowed - decided in favor of appellant. 2017 (11) TMI 603 CENVAT credit - fake invoices - allegation made by the investigating agency is that appellant were availing cenvat credit on the invoice in respect of scrap but scrap covered under the said invoice were not received - principles of natural justice - Held that: - though the adjudicating authority has tried his best to comply with principle of natural justice and granted number of opportunity of personal hearing and also allowed the cross examination but the fact remains that appellant have not received all the relied upon documents, the cross examination of the witnesses could not be conducted therefore though there is no fault of the Ld. Commissioner but for meeting end of the justice, we are of the view that one more opportunity can be given to the appellant for cross examination of the witnesses and the documents may also be provided to the appellant for making their final defence - matter on remand. Penalties u/r 26 - Held that: - as per the act/role prescribed under Rule 26, it is not possible to carry out such acts/play role by artificial person as company therefore penalty under Rule 26 can only be imposed on the natural person and not on the company - As regard the personal penalties imposed on the other individual persons under Rule 26, we find that there is no case of handling of offended goods as the entire case is of alleged fraudulent availment of Cenvat credit by M/s. Bhavshakti Steelmines Pvt Ltd, therefore all persons have not dealt with the goods which is liable for confiscation - The period involved in the present case is April, 2003 to March, 2004 during such period there was no pari material provision of sub rule (2) of Rule 26 therefore penalty under Rule 26 was not imposable for the role of the person involved in the present case, accordingly penalties u/r 26 were set aside and the appeals of the other appellants are allowed. Appeal allowed in part and part matter on remand. 2017 (11) TMI 602 Valuation - physician samples of medicament - case of the department is that valuation of physician sample should have been done in accordance with provision of Section 4(1)(b) of Central Excise Act, 1944 read with Rule 4 of the Central Excise Valuation Rule, 2000 read with Board Circular dated 25-4-2005 - extended period of limitation - Held that: - firstly department itself has raised issue that the valuation should be done as per 110% of the cost of production. Accordingly the respondent was paying duty on 110% therefore it cannot be said that department was not aware of the fact regarding the method of valuation adopted by the respondent - secondly, the issue was debatable and various contrary decisions were existing during the relevant period therefore respondent have rightly entertained the bonafide belief. There is no suppression of facts on the part of the respondent, accordingly, order passed by the Ld. Commissioner cannot be interfered with - appeal dismissed - decided against Revenue. 2017 (11) TMI 601 CENVAT credit - receipt of assembly frame - manufacture - denial on the ground that after receipt, appellant have carried out only painting process and such activity does not amount to manufacture in terms of Section 2(f) accordingly, appellant is not entitle for the Cenvat credit on the duty paid goods received by them - Held that: - the Cenvat credit in respect of duty paid goods is allowed when the said duty paid goods is brought into factory for the purpose of remaking, refine, reconditioning or for any other reason. In the present case admittedly duty paid goods brought by the appellant has undergone the painting process. As per the provision of Rule 16(2) assesse is supposed to discharge excise duty equivalent to Cenvat credit availed in case of process does not amount to manufacture and excise duty payable on the transaction value in case activity amounts to manufacture. As per this provision whether activity on the duty paid goods brought into factory is manufacture of otherwise, the duty paid goods to be treated as input and credit is allowed - demand set aside. Reliance also placed in the case of Commissioner of Central Excise & Customs, Aurangabad Versus M/s Fine Packaging Pvt Ltd [2016 (3) TMI 801 - CESTAT MUMBAI]. As regard the demand of ₹ 8,43,320/- appellant have admitted the same therefore demand of ₹ 8,43,320/- along with interest is upheld. Appeal allowed in part. 2017 (11) TMI 600 Valuation - SKO(PDS) - whether duty payable on SKO(PDS) should be on the retail sale price fixed by the government/OCC under administered price mechanism or on the value recovered from oil marketing companies during the disputed period? - extended period of limitation - Held that: - issue involved in the present case is identical to the issue which was referred to Larger bench as per the Larger bench judgment in case of ONGC [2015 (11) TMI 1038 - CESTAT MUMBAI (LB)], the assesse has to discharge the excise duty on the transaction value which is collected from oil marketing company by issuing commercial invoice, therefore in view of the said decision this issue is no longer res integra. Extended period of limitation - Held that: - issue involved was of interpretation of law and there are contrary decision on the issue - also, in case of government undertaking unit malafide intentions cannot be attributed to the assessee - extended period not invokable. Appeal allowed - decided in favor of appellant. 2017 (11) TMI 599 Refund claim of duty reversed - time limitation - Section 11 B of the Central Excise Act - Bagasse - Rule 6(3) of CCR, 2004 - Held that: - Bagasse is not a dutiable item and not a manufacturer item, there was no question of any reversal of duty under the provision of Rule 6(3) of CCR, 2004. Under such facts and circumstances, the amount reversed by the appellant u/r 6(3) of CCR was in the nature of revenue deposit. Further, it is an admitted fact that such amount was reversibly deposited under protest - refund allowed - appeal allowed - decided in favor of appellant. 2017 (11) TMI 598 Benefit of N/N. 8/2003-CE dated 01/03/2003 - clearance of acid oil as waste - Held that: - in the case of State of Gujarat Vs. Raipur Manufacturing Co. Ltd., [1966 (9) TMI 82 - SUPREME COURT OF INDIA] it was observed that the concept of waste is not a subject matter of excise duty as per the exemption N/N. 89/95-CE. So, the exemption was held to be available to gums/ waxes and recovered oil/fatty acids in the said case - appeal allowed - decided in favor of appellant. 2017 (11) TMI 597 CENVAT credit - deemed manufacture - imported automobile parts like ‘spark plugs’ and ‘ignition coils’ - Held that: - sparking plug is a part of the engine and the engine is the essential part of the auto mobile industries. Engine cannot start without sparking plug. So, the sparking plug and ignition coils are the part of auto mobile industries as per the definition of the imported items. When the duty was accepted by the Department than the appellant is entitled to the Cenvat credit - appeal allowed - decided in favor of appellant. 2017 (11) TMI 596 Classification of leftover goods after manufacture - Residual Crude Petroleum Oil’ or ‘Reduced Crude Petroleum Oil’ - whether classified under CTH 2709.00.00 or under CTH 2713 90 00? - Held that: - Respondents produced report before learned Commissioner (Appeals), issued by IIT, New Delhi, which indicated that ‘Reduced Crude Oil’ was in fact crude oil - Revenue could not put forth any grounds for refusing the certificate issued by the IIT, New Delhi about the nature of the goods which was accepted by the learned Commissioner (Appeals) - appeal dismissed - decided against Revenue. 2017 (11) TMI 595 CENVAT credit - job-work - returned inputs - Department's allegation is that in a number of cases the material returned to the customers was not the one which had been received from customers, but was from the stocks of Cenvat credit taken inputs of the appellants - Whether the appellants on return back of such material to the supplier cleared their own raw materials on which Cenvat credit was availed by them and as to whether Cenvat credit involved on such self owned material was liable to be reversed by the appellants under the provisions of Rule 3(4) of Cenvat Credit Rules, 2002/2004? Held that: - it is evident that in some cases after receipt of the material on job-work basis, the finished goods could not be produced in the given time span. The materials received on job-work were returned to them (Principal). There is no dispute that such unprocessed inputs were returned, and/or was not received by the respective suppliers - even if the material which had been returned, though maybe from a different lot, by the goods being homogenous, in my view, it does not make any difference. In respect of the material received on job work, which could not be returned and would be used by the appellant for manufacture on their own account, the Cenvat credit would become available, in any case the situation is revenue neutral - except the stock statement of inputs for 14/10/2004, there is no other evidence to show that on each occasion the unprocessed inputs return to the customers were out of the stock of Cenvatable inputs and not inputs which had been received from the customers on job-work. The impugned order is also vitiated for denial of opportunity for cross-examination although prayed by the appellants. Appeal allowed - decided in favor of appellant. 2017 (11) TMI 594 Clearance to 100% EOU - Refund claim - deemed export - period of limitation - Held that: - the issue on merits is settled in favor of the appellant, by Hon’ble Gujarat High Court in the case of COMMISSIONER - CENTRAL EXCISE AND CUSTOMS Versus NBM INDUSTRIES [2011 (9) TMI 360 - GUJARAT HIGH COURT], where it was held that Refund of Cenvat credit was available on inputs used in manufacture of goods cleared by DTA unit to 100% EOU that Refund could not be denied on ground that it was a case of deemed export, under Rule 5 of CCR, 2004. Refund claim - time limitation - rejection of refund claim for the quarter ending March, 2006 - Held that: - when the claim was to be filed quarterly, the date of filing was to be computed from the last date of quarters - refund filed is within time limit. Refund allowed - appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2017 (11) TMI 593 Revision of assessment order - TNGST Act - inter-state purchases - assessment of turnover - penalty u/s 12 (3) (b)of the TNGST Act - natural justice - Held that: - if a document relied by the Assessing Officer collected from the third party is not made available to the dealer and if the dealer is not provided an opportunity to cross- examine such third party for no fault committed by them, then, the benefit should accrue to the dealer. Consequently, it has to be held that no Revision of Assessment can be made based on those documents/ statements which remain uncontroverted. The mistake committed by the respondent is writ large on the face of the impugned order. Therefore, the impugned order has necessarily held to be unsustainable - petition allowed - decided in favor of petitioner. 2017 (11) TMI 592 Principles of Natural Justice - Revision of assessment order - input tax credit - TNVAT Act - Held that: - the respondent could have afforded an opportunity to the petitioner and directed them to appear in person and produce necessary details and records to substantiate their stand - there has been violation of principles of natural justice in passing the impugned orders - this Court is of the considered view that the assessment should be re-done by the respondent after affording an opportunity of personal hearing - petition allowed by way of remand. Indian Laws 2017 (11) TMI 617 PIL - Direction to the CBI to conduct an investigation/inquiry against the Indian offshore bank account holders, revealed in “Panama Papers” and to file their report before this Hon’ble Court - Direction has also been sought to register FIR and conduct investigation against the Securities and Exchange Board of India (SEBI) Chairman, his associate directors, share brokers and companies - Held that:- Public Interest Litigation is a mechanism by which this Court can initiate action for protection of rights of public on account of inaction of any public authority or to oversee any abuse of power by the public authority. At the same time, the PIL weapon is to be used with great caution keeping in mind the fact that governance is the basic function of the Executive. Unless there is a clear abuse of power or failure of governance, the Court may not interfere. In the present case, SIT has already been constituted under the orders of this Court which comprises of two former judges of this Court. The terms of reference of the SIT covers the subject matter of this petition also which is clear from the notification dated 29th May, 2014 issued by the Ministry of Finance . The Government of India, Department of Revenue vide Office Memorandum dated 4th April, 2016, has constituted Multi Agency Group to go into the issues arising out of “Panama Papers”. The reports of MAG are being submitted for consideration by the SIT constituted by this Court. We record the submission made on behalf of learned counsel for the respondents that further reports of the MAG will also be submitted to the SIT and MAG will carry out any direction which SIT may give or this Court may give in pending writ petition. In view of the above, we do not consider it necessary to give any further direction as the concern expressed in the writ petition stands addressed.
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