TMI Tax Updates - e-Newsletter
December 15, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
If the stand of the writ petitioner company is bona fide and indeed if no international transaction is involved, see no reason why the company should shy away from the proceeding before the TPO and not urge and establish the same in the proceeding before the TPO. - HC
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Income Tax:
Unexplained expenditure u/s 69C - once estimation of GP has been made on the unaccounted sales it covers unexplained expenditure also to this extent - AT
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Income Tax:
Rent expenses - plot was used for the purpose of sister concern - if the expense has incurred expenses for business expediency and third party also gets some benefit in the process, then also, the expenditure is allowable - AT
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Income Tax:
Deduction towards the Central Excise on the basis of provision made - matter was under dispute - the revenue will not suffer any prejudice since the department can bring the provisional amount to tax, u/s 41(1) - deduction allowed - HC
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Income Tax:
Validity of reopening of assessment - the analysis of data (material) would alone determine whether, prima facie, income chargeable to tax has escaped assessment - AO had reasonable belief to come to the conclusion that income chargeable to tax has escaped assessment - HC
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Corporate Law:
Winding up petition - inability to pay debts - The disputes to the debt due as raised in the reply to the winding up petition are a mere after thought and without substance - the respondent company directed to be wound - HC
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Service Tax:
Rejection of refund claim - in the Show Cause Notice there is no allegation raised that the refund claims are filed beyond time limit - The rejection of refund claim on time bar is unjustifiable - AT
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Central Excise:
When in the first place there was no requirement of issue of SCN itself, penalties will not survive particularly as there was some confusion on the duty rates and the continued eligibility of SSI concessions for these appellants. - AT
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Central Excise:
Cenvat credit on capital goods - Conveyor Belt - Circular Bottom Plate - Rubber goods - Steel wire ropes - Wire woven Mesh - subject goods fall within the definition of capital goods being spare/ components /accessories - credit allowed - AT
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VAT:
Assessment once having become final should not have been reopened on the basis of judgment of the Apex Court which has no applicability to the facts of this case and is in ignorance of factual position as is very clear from facts - HC imposes the cost on the revenue.
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (12) TMI 687
Disallowance of depreciation claimed by assessee trust - Held that:- The depreciation is not allowable since the cost of asset was already allowed as deduction towards application of income. See Lissie Medical Institutions v. CIT [2012 (4) TMI 115 - KERALA HIGH COURT ] - Decided against assessee.
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2016 (12) TMI 686
Revision u/s 263 - computation of long term capital gain - Held that:- Commissioner did not appreciate the facts in right perspective. The first emphasis by the assessee was that she has not made claim under section 54F. It is an error committed by the AO. The ld.Commissioner ought to have examined this aspect on merit before setting aside the issue to the file of the AO. It is a just an apparent error which can be rectified even by the AO under section 154. It is not such an issue which has caused any prejudice to the Revenue. If under section 54 exemption was available to the assessee, then merely making a wrong mention of section 54F by the AO exemption would not be denied to the assessee. The ld.Commissioner did not analysis this aspect while observing that the AO has committed an error and his order is an erroneous one. In the present case, even if for the sake of arguments, it is assumed that there was an error in the order of Assessing Officer/ITO by making a mention of section 54F then also ultimately, there will be no capital gain tax upon the assessee, because, she has made investment in NHAI bond. She has made investment in the capital gain account with State Bank of India. Apart from this, she has acquired house and made investment of ₹ 1,27,50,000/-. This house has been acquired within the time limit available in section 54. Under both the circumstances, there will not be any long term capital gain tax upon the assessee, and thus, there will not be any prejudice to the Revenue. In such situation, the ld.Commissioner ought to have dropped the proceedings under section 263 of the Income Tax Act. We allow the appeal of the assessee and quash the order of the ld.Commissioner passed under section 263 of the Act. - Decided in favour of assessee
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2016 (12) TMI 685
Reference to TPO without jurisdiction - TPA - Held that:- We are unable to hold that the reference to the TPO is without jurisdiction. Sec. 92CA(1) envisages that where the assessing officer considers it ‘necessary or expedient’ to do so, he may with the approval of the Commissioner refer the computation of the arm’s length price in relation to the concerned international transaction to the TPO. In my opinion, the said section does not contemplate that the assessing officer has to first come to a definite finding that there is an international transaction within the meaning of Sec. 92B before he can exercise his power to refer the matter to the TPO. So long as he is of a prima facie view that an international transaction is involved and it is necessary or expedient to refer the computation of the arm’s length price in relation thereto to the TPO, he will be well within his powers to do so. It is needless to say that the proceeding before the TPO will be only upon notice to the assessee who will have full opportunity of urging before the TPO that no international transaction is involved. In the present case, PWH shall have full opportunity of impressing upon the TPO that it and Services BV are not associated enterprises. Whether or not Services BV participates directly or indirectly in the management or control or capital of PWH and whether or not at least one of the conditions mentioned in the sub-paragraphs (a) to (m) of Sec. 92A(2) of the Act is satisfied, are factual issues which the TPO is equipped and competent to decide. It is not proper or convenient nor desirable for a Writ Court to go into such disputed questions of fact. Further, the decision of the TPO is in the nature of an opinion. The TPO will send his opinion to the Assessing Officer who shall conduct the re- assessment proceeding taking into consideration such opinion of the TPO and upon notice to the assessee. The opinion of the TPO is not binding on the Assessing Officer. The assessee will have a second opportunity of arguing before the Assessing Officer or before the Dispute Resolution Panel as envisaged under Sec. 144C of the Act that the parties involved are not associated enterprises and hence there is no international transaction and consequently reference to the TPO was without jurisdiction. If so satisfied, the Assessing Officer would be at liberty to ignore the opinion/report of the TPO. Thus the reference to the TPO under Sec. 92CA(1) of the Act should not be interfered with by the Writ Court at this stage. The nature of transaction between PWH and Services BV is not totally clear. We are not in a position to hold that the factual issues contemplated in Sec. 92A(1) and (2) of the Act do not exist and as such the reference to the TPO was without jurisdiction. No case of mala fide or ex facie lack of jurisdiction has been made out by the petitioners and it is of the considered opinion that we should not stifle the reference to the TPO by nipping the same in the bud. If the stand of the writ petitioner company is bona fide and indeed if no international transaction is involved, see no reason why the company should shy away from the proceeding before the TPO and not urge and establish the same in the proceeding before the TPO. Thus matter set aside to hold proceedings afresh
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2016 (12) TMI 684
Revision u/s 263 - “deemed dividend” addition under Section 2(22)(e) - addition under Section 153A - Held that:- There is no dispute that the search and seizure proceedings in this case did not result in anything, therefore, material either in the form of books of account or other documents related to the issue of deemed dividend under Section 2(22) of the Act. The amounts paid were in fact originally declared in the assessment returns of the assessee. The CIT, therefore, had opportunity to exercise his powers as it were on the basis of returns as filed originally and validly under Section 263 of the Act. In the circumstances in the absence of any material disclosing that the issue of deemed dividend had been wilfully derived or had been deemed or otherwise withheld from the assessment an addition under Section 153A was warranted – based on the proposition taught by this Court in CIT vs Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT]. Therefore, we concur with the ITAT’s opinion in this regard. The search and seizure proceedings in such cases are undoubtedly meant to bring to tax amount that are to be determined on the basis of materials seized in the course of such searches; permitting anything over and above that would virtually amount to letting the Revenue have a third or fourth opinion as it were. - Decided against revenue
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2016 (12) TMI 683
Non charitable activities - whether ITAT fell into error in overlooking the proviso to Section 2(15) added by Finance Act, 2008? - Held that:- This Court notices that the issue at hand has been decided in the judgment reported as India Trade Promotion Organisation vs Director General of Income Tax (2015 (1) TMI 928 - DELHI HIGH COURT ) whether curt had clearly ruled that the proviso was not designed to hit at those institutions which had advancement of objects of general utility at heart and were charity institutions but to remove masks from entities which were purely trade, commerce or business enterprises and to expose their true identity. Therefore, the Court deduced that the correct interpretation would be that the activity should be an exception from the charitable purpose of advancement of any other object of general public utility and that exception is limited to activities in the nature of trade, commerce and business. Therefore, if the dominant and prime objective of the institution established for charitable purpose is profit making whether its activities relate directly in the nature of trade, commerce or business or indirectly in rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim that its object is charitable purpose. No substantial question of law arises
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2016 (12) TMI 682
Disallowance u/s 14A r.w.r. 8D - suo moto disallowance - Held that:- When the assessee possesses own funds much more than the tax free investments, the disallowance u/s 14A read with Rule 8D cannot be made. There is also merit in the plea of ld. Counsel on the count that the burden of establishing the nexus has been wrongly attributed to the assessee and it was for the Assessing Officer to rebut the assessee’s contention and demonstrate that the tax free investments were not from own funds but from borrowed funds. In the absence of such rebuttal, it cannot be assumed that the assessee made tax free investments out of borrowed funds. The assessee has suo moto offered ₹ 2 lakhs out of income of ₹ 3,18,472/- as disallowed u/s 14A of the Act. In view of our foregoing observations and relying the case of CIT vs. Corrtech Energy Pvt Ltd, [2014 (3) TMI 856 - GUJARAT HIGH COURT] we are of the view that no disallowance beyond what has been suo moto disallowed by the assessee can be made. In the result, the assessee’s ground in this behalf is allowed and that of Revenue is dismissed. Disallowance u/s 40A(2)(b) - Held that:- It is not disputed that the assessee has not paid any expenditure to which Section 40A(2)(b) can be attracted. In our considered view, ld. CIT(A) has rightly appreciated the factual and legal aspects and held that Section 40A(2)(b) is not applicable. His order is upheld and this ground of the Revenue’s appeal is dismissed. MAT computation - Held that:- Debt redemption fund is to be excluded while computing the book profits u/s 115JB of the Act. See Genus Electrotech Ltd case [2016 (5) TMI 1136 - ITAT AHMEDABAD ] Eligibility of deduction u/s 80IA(4) - Held that:- In view of the Hon’ble Gujarat High Court judgment on the same issue in assessee’s own case, the issue in question that the assessee is eligible for computation of deduction u/s 80IA(4) on the rates charged by it at selling price is no more res integra. - Decided in favour of assessee Income from realization of carbon credits - revenue or capital receipts - Held that:- Merely because the assessee was of the opinion that the receipt was Revenue in nature cannot act as an estoppels against it when the law as interpreted by Hon’ble High Courts takes a view at variance with the assessee. The law is settled that the Revenue cannot stand benefited from a tax which is not leviable in right earnest. We find merit in the contentions of the ld. Counsel for the assessee that the Hon’ble Karnataka High Court in the case of Subhash Kabini Power Corporation Ltd (2016 (5) TMI 793 - KARNATAKA HIGH COURT ) and My Home Power Ltd (2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT ), have taken a view that the carbon credit realization is capital in nature. No contrary judgment is cited. Therefore, respectfully following these judgments, this additional ground of the assessee in respect of realization of carbon credit as capital receipt is allowed. Disallowance u/s 14A read with Rule 8D - MAT calculation - Held that:- The amount in question stands restricted to only ₹ 2 lakhs. We have allowed the ground of the assessee in respect of redemption reserves. The issue in question is only a notional disallowance; therefore, it will not be justified to disallow this expenditure of ₹ 2 lacs while computing the book profit u/s 115JB of the Act. In view thereof, the second additional ground of the assessee is also allowed.
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2016 (12) TMI 681
Addition on account of GP estimation on unaccounted sales - Held that:- All necessary quantitative details were filed before the assessing authority during the course of assessment proceedings including excise records and no defect has been pointed out except for minor difference in the yield. Ld. Assessing Officer has also not been able to point out any mistake in the excise record which could not be avoided and certainly carry a far better evidentiary value in comparison to the computer generated sheet of the accounting system in which figures of closing stock can be manually putin to increase or decrease the profits. Certainly the excise record and quantitative records are having an edge over the computer generated print out. We are therefore, of the view in that where Revenue has been unable to point out any major fault in the quantitative record maintained by the assessee which were duly produced during the course of assessment proceedings, we agree with the contentions of assessee that the shortage of stock is only to the extent of ₹ 10,30,028/- and not ₹ 60,00,000/- Accordingly addition towards GP estimation on unaccounted sales will work out to ₹ 1,61,920/- being 15.72% of the shortage figure of ₹ 10,30,028/-. Unexplained expenditure u/s 69C for payment of labourand two expenditure directly made by the partners out of their cash withdrawals - Held that:- We observe that ld. Assessing Officer has made a general remark for making addition and has not given any cognizance to the fact that there was a shortage in cash of ₹ 250781/- which could have taken care of the unexplained expenditure as submitted by the assessee. Further we also agree to the contentions of assessee that once estimation of GP has been made on the unaccounted sales it covers unexplained expenditure also to this extent. We are, therefore, of the view that ld. Assessing Officer erred in making addition
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2016 (12) TMI 680
Benefit of exemption u/s 10(23C) - Whether the assessee was entitled for exemption when the gross receipts of the assessee society exceeded ₹ 1 crore from all the three educational institutions OR of each educational institution run by it? - Held that:- In consonance with the ruling of the Hon’ble Court the case of Commissioner of Income-tax and another v. Children’s Education Society (2013 (7) TMI 519 - KARNATAKA HIGH COURT) we are of the view that the aggregate annual receipts of other educational institution means, the total annual receipts of each educational Institution. To examine the said issue, the case is restored to AO. It is ordered accordingly.
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2016 (12) TMI 679
Penalty levied u/s. 271(1)(c) - under valuation of stock - income declared at the time of survey - Held that:- No doubt additions have been made by the AO based on the disclosure made by the assessee during the course of survey operations u/s 133A of the Act. There was no allegation by the assessee hat disclosure was made by him out of duress and coercion by the department. No doubt, addition was on account of undervaluation of closing stock and it is no body case there is any difference in quantitative closing stock. The submission of the assessee that the addition was offered to tax on account of change in the method of closing stock from LIFO and FIFO at the insistence of the AO, is not borne out of record. Therefore, it follows that the difference in valuation arisen on account of adopting wrong method of valuation of closing stock which amounts to concealment of particulars of income. Therefore, in our considered opinion, the AO was justified in levying penalty u/s 271(1)(c) of the Act. The reasoning of the CIT(A) that penalty cannot be levied in estimate basis, cannot be applied to the facts of the present case as no addition was made on estimate basis and the CIT(A) has allowed appeal on wrong premise. - Decided against assessee Maintainability of the present cross-objections - Held that:- Having regard to plain provisions of statute, in absence of nonadjudication of ground by the CIT(A), assessee can come only by way of appeal before the Tribunal, not by way of cross objections. In the present case, the CIT(A) had no occasion to deal with the issue raised by way of cross objections, as the assessee never contested this issue either before the AO or before the CIT(A). The cross objections do not widen the scope of subject matter of appeal. Therefore, the cross objections are not maintainable and dismissed as such.
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2016 (12) TMI 678
Grant of Registration u/s. 12AA(1)(b)(ii) rejected - Held that:- Denial of Registration is based on the ground that on the dissolution of the assessee-trust the properties were to go to Sri Ramakrishna Ashrama whose status of Registration under Section 12A was not known. As the assessee was not given an opportunity to clarify on this point therefore, the denial of Registration is without verifying the necessary record and status of Sri Ramakrishna Ashrama. In any case, the assessee has subsequently amended the Trust Deed vide Supplementary Deed dt.10.3.2016 whereby it has incorporated the necessary amendment in the said irrevocability clause regarding distribution of property on dissolution to satisfy the requirement as per the provisions of the Income Tax Act. In the facts and circumstances of the case, we set aside the impugned order passed under Section 12AA(1)(b)(ii) of the Income Tax Act and remand the matter to the record of the CIT (EXEMPTIONS) for deciding the matter afresh after considering the amendment carried out by the assessee vide Supplementary Deed dt.10.3.2016 as well as after giving an opportunity of hearing to the assessee. Entitlement to exemption under Section 80G(5) - Held that:- As the application for Registration under Section 80G(5) ws rejected by the CIT (EXEMPTIONS) based on the order dt.6.11.2015 passed under Section 12AA(1)(b)(ii) of the Act. As we have already set aside the order passed under Section 12AA(1)(b)(ii) therefore the impugned order rejecting the application under Section 80G(5) is also set aside for reconsideration.
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2016 (12) TMI 677
Addition for alleged under-valuation of closing stock - Held that:- As submitted by assessee that screening & crushing expenditure was also incurred in the next year and therefore, no cost was included on that account also. This explanation of assessee was rejected by the AO, but in view of this factual position that in the tax audit report for the year ending 31.3.2008, it was reported by the auditors that assessee is valuing its closing stock at cost on FIFO basis, it has to be accepted that if closing stock at the end of the present year is without any processing such as screening, crushing etc. and without shifting; the screening, crushing and shifting charges cannot be added to the valuation of closing stock in the present year and therefore, if the total amount of cost of production in the present year after excluding plot rent is considered, it will amount to valuation of closing stock at a cost including such charges also i.e., screening, crushing and shifting charges, whereas the closing stock was without screening, crushing and shifting. Hence, we are of the considered opinion that in the facts and circumstances of the present case as discussed above, the addition made by the AO in valuation of closing stock is not proper and justified and hence we delete the same - Decided in favour of assessee Disallowance of JD Plot rent - Held that:- AO himself has accepted that the plot was used for the purpose of sister concern M/s. Obulapuram Mining Co., and goods are in fact sold by the assessee to this sister concern and delivery at this plot was an important aspect for affecting this sale as per the assessee. Hence, the facts are not in dispute and under these facts, the judgment of the Hon’ble Apex Court rendered in the case of S.A. Builders (2006 (12) TMI 82 - SUPREME COURT ) is applicable as per which, if the expense has incurred expenses for business expediency and third party also gets some benefit in the process, then also, the expenditure is allowable. Respectfully following the judgment of the Hon’ble Apex Court and considering the facts of the present case as discussed above, we are of the considered opinion that the expenses incurred by the assessee on account of rent of the plot in question is an allowable business expenditure and therefore, we delete this disallowance - Decided in favour of assessee
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2016 (12) TMI 676
Disallowance of depreciation to assessee trust - double deduction - Held that:- Tribunal in the case of Accion Technical Advisors India Vs. The Asst. Director of Income-Tax (Exemptions), Bangalore (2015 (11) TMI 634 - ITAT BANGALORE ), held that the assessee was entitled to the benefit of depreciation irrespective whether the cost of the said asset on which the depreciation is claimed has been allowed as an application of income in the previous years. The tribunal had taken note of the amendment effected by the Finance (No. 2) Act, 2014 w.e.f 1.4.2015 and held the amendment is prospective and does not have application for the years prior to AY 2015-16. - Decided in favour of assessee
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2016 (12) TMI 675
Validity of order passed by Income-tax Settlement Commission under Section 245D(4) - whether orders without jurisdiction and barred by limitation - Held that:- On the conjoint reading of Sections 245C, 245D(4A) and Section 245HA(1)(iv) and considering the aims and objects of the legislation and the delay caused in passing the order was not attributable to the applicant, the Court was pleased to hold that only when the Settlement Commission is prevented from fulfilling its mandatory statutory duty due to any reason attributable to the applicant, only in that situation, the time-limit for disposal of an application under s.245D(4A)(i) will have to be read as `may’. Therefore, at any stretch of imagination it can be said that the mandatory statutory duty cast upon the Settlement Commission to dispose of the application within the time–frame fixed under Section 245D(4A) is taken out. In that view of the matter, the judgment in Star Television News case [2009 (8) TMI 86 - BOMBAY HIGH COURT] is not applicable to the facts of the present case as sought to be contended by the Revenue. The order passed by the Settlement Commission dated 27.5.2016 is beyond the time after the proceedings before it stood abated. As also contended by the Revenue that the petitioner having submitted letter dated 9.2.2016 and contended that the limitation is available up to 31.12.2016, the contrary contentions raised by the petitioner are unreasonable and unacceptable. It is to be mentioned here that consent of the parties cannot vest jurisdiction or extend the period of limitation. In that view of the matter, the said contention raised by the Revenue is hereby rejected. - Decided in favour of assessee
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2016 (12) TMI 674
Deduction towards the Central Excise on the basis of provision made - matter was under dispute - Held that:- The extent of liability of central excise duty payable by the assessee for the assessment year 2009-10, will flow from the final verdict on the legality of the curtailment notification No.17/2008-Central Excise dated 27.03.2008 and although the notification was quashed in the HERBO FOUNDATION PVT. LTD. And Others Versus UNION OF INDIA [2009 (6) TMI 624 - GAUHATI HIGH COURT] the consequential departmental challenge to the verdict of the High Court, is awaiting finality in the Supreme Court. Thus the precise amount of excise duty payable in the concerned year has remained inconclusive and therefore the reflection of the disputed amount in the books of accounts cannot be said to be an unreasonable act. In our understanding, a prudent assessee following the mercantile system, can certainly make provision for expenditure towards tax liability, even though the assessee may dispute the departmental claim but when the litigation is not yet finalized, it cannot be said with authority that the provision made will never be categorized as expenditure for the concerned assessment year. That apart, if the Supreme Court finally declares that the curtailment notification of 27.03.2008 is legally unsustainable, the revenue will not suffer any prejudice since the department can bring the provisional amount to tax, under Section 41(1) of the IT Act. Therefore we are of the considered opinion that the substantial question of law framed in this proceeding has to be answered in favour of the assessee and against the revenue.
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2016 (12) TMI 673
Dis-allowance of Long Term Capital Loss on account of sale of shares to a sister concern - Held that:- We are of the view that the Assessee had provided an acceptable justification for both transactions of sale of shares including the aspect of valuation of the shares. The Assessing Authority, while accepting the genuineness of the transactions, merely raises a vague suspicion relating to the valuation adopted by the assessee. This, by itself, is insufficient to reject the claim of capital loss. While the Assessing Officer is certainly entitled to question the valuation, he ought to have produced some materials to either disprove the justification offered by the assessee or to substantiate his doubts. A mere suspicion, however strong it might appear, cannot take the form of a substantiated opinion sans supporting materials and hence it cannot form the basis for rejection of the claim. Further more, the question of valuation in itself, is a pure question of fact particularly, when the same has been concurrently accepted by both the lower appellate authorities. No perversity has been either alleged or made out at any stage in appeal. We agree with the conclusions of the ITAT and are of the view that no substantial questions of law arise for consideration. - Decided in favour of the assessee.
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2016 (12) TMI 672
Validity of reopening of assessment - absence of the words “failure to disclose fully and truly all material particulars” in to the recording of the reasons - Held that:- The reasons recorded as whole, it is evident that there is, prima facie, failure of the assessee to disclose fully and truly all material particulars necessary for Assessment. The material received from the Principal Director of Income Tax (Investigation), Ahmedabad was material which was not disclosed during the regular assessment proceedings. Therefore, the impugned notice is not hit by the first proviso to Section 147 of the Act. The mere absence of the words “failure to disclose fully and truly all material particulars” in to the recording of the reasons, is not fatal to the impugned notice, if on a reading of the reasons as a whole one could conclude that there has been a failure on the part of the Assessee to disclose fully and truly all material particulars during the regular Assessment Proceedings. Therefore, we find no substance in the above submission. The letter dated 28th March, 2016 addressed by the Principal Commissioner of Income Tax (enclosing the communication dated 8th March, 2016 from the Principal Director of Income Tax (Investigation), Ahmedabad), only states “reopening of cases for Financial Year 2008-09 is getting barred by limitation of time on 31st March, 2016 and therefore to give top priority to these cases for necessary action.” This observation cannot lead to the conclusion that the Assessing Officer is acting on directions of his superior. All that the above observation means is that the Assessing Officer should expeditiously examine the facts, and if necessary, act before 31st March, 2016. It is not a direction to the Assessing Officer to issue a reopening notice Analysis of data i.e. material available can only lead to a prima facie view of income chargeable to tax has escaped assessment. If the data (material) received is not analyzed then the grievance is that there is no link between the material received and conclusion reached. Therefore, the analysis of data (material) would alone determine whether, prima facie, income chargeable to tax has escaped assessment. Therefore, we do not find any merit in the above objections.we are satisfied that the Assessing Officer on the basis of reasons recorded to issue impugned notice dated 30th March, 2016, had reasonable belief to come to the conclusion that income chargeable to tax has escaped assessment. - Decided against assessee
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2016 (12) TMI 671
Reopening of assessment - Exemption under Section 54EC - Held that:- No reason to hold that the income chargeable to tax had escaped assessment in the present facts. The trigger for issuing the reopening notice appears to have been the limit to exemption available under Section 54EC of the Act coming into force with effect from Assessment Year 2007-08 onwards. This is evident not only from reasons recorded for issue of Notice u/s 148 of the Act as referred to herein above, but as also recorded by the Tribunal that the report received from the Deputy Director of Income Tax (Investigation), Surat essentially seeks to deny the exemption under Section 54EC of the Act in view of the amendment thereto. When the capital gains has been offered to tax in earlier assessment year and accepted by the Revenue in scrutiny proceedings, then a mere change in law in the subject assessment year with regard to extent of exemption will not give any reason to believe that income chargeable to tax in the subject assessment year had escaped assessment. - Decided in favour of assessee
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2016 (12) TMI 670
Failure of the technology employed by IT department to process the returns - Communication from the DCIT expressing his helplessness to process the return of income under Section 143(1) - return of income filed for Assessment Years 2014-15 and 2015-16 - Held that:- Assessing Officer is unable to process the return of income not of his volition but because the technology employed by the Income Tax Department fails him and the Act. On being asked the Revenue, on instructions, states that the systems difficulty continues till date even though the Commissioner of Income Tax has taken up the issue with the System Administrator, it is not possible to state how much longer it would take to fix the problem. Where the computer system, as operating, is an hindrance to the discharge of statutory obligations, then the least that would be expected is that the senior most Officers of the Department would address this issue on warfooting. This inability to process a return of income would cause tremendous hardship to a large number of assessees, particularly retired individuals and others similarly placed who would be entitled to refund of taxes as a large quantum of amounts received by them would be subject to Tax Deducted at Source, when the tax payable by them is minimal. Thus we direct the Chief Commissioner of Income Tax to examine and attempt to resolve the issue on warfooting to ensure that the computer system runs in accord with the Act. In case, it is not possible to resolve the issue, then come up with an alternative so that the return of income can be processed and grant of refund be considered by the Assessing Officer. We direct a responsible and senior Officer of the Revenue to file an affidavit setting out the steps taken by it so far to rectify the system, including the time within which the system would be rectified and the alternative method by which the return of income could be processed under Section 143(1) of the Act.
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Customs
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2016 (12) TMI 643
Import of old and digital multi function copiers - whether restricted goods or not? - Held that: - Ld. Counsel is correct in his submissions that the impugned items came to be restricted for imports only with effect from 05.06.2012. It is also seen from the impugned order that goods have been found liable for confiscation and hence fined under section 125 ibid and penalty imposed under section 112(a) ibid only on the store that they are restricted, which was indeed not the case at the time of import. This being the case, fine and penalty imposed on the appellant cannot sustain and hence are set aside accordingly. We do not however interfere with the enhancement of declared value of the impugned items. Appeal partly allowed as above.
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2016 (12) TMI 642
Jurisdiction of Chemical examiner - whether the PHO was the sole authority to certify the goods in quantum and not the Chemical Examiner? - Held that: - From the circular No. 58/2001 dated 25/10/2001, it is evidently clear that all consignments of imported edible/food products have to be referred to PHO's for testing and clearance shall be allowed only after receipt of the test reports. It is further clarified that where PHO's are not available, sample should be got tested from nearest Central Food Laboratory or any laboratory authorized for such testing by the Directorate General of Health Services. Contention of Revenue is that the PHO certificates issued in these cases do not specifically indicate the acid values which are required for considering benefit of Notification No. 21/2002 dated 01.03.2002. However on perusal of the PHO certificate it reveals that there is in fact a certification concerning that the samples conform to the standards laid down under item A-17.15 of the PFA Rules, 1955. When item A-17.15 is seen, it lays down that the standards prescribed in the rules for specific edible oils will also apply, except for moisture and acid value which shall not be more than 0.5 and 0.10 respectively. Item A-17.19 of the Rules specifically concerns palm oil, wherein it is laid down that acid value should not be more than 0.10. It is further clarified that palm oil imported into the country shall be refined before its supplied and it shall confirm to the standards laid down under A-17.15. These aspects are found very clearly brought out in the certificates issued by PHO. In the event, the conclusions of the lower appellate authority in Para 14 in his order that any matter concerning testing of edibility, it is the PHO and CFL alone that have the authority in reporting on the matter is correct and does not require any interference - appeal dismissed - decided against Department.
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2016 (12) TMI 641
Fe fines exported - Department took the view that such consignments having Fe content of more than 64% was in restricted category as per the FTP 2007-08 and shall be exported only through state trading enterprises viz. MMTC Ltd. - whether confiscation of goods, and imposition of fines and penalties justified? - Held that: - In the light of the Board's Circular No.4/2012-Cus. dt. 17/02/2012, the issue is now stands gone in favour of the appellant. in the circumstances, the appeals filed by the exporters are required to be allowed in toto and we order accordingly. For the same reasons, Department's appeals (C/508, 509/2009) cannot succeed and will have to be dismissed, which we hereby do. The appeal Nos. C/533/2009 and C/534/2009 are allowed with consequential reliefs, if any.
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2016 (12) TMI 640
Refund claim - SAD - Held that: - The issue whether for availing benefit of Notification No. 102/2007, the condition 2 (b) of the Notification is mandatory for compliance by a trader came up for analysation before the Larger Bench of the Tribunal in the case of Chowgule and Company Private Ltd., [2014 (8) TMI 214 - CESTAT MUMBAI (LB)] relied by the Ld. Counsel for appellant. The Ld. Counsel has also submitted that the duty element was not declared in the invoice. In the said case the Larger Bench of the Tribunal has held that the said condition is not mandatory in the case of a trader - Following the judgment laid by the Larger Bench in the case M/s Chowgule and Company Private Ltd., I hold that the appellant is eligible for refund. The impugned order for rejecting the refund is allowed - appeal allowed - decided in favor of appellant-assessee.
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2016 (12) TMI 639
Confiscation - DEPB benefit - mis-declaration of description of goods - Held that: - We find that the claim on DEPB appellant has given up the claim hence, we upheld the denial of DEPB claimed by the appellant. Now the issue to be decided whether adjudicating authority is correct in confiscating the goods, imposing penalty and fine. We find that it is admitted fact that the goods were never seized or not released provisionally on the execution of bond and bank guarantee therefore in case when the goods were not seized and released provisionally and the goods are not available then confiscation of such goods is not correct which has been settled in various judgments, in particular, the judgment in case of Shiv Kripa Ispat Pvt Ltd Vs. Commissioner of C. Ex. & Cus, Nashik[2009 (1) TMI 124 - CESTAT MUMBAI] supports the present case. In view of the settled legal position on this issue, we find that adjudicating authority was not suppose to confiscate the goods. As regard the redemption fine, redemption fine is imposed only for redeeming the goods which was under confiscation. The goods are not available, redeeming such goods is out of question, therefore redemption fine of ₹ 7,50,000/- is not sustainable. As regard the penalty of ₹ 5 lacs imposed on the appellant, we find that firstly confiscation is not sustainable. As regard the mis-declaration of the goods the Adjudicating authority itself arrived at the value of ₹ 5 Lacs in respect of export of goods and not FOB value of ₹ 27,89,568/- therefore considering overall facts and correct FOB value of the exports goods, we are of the view that penalty of ₹ 5 lacs is much on higher side which deserves to be reduced. We therefore reduce the penalty from ₹ 5 lakhs to ₹ 1 lakh. Impugned order stands modified to the above extent. Appeal is partly allowed.
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2016 (12) TMI 638
Confiscation of goods - imposition of redemption fine and penalty - Held that: - When appellants failed even today to repel the argument of Revenue on merit, there is no doubt that certain contributor factors to determine redemption fine and penalty are considerable looking to the spirit of the proviso under section 125(1) of the Customs Act, 1962 and section 112 of the Customs Act, 1962. A higher limit not exceeding the market value of goods less than the duty payable is prescribed as redemption fine in law. Learned Commissioner (Appeals) has not gone to extreme limit. But he has proceeded upto 25% of the assessed value to impose redemption fine. He also found that penalty was rightly imposed - In all cases, import being of restricted goods, levy of penalties is confirmed finding nothing unreasonable looking to the nature of goods, life thereof as well as deliberate import of old and used machines in violation of law. Appeal disposed off - redemption fine reduced - decided partly in favor of appellant-assessee.
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2016 (12) TMI 637
Imposition of penalty - forged signature of customs officer - Held that: - From the observations made by the Ld. Commissioner (Appeals) in the impugned order, it is evident that the appellant is not connected with preparation of the forged DEPB Scripts and also preparation of the Bills of Entry. Hence in my view, since the involvement of the appellant in the fraudulent activities have not been proved with any tangible evidence, the proceedings initiated against him for imposition of penalty will not be justified. Therefore, penalty imposed in the Adjudication order as well as confirmed in the impugned order is not legal and proper, and as such, the appeal is allowed by setting aside the impugned order - decided in favor of appellant-assessee.
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2016 (12) TMI 636
Classification of imported goods - old and used mainframes - classified under CTH 90099900 as part of photocopier machine or under CTH 90091200 as Electrostatic Photocopying Apparatus? - goods liable for confiscation on the ground that these are old and used mainframes were to be treated as photocopier that all second hand goods except second hand capital goods are restricted for imports as per para 2.17 of the Foreign Trade Policy (2004-2009) and required specific import licence. As the respondent was not having import licence, therefore, the goods were held liable for confiscation - Held that: - we find that the Chartered Engineer has given certificate where it has been pointed with the mainframe of photocopier machine were found to be incomplete set of machine parts, some components i.e. Trolleys, main Mother Boards, Paper Deck, lamp Regulators were not found. Therefore, these are the parts of main frame assembles and the said missing parts are required to complete the photocopier machine. The said report of the Chartered Engineer has not been disputed by Vs. Ltd the adjudicating authority nor in the appeal, therefore, we hold that the Ld. Commissioner (A) has correctly classified the goods in question as part of photocopier machine and under CTH 90099900 - appeal dismissed - decided against Revenue.
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2016 (12) TMI 635
Revocation of CHA licence - forfeiture of entire amount of security deposit - Appellant has sublet the licence against consideration to various companies - violation of Regulation 12, 13(a), 13(d). 13(e). 13(n), 13(o), 19(8) of CHALR, 2004 - Held that: - in the identical modus operandi of the present case, it was held that this sort of arrangement is not subletting of licence. As regard the Commissioner’s finding with regard to violation of other regulations, we find that, the genesis of entire case is the charge of subletting of the licence. We hold that in the present case there is no case of subletting & CHA Licence therefore violation of all other regulations being consequential would not sustain. Moreover, all the charges except the violation of Regulation 12 of the Regulations were either ‘disproved’ or ‘not proved’ by the enquiry officer. On careful reading of the repot of enquiry officer we are in agreement for holding the various regulations as ‘disproved’ or ‘not proved’. As per our above discussion, we are of the considered view that the department’s case of revocation of licence is not sustainable - appeal allowed - decided in favor of appellant.
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2016 (12) TMI 634
Duty drawback - valuation - declared value on higher side to claim higher drawback - opinion of Chartered Engineer relied upon - Held that: - Admittedly the Mechanical Chartered Engineer is not an expert to value the readymade garments. The report of the Chartered Engineer is merely on the basis of eye-estimation and who had not conducted any analysis with regard to raw material used in manufacture of readymade garments and quality and quantity of readymade garments. The mechanical engineer can examine the machinery, but not the readymade garments. Therefore, the learned Commissioner (Appeals) has rightly rejected the value adopted by the Chartered Engineer. - appeal dismissed - decided against Revenue.
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2016 (12) TMI 633
Import of capital goods - EPCG scheme - demand on account of non-fulfillment of export obligation as such that the goods exported by the appellant were not manufactured in the factory where the goods imported under EPCG were installed; the said exports were made from their other factory and it was violation of the provisions of para 4.1 'of the EXIM Policy 1992-97 - Held that: - The appellant has produced a copy of the letter F. No.20/663/AM96ÆPCG-1/664 dated 14.10.99 from the office of Director General of Foreign Trade, Ministry of Commerce, Government of India, wherein the subject EPCG dated 15.03.1996 has been mentioned. This letter says that the appellant has fulfilled entire EO (export obligation) imposed in respect of the subject EPCG licence. This letter further mentions that the appellant is advised to approach the concerned customs authorities for the release of their bank guarantee/LUT executed by them. This letter has been signed by Foreign Trade Development Officer. When the Licencing Authority, which is the office of DGFT certifies that export obligation has been fulfilled, it is not for the Revenue to deny the benefit of the subject Notification No. 110/95-Cus unless Revenue is able to get specific clarification from DGFT that the goods exported from other factory are not to be taken into account for getting benefit under EPCG scheme - appeal allowed - decided in favor of appellant-assessee.
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Corporate Laws
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2016 (12) TMI 628
Scheme of Amalgamation - Held that:- Scheme appears to be fair and reasonable and does not appear to be violative of any provisions of law or contrary to public policy. Since all the requisite statutory compliances have been fulfilled, scheme is hereby allowed.
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2016 (12) TMI 627
Winding up petition - inability to pay debts - Held that:- From the facts and material on record, it is fully established that goods (HR Coils) were indeed supplied to the respondent-Company and admittedly receipted by it. Payment thereof by way of a cheque issued was not made for reason of the cheque being dishonoured. The respondent- Company vide letter dated 10-1-2013 undertook to make the requisite payment by 20-1-2013. The promised payment was not made. A debt thus obtained. As earlier held the said debt is not disputed on any substantial and bonafide grounds. The disputes to the debt due as raised in the reply to the winding up petition are a mere after thought and without substance. Aside of the aforesaid, in any event, admittedly goods receipted or part thereof retained was more than ₹ 1 lac. They were dishonestly not returned and instead disposed of in the market. The sale price was appropriated by the respondent company most dishonestly. The statutory notice under Section 432(1)(a) of the Act of 1956 was not replied to. The defence to the winding up petition is of no substance, wholly contrived, mere moonshine, a sham and not bonafide. On 27-5-2016, the respondent company was directed to file statement of affairs of the company. That has still not been filed. Thereafter vide order dated 16-9-2016 while deciding the application under Section 450 of the Act of 1956 the Official Liquidator attached to this court was appointed as provisional Liquidator of the respondent company with a direction to take possession of the assets, both movable and immovable, of the respondent company. The Official Liquidator was also authorised to exercise powers under section 457(1) of the Act of 1956. The respondent company was also directed to file statement of affairs of the company under pain of contempt. Even the said direction to file the state of affairs has again gone abegging. Thus the respondent company M/s. Shiv Mahima Ispat Private Limited is directed to be wound up. The Official Liquidator is appointed as the Liquidator of the respondent company under Section 448 of the 1956 Act. He shall take steps to take possession of the immovable and movable assets of the respondent company, if not so already done. The Directors of the respondent company are again directed to file statement of affairs of the respondent company before the Official Liquidator as statutorily required and also put on record their correct addresses.
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Service Tax
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2016 (12) TMI 669
Imposition of penalty under Section 76 of the Finance Act, 1994 - during the period of 01.06.2007 to 31.03.2008, the appellant did not pay service tax under the category of Renting of Immovable Property services as levy of service under the category of Renting of Immovable Property was in dispute. Later on, the levy of service tax was held ultra virus. After the retrospective amendment, the matter approach to Hon'ble Apex Court where the matter is still pending - Held that: - The appellant has paid service tax along with interest before issuance of the show cause notice. In that circumstances, I hold that penalty under Section 76 of the Finance Act, 1994 is not imposable on the appellant. Accordingly, penalty under section 76 of the Finance Act, 1994 is set aside - appeal allowed - decided in favor of appellant-assessee.
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2016 (12) TMI 668
Demand of service tax - “Rent-a-Cab” services - Held that: - very same issue has been decided by CESTAT, Bangalore in the case of SK. Kareemun W/o Khadeer and others Vs CCE, C & ST, Hyderabad-III [2015 (1) TMI 282] where the concerned appellants has been remanded for the purpose re-quantification in course with the guidelines laid down therein. Respectfully following the said Tribunal order, the present appeals also, are remanded to original authority for denovo adjudication on the basis of guidelines laid down in the CESTAT Bangalore decision - appeal allowed by way of remand.
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2016 (12) TMI 667
Works contract - whether the composite contract for entire work design, supply, testing, erection and commissioning of auto LPG dispending System on turnkey basis is open to vivisection or artificial splitting? - Held that: - It is seen that the period involved in this case is from November, 2005 to March 2006. As rightly pointed out by Ld. Counsel for appellants, the issue is no longer res integra. In the appellant’s own case M/s Vanaz engineers Ltd. Vs. CCE, Pune-III, [2016 (3) TMI 166 - CESTAT MUMBAI] for an identical turnkey composite contract, this Tribunal took the view that for the period prior to 01.06.2007, work contract is non-taxable. This was based on the judgment of Hon’ble Apex court in the case of CCE, Kerala Vs. Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT]. In the said judgement, Hon’ble Apex Court has settled the law that prior to 01.06.2007, the Service Tax liability will not arise when work contract is executed, under any other services - appeal allowed - decided in favor of appellant-assessee.
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2016 (12) TMI 666
Demand of differential service tax - Manpower Recruitment or Supply Service - whether service tax is leviable on service charges collected by the appellant for recruiting and providing manpower to the state government departments or whether the assessable value includes the salaries paid to the staff by the appellant and reimbursed by the government? - Held that: - appellant has not made of a prima facie case for full waiver of pre-deposit. We therefore direct to pre-deposit ₹ 6 lakhs. - stay granted partly.
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2016 (12) TMI 665
Levy of tax - setting up of water supply / drainage infrastructure involving laying of underground pipelines and other works - bona fide belief that these works are not meant for commerce but are meant for the purposes of general public utility - Held that: - Following the judgment laid in Lanco Infra Tech Ltd., [2015 (5) TMI 37 - CESTAT BANGALORE (LB)] case, this Bench has, on identical issue, remanded the matter to adjudicating authority. Therefore, in the light of the decision laid in Lanco Infra Tech Ltd., we remand this matter to the adjudicating authority - appeal allowed by way of remand.
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2016 (12) TMI 664
Whether the Commissioner (Appeals) has rightly deleted the penalty imposed under Section 77 and 78 and extended the benefit of Section 80 of the Finance Act, correctly? - Held that: - I find that the issue is no longer res-integra in view of the ruling of Hon’ble Allahabad High Court, in the case of H.M. Singh Vs Commissioner of Central Excise and Service Tax, [2014 (9) TMI 218 - ALLAHABAD HIGH COURT], wherein Hon'ble High Court have taken notice that at the material time there was a general mass unawareness among the service providers on which the service tax was liable to be deposited particularly on the component of provident fund, received from the recipient of service to whom the “Manpower Services” were provided. The Hon'ble High Court further held that under such facts and circumstances, there was no fraud, collusion, willful misstatement or suppression of facts or any contravention with any intent to evade the payment of tax - it was also held that mere failure to declare does not amount to willful suppression. There must be some positive act from the side of the assessee to find willful suppression - appeal dismissed - decided in favor of respondent-assessee.
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2016 (12) TMI 663
Waiver of the pre-deposit - Section 35F of the Central Excise Act, 1944 - Held that: - The main submission made by the Ld Counsel appearing for appellant, Ms. A.S.K. Swetha is that the activities undertaken by appellant include laying of pipelines for water distribution in respect of M/s A.P. Industrial Infrastructure Corporation Ltd. However, we find that appellant has not made out a convincing case for full waiver of pre-deposit. In view thereof, we direct the appellant to pre-deposit ₹ 10 lakhs within period of 4 weeks and to report compliance within 07-10-2016. - stay granted partly.
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2016 (12) TMI 662
Validity of proceedings initiated under sub-section (3) of Section 73 of the Finance Act, 1994 - imposition of penalty u/s 76 and 78 ibid - tax with interest paid before issuance of SCN - GTA service - reverse charge mechanism - Held that: - I find that the entire amount of adjudged service tax alongwith interest was paid by the appellant before issuance of show cause notice and non-payment of service tax amount within the stipulated time is not attributable to fraud or collusion or wilful misstatement or suppression of facts, with intend to evade payment of service tax. Therefore, in terms of Sub-Section (3) of Section 73 ibid, there was no necessity for issuance of show cause notice for imposition of penalty. In other words, as per the said statutory provisions, on payment of service tax alongwith interest, further proceedings have to be closed for all practical and statistical purposes - appeal allowed - decided in favor of appellant-assessee.
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2016 (12) TMI 661
CENVAT credit - Security Services - GTA services - internet telephone services - Rent-a-Cab Service - whether the appellant is eligible for credit of service tax paid on various input services? - Held that: - with regard to security services - On perusal of invoice, it is not clear whether appellant has incurred the expenses for availing the said services. It is also doubtful whether the Welfare Committee constituted has taken contribution from the members. Therefore, since the invoice is seen raised in the name of welfare committee and the appellant having failed to produce evidence to establish that the expenses have been fully incurred by the appellant, I hold that the denial of credit is proper. Security Services - GTA services - Held that: - The credit availed on GTA service has been denied for the reason that the appellant has availed the service for transportation of goods upto buyers premises. It is not seen discussed in the order, whether such transportation is based on FOR destination. This aspect having not been considered by the authorities below, I am of the view that the appellant has to be given a chance to establish whether GTA services are availed under FOR destination. The circular issued by the Board No.97/8/2007-ST, dated 23-08-2007 clarifies that credit is admissible in respect of GTA service if the sale is on FOR basis upto the buyers premises. The Hon'ble High Court in the case of CCE Vs Grey Gold cement [2014 (9) TMI 673 - Andhra Pradesh High Court] has also held the issue in favour of assessee if on FOR destination basis - In view thereof, the issue whether appellant is eligible for credit on GTA services, is remanded to the adjudicating authority. The appellant shall be given an opportunity for personal hearing and also to submit additional evidence. Internet services - rent-a-cab services - Held that: - credit is denied for the reasons that no documents have been produced by the appellant. Needles to say that the appellant cannot avail credit without proper documents. Therefore, I do not interfere with the credit disallowed in respect of internet service and rent-a-cab services. The impugned order is modified to the extent of remanding the issue with regard to GTA service to the adjudicating authority as observed in previous para. The credit in regard to Security Services, internet services, rent-a-cab services are disallowed. The appeals are party allowed in the above terms.
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2016 (12) TMI 660
Rejection of refund claim - service tax amounts which have been paid on specified services received under the N/N. 17/2011-ST, dated 01.03.2001 pertaining to the period from January, 2011 to March, 2011 and April, 2011 to June, 2011 - compliance with the notification - Held that: - It has to be noted that in the Show Cause Notice there is no allegation raised that the refund claims are filed beyond time limit. Be that as it may, the original authority has given a clear cut finding in para 11 of Order-in-Original dated 28.02.2012 that the refund claims are filed within the time limit. This being so, the observation of Commissioner(Appeals) that refund claim is filed beyond the time limit is definitely unwarranted and unjustified. In view thereof, I find merits in the arguments raised by the appellants. The rejection of refund claim on time bar is unjustifiable. The appellant is eligible for the refund. The impugned order to the extent of rejecting the refund claim for the months January, 2011 and February, 2011 is set aside - appeal allowed - decided in favor of appellant-assessee.
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Central Excise
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2016 (12) TMI 659
Denial of CENVAT credit - denial on the ground that the appellant had availed irregular credit of duty paid on items namely Ms channel, MS beams, MS joist, HR coils, HR plates, Woven Wiremesh etc., which were used in the fabrication of capital goods - fabrication of structure fall under the definition of capital goods or not? - Held that: - The issue whether the subject items are eligible for credit, when used for the fabrication of parts/component /accessories of capital goods has been settled by the decision of the case of CCE, Tiruchirapally vs India Cement Ltd [2011 (8) TMI 399 - MADRAS HIGH COURT]. The Hon'ble Apex Court in the Rajasthan Spinning & Weaving Mills Ltd case [2010 (7) TMI 12 - SUPREME COURT OF INDIA] has laid down the user test. The appellants have been able to establish that without fabrication of such parts, accessories, components of capital goods it is not able to carry out the process of manufacture as these capital goods are integral for carrying out the manufacturing activity. In view of the facts of the present case being similar to the cases already decided by this Tribunal, applying the ratio in the above judgment, I hold that the credit is admissible - appeal allowed - decided in favor of appellant-assessee.
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2016 (12) TMI 658
100% EOU - clearance of 2 obsolete auto coner machines from one M/s. Kumar Cotex Ltd.(KCL). Permission had been taken from the Development Commissioner by KCL for clearance to DTA. These goods were purchased by the appellants. Department has taken the view that the goods have been so cleared only by payment of Central Excise duty whereas they should have suffered Customs duty along with CVD Held that: - A reading of the impugned order will indicate that culpability for non-discharge of duty liability has been imposed on KCL only. No allegation has been put against the appellant to the effect that they have in any manner colluded with KCL in the clearance of the said goods to DTA without discharging of appropriate duty thereon. This being so, the appellants cannot be faulted for having availed of the CENVAT credit of the goods purchased and received by them. Imposition of redemption fine on them only for the reason that the goods are already purchased and received by them is also not sustainable. In the circumstances, their appeal succeeds and is allowed - decided in favor of appellant.
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2016 (12) TMI 657
Default in timely payment of central excise duty for the month of May 2011 in terms of Rule 8(1) of Central Excise Rules, 2002 - contravention of the provisions of Rule 8(3A) as they have not paid duty on excisable goods consignment wise and also using only cash - Held that: - Admittedly, the appellant did not discharge their duty liability for the month of May 2011 within time as stipulated in Rule 8(1). Accordingly, the clearances made from June 2011 November 2011 utilizing cenvat credit were considered as non-duty paid clearance and the duty was confirmed with interest to be paid by cash. The appellants pleaded that the amount payable by them for the month of May 2011 was correctly worked out and reflected in ER-1 return. However, on account of calculation mistake, the amount of ₹ 23,86,456/- was debited in place of correct duty liability of ₹ 28,66,254/-. They had sufficient balance in the cenvat credit account to pay this differential duty and hence it was pleaded that it was a bona fide mistake and cannot be considered as default payment. We note that utilization of cenvat credit for discharging central excise duty during default period has been the subject matter of decisions by the Tribunal as well as various High Courts. We find that similar matters came up for decision before the Tribunal in various cases. In Steel Tubes of India Ltd. vs. C.C.E., Indore [2016 (2) TMI 684 - CESTAT NEW DELHI], it was held that the duty liability when fully discharging payment of the amount again by cash only which resulted in to re-credit of already debited credit is not necessary. Appeal allowed - decided in favor of assessee.
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2016 (12) TMI 656
CENVAT credit - denial on the ground that respondents are showing more consumption of cenvat credit availed inputs than actually consumed and apparently the cenvat credit has been wrongly availed on these input chemicals - Held that: - No study has been made regarding the composition of various other raw materials and their impact and the usage of caustic soda and sodium sulphite. Apparently, the whole calculation is rudimentary and no scientific analysis or expert guidance has been taken in this regard. Above all as pointed out in the impugned order, there is no evidence of non receipt of these raw materials or unaccounted diversion of these materials from the premises of the respondent. No discussion to that effect has been recorded in the original order. As such, we find no justification to interfere with the impugned order. Similarly, we note that when the respondent paid back the amount of credit to be reversed on their option to avail the exemption under N/N. 4/2006-CE, no penal action follows. We are in agreement with the impugned order on this ground also. Accordingly, appeal filed by the Revenue is dismissed - decided in favor of respondent-assessee.
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2016 (12) TMI 655
CENVAT credit - manufacture of Ordinary Portland cement, Pozzolana cement and clinker falling under Chapter 25 of the First Schedule to the Central Excise Tariff Act, 1985 - the appellant took Cenvat credit in respect of certain items in ready to use condition treating the same as capital goods under Rule 2(a) of the Credit Rules. These items were worked upon by the vendor according to specifications given by the appellant. Thereafter, the same were used as spares, accessories etc. of capital goods in the factory of the appellant - whether denial of credit justified? Held that: - the issue is squarely covered by the decision of the Apex Court in the case of CCE, Jaipur Vs. Rajasthan Spinning & Weaving Mills Ltd., [2010 (7) TMI 12 - SUPREME COURT OF INDIA] wherein the Hon'ble Supreme Court has considered an identical issue of steel plates and MS channels used in the erection of chimney for diesel generating set. The credit stands allowed in the light of Rule 57Q of the erstwhile Central Excise Rules, 1944. In the said judgement, the Apex Court has referred to the user test evolved by the Apex Court in the case of CCE, Coimbatore Vs. Jawahar Mills Ltd. [2001 (7) TMI 118 - SUPREME COURT OF INDIA], which is required to be satisfied to find out whether or not particular goods could be said to be capital goods. When we apply the user test to the case in hand, we find that the structural steel items have been used for the fabrication of support structures for capital goods. The appellants have argued that the various capital goods, such as kiln, material handling conveyor system, furnace etc. cannot be suspended in mid air. They will need to be suitably supported to facilitate smooth functioning of such machines. It is obvious that the structural items have been suitably worked upon for this purpose. Accordingly, the goods fabricated, using such structural items, will have to be considered as parts of the relevant machines. The definition of capital goods includes, components, spares and accessories of such capital goods. Accordingly, applying the User Test to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of capital goods as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat credit. Appeal allowed - credit allowed - decided in favor of appellant-assessee.
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2016 (12) TMI 654
Imposition of redemption fine and penalties - job work - the main appellant is job worker of M/s Tafe Motors & Tractors Ltd. who is manufacturer of tractors and doing certain activity on job work basis. Under Notification No. 23/2004-CE. With effect from 09/07/2004 the tractor became duty free, therefore, the activity undertaken by main appellant became dutiable - Held that: - As admitted that no goods were available, therefore, I hold that redemption fine is not imposable on the appellant in the light of the decision of Larger Bench of this Tribunal in the case of Shiv Kripa Ispat Pvt. Ltd.[2009 (1) TMI 124 - CESTAT MUMBAI], where it was held that fine was not imposable when goods were allowed to be cleared. I have gone through the contents of the show cause notice, there is no allegation in the show cause notice of fraud, collusion, wilful mis-statement, suppression of fact or not paid the duty with an intend to evade payment of duty. In the absence of such elements, penalty is not imposable on the main appellant under Section 11AC of the Act. Further, I find that on co-appellants penalties have been imposed under Rule 26 of the Central Excise Rules, 2002. Admittedly penalty under Rule 26 can be imposed subject to the provisions of Section 11AC of the Act which are absent here. Therefore, penalties on all the appellants are not imposable - I set aside the imposition of redemption fine and penalty on all the appellants - appeal disposed off - decided in favor of appellant-assessee.
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2016 (12) TMI 653
Valuation - inclusion of ‘erection, installation and commissioning’ charges in the assessable value of industrial packing machines manufactured the appellant and cleared on payment of duty in ‘completely knocked down’ (CKD) condition to the site of the buyer - Held that: - the issue is no longer res integra. In almost identical circumstances, the Tribunal, in Commissioner of Central Excise, Pune v. Nichrome Metal Works P. Ltd [1999 (11) TMI 583 - CEGAT, MUMBAI], has held that such charges being paid on account of services offered after the manufacture and clearance of the product is not liable to be included in the assessable value - goods cleared at the factory gate, assessable value will not include payment made for any activities thereafter - appeal allowed - decided in favor of appellant-assessee.
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2016 (12) TMI 652
Non-maintenance of proper records - non-payment of amount equal to appropriate rate of value of exempted goods u/r 6(3) of Cenvat Credit Rules, 2004 - Held that: - I find that the issue is settled in view of the decision of Hon’ble High Court of Bombay in the case of M/s. Hindalco Industries Ltd. vs. Union of India [2014 (12) TMI 657 - BOMBAY HIGH COURT], where it was held that in the present case it could not be pointed out as to whether any process in respect of Bagasse has been specified either in the Section or in the Chapter notice. In the absence thereof this deeming provision cannot be attracted. Otherwise, it is not in dispute that Bagasse is only an agricultural waste and residue, which itself is not the result of any process. Therefore, it cannot be treated as falling within the definition of Section 2(f) of the Act and the absence of manufacture, there cannot be any excise duty - Since it is not a manufacture, obviously Rule 6 of the Cenvat Rules, 2004, shall have no application. Respectfully following the judgment and the Board's Circular No. 1027/15/2016-CX dated 25.04.2016, the appeals filed by the appellant Revenue are rejected.
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2016 (12) TMI 651
CENAT credit - availment of credit after receipt of goods in the factory - job work - Held that: - The Board's Circular No.345/2/2000-TRU dated 29.02.2000 is in favour of the appellant assessee. It is the case of the appellant that only after receipt of the entire lot received in their factory by the job-worker and its reconciliation, they take the credit in their RG-23 Register. So, the submission of the ld.A.R. for the Revenue in respect of the contra-vention of the area based Notification, is not relevant herein. I make it clear that the present order relates to denial of cenvat credit under Cenvat Credit Rules, 2004 - appeal allowed - decided in favor of assessee.
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2016 (12) TMI 650
Denial of CENVAT credit - improper documents - Held that: - As per the provisions of Rule 9 (1) of the Cenvat Credit Rules the appellant is entitled to avail Cenvat credit on the basis of invoices issued by the manufacturer of input/input service. Admittedly the appellant availed the Cenvat credit on the basis of invoices issued by the manufacturer of inputs. In that circumstances, the provisions of Rule 9 (1) (e) (f) (g) are not applicable to the facts of the case, therefore, I hold that appellant has not contravene the provision of Rule 9 (1) of the Cenvat Credit Rules, 2004 for availment of Cenvat credit on the strength of invoice issued by the manufacturer. In fact the impugned proceedings were not warranted against the appellant. In that circumstances, the impugned order is not sustainable. Consequently, the same is set aside - appeal allowed - decided in favor of appellant-assessee.
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2016 (12) TMI 649
Whether the appellant should reverse the CENVAT Credit contained in the stock lying in factory on 9.7.2004 i.e. from the date appellant opted for exemption under Notification No. 30/2004 dated 9.7.2004 or otherwise? - Held that: - the appellant had availed CENVAT Credit on the inputs but reversed the attributable CENVAT Credit on the inputs of the finished goods when they were cleared without payment of duty under Notification No. 30/2004. There is no dispute that the appellant is eligible to avail benefit of Notification No. 30/2004. The only dispute is that the said notification has a condition which mandates for non availment of CENVAT Credit of the inputs by the assessee it he opts for such exemption notification. Since appellant has reversed the CENVAT Credit on the inputs attributable to the finished goods cleared by him availing he benefit of Notification No. 30/2004, I find that the exemptions cannot be denied. I find that the CENVAT Credit reversed need not be immediate, as correctly pointed out by the learned Counsel that the issue is now squarely settled by the judgment of the Tribunal in the case of Omkar Textile Mills [2013 (10) TMI 1298 - CESTAT AHMEDABAD]. Appeal allowed - decided in favor of appellant.
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2016 (12) TMI 648
Denial of CENVAT credit - manufacture of sponge iron - cenvat credit on various items, namely, HSS plate, channels, joist, beams, chequered coil/ plates etc. used in the electro static pacificator, conveyor, Banker chimney and Ash Sylo etc - whether denial of credit on the ground that the same cannot be considered as either input or capital goods for the appellant and taking of cenvat credit is not in conformity with the cenvat statute, justified? - Held that: - I find that this Tribunal in the case of N.R. Sponge Pvt. Ltd. [2016 (12) TMI 433 - CESTAT NEW DELHI] has allowed the cenvat benefit on the goods, namely, plates, angles, channels etc. holding the same as inputs/capital goods for availment of cenvat credit. With regard to oxygen gas, I find that in terms of the broad definition of input contained in Rule 2(k) of the Cenvat Credit Rules, 2004, the said item should fall within its scope and ambit for the purpose of availment of cenvat benefit. Also the cenvat benefit on welding electrodes used in the repair and maintenance of plant and machinery as input are allowed for availment of the cenvat benefit. CENVAT credit allowed - appeal allowed - decided in favor of assessee.
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2016 (12) TMI 647
Clandestine removal - pharmaceutical products - Held that: - Reliance was placed on various private records and statements recorded during investigation by the officers. This was found to be not corroborated sufficiently by the Original Authority. We note that substantial amount of ₹ 28,97,641/- is demanded against unaccounted clearance of one product, namely, I.V. fluid. It is noted here that availability of exemption to this product has been a subject matter of dispute for long and the matter has reached up to Hon’ble Supreme Court and was remanded to the Tribunal. The Tribunal, held against the respondent claim for exemption. During the pendency of these proceedings periodically notices were issued to the respondent as a protective measure. It is seen that such notices were challenged by way of writ-petition No. 14034/2010 before the Hon’ble Madhya Pradesh High Court who quashed the notices in their order dated 06/12/10 as during the period the petitioner had a favourable order on merit regarding the exemption of the goods. Against this order, the Revenue moved Hon’ble Supreme Court in civil writ-petition No.14181/2015 which is still pending and no details of stay or interim order has been brought to our notice. Considering that substantial portion of demand regarding I.V. fluid as contested by the Original Authority is purportedly involving demands which are already covered by way of periodical notices which was quashed by the Hon’ble Madhya Pradesh High Court, the matter requires factual re-verification. During the arguments, both the sides were not able to categorically submit, based on documents, about the amount of ₹ 28,97,641/- being partly or wholly covered in such periodical notices. Though contrary claims were made, no supporting evidence are placed before us. As such, we find that this requires verification by the Original Authority for a fresh decision - appeal allowed by way of remand.
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2016 (12) TMI 646
Non-payment of differential duty which arose during the period from 1.3.2011 to 28.2.2013 on account of increase in duty rates on "Tapioca Sago" falling under Chapter Heading 1903 0000 - Held that: - It is not in dispute that differential duty liability arose on account of increase in duty rates on Tapioca Sago during the period 1.3.2011 to 28.2.2013. It is also not in dispute that in respect of two of the appellants i.e. appellants M/s. Arulmurugan Sago Factory and M/s. Sri Balamurugan Sago Factory (Appellants 2 & 3), entire duty liability along with interest has been discharged before issue of SCN thereon and in respect of appellant No.1 in appeal No.E/40034/2016, almost 98% of such liability has been discharged - This being the case, it would have been most appropriate if the SCNs had not been issued in these cases. Instead, these Appellants perforce have been required to come before this forum for relief. In the circumstances, while there is no two opinion that the differential duty has been discharged by the appellant on being pointed out, along with interest amounts thereon, issue of SCNs for imposition of penalties under Section 11AC is an overkill. Penalty has also been imposed under Rule 27 of the Central Excise Rules, 2002 for not taking registration. When in the first place there was no requirement of issue of SCN itself, penalties will not survive particularly as there was some confusion on the duty rates and the continued eligibility of SSI concessions for these appellants. Appeal allowed - decided in favor of assessee.
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2016 (12) TMI 645
Disallowance of credit on capital goods - Conveyor Belt - Circular Bottom Plate - Rubber goods - Steel wire ropes - Wire woven Mesh - during the period February, 2010 to March, 2010 - Held that: - the definition of capital goods includes spare/ components/accessories of capital goods specified under chapter 82, 84,85 or 90 of Central Excise Tariff Act, 1985 - it is revealed that the subject goods are spares parts of capital goods which are used in the manufacturing activity by the appellant. Further, it is also seen that for earlier period, vide Order-in-Original dated 23-07-2010 the adjudicating authority has allowed credit on all these subject items and dropped the proceedings. Although the department filed appeal against such order before the Commissioner(Appeals), the same was dismissed vide Order-in-Appeal dated 07-03-2011 - For the reasons that the subject goods fall within the definition of capital goods being spare/ components /accessories of capital goods and also taking note of the fact that the appellant has been allowed credit for the earlier periods, I hold that the demand is unsustainable. The impugned order is set aside - appeal allowed - decided in favor of assessee.
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2016 (12) TMI 644
Doctrine of merger - Whether penalty is to be imposed in terms of Rule 15 of CCR, 2004 read with Section 11AC of Central Excise Act, 1944 where the CENVAT denial has been confirmed? - Held that: - In the facts of the present case, since the penalty has been set aside by the Division Bench of this Tribunal in the appellant's own case [2016 (12) TMI 218 - CESTAT, CHENNAI], the present appeal filed by the department is unsustainable as the doctrine of merger applies. Hence, the appeal filed by the Revenue is accordingly dismissed.
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CST, VAT & Sales Tax
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2016 (12) TMI 632
Input tax credit - Cross-verification / invoice wise mismatch - principles of natural justice - Held that: - the respondent, has selectively referred to certain portions of the petitioner's objections and has not dealt with the entire objections, did not furnish the documents sought for, did not afford an opportunity of personal hearing to the petitioner and did not deal with the applicability or otherwise of the decisions referred to by the petitioner, but proceeded on a ground that there was no document filed by the petitioner to substantiate the movement of the goods for confirmation of the purchase made from local registered dealers. Thus, it is clear that the respondent has misdirected himself in completing the assessments and the manner, in which, the assessments have been completed, is not tenable. The writ petitions are partly allowed, the impugned orders are set aside in so far as the finding rendered by the respondent with regard to cross verification (invoice wise mismatch) and the matters are remanded back to the respondent for fresh consideration.
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2016 (12) TMI 631
Maintainability of petition - Writ jurisdiction - opportunity to represent the case - Held that: - Considering the substantial questions of law which arise in the present petition, we are of the opinion that the present petition is not required to be dismissed on the ground that the present petition is at the show cause notice stage. Identical question came to be considered by the Hon'ble Supreme Court in the case of the Aircel Limited and Anr [2016 (6) TMI 1063 - SUPREME COURT OF INDIA]. Considering the fact that pure questions of law had arisen, the Hon'ble Supreme Court set aside the order passed by the High Court, by which, the petition was not entertained on the ground of availability of alternative remedy and has observed that questions that have been raised by the original petitioner being absolutely pure question of law, the High Court should have decided the matter. Considering the aforesaid decision of the Hon'ble Supreme Court and in the facts and circumstances of the case narrated herein above and as pure question of law arise which as per the opinion, are required to be decided by the High Court, preliminary objection raised by Shri Kamal Trivedi, learned Advocate General is hereby overruled - matter to be remitted to High Court - petition disposed off.
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2016 (12) TMI 630
Reassessment where original assessment is sought to be superseded on the ground that it was erroneous - change of opinion on the basis of subsequent decision, where different view adopted - taxability of sale of mobile phones in the state of Uttar Pradesh - Held that: - How a product is to be taxed, is a matter of intent of the parties. In a composite contract, it depends on what the parties intended to buy and sell. In the facts of the present case, the intention of the parties was to sell the mobile phone alone, and not the mobile charger which was supplied along with the mobile phone in a composite pack. This writ petition has to be allowed with cost as law is well settled that assessment once having become final should not have been reopened on the basis of judgment of the Apex Court which has no applicability to the facts of this case and is in ignorance of factual position as is very clear from facts narrated herein above - petition allowed - decided in favor of assessee.
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2016 (12) TMI 629
Input tax credit - presumptive tax - unaccounted purchases - Evasion of tax - suppression of facts - Section 25(1) of the KVAT - Held that: - primarily Section 25C of the Act will not apply in an instance where the presumptive dealer suppresses his turnover. The learned counsel for the petitioners however submits that even in an instance where there is suppression of turnover by a presumptive dealer, a Division Bench of this Court in Mooken Devassy & Co., [2016 (12) TMI 463 - KERALA HIGH COURT] observed that if the turnover assessed does not exceed ₹ 60 lakhs, the dealer is entitled for the benefit of payment of presumptive tax. If such a rationale is adopted, the petitioners in the present cases are also entitled for benefit of input tax credit. Section 25C applies only if the assessing authority had denied the eligibility of the dealer to pay presumptive tax for the violation of conditions enumerated in sub section (5) of Section 6. Unless such a finding is made by the assessing authority in the assessment order that the petitioners have violated any of the conditions enumerated in Section 6(5), none of the petitioners are entitled for the benefit of Section 25C. In other words, a finding by the assessing authority that the dealer has violated the conditions in Section 6(5) is a precondition for claiming input tax credit under Section 25C. Penalty proceedings u/s 22(7) of the Act - Held that: - it is an independent provision in respect of dealers paying tax under Section 6(5) and if it is found that amount of tax if any paid is less than the amount of tax which he is liable to pay, then the assessing authority has jurisdiction to direct the dealer to pay difference of tax between the amount of tax already paid and that fixed in such proceedings together with thrice the amount of such difference as penalty. Having regard to the aforesaid discussion, I do not think that the petitioners are entitled to get any relief in the above writ petitions. Petitions disposed off - The assessing Officer is directed to make a fresh assessment giving the benefit of payment of tax at presumptive rate - decided partly in favor of petitioner-assessee.
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Indian Laws
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2016 (12) TMI 626
Application filed under Section 47 (Part II) of the Arbitration and Conciliation Act, 1996 for enforcement of the foreign arbitration award dismissed - whether the District Court would cease to have jurisdiction to proceed with the execution of the foreign arbitration awards, after coming into force of the Explanation to Section 47 by way of the Amended Ordinance-2015 and the execution pending before the District Judge has to be filed in the High Court? - Held that:- There is no dispute that in the execution application filed by the petitioner, the District Judge, Gurgaon had the jurisdiction in terms of the un-amended Explanation to Section 47 of the Act but during the pendency of the execution, with the amendment in the Explanation to Section 47 of the Act, the forum for the purpose of execution of the foreign arbitration award was changed from the principal Civil Court of original jurisdiction to the High Court. In view of the decision of the Supreme Court in Dhadi Sahu's case (1992 (11) TMI 2 - SUPREME Court ) wherein held that the general principle is that a law which brings about a change in the forum does not affect pending actions unless intention to the contrary is clearly shown. One of the modes by which such an intention is shown is by making a provision for change-over of proceedings, from the court or the tribunal where they are pending to the court or the tribunal which under the new law gets jurisdiction to try them, it can safely be held that the impugned order passed by the Additional District Judge, Gurgaon, is illegal.Consequently, the present writ petition is hereby allowed and the impugned order dated 14.12.2015 passed by the Additional District Judge, Gurgaon, is set aside.
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