TMI Tax Updates - e-Newsletter
February 8, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
Income Tax
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TDS u/s 194J or 194C - When the basket of services is filled with different and distinguishable services, we are of the opinion that the assessee was correct in adopting different rates of TDS for different types of payments - AT
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TDS u/s 194H - on the basis of the mistaken presumption of existence of relationship of principal and agent, that the discount offered by the assessee to its customers was considered by the Assessing Officer as commission - No TDS liability - AT
Customs
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Revision of bill of lading - Penalty - the person who filed the manifest is not proceeded against in its individual capacity but as the agent of the shipping line; the lapse that is to be penalised is that of the shipping line and, if it be that of the agent, is also visited upon the shipping line vicariously - AT
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The action of the Asst. Commissioner in terming the application as premature is really an act of refusal to exercise a statutory duty to decide upon the refund application one way or the other. - AT
Service Tax
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CENVAT credit - denial on the ground that the appellant should not have taken service tax credit at Nagpur for the services received in Pune. - In the absence of any nexus, credit was rightly denied - AT
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Renting of machinery - Computer Colour Display Machines along with software for matching of shades - the amount received by appellant in the case in hand would not be covered for taxing under Banking and other Financial Services - AT
Central Excise
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Returned goods - re-conditioning of the duty paid motor vehicle - Rule 16(2) - whether the the process on the re-made goods, amounts to manufacture or not? - Held No - However the duty paid by the appellant is short, accordingly the differential duty demand confirmed - AT
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Valuation - inclusion of overhead charges - Since there is no supporting documents either by the department or by the appellant for their respective claim of 300% and 100% overhead charges, the 100% overhead charges arrived at by the Cost Accountant should be accepted - AT
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Manufacture - whether the activity of conversion of edible oil from tanker to retail pack and labeling amounts to manufacture and repacked refined edible oil is liable to duty? - Held NO - AT
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Manufacture - assembling of the parts of computers systems - whether the activity of while installing all the items, the appellant used to connect each other by using cord, amounts to manufacture? - Held No - AT
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Inter-mediate product - captive consumption - the sugar syrup in the present case has indeed shelf life therefore, it is marketable - sugar syrup is dutiable - AT
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Cenvat credit - Plastic Wire Scrap - process of separation of copper is not amounting to manufacture - It is not in dispute that out of the said waste and scrap, approximately 55% was retrieved manually which does not result into manufacture , but the copper portion of the same was cleared on payment of duty - No demand - AT
VAT
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Validity of assessment order - notice returned on account of non-availability of address of petitioner - all avenues of effecting service on petitioner were not exhausted. The respondent's proposal to reverse ITC and levy penalty, consequently, did not get communicated to the petitioner - order set aside - HC
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (2) TMI 285
Addition u/s 14A r.w.r. 8D - AO has taken into account the shares which were held as stock in trade and on which no dividend income was earned in making disallowance - Held that:- Assessee is a broker at the BSE and the NSE and is engaged in the business of share broking, investing and trading in shares and securities, mutual fund distribution, arbitrage activity on equity and derivative segment, providing financial consultancy services. In view of the decision of India Advantage Securities Limited [2012 (11) TMI 458 - ITAT, MUMBAI] direct the AO to exclude the shares held as stock in trade. Strategic investments made in the sister concerns/group companies - Held that:- Direct the A.O. to exclude the investments made in foreign subsidiaries and investment made in companies which are strategic in nature while computing the disallowance u/s 14A of the Act in respect of administrative expenses. See Kotak Mahindra Capital Company Limited Versus DCIT [2015 (1) TMI 1289 - ITAT MUMBAI ] Investment made in the immovable property also does not earn any exempt income. Accordingly, direct the AO to exclude the investment in the immovable property while computing disallowance under Rule 8D.
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2017 (2) TMI 284
Deemed dividend u/s 2(22)(e) - Held that:- The assessee has advanced interest free loans to the company and it is only for a brief period of 34 days in the A.Y 2009-10 that there was a small amount of ₹ 3,34,000/- as on 03-04-2011 debit balance in favour of the assessee in the books of the company. Even if the assessee’s contentions about receiving the consideration towards development agreement is not acceptable, the decision of the Hon’ble Punjab & Haryana High Court in the case of CIT Vs Suraj Dev Dada [2014 (5) TMI 625 - PUNJAB & HARYANA HIGH COURT ] would apply to the facts of the case on hand. Therefore, respectfully following the same, we hold that this amount cannot brought to tax u/s 2(22)(e) of the Act in the hands of the assessee for both the assessment years.
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2017 (2) TMI 283
Addition to the income of the appellant in respect of the deductions made for the cost of the material supplied by them the deduction towards PF and medical and other expenses of the employees - Held that:- The whole addition has been made by the Assessing Officer merely relying upon Form 26AS without making further enquiry. Whereas the ld CIT(A) has looked at the complete aspect of the contract and reconciliation of the assessee with respect to complete financial statements. In view of this we confirm the finding of the ld CIT(A) in deleting the addition - Decided in favour of assessee
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2017 (2) TMI 282
Chargeability of interest under Section 201(1A)- non deduction of tds - Held that:- As proceedings were already barred by limitation and this finding of CIT(A) was not challenged and has attained finality. Therefore, no occasion has arisen to raise any further question in regard to Section 201(1) of Act, 1961 before this Court for the first time when against this finding, no appeal has been filed before Tribunal.
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2017 (2) TMI 281
TDS u/s 194J or 194C - payments made towards various services rendered by M/s K12 Techno Services Pvt. Ltd. - difference between the TDS deducted and the TDS that ought to have been deducted - assessee in default - Held that:- We find that M/s K12 Techno Services Pvt. Ltd, has rendered various services to the assessee for the efficient and effective running of the educational institution. The services rendered by M/s K12 Techno Services Pvt. Ltd. are distinguishable from each other and though the recipient of all the payments is a single party, the nature of the services are discernible and different. If the contention of the Revenue was to be accepted, then why should the TDS be deducted u/s 194J and not u/s 194C for all the payments treating the entire agreement as a work contract?. When the basket of services is filled with different and distinguishable services, we are of the opinion that the assessee was correct in adopting different rates of TDS for different types of payments. Even the CBDT circular relied upon by the Ld. DR provided that the all the payments cannot be covered under one section. Therefore, in our opinion, the Assessing Officer and CIT(A) have erred heard in holding that the assessee ought to have made TDS u/s 19J of the Act on the entire payment to M/s K12 Techno Services Private Limited. - Decided in favour of assessee
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2017 (2) TMI 280
Claim of long-term capital loss - Held that:- The assessee had not taken permission of the relevant statutory authority regarding sale of said shares. The assessee's reply to the Assessing Officer remained silent on the issue of statutory permission. Section 536(2) of the Companies Act, 1956 is very clear regarding the avoidance of transfers after commencement of winding up. In the case of a winding up by or subject to the supervision of the court, any disposition of the property (including actionable claims) of the company, and any transfer of shares in the company or alteration in the status of its members, made after the commencement of the winding up, shall unless the court otherwise orders, be void. Section 536(2) of the Companies Act declares the transfer of shares during the liquidation proceedings as void. The transfer of shares includes transfer of rights in shares which is declared void under section 536(2) of the Companies Act and therefore, it is not a transfer at all and therefore, the question of capital gains/losses on the said transaction does not arise. Therefore, the transfer of 27410 shares of M/s Rustom Mills Industries Ltd by the assessee company by way of deed of assignment is held as void and not falling under section 2(47) of the Income-tax Act with no consequences as to the claim of long-term capital loss is not allowed to the assessee. - Decided in favour of the Revenue
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2017 (2) TMI 279
Penalty under section 271C - failure to deduct tax at source - Held that:- As decided in each of the expatriate employees have paid directly the taxes due on the foreign salary by way of advance tax/self-assessment tax. The tax deductor-assessee was under a genuine and bona fide belief that it was not under any obligation to deduct tax at source from the home salary paid by the foreign company/HO and, consequently, we are of the view that in none of the 104 cases penalty was leviable under section 271C as the respondent in each case has discharged its burden of showing reasonable cause for failure to deduct tax at source. No penalty proceedings under section 271C shall be taken in any of these cases as the issue involved was a nascent issue. See Commissioner of Income-tax, New Delhi Versus Eli Lilly & Company (India) Pvt. Ltd. [2009 (3) TMI 33 - SUPREME COURT ] - Decided in favour of assessee.
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2017 (2) TMI 278
Entitlement to depreciation on plant and machinery not put to use during the year under consideration - assessee had stopped the manufacturing activity and therefore, the question of use of machinery does not arise - CIT(A) reversed the findings of the AO on the premise that individual items included in the block are not to be considered separately for the purposes of granting depreciation in light of the amended provisions - Held that:- We do not find any legal infirmity in the aforesaid view adopted by the first appellate authority since the assessment order itself reveals that it is not the case of Assessing Officer that the assets were not put to use at all. Once the factory building is put to use, it is not possible to restrict the depreciation on the said building by stating that only a portion thereof has been put to use. Similarly, in relation to block of assets, it is not possible to segregate items falling within the block for the purposes of granting depreciation or restricting the claim thereof. Once it is found that the assets are used for business, it is not necessary that all the items falling within plant and machinery have to be simultaneously used for being entitled to depreciation. In view of the above discussion, we hold that the Tribunal committed serious error in law in disallowing the depreciation. - Decided in favour of assessee
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2017 (2) TMI 277
Reopening of assessment - Deduction available under section 80-IB - Held that:- For reopening of the assessment, notice should be issued within a period of four years from the end of the assessment. In the present case, we notice that the Assessing Officer has issued notice under section 148 of the Income-tax Act on August 10, 2009 which is beyond the period of four years from the end of the assessment year. Even otherwise, no reasons are assigned by the respondent authority to claim that the earlier Assessing Officer has wrongly allowed the claim of the assessee. In that view of the matter, the petition deserves to be allowed and is allowed accordingly - Decided in favour of assessee.
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2017 (2) TMI 276
Disallowance of claim of deduction u/s 54 - manner of construction of house - Held that:- Section 54/54F uses the expression "a residential house". There is nothing in these sections which require the residential house to be constructed in a particular manner. The only requirement is that it should be for the residential use and not for commercial use. If there is nothing in the section which requires that the residential house should be built in a particular manner, it seems to us that the income tax authorities cannot insist upon that requirement. A person may construct a house according to his plans and requirements. Most of the houses are constructed according to the needs and requirements and even compulsions. There may be several such considerations for a person while constructing a residential house. We are therefore, unable to see how or why the physical structuring of the new residential house, whether it is lateral or vertical, should come in the way of considering the building as a residential house. We do not think that the fact that the residential house consists of several independent units can be permitted to act as an impediment to the allowance of the deduction under Section 54/54F. It is neither expressly nor by necessary implication prohibited. The ratio laid down by Hon'ble Delhi High Court in CIT vs Gita Duggal (2013 (3) TMI 101 - DELHI HIGH COURT ) supports the case of the assessee. Exemption u/s 54 will be available in respect of any number of long term capital assets, being residential houses, if other conditions are fulfilled. If the sale proceeds of the long term capital asset is not utilised, within specified time, then it will be dealt with in accordance with law. In the present appeal, it is not the case of the Revenue that the proceeds received upon transfer of long term capital asset was not utilised by the assessee. Thus, considering the totality of facts, the appeal of the assessee is allowed.
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2017 (2) TMI 275
TDS u/s 194H - non deduction of TDS on expenses under heads discount and activation charges u/s 40(a) (ia ) - whether discount/activation charges have not been given on sales but have been disbursed out of receipts received on account commission and activation charges, received from BSNL clearly covered under section 194H ? - Held that:- Since no dealer or sub-dealer was appointed either by Bharat Sanchar Nigam Ltd. (BSNL) or by the assessee, for the purpose of marketing the products and/or service of the Bharat Sanchar Nigam Ltd., the entire sales were to customers, either directly or through shopkeepers, who rendered services to the customers. Moreover, the entire sales were in cash. No commission was paid by the assessee to the customers. Then, Section 194H of the Act does not cover such discounts as under consideration herein and that being so, obviously the provisions of Section 40(a)(ia) of the Act was wrongly applied. Accounting-wise, the face value of the recharge coupon was debited to the purchase account, whereas the commission given by BSNL was credited to the commission account. At the time of sale, on the other hand, the face value of the recharge coupon was credited to the sales account and the cash receipts was debited to the cash account. The discount offered was debited to the discount account. When purchasing the SIM cards and recharge coupons from BSNL, the assessee had to deposit the money in advance. Undisputed, it is to customers directly and to petty shopkeepers, that the SIM cards and recharge coupons were sold in cash. The customers and shopkeepers were offered discount on the face value of the SIM cards. Apropos the recharge coupons, on the other hand, a small margin was kept by the assessee out of the commission/discount offered by BSNL. Then, activation charges were given by BSNL to the assessee on new connections, and a major portion thereof was given to the customers as discount. As discussed, it was on the basis of the mistaken presumption of existence of relationship of principal and agent, that the discount offered by the assessee to its customers was considered by the Assessing Officer as commission. This, however, is not so, to reiterate it was only discounts offered to the customers, on a principal to principal basis, on which, no TDS was either required to be made or was actually made. - Decided in favour of assessee
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2017 (2) TMI 274
Scope of rectification of mistake orders - Disallowance made u/s. 40(a)(ia) in the proceedings u/s. 154 - Held that:- We find that the AO had merely sought to investigate in detail the basic facts as to whether the assessee had indulged in making purchase of printing material for the purpose of its business or had engaged contractors and have the printing job done in tune with its requirements in the proceedings initiated u/s. 154 of the Act. We hold that the same ought to have been carried out by the AO only in the assessment proceedings u/s. 143(3) of the Act or if necessary, avenues open to the revenue are by either resorting to section 263 of the Act (revision proceedings) by the Ld. CIT or by reopening the assessment u/s. 147 of the Act. We hold that the issue being squarely debatable cannot be carried out u/s. 154 of the Act. We also hold that what could be rectified u/s. 154 of the Act are mistakes that are patent, glaring and apparent from record. Mistake, if any, which has to be discovered by a long drawn process or reasoning or examination of arguments on points where there may conceivably be two opinions cannot be said to be mistake or error apparent from record.We also appreciate the circular of CBDT No. 715 is binding only on the tax authorities and not on the assessee as admittedly the circular cannot detract from the provisions of the Act. Addition made on account of closing stock - Held that:- Necessity of making such addition had been understood and accepted as a dispute and the said dispute has reached the corridors of the various High Courts hence, the same would make the issue debatable.Since the subject mentioned issue also is debatable the same cannot be adjudicated in section 154 proceedings. Hence, the grounds raised by the revenue are dismissed
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2017 (2) TMI 273
Disallowance u/s 14A r.w.r 8D - whether the deduction on account of cess on green leaf is to be allowed from the composite income before applying Rule 8D or from 60% agricultural income after applying Rule 8D - Held that:- Now stands resolved by the decision of the Hon’ble Supreme Court in the case of CIT –vs. - Apeejay Tea Co. Limited (2015 (8) TMI 1260 - SUPREME COURT ), wherein it was held that the deduction on account of cess paid has to be allowed while computing the income of the tea grown and manufactured under Rule 8D. Respectfully following the said decision we uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee - Decided against revenue Disallowance made by the Assessing Officer on account of proportionate interest under Rule 8D(2)(ii) deleted - Decided against revenue
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2017 (2) TMI 272
Revision u/s 263 - contribution to CAF - revenue or capital receipt - deferred revenue expenditure - Held that:- No point of time could it be said that the assessee had incurred capital expenditure giving the assessee a benefit of enduring nature for the purpose of earning segmented income to render the same to income tax. In other words, the authorities below have not pointed out the income generated against the purported deferred revenue expenditure so proposed by them in their impugned orders. The amount was incurred as a revenue expenditure to be allowed in the year it has been incurred. It is not in dispute that the said payment was made as contribution to compensatory afforestation as per the directions of the Supreme Court. It is not permissible for the assessee to make phase-wise payment. In that view, the order of the Appellate Tribunal is sound and proper. See Ramgad Minerals and Mining Pvt. Ld. [2012 (1) TMI 313 - Karnataka High Court] Interest u/s 234C - Held that:- Direct the A.O. to levy interest u/s 234C only on the basis of returned income of the assessee.
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2017 (2) TMI 271
Deemed Dividend addition u/s 2(22)(e) - Held that:- Assessee is also a director in the said company M/s Prescomec Autocomp Pvt.Ltd. and is also a principal shareholder. The assessee has a running account with the company in which the amount contributed by the assessee is added and the amount drawn by the assessee is reduced. During the year on 27.04.2006, 22.05.2006 and 10.06.2006 the assessee withdrew amounts of ₹ 5,00,000/-, ₹ 10,00,000/- and ₹ 10,00,000/- respectively which led to a creation of a debit balance in the company amounting to ₹ 11,55,936.84. The assessee has given personal Guarantee for availing of the working capital loan by M/s Prescomec Auto Co.Pvt. ltd. where the assessee is a Director and in terms of the aforesaid Resolution the Directors in lieu thereof the assessee too has been permitted to make temporary drawings of advances to the maximum limit of ₹ 50 lakhs. It is seen that there is no change in facts and circumstances of the case. No distinguishing fact or circumstance has been canvassed by the Revenue to take a contrary view. In the absence of any distinction on facts or law respectfully following the order of the ITAT, the appeal of the assessee is allowed.
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2017 (2) TMI 270
Work Contract vs Contract for sale – tds liability - Held that:- It is a fact that the assessee was not heard when the impugned judgment was delivered. We note the fact that even the review petition filed by the appellant before the High Court was also rejected. In the circumstances, the impugned judgment is set aside and the matters are remitted to the High Court for hearing afresh. [2012 (2) TMI 52 - KARNATAKA HIGH COURT]
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2017 (2) TMI 269
NRI challenging the assessment order u/s 144 - Held that:- High Court has omitted to take note of the Explanation under section 246 of the Income-tax Act, 1961. Therefore, we are of the view that the petitioner should be granted liberty to approach the High Court by way of a review petition. [HC ref case - 2016 (5) TMI 948 - ALLAHABAD HIGH COURT]
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2017 (2) TMI 268
Review petitions against the order in M/s G.S. Homes & Hotels P. Ltd. Versus Dy. Commissioner of Income Tax [2016 (8) TMI 613 - SUPREME COURT] - Held that:- No case for review of order is made out. Consequently, the review petitions are dismissed. Share capital received from the various share-holders ought not to have been treated as business income
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2017 (2) TMI 267
Addition u/s 68 - proof of genuineness of the transactions - Held that:- No doubt the initial onus placed upon the assessee can be said to have been discharged by providing confirmations, ITR’s, balance sheets etc of the said companies. However it shifts back to the assessee when the assessee has been required to produce the directors of these 8 closely held companies keeping in mind the fact that the assessee is a private limited company whose nature of activity necessarily would be known to only its close knit circle of friends, relatives and associates thus what were the facts which persuaded these 8 shareholders to make an investment in shares of the said company to the extent of ₹ 5 lakh each are necessary facts which are required to be taken into consideration and the burden which shifts back to the assessee in the facts of the present case is not be discharged. While so holding, it may not be out of place to note yet again that the assessee company is a private limited company, the shareholders are also claimed to be private limited companies and the Ld.AR has stated that the assessee may not be in a position to produce the directors of the 8 private limited companies. The wisdom of the said submission is left open to the assessee who is required to prove genuineness of the transactions. Accordingly, for the reason given hereinabove the impugned order is set aside and the issue is set aside back to the file of the CIT(A) with a direction to decide the same by way of a speaking order in accordance with law addressing the facts on record. - Decided in favour of revenue for statistical purposes
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2017 (2) TMI 266
Unexplained cash credits under section 68 - Held that:- The approach of the CIT(A) in dissecting the transaction and holding it to be ingenuine is quite straight jacketed and myopic. The CIT(A) impliedly suggests that a transaction is to be held as ingenuine, if the money is not returned back when the purpose for which it was given was not achieved. In our considered opinion, the aforesaid approach of the CIT(A) would give weightage to suspicion than the evidence available in order to evaluate the genuineness of a transaction. The genuineness of the transaction has to be evaluated at the time when the transaction was carried out. We may hasten to add here that we are not professing that the post-transaction events are not relevant to evaluate the genuineness but what we are only trying to emphasize is that the imponderables of the business cannot be the sole basis to defeat the genuineness of a transaction, which the CIT(A) has sought to do in the present case. Therefore, considering the fact that the explanations rendered by the assessee have not been found to be false, we find no reason for the CIT(A) to uphold the addition u/s. 68 in relation to the credit appearing in the name of M/s. Ganesh. - Decided in favour of assessee
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2017 (2) TMI 265
Addition on sale of shares - Held that:- The amount received by the assessee company from M/s. Finorg Chemicals Ltd. is not in the nature of unexplained cash credit u/s 68 of the Act as it has received the amount on account of sale consideration received from M/s. Finorg Chemicals Ltd. for the sale of shares of M/s. Sahil Stock Broking Ltd. for ₹ 18,00,000/-, for sale of shares of M/s. Jyoti Global Pvt. Ltd. for ₹ 5,00,000/- and for sale of shares of M/s. Sethi Estate Pvt. Ltd. for ₹ 5,00,000/- during FY 2001-02 relevant for AY 2002-03. Assessee filed confirmation of accounts of M/s. Finorg Chemicals Ltd. containing GIR number, assessment details, Form No.2, now available at page 100 and 101 of the paper book. Moreover, in order dated 19.12.2006 passed in case of Sanjay Rastogi for AY 2002-03 by ld. CIT (A) it is categorically mentioned by ld. CIT (A) that there is no material to establish the link between Sanjay Rastogi and Finorg Chemicals Ltd. So, we are also of the considered view that the addition of ₹ 28,00,000/- is not sustainable. Thus amount received by the assessee company from M/s. Finorg Chemicals Ltd. on account of sale of shares has already been taxed in its hands and as such, this addition is not sustainable, hence we delete the addition - Decided in favour of assessee Addition on incomplete confirmation bearing incomplete date and PAN from M/s. Kishan Chand Ferro Steel Pvt. Ltd. - Held that:- Even no cogent evidence has been produced during first appellate proceedings before the ld. CIT (A) by the assessee. So, we hereby confirm the addition made by the AO and affirmed by the ld. CIT (A). - Decided against the assessee. Disallowance of expenses - assessee company has failed to submit necessary evidence - Held that:- No cogent material to support the expenditure claimed by the assessee company has been brought on record. So, we find no ground to interfere into the findings returned by the AO as well as by the ld. CIT (A) in making ad hoc disallowance of ₹ 3,34,560/- on account of certain expenses. So, we hereby determine against the assessee.
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Customs
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2017 (2) TMI 241
Revision of bill of lading - Penalty - Held that: - To the extent that the manifest was filed in accordance with the prescription under section 30 of Customs Act, 1962, and the truth thereof subscribed to on the basis of documentation on record, allegation that section 30 has been contravened will not sustain - It is on record that the bill of lading issued at load port did contain the details as entered in the manifest. Section 30 also empowers the ‘proper officer’ to amend an incorrect manifest or to supplement an incomplete manifest if no fraudulent intent is on evidence. In the present instance, the respondent had informed the adjudicating authority that the revision in bill of lading was made after the filing of the manifest and, therefore, no lapse could be attributed to the agent. It must be clarified here that the person who filed the manifest is not proceeded against in its individual capacity but as the agent of the shipping line; the lapse that is to be penalised is that of the shipping line and, if it be that of the agent, is also visited upon the shipping line vicariously - It is also a document of custodianship and a shipping line cannot issue a bill with a later date owing to implications of responsibility for safe delivery of cargo being alienated for the inter regnum - Decided in favor of the assessee.
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2017 (2) TMI 240
No speaking order - Held that: - Perusal of the above impugned order dated 12.02.2016 shows that the said order merely quotes the paras of the Foreign Trade Policy and the directions issued by the Division Bench. The order does not also deal with any of the submissions made by the petitioner. There is no rationale or reasoning in the impugned order dated 12.02.2016 elucidating to how and why the petitioner is not entitled to the issuance of the Duty Credit Scrips under the Foreign Trade Policy 2009 – 2014. The respondents are directed to pass a speaking order within a period of six weeks from today - Petition disposed of.
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2017 (2) TMI 239
Whether the Appellant had a right to file an appeal before the Commissioner (Appeals) against a mere communication/letter dated 10.6.2014? - Held that: - Section 128 of the Customs Act, permits an appeal to be filed before the Commissioner (Appeals) against any decision or order passed by an officer of Customs. The words any decision are very wide in their amplitude and would cover a decision holding that the refund applications premature. Such a view is undoubtedly a decision affecting the right of the affected party and is therefore appealable. Whether the Commissioner (Appeals) was right in upholding the view of the Asst. Commissioner that the refund application were premature in view of the pendency of the Show Cause Notices? - Held that: - once an application of refund has been filed before the refund sanctioning authority, the said authority is duty bound to decide the refund application one way or the other. The refund application can either be rejected or allowed in part or in full - The provisions of Section 27 do not entitle the refund sanctioning authority to return the refund application by terming the same to be premature - Therefore the action of the Asst. Commissioner in terming the application as premature is really an act of refusal to exercise a statutory duty to decide upon the refund application one way or the other. For this reason also, the order of the lower authorities is untenable - matter remanded to Asst. Commissioner to decide the matter afresh. Appeal allowed by way of remand.
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2017 (2) TMI 238
Confiscation of imported goods - cut betel nuts - smuggled character - goods released on the belief that the onus of proving the goods to be smuggled in character as per Section 123 of the Customs Act, 1962 has not been fulfilled - Held that: - the betel nut imported by the respondents herein is a non-notified item and as such, the burden of proof is on the appellant-department to substantiate the allegation of illegal import with evidences. I find that there is no evidence to show that the goods are of foreign origin and had been imported illegally. Reliance was placed in the case of Commr. of Customs (Preventive) Vs. Dungarmal Mohata [2006 (5) TMI 92 - HIGH COURT AT CALCUTTA], where it was held that when at the time of inventory if the markings of the names of the foreign countries are not found, then the Revenue had failed to establish a case that the betel nuts are of foreign origin and smuggled into India. The allegation of findings of the presence of the Third Country Origin Mark is not found in the panchanama and also in the SCN or in the Order-in-Original. The Department has failed to establish that the said goods are of foreign origin - appeal dismissed - decided against appellant-Revenue.
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2017 (2) TMI 237
Maintainability of appeal - classification of goods in dispute - Held that: - the issue raised in the Writ Petition is a mixed question of fact and law - having regard to the scope of controversy, the petitioner, should avail of the alternative remedy by way of an appeal, which is admittedly available to it. The petitioner is, thus, given liberty to withdraw the Writ Petition with leave to approach the first appellate authority, i.e., Commissioner of Customs (Appeals) - petition not maintainable - petition dismissed.
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2017 (2) TMI 236
Unjust enrichment - refund of excess duty paid - finalization of provisional assessment - denial on the ground that appellant could not establish that the incidents of excess paid Customs duty was not passed on to the customers - Held that: - as far as Section 18 of the Customs Act is concerned when an amount becomes refundable after a final order is passed, the same has to be refunded immediately and for such purpose, the assessee is not required to move an application under Section 27 of the Customs Act, 1962 since the same is not applicable in such cases - for the period before 13.07.2006, provisions of Sub-Sections 3, 4 & 5 of said Section 18 shall not be applicable. The provisions of ‘unjust enrichment' not applicable in the present case - appeal allowed - decided in favor of assessee.
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2017 (2) TMI 235
Natural justice - offence of fraudulent import - imposition of penalty of ₹ 1 lac each u/s 112 of Customs Act, 1962 - Held that: - appellant have requested for cross examination. As regard their statements they have retracted the said statements. Therefore, it was obligatory on the part of the adjudicating authority to provide the cross examination of the witnesses which is mandatory u/s 138(1)(b). The Adjudicating authority, irrespective of any grave offence, was suppose to give cross examination of the witnesses. By not complying the provision of Section 138(b) (1)(b) he has violated the principle of natural justice - matter needs to be remanded to original adjudicating authority - appeal allowed by way of remand.
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2017 (2) TMI 234
Imposition of penalty u/s 114A of Customs Act, 1962 - failure to specify the name of the firm or individual on whom the penalty u/s 114A of CA, 1962 was fastened - Held that: - penalty u/s 114A is liable to be imposed on the person liable to pay duty as determined in proceedings under section 28 - The importer in the present matter has been identified in the impugned order as ‘noticee’ and has been fastened with differential duty on the enhanced value. Doubtlessly, it is the same entity that is liable to be penalised. There is no requirement for a specific mention of the importer to validate the penalty under section 114A of Customs Act, 1962. The order is not invalidated on that count - imposition of penalty justified. Penalty u/s 112 of CA, 1962 - Held that: - While one penalty has been imposed u/s 114A, the penalty of ₹ 19,29,000/- is without reference to any provision, let alone section 112 as presumed by the appellant. Even if such penalty was imposed u/s 112 of Customs Act, 1962, this is a consequence of holding the goods liable for confiscation u/s 111(m) and the adjudicating Commissioner has rendered a finding for doing so - imposition of penalty presumed to be u/s 112, cannot also be faulted. Imposition of penalty both u/s 114A and u/s 112 of Customs Act, 1962 is not improper - revenue dismissed - decided against revenue.
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Service Tax
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2017 (2) TMI 264
CENVAT credit - denial on the ground that the appellant should not have taken service tax credit at Nagpur for the services received in Pune. Only the Nagpur premises have been registered whereas the invoices indicate the service recipient at the Pune address - Held that: - the appellants have failed to establish nexus and clearly communicated the nature of services provided by them and why there is no nexus between the services provided by them and the services received by them. Even in grounds of appeal there is no clarity. In view of the above, I am unable to hold that there is any nexus between the input service and the services provided by the appellant. Accordingly, the credit of input is not available to the appellant - appeal dismissed - decided against appellant.
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2017 (2) TMI 263
Condonation of delay - whether this appeal can be entertained or it is time barred as per the provisions of Section 86 (3A) of the Act? - rectification of mistake invoking Sec 74 of the FA - Held that: - The application of Section 74 was rejected by the Additional Commissioner and the said rejection letter was received by the appellant on 11/05/2015. In these circumstances, the order of Additional Commissioner became final only on 11/05/2015 and the period of limitation needs to be counted from that date. The impugned order has counted the period from 07/03/2015 when the order-in-original was received by the appellant, the same needs to be re-calculated from 11/05/2015 when the order u/s 74 was received by the appellant - appeal allowed by way of remand.
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2017 (2) TMI 262
Renting of machinery - Computer Colour Display Machines along with software for matching of shades - whether the rent received will be taxable under the category of Banking & Other Financial Services or not? - Held that: - Applying the definition of Banking and other Financial Services and the definition of other taxable service, it is found that the amount received by appellant in the case in hand would not be covered for taxing under Banking and other Financial Services. The Tribunal in the case of Banswara Syntex [2009 (7) TMI 85 - CESTAT, NEW DELHI] while considering a similar issue of whether leasing of land, building as well as machinery would fall under Banking and other Financial Services or otherwise, held that such amount received as lease rent would not be covered under Section 65 (105) of Banking and other Financial Services in the Finance Act, 1994. Service not taxable - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 261
Cenvat credit - Payment of salary and other expenses on employees of foreign company - Penalty - Held that: - the issue in the show-cause-notice was, whether services rendered by Foreign company were input services or not, therefore, the grounds of appeal were travelling beyond the said show-cause-notice. He further contended that even if liability to pay under Section 66A is created by law, the said liability is in respect of provisions of charging Section 66 of Finance Act, 1994 - Appeal dismissed - decided in favor of the assessee.
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2017 (2) TMI 260
Liability of sub-contractor - benefit of doubt - Section 80 of the FA, 1994 - CBE&C vide Circular No. 108/02/2009-ST dated 29.9.2009 - Held that: - at the material time there were certain doubts regarding liability of Service Tax in relation to construction of a complex. The said clarification does not specifically states that there was any doubt regarding liability of sub-contractor in respect of services provided to main contractors. However, considering the similar nature of the service provider, invocation of Section 80 appears to be justified - penalties set aside - appeal disposed off - decided partly in favor of appellant.
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Central Excise
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2017 (2) TMI 259
Returned goods - re-conditioning of the duty paid motor vehicle in the factory of the appellant - Rule 16(2) of the Central Excise Rules, 2002 - whether the the process on the re-made goods, amounts to manufacture or not? Held that: - The process carried out by the appellant does not amount to manufacture as the motor vehicle was completely manufactured and sent for test therefore after return of the said motor vehicle no process which amounts to manufacture was carried out, therefore in terms of Rule 16(2) of Central Excise Rules 2002 the appellant is required to pay the duty on reissue of the motor vehicle equivalent to cenvat credit availed at the time of re-entry of the motor vehicle in their factory. However the duty paid by the appellant is short, accordingly the differential duty demand confirmed and upheld by the lower authority is sustainable. Reduced penalty was upheld on the ground that there is no mala fide intention to evade payment of duty on the part of the appellant. Extended period of limitation - the appellant have been filing the periodical returns which indicates the payment of duty, for this reason also there is no suppression of fact. In this fact the demand prior to 26.7.2003 will not sustain being time bar. Appeal allowed - decided partly in favor of appellant.
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2017 (2) TMI 258
Rectification of mistake - Held that: - it is a fact that there is a typographical error in mentioning the impugned order in the first page of the said final order. This prayer of the assessee is acceded to. The impugned order mentioned in the preamble of the Final Order No.40553/2015 dt. 22.5.2015 shall be read as Order-in-Original No.14/2001 (Commr.) dated 20.3.2002. The rectifications sought by respondent-assessee, are tantamount to review of the order per se. Tribunal does not have power of review as it becomes functus officio soon after passing the order. Application for ROM dismissed.
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2017 (2) TMI 257
Valuation - whether the appellants-manufacturer of M.S. Ingots who had initially opted to pay duty under the provisions of Rule 96ZO read with Sec 3A of the Central Excise Act and subsequently in the month of April/May, 1998 changed option to pay duty on actual production basis, is liable to pay duty u/s 3 or u/s 3A, on the compounded levy amount or on the basis of actual production, for the period April, 1999 to March, 2000? Held that: - the issue involved had already been considered by the Tribunal while remanding the case in Final Order No.A/387 - 388/99-NB dated 4th May, 1999 and, therefore, the appellant (that is revenue) could not issue another show cause notice and levy Excise Duty in as much as the earlier proceedings which had attained finality, operate as res judicata - appeal allowed, setting aside the impugned order and remand the matter back to the adjudicating authority to re-determine the duty payable on the basis of actual production - appeal allowed by way of remand.
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2017 (2) TMI 256
Valuation - overhead charges - for the cost of manufacture, earlier appellant were taking overhead expenses @ 300% of labour charges and filed their price list. Subsequently in the price list dated 21.8.1990, they have added overhead charges @ 100% equivalent to the labor charges - whether the overhead charges are to be 100% or 300% of labor charges? - Held that: - in the subsequent period neither the department carried out any costing verification nor the appellants have submitted any cost data but they continued to take overhead charges @ 100%. In this case, even if we go as per best judgment since the 100% overhead charges was accepted on the basis of costing done by the Cost Accountant that is more authentic and there is no change of circumstances by which it can be said that overhead charges can be different from 100% overhead charges. Since there is no supporting documents either by the department or by the appellant for their respective claim of 300% and 100% overhead charges, the 100% overhead charges arrived at by the Cost Accountant should be accepted - 100% overhead charges is correct - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 255
Levy of penalty - whether the penalty under Section 11AC should be imposed in the fact that the dispute relates to valuation of physician samples and the duty and interest have been admittedly paid by the appellants? - Held that: - as regards valuation of physician samples, the issue was in dispute and various litigations were going on. Therefore the valuations of physician samples were not free from doubt as it involved the grave interpretation of the valuation law. The appellants were clearing their goods under the cover of invoice and discharged the duty, therefore, there was no suppression of fact in order to invoke the penal provisions. Penalty set aside - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 254
Manufacture - whether the activity of conversion of edible oil from tanker to retail pack and labeling amounts to manufacture and repacked refined edible oil is liable to duty? - Held that: - the conversion of the product from tanker to retail pack is not conversion of bulk packs to retail packs because the tanker in which goods are received is not bulk pack, therefore, one limb of the Chapter Note that packing from bulk pack to retail pack does not satisfy. Though there is an activity of labeling but as per the Chapter Note 4 prevailing at the relevant time, the activity of repacking from bulk pack to retail pack and also labeling both should be carried out in order to hold manufacture under Note 4 to the Chapter 15. There is no activity of repacking from bulk packs to retail packs and only labeling alone is carried out, therefore, the activity does not amount to manufacture - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 253
Attachment of property - raw materials, work-in-progress, and finished goods - appellant contention that due to attachment, it has become practically impossible for appellant to run their factory - Held that: - the re-adjudication is still pending with respect to the part of demand, set aside by this Tribunal vide Final Order dated 19th March, 2013 amounting to ₹ 12,85,084/-. Also appellant has made substantial payment of the confirmed demand during the last 8 months - the order of the attachment is modified to this effect that-the appellant is permitted to run their factory normally and the attachment on raw material, work-in-progress and finished goods is set aside, so as to enable the appellant to run their factory and clear the finished goods. The adjudicating authority directed to complete the re-adjudication proceeding within the period of 90 days from the date of receipt of a copy of this order and pass an appropriate order upon the remanded issue - appeal allowed in part - matter on remand.
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2017 (2) TMI 252
Eligibility of the deemed credit availed as per the provisions of Sub Para 1(a) and (b) of para 2 of the N/N. 6/2002-CE(NT) dtd 1.3.2002 - appellant availed deemed credit at a lesser rate and instead of the demand of the Cenvat Credit, whether the appellant is eligible for the refund of the credit which they failed to avail? - Held that: - the provisions given in Para 4 of the N/N. 6/2002-CE(NT) dt 1.3.2002 are very clear when it states that this Notification is not applicable to a manufacturer (other than composite mill), who avails any credit under Rule 3 of the CCR 2002. The option of payment of 25% penalty as per the provisions of Sec. 11AC (C) of Central Excise Act, 1944, if duty, interest and 25% penalty is paid within 30 days of communication of this order, is given to the assessee appellant by this Order - appeal allowed - decided partly in favor of appellant.
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2017 (2) TMI 251
Manufacture - business of trading, upgrading, repairing and maintenance of computers - whether the activity of while installing all the items, the appellant used to connect each other by using cord, amounts to manufacture? - Held that: - This activity does not amount to manufacture, as whole computer is already manufactured items by way of assembling of various components and in the manufactured condition, it is bought and sold by the appellant - there is no activity carried out by the appellant which amounts to manufacture of some new and distinct product - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 250
Reversal of credit - dutiable goods became exempted from Central Excise duty w.e.f. 04/02/2004 - Rule 6 (1) read with Rule 3 of CCR, 2002 - Held that: - the same issue has been decided by the Tribunal in the case of Albert David Ltd. [2002 (11) TMI 144 - CEGAT, COURT NO. III, NEW DELHI], where it was held that a harmonious reading of Rules dealing with Cenvat Scheme and particularly Rule 57AC and Rule 57AD of the Central Excise Rules, 1944 makes it very evident that Cenvat credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods - demand of reversal of Cenvat Credit upheld - penalty set aside - appeal disposed off - decided partly in favor of assessee.
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2017 (2) TMI 249
Refund claim - CENVAT credit availed on HR/CR coils - denial on the ground that processes such as de-coiling, cutting and slitting of HR steel coils and pickling and oiling the same, does not amount to manufacture - Held that: - All the refund sanctioned and appropriated in the Order-in-Original now become refundable to the appellant. Since the demand has been dropped now status is as if demand was not recoverable. Though the appellant pursuing their appeals against the demand, department should not have appropriated the amount of rebate against confirmation of demand - appellant also entitle for the interest from the filing of rebate application till the release of the rebate amount to the appellant - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 248
Rejection of books produced by appellant - Valuation - inclusion of certain disputed clearances in the value of clearances under N/N. 34/2003 - Held that: - If the appellant produced any records in the defence and revenue was successful in finding holes in the said evidence, the same cannot be accepted - appeal dismissed - decided against appellant.
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2017 (2) TMI 247
Valuation - freight - whether the excess insurance amount towards transit insurance of the excisable goods collected by the appellant from their buyer is includible in the assessable value of the final product or otherwise? Held that: - The Hon’ble Apex Court in case of Baroda Electric Meters Ltd. Versus Collector of Central Excise [1997 (7) TMI 126 - SUPREME COURT OF INDIA] held that even if amount on account of freight collected over and above the actual freight that amount is on account of freight only and therefore the same is not includible in the assessable value - excess amount collected by the appellant on account of insurance premium is not includible in the assessable value - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 246
Rectification of mistake - Held that: - there is no whisper that the applicant has agitated the matter before Hon'ble High Court and subsequently before Hon'ble Supreme Court - the applicant have not come before this Tribunal with clean hands and have resorted to the suppression of facts - the ROM and COD applications are dismissed.
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2017 (2) TMI 245
Natural justice - the Original Authority while deciding the issue has not made any independent study in the matter to confirm the products of being suitable for use as fuel and has solely relied on the report of the Chemical Examiner’s report - Held that: - Revenue also did not submit any literature or argument for establishing that the conclusion drawn by the Chemical Examiner or the decision of the Original Authority is not tenable in law. Therefore, we did find any sustainable ground advance by Revenue in this appeal - appeal dismissed - decided against Revenue.
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2017 (2) TMI 244
Inter-mediate product - captive consumption - demand on the ground that the sugar syrup though captively used in the manufacture of exempted goods, the same is not marketable - Held that: - if the sugar concentrate by weight is less than 65% then it will not have shelf life and such case sugar syrup will not be a marketable goods. However, as per the undisputed fact of the present case, the sugar syrup contained more than 65% sugar concentrate and it also contained the preservative, i.e. citric acid. Therefore, the sugar syrup in the present case has indeed shelf life therefore, it is marketable - sugar syrup is dutiable - demand upheld - appeal dismissed - decided against appellant.
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2017 (2) TMI 243
Cenvat credit - Plastic Wire Scrap - process of separation of copper is not amounting to manufacture - Penalty - Held that: - I find that the only issue involved in the present appeals is whether the CENVAT credit availed on plastic wire and scrap, when a portion of the said scrap was sold later after retrieving the copper from it on payment of excise duty, which was twice the amount of credit on whole scrap - It is not in dispute that out of the said waste and scrap, approximately 55% was retrieved manually which does not result into manufacture , but the copper portion of the same was cleared on payment of duty - Decided in favor of the assessee.
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2017 (2) TMI 242
Confiscation - Penalty - Held that: - The copy of the returns submitted before this Tribunal today indicates that duty demanded in the show cause notice was paid. However, the Original Authority did not have benefited of such evidences before him. I, therefore, remand the matter back to the Original Authority who shall consider the evidence and re-adjudicate the case after giving opportunity to the appellants. Both the appellants are directed to submit their defence reply alongwith evidence before the Original Authority within sixty days from the date of receipt of this order - Appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2017 (2) TMI 233
Order for reversing the Input tax credit (ITC) and levy of penalty - order had been passed, without service of notice - notice returned on account of non-availability of address of petitioner - Held that: - the respondent had available in its record, not only the local address of the petitioner, but also his address at Delhi. Therefore, had the notice dated 29.07.2016 been directed to the petitioner's address, at Delhi, which I am told, is his business address, one would not have come to such a pass. Therefore, in my view, all avenues of effecting service on petitioner were not exhausted. The respondent's proposal to reverse ITC and levy penalty, consequently, did not get communicated to the petitioner - impugned order set aside - petition allowed - decided in favor of petitioner.
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2017 (2) TMI 232
Validity of assessment order - order was passed before the time stipulated for filing the audit report in Form WW had expired - Held that: - A plain reading of Rule 16-A(1) would show that a dealer is required to furnish his audit report in Form WW within nine months from the end of the financial year. Therefore, clearly, the petitioner had initially leeway till 31.12.2016, to file the audit report in Form WW, which got extended via the aforementioned Government Order till 10.01.2017, with the insertion of a proviso to that effect, in Rule 16-A(1) of the 2007 Rules - assessment order set aside with a direction to respondent No.1 to redo the assessment - petition allowed by way of remand.
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