TMI Tax Updates - e-Newsletter
November 28, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
-
Income Tax:
Deduction of interest paid on borrowed sums from Bank under the provisions of Section 36(1)(iii) disallowed - diversion of loan - loan given to Directors and Sister concern - the company had reserve/surplus to the tune of almost 15 crores - claim of deduction of interest allowed - SC
-
Income Tax:
TDS u/s 194J - payments made by the assessee in form of transmission/wheeling and SLDC charges - The primary basis to conclude the services to the falling u/s 194J of the Act to be technical services or not is to find as to whether any human intervention was involved in the activity or not - HC
-
Income Tax:
Accommodation entries - Once the sales have been accepted, there must be purchases - total purchases cannot be disallowed. AO directed to restrict the addition to the extent of 10% of the purchases - AT
-
Income Tax:
Profits in lieu of salary - chargeable to tax u/s 17(3) or section 28(va) - appellant was not an employee - compensation attributable to a negative/restrictive covenant is a capital receipt. - as the sum received by the appellant does not fall within the ambit of section 28(va), and being a capital receipt is not taxable - AT
-
Income Tax:
Amount received towards the development fund - Taxing land premium on transfer in excess - the principle of mutuality was applicable to the assessee which had as its predominant activity, the maintenance of the property of the society which included its buildings) and as long as there was no taint of commerciality, trade or business, the receipt of transfer fees was not liable to tax - AT
-
Income Tax:
Short term capital gain - AO held to be as bogus and not real accordingly assessed the same as income of the assessee from undisclosed sources - shares have been purchased only on the date on which they were credited in the d-mat account. - claim of assessee allowed - AT
-
Income Tax:
Reopening of assessment - disallowance of deduction u/s 80IB - after having accepted that the assessee is a small scale industry for a good number of earlier years, it is not open for the AO to change his view, that too only for two years under consideration. - AT
-
Income Tax:
Addition on account of valuation of closing stock by following FIFO method - assessee had miserably failed to demonstrate that it was following continuously weighted average cost method for the purpose of valuation - additions confirmed - AT
-
Customs:
Denial of refund claim - Unjust enrichment - That burden cannot be deemed to have been discharged merely by saying that the price of the final products reduced after the import of the impugned goods because the price of the final product does not depend solely on the price of the impugned goods - AT
-
Customs:
Imported of goods as ‘private personal property’ or import to warranty replacement by companies or commercial organization - Benefit of exemption Notification No. 80/70-Cus dated 24.08.1970 allowed - AT
-
Service Tax:
Clarification regarding leviability of service tax in respect of Seed Testing with effect from 01.07.2012 - Circular
-
Service Tax:
Advertising agency - amounts received as cash discount and incentives from media - service tax had been rightly imposed on the assessee-appellant besides recovery of interest on the confirmed demand - HC
-
Service Tax:
Adjustment of excess payment of service tax with short payment - prescribed procedure of intimation to superintendent not followed - The only option is either to refund that amount or allow adjustment - Adjustment allowed - AT
-
Service Tax:
Manpower Supply service - centralized group company providing various services to other group company - MPCMS is providing personnel to MFL and other group companies - Prima facise case is against the assessee - AT
-
Service Tax:
Levy of interest and penalty on reversal of CENVAT credit - they had only taken the CENVAT credit erroneously but had sufficient balance in their account of CENVAT credit - appeal does not succeed on the issue of interest but the appellant will get relief on the penalty part - AT
-
Service Tax:
Refund claim - Bar of limitation - Respondent filed refund claim consequential to the dropping of demand under adjudication order dated 27/11/2009 within 3 months - refund allowed - AT
-
Service Tax:
CENVAT credit on steel items used for fabrication and erection of hoardings, central medians, bus shelters and unipoles which are erected for fixing advertising hoardings for the purposes of display of advertisements. - movable goods or not - credit is not allowable - AT
-
Service Tax:
Valuation - to claim exemption under Notification No.12/2003-ST it is not necessary that invoices should separately indicate the value of the goods sold and the benefit of the said notification can be granted when there is transfer of possession of goods - AT
-
Central Excise:
Destruction of the sample - Only for the sake of absence of a column mentioning the date of destruction of the sample, without there being any finding as to clearance or sale of any sample products by the assessee, no adverse inference can be drawn based on presumptions and assumptions - AT
-
Central Excise:
Imposition of penalty u/s 11AC - differential duty was paid suo motu as pointed out by the Audit Team without disputing liability - Clearance of goods to sister concern much prior to issue of show-cause notice - Clearance of goods in unpacked condition - Penalty cannot be leived - AT
-
Central Excise:
Claiming area based exemption after availing full duty exemption under SSI exemption - the filing of this declaration cannot be said to be a pure procedural or technical requirement - exemption Notification No. 50/03-CE would be available to the appellant only w.e.f. 28/06/2010 and not for the period prior to 28/06/2010 i.e. the date of filing of declaration - AT
-
Central Excise:
Refund claim u/r 5 of unutilized Cenvat Credit - appellant has debited the amount in the Cenvat credit account on 01.07.2003 i.e. on the date of filing of the refund claim satisfied the said condition. The fact that the details of the same have not been reflected in the ER-2 or in the application filed will not make any difference - AT
-
Central Excise:
Excess material found during search in the premises of Job worker - provisions of Rule 15 of Cenvat Credit Rules, 2004 and Rule 25 of Central Excise Rules, 2002 are not applicable to the facts of cases in hand, consequently, the confiscation of the goods in question is set aside - AT
-
VAT:
Disallowance of the claim of Input Tax Credit (ITC) - pre-requisite for denying ITC under Section 18 - This would place an exempted manufacturer-dealer at a disadvantageous position and make his products uncompetitive inspite of the exemption notifications under Section 8(3) of the RVAT - SC
-
VAT:
DST - The imposition of penalty is not automatic even assuming that the reassessment was justified. The fact that there was a dissenting opinion by one of the Members of the Tribunal, does indicate that it is not a case of concealment of particulars but a case where there is a possible interpretation in favour of the Assessee. - HC
-
VAT:
Reopening of assessment - Delhi Sales Tax - A mistake in the original assessment will not by itself constitute a justification for reopening of the assessment particularly where all the material facts were already known to the assessing authority. - HC
-
VAT:
Classification of goods under Assam VAT - ayurvedic medicines or cosmetics and toilet preparations - when some goods which are drugs and medicines in their primary use but have cosmetic use as well cannot be treated as product covered by entry 1 of the Fifth Schedule. - HC
Articles
Notifications
Customs-
124/2015 - dated
24-11-2015
-
Cus (NT)
Appoints the Joint/Additional Commissioner of Customs(Imports), New Delhi
-
123/2015 - dated
24-11-2015
-
Cus (NT)
Appoints the Principal Commissioner/Commissioner, Customs Commissionerate, Ahmedabad
-
122/2015 - dated
24-11-2015
-
Cus (NT)
Appoints the Principal Commissioner/Commissioner of Customs, Nhava Sheva
-
121/2015 - dated
24-11-2015
-
Cus (NT)
Appoints the Additional Director General (Adjudication), Directorate of Revenue Intelligence, New Delhi
-
120/2015 - dated
24-11-2015
-
Cus (NT)
Appoints the Additional Director General (Adjudication), Directorate of Revenue Intelligence, New Delhi
-
119/2015 - dated
24-11-2015
-
Cus (NT)
Appoints the Additional Director General (Adjudication), Directorate of Revenue Intelligence, Mumbai
-
118/2015 - dated
24-11-2015
-
Cus (NT)
Appoints the Additional Director General (Adjudication), Directorate of Revenue Intelligence, Mumbai
-
117/2015 - dated
24-11-2015
-
Cus (NT)
Appoints the Additional Director General (Adjudication), Directorate of Revenue Intelligence, Mumbai
-
116/2015 - dated
24-11-2015
-
Cus (NT)
Appoints the Additional Director General (Adjudication), Directorate of Revenue Intelligence, Mumbai
-
115/2015 - dated
24-11-2015
-
Cus (NT)
Appoints the Additional Director General (Adjudication), Directorate of Revenue Intelligence, Mumbai
-
114/2015 - dated
24-11-2015
-
Cus (NT)
Appoints the Commissioner of Customs, Chennai
-
113/2015 - dated
24-11-2015
-
Cus (NT)
Appoints the Principal Commissioner of Customs, Nhava Sheva-I
Circulars / Instructions / Orders
News
Case Laws:
-
Income Tax
-
2015 (11) TMI 1358
Assessment under section 153C - Disallowance on account of administrative and other overheads - plea of the assessee was that for the year under consideration the return filed by the assessee having been deemed to be processed under section 143(1) of the Act, in the absence of any notice issued under section 148 of the Act it attained finality - Held that:- It is not in dispute that the assessments in both the cases have attained finality by operation of law in as much as the assessee filed returns of income before the search and seizure action took place and even the proceedings under section 143(1) of the Act have attained finality before the date of receipt of the files by the AO concerned. Even otherwise it is not in dispute that there was no incriminating material found during the course of search in respect of the assessee herein and in fact no addition was made by AO on the strength of the documents seized, in this assessment year. Thus the proceedings initiated under section 153C are not valid and therefore the assessments made thereon were quashed. The proceedings initiated under section 153C and the assessment made in the instant case is also not valid in as much as there is no incriminating material found during the course of search, pertaining to A.Y. 2011-12. Since the notice issued under section 153C is held to be invalid, the assessment made thereon has no legs to stand and therefore it is not necessary to deal with other disallowances. - Decided in favour of assessee
-
2015 (11) TMI 1314
Deduction of interest paid on borrowed sums from Bank under the provisions of Section 36(1)(iii) disallowed - diversion of loan - loan given to Directors and Sister concern - Held that:- A perusal of the order passed by the High Court would reveal that the High Court has not at all discussed the aforesaid facts which were established on record pertaining to the interest free advance given to M/s. Hero Fibres Limited as well as loans given to its own Directors at interest at the rate of 10 per cent. On the other hand, the High Court has simply quoted from its own judgment in the case of 'Commissioner of Income Tax-I, Ludhiana v. M/s. Abhishek Industries Limited, Ludhiana' [2006 (8) TMI 123 - PUNJAB AND HARYANA High Court ]. On that basis, it has held that when loans were taken from the banks at which interest was paid for the purposes of business, the interest thereon could not be claimed as business expenditure.We are of the opinion that such an approach is clearly faulty in law and cannot be countenanced. It is manifest that the advance to M/s. Hero Fibres Limited became imperative as a business expediency in view of the undertaking given to the financial institutions by the assessee to the effect that it would provide additional margin to M/s. Hero Fibres Limited to meet the working capital for meeting any cash loses. See 'S.A. Builders Ltd. v. Commissioner of Income Tax [2006 (12) TMI 82 - SUPREME COURT] It would also be significant to mention at this stage that, subsequently, the assessee company had off-loaded its share holding in the said M/s. Hero Fibres Limited to various companies of Oswal Group and at that time, the assessee company not only refunded back the entire loan given to M/s. Hero Fibres Limited by the assessee but this was refunded with interest. In the year in which the aforesaid interest was received, same was shown as income and offered for tax. Insofar as the loans to Directors are concerned, it could not be disputed by the Revenue that the assessee had a credit balance in the Bank account when the said advance of ₹ 34 lakhs was given. Remarkably, as observed by the CIT (Appeal) in his order, the company had reserve/surplus to the tune of almost 15 crores and, therefore, the assessee company could in any case, utilise those funds for giving advance to its Directors. - Decided in favour of assessee.
-
2015 (11) TMI 1313
Reopening of assessment - Held that:- Considering the material before the Assessing Officer and the nature of inquiry made by him, except for the report of the DVO, there was no tangible material for the Assessing Officer to form the belief that income chargeable to tax has escaped assessment. As held by the Supreme Court in the case of Assistant Commissioner of Income Tax v. Dhariya Construction Co. (2010 (2) TMI 612 - Supreme Court of India), the opinion of the DVO per se is not an information for the purposes of reopening assessment under section 147 of the Act. The Assessing Officer has to apply his mind to the information, if any, collected and must form a belief thereon. In the light of the above discussion, this court is of the view that on the reasons recorded by the Assessing Officer, he could not have formed the belief that the income chargeable to tax has escaped assessment. Under the circumstances, the very assumption of jurisdiction under section 147 of the Act on the part of the Assessing Officer by issuing the impugned notice under section 148 of the Act is without authority of law, and hence, the impugned notice cannot be sustained. - Decided in favour of assessee.
-
2015 (11) TMI 1312
Determination of arm’s length price - selection of comparable - the impugned order passed by the first respondent challenged on the premise that it was reiterated on earlier findings without making de novo assessment - Held that:- There is absolutely nothing wrong in adopting the comparables selected by the TPO in erstwhile order, dated 26.10.2010 by the first respondent in determining the arm’s length price of the international transaction of the petitioner while passing the impugned order. If at all the petitioner is aggrieved in such adoption, it is needless to state that the petitioner is always at liberty to challenge the impugned order in the manner known to law as the impugned order passed by the first respondent is not final and as against the said order, under the statute, an efficacious remedy of appeal is available to the petitioner. In fact, the first respondent has not only considered the comparables selected by the TPO in erstwhile draft assessment, but he has also considered the eight comparables newly identified by the petitioner using information collected from responses to letters issued under Section 133(6) and thereby determined the arm’s length revenue at ₹ 57,05,68,292/- which is considerably lower than the erstwhile draft assessment, wherein, it was determined at ₹ 110.27 crores. Hence, the contention that the first respondent has reiterated the earlier findings, cannot be accepted. Therefore, it seems that the petitioner is not aggrieved of the impugned order passed by the first respondent on the premise that it was reiterated on earlier findings without making de novo assessment, but for the order that was not passed by the first respondent in favour of the petitioner by their expectation. - Decided against assessee.
-
2015 (11) TMI 1311
Addition on consignment purchases made by the assessee - CIT(A) deleted the addition confirmed by ITAT - Held that:- CIT (A) held that the single instance did not call for complete rejection of the Assessee’s books of accounts. The CIT(A) gave a further opportunity to the Assessee to explain the discrepancy since the P&L Account was debited to an extent of ₹ 11,43,016/- towards ‘own purchase’, whereas the sale of milk had been shown as consignment sale to Apollo Hospital. The Assessee then filed a chart giving the break-up of the sale of milk to Apollo Hospital which showed that the purchase of the milk sold to it was already debited to the P&L Account. However, the sales of milk worth ₹ 21,65,485/- made to Apollo Hospital was not included in the P&L Account. After accounting for the commission income at 0.94 per cent the net addition of ₹ 11,97,312/- was directed to be made. As regards addition on account of undisclosed closing stock, the CIT(A) noted that an incorrect figure had been given by the Assessee by mixing the figures of monthly sales with monthly purchases in some months or by mixing up opening or closing stock at the end of the month with the relevant monthly purchases. The actual closing stock out of the consignment purchases amounted to ₹ 31,755/- which had been duly disclosed in the balance sheet. The An explanation offered by letter dated 15th February, 2006 had been accepted by the AO. The figures had been corrected on 22nd March, 2006 during the course of assessment proceedings. On this a remand report was requisitioned. After considering the report of the AO the CIT (A) was satisfied that the discrepancy in the figures had been satisfactorily explained by the Assessee and accordingly deleted the said addition correctly confirmed by ITAT. - Decided against revenue Addition on the ground of bogus creditors - CIT(A) deleted the addition confirmed by ITAT - Held that:- CIT(A) was satisfied that one Khurshid S/o Fazal, who had been summoned was a wrong person and he had denied having a dealing with the Assessee. This was supported by a letter dated 9th March, 2006 of the Chartered Accountant. It was also urged before the CIT (A) that no serious attempt was made to summon vendors who lived in remote areas of UP and Haryana. The CIT (A) then asked the AO to conduct another inquiry and send a report. This report showed that the transactions were conducted with fourteen of the creditors in cash. The creditors had confirmed the supplies as well as credit balances. Only one of the creditors did not respond to the notice issued. The CIT (A), therefore, concluded that the identity and creditworthiness of the said creditors had not been doubted by the AO and the genuineness of the transaction was also not in doubt. The lack of response only from one of the creditors would not, therefore, make much of a difference. Unable to find any legal error committed by the ITAT - Decided against revenue
-
2015 (11) TMI 1310
TDS u/s 194J - payments made by the assessee in form of transmission/wheeling and SLDC charges - ITAT quashed TDS liability making a mention of Explanation 2 to section 9(1)(viii) of I.T.Act, regarding term ‘technical service’ by using the word ‘human’- Held that:- As decided in Commissioner of Income Tax (TDS) Chandigarh vs. Dakshin Haryana Bijli Vitran Nigam Limited [2014 (6) TMI 542 - PUNJAB & HARYANA HIGH COURT] the issue arising in these appeals requires to be re-adjudicated by the Assessing Officer keeping in view the principles of law enunciated by the Apex Court in Bharti Cellular Limited's case [2010 (8) TMI 332 - Supreme Court of India] wherever there was human intervention requiring examination of technical data, the same would fall within the definition of technical services and in the absence it would not partake the character of technical services – The primary basis to conclude the services to the falling u/s 194J of the Act to be technical services or not is to find as to whether any human intervention was involved in the activity or not - thus, the matter is remitted back to the AO to examine the technical expert and after examining him for fresh adjudication - the assessing authority shall also examine whether the Provisos inserted in Sections 201(1) and 201(1A) by Finance Act, 2012 are applicable retrospectively, as urged by the assessee – Decided in favour of Revenue for statistical purposes.
-
2015 (11) TMI 1309
Addition on account of closing work in progress - ITAT deleted the addition - Held that:- Nothing has been brought by the AO or nothing has been demonstrated by the AO that the method adopted by the assessee is different as required by the revenue and how the profit has been under estimated has not been worked out properly. The AO has relied upon the measurement book of Jalandhar Improvement Trust and the same has been applied on the other contractees which infact is not true. It has been argued and also is on record that the assessee had received payment upto 30th March. Therefore, on no account, the purchase of material between 25th March 2007 to 31st March 2007 can be ₹ 22,27,607/-. Therefore, no addition in the present case can be made on surmises and conjectures. The finding recorded by the Tribunal is a pure finding of fact which has not been shown to be illegal or perverse in any manner by the learned counsel for the appellant-revenue warranting interference by this Court. - Decided against revenue
-
2015 (11) TMI 1308
Transfer pricing adjustment - adjustment to the Arms’ Length Price (“ALP”) to an international transaction - Held that:- The turnover filter is an important criteria in choosing the comparables. The assessee’s turnover is ₹ 47,46,66,638. It would therefore fall within the category of companies in the range of turnover between 1 crore and 200 crores (as laid down in the case of Genesis Integrating Systems (India) Pvt. Ltd. v. DCIT [2011 (8) TMI 952 - ITAT BANGALORE]) . Thus, companies having turnover of more than 200 crores have to be eliminated from the list of comparables KALS Information Systems Limited and Accel Transmission Limited companies was not comparable in the case of the assessees engaged in software development services business. Megasoft Ltd -segmental margins in so far as it relates to providing software services by Megasoft alone should be taken for the purpose of comparison. Lucid Software Limited, has to be excluded as functionally not comparable with that of the assessee Geometric Software Ltd. (Seg.) & Ishir Infotech Ltd.the related party transaction in the case of companies exceeds 15% ( 19.98 % in the case of Geometric Software Ltd. and 21.97% in the case of Ishir Infotech Ltd.) and in view of the decision of the Tribunal in the case of 24 X 7 Customer.Com Pvt. Ltd. [2013 (1) TMI 45 - ITAT BANGALORE] followed by this Tribunal in the case of Logica Private Ltd.[2015 (3) TMI 401 - ITAT BANGALORE] wherein it was held that where the RPT exceeds 15%, such companies should not be taken as comparable companies. Avani Cimcon Technologies Ltd. and Celestial Labs Ltd. not comparable to the software service provider companies. E-Zest Solutions Ltd. - With regard to the objection of the leaned DR that the functional profile of the company E-Zest Solutions Ltd. in AY 07-08 has to be compared with that in AY 08-09 decided by the Tribunal, we accept the said prayer and for this limited purpose direct the TPO/AO to examine as to whether there is any change in the profile of the said company so that it can be regarded as comparable with an Assessee rendering software development service such as the Assessee. Computing deduction under section 10A - Taking into consideration the decision rendered by the Hon’ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT ] we are of the view that it would be just and appropriate to direct the Assessing Officer to exclude expenses incurred in foreign currency towards travelling and expenses incurred towards communication both from export turnover and total turnover, as has been prayed for by the assessee Not granting set-off of current year unabsorbed depreciation against the adjustments made to the business income - Held that:- The AO in his order computed total income treating income declared in the return as “Nil”. Despite specific objection by the Assessee in this regard before the DRP, the DRP did not consider the claim of the Assessee. We are of the view that it would just and appropriate to direct the AO to verify the claim of the Assessee for set off of current year unabsorbed depreciation against the adjustments made to the business income, if the claim of the Assessee is found to be correct, the AO shall give consequential relief to the Assessee.
-
2015 (11) TMI 1307
Validity of action and notice u/s 153C - Held that:- In the present case, the base of document does not belong or belongs to the present assessee as the Assessing Officer of the other person himself was not clear in his mind that whether this chart belongs to or belong to the present assessee, therefore, he made jugglery of words by mentioning that the company wise non appearing in these pages will be treated as documents pertaining to all respective companies including the assessee company appearing in the said chart. In this situation, we are inclined to hold that the reasons recorded by the Assessing Officer of the present assessee for initiation of action u/s 153C of the Act and issuance of notice under the said provision do not quash the requirement of said provision as accepted in the Act at the time of recording satisfaction. It is also relevant to mention that the so-called seized document i.e. chart cannot be held as belongs to or belong to the present assessee and on this ground also, the validity of reasons recorded comes within the teeth of proposition laid down in the case of Pepsico Holding Pvt. Ltd. (2014 (8) TMI 898 - DELHI HIGH COURT) and Pepsi Food Pvt. Ltd. vs CIT [2014 (8) TMI 425 - DELHI HIGH COURT]. Respectfully following the proposition laid down by Hon'ble Jurisdictional High Court, we are inclined to hold that the reasons recorded for action u/s 153 of the Act and issuance of notice under the said provision was not only bad in law but void ab initio which cannot be held as sustainable and consequently, we quash the same. Accordingly, C.O. of the assessee is hereby allowed. Addition on account of interest free loan & advances - CIT(A) deleted the addition - Held that:- CIT(A) placing reliance on the judgment of Hon’ble Delhi High Court in the case of SSP Aviation Ltd. vs DCIT (2012 (4) TMI 335 - DELHI HIGH COURT) held that the impugned addition based on disallowance of interest does not relate to emanating from the allegation of suppression of sales or receipt of unaccounted cash in sale of flats. Further, the first appellate authority also noted that the advances made to these persons/entities by the assessee firm were to raise capital for the purpose of business and also that these transactions are not in the nature of business advances. The Ld. CIT(A) also noted that the interest payment made by the assessee to Bank of Maharashtra also does not appear to have any nexus with the money advanced as all payments. In the light of above noted facts, when we analyse the action of the A.O. and contentions of the Ld. Ld. DR, we observe that aforesaid observations of the Ld. CIT(A) have not been controverted by them. - Decided against revenue. Addition on account of bogus purchases of raw material - CIT(A) deleted the addition - Held that:- CIT(A) rightly noted that in the eventuality when assessee failed to produce alleged vendors, the appropriate course of action for A.O was to inform VAT authorities about the tax said to be deducted by the sellers so that the deposit of VAT tax could have been verified by them. Simultaneously, the A.O of the vendors could have also been informed about the sales made and to verify whether these sales had been reflected in their respective tax returns. The Ld. CIT(A) also mentions that the A.O could also have investigated bank accounts of the parties (Vendors) available with him and none of these courses have been taken by the A.O. The First Appellate Authority rightly concluded that instead of adopting said available courses, the A.O proceeded to made disallowance and addition for non-production of vendors parties and adverse inference drawn by the A.O was pre-mature and without any sound basis. The Ld. CIT(A) rightly concluded that u/s 153C of the Act, the A.O cannot travel beyond the satisfaction recorded and the impugned addition based on alleged bogus purchases does not pertain to or emanate from allegation of suppression of sales or receipt of unaccounted cash in the sale of flats. - Decided against revenue.
-
2015 (11) TMI 1306
Reopening of assessment - Held that:- A perusal of the 'Reasons’ would clearly reveal that these have been recorded by the AO on the basis of examination done by the AO of the existing assessment records of the assessee-company. On none of the issues we could find reference to any fresh tangible material in the possession of the AO to make a belief about escapement of income. In our considered view, the law in this regard is now well settled. As relied upon by the learned Counsel also, recently Hon’ble Mumbai Bench of the Tribunal in the case of Motilal R.Todi (2015 (11) TMI 181 - ITAT MUMBAI) has analyzed the entire law available on this issue, and thereafter it was held by the Hon’ble Bench that reopening was invalid in the absence of fresh tangible material. Therefore, reopening is held invalid for want of availability of requisite conditions for exercising the jurisdiction of reopening by the Assessing Officer. The law does not give powers to the AO to reopen an assessment carried out u/s 143(3) after the expiry of four years unless the AO is able to demonstrate that there was failure on the part of the assessee in disclosure of material facts - Decided in favour of assessee
-
2015 (11) TMI 1305
Exemption of interest income under section 10 (23G) - whether CIT(A) ought to have held that if the exemption u/s 10(23G) of the Act was to be granted at net of interest income, then, the deduction for interest cost incurred was to be taken only in relation to earmarked borrowings utilized by the assessee for the purpose of granting loans to the enterprises, interest income whereof is exempt under section 10(23G) - Held that:- From the perusal of these working sheets, with the assistance of Ld counsel, it is seen that the own funds of the assessee are to the tune of ₹ 2512.49/- crores whereas total of all the amounts of loans in INR granted and investment in shares and securities out of mixed funds are to the tune of ₹ 236.02 crores only, which happens to be merely 9.39 % of the aggregate amount of the own funds of the Assessee. Under these circumstances, investments in shares and loans can be presumed to have been made out of own funds. This view has also been supported by another judgment of Hon'ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd.,[2014 (8) TMI 119 - BOMBAY HIGH COURT]. Thus, respectfully following above we hold that deduction for the interest cost incurred was to be taken only in relation to earmarked borrowings utilized by the assessee for the purpose of granting loans to the enterprises, interest income whereof is exempt u/s 10(23G) of the Act for the purpose of computing net interest income eligible for deduction u/s 10(23G) of the Act. Decided in favour of assessee. Exemption u/s 10(34) granted on the amount of gross dividend income - Held that:- assessee's own funds exceed the investment made and therefore no disallowance could have been made by the assessing officer in the given facts and circumstances of the case and therefore, respectfully following judgments of Hon'ble Tribunal in assessee's own case and jurisdictional High Court, we decide these grounds in favour of the assessee Taxability of penal interest and interest received during the year on non performing assets - selection of year of assessment - Held that:- It has been held by the Tribunal in assessee's own case for A.Y. 1999-2000 that income of the assessee earned upto 31.03.1999 is clearly exempt because of section 37 of Export-Import Bank of India Act, 1981. It was further held that omission of section 37 shall take place w.e.f. 01.04.1999. income of the assessee for, the period upto 31.03.1999, was exempt. Hon'ble Bench has also taken into consideration, the effect of provisions of section 43D, while holding that income of the assessee pertains to the period upto 31.03.1999, and even if it was received by the assessee subsequent to that date, would not be liable to tax. It is seen by us that there is no change in the facts in this year as compared to the facts of A.Ys. 2000-01, 2001-02 2002- 03. The Ld DR also could not point out anything wrong in submissions of the Ld Counsel or the material placed before us, to make a distinction from the facts of earlier years. Ld DR could not bring out anything to distinguish the orders of the Hon'ble Tribunal in Assessee's own case. Therefore, keeping in view all these facts and circumstances of the case, we decide these grounds in favour of the assessee and hold that penal interest and interest received during the year on non performing assets aggregating pertaining to F.Y. ended upto 31.03.1998/31.03.1999 is not taxable in the hands of the assessee in the year under consideration. - Decided in favour of assessee. Depreciation adopting WDV of assessment year 1999-00 - Held that:- Ld DR has not been able to point out anything wrong in the findings of Ld CIT(A). It has been informed that decision of the Ld. CIT(A) on this issue, in earlier years, has attained finality, as it remained uncontested by the Revenue. Thus, as a matter of consistency and harmony, no different view can be taken in this year. Keeping in view, these facts and circumstances of the case, we find no reason to intervene in the findings recorded by Ld CIT(A), as per law. Action of the AO in reducing the amount of WDV on notional basis for the amount of depreciation which was neither claimed nor actually allowed, should not have been deducted from the original cost of the assets. Therefore, we hold that the claim of the assessee was justified and Ld CIT(A) has rightly reversed the action of AO in rejecting this claim. - Decided in favour of assessee.
-
2015 (11) TMI 1304
Addition made on account of share application money - CIT(A) deleted the addition - Held that:- The assessee has filed before the AO documents and details regarding share subscribers in question, so as to establish these ingredients of genuine credit. The identity of the subscribers stood proved by the fact that their names, address PAN Number balance sheet, bank statement and confirmation letters, share application and share allotment details were submitted by the assessee company. All these facts go to prove the identity of the subscribers. The CIT(A) further recorded a finding to the effect that creditworthiness of these parties was also proved by the fact that all the payments have been made through the banking channels through account payee cheques and that bank statements were also submitted by the assessee company. It was also observed that since money is towards purchase of shares having drawn from bank, it is clear that moneys were available. The finding recorded by the CIT(A) is as per material on record and do not require any interference on our part. - Decided against revenue Reopening of assessment - receipt of accommodation entries - CIT(A) deleted the addition by observing that purchases were genuine, however, at the very same time, the CIT(A) directed the AO to estimate the gross profit at 6% - Held that:- carefully gone through the orders of the authorities below and found that the contradictory statement was given by Mehrunissa with regard to the sales undertaken by her. However, nowhere she has stated the name of assessee company with regard to any bogus sales. It is a matter of record that nothing wrong was found by the AO in the books of account. All the purchases have been accepted by the AO and its corresponding sales. Once the sales have been accepted, there must be purchases. Under such circumstances, it is possible that bills have been taken from one party, whereas goods have been purchased from some other party. Keeping in view the totality of facts and circumstances of the case the total purchases cannot be disallowed. Accordingly, we direct the AO to restrict the addition to the extent of 10% of the purchases so as to serve the end of justice. Accordingly, we uphold the addition of ₹ 2,21,600/-. There is no merit in the action of CIT(A) for directing the AO to estimate the assessee’s GP rate at 6%, which was upheld by him in case of SKS Ispat & Power Limited,a group company. Neither it is the case of AO nor it is case of CIT(A) that assessee has not maintained proper books of accounts and that it had not reported true and correct state of affairs.any justification in estimating GP rate without rejecting the books of account. As we have already upheld the addition of ₹ 2,31,600/- on account of purchases which was pointed out by the AO, there is no justification for applying the higher GP rate to the entire sales of the assessee which was ₹ 151 crores. In case of Girish M. Mehta (2005 (2) TMI 494 - ITAT RAJKOT), the Tribunal has elaborately explained the principle of rejection of books of accounts and estimating GP rate in para 9 of the said order is precisely applicable to the facts of the case. It is also pertinent to mention here that the AO has nowhere doubted the quantitative tally/stock register maintained by the assessee. No incriminating material or evidence in respect of other transactions of the assessee have been brought on record. Therefore, addition in the GP, if any, should be restricted to the extent of part of the purchases made from M/s Chevron Metal Products Private Limited. Since we have already upheld the addition of ₹ 2,31,600/-, there is no justification for estimation of assessee’s GP at 6% as directed by CIT(A). We direct accordingly.
-
2015 (11) TMI 1303
Disallowance of notional loss on F&O foreign currency transaction - CIT(A) allowed the claim - Held that:- CIT(A) rightly demolished the conclusion of the Assessing Officer that the said loss is a notional loss and represents marked to market is not correct. We are also in agreement with the conclusion of the CIT(A) that the claim of the assessee is not in pursuance to the notional entry which has been passed on the last date of the financial year and represents the value as per market value as on 31st March. Ld. CIT(A) explicitly held that the entry was passed out of running account whereby profit and loss which have been incurred on settlement day and amount have been debited and credited on account of loss or profit as the case may be. Ld. CIT(A) finally granted relief to the assessee by holding that as per Circular regarding notional loss is not applicable to the transaction which was undertaken by the assessee as F&O transaction. On logical analysis of the order of the first appellate authority on this issue, we reach to a logical conclusion that the Assessing Officer made addition regarding the Board Circular which is not actually applicable to the facts and circumstances of the present case, therefore, the CIT(A) was right in concluding this issue in favour of the assessee. We are unable to see any perversity or any other valid reason to interfere with the order of the ld. CIT(A). - Decided against revenue Disallowance of claim of exemption u/s 54F - CIT(A) allowed the claim - Held that:- CIT(A) was right in concluding that during the course of assessment proceedings, the assessee filed the relevant details of capital gain and its utilization along with copies of the bank account statement and from these details, it is amply clear that the money of capital gain has been deposited in mutual fund and on redemption of the mutual fund, it has been deposited in the capital gain account scheme. It was also noticed that the assessee on sale of original assets has deposited the proceeds in his bank account. From there, he deposited the money temporarily with mutual funds and before the due date of deposit in Capital Gain Scheme, encashed the mutual funds and deposited the amount in Capital Gain Scheme as required by the relevant provisions of the Act. On vigilant and careful consideration of contention of the Assessing Officer as well as conclusion of the CIT(A) as noted above, we are of the view that the Assessing Officer rejected the claim of the assessee u/s 54 of the Act without any justified reason and on incorrect premise which was rightly allowed by the CIT(A) after properly appreciating and considering the facts and circumstances of the case in the light of explanation of the assessee. We are unable to see any infirmity or any other valid reason to interfere with the order of the ld. CIT(A) and uphold the same. - Decided against revenue
-
2015 (11) TMI 1302
Profits in lieu of salary - chargeable to tax under section 17(3) or section 28(va) or any other section of the Income-tax Act - Held that:- The wide amplitude of the role assigned to the appellant clearly show that he was not subject to the direct control or supervision of Suzuki India, but was managing all affairs of the company; evolving business strategies; and advising the company. His role was clearly that of a joint venture partner in Suzuki India and not that of an employee of the company. In view of the foregoing and the submissions made by Shri Aggarwal, we are of Opinion that the appellant was not an employee of Suzuki India and, as such, the sum received by him from the company cannot be taxed as “profits in lieu of salary” under section 17(3) of the Act. We agree with Shri Aggarwal that as the sum of ₹ 1,32,00,000 was paid by Suzuki India to the appellant in consideration of not providing “the benefit of his knowledge of regulatory matters, negotiating skills and strategic planning expertise to any other person in India in the two wheeler segment” it cannot be regarded as non-competition fee because it has not been paid for not competing with the payer, but for not providing the benefit of his knowledge, expertise, skills etc. to any other person in the two wheeler segment. Thus compensation attributable to a negative/restrictive covenant is a capital receipt. Hence, as the sum received by the appellant does not fall within the ambit of section 28(va), and being a capital receipt is not taxable under the Income-tax Act - Decided in favour of assessee.
-
2015 (11) TMI 1301
Amount received towards the development fund - Held that:- From the record found that amount so received by the assessee was within the framework of law of the society, thus, there was no profit motive attributed to the society. In order to bring the contribution within the net of tax, there should exist a pervading profit motive. The transferrable development rights premium was a payment made by a member of the assessee, as a consideration for being permitted to make an additional utilization of the FSI on the plot allotted by the assessee. The assessee which looked after the infrastructure, required the payment of the premium in order to defray the additional burden that must be cast as a result of the utilization of the FSI. The point, however, was that there was a complete mutuality between the assessee and its members. See Jai Hind CHS Ltd.[2012 (10) TMI 527 - BOMBAY HIGH COURT ]. Thus merit in the order of lower authorities taxing the contribution towards special development funds (for giving NOC) as liable to tax - Decided in favour of assessee. Taxing land premium on transfer in excess - Held that:- This issue is also covered by the decision of Hon’ble Bombay High Court in the case of Sind Cooperative Housing Society, [2009 (7) TMI 15 - BOMBAY HIGH COURT] as held Payments were made under the bye-laws of the assessee which constituted a contract between the assessee and its members which was voluntarily entered into and voluntarily conducted as a matter of convenience and discipline for running of the assessee-society. If any amount was received more than was chargeable under the bye-laws or the Government notification, the assessee was bound to repay the amount and if it retained the amount it would be in the nature of profit making that specific amount exigible to tax. Under the bye-laws, charging of transfer fees had no element of trading or commerciality. Since there was no taint of commerciality the question of earning profits would not arise when the assessee from the funds received applied the moneys received towards maintenance of the society and providing the members with usual privileges, advantages and conveniences. Thus, the principle of mutuality was applicable to the assessee which had as its predominant activity, the maintenance of the property of the society which included its buildings) and as long as there was no taint of commerciality, trade or business, the receipt of transfer fees was not liable to tax - Decided in favour of assessee.
-
2015 (11) TMI 1300
Assessment order u/s 144C on amalgamating company - assessment against non-existent entity/person - Held that:- In the light of the ratio of the judgment of Hon'ble High Court in the case of Spice (2011 (8) TMI 544 - DELHI HIGH COURT ), when we analyze the facts and circumstances of the present case, we clearly observe that undisputedly and admittedly, the return was filed by amalgamating company on 26.9.2009. The Assessing Officer issued notices u/s 143(2) of the Act in the name of amalgamating company on 18.8.2010. Subsequently, letter dated 27.1.2012 was filed before the Assessing Officer, during the course of assessment proceedings, informing the order of the Hon'ble High Court dated 12.10.2011. However, the Assessing Officer issued notices u/s 143(2) and 142(1) of the Act along with questionnaire on the amalgamating company. After issuing said notices, the Assessing Officer issued additional questionnaires on 5.12.2012 and 13.2.2013 on amalgamating company. The Assessing Officer passed draft assessment order u/s 144C of the Act on amalgamating company. Finally, the Assessing Officer passed final assessment order u/s 143(3) r/w section 144C of the Act on amalgamating company in pursuance to the directions of the ld. DRP dated 19.2.2013 u/s 144C(5) of the Act. Thus framing of assessment against non-existent entity/person goes to the root of the validity of the assessment which is not a procedural irregularity curable u/s 292B of the Act or under any other provision of the Act but it is a jurisdictional defect because there cannot be framing of any assessment order against a dead person or entity which is non-existent on the date of framing/passing assessment order. - Decided in favour of assessee.
-
2015 (11) TMI 1299
Amount received on account of non-compete fees - whether chargeable as business income or capital gains? - Held that:- Only on the basis of clause No.3.4 of the agreement dated 29-5-2003, the AO inferred that entire amount was received by assessee on account of non-compete clause. We found that this clause is merely consequent to the transfer of the business. Obviously, the vendor cannot carry on the business because it has already been transferred major part of its business. The assessee group held major shareholding of 51% in the transferee company and after the transfer of contract, employees, customers, licence of premises, market standing, goodwill, etc., there is very few possibility of competition. However, keeping in view the nature of assessee‟s business and the fact that assessee entered into a non-competitive agreement for a period of one year by which it would have established itself in the market and sort of production of the assessee would have ceased, the CIT(A) had very rationally attributed ₹ 4.5 crores as non-competitive fees falling under Section 28(va) of the Act. The balance amount was for transfer of intangible assets and goodwill, therefore, treated by CIT(A) as capital receipt liable to tax under the head capital gains amounting to ₹ 50.23 crores, we do not find any infirmity in the decision arrived at by CIT(A), which is based on material on record, therefore, do not require any interference on our part.
-
2015 (11) TMI 1298
Reopening of assessment - excess deduction allowed u/s 36(1)(viii) and excess depreciation claimed - Held that:- As per the provisions of section of 36(1)(viii) of Income Tax Act, 1961, the assessee can claim deduction up to 40% of its income by way of creation of reserve. Therefore, a limit was placed by the second proviso on the amount which can be transferred to the reserve. This limit is there in the section since the beginning. Otherwise the assessee will keep on depositing the amount in the reserve and withdrawing it simultaneously and can claim deduction up to 40 % of total income as envisage in the section 36( 1) (viii) of Income Tax Act,1961. In the instant case, it is not clear as to whether the assessee has excluded the amount withdrawn from the reserve as mentioned above in the aggregate of amounts carried to the reserve, there was excess deduction claimed by the assessee in AY 2004-05 and AY 2005-06 to the tune of ₹ 20.47 cr in AY 2004-05 and ₹ 71.65 er in AY 2005-06.However, as per the amended provision, assessee’s eligibility for enhanced deduction is available only, if it is found that amount withdrawn out of the reserve had been offered for taxation u/s.41(4A). However, it is not clear from the record as to whether the amount so withdrawn by the assessee has been offered for tax. Therefore, we restore the matter back to the file of the AO for finding out the factual position and for deciding afresh. - Decided in favour of assessee for statistical purposes. Disallowance of depreciation on the plea assessee had wrongly classified these assets are falling under the head furniture and fixtures, in the plant and machinery - assessee had classified Air conditioners, ECR, Printers, Typewriters, Mobile Phones, Refrigerators, Water Coolers, Photocopiers, EPBX, Fax as machinery and plant and claimed depreciation @ 15% as against @ 10% made by AO - Held that:- Assessee’s claim of depreciation in respect of these items is in accordance with the New Appendix to the I.T. Rules. These are not furniture and fixtures. Accordingly, there is no merit in AO’s action for treating same as furniture and fixture so as to reduce to rate of depreciation from 15% to 10%. The AO is directed to allow depreciation @15% on these items. - Decided in favour of assessee
-
2015 (11) TMI 1297
Short term capital gain - AO held to be as bogus and not real accordingly assessed the same as income of the assessee from undisclosed sources - Held that:- The assessee has furnished all the details relating to purchases as well as the sales. The brokers through whom the assessee had purchased the shares have also confirmed the transactions. The payments towards purchase of shares have gone through the banking channels except a very small amount. The shares purchased by the assessee have been credited to the D-mat account of the assessee. The deficiency noticed was the time gap between the purchase of shares and credit of the same in the D-mat account of the assessee. The delay in making payment and the delay in crediting the shares in the demat account is dependent upon various factors including the understanding between the buyer and seller. Thus, from the point of view of the assessee, she has established the details of purchases with sufficient documentary evidences and those documentary evidences were also confirmed by the share broker also. Further, it is settled proposition that date of broker notes is considered as the date of purchase and in this regard, one may refer to the Circular No.704 dated 28-04-1995. In our view, the assessee cannot be punished in respect of defaults, if any, committed by the share broker, since the factum of purchase and sale of shares have been accepted by Ld CIT(A). From the point of view of the assessee, the broker has delivered the shares purchased by her. We further notice that all the shares purchased by the assessee are that of reputed companies only. On the contrary, the Ld CIT(A), as noticed earlier, has drawn only inferences about the date of purchases and he has not brought any material on record to support the view taken by him. Hence, we are confronted with two different situations, viz., (a) the assessee has furnished materials to support the claim of purchases and both the assessee and the seller of shares have confirmed those materials and (b) the Ld CIT(A) has drawn inferences which is not supported by any materials. Under these set of facts, in our view, the case of the assessee should weigh more, since his claim is supported by certain documents. We are unable to uphold the view taken by Ld CIT(A) that the shares have been purchased only on the date on which they were credited in the d-mat account. Accordingly, we set aside the order of the Ld CIT(A) on this issue and direct the assessing officer to assess the impugned income declared by the assessee as short term capital gain. - Decided in favour of assessee. Commission expenses estimated by the AO. Since the Ld CIT(A) has accepted the genuineness of purchase and sale of shares and since we have directed the AO to assess the gain arising on sale of shares as short term capital gain, the impugned addition made on estimated basis is liable to be dismissed. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to delete this addition.- Decided in favour of assessee.
-
2015 (11) TMI 1296
Reopening of assessment - disallowance of deduction u/s 80IB - CIT(A) allowed claim - Held that:- CIT(A) has given clear finding that the assessee is eligible to claim deduction u/s 80IB as per the provisions of sec. 80IB(3)(ii) of the Act. The Ld CIT(A) has further held that the question as to whether the assessee is a “Small Scale Undertaking” or not has to be examined as per the provisions of Industries (Development and Regulation) Act, 1951. Another important point noted by the Ld CIT(A) is that the assessee had been allowed deduction u/s 80IB of the Act in the years earlier to the two years under consideration, meaning thereby the eligibility of the assessee to claim deduction u/s 80IB of the Act had already been examined in the earlier years. Hence, by placing reliance on some of the judicial decisions, the Ld CIT(A) held that the assessing officer, after having accepted the eligibility of the assessee to claim deduction u/s 80IB of the Act in the earlier years and after having allowed the deduction in the initial year as well as in some of the subsequent years, is not correct in examining the eligibility of the assessee again in other subsequent years. Accordingly he held that the action of the AO has to be considered as taken on mere change of opinion only. CIT(A) was justified in holding that the assessing officer has proceeded to examine the eligibility of the assessee to claim deduction u/s 80IB of the Act for the two years under consideration merely on change of opinion. Further, the various judicial decision relied upon by Ld CIT(A) would show that, after having accepted that the assessee is a small scale industry for a good number of earlier years, it is not open for the AO to change his view, that too only for two years under consideration. Accordingly, we uphold the orders passed by Ld CIT(A) for both the years under consideration. - Decided in favour of assessee.
-
2015 (11) TMI 1295
Disallowance of depreciation - whether application of income for charitable purpose amounts to double depreciation and therefore depreciation cannot be allowed - Held that:- In the case of CIT v. Market Committee, Pipli, (2010 (7) TMI 374 - Punjab and Haryana High Court ) held that a trust claiming depreciation cannot be equated with a claim for double deduction. The Hon’ble Punjab & Haryana High Court has also made a reference to the decision of CIT v. Society of Sisters of Anne, (1983 (8) TMI 44 - KARNATAKA High Court), wherein it was held that u/s. 11(1) of the Act, income has to be computed in normal commercial manner and the amount of depreciation debited in the books is deductible while computing such income. - Decided in favour of assessee. Entitlement to carry forward expenditure incurred in excess of its income for setting off against income of the succeeding years - CIT(A) allowed the claim - Held that:- The principle that the loss incurred under one head can only be set off against the income from the same head is not of any relevance, if the expenditure incurred was for religious or charitable purposes, and the expenditure adjusted against the income of the trust in a subsequent year, would not amount to an incidence of loss of an earlier year being set off against the profit of a subsequent year. The object of the religious and charitable trust can only be achieved by incurring expenditure and in order to incur that expenditure, the trust should have an income. So long as the expenditure incurred is on religious or charitable purposes, it is the expenditure properly incurred by the trust, and the income from out of which that expenditure is incurred, would not be liable to tax. The expenditure, if incurred in an earlier year is adjusted against the income of a later year, it has to be held that the trust had incurred expenditure on religious and charitable purposes from the income of the subsequent year, even though the actual expenditure was in the earlier years, if in the books of account of the trust such earlier expenditure had been set off against the income of the subsequent year. The expenditure that can be so adjusted can only be expenditure on religious and charitable purposes and no other. See Govindu Naicker Estate VS. ADIT [1998 (10) TMI 4 - MADRAS High Court] - Decided in favour of assessee. Accumulation of income - 15% accumulation for application in future has to be calculated on gross receipts or net receipts after deduction of revenue expenditure? - Held that:- As per the statutory language of section 11(1)(a) the income which is to be taken for purpose of accumulation is the income derived by the trust from property any expenditure which is in the shape of application of income is not to be taken into account. Having found that trust is entitled to exemption under s. 11(1), we are to go to the stage of income before application thereof. The gross income earned by the assessee is relevant - Decided in favour of assessee.
-
2015 (11) TMI 1294
Addition on account of valuation of closing stock by following FIFO method - Held that:- The Assessing Officer made addition on account of valuation of closing stock by following FIFO method which is one of the accepted methods of valuation of closing stock. The appellant had adopted inconsistent stand, on one hand he submits that he was following FIFO method, and on the other hand he submits that he followed weighted average cost method. In the Tax Audit Report, it was stated that cost or net realizable value was adopted. The principle of lower of cost or net realizable value is also one of the methods adopted for the purpose of valuing closing stock. In the light of this different stand taken before the Assessing Officer, he had no option but to adopt one of the permissible methods for valuation of closing stock. The method of calculation under FIFO method made by the Assessing Officer was not found fault by the appellant. Since the appellant had miserably failed to demonstrate before us that it was following continuously weighted average cost method for the purpose of valuation, we have no option but to confirm the action of the Assessing Officer in this regard. - Decided against assessee
-
2015 (11) TMI 1293
Reopening of assessment - CIT(A) quashed reopening - Held that:- CIT(A) has stated on the same page of his order that the AO has not appraised any of the evidence, rendered to in his remand report while framing the order and making assessment and therefore, its conclusion is not based any material in his position and he simply assessed by trade tax authority. After making this disallowance, he held that making an assessment in such a manner is fairly not permissible and is contravention of the judgment of the Hon’ble Supreme Court rendered by Ld. AR in his submission. We fail to understand this finding of Ld. CIT(A) after observing this in the preceding para that the reopening was made on the basis of material. Hence, we are of the considered opinion that in the facts of the present case, the orders of the CIT(A) is not sustainable on this issue because when this is accepted by the Ld. CIT(A) that reopening was made on the basis of material indicated by the AO in the remand report reopening of assessment cannot be said to be faulty. - Decided in favour of revenue Unexplained investment on account of sales - CIT(A) deleted the addition - Held that:- The reason made by the AO without disposing of the objection of the assessee and on the basis of assessment order passed by the Trade Tax Authority which was set aside and the subsequent order of the Trade Tax Authority has not been brought on record before us. But the relief allowed by the Ld. CIT(A) is also without taking cognizance of the subsequent order of Trade Tax Authority and without referring to the material of 19 pages indicated by the AO in the remand report. Considering all these facts, we feel it proper that this matter should go back to the file of the AO for fresh decision and he pass necessary order as per law. In the light of the above discussion after providing reasonable opportunity of being heard to the assessee and such order of the AO should be speaking and reasoned order. - Decided in favour of assessee for statistical purposes.
-
2015 (11) TMI 1292
TDS u/s 195 - taxability of payment made to M/s Liftech Consultants Inc., USA in India - CIT(A) treating assessee as assessee in default u/s 201 - Held that:- Going through the agreement for engineering services for procurement and other aspects as appearing in the assessment order, we find that the service to be performed by M/s Liftech Consultant Inc., USA was more of a reviewing the design. The power of review is something more than the power of supervision. However, it is something less than the development and transfer of services and design. When we say that there is a power to review, essentially it implies also the power to make suggestions, advice on the concerned topic and area but if there is something more than the suggestion given i.e. if there is a transfer of some development or design and the person reviewing it monitor such transfer of design and development, then it cannot be a simple power of reviewing. We find that the lower authorities have not examined as to whether the suggestions given by M/s Liftech Consultant Inc., USA would amount to major change or improvisation of the design or were limited to just pointing out the shortcomings or defects, whatever it may be, in the already settled and agreed design of the product. Further, we do not find any record to suggest that whether M/s Liftech Consultant Inc., USA not only given these suggestions but were also physically active and present to implement these suggestions. We, therefore, on this limited issue, set aside the matter to the file of A.O. to find out if M/s Liftech Consultant Inc., USA has just suggested the development or has physically made available its presence through its officials to see whether those development and suggestions were actually implemented. If it is only suggestions given, then it will be review but if the M/s Liftech Consultant Inc., USA has forwarded to implement those suggestions on behalf of the assessee and have improvised the design or brought any major change in the design, then such suggestions would amount to transfer of technical services and design, which would be more than the power of review and would attract Article 12 of the India-US DTAA Treaty. - Decided in favour of assessee for statistical purposes.
-
2015 (11) TMI 1291
Penalty u/s.271(1)(c) - Addition(s) made on account of unexplained household expenditure and undisclosed capital gain - CIT(A) deleted the penalty - Held that:- As in quantum proceeding the Tribunal was pleased to restore the appeals to the file of ld.CIT(A), thus these penalty appeals may also be restored back to the file of ld.CIT(A). We hereby set aside the order of the ld.CIT(A) and restore these appeals to the file of ld.CIT(A) for decision afresh in accordance with law. Decided in favour of Revenue for statistical purposes.
-
2015 (11) TMI 1290
Reopening of assessment - non communication of reasons for initiation of proceedings Held that:- We find that the Commissioner of Income Tax (Appeals) has stated in his order that no reasons for initiation of proceedings under section 148 of the IT Act, 1961 were communicated to the assessee. The Departmental Representative could not bring any material on record to controvert the finding of the Commissioner of Income Tax (Appeals) that the reason for reopening of the assessment was communicated to the assessee. Hence, following the decision of the Hon'ble Bombay High Court in the case of M/s. Trend Electronics (2015 (9) TMI 1119 - BOMBAY HIGH COURT), the appeals of the assessee are to be allowed and the reassessment orders dated in all the years under consideration is to be quashed. - Decided in favour of assessee.
-
Customs
-
2015 (11) TMI 1333
Denial of refund claim - Unjust enrichment - refund arising out of finalisation of provisional assessment - Held that:- Even in the case of CC Vs. Hindalco Industries Ltd. (2008 (9) TMI 372 - HIGH COURT OF GUJARAT AT AHMEDABAD) the Gujarat High Court only stated that no provision existed in section 18 of the Customs Act,1962 which would permit Revenue to invoke principles of unjust enrichment in relation to duty paid in excess, found to be so, upon finalisation of provisional assessment under section 18 ibid. While that was certainly the case, (i.e., Section 18 ibid did not expressly contain provision regarding unjust enrichment) the invocation of doctrine of unjust enrichment does not require the crutches of any section of any act in the light of the fact that the said doctrine was required to be invoked in all cases involving refund of duty in the wake of the judgement of Hon ble Supreme Court in the case of Mafatlal Industries Ltd. Vs. Union of India (1996 (12) TMI 50 - SUPREME COURT OF INDIA) which laid down the principles of unjust enrichment as law of the land. - doctrine of unjust enrichment is applicable even in respect of raw materials to be consumed it, settled by Supreme Court in the case of Union of India Vs. Solar Pesticides Pvt. Ltd. (2000 (2) TMI 237 - SUPREME COURT OF INDIA ). It is not in dispute that the burden to establish that the burden of duty has not been passed on to any other person squarely rests on the appellant. That burden cannot be deemed to have been discharged merely by saying that the price of the final products reduced after the import of the impugned goods because the price of the final product does not depend solely on the price of the impugned goods - No infirmity in impugned order - Decided against the assessee.
-
2015 (11) TMI 1332
Maintainability of appeal - aggrieved by the administrative action of the Ld. Commissioner appointing the officers for inquiry. - Held that:- it is an order for appointment of officers and the appellant cannot be aggrieved by the administrative action of the Ld. Commissioner appointing the officers for inquiry. - under the said provision, a notice shall be issued by Commissioner of Customs. In the present case also it is the notice in terms of Regulation 20(1) was issued and there is no provision under the said Regulation for passing any appealable order. Therefore, the Commissioner strictly following the Regulation 20(1) issued notice dated 24.04.2015 - notice dated 24.04.2015 being a notice for holding an inquiry cannot be appealed against. As regard order dated 24.04.2015 the same is only for the appointment of the Inquiry Officer and Presenting Officer and the same was meant for those officers only. Therefore, the same cannot be treated as the adjudication order and the appeal against which is not maintainable before this Tribunal. Under the CBLR, 2013, appeal can be filed only against the order of suspension or revocation of CBLR in terms of Sec. 146(2)(g) of Customs Act, 1962. Since in the present case, neither any order for suspension or revocation of the License was passed, the present appeal is not maintainable on this count also. We make further clear that the appellant has liberty to file appeal as and when any final order is passed after inquiry, therefore at this stage appeal is not maintainable against a notice for holding the inquiry - Appeal dismissed as not maintainable - Decided against assessee.
-
2015 (11) TMI 1331
Valuation - Demand of differential duty - whether the impugned order is correct in setting aside the OIO or otherwise in so far as relates to valuation of imported goods - Held that:- Lower appellate authority in her order nowhere discussed and rebutted as to how the findings of the adjudicating authority was not acceptable instead as per straightaway came to the conclusion that the payment made as per the agreement are to be added to the value of the imported goods as there must be clear cut evidence to show the know how fee is a condition of sale of goods. Whereas we find that the original authority has examined the contract agreement between CIRIA and the appellant. We perused the contract agreement dated 11.02.1994, between CIRIA SpA Italy and MMTCL India - both the conditions have been dealt in detail in the OIO passed by the adjudicating authority. We find that MMTCL is imported the goods under project imports and used the goods in the manufacture of final products which is called Z Blocks, and the same were supplied as per the original contract between to RIL & CIRIA. We also find that as per clause (6) of agreement between CIRIA and MMTCL, appellants have to make payment of 10% as a commission if the final products directly sold. In the present case, it is clearly brought out in the OIO that there is no direct sale of finished goods involved. The LAA without going into the details of contract and without examining the facts straight away ordered for loading of 14.8%. Therefore we hold that loading of value ordered by the LAA is not justified and liable to be set aside - Decided in favour of assessee.
-
2015 (11) TMI 1330
SEZ Unit - DTA Clearances - the allegation is that said materials were plastic waste and scrap classifiable under Heading (CTH) No. 39151909 of the Customs Tariff Act, and restricted items in the policy - Undervaluation of goods - Confiscation of goods - Imposition of redemption fine - Held that:- In the Test Report, CIPET observed that the sample is cut pieces of clear film with Paper Stickers. The Adjudicating Authority proceeded on the basis Report of the Customs Laboratory. We find that the Hon’ble Gujarat High Court in the case of Oswal Agricomm Pvt. Ltd. (2010 (7) TMI 712 - GUJARAT HIGH COURT ) on the identical situation observed that Report of CIPET, Ahmedabad cannot be ignored. In that case, the issue before the Hon’ble High Court is whether test report submitted by the Customs House Laboratory, Kandla has any overriding effect on the Reports submitted by the CIPET, Ahmedabad and Chennai - High Court had given a clear direction to consider the Report of the CIPET. In the present case, the Adjudicating Authority had not given any finding on the Report of CIPET. In our considered view, the CIPET Report is required to be considered, before going to the Customs House Laboratory Report. Hence, the impugned order cannot be sustained on this ground alone. - Impugned order is set aside - Matter remanded back - Decided in favour of assessee.
-
2015 (11) TMI 1329
Seizure of goods - Illegal import - allegation of smuggling of goods - Held that:- Ownership of the seized/confiscated goods is uncontested. Shri Dipak Chakraborty of Siliguri in his statement dated 26/06/2009 stated that he has booked 23 bundles of goods from Jalpaiguri to New Delhi under PW Bill No. D 3988885 on 4/06/2009. Respondents have produced trading invoices of the seized/confiscated goods which are not brand name wise. Due to non matching of brandwise description in the trading invoices and the bills of entry produced/statements recorded it is the case of the Revenue that seized goods are of smuggled nature. In this regard first appellate authority has correctly held that documentary evidences cannot override the oral statements. In this regard it is observed that CESTAT in the case of Manish Kumar Jain Vs. C.C., Chennai (2008 (3) TMI 574 - CESTAT, CHENNAI) has also held it to be so. So far as discrepancies in matching the details of the seized goods with the documents produced by the Respondents is concerned, following has been held by Bombay High Court in C.C. (P) Vs. Mahendra Singh Purohit (2007 (8) TMI 358 - HIGH COURT OF JUDICATURE AT BOMBAY) - Revenue has only raised suspicion on the origin of seized goods but has not discharged the burden as to how seized goods were of smuggled nature when Respondents have produced copies of trading invoices. In view of the above observations and the settled proposition law this bench does not find any reason to interfere with the order passed by the first appellate authority - Decided against Revenue.
-
2015 (11) TMI 1328
Denial of exemption claim - goods imported under DEEC Licence as transferee of the said licenses - Modvat Credit - Held that:- In the show cause notice there is allegation that manufacturer/exporter i.e. original licence holder has availed modvat credit and made wrong declaration in the export documents to the effect that no modvat credit was availed and as such violated the condition V(a) of Notification No. 203/92-Cus. However, it is undisputed facts that show cause notice has no base or infact no single document has been relied upon in the show cause notice that the manufacturer exporter made a wrong declaration on the export documents that no modvat credit was availed on the input used in the export goods, the entire proceedings is vitiated by the Revenue as it failed to prove that the declaration is incorrect. Allegation of charge is possible only by adducing tangible documentary evidences such as modvat invoices, modvat account in respect of input of manufacturer exporter. No such exercise was carried out in order to issue effective show cause notice. In view of this fact the show cause notice and the allegation made there under without support of any evidence cannot stand. - transferees import under legitimate transferred licence cannot be disputed on the ground that obligation casted on exporter manufacturer regarding non availment of Modvat credit was not satisfied. - Appeal of revenue is not maintainable - Decided against Revenue.
-
2015 (11) TMI 1327
Benefit of Notification No. 80/70-Cus dated 24.08.1970 - imported of goods as ‘private personal property’ or import to warranty replacement by companies or commercial organization - Held that:- benefit of notification is eligible even to the commercial organization also. - Decision in the case of Echjay Industries P. Ltd. [1994 (3) TMI 115 - HIGH COURT OF JUDICATURE AT BOMBAY] followed - Decided against Revenue.
-
2015 (11) TMI 1326
Waiver of pre deposit - Overvaluation to claim higher duty draw-back - Held that:- Allegation is regarding over-valuation of the readymade garments and diversion of garments exported to Russia. While the entire findings of the adjudicating authority proceeds on this basic allegation as also various documentary evidences which were produced before him, we find that the entire case needs appreciation of the evidences which is in paper book. At the same time we do find that the Tribunal at Delhi in the case of Hem Chand Gupta & Sons wherein identical issue was agitated in final order dated 12.01.2015 considered all the evidences and held in favour of the appellants therein. The findings of the Tribunal are recorded in para 21.1, 21.2 and 21.3. We also find that the Tribunal has recorded that the jurisdiction of DRI officers to issue show cause notice for recovery of improper draw back is incorrect and has also been dealt with at para 25.1, 25.2, 25.3 and 25.4 of the said order which is also one of the issue in appeal. The Tribunal has addressed to all the decisions put forth by the Revenue in various paragraphs and has also addressed to the fact that the demand for incorrect duty draw back can be raised only by a proper officer and DRI officer is not considered as a proper officer. - prima facie these appellants have made out a case for waiver of pre-deposit of the entire amount of interest and penalties imposed. - Stay granted.
-
2015 (11) TMI 1325
Classification of goods - Classification under Chapter Heading 8419 or 8443 - Exemption claim - Held that:- Commissioner (Appeals) went beyond the findings of the adjudicating authority and held that the exemption was applicable only to parts imported for initial installation/assembly or manufacture of machines when imported in complete form. We find that facts on record speak otherwise. The DGFT certificate endorses eligibility specifically to the parts imported. Even otherwise, there is no evidence forthcoming that the parts were not required for the initial setting up of the printing machine even if the parts were imported later. We also note that Notification No. 213/87 covered Headings 8419 as well as Heading 8443. However, this aspect has not been discussed by the authorities below. Nevertheless, without basing our decision on this fact, we have held above that the classification under Heading 8443 is more appropriate. - Decided in favour of assessee.
-
2015 (11) TMI 1324
Denial of refund claim - Excess duty paid - Held that:- Though the Revenue has filed appeal against this Tribunal order dated 5/9/2013 but no stay has been granted by Honble Mumbai High Court. It is also observed that implementing the Tribunal order, Revenue has already sanctioned the refund therefore I do not understand why the consequential relief of the refund i.e. interest should not be given to the assessee. Even as per the CBEC Circular No. 967/01/2013-CX dated 1/1/2013, if the Revenue is not in position to obtain the stay within three months from the date of order of the Tribunal, the order allowing refund should be implemented and refund should be granted. In the present case the refund has already been granted despite filing the appeal before the High Court therefore interest being piggy back of the refund should also be granted. - it is clear that without stay, order of the Tribunal has to be implemented which is the requirement of the principle of judicial discipline. I, therefore, do not find any infirmity in the impugned order; hence, the same is sustained - Decided against Revenue.
-
2015 (11) TMI 1323
Suspension of the licence - violation of Regulation 13(a) on the ground that neither the exporter nor the suspected middleman could be found at their available addresses and that the CHA also failed to follow Regulation 13(a), 13(k) and 13(o) by not obtaining authorisation from the exporter (as none was produced before the investigation officer), not maintaining the prescribed job register and not verifying the identity and antecedents of the exporter - Held that:- Personal hearing was granted after more than nine months after the date of suspension. Not only that, after completion of hearing, the Commissioner took almost seven months to issue the order. We are aware that the time lines prescribed by CBEC are advisory in nature and cannot be given status of mandatory time lines. However, even advisory time lines have certain sanctity inasmuch as if such time lines have been exceeded beyond all reasonable limits, with regard to completion of suspension proceedings, such proceedings will have to be held to be fatally vitiated, more so when such proceedings have a direct and adverse bearing on some-one's livelihood and freedom to pursue a profession. Here is the case where the hearing was granted nine months after the suspension order while the time limit was 15 days and order was issued almost seven months after the hearing while it was expected to be issued in about 15 days. - we do not find any justification in allowing the impugned order to remain alive - Decided in favour of appellant.
-
2015 (11) TMI 1322
Levy of penalty for abetting in Evasion of duty - import of newsprint at concessional rate of duty of 5% under Notification No. 21/2002 Cus - Held that:- Show Cause Notice brings out their role and required them to show cause as to why they should not be penalised under Section 112 of Customs Act, 1962. The impugned goods were imported at the behest of the proprietor of the appellants. The fact that the proprietor of the appellants paid ₹ 28 lakhs towards differential duty when he was not even the importer on paper also shows their involvement in the modus operandi to evade customs duty on import of newsprint. He was the sole purchaser of the entire quantity of impugned newsprint imported and as he has been dealing in the newsprint for a considerable period of time, he was fully aware that the impugned newsprint was imported at concessional rate of duty on actual user condition. - Mr. M L Gupta, proprietor of the two appellants abetted the smuggling of impugned goods which were liable to confiscation and was purchasing the said newsprint imported at concessional rate of duty. Thus, the appellants are clearly liable to penalty - Decided in favour of Revenue.
-
Corporate Laws
-
2015 (11) TMI 1317
Winding up petition - settlement of accounts - whether having regard to the emails exchanged it cannot be said that the company is not indebted to the petitioner? - Held that:- Both the agreements namely, the Distributorship Agreement 2009 and the Distributorship Agreement- Princeton 2011 clearly state that the company is a non-exclusive distributor of the petitioners. The company accepts that the said agreements are on a principal to principal basis and the company would be required to pay the price of the books sold and delivered at a discounted price. Moreover, nowhere in the agreements is it mentioned that the number of distributors that Random House could have was required to be limited, nor has there been any definition given to the ‘semi-exclusive distributor’. The allegation made by the said company that contracting with more distributors in the north and eastern zone, where they were conducting their distributorship is untenable. Terming this to be a premeditated conduct on the part of the petitioners to injure the business of the company and thus causing breach of contract amounting to a loss of 15 crore has no reasonable foundation. The matter regarding return of book s i.e. the RHI books which are in possession of MB at its warehouse in Delhi and Kolkata, has been duly considered by the petitioner in the legal notice issued by the attorney of the petitioner to the said company dated August 4, 2013. In the said notice, a solution has been suggested to SK Mehra with respect to the same. It is however seen that there has not been any confirmation received by the said company when in 2014 email, again the matter of sending the books back to RHI is asked by the company. However, despite the fact that both the distributorship agreements had already terminated owing to the failure or default in making timely payment, and that has also been acknowledged by the said company, the reason to wait for the confirmation of the petitioner seems groundless. . Prior to the issuance of the winding up notice there has been no contemporaneous document and material to show that the company has denied its liability and claimed damages. It has also been seen that the demand notices have been issued by the petitioner with respect to both Distributorship Agreement and Distributorship-Agreement-Princeton on June 17, 2013. In its reply the aforementioned allegations have been made. The said company has not been able to place any material, or document to substantiate any of the allegations later made by it. The said allegations are clear afterthought and made in order to avoid its liability. It can, therefore, be logically inferred that the disputes raised by the respondent company have been raised as afterthought and that the disputes were not raised contemporaneously. Thus, these are neither reasonable nor bona fide disputes and do not form substantial defence. The said company in any event has no defence for the amount admitted. The defence set up is illusory. The disputes sought to be raised by the said company is in the nature of afterthought and lacks bona fide and so in the present case the objection and contention cannot be sustained. In the present case it is evident that the denial by the company is motivated by an intention to evade payment. It is relevant to note that in the case of Ficom Orgarnics Ltd v. Laffans Petrochemicals Ltd. reported at (1998 (10) TMI 440 - HIGH COURT OF GUJARAT), after reaching the conclusion that the dispute raised by the respondent company against the petitioner's claim was not bona fide, time was granted to the company to pay the petitioner the claim amount.\ Having regard to the nature of the defence disclosed there cannot be any doubt that at least a sum of ₹ 1.38 crores was due and payable by the company to the petitioner. The company did not even raise any dispute contemporaneously and what emerges from the facts is that the defence raised and the claim made in defence to the action initiated by the petitioner were never raised at the relevant point of time or until the statutory notice was served upon the company. However, considering the plea that if in the arbitration proceeding the company is able to establish return of some books and adjustment thereof admit the petition for a sum of ₹ 60 lakhs. This amount is ascertained on a generous allowance being given to the company of all its grievances for rebate and SOR. The company has not been able to demonstrate before this Court that the Company is solvent enough to pay off the debts assessed in this winding up petition. Thus direct the company to furnish security for a sum of ₹ 60 lakhs to the satisfaction of the Registrar, Original Side, High Court, Calcutta on or before 15th December, 2015 which shall remain valid till the disposal of the arbitration proceeding
-
Service Tax
-
2015 (11) TMI 1357
Demand of service tax - advertising agency - amounts received as cash discount and incentives from media - Invocation of extended period of limitation - Held that:- Amounts received as cash discount and incentives were not liable to service tax since no service was provided by the advertising agency to the media, the Commissioner (Appeals) recorded that the incentives or cash discounts shown as commission in the balance sheet of the appellant were not liable to service tax. Aggrieved by the order, the revenue went in appeal before the Tribunal. The Tribunal while reversing the order passed by the Commissioner (Appeals), vide order dated 9.4.2013, Annexure A.9 recorded that the assessee was not assessed to service tax on any transaction involving sale of space for advertisement in print media. It was concluded that the activity of the appellant-assessee fell within the taxable service of “advertising agency”. - service tax amounting to ₹ 7,11,804.78 and Education cess of ₹ 3692.90 for the period 1.4.2001 to 31.12.2005 had been rightly imposed on the assessee-appellant besides recovery of interest on the confirmed demand - No illegality or perversity in the impugned order so as to call for interference by this Court - Decided against the assessee.
-
2015 (11) TMI 1356
Adjustment of excess payment of service tax with short payment - prescribed procedure of intimation to superintendent not followed - valuation - inclusion of reimbursement of expenses - held that:- Any expenses, which is reimbursed in connection with the provision of Consultancy Engineering Services should not be included in the gross value of taxable services. From the records and documents produced by the appellant, reimbursement portion and services charges of the services are clearly and distinctly identifiable. For that reason also the service tax is chargeable only on the gross value of taxable services which shall not include the reimbursement of various expenses. Evan as per the Valuation Rules, it is the gross value of the taxable services which shall be chargeable to the service tax. Gross value of taxable could not be interpreted in a manner by which other expenses which is over and above the distinct services charges can included in the gross value. This Tribunal and Hon'ble Courts in the cited judgments have clearly held that reimbursement of various expenditures incurred by the service provider should not be included in the gross value of service. Respectfully following ratio of judgments cited by the Ld. Counsel and as per our above observations, we are of the considered view that reimbursement shall not be taxable and demand on such reimbursement is not sustainable. Even though appellant have not specifically intimidated to the Superintendent in this regard but adjustment was declared in their ST3 returns, accordingly intimation of such adjustment stand made to the department. Even if it is considered that the said procedure was not strictly adhered to, at the most it is a procedural lapse, merely for this procedure lapse the fact that the excess amount was paid could not be deviated. Moreover, amount which was paid in excess, is neither the service tax nor an amount which was payable by the appellant, therefore in any case the said amount cannot be permitted to be retained by the government. The only option is either to refund that amount or allow adjustment. In our view, the adjustment is very appropriate and favourable to Revenue as compared to the refund. - Adjustment is legal - Decided in favour of assessee.
-
2015 (11) TMI 1355
Waiver of pre deposit - Manpower Supply service - centralized group company providing various services to other group company - MPCMS is providing personnel to MFL and other group companies - Held that:- According to the agreement between MPCMS and MFL in under terms and conditions, it is provided that MPCMS shall provide necessary personnel to the first party for its day-to-day operation and shall supervise and manage them as required by the law. The personnel will be considered and treated as employees of MPCMS and MFL shall in no way be responsible for their conduct, remuneration, service conditions, welfare etc. This clause alone would show that as claimed by the learned AR, according to the agreement the activity is one of Manpower Supply. Appellant does not have a prima facie case. However having regard to the nature of transactions and keeping in mind that the services have been provided only to the group companies and in some cases service has been provided free, we consider that if the appellant deposits an amount of ₹ 5,00,00,000/- (Rupees Five Crores only) which is much less than the demand for the normal period plus interest and less than 10% of the total demand involving service tax, interest and penalty - Partial stay granted.
-
2015 (11) TMI 1354
Denial of refund claim - export of services - Invoices were raised in the name of division of the assessee - contravention of the condition of Notification No. 17/2009-ST - invoices against which refund was claimed are not in the name of respondent company - Held that:- Even though the service invoices of barge issued in favour of the division and the payment made by that division and transaction bills to the respondent company only and there is no any other entity therefore it can not be said that division and the company have separate status. When once the Appellant has clarified that M/s. Greater Ferromet is their Division and has given legal proof for the same, the refund claim cannot be denied. Department has also not been able to dispute that M/s. Greater Ferromet is not a division of the Appellant. In such circumstances, rejection of the claim does not stand to reason. Refund has to be granted to the Appellant. - Decided in favour of assessee.
-
2015 (11) TMI 1353
Levy of interest and penalty on reversal of CENVAT credit - they had only taken the CENVAT credit erroneously but had sufficient balance in their account of CENVAT credit - Held that:- date 1.4.2012 is the watermark i.e., the activities and the operations of an assessee (manufacturer or service provider) have to follow the provisions of Rule 14 of CENVAT Credit Rules as they existed then (before 1.4.2012); and after 1.4.2012 when the subject amendment was made, an assessee would be entitled to the benefit as provided by the said amendment. The Hon’ble Supreme Court in the case of UOI vs. Ind-Swift (2011 (2) TMI 6 - Supreme Court) and Hon’ble High Court of Bombay in the case of CCE, Pune-I vs. GL & V India Pvt. Ltd. (2015 (5) TMI 375 - BOMBAY HIGH COURT) make the position clear that one cannot do away with the wording ‘OR’ as appeared in Rule 14 twice prior to the watermark date 1.4.2012 and one cannot replace the said wording ‘OR’ with the wording ‘AND’ and reading it so. Respondent viz., Commissioner of Central Excise and Service Tax, LTU, Bangalore has not been given any evidence other than the fact of taking wrong or erroneous CENVAT credit to prove appellant’s intention to evade payment of service tax. When no intention to evade payment of service tax is proved beyond doubt it will not be right to impose penalty on the appellant under Section 78 read with Rule 15(3) of CENVAT Credit Rules, 2004. Consequently on the issue of penalty, the appellant deserves relief and the impugned order in respect of penalty imposed on the appellant is hereby set aside. - appeal does not succeed on the issue of interest but the appellant will get relief on the penalty part as the penalty imposed on them has been set aside by this order. - Decided party in favour of assessee.
-
2015 (11) TMI 1352
Restoration of appeal - Appeal dismissed for non compliance of pre deposit order - Held that:- The ratio of the Apex Court decisions [2002 (12) TMI 87 - SUPREME COURT OF INDIA], [1985 (5) TMI 215 - SUPREME COURT OF INDIA] and High Court order [2010 (12) TMI 698 - MADRAS HIGH COURT] is directly applicable to the facts of the present case. It is pertinent to state that the applicant was supposed to comply with the order dated 18.11.2014 on 24.01.2015 but has not complied the said order not challenged it but initially sought for extension of time for compliance. The miscellaneous application was filed before this Bench only on 06.02.2015 after the expiry of due date and again on 17.07.2015. In view of the foregoing discussions and by respectfully following the Apex court decisions and Hon'ble High Court orders discussed, we do not find any apparent and manifest mistake to exercise the powers to recall the miscellaneous order dated 24.04.2014 as pleaded by the applicants. However, we allow the applicant a further period of 4 weeks as a last chance to comply the stay order - Decided partly in favour of assessee.
-
2015 (11) TMI 1351
Waiver of pre deposit - Denial of benefit of Notification No.16/2005-ST - benefit of Notification No. 16/2005 was denied only because the Jetty was for the private use of M/s RGPPL and not for common/general use of port facilities - Held that:- In the said notification no distinction is sought to be made between a public port and a private port. The adjudicating authority cannot alter the amplitude of an exemption notification. Thus, the appellant has been able to make out a good case for full waiver of pre-deposit of demand (Rs.43,74,86,035/-) relating to CICS. Consulting Engineer Service - reverse charge mechanism - Held that:- Prima facie the value of the goods supplied cannot be included in the value of service rendered by WOGL - once the goods are removed from the scope of work as per the sub-contract, the remaining will be a bouquet of services which taken in totality would be classifiable under CICS in terms of Section 65A ibid and not under Consulting Engineer Service as values of individual services are not ascertainable inasmuch as the payment is as per the milestone payment schedule attached to the sub-contract. However, we find that in the case of Alstom Projects India Ltd. (supra) it has been held that even such contracts can be vivisected. Although the ld. advocate for the appellant tried to distinguish the said judgement on the ground that in case of Alstom Projects India Ltd., it was admitted by the appellant that the milestone payments reflected the value of the goods or services rendered, no such admission exists in the present case, prima facie the judgement being on a similar issue at this interlocutory stage due weigtage has to be given to the said judgement for the purpose of determining the reasonable amount of pre-deposit. Prima facie the value of the goods has to be deducted to arrive at the value of the bouquet of services and the value of Consulting Engineer Service will be only a part of the value of such bouquet of services. Thus, we are of the opinion that while the appellant has not been able to make out a good case for full waiver of pre-deposit of the demand relating thereto Consulting Engineer Service specially in the wake of the judgement in the case of Alstom Projects India Ltd. (2011 (3) TMI 538 - CESTAT, NEW DELHI ), taking an overall view a pre-deposit of ₹ 1.3 crores will meet the requirement of Section 35F of the Central Excise Act, 1944 read with Section 83 of Finance Act, 1994. - Patial stay granted.
-
2015 (11) TMI 1350
Denial of refund claim - Bar of limitation - Held that:- Respondent filed refund claim consequential to the dropping of demand under adjudication order dated 27/11/2009. Since the matter of demand was sub-judice before the adjudicating authority the respondent neither could have filed any refund nor the Revenue could have disposed of such refund. After passing of the adjudication only it was confirmed that the amount deposited by them was not payable and accordingly it matured for refund to the respondent. Therefore, filing of refund within three months from the date of adjudication order under which the demand was dropped is not time-barred. - refund arose out of the adjudication order and the same was filed within three months from the date of such order and hence it is not time-barred - it is apparent that test of unjust enrichment has not been passed either during adjudication of the refund or at the stage of lower appellate authority - Matter remanded back - Appeal disposed of.
-
2015 (11) TMI 1349
CENVAT credit on steel items used for fabrication and erection of hoardings, central medians, bus shelters and unipoles which are erected for fixing advertising hoardings for the purposes of display of advertisements. - movable goods or not - Held that:- Even though photographs were produced on going through the photographs, it is difficult to come to a conclusion. Nevertheless it is quite clear that the issue is debatable and on this ground itself extended period could not have been invoked since two ways are possible. It was pointed out by the learned AR that Hon ble High Court of Bombay in the case of Bharti Airtel Ltd. Vs. CCE, Pune-III [2014 (9) TMI 38 - BOMBAY HIGH COURT] in somewhat similar circumstances has held that CENVAT credit would not be admissible - Therefore for the normal period, it has to be held that appellant is not eligible for the benefit of CENVAT credit. Since the issue is a debatable one and arguable one and in view of the fact that extended period has been held as not invokable, in my opinion, penalty cannot be imposed. In view of the above discussion, the demand for CENVAT credit within the normal period with interest is upheld and penalty and demand for the period beyond the normal period are set aside. - Decided partly in favour of assessee.
-
2015 (11) TMI 1348
Denial of CENVAT Credit - whether the demand of ₹ 33,619/- under Rule 6(3)(b) equal to 8% value of the trading activity in terms of Rules 6(3)(b) is correct or otherwise and whether penalty of ₹ 1,63,370/-imposed under Section 78 in respect of denial of Cenvat Credit availed before the payment of Service value to the service provider is legal and correct or not - Held that:- Credit was disputed only due to the reason that same was availed before the payment of service value to the service provider by the appellant however, in principle, the credit was very much admissible to the appellant which the appellant on pointing out discrepancy, immediately paid the amount. There was no malafide intention to evade the service tax by the notice and their only lapse was that they availed said credit before the payment of service value to the service provider, which they made goods by making payment of service tax amount along with interest. I find that explanation given by the original authority is satisfactory in invoking Section 80 for dropping the penalty proposed under Section 78. Therefore the Ld. Commissioner’s observations in the impugned order that there is no justification are erroneous and incorrect. In view of this, I set aside the penalty - Decided partly in favour of assessee.
-
2015 (11) TMI 1347
Waiver of penalty - Cenvat credit - Credit availed for both exempted and non exempted services - Non maintenance of separate accounts - Held that:- Appellant M/s. IIT is reputed Technical Education Institute of Government of India, therefore, there cannot be malafide intention for the reason that there is no individual who can be benefitted by taking wrong Cenvat credit. Therefore, malafide intention does not exist. - issue involved is wrong availment of Cenvat credit due to reasons that either some of the input services were not used in the taxable output services or input services are not admissible input services in term of definition of input services. We considered that the institution is one single entity and carrying out various activities related to education as well as scientific analysis simultaneously where some of the services are taxable and some are exempted or not liable to service tax. The appellant have declared the entire Cenvat credit availed by them to the department. In view of this fact, the appellant made out fit case for waiver of penalty under Section 76 invoking Section 80 of Finance Act, 1994 - However, penalty on Section 77 is upheld - Decided partly in favour of assessee.
-
2015 (11) TMI 1346
Valuation - Construction Services (CS) / Commercial or Industrial Construction Service - Completion and Finishing Services - benefit of abatement under Notification No.15/2004-ST dated 10.09.2004 and Notification No.1/2006-ST, dated 01.03.2006 - Held that:- From the sample scrutiny of work-orders provided by the appellants, it is evident that they were providing various interior services such as wooden & metal partition, plastering, painting, civil work, joinery items, floor & wall tiling and other similar services in respect of buildings or civil structures or part thereof. The item rates in the work-orders were inclusive of cost of material. In the light of the type of activities which are covered under the scope of completion and finishing services as per the definition quoted above, there hardly remains any doubt that the services rendered by the appellants were more appropriately covered under the scope of completion and finishing services, and therefore, the abatement of 67% under Notification No.15/2004-ST or No.1/2006-ST is clearly inadmissible as completion and finishing services have been expressly excluded from the coverage of the said Notification. To claim exemption under Notification No.12/2003-ST it is not necessary that invoices should separately indicate the value of the goods sold and the benefit of the said notification can be granted when there is transfer of possession of goods - Matter remanded back - Decided in favour of assessee.
-
Central Excise
-
2015 (11) TMI 1345
Duty demand - MODVAT Credit - Adjustment of tax - Held that:- While issuing the demand notice, payment of ₹ 20,128/- through PLA as also modvat credit of ₹ 11,40,188/- has already been taken into consideration. The demand in respect of the said clearances amounting to ₹ 9,41,109/- has been arrived after extending the said benefit. Thus, we agree with the contention of the Revenue that this has resulted in the adjustment of the paid amount twice. We, therefore, order that the duty paid should be considered as ₹ 10,00,000/- + ₹ 6,10,337/- (Rs.17,50,525/- - ₹ 11,40,188/-) extending the said benefit, the net duty leviable will be ₹ 40,38,454. Revenue contends that modvat credit against payment of CVD cannot be extended as the same had been disallowed by order-in-original dated 9.10.2011. We have seen the said order-in-original. In the said order-in-original, the Revenue has already proposed recovery of the said amount. The respondent-assessee has taken the credit of the said amount only once. We, therefore, do not see there is any adjustment of modvat credit against duty payable. Entire ship does not consist of M.S. alone and the Commissioner has given a deduction of 10% towards erections and fitments for constructing ship, cabin crew etc. The Revenue is submitting that in the calculation, a benefit of 326.740 MT of firewood has already been given. Firewood and erection and fitments for constructing ships cabin crew etc. are different things. A lot of wood is used in the ship even for proper storage of the goods etc. In view of the said position, we do not find any merit in the contention of the Revenue to disallow 10% deduction towards erecting and fitment for constructing ship cabin crew etc. - penalty under Section 11AC has been imposed which is required to be equal to the duty imposed. Accordingly the penalty imposed under Section 11AC is also increased - Decided partly in favour of Revenue.
-
2015 (11) TMI 1344
Denial of refund claim - remission of duty - damaged / destroyed goods - Misdeclaration of value - Held that:- Before clearance of the goods and during the process of loading, one of the drums fell down as a result of which its content got damaged and as a result of this the consignment itself was not despatched and the same was dispatched subsequently under the invoice no. 1815 dated 31/3/2003. There is also no dispute at the time of clearance of the goods under invoice no. 1815 dated 31/3/2003 the duty had been paid once again. From this, it is clear that in respect of the second drum for which the appellant had not claimed any reimbursement from the insurance company the duty had been paid twice. In our view, the provision of Rule 16 of the Central Excise Rule, are not applicable as the goods had been damaged when the same were being loaded in the factory. In view of this, we hold that there is no infirmity in the Commissioner (appeals) order sanctioning the refund. - Decided in favor of assessee. If prior to the period of supply, the rate at which the goods were to be supplied had been decided and the same was reduced only subsequently, the judgment of Apex Court in the case of MRF Limited Vs. CCE Madras [1997 (3) TMI 104 - SUPREME COURT OF INDIA] would be applicable and the respondent would not have eligible for refund. For ascertaining this factual position, the matter has to be remanded - while the Commissioner (appeals) s order in respect of the refund claims of ₹ 26,702/- and 1701/- is upheld his order in respect of the refund claims of ₹ 1,48,253 and 87,479/- is set aside and the matter is remanded to the original adjudicating authority for de-novo adjudication - Decided party in favour of Revenue.
-
2015 (11) TMI 1343
Clandestine removal of goods (chocolates ) - Destruction of the sample - drawing samples, without payment of Central Excise duty for in-house testing of quality of the goods manufactured and without following any procedure under the Central Excise law, on hourly basis, daily for all the 3 shifts - Penalty u/s 11AC - Held that:- There is no finding of any misstatement and/or contumacious conduct and/or suppression of the records by the appellant-assessee. Further, I find that proper records have been maintained of the drawal of samples in the usual course of business. Only for the sake of absence of a column mentioning the date of destruction of the sample, without there being any finding as to clearance or sale of any sample products by the assessee, no adverse inference can be drawn based on presumptions and assumptions. In this view of the matter, I set aside the impugned order. - Decided in favour of assessee.
-
2015 (11) TMI 1342
Duty demand - Failure to make payment of duty on due dates - violation of sub-rule 3A of Rule 8 of Central Excise Rules, 2002 - confiscation under the provisions of Rule 5 of the Central Excise Rules, 2002 - penalty be imposed under Rule 25/27 of the Central Excise Rules, 2002 - Held that:- penalty under Rule 25 can be imposed only on satisfaction of pre-condition, the condition laid down for the penalty under Section 11AC of the Act. As the return (TR-6) was filed, is recorded in the impugned order, the ingredients of Section 11AC are absent. Accordingly, I set aside the penalty imposed under Rule 25 of Central Excise Rules. However, the assessee will be liable to penalty under Rule 27 of the Act for an amount of ₹ 5000/-. Further, I hold that the SMB ruling in the case of Shivam Pressings (2015 (7) TMI 581 - CESTAT MUMBAI) as per incurium as the same has been passed ignoring the condition precedent contained in the Rule 25 itself. - Decided in favour of assessee.
-
2015 (11) TMI 1341
Evasion of duty - unaccounted manufacture - clandestine clearances of Gutka - Confiscation of goods - Held that:- Appellant has not dealt with any excisable goods inasmuch as he has neither acquired possession of any excisable goods nor he is in any way concerned in transporting, removing, keeping, depositing, concealing, selling, or in any other manner dealing with excisable goods which he knew or had reason to believe are liable for confiscation. The Appellant’s alleged activity would at the most amount to abetment of duty evasion which as discussed above is not covered by Rule 26. Therefore, the penal provisions of Rule 26 are not attracted in the case of the appellant for his alleged act of fabrication of documents to give legal cover to illicit income of M/s. Shyam Traders. Rule 27 provides for penalty up to the maximum limit of ₹ 5000/- for breach of the Central excisable goods where no other penalty is prescribed. For invoking Rule 27 there must be a breach of Central Excise Rules and in the present case, the department has not spelled out as to which the provision of Central Excise Rules has been contravened by the appellant. There was allegation of clearance of finished goods without payment of duty as well as availing CENVAT Credit fraudulently on the basis of bogus invoices procured from Registered Central Excise without physically receiving any raw material against these company and in this case, Shri Sanjay Vimal Bhai Deora was sought to be penalized under Rule 26 for being concerned in clearance of the goods without payment of duty. But in the present case, the appellant Shri V.K. Tulsian, Chartered Accountant had absolutely no role in illicit clearance of the gutka without payment of duty by M/s. Shyam Traders. - Imposing penalty of ₹ 50 lakh on the appellant is not sustainable. The same is set aside - Decided in favour of assessee.
-
2015 (11) TMI 1340
Imposition of penalty u/s 11AC - differential duty was paid suo motu as pointed out by the Audit Team without disputing liability - Clearance of goods to sister concern much prior to issue of show-cause notice - Clearance of goods in unpacked condition - malafide intention - Section 11A(2B) - Held that:- Goods were cleared by the appellant which was input for the consignee sister concern therefore the valuation was governed by Rule 8 of Central Excise Valuation Rules, 2000 which provides the valuation i.e. 110% of cost of manufacturing. The goods were cleared in July, 2007 and the appellant has calculated the cost of manufacturing on the basis of data for the financial year, 2006-2007 which is the correct procedure. However the appellant was supposed pay the differential duty if it arise due to enhancement of the cost on actual basis which cannot be worked out before completion of the financial year 2007-2008. In such procedure the appellant can pay the differential duty only some- where-in September - October, 2009 when the Balance Sheet is audited and annual report is submitted to the Income Tax department. In the present case the audit was conducted in the months of September - October, 2009 and on pointing out the discrepancy of valuation, the appellant suo moto paid the duty along with interest. Case of the appellant is squarely covered by Section 11A(2B), according to which the appellant should not have been issued any show-cause notice, as a result no penalty could have been imposed. I also agree with the learned Counsel of the appellant that show-cause notice has not alleged that the omission and commission of the appellant falls under the 4 corner of the ingredients of provision to Section 11A such as suppression of fact, mis-declaration, fraud, collusion, etc. with intent to evade payment of duty. - Decided in favour of assessee.
-
2015 (11) TMI 1339
Claiming area based exemption after availing full duty exemption under SSI exemption Notification No. 8/03-CE - Initially Assessee had not opted for Notification No. 50/03-CE - appellant crossed the SSI exemption limit on 3/11/09 and immediately thereafter, they started availing of full duty exemption under 50/03-CE. However, there is no dispute that at that stage, the appellant did not file any declaration or submitted any intimation to the Department, and that they have started availing of this exemption without filing the declaration - whether the benefit of this notification would be available only w.e.f. 28/6/10 or would be available from 04/11/09 - Held that:- In view of the Circular of the Board, we hold that the basis for denying the exemption on the ground that the declaration was filed after 31/3/10, is not correct. Exemption would be available only from the date from which the declaration is filed and, therefore, the exemption cannot be extended for the period prior to filing of this declaration. Moreover, the condition of filing declaration is designed to prevent the misuse of the exemption notification and to enable the Jurisdictional Assessing Officer to examine as to whether the assessee is eligible for benefit of this exemption notification or not. Therefore, the filing of this declaration cannot be said to be a pure procedural or technical requirement. It is well settled law that when a notification subject to some condition and that condition has been put to prevent the misuse of the exemption notification, non fulfilling of that condition cannot be treated as a mere procedural or mere technical violation and would result in denial of exemption. - exemption Notification No. 50/03-CE would be available to the appellant only w.e.f. 28/06/2010 and not for the period prior to 28/06/2010. The appeal is thus partly allowed. - Decided partly in favour of assessee.
-
2015 (11) TMI 1338
Refund claim u/r 5 of unutilized Cenvat Credit - respondent is not satisfying the clause 2(h) of Notification 27/12-CE(NT) dated 18.06.2012 - Held that:- None of the findings of the Commissioner (Appeals) mentioned above has been disputed except stating that condition under clause 2(h) is mandatory. In my view the finding of the Commissioner that the appellant has debited the amount in the Cenvat credit account on 01.07.2003 i.e. on the date of filing of the refund claim satisfied the said condition. The fact that the details of the same have not been reflected in the ER-2 or in the application filed will not make any difference. In any case, all the information was provided to the Revenue before the decision of the case and there is no possibility of any manipulation etc. - infirmity in the order passed by the Commissioner (Appeals) - Decided against Revenue.
-
2015 (11) TMI 1337
Benefit of Notification No.30/2004-CE - Reversal of CENVAT Credit - Non fulfillment of condition of notification - Held that:- Appellants have fulfilled the conditions of the notification and therefore, they are eligible for the benefit of the said notification. Any violation of sub-rule (3) of Rule 11 of the CENVAT Credit Rules 2004 should invite necessary action under Rule 14 & 15 of CENVAT Credit Rules 2004 only and cannot be extended to the extent of denying the benefit of the substantial notification for that mere reason. We therefore, do not find force in the findings of the Adjudicating authority in this respect in the impugned order. The same cannot be sustained. - Impugned order is set aside - Decided in favour of assessee.
-
2015 (11) TMI 1336
Reversal of CENVAT Credit - Notification No.30/2004-CE, dt.09.07.2004 - Held that:- Appellant opted for the benefit of Notification No.30/2004-CE on 01.08.2005. They reversed the credit on the inputs lying in stock, and also cleared the finished goods in stock on payment of duty. Therefore, they had met with the conditions of notification on the date of opting for the benefit of notification. They did not take any fresh credit on the inputs received subsequent to the said date. These facts are not disputed. The bone of contention is regarding the excess credit the appellant had in their account on 01.08.2005. There were no instructions or legal requirement to expunge (lapse) the said excess credit on 01.08.2005. However, by introduction of sub-rule (3) of Rule 11 of the CENVAT Credit Rules 2004 on 01.03.2007, such provisions to lapse , such excess credit was introduced. - Appellants have fulfilled the conditions of the notification and therefore, they are eligible for the benefit of the said notification. Any violation of sub-rule (3) of Rule 11 of the CENVAT Credit Rules 2004 should invite necessary action under Rule 14 & 15 of CENVAT Credit Rules 2004 only and cannot be extended to the extent of denying the benefit of the substantial notification for that mere reason. We therefore, do not find force in the findings of the Adjudicating authority in this respect in the impugned order. The same cannot be sustained. - Impugned order is set aside - Decided in favour of assessee.
-
2015 (11) TMI 1335
Rectification of mistake - Held that:- Tribunal had given the detailed finding for nonapplicability of the case laws as cited by the Appellant. It has also followed the decision of the Larger Bench of the Tribunal in the case of Spenta International Ltd (2007 (8) TMI 25 - CESTAT, MUMBAI) - Tribunal, after considering the facts of the case, had come to a conclusion that the Applicant used the capital goods for manufacturing the exempted finished goods. This is supported by the statement of Shri Nalin Desai, Chief Manager of the Applicant. - factual dispute on use of capital goods and non-consideration of the case laws as relied upon by the Applicant and follow the decision of the Larger Bench of the Tribunal, are debatable issues and therefore, it cannot be a mistake apparent on the face of records. It is well settled that the Tribunal is not empowered to review/recall its earlier order and substituting the same by a different order. - No merit in appeal filed - Decided against Assessee.
-
2015 (11) TMI 1334
Excess material found during search in the premises of Job worker - appellant has not recorded the excess goods in their statutory records - contravention of the provisions of Rule 15 of Cenvat Credit Rules, 2004 read with Rule 25 of the Central Excise Rules, 2002 - Confiscation of goods - Imposition of redemption fine and penalties - Held that:- On plain reading of the said Rule, the Rule is applicable when the assessee takes Cenvat Credit on inputs/ capital goods. The facts of the case are such that the appellants have not taken cenvat credit on inputs. Therefore, Rule 15 of the Cenvat Credit Rules, 2004 is not applicable to the facts of the case as appellant have not taken any cenvat credit either wrongly or in contravention of the provisions of any Rule. Therefore, I hold that goods in question are not to be held liable for confiscation under Rule 15 of the Cenvat Credit Rules, 2004. - provisions of Rule 25 are attracted if there is violation of provisions of section 11AC of the Central Excise Act, 1944. Provisions of Rule 25 of Central Excise Rules 2002 cannot be invoked for confiscation of the goods in the subject matter as held by this Tribunal in the case of BMW Steels Ltd. (2010 (10) TMI 885 - CESTAT, NEW DELHI) and in the case of Sadashiv Ispat Ltd. (2010 (1) TMI 500 - PUNJAB & HARYANA HIGH COURT). Therefore, I hold that the provisions of Rule 15 of Cenvat Credit Rules, 2004 and Rule 25 of Central Excise Rules, 2002 are not applicable to the facts of cases in hand, consequently, the confiscation of the goods in question is set aside, hence no redemption fine and penalty are imposable on the appellants - Decided in favour of assessee.
-
CST, VAT & Sales Tax
-
2015 (11) TMI 1321
Disallowance of the claim of Input Tax Credit (ITC) - pre-requisite for denying ITC under Section 18 - Exemption of tax - Rajasthan Value Added Tax Act, 2003 - charging of interest under Sections 18, 22 and 55(4) - Held that:- There is difference between exempted goods, i.e., goods on which no Value Added Tax is payable and are, therefore, not taxable and other cases where a particular transaction when it satisfies specific condition is not taxable. In this regard reference to the authority in State of Tamil Nadu v. M.K. Kandaswami others [1975 (7) TMI 123 - SUPREME COURT OF INDIA], would be seemly, for this Court had adverted to three distinct concepts; taxable persons, taxable goods and taxable events and how they were distinguished. - When the goods are exempt, there would be no taxable transactions or exemption to a taxable person. In other cases, goods might be taxable, but exemption could be given in respect of a taxable event, i.e., exemption to specified transactions from liability of tax or exemption to a taxable person, though the goods are taxable. Such exemptions operate in circumscribed boundaries and not as expansive as in the case of taxable goods. Exemptions with reference to taxable events or taxable persons would not exempt the goods as such, for a subsequent transaction or when the goods are sold or purchased by a non-specified person, the subsequent transaction or the taxable person would be liable to pay tax. It is, in this context, it has been highlighted by the respondent and, in our opinion, absolutely correctly that Section 4 of the Act provides for levy of tax in a situation where the goods, which were not exempted but could otherwise not be subjected to tax on account of exemption granted to a person or to a transaction. The goods remain taxable goods through exemption stands granted to a particular individual or a specified transaction. Appellant though exempted from payment of tax, subsequent transactions of sale of asbestos cement sheets would be taxable. The transaction of sale by the manufacturer/dealer covered by the exemption notifications issued under Section 8(3) of the Act would be protected or an exempted transaction, but the goods not being exempted goods would be taxable and could be taxed on the happening of a taxable or charging event. It is simply because the goods are not exempt from tax or exempted goods, but are taxable. As a logical corollary it follows that the Value Added Tax would have to be paid on the taxable goods in a subsequent transaction by the purchasing dealer. As a sequitur, we are obliged to observe that if the contention of the appellant is to be accepted, the respondent though covered by exemption notification under Section 8(3) of the Act could be at a disadvantage because finally when the subsequent sale is made by a non-exempted dealer or tax stands paid on the non-exempted transfer, the goods, i.e., asbestos cement sheet, would suffer the tax on the entire sale consideration. This would place an exempted manufacturer-dealer at a disadvantageous position and make his products uncompetitive inspite of the exemption notifications under Section 8(3) of the Act. Credit allowed - Decided against Revenue.
-
2015 (11) TMI 1320
Benefit of Form ST 35 for the sales made to buyers outside Delhi, which has resulted in enhancement of turnover - Levy of penalty & interest u/s 56 - Reopening of assessment - Held that:- No indication that the amended Form also stood notified in the gazette, what is similar to both cases is that the Department failed to print the amended forms for issuance to the dealers. As has been discussed hereinbefore, a very detailed procedure has been prescribed under Rule 8 of the DST Rules for issuance of the Forms. It is not as if a dealer can simply print out a form and begin using it. The assessing authority has to be satisfied that the purchasing dealer is entitled to such a Form. The Forms are maintained in serial numbers and the assessing authority has to keep a complete record of all the Forms being issued to various dealers. - on the strength of the registration certificate that was still unamended, it was open to the Assessees to make the purchases by using the authorisation under Form ST-37A as it turned out that the amended Forms were issued only with effect from 27th June 2000. Therefore, even if the Assessees had approached their ward authorities to get the Form ST-8 in its amended version (which had replaced Form ST-37A) such amended Forms would in fact have not been available. There was not even any press note, circular or notification issued to the dealers about the availability of such amended ST-8 Forms. This was not a case of making a false declaration. The Appellants were issued Form ST-35 and ST-35/1 and declarations were given in both forms, which at the time of making of these declarations, could not be held to be false declarations. Another decision which is relevant in this context is MMTC v. State of Orissa [1986 (1) TMI 377 - ORISSA HIGH COURT] where again it was observed that when the Form is not amended by the time of furnishing the declaration it was impossible on the part of the Assessee to furnish a declaration in the amended Form. - Clause 7A refers to Rule 23A(2) which provides that where a dealer purchases goods on the strength of the registration certificate issued under Rule 16 and against Form ST-35(1) but utilises such goods not by way of sale but for a purpose other than that mentioned in Rule 11(XXXIVA) then the purchase price would be included in his taxable turnover. However, Rule 23A(2) itself is not applicable because the condition laid down for its applicability did not exist. In other words, with Form ST-37A not being formally withdrawn and in fact the authorisation being continued to be issued, it was impossible for the dealers to comply with the requirement of the amended provisions and on the one hand with the department issuing the old unamended Forms, the dealers could not be faulted for making declarations in the unamended Forms. Majority opinion was in error in upholding the levy of interest and penalty under Section 56 of the DST Act. In this context, reference made to the decision of the Supreme Court in J.K. Synthetics Ltd and Birla Cement Works v. Commercial Taxes Officer and State of Rajasthan [1994 (5) TMI 233 - SUPREME COURT] which holds that if the original assessment is accepted and the dealer has paid tax in terms of that return, the levy of interest will not be justified. The levy of penalty was in any event not justified. The imposition of penalty is not automatic even assuming that the reassessment was justified. The fact that there was a dissenting opinion by one of the Members of the Tribunal, does indicate that it is not a case of concealment of particulars but a case where there is a possible interpretation in favour of the Assessee. Assessing authority was seeking to do by invoking Section 24 of the DST Act was to review the earlier order passed by him earlier after having realised that the Assessees ought not to have furnished the declarations under the unamended Forms in ST-35 in respect of the inter-state sales. There is a distinction between the reopening of an assessment under Section 24 of the DST Act and the exercise of revisionary powers by a superior officer under Section 46 of the Act. Thus a Commissioner could form the opinion that the order of an assessing authority is prejudicial to the interests of the Department. In other words, Section 24 cannot substitute for the power exercisable under Section 46 of the Act. A mistake in the original assessment will not by itself constitute a justification for reopening of the assessment particularly where all the material facts were already known to the assessing authority. Secondly, the statutory requirement of recording the formation of an opinion about turnover escaping assessment by the tax by the assessing authority is mandatory. Thirdly, the question whether there was ground for reopening the assessment is not a matter for inference reference. There is a mandatory requirement that there must be a written note on the file by the assessing authority recording satisfaction that there existed grounds for reopening the assessment within the meaning of Section 24 of the DST Act. This again cannot be a mechanical reproduction of the provision. If there is no such recording of satisfaction by the assessing authority, the inevitable result is invalidation of the entire reassessment proceedings. - Decided in favour of assessee,
-
2015 (11) TMI 1319
Classification of goods under Assam VAT - ayurvedic medicines or cosmetics and toilet preparations - Goods fall under Entry 1 of the Fifth Schedule or Entry 21 of the Fourth Schedule - Held that:- Drugs and medicines clearly falls within the purview of entry 21 of the Fourth Schedule to the Act of 2003 and as such, taxable at four per cent on MRP basis. The Explanation which was added to the aforesaid entry No. 21 by notification dated July 29, 2005 states that expression "drugs and medicines" should not include products capable of being used as cosmetic and toilet preparation including toothpaste, tooth powder, cosmetic and toilet articles and soaps. - Explanation, however, lays emphasis on the term "shall not include" and the same is designed to exclude the goods which are primarily cosmetic in use but have a subsidiary use as drugs and medicines. However, when some goods which are drugs and medicines in their primary use but have cosmetic use as well cannot be treated as product covered by entry 1 of the Fifth Schedule. - products which are involved in the proceedings before us are basically treated as drugs and medicines although they have ancillary use as cosmetics and toilet products, and as such, the respondent-authorities herein were not right in treating those articles as cosmetics and toilet products for the purpose of levy of tax at 12.5 per cent in terms of entry No. 1 of the Fifth Schedule to the Act of 2003. Rather, tax on those products was to be levied at per cent in terms of entry No. 21 of the Fourth Schedule to the aforesaid Act. - notification/letters/orders classification in so far they relate to the impugned goods, so specified in the writ petitions aforesaid are hereby quashed and set aside - Decided in favour of assessee.
-
2015 (11) TMI 1318
Seizure of goods - Misdeclaration of goods - whether there was some mis-declaration with regard to the entry in the schedule under which Dettol Antiseptic Liquid fell and accordingly, the entire consignment of Dettol was seized at the check post - Held that:- neither in the order under challenge nor in the reply is it stated that the documents are false or forged. The only allegation is that there is mis-declaration and the petitioner company has wrongly shown the items to fall under a particular entry which entails less payment of tax and have thus mis-declared the goods with a view to evade taxes. As already held by us earlier, we are not going into the question of assessment as that is an order which the Assessing Officer must pass after hearing the party. However, we are clearly of the view that the Officer-in-Charge of the check post did not have the authority to seize the goods since the documents were produced and he has not even prima facie come to the conclusion that the documents are false or forged. What is the purpose of seizing the goods, when the petitioner company is a registered dealer and is not going to run away. At best the driver could have been ordered to keep the goods in a godown and within seven days, as indicated above, a decision could have been taken. In fact, we are doubtful whether even that course could have been followed because this is not a case of no documents or forged documents but only a case, even according to the State, of mis-declaration - soaps are also sold under the brand name Dettol and antiseptic liquid is also sold under the brand name Dettol. This does not mean that only because the brand name Dettol is used both the goods are to be classified under one entry for the purpose of assessing the tax. If this reasoning of the officer was to be accepted, tomorrow if the petitioner company starts manufacturing cars and starts selling them under the name of Dettol then would the same duty be charged on the cars also? Obviously, the answer is no. What tax has to be charged on an item depends on the classification of the item and on the entry in which that item or good falls, regardless of the brand name which it may have. - seizure was totally illegal. Accordingly, the impugned order is set aside - Decided in favour of assessee.
-
Indian Laws
-
2015 (11) TMI 1316
Jurisdiction of the High Court under Article 226 of the Constitution of India regarding matters related to Armed Forces. - Held that:- The High Court (Delhi High Court) while entertaining the writ petition under Article 226 of the Constitution bypassed the machinery created under Sections 30 and 31 of Act. However, we find that Andhra Pradesh High Court and the Allahabad High Court had not entertained the petitions under Article 226 and directed the writ petitioners to seek resort under Sections 30 and 31 of the Act. Further, the law laid down by this Court, as referred to above, being binding on the High Court, we are of the view that Delhi High Court was not justified in entertaining the petition under Article 226 of the Constitution of India.
-
2015 (11) TMI 1315
Whether the provisions of the SARFAESI Act have in any way affected the right of a lessee to remain in possession of the secured asset during the period of a lease. - whether the provisions of the SARFAESI Act have the effect of terminating these valid leases made by the borrower or the mortgagor made in accordance with the provisions of the Transfer of Property Act. - whether there is any provision in Section 13 of the SARFAESI Act which is inconsistent with the right of a borrower or a mortgagor to make a lease in accordance with the provisions of the Transfer of Property Act and the corresponding right of a lessee to remain in possession of the property leased out to him during the period of a lease. - whether it confers any power on the Chief Metropolitan Magistrate or the District Magistrate to assist the secured creditor in taking possession of the secured asset which is in lawful possession of the lessee under a valid lease. Held that:- so long as the mortgage -deed does not prohibit a mortgagor from making a lease of the mortgaged property and so long as the lease satisfies the requirements of sub - section (2) of Section 65A, a lease made by a borrower as a mortgagor will not only be valid but is also binding bn the secured creditor as a mortgagee. Thus, so long as a lease of an immovable property does not get determined, the lessee has a right to enjoy the property and this right is a right to property and this right cannot be taken away without the authority of law as provided in Article 300A of the Constitution. As we have noticed, there is no provision in Section 13 of the SARFAESI Act that a lease in respect of a secured asset shall stand determined when the secured creditor decides to take the measures mentioned in Section 13 of the said Act. Without the determination of a valid lease, the possession of the lessee is lawful and such lawful possession of a lessee has to be protected by all courts and tribunals. - Decided in favor of petitioners.
|
