TMI Tax Updates - e-Newsletter
February 12, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
Income Tax
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When the Assessing Officer and the Commissioner concurrently found that there was unexplained expenditure and source of such income was not satisfactorily explained, section 69C of the Act would certainly be applicable. - HC
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Scope of ‘transfer’ u/s 47(xiv) - whether the assessee’s transaction of converting his proprietary business into a private limited company is outside the scope of ‘transfer’ as provided under Section 47(xiv) of the Act and therefore not liable to be taxed under the head long term capital gains? - Held Yes - AT
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Taxability of the sale of property as Short Term Capital Gains OR long Term Capital Gains - The mere fact that possession of the flat was delivered later does not detract from the fact that the allotment was conferred with a right to hold the property on issuance of an allotment letter. - AT
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Amount received on transfer of Bungalow - the presumption under the law is that the assessee had sold his interest in the entire property even if he has acquired such ownership rights after the sale. - to be assessed under the head “capital gains” - AT
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Unexplained credits introduced in the garb of unsecured loans - Accommodation entries - CIT(A) found that even the basic step i.e. summons or query letter were not issued, to these cash creditor and not an iota of evidence has been collected and brought on record which indicates or prove that the cash credit money was assessee's own money - No addition - AT
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MAT - computation of income u/s 115JB - unabsorbed depreciation and book loss furnished by the assessee for computation of Book Profit u/s 115JB - adjudicating authorities can always consider and decide on merits, any claim which the taxpayer has raised before the AO during assessment proceedings although the same is not claimed by the taxpayer vide Return of income filed with the Revenue - AT
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TDS u/s 194C(2) - it cannot be said that the payments made for hiring vehicles would fall in the category of payment towards a sub-contract and as such the assessee is not liable to deduct tax at source as per provisions of section 194C(2) and consequently the provisions of section 40(a)(ia) will not apply on such payments - AT
Customs
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Recovery notice for Warehoused of goods - application for extension of warehouse period - Case of the petitioner is that it is not possible to complete manufacturing of a ship in couple of years and usually takes longer time, during which the goods remained warehoused. - Interim relief granted - HC
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Recovery of duty drawback granted earlier due to non realization of foreign exchange - Recovery of drawback with appropriate interest confirmed - CGOVT
Service Tax
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Cenvat Credit - eligible input services after amendment - outdoor catering services, life insurance and premium - in view of specific exclusions, credit cannot be allowed - AT
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Demand of service tax on promotion/marketing/sale of the goods of M/s. Amway India Enterprises - multilevel marketing scheme (MLM) - service tax demand in respect of commission received by the appellants on direct retail sale is liable to be sustained and the service tax on the commission received for sale of goods through second and third level distributors is sustained - AT
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Demand of service tax - Activity of Erection of Tele-communication towers for BSNL - taxability prior to 01/6/2007 - certain basic facts, like the actual supply of materials in the execution of contract to establish the composite nature of contract requires verification by the Original Authority - AT
Central Excise
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100% EOU - diversion of imported material - Appellants have been able to prove that PFY/PTY is the raw material and they have procured these raw materials on the strength of CT 3 issued by appellant for procurement of the same, therefore, the duty cannot be demanded from the appellants - AT
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Appropriation of the rebate amount - The amount of interest was sub-judice and had not attained finality and as such, could not be recovered by way of special mode of recovery, thus hold that the recovery is bad - AT
VAT
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Whether the petitioner could avail the benefit of the judgment which was rendered much after the assessment order was passed and whether such reassessment orders can be passed on their prayer for rectification of the earlier assessment - Held Yes - HC
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Assessment under DVAT - system generated orders and notices - mismatch between the data filed online in Annexure-2A with the Annexure-2B filed by the selling dealers - overlap of the period for which notices were issued - principle of natural justice - VATO directed to begin de novo assessment proceedings - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (2) TMI 353
Disallowance of deferred revenue expenditure - expenditure not debited to the profit and loss account - Held that:- The one time payment of interest was however, shown by the assessee in the books as deferred expenditure to be written off over the entire period of debentures. The assessee however, claimed the entire expenditure under section 36(1)(iii) of the Act during the year under consideration upon which the Revenue objected. The Supreme Court held that under section 36(1) (iii) of the Act any amount paid on account of interest becomes an admissible deduction if the same was paid on the capital borrowed by the assessee and the borrowing was for the purpose of business or profession. While examining the allowability of such deduction, the Assessing Officer is to consider the genuineness of the business borrowing and that the borrowing was for the purpose of business and not an illusionary and colourable transaction. It was further held that the amount would be said to have been paid even if same is not actually paid but incurred on the basis of method of accounting. It was further held and observed that there is no concept of deferred revenue expenditure in the Act except under certain specified sections where amortisation is specifically provided. Normally, the ordinary rule would be that the revenue expenditure incurred in a particular year is to be allowed in that year. If the assessee claims the expenditure in the year when the same was made, the department cannot deny it. The decision of Supreme Court in case of Madras Industrial Investment Corporation Ltd v. CIT reported in (1997 (4) TMI 5 - SUPREME Court ), where the assessee had claimed spread over of the expenditure which was allowed was noticed and explained. - Decided against revenue
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2016 (2) TMI 352
Addition u/s 69C - Held that:- When the Assessing Officer and the Commissioner concurrently found that there was unexplained expenditure and source of such income was not satisfactorily explained, section 69C of the Act would certainly be applicable. - Decided against assessee Additional depreciation for installation of windmills - Held that:- The assessee would be entitled to such depreciation as may be available in term of section 32 of the Act.- Decided against revenue
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2016 (2) TMI 351
Maintainability of appeal - jurisdiction of the High Court - Held that:- Chapter XX of the Income Tax Act, 1961 makes provision for appeals and revision. Section 269 of the Act, inter alia, provides that for that Chapter, “High Court” means (vi) in relation to the Union Territories of Dadra and Nagar Haveli and Daman and Diu, the High Court of Bombay. Since this matter arises from Union Territory of Daman, in view of the provisions of section 269 (iv) of the Act, the same would fall within the jurisdiction of the High Court of Bombay and consequently, the appeal is not maintainable before this court.
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2016 (2) TMI 350
TDS u/s 194C - whether the assessee is not liable to deduct tax at source u/s 194C in respect of contract manufacturing? - Held that:- In the present case, the assessee has purchased goods manufactured by the third party and payments made towards goods purchased by assessee. In the section 194C, there is no whisper about the goods purchased from other person and TDS is to be deducted on this payment. The Hon'ble Supreme Court also made clear that for purchasing of goods no TDS is to be deduced as held in CIT V/s Silver Oak Laboratories Pvt. Ltd [2010 (8) TMI 839 - SUPREME COURT ] - Decided in favour of assessee
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2016 (2) TMI 349
Interest income - treated as income from other sources or capital gain - Held that:- The Delhi High Court, after considering decision in the case of Bongaigaon Refinery & Petrochemicals Ltd. vs. CIT( 2001 (7) TMI 4 - SUPREME Court ), in the case of CIT v. Jaypee DSC Ventures Ltd. (2011 (3) TMI 309 - Delhi High Court ), observed that the interest earned by the assessee on the fixed deposit made for performance guarantee of contract was capital in nature and cannot be assessed as income from other sources. Similarly, the Tribunal on another occasion in assessee’s case, has taken the same view. Considering the facts and circumstances of the case, we are of the opinion that the deposit made by the assessee had an inextricable nexus with the implementation of the power project. - Decided in favour of assessee.
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2016 (2) TMI 348
Scope of ‘transfer’ u/s 47(xiv) - whether the assessee’s transaction of converting his proprietary business into a private limited company is outside the scope of ‘transfer’ as provided under Section 47(xiv) of the Act and therefore not liable to be taxed under the head long term capital gains? - Held that:- CIT (A) has made a categorical finding in his order that the entire transaction is nothing but the conversion of assessee’s proprietorship concern as a going concern into a private limited company wherein the assessee is holding 51% of share capital with voting power immediately after conversion. The entire assets and liabilities of the assessee’s proprietorship concern are absorbed by the resultant private limited company. The assessee has also complied with the provisions of section 47(xiv) of the Act in all respects. Considering these facts which could not be controverted by the Revenue we are of the view that the entire transaction falls outside the ambit of Section-45 of the Act. Further, provisions of section 50B of the Act will not be applicable in the present case before us because this transaction is not slump sale as envisaged under the provisions of the Act. In these circumstances, we fully agree with the decision of the Ld. CIT (A) and accordingly, uphold his order. - Decided against revenue
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2016 (2) TMI 347
Penalty u/s.271(1)(c) - undisclosed income - Held that:- The assessee, in the instant case, has offered the undisclosed income of ₹ 60 lakhs in A.Y. 1991-92 and 1994-95 on the basis of sale of flats during those years and the assessee has given a note in the return filed for the impugned assessment year giving reasons for not declaring the same in this assessment year. It is now accepted proposition that on-money has to be brought to tax only in the year of sale of flats. Therefore, merely because addition has been sustained in quantum proceedings, the same cannot be a ground for levy of penalty u/s.271(1)(c) of the I.T. Act, 1961. The assessee can always make new plea during penalty proceedings. It is now the settled proposition of law that assessment proceedings and quantum proceedings are separate and distinct. In this view of the matter, we are of the considered opinion that this is not a fit case for levy of penalty u/s.271(1)(c) of the I.T. Act. We therefore, uphold the order of the CIT(A). - Decided in favour of assessee
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2016 (2) TMI 346
Taxability of the sale of property as Short Term Capital Gains OR long Term Capital Gains - denial of exemption claimed u/s 54F - Held that:- Possession of the flat was given subsequently. The assessee then sold the flat on 05/07/1989. In the return of income the assessee disclosed the capital gain arising from the sale of flat as LTCG. The authorities below treated the capital gain arising there from as STCG. Their Lordships held that the capital gains arising from the sale was LTCG. At para 7 thereof, their Lordships have observed that when the assessee paid the first installment on 04/07/1986 after allotment on 07/06/1986, this act conferred upon the assessee a right to hold the flat. The mere fact that possession of the flat was delivered later does not detract from the fact that the allotment was conferred with a right to hold the property on issuance of an allotment letter. The payment of balance installments and delivery of possession are consequential acts that relate back to and arise from the rights conferred by the allotment letter. In this view of the matter, the transaction was held to LTCG. Capital gains arising from sale of the said Flat No. 702, Mumbai Central, Mumbai by the assessee is to computed as LTCG as the period of 36 months is to be taken from 18/10/2005, i.e. the date of allotment to 11/12/2009 i.e. the date of sale. We accordingly uphold the order of the Ld.CIT (A) on this issue and dismiss the grounds raised by Revenue in this regard. As regards revenue averments that the assessee is not entitled to exemption u/s 54F of the Act since the claim by the assessee was made u/s 54 of the Act. We have heard both parties and perused the record and the judicial decisions and CBDT Circular No.14 (XI-35) of 1955 dt. 11/04/55 cited by the assessee. On an appreciation of the same, we concur with the view of the Ld. CIT (A) that there are a number of judicial pronouncements wherein it has been held that it is obligatory on the part of the AO to draw the assessee’s attention to the lawful relief available and that if such exemption /deduction was otherwise available to the assessee, the same should be allowed. Finding no reason to interfere with the order of the Ld. CIT (A) in the matter, we dismiss the ground raised by Revenue. - Decided in favour of assessee
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2016 (2) TMI 345
Penalty under section 271(1)(c) - addition of foreign travel expenses - Held that:- There is no finding by the authorities below that the details furnished by the assessee were found to be incorrect or erroneous or false. In these factual circumstances, there would be no question of imposing penalty u/s. 271(1)(c) of the Act. A mere claim made in the return of income which is not acceptable by itself, will not amount to furnishing of inaccurate particulars or concealment of income. In this view of the matter, we are of the considered opinion that the foreign travelling expenses incurred, claimed by the assessee and disallowed by the Assessing Officer in the case on hand cannot be said to be attract the provisions of section 271(1)(c) of the Act to justify and sustain the levy of penalty thereunder. We, therefore, cancel the penalty - Decided in favour of assessee
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2016 (2) TMI 344
Purchase and sale of shares - “Capital Gains” or “Business Income” - whether the assessee had purchased/sold the shares in question as an investor or as a share trader; whether any borrowed funds were utilized or the assessee has invested its own funds and whether the shares in question were purchased/sold under a Portfolio Management Scheme or the assessee has made the transaction as a share trader? - Held that:- Admittedly, the objective of the appellant trust is to ensure effective succession planning mechanism and transfer of funds from generation to generation for the benefit of the family members of the settler and protecting the family wealth as the trust beneficiaries are only family members i.e., purely blood relatives including children and grand children. The shares in question were acquired and transferred through Portfolio Managers engaged by the assessee. The entire investments have come out of the Corpus Fund of the assessee and no borrowed funds were utilized for purchase of the shares in question. In view of the aforesaid facts the contention of the revenue that the assessee has indulged in business activities in the guise of share investment has no merit. It is quite clear that the over-riding intention of the assessee is not to trade in shares even when the purchase and sale of shares was made through various Portfolio Managers. Therefore the CIT(A) has rightly held the income in question as ‘Capital Gains’ and not the ‘Business Income’. Thus it can be concluded that the assessee had purchased/sold the shares in question in the capacity of an investor and not in the capacity of a share trader and therefore, in the present case the income accrued from sale of the shares in question is required to be computed as capital gain and not as business income. - Decided in favour of assessee
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2016 (2) TMI 343
Amount received on transfer of Bungalow - assessed as capital gains or income from others sources - CIT(A) held it liable to be assessed under the head “capital gains” - Held that:- The undisputed fact is that the income was received by the assessee for transfer of bungalow under exchange deed dated 29.8.2005. The assessee was having right and interest in the bungalow, which was transferred. Under such circumstances, it cannot be said that the assessee had received the income without consideration. There is ample evidence on the file that ultimately the property i.e. bungalow in question devolved upon the assessee which was transferred by the assessee and the income earned by the assessee there from is to be assessed as capital gains. Even for the sake of arguments if we presume that the assessee had sold the property in which he had no title or interest but after having sold the property he got right or title in the property then also he is estopped under the law from saying that the sale agreement earlier entered by him cannot be acted upon or that the sale deed was invalid. Under such circumstances, the presumption under the law is that the assessee had sold his interest in the entire property even if he has acquired such ownership rights after the sale. We do not find any infirmity in the order of ld. CIT(A) on this issue and the same is upheld. - Decided against revenue Deduction u/s 54F - interconnection of flats - whether assessee is not the rightful owner of the property he has sold and the sale proceeds have been invested in three residential units? - Held that:- CIT(A) after considering the facts and evidences on the filed observed that all the three flats were interconnected and had only one entry, one kitchen they were used by the assessee as one unit. The electricity bill was also only one, though there were three agreements for purchase of three flats, however, the same were used as one unit. The ld. CIT(A) after perusing the floor plan and other record held that in fact, the assessee had purchased only one flat which was conveyed to the assessee vide three separate agreements for the purpose of convenience of the builder or for any other purposes as the case may be . He held that it was a single dwelling unit and the assessee thus was entitled to claim all the benefits arising out of section 54F of the Act. In view of the detailed discussion made by the ld. CIT(A) after proper appreciation of the evidence on the file, we do not find any reason to interfere with the order of the ld. CIT(A) - Decided against revenue
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2016 (2) TMI 342
Rectification of mistake - whether the tax is required to be deducted tax at source from payments made by a foreign bank’s Indian branch to its overseas head office? - Held that:- The payment is made by the non resident to himself, there is no obligation to deduct tax at source from such payments. Hon’ble Calcutta High Court, in the case of ABN Amro Bank NV Vs CIT [2010 (12) TMI 340 - CALCUTTA HIGH COURT] has held that there is tax deduction at source requirement, under section 195, from the payment of interest made by the Indian branch of a foreign bank to its offices abroad. It is thus clear that the impugned disallowance, even on merits, is unsustainable in law. Accordingly, the impugned disallowance, by way of rectification of mistake under section 154, is wholly unsustainable in law. The CIT(A) was indeed in error in upholding the impugned rectification order on this aspect of the matter. Interest under section 244A not admissible in respect of delay in making claim of exemption under section 10(23G) - Held that:- The law is quite unambiguous on this aspect as it provides that “where any question arises as to the period to be excluded, it shall be decided by Chief Commissioner or Commissioner whose decision thereon shall be final”. Undoubtedly, such a decision by the Commissioner of the Chief Commissioner cannot be a subject matter of then the call about the period for exclusion of interest is to be determined by the Commissioner or the Chief Commissioner. Obviously, no such exercise was carried out at the assessment stage or even at the stage of the rectification proceedings, and it was, therefore, not open to the Assessing Officer, on his own, to decide the period for which interest under section 244A was to be declined. For this reason also, not declining the interest under section 244A for the period of 1.4.2002 to 20.1.2005, was not a mistake apparent on record. In view of the above discussions, and for more reasons than one, the Assessing Officer was in error in passing the impugned order under section 154 on this aspect of the matter as well.
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2016 (2) TMI 341
Disallowance of office expenses - commencement of business - whether what is required to start is business as only setting up of the infrastructure and appointment of the directors and managers as well as other staff? - Held that:- The assessee has already appointed its directors and the employees and also installed the requisite infrastructure for the purpose of carrying out the business activity of investment by procuring funds from its parent company and investing the same in the Indian group companies. Hence the assessee has already completed all the requisite acquisition and installation of facilities then the business of investment was set up by the assessee though it was commenced later on when the assessee has actually invested in the group of companies on 14.12.2011. It is a case of service/ investment company and not manufacturing or other production activity where a manufacturing facilities is required to be constructed prior to that the business cannot said to be set up. In view of the above facts and circumstances as well as the judgement of the Hon'ble High Court I am of the considered view that the assessee has set up its business at the beginning of the financial year under consideration as the assessee was not require to do anything more whatever already completed for start of the business. Accordingly the claim of expenses is allowable claim. The orders of the authorities below are set aside and the claim of the assessee is allowed. - Decided in favour of assessee
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2016 (2) TMI 340
Unexplained credits introduced in the garb of unsecured loans - Accommodation entries - Held that:- CIT(A) has rightly held that when the assessee had provided the AO with the latest address of the squared up cash creditor (as the assessee had no such control on them therefore they were unable to produce before the AO and no further enquiries have been done of any kind by the AO) Ld. CIT(A) found that even the basic step i.e. summons or query letter were not issued, to these cash creditor and not an iota of evidence has been collected and brought on record which indicates or prove that the cash credit money was assessee's own money, in such an event, he rightly held that AO is not correct in holding the ₹ 95,00,000 received from 3 corporate entities mentioned above are bogus, sham and they are engaged in providing accommodation entry. - Decided against revenue Addition on on account of earnest money - Held that:- CIT(A) has rightly held that AO was not justified in making addition on account of earnest Money, particularly when the property which was reflected as part of the inventory as on 31.03.2009 and the same is sold in the subsequent year and profit on the same has duly been reflected in and profit and loss account for assessment year 2010-11. Hence the addition made on account of earnest money was rightly deleted. - Decided against revenue Unaccounted cash deposited in bank - Held that:- As during the year the assessee sold 2 of properties, namely Property no. 11, N.K. II Indirapuram (Rs. 75,00,000) and property no. 392, Shakti Khand-III, Indirapuram (Rs.9,50,000). We find that both the property sale are duly been reflected in assessment year 2009-10. The assessee had received the sale consideration of ₹ 9,50,000 in cash and the same was shown as a source of cash being deposited in the bank account. The AO had accepted the sales of ₹ 84,50,000 declared by the assessee, in these circumstances the action of the Ld. CIT(A) in deleting the addition of ₹ 9,50,000 on account of cash deposited in the bank account was a rightful one. - Decided against revenue Addition u/s. 50C(1) - Held that:- As it is an established fact that the assessee is engaged in the real estate business, therefore, the immovable properties are appearing in assessee's books of account as stock-in-trade. Further from the perusal of Circular No. 8 of 2002 which relates to the provisions of Section 50C, it was seen that the provisions of Section 50C are only applicable to those assets which are capital assets and on which capital gain is to be computed. In view of above, in our considered opinion, Ld. CIT(A) has rightly held that since the immovable properties are treated as stock-in-trade accordingly, the provisions of section 50C(1) are not applicable, and the addition made by the AO was rightly deleted by the Ld. CIT(A). Therefore, we find no infirmity in the impugned order passed by the Ld. CIT(A) - Decided against revenue
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2016 (2) TMI 339
MAT - computation of income u/s 115JB - unabsorbed depreciation and book loss furnished by the assessee for computation of Book Profit u/s 115JB - Held that:- We have observed that the assessee company has raised additional claim before the A.O. during the assessment proceedings by filing a revised statement of unabsorbed depreciation and book loss for computing the book profit u/s 115JB of the Act in which the losses were different from the one which was claimed in the return of income filed with Revenue, the said revised statement filed by the assessee company before the AO during assessment proceedings was not considered by the A.O and no cognizance was taken thereof by the AO on the ground that the assessee company’s claim raised vide return of income filed with Revenue can only be considered. The CIT(A) duly considered the said claim and has allowed the same on merits. We do not find any infirmity in the orders of the CIT(A) in considering the said claim as adjudicating authorities can always consider and decide on merits, any claim which the taxpayer has raised before the AO during assessment proceedings although the same is not claimed by the taxpayer vide Return of income filed with the Revenue as held by Hon’ble Bombay High Court in CIT v. Pruthvi Brokers & Shareholders (P) Ltd., (2012 (7) TMI 158 - BOMBAY HIGH COURT). - Decided against revenue CIT(A) directing the A.O. to consider the revised statement of unabsorbed depreciation and book loss furnished by the assessee company for computation of book profit u/s 115JB of the Act confirmed - Decided against revenue
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2016 (2) TMI 338
Disallowance U/s 14A - Held that:- The assessee claimed that it has furnished evidence of interest free fund available with it before the Assessing Officer but whatever paper book filed, has not referred by the Assessing Officer. The representative of the assessee company has not signed on some of the papers allegedly claimed to be furnished before the Assessing Officer. The ld CIT(A) accepted the additional evidence without giving any finding of admitting the additional evidence in his order and seeking any comment from the Assessing Officer and passed the order by accepting the assessee's submission. Prima facie, these evidences were not available at the time of assessment with the Assessing Officer, therefore, in the interest of justice, we set aside the order of the ld CIT(A) and directed to give the opportunities to the Assessing Officer on evidence considered while deciding the assessee's appeal on disallowance of interest and disallowance on 14A. - Decided in favour of revenue for statistical purposes only.
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2016 (2) TMI 337
TDS u/s 194C(2) - disallowance of expenses under section 40(a)(ia) - payments to various truck owners on account of freight was made without TDS - Held that:- All the responsibility for the transportation of goods was on the assessee and assessee did not enter into any subcontract with the transport agencies and used to take on the trucks as and when required for the destination as and where required. The separate lorry receipt/challan and separate payments were made on successful delivery of the goods. There is no material to suggest that the other lorry owners involved themselves in carrying out any part of the work undertaken by the assessee for spending their energy, time, expenses on running trucks and by taking the risks associated with the main contract. In the reasoning of the AO that the payment made for the hired vehicles comes under the category of sub-contract is not correct and nor it is based on any relevant consideration. Therefore, in our opinion it cannot be said that the payments made for hiring vehicles would fall in the category of payment towards a sub-contract and as such the assessee is not liable to deduct tax at source as per provisions of section 194C(2) and consequently the provisions of section 40(a)(ia) will not apply on such payments - Decided in favour of assessee
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Customs
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2016 (2) TMI 324
Import of wrong goods - The declared importer refused to take the consignment - and therefore, the appellant, who was also a exporter of the consignment from the Singapore, approached the Revenue with a request to permit re-export of goods or to permit sale to a new buyer. - consignment was examined and it was found that it contained not only Blank Video Cassettes as declared in IGM but also 30 Panasonic Video Cameras, which were not declared in the IGM - request to permit re-export of goods or to permit sale to a new buyer. Held that:- the entire case has been made on account of earlier mis-conduct and mis-declaration of the importer and exporter. In respect of this consignment also, there was certain signs which created suspicion. The Bill of Lading did not have complete description of all the goods and as a result, the Import General Manifest (IGM) also did not contain the complete description of goods imported. The boxes in which the goods were exported did not have the importer’s name nor it have the correct description of the product. The importers have neither filed Bill of Entry nor claimed the goods and have practically abandoned the goods. It is seen that while there is a good reason to suspect the intention of the appellant, there is no evidence that the goods would have been mis-declared in the Bills of Entry. Appellants allowed to re export the consignment. - Decided in favor of appellant.
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2016 (2) TMI 323
Refund of SAD - Notification No. 102/07-Customs dated 14.09.2007 - failure to make endorsement that “credit of duty is not admissible” - Held that:- The ratio of the LB decision in the case of Chowglue & Co. Pvt. Ltd. Vs. CC, Mumbai [2014 (8) TMI 214 - CESTAT MUMBAI (LB)] squarely applies to the present case as in the present case, the appellant has imported finished goods for the purpose of trading. The Revenue’s contention is that the appellant is the manufacturer and they are not proved that they have used these tyres is not justified. - Refund allowed - Decided in favor of assessee.
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2016 (2) TMI 322
Recovery notice for Warehoused of goods - application for extension of warehouse period - Case of the petitioner is that it is not possible to complete manufacturing of a ship in couple of years and usually takes longer time, during which the goods remained warehoused. - Held that:- We are prima facie of the opinion that if no protection is granted, the petitioner would suffer irreparable loss. We may recall that the first of the demand notices was issued on 29.11.2013. The Assistant Commissioner of Central Excise and Customs, Surat, till further orders, therefore, shall not proceed with the hearing in connection with the said demand notices. - Interim relief granted.
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2016 (2) TMI 321
Re-validation Status Holders Incentive Scrip (SHIS) scheme - It is submitted that on account of wrong action on part of the authorities in crediting the said duty amount, the petitioner could not utilize the duty during the original licence period, which at the relevant time was approximately 15 months duration left. - Held that:- Be that as it may, now that the authorities have done both, re-crediting the amount as well as extended the validity period of the licence, we do not propose to take any further action in the present petition.
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2016 (2) TMI 320
Recovery of duty drawback granted earlier due to non realization of foreign exchange - scope of sub-rule (5) of Rule 16A of Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 introduced as per Notification No. 30/2011 - retrospective effect to be given or not - Held that:- as Rule 16(A)(5) of the Customs, Central Excise and Service Tax Drawback Rules, 1995, as amended, was made effective w.e.f. 11-4-2011 only and all export proceeds due to be realized prior to this date would not be covered by the relaxation provided thereunder. The provision of sub-rule (5) of Rule 16(A) ibid have rightly been held to be inapplicable by the lower authorities in the present case. The lower authorities have concluded that write off of foreign exchange on default of foreign buyer and compensation of the same by way of ECGC does not entitle the exporter to drawback benefit. It is an undisputed fact that at the material time i.e. the period to which the impugned Shipping Bills belong and the period when the realization of export proceeds become due pertains to a period when the said RBI circulars and provisions of FTP 2009-14 were in force and Rule 16A(5) did not exist. The detailed findings of lower authorities regarding recovery of drawback amount in view of the said RBI circulars have also not been challenged by the applicant and Government finds that such findings of lower authorities and orders thereof continue to hole ground. Recovery of drawback with appropriate interest confirmed - Decided against the appellant.
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Corporate Laws
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2016 (2) TMI 317
Seeking approval of a scheme of arrangement under Sections 391 to 394 of the Companies Act, 1956 - learned Single Judge dismissed the petition - Held that:- It is on account of error that the learned Judge also observed that after implementation of the first part of the scheme, the shareholding pattern, the business and the profits etc. of the transferor and transferee companies will undergo change and that those figures and particulars are required to be presented before the members and the shareholders of the resultant companies and the other companies who are sought to be merged and demerged with the resultant company i.e. appellant No.1 as demerged. In the case of a composite scheme such as the one before us, the question of implementing the various components thereof separately does not and indeed cannot arise. There is no question, therefore, of the particulars being required to be presented before the stakeholders and the Court upon implementation of each of the components. The consequence of each of the components is viewed by the stakeholders not independently but together with the other components while deciding whether or not to approve the scheme. Company Appeal No. 52 of 2015 filed by the Demerged Companies and the Resulting Company respectively is allowed and the scheme is sanctioned as proposed. - Petitioners-appellants are directed to file a copy of this order along with a copy of the Scheme with the concerned Registrar of Companies, electronically, along with E-Form INC 28 in addition to physical copy as per the relevant provisions of the Companies Act, 1956.
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Service Tax
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2016 (2) TMI 336
Cenvat Credit - eligible input services after amendment - outdoor catering services, life insurance and premium - Held that:- there is specific exclusion in respect of outdoor catering service and various other services including life insurance when such services are used for primarily or personnel use of consumption of any employee in the case as per the case records the services of outdoor catering and the life insurance services were clearly received for personal use of employees is not controverted in the grounds of appeal. - Credit cannot be allowed - Decided against the assessee.
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2016 (2) TMI 335
Demand of service tax on promotion/marketing/sale of the goods of M/s. Amway India Enterprises - appellants were not discharging service tax liability on the commissions received under multilevel marketing scheme (Direct Marketing) - extended period of limitation - Held that:- service tax demand in respect of commission received by the appellants on direct retail sale is liable to be sustained and the service tax on the commission received for sale of goods through second and third level distributors is sustained. Matter remanded back to adjudicating authority to re-quantify the service tax demand on the commission received on the volumes of purchases made by the distributors, sponsors enrolled by the particular distributor. and to grant the benefit of notifications if available. Decided partly in favor of assessee.
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2016 (2) TMI 334
Delay in filing of an appeal before Commissioner (Appeals) - period of limitation - The appeal was filed after five months and sixteen days. - The ld. Commissioner (Appeals) held that in terms of Section 85 (3A) of the Finance Act, 1994, the initial period of appeal of two months is extendable by another one month by the ld. Commissioner (Appeals). However, the present appeal before him, was filed with further delay of more than three months and hence, he rejected the appeal as barred by limitation - Held that:- Commissioner (Appeals) cannot exercise powers beyond condonable period of limitation under Section 85 of the Finance Act, 1994. - there is no ground to interfere with the order of the lower Appellate Authority in this case. - Appeal dismissed - Decided against the assessee.
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2016 (2) TMI 333
Condonation of delay - Period of limitation for filing an appeal - To be computed from the date of original order or from the date of modified order in original - Held that:- The case laws relied upon by the appellant are not applicable to the present factual matrix as it was not a case of modification of a stay order passed by Commr (A). Secondly, the modification application before Commr (A) can not be considered as an appeal filed before a wrong forum. Filing such a modification of a final order before the first appellate authority has no legal backing at all. - delay of more than 1000 days in filing appeal before us, is not satisfactorily explained by the appellant. MA (COD) filed by the appellant is dismissed. - Appeal dismissed - Decided against the assessee.
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2016 (2) TMI 332
Waiver of pre-deposit - Demand of service beyond the scope of show cause notice - though initially it was demanded in the SCN under the category of "Mining services", but in the adjudication order, the said demand was confirmed under 'Business Auxiliary Service' and GTA services. - Held that:- At this stage, it is difficult to accept the contention of the Revenue that discharge of service tax liability for the services rendered mostly in Orissa and partly in Jharkhand at Bhubaneswar, Odisha cannot be accepted as payment towards their liability and the applicant is required to discharge service tax again. Therefore, on this account, the applicant could able to make out a prima facie case for total waiver of pre-deposit. Since the appellant had submitted their reply explaining their stand on the applicability of BAS & GTA service to their case, prima facie, it cannot be said that the Order is de hors the record of the case. - Stay granted partly.
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2016 (2) TMI 331
Demand of service tax - Activity of Erection of Tele-communication towers for BSNL - taxability prior to 01/6/2007 - Held that:- Though there is mention about making civil work of foundation, as contended by the learned AR documents to show the nature of material involved and supplied in the execution of the contract is not forthcoming. - However, he agreed that the value of the tower and other supplied materials of BSNL is not included in the gross value for VAT assessment, as such, we find certain basic facts, like the actual supply of materials in the execution of contract to establish the composite nature of contract requires verification by the Original Authority. - Matter remanded back.
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Central Excise
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2016 (2) TMI 330
Area based exemption - misuse of the scheme - manufacturer of menthol located in Jammu & Kathua - notification no. 56/2002-CE - Revenue contended that these units are actually manufacturing menthol flakes i.e. (terpene /menthol / DMO) only in small quantities but were showing their production in huge quantities. Thereafter, only invoices showing payment of excise duty were issued without actually manufacturing and clearing the goods. For the clearances, movements of trucks were being manipulated to show many trips thereof across the J & K border. - method adopted for taking samples. Held that:- the samples were drawn on random basis and groups were made by the inspecting team without identifying any plausible reason to decide into different groups and the samples were drawn from one drum of the said group. - t the segregation of drums into different groups is totally illogical and allegation of mis declaration stands disproved. With regard to the goods contained in samples mentioned as 2H to 2S there is a mis-declaration alleged by the Revenue that M/s. Sharp has mis declared the goods. We find that M/s. Sharp has declared residue / terpene and as per the report of IIT, these goods they were found rejects. The Adjudicating authority failed to answer the questions what is the difference between residue and reject and have not analyzed the same. In these circumstances, we hold that charge of mis declaration is not sustainable. Consequently, allegation of mis declaration of goods is set aside.
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2016 (2) TMI 329
100% EOU - diversion of imported material - Revenue has concluded that the suppliers were engaged in diversion of imported goods without payment of duty and appellant also issued CT 3 certificate to the suppliers to procure goods without payment of duty which have been diverted to the open market on the instructions of the appellants by the supplier. Therefore, the appellants are liable to pay duty along with interest and penalties on both the appellants have been imposed. - The defense of the appellants is that yarn in question i.e. PTY/PFY is an input for them to manufacture terry towel which have been used in manufacture of export goods which were ultimately exported which is not in dispute. Held that:- The Revenue has decided the case against the appellants on wrong premise that PFY/PTY is not the raw material to manufacture of export goods by the appellants. We find that evidence produced and a defense taken by the appellant is having evidentiary value over the evidence relied by the Revenue which are oral statements only. - in the absence of any corroborative evidence produced by the Revenue, the case of the Revenue is not sustainable. Appellants have been able to prove that PFY/PTY is the raw material and they have procured these raw materials on the strength of CT 3 issued by appellant for procurement of the same, therefore, the duty cannot be demanded from the appellants. - Decided in favor of assessee.
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2016 (2) TMI 328
Shortages found during the course of physical verification - demanding duty along with interest and imposing penalty - Held that:- As the learned Counsel for the appellant has conceded the liability of duty, therefore duty demand is confirmed. With regard to the interest, find that appellant has paid the duty within a month of investigation, no interest is payable by the appellant. Coming to the imposition of penalty on the appellant as gone through the panchnama and submissions recorded by the authorities below at the time of investigation by authorized signatories who admitted that they have cleared the short found goods without payment of duty clandestinely. In these circumstances, the allegation of suppressions under section 11AC of the Central Excise Act, 1944 stand proved. Thus as per the proviso to section 11 AC of the Act, penalty is to be paid 25% if the assessee pays the duty along with interest within 30 days of the adjudication. Admittedly, in this case, the appellant has paid the duty before adjudication and moreover within the same month of investigation and no interest was payable by the appellant. In these circumstances, as per the proviso of Section 11AC of the Act, penalty is reduced to 25% of duty in question. Therefore, appellant is directed to pay 25% of duty as penalty within 30 days of communication of this order failing which the appellant shall be liable to pay duty 100% as penalty.
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2016 (2) TMI 327
Appropriation of the rebate amount - Appropriation made against the liability for interest relating to prior period of their Bombay unit - lack of notice to the appellant - Held that:- The appellant was required to be given notice before adjustment of any amount from the rebate for subsequent period, Section 142 read with section 11, being the special power of recovery (garnishee proceedings). Scope of notification number 68 of 1963 as amended - whether have not made Section 142 (1)(a) of Customs Act applicable to the Central Excise act? - Held that:- Clause (a) of sub-section 1 of section 142 of the Customs Act, 1962, which enables the proper officer to deduct or to require any other officer of Customs to deduct the amount so payable from any money owing to such person which may be under the control of the proper officer or any such other officer of Customs. In view of the fact that sub-clause (ii) of clause (c) of section 142 (1), has been made "applicable to the provisions of Central Excise which includes all movable or immovable which can be attached for the purposes of recovery, hold that the cash is movable property and this ground is decided in favour of the revenue Demand for interest - Held that:- The amount of interest was sub-judice and had not attained finality and as such, could not be recovered by way of special mode of recovery, thus hold that the recovery is bad as the matter was sub-judice before the Honourable Bombay High Court on the date, the adjudicating authority made the adjustment of the rebate with the amount of interest for the previous period. Thus, the appeals are allowed and the impugned order is set aside. The adjudicating authority is directed to restore the amount which have been adjusted in order-in-original and it is held that the appellant will be entitled to consequential relief, if any, in accordance with law.
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2016 (2) TMI 326
Duty concession under notification no. 50/03 CE dated 10/6/2003 w.e.f. 7/11/2005 denied - eligibility for the exemption based on the expansion of installed capacity by 25 per cent or more - Held that:- We find that from the letter dated 17/2/2009 issued by the Deputy Director of Industries District Solan Himachal Pradesh that the revised capacity after substantial expansion has been above 25% of bonnet assembly consisting of 52 parts and sheet metal for tractors. This communication makes it clear that the enhancement in installed capacity is for overall bonnet assembly and not for single component only. We find that the appellants have also submitted a certificate dated 25/7/2015 issued by Chartered Engineers to the effect that the listed 52 items are parts of bonnet assembly for tractor and these are joined or welded altogether to complete the full assembly. Most of these parts are listed as sheet metal parts which are manufactured using hydraulic press. Considering the various evidences submitted by the appellant and the categorical report received from the District Industries Authorities of the State Government, we find that the appellants had executed substantial expansion of installed capacity of more than 25 per cent and' as such are eligible for the exemption claimed under notification no. 50/03 CE. - Decided in favour of assessee.
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2016 (2) TMI 325
Demanding duty along with interest and imposing penalty thereon - Held that:- We have perused the impugned order in detail and in the impugned order, the adjudicating authority has not given any independent finding to arrive at the conclusion but merely copied the finding of the earlier adjudication order and hold that clearance of both units can be clubbed and duty can be demanded accordingly, which is not permissible in law as the adjudicating authority was not having any documents to rely or examine the other documents. We further find that in this case, the matter was remanded back to the adjudicating authority for de novo adjudication on 23.6.92 and till December, 2008, the adjudication order could not be passed. Such a delay of the adjudicating authority in passing / complying with the direction of / not following the direction of this Tribunal of 1992 lends the appellant to succeed in default itself. In these circumstances, as revenue has failed to comply with the direction of this Tribunal dated 23.6.92, the impugned order is not sustainable in the eyes of law, therefore, same is set aside and appeal is allowed with consequential relief - Decided in favour of assessee
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CST, VAT & Sales Tax
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2016 (2) TMI 319
Input Tax Credit / Input rebate - KVAT - whether the petitioner could avail the benefit of the judgment which was rendered much after the assessment order was passed and whether such reassessment orders can be passed on their prayer for rectification of the earlier assessment. - Held that:- in a situation where if the revenue were to be in the position of the assessee and if it was discovered that by virtue of the operation of law, the revenue was entitled to a certain amount from the dealers, it would have certainly turned the tables on the assessee and proceeding on that presumption, it would be only just and fair to direct the revenue to consider the prayer of the petitioner for rectification, when there is no dispute that they were entitled to full tax rebate by virtue of the decision in M.K.Agro Tech , supra. It would be a formality for the respondent to pass a rectification order and grant full tax rebate to the petitioner in terms of its prayer. The petitions are allowed. - Decided in favor of assessee.
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2016 (2) TMI 318
Assessment under DVAT - system generated orders and notices - mismatch between the data filed online in Annexure-2A with the Annexure-2B filed by the selling dealers - overlap of the period for which notices were issued - principle of natural justice - Held that:- The impugned order of default assessment dated 13th January, 2015 under Section 32 of the DVAT Act in respect of the Petitioner for the tax period pertaining to the fourth quarter of 2013 is set aside. - The notice of default assessment of penalty dated 13th January, 2015 under Section 33 of the DVAT Act for the fourth quarter of 2013 is hereby set aside. - The order dated 29th January 2016 passed by the VATO declining to issue C Forms to the Petitioner is set aside. The matter is remanded to the VATO Ward 77 to begin de novo assessment proceedings pursuant to the notice dated 26th August, 2014 issued under Section 59(2) of the DVAT Act. The VATO will also consider afresh the request of the Petitioner for issuance of C Forms in terms of the application dated 26th October 2015. Decided in favor of assessee.
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