TMI Tax Updates - e-Newsletter
February 8, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Central Excise
Indian Laws
Highlights / Catch Notes
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Income Tax:
Transfer pricing adjustment - advance to subsidiary - even though this interest rate could reach upto 400 basis points in some cases, there cannot be any good reason for holding that loan advanced to a subsidiary at 247 basis points above the LIBOR rate is not at an arm’s length price. - AT
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Income Tax:
Penalty u/s 271C - non deduction of tds u/s 194A - There was a reasonable cause for holding a belief regarding non deduction of tax at source on payment of interest made to Noida which is supported by a notification issued as well as several orders of the coordinate benches - No penalty - AT
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Income Tax:
Partners remuneration u/s. 40b - once the additional income offered for taxation during the survey is accepted and it has been explained to be as business income as the source then there is no bar in the Act for claiming partners remuneration from such additional business income - AT
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Income Tax:
Exemption u/s 11 - The purchase cost of assets would have been already allowed as application of funds in the year in which the assets were purchased. Therefore, the loss on sale of these assets cannot be treated as application of funds once again. It would amount to double deduction - AT
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Income Tax:
Commissioner of Income Tax (Appeals) has erred in allowing deduction claimed by the assessee on expenditure for increasing the authorized share capital of the assessee. - AT
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Central Excise:
Clandestine removal - shortages suggested by the statutory auditors - A case of clandestine removal can not be considered to be established based only upon the statutory auditors of the Respondent - AT
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Central Excise:
Eligibility of exemption - waste steam and low boiling component to concessional rate of duty - the products should have been manufactured wholly out of raw material produced or manufactured in India. - the meaning to the expression 'raw material' has to be given in the ordinary well accepted connotation in common parlance of those who deal with the matter - AT
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Central Excise:
Distribution of Cenvat credit - ISD - there is nothing in the said Rules which would automatically and without any additional reasons dis-entitle an input service distributor from availing Cenvat credit unless and until such registration was applied and granted - HC
Articles
Notifications
News
Case Laws:
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Income Tax
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2016 (2) TMI 198
Disallowance of Directors’ remuneration - CIT(A) deleted the addition - Held that:- A.O had disallowed the expenses on comparing the expenses with that of earlier year. We further find that apart from the absolute increase in terms of expenses no material has been brought on record to demonstrate the excessiveness of remuneration. We also find that ld. CIT(A) while deleting the addition has noted that the two Directors’ to whom the remuneration was paid have shown the remuneration received from the Assessee as their income and has also paid the taxes. He has also given a finding that the payment of excess remuneration cannot be considered to be a diversion of income with a view to avoid taxes. Before us, Revenue has not placed any material on record to controvert the findings of ld. CIT(A). In view of the aforesaid facts, we find no reason to interfere with the order of ld. CIT(A) - Decided against revenue Disallowance of various expenses - CIT(A) deleted the addition - Held that:- The perusal of provisions of Section 251(1)(a) reveals that CIT(A) in an appeal against an order of assessment can confirm, reduce, enhance or annul the assessment. The power of setting aside which was available to CIT(A), is no more available to CIT(A) by virtue of amendment made by Finance Act 2001 with effect from 1.06.2001. Thus it can be seen that in the present case CIT(A) has set aside the issue to the file of A.O, the powers of which are not available to him at the relevant time. We therefore are of the view that the matter needs to be restored to the file of CIT(A) for considering the submissions of the Assessee and thereafter deciding the issue on the basis of facts and circumstances of the case and in accordance with law and after recording a clear finding on the issue. - Decided in favour of Revenue for statistical purposes. Disallowance of PF and ESIC expenses - delayed deposit of employees contribution of PF - Held that:- As decided in case of GSRTC [2014 (1) TMI 502 - GUJARAT HIGH COURT] any sum with respect to the employees contribution as mentioned in s. 36(l)(va), assessee shall be entitled to the deduction of such sum towards the employees contribution if the same is deposited in the accounts of the concerned employees and in the concerned fund such as Provident Fund, ESI Contribution fund, etc provided the said sum is credited by the assessee to the employees accounts in the relevant fund or funds on or before the "due date" under the Provident fund Act, ESI Act, Rule, Order or Notification issued thereunder or under any Standing Order, Award, Contract or Service or otherwise. - Decided against assessee Disallowance u/s. 40A(3) - Held that:- Appellant’s contentions are general and vague since the A.R. of the appellant has not controverted the findings of the A.O., the disallowance made by the A.O is upheld - Decided against assessee
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2016 (2) TMI 197
Assessment under Section 153 A - Eligibility of deduction u/s 80IB and 80IC denied - Held that:- None of the material seized during the search relates to the year under appeal.None of the material found relate to the goods transfer to one unit from other for the period. None of the material relates to the purchases from sister concerns.None of the material suggest that the material transferred to eligible undertaking is less than the market rate. None of the material suggest that the eligible units are not carrying out manufacturing activity, which is stated by assessee. None of the material shows that there is inflation of the profit by assessee of eligible undertakings. None of the material suggest that appropriation of profit made by the assessee to derive the income of eligible undertaking is incorrect. None of the material suggest that eligible units earns „more than Ordinary profits‟. In view of above, we confirm that the material found during the course of search is not incriminating which even remotely suggest that assessee's claim of deduction u/s 80IC/80 IB is incorrect. - Decided in favour of assessee
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2016 (2) TMI 196
Transfer pricing adjustment - advance to subsidiary - addition on interest charged on advances to the subsidiaries - Held that:- It cannot be said that the advance to subsidiary, at 247 basis points above the LIBOR, is not at an arm’s length price. In any event, once DRP itself states that the Indian banks are charging 250 basis above LIBOR on similar loans, even though this interest rate could reach upto 400 basis points in some cases, there cannot be any good reason for holding that loan advanced to a subsidiary at 247 basis points above the LIBOR rate is not at an arm’s length price. That apart, as noted earlier in this order, once Hon’b;le Delhi High Court, observes that the “assessee advanced monies to the subsidiaries which were under its management and control, which in fact substantially reduced the risk and in these circumstances there was no rationale of adjusting any amount of higher basis”, it cannot be open to the transfer pricing authorities to contend that this loan should be treated as a high risk loan on which high interest rate should be charged even within the range of interest rates charged by the Indian banks generally. In view of these discussions, as also bearing in mind entirety of the case, we uphold the grievance of the assessee and direct the Assessing Officer to delete this arm’s length price adjustment in respect of interest charged on advances to the subsidiaries. Disallowance under section 14A - Held that:- Having noted the uncontroverted claim of the assessee that borrowed funds are not used in investments yielding the tax exempt in question, we are of the considered view that no part of the interest could be disallowed under rule 8D. The question of allocation of interest could arise only in a situation in which at least a part of borrowed funds are used in investments resulting in tax exempt income. That’s not the case here and none of the authorities even allege that. Accordingly, the disallowance under rule 8D remains restricted to 0.5% of the average value of investments resulting in tax exempt income. The Assessing Officer will, accordingly, recompute the disallowance under section 14A r.w.r. 8 D.
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2016 (2) TMI 195
Penalty u/s 271C - non deduction of tds u/s 194A by the banks including the assessee bank with respect to interest paid to NOIDA - Held that:- In the present case it is apparent that belief of the assessee was reasonable to not to deduct tax at source which is also based upon the notification issued by CBDT u/s 194A(3)(iii)(f) of the Act as well as several judicial precedents. In our view, it cannot be said that Hon‟ble Allahabad High Court has laid down any law with respect to deduction of tax at source on interest payment made by the assessee to Noida. In view of the above facts and circumstances we are of the view that the assessee cannot be subjected to penalty u/s 271C of the Act because there is no failure on part of the assessee to deduct tax at sources u/s 194A of the act in view of the decision of ITAT on this issue for the same years holding that there is no requirement of deduction of tax at source at all u/s 194A of the Act in view of notification dated 22.10.1990. There was a reasonable cause for holding a belief regarding non deduction of tax at source on payment of interest made to Noida which is supported by a notification issued as well as several orders of the coordinate benches holding that interest payment made to Development authorities are exempt for deduction of tax u/s 194A(3)(iii)(f) of the Act. - Decided in favour of assessee
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2016 (2) TMI 194
Disallowance u/s 14A - Held that:- Rule 8D of the I.T. rules is applicable only from the assessment year 2008-09 and is not applicable to the earlier assessment year. Applying the aforesaid legal position to the facts of the assessee’s case, it is noticed that the assessee has, as stated above, claimed expenditure of only ₹ 5,32,48,929 out of the total expenditure of more than ₹ 27 crores. The composition of the said administrative expenses of ₹ 5,32,48,929 is found in Schedule 13 of the Audited Accounts. The said amount comprises of various expenses which are normally incurred by a company during the course of it's regular business activities. Further, the assessee has additionally itself disallowed a sum of ₹ 15,66,528 by proportionately disallowing expenses of some of the employees. There is nothing on record to controvert the submissions made on behalf of the assessee. The expenses claimed are also in the nature of day to day administrative expenses and cannot be held to be relatable to the exempt income. It was also find that that more than 80% of the total dividend received has been received from various HCL Group of Companies which the assessee is a promoter investor and has been stated to be holding shares in the said companies for more 15 to 25 years. Dividend income is also stated to be received directly by way of dividend warrant which gets credited to the bank of the assessee. In the background of the aforesaid discussions and precedents, we are in agreement with the finding of the Ld. CIT(A) in directing the AO to delete the disallowance of ₹ 1,99,09,856/- made u/s. 14A of the I.T. Act and by holding that Rule 8D is not applicable in this case. - Decided in favour of assessee Penalty u/s 271(l)(c) - Held that:- When assessee furnished all the material in the return which was not found to be incorrect, it is upto the authorities to accept the claim in the return or not, but the same couldn't be considered as concealment or furnishing of inaccurate particulars. CIT(A) has rightly held that there is no concealment or inaccurate particulars of income where the addition and/or disallowance is based on bona-fide claims, debatable claims and difference of opinion as held inter-alia by the Hon'ble Supreme Court in a recent judgment in the case of Commissioner of Income tax Vs. Reliance Petroproducts Pvt. Ltd. reported in (2010 (3) TMI 80 - SUPREME COURT )- Decided in favour of assessee
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2016 (2) TMI 193
Entitlement to deduction u/s 10AA - Held that:- Given the consistent decisions of the Coordinate Bench where the deduction has been allowed to the assesee u/s 10AA of the Act in respect of profit earned on trading of re-export of imported goods, respectfully following the said decisions, the assessee in the instant case shall be eligible for deduction u/s 10AA of the Act. See M/s Goenka Diamond & Jewellers Lt.[2012 (3) TMI 258 - ITAT JAIPUR] - Decided in favour of assessee
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2016 (2) TMI 192
Allowance of partners remuneration u/s. 40b from the additional income offered for taxation during survey - CIT(A) deleted the addition - Held that:- CIT(A) while deleting the addition has noted that Assessee had only one source of income being construction activity and in the statement recorded during the course of survey, it was categorical mentioned that the income was from construction project, it was disclosed in the Profit and Loss account of the firm and was offered to tax and the quantum of income disclosed has been accepted by Revenue. We find that the Co-ordinate Bench of Tribunal in the case of Shri Labdhi Prints (2012 (5) TMI 635 - ITAT AHMEDABAD) after considering the various decisions cited before it and referred to in the order had agreed with the decision of ld. CIT(A) that once the additional income offered for taxation during the survey is accepted and it has been explained to be as business income as the source then there is no bar in the Act for claiming partners remuneration from such additional business income. Before us, Revenue has not controverted the findings of ld. CIT(A) nor has brought on record any contrary binding decision. We further find that Hon’ble Calcutta High Court in the case of Md. Serajuddin & Brothers vs. CIT reported in (2012 (8) TMI 104 - CALCUTTA HIGH COURT ) has held that even if the income from other sources is included in the Profit and Loss accounts, to ascertain the net profits qua book profit for computation of the remuneration of the partners, the same cannot be discarded. - Decided against revenue
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2016 (2) TMI 191
Addition on account of bogus/non existing liabilities - CIT(A) deleted the addition - Held that:-CIT(A) while deleting the addition has noted that he has gone through the copies of truck rent payment and it mentioned the name of the persons, truck numbers, weight of material, amount paid to such persons and the complete details. He has also given a finding that on the verification of the LRs, he found them it to be duly stamped and acknowledged by the buyers of the material transported by the Assessee and vouchers were maintained in respect of payment to respective truck owners. He has further given a finding that the addition could not have been made either u/s. 68 or Section 41(1) of the Act as the provisions of those sections were not applicable to the facts of the case. Before us, Revenue could not controvert the findings of ld. CIT(A). See CIT vs. Bhogilal Ramjibhai Atara [2014 (2) TMI 794 - GUJARAT HIGH COURT ] wherein held Section 41(1) of the Act would apply in a case where there has been remission or cessation of liability during the year under consideration subject to the conditions contained in the statute being fulfilled – Decided against Revenue. Addition of carting expenses - CIT(A) restricted the addition - Held that:- CIT(A) while granting relief has noted the expenditure to be essential for the normal business activity of the Assessee and that the labour engaged in the process needs to be paid in cash and their names address and confirmations for the entire expenditure cannot be expected from the Assessee. He accordingly restricted the disallowance to ₹ 1 lac as against 3,62,785/- made by the A.O. Before us, no fallacy has been pointed out in the findings of ld. CIT(A). In view of these facts, we find no reason to interfere with the order of ld. CIT(A)– Decided against Revenue. Addition on account of bogus purchases - CIT(A) deleted the addition - Held that:- CIT(A) while deleting the addition has noted that Assessee had furnished the copy of purchase bills, the details of payment made to those parties and sales being made out of the said purchases. He has also noted that there is no evidence to suggest that the payments made were reverted back to the Assessee. He accordingly deleted the addition. Before us, no fallacy has been pointed out in the order of ld. CIT(A). We therefore find no reason to interfere with the order of ld. CIT(A) – Decided against Revenue. Addition on account of difference in the balances - CIT(A) deleted the addition - Held that:- We find that ld. CIT(A) while deleting the addition has noted that Atul Ltd. is a debtor and not a creditors in the books of Assessee and therefore no addition could be made merely because there was a difference between the account of two concerns. Before us, Revenue has not pointed out any fallacy in the order of ld CIT(A) – Decided against Revenue.
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2016 (2) TMI 190
Rejection of books of accounts - adoption of NP rate of 9% - Held that:- As ample opportunities have been given to the assessee to produce the books of accounts, the assessee being contractor, is statutorily bound to maintain bills, vouchers, cash book, stock register etc. and in the absence of maintenance of the said records, the AO is left with no option but to invoke section 145(3) of the IT Act and estimate the income of the assessee. Even otherwise the assessee had admitted before the authorities below for rejection of books of account and application of 9% NP rate on contractual receipts subject to depreciation and interest. In our view, once the complete books of account have not been produced, the AO was right in rejecting the books of account and has righty done so. Even otherwise, the assessee has no legs to stand that the books of account and the NP rate of 9% has been wrongly decided by the AO. The admission of the assessee is the best evidence against the assessee. Once the assessee himself has admitted the imposition of 9% NP rate subject to depreciation and interest, the AO was left with no other option but either to accept the offer or to determine the N.P. on the basis of comparable material on record or on the basis of past history. - Decided against assessee Addition on account of interest income from FDRs - Held that:- We are in agreement with the ld. A/R for the assessee that the FDRs were required to furnish performance guarantee to get a contract awarded in assessee’s favour and to procure said guarantee, it had kept amount in fixed deposit. Therefore, the income earned on this account cannot be treated as Income from other sources. The contention of the assessee are supported by various judgments relied on by ld. A/R. We find that the decisions cited by ld. CIT (A) are not applicable to the facts of the assessee’s case. We, therefore, taking into consideration various judgments mentioned above, deleted the additions made by the AO. - Decided in favour of assessee Addition on account of taxi plying, on estimate basis - Held that:- AO has not given any basis for making this addition. Therefore, we do not find any justification in the order of the AO for making this addition. The addition is thus deleted.- Decided in favour of assessee Disallowance on account of non business use of cars - Held that:- The assessee has not produced any log book in respect of running of vehicles, therefore, personal use of vehicles cannot be rued out. But the disallowance made by the AO is on higher side, therefore, we restrict the disallowance to ₹ 13,116/- (10%).- Decided in favour of assessee in part.
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2016 (2) TMI 189
Deduction u/s 80HHC without reducing the deduction allowed u/s 80IB - Held that:- The material available on record. Sec. 80IA(9) is very clear that where any amount of profits and gains of an undertaking is claimed and allowed, deduction to the extent of such profits and gains shall not be allowed under any other provisions of Chapter VI of the Act. It further says that the deduction shall not exceed the profits and gains of such eligible business as the case may. While interpreting sec. 80IA(9) of the Act, the Bombay High Court in CIT vs Nima Specific Family Trust [2000 (12) TMI 87 - BOMBAY High Court], J.P. Tobacco Products P. Ltd vs CIT [1996 (8) TMI 29 - MADHYA PRADESH High Court] and Apex Court in Jt. CIT vs Mandideep Engineering and Packaging Industries P. Ltd [2006 (4) TMI 75 - SUPREME Court] found that deduction allowed u/s 80HHC need not be reduced while computing deduction u/s 80IA of the Act. In view of the judgment of Bombay High Court in Nima Specific Family Trust(supra) which was followed by the jurisdictional High court in MRF Ltd. (supra), this Tribunal do not find any reason to interfere with the order of the lower authority. Sale proceeds of scrap - whether has to be included in the business profit as well as total turnover while computing deduction u/s 80HHC? - Held that:- The raw material which is not capable of being used for manufacturing the goods will have to be either sold as scrap or might have to be recycled. When such scrap is sold, the sale proceeds cannot be included in the total turnover. Therefore, the proceeds of the sale of such scrap would not be included in the sales in the Profit & Loss Account of the assessee. In the case before us, the assessee is admittedly a manufacturing company, therefore, the sale proceeds of the scrap cannot form part of the total turnover. Therefore, we are unable to uphold the order of the lower authority. In view of the judgment of the Apex Court in Punjab Stainless Steel Industries (2014 (5) TMI 238 - SUPREME COURT ) and for the reasons stated therein, we set aside the orders of the lower authorities and the Assessing Officer is directed to exclude the sale proceeds of scrap from the total turnover. Exclusion of freight and insurance from the total turnover - Held that:- Total turnover and export turnover shall be of the same factor. In other words, the denominator and numerator shall be of the same factor while computing the deduction u/s 80HHC. Therefore, once the Assessing Officer excluded the freight and insurance charges from the export turnover the same shall also be excluded from the total turnover. Therefore, the orders of the lower authorities are set aside and the Assessing Officer is directed to exclude the insurance and freight charges from the total turnover also. Exclusion of 90% of interest, agency commission, rent and miscellaneous income from the profits of business while computing deduction u/s 80HHC - Held that:- As rightly submitted by the ld. Counsel, 90% the miscellaneous incomes like, interest, agency commission, rent etc. which are included in the profit of the assessee has to be excluded while computing deduction u/s 80HHC of the Act. The profit of the business has to be computed under the provisions of the Income-tax Act, 1961, therefore, the expenditure incurred by the assessee has to be excluded and what is included is the net income and not the gross income. This Tribunal is of the considered opinion that what is to be excluded under Explanation (baa) of sec. 80HHC is net income included in the profit. Therefore, the orders of the lower authorities are modified and the Assessing Officer is directed to exclude 90% of the net receipt like interest, agency commission, rent etc from the profit of the assessee while computing deduction u/s 80HHC of the Act.
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2016 (2) TMI 188
Denial of the benefit of Section-11 of the Act and thereby taxing the corpus donation received - Held that:- The assessee trust engaged in running of hospitals would be entitled for the benefit of Section-11 of the Act even though it is incidentally generating surplus, since it is running a hospital and thereby providing medical relief, however subject to the compliance of the other provisions of the Act. Thus this issue is decided in favour of the assessee. Since we have held that the assessee trust would be eligible for the benefit of Section-11 of the Act, consequently we hereby hold that the Corpus donations received by the assessee trust shall not be included in the total income of the previous year in which such donation is received by the trust, as provided U/s.11 (1)(d) of the Act. Further we make it clear that the Ld.CIT(A) has powers to enhance an assessment and travel beyond the subject matter of the appeal as per Section 251(2) of the Act after providing an opportunity of being heard. Disallowance of the carry forward and set off of excess application of income - Held that:- The claim of the assessee for carry forward of excess application of fund to subsequent years is not permissible as per the provisions of the Act. See case of The Anjuman-E-Himayath-E-Islam [2015 (7) TMI 594 - ITAT CHENNAI] - Decided against assessee Denial of treating the loss on sale of assets as application of income - Held that:- We are in agreement with the view taken by the Ld. Assessing Officer. The purchase cost of these assets would have been already allowed as application of funds in the year in which the assets were purchased. Therefore, the loss on sale of these assets cannot be treated as application of funds once again. It would amount to double deduction. Further the facts remain that the sale proceeds of ₹ 5,81,000/- is the income of the assessee because there is a cash inflow to that extend which has to be applied for the objects of the trust as provided under the provisions of the Act. Therefore the action of Ld. Assessing Officer is justified - Decided against assessee Disallowance of the depreciation while computing the income of the assessee trust - Held that:- The claim of depreciation made by the assessee cannot be entertained as per the provisions of the Act. See case of The Anjuman-E-Himayath-E-Islam [2015 (7) TMI 594 - ITAT CHENNAI] - Decided against assessee. Disallowance of claim of bad debts as application of income - Held that:- We are of the view that if the receivables on which such claim of bad debts is made was earlier treated as the income of the assessee trust for the purpose of Section-11(1) of the Act, by applying the accruing concept and following the mercantile system of accounting, then the same should be allowed as application of fund when such receivables have become bad and written off in the books of accounts during the relevant assessment year. It is ordered accordingly.
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2016 (2) TMI 187
Deduction u/s. 35D(2)(c)(iv) - CIT(a) allowed the claim - Held that:- It is a well settled law that the expenditure incurred on issue of fresh share and expansion of capital base is capital in nature. Thus, in view of the law laid down in the case of Brooke Bond India Ltd. Vs. Commissioner of Income Tax reported as [1997 (2) TMI 11 - SUPREME Court ] we are of the view that the Commissioner of Income Tax (Appeals) has erred in allowing deduction claimed by the assessee on expenditure for increasing the authorized share capital of the assessee. The findings of the Commissioner of Income Tax (Appeals) on this issue are reverse and the appeal of the Revenue is allowed. Depreciation claimed on payment of non-compete fees - Held that:- Non-compete payment is capital in nature and falls in the category of an intangible asset. Thus, non-compete payment is eligible for depreciation u/s. 32(1)(ii) of the Act. Disallowance of depreciation claimed on goodwill u/s. 32(1)(ii) - Held that:- Following the decision rendered in the case of Commissioner of Income Tax Vs. Smifs Securities Ltd. (2012 (8) TMI 713 - SUPREME COURT ), the Hon'ble Bombay High Court in the case of Commissioner of Income Tax Vs. Birla Global Asset Finance Co. Ltd. (2012 (8) TMI 773 - BOMBAY HIGH COURT ) held that depreciation in respect of intangible assets constituting goodwill is allowable.
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Customs
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2016 (2) TMI 181
Cancellation of CHA licence - period of limitation - The learned Counsel of the appellants raised the ground of limitation for the first time during the arguments at hearing stage. - Held that:- It is seen that the question of limitation has neither been raised during original proceeding before adjudicating authority nor has it been incorporated as a ground of appeal in the appeal memo nor has it been sought to be included by miscellaneous application for inclusion of fresh grounds. In these circumstances and the case law cited above, while cannot ignore the submissions on limitation, we cannot also given findings without giving Revenue an adequate opportunity to given findings on the same. We are left with no option but to set aside the order and remand the matter to the original adjudicating authority to give findings on the issue of limitation. - Matter remanded back.
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2016 (2) TMI 180
Recovery of Merchant Over Time (MOT) charges or Cost Recovery charges from the appellant - manufacture of vessel is conducted under supervisions of Customs Officers - Held that:- in the case where no services are provided, no cost recovery charges can be demanded - no cost recovery can be done when there was no officer specifically posited on cost recovery basis. - As regards the rate at which cost recovery is made is concerned, the same is administrative decision at which CESTAT has no jurisdiction.
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2016 (2) TMI 179
Restoration of appeal which was dismissed due to failure to deposit the amount as per stay order - appellant filed no application for extension of time, pleading financial distress. The appellant took its own time to predeposit the amount ordered, at its own convenience without any intimation to the Tribunal. - Held that:- However with a view to provide the appellant an opportunity to pursue its appeal on merits, we are inclined to restore the appeal but on terms as to costs. Accordingly, on condition that appellant remits costs of ₹ 5000/- (Rupees five thousand only) to the credit of Revenue.
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2016 (2) TMI 178
Import of capital goods - exemption Notification No. 53/97 - installation of the machinery within one year - the bill of entry in this case was filed on 27.10.1997 and at that time there was no provision in the Notification No. 53/1997-Cus. dated 3.6.1997 that the goods imported there under should be installed within the period of one year - Held that:- the goods after import were warehoused at the Nagpur unit of the appellant which is other than the unit in respect of which the LOP was issued. These goods were later transferred to Raipur unit in favour of which LOP was issued. It is also seen that it is only after the amendment of Notification No. 53/1997-Cus that the provision for procurement of goods from public warehouse or private warehoused was added to the said notification and at the same time the condition of installation of goods during the prescribed time was also added. The transfer of goods from Nagpur unit to the Raipur unit for which LOP was issued took place after such amendments. Thus, there is prima facie some rationale behind the primary adjudicating authority applying conditions of the Notification No. 53/1997-Cus as amended (as applicable on the date of such transfer) which contained the requirement of installation of the goods within the prescribed period. The appellant has not been able to make out a good case for complete waiver of pre-deposit - stay granted partly.
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Corporate Laws
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2016 (2) TMI 177
Scheme of Amalgamation - Scheme of arrangement is in the interest of the shareholders and creditors of all the companies as well as in the public interest, therefore, the same deserves to be sanctioned. It is, however, directed that the petitioners shall preserve their books of Accounts, papers and records and shall not dispose of the records without the prior permission of the Central Government under Section 396A of the Companies Act, 1956. The petitioner shall further ensure statutory compliance of all applicable laws. On the sanctioning of the Scheme of Amalgamation, the petitioner Companies shall not be absolved of any of their statutory liabilities.
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2016 (2) TMI 176
Scheme of Amalgamation - amendment to clause - Held that:- As the scheme at clause 9(a) is hereby modified and relevant extract of the clause 9(a) be read as: “1(one) Equity shares of ₹ 10/each credited as fully paidup held by such member in the capital of the Transferor Company. In respect to entitlement to a shareholder, the same shall be rounded to the next nearest integer”. The amendment as above is permitted to be carried out in the Scheme. As per the report of the Official Liquidator, the petitioner has undertaken to preserve the books of account, papers and records and not to dispose of the records without the prior permission of Central Government, as per the provisions of Section 396(A) of the Companies Act, 1956, as well to comply with all statutory provisions. Considering the above facts and circumstances, the prayers made in the petitions are granted. The Scheme at Exhibit “D”, with both the petitions is sanctioned, with the modification as directed above, in respect of clause 9(a).
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Central Excise
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2016 (2) TMI 202
Duty liability - whether the finished goods i.e. bars and rods and ingots and billets lying in stock as on 1.8.99 is chargeable to duty at specific rate of duty as per the notification No.50/97 or standard rate of 16% advalorem? - Held that:- Commissioner (Appeals) in his order has dealt the issue in detail and clearly brought out that appellants have failed to produce any evidence that stock of goods lying in appellant's factory were manufactured prior to 1.9.1997. Further, we find that Revenue's verification report as per the appellant's monthly returns filed for the months of July 97 and March 99 the closing stock of bars and rods and billets are less than what was declared on 1.8.99. Therefore, in the absence of evidence that the stocks were manufactured prior to 1.8.97 duty is chargeable at 16% advalorem. Notification No.50/97 is applicable only to the goods which are manufactured prior to 1.9.97. Since the appellants have opted only on 1.8.99 and there is no evidence to show that the stocks were prior to 1.9.97 we find that rate of duty is applicable is as per the tariff rate of 16% advalorem. Therefore, we do not find any infirmity in the order of Commissioner (Appeals). Accordingly, the impugned order is upheld and the appeal is rejected. - Decided against assessee
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2016 (2) TMI 201
Duty liability of mercury - Excisability - Held that:- Mercury obtained through manufacture of caustic soda and cleared as such is liable to duty of Central Excise. In this regard, CESTAT Delhi’s decision in the case of Modi Alkalies & Chemicals Ltd. (2005 (4) TMI 113 - CESTAT, NEW DELHI ) also aptly reinforces Revenue's stand that the mercury cleared as such is liable to duty of Central Excise. - Decided against assessee
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2016 (2) TMI 200
Clandestine removal - whether shortages suggested by the statutory auditors of the Respondent, based on test check, can be made the basis for clandestine removal? - Held that:- There is no evidence with the Revenue that the re-conciliation done by the Respondent is incorrect. There is force in the argument of the Respondent that finished goods can not be both short & excess and that such a situation can be only due to wrong recording of code numbers. There is also no evidence with the department that goods have been cleared clandestinely which is based only on presumptions & assumption. Secondly no duty can be demanded on semi finished goods. It is also not the case of the Revenue that shortages of finished goods suggested by the auditors was finally accepted by the Respondent in their balance sheet for the relevant financial year. A case of clandestine removal can not be considered to be established based only upon the statutory auditors of the Respondent made on test check basis. Accordingly, appeal filed by the Revenue is rejected - Decided in favour of assessee
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2016 (2) TMI 199
CENVAT credit - whether supplies made to SEZ Developer for the period prior to 31.12.2008 will attract the provisions of Rule 6(6) of the Cenvat Credit Rules or not? - whether the appellant is liable to pay 10% of the value of the goods supplied to SEZ Developer in case no separate accounts have been maintained in respect of dutiable goods and goods supplied without payment of duty? - Held that:- The very same issue was considered in Sujana Metal Products Ltd. vs. CCE, Hyderabad [2009 (5) TMI 643 - CESTAT, BANGALORE] wherein held that for the period upto 09/02/2006, the supplies made to SEZ units are to be treated as export both for extending export benefits and for levy of duty in terms of SEZ provisions contained in Chapter XA of the Customs Act. For the period from 10/02/2006, the definition of the term export under the Customs Act is not consistent with the definition of the term export under the SEZ Act. However, the definition of the term “export” under the SEZ Act shall prevail over the definition of term “export” under the Customs Act. Therefore, supplies made to SEZ from DTA units shall be treated as export. Since both during the period prior to and w.e.f 10/02/2006, the supplies made to SEZ are held to be “export”. The application of provisions of Cenvat Credit Rules for recovery of amounts on goods supplied to SEZ units in terms of Rule 6 of CCR, 2002/CCR, 2004 does not arise. - Decided in favour of assessee
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2016 (2) TMI 186
Eligibility of exemption - waste steam and low boiling component to concessional rate of duty under Notification No. 8/1997, 13/1998 and 23/2003 - the products should have been manufactured wholly out of raw material produced or manufactured in India. - appellants were using imported raw materials. - The appellants have contended that they are maintaining separate records for storage and use of imported and indigenous Orthoxylene. The lower authority has noted this contention in the impugned order and has not controverted this. The appellants have further contended that they had paid normal duty on the products manufactured out of imported Orthoxylene and claimed concessional rate only in respect of products manufactured out of Orthoxylene manufactured / produced in India. Held that:- under EXIM Policy catalyst is covered as capital goods inasmuch as this Court in various judgments on the subject has taken the view that the raw material is not a defined term. On that basis, it is held that the meaning to the expression 'raw material' has to be given in the ordinary well accepted connotation in common parlance of those who deal with the matter. - Benefit of exemption allowed - Decided against the revenue.
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2016 (2) TMI 185
Extended period of limitation and, penalty imposed on the assessee - Held that:- Extended period cannot be invoked and demand has to be restricted to the period within one year from the date of show cause notice. The amount involved within the period of one year should be worked out by the adjudicating authority and communicated to the appellant. The same should be paid by the appellant alongwith interest. So far as imposition of penalty upon the appellant is concerned, no intention to evade duty can be attributed to the appellant when the issue of admissibility of cenvat credit on the amount of service was disputed. Accordingly, penalty imposed by the adjudicating authority under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 111AC of the Central Excise Act, 1944 is set aside. Thus no question of invocation of extended period of limitation of imposing penalty. - Decided in favour of assessee
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2016 (2) TMI 184
Denial of MODVAT credit - belated claim of credit - Held that:- In the instant case, it is not disputed by the department that the appellant was a new assessee. The appellant further contends that he was not aware of the Modvat Rules and, therefore, could not take credit. This fact has not been disputed by the respondents and, therefore, in our opinion sufficient reasons had been given by the appellant for the purpose of condoning the delay in filing the declaration form. Once sufficient reasons have been given, the competent authority was required to give Modvat credit in terms of subrule (9) of Rule 57G. The show cause notice itself indicates that the Modvat credit was applied for inputs received in the appellant's factory for the period March, 1994 to 28th July, 1994 which was within the prescribed period of six months. Consequently in our opinion the authorities as well as the Tribunal committed an error in not allowing the application for availing the Modvat credit for the said period. The application for condonation of delay could not have been rejected by the authorities. - Decided in favour of assessee
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2016 (2) TMI 183
Distribution of Cenvat credit without obtaining registration and without pro rata distribution - revenue neutral exercise - input service distributor (ISD) - Held that:- It is true that the Government had framed Rules of 2005 for registration of input service distributors, who would have to make application to the jurisdictional Superintendent of Central Excise in terms of Rule 3 thereof. Sub-rule (2) of Rule 3 further required any provider of taxable service whose aggregate value of taxable service exceeds certain limit to make an application for registration within the time prescribed. However, there is nothing in the said Rules of 2005 or in the Rules of 2004 which would automatically and without any additional reasons dis-entitle an input service distributor from availing Cenvat credit unless and until such registration was applied and granted. It was in this background that the Tribunal viewed the requirement as curable. Particularly when it was found that full records were maintained and the irregularity, if at all, was procedural and when it was further found that the records were available for the Revenue to verify the correctness, the Tribunal, in our opinion, rightly did not dis-entitle the assessee from the entire Cenvat credit availed for payment of duty - Decided against revenue Coming to the question of penalty, right from the show cause notice stage till the final disposal of the show cause notice proceedings, we find little evidence to support the allegations of willful misstatement, suppression, fraud or collusion on the part of the assessee. In fact, perusal of the show cause notice would show that the entire basis of the Revenue was wrongfully availment of the credit. Mere wrongfully availment without element of mens rea and that too for the purpose of evading payment of duty would not be sufficient to impose penalty. The adjudicating authority, without any basis or evidence, merely mechanically recorded that the assessee had, by reason of willful misstatement, suppression of fact or in contravention of the provisions of the Rules, evaded payment of central excise duty. He was not even sure whether this was a case of willful misstatement or suppression of fact or contravention of provisions of the Rules.- Decided against revenue
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2016 (2) TMI 182
Settlement of a case - Eligibility to avail the benefit of the SSI exemptions No. 8/2003-C.E - benefit of cum duty price - Held that:- The applicant has admitted duty liability on a cum-duty basis. The Revenue has not given any reason as to why cum-duty benefit may be denied. There is also no charge that the applicant cleared goods clandestinely nor is there any charge against M/s. Bata India that they procured goods from the applicant without payment of duty. Under the circumstances the Bench holds that in terms of the Supreme Court judgment in the case of Commissioner of Central Excise, Delhi v. Maruti Udyog Ltd. [2002 (2) TMI 101 - Supreme Court ], the benefit of cum-duty is available to the applicant. Late fee, as prescribed, for late filing of returns is to be paid by the applicant. So far as the co-applicants are concerned, the Bench finds that no specific charge has been alleged against the co-applicants. The SCN only states that the co-applicants who are partners of the applicant are responsible for any activity in their factory premises. This is not sufficient to establish any culpability. The Bench accordingly finds that the applicant has made full and true disclosure and has cooperated in the proceeding during the investigation as well as before the Commission. In view of above and the facts and circumstances of the case, the Bench settles the case under Section 32F(5) - immunities to the applicant granted under sub-section (1) of Section 32K of the Act.
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Indian Laws
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2016 (2) TMI 175
Constitutionality of Sardar Sarovar Narmada Nigam Limited (Conferment of Powers to Redeem Bonds) Act, 2008 - Held that:- The impugned Sardar Sarovar Narmada Nigam Limited (Conferment of Power to Redeem Bonds) Act, 2008 does not fall within the legislative head or legislative field either under Entry 43 in the State List being ‘Public Debt of the State’ or under Entry 20 in the Concurrent List being ‘Economic and Social Planning’, to the Seventh Schedule of the Constitution nor it traces legislative field even by reading the said two Entries together. It is held that the impugned legislation is constitutionally invalid, for, the impugned legislation and the provisions thereof operate in the legislative field already occupied by the competent Central legislation, in particular Securities Contract (Regulation) Act, 1956, Security Exchange Board of India Act, 1992, the Indian Companies Act, 1956 as the provisions of these Central legislations govern the matters and aspects sought to be dealt with and provided for by the impugned legislation. The State Legislature cannot claim and does not have the legislative competence to enact the impugned law. If the legislative head is to be traced for the impugned legislation, at the best, the same may be traced in Entry 7 in the Concurrent List for the reason that the impugned legislation and the provisions enacted therein deal with the special kind of contract which would be falling within the said Entry. But then even in this purview the State law fails to co-exist and stands in conflict with the Security Contracts (Regulation) Act. The impugned legislation could be traced for its legislative head at the best, to Entry 7 in List III-the Concurrent List to the Seventh Schedule of the Constitution, as the impugned legislation and the provisions enacted therein deal with the subject-special kind contract falling within that Entry. The impugned legislation, however in its pith and substance is a law in respect of any in connection with the Regulation of Securities and the governing mechanism therefor which are provided for by the aforesaid laws made by the Parliament. The provisions of the impugned legislation are irreconcilable with the Central legislation occupying the field. The impugned law made by the State Legislature and the laws made by the Union Legislature aforesaid, having regard to their subject matter area, nature and effect cannot stand together. The impugned law cannot be obeyed without disobeying the Central legislations. Therefore the conclusion is that the enacting of impugned legislation amounts to an incompetent legislative exercise by the State Legislature. We declare that the Act is constitutionally invalid.
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