TMI Tax Updates - e-Newsletter
November 26, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Highlights / Catch Notes
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Income Tax:
Preponement of deferred sales tax loan chargeable u/s 41(1) or not – deferred sales tax liability is capital receipt not taxable - AT
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Income Tax:
The net profit is ranging from 5.19% to 6.15%, definitely there will be lower profit in the case of sub contractor i.e. the assessee and hence, the CIT(A) has rightly estimated the net profit rate at 4% - AT
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Income Tax:
TDS - Section 194C requires the person responsible for paying the money and it does not requires to deduct tax by the person who is liable to make money - AT
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Service Tax:
Waiver of pre deposit - CENVAT Credit - consulting engineer service - Credit taken on strength of debit notes - Appellants have a prima facie made out a good case for complete waiver of pre-deposit - AT
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Service Tax:
Levy of tax on commission retained by other person - Reverse charge mechanism -both the service provider and service recipient are situated in India and therefore there is no import of service involved. - AT
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Service Tax:
CENVAT Credit - Availment of credit on tippers and dumpers - Central Excise duty paid on dumpers and tippers is not eligible to be availed as CENVAT Credit before amendment - AT
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Central Excise:
Demand of interest - provisional assessment was ordered at the request of the appellants and it was made clear that appellants would be required to pay the interest from the due date to the date of payment - AT
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Central Excise:
It is proper to allow Cenvat credit to M/s. SISCOL from October, 2005 on capital goods used in setting up Power Plant for generation of electricity, which was captively consumed within the factory of M/s. SISCOL for manufacturing of their final product - AT
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2014 (11) TMI 773
Assessment of gains on sale of agricultural land - Whether the CIT(A) was justified in confirming the assessment of gain arising on sale of agricultural land as “business Profit” by rejecting the claim of the assessees that the same is not liable for taxation – Held that:- CIT(A) has proceeded on a new line of thought and concluded that there was no purchase or sale of land and further held that it was a simple case of giving advance in the course of business activity - the business activity of the assessees is not giving of advances - Even if it is considered to be so, for a moment, the advance should be returned back by the same person who had received the advance - If the assessee had not acquired interest in the land, there was not necessity for the Mumbai SEZ Ltd to enter into MOU with the assessee. The tax authorities have proceeded to assess the income as business income of the assessee on wrong understanding of facts - they were influenced by the fact that the assessees have sold the lands within a period of one year from the date of purchase - the tax authorities have not brought any material to show that these assessees had intention to hold the agricultural lands as their trading asset, which would have warranted the gain arising on their sale as business income - They have also not brought any material to contradict the submissions made by the assessees - these assessees were constrained to sell the lands to Mumbai SEZ Ltd in view of the notification issued by the State Government within one year from the date of purchase - these assessees were constrained to sell the lands and there is nothing on record to show that they intended to sell the lands within short period from the date of their purchase - the AO himself have accepted the fact that the lands were agricultural lands and they will not fall in the category of “Capital asset” as defined u/s 2(14) of the Act - the tax authorities are not justified in treating the gains arising on transfer of land as business profits – the order of the CIT(A) is set aside and AO is directed not to assess the gains arising on sale of lands as business profits – Decided in favour of assessee.
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2014 (11) TMI 772
ESOP expenses disallowed – Held that:- The CIT(A) rightly observed that the ESOP expenses represented the option discount, that is, the excess of the market price of the share on the date of grant of the option under ESOP 2006 over the exercise price of the option – in assessee’s own case for the earlier AY CIT(A) allowed the claim of assessee for ESOP expenses - the decision of the CIT(A) regarding allowing ESOP expenses claimed by the assessee is upheld – Decided against revenue. Preponement of deferred sales tax loan chargeable u/s 41(1) or not – capital receipt or not – Held that:- The AO noticed that the surplus representing remission of principal amount of sales tax loan was not offered for taxation and when queried assessee submitted that the sum of ₹ 34,79,580/- being remission of principal amount of loan is a capital receipt and is therefore not chargeable to tax under the Income-tax Act, 1961 - the company availed of the benefit offered SICOM scheme and decided to pay the discounted value of deferred liability which resulted in capital receipt - The AO held that the discounted surplus of sales tax loan represents sales tax subsidy and was taxable as revenue receipt chargeable to tax u/s 41(1) because assessee's liability to pay had been extinguished - CIT(A) rightly followed the order of the Tribunal and allowed the ground of assessee in regard to treating the deferred sales tax liability as capital receipt – thus, the AO is directed to treat the deferred sales tax liability as capital receipt – Decided against revenue.
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2014 (11) TMI 771
Disallowance u/s 14A r.w Rule 8D on interest expenses - Held that:- Neither the AO nor CIT(A) has taken any step to verify the claim of the assessee that its own fund was sufficient for making the investment - once the assessee has claimed that his own fund is available for investment then it is incumbent upon the AO to examine and verify the claim of the assessee and then give the finding on the availability as well as use of interest free fund - a very relevant aspect has not been examined regarding investment in the subsidiary and group concern - So far as the investment in the subsidiary is concerned, it is not with the motive and purpose of earning dividend income but for holding controlling stake in the subsidiary - if the investments in subsidiary is for control and for a long period then for the purpose of disallowance as per formula provided under Rule 8D, the amount of investment should be executed from the average investment. None of the aspects were examined by the authorities - the assessee’s main business activity is only investment and earning the interest income - Therefore, it is not the case of the surplus fund parked by the assessee in the bank account for earning the interest or otherwise advanced for earning the interest but the interest earned by the assessee is part of its business activity - for the purpose of disallowance of interest u/s 14A, the interest income being the main business activity of the assessee cannot be set off against the business expenditure to the extent of borrowed fund used for investment in shares – for the purpose of working out the quantum of disallowance as per Rule 8D, the investment made in subsidiaries for the purpose of holding the stake should be executed from the average investment – the AO is directed to re-compute the disallowance made u/s 14A on account of administrative expenses - thus, the matter is remitted back to the AO for fresh consideration – Decided in favour of assessee. Expenses on securing the power supply and towards protection from encroachment of land held as stock in trade disallowed – Capital expenses or not – Held that:- Though the assessee has claimed that the land was held as stock-in-trade, this was not shown in the P&L account but directly taken into balance sheet - it cannot be denied that, barring ₹ 76,050/- incurred on tiling of the land, the balance expenditure would go to enhancing the value of the stock in trade - expenditure of ₹ 2,60,588/- should be added to the closing stock and simultaneously allowed as expenditure u/s 37(1). In the result, the appellant gets a relief of ₹ 76,050 - since the land has not been taken as stock in trade in the P&L account, the expenditure alone cannot be booked to the P&L account – the order of the CIT(A) is upheld – Decided partly in favour of assessee.
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2014 (11) TMI 770
Reduction of 90% of interest under Explanation (baa) to Section 80HHC - Netting off of interest expenses have nexus between interest income or not – Held that:- The word is receipt and not income accordingly while computing deduction u/s 80HHC 90% of gross receipt is to be reduced and not net of interest - stand of assessee has been that interest was earned on over due collection of sales bills, margin money deposits with the Bank and turnover tax refund from State Government etc. and these have direct business connection and were necessitated by primary business needs and do not represent any investment of surplus funds – the AO is directed to reduce 90% of the interest by netting of interest expenses having nexus with interest income – the order of the CIT(A) for reducing 90% of the interest by netting of interest expenses having nexus with interest income as held in ACG Associated Capsules (P) Ltd. v. CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA] - Decided against revenue. Deduction u/s 80HHC – Computation of export of trading goods - Held that:- CIT(A) rightly observed that apart from expenses of ₹ 1,10,79,522/-, auditor’s expenses of ₹ 17,27,437/- need to be allocated proportionately which makes total income of ₹ 1,28,06,959/- for allocation - thus, the AO was rightly directed to rework the indirect expenses for export of trading goods – Decided against revenue.
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2014 (11) TMI 769
Expenses incurred on contract research u/s 35(1)(iv) – revenue was of the view that such expenditure would facilitate the business of a third party and not that of the assessee – Held that:- Assessee is involved in R & D activities and has employed its activities of research for commercial purposes also - Assessee’s unit is recognized R&D unit and there is evidence that assessee is also indulging its own research - It has also exploited commercially and also has patents to its own – in CIT vs. Yamuna Digital Equipments P. Ltd., [1998 (8) TMI 56 - ANDHRA PRADESH High Court] it has clearly held that expenditure should be wholly and exclusively used for research and development - In the absence of word ‘wholly and exclusively used for research and development’ the contention of the Revenue cannot be accepted - the expenditure which is of a capital nature when used for scientific research relating to the business carried on by assessee, the assessee is entitled to the deduction of the claim - assessee has used the assets for scientific research and expenditure incurred is for the business carried on by assessee – Decided against revenue. Admission of additional evidence – Held that:- Since the CIT(A) undertook examination of documents placed and has also coterminus powers with that of AO - both AO as well as Addl. CIT misdirected themselves in rejecting the contentions of assessee - both A.O. and Addl. CIT acknowledges that assessee’s capital R & D expenditure was incurred with reference to in-house products as well as contract research – decided against revenue. Judgment delivered in M/s. Enem Nostrum Remedies P. Ltd., vs. ACIT [2008 (8) TMI 384 - ITAT BOMBAY-E] considered or not – Held that:- The facts in the case is entirely different from the facts of assessee, wherein the present assessee is not only involved in research for in-house products which are also commercially exploited but also for contract research of the excess capacity available in R & D, which is also yielding good returns to assessee - the case law relied on by Revenue does not apply to the facts of the case – Decided against revenue.
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2014 (11) TMI 768
Belated payment of contributions towards EPF and ESI deleted – Held that:- Following the decision in CIT V/s. Ghatge Patil Transport Ltd. [2014 (10) TMI 402 - BOMBAY HIGH COURT] wherein after taking into consideration the provisions of S.2(24)(x) read with S.36(1)(va) and S.43B, held that even employees contribution to Provident Fund etc. is allowable as deduction, if it is deposited before the due date of filing of the return of income for the relevant year - the order of the CIT(A) is upheld allowing the deduction claimed by the assessee on account of payment of employees’ contribution towards Provident Fund and ESI made by the assessee, after the due dates prescribed in the respective statutes, but before the due date of filing of the return of income for the year – Decided against revenue. Disallowance u/s 40(a)(ia) – Audit fee paid – Laibility to deduct tax u/s 194J - Held that:- The assessee has contended that the assessee company has not been treated as the assessee in default u/s 201(1) of the Act for its failure to deduct tax at source from the payment made on account of audit fee and therefore, no disallowance can be made on account of audit fee, as per the second proviso to S.40(a)(ia) – thus, the matter is remitted back to the AO for verification as to whether the assessee company is treated as an assessee in default under S.201(1) of the Act for its failure to deduct tax at source from the payment made on account of audit fee – Decided in favour of assessee. Depreciation on Xerox copiers, LCD TV, colour copier and LCD screens – Held that:- As held in Asstt. CIT V/s. Amadeus India (P) Ltd. [2001 (1) TMI 918 - ITAT DELHI] - the term ‘computer’ should be interpreted liberally, broadly and in consonance with the intent of the legislation and working of the entire system as a whole - if any assets are found to be integral parts of the computer or computer system, the same are entitled for depreciation at higher rate, as applicable to the ’computer’ – It depends on the facts of each case as to whether a particular item or asset forms integral part of the computer or computer system and this issue is required to be decided after taking into consideration the exact usage or application for such items or assets keeping in view the nature of the business of the assessee as well as the functions to which the said assets/items are put to use - The submissions explaining the usage or application of the concerned items/assets are being made by the assessee for the first time before the Tribunal, and no such explanation was offered either before the AO or before the CIT(A) – thus, the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of assessee.
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2014 (11) TMI 767
Deletion of unexplained expenses – Held that:- The amount withdrawn by the assessee from his bank account cannot be treated as his income merely because the same was not recorded in the books of account – it cannot be treated as unexplained expenditure of the assessee since the source of the amount withdrawn was assessee’s own bank account, as admitted by the AO himself, and there was no dispute about the source of the deposits found to be made in that bank account - revenue has not been able to explain as to how the amount withdrawn by the assessee from his bank account regularly maintained can be treated as income of the assessee and that too as unexplained expenditure u/s 69C of the Act – thus, the order of the CIT(A) is upheld – Decided against revenue. Unexplained credit – Held that:- The amount received form Shri Ajay Agarwal was claimed to be repaid by the assessee as per his instruction to Shri S.Sariah and this claim was duly supported by the confirmation letter issued by Shri Ajay Agarwal - The AO did not accept the explanation offered by the assessee on this issue mainly on the ground that there was no evidence to suggest that Shri S.Saiarah has subsequently paid the amount of ₹ 9,50,000 to Shri Ajay Agarwal - the reason given by the Assessing Officer as well as other reasons given by him to reject the claim of the assessee were totally irrelevant, as the explanation of the assessee of having repaid the amount to Shri S. Sariah on behalf of Shri Ajay Agarwal was duly supported by the confirmation letter issued by Shri Ajay Agarwal himself, wherein he accepted that the payment was made by the assessee to Shri S.Saraiah as per his instructions - it was not a case of any unexplained credit, as alleged by the AO, and the CIT(A) was fully justified in deleting the addition made by the AO – Decided against revenue. Addition u/s 40A(3) – Held that:- CIT(A) was rightly of the view that the disallowance made by the AO u/s 40A(3) observing that there was no evidence produced by the assessee to establish that the amount against purchase of bardan was paid by demand draft - there is no evidence placed even to support and substantiate the same - the payment made for the purchase in cash is covered by the exceptions given in Rule 6DD(e)(i) – He has not been able to establish or show as to how the bardan can be regarded as a forest produce – the order of the CIT(A) is upheld – Decided in favour of assessee.
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2014 (11) TMI 766
Estimation of rate of NP @ 4% of gross contractual receipt or @ 8% - Held that:- The assessee company is a sub-contractor to execute the civil construction works awarded by the principals, which is a small part of the projects executed by the principals - On the contract receipts, the principals had also deducted the tax u/s 194C of the Act - Besides, the assessee company is also engaged in the business of trading of sarees - the assessee filed duly audited profit and loss account and balance sheet along with its annexure - It also produced the audited books of account, bills/vouchers and bank statements before the AO as admitted by him ín the assessment order - it further produced all the details and explanations called for by the AO from time to time - It also produced labour registers before the AO - assessee contended that the estimation of net profit @ 8% by relying on provisions of section 44AD of the Act is totally incorrect and without any basis for the reason that the assessee company is subcontractor and its profìt margin is low in comparìson to the contractors. The AO has compared the profit of the assessee with the companies whose turnover and business paraphernalia is huge in comparison to the assessee company - the assessee company had executed the part of work of civil construction for these companies and, therefore, it is not correct to compare the profit of those companies with the profit margin of the assessee - the profit margin of those companies is also less than the margin which has been estimated by the AO in the case of assessee - assessee argued that the AO has failed to appreciate that the profit margins of contractors and sub-contractors cannot be same - the net profit is ranging from 5.19% to 6.15%, definitely there will be lower profit in the case of sub contractor i.e. the assessee and hence, the CIT(A) has rightly estimated the net profit rate at 4% - thus, the order of the CIT(A) is upheld – Decided against revenue.
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2014 (11) TMI 765
Validity of reopening of assessment - Change of opinion - Whether the CIT(A) was justified in confirming the disallowance of expenditure upto 50% out of the total disallowance made by the AO on account of administrative expenses – Held that:- Reopening was done on the ground that from the assessment records it transpired that computation of loss from business by allowing deduction towards administrative expenditure was irregular as there was no business activity during the year - assessee contended that the computation of loss from business by allowing deduction of administrative expenditure was examined by the AO - AO has held that the assessee has adjusted the loss with Long Term Capital Gain from sale of land and held that it was not allowable - It was clearly evident that AO was conscious of the administrative expenses claimed by the assessee - It also cannot be said that assessee’s claim of administrative expenses was to be disallowed at the very first glance as the assessee has also shown income from operation – relying upon CIT vs Ganga Properties Ltd. [1989 (5) TMI 10 - CALCUTTA High Court] – assessee rightly contended that there was change of opinion and in this view of the matter reopening is not sustainable – reference is also made to CIT vs Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - there was change of opinion and the reopening is not valid – Decided in favour of assessee.
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2014 (11) TMI 764
Rejection of explanation offered by assessee – Credits confirmed as appearing in bank account – Held that:- Assessee has genuinely explained the whole arrangement - assessee was also present in the court room and admitted that he has taken some benefit from his friend when he was unemployed and with that loyalty, he accommodated his friend in providing finance to his business of Airtel Relationship centre - It is general practice in the market that some of the shops are accommodating credit card holders by providing cash on discount of 3% to 4% and as seen from the transactions of M/s. Gandhi Jewellers and Srikrishna Sarees and periodic purchases from them and repayments to the credit cards do indicate that funds are obtained in this manner for Mr. Srinivas business purposes and these are only temporary finance arrangement undertaken to help assessee’s friend - It is a fact that Mr. Srinivas has defaulted and present whereabouts are not known to assessee - the other evidences furnished by assessee should have been considered by Revenue - Since the overwhelming evidence furnished by assessee does indicate that the transactions are undertaken to help his friend in getting temporary finance for his business and since Mr. Srinivas repaid the amounts to a large extent out of total transactions, deposits in the bank account cannot be considered as unexplained - As seen from the credit card statements as well as bank statements, there are payments to Airtel also which indicates that Mr. Srinivas had Airtel business transactions – the authorities were not justified in treating the cash deposits as income of assessee as unexplained - Since assessee has given bonafide explanation which is not disproved, the same should be accepted – there is no reason to assess the entire cash deposits made periodically into the bank account for repayment of credit card amounts cannot be considered as income of the assessee – the order of the CIT(A) is set aside – Decided in favour of assessee.
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2014 (11) TMI 763
Reopening of assessment u/s 147 - Change of opinion - Held that:- Explanation 2(c)(iii) to section 147 of the Act clearly says that income chargeable to tax has escaped assessment where an assessment has been made but excess relief was granted under the Act - In case the reopening is within four years Explanation 1 & 2 of section 147 would come into operation - Therefore, wherever excess relief was granted the assessing officer can rectify the same by reopening the assessment u/s 147 of the Act - Since excess relief was granted without considering the provisions of section 40(a)(ia) of the Act, the AO has rightly reopened the assessment. Amount paid for air and freight to three companies – TDS not deducted – Disallowance u/s 40(a)(ia) – Held that:- The agreement entered into between the assessee and Three Star Corporation clearly says that Three Star Corporation has to bear the actual freight from Cochin Airport - it is not the liability of the assessee to meet the expenditure of freight charges - the freight charges are the liability of Three Star Corporation - As per the agreement, Three Star Corporation has to pay the freight charges along with weekly bills to the assessee in dollars - Section 194C provides for deduction of tax by any person responsible for making payment for carrying out any work in pursuance of a contract. When Three Star Corporation is liable to pay the freight charges as per the arrangement / agreement and the assessee was required to pay the amount initially to the respective companies whether the assessee is liable to deduct tax or not – Held that:- The purchaser has to pay the freight charges in addition to the price agreed upon – the contention of the assessee cannot be accepted that the assessee is not expected to deduct tax - Liability to pay the money is different from responsibility to pay the money - Section 194C requires the person responsible for paying the money and it does not requires to deduct tax by the person who is liable to make money - Since the assessee is responsible for making the payment, this Tribunal is of the considered opinion that the assessee is expected to deduct tax u/s 194C of the Act - There is no further disallowance required provided the assessee credited the reimbursement of freight charges under the head income from other sources as claimed by the ld.representative for the assessee - it needs to be verified whether the assessee credited the amount as "Income from other sources – thus, the matter is remitted back to the AO for verification – Decided in favour of assessee.
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2014 (11) TMI 762
Rejection of deduction u/s 80IC(2) – Failure to obtain NOC from the pollution Control Board - Whether the AO can disallow the claim for deduction u/s 80IC for the asstt. Year 2009-10 and 2010-11 when the claim has not been disallowed or withdrawn in the first two years – Held that:- The assesese had claimed deduction u/s 80IC for the first time during the year AY 2007-08 - The return was processed u/s 143(1) and the deduction has not been disallowed or withdrawn till date – the assesee has been claiming deduction u/s 80IC of the Act for the earlier years and that the AO has allowed the same in the first year u/s 143(3) and as it is well settled that if the conditions for allowability of a deduction is examined by the AO in the initial year of claim then, in the subsequent year, this aspect cannot be reviewed by the AO and a contrary view taken - The particulars of the assessments where the claim has been made and allowed in the earlier years - The assessments of the earlier years or the later years are not disturbed and the assessee was allowed the claims u/s 80IC. In Commissioner of Income Tax and others Versus M/s Delhi Press Patra Prakashan Ltd. And others [2013 (6) TMI 70 - DELHI HIGH COURT] it has been held that the requisite conditions to be fulfilled for allowability of deduction u/s 80 I ought to be satisfied, not only in the first or the initial year, but in all the assessment years in which the deduction u/s 80I is claimed by the assessee - The AO has examined the condition of allowability of the claim u/s 80IC in the initial assessment year of the claims i.e. A.Y. 2005-06 itself in an order passed u/s 143(3) of the Act - This was followed in the subsequent A.Y. These assessments are not disturbed till date - There is no change in the facts and circumstances of the case - Only a fresh view, contrary to the earlier view is taken during the AY on the same set of facts and exemption is denied – Decided against revenue.
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2014 (11) TMI 761
Additions u/s 69A - Principles of natural justice – Opportunity of being heard provided to assessee or not - Service of notice - Held that:- The Tax Authorities have noticed cash deposits in the HDFC Bank Account, Crawford Market Branch, Mumbai and when asked about the nature and source of acquisition of the cash it was stated that he was maintaining two separate accounts, one in ICICI Bank and the other in HDFC Bank, and he had taken unsecured loans which were utilised exclusively for development of new business - The amount available in HDFC Bank was withdrawn from time to time and advanced to other parties and upon repayment the same was redeposited - one would withdraw from bank only when the cash already lying with him is not sufficient to meet his needs on that day or conversely a person would not deposit only a small amount of the cash-in-hand available with him in the bank a/c leaving large amounts as cash in hand even though the same was not required to be used - the claim of the assessee that he had given temporary loans to his friends and relatives and these loans, on being repaid, were redeposited in the bank account is not tenable and is merely a self serving statement and the confirmations filed by the assessee are merely self serving documents when seen in the context of the facts and circumstances of the case – assessee was not in physical possession of the cash with him which has been withdrawn by him on earlier dates - the bank account was not disclosed in the return of income. Assessee has made only vague submissions without specifically bringing any material to rebut the discrepancies - the source of cash deposited in the bank account maintained with HDFC Bank on various dates is held to be unexplained - no material was placed to contradict the findings of the CIT(A) – thus, CIT(A) was justified in holding that the assessee did not prove the cash deposits in the bank account and correctly brought to tax the amount deposited u/s 69A – the order of the CIT(A) is upheld – Decided against assessee.
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2014 (11) TMI 760
Addition u/s 68 - Multiple accounts in various branches – Unaccounted black money found by DIT(Inv.) –Whether undisclosed income actually represented disputed settlement amount recoverable from M/s Miraculas Construction P. Ltd. against the leasing charges due – Genuineness of transaction - Held that:- The information in the case of assessee was received from DIT(Inv.) that the assessee company had received ₹ 30,04,500/- from Shattarchi Fin. & Leasing P. Ltd. vide cheque dated 04/05/2003 the case of the assessee was reopened u/s 148 of the IT Act after following due procedure of law and statutory notices were issued to the assesee to give detailed facts regarding the above credit entry - the assessee was unable to prove the identity, genuineness and creditworthiness of the party from whom the amount had been received and could not correlate it to any business activities - assessee has failed to prove that the draft/cheque of ₹ 30 lacs dated 24/05/2003 received by the assessee company from M/s Shattarchi Fin. & Leasing P. Ltd. is recovery of that from M/s Miraculous Const. P. Ltd. The assessee company has failed to prove the source of ₹ 30 lacs credited in its books of account - the assessee has failed to substantiate its claim by filing any documentary evidence - assessee company has also failed to produce the Director of M/s Shattarchi Fin. & Leasing Ltd. and M/s Miraculous Construction P. Ltd. Even assessee has not filed any confirmation or bank account or balance sheet of M/s Miraculous Const. P. Ltd. for substantiating its claim before the Revenue Authority – thus, the order of the CIT(A) is upheld – Decided against assessee.
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2014 (11) TMI 759
Confirmation of disallowance u/s 14A – Decision relied overruled by subsequent decision - Held that:- The AO observed that the assessee has earned dividend income - The assessee has made investment of ₹ 200 lakhs on 31.03.2007 - The assessee is engaged in trading of shares & securities and shares & securities of ₹ 17,79,181/- were held by the assessee as inventory on 31.03.2007 - The assessee has taken loan of ₹ 2,92,25,326/- on which interest of ₹ 12,20,327/- was paid - the assessee must have incurred some administrative expenses to earn tax free dividend income - some disallowance u/s. 14A of the Income Tax Act is warranted - the assessee rightly argued that the decision in Income-tax Officer, Ward 6(2) (2), Mumbai Versus Daga Capital Management (P.) Ltd. [2008 (10) TMI 383 - ITAT MUMBAI] has been overruled in Godrej & Boyce Mfg. Co. Ltd. vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - Since the decision was not available before the AO, therefore the issue should be restored back to the file of the AO for adjudication of the issue afresh in the light of the decision of the Hon’ble Bombay High Court – thus, the order of the CIT(A) is remitted back to the AO for fresh adjudication for adjudicating the issue of disallowance of expenditure u/s. 14A – Decided in favour of assessee.
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Customs
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2014 (11) TMI 787
Waiver of pre deposit - Valuation of HCG 3 mm strip and LH 3 mm strip - identical goods had been imported at an enhanced value, during the comparable period at other Custom station - Held that:- No evidence has been produced that the submission of the Managing Director that one of the import was in bulk and the other was in retail packs has not been considered, has not been verified and has not been investigated. At the same time, there is not even an observation why this claim was not accepted. Both of them have held that the goods are identical. Similarly the supplier s letter also has been ignored. It is also not on record that the samples were drawn in both the places and the samples are similar. It is also not on record that the goods have been examined by any of the officers or recovered to examine this aspect. Prima facie, we find that appellant has a strong case on merits and therefore the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal - Stay granted.
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2014 (11) TMI 786
Waiver of predeposit - penalty u/s 114 - smuggling of red sanders - Held that:- Prima facie, we find that it is a case of appreciation of evidences placed by both sides. In the circumstances, we are of the view that directing 10% of the penalty imposed on each of the Applicants would meet the ends of justice. Consequently, we direct each of the Applicants to make a predeposit of 10% of the penalty imposed on each of them, within a period of eight weeks from today and report compliance on 01.12.2014. Subject to compliance, balance dues adjudged would stand waived and its recovery stayed during the pendency of the Appeals - Partial stay granted.
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2014 (11) TMI 785
Valuation of goods - Misdclaration of goods - Redemption fine and penalty - Held that:- the word ‘for amplifier is added with a malafide intention so as to justify lower assessable value of the goods. Inasmuch as there is admitted mis-declaration in the Bill of Entry, the value reflected therein, as transaction value, has to be rejected. inquiries made by the Revenue from CEAMA revealed that the computed value of the product should be US $ 11 or US $ 12. The Revenue has further taken the separate cost of various components of the product and has justifiably arrived at a lower value of US $ 8.67. The said value stand accepted by Shri Amarjit Singh Kalra, in his statement recorded during investigation. The firm vide his letter dated 30.11.08 has also accepted the said value and has agreed to collect the goods on payment of duty on the said value. In view of the above, we find no justifiable reason to interfere in the impugned order of the Commissioner as regards the value of the goods - Revenue has not conducted any inquiry in respect of margin of profit for the purpose of fixing the redemption fine. The said data is also not available before us but keeping in view the quantum of duty, which is be around ₹ 9,00,000, we reduce the redemption fine to ₹ 3,00,000 - No reason to interfere with penalty - Decided partly in favour of assessee.
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2014 (11) TMI 784
Remission of duty - Theft of goods - dispute traveled up to the Tribunal, who rejected the assessees request to allow remission of duty - matter was remanded for re-quantification of the said duty and to finalize interest rate - Commissioner restricted the duty foregone on components holding that while imposing duty Revenue travelled beyond SCN - Held that:- it is not a case where the demand of duty foregone by the importer in terms of notification No. 137/2000 Cus at the time of import was the subject matter of dispute. Admittedly, the duty free import components already stand utilized by the appellant in the manufacture of their final product. The said final product has not been exported and was stolen. The Tribunal has denied remission of duty in respect of said stolen goods. As such, the assessee was required to pay duty on their final manufactured goods which by the process of stealing has gone into the DTA stream. As such, the duty has to be confirmed on the value of said final product. Revenue has confirmed the duty by debiting the FOB value on the said goods cleared under DTA. There is no value available inasmuch as the goods were not being cleared by the appellant in DTA routine /normal course. The assessee would also have no alternate value of said goods. As such, we agree with the Revenue that duty of ₹ 28,73,326/- which was sought remission for, are required to be confirmed. However, in case of interest rate of 15%, applied by the Commissioner is upheld inasmuch as there is no challenge of the same in the appeal of Revenue. We accordingly, allow the Revenue s appeal to that extent. However, penalty is not imposable - Decided partly in favour of assessee.
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Service Tax
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2014 (11) TMI 795
Waiver of pre deposit - CENVAT Credit - consulting engineer service - Credit taken on strength of debit notes - Held that:- debit notes are serially numbered and clearly show the amount of service tax paid thereunder along with other details like description, value of service, service tax registration number, the recipient and the signature of the authorised signatory. Further, it is seen that the Board vide circular No. 120/01/2010-ST dated 19/1/2010 in para 3.4 has observed that in case of incomplete invoice the department shall take a liberal view in view of the judicial pronouncements. there is no allegation that the service in respect of which impugned credit was taken was not received by the appellants. CESTAT in the case of CCE, Salem vs. Pallipalayam Spinners (P) Ltd. (2010 (9) TMI 951 - CESTAT CHENNAI) has held that credit is admissible on documents such as debit notes containing all the requisite particulars for the purpose of extending the credit. Similar view was held by CESTAT in the case of Pharmalab Process Equipments Pvt. Ltd. vs. CCE, Ahmedabad [2009 (4) TMI 142 - CESTAT AHMEDABAD] and in the case of Gujarat Tea Processors and Packers Ltd. vs. CCE, Ahmedabad [2011 (9) TMI 248 - CESTAT, AHMEDABAD]. Appellants have a prima facie made out a good case for complete waiver of pre-deposit. We accordingly waive the pre-deposit in full and stay recovery of the impugned service tax demand, interest and penalties during the penalty of the appeal - Stay granted.
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2014 (11) TMI 794
Levy of tax on commission retained by other person - Reverse charge mechanism - Assessee handed over bills for collection of the export proceeds to Standard Chartered Bank - Standard Chartered Bank undertook collection of the export proceeds through their office in UK who retained a part of the amount towards collection charges - Held that:- contract for collection is between the appellant and the Bombay branch of the Standard Chartered Bank. Thus both the service provider and service recipient are situated in India and therefore there is no import of service involved. How the Standard Chartered Bank in Mumbai makes arrangement for collection is not the business of the appellant, nor are they concerned with that. We, therefore, find that the appellant has made out a prima facie case for wavier of pre-deposit. We therefore grant unconditional waiver of pre-deposit of the dues adjudged vide the impugned order and stay of recovery thereof during the pendency of the appeal - Stay granted.
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2014 (11) TMI 793
CENVAT Credit - Availment of credit on tippers and dumpers - Trippers and dumpers not considered as inputs or capital goods - Exemption under Notification No.25/2010-CE(NT) - Retrospective effect of amendment done in Notification - Held that:- The said notification is very clear as inserting sub-clause ‘C’ in Rule 2 of CENVAT Credit Rules, 2004 and nowhere it mentions that the said notification is of retrospective nature. We find that on an identical issue in the case of Ganta Ramanaiah Naidu (2009 (9) TMI 261 - CESTAT, BANGALORE ), co-ordinate Bench had taken a view that Central Excise duty paid on dumpers and tippers is not eligible to be availed as CENVAT Credit before amendment. appellant has not made out a strong prima facie case for complete waiver of the pre-deposit of the amounts involved only on limitation ground - Partial stay granted.
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2014 (11) TMI 792
Waiver of pre deposit - Commercial and Industrial Complex Service - applicants had not placed any evidence in support of their stand that construction of residential dwelling single units would not come under the purview of construction of residential complex service - Held that:- Revenue submits that without prejudice, after granting abatement, the demand of tax would be approximately ₹ 36,00,000/-. The Ld. Advocate submits that they have already paid an amount of ₹ 14,8,595/- which has been appropriated in the adjudication order. The applicant admitted the dues of about ₹ 10,00,000 - applicant directed to make pre-deposit a further amount of ₹ 15,00,000 - Partial stay granted.
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2014 (11) TMI 791
Erection, commissioning and installation service - works contract service - whether composite works contracts are susceptible to levy and demand of service tax prior to 01.06.2007 under existing taxable services such as commercial or industrial construction service or erection, commissioning or installation service - Held that:- There are conflicting decision of Tribunal on the issue in Jyoti Limited vs. Commissioner - [2007 (12) TMI 20 - CESTAT, AHMEDABAD], Commissioner vs. Indian Oiltanking Limited - [2009 (1) TMI 443 - CESTAT, MUMBAI], on the one hand and Commissioner vs. BSBK Pvt. Limited - [2010 (5) TMI 46 - CESTAT, NEW DELHI - LB], on the other therefore, matter is referred to larger bench.
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2014 (11) TMI 790
Waiver of pre deposit - Authorized Service Station service - Held that:- Appellant’s service station is recognized because they used brand name of ‘Maruti’ and owners of vehicles manufactured by Maruti come to the appellant’s premises for obtaining service because they used brand name of ‘Maruti’. In the bills, invoices etc., they mentioned the fact that they are ‘Maruti Authorized Service Station’ There is no doubt that they have extra clientele and additional business because they used the brand name of ‘Maruti’. No doubt that the issue is debatable and requires consideration of precedent decisions, statute etc. which can be done at the time of final hearing. At this stage, prima facie, we consider that the appellant is not able to make out a case in their favour. Therefore, the appellant is required to deposit the entire amount of service tax demanded within eight weeks - Partial stay granted.
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2014 (11) TMI 789
Waiver of pre deposit - Survey and Map Making Service - Held that:- if an assessee makes a claim that the same service and the same transaction has already suffered the tax, levy of tax for the second time on the same transaction without even verifying the correctness of the claim, in our opinion, may not be sustainable. For the normal period of limitation, in our opinion, the demand would have been definitely sustainable since for demand in the normal period, even if there is a mistake, the amount becomes payable. However in the case of extended period, there has to be suppression of fact or mis-declaration. In this case if an assessee believed in a bona fide manner that he is not liable to pay service tax and there are sufficient grounds for such plea and such plea is not a blind belief, he cannot be found fault with if the assessee considers that the tax is non-taxable. This would mean that the assessee has assessed his tax as ‘nil’. In this case since the main contractor paid the tax and show-cause notice has been issued beyond the normal period of limitation, we consider that in the absence of any evidence to show that the appellant had an intention to evade tax or suppress the facts, tax could not have been demanded again. Suppression of fact is something which is required to be declared in accordance with statute and not declared. In a self assessment regime, if an assessee correctly assessed the goods according to his own assessment and if there is a valid ground for him to take such a view, extended period may not be invokable. Under these circumstances we consider that appellant has made out a prima facie case for waiver of pre-deposit - Stay granted.
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2014 (11) TMI 788
Waiver of pre deposit - Manpower Recruitment and Supply Agency Service - Held that:- issue is covered by the decision of the Tribunal in the case of Future Focus Infotech Vs. CCE - [2010 (3) TMI 190 - CESTAT, CHENNAI]. On the other hand, the learned counsel submits that the issue is covered by the decision of the Tribunal in the case of Cognizant Technology Solutions Ltd. Vs. CCE - [2010 (3) TMI 328 - CESTAT, CHENNAI]. We find that the issue will be decided after examining the documents. Hence the applicant failed to make out a strong prima facie for waiver of entire amount of dues - Partial stay granted.
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Central Excise
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2014 (11) TMI 783
Demand of differential duty - Demand of interest - Whether they are liable to pay interest on the differential duty that would commence from the month succeeding the date on which the duty was due and payable in relation to the goods cleared till the date of payment of differential duty - Held that:- Under new Central Excise Rules, 2002 Rule 6 provides for self-assessment by assessee. Provisional assessment is also resorted to at the request of assessee when it is not possible for him to self-assess the duty liability at the time of clearance. It is also seen in these cases the provisional assessment was ordered at the request of the appellants and it was made clear that appellants would be required to pay the interest from the due date to the date of payment. Rule 8 of the Central Excise Rules details the manner of payment of duty. - Appellants are required to pay the interest. The fact that they have paid the duty before formal finalization order issued by the Deputy/Assistant Commissioner will not make any difference to the said position - Following decision of Commissioner of Central Excise v. International Auto Ltd. reported in [2010 (1) TMI 151 - SUPREME COURT OF INDIA], Commissioner of Central Excise, Mysore-I v. J.K. Industries Ltd. reported in [2011 (3) TMI 373 - KARNATAKA HIGH COURT], Cadbury India Ltd. v. Commissioner of Cus. & C. Ex., Pune-I reported in [2008 (11) TMI 62 - CESTAT MUMBAI] and Bharat Heavy Electricals Ltd. v. Commissioner of C. Ex., Bhopal reported in [2011 (6) TMI 396 - CESTAT, DELHI] - Decided against assessee.
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2014 (11) TMI 782
Cenvat Credit - Capital goods - capital goods were used to set up power plant for generation of electricity - allegation that concerned power plant is not an integral part of the manufacturing unit - allegation that there is no relation between M/s. SISCOL and M/s. JSWPL and it would lead to neighbour taking the credit on capital goods. - Effective date of allowance of CENVAT Credit - Difference of opinion - Majority order - Held that:- the Lessor (SISCOL) requested to the Lessee (JSWPL) to set up a power plant in the premises of the Lessor (SISCOL) to take care of the power generation of the Lessor to which Lessee has agreed. - M/s. SISCOL had provided their land to M/s. JSWPL with a condition to set up a power plant and the electricity generated would be consumed in manufacturing activities of M/s. SISCOL. It may be seen from the documents and records that in 2004, M/s. SISCOL was declared as sick unit under SICA, 1985. CDR Cell report would show that SJG came toward for financing the sick unit M/s. SISCOL, as finance acts as an engine of growth. It appears from the Show Cause Notices that M/s. JSWPL, one of the companies of SJG, have expertise in constructing and operating Power Plants and M/s. JSW Steel Ltd. another company of SJG, is one of the purchasers of the final product of M/s. SISCOL. It is recorded in the CDR Cell report that there was proposal of merger of M/s. SISCOL with SJG, which is corroborated by Director’s report dated 26-4-2005 of JSWPL balance sheet. It is mentioned in “Unit III Debentures Trust Deed” dated 22-9-2005 of M/s. JSWPL that with a view to finance its 2 x 30 MW plant at SISCOL, the company has approached the Debenture holders. JSWPL declared to TNEB by letter dated 6-1-2005 that Captive Power Plant is installed inside the SISCOL premises to meet the present and future power requirements of SISCOL. Further, TNEB approved as SISCOL Captive Power Plant located in the company’s premises. Rule 4(3) of CCR, 2004 provides that the Cenvat credit in respect of the capital goods shall be allowed to a manufacturer, even if the capital goods are acquired by him on lease, hire-purchase or loan agreement, from a financing company. Rule 4(3) has a wide amplitude in so far as it would cover the cases of various types of financial arrangements for availing credit on the capital goods. It is contemplated that under this sub-rule (3) of Rule 4 would cover the cases where the ownership of the capital goods does not vest in the manufacturer until the loan is repaid. There must be an agreement for the purpose of acquiring the capital goods. The Tribunal in the case of Iljin Automotive India Ltd. v. CCE, Chennai - [2004 (2) TMI 561 - CESTAT, CHENNAI] observed that variations/unusual features in the agreement covering the lease arrangement were not relevant for determining the eligibility of credit. It is clear that title of the property is not relevant for availing Cenvat credit on capital goods. Even prior to 31-8-2006, it was a Captive Power Plant of M/s. SISCOL as approved by TNEB under the Electricity Act. SISCOL was a sick unit. They entered into lease agreement with M/s. JSWPL, a relationship had already been developed prior to October, 2005, as evident from CDR Cell report, JSWPL balance sheet, etc., for financial accommodation to get loan from UTI Bank Ltd. for setting up C.P.P. and one of the considerations is that electricity would be supplied to M/s. SISCOL, which is an integral part of manufacturing activities of M/s. SISCOL. - It is proper to allow Cenvat credit to M/s. SISCOL from October, 2005 on capital goods used in setting up Power Plant for generation of electricity, which was captively consumed within the factory of M/s. SISCOL for manufacturing of their final product - Decided in favour of assessee.
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2014 (11) TMI 781
Delay in payment of excise duty - Demand of interest u/s 11AB - Rate of interest - Held that:- Part of Rule 8(3) of the Central Excise Rules, 2002, which was prevailing at the relevant time as per Notification No. 12/2003, dated 1st March 2003, which includes expression, “at the rate of two per cent per month or rupees one thousand per day, whichever is higher” is held to be invalid and consequently, it is held that the interest chargeable on the delayed payment had to be only at the rate of two per cent per month, or for that matter twenty four per cent per annum, as notified by the Government at the relevant time in terms of Section 11AB of the Central Excise Act, and consequently, the impugned demand notices are also quashed and set aside. - Decided in favour of assessee.
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2014 (11) TMI 780
Condonation of delay - Copy of order lost in office - Delay caused in obtaining duplicate copy of the order - Held that:- Petitioner had shown sufficient cause for not being able to prefer appeal within the time permitted. It is a case where, if the petition is not entertained, great injustice would cause to the petitioner. - Delay condoned - Matter restored before before the adjudicating authority who may dispose of the same in accordance with law.
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2014 (11) TMI 779
Denial of CENVAT Credit - Shortage in stock - Suppression of facts - Invocation of extended period of limitation - Whether the loss on the inputs which was found out by the respondent during their annual stock taking and which was written off by them in their books of account should be considered as loss which is allowable under Rule 57D of the Central Excise Rules, 1944 or whether duty should be charged on such loss - Held that:- Credit of duty cannot be denied or varied where input has become waste in or in relation to manufacture of final product; that the loss in stocks was detected in the annual stock taking which was accounted for by writing off the losses; the percentage of shortage found is less than 1.5% on an average for all the years in question; that after the inputs were received in the factory, there was a loss during the process of manufacture of finished products; the process of manufacture of finished products starts from the stage of taking raw material from the storage base to the factory and onward processes; under Rule 57D, on such losses, credit cannot be denied; a similar view was taken by it in the assessee’s own case in Final Order No. A/373/2003/NB-C, dated 12-6-2003 [2003 (6) TMI 144 - CESTAT, NEW DELHI] where similar issue was considered by the Tribunal; that it is not the case of the department that inputs were cleared from the factory without payment of duty; Modvat credit in respect of losses to the extent of 10% is considered reasonable and is allowable; and therefore the Orders-in-Original are liable to be set aside - Decided against Revenue.
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2014 (11) TMI 778
Penalty u/s 11AC - Suppression of facts - Intention for evasion of duty - whether the Tribunal is justified in reducing the imposition of penalty - Held that:- There was wilful suppression of facts and fraud committed by the assessee with an intention to evade payment of duty as recorded by the Original Authority as well as the First Appellate Authority was confirmed by the Tribunal and the assessee has not preferred any appeal as regards this finding before this Court. The question therefore is once the ingredients required for applying Section 11AC of the Central Excise Act was made out, whether the Tribunal is justified in reducing the imposition of penalty which was imposed equivalent to that of differential duty. once Section 11AC of the Central Excise Act is applicable, there is no justification in quantifying the amount and the penalty imposed must be equivalent to the differential duty re-determined under Section 11A of the Central Excise Act, 1944. Referring to the decision in the case of Union of India v. Dharmendra Textile Processors reported in [2008 (9) TMI 52 - SUPREME COURT], the Supreme Court pointed out that “though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the authority concerned would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. - Decided in favour of revenue.
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2014 (11) TMI 777
DTA clearances - concessional rate of duty vide Notification dated 31-3-2003 - Whether the first respondent erred in law while giving prima facie finding that the goods under question are not similar by importing the provisions contained in and the clarifications issued in connection with Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 for “similar goods” into the provisions of Foreign Trade Development and Regulation Act, 1992 and the Foreign Trade Policy issued thereof - Held that:- The concession availed by the appellant is only for clearance of Turbine Wheel in the DTA, whereas the goods exported i.e. ‘Bearing Housing Assembly, were found not similar to the goods cleared in the DTA. This being a prima facie finding of the Tribunal for the purpose of passing an interim order, such a finding cannot be considered to be a ground for raising a substantial question of law. Similarly, as far as the invocation of the extended period and consequently, the finding that the Department had been kept in dark regarding the use of both indigenous and imported raw materials as well, the finding is sought to be challenged on the ground that it is factually incorrect. The substantial questions of law are raised with reference to appreciation of factual aspect and therefore, when the Tribunal, on factual consideration, had come to a conclusion that for the purpose of granting an interim order, the appellant should be directed to deposit 50% of the amount covered under the order passed by the Commissioner and in the absence of any prejudice or financial hardship pleaded, it must be agitated only before the CESTAT. Accordingly, we are not inclined to entertain this appeal, as no question of law, much less the one raised herein, arises for consideration. - Decided against assessee.
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2014 (11) TMI 776
Non discharge of the duty liability for the month of December 2007 to February 2008 - default as per Rule 8(3A) of the Central Excise Rules, 2002 - Penalty under Rule 25 of the Central Excise Rules - Bombay High Court admitted the appeal of Revenue against the decision of CESTAT AHMEDABAD [2013 (4) TMI 382 - CESTAT AHMEDABAD] on following questions of Law:- Whether in the facts and circumstances of the case and in law, the CESTAT was justified in holding that Rule 25 of the Central Excise Rules, 2002 could not have been invoked and applied by the Revenue and the applicable provision was Rule 27 of the said Rules? Whether the CESTAT was right in placing reliance upon the order passed by the CESTAT in the case of Tejpal Paper Mills Limited v. Commissioner of Central Excise, Ahmedabad reported in [2010 (7) TMI 385 - CESTAT, AHMEDABAD] and applying it to the facts and circumstances of the present case particularly when the Assessee defaulted in payment of duty as noted in the order of adjudication, but paid the same together with interest belatedly and in terms of the Chart which is referred to in the show cause notice?
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2014 (11) TMI 775
Denial of refund claim - Whether refund claim is liable to be rejected on ground of unjust enrichment u/s 11B - Bombay High Court admitted appeal of Assessee against the decision of Tribunal [2012 (7) TMI 231 - CESTAT, MUMBAI] on the following substantial questions of law :- Whether in the facts and circumstances of the case the Income Tax Appellate Tribunal was justified in disallowing refund of ₹ 15,33,713/- to the appellant by holding that the refund claim of the appellant is hit by the bar of unjust enrichment?
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2014 (11) TMI 774
Waiver of pre deposit - SSI Exemption - Brand name - Benefit of Exemption Notification No. 1/93-CE - Supreme Court partly granted stay in the appeal filed by the assessee against the decision of CESTAT Chennai [2004 (4) TMI 513 - CESTAT, CHENNAI].
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