TMI Tax Updates - e-Newsletter
February 21, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
Penalty u/s 271D and 271E - whether Section 245H of the Act excludes Sections 271D and 271E of the Act from the benefit of immunity by the Commission - Power of Settlement Commission to grant immunity from prosecution and penalty - Held No - HC
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Income Tax:
Deduction u/s 80IA(4) - Commission for collection of electric duty is an independent income and it also cannot be accepted as reimbursement of manufacturing or selling expenses and as a consequence, it is also not an income derived from an industrial undertaking. - AT
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Income Tax:
Levy of fee u/s 234E for late filing of quarterly e-TDS returns u/s 200(3) - admittedly all the TDS returns has been filed and processed by the TDS, CPC before 1.6.2015. Therefore, fee payable u/s 234E, cannot be levied while processing TDS statements u/s 200A - AT
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Income Tax:
Donation to political parties - payments of donation have been made in Financial Year 2009-10 evidenced by the receipts issued by the political party whereas claim has been made for Financial Year 2008-09 - assessee is not eligible for any deduction u/s 80GGC - AT
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Income Tax:
DTAA - once it is held that chartering includes slot charter, space charter and it falls within the ambit of “operation of ships”, then the benefit of Article 8 cannot be denied simple on the ground that the transportation has been done either partly or fully through slot charter arrangement or joint charter arrangement, etc. - AT
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Customs:
Classification of machinery for using thermal/mechanical pre-treatment of mixed feed for poultry industry - classified under CTH 84.38 or CTH 84.36? - specific prescription of law excludes the general goods from its fold - classifiable under CTH 8436 2900 - AT
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Customs:
Revocation of CHA licence - revocation on the ground that appellant is a defaulter of service tax liability - No proceeding under that regulation lies for default to pay service tax by the Customs broker for the service he provides to his clients - licence to be be restored - AT
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Indian Laws:
Dishonour of cheques - if the cheque is issued by an individual not acting on behalf of the company, the vicarious liability on the company cannot be fastened in the absence of any specific provision permitting the same - HC
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Service Tax:
Levy of penalty - if an amount of service tax liability on CENVAT credit is reversed on being pointed out by the departmental officers, provisions of Section 73(3) of the FA, 1994, gets attracted and SCN was not to be issued - AT
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Service Tax:
Business Auxiliary Services - suppression of the value of services - It is settled law that if new category of services is introduced the same is taxable from that date and are not covered any of existing services - extended period of limitation cannot be invoked - AT
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Service Tax:
CENVAT credit - input services - Golf Club Membership Fee - Cargo Handling Charges for Japanese expatriation/repatriation - Pandal/Shamiana Charges - these services are not integrally connected with the business of the assessee - credit denied - AT
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Central Excise:
SSI Exemption - use of brand name of others - The activities of assembling of various components of computers into a working computer system will not amount to manufacture and hence are not liable to payment of excise duty - AT
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Central Excise:
Cenvat credit - Capital goods and input at service station - ISD - it is clear that to avail input service credit, the registration of head office/registered office is not mandatory, however, it is necessary to ascertain the documents on which these units had availed credit as there have been claims and counter claims - AT
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Central Excise:
Benefit of N/N. 6/2006-CE dated 1-3-2006 - purchase of car Skoda Laura fitted with Automatic Transmission - appellant being handicapped person pursuing his refund for more than five years, therefore the adjudicating authority is directed to sanction the refund to the appellant alongwith interest - AT
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Central Excise:
CENVAT credit - consumption variation - in the absence of evidence that the input was not received in the factory or the same after receipt cleared from the factory the cenvat credit cannot be denied - credit allowed - AT
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Central Excise:
Cenvat credit - Capital goods - appellants have not claimed the depreciation in the respective financial years, therefore, the entire allegation in the show-cause notice stands collapsed - AT
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Central Excise:
Valuation - clearance to sister unit - goods were not fully finished - the valuation could not have been done under Rule 9 of Central Excise Valuation Rules 2000 - AT
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VAT:
Works contract - cleaning activity - The property in the consumable chemicals used in the process of cleaning does not transfer to the Contractee/Railways and accordingly the said goods are not exigible to tax - since the activity is not liable to VAT, not TDS is required - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (2) TMI 866
Penalty u/s 271(1)(c) - Assessee had filed its returns under Section 115JB - Held that:- HC order confirmed [2016 (9) TMI 297 - DELHI HIGH COURT]. ITAT in this case correctly concluded that the question of concealment had been finally determined in the quantum proceedings and furthermore the SCN was not time-barred. Yet, it proceeded to affirm the CIT(A)’s directions to delete the penalty order. There was no concealment of any material particulars in respect of that part of the return. The concealment found was in respect of normal computation. That the normal computation involved certain disallowances at later and higher stages of the proceedings at the first appellate and the ITAT’s proceedings reflect the unfortunate circumstances of the litigating parties. That would not in any manner deviate from the fact as to whether the AO could have assumed, on the basis of the opinion that there was concealment of income which led to revenue loss.
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2017 (2) TMI 865
Review petition against the SC order [2016 (10) TMI 704 - SUPREME COURT] - Partnership firm - Nature of the Certain considerations received after the dissolution of the firm - Slump sale or not - capital gain - Goodwill - Held that:- We find no error much less apparent in the order impugned. The review petitions are, accordingly, dismissed. The partnership firm had dissolved and thereafter winding up proceedings were taken up in the High Court. The result of those proceedings was to sell the assets of the firm and distribute the share thereof to the erstwhile partners. Thus, the 'transfer' of the assets triggered the provisions of Section 45 of the Act and making the capital gain subject to the payment of tax under the Act.The appellants as erstwhile partners are liable to pay capital gain on the amount received by them towards the value of their share in the net assets of the firm are liable for payment of capital gains u/s 45 of the Act. Business income/revenue income in the Assessment Year in question is to be assessed at the hands of AOP-3, in terms of the orders of the High Court, as AOP-3 retained the tax amount from the consideration which was payable to the assessees herein and it is AOP-3 which was supposed to file the return in that behalf and pay tax on the said revenue income.
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2017 (2) TMI 864
Revision u/s 263 - unsecured loans - Held that:- An obvious mistake had been made by the CIT while passing the order under Section 263 of the Income Tax Act. It has made a double addition, even though the AO has already added an income of two crores and ninety eight lakhs approximately for the year in question. The Tribunal has, therefore, come to the conclusion that there was no occasion for the CIT to pass order under Section 263 of the Act as it could not be said that while taking a view the AO had made an error or that it amounted to an error and consequently no loss or prejudice had been caused to the revenue. Having heard learned Counsels on both sides and having perused the material on record, we are of the opinion that the view taken by the Tribunal is justified in the facts and circumstances of the case. It is settled law that where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous or prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law.- Decided in favour of the assessee
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2017 (2) TMI 863
Disallowance u/s 14A - Held that:- We find that this case has yielded concurrent finding of facts regarding expenditure incurred by the assessee for the purpose of earning the exempt income, by the Appellate Authority and the Tribunal. As such there is no scope for interference with such concurrent findings of facts. We, therefore, are not satisfied that the case involves any substantial question of law.
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2017 (2) TMI 862
Validity of assessment orders passed under section 153(A) - Held that:- We have perused and considered the assessment orders passed under section 153(A) of the Act as well as the order passed by the learned CIT(A) as well as the impugned judgement and order passed by the learned tribunal. The learned tribunal has deleted the additions made under section 153(A) of the Act, made on the basis of incriminating material found during the search, on the ground that under section 153(A) of the Act in respect of undisclosed income and undisclosed assets detected during the search could be brought to tax. See Commissioner of Income Tax (Central) -III Versus Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] wherein held since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. - Decided in favour of the Assessee
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2017 (2) TMI 861
Penalty u/s 271D and 271E - whether Section 245H of the Act excludes Sections 271D and 271E of the Act from the benefit of immunity by the Commission - Power of Settlement Commission to grant immunity from prosecution and penalty - Held that:- Mr. Setalvad very fairly states that Section 245H of the Act does not exclude the aforesaid two Sections namely – Sections 271D and 271E of the Act from the province of the Commission to grant immunity under Section 245H of the Act. In the above view, the mere fact that the Tribunal mistakenly records that the Respondent-Assessee is not entitled to grant immunity from levy of penalty under Sections 271D and 271E of the Act will not make the impugned order vulnerable on the above ground. This is a mistake on the face of it, as there is no such exclusion from Section 245H of the Act of Sections 271D and 271E of the Act, for grant of immunity. It is possibly for this reason that the Petitioner had not filed any rectification application on the above account, seeking withdrawal of immunity from penalty, in view of the above recording by the Commission. In fact, if the entire paragraph 39 of the impugned order which deals with the issue of waiver of penalty is read, it is very clear that the Commission sought to grant partial immunity in respect of penalty imposed under Sections 271D and 271E of the Act. Therefore, the exercise of restoring the issue to the Commission to freshly determine the issue of penalty, would in the present facts be an academic exercise. In the above view, the aforesaid objections on the part of the Petitioner also does not warrant any interference.
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2017 (2) TMI 860
Review petition - Internally Generated Goodwill - errors apparent on the face of the record for this court did not refer, in addition to clause (xiv) of section 47, two important sections section 55(2) as also another provision on which he placed reliance, namely, sections 48 and 49 - Held that:- Once M/s. Overseas Plastic Moulders was converted into a private limited company in the name and style as M/s. Overseas Plastic Moulders India Private Limited, the business of the appellant was transferred. The appellant received the entire consideration of transfer by way of fully paid up shares of the private limited company. No monetary consideration for transfer of this proprietary business with goodwill was received. That is why section 47(xiv) enabled the appellant to claim a benefit of the goodwill of ₹ 2,29,89,701/-, which was generated as a result of the proprietary business carried out was the plea raised. It is in relation to these facts that the tribunal concurred with the Commissioner of Income Tax (Appeals). It has also referred to the deed of assignment dated 17th September, 2008. It also perused the first and the second Schedule to the agreement, which set out the details and particulars of the immovable and movable assets, to which the assignor is entitled. That did not contain any details as to the valuation of goodwill while arriving at a total value of ₹ 3,35,90,640/-, for which the allotment of 3359064 shares of ₹ 10/- each in the share capital of the assignee was obtained. The general wording in the recitals may cover goodwill, but the assignment deed did not evidence that a goodwill valued at certain figure is transferred. The alleged goodwill was not created in the books of the propriety concern is thus one of the findings. The tribunal holds that the allotment of shares exceeding ₹ 1,16,05,939/- is in the form of excess asset over and above the assets and liabilities of the assignor. That is why it referred to the figures in the books of Account and rendered an opinion that the assessee derived an additional share capital allotment of ₹ 2,29,84,701/- without bringing in anything to the assignee. It is in these circumstances that the pre-requisite in section 47 has not been complied with. The tribunal distinguished the judgments relied upon by holding that in those cases, facts denote that a proper valuation of the goodwill has been done prior to the transfer of the assets. We do not think that by going behind the order again, we can test whether other provisions and the pre-requisite necessary to attract them are present and therefore we must rely on the Hon'ble Supreme Court judgment in the case of Commissioner of Income Tax vs. Smifs Securities Ltd. (2012 (8) TMI 713 - SUPREME COURT) and the accounting standards. This is a course impermissible in review jurisdiction. We find no merit in the review petition and it is dismissed.
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2017 (2) TMI 859
Non-payment of the admitted tax liability - belated payment - Held that:- In view of the admitted tax liability paid by the assessee later on, the dismissal of the appeal on the ground of non-payment of the admitted tax liability at the point of time of filing of the said appeal was not justified and the appeals were thus restored on the file of learned CIT(A) for considering the said appeals on merits. We do not find any substantial question of law arising in the present appeal of the Revenue and therefore, the impugned order of the learned Tribunal deserves to be upheld.
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2017 (2) TMI 858
Deduction allowable to the assessee u/s. 80IA(4)(iv)(c) - Held that:- Interest income is independent income and it is not reimbursement of manufacturing or selling expenses and hence, it cannot be said to be income derived from an industrial undertaking. Similarly profit on sale of stores also is an independent income and it also cannot be accepted as reimbursement of manufacturing or selling expenses and as a consequence, it is also not an income derived from an industrial undertaking. Misc. receipts from trading also is an independent income and it also cannot be accepted as reimbursement of manufacturing or selling expenses and as a consequence, it is also not an income derived from an industrial undertaking. Rental income also is an independent income and it also cannot be accepted as reimbursement of manufacturing or selling expenses in the absence of this fact that assessee was paying rent of staff quarters which was debited to Profit & Loss account and as such recovery of rental income from staff quarters is going to reduce the expenses of the assessee incurred on rent. As a consequence, it is also not an income derived from an industrial undertaking. Commission for collection of electric duty also is an independent income and it also cannot be accepted as reimbursement of manufacturing or selling expenses and as a consequence, it is also not an income derived from an industrial undertaking. Apart from the miscellaneous recovery we are left with two items i.e., sale of scrap and excess found on physical verification of material stock. Regarding these two items, we are satisfied that this will go to reduce the cost incurred by the assessee and debited to Profit & Loss account and to this extent, these receipts should be reduced from the cost and therefore, these two items should not be reduced from the profit shown by the assessee in the Profit & Loss account for the purpose of computing deduction allowed to the assessee u/s. 80IA(4)(iv)(c). We hold accordingly. Miscellaneous recovery - Held that:- The items included herein are penalty recovered from suppliers/contractor of ₹ 431.07 lakhs, unclaimed balance o/s of ₹ 264.25 lakhs and difference between the WDV and books value of released asset of ₹ 96.77 lakhs. These 3 items are neither any income derived from an industrial undertaking nor a realization to reduce the cost of manufacturing/cost of sale of assessee and therefore, these 3 items are rightly reduced from the profit of the assessee for the purpose of computing deduction allowable u/s. 80IA(4)(iv)(c). Regarding the balance items such as dept. exam fees, sale of dept. books and sale of forms, sale of scrap/stock excess found, meter reading testing charges and BBC theft ca collected etc., in our considered opinion, these receipts reduce the cost of assessee which are debited to Profit & Loss account and therefore, these items should not be reduced from the profit of assessee as per Profit & Loss account for the purpose of computing deduction allowable to the assessee u/s. 80IA(4)(iv)(c). Misc. recovery from employees - Regarding this item, nothing has been shown that these are on account of recovery of certain expenses incurred by the assessee and debited to Profit & Loss account and therefore, regarding reduction of this item from the profit of the assessee, we find no infirmity in the order of ld. CIT (Appeals). Sale of scrap reduced from the profit of the assessee for the purpose of computing deduction allowable to the assessee u/s. 80IA(4)(iv)(c) but the other receipts were rightly reduced from the profit of the assessee because these other receipts are neither income derived from industrial undertaking nor a receipt in the nature of reimbursement of expenses incurred by the assessee for manufacturing and selling of goods. The assessee gets relief to the extent of ₹ 40,22,860/- which should not be reduced from profit of the assessee for computing deduction allowable to the assessee u/s. 80IA(4)(iv)(c).
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2017 (2) TMI 857
Levy of fee u/s 234E for late filing of quarterly e-TDS returns u/s 200(3) - Held that:- There is no enabling provision in section 200A of the Act, before insertion of sub-clause (c) into section 200A of the Act, by the Finance Act, 2015 w.e.f. 1.6.2015 and hence, no adjustments can be made towards late fee payable u/s 234E of the Act, for belated filing of TDS statements u/s 200(3) of the Act, while issuing intimation u/s 200A of the Act, for processing TDS statements filed and processed for the assessment years prior to 1.6.2015. In these cases, admittedly all the TDS returns has been filed and processed by the TDS, CPC before 1.6.2015. Therefore, we are of the view that fee payable u/s 234E of the Act, cannot be levied while processing TDS statements u/s 200A of the Act. The CIT(A), without appreciating the facts simply upheld the action of the A.O. in levying late fee u/s 234E of the Act. Hence, we reverse the CIT(A) order and direct the A.O. to delete additions made towards late fee u/s 234E of the Act.
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2017 (2) TMI 856
Additional depreciation on plant & machinery - AO disallowed the claim on the ground that the activities carried out were not amounting to manufacture or production of article or thing, therefore, not entitled for additional depreciation - Held that:- Assessee is entitled for additional depreciation under section 32(1)(iia) of the Act. Thus, we reverse the order passed by the Commissioner of Income Tax (Appeals) and the ground of appeal raised by the assessee is allowed. See ITO vs. M/s. Arihant Tiles & Marbles (P) Ltd. [2009 (12) TMI 1 - SUPREME COURT]
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2017 (2) TMI 855
Penalty under section 271(1)(c) - addition on peak credit in view of the statement given by the assessee’s partner - Held that:- The fact remains is that the Assessing Officer has not given opportunity of cross-examining the partner Shri Korata Srinivasa Rao, however, by relying on the statement, addition is made. When the assessee has given a detailed explanation during the course of the penalty proceedings, the Assessing Officer simply disbelieved the explanation given by the assessee. It is not the case of the Assessing Officer that the explanation given by the assessee either false or not bonafide. The case law relied on by the assessee in the case of G.R. Rajendran (2002 (10) TMI 71 - MADRAS High Court) has held that section 271(1)(c) refers to the explanation offered by the person being found to be false or not being one which the person offering the explanation is able to substantiate. The consideration of the explanation offered is, therefore, duty cast upon the officer imposing penalty. In the absence of such consideration and the finding that the explanation is false or that the assessee had failed to substantiate the explanation offered, the officer cannot proceed to hold that there has been concealment of income attracting levy of penalty. Thus it is not a fit case for imposing penalty under section 271(1)(c) of the Act. - Decided in favour of assessee
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2017 (2) TMI 854
Reopening of assessment - whether AO has rightly brought to tax 1/6th of the amount of interest in each of the assessment years in which interest has been held to be taxable by the Tribunal? - Held that:- From a literal reading of the observation of the ITAT for the A.Y 2006-07 we find that the Tribunal has held that the entire interest has not accrued to the assessee in A.Y 2006-07 but that it pertains to six years and therefore, only 1/6th of the amount can be brought to tax in the relevant A.Y. We do not find any direction to bring the balance of the interest received to tax in the earlier A.Ys. Therefore, the AO invoking the provisions of section 150(1) and reopening the assessments u/s 147 of the Act for the A.Ys before us is not sustainable. In the case of P.G. and W.Sawoo Pvt Ltd (2016 (4) TMI 1002 - SUPREME COURT) has held that income to be charged to tax must accrue or arise at any point of time during the previous year and it can be said to have accrued or arisen only when a right to receive the amount in question is vested in the assessee. It was held in that case that no such right to receive rent accrued to the assessee at any point of time during the A.Y in question, in as much as enhancement of rent though with retrospective effect, was made only in the year 1994. It was held that notice seeking to reopen the assessment for the A.Y 1989-1990 was without jurisdiction or authority of law. - Decided in favour of assessee.
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2017 (2) TMI 853
Validity of assessment proceedings - no notice issued - Held that:- Jurisdictional AO has not issued any notice u/s 143(2) of the I.T. Act to the assessee, hence, the assessment order in dispute is invalid, void abnitio and against the provisions of the law and is not sustainable in the eyes of law. Therefore, the assessment order as well as the appellate order stand cancelled and appeal of the assessee stands allowed.
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2017 (2) TMI 852
Denial of exemption claimed under section 11 & 12 - registration granted to the Society under section 12A has not been withdrawn - whether assessee society is a charitable institution and is existing for charitable purpose within the meaning of section 2(15)? - Held that:- On the similar issues, the appeals of the assessee were allowed by the ITAT for the assessment year 2009-10 [2016 (8) TMI 865 - ITAT DELHI] wherein it has been held that “invocation of proviso to section 2(15) of the Act to deny claim of exemption under section 11 and 12 of the Act is not justified. Accordingly, grounds of appeal are allowed.
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2017 (2) TMI 851
Bogus capitalization addition - denial of claim on the basis of statement of Shri Soumil M Parik recorded under section 131 by the department - Held that:- The assessee has produced ledger extracts of the parties, confirmations from these parties, bank statements and also certificate from the register valuer to prove the construction of building, which ultimately proves procurement of steel. Recording of statement of Shri Soumil M Parik recorded under section 131 has already been negated by the coordinate Bench of Tribunal in the group concerns case i.e. Shri Nitin M Shah [2015 (7) TMI 290 - ITAT MUMBAI ] The assessee has produced copies of invoice for purchases and also the details of opening stock, purchases, sales and closing stock. Even the assessee has proved the raw material used in construction of building, which is supported by valuation report. Merely on a statement, which was never confronted or no opportunity to cross examine the party was allowed, in that eventuality the capitalization cannot be denied to the assessee. We agree with the Revenue that the statement recorded by Revenue is a good starting point for making further investigation but it is not conclusive. The Revenue should have made further investigation and take it to logical conclusion but the AO left the job at the initial point itself, which is clear from the assessment order. Even the CIT(A) has not carried this matter further. We are of the view that suspicion however high, cannot take place of evidence. In such circumstances we allowed to these interconnected issues in assessee’s appeal directing the AO to allowed capitalization on both the counts. - Decided in favour of assessee
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2017 (2) TMI 850
Rejection of books of accounts - G.P. addition - assessee did not produce itemwise quantitative details, did not file proper evidence to prove the rejection of material, overall lower GP rate of 8.65% as against 13.92% and some other mistakes relating to improper valuation of closing stock at higher value and alteration in purchase bills - Held that:- There are certain facts which are undisputedly accepted by the Revenue which are that assessee’s books of accounts are audited u/s 44AB of the Act and as per Tax Audit Report assessee is maintaining register for purchase and sale, bank book, cash book, VAT register, journal register. Tax Audit Report also shows the quantitative details of goods traded by the assessee. Assessee also demonstrated with the copy of accounts of M/s Siddharth Enterprise, Chennai that rejection of material was genuine. The quantum of value of purchase and sale has not been disputed as they were fully vouched. Also when the commission income is not considered for calculating gross profit rate then the real picture of the business of trading of packing material shows that assessee has a better gross profit of 6,88% as against 4.68% of preceding year coupled with a better turnover figure of ₹ 3,35,60,936/- as against turnover of Financial Year 2007-08 at ₹ 2,09,28,595/-. This is a known fact that commission income is a indirect income which normally forms part of profit and loss account and, therefore,trading figures (excluding commission) shows that assessee has an improved gross profit rate. Thus on discussion made above wherein assessee is regularly maintaining books of account which are audited, regular returns under VAT have been filed, no major defect in the quantum of purchase and sale has been observed, quantitative details of closing stock as on the year end has been furnished, details of rejection of material duly provided before the lower authorities and above all a better turnover and improved gross profit, action taken by ld. Assessing Officer rejecting books of accounts is held to be incorrect. We, therefore, accept the trading results of the assessee and delete the impugned addition - Decided in favour of assessee Disallowance of interest expenses and processing charges relating to funds borrowed from financial institutions - whether personal loans taken by assessee are for the purpose of business or not and secondly if they are for the purpose of business then whether disallowance is called for u/s 40(a)(ia) of the Act for non-deduction of TDS? - Held that:- Matter needs to be reexamined by the Assessing Authority specifically for the loans taken during financial year 2008-09 and assessee is required to supply necessary information and supporting evidences to prove that personal loans taken from non banking financial institutions during Financial Year 2008-09 have been utilized specifically for the purpose of business and not for personal purposes. AO has also to examine all expenditure for interest claimed with specific details of interest paid on personal loans and housing loans and if expenses include interest paid on home loan to Reliance Capital or others the same needs to be disallowed. As far as other personal loans taken during the year, if ld. Assessing Officer is satisfied that they have been utilized for the purpose of business then with regard to disallowance u/s 40(a)(ia) of the Act for non-deduction of TDS. Issue is now well settled in the case of CIT vs. Ansal Landmark Townships Pvt. Ltd. (2015 (9) TMI 79 - DELHI HIGH COURT) observing that the insertion of second proviso inserted by the Finance (No. 2) Act, 2004.to Section 40(a)(ia) is declaratory and curative in nature and it has retrospective effect from 1st April, 2005,and to be given retrospective effect and to be applied in the cases where TDS has not been deducted on the payments but expenses should be allowed if assessee is able to prove that the payee also has included the receipt from assessee in the return of income and paid due taxes. Accordingly ld. Assessing Officer may ask the assessee to furnish a certificate of Chartered Accountant as well as copies of income-tax returns of the alleged financial institutions which can prove that interest paid by the assessee has been included in their income. As regards processing charges is concerned they will be allowed only in respect of personal loans utilized for business purposes which will depend on the result of the fresh examination to be carried out by the Assessing Officer as discussed in the preceding paragraph.matter set aside for reconsideration Association expenses - whether he said expenditure is admissible deduction U/s 30 to 37? - Held that:- Undisputedly receipts submitted relating to expenses of ₹ 79,000/- do not have the name of assessee. Further payments made relate to Financial Year 2006-07, 2007-08, flat transfer fees etc. which have been paid to Shri Harshad R. Shah, Bhavna K. Gor and, Shantaben B. Shah. We further observe that the audited balance sheet of the assessee filed on 31.3.2009 under the head ‘fixed asset’ there is no office building shown rather at sl.no. 9 of the schedule houseresidence is shown at ₹ 3,38,380/- and at sl.10 investment in residence at flat no.603 is shown at Rs…20,45,927/- It seems that assessee has paid the impugned expenses of ₹ 79,000/- with relation to the residence at flat no.603 and the expenses also relates to common maintenance, electricity charges etc. In the given facts of the case as well as receipts of the impugned expenses it is very well evident that assessee has miserably failed to prove that the impugned expenses of ₹ 79,000/- has been made towards business expenditure no concrete evidence has been placed before the lower authorities and even before us. We, therefore, are of the view that ld. Assessing Officer has rightly disallowed the association expenses - Decided against assessee. Addition on account of transportation charges - Held that:- Assessee has not tried to place material evidence in a proper way before both the lower authorities which could have been easily done because assessee’s accounts are audited and assessee is strongly supporting the same. Certainly when information were not available with the adjudicating authorities it is very hard to verify the genuineness of the expenditure and the same has happened in this case also. We also observe that facts relating to this ground are varying since the assessment proceedings then before the first appellate authority as well as in the additional evidence examined by the ld. Assessing Officer. As a result of this variation in facts, adjudication of the issue is not materializing to a correct finding. We, therefore, are of the view that this issue of transport expenses needs to be examined afresh by the ld. Assessing Officer on the basis of documents and details to be provided in totality by the assessee. Needless to mention a proper opportunity of being heard to be given to the assessee before adjudication. This ground is allowed for statistical purposes. Denial of claim U/s 80GGC for payment to a political party namely Lok Jan Shakti party - Held that:- We are really very surprised to observe that the above receipts which totaled to ₹ 3,51,000/- paid in cash to Lok Janshakti Party are paid in Financial Year 2009-10 relevant to Asst. Year 2010-11 whereas assessee has claimed deduction for Financial Year 2008-09 relevant to Asst. Year 2009-10 showing that payment in cash of ₹ 3,51,000/- has been made on 31.3.2009. It is very strange that the deduction which has been claimed for Financial Year 2008-09 the corresponding payment has been made in 2009-10 and ever since the assessment proceedings assessee is giving different submissions along with other evidences. In the given facts and circumstances of the case wherein the impugned payments of donation have been made in Financial Year 2009-10 evidenced by the receipts issued by the political party whereas claim has been made for Financial Year 2008-09 we are of the considered view that assessee is not eligible for any deduction u/s 80GGC of the Act - Decided against assessee
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2017 (2) TMI 849
Benefit of Article 8 denied - Limitation clause as appearing in Article 24 of India-Singapore DTAA applicability - Eligibility of Article 8 in respect of income earned from shipping operations by the assessee from India - Held that:- There is no stipulation about exemption under Article 8 of the shipping income which as pointed out by ld. Senior Counsel has been specifically provided in some of the Articles like Article 20, 21 & 22. Hence, it cannot be reckoned that shipping income earned from India is to be treated as exempt from tax or taxed at reduced rate, which is a condition precedent for applicability of Article 24, albeit India at the threshold does not have the jurisdiction to tax the shipping income of the non-resident entity. Thus, the condition of Article 24 is not satisfied in the present case from this angle also. In conclusion, we hold that the ld. CIT (A) was not justified in denying the benefit of Article 8 by invoking the limitation clause of Article 24 of India- Singapore DTAA as per our discussion above The definition of “operation of ships” also alludes to the concept of charterer of ships, which even includes part of ship in an arrangement such as slot charter, space charter or joint charter. The slot charter and space charter of a ship cannot be segregated or read in isolation from the meaning of “charterer” as appearing in para 4 of Article 8. There is no stipulation under Article 8 that wherever passengers or cargos etc. are transported under charter arrangement with third party which includes slot or space charter, then, one leg of journey should be on vessel owned or leased by the shipping or Aircraft Company. As mentioned above, the word “Charterer” will include third party/joint service arrangement of slot or space in a ship and hence the transportation under such arrangement will be reckoned as profit from operation of ships. Thus, we agree with the contentions of the ld. Senior Counsel that even if the entire leg of journey is undertaken by a shipping company through and through charter arrangement or joint service arrangement, the benefit of Article 8 cannot be denied, because it will still fall within the ambit and scope of “operation of ships” under Article 8 (even under India- Singapore DTAA). So far as the issue of establishing linkage between transportation by feeder vessel and mother vessel of the ship owned or leased by the assessee, once it is held that chartering includes slot charter, space charter and it falls within the ambit of “operation of ships”, then the benefit of Article 8 cannot be denied simple on the ground that the transportation has been done either partly or fully through slot charter arrangement or joint charter arrangement, etc. Thus, in view of our discussion above, we hold that so far as denial of benefit of Article 8 in respect of 97 ships for sums aggregating to ₹ 97,29,89,746/- is not justified and we direct the Assessing Officer to give the benefit of Article 8 in respect of 97 ships, which has been denied by the CIT(A). So far as the freight receipt in respect of 4 ships is concerned, it is an admitted fact that no evidence whatsoever or documents could be furnished by the assessee either before the Assessing Officer or the CIT(A) or even before us and, therefore, we hold that to the extent of freight receipt the benefit of Article 8 will not be available to the assessee and same is directed to be taxed in India under the relevant statutory provisions. Thus, the issue relating to benefit of Article 8 is decided partly in favour of the assessee. The issue relating to Permanent Establishment (PE) and attribution of income to PE has become purely academic and, therefore, no separate adjudication is required. Once we have held that assessee is entitled for benefit of Article 8, then attribution of income in India through agency PE will not arise. Allowability of interest u/s 234B - Held that:- It is admitted by both the parties that the issue is covered in favour of the assessee by the decision of the Jurisdictional High Court in the case of NGC Network Asia LLC (2009 (1) TMI 174 - BOMBAY HIGH COURT ).
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2017 (2) TMI 848
Attribution of income - determination of the quantum of income chargeable to tax in India - at a mark-up of 15% on costs incurred by CIT-A as against AO's profit attribution to sales activity in India at 40% of the profit from sales made in India - nature of activities carried out by the PE in India - Held that:- Attribution of profits to PE in India is fact based, depending upon the role played by the PE in the overall generation of income. Such activities carried out by a PE in India resulting in generation of income, may vary from case to case. Attribution of income has to be in line with the extent of activities of PE in India. Taking all the relevant facts into consideration and on a holistic approach, we direct to apply 30% of the profits, namely, 3% (30% of 10%) on the amount of sales made by the assessee in India either directly or through its branch office amounting to ₹ 17,21,14,673/- (USD 36,15,095 x ₹ 47.61), as the amount of profit attributable to the PE in India. No further deduction on any account is to be allowed. This will result into determination of total income at ₹ 51,63,440/- as against ₹ 80.95 lac determined by the AO and ₹ 16.75 lac computed by the ld. CIT(A). We direct to take ₹ 51,63,440 as the total income of the assessee.
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2017 (2) TMI 847
Nature of income - share transaction - business income or capital gain - Held that:- In principle ld.CIT(A) has accepted status of the assessee as investor also. It has also been explained that the assessee was maintaining two portfolios. There is no provision in the Income Tax Act which can authorize the authority to draw a line i.e. shares held less than 30 days would be treated as a business transaction. An assessee is either an investor or trader. His status cannot be changed on the basis of the transactions where shares were held below a particular number of days. There is no such provision in the Act. Thus, the ld.CIT(A) has erred in creating an artificial line between transactions. The Revenue has not challenged the finding of the CIT(A) qua treating the assessee as an investor. Therefore, we partly allow the appeal of the assessee and modify the order of the CIT(A). The transactions in respect of shares held by the assessee less than 30 days should also be treated as a transaction of investment. In other words, short term capital gain shown by the assessee is to be accepted. Disallowance in respect of expenditure relevant to the activity of shares and securities - Alternatively, it has been contended that the AO be directed to delete the disallowance or he may be directed to grant rebate under section 88E - Held that:- A perusal of the record shows that an application under section 154 of the Act was filed before the ld.CIT(A). Since this issue has already been relegated to the AO for readjudication and there is no specific finding at the end of the AO on this issue. Moreover, the order of the ld.CIT(A) based on an application under section 154 of the Act has not been challenged before the Tribunal, it became final. In view of this development, we are of the view that ends of justice would meet if we set aside this issue to the file of the AO for re-adjudication in accordance with law.
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Customs
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2017 (2) TMI 820
Renewal of CHA licence - whether mere pendency of a writ petition wherein the petitioner sought for release of 75 containers can be a reason to refuse to renew the petitioner’s Custom House Agents License? - Held that: - the pendency of a SCN for adjudication that too for a period of three years cannot be a sole ground to grant temporary renewal to the petitioner. That apart, it is not known as to why the Officer, who had adjudicated the show cause and given a personal hearing on 21-6-2012, has not passed any orders on the petitioner’s application. As already observed, merely because the petitioner has approached this Court seeking certain relief and the writ petition is pending does not mean that the petitioner is charged with a misconduct - the reason assigned by the respondents in the counter affidavit for not granting renewal for a longer period and renewing the license temporarily is not sustainable - petiiton allowed - decided in favor of petitioner.
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2017 (2) TMI 819
Cut betel nuts - import from Nepal - whether the gods imported from Nepal are of smuggling nature? - Held that: - The case of Sundarlal v. Commissioner of Customs(Prev.), Patna [2003 (12) TMI 398 - CESTAT, KOLKATA] was relied upon, where it was held that in respect of confiscation of Betel Nuts, the burden is on Revenue to prove the smuggled nature of goods and circumstantial evidence relied upon by the department not to take place of legal evidence - the appellant produced the Affidavit, which was discarded by the lower authority as the same was not submitted during investigation/adjudication. It is observed that Betel Nuts is being grown in plenty in north-east area of the country, and in absence of any expert opinion as regards foreign origin of goods, confiscation is not sustainable - confiscation and penalty set aside - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 818
Interest u/s 27A of the CA, 1962 - petitioner claim that since the assessment was provisional, there cannot be a claim of interest u/s 27A of the CA, 1962, as it pertains to the period far prior to 2006 - both the authorities below proceeded on the basis that the assessment was provisional and therefore the amended section 18 in 2006 could be attracted - Held that: - it is not clear as to whether the refund claim is arising out of the provisional assessment or not. It appears from the submission of the ld.Advocate that the refund claim was filed as the benefit of exemption Notification was not claimed by the appellant. Thus, there is no clarity in the facts and findings of the case - In my considered view, it should be decided as to whether the refund claim is arising out of the provisional assessment or not and thereafter, the claim of interest could be decided under the provisions of Customs Act, 1962 - appeal allowed by way of remand.
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2017 (2) TMI 817
Classification of goods - machinery for using thermal/mechanical pre-treatment of mixed feed for poultry industry - classified under CTH 84.38 or CTH 84.36? - Held that: - When CTH 84.38 is read that relates to food and drink items. Law is well settled that specific prescription of law excludes the general goods from its fold. Therefore, appellant is correct to aver that the goods shall be classifiable under CTH 8436 2900 - appeal allowed.
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2017 (2) TMI 816
Revocation of CHA licence - revocation on the ground that appellant is a defaulter of service tax liability - Held that: - Regulation 11(g) of CBLR, 2013 can be invoked only when the duty, tax or other debt or obligation owing to Government in respect of cargo or baggage is unpaid on behalf of client by the Customs broker - No proceeding under that regulation lies for default to pay service tax by the Customs broker for the service he provides to his clients - licence to be be restored - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 815
Demurrage charges - release of goods on payment of demurrage charges - Held that: - the appeal is pending before this Court for about 8 years, we deem it appropriate to direct the respondent to release the goods in question to the petitioner subject to the condition the petitioner gives a bank guarantee for an amount of ₹ 10 lakhs within a period of three weeks - appeal disposed off.
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Service Tax
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2017 (2) TMI 846
Legality and validity of the order - Penalty - Rule 6 of the Service Tax Rules, 1994 - Held that: - the learned Tribunal, considered the dispute with respect to the interest and penalties on the remaining sum of ₹ 4,89,448/= and had not considered anything on merits with respect to the penalty imposed by the Adjudicating Authority on the remaining amount of ₹ 47,68,300/ - there was an error apparent on the face of the record, while disposing of the main appeal in not considering the legality and validity of the order-in-original imposing penalties under Sections 76 & 78 of the Finance Act, 1994 on the entire amount of ₹ 52,57,748/= and the appeal was restricted to an amount of ₹ 4,89,448/= and penalties imposed on the same. The learned Tribunal ought to have restored the appeal with respect to the penalties imposed under Sections 76 & 78 of the Finance Act, 1994 on the remaining sum of ₹ 47,68,300/. Appeal partly allowed by way of remand.
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2017 (2) TMI 845
Interest - penalty - CENVAT credit improperly availed - Held that: - Having discharged CENVAT credit and the interest therein, the respondent cannot be further saddled with penalty as sought by Revenue in this appeal for a simple reason that respondent could have entertained bonafide belief that popcorn making machines and other machines which were used by various persons outside multiplexes - reliance placed in the case of CCE v. Adecco Flexione Workforce Solutions Ltd. [2011 (9) TMI 114 - KARNATAKA HIGH COURT] wherein the law has been settled as to if an amount of service tax liability on CENVAT credit is reversed on being pointed out by the departmental officers, provisions of Section 73(3) of the FA, 1994, gets attracted and SCN was not to be issued - appeal rejected - decided in favor of assessee and against Revenue.
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2017 (2) TMI 844
Harvesting and loading & unloading of the sugarcane at the sugar factory - whether amounts to rendering of services under the head 'manpower recruitment or supply agency service' and is taxable or not? - Held that: - the revenue authorities are not able to show that the appellant had supplied manpower to M/s Bhima Sahakari Sakhar Karkahana Ltd. We find that identical issue came up before the Tribunal in various matters and it has been held by the Tribunal that such activities does not fall under the category of ‘manpower recruitment or supply agency service’ - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 843
Business Auxiliary Services - suppression of the value of services - invocation of Section 73(3) of FA - Held that: - It is settled law that if new category of services is introduced the same is taxable from that date and are not covered any of existing services. Hence it cannot be said that appellant had acted in a mala fide manner is not discharging the Service Tax on the amount received for recovery of dues - appeal rejected - decided against Revenue.
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2017 (2) TMI 842
Restoration of appeal - appeal was dismissed summarily on the ground that the amount involved in the appeal was less than ₹ 10,00,000/- - Held that: - the issue involves classification and the subject activities of respondent are continuing one, therefore, issue of classification becomes a recurring one, which is covered under Para 3, sub-clause ‘c’ of the original C.B.E. & C. Instruction F. No. 390/Misc./163/2010-JC, dated 17-8-2011 introduced vide Instruction F. No. 390/Misc./163/2010-JC, dated 17-12-2015 - Revenue’s application for restoration of appeal on account of this prima facie mistake has to be restored to its original place and deserves to be decided on merit - appeal restored - decided in favor of appellant.
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2017 (2) TMI 841
CENVAT credit - Garden Maintenance service - Brokerage Charges paid by the company for getting residential garden for Japanese employees in Bangalore - Golf Membership fee - Cargo Handling Charges for Japanese expatriation and repatriation - Pandal and Shamiana charges - denial on the ground that the impugned services are not covered by the definition of ‘input service’ u/r 2(l) of CCR, 2004 as the same is not directly or indirectly in or in relation to manufacture and clearance of goods - Held that: - any service which is used by the manufacturer whether directly or indirectly, in or in relation to manufacture of final products and clearance of final products up to the place of removal fall in the definition of ‘input service’ - the Madras High Court in the case of CCE v. Rane TRW Steering Systems Ltd. [2015 (4) TMI 704 - MADRAS HIGH COURT] has held that House Keeping and Garden Services where an employer spends money to maintain their factory premises in an eco-friendly manner, the tax paid on such services would form part of the cost of final products and the same would fall within the ambit of ‘input services’ - Cenvat credit of service tax paid on Garden Maintenance Service allowed. Brokerage charges - Held that: - Brokerage charges paid by the company for getting residential accommodation for Japanese employees in Bangalore is also related to the business of the company and fall in the definition of ‘input service’ - credit allowed. Golf Club Membership Fee - Cargo Handling Charges for Japanese expatriation/repatriation - Pandal/Shamiana Charges - Held that: - the appellant is not entitled to Cenvat credit of service tax paid on these three services as these services are not integrally connected with the business of the assessee and therefore the appellants are not entitled to Cenvat credit on these three services. Equal penalty on the appellant is set aside and a penalty of ₹ 1000/- u/r 15 of CCR 2004 imposed. Appeal disposed off - decided partly in favor of appellant.
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Central Excise
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2017 (2) TMI 840
Condonation of delay - Rectification of Mistake - the decision in the case of KSB Pumps Ltd. Versus Commissioner of Central Excise Pune I [2016 (12) TMI 1326 - CESTAT MUMBAI] contested - Held that: - notice on applications seeking condonation of delay as well as in the appeals issued - in the meantime time there will be stay on the order of above case.
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2017 (2) TMI 839
Jurisdiction - Joint Secretary of the Government of India - recovery of rebate for violation of certain conditions prescribed under relevant notification - Held that: - the Punjab and Haryana High Court in a judgment in the case of Kent Malleables Pvt. Ltd. v. Union of India [2016 (9) TMI 135 - PUNJAB AND HARYANA HIGH COURT] has proceeded to hold that the officer in the rank of Joint Secretary (Revisional Authority) to the Government of India is of the same rank as that of the Commissioner of Central Excise (Appeals) - in the present case, it would be appropriate if the present case is ordered to be decided by the officer on the post of Joint Secretary (Revisional Authority) who would be senior in rank to the Commissioner (Appeals) - petition disposed off.
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2017 (2) TMI 838
Levy of CVD - import of polyester knitted fabric - petitioner claim that on the goods imported by the petitioner Additional Customs Duty/Countervailing Duty (CVD) was not leviable as the goods were not liable to levy of excise duty but still the Commission upheld even that part of duty. Held that: - Once it is found that CVD was not leviable on the goods imported by the petitioner, levy thereof by the Commission would certainly be contrary to the provisions of the Act, hence, the order to that extent cannot be legally sustained. Matter on remand for reconsideration.
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2017 (2) TMI 837
CENVAT credit - failure to reverse the credit before switching over to the exemption N/N. 30/2004-C.E. dated 29.7.2004 from 1.7.2007 - appellant's claim that the amendment to Rule 11(3) which was brought into effect from 01.3.2007, by virtue of N/N. 10/2011-Central Excise(NT) dated 1.3.2007, being prospective and not retrospective in operation, the credit need not be reversed - Held that: - matter is remanded to the adjudicating authority to ascertain the fact whether the appellant had utilized the inputs procured before or after 01.3.2007 in the manufacture of goods and decide the issue afresh - appeal allowed by way of remand.
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2017 (2) TMI 836
CENVAT credit - GTA service - inward freight - whether the appellants are eligible to CENVAT credit on the service tax paid on Goods Transport Agency services (inward freight)? - Held that: - to avail CENVAT credit, registration of Head Office as an input service distributor cannot be insistent upon - there is no doubt about the fact that the appellant has discharged the service tax against GAR-7 challans , prescribed documents under Rule 9 of CENVAT Credit Rules, 2004 in availing the CENVAT credit - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 835
Valuation - rejection of transaction value - related party transaction - Held that: - The various public sector units including OMCs are mandated by the Central Vigilance Commissioner to adopt the open tender procedure for procurement of goods. Such procedure is mandated with the objective of transparency in procurement and the possibility of lowest price discovery by open competition. Since the price of procurement of PIB for supply to BPCL has been decided by such an open tender procedure, it cannot be said that the transaction value has been influenced by the relationship between KRL and BPCL - From the chart submitted by KRL, it is seen that KRL has supplied the same product PIB not only to BPCL but also to other OMCs such as IOCL, HPCL, IBP, etc. During the disputed period, the product has been supplied at the same price to various other OMCs as for BPCL. Appeal allowed - decided in favor of assessee.
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2017 (2) TMI 834
SSI Exemption - use of brand name of others - denial on the ground that the appellant has undertaken manufacture of computers with the brand name of NOVO which belonged to another person - whether the activities of the appellant can be construed as manufacture and thus duty can be demanded? - Held that: - whether assembling various components of computer include computer system amounts to manufacture has been examined by the Tribunal in a recent decision in the case of Lampo Computers Pvt. Ltd., [2017 (2) TMI 665 - CESTAT BANGALORE] in which it has been held that such activity will not amount to manufacture. The activities of assembling of various components of computers into a working computer system will not amount to manufacture and hence are not liable to payment of excise duty - Consequently there is no need to discuss the issue of brand name and SSI benefit - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 833
Cenvat credit - Capital goods and input at service station - No centralised registration - Penalty - Rule 15(2) of CER, 2004 - Time limitation - Held that: - In the present case the appellant could not bring out any particular rule of Cenvat Credit Rule,2004 in which the defined expressions input and capital goods be read differently in the context of the said Rule - The principal criteria for eligibility to CENVAT Credit on inputs rests on its use in or in relation to manufacture of final products in the factory and for capital goods its use in the factory of production. The learned Advocate has also submitted that they have applied for centralized registration way back in 2005, which was to them allowed to them pursuant to issuance of Notification No.43/2008CE(NT) dt. 06.10.2008 It is his contention that the said notification is retrospective in nature and accordingly, the Appellants are eligible to avail CENVAT Credit of inputs/capital goods at their daughter stations. On going through the said notification and the Circular no. 875/13/2008-CX dt. 16.10.2008 issued in this regard we find that though centralized registration was allowed, but it is specifically mentioned that provisions governing eligibility to claim the CENVAT Credit would be applicable as earlier. The issue of eligibility of CENVAT Credit on input service where the Input service distributor is not registered has been settled by the Gujrat High Court in the case of CCE Vs. Dashion Ltd. [2016 (2) TMI 183 - GUJARAT HIGH COURT] - it is clear that to avail input service credit, the registration of head office/registered office is not mandatory, however, it is necessary to ascertain the documents on which these units had availed credit as there have been claims and counter claims - In the Departments contention, all relevant documents on which input service CENVAT credit availed, had not been placed before the adjudicating authority, whereas, the claim of the appellant is that the relevant input service invoices were submitted before the authorities in September 2007. Hence, in our opinion, to verify the claim, it is necessary to remit the case for verification of the documents. It cannot be denied that the issue of eligibility of CENVAT credit on capital goods inputs and input services availed at various daughter stations, from where the CNG was ultimately cleared/sold during the course of pendency of application for centralised registration, rests on interpretation of the relevant provisions of law and all facts had been disclosed to the department - Hence, imposition of equivalent penalty on the appellant under rule 15(2) of Cenvat Credit Rules,2004 read with section 11AC of Central Excise Act,1944 is unsustainable in law - Appeal disposed of.
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2017 (2) TMI 832
Benefit of N/N. 6/2006-CE dated 1-3-2006 - purchase of car Skoda Laura fitted with Automatic Transmission - Held that: - it is admitted fact that there is no dispute that appellant is physically handicapped person as he is 55% paralysis pmt - certificate also was issued by the government of India, Department of Heavy Industries - buyer also given affidavit that he shall not dispose of the car for five years from the date of purchase of the same - appellant has made compliance to the conditions of the N/N. 6/2006-CE dated 1-3-2006 and all the documentary evidences clearly established that appellant is eligible for the exemption notification - appellant being handicapped person pursuing his refund for more than five years, therefore the adjudicating authority is directed to sanction the refund to the appellant alongwith interest - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 831
CENVAT credit - consumption variation - demand on the basis of debit notes raised by Britannia Industries Ltd. to the appellant on account of variation in the consumption - Held that: - No verification was carried out by the department - Either the input must be lying in the factory or same has been used in the production but only as per input output ratio the principal has assumed that there is a consumption variation and accordingly, the debit notes were raised - in the absence of evidence that the input was not received in the factory or the same after receipt cleared from the factory the cenvat credit cannot be denied - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 830
Reversal of CENVAT credit - demand on the ground that the appellant have not followed the procedure as laid down in Rule 6(2) of Cenvat Credit Rules inasmuch they have not maintained the separate account - Held that: - the product being a medicament, it is a statutory requirement to maintain the batch records which the appellant is maintaining. They are also maintaining Bin cards for the consumption of the inputs. On the basis of that record, the appellants have been reversing the credit proportionate to the inputs used in the exempted goods - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 829
Investigation - Shortage of stock - Held that: - I find that even though at the time of stock taking officers found shortage but immediately thereafter on 7-8-1995(6-8-1996 being Sunday) the appellant submitted a letter to the department explaining that there is no shortage in the quantity of 2617 Nos. it is lying in the factory at different location. In such case it was obligatory on the departmental officer to re-visit factory and verify the correctness of the claim of the appellant. Non consideration of request of the appellant is clear violation of principle of natural justice, this shows that the officers made up their mind to make out case without resorting the issue - Appeal allowed.
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2017 (2) TMI 828
Cenvat credit - Ferro Silicon Calcium Cored Wire - The adjudicating authority denied the credit on the ground that firstly this is not input for the appellant as this was manufactured as final product and cleared on payment of duty. Secondly, the declaration under 57G was not filed in respect of such goods declaring as input - Held that: - We find that as pointed out by the appellant in appeal memo as well as in their submission that appellant have filed declaration wherein input was declared as Ferro Silicon Calcium and final product as “Ferro Silicon Calcium Cored Wire” falling under the same chapter heading i.e. CH 7202. In our view though not very specific but this declaration is sufficient for compliance of provision of Rule 57G. Appeal allowed - decided in favor of the assessee.
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2017 (2) TMI 827
Cenvat credit - Capital goods - In the first adjudication order, the Modvat credit was denied on the ground that the appellants had availed double benefits, i.e. they have availed Modvat credit as well as claimed the depreciation of the same amount under the Income Tax Act, 1960 - Held that: - As per the submission of the learned Counsel and perusal of the Income Tax return and calculation chart of the depreciation, it appears that the appellants have not claimed the depreciation in respect of the amount of Modvat credit which they have availed - However, on going through the records, prima face appears that the appellants have not claimed the depreciation in the respective financial years, therefore, the entire allegation in the show-cause notice stands collapsed - Appeal allowed by way of remand.
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2017 (2) TMI 826
Cenvat credit - capital goods - Interest - It is undisputed that respondent had availed CENVAT credit on capital goods during the period July 2002 to November 2002 - Held that: - During the period i.e. July to November 2002, the provisions of CENVAT Credit Rules, 2002 envisaged availment of CENVAT credit only on original or duplicate copies of duty paying documents and there were no exceptions. That being the requirement of law, in my considered view, whatever may be circumstances, CENVAT credit availed by respondent is not in spirit and consonance of law, hence needs to be disallowed - Appeal allowed.
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2017 (2) TMI 825
Cenvat credit - Capital goods - Penalty - Held that: - I find strong force in the contentions raised by learned Counsel that the show-cause notice dated 13th February 2006 is demanding an interest and penalty for an amount which cannot be confirmed beyond five years - In the case in hand the demand of ineligible CENVAT credit by a show-cause notice dated 13th February 2006 is for a period beyond five years except for two entries. As regards two credit availed within period of five years from show-cause notice, I find that there is no allegation in show-cause notice as the CENVAT credit was availed with intent to evade duty. There could be a genuine error as understanding of the issue, which is fortified from the fact that the amounts were reversed despite not required to do so - Appeal allowed.
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2017 (2) TMI 824
Refund claim - interest on refund - unjust enrichment - Held that: - while dismissing the appeal of M/s Allied Photographic Ltd, it was held that the order, being of itself flawed, cannot confer a right of interest on the applicant for refund. The reasoning adopted is certainly within the scope of decision on appeal. However, it does not suffer from any infirmity even though the decision may be challenged. Interest - section 11BB of Central Excise Act, 1944 - Whether the notice, limited to the issue of unjust enrichment, could settle the issue of limitation is not relevant; the highest court in the land has held the claim to be ineligible and that ineligibility cannot be transformed into eligibility by the Assistant Commissioner. The conclusion is that such an order does not reinstate the claims of the appellant to be an eligible claim for refund. A tax collected without authority of law retains its sanctity until illegality of collection is decided upon by lawfully constituted authority and brought to fruition by sanction of the amount - Appellant has no vicarious standing to act on behalf of the Fund and for claiming that, as the Fund is not entitled to interest, the Central Government has to be deprived of such amount. The appellant is not entitled to refund and, with that, its claim on time value of that money does not exist. Appeal dismissed - decided against appellant.
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2017 (2) TMI 823
Valuation - clearance to sister unit - the clearance of the said goods was made considering the value of the semi-finished goods - The department’s contention is that the goods cleared to their sister concern is fully finished goods. Therefore the valuation should be done u/r 6(c)(iii) of Central Excise Valuation Rules, 1975 and after 01.07.2000 under Rule 9 of Central Excise Valuation Rules, 2000. Held that: - the record maintained by the appellant i.e. route card clearly shows that the process such as drilling, reeling, broaching etc. were not carried out by the Pune unit therefore the said process were carried out by their Garauli unit - it is established that the goods cleared by the appellant to their Garauli unit was not fully finished. Therefore, the valuation could not have been done under Rule 6(c)(iii) of Central Excise Valuation Rules, 1975 and/or Rule 9 of Central Excise Valuation Rules 2000. Demand set aside - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 822
Benefit of N/N. 3/2004-CE dated 8.1.2004 - denial on the ground that the project for which pipes were supplied has not fulfilled all the conditions inasmuch as exemption certificate and the actual utilization of the PVC pipes and fittings cleared were not used for intended purpose, and the certificates issued by Collector was cancelled later - Held that: - the issue involved in the present has been dealt by this Tribunal in case of M/s. Finolex Industries Ltd Vs. Commissioner of Central Excise, Pune [2017 (1) TMI 599 - CESTAT MUMBAI], where on similar issue the exemption was allowed to assessee on fulfillment of both the conditions - benefit allowed - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 821
Denial of SSI exemption - Due to failure in filing the declaration the exemption was denied - Held that: - we are of the considered view that merely for non-filing, of option letter to the department, the SSI exemption Notification No. 9/2003-CE cannot be denied - Appeal allowed - decided in favor of the assessee.
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CST, VAT & Sales Tax
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2017 (2) TMI 814
Works contract - Chemicals/Solvents used in cleaning activity - exigibility to tax - whether the consumable chemicals/solvents used in the process of cleaning amounts to transfer of property in the goods between the contractor and the Contractee and is thus exigible to tax? - the chemicals and solvent that are used for the purpose of cleaning, washing etc. and are integral part of the works contract. They are goods, which are integral for the very execution of the service contract and are consumables, that are completely consumed in the contract, and no property in them passes to the Contractee. Held that: - The soaps, detergent, chemicals and solvent used purely for the purposes of cleaning and which are completely consumed, in the process of the execution of the above referred tasks, cannot by any stretch of imagination be said to goods in which property could pass to the Contractee. Similarly, water is also used in the above-referred process of cleaning and execution of the contract. Can it be said, that even property in water, that is used and consumed in the said process of cleaning and execution of the contract, is also transferred to the Contractee and the value of the water consumed should be exigible to tax - The mere fact that soaps, detergent, chemicals and solvents are deposited in the store of the Contractee would not make any difference to the exigibility, as is sought to be contended by the Revenue/respondents, because, admittedly, by mere deposit in the store, the property in them is not stated to pass. The property in the consumable chemicals used in the process of cleaning does not transfer to the Contractee/Railways and accordingly the said goods are not exigible to tax. Whether the Commissioner was liable to grant a certificate for NIL deduction of Tax Deducted at Source, is dependent on the answer to the above question? - Held that: - Since the said goods are not exigible to tax, the Contractee/Railways is not liable to deduct Tax at Source and the Commissioner VAT is liable to grant a certificate for NIL deduction of Tax Deducted at Source. Petition allowed - decided in favor of assessee.
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2017 (2) TMI 813
Levy of penalty u/s 44(i) of the OVAT Act - Whether the findings arrived at by the Deputy Commissioner, Sales Tax in determining the daily sale of the dealer @ ₹ 10,000/- for the period from 11.01.2007 to 31.03.2007 and ₹ 15,000/- from 01.04.2007 to 29.02.2008 per day and determining the liability U/s.44 of the OVAT Act and imposition of penalty U/s.44(i) of the OVAT Act which resulted in reduction of the amount is justified in the eye of law? Held that: - whatever ground has been taken by way of substantial question of law, actually it is not substantial question of law, rather it pertains to factual aspect and the second appellate authority accepting the reasons of the first appellate authority, which is based upon cogent evidence, has found no reason to deviate from it. We, in exercise of power conferred u/s 80 of the OVAT Act, may interfere with the finding of the statutory appellate authority if there is any error apparent on the face of record or miscarriage of justice, but cannot assume the power of appellate court for reversing the fact finding by re-appreciating the evidence or the materials produced before the appellate forum. Review application dismissed.
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Indian Laws
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2017 (2) TMI 812
Dishonour of cheques - cause of action to file complaint on non-payment despite issue of notice - Held that:- Section 141 NI Act provides that if the person committing an offence under Section 138 NI Act is a company, every person who, at the time when the offence was committed, was in-charge of and responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence. Thus besides the company, the person in-charge and responsible to the company for the conduct of the business of the company are also vicariously held liable. However, it has not been provided in the Act that a person though in-charge of the affairs of the company, if signs the cheque in his individual capacity, the company will be vicariously liable. Thus if the cheque is issued by an individual not acting on behalf of the company, the vicarious liability on the company cannot be fastened in the absence of any specific provision permitting the same. If dishonor of a cheque has once snowballed into a cause of action it is not permissible for a payee to create another cause of action with the same cheque. The cheque in question was re-presented and on each occasion of dishonor, notice was issued by the complainant. Thus the cause of action to file the complaint under Section 138 read with Section 142 NI Act arose but once when no payment was made despite fifteen days of the receipt of notice elapsing. In view of the discussion aforesaid, the proceedings in Complaint Case No.3967/1 titled as ‘Shri Gopal Dass vs. Unicon Real Estates Pvt. Ltd. & Anr.’ pending in the Court learned Metropolitan Magistrate, Patiala House Courts, New Delhi under Sections 138 and 142 of the Negotiable Instruments Act, 1881 and the summoning order dated 24th June, 2011 qua the petitioner Unicon are set aside.
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2017 (2) TMI 811
Granting permission to the respondent to travel Germany - Held that:- What is emerging on record is that the respondent sought permission to go abroad. Mr. Frank Thierfelder, German Counsellor and Consul filed a certificate on 19.12.2016 affirming the plea of the respondent that he is a citizen of Germany and his presence can be secured. The respondent was granted permission to go abroad vide order dated 20.12.2016 subject to deposit of ₹ 15,00,000/- by way of demand draft/bankers cheque/FDR. In compliance of order dated 20.12.2016, the respondent furnished demand draft for a sum of ₹ 15,00,000/- which was accepted by the learned CMM, New Delhi on 21.12.2016. To our mind, Mr. Frank Thierfelder, German Counsellor and Consul is the appropriate guarantor in the present facts of the case, who can assure the presence of respondent. Therefore, find no infirmity in the impugned orders passed by the Court below.
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2017 (2) TMI 810
Grant of leave to defend - suit for recovery - Held that:- The submitted documents when read together, make it abundantly clear that there was never any understanding between the parties that the respondent/plaintiff had paid a sum of ₹ 1,06,50,000/- to the appellant/defendant so that he could utilize the said funds to construct eight flats in the suit premises and after the completion of the construction, parties had agreed that the said flats would be sold in the open market and the sale proceeds shared between them. On the contrary, all the aforesaid documents demonstrate an underlying common intent and purpose which was that the appellant/defendant had decided to sell the subject property outright to the respondent/plaintiff for a total sale consideration of ₹ 1,10,00,000/-. Nowhere has the appellant/defendant taken a stand in the leave to defend application that he had signed the said Agreement to Sell under any misconception or claimed that the same had been executed by him under any undue influence or coercion. Instead, even as per the averments made by him in the leave to defend application, the appellant/defendant has stated that the parties were known to each other as both of them belong to Bihar and have common relatives and friends. On a bare reading of the admitted documents, it is crystal clear that the appellant/defendant had issued four post-dated cheques totalling to a sum of ₹ 1,40,00,000/- in favour of the respondent/plaintiff towards repayment of the principal amount along with interest and all the said cheques were dishonoured on presentation. It is also an undisputed position that the respondent/plaintiff had served two legal notices dated 28.6.2014 and 7.5.2014 on the appellant/defendant calling upon him to pay the amounts, subject matter of the post dated cheques. Pertinently, the appellant/defendant did not give a reply to the said notices. When the respondent/plaintiff filed four criminal complaints against the appellant/defendant under Section 138 of the NI Act on account of dishonour of the aforesaid cheques, the latter had contested the said complaints. It is an admitted position that the appellant/defendant has been convicted by the learned MM in the said complaints. On a consideration of the facts of the case, this Court concurs with the finding returned by the learned trial court that no prima facie case has been made out by the appellant/defendant for grant of leave to defend and that leave to defend cannot be granted as a matter of course, unless there is a substantial defence and the pleas raised by the defendant gives rise to triable issues. Further, the affidavit of the appellant/defendant does not disclose a plausible defence which indicates that he may succeed in establishing the same.
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