TMI Tax Updates - e-Newsletter
February 22, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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Income Tax:
TDS u/s 192 - Amount paid to Ex-empoyees - Profits in lieu of salary - the assessee was under bona fide belief that payment made to the ex-employees was in nature of capital compensation and that same was not taxable in the hands of recipients, that the provisions of section 201(1) and 201 (1A) were not applicable- AT
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Income Tax:
TPA - lower authorities having rejected the TNMM method did not verify the appropriateness of the comparables selected by the assessee in its TP study. Functional profile of the comparables and that of the assessee were never verified - Matter remanded back - AT
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Customs:
Duty Drawback - No doubt, the Department is at liberty to inquire in full details about the export or import in connection with the transaction which is the basis for the claim of duty drawback. However, it is expected that such inquiry or investigation as contemplated by the Department cannot be prolonged beyond a particular point of time. - HC
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Indian Laws:
Right to Information (RTI) form Bar Council - State Bar Council would be discussing confidential personal matters of advocates. - Putting all the minutes in public domain and on the website would imply making public the confidential personal information and also information received by Bar Council in fiduciary capacity. - HC
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Service Tax:
Validity of Garnishee order - the respondents could not have, willy-nilly, passed the garnishee orders without first passing an assessment order - garnishee order set aside - HC
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Service Tax:
Refund claim - export of services - Rule 5 of the CCR, 2004 - appellant failed to produce FIRC certificate issued from the Bank that remittance is convertible Foreign Exchange - refund could not be allowed - AT
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Central Excise:
Claiming benefit of exemption - While the said snap off cutter can also be use for sharpening the pencil, it has multiple uses - The N/N. 4/97-C.E. exempt the pencil sharpener, whereas this blade cannot be considered as a pencil sharpener - benefit rightly denied - AT
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Central Excise:
When the goods have been cleared by the assessee-Appellants to be supplied free of cost with other products manufactured by their sister concern, then the valuation of the item in question will have to be made under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - AT
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Central Excise:
Valuation - inclusion of ‘erection, commissioning and installation charges’ in the assessable value of ‘duct and duct support structures’ - The expenditure on such activities would form part of the assessable value of the machinery and equipment - AT
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Central Excise:
Reversal of credit / payment of duty - removal of inputs as such - Merely because deeming fictions is given in rule for the purpose of procedure it does not empower to Revenue to charge the duty over and above the duty equivalent to the Cenvat Credit availed - AT
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Central Excise:
CENVAT credit - if in the invoices end user’s name is appearing as consignee irrespective of fact that sale purchase transaction is not between the supplier of inputs and the end user, the credit is admissible at the recipient’s end - credit allowed - AT
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VAT:
The Railway Container Contractor is required in law to get itself registered and maintain records, as is clearly specified u/r 38 (7) of the Rules, and in case such records are not made available under the statutory scheme, the contractor acquires status of a dealer, so as to attract relevant provisions of the UPVAT - HC
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (2) TMI 921
Validity of special audit - non providing reasonable opportunity of being heard to assessee - Held that:- We find that the issue raised in the present appeal is squarely covered by the ratio laid down by the Tribunal in the case of ITO Vs. Vilsons Particle Board Industries Ltd. [2017 (1) TMI 263 - ITAT PUNE] and in the absence of any opportunity given to the assessee to show cause as to why special audit under section 142(2A) of the Act should not be carried out in the case of assessee i.e. at the pre-decisional stage, the special audit conducted in the case is without jurisdiction and consequently, the assessment order passed is beyond the stipulated date, because of time taken for special audit, is invalid and since it is passed beyond period of limitation and hence, is invalid and bad in law. Accordingly, we hold so. - Decided in favour of assessee
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2017 (2) TMI 920
Discount received on term loan - whether the said sum is a capital receipt and not taxable in hands of the assessee? - Held that:- We find no merit in the said stand of Assessing Officer where the assessee is a limited company and it has to report all its receipts as part of the Profit & Loss Account. The receipt is whether taxable or not in the hands of assessee is to be decided thereafter. The auditor had also reduced the said amount from the Written Down Value of the assets and computed depreciation accordingly. The assessee on the other hand, had disallowed the said amount from the profits of year while computing income in its hands. It is not disputed that the assessee had received the discount on loan amount, which was utilized for the purpose of investment in assets. Only because it was credited as other income in the Profit & Loss Account, would not justify its taxability in the hands of assessee. The nature of receipt has to be seen and where it is relatable to acquisition of capital asset i.e. the loan raised by the assessee was admittedly, used for purchase of capital asset, then the discount, if any, received by the assessee is capital receipt in the hands of assessee and hence, the same is not assessable to tax. Thus we hold that discount received by the assessee is capital receipt and hence, is not to be included in the total income of the assessee. - Decided in favour of assessee Deduction claimed on account of employee’s contribution to PF and ESI - Held that:- The said issue is squarely covered by the ratio laid down in CIT Vs. Ghatge Patil Transports Ltd.(2014 (10) TMI 402 - BOMBAY HIGH COURT) and in CIT Vs. Hindstan Organics Chemicals Ltd. (2014 (7) TMI 477 - BOMBAY HIGH COURT). Following the same parity of reasoning, we direct the Assessing Officer to allow the claim of assessee.
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2017 (2) TMI 919
Income from property of the assessee authority - assessee being a State - immunity from tax under Article 289(1) of the Constitution - whether could be said to be income from property of the State and if so whether the same is derived from trade or business carried out by it? - Held that:- The facts in the present case are identical to that in Vidharba Housing Society (1972 (2) TMI 23 - BOMBAY High Court ) and the decision rendered therein squarely applies in the present case moreso when no other decision on identical facts favouring the assessee was brought to our notice. We, therefore, have no hesitation in holding that the assessee authority could not be termed to be an extension of the State. Even the arguments of the Ld. counsel for the assessee that it is the substance which is relevant for determining the case of the assessee and not form, is defeated by the relevant clauses reproduced above, which clearly point out that even in substance the assessee was not an extension of the State. Having said so, the question of granting immunity under Article 289 of the Constitution does not arise at all. Even the Hon'ble Apex Court in Adityapur Industrial Area Development Authority Vs. UOI, (2006 (5) TMI 61 - SUPREME Court ) read the relevant clauses of the authority in that case, which we find are identical to that in the assessee's case and held it to be a distinct entity separate from the State. The Apex Court further held that the exemption otherwise specifically provided to the assessee authority under section 10(20A)/10(20) having been expressly taken away there was no merit in the contention of the assessee. Thus the assessee is distinct and separate from the State and thus not entitled to claim exemption from taxation under Article 289 of the Constitution. - Decided against assessee.
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2017 (2) TMI 918
G.P. addition - Addition on account of alleged peak of unaccounted investment made in purchases - Held that:- In the absence of any documentary evidence, the impugned additions cannot be made solely based on the action of the third person that is the DRI on the allegation that the assessee has under-valued its import of PFY and has made payments by under invoicing. The impugned additions do not hold any water. We, accordingly, set aside the findings of the ld. CIT(A) and direct the A.O. to delete the addition on account of G.P. addition and on account of alleged peak of unaccounted investment made in purchases. - Decided in favour of assessee. Addition of bogus purchases - Held that:- There is no dispute that the purchases made from M/s. Raj Impex were duly supported by bills and all the payments have been made by account payee cheques. There is also no dispute that M/s. Raj Impex have confirmed all the transactions. There is no evidence to draw the conclusion that the entire purchase consideration which the assessee had paid to M/s. Raj Impex had come back to the assessee in cash.It is also true that no adverse inference has been drawn so far as the sales made by the assessee is concerned. We also find that the entire purchases made by the assessee from M/s. Raj Impex have been accounted by Raj Impex and have paid the taxes accordingly - Decided in favour of assessee. Addition on account of estimation of oil gain - Held that:- It is true that the A.O. has made the additions taking a leaf out of the findings given in A.Y. 2004-05. Except for this, there is nothing on record which could suggest that the assessee has made oil gain during the year under consideration. In the absence of any corroborative evidence, we decline to interfere with the findings of the ld. CIT(A).- Decided in favour of assessee.
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2017 (2) TMI 917
Denial of TDS credit - accrual of income - assessee has not offered income to tax - Held that:- If a particular amount on which tax was deducted at source is not chargeable to tax, the assessee is entitled for credit for TDS. Similarly in the case on hand before us, the assessee received mobilization advance and in turn this was passed on to Essar Engineering Services Ltd for execution of sub contract, however, the whole contract got cancelled by virtue of which Essar Engineering Services Ltd refunded the assessee the entire sub contract amount of ₹ 54,04,47,510/- and the assessee in turn has to refund the entire contract amount which was agreed between the assessee and Essar projects (India) Ltd and in this circumstance, no part of income has been accrued to the assessee. In this situation, when no part of the contract has been accrued and nothing is taxable in the hands of the assessee, there is no justification in denying the credit for TDS on the ground that the assessee has not offered income to tax. The fact of cancellation of contract has not been denied by the assessing officer and it is not the contention of the assessing officer that the assessee or the sub contractor has executed a part of the contract and therefore, income was accrued to the assessee or to the sub contractor. Therefore, in the absence of any such finding by the assessing officer that the assessee or the sub contractor has executed a part of the contract, the question of accruing income to the assessee from this contract does not arise, hence in our considered view, the assessing officer should not have denied credit for TDS refund to the assessee. - Decided in favour of assessee
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2017 (2) TMI 916
TDS on the payment to ZES treating it in the nature of royalty - liability for the payment to ZES for the use of copy right or for copyrighted article - Permanent Establishment (PE) in India - taxability in India - payments made to ZES are its business income or Royalty - Held that:- Assessee throughout his submission urged that, ZES provided the assessee a license to use its software on perpetual, non- exclusive, known as assignable, terminable and known sub licensable basis. ZES software is a ‘Shrink wrapped’ or ‘off the shelf’ copyrighted packaged software readily available and which has not been customized to meet specific requirement of the assessee. The assessee will have no right to use, copy, and display or print the software or documentation in whole or in part. Similarly the assessee is prohibited from using the software on a service bureau basis or otherwise providing data catching and /or management functionality to third party except or otherwise permitted in the agreement. The AO has not brought any quantity material on record to prove it otherwise. As decided in M/s Capgemini Business Services India Ltd. vs. ACIT [2016 (3) TMI 280 - ITAT MUMBAI] the assessee can not be said to have paid the consideration for use of or the right to use copyright but has simply purchased the copyrighted work embedded in the CD- ROM which can be said to be sale of ‘good’ by the owner. The consideration paid by the assessee thus as per the clauses of DTAA can not be said to be royalty and the same will be outside the scope of the definition of ‘royalty’ as provided in DTAA and would be taxable as business income of the recipient. The assessee is entitled to the fair use of the work/product including making copies for temporary purpose for protection against damage or loss even without a license provided by the owner in this respect and the same would not constitute infringement of any copyright of the owner of the work even as per the provisions of section 52 of the Copyright Act,1957. - Decided in favour of assessee
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2017 (2) TMI 915
Reopening of assessment - treating the loan amount waived by the Bank as income u/s 41(1) read with section 28(iv) of the Income Tax Act - Held that:- Assessment was reopened only based on the information which was already available on the records and no new tangible materials have come on record suggesting escaped of income in respect of waiver of loan on OTS by Banks which was claimed as deduction by the assessee. It is very apparent from the reassessment order that the assessing officer came to the conclusion that income had escaped assessment for the reason that assessee claimed deduction of ₹ 30.07 crores as waiver of loan on account of one time settlement with bank and NCD holders and this amount was credited to P&L account as income, but was claimed as deduction in the computation of income and therefore income had escaped assessment. It is not the case of the revenue that the assessee has not submitted any details in respect of the loan waived by the banks, but, it was the contention of the assessing officer that there is no change of opinion which in our considered view is not correct. The assessee has furnished all the information and a detailed submission along with case law in its support for its claim for deduction of waiver of loan by Banks on OTS. We also find that there is nothing on record to suggest that the revenue has got tangible material in its possession after completion of assessment suggesting escapement of income. Thus reopening of assessment u/s 147 is only on mere change of opinion by the assessing officer on some set of facts which were already available on record before him while completing the original assessment u/s 143(3) of the Act. Thus, following the decision of Hon’ble Supreme Court in the case of Kelvinator India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA ] we hold that reassessment made u/s 143 r.w.s. 147 is bad in law. Hence we quash the reassessment order passed by the assessing officer. - Decided in favour of assessee.
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2017 (2) TMI 914
Disallowance of depreciation claim made in course of assessment proceedings - Plant & machinery merge with motor vehicle so as to form a single block of assets - seeking to include the alleged short term capital gains arising from sale of motor vehicles with the other block of assets of plant and machinery thereby assessing its short term capital gains u/s.50 Held that:- Section 2(11) of the Act means a group of assets falling within the respective categories/clauses (a) & ( b) and the former one pertaining to tangible assets including building , machinery, plant etc. The relevant appendix of rate of depreciation prescribing the same rate of depreciation of 15% for plant and machinery and motor vehicles forms a single category of block of assets. We accordingly observe that the assessee was very well justified in seeking to merge its plant & machinery with motor vehicle so as to form a single block of assets as per provisions of the Act. We thus direct the Assessing Officer to frame necessary consequential computation as per the assessee’s revised depreciation schedule filed in the course of assessment proceedings as per law. See M/s. Filmcraft Productions India Ltd. vs. Addl.CIT [2015 (7) TMI 1193 - ITAT MUMBAI] and Ansal Property & Infrastructure Ltd.[2012 (4) TMI 469 - DELHI HIGH COURT ] - Decided in favour of assessee
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2017 (2) TMI 913
TDS u/s 192 - short deduction of tax on account of credit tips recovered from the hotel guest to the employees - Held that:- As decided in case of ITC Ltd. vs CIT (TDS), Delhi [2016 (4) TMI 1055 - SUPREME COURT] since TIPS were received from the customers and not from the employer these would be chargeable in the hands of the employee as income from other sources and section 192 would not get attracted on the facts of the case. Assessee cannot be said to be in default of the provisions of Section 192 of the income Tax Act, 1961 as there was no liability of the assessee to deduct TDS under the said provision on the tips recovered from the hotel guests. Thus, it cannot be held to be an assessee in default. Since interest u/s 201(1A) can only be levied only a person who is declared as in assessee is default the question of interest does not arise. Accordingly in the face of the clear statement of law as settled by the Apex Court, the impugned order cannot be upheld. Accordingly, the orders of the AO u/s 201(1)/201(1A) in the respective years are quashed. - Decided in favour of assessee
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2017 (2) TMI 912
Slump sale - Addition of excess liabilities over assets of the division to sale consideration for the purpose of computation of long term capital gain on the sale of the division - computation of income - whether the Assessing Officer was right in adding the amount of liability reflected in the negative net worth to the sale consideration for determining the capital gain on account of slump sale? Held that:- The Revenue not only specifically challenged the finding of the Ld. Commissioner of Income Tax (Appeal) for ignoring the negative figure of net worth but also submissions were made on the issue. The Tribunal duly considered the decision the case of Ahmedabad Electricity Company Ltd. vs CIT (1992 (4) TMI 29 - BOMBAY High Court ) and CIT vs Mahalaxmi Textiles Mills Ltd. (1967 (5) TMI 4 - SUPREME Court) and then reached to a conclusion by holding that the Assessing Officer was right in adding the amount of liability reflected in the negative net worth of the assessee to sale consideration for determining the capital gain on account of slump sale. Respectfully following the order of the Special Bench and the factual matrix that neither any contrary decision nor the plea that the facts are different were brought to our notice by the assessee, therefore, the appeal of the assessee is dismissed.
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2017 (2) TMI 911
Addition made on account of speculation income on forward contract - CIT(A) deleted the addition - Held that:- As decided in assessee's own case for the Assessment Year 2011-2012 deleting the addition made on account of notional gain on forward contract the CIT(A) had taken note of the fact that in case of Woodward Governor India Pvt. Ltd., (2009 (4) TMI 4 - SUPREME COURT) dealt with the loss suffered by assessee in respect of revenue liability on account of exchange difference as on the date of balance sheet. Thereafter, considering the decision of Madras High Court in case of Indian Overseas Bank [1990 (2) TMI 43 - MADRAS High Court ], CIT(A) concluded that estimated, anticipated income arrived at on the basis of rate of exchange which prevailed on the last date of forward contract in foreign currencies only represents notional profit and could not be subject to tax. Respectfully following the proposition laid down by Madras High Court, we do not find any infirmity in the order of CIT(A) for deleting the addition made by AO on account of notional gain on forward contract. However, AO is at a liberty to verify that this gain has been offered for taxation in the subsequent years when it actually arose. - Decided against revenue
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2017 (2) TMI 910
Validity of reopening of assessment - claim of tax deduction at source credits by the assessee on the basis of certificate which do not relate to income of the present assessment year - Held that:- As regards the decision of the Tribunal in earlier year wherein it was held that income represented by the deduction at source certificates relating to other years cannot be added as income of the year in which the same was claimed, the same is also related to facts of the case of the particular year and cannot be said to be laying down any blanket ratio. As regards the issue of dropping of rectification proceedings we find that the matter of reconciliation of TDS certificates is a matter which requires analysis and examination of the facts and cannot be said to be subject matter of rectification of apparent mistake. Hence the assessing officer has rightly dropped the rectification proceeding and has initiated reopening of the case. Further more the plea that since addition have been deleted, direction to withdraw T.D.S credit does not survive is also not cogent, as the addition and T.D.S credits are intertwined matter. In the background of aforesaid discussion and precedent we are of the considered opinion that the reopening in this case was valid. Accordingly, we uphold the order of Ld. CIT (A)on the issue of validity of reopening proceedings. As regards the merits of the issue we find that Ld. CIT (A) has drawn adverse inference by observing that assessing officer has made the addition without proper verification and correlation of the tax deduction at source certificates with the income offered by the assessee in assessment year 2005 -06. We find that it is settled law that the powers of the Ld. CIT(A) are coterminous with that of the assessing officer. When the Ld. CIT (A) has found an error in the proceedings of the authorities below. It was his duty as well as jurisdiction to correct the error. This proposition is supported by the case law from honourable Supreme Court in the case of Kapoorchand shrimal [1981 (8) TMI 2 - SUPREME Court ]. Hence we are of the considered opinion that the Ld. CIT(A) was not correct in directing the deletion of the addition without verification and correlation of the tax deduction at source certificates with the income of the assessee which was offered for assessment year 2005 -06. In this regard we also find that there is justification in the pleading of the Ld. Counsel of the assessee that the credit should be granted for the tax deduction at source for the years in which the actually relate. But this requires follow up of proper procedure to claim tax refund. The plea of Ld. Counsel goes on to prove that assessee has claimed credit of T.D.S certificate in the current year without offering concerned income to tax in the current year. Hence the offer of income as well claim of T.D.S is not at all in accordance with law. Accordingly, in the interest of justice we remit the issue raised the file of the assessing officer. The assessing officer is directed to examine the TDS certificates with the income offered by the assessee and compute income accordingly. The assessing officer is also directed to grant credit to the assessee for the tax deduction at source for the years for which they actually relate if the same is claimed as per law. As regards the issue of charging of interest is concerned learned counsel of the assessee has submitted that the same was not adjudicated by the Ld. CIT (A) though the issue has been raised before him. Since we have already remitted the main issue to the file of the assessing officer, this issue should also be considered by him afresh.- Decided partly in favour of assessee for statistical purposes.
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2017 (2) TMI 909
Addition on account of purchases of machinery alleged to be not genuine by invoking provisions of Section 69C - AO has disallowed the purchase of machinery only on the basis of statement of Proprietor of Siddhivinayak Steel which was made before the Sales Tax Department - Held that:- CIT(A) has recorded a categoric finding to the effect that since assessee has not claimed any expenditure in respect of investments made in Rolling Mill and he has fully explained the source of payment which was made from the cash credit account of Karnataka Bank, there is no reason to disallow the same. The CIT(A) also observed that neither AO has recorded the statement of Siddhi Vinayak Steel u/s.131 nor has allowed the cross examination to the assessee. With regard to genuineness of Rolling mill so purchased, the CIT(A) has also recorded a finding to the effect that said Rolling mill was set up and fully operational on which excise duty were also paid on production. Therefore the purchase of the Rolling Mill cannot be doubted and the additions cannot be made merely on the basis of the statement of Shri. Pramod Kumar Singh, the proprietor of M/s. Siddhivinayak Steel which too was made before the sales Tax Department. After giving detailed finding from para 6.3.2 to 5.3.11, the CIT(A) has deleted the addition. The finding so recorded by CIT(A) are as per material on record. Learned DR has not controverted the finding so recorded by CIT(A). Accordingly, we do not find any reason to interfere in the order of CIT(A) for deleting the disallowance / addition made u/s.69C of the IT Act. Addition by treating the sale of scrap as unaccounted sales - Held that:- CIT(A) has recorded the categorical finding to the effect that generation of scrap was @4.88% equivalent to 234.84 M/Ts. The said quantity was developed as scrap and sold at ₹ 33,93,42/- which was reflected in sales. Therefore, the question of any addition did not arise. However, the AO has wrongly taken the sale price of scrap at the rate of finished goods which was ₹ 52,939/- M/T. The CIT(A) had also recorded a finding to the effect that similar type of scrap was developed in earlier years and the sale value have been accepted by the department. However, AO has not given any reason for taking the value of scrap and sale at the rate on which finished goods were sold. We also found that during the year scrap generated was as per norms prescribed by Director General of Foreign Trade, standard input / output norms as per survey No.C-692 has notified by DGFT in the handbook (Volume-2) 2002-07. According to this notification scrap sale is allowed at 5%, however, scrap of the assessee was 4.88% which is within the limit as mentioned in the above notification. The CIT(A) has also recorded a finding to the effect that sale of scrap has been recorded in RG-1 which has also been verified by the excise department. Detailed finding so recorded by CIT(A) at para 5.3 have not been controverted by learned DR by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the finding so recorded by CIT(A) which is as per material on record. Accordingly ground taken by Revenue is dismissed. Disallowance u/s 14A - Held that:- During the year under reference the totaI interest paid on borrowed funds of ₹ 1,30,10,812/- while disallowing the expenses u/s 14A the Assessing Officer under Rule 8D(2) has considered disallowances of ₹ 3,25,224/- under Sub rule (ii) and ₹ 24,200/- under sub rule (iii). We found that no expenses were incurred on the Investments made in shares. Therefore no expenses is disallowable particularly the interest payment on borrowed fund have no link with investments made. At para 7.3 CIT(A) has given detailed finding and restricted the disallowance of other expenditure to the extent of ₹ 24,200/-. The detailed finding so given at para 7.3 by the CIT(A) has not been controverted by learned DR by bringing any positive material on record, accordingly, we do not find any reason to interfere in the order of CIT(A) for restricting the disallowance u/s.14A to the extent of ₹ 24,200/-.
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2017 (2) TMI 908
Transaction of shares - treating the assessee as an investor of shares as against trader of shares - Held that:- the assessee had been consistently showing the amount invested in shares and mutual funds under the head ‘investments’ in its books of accounts and there are no borrowings in the balance sheet filed by the assessee for the earlier years. These facts are not controverted by the revenue before us. We find that the revenue had already accepted the assessee to be an investor in the earlier years even in the scrutiny assessments framed u/s 143(3) of the Act for the Asst Years 2004-05 and 2005-06. Though the principle of resjudicata is not applicable in income tax proceedings, the principle of consistency cannot be ignored in the absence of any changed circumstances. CIT-A had rightly classified the assessee as an investor and treated the gains received on sale of shares and mutual funds as short term capital gains as against business income and granted relief to the assessee. Accordingly, the grounds raised by the revenue are dismissed.
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2017 (2) TMI 907
Estimation of net profit - rejection of books accounts - Held that:- Books of accounts of the assessee are audited and no particular defects were pointed out by the Ld. assessing officer, which is patent and glaring. In fact, he has also sustained the addition of ₹ 1 lakh for the reason that assessee has not been able to produce the stock register for diamond and stones and other minor shortcomings as mentioned in his order. The Ld. departmental representative could not point out any infirmity in the order of the Ld. Ld. 1st appellate authority. Therefore, we confirm the finding of the Ld. CIT (A) in deleting the addition on account of rejection of the books of accounts by the Ld. and assessing officer and estimating the net profit. - Decided against revenue. Addition on account of the sundry creditors - Held that:- CIT(A) deleted the addition when the assessee has submitted the confirmation of the sundry creditors, which were duly submitted before the Ld. assessing officer during the assessment proceedings and further submitting the copies of invoices and bills for purchase from the creditors to prove the genuineness of the transactions. The assessee also produced confirmation for payments made to some of the creditors and legal notices issued by the some of the sundry creditors towards outstanding amounts and therefore there was no cessation of any liability and nothing has been written off in the books of accounts. The Ld. departmental representative could not point out any infirmity in the order of the first appellate authority in deleting the above addition. Therefore we confirm the order of the Ld. at first appellate authority in deleting the addition on account of the sundry creditors. Addition on account of unaccounted sales - Held that:- CIT appeal has deleted the addition because the difference in the account has arisen due to the one transaction of 5.820 grms of the gold of ₹ 3893850/- which is wrongly shown by the party as sales instead of being accounted for issue of finished job material. For this reason, the confirmation from the supplier was also submitted along with the copy of the challan and receipt vouchers as well as the labour bill for job done which had been duly forwarded to the AO during the remand proceedings AO has not made any adverse comment on the basis of any independent enquiry verification in this regard. The assessing officer has rejected the confirmation stating that it is an afterthought. The Ld. departmental representative could not point out any infirmity in the order of the Ld. CIT appeal who has deleted the above addition on the basis of the confirmation and no other adverse material brought on record by the Ld. Assessing officer. In view of this we do not find any infirmity in the order of the Ld. CIT appeal in deleting the addition. Addition on account of unaccounted purchases - Held that:- As the opening stock is supported by the books of accounts and stock register which are been produced and examine by the Ld. assessing officer which has not been controlled by the Ld. assessing officer either in the assessment order or in the remand reports. No infirmity could be pointed out by the Ld. departmental representative in the order of the Ld. first appellate authority in deleting the above addition.
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2017 (2) TMI 906
Bogus purchases - Held that:- CIT(A) was justified in holding that the assessing officer was not justified in disallowing the purchases made from the suspicious dealers treating them as bogus. After having held so, the Ld CIT(A) has proceeded to sustain the addition to the extent of 12.50% of the purchases on the ground that the profit element on the alleged unverifiable purchases should be added. Question of making any profit on purchases would arise only if there is a possibility for the assessee to purchase inferior quality material from the grey market and obtaine accommodation bills from the dealers. The work executed by the assessee has not been rejected by the Government authorities and he continues to get work from them on account of quality of work. We are of the view that there is merit in the contentions of the assessee that the Ld CIT(A) has sustained addition to the extent of 12.5% only on the basis of surmises. The addition of alleged bogus purchases made in all the three years cannot be sustained. Accordingly we direct the AO to delete the additions relating to purchases made in all the three years under consideration. - Decided in favour of assessee
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2017 (2) TMI 905
Revision u/s 263 - assessee made applications in his own name to different companies in IPOs - Held that:- The shares will be delivered to the demat account of the respective persons and the assessee has delivered the same to the demat accounts. In case of his HUF, the shares were delivered to HUF demat account which has been verified by the Ld. Assessing Officer from demat account statement filed and place on record. The assessee and his wife had demat account in joint names. AO has also verified the information regarding shares given to the assessee's wife and the assessee's HUF. He has also categorically asked and had seen whether these persons or recipients of shares had sold and disclosed Income in their respective returns and being satisfied, he has finalized the assessment. We are enclosing herewith a statement for your perusal which shows profit arising to these persons from the shares allotted to the assessee and transferred to them. The profit has been included in their respective income and they have paid taxes as short term capital gain in their return. This fact was verified by the Ld. Assessing Officer The rate of taxes are the same on short term capital gain and since taxes were correctly paid, there is no loss to the revenue. Under these circumstances, the assessment was correctly made after due and complete inquiry and by verifying the details and therefore, action U/s.263 of the I T Act on this account is unjustified and invalid. Nexux of interest paid against interest income - Held that:- The bank statements were placed on record, which shows the borrowings made by the assessee on overdraft account and the amounts advanced to the parties from whom interest income is received. Direct nexus of interest income to interest expenditure has been verified not only with the bank statement but also with the return of income. In the return of income, the amounts stated by you in your notice for income and claim for deduction of interest paid both have been shown under and details regarding this, has been furnished separately to the Ld. A.O. which has been verified by him. Copy of the statement is annexed herewith for your ready reference. The nexus of interest income to expenditure was also established, allowability of expenditure was also examined and after due verification of the details, the assessment was finalized. There is no reason now to question the action of the Ld. A.O. and come to a conclusion that assessment was erroneous and prejudicial to the interest of the revenue. Income Tax Consultation Fee is business expenditure and was considered as allowable from business income. This is not personal expenditure of the assessee and therefore, it cannot be said that action of the Ld. A.O. allowing this expenditure from business income was erroneous. Short term capital gain on shares - Held that:- The assessee has not carried on these transactions on regular basis but only in few cases and in some selected scripts. There is no inquiry or investigation required now to be done when the assessee had furnished all details regarding share applications, allotment of shares, sales bills and delivery of shares on sale from demat account. The transactions have been low and volume is also marginal. Therefore, once the Ld. Assessing Officer has already verified these details, his decision to tax as income from short term capital gain is just and equitable on facts. Ld. Commissioner of Income Tax’s decision to consider it as business income is erroneous and a change of opinion and such change of opinion by ld. Commissioner of Income Tax to direct the Ld. A.O. to consider it as business income is outside the purview of scope of the provisions of Section 263 of the I T Act. Thus assessment proceedings taking action U/s.263 in this case is purely an action of change of opinion - Decided in favour of assessee
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2017 (2) TMI 904
Assessability of advance received on relinquishment of development rights - denial of natural justice - grievance of assessee is that the addition has been made in the hands of assessee solely relying on the statement of Shri Aditya Dadhe, partner of Viraj Properties without giving the assessee an opportunity to examine him in his presence or cross-examine him in respect of statement of deponent witness being used as evidence against the assessee - Held that:- There is violation of principles of natural justice as the statement of Shri Aditya Dadhe which was made the basis for making addition was not given to the assessee by the Assessing Officer and his request to examine and cross-examine the said witness was rejected by the Assessing Officer in the remand proceedings and also by the CIT(A) when this fact was brought to his knowledge. The assessment order was passed in the present case relying on the said statement which was recorded during investigation by ADIT(Inv) and not by the Assessing Officer during assessment proceedings. The said statement was recorded at the back of assessee and copy of which was not given to assessee and assessment order was passed relying on the same. The assessee was held liable for tax on the basis of said statement. But in case the testimony of the said witness is discarded as before the Apex Court for violation of Rule of audi alteram partem, then there is no basis for making addition in the hands of assessee, since both the authorities below have made addition on the basis of statement given by Shri Aditya Dadhe. Accordingly, for violation of principles of natural justice and Rule of audi alteram partem, the addition made by the Assessing Officer and upheld by the CIT(A) is not sustainable and hence, the same is deleted. The preliminary issue raised vide ground of appeal No.3 in this regard is allowed and the issue on merits becomes academic. - Decided in favour of assessee.
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2017 (2) TMI 903
Depreciation on Goodwill - Held that:- Explanation 3 states that the expression “asset” shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading the words “any other business or commercial rights of similar nature” in clause (b) of Explanation 3 indicates that goodwill would fall under the expression “any other business or commercial right of a similar nature:. The principle of ejusdem generic would strictly apply while interpreting the said expression which finds place in Explanation 3(b). In the circumstances, we are of the view that “goodwill” is an asset under Explanation 3(b) to section 32(1) of the Act.
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2017 (2) TMI 902
TDS u/s 192 - Amount paid to Ex-empoyees - Profits in lieu of salary - Taxability of amount received under section 17(3) - retrenched of employees - assessee in default for non deduction of tds - Held that:- Two things are noticeable first the assessee had not made any payment to its ex-employees. Section 17(3)(iii)of the Act presupposes the existence of an employment i. e. , a relationship of employee and employer between the assessee and the person who makes the payment of “any amount” in terms of section 17(3)(iii)of the Act. So, the words in section 17(3)(iii) cannot be read disjunctively to overlook the essential facet of the provision, the existence of employment i. e. , a relationship of employer and employee between the person who makes the payment of the amount and the assessee. In the case before us, the essential fact is missing. There was no employer-employee relationship between the assessee and the ex-employees. Secondly the ex-employees had paid the due taxes on the disputed amount. The assessee had claimed that it was under the bonafide belief that the amount received by the ex-employees was capital receipt. The word “compensation” is not defined under the Act. Therefore, one has to take into consideration the ordinary connotation of this expression in common parlance. It has to be in the nature of something awarded to compensate for loss, suffering or injury. When translated in the context of employment, it would imply a monetary and non-monetary amount to be given to the employee in return for some services rendered by him. Inherent in this would be the obligation of the employer to pay some amount to the employee to “compensate” him. It would also mean that the employee gets a vested right to get such an amount. In the case under consideration there the ex employee did not get vested right to receive the amounts in question. A settlement was arrived at to avoid litigation-there was no obligation on part of the employer to pay some amount to the employees to compensate them. Considering the peculiar facts and circumstances of the case, and relying upon the case of Arun Bhai R Naik (2015 (10) TMI 2434 - GUJARAT HIGH COURT ), we are of the opinion that the order of the FAA does not suffer from any legal or factual infirmity and that the assessee could not be treated assessee in default [A-I-D]. So, upholding his order, we decide the effective ground of appeal against the AO. - Decided in favour of assessee.
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2017 (2) TMI 901
Transfer pricing adjustment - as per assessee TNMM rejected without proper reasoning and a method which was unknown to the law was used by the ld. TPO for the transfer pricing analysis - Held that:- In the case of Frigoglass India (P) Ltd (2016 (8) TMI 1081 - ITAT DELHI)as held CUP method could be adopted after discarding TNMM only when a comparable product or service is available. Ld. TPO and ld. DRP were not able to identify a single uncontrolled comparable for bench marking R & D fees and management fees paid by the assessee. This may be due to the difficulties in finding another entity that had rendered services which were identical to what were given to the assessee by M/s.Durr Systems Gmbh, Germany, that too in an uncontrolled set of circumstance. In such a situation in our opinion assessee could not be faulted in insisting that the TNMM method adopted by it for analyzing its international transactions with Associated Enterprises, for the impugned assessment years should be accepted. Nevertheless, we find that lower authorities having rejected the TNMM method did not verify the appropriateness of the comparables selected by the assessee in its TP study. Functional profile of the comparables and that of the assessee were never verified. Lower authorities did not verify whether the Arms Length Price analysis done by the assessee based on TNMM was correctly done and whether any modification in the comparables selected or the PLI computed were necessary. Thus, while setting aside the orders of the lower authorities for all the impugned assessment years, we remit the issue of fixing the Arms Length Price of the international transactions of the assessee under TNMM, back to the file of the ld. Assessing Officer /ld. TPO for consideration afresh in accordance with law. - Decided in favour of assessee for statistical purposes.
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Customs
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2017 (2) TMI 875
Duty Drawback - petitioner claim that once the goods have been cleared for export and the goods have been released and exported and after the export commitments are fulfilled, there is no reason for withholding the drawback amount - Held that: - This Court is of the opinion that the Department cannot indefinitely delay or suspend consideration of the duty drawback claims of the petitioner. No doubt, the Department is at liberty to inquire in full details about the export or import in connection with the transaction which is the basis for the claim of duty drawback. However, it is expected that such inquiry or investigation as contemplated by the Department cannot be prolonged beyond a particular point of time. Section 75A provides for payment of interest to the petitioners if the drawback claim is delayed beyond a period of one month, in that view of the matter, it would be prudent to direct the Department to conclude the investigation in contemplation or inquiry, if any, within a stipulated period of time. Petition allowed.
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2017 (2) TMI 874
Gold - seizure of gold by the Department in the year 1990 - in the meantime the proceedings took place, the petitioner and his associates were convicted and sentenced to three years rigorous imprisonment for having smuggled gold of foreign origin, gold was confiscated - By this writ petition, petitioner wants to know as to what happened to his gold. Held that: - The simple answer is that there is no gold left. The gold has vested in the Government which order has attained finality. On raising of objection by the petitioner that the gold was not of foreign origin, in my opinion, whether gold was of foreign marking or not, whether it was being legitimately brought in India or not, are all questions of facts which are sub-judice in Criminal Appeal as filed by the petitioner. It will be open to the petitioner to move the said criminal court for whatever relief he wants in respect thereof either to discredit or impeach the prosecution evidence. Petition dismissed - decided against petitioner.
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2017 (2) TMI 873
Contraband item - heroin - Learned counsel for the appellants urged that the Trial Court did not appreciate the evidence in its true and proper perspective. It ignored vital discrepancies and infirmities in the statements of the prosecution witnesses without cogent reasons. It overlooked that material independent public witnesses were not produced during evidence. The case property was tampered with - Held that: - True, it is not a rule of law that public witnesses should be joined in every eventuality and no conviction can be based upon the testimonies of police/official witnesses. Sometimes it becomes highly difficult for the police/official witnesses to associate independent public witnesses for various reasons. At the same time, it is undoubtedly true that joining of independent public witness is not an empty formality. The Investigating Officer is required to make genuine efforts to associate genuine independent public witnesses. The appellants have produced many documents containing information received through RTI. Number of documents produced in defence reveal that in similar circumstances, in most of the cases, independent public witnesses relied upon by DRI were dropped and could not be served or were found not traceable. It is really a matter of concern. It cannot be coincidence that in various cases detailed in Ex. DW-1/D, the public witnesses won’t be available/traceable. The law on this aspect is that “stringent the punishment stricter the proof.” In such like cases, the prosecution evidence has to be examined very zealously so as to exclude every chance of false implication - appeal allowed by way of remand.
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2017 (2) TMI 872
Waiver of pre-deposit, interest and penalty - under valuation - import of Polyester Spun Yarn - Held that: - the demand of duty has been confirmed against the applicant on account of e-mails/documents recovered from other importers of similar goods. No incriminating documents were recovered from the premises of the applicants and the DRI alert was also issued after importing the impugned goods - prima-facie the charge of under valuation is not sustainable against the applicants, therefore, the applicants made out a case for the complete waiver of pre-deposit - the pre-deposit of entire amount of duty along with interest and various penalties imposed on both the applicants waived - goods to be released - appeal allowed - decided in favor of applicants.
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Service Tax
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2017 (2) TMI 900
Validity of Garnishee order - no tax is due on petitioner's account to the respondents and tax, if any due, was payable, if at all, by the erstwhile proprietorship concern - Held that: - the respondents could not have, willy-nilly, passed the garnishee orders without first passing an assessment order - garnishee order set aside - petition allowed - decided in favor of petitoner.
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2017 (2) TMI 899
Club - club allows its space especially its “Mandap Keeper” on hire for functions to its members - principle of mutuality - whether the activity amounts to rendering of services or not? - Held that: - it seems to be no impediment to the application of principle of mutuality relied upon - the activity does not amount to rendering of services and is not taxable - appeal dismissed - decided against Revenue.
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2017 (2) TMI 898
Refund claim - export of services - Rule 5 of the CCR, 2004, along with N/N. 5/2006-CE(NT) dated 14.03.2006 - Held that: - It is evident from the record that the appellant failed to produce FIRC certificate issued from the Bank that remittance is convertible Foreign Exchange - appeal rejected - decided against appellant.
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2017 (2) TMI 897
Procedural compliance - the Commissioner and his officials are playing a blamegame. To cover up their lapses and deficiencies, they turned around and blamed their Advocates. They are of the opinion that their Advocates ought to inform them and at every stage of the matter, particularly as to which office objections have to be complied with or are to be removed - Held that: - If the officers are unaware of legal procedures, then, they have to be in touch with their Advocates and periodically. They cannot expect that the Advocate himself comes to their office and apprise them as to what further has to be done after the filing of an Appeal - This blame game must be immediately stopped.
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Central Excise
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2017 (2) TMI 896
Benefit of N/N. 4/97-C.E. dated 1-3-1997 - paper cutter - classified under Sr. No. 184 as ‘Pencil Sharpeners and blades thereof’ falling under Chapter Heading 82 of the Central Excise Tariff Act or otherwise - Held that: - the product is in the shape of blade, which is covered by plastic shell. The said blade can be taken out from plastic shell by use of button. The blade is divided into number of segment and each segment can be snapped off after use. While the said snap off cutter can also be use for sharpening the pencil, it has multiple uses - The N/N. 4/97-C.E. exempt the pencil sharpener, whereas this blade cannot be considered as a pencil sharpener - benefit rightly denied - appeal dismissed - decided against appellant.
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2017 (2) TMI 895
Valuation - goods supplied free of cost to sister concern - Held that: - after clearing the goods i.e. Soap to the sister concern, no further activity was done on the same and the said goods were not used in the production or manufacture of other articles, so the said goods cleared by the assessee-Appellants in fully manufactured and packed condition - When the goods have been cleared by the assessee-Appellants to be supplied free of cost with other products manufactured by their sister concern, then the valuation of the item in question will have to be made under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. Extended period of limitation - Held that: - the assessee-Appellants have suppressed the material facts from the Department by not disclosing in their monthly ER-1 Return that they are indulged in the institutional sale by clearing of the Toilet Soap manufactured in their factory for “free distribution” alongwith the other product u/s 4 of the Central Excise Act, 1944 - extended period rightly invoked. Appeal dismissed - decided against appellant-assessee.
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2017 (2) TMI 894
SSI exemption - clubbing of clearances - whether while computing the aggregate value of clearances for the financial year 2007-08 the value of clearances made in terms of N/N. 64/95-CE dated 16.3.1995 is required to be excluded in terms of clause 4(a) of the Notification ibid? - Held that: - It is not disputed that the clearances made to the ordnance factory have been made under the provision of 64/95 CE dated 16.03.1995. The aggregate value of such clearances are clearly not to be included in computing the total aggregate value of clearances of excisable goods under clause z(vi) - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 893
Manufacture - packing and labelling business - assessee-Appellants packed 10 Nos. of 35 ml Clinic Plus Shampoo bottles in a Pet Jar and shrink-sleeving the jar and affixing the label containing the product details on the lid of the jar - Held that: - the activity of the assessee-Appellants is of 'manufacture' and falls within the category of Section 2(f)(iii) of the Central Excise Act, 1944. During the period under consideration, no duty is leviable as the Department never raised any objection which is an implied consent for having the Service Tax from the assessee-Appellants. Appeal disposed off.
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2017 (2) TMI 892
CENVAT credit - transportation services used for transportation of clinker transferred by the party to their sister unit - Held that: - The goods viz. clinker is to be transported from party's premises to their sister unit premises and the respondent viz. Lafarge India Pvt. Ltd. is not taking any consideration for the same as Jojobera unit being their sister unit - It is clear that the definition 'place of removal' is inextricably linked with the fact of 'sale'. When present facts do not involve any sale, one cannot say that the factory premises of the appellant is the 'place of removal' - credit allowed - appeal dismissed - decided against Revenue.
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2017 (2) TMI 891
Benefit of N/N. 6/2002 - whether the assessee have rightly claimed the benefit of concessional rate of duty in clearance of the products under Serial No. 86 of N/N. 6/2002 for the first 3500 MT of clearance and thereafter, in the same financial year by availing benefit of Serial No. 86(A) of the same N/N. 6/2002, as amended by N/N. 48/2004? Held that: - the issue herein is squarely covered by the precedent decision of Division Bench of this Tribunal in the case of Karanja industries Vs Commissioner of Central Excise, [2009 (7) TMI 1114 - CESTAT BANGALORE] wherein considering the same notification and the same entries, this Tribunal held that, from the conditions and reading of the entries 86 and 86(A), it is very clear that benefit of Serial No.86 and 86(A) can be availed by the assessee if he fulfills the conditions as mentioned - If that be so, the appellant's claim for benefit of lesser rate of duty of 12% as mentioned under Serial No.86(A) of the N/N. 06/2002, cannot be denied by the revenue as condition No.14(A) does not put any restriction on the availment of such benefit if the assessee had availed the benefit under Serial No.86 - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 890
CENVAT credit - compounded levy scheme - From March, 2002 the appellant have started payment of duty and they were opted out from the compounded levy scheme - whether the credit on capital goods should be considered on the date of its receipt or any date subsequently? - Held that: - the appellant at the time of receipt of the capital goods was not legally entitle for Cenvat credit therefore at later stage also they are not eligible for Cenvat credit on the capital goods. As regard the issue raised by the appellant on limitation, appellant have availed cenvat credit in the month of March, 2002 and department was not aware that whether the said capital goods received in March, 2002 or prior to that, therefore credit details shown in the monthly return does not help the appellant that there is no suppression of facts particularly as regard to receipt and installation of the capital goods, therefore the extended period of demand correctly invoked. Appeal dismissed - decided against appellant.
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2017 (2) TMI 889
Valuation - whether marketing expenses should be includible in the assessable value of excisable goods arrived at on cost construction basis or otherwise? - Held that: - This Tribunal in assessee's own case have categorically held that marketing expenses is not includible in the assessable value arrived at under Rule 6(b)(ii) of Central Excise(Valuation) Rules, 1975 - appeal dismissed - decided against Revenue.
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2017 (2) TMI 888
Valuation - inclusion of freight charges in the assessable value - freight recoveries - Held that: - The appellant is liable to duty on the actual usage of returning trucks which needs ascertainment - On the issue of freight recoveries, appellant is directed to submit particulars of freight recovered and freight paid to assessing officer who will restrict the enhancement of assessable value to the difference, if any - appeal disposed off - matter on remand.
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2017 (2) TMI 887
Valuation - inclusion of ‘erection, commissioning and installation charges’ in the assessable value of ‘duct and duct support structures’ - Held that: - reliance was placed in the case of Indo Berolina Industries Pvt. Ltd. And IBI Chematur (Engg. & Consultancy) Ltd. Versus Commissioner of Central Excise, Mumbai-IV [2015 (10) TMI 1103 - CESTAT MUMBAI], where it was held that most of the activities are relating to pre-fabrication, engineering and design stage. It is on the basis of this designing that the appellant is fabricating various equipment, instruments, pipings, insulations etc. The expenditure on such activities would, therefore, form part of the assessable value of the machinery and equipment - this component should have been added to the assessable value - appeal allowed - decided in favor of Revenue.
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2017 (2) TMI 886
Reversal of credit / payment of duty - removal of inputs as such - Valuation - when the inputs or capital goods, on which the credit has been taken are cleared as such from the factory, whether the manufacturer of final products shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of such removal? - Held that: - the concept of deemed manufacture is only for the purpose of procedure to be followed for removal of input since the removal of input also attracts duty - But it is the fact that the input is not manufactured by the appellant whereas the same is manufactured by the supplier therefore as regard the concept of valuation and rate of duty of the input for the purpose of charging duty, it is that value and rate of duty which was applicable to the manufacturer supplier of the input. Merely because deeming fictions is given in rule for the purpose of procedure it does not empower to Revenue to charge the duty over and above the duty equivalent to the Cenvat Credit availed - duty paid by the removal of inputs is in order - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 885
Refund claim - payment of duty under protest - payment of duty on 110% of production cost - Held that: - facts did not warrant levying Central Excise duty on enhanced assessable value, where 10% notional profit was added to the cost of the goods in terms of Rule 8 read with Rule 9 [not Rule 4(b) as mentioned by the notice] of Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000 read with provisions of Section 4(1) (b) of the Central Excise Act, 1944 - refund to be allowed - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 884
Valuation - The handling charges has been collected by the appellant over and above the transaction value and would normally form part of the transaction value - Held that: - It has been stated in the appeal memo that they have in the declaration in 173C(3A) declared that they were collecting this amount and therefore there is no suppression - It has been seen that the said declaration is only for octroi and freight charges and does not cover handling charges - Appeal dismissed.
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2017 (2) TMI 883
Imposition of penalty u/r 25 - clandestine removal - appellant's claim that M/s Pharmaica is registered dealer for the purpose of Chapter 28.29 and they are not registered dealer for the product of chapter 33. Also M/s Pharmaica, M/s Vipul Drugs and M/s Money Pharma are not purchaser, manufacturer, registered person of HUF or the importer - whether penalty u/r 25 justified? - Held that: - M/s Pharmaica and M/s Vipul Drugs are registered dealer. Rule 25 is very clear that penalty on a person, who is not under the category specified in the said Rule cannot be imposed. Since M/s Money Pharma does not fall in any category specified under Rule 25, no penalty under Rule 25 can be imposed on M/s Money Pharma. Whether penalty can be imposed on M/s Vipul Drugs and Pharmaica when they are registered dealer though they have not availed credit of these goods or transferred the credit on these goods? - Held that: - Rule 25 says says that if any excisable goods are removed in contravention of any provisions of rule or notification issued under these rules, penalty can be imposed. If any goods are clandestinely removed without issue of invoice and handled by a registered dealer then obviously the registered dealer cannot take credit and cannot pass on credit as there is no excise invoice - Rule 25 identifies purchaser or manufacturer or registered person of a warehouse or an importer or a registered dealer as a person liable to penalty because of the fact that they are registered with the Revenue and are reasonably conversant with law. It is not necessary that they could do actually official deal with such goods in their capacity as manufacturer or purchaser or registered dealer etc. Thus, penalty can be imposed on all such persons irrespective of the fact that they have dealt with these goods on record or off record - M/s Pharmaica and M/s Vipul Drugs are held liable to penalty u/r 173Q(1) of CER, 1944 and Rule 25 of CER, 2002 being a registered dealer - the penalty in case of Vipul Durgs is reduced from ₹ 8 lakhs to ₹ 4 lakhs and in case of M/s Pharmaica, the same is reduced from ₹ 2 lakhs to ₹ 1 lakh. Appeal disposed off - decided partly in favor of assessee.
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2017 (2) TMI 882
Valuation - finalization of price / value at the end of the year - Extended period of limitation - Held that: - The observation of the Commissioner (Appeals) is on assumption and presumption that costing of the goods is done on yearly basis. He felt that the assessment is deemed to be provisional, which is basically incorrect on the fact that neither any provisional assessment order was passed by the Department, nor the appellant has sought for the provisional assessment. We are of the considered view that the adjudicating authority should examine the issue of time bar afresh and pass a reasoned order including the issue of quantum of value which was remanded by the Commissioner (Appeals) - Appeal allowed by way of remand.
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2017 (2) TMI 881
Valuation - job work - packing machinery provided by principal to appellant - time limitation - Held that: - the issue was not free from doubt - during the period of demand i.e. October, 98 to February, 99 the judgment of Marathwada Glass was prevailing according to which the appellant was not required to include the amortization cost of the packing machine supplied free of cost by the principal. Therefore, the extended period of limitation is not invokable - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 880
Refund claim - unjust enrichment - rejection on the ground that the credit note has been issued after clearance of the goods - Held that: - it is not coming out whether the buyer M/s Swaraj Mazda Ltd. has availed the Cenvat Credit of excess duty paid by the appellant. In that circumstance, the matter needs examination at the end of the Adjudicating Authority to verify the fact whether on the excess duty paid by the M/s Swaraj Mazda Ltd. has not taken Cenvat Credit of the excess duty for which debit note has been issued to the appellant - appeal allowed by way of remand.
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2017 (2) TMI 879
Confiscation of Indian Currency - whether there was sale of illegally manufactured goods and the currency, which are confiscated are the sale proceeds? - Held that: - The Revenue fails to prove that Indian Currency of ₹ 23.15 lacs is the sale proceeds of excisable goods illegally manufactured and cleared so - The documents produced in this regard by the appellants like the “Agreement to Sell”, copy of Resolution of Board of Directors, and affidavit of “Agreement to Sell” cannot be taken as false evidences - Further the Commissioner, Income Tax (Appeals), has also ruled that the said amount is not an extra income, from sale of illicit manufacturing and clearance of excisable goods but is the part of the payments made by M/s. M.D. Buildwell (P) Ltd. - confiscation of currency set aside. Confiscation of excess copper scrap - Held that: - various explanations mentioned by the assessee appellant and the pleadings that such estimation of the excess is an eye estimation only have not been appropriately considered by the Commissioner (Appeals) - matter to be remanded. Appeal disposed off - part matter allowed - part matter on remand.
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2017 (2) TMI 878
CENVAT credit - duty paying documents - refusal on the basis of certain irregularities alleged with reference to transportation and non-existence of evidence for transportation of duty paid inputs to the premises of the respondent - Held that: - The original authority has recorded that vehicles which transported the duty paid inputs were deployed by Shri Ravikant Dwivedi Director of M/s. Saral Logistics System Pvt. Ltd. from his office situated in Rama Chauraha. The question regarding the transportation of raw material has been discussed at length by the original authority - the original authority also recorded that the freight has been regularly paid on cash payment voucher which are acknowledged by the transporter. Revenue could not in any manner bring out the non-receipt of duty paid raw materials or the bogus nature of all the transactions - appeal rejected - decided against Revenue.
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2017 (2) TMI 877
CENVAT credit - holdings - denial on the ground that holdings used as support structures for the factory shed as well as the EOT cranes - Held that: - In fact crane column is used to hold crane girders in position properly while the crane is working. In view of this use, it is essential accessories for EOT crane installed in the appellant’s factory as EOT crane cannot function without the crane column - the impugned order on which credit has been denied is covered in the scope of the terms “accessories”, in the definition of capital goods at clause (ii) of Rule 2(b) of Cenvat Credit Rules, 2004 because it is specifically designed fabricated/manufactured as per specific technical requirement - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 876
CENVAT credit - duty paying documents - invoices issued by second stage dealer, however the input was purchased from an agent of said second stage dealer - Held that: - Even if the purchase of the inputs were made by the appellant from an agent of the second stage dealer but duty paying invoices is consigned to the appellant, credit is legally admissible to the appellant - if in the invoices end user’s name is appearing as consignee irrespective of fact that sale purchase transaction is not between the supplier of inputs and the end user, the credit is admissible at the recipient’s end - credit allowed - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (2) TMI 871
Levy of tax - Rule 38 (7) of the Rules - Held that: - it is not necessary that only when the contractor is found in possession of goods that he can be proceeded with and not otherwise. Once the movement of consignment through the Railway Container Contractor is not disputed and is established, the obligation in law was upon the contractor, to furnish details of the consigner and consignee, so that the interest of revenue could be safeguarded, is clearly imposed. The failure on part of contractor to maintain the records, therefore, would entitle the revenue to proceed as per law. The Railway Container Contractor is required in law to get itself registered and maintain records, as is clearly specified u/r 38 (7) of the Rules, and in case such records are not made available under the statutory scheme, the contractor acquires status of a dealer, so as to attract relevant provisions of the U.P. Value Added Tax Act, 2008, for the purposes of levying tax. Petition disposed off.
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2017 (2) TMI 870
Whether respondent No.6 is eligible to be a member of the Commercial Taxes Tribunal as he is said to have no experience in "administration of accounts and financial Management" as contemplated in Section 9(3)(c) of the Act in the category of serving as retired Government servant? Held that: - Mere fact that at one point of time, the officer was working with the Commercial Taxes Department, cannot be a reasonable suspicion to disqualify him for appointment. He has no interest, either pecuniary or otherwise, which may afford strongest proof against his neutrality. Therefore, mere fact that he was serving the State Government, he will have a natural bias towards the State is too wide a proposition to be accepted. In view of the development of law as to when non-pecuniary bias will vitiate an action, though he will have a natural bias towards the State is not justified. The expressions "administration of Accounts" or "financial Management" are not defined under the Act. Therefore, such expressions have to be given ordinary meaning to such words. The argument that Clause (c) has to be read ejusdem generis to Clause (a) and (b) of Section 3 to contend that the member has to be qualified Chartered Accountant or having fair knowledge of accounts is not a legitimate inference. Though the one post is popularly called as the Member (Accounts), the experience of a candidate of working in Commercial Taxes Department would be helpful in discharge of the appeals by the Tribunals in the matter of Commercial Taxes. The experience which he has gained while working in the Commercial Taxes Department is in the field of Applied Accounts, therefore, it cannot be said that he does not have experience in administration of accounts. The assessment undertaken by the candidates gives him insight of the financial management given by the assessees - Therefore, it cannot be said that respondent No.6, appointed as Member (Accounts) is ineligible for appointment as a member in view of the fact that he has no experience of administration of accounts or financial management. Still further, only one candidate is a Chartered Accountant whereas another candidate is a Commerce and Law Graduate and has done M.B.M. in Finance. The three candidates are the members of Bihar Finance Service and have worked in the Commercial Taxes Department. Therefore, the State had to choose out of the limited choice available. Thus, respondent No.6 cannot be said to be wholly ineligible candidate and a wrong choice to discharge the duties as Member (Accounts). Petition dismissed - decided against petitioner.
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Indian Laws
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2017 (2) TMI 869
Dishonor of cheque due to ‘insufficient funds’ - proceedings initiated Section 138 Negotiable Instruments Act - Held that:- The petitioner has given contradictory statements in this behalf. It is not clear as to how much amount was advanced by the respondent to the petitioner in 2007. In response to the notice under Section 251 Cr.P.C. it was claimed that amount of ₹ 3.5 lacs was given in the month of June/July, 2007. The petitioner did not claim if the whole amount was returned in 2009. It was merely stated that interest @ 5% per month was given to the petitioner till July, 2009. No documents, whatsoever, have been placed on record regarding payment of interest to the petitioner. In the cross-examination of CW-1, it was suggested that payment of ₹ 3.5 lacs was given to the petitioner in 2007. In his 313 Cr.P.C. statement altogether different defence has been taken by the petitioner. He came up with the plea that he had given four cheques to the complainant and only one of them was signed by him. The said cheque was not presented by the complainant till date. He further stated that he had taken an amount of ₹ 3.5 lacs from the complainant and it was returned along with interest on 10.01.2009. The petitioner, however, has failed to place on record any document, whatsoever regarding the taking of loan of ₹ 3.5 lacs and its return along with interest. Considering the conflicting versions given by the petitioner at different stages of the trial, it appears that he has not presented true facts. Concurrent findings of the courts below are based upon fair appreciation of evidence and need no disturbance or intervention. The petitioner has been sentenced to undergo Simple Imprisonment for one year with fine/compensation of ₹ 21.50 lacs to the complainant; default sentence being Simple Imprisonment for six months. It is informed that the petitioner is not a previous convict and has already undergone substantial period of substantive sentence. Considering the facts and circumstances of the case, the sentence order is modified and the default sentence for non-payment of fine/compensation would be Simple Imprisonment for three months. Other terms and conditions of the sentence order are left undisturbed
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2017 (2) TMI 868
Right to Information form Bar Council - delay in providing information - Held that:- Perusal of section 6 and also section 36 shows that in its meetings, apart from general function and information, a State Bar Council would be discussing confidential personal matters of advocates. Personal and confidential issues would come up before the Bar Council for consideration. Putting all the minutes in public domain and on the website would imply making public the confidential personal information and also information received by Bar Council in fiduciary capacity. - The minutes would also contain personal information about Advocates who seek financial help on medical ground which would clearly be personal information of the third party. Such information clearly cannot be put in public domain. Under section 12, the accounts of the State Bar Council are to be audited and the State Bar Council is obliged to send a copy of the accounts along with the report of the auditor to the Bar Council of India and also cause the same to be published in the Official Gazette. By publication in the official gazette, the accounts of a State Bar Council, come in public domain. As noticed that the impugned order does not contain any reasons based on which the CIC formed an opinion that the information was required to be put in public domain and on the website. With regard to the show cause notices issued, by the CIC, to the CPIO, for delay in furnishing information, it is noticed that the CPIO had responded to the application filed by Respondent No. 2 within the period of 30 days. The Response itself indicates that whatever information was available, was provided. The CPIO in his reply to the Central Information Commission has indicated that voluminous records had been sought by the respondent no. 2. Respondent No. 2 had sought minutes of full house meetings for the period 01.04.2010 till date of the application which was nearly five years. Apart from contending that the information was exempt, the CPIO in his reply to CIC had relied on the decision of the High Court of Judicature at Bombay in “State Information Commissioner Vs. Tushar Dhananjya Mandlekar [2012 (7) TMI 1014 - BOMBAY HIGH COURT]”, whereby the High Court has held that where the required information is general, vague and voluminous in nature, the parties cannot be expected to be provided the required information within 30 days. In view of the above, the impugned orders dated 11.08.2015 and 01.12.2015 are quashed. Further, the proceedings initiated by the CIC, requiring the Petitioner to show cause as to why action be not taken for delay in furnishing information are also quashed. The Writ petition is disposed of accordingly.
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2017 (2) TMI 867
Proceedings under the SARFAESI Act initiated by the respondent Bank against the said borrowers - petitioners herein are the tenants in the properties by virtue of lease/tenancy documents executed - Held that:- It is well settled that when the remedy under Section 17 of the Act is available to approach by way of appeal before the Debt Recovery Tribunal, the petitioners have to avail the same. The petitioners are entitled to raise all the issues including the claim of tenancy while pursuing such alternative forum. The stage at which the case is placed, is an appropriate stage where the remedy before the Tribunal could be properly pursued. It is held by the Supreme Court that order under section 14 of the Act also constitutes post-13(4) stage to avail alternative remedy and challenge the order passed under section 14 of the Act. In United Bank of India vs. Satyawati Tondon and Others [2010 (7) TMI 829 - SUPREME COURT], the Supreme Court cautioned about the High Court readily entertaining writ petitions even though an efficacious remedy of appeal under section 17 is available to the aggrieved party. Learned advocate for the petitioners fairly stated that he would approach the Tribunal by preferring appeal and raise all the contentions which are sought to be raised in this petition. The petitioners are permitted accordingly, and therefore relegated to the remedy of appeal under Section 17 of the Act before the Debts Recovery Tribunal.
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