TMI Tax Updates - e-Newsletter
November 24, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Highlights / Catch Notes
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Income Tax:
Capital gains on sale of land - Addition u/s 50C - the difference between the valuation for the stamp duty and the actual consideration received by the assessee is less than 2% - addition sustained by CIT(A) should be deleted. - AT
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Income Tax:
Income from the professional fees - charitable activity - whether the assessee is paying fees to professors and collecting charges from outside parties and net balance is offered as income, which is a commercial activity? - the activity of the assessee is not covered by the provisions of section 2(15) - AT
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Income Tax:
Revision u/s 263 - depreciation set off claim - in order to avail Section 32(2) depreciation claim, it is not necessary that the business carried on in the following previous year should be the same as it was carried on the preceding previous year - AT
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Income Tax:
Exemption u/s 54F - LTCG - The moment a cheque has been issued by a person, in pursuance of a contract of purchase, in our view, it is utilization of funds, as there is a legal commitment by the assessee - deduction allowed - AT
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Income Tax:
Interest u/s 234B and 234C - In the scheme of demerger, it was not possible for the assessee to estimate the income and pay the advance tax as the scheme was approved after the close of the financial year. - No interest - AT
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Customs:
Valuation of goods - both engineering & design charges and technical know-how fees are not includible in the assessable value and Rule 9(1)(b)(iv), 9(1)(c) and 9(1)(e) are not applicable - invoice price is to be accepted as the actual transaction value. - AT
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Customs:
Duty demand - Fraudulent DEPB Benefit availed by the seller of DEPB - DEPB scrips issued by DGFT is itself genuine, at the time of import and valid till it is set-aside transaction on the basis said document was good and it is good title to holder for valuable consideration and the rights of such third party are required to be protected - Demand set aside - AT
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Customs:
Denial of refund claim - Refund of SAD - Issue of Invoices before the date of Bill of Entry - but they had issued the same only after the payment of duty etc. - Refund allowed - AT
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Service Tax:
Import of services - Arrangement Fees and Agent's Bank fees - Amount paid to Mandated Lead Arrangers (MLAs) to procure lenders/lender syndicate for the appellant. - services have been received by the appellant-assessee beyond the Indian Territory - The activity is chargeable to service tax - AT
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Service Tax:
Refund of service tax - developer unit in SEZ - claim of refund prior to the exemption notifications no 9/2009-ST issued - refund allowed - AT
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Service Tax:
CENVAT credit - credit on exempted service - non maintenance of separate accounts - failure to exercise the option to avail the provisions of Rule 6(3A) in writing - If we accept that even after 01.03.2008 that would be the situation, we will be rendering the provisions of Sub-rule (3A) of Rule 6 of CCR 2004 totally irrelevant and otiose. This cannot be the intention of the legislature. - AT
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Service Tax:
Demand of service tax - appellant (builder) collected an amount from the flat owners which is titled as towards Management, Maintenance or Repair of the premises - service tax liability as confirmed against the appellant under Management, Maintenance or Repair services is unsustainable. - AT
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Service Tax:
Mandap keeper service - we are in no doubt that the said explanation added on 1.6.2007 was merely in the nature of ex abundante cautela and therefore has retrospective applicability - AT
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Service Tax:
Leviability of service tax - retreading of tyres - Manufacture or management. maintenance and repair service - we uphold the contention of Revenue that the activity of the appellant is taxable under Finance Act, 1994. - AT
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Service Tax:
Cenvat Credit - input services - event management services - Services are not related to their output services being Advertisement agency service - The grounds on which credit has been denied is too flimsy and feeble. - AT
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Central Excise:
Valuation - Determination of transactional value - manufacturer of LPG selling the product in bulk - appellant has to discharge the excise duty on the transaction value which is collected from the Oil Marketing Company by issuing commercial invoices during the disputed period. - AT
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Central Excise:
Denial of benefit of export in case of Deemed export - Notification No. 44/2001-CE (NT) dated 26.06.2001 - Proviso to the said notification have wider amplitude, to extend the goods cleared by on Advance Licence holder to another Advance Licence holder for use in the manufacture of export of goods to ICB, by following the procedure laid down therein - Demand set aside - AT
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Central Excise:
Cenvat Credit - Supplementary invoices - one cannot really come to the conclusion that this was a planned operation to extract Cenvat credit. The department could have had a better case if there was any evidence to show that there was no payment by the appellant to the job-worker but it was paper transaction and only credit was transferred. - AT
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VAT:
Recovery of outstanding sales tax dues of respondent which is in liquidation from the directors as an arrears of land revenue - Violation of principle of natural justice - recovery cannot sustain - HC
Articles
News
Case Laws:
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Income Tax
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2015 (11) TMI 1074
Reopening of assessment - Held that:- In so far as the violation of the principles of natural justice is concerned, it is an admitted fact that the recorded reasons were not given to the assessee. Therefore, the submission that the assessee was prevented from making an adequate representation as regards illegality of the proceedings under Section 147 cannot be lightly brushed aside. There has, in fact, been a violation of the principles of natural justice. We are concerned in this case with the assessment of the assessment order 2000-01 and 2001-02, that is to say, financial year 1999-2000 and 2000-01. The financial year 2000-01 ended on 31st March, 2001 whereas the statement of the assessee was recorded on 20th August, 2004. The questions put to the assessee have been quoted above. Not one question was put to him as to what was his income during the relevant period which is the subject matter of consideration in this appeal. The assessee was asked in August, 2004 as to what was his income, he gave an answer to that. But the present income cannot also be presumed to be the past income. The officers of the revenue could have asked necessary questions but they omitted to do so. When they omitted to do so that may be a pointer to show that they did not have any information as regards any understatement of income by the assessee for that period. If such information was available with them, they would have asked that question. Without asking any question without having any material, they could not have proceeded on the basis that the assessee must have earned the amount. Nothing was shown to us to establish that such a course is permitted by the law. It is wellsettled that statutory authorities must act in accordance with law or not at all. The judgment cited by Mr. Bhowmick does not really assist him because in that case definite information as regards payments received by the assessee and definite information as regards surgeries attended by the assessee were available. Therefore, the facts and circumstances of that case are different than the facts and circumstances of the case before us. Thus the entire proceedings were without any basis. - Decided in favour of assessee.
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2015 (11) TMI 1073
Territorial jurisdiction to decide the appeal - Assessing Officer passed the assessment order based at Alwar and the first appeal was adjudicated by the CIT(A), Central Jaipur - Held that:- The matter is no longer res integra. This Court in Commissioner of Income Tax (Central) Gurgaon v. M/s Parabolic Drugs Ltd. [2013 (1) TMI 565 - PUNJAB AND HARYANA HIGH COURT] following its earlier Division Bench judgment in The Commissioner of Income Tax, Faridabad v. M/s Motorola India Ltd. [2007 (10) TMI 384 - PUNJAB & HARYANA HIGH COURT] held that this Court had no territorial jurisdiction to decide the appeal when the order passed by the assessing authority was at Delhi. The present appeal is dismissed as this Court has no territorial jurisdiction to adjudicate upon the lis over an order passed by the Assessing Officer at Alwar.
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2015 (11) TMI 1072
Stay the recovery proceedings - demanding 50% of the demanded tax - Held that:- The property in question, which was earlier registered inadvertently came to be registered once again, which lead the assessing authority to pass the impugned assessment order under the provisions of the Income Tax Act, 1961, as against which, the Petitioner filed an appeal before the 2nd Respondent and in the stay application filed by the Petitioner, the Petitioner was directed to pay 50% of the demanded tax in order to stay the recovery proceedings till the disposal of the appeal, which is challenged in this Writ Petition. Since the Petitioner is willing to pursue the appeal before the 2nd Respondent, she can be permitted to raise all the grounds and submissions made in this Writ Petition before the 2nd Respondent on payment of substantial sum to stay the recovery proceedings, pending the appeal. The Petitioner is directed to pay a sum of ₹ 10,00,000/- (Rupees Ten Lakhs Only) within a period of eight weeks from the date of receipt of a copy of this order. On such payment, the Respondents are restrained from initiating the recovery proceedings against the Petitioner, till the disposal of the appeal by the 2nd Respondent. The 2nd Respondent is directed to dispose of the appeal, on merits and in accordance with law, as expeditiously as possible.
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2015 (11) TMI 1071
Deduction u/s 80HHC(4C) - whether insurance claim was not in the nature of 'other receipts' and 90% of such receipts could not be reduced from 'profit of business' under clause (baa) of Explanation below section 80HHC(4C) of I.T. Act? - Held that:- Question No. (i) is covered by the decision of this Court in Commissioner of Income Tax-I, Ludhiana v. Venus Fabrics, Ludhiana (2013 (7) TMI 927 - PUNJAB & HARYANA HIGH COURT) wherein it was held the words “any other receipt of a similar nature included in such profits” used in the explanation have to be read “edjusdem generis” to the preceding words, i.e., “brokerage”, “commission”, “rent”, “charges”. The words “similar nature” used before the words “any other receipt” refers to and alludes to the principle of “edjusdem generis” and in fact leaves no ambiguity as to legislative intent that only such receipts would fall within the meaning of sub-clause (1) of the explanation as would partake the nature of the words preceding the expression “receipts of a similar nature”. A claim for insurance arises on account of a special loss to an assessee and, therefore, does not require any degree of legal acumen or scholarship to infer that such receipt cannot be included within subclause (1) of the aforementioned explanation. - Decided against the revenue Deduction u/s 80HHC - Held that:- The sales tax & CST were not includible in total turnover for computing deduction u/s 80HHC of I.T. Act, when the sales tax & CST were realized as a part of sale proceeds of the goods manufactured by the Respondent - This question is covered by the decisions of this Court in Commissioner of Income Tax v. Lakshmi Machine Works (2007 (4) TMI 202 - SUPREME Court) and Commissioner of Income Tax v. Vardhman Polytex Ltd. (2006 (5) TMI 82 - PUNJAB AND HARYANA High Court) wherein it was held that the amount of sales tax and excise duty for the purposes of computation of deduction under Section 80HHC of the Act are to be excluded from the total turnover. - Decided against the revenue Deduction u/s 80IB on duty drawn back - Held that:- As revenue has relied upon the judgment of the Apex Court in Liberty India v. Commissioner of Income Tax (2009 (8) TMI 63 - SUPREME COURT) to urge that profit from DEPB and Duty Drawback Scheme are not profits derived from the eligible business under Section 80IB of the Act. It was prayed that question thus, to be answered in favour of the revenue. Learned counsel for the assessee was unable to controvert that the similar issue was adjudicated by the Apex Court in Liberty India's case (supra) in favour of the revenue. - Decided against the assessee.
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2015 (11) TMI 1070
Disallowance u/s 14A - CIT(A) deleted the addition - Held that:- Share application money is only in the nature of an offer to buy shares made by the assessee. It is only after the offer is accepted by the company resulting in a concluded contract, the Assessee becomes the shareholder in a company. Till this time the Assessee becomes a shareholder, the assessee cannot have any rights to claim any dividend that may be declared by the company. In such circumstances we are of the view that while working out the average value of the investments u/r 8D(2)(iii) of the Rules the share application money should not be included. - Decided against revenue. Disallowance of commission expenses - CIT(A) deleted the addition made by the AO - Held that:- In our view the submission made by the revenue cannot be accepted. This is because the payment in question has been made by cheques and TDS has also been made by the assessee. The annexures to the letter of Shri Laxmikant Josh (HUF) dated 15.12.2011 which is at pages 91 to 93 of the assessee’s paper book clearly demonstrates the claim of the assessee. We, therefore dismiss ground no.(ii) of the revenue.- Decided against revenue. Disallowance on account of forex forward contracts which was treated as speculative loss by the AO as against normal business expenditure/loss claimed by assessee - Held that:- We shall as a test case consider one of the contract for export of contract and the forward contract entered into by the Assessee in connection with such export contract. Page 134 of the Assessee’s paper book contains the list of contract in which forward contract in Euro currency were booked. KS-0000026 is a forward contract dated 17.7.2008 entered into by the Assessee with State Bank of India Trade Finance CPC, Kolkata. The Assessee had an export order for Indian Raw Cotton of 4409200 LBS of the value of 31,74,624 US $ equivalent to 10,00,000 Euros, to supply to one M/S.Nassa Spinning Ltd., Bangladesh. The contract was cancelled by HB Cotton who was agent of M/S.Nassa Spinning Ltd., Bangaldesh on 21.10.2008. The period of the contract for supply of cotton to Bangaldesh was upto 22.1.2009. Since the contract was cancelled by communication dated 24.10.2008, the Bank intimated the Assessee that in view of the adverse fluctuation of Euro currency, the Assessee had to bear the loss of ₹ 1,56,80,527 because the booking rate as on 17.7.2008 was 1.5711 the cancellation date was 22.1.2009 on which date the rate was 1.2613. Thus the Assessee suffered a loss on the forward contract in question. From the sample case set out above it is clear that the forward contract in question was purely hedging transactions entered into by the Assessee to safeguard against loss arising out of fluctuation in foreign currency. Such transactions have been held in the following cases to be not speculative transactions falling within the ambit of Sec.43(5) of the Act. Capital gains on sale of land - Assessing Officer by adopting the sale consideration relying on the provisions of sec.50C - Held that:- Though section 50C of the Act does not speak of any such variation in terms of percentage between value adopted for the purpose of stamp duty and the registration and the actual consideration received on transfer, keeping in view of the decision of the Hon’ble ITAT, Hyderabad Bench referred to above and keeping in view of the fact that the difference between the valuation for the stamp duty and the actual consideration received by the assessee is less than 2% we are of the view that addition sustained by CIT(A) should be deleted. Disallowance of loss incurred by the assessee company on sale of Long Term investment in shares - Held that:- Capital gains arising between April 1, 1948, and April 1, 1957 was not chargeable to tax. The second condition, namely, "the manner of computation laid down in the Act" which "forms an integral part of the definition of ' total income’ " was not satisfied. Thus, in the relevant previous year and the assessment year, or even in the subsequent year, capital gains or "capital losses" did not form part of the "total income" of the assessee which could be brought to charge, and were, therefore, not required to be computed under the Act. The Hon’ble Supreme Court in Commissioner of Income-tax v. Harprasad and Co. P. Ltd. [1975 (2) TMI 2 - SUPREME Court] answered the question referred to it in favour of the revenue.
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2015 (11) TMI 1069
Gain arising from sale of capital asset - LTCG or STCG - CIT(A) treating the gain arising from sale of capital asset as long term capital gain - whether date of acquisition of capital asset is date of registration under Maharashtra ownership of flats (regulation of promotion of construction, sale, management and Transfer Act 1963) and not the date of allotment of letter? - Held that:- the interest of the assessee accrued right from the date of allotment itself. The claim of the assessee is further supported by CBDT Circular No.672 and 471 dated 16/12/1993 and 15/10/1986 respectively clarifying that “the allotee gets title to the property on the issuance of allotment letter and the payment of installments is only a follow of action and taking the delivery of possession is only a formality.” The case of the assessee is further fortified by the ratio laid down in ACIT vs Smt. Sundar Kaur Sujan Singh Gad (2005 (4) TMI 518 - ITAT MUMBAI ) holding date of allotment is the relevant date for computing capital gains. Thus, we find no infirmity in the conclusion of the ld. Commissioner of Income Tax (Appeals) on the issue in hand - Decided against revenue. Deduction in respect of interest paid on borrowed capital to acquire capital asset - CIT(A) allowed the claim - there is no provision for such deduction, therefore, the conclusion drawn in the assessment order was defended - Held that:- Section 48, which is meant for capital gains clearly envisages allowbility of such expenditure which is incurred wholly and exclusively in connection with such transfer and for the purpose of cost of acquisition of the asset as deduction from the full value of consideration received or accrued as a result of transfer of capital asset, which is chargeable under the head capital gain. The words ‘in connection with’ used in section 48 (i) are very wide in their ambit and hence there is no warrant for importing a restriction that to qualify for deduction the expenditure must necessarily have been incurred prior to the passing of title. The Hon’ble Karnataka High Court in Commissioner Of Income-Tax, Karnataka II Versus Maithreyi Pai (1983 (11) TMI 43 - KARNATAKA High Court ) held that interest on borrows is deductible only if is not allowed u/s 57 of the Act, thus, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals) on this issue also, therefore, dismissed. - Decided against revenue. Additions made invoking the provisions of section 50C - CIT(A) deleted the addition - Held that:-Uncontrovertedly, the impugned payments were made through account payee cheque and the assessee furnished the complete list of vendors to whom the payments were made (through cheque), Cheque No., copy of invoices for the impugned amount were produced before the authorities. Admittedly, without interior work, largely kitchen, carpentry, ceiling and flooring the apartment cannot be come usable, thus, such investment was rightly held to be investment in the residential property, thus, we find no infirmity in the conclusion of the ld. Commissioner of Income Tax (Appeals), therefore, we find no merit in the impugned ground, raised by the Revenue, consequently, dismissed - Decided against revenue. Allowing deduction u/s 54 - treating the gain so arrived on transfer of capital asset as long term capital gains instead of short term capital gain - Held that:- Considering the peculiar circumstances of that case, it was held that the benefit of section 54 should be extended by taking the date of allotment and occupation as the relevant date of purchase. As the relevant date to be taken for the purpose of applying of section 54 should be the date on which the flat was ready for occupation by the assessee. Taking that date as the date of purchase, is within the period of one year and therefore the capital gains are clearly exempt from tax applying the provisions of section 54. - Decided against revenue.
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2015 (11) TMI 1068
Income from the professional fees - charitable activity - whether the assessee is paying fees to professors and collecting charges from outside parties and net balance is offered as income, which is a commercial activity? - Held that:- In the present case, the assessee was established as a Department of Chemical Technology on 1st October, 1993 by the University of Mumbai and since in the year 2008 it was declared as an Autonomous Institute and deemed University by the Central Government. The main aims and object of the Institute are to provide instructions, study, teaching, training and research in various branches of Science and Technology. Though it is the case of the assessee that by virtue of the University Circular bearing No.508 of 1985 dated 7th September, 1985, the revised terms and conditions under which teachers / professors are permitted to undertake the consultation work. We find that invariably, the consultancy services provided for the specific project or a specific purpose which has direct co-relation with the education imparted by the assessee-University should come within the realm of services imparted for the attainment of the object of the trust. But in the present case, a sample letter from Bharat Petroleum Corporation Ltd. placed on record clearly shows that the expert advice services were sought from Dr. V.V.Mahajani for the corporate R & D Centre, Greater Noida. The letter dated 29th October, 2010 has been reproduced hereinabove was addressed to the Director, Institute of Chemical Technology (the assessee). Therefore, it is not right on the part of the assessee to allege that it is not rendering any services, rather, its Professors are rendering the services. The juristic person like the assessee can only execute its work either through its trustees or employees. Since the employees of the assessee trust (juristic person) are rendering consultancy / advice services for a fee and the part of the fee is also coming to the chest of the assessee, therefore, in our opinion, the activity of the assessee is not covered by the provisions of section 2(15) of the Act and the assessee is not entitled to any exemption for the consultancy fees. Assessing Officer is justified in not granting exemption to the assessee - Decided against assessee.
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2015 (11) TMI 1067
Disallowance of interest u/s 36(1)(iii) - Held that:- During the year under consideration the assessee has furnished the details of utilization of loans. A perusal of the same shows that the assessee has used major portion of the loans for purchasing shares and giving interest bearing advances. With regard to the interest free advances of ₹ 1.90 crores given by the assessee, we notice that the assessee is having funds as explained. In view of the availability of interest free funds, the disallowance of interest made by the tax authorities is liable to deleted in view of the decision of Hon’ble Bombay High Court in the case of Reliance Utilities & infrastructre Ltd (2009 (1) TMI 4 - HIGH COURT BOMBAY). Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to delete the disallowance made out interest expenditure. Disallowance made u/s 14A - Held that:- We notice that the Hon’ble Karnataka High Court has clearly held in the case of CCI Ltd (2012 (4) TMI 282 - KARNATAKA HIGH COURT) that the shares held as stock in trade should be excluded for the purpose of computing disallowance u/s 14A of the Act, since they can not be said to be the “investment” made for the purpose of earning dividend income. In the case of India Advantage Securities Ltd (2015 (6) TMI 140 - BOMBAY HIGH COURT), the Hon’ble Bombay High Court has noticed that the CIT(A) took into account the words of the Rule and found that the figures as derived by the Assessing officer cannot be taken into consideration. The Ld CIT(A) had observed that, one can at best disallow the expenses which are incurred for earning dividend income and for that purpose, the figures under the head “Investment” could be taken and some charges apportioned for the purpose of computing expenses. Thus the disallowance of interest in relation to dividend received from shares held as stock-in-trade cannot be made.
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2015 (11) TMI 1066
Eligibility to claim deduction u/s 80IA - whether the receipts i.e. Interest on IT refund,Interest from others, Interest on FDR, Sale of scrap and Tender fees can be considered to be profits or gains “derived” from the eligible business or not? - CIT(A) allowed the claim - Held that:- In the instant case, TDS deduction is integral part connected with the receipt of lease income and the same cannot be separted from the activity carried on by the assessee. Since the lease income is the primary source of the assessee and since the TDS has been deducted from the said primary source and since the assessee was deprived of a portion of lease rent for a temporary period for the reasons beyond the control of the assessee, there is some merit in the contention of the assessee that the interest on TDS refund should be equated with the interest on delayed payment of business receipts. In our view, the assessee has got strong case in the alternative contentions that interest received by it on the TDS refund should be netted off against the interest expenditure for the purpose of computing the profits and gains derived from the undertaking, in which case, the interest income need not be assessed separately and it would automatically get deduction u/s 80IA of the Act due to netting off. In view of the above, we uphold the decision taken by the Ld CIT(A) on this issue.- Decided in favour of assessee. Receipt relates to the interest received from others, which is the interest received from the lessees for the delayed payment of lease rent. In view of the decision rendered by the Hon’ble Supreme Court in the case of Govinda Choudhary & Sons (1992 (4) TMI 8 - SUPREME Court) and CIT Vs, Bhansali Engg. Polymers Ltd (2008 (4) TMI 236 - BOMBAY HIGH COURT), we do not find any infirmity in the decision of Ld CIT(A) in holding that interest so received partakes the character of lease rentals and hence eligible for deduction u/s 80IA of the Act.- Decided in favour of assessee. Receipt relates to the interest received on FDR - The assessee had received lease deposits from the lessees, which is required to be returned to them upon vacating the premises. Since the possibility of vacating the premises in the middle is always there, in which event the lease deposits are required to be refunded, the assessee was not in a position to use the entire lease deposits for business purposes including for repayment of loans taken by it. Hence, as a prudent business policy, the assessee was constrained to keep part of the lease deposits into the Fixed deposits maintained with banks. The said fixed deposits have earned interest income. Thus, we notice that the assessee was required to keep part of lease deposits amounts in fixed deposits out of business compulsion. Since the lease rental income is the primary source of the assessee, in our view, the keeping of fixed deposits shall form integral part of the business of operation of IT parks and SEZ. We also find merit in the alternative argument of the assessee that the interest income should be netted off against the interest expenditure, since the assessee was constrained to keep part of lease deposits into fixed deposits in view of the peculiar nature of activities of the assessee instead of using the same for business purposes including repayment of loan. In view of the above, we do not find any infirmity in the decision taken by the Ld CIT(A) on this issue allowing interest received on FDR eligible for deduction u/s 80IA.- Decided in favour of assessee. Receipts relates to the Tender fees received by the assessee on sale of tender forms. The Ld CIT(A) has noticed that the assessee has availed the services of various sub-contractors for the purpose of carrying our various works in the IT parks and SEZ. In order to select the vendors (sub-contractors), the assessee has followed tender system and in that process, it has collected money on sale of tender forms. Hence, the Ld CIT(A) has held that the activity of inviting tender is very much part of the development and operation of SEZ and accordingly held that the sale of tender forms shall be eligible for deduction u/s 80IA of the Act. Since the tenders have been invited in connection with the development and operation of IT parks and SEZ, we are of the view that the Ld CIT(A) was justified in holding that the tender fees are eligible for deduction u/s 80IA of the Act. - Decided in favour of assessee. Corresponding expenditure relating to the items of receipts, which were not considered to be deductible u/s 80IA should be deducted and the deduction should be denied only in respect of net receipts is acceptable since the deduction u/s 80IA is allowed in respect of “Profits and gains”, which means only net income, i.e., Gross receipt less corresponding expenditure incurred to earn the said income. Accordingly, we direct the AO to exclude only the net receipts in respect of ineligible item of income. - Decided in favour of assessee for statistical purposes.
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2015 (11) TMI 1065
Levy of penalty u/s. 271(1)(c) - bogus speculation profit - Held that:- In the present case, the assessee has disclosed income from speculation profit only and the case is that he could not prove that this is speculation income or any other income for the want of evidence and merely he has not challenged the quantum addition. Assessee may file an appeal against an order of imposition of penalty even though he might not have filed an appeal against the order of assessment. The assessment proceedings are quite distinct and different from penalty proceedings. Although the order of assessment is a good evidence but it is not a conclusive proof that the assessee has concealed the particulars of income. In the present case before us, the AO’s levy of penalty is entirely based on the assessment order that the assessee is unable to prove the profit declared in speculation income received to be one from Nakamichi Securities Ltd. in the absence of evidence. In levying penalty the burden is on the revenue to prove that the particular amount is profit not from speculation income but income from other sources against which speculation loss cannot be adjusted. No doubt the findings during assessment proceeding for determining or computing the income is conclusive and it is also a good piece of evidence for initiating penalty proceeding but before penalty could be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income that the assessee has concealed the particulars of income or has deliberately furnished inaccurate particulars of income. Here none of the case is present. In view of the above, we are of the considered view that the penalty u/s. 271(1)(c) of the Act in the given facts and circumstances is not leviable. Accordingly, we delete the penalty and allow this issue of assessee’s appeal.- Decided in favour of assessee. Short term capital loss disclosed by assessee claimed to have been carried forward for setting off - Held that:- AO’s levy of penalty is entirely based on the assessment order that the assessee is unable to prove the profit declared in speculation income received to be one from Nakamichi Securities Ltd. in the absence of evidence. In levying penalty the burden is on the revenue to prove that the particular amount is profit not from speculation income but income from other sources against which speculation loss cannot be adjusted. No doubt the findings in the assessment proceeding for determining or computing the income is conclusive and it is also a good piece of evidence for initiating penalty proceeding but before penalty could be imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income that the assessee has concealed the particulars of income or has deliberately furnished inaccurate particulars of income. Here none of the case is present. In view of the above, we are of the considered view that the penalty u/s. 271(1)(c) of the Act in the given facts and circumstances is not leviable.- Decided in favour of assessee. Disallowance of expenses against exempt income u/s. 14A of the Act by invoking Rule 8D - Held that:- Where no information given in the return of income is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing of inaccurate particulars of income. In the present case also, the AO has nowhere found the explanation of the assessee as false and moreover from the details filed it could not be ascertained that the claim made by assessee is false. The AO has to prove that the assessee has concealed the particulars of income. In such circumstances, the penalty levied by the AO cannot be sustained. - Decided in favour of assessee.
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2015 (11) TMI 1064
Revision u/s 263 - depreciation set off claim - assessee’s argument is that its income from other sources in question comes u/s. 56(2)(iii) of the Act which in turn is entitled for Section 32(1) & (2) depreciation claim as per Section 57 (ii) - Held that:- The assessee has derived its lease rental income under the head from “other” sources. There is no dispute that the same is covered u/s.56(2)(iii) of the Act. This is followed by Section 57 stipulating allowability of corresponding depreciation relief u/s.32(1) & (2) of the Act. The CIT holds that the assessee’s business as it existed earlier of manufacturing is no longer in existence or the same is not being carried out in the impugned assessment year so as to claim depreciation relief u/s.32(1) & (2) of the Act. We notice from case law of Fabriquik (2002 (7) TMI 27 - GUJARAT High Court) that their lordships consider earlier decisions of CIT vs. Deepak Textile Industries Ltd. (1987 (8) TMI 81 - GUJARAT High Court) and CIT vs. Virmani Industries Pvt. Ltd. [1995 (10) TMI 1 - SUPREME Court] holding that in order to avail Section 32(2) depreciation claim, it is not necessary that the business carried on in the following previous year should be the same as it was carried on the preceding previous year. And also that there are no words to that effect in the relevant statutory provision as well. The jurisdictional high court is of the view that an assessee need not carry on any business or profession for availing this benefit in the following year. The Revenue fails to point out any exception thereto. We accordingly accept assessee’s latter two arguments on merits and hold it entitled for the impugned depreciation benefit. Its legal plea of merger principle (supra) is rendered infructuous. The CIT’s order under challenged passed u/s.263 of the Act stands reversed accordingly. - Decided in favour of assessee.
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2015 (11) TMI 1063
Reopening of assessment - disallowance of 30% of the expenditure - Held that:- Reopening of assessment in the impugned years 2002-03 to 2005-06 are bad in law as there being no nexus or live-link with the reasons recorded and the 'formation of belief' to come to a conclusion that there was escapement of income and also since the assessment has been reopened beyond the period of 4 years when there is no failure on the part of the assessee to fully and truly disclose all material facts in the original assessment itself, and there being 'no tangible material' for the reopening of the assessment, the CIT(A) erred in confirming the order of the Assessing Officer. The issues considering the merits are purely academic in nature and therefore it is not necessary to consider the disallowance of expenditure in the impugned assessment years. The orders of AO and CIT(A) are accordingly set aside. For AY. 2007-08 except car hire charges, which has increased more than 100% and professional charges and reimbursement of professional charges, all other charges are more or less commensurate with the expenditure in earlier years. Therefore, we are of the opinion that the expenditure cannot be disallowed on adhoc basis as far as these other expenditures are concerned. Car hire charges, the same has been increased from ₹ 78,580/- in earlier year to ₹ 1,99,933/-. The reasons were not explained and in the absence of any vouchers, we are of the opinion that 20% of the car hire charges can be disallowed. Professional charges and reimbursement of expenses to consultants, there is also manifold increase in this expenditure. Whether the amounts were covered by provisions of TDS or not could not be verified in the absence of any details. Moreover, justification for payment of professional charges was also not available on record. In the absence of any justification of expenditure claims and further in the absence of books of accounts available at this point of time, we are of the opinion that disallowance of 10% of expenditure would meet the ends of justice. Accordingly, the disallowance stands modified as directed above. - Decided partly in favour of assessee.
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2015 (11) TMI 1062
Disallowance of exemption u/s 54F - CIT(A) allowed part claim - Held that:- Claim of deduction u/s 54F cannot be denied for the sole reason that the assessee did not have sufficient balance in his bank account as on the date of issue of cheque for purchase of a plot of land for the reason that the cheque was honoured as and when it was presented; this is a beneficial provision and has to be liberally construed; factually it cannot be stated that the assessee has not invested the said amount in the purchase of a plot, before the filing of the return of income on 30.9.2008. The Tribunals and Courts have in a number of decisions held that, there is no requirement in law, that the same funds, which were obtained on the sale of a asset, should be utilized for the purchase of a plot. The moment a cheque has been issued by a person, in pursuance of a contract of purchase, in our view, it is utilization of funds, as there is a legal commitment by the assessee. When the transaction materialized it relates back to the date of agreement and the date of encashment is of no relevance. See Sanjeev Lal vs. CIT [2014 (7) TMI 99 - SUPREME COURT] - Decided in favour of assessee. Disallowance u/s 40(a)(ia) - Held that:- The provision made for the electricity charges is apparently for the period 14.3.2008 to 31.3.2008. This being the case, the provision for this period of ₹ 76,584 is allowable as deduction therefore the disallowance made is deleted and the ground of appeal is allowed - Decided in favour of assessee.
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2015 (11) TMI 1061
Disallowance u/s 14A - assessee made a suo motu disallowance u/s 14A - Held that:- In the present case, it is seen that conditions of subsection 2 of section 14A are not satisfied. The AO has not cared to examine the accounts of the assessee and correctness of the claim made by the assessee. Ld. AO in the present case has straight away proceeded to apply Rule 8D for the purpose of disallowance u/s 14A, without satisfying or applying with the mandatory requirement of section 14A(2) r.w. Rule 8D. It is seen that the Assessee has given item wise justification for determination of the proportionate expense incurred on making investments earning tax-free income. No discrepancies have been pointed out by the AO before rejecting the claim of the Assessee. Since the AO has failed to comply with the statutory requirement, he could not have proceeded to make disallowance u/s 14A. It is further noted that out of total dividend income of ₹ 3,70,61,654/- received by the assessee company during the year, an amount of ₹ 3,00,71,654/- was on the investments in Mutual Funds of group companies for strategic reasons and ₹ 50,00,000/- on the preference shares of subsidiary company. Both of these amounts have been received on the investments made ostensibly for strategic reasons. In our considered view, strategic investments are not made for the purpose of earning tax-free income. These should not be considered for making disallowance u/s 14A The remaining amount of dividend was received on the investment in equity shares, only for an amount of ₹ 19,90,000/-. Thus, viewed from this angle also, the disallowance made by the AO is not justified. In view of the aforesaid discussion and keeping in mind the facts and circumstances of the case, disallowance made by the AO is reduced to the amount of ₹ 7,64,949/-, as was voluntarily offered by the assessee. - Decided in favour of assessee in part
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2015 (11) TMI 1060
Validity of assessment u/s. 153A - CIT(A) deleted the addition - Held that:- CIT(A) has rightly held that in the absence of any material found during the search, as a result, no disallowance / additions can be made in the assessment u/s. 153A of the I.T. Act. Even otherwise, we find force in the Ld. Counsel’s submissions that the issue in dispute is also covered by the decision of the Hon’ble Jurisdictional High Court in the case of CIT(Central)-III vs. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] wherein held that if the additions are made, but not based on any incriminating material found during search operation, then these additions were not sustainable in the eyes of law. In our considered opinion, the Ld. CIT(A) has rightly adjudicated the issue in dispute and accordingly rightly deleted the additions in dispute. - Decided in favour of assessee.
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2015 (11) TMI 1059
Interest u/s 234B and 234C - whether leviable on the tax liability of the assessee where the scheme of demerger is sanctioned by the High Court after the close of financial year and the demerger is effective from the appointed date? - Held that:- Once the default is attributed to the assessee , then the charging of interest becomes mandatory. The ratio decendie in the said decision was that where it was not possible for the assessee to have anticipated the events during the year which took place after the close of year ,there was no default on the part of the assessee and consequently interest u/s 234B could not to be charged. In the scheme of demerger, it was not possible for the assessee to estimate the income and pay the advance tax as the scheme was approved after the close of the financial year. We, therefore, respectfully following the above decisions reverse the order passed by the first appellate authority on this point and decide the issue in favour of the assessee. Apportionment of common administrative and other expenses between tonnage and non tonnage business in the ratio of 67: 33 - Held that:- AO accepted the system of apportionment adopted by the assessee qua total operating expenses, interest and finance charges and depreciation meaning thereby that the system adopted by the assessee is partly accepted by the AO. The CIT(A) decided the issue against the assessee on the ground that the AO is not bound by the system adopted and followed by the assessee and further observing that section 115VJ also empowers the AO to apportion on reasonable basis which is in the present case is actual revenue basis thereby sustaining an addition. In our opinion, the approach of the AO and CIT(A) is not correct especially when the system of allocation adopted by the assessee is accepted for three heads of expenses namely total operating expenses, interest and finance charges and depreciation and only rejected apportionment qua administrative and other expenses and more so when the revenue had accepted system of apportionment of common overheads followed by the assessee in the earlier year. In view of our observations and the decisions cited by the Ld AR , we are of the considered view that the order of CIT(A) deserves to be reversed.- Decided in favour of assessee. Disallowance of expenses u/s 35DD(1) - Held that:- We first refer to the provisions of section 35DD(1) which provides that w.e.f. 01.04.1999 where an assessee being Indian company, incurs any expenses wholly and exclusively for the purposes of amalgamation or demerger of an undertaking, the assessee shall be allowed 1/5th of such expenditure for each of the five successive previous years beginning with the previous year in which the expenses are incurred. After close look at the these provisions, we find that it no where speaks of the demerged or resulting company. It simply says that in case the assesseee incurs expenses of the nature as mentioned in section 35DD(1) , the assessee shall be entitled to 1/5th of such expenses. We, therefore, are of the considered view that the assessee is entitled to claim the said expenses which was rightly held so by the ld CIT(A). In view of this, we dismiss the appeal of the revenue. - Decided in favour of assessee.
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2015 (11) TMI 1058
Disallowance u/s 14A r.w.r.8D - Held that:- In the instant case, the assessee has earned exempted income of ₹ 54.09 crores and it has claimed that it did not incur any expenditure in order to earn the above said exempted income. The assessee has raised many contentions, viz., the interest free funds available with the assessee are more than the investments; the securities were held as stock in trade and it has earned net interest income warranting no disallowance of interest expenditure etc. However, we notice that neither the AO nor the Ld CIT(A) did consider the above said contentions of the assessee, more particularly with referencce to the accounts of the assessee, which is a mandatory condition prescribed u/s 14A(2) of the Act. Thus, we notice that the AO has proceeded to compute the disallowance as per rule 8D of IT Rules without satisfying himself that the claim of the assessee was not correct by having regard to the accounts of the assessee. Hence, the disallowance computed by the AO and that confirmed by Ld CIT(A) was not in accordance with the mandate of law. Thus issue requires fresh examination - Decided in favour of assessee for statistical purposes. Deduction claimed u/s 36(1)(viii) - Held that:- When the assessee is able to identify the long term finance given to specified purposes, it should not be difficult to cull out the actual interest income earned from such advances. Since the assessee had proceeded to ascertain the interest income on average basis and since the details furnished by the assessee was not convincing to the tax authorities, they were constrained to make their own estimates according to their respective understanding. In our view, the approach of the assessee is not appreciable. In this era of computerisation, it should not be difficult at all for the assessee to cull out the actual interest income earned by it out of eligible business. Further, there should not be any dispute that it is the responsibility of the assessee to show that the deduction claimed by it u/s 36(1)(viii) was justified. However, with regard to the cost of funds and administrative expenses, the assessee is required to allocate the expenses towards eligible business on a reasonable basis, since they are incurred from common pool of funds and also for all activities of the assessee. Hence, in our view, the workings given by the assessee, AO and Ld CIT(A) on approximate basis cannot be approved. Accordingly, in our view, this issue also requires reconsideration at the end of the assessing officer - Decided in favour of assessee for statistical purposes. Bad debts written off disallowed - CIT(A) allowed claim - Held that:- The new Explanation 2, which covers both rural and non-rural advances, has been inserted under sec. 36(1)(vii) of the Act by the Finance Act, 2013 w.e.f. 1.4.2014 only and hence it cannot have retrospective effect, since it affects substantive rights of the assessees. Accordingly, we are of the view that there is no reason to interfere with the decision of Ld CIT(A) on this issue.- Decided in favour of assessee Claim of loss on revaluation of investment - Held that:- Tribunal in the assessee’s own case in AY 2007-08 and it has been decided in favour of the assessee by following the decision rendered by the Hon’ble Supreme Court in the case of UCO Bank Vs. CIT (1999 (9) TMI 4 - SUPREME Court) and also the decision of CIT Vs. Bank of Baroda (2003 (3) TMI 80 - BOMBAY High Court ). Accordingly, we do not find any reason to interfere with the decision of Ld CIT(A) on this issue, since he has also followed the decision of Hon’ble Supreme Court rendered in the case of UCO Bank (supra) in deciding this issue in favour of the assessee. Deduction claimed u/s 80LA - AO disallowed this claim for the reason that the assessee did not furnish the audit report - Held that:- The filing of audit report is only directory and not mandatory. Since the assessee has filed the audit report before finalisation of assessment order, we are of the view that the Ld CIT(A) was justified in directing the AO to allow the claim.- Decided in favour of assessee
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2015 (11) TMI 1057
Deduction u/s 54(1) denied - Held that:- The assessee had booked the flat with the builder and an allotment letter was given to the assessee. The house was under construction. Under such circumstances it can be safely presumed that the assessee had invested the money for construction of the house through the builder. So the money invested by the assessee within three years from the date of transfer is allowable as deduction under section 54 of the Act. The assessee has claimed that up to the due date of filing of the return for the year under consideration, he had invested an amount of ₹ 25,46,760/-. Therefore, the assessee is entitled to claim the said sum as deduction under section 54(1)/54F for the year under consideration. - Decided in favour of assessee. Disallowance of expenditure under section 14A read with rule 8D - Held that:- in the earlier Assessment Year 2007-08, the Ld. CIT(A) had restricted the disallowance to the extent of bank charges and accounting charges. Considering the overall facts and circumstances of the case, we find that apart from the suo-moto disallowance of ₹ 5,40,188/-, the further disallowance which can be added is in relation to bank charges of ₹ 5,426/- and accounting expenses of ₹ 71,500/-. So considering the overall facts and circumstances of the case, the disallowance under section 14A is restricted to the suo-moto disallowance made by the assessee of ₹ 5,40,188/- + ₹ 5,426/- towards bank charges + ₹ 71,500/- incurred towards accounting expenses. - Decided partly in favour of assessee. Disallowance being 10% of the telephone expenses - Held that:- The nature of the telephone expenses is that some element of personal use cannot be ruled out. The Ld. CIT(A) has very fairly restricted the disallowance of the telephone expense to 10%. We do not find any infirmity in the order of the Ld. CIT(A) in this respect. - Decided against the assessee. Disallowance of 1/6 of interest on motor car loan and motor car insurance - Held that:- The assessee himself has disallowed 1/6 car expenses but left out to disallow the expenses related to interest on car loan and insurance on car which are very much part of the car expenses. We do not find any infirmity in the order of the lower authorities in making the above disallowance - Decided against the assessee.
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2015 (11) TMI 1056
Addition u/s 68 - addition on the basis of copy of the bank account statement of the assessee by holding that the genuineness of the transaction and creditworthiness of the payer have not been established - Held that:- Assessing Officer and the CIT(A) did not bother to consider the documentary evidence filed by the assessee showing the factum that the amount was actually not a loan or advance to the assessee but the same was refund or return of advance/loan of USD 50000 given by the assessee to Mr. Giang Tran in the year 2000 on 14.2.2000 which was credited to the bank account of Mr. Tran on 16.2.2000. From totality of the facts emerged from documentary evidence and affidavits of the assessee payee and Mr. Tran payer, this fact is amply clear that the amount of USD 46000 equivalent to INR 26,31,257 at that time was received by the assessee from Mr. Tran in eight instalments from 20.7.2002 to 2.1.2003 pertaining to FY 2002-03 relevant to assessment year 2003-04 which is under consideration in this appeal. In this situation, we are inclined to hold that the assessee discharged its onus to prove identity and creditworthiness of the payer and the genuineness of the transaction as required u/s 68 of the Act. We are also of the opinion that the addition cannot be made u/s 68 of the Act where the assessee has established this fact that he made advance/loan to payer on 14.2.2000 which was returned during previous year under consideration and thus amount cannot be held as deemed income of the assessee u/s 68 of the Act. - Decided in favour of assessee.
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2015 (11) TMI 1055
Treatment of carbon credit receipts - assessee admitted receipts from trading of carbon credits as revenue nature and included the same for computation of deduction under section 80-IA - Held that:- It is a credit given to the assessee under the Kyoto Protocol and because of international understanding. Thus, the assessees who have surplus carbon credits can sell them to other assessees under the Kyoto carbon credits to have capped emission commitment under the Kyoto Protocol. Transferable carbon credit is not a result or incidence of one's business and it is a credit for reducing emissions. The persons having carbon credits get benefit by selling the same to a person who needs carbon credits to overcome one's negative point carbon credit. The amount received is not received for producing and/or selling any product, by-product or for rendering any service for carrying on the business. The receipt from sale of carbon credits has to be considered as capital receipt and accordingly, it is not taxable. Thus, there is no question of considering the same for deduction under section 80-IA of the Act. - Decided in favour of assessee.
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2015 (11) TMI 1054
Non-service of notices under sections 143(2) and 142(1) - assessee argued that the service of notice has been made to a wrong person, who is not known to the assessee and, therefore, the assessment so made is illegal and bad in the eyes of law - Held that:- The service made on a wrong person who in fact is not related to the assessee either as an employee or an authorised-agent and, therefore, said service of notice is not valid in view of the provisions of section 282 of the Act and, therefore, notice so issued is void ab initio and the assessment so made is directed to be quashed. - Decided in favour of assessee.
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2015 (11) TMI 1053
Deduction under section 10B denied - Held that:- Before the Commissioner of Income-tax (Appeals), the assessee has produced documents whatever documents he has produced before us in paper book. However, the Commissioner of Income-tax (Appeals) declined to consider the same as there is no petition for admitting these as fresh evidence. The Commissioner of Income-tax (Appeals) failed to point out discrepancies to the assessee when it was filed as new evidence and he also refrained to consider the same. It would have been appropriate had he pointed out the discrepancies and given an opportunity to the assessee to file an application to admit fresh evidence. Instead of this, he outrightly dismissed the appeal of the assessee. Thus remit the entire issue back to the file of the Assessing Officer for fresh consideration as he had no occasion to consider the above documents as it was first time filed with the Commissioner of Income-tax (Appeals). The Assessing Officer shall redecide the issue after giving adequate opportunity of hearing to the assessee. - Decided in favour of assessee for statistical purposes.
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2015 (11) TMI 1052
Penalty under section 271E - Held that:- Undisputedly the assessment was completed on December 24, 2010 and reference to the Additional Commissioner of Income-tax was made by the Assessing Officer on December 30, 2010. Copy of the reference letter is placed on record and the penalty order was passed on July 28, 2012 which is clearly after the expiry of the period of six months from the action initiated for levying the penalty. See M/s Ashok Kumar Pathak Versus Jt. C.I.T [2015 (11) TMI 1006 - ITAT LUCKNOW] Thus if the penalty order is passed after a period of six months from the action initiated for levying the penalty, the penalty order is barred by time - Decided in favour of assessee.
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2015 (11) TMI 1051
Non serving of notice of demand - Held that:- the assessee has applied for certified copy of the demand notice for the relevant assessment year 2000-01 and the same has been issued by the Department. The appeals of the assessee were dismissed by the Commissioner of Income-tax (Appeals) on the technical ground that the demand notice, in original, was not filed by the assessee along with the appeal papers. We find that the assessee has explained that it was never served with the notice of demand and therefore, could not file the same along with the memorandum of appeal on Form 35 before the Commissioner of Income-tax (Appeals). In the peculiar facts and circumstances of the case we are of the view that it shall be in the interest of justice to restore the issue to the file of the Commissioner of Income-tax (Appeals) to decide the same de novo on merits after allowing reasonable opportunity of hearing to both the parties and the assessee is directed to file the certified copy of the demand notice - Decided in favour of assessee for statistical purposes.
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Customs
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2015 (11) TMI 1027
Import of boric acid - Violation of Article 19(1) (g) - refund claim - Whether an insecticide, which has non-insecticidal uses, can be regulated in view of Section 38 of the Insecticides Act 1968 - violation of condition of notification issued under Section 5 of the Foreign Trade Act - Held that:- It is certainly open to the government to put in place sufficient safeguards to ensure that actually only insecticides which are genuinely intended for non insecticidal purposes are taken out of the purview of the Act and the restrictions and controls are which are provided therein. It is in this context when the importer of boric acid is not able to establish the end use it is not open to the trader to say that he should be allowed to import boric acid ostensibly for non insecticidal purposes. It is fraught with the danger that the imported quantity is diverted for insecticidal purposes. If such diversion happens, certainly it could lead to a situation where the purpose of the Act itself would be defeated as there could be large quantities of insecticides having multiple uses being imported in the guise of being employed for non insecticidal purposes but falling into the hands of those who use it as insecticides. Insecticides being used as insecticides forms the subject matter of the Act. Governor is not empowered to make any order in regard to that matter in exercise of its executive power nor can the Governor exercise such power in regard to that matter through officers subordinate to that authority cannot apply to the situation at hand. What is involved is not grant of Registration under Section 9 or discharge of any other function assigned to the statutory authorities under the Act through any subordinate authorities. Equally , it is not a case where the Executive power in this case has been exercised in relation to the matter which is the subject matter of Section 9 - we cannot even say that it is bad for reasons which would invalidate a piece of subordinate legislation viz. there is conferment of uncanalised power. We must proceed on the basis that the officers called upon to decide the issue on merit being experts in their field would not only act on the basis of the information which is available objectively in the application forms but also in a fair manner as every member associated with the activities of the State are enjoined to. If there is any exercise of power illegally or arbitrarily, certainly any such aggrieved person can always seek legal redress if a genuine claim is rejected without warrant in law and facts. The possibility of abuse by itself cannot persuade us to hold procedure for issuance of permit is bad. We would also expect the officers to bear in mind that it has a duty not to harass any applicants, but process their application with needed speed and to grant import permit where requirements are fulfilled and without any bureaucratic hassles. Constitutional validity of requirement of seeking Import permit - Held that:- Essentially the purport of import permit is to ensure that import is genuinely intended for catering to non-insecticidal purposes alone. This result would appear to be inescapable having regard to the form of application for grant of import permit. Therefore, we cannot even say that it is bad for reasons which would invalidate a piece of subordinate legislation viz. there is conferment of uncanalised power. - The possibility of abuse by itself cannot persuade us to hold procedure for issuance of permit is bad. We would also expect the officers to bear in mind that it has a duty not to harass any applicants, but process their application with needed speed and to grant import permit where requirements are fulfilled and without any bureaucratic hassles. Whether the condition is unworkable or unreasonable? - It would appear, from the document produced, that import permits have been granted not only for boric acid but for other chemicals/insecticides. What would have been unworkable would have been insistence of registration when it is sought in respect of insecticide not intended for insecticidal purposes. But, that is not the case here. When boric acid is sought to be imported for non insecticidal purposes under the Foreign Trade policy, no registration under the Act is required. The learned Single Judge was in error in thinking otherwise. That appears to be basis for finding that the condition imposed is on impossible condition and it involves directing the authority under the Act to do something which they are not obliged to do. It is a case of the local manufacturers that they applied for registration. But, the Act appears to prohibit carrying out the activities without getting registration if intended to be used as insecticides. According to us, no further investigation into this matter is necessary for by finding that there is illegality committed by the local manufactures which is being condoned by the authorities may not advance the case of the writ petitioners. The case of the writ petitioner is to quash the of condition in Ext.P5 relating to boric acid. We are of the view that there is no basis for the learned Single Judge to have quashed Ext.P5. Even in respect of Sodium cyanide there is a requirement of import permit and also the end use element govern the import of sodium cyanide which apparently is multiple use pesticide. No doubt the writ petitioner would point out that there are such requirements in an executive order in relation to other insecticides . It is pertinent to note that there is no such requirement in the statutory policy in regard to other insecticides. Discrimination and arbitrary conditions are imposed only in regard to the boric acid in the statute. - No doubt, if the restriction had not been imposed by law (the amendment on 7/4/2006to the statutory policy), the question would arise as to what is the effect of executive instructions on the right to import boric acid as per the statutory policy till the date of the amendment that is 7/4/2006. An executive order cannot impinge on a legal right. There was a right available under the extant statutory policy before the amendment. It could be said that an executive order could not have imposed a restriction on the right available under the policy. But, after the amendment with effect from 7/4/2006 the issue is purely academic as restriction is placed by statutory amendment. Writ petition is against the circular. Since the circular placed restriction on the legal right under the unamended statutory policy to import, the circular, in so far as it prohibited traders from import of boric acid for non insecticidal purposes, cannot be supported. But, at the same time, the direction to refund the duty cannot be sustained, as it has no connection at all to the question relating to the circular being illegal. Therefore, the direction to refund the duty can only be set aside. We uphold the quashing of the circular to the extent it effected the trader's right to import boric acid without registration. We, however, delete the direction to refund the amount. - Decided partly in favour of revenue.
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2015 (11) TMI 1026
Denial of concessional rate of duty - violation of condition 6 - appellant/assessee was faced with the dilemma as to whether they must have a provisional clearance of the goods or they must await the actual issue of the EPCG licence and incur the demurrage. - Held that:- licence issued on 17.5.1995 imposed only two limitations or restrictions upon the assessee. One was in respect of time available to the assessee to complete the import and the other was the CIF value of the machinery which the licensee proposed to import. The conditions incorporated in annexure A of the licence did not call upon the assessee to wait until the date of issue of licence even for placing a purchase order upon the foreign exporter. The only restriction as could be seen from Annexure A to the licence was that the assessee should not have cleared the goods, from the Customs and should not have paid customs duty before the actual date of issue of licence. Appellant was forced to get the goods cleared from the Customs on 15.3.1995, as otherwise, they had to incur demurrage, without knowing the proposed date of issue of licence. The decision to grant licence for the import of the very same machinery at concessional rate had been taken by the Committee atleast one month before the date of clearance of the goods. The meeting in which the Committee decided to issue a licence took place on 13.2.1995 and the assessee cleared the machinery from the Customs on 15.3.1995. But, the DGFT issued the licence on 17.5.1995, despite the fact that nearly three months have passed by that time from the date of the decision. Therefore, the provisional clearance of goods on 15.3.1995 cannot be held against the assessee, especially when the very licence issued to the assessee had only two kinds of limitation, one in the form of a period of validity and another in the form of total CIF value of the import - Decided in favour of assessee.
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2015 (11) TMI 1025
Valuation of goods - Inclusion of amount paid towards design / engineering charges used for manufacture of imported equipment and technical know-how fees - loading of charges paid by the assessee towards basic engineering, design, drawing and technical know-how paid to CCI on the imported equipments i.e. ID sterilizer doors, Screw Press P5 and centrifuge imported under two Bills of Entry - Held that:- As per original agreement the Indian entity SCI agreed to set up the palm oil plant to the appellant and it includes imported as well as indigenous machinery and equipments installation and erection of palm oil plant. Thereafter the SCI assigned the said contract to CCI another Indian entity who signed MoU with TSDN, Malaysia for technology transfer as well as for setting up of palm oil plant in India to any potential buyer in India only through CCI. On perusal of the records, we find that the appellant GAVL was to procure the equipment only from SCI. Due to RBI restrictions of opening of LC, SCI requested the appellant to place order directly with TSDN Malaysia only for three equipments i.e. ID sterilizer doors, screw press P5 and Centrifuge. By virtue of this understanding, the appellants placed purchase order with TSDN for import of these three equipments. There is no direct agreement entered into between the appellant with TSDN for any transfer of technical know-how or for supply of engineering and design or for installation and erection of the palm oil plant. Basic engineering and design supplied by TSDN to CCI relates to lay out drawings of the palm oil plant, assembling and drawing of palm oil plant. Clause 3 of Appendix I provides a complete list of documentation, specifications, piping, valve, instrumentation for the entire setting up of the palm oil plant. Nowhere in the MoU there is any mention that the design, basic engineering designs are related to the imported goods in question. It is pertinent to state that the appellant GAVL has entered into contract with SCI vide No.1182 dated 28.11.1997. As per this contract, they placed revised purchase order dated 9.3.1998. As per this contract between GAVL and SCI, the supply of equipment to be made in India for an amount of ₹ 1.92 crores, technical know-how fee of ₹ 50 lakhs, the detail engineering of ₹ 27.32 lakhs. There is nothing on record to establish any payments made between CCI and TSDN towards the design fees etc. except it is provided in the clause 3.1.2 of the MOU. Further, it is seen from the contract between appellant and SCI/now CCI that nowhere it is shown or agreed that the appellant has to pay the engineering charges towards the imported equipment or it is a condition of sale. In the absence of any evidence Revenue cannot assume that amount paid by the appellant to CCI an Indian counterpart was directly related to engineering design charges and design charges towards imported goods. Further, we find that this is not the case of a related transaction between the supplier i.e. TSDN and GAVL. The appellant directly placed purchase order with TSDN for supply of impugned goods covered in the Bill of Entry. No doubt this import has been made as per the recommendations of the SCI/CCI and this cannot be construed that GAVL and TSDN are related unless it is established with clear evidence. There is no agreement between GAVL and TSDN for transfer of know-how or supply of goods or payment of royalty. The appellant imported the impugned equipments goods from TSDN Malaysia as per their purchase order No. 1239 dated 9.1.1998. Basic engineering fee charges paid by the appellant to CCI are not related to the imported goods. In this regard, we rely on the decision of the Hon ble Supreme Court in the case of TISCO Vs. CCE (2000 (2) TMI 91 - SUPREME COURT OF INDIA) wherein the Hon ble Supreme Court has held that drawings and documents used for construction, erection and assembling are not includible in the assessable value. - engineering fees of ₹ 27.38 lakhs paid by the appellants to CCI is not includible in the imported goods. Accordingly, the demand of differential duty confirmed in the impugned order is liable to be set aside. Consequently, the confiscation and penalty are also set aside. As rightly held by the adjudicating authority, Rule 9(1)(c) is not applicable to the present case. In this regard, this Tribunal in the case of Saint Gobain Glass India Ltd. Vs. Commissioner of Customs, Chennai - [2014 (8) TMI 47 - CESTAT CHENNAI], on identical issue held that design fees, transfer of technology know-how for manufacture of goods are not relatable to the imported goods and allowed the appeal. - both engineering & design charges and technical know-how fees are not includible in the assessable value and Rule 9(1)(b)(iv), 9(1)(c) and 9(1)(e) are not applicable and we hold that the invoice price is to be accepted as the actual transaction value. - Decided against Revenue.
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2015 (11) TMI 1024
Duty demand - Fraudulent DEPB Benefit availed by the seller of DEPB - Appellant which is a SEZ Unit, purchased DEPB scrips on payment of valuable consideration and it was valid document at time of import. - Invocation of extended period of limitation - Held that:- DEPB scrip/licence had been issued by the DGFT, against the export of goods, produced by the exporter. The appellants purchased DEPB scrips on payment of valuable consideration and it was valid document at time of import. There is neither any allegation nor evidence that the appellants were aware of the fraud committed by the exporter M/s. Trisuns. The goods were imported in the year 2000 and DEPB scrip was cancelled only on 28.01.2010. DEPB scrips issued by DGFT is itself genuine, at the time of import and valid till it is set-aside transaction on the basis said document was good and it is good title to holder for valuable consideration and the rights of such third party are required to be protected - demand of duty for the extended period of limitation cannot be sustained and therefore, the imposition of penalty would not be warranted - Decided in favour of assessee.
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2015 (11) TMI 1023
Whether the vessel can be confiscated for non-filing of Bill of Entry in 1997 and whether duty can be demanded in 2012, the exemption having been withdrawn in 2000 - Suppression of facts - Provisional release of vessel - Section 28 - Held that:- when the impugned vessel was imported 14 years ago in 1997, it was exempted from Customs duty and although IGM was filed in respect of stores when the vessel was imported at Chennai, no IGM was filed for the vessel as goods imported into India. Neither was any Bill of Entry filed for the vessel as goods. - The vessel was seized and as a precondition for provisional release, the owner was asked to file a Bill of Entry in 2012. - vessel was converted to the Indian Flag in 1998 and was granted coastal runs between Indian Ports with the knowledge of Customs. Generally, we find that Customs board a vessel when it enters the port and therefore should have been aware of import of the vessel as goods . The fact that it did many coastal runs and called on various ports in the preceding 14 years itself shows that the Customs were aware that this vessel had been imported into India. After a gap of 14 years when duty has become imposable on import of a vessel, Revenue’s stand that since IGM/Bill of Entry was not filed in 1997 duty must be paid now is not reasonable. Goods on which no duty is chargeable under the tariff or by way of exemption notification will not be regarded as dutiable goods. Therefore clearly Section 111(f) is not applicable and goods are not liable to confiscation. Contravention of Section 32 is not possible as there is no question of unloading a vessel. Therefore the finding that the vessel is liable for confiscation for violation of Section 32 is also not sustainable. Import, which in terms of the definition under Section 2(23) means bringing into India from a place outside India, had got completed in 1997. Customs duty is charged under Section 12 of the Customs Act when the goods are imported into India. When by general practice the IGM/Bill of Entry was not filed for vessel imported into India when the duty was Nil, the proposition that duty may be levied after 14 years when the Bill of Entry was got filed would lead to a anachronistic situation. Let us take the case of two ships imported at the same time when there was no duty. Under one case a Bill of Entry may have been filed and in the other case a Bill of Entry is filed after 14 years when the vessel became dutiable. Charging duty from the latter when both were imported at the same time would be a most unreasonable proposition. More so when Customs never insisted on filing a Bill of Entry for the import of the vessel and Customs continued to give clearance for coastal runs. For these reasons we hold that there was no deliberate suppression of facts to invoke the provisions of Section 28(4) for demanding duty. - Decided against Revenue.
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2015 (11) TMI 1022
Violation of the provisions of Section 51 of the Customs Act, 1962 read with Section 147 proposing to impose penalties - whether the CHA is liable to penalty - Held that:- From the statutory provisions and the supplemental instructions issued, it can be easily seen that the responsibility of the CHA does not end with filing of the shipping bill. He has to ensure the assessment of the shipping bill, examination of cargo and obtain the ‘Let Export Order’ after which he has to contact the customs staff for loading of the goods. Thus unless and until the loading of the export goods on to the vessel is completed, the duty and responsibility cast on the CHA does not come to an end. In case the CHA fails to comply with these statutory provisions, he would be liable for penal consequences. - any act or omission to do any act, which renders the goods liable to confiscation attracts penalty. The said provision does not speak of the requirement of any mens rea on the part of the person committing the act or omission. Mere act or omission would suffice to attract the penalty. Thus applying these provisions to the facts at hand, the CHA failed to ensure that the goods were loaded on to the vessel only after ‘let export order’ was obtained, thereby making the goods liable to confiscation under section 113(g). For the omission on the part of CHA, he is liable to penalty under section 114(iii). - There is nothing in the language of the provisions of section 114 of the Customs Act, 1962, to suggest that mens rea is essential for imposition of penalty . Mere ‘act or omission to act’ would suffice for imposition of penalty if such act or omission violates statutory provisions. Proceedings under section 114 of the Customs Act are not criminal proceedings but quasi -judicial proceedings and hence mens rea is not required to impose penalty under the said section - identical matter was considered by a Division Bench and the imposition of penalty on the CHA was upheld. The said decision of the Division Bench would prevail over the decisions of Single Member Bench. In view of the above, I am of the considered view that the appellant is liable to penalty under Section 114 of the Customs Act. - However, penalty is reduced - Decided partly in favour of appellant.
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2015 (11) TMI 1021
Revocation of CHA License - Forfeiture of the security deposit - consignments through which cigarettes were smuggled were cleared by the CHA - violation of Regulation 12 & 13 - Held that:- Finding of Commissioner that M/s Sea Speed, being a logistics company, should not be aiding in the customs clearance work is unfounded. Even the payment mode by cheque on per container basis cannot and does not lead to the conclusion that the CHA had transferred the license to M/s Sea Speed. Once it is admitted that the CHA got his clients through an intermediary that is M/s M/s.Sea Speed, the violation of regulation 12 is not established beyond doubt. - no bill of entry had been filed by the appellant in respect of the consignment which was found to contain cigarettes. Therefore the violations of Regulation 13 (d), Regulation 13 (e) and Regulation 13 (n) is difficult to sustain. Even if we consider the violation of these regulations in the context of past consignments alleged to have been smuggled, we find that no show cause notice has been issued to the appellant under the Customs Act, in respect of the past consignments. Therefore, the violations are not proved even in respect of the past consignments alleged to have been smuggled by the logistics company/so called dummy IEC holders. Appellant has shown laxity in not verifying the antecedents and functioning of his client at the declared address by using independent information. To this extent there has been a violation of Regulation 13 (o). Once the Commissioner accuses the appellant of abetment in smuggling, the appellant could have been charged under the relevant provisions of the Customs Act. Having not been made a noticee in the show cause notice issued to the logistics company under the Customs Act for the offence of smuggling, we hold that the appellant do not deserve the most stringent punishment, that is permanent revocation of the CHA license. Appellant guilty of violating Regulations 13 (b) and 13 (o) and also guilty of not taking adequate care to check the antecedents of the IEC holder who signed the Authorisation letter. We hold that revocation of the license up to December 2015 would be adequate punishment for these violations of the CHALR. - Decided partly in favour of appellant.
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2015 (11) TMI 1020
Import of restricted items being used tyres - Misdeclaration of goods - Undervaluation of goods - Confiscation of goods - Imposition of redemption fine and penalty - Captive consumption - Held that:- As per ITC (HS) Classification the impugned goods are not freely importable under the Import and Export Policy by virtue of the fact that their value even after revision upward is less than US$25 per piece and to that extent the violation of Section 111(d) of the Customs Act is established making the goods liable to confiscation and consequently making the importer liable to penalty. - impugned goods do not figure in Part A of Schedule-III of the said Rules. The said list contains the description of goods import of which requires permission from the competent authority for their import. It is also seen that Part B of Schedule-III of the said Rules does not cover the impugned goods inasmuch as it covers only such waste of pneumatic tyres which do not lead to resource, recovery, re-cycling or direct reuse. The impugned tyres without any doubt are directly reusable and hence are clearly excluded from the said entry B-3140. Thus, the adjudicating authority is not correct to hold (as it did in para 5.20 of the impugned order) that Basel B-3140 covers all used tyres which lead to resource recovery, recycling, reclamation or direct us. Further the adjudicating authority in the said para 5.20 takes due note of the fact that goods listed in Part B do not require prior permission but comes to a finding that the impugned goods require permission of MoEF While the CPCB report is not conclusive, even if the tyres are taken to be used tyres (they admittedly are), the adjudicating authority has not disputed that they are directly usable and hence as discussed earlier, they are excluded from the scope of the said entry B-3140. Further, the impugned goods do not figure in Part A of the said Schedule-III which contains list of items requiring MoEF’s permission for import. Incidentally, it may be pertinent to state that the fact that the impugned goods are not covered under the said Part-B does not mean that their import requires prior permission of MoEF, more so because they are not covered under the said Part-A. Thus, the adjudicating authority is not right in holding that the impugned tyres required permission of MoEF for import and therefore absolute confiscation ordered on that count is unsustainable. Regarding valuation - Adjudicating authority has systematically dealt with this issue, first coming to a finding as to why the transaction value was not acceptable and then re-determining the value as per the provision of Customs (Determination of Value of Imported Goods) Rules, 2007. We find that such re-determination of value was done on a rational basis and we do not find infirmity with regard thereto. Resultantly, the liability to confiscation also arises under Section 111(m) of the Customs Act, 1962 for mis-declaration of value. - we uphold the confiscation of the impugned goods under Section 111(d) and 111(m) of the Act ibid as also the upward revision of value. However, in the facts and circumstances of the case including the fact that the goods are awaiting clearance for so long, we allow redemption of the same on fine of 15% of the redetermined value. We also impose a penalty of 10% of the redetermined value under Section 112 of Customs Act, 1962 - Decided partly in favour of assessee.
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2015 (11) TMI 1019
Benefit of duty-free exemption under DFIA scheme has been denied primarily on the ground that the import took place after the issue of the policy circular dated 31.1.11 - appellant contended that, the policy circular no 13 dated 31.1.2011 did not amend the SION norms otherwise there was no need to amend the same on 1.2.2011 - notification No 98/0 - Held that:- Letter was issued to a particular party but the Policy Circular 72 mentioned above still prevailed in general. Support is had from the Madras High Court judgement in the case of Hoewitzer Organic Chemical Ltd (2013 (6) TMI 303 - MADRAS HIGH COURT) holding that “the clarification dated 23.9.2010 and the Policy Circular dated 31.1.2011 is concerned, the same may not apply to a valid license, the transferability of which is endorsed. It is to be noticed that the clarification issued by the Ministry of commerce dated 31.7.2008 and the DGFT policy circular dated 24.3.2009, which were enforced prior to issuance of license in question dated 15.4.2010, will be made applicable to the license, as it extends the benefits of flexibility to import the alternative input/product mentioned in the SION and that appears to be the main tenor of the petitioners seeking release of the lactose stating that the clarification and the circular which were in force at the time of issuance of license will be applicable to the goods imported and not the subsequent clarifications.” Even if the actual user condition was brought in in 2011, fact remains that this condition has been deleted. The spirit of the judicial pronouncement is that the license has to be accepted as it is. And Customs cannot deny the benefit unless the DFIA is amended. Significantly, till date, the DFIA licenses have not been cancelled nor has any evidence been produced that the Customs have approached the DGFT for the same. - appellants are entitled to the benefit of Notification No. 98/2009-Cus. in terms of the DFIA presented to customs - Decided in favour of assessee.
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2015 (11) TMI 1018
Suspension of CHA License - Non maintenance of separate accounts - Sub letting of license - Held that:- Imported goods involving mis-declaration and under valuation were seized on 4th July, 2012. Shri Ravi Madan, the proprietor of the importing firm in his statement dated 27/8/12, stated that their CHA is M/s. Kapoor & Co.; however, he transacted all the business and made the payments to Shri Prasenjit Banerjee of M/s. First Logistic Co. Shri Prasenjit Banerjee in his statement dated 30/8/12, stated that as per verbal agreement with the appellant CHA firm, he took the clearance job using the license of the appellant on payment of ₹ 300/- to ₹ 500/- per bill of entry. Similar averments were made by other persons whose statements were recorded by the officers. Shri Awadesh Kr. Srivastava, the authorized signatory of the CHA firm in his statement dated 22/8/2012 admitted about letting out his license for monetary consideration.- admittedly, enquiry is pending or contemplated. Accordingly, we hold that the Ld. Commissioner has rightly suspended the license and the order passed by him does not suffer with infirmity on account of the same not being an immediate suspension order. - No infirmity in impugned order - Decided in favour of Revenue.
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2015 (11) TMI 1017
Denial of refund claim - Refund of SAD - Issue of Invoices before the date of Bill of Entry - appellant submitted that, the invoice was prepared in advance since the consignment was imported against a specific order and was meant for the end user which was known well in advance and therefore, they prepared the invoice in advance, but had issued the same only after the payment of duty etc. - Held that:- There is no evidence on record that the invoice has been issued prior to the Bill of Entry and payment of duty. The Department has also not countered that the details given in the invoice do not tally with the Bill of Entry. - Refund allowed.
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Service Tax
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2015 (11) TMI 1049
Import of services - Arrangement Fees and Agent's Bank fees - Amount paid to Mandated Lead Arrangers (MLAs) to procure lenders/lender syndicate for the appellant. - services have been received by the appellant-assessee beyond the Indian Territory - Invocation of extended period of limitation - Imposition of penalty u/s 76 & 78 - Held that:- On a careful reading of clause (a) & (b) of Section 66A, it is quite clear that when the service provider is from outside India and the recipient of the service who has his place of business, fixed establishment, permanent address or usual place of residence in India, then the recipient of such service will be liable to pay service tax. This is also clear from the reading of Rule 3(iii) of Taxation of Services (Provided from Outside India & Received in India) Rules, 2006. Recipient of services is the appellant located in India. - money was received by the appellant. The fact that this money was used abroad to acquire certain assets will not make any difference. Location of assets, procured as a result of receiving the money which in turn was consequent to the receipt of the said service, is immaterial. The so called MLAs are none other than the banking and financial institutions and 10 of them put together has extended 90% of the loan and the remaining six banks have extended only remaining 10% of the loan. Thus, keeping in view the trade practices as also the holistic view of the operations, in my view, no distinction can be made for the services in connection with the loan vis-à-vis borrowing. Services provided by the MLAs were not in relation to 'borrowing' and in relation to 'lending'. Classification of service - Keeping in view the said trade practices, the definition of the stock broker service clarifies that it is chargeable for both sale or purchase. Services in relation to the lending are different and cannot be compared with the stock broker's services. The contention of the learned counsel does not hold good. The contention of the appellant also rejected that, the Agent Bank provided services to the lender banks not to the appellant. Needless to say that the appellant paid fees to the Agent bank in terms of the Facility Agreement dated 10/10/2006. It is inconceivable that the appellant would pay fees to the Agent bank without any service to it. The Agent bank acted mainly as a coordinator between the appellant and the lender banks for various follow-up action in connection with the loans and repayments thereof. Taxability of services provided outside India - the fact that the amount was used for acquiring assets abroad or in India will not make any difference. Extended period of limitation - it is not possible to accept the contention that the appellant had a bonafide doubt. - the information should be provided to the concerned jurisdictional assessing authority. The balance sheet may be providing some details but these generally do not provide the precise details to enable the department to issue demand notice. In any case the balance sheet may be a public document but the question is whether the balance sheet or information was given to the assessing authorities. In the present case, the appellants did not provide the information in July, 2007. They did not pay the tax as per the direction of the letter dated 27/08/2007. Under the circumstances, I am of the view that the relevant information was suppressed from the department and extended period of limitation has been correctly invoked. - Penalties upon assessee are also upheld - Decided against assessee.
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2015 (11) TMI 1048
Refund of service tax - developer unit in SEZ - claim of refund prior to the exemption notifications no 9/2009-ST issued - first appellant authority denied the refund for the reason that (a) the exemption is available only to service tax paid after the notification has come into force (paragraph 3 of notification 9/2009-ST dated 3 rd March 2009) and (b) that the applicant had not sought refund within six months of payment of tax (condition (f) in paragraph 2 of notification 9/2009-ST dated 3 rd March 2009) the objective of such an unambiguous procedure is amply clear. Held that:- Admittedly, the notification 9/2009-ST was not in existence and, hence, not the basis of the claim preferred by the appellant before the jurisdictional Central Excise officer. At the same time, it is, undoubtedly, the operational procedure put in place for implementing the provision in the Special Economic Zones Act, 2005 granting exemption of service tax for authorized operations. It is also the first such enabling procedure after the Special Economic Zones Act, 2005 was brought into force on 10 th February 2006. From the notifications of 2009 issued by Department of Revenue, it is clear that the test of utilization of service for authorized operations is left to the wisdom of the Approval Committee and the satisfaction of the jurisdictional Assistant Commissioner regarding its actual utilization. This is in conformity with the scheme envisaged by the Special Economic Zones Act, 2005. The approval of the Approval Committee is not in question in the instant case. However, the original authority could not find a link between the service rendered by M/s NSDL and the operations of the appellant as developer/unit in the Zone. The two lower authorities have erred in arriving at this conclusion. The undertaking in the Zone was the sole investment of the appellant and hence any service provided to the appellant cannot but be in relation to its authorized operations. Provisions of section 26 of Special Economic Zones Act, 2005 are conferred with a primacy that cannot be denied, diluted or denigrated owing to delay in devising a facilitative mechanism that was agreeable to Revenue. Disregard of parliamentary intent to levy a tax or exempt a tax cannot be brooked under any circumstance. A harmonious construction of the exemption notification 4/2004-ST dated 31 st March 2004 that preceded the Special Economic Zones Act, 2005 with that Act must perforce be the facilitative mechanism in the absence of any other. A misconceived notion, as entertained by the lower authorities about that distinction between the corporate office address and the site address, should not be allowed to hold sway when confronted with the factual matrix of its exclusive existence in a Special Economic Zone; consequently, there can be no doubt that the services provided by M/s NSDL was for the authorized operations in a Special Economic Zone. - Decided in favour of assessee.
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2015 (11) TMI 1047
CENVAT credit - credit on exempted service - non maintenance of separate accounts - failure to exercise the option to avail the provisions of Rule 6(3A) in writing - Held that:- Commissioner’s conclusion in the impugned order that in view of the retrospective amendment to Cenvat Credit Rules, procedure followed by the assessee can be said to have fulfilled the requirement in my opinion is not correct. This is in view of the fact that amendments were carried out and benefit of payment of proportionate credit or Cenvat credit attributable to exempted goods and services was extended only to manufacturers and not to service providers - In this case there is no such ambiguity or lack of clarity in the amendments or Finance Act brought out in the year 2010. Therefore I am unable to consider this submission. The second conclusion the Commissioner has reached is that the omission or intention is only technical and reversal has been done as required under Rule 6(3) (ii) of the Cenvat Credit Rules 2004. In view of the amendment in 2010, once the amendment is not applicable, the benefit of subsequent reversal will not be available. The amendment brought out in the year 2010 clearly provided for subsequent reversals by the manufacturers where they had omitted to reverse the credit earlier and according to the law they would have been required to pay 6%/8%/10% as the case maybe. Option to avail the provisions of Rule 6(3A) in writing - Held that:- If we accept that even after 01.03.2008 that would be the situation, we will be rendering the provisions of Sub-rule (3A) of Rule 6 of CCR 2004 totally irrelevant and otiose. This cannot be the intention of the legislature. In such a situation applying the decision which was rendered prior to 01.03.2008 and taking a view that option can be exercised at any time or reversal can be made subsequently would be totally against the law as well as the intention of the legislature. The learned DR countered this by submitting that the fact that the explanation provides that it shall not be withdrawn during the remaining part of the financial year shows that it has to be exercised within the same financial year. However it is difficult to come to the conclusion that because of this particular clause, the explanation has to be understood to mean that option should be exercised within the financial year. - However it is difficult to come to the conclusion that because of this particular clause, the explanation has to be understood to mean that option should be exercised within the financial year. Services provided to SEZ units - Held that:- in respect of clearances to SEZ United Nations, there was no need for reversal of Cenvat credit or payment of the percentage of the amount prescribed under Rule 6(3) of Cenvat Credit Rules 2004. In view of the fact that Commissioner (Appeals) has already allowed benefit wrongly as held by me and further in view of the complexity of the nature, in my opinion as a special case, the assessee can be allowed to regularize the activity undertaken by them by submitting a detailed letter as contemplated in Sub-rule (3A) of Rule 6 of Cenvat Credit Rules. Whether it is rectifiable or not is another complicated question which in my opinion goes in favour of the assessee mainly because of the discussion given above and entire facts and circumstances of this case. Appellant would be eligible to reverse the proportionate credit attributable to clearances to Jammu & Kashmir State alone for the year 2008-09 subject to the condition that within 30 days from the date of this order they will file a letter rectifying the deficiencies in the letter of option given by them as contemplated in Rule 6(3A) of Cenvat Credit Rules 2004. - Decided in favor of assessee.
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2015 (11) TMI 1046
Demand of service tax - Management, Maintenance or Repair services - appellant (builder) collected an amount from the flat owners which is titled as towards Management, Maintenance or Repair of the premises - Held that:- As regards the Management, Maintenance or Repair services, we find that it is undisputed that the said amounts are collected by the appellant as a builder for the common maintenance of building as well as the entire premises of the apartment. We find that it is undisputed that the amounts which are collected are used for Management, Maintenance of the common facilities. Ld. CA was correct in bringing to our notice that the issue is now settled by this bench in Kumar Beheray Rathi (2013 (12) TMI 269 - CESTAT MUMBAI) - service tax liability as confirmed against the appellant under Management, Maintenance or Repair services is unsustainable. As regards the point raised by the ld. AR, that amount collected for maintenance of Garden, roads and club house facilities are for the members of the society as and when formed; secondly the entire premises is transferred to society of members, on execution of conveyance deed. The impugned order to that extent is set aside - Decided in favour of assessee.
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2015 (11) TMI 1045
Cenvat Credit - Authorized Service Station Service and ‘Business Auxiliary Service’- Trading activity - Penalty u/s 77 & 78 - Held that:- the disputed input services have not been entirely used by the appellant for providing the taxable output services. Rather, some portion of the input services has been used for trading activity of selling cars. In my view, trading activity cannot be termed as a service . Accordingly, cenvat credit on input services attributable to trading activity will not be available to the appellant. In such eventuality, the only recourse left to the appellant is to segregate the quantum of input service attributable to trading activity and exclude the same from the records maintained for availment of credit, which in the present case, admittedly has not been done by the appellant. - matter remanded back for computation of amount of credit to be reversed - Decided against the assessee. Levy of penalty - Appellant was not in a position to maintain separate records with regard use of input services for the taxable services and for trading activity (which was not an exempted service at the material time), I am of the view that there is no contravention of the Cenvat rules, and as such, imposition of penalty under Section 77 of the Finance Act, 1994 is not justified. Further, in absence of any specific findings by the authorities below regarding the involvement of the appellant in activities concerning fraud, collusion, willful mis-statement or suppression of fact etc., with intent to evade Government revenue, I am of the considered view that penalty imposed under Section 78 of the Act has no leg to stand for legal scrutiny. - Decided in favour of assessee.
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2015 (11) TMI 1044
Mandap keeper service - appellant contended that explanation in the definition of Mandap in Section 65(66) ibid to the effect that social function includes marriage was inserted on 1.6.2007 and therefore prior thereto property let out for a consideration for a marriage function would not be covered under Mandap Keeper Service. - Held that:- Even before the explanation was added from 1.6.2007 Mandap meant inter alia immovable property etc. let out for a consideration for organizing any official, social or business function. A marriage function is also a social function. Thus we are in no doubt that the said explanation added on 1.6.2007 was merely in the nature of ex abundante cautela and therefore has retrospective applicability. - Decided against the assessee. Benefit of Notification No. 12/2003-ST - benefit thereof can be granted only if the assessee is able to produce documentary evidence showing the value of the goods sold. As has been brought out by the original adjudicating authority as well as by the appellate authority, the appellant-assessee was not able to provide documentary evidence regarding the value of such goods and therefore benefit of the said notification was rightly denied to them. Indeed the lower authority in the absence of the documentary evidence of the value of the goods sold allowed 40% abatement in terms of notification 1/2006-ST which the assessee had itself claimed and paid service tax accordingly. Thus there is no infirmity as far as the confirmation of the impugned service tax demand is concerned. - Decided against the assessee. Levy of penalty - even if reasoning given by the appellate authority that if penalty under section 78 of the Act was imposed, penalty under section 76 of the Act could never be imposed may not be correct, the appellate authority was within its jurisdiction not to levy penalty under section 76 of the Act having regard to the fact that penalty equal to service tax had already been imposed under section 78 of the Act. This thinking was also in consonance with the amendment now incorporated though the said amendment may not have been applicable at the relevant time - Decided partly in favor of assessee.
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2015 (11) TMI 1043
Levy of Penalty u/s 78 - Invocation of Section 80 - whatever was suggested by the audit party and reversed the cenvat credit taken along with interest - show cause notice was issued with the wrong name as M/s. Gland instead of the name of appellant - Held that:- In the SCN it has been stated that M/s. Gland has not disclosed the details. Therefore the appellant could have easily contested this saying that if Gland has not disclosed the details how can appellant be liable to pay back the cenvat credit and interest and penalty. However the appellant has accepted it as a typographical error and this issue has never been raised. Apparently the appellant wanted to close the issue and do not enter into a litigation. Nevertheless litigation has been commenced by the Revenue and even while doing so in the case of a demand, the cut and paste procedure has been adopted resulting in a wrong name mentioned in the show-cause notice. - even the statutory provisions have not been considered and decisions cited have not been discussed. - this is a fit case for waiver of penalty under Section 80 of Finance Act 1994 and accordingly penalty imposed on the appellant are set aside. - Decided in favour of assessee.
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2015 (11) TMI 1042
Leviability of service tax - retreading of tyres - Manufacture or management. maintenance and repair service - Held that:- Taxability of the said service had, between its introduction on 1st July 2003 and amendment on 16th June 2005, been restricted to such maintenance or repairs as were performed in accordance with an maintenance contract but which thereafter was not restricted by such a condition. Thereby, the status of the appellant as manufacturer is not relevant to determine taxability. - contract is not required to be in writing. At the same time, the existence of offer, acceptance, performance and consideration is sufficient to render even the most simple and rudimentary transaction to be a contract. The activity of retreading is an activity of repair for maintenance of used tyres and, considering the ingredients of the transaction, would fall well within the ambit of section 65(64)(i). Accordingly, we uphold the contention of Revenue that the activity of the appellant is taxable under Finance Act, 1994. Goods on which VAT has been discharged are not liable to be subject to tax again under Finance Act, 1994 by inclusion in value of taxable services. The tax amount due on the service component thereon will require to be computed. Accordingly, we set aside the demand of tax in the impugned orders and direct the original authority to re-compute the tax due after taking into account the goods on which VAT liability has been discharged. - Decided partly in favour of assessee.
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2015 (11) TMI 1041
Cenvat Credit - input services - event management services - Services are not related to their output services being Advertisement agency service - Undervaluation of service - Held that:- The service of advertising agency as pointed out from the definition includes exhibition, display etc. It has to be noted that the period is prior to 1.4.2011 when the definition of input service had a wider ambit. The activities as explained and borne out from records establish that event management services availed by appellant is related to the output service of providing advertisement services. Again, the denial of credit on the ground that they are not registered for event management services is not tenable. The payment of service tax is not disputed. The grounds on which credit has been denied is too flimsy and feeble. Therefore I hold that event management services being input services would be eligible for credit. Levy of penalty for short payment of service tax - Held that:- In a few cases in which the commission received was more than 15% the appellants omitted to pay service tax for the higher amount of commission received. It occurred only by mistake because generally the commission received is 15% and service tax was being paid on 15%. The learned counsel submitted that the short payment occurred only with regard to 18 cases and on coming to know about it the appellant deposited the tax with interest even before the issuance of show cause notice. A penalty of ₹ 48,705/- is imposed alleging suppression under Section 78 of the Finance Act, 1994, which has been upheld by the impugned order. - appellant has put forward a plausible explanation for the failure to pay. I find that it is a fit case for invoking the provisions of Section 80 of the Finance Act, which provides that, no penalty shall be imposable if the assessee establishes there was reasonable cause for the failure. I hold that the penalty imposed is not justified and has to be set aside - Decided in favour of assessee.
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2015 (11) TMI 1040
Benefit of 67% abatement under Notification No. 15/2004-ST, 1/2006-ST - Benefit of Section 80 - commercial or industrial construction service - respondent had not furnished any document to indicate that cost of construction material was included in the amount charged or same were supplied free of cost by service recipient - Held that:- Gross amount received by the appellant would have included the cost of material used in connection with construction of commercial shops for Municipal Corporation, Bilaspur. As regards extending the benefit of Section 80 of the Finance Act for setting aside the penalties we find that after allowing the 67% abatement the impugned demand would reduce to about one third of the amount confirmed by the primary adjudicating authority. Further while considering the eligibility of the appellant for the benefit of Section 80. Revenue in its appeal has not been able to bring out any reasonable basis to counter the observations of the Commissioner (Appeals) based on which the benefit of Section 80 ibid was extended by Commissioner (Appeals). In the given circumstances inter alia involving relatively small amount of service tax extension of benefit of Section 80 ibid by Commissioner (Appeals) can scarcely be said to be arbitrary or unreasonable. - Decided against Revenue.
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Central Excise
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2015 (11) TMI 1039
CENVAT credit - Bogus invoices - No dealing with physical of goods - Fraudulent availement of credit - Imposition of interest and penalty - Held that:- All the five traders/bidders based in Viramgam have admitted that the freight charges were being paid by them or the buyer of the goods when such HR trimmings were being unloaded at Viramgam or nearby area. These statements leads to far more credibility than the bald claim of the main appellant. Further, we find that it is undisputed that consignments were transported through the trucks having Gujarat registration Number. For the transportation of the goods within the State of Maharashtra such trucks cannot undertake this activity. None of the appellants have contradicted this allegation or said anything about this allegation. We also find that the incriminating documents recovered from M/s. SKT i.e. the office of the transport commission agent Shri Chandrakant Nathwani (appellant No. 17) clearly indicates the vehicle number, date, weighment of the goods, the destination where the goods are unloaded and other details. Number of other officers were offered for cross-examination and were cross-examined. We do not find any consequence coming out from such cross-examination. We have also gone through the various case laws submitted by the appellant relating to cross-examination. We find, as mentioned earlier, the two persons who did not turn up for cross-examination are the co-noticees and in view of this Tribunal s decision in the case of Maya Mahal Industries reported in [1995 (3) TMI 260 - CEGAT, NEW DELHI] and also in view of Article 20(3) of the Constitution of India, the two cannot be forced for cross-examination. - purported consignee as per the invoice was different from the actual consignee who were Viramgam based traders. Thus, the manipulation in the name of consignee was done with the sole purpose of evading excise duty by mis-using the credit of duty paid on the HR trimmings. In view of the said position, in our view, the goods are confiscable under Rule 25(1)(d) and penalty is also imposable on the appellants. - Decided against the assessee. Levy of penalty for abetment - That a person would render himself liable for penalty for indulging in activities mentioned in Rule 26 of the Central Excise Rules, 2002, even if goods are not confiscated or had not been rendered liable for confiscation. We also note that as in that case, even in the present case all the appellants have full knowledge about every stage of removing, keeping, selling, concealing the excisable goods and the same would not have been possible without their active participation and connivance with each other. - from the documents recovered from their premises, it was very clear that they were fully aware that the HR trimmings were consigned to Viramgam based bidder and are being used by SSI units there. Under these circumstances, it was incorrect on their part to indicate the name and address of the main appellant in the present case and since they have changed the name of the consignee in spite of the fact that the goods were being transported to Viramgam or nearby area in different State. The goods are therefore liable for confiscation as discussed earlier and they are liable to penalty. - However, Penalty imposed on some appellants are reduced.
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2015 (11) TMI 1038
Valuation - Determination of transactional value - Whether a manufacturer of LPG selling the product in bulk, post 1.7.2000, to an OMC for further sale in packed form to dealers/domestic consumers and recovering ex-refinery price from the OMC as sale consideration is entitled to adopt ex-storage price (APM price) as the assessable value of the said product in bulk by ignoring the provisions of Section 4 of the Central Excise Act as amended w.e.f 1.7.2000. Held that:- Revenue was not in favour of even accepting the Larger Bench decision of this Tribunal in the case of Gas Authority of India Ltd., therefore filed appeal before the Hon'ble Supreme Court after taking opinion of Attorney General. However, the Hon'ble Supreme Court desired that the matter be resolved by the two Departments and the appeal was dismissed as not pressed. In view of the direction of Hon'ble Supreme Court, and various considerations elaborated in the circular, Larger Bench order was accepted. It is clear from the circular that Tribunal's order was not accepted on legal/judicial consideration but administrative consideration. In my considered view, for future dispute, particularly when law itself was amended, in such a situation it is the duty of this Tribunal to examine the legal issues and give a verdict on the legal issue. If the circular was issued based upon legal analysis, this Tribunal will be justified to say that Revenue could not have argued against the circular. But that is not the case here. In case Government finds that Tribunal's decision is not acceptable due to administrative considerations such as subsidy etc., Government is empowered to issue suitable exemption notification or bring change in law to align the law with administrative desirability. Board has not anywhere stated that even when the manufacturer was selling the goods at a price higher than the APM price, then also the APM price is to be taken as the transaction value for purposes of assessment. Similarly, this circular no where states that even wherein manufacturer (like appellant) is selling the gas in bulk at import price parity to OMCs, duty is required to be collected at APM prices. - The OMCs sold, a part of it (which is subject matter of dispute) after bottling in cylinders to domestic consumers through dealers. ONGC sold to the OMCs at a price as indicated in commercial invoices. This price was based upon Import Price Parity. Amount indicated in commercial invoices was collected from OMC. However, excise duty was not paid as per these invoices. OMC in turn sold the same after bottling in cylinders at 'APM price' which was ex-storage price fixed by OCC, Ministry of Petroleum, ONGC paid central excise duty on APM price under cover of central excise invoices issued under Rule 11 of the Central Excise Rules, 2002. The OMCs received compensation/subsidy (i.e. difference between ex-refinery price paid to ONGC and the ex-storage price i.e. APM price collected from the dealers) from the 'Oil Pool Account/Subsidy' maintained by the Ministry of Petroleum. ONGC did not receive any subsidy or compensation from the Govt. Transaction value of excisable goods is the price actually paid or payable for the goods when sold and includes, in addition to such price, any additional consideration which the buyer is liable to pay to, or on behalf of the assessee by reason of, or in connection with the sale. In the present case, the sale amount actually paid by the buyer (OMCs) to the appellant (ONGC) as price of LPG (bulk), ex-refinery, is the one mentioned in the commercial invoice and that only is the transaction value of the goods. - Under the contract of sale between ONGC and the OMCs in this case, the latter was liable to pay the ex-refinery price (i.e. import parity price). Therefore, it cannot be denied that the price actually paid by the OMCs to the appellant is the transaction value as defined in Section 4(3)(d), which is the price mentioned in ONGC's commercial invoices. The fact that appellant's customer i.e. OMCs in turn were selling part of such goods (after bottling) to final consumer at APM price and the differential between their purchase price and APM price was being received by them as subsidy or from Oil Pool Account is of no consequence as far as section 4 of the Central Excise Act is concerned. After 1/7/2000, the appellant has to pay duty of excise on the transaction value in terms of new Section 4 of the Central Excise Act, 1944. It is needless to say that the appellant had collected import parity price (i.e. the transaction value) from its buyers (OMCs) by issuing commercial invoice and not the APM price which was lower than the value declared in the commercial invoice. Only the actual taxes paid from the overall transaction value are required to be deducted. In essence, whatever amount is recovered except the taxes actually paid will be the assessable value. In the present case, there is no dispute that the value recovered by the appellant is as per the commercial invoice and therefore the commercial invoices represent the transaction value, the duty will required to be paid by the appellant on the said transaction value. The APM price recovered by the appellant's customer from the general public or their customer is not relevant for determining the assessable value of the goods sold by appellant to OMCs under Section 4 of the Central Excise Act. Appellant was required to discharge its duty liability on the basis of 'transaction value' which it collected from the OMCs by issuing commercial invoices during the disputed period in terms of provisions of Section 4 of the Central Excise Act as amended w.e.f. 01/07/2000. In other words, post 01/07/2000, the provisions of new Section 4 cannot be ignored for determination of assessable value of LPG sold in bulk to OMCs for further sale in packed form to dealers/domestic consumers. Therefore, the views expressed by the referral Bench are correct and the same are endorsed. - appellant has to discharge the excise duty on the transaction value which is collected from the Oil Marketing Company by issuing commercial invoices during the disputed period. - Decided against assessee.
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2015 (11) TMI 1037
Denial of CENVAT Credit - Bogus invoices - Non receipt of physical goods - whether the appellant-manufacturer have availed CENVAT credit on inputs without actually receiving the inputs - Held that:- Demands have arisen as a result of investigation carried out by the officers at residential premises of Shri Kirti Kala and other employees, director of M/s SOL Shri Mukesh Sangla, office and godown of M/s SOL and its associate concerns. The hand written slips and lap top seized from the residence of Shri Kala, contained details of purported cash transactions by M/s SOL. Shri Kirti Kala and Shri Mukesh Sangla stated that the entries pertains to cash received on account of sale of polymers without issue of invoices and cash payments which included the payments made in lieu of cheques to the parties who purchased bogus invoices without delivery of goods. Reliance has also been placed upon the statement of Ravindra Pingle the godown Incharge at Indore and Paras Patidar, Marketing Manager of M/s SOL. The officers also investigated one of the transporter Shree Ganesh Transport who had transported goods from Mumbai godown of M/s SOL to M/s TEL but the same was found to be non existing. Neither the statement of Shri Ravindra Pingle, the godown Incharge nor the statement of Shri Paras Patidar points out any modus operandi in respect of M/s TEL having been issued duty paid invoices by M/s SOL, without actual delivery of goods. M/s TEL had produced the documents towards deposit of cash showing the receipt of the same from buyers/dealers of finished goods. These documents remained undisputed, as not found untrue, by the adjudicating authority, which shows that the contention made by M/s TEL is correct. No investigation has been conducted at Mumbai godown nor the records of said premises has been relied upon to show that the goods were not dispatched from the Mumbai Godown of M/s SOL and if dispatched having been diverted elsewhere. In case of goods received from M/s DCW, there is no investigation as to whether the goods were diverted elsewhere and not received by M/s TEL. The investigation is silent upon all these issues. Further it is not appearing on record that if the goods were not received by the Units of M/s TEL in that case what was the alternate source from where M/s TEL procured the goods. When the goods (inputs) were found to have been entered in records of M/s TEL and were shown to have been consumed in the production, which remains undisputed, I hold that looking to all these aspects the demand is not sustainable. - case of Revenue does not stand. The impugned Order-in-Appeals are set aside. The demand and penalty against M/s TEL Unit No.1 and Unit No.2 are not sustainable and therefore are set aside. - Decided in favour of assessee.
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2015 (11) TMI 1036
Job Work - There was no evidence to show that appellants or the principal supplier claimed the benefit of exemption under Notification No.214/86. - No declaration filed by the principal supplier with jurisdictional Central Excise authority under whose jurisdiction the job worker was located. - Revenue contended that Rule 4 (5) (a) of CCR is not applicable on the ground that principal supplier has not availed credit - Extended period of limitation - Held that:- appellants have informed the concerned jurisdictional authorities at every stage about their carrying out the job work and receipt of MS scrap and conversion into billets and ingots as per conversion agreements to the principal suppliers. Therefore, we are of the considered opinion that appellant has not suppressed any facts particularly to the fact that the said letters were duly received by the jurisdictional authorities and there was no objection raised by the authorities and no verification was done treating that it is only an intimation. - demand is hit by limitation. - Decided in favor of assessee. Decision on merit - Appellant have received MS scrap as per conversion agreements entered into with the principal manufacturer/supplier and there is no dispute on the fact that appellants are also original manufacturers of MS ingots and billets on their own account and discharging central excise duty on the final products. It is an admitted fact that appellant received raw materials on job work and after conversion cleared MS ingots/billets to their principal supplier M/s.Kanishk Steel Industries. Vyapar, Salem, Ispat Radice (India) Ltd. in the respective central excise jurisdiction. On perusal of the challans and invoices, we find that the invoice bears the clear endorsement sent for conversion under Rule 4 (5) (a). No SCN has been issued or any investigation carried out with the principal suppliers of raw materials as to whether the duty has been discharged on the final product cleared by the principal manufacturer as per the job work notification. Further, it is pertinent to see that both the appellant and the principal suppliers are duly registered with the Central Excise and following Central Excise procedures. The principal manufacturers duly declared/intimated to the department that raw materials were being sent for conversion under Rule 4 (5) (a) as evident from the correspondences, invoice and DC and other documents. Being a central excise manufacturer the principal manufacturer is entitled to send raw material as such or for further processing under Rule 4 (5) (a). The rule includes the term removal of raw materials for further processing" and the department is not disputing that the goods are not returned by the appellant after conversion. No input credit has been availed by the job worker. Revenue contended that Rule 4 (5) (a) of CCR is not applicable on the ground that principal supplier has not availed credit. In the present case, the scrap was directly sent from the port of import to the job worker and the principal supplier has availed credit immediately on receipt of MS ingots and billets from the job worker. There is no restriction on the manufacturer to send raw material directly from the place of import to the job work premises. Therefore, we hold that there is no dispute on the receipt of scrap and clearance of MS ingots/billets to the principal supplier, the question of demanding duty on the job work does not arise. In view of the foregoing discussions, we are of the considered view that demand of excise duty on the job worker i.e. appellant is not sustainable both on limitation and on merits. - principal manufacturer also filed declaration to ACCE Karaikal vide letter dt. 20.11.2007 and clearly indicated the jurisdictional ACCE on job work under Rule 4 (5) (a). Since the appeal of the main appellant is allowed by setting aside demand and penalty, the penalty imposed on the co-noticees are also liable to be set aside - Decided in favour of assessee.
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2015 (11) TMI 1035
Denial of benefit of export in case of Deemed export - Notification No. 44/2001-CE (NT) dated 26.06.2001 - Revenue contended that the opening paragraph of the notification provides that the said notification would apply only on the physical export of the goods, out of India and not deemed export - Held that:- Under the Central Excise Scheme, Rule 18 and Rule 19 of Rules are dealing with export of the goods. Rule 18 provides any goods are exported, the Central Government granted rebate of duty paid on such excisable goods or duty paid on materials used in the manufacture or processing of such goods. Rule 19 allowed to export any excisable goods without payment of duty. Sub Rule (2) of Rule 19 permitted to clear the any materials from a factory without payment of duty for use in the manufacture or processing of the export goods. Sub Rule (3) of Rule 19 empowered the Board to frame the conditions, safeguards and procedure to clear the excisable goods for export and any materials cleared without payment of duty for use in the manufacture of export goods. Language of the proviso is clear and there is no ambiguity. The manufacturer of Advance Licence holder supplies the material to another manufacturer, who in turn supplied the resultant products to the ICB would be covered within scope of the notification. In our considered view, it is not justified to ignore the plain meaning of the proviso and interpret in such a manner, as it would render inconsistency with and meaningless of the notification. - by Notification No. 108/95-CE, the final product of the appellant is exempted from duty supplied to Assam Integrated Flood and Riverbank Erosion Risk Management Programme, which will be a deemed export as per Para 8.1 of Foreign Trade Policy. Revenue is demanding duty on the intermediate goods used in the manufacture of finished goods cleared as per Para 8.1 of policy, by denying the benefit of notification No. 44/2001-CE (NT) dated 26.06.2001 as amended. After amendment of the said Notification No. 44/2001-CE (NT) by Notification No. 23/2009-CE (NT) dated 22.09.2009, it has extended the removal of intermediate goods without payment of duty, for manufacture and export in terms of Para 8.3 (C) of policy, otherwise, the proviso inserted therein by amending notification would be nugatory and meaningless. Notification No. 44/2001-CE (NT), in this case, is issued in exercise of prior Rule 19 of the Rules. Rule 19 of the Central Excise Rules permitted to export the goods without payment of duty. Sub Rule (2) of Rule 19 further permitted to removal any material without payment of duty for use in the manufacture of goods, which are exported. Central Board of Excise and Customs by virtue of power under Sub Rule (3) of Rule 19 of the said Rules framed the procedure, conditions and safeguards for removal of the goods from the factory without payment of duty for used in the exported goods. As per Clause No. (ii) of the notification, the Central Government notified to follow the procedure of Rules 2001 for removal of intermediate goods for manufacture and except of goods by holder of DEEC and Advance License. Proviso to the said notification have wider amplitude, to extend the goods cleared by on Advance Licence holder to another Advance Licence holder for use in the manufacture of export of goods to ICB, by following the procedure laid down therein. - demand of duty alongwith interest and penalty cannot be sustained. Accordingly, the impugned order is set-aside. - Decided in favour of assessee.
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2015 (11) TMI 1034
Clandestine clearance of goods - SSI Exemption - Clearances of goods without making declaration to Department - Non Inclusion of value of clearance - Held that:- On perusal of some of the invoices procured from the customers who had made cheque payments to M/s Batra Henlay Cables and M/s Cosmoline Electricals, it is seen that some of the invoices are in respect of supply of aluminium cables, while it is the stand of M/s Batra Henlay Cables that their unit was not capable of manufactured aluminium cables. In this regard, Shri Krishan Singh Rathore, an employee of the appellant company, in his statement dated 17/1/97 has stated that Batra Henlay Cables were manufacturing only the house wire cables and telephone cables and were not manufacturing any aluminium cables. On this point no finding has been given by the Commissioner. If M/s Batra Henlay Cables were not having any machinery for manufacture of aluminium cables, the aluminium cables sold by them must obviously have been procured by them from other dealers and accordingly the payments received in the above-mentioned four bank accounts in respect of sales of aluminium cables cannot be treated as the payments received for sale of the cables manufactured and cleared by M/s Batra Henlay Cables. No enquiry has been conducted with the remaining customers - Without any enquiry with them, it cannot be presumed that the payments made by them were in respect of the goods manufactured and cleared by M/s Batra Henlay Cables which had been sold to them. In view of this, the payments received into the four bank accounts, mentioned above, from the parties with whom no enquiry had been conducted, cannot be treated as the payments for the goods manufactured and cleared by M/s Batra Henlay Cables and those amounts cannot be taken into account for calculation of the duty demandable from M/s Batra Henlay Cables. - Commissioner s order confirming duty demand of ₹ 66,04,307/- has to be set aside and the matter has to be remanded to the Commissioner for denovo adjudication - impugned order is set aside - Decided in favour of assessee.
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2015 (11) TMI 1033
Demand of differential duty - Undervaluation - Mutuality of interest - related persons - Imposition of penalty - Held that:- It is the same group of persons, the three brothers, Shri Satnam Singh, Shri Mohinder Singh and Shri Bhupinder Singh who have all pervasive control over SBM, RD and RWM and the three units are being as one entity and the separate firm/company have been created for reducing their tax liability. There is no explanation as to why SBM in respect of their sales to RWM and RD being on long term credit, are selling goods to RWM at a price much below the cost of production and also much below the price at which the same goods were being sold during the same period to other independent buyers on cash payment. In view of these circumstances, we hold that there is mutuality of interest between SBM and RWM, and therefore, in respect of the SBM sales to RWM, the sale price of SBM cannot be accepted as assessable value. However, in our view, the Commissioner's decision to adopt the average sales price at which the grey acrylic spun yarn was being purchased by RD from other suppliers would not be correct and that the correct assessable value in respect of the sale of grey acrylic spun yarn by SBM to RWM and RD would be the average price at which SBM were selling the same goods to other independent buyers during that period. Accordingly, the assessable value has to be determined on this basis and the duty demand has to be quantified. - Decided against the assessee. Wrong availmnent of exemption - concessional rate of duty in respect of the dyed yarn - notification no. 5/99 and 6/2000 CE - Held that:- in respect of grey acrylic spun yarn, the duty has been short paid by taking recourse to under-valuation, the grey acrylic spun yarn cannot be said to be the goods on which the appropriate duty has been paid and hence, the dyed yarn made out of grey yarn would not be eligible for exemption. However, if SBM pay the differential duty on the clearance of grey yarn to RD, as determined by the assessing officer, the exemption notification no. 5/99 and 6/2000 CE would be applicable in respect of the dyed yarn manufactured out of grey yarn received from SBM. - Decided partly in favor of assessee. Clandestine removal of goods - Allegation is based only on the presumption and there is absolutely no evidence to substantiate the same. Even if there is mutuality of interest between SBM and RD on one hand and SBM and RWM on the other hand, it cannot be presumed that the yarn sold by SBM to RWM had actually be diverted to RD who had used it for unaccounted manufacture of died yarn. In view of this, we hold that duty demand of ₹ 36,78,122/- is not sustainable and is to be set aside. - Decided in favour of assessee.
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2015 (11) TMI 1032
Duty demand - Clandestine removal of goods - whether on the basis of the recovery of a private ledger book from the factory premises of SSSRM which contain entries regarding receipt of MS Ingots by SSSRM from the appellant company during the period from April 2005 to August 2005 allegation of clandestine removal can be made against the appellant - Held that:- In terms of the Apex Court judgment in the case of Kishin Chand Chella Ram vs. Commissioner of Income Tax reported in [1980 (9) TMI 3 - SUPREME Court] allegation of duty evasion cannot be made against an assessee on the basis of the entries in the records being maintained by some other person unless an opportunity for cross examination of that person had been allowed. In this case no such opportunity for cross examination of the writer of the private ledger book of SSSRM or their supervising officer had been given. Moreover, the entries in the private ledger book of SSSRM showing receipt of MS Ingots from the appellant during the period from April 2005 to August 2005 are not supported by any other independent evidence on record. Therefore, we hold that merely on the basis of the entries in the private ledger book of SSSRM, the allegation of duty evasion against the appellant company cannot be sustained. Merely because during 2003-2004 the appellant sold their finished goods on a small profit margin of ₹ 15 per MT and during 2005-2006 the appellant sold their products at the loss of 1278 per MT, no adverse conclusion can be drawn and merely on profit and loss data it cannot be concluded that the appellant were indulging in duty evasion by clandestine removal during this period. Though the Department alleges that during 2004-2005 and 2005-2006 the appellant had received the commission income of ₹ 1,16,25,916/- from commission agent certificate from parties which is an unrelated activity and thereby implying that the appellant were under reporting their production and showing their income from manufacturing activity as the income from commission agent service, no adverse conclusion can be drawn from this, as the appellant s claim that they had paid service tax on the commission income and also the income tax had been deducted at the source on the payments being received is not disputed. Moreover, no inquiry has been conducted to prove that these service transactions are bogus. When the Department does not dispute that till August 2004 the furnace installed in the appellant unit was 3 M.T. capacity and only in September 2004 this furnace was replaced by the furnace with 6 M.T. capacity and thus still August 2004 the capacity of production of the unit was only 6300 M.T. per annum and only w.e.f. September 2004 the installed capacity was enhanced to 12600 MT per annum and on this basis the maximum production during the period from April 2002 to September 2006 would be 40950 M.T. against which the production recorded in the statutory recorded during this period on which duty has been paid is 37478.94 M.T., merely based on the assumed power consumption norm of 689 units per MT for which there is no basis, the appellant unit cannot be alleged to have manufactured and cleared 64511 MT of MS Ingots during the same period. - Impugned order is unsustainable - Decided in favour of assessee.
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2015 (11) TMI 1031
Recall of order - Appeal dismissed for non compliance with pre deposit order - Held that:- This application is filed for restoring Appeal which was dismissed by the bench [2015 (11) TMI 957 - CESTAT MUMBAI] holding that the appellant had not complied with the pre-deposit ordered by the bench. This dismissal of the appeal for non-compliance seems to be erroneous inasmuch there was no pre-deposit ordered by the bench as the appeal is against dismissal of appeal by the first appellate authority against non-granting of remission of the duty on the finished goods which was destroyed in fire. - Appeal restored.
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2015 (11) TMI 1030
Waiver of pre deposit - modification application - Suppression of production - Clandestine clearances - Held that:- Evidence of suppression of production and clearances is in form of the data retrieve hard disks recovered from the premises of the headquarters of the group companies. The tribunal in the stay order given a prima facie findings that the hard disk recovered from the headquarters of the group companies pertain to the appellant company and the clearances reflected therein are not accounted for statutory Central Excise records. If this is the prima facie finding of the Tribunal in the stay order and a prima facie view has been taken on the basis of material on record that the appellant company has suppressed its production and clearance, a logical conclusions of this would be that no sanctity can be attached to their profit and loss account or their claim of the company being in losses. In view of this, so far as the appellant company is concerned, we do not find any justification for modifying the quantum of pre-deposit. - However, as regards, the quantum of pre-deposit in respect of Shrivats Rathi is concerned, the same is reduced to Rs. One lakh.
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2015 (11) TMI 1029
Duty demand - removal of semi-finished goods under Rule 16B to the Job worker - Held that:- Rule 16B empowers the Commissioner, Customs, to permit a manufacturer to remove the excisable goods which are in the nature of semi-finished goods, for carrying out certain manufacturing process, to some other premises and to bring back such goods to his factory, without payment of duty. Admittedly in the present case, the Commissioner has granted the permission to remove the yarn. As such, I find that the conditions of Rule 16B stands fully satisfied. Otherwise also, I find that the appellants received fibre which are converted into yarn and such yarn is cleared for further conversion into fabrics by the job worker. As such, it is the said fabrics which have to be considered as the final product and the yarn is entitled to be considered as semi-finished goods which are further used in the manufacture of fabric. As such, I am of the view that Rule 16B fully applies to the facts of the present case. The said issue also stands decided by the Tribunal in the case of Valentino Syntex Pvt. Ltd. v. CCE, Jaipur [2008 (2) TMI 806 - CESTAT, NEW DELHI]. In the said decision, the yarn received by the manufacturer was converted into grey fabrics in their factory and was subsequently cleared to the job work for further processing. The Tribunal has held that the movement of grey fabrics to the job worker and return of man-made fabric to the appellant were in accordance with the erstwhile Rule 16B of Central Excise Rules, 2002. As such, the issue stands decided. Otherwise also, if the appellants are made liable to pay the duty on the yarn so cleared to the job worker, they are entitled to Cenvat credit of the duty so paid, which can be utilised by them for payment of duty on the fabrics, so received by them from the job worker. As such, the entire situation is revenue neutral. On the basis of the above discussions, I set aside the impugned order - Decided in favour of assessee.
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2015 (11) TMI 1028
Cenvat Credit - Supplementary invoices - transfer of Credit by paper transaction by the Job worker - Held that:- In the absence of any evidence to show that the appellant had not paid the amount of ₹ 47,64,194/- and ₹ 8,73,600/-, for taking back the CENVAT credit of 16% it would be difficult to assume that a party would pay 100% towards value. Unless it is shown that this amount was not paid or this was a paper transaction, it is difficult to take a view that this was a planned operation to extract the CENVAT credit. The amount has been paid in reality by the appellant and in the absence of contrary evidence on record that would be obvious conclusion. There was a possibility of the Revenue taking a view that the job worker having realized the excess value should have debited the CENVAT credit and paid the amount in cash and commencement of proceedings against the job-worker if the appellant had not ensured that the job worker had paid the differential duty arising because of the transaction. That being the situation, one cannot really come to the conclusion that this was a planned operation to extract Cenvat credit. The department could have had a better case if there was any evidence to show that there was no payment by the appellant to the job-worker but it was paper transaction and only credit was transferred. - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (11) TMI 1016
Recovery proceedings where appeal is pending before the appellant authority - Attachment of bank accounts - section 44 of the Gujarat Value Added Tax Act, 2003 - Held that:- While it is true that under rule 27 of the rules, the respondent is empowered to call upon the petitioner to pay the amount assessed within a period of thirty days from the date of service of such notice, however, when the petitioner has preferred an appeal together with the stay application within the prescribed period of limitation, the respondents are required to act in a reasonable manner in connection with the notice issued under section 27 of the Act. The fourth respondent is required to keep in mind the fact that the petitioner has preferred appeals before the first appellate authority and that the stay applications are pending. That if the stay applications are allowed or partly allowed, the petitioner would be required to deposit only a part of the demand covered under the notice or may be even granted complete unconditional stay. Under the circumstances, it is expected of the fourth respondent to stay his hands till the stay application of the petitioner is decided, unless the stay application is not decided on account of default on the part of the petitioner or it is found that the petitioner is unnecessarily delaying the hearing of the stay application. However, in the absence of any exceptional circumstances, there is no warrant for the respondent authorities to proceed to initiate coercive recovery in exercise of powers under section 44 of the Act by attaching the bank accounts of the petitioner. When the petitioner had already preferred an appeal with a stay application, the least that was expected of the fourth respondent was to wait for the outcome of the stay application before resorting to coercive measures as has been done in the present case. Besides, the orders under section 44 of the Act also suffer from the vice of non-application of mind, inasmuch as, in the notices issued to each of the banks, the fourth respondent has sought to recover the entire demand covered under the notice from each of the banks. - The impugned orders dated 17.7.2015, 9.6.2015 and 17.7.2015 (Annexure-E collectively to the petition) as well as the impugned orders dated 11.9.2015 Annexure-R-III Collectively, to the affidavit in reply of the respondent cannot be sustained. - Decided in favour of assessee.
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2015 (11) TMI 1015
Validity of assessment order - Bar of limitation - Delay in delivery of assessment order - Held that:- Provision of Section 15 of the HVAT Act, nowhere envisages that the order of assessment is required to be communicated within the period of three years. It only contemplates exercise of jurisdiction in passing assessment order within a period not exceeding three years. Once that jurisdiction has been exercised within the stipulated period, the communication thereof being ministerial act can be even after the expiry of period of three years. It is not provided under Section 15 of the HVAT Act that the date of dispatch or service of the assessment order on the dealer would constitute the date of the passing of the order. It is also not provided that it is the sine qua non for treating the date of passing of the assessment order. - order made or passed is required to be communicated within the period of limitation, otherwise it would be time barred. The factual matrix being different, the judgment relied upon does not come to the rescue of the appellant. What is of the essence under Section 15(4) of the HVAT Act is to assess to the best of assessing authority's judgment the amount of tax due from the assessee and not communication of assessment order. Hence the assessment had been made within the time prescribed and the date of the communication could not be taken as the date of making of the order as per observations of the Apex Court in Amar Singh Karika [1966 (1) TMI 79 - Supreme Court of India ] and Mangal Sen Shyam Lal Bhagwan Industries's cases (1975 (4) TMI 96 - SUPREME COURT OF INDIA). In Kappumalai Estate's case (1997 (3) TMI 39 - KERALA High Court), the Kerala High Court again applying the principles laid down in Government Wood Work's case (1987 (1) TMI 451 - KERALA HIGH COURT) has taken similar view. - No merit in appeal - Decided in favour of Revenue.
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2015 (11) TMI 1014
Recovery of outstanding sales tax dues of respondent which is in liquidation from the directors as an arrears of land revenue - Violation of principle of natural justice - Held that:- recovery proceedings can be initiated in terms of the specific provisions in the statute. There exists no particular provision either under the Act or the VAT Act whereby the liability of the private limited company can be fastened on the directors of the said company and recovered from them. Unlike section 179 of the Income-tax Act, 1961 where a director of a company can be held liable for recovery of tax due from the company on fulfilment of conditions enumerated therein or even under section 18 of the CST Act which provides for recovery from the director of a private limited company which is in liquidation under certain circumstances. - recovery on account of sales tax liability under the Act or VAT Act of M/s. Bhagwati Wooltex Pvt. Ltd. relating to exemption period cannot be recovered from the petitioner. Recovery of CST - In the absence of taking any specific recourse to proceedings under section 18 of the CST Act and passing of any valid order for effecting recovery of CST from the directors of the private limited company in liquidation, the proceedings relating to recovery of arrears of CST from the petitioner are held to be not permissible in law. Further, the respondents have not shown that the amount of tax recoverable under the CST Act cannot be recovered from the company. It is also not shown as to what efforts were made to recover the arrears of CST from the assets of the company. Thus, recovery of CST from the petitioner is unsustainable. However, it shall be open for the respondents to proceed to recover the amount on account of CST after taking proper action under section 18 of the CST Act and considering the notification dated September 4, 1995 (annexure P11) issued under section 8(5) of the CST Act. Recovery of Surety - liability of the petitioner on account of non payment of the amount due from the principal where he had stood surety cannot be doubted. However, in the absence of any notice having been issued before serving annexure P9, the action cannot be legally sustained being violative of principles of natural justice. - Decided in favour of petitioner.
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Wealth tax
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2015 (11) TMI 1050
Deletion in net wealth - Agriculture land or urban land - Held that:- Finding of the ld.CWT(A) would indicate that the ld.First Appellate Authority has relied upon the reasoning given by his predecessor. That reasoning has already been set aside by the Tribunal for re-adjudication. Therefore, we allow the appeal of the Revenue and set aside the impugned order. The issue is restored to the file of ld.CWT(A) for re-adjudication - Decision in assessee's own previous case followed [2013 (8) TMI 919 - ITAT AHMEDABAD] - Matter remanded back - Decided in favour of Revenue.
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