TMI Tax Updates - e-Newsletter
February 9, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
Reopening of assessment on the basis of perusal of the balance sheets - Re-appreciating the very same material on facts ad-infintum lays the Revenue open to the charge of arbitrariness and abuse of a power vested in the A.O - AT
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Income Tax:
Allowance of deduction the expenses - when executives are employed and the infrastructure is ready to commence business, it can be said that the business has been set up for carrying on business. - HC
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Income Tax:
Reopening of assessment - while issuing notice, the subsequent Assessing Officer did consider the material which was already on the record, which was considered by the Assessing Officer, while framing the scrutiny assessment u/s 143 - Reopening order unsustainable - HC
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Income Tax:
Penalty levied u/s 271(1)(c) - this is not a fit case for levy of 300% penalty. Therefore, we direct the assessing officer to levy minimum penalty i.e. 100% of the income sought to be evaded and compute the penalty accordingly. - AT
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Income Tax:
Entrance fee received from members - since the amount was in the nature of deposits, i.e., capital receipts, in the hands of the assessee, the forfeiture of the same cannot change the nature of receipt, therefore, it is capital receipt - AT
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Income Tax:
Undisclosed current asset - the impugned addition was part of gross receipt and as shown income in the profit and loss account, thus, it can not become an addition again bringing the same for taxation for not following the principles of accountancy - AT
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Income Tax:
TDS - non availability of PAN - @ 20% OR 10% - Since the mistake of quoting wrong PAN has been rectified in the revised TDS return filed by the assessee which has been accepted by the department, therefore, there is no justification in raising a demand on account of short deduction of TDS. - AT
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Income Tax:
Exemption claimed u/s 10(10)(i)- arrear of gratuity received from the State Government after retirement - assessee to be entitled to exemption u/s 10(10)(i) in respect of arrears of gratuity, following the same, extend the benefit of exemption u/s 10(10AA)(i) in respect of arrears of leave encashment - AT
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Income Tax:
Estimation of cost of construction - Adopting State PWD rate for construction may be preferable rather than Central PWD rate - AT
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Income Tax:
The fact that the payment took the character of liquidated damages, does not obliterate the fact that the liability to pay was on account of dividend. Failure on the part of the assessee to pay dividend was a breach of the contract which entitled the UTI Bank to recover damages - Not to be allowed as business expenditure - HC
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Customs:
EPCG Scheme - breach of condition of EPCG - import of Rolls Royce Ghost model car - If the vehicle has been imported, there is nothing that could be enforced as far as its parking or its plying within the State of Karnataka or its registration with a particular Regional Transport Office. - HC
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Customs:
Import of cosmetics - Loomy Tunes Room Air Fresheners - The Commissioner of Customs has no power to waive the conditions subject to which such cosmetic products can be imported as he is not the Competent Authority but someone else. - HC
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Customs:
Import of rigs for repair and reexport - non filing of Import General Manifest of the towing rigs - Provisions of the Act are required to be met and complied with even when no goods are to be unloaded for import into India or the vessel is not a ‘good’ meant for home consumption - though Goods are liable to confiscation, reduction in redemption fine by the tribunal is justified - SC
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Customs:
Denial of exemption on the ground that the re-imported goods is not the same goods which were exported by the appellant - However, the goods contain two stickers and one of them matches in batch number with the export goods. The other also differs marginally and could be, possibly, a result of clerical error - Exemption allowed - AT
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Customs:
Imposition of penalty u/s 114A of Customs Act, 1962 - failure to specify the name of the firm or individual on whom the penalty u/s 114A of CA, 1962 was fastened - There is no requirement for a specific mention of the importer to validate the penalty under section 114A of Customs Act, 1962 - AT
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Customs:
The Tribunal has become functus officio and has no jurisdiction to entertain the application for restoration of appeal in view of the clear violation of the Hon’ble High Court Order to make the pre-deposit - AT
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Service Tax:
Rejection of VCES declaration - clerical error - the appellant had failed to consider the amount of APMC contract in VCES declaration, no benefit in respect of said duty and penalty can be granted to the appellant. - AT
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Service Tax:
CENVAT credit - all these insurance policies which have been taken by appellant are connected with the activity of the appellant i.e. manufacturing of Hot Iron and Sponge Iron - credit allowed - AT
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Central Excise:
Valuation - The tools were used for manufacture of components under job work in terms of Rule 4(5)(a). In such case no excise duty is payable. Therefore, no question of inclusion of amortisation cost of the tools arise. - AT
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Central Excise:
Refund of unutilized cenvat credit - deemed export ie. Supplies made to 100% EOU is at par with the physical export and all the benefit otherwise available to the export out of India shall be mutatis mutandis applicable to the clearances made to the 100% EOU - AT
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Central Excise:
Valuation - physician samples manufactured and supplied either on loan license basis or on job-work basis - irrespective it is physician samples, the valuation shall be governed by Section 4 of the Central Excise Act. - AT
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Central Excise:
Valuation - royalty - even though there is a clause of royalty payment but since payment transaction was not made, there is no question of inclusion of any amount in the assessable value of the goods - AT
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Central Excise:
Valuation - the notional interest of the advance which is not only against the appellants manufactured goods but also towards other bought out items and service of the works contract is involved. - interest on advances cannot be included in the assessable value - AT
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Central Excise:
The appellants have issued invoices without payment of duty and issue of invoice without payment of duty is contravention of provision of Cenvat Credit Rules - Levy of penalty confirmed - AT
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Central Excise:
Refund claim - cenvat credit - Rule 5 read with N/N. 11/2002-CE(NT) dated 1-3-2002 - Commissioner (Appeals) had no jurisdiction to question the appellant that why credit could not be utilized for clearance of the goods for home consumption - AT
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Central Excise:
Cenvat credit Rules 2002 permitting carry forward of the unutilised Cenvat credit remained in the hands of the amalgamating company to be utilized by the amalgamated company, there is no question of any demand or recovery of the Cenvat credit amount - AT
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VAT:
Exemption from sales tax - Entitlement certificate - backward area - Vires of notification - the fundamental and underlying difference between the two schemes and the two modes is the factor and which has weighed with the State - No reason to interfere with the impugned Notifications - HC
Articles
Notifications
Companies Law-
F. No. A-45011/80/2016-Ad.IV - S.O. 345(E) - dated
3-2-2017
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Co. Law
Amendment in Notification Number S.O. 1935 (E) dated the 1st day of June, 2016
Customs-
6/2017 - dated
7-2-2017
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ADD
Seeks to extend the levy of anti-dumping duty, imposed on Cold Rolled Flat Products of alloy or non-alloy steel originating in or exported from China PR, Japan, Korea RP and Ukraine vide notification No. 45/2016-Customs (ADD), dated the 17.08.2016, for a further period of two months
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5/2017 - dated
7-2-2017
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ADD
Seeks to extend the levy of anti-dumping duty, imposed on Hot Rolled products of alloy or non-alloy steel originating in or exported from China PR, Japan, Korea RP, Russia, Brazil and Indonesia, vide notification No. 44/2016-Customs (ADD), dated the 08.08.2016, for a further period of two months
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (2) TMI 324
Claim of set off of brought forward unabsorbed depreciation pertaining to AY 1999-2000 against the income of AY 2008-09 - Held that:- Respectfully following the judgment of Hon. Jurisdictional High Court in the case of Gujarat Themis Biosyn Ltd. (2014 (5) TMI 194 - GUJARAT HIGH COURT) and in the case of General Motors India P. Ltd. (2012 (8) TMI 714 - GUJARAT HIGH COURT ) we are of the view that as per the provisions of sec.32(2) of the Act as amended by Finance Act, 2001, unabsorbed depreciation concerning assessment year 1997-98, 1999-2000, 2000-01 and 2001-02 can be set off in subsequent years without any time limit. We, therefore, find no reason to interfere with the order of ld. CIT(A) and dismiss the appeal of Revenue.
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2017 (2) TMI 323
Penalty u/s 271(1)(c) - bogus gifts - Held that:- the case of the assessee represents a classic case of creating the dubious capital. The assessee is owned agricultural income which has been found to be not justified and the gifts from co-owner brother Shri Vinodbhai Patel has been found to be not correct as the bills were found to be bogus. In view of these facts and circumstances, I find no infirmity in the order of the ld. CIT(A) which is upheld. Accordingly, this appeal of the assessee is dismissed.
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2017 (2) TMI 345
Depreciation on aircraft acquired on hire purchase -
Issue notice only on Question No. 2 - whether in the facts and in the circumstances of the case and in law the Hon'ble High Court was justified in not admitting the appeal of the revenue on the issue in deleting the addition made on account of depreciation on aircraft acquired on hire purchase. Ref hc case - 2016 (2) TMI 572 - BOMBAY HIGH COURT
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2017 (2) TMI 333
Penalty u/s 271(1)(c) - addition u/s 14A - Held that:- We do not see any concealment or furnishing of inaccurate particulars in respect of the disallowance made under Section 14A of the Act. Disallowance came to be made by invoking the provisions of Rule 8D. Here the assessee proved that it has own funds much more than investments and therefore there is no question of disallowance under 8D 2(ii). Coming to administrative expenses disallowed under Rule 8D 2(iii) we find that during the assessment proceedings, the assessee itself given the computation u/s 14A for disallowance of estimated expenditure under Rule 8D 2(iii). This expenditure came to be disallowed by the operation of law but not on account of the reason that the assessee furnished inaccurate particulars or concealment of income. Hence no penalty is attracted for such disallowance.
Addition made towards short term capital gains - Held that:- The bonafide explanation of the assessee that it is an inadvertent mistake and bonafide error while computing the capital gains is not proved to be false by the assessing officer. The assessing officer could not prove that the explanation of the assessee was not genuine. The assessee computed long term capital gain taking the sale proceeds of entire investments which were shown in the profit and loss account may be by oversight or inadvertence. It is only a change in the head of income. It is not complete non disclosure by the assessee. Therefore, the explanation of the assessee since not proved to be non genuine, in our view, there is no concealment of income or furnishing of inaccurate particulars by the assessee in respect of computation of capital gains, thus we delete the penalty levied by the assessing officer on the addition of capital gains.
Assessee appeal allowed.
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2017 (2) TMI 332
Penalty levied u/s 271(1)(c) - false claim made towards interest deduction while computing income from house property - Held that:- The assessee has deliberately filed inaccurate particulars in respect of the claim made towards interest deduction while computing income from house property. It is apparent from the facts that entire loan amount was not utilized for purchase of the property on which rental income was earned. Similar deductions were made in the assessment years 2007-08, 2008-09 and 2009-10. It is not in dispute that the assessee herself filed revised return for the assessment year 2009-10. This shows that the assessee all along knows that the entire interest claimed against rental income is not allowable. However, for the 2010-11, no such revised return was filed. The intentions of the assessee in claiming entire interest as deduction from house property income does not appear to be bonafide.
Thus we agree with the view of the lower authorities that the assessee had deliberately and intentionally made a false claim of excess interest against the house property income. However, at the same time, we are of the considered view that this is not a fit case for levy of 300% penalty. Therefore, we direct the assessing officer to levy minimum penalty i.e. 100% of the income sought to be evaded and compute the penalty accordingly. - Decided partly in favour of assessee
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2017 (2) TMI 326
Undisclosed current asset - outstanding balance receivable being not reflected the same in the balance sheet as on 31-03-06 - Held that:- We find that the impugned amount of ₹ 3,70,244/- remained as unpaid as on 31-03-2006 as the Simplex Infrastructures Limited to whom the Assessee rendered services retained the same as retention money for realization of liquidated damages, if any, for the work executed by the Assessee and according to Assessee, the realization of the amount was uncertain and that was the reason, he did not show the amount as receivable in the Balance Sheet.
It is pertinent to note that the Simplex Infrastructures Limited deducted tax on the total amount as required to be paid to the Assessee and a letter of confirmation was filed before the AO as issued by the Simplex Infrastructures Ltd, deductor, along with the evidences of payments mentioning the cheque no’s and dates of payments of impugned of ₹ 3,70,244/- and thereby, we agree with the submissions of the Ld.AR that the tax was offered on the total value of contract work and we find force in the arguments of the Assessee that income once taxed can not be taxed again, we hold that the impugned addition was part of gross receipt and as shown income in the profit and loss account, thus, it can not become an addition again bringing the same for taxation for not following the principles of accountancy. - Decided in favour of assessee
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2017 (2) TMI 339
Eligibility of exemption u/s 54F - as within the stipulated period the assessee has purchased plot for construction of residential house but constructions has not been completed - Whether phrase 'constructed residential house", inter-alia, will include investment in purchase of residential plot and investment in payment of development charges for use of plot ? - Held that:- The assessee has not started the construction within the specified period and the development charges have been paid to M/s Ansal Housing and Construction Ltd. for the development of the road and other facilities in the colony where the plot is situated at a pre-determined rate depending on the size of the plot. Mere payment of the development charges to the builder does not mean that the assessee has started construction, which is essential condition or claiming exemption u/s 54F of the I.T. Act.
As in the case of Pawan Kumar Garg v. Commissioner of Income Tax reported in (2007 (7) TMI 294 - PUNJAB AND HARYANA HIGH COURT ) wherein also the Court has held that no benefit under Section 54F of the Act could be given to the assessee, who had failed to fulfil the primary ingredients of proving either the constructions of a house or the purchase of a house. In fact there is not such a whisper that the construction had been started or that any portion at all had been built. - Decided against the assessee.
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2017 (2) TMI 321
Penalty u/s 271(1)(c) - assessee made certain claims by way of business expenditure in the return of income but was not able to substantiate these claims - Held that:- There is no conclusive proof that the assessee concealed income or furnished inaccurate particulars of income. The AO has not brought enough incriminating material for concealment and there is no material for establishing the concealment independently in the given facts and circumstances of the penalty is not leviable, because all the documents submitted by the assessee were neither rejected by the AO as false or incorrect facts nor AO had clinching any further evidence of concealment of facts. Further find that the assessee has admitted the addition only to avoid hazards of litigation and to buy the peace but the same do not constitute admission for the purpose of levying penalty.
Section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. On the facts and circumstances of this case the assessee’s conduct cannot be said to be contumacious so as to warrant levy of penalty. - Decided in favour of assessee
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2017 (2) TMI 337
Reopening of assessment - assessee debited an amount under the head interest and finance charges on account of loan as in order to expand the business in USA, the company had established a step down subsidiary in USA. Held that:- As from the reasons recorded, it appears that according to the Assessing Officer, the expenditure was incurred to establish a subsidiary in USA, and therefore, such expenditure was covered under Section 35D [1] (ii) of the I.T Act, and therefore, only 1/5th of the expenditure ie., ₹ 47,23,722/- was required to be allowed. Instead, the entire amount claimed by the assessee ie., ₹ 2,36,18,612/- is allowed to be debited. Therefore, according to the Assessing Officer, his predecessor has wrongly allowed the entire amount of ₹ 2,36,18,612/- to be debited under the head “Interest and Finance charges”. In the reasons recorded, it is specifically observed by the Assessing Officer that, “..On observation of the assessment records,” meaning thereby, while issuing notice, the subsequent Assessing Officer did consider the material which was already on the record, which was considered by the Assessing Officer, while framing the scrutiny assessment under Section 143 of the Act.
As observed hereinabove, even there is no allegation in the reasons recorded that there was any failure on the part of the assessee in not disclosing true and correct facts necessary for the assessment. - Reopening order unsustainable - Decided in favour of assessee.
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2017 (2) TMI 336
Revision u/s 263 - issue of paying of commission to the sales agency was not examined earlier by the Assessing Officer - Held that:- Tribunal came to conclusion that assessee was in no way in control of the selling agent. Further the tribunal also examined the documents relating to the approval granted by the Government of India, Ministry of Law, Justice & Company Affairs issued under Section 294 AA of the Companies Act, as this approval was required to be taken by the companies, which had to be taken paid up capital of more than ₹ 50 lakhs. This too reflected the genuineness of the commission which was granted by the assessee, who is selling agent. It is on the basis of above material that the tribunal has come to conclusion that the learned CIT had made an error in revising the order under Section 263 of the Income Tax Act, as the material on record did not reflect in any manner that any activity of the assessee had resulted in causing prejudice to the revenue, nor were there any circumstances to contemplate the taking of any action under Section 263 of the Income Tax Act by the department. The tribunal, therefore, came to conclusion that the commission paid to the selling agent was based on sound and genuine business consideration and therefore, the allowances have rightly been allowed by the A.O. The disallowance made by the CIT was therefore, deleted by the Tribunal.
Having heard the counsel for the both the sides and after examining the law on this issue, we are of the opinion that in the facts and circumstances of this case it is abundantly clear that the provisions of Section 263 of the Income Tax Act were not attracted in the present case for reasons that no income had escaped taxation and no prejudice or loss had been caused to the revenue. - Decided in favour of assessee
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2017 (2) TMI 335
Allowance of expenditure of direct and indirect nature - assessee is a cricketer receiving match fees/retainerships from various cricket bodies as declared under the head ‘income from business and profession’ - Held that:- Assessee clarifies that the assessing authority itself had verified correctness of the impugned expenses. The same however does not emanate from the assessment order. We further find that neither the Assessing Officer nor the CIT(A) has sought to establish a direct nexus between assessees professional income from playing cricket along with his expenditure in question claimed u/s.37.
It is evident to us that the learned CIT(A) has merely drawn his conclusions qua genuineness aspect instead of establishing the above stated nexus between each head of expenditure vis-à-vis assessee’s taxable income declared. We deem it appropriate in these facts and circumstances that the issue in question requires Assessing Officer’s re-adjudication in accordance with law after affording adequate opportunity of hearing to the assessee so as to prove the above direct nexus. - Decided in favour of revenue for statistical purposes.
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2017 (2) TMI 327
Addition u/s. 68 - Held that:- The undisputed fact is that the assessee had produced all the cash creditors except one. It is also not in dispute that all the related documentary evidences were furnished to establish the genuineness of the transaction and the prima facie creditworthiness of the creditors. The documentary evidences given it goes to prove that the assessee has discharged the initial burden.
As the assessee has fulfilled all the conditions to discharge its onus additions hereby deleted - Decided n favour of assessee
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2017 (2) TMI 322
Reopening of assessment - spreading of unaccounted investments over the period of construction of the property - period of limitation - Held that:- This Tribunal has to confine itself only to the assessment year for which the appeal is filed either by the assessee or by the Revenue relates to. Since the appeals relating to assessment years 2002-03 and 2003-04 are not pending before this Tribunal, this Tribunal is of the considered opinion that even a casual reference made by ITAT with regard to assessment years of construction cannot be treated as direction or finding. When this issue came before another co-ordinate Bench of this Tribunal in Emgeeyar Pictures Pvt. Ltd. (2016 (6) TMI 418 - ITAT CHENNAI ), on a majority opinion, this Tribunal found that when the assessment was barred by limitation, the Revenue cannot reopen the assessments by virtue of opinion expressed by higher forum at a later stage.
This Tribunal is of the considered opinion that reopening of assessments under Section 147 for assessment years 2002-03 and 2003-04 are barred by limitation.
Estimation of cost of construction - Held that:- State Government has prescribed a rate for construction of building in the State. Central Government has also prescribed rate for construction of building. When there was a variation in the cost of construction between the State PWD and Central PWD, this Tribunal is of the considered opinion that the State PWD rate would be more relevant rather than Central PWD rate. The Central PWD rate might have been fixed by taking the cost of material available at the Headquarters, namely, New Delhi. The State PWD rate may be fixed on the basis of rate prevailing in a particular State. Adopting State PWD rate for construction may be preferable rather than Central PWD rate. Therefore, the orders of the lower authorities are set aside and the Assessing Officer is directed to estimate the cost of construction on the basis of State PWD rate.
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2017 (2) TMI 340
Allowance of deduction the expenses - business of the Assessee Company was not set up - distinction between setting up of business and commencement of business - Held that:- Tribunal on examination of facts found that the business of the respondent – assessee has been set up in the subject assessment year and consequently, the business loss arising on account of expenditure as claimed by the respondent – assessee was allowable. Thus when executives are employed and the infrastructure is ready to commence business, it can be said that the business has been set up for carrying on business. - Decided in favour of assessee.
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2017 (2) TMI 341
Reopening of assessment - statutory remedy - Held that:- Except for contending that the loose papers and the entries made in the loose papers cannot be treated as evidence to reopen the assessment, we find that in the assessment order detailed analysis of the various aspects of the matter has been done and the assessment has been completed. That being so, at this stage when the assessment is already over after notice under Section 148 was issued and when proceedings held under Section 147 has attained finality in view of the assessment order made vide Annexure P-25 on 30.12.2016, it is not appropriate for this Court to go into various aspects of the matter and entertain the writ petition, merely because in some other case the writ petition is pending consideration.
In the present case, once we find that a statutory remedy of appeal is available to the petitioner it is not appropriate to take any indulgence in the matter bypassing the statutory remedy available.
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2017 (2) TMI 342
Addition u/s 68 - ITAT ruled that the additions were unwarranted - Held that:- The appellant has adduced the documentary evidences in support of the transaction in question. The identity of the purchasers of the shares was established as it was borne on the record of the Income Tax Department. The purchasers have PAN card as well.
ITAT discounted the Revenue’s submissions that the investment shown in the book of accounts and reflected as assets in the side of the balance sheet, should have been properly treated and that in the absence of such treatment Section 68 applies. The ITAT rejected this contention and held - based upon the principles enunciated in CIT v. Vishal Holding & Capital Pvt. Ltd. (2010 (8) TMI 634 - DELHI HIGH COURT ) that the invocation of Section 68 in the circumstances is unwarranted. - Decided n favour of assessee
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2017 (2) TMI 344
Reopening of assessment - advancing loans to son and nephew by assessee - Held that:- Considering the copy of the reasons recorded, it is seen that the AO does not refer to any new material noticed by him for re-opening the assessment as the AO records that on a “perusal of the balance sheets” the opinion is formed. The consistent claim of the assessee that the re-opening is based on a mere change of opinion has not been rebutted by the Revenue by referring to any fact, argument or evidence which came up for consideration. In the absence of any new material in the peculiar facts of the present case justifying change of opinion income cannot be said to have escaped assessment. Re-appreciating the very same material on facts ad-infintum lays the Revenue open to the charge of arbitrariness and abuse of a power vested in the A.O.
Consistent claim of the assessee before the tax authorities on facts has wrongly been ignored. It is seen that the assessee in each of these three years though has pleaded commercial expediency for advancing loans to his son and nephew where being a senior citizen i.e. 60 years the presence of his relatives was considered necessary on site to ensure quality and time related compliances in order to avoid penalties and being black listed from Government contract work the son and the nephew are stated to have helped by being present on site and over-seeing the quality and the work. However, if even otherwise the availability of sufficient funds in his own capital account and interest free loans and sundry creditors have not been disputed by the Revenue the occasion to make addition in the peculiar facts of the present case does not arise. The advances have been returned and have not been advanced out of borrowed funds for business purposes. - Decided in favour of assessee
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2017 (2) TMI 343
Disallowance u/s 36(i)(iv) on account of bed debts - Held that:- In the instant case, the assessee, on one hand, is claiming that the debt of the said party has been written off in its books of accounts, however, the Assessing Officer has stated that the said party was appearing as debtor in the balance sheet as on 31/3/2008. Thus, in the case, it needs verification whether the debt in question was written off in the year under consideration. In view of the above, we feel it appropriate to restore the matter to the file of the Assessing Officer, who is directed to ascertain from the books of accounts of the assessee, whether the bad debt in question has been written off by the assessee in its accounts for the year under consideration and then decide the issue in dispute in accordance with law. The assessee shall be afforded sufficient opportunity of hearing. Accordingly, the ground of the appeal is allowed for statistical purpose.
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2017 (2) TMI 320
Exemption claimed u/s 10(10)(i) - arrear of gratuity received from the State Government after retirement - Held that:- As decided in assessee's own case for previous AY the assessee is found to be an employee holding a civil post under a State, in considered opinion, the provisions of section 10(10)(i) are fully attracted in this case entitling him to exemption for the amount under consideration. Once a case falls under clause (i) of section 10(10), the same cannot be brought within the purview of clause (iii) of section 10(10). Therefore, hold that the assessee is entitled to exemption u/s 10(10)(i) in respect of gratuity amount received in total upto ₹ 10 lac, which covers a sum of ₹ 6,50,000/- received during the year. Overturning the impugned order on this score, allow exemption u/s 10(10)(i) to the arrears of gratuity received by the assessee at ₹ 6,50,000/- during the instant year.
As regards the second amount received by the assessee during the year towards the arrears of leave encashment AR submitted that there is not much difference in the language of section 10(10)(i) and 10(10AA)(i) and the view taken in respect of arrears of gratuity u/s 10(10) should be followed for arrears of leave encashment u/s 10(10AA). The ld. DR supported this proposition. As both the sides are consensus ad idem on the position that the view taken in the context of section 10(10) as applicable to leave gratuity be followed here in the context of section 10(10AA) in the context of leave encashment, desisting from independently examining the later provision. In view of the fact that held the assessee to be entitled to exemption u/s 10(10)(i) in respect of arrears of gratuity, following the same, extend the benefit of exemption u/s 10(10AA)(i) in respect of arrears of leave encashment. - Decided in favour of assessee
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2017 (2) TMI 334
Depreciation treated as expenditure in context to section 14A - disallowing Depreciation Allowance under rule 8D read with section 14A - Held that:- The depreciation is a notional expenditure which is provided on the fixed assets. The depreciation is not out of pocket cost. It has not been incurred during the assessment year. Section 14A clearly speaks about the expenditure incurred in relation to earning exempt income which do not form part of the total income.
Thus it is clear that the depreciation is a statutory allowance u/s. 32 and it is not expenditure in context to section 14A. SEE Vishnu Anant Mahajan vs. ACIT [2012 (6) TMI 297 - ITAT, Ahmedabad ] - Decided in favour of assessee
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2017 (2) TMI 328
Allowing payments U/s 40A(3) - Held that:- Once books are rejected then AO cannot make separate additions in respect of different items and, therefore, this observation of AO is not legally sustainable in view of the decision of Hon’ble Supreme Court in the case of Commissioenr of Sales Tax Vs. H.M. Esufali H.M. Abdulali [1973 (4) TMI 49 - SUPREME Court].
The plea of payments were made on bank holidays have not at all been considered by AO and, therefore, the same is to be examined by AO afresh. Further, ld. counsel has referred to page 12 of PB wherein details of payment over ₹ 20,000/- and less than ₹ 20,000/- is made aggregating to ₹ 3,69,407/- and this also needs to be examined by AO. Therefore, this ground is allowed for statistical purposes in respect of aforementioned observation.
Disallowance of freight - Held that:- Assessee has not been provided cross-examination of proprietor of Chacha Transport Co. and, therefore, the matter is restored back to the file of AO to provide opportunity to cross-examine the proprietor of Chacha Transport Co. Accordingly, this ground is allowed for statistical purposes.
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2017 (2) TMI 331
Addition of amount paid to the bank on account of interest - Held that:- We find that it is fact that the capital of the partners in all the years from 2006-07 to 2009-10 remained more than ₹ 1,00,00,000 against the alleged loan of ₹ 1,00,00,000. The hon'ble Punjab and Haryana High Court in the case of Gurdas Garg v. CIT [2015 (8) TMI 569 - PUNJAB & HARYANA HIGH COURT] has decided the following question of law in favour of assessee.
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2017 (2) TMI 330
Deduction of travelling expenditure - Held that:- This Tribunal is of the considered opinion that when the assessee has made comprehensive payment of commission, which included travelling expenditure, deduction towards travelling expenditure of foreign agent cannot be claimed. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. - Decided against assessee
TDS u/s 195 - Disallowance u/s 40(a)(ia) - non deduction of tds on services of Walmsleys Ltd., UK for engineering drawings - Held that:- Erection of the machine was done by the engineers of M/s. Walmsleys Ltd., UK in India. In fact, the engineers came down to India to the site of the assessee to supervise the erection personally. This clearly demonstrates that the engineering service was rendered in India by M/s. Walmsleys Ltd. UK. Even though the design and drawings were said to be prepared in the UK, mere preparing design and drawings would not complete the service rendered by M/s. Walmsleys Ltd. UK. The Walmsleys Ltd. UK has to necessarily execute the project and supervise the same in India. Therefore, the UK company not only made available of design and drawings to the assessee-company but also erected the entire project in India under the personal supervision. Therefore, the services rendered by M/s. Walmsleys Ltd., UK, is very much taxable in India. Assessee has to necessarily deduct tax under section 195 of the Act - Decided against assessee
Addition under section 28(iv) - advance receipt - Held that:- The assessee could not furnish any details with regard to so called advance said to be received and details of the supplies made to the above parties. Even though the assessee incurred an expenditure of ₹ 14,92,200 in executing the orders, which was shown as work-in-progress, the assessee could not produce any material before the authorities below regarding work-in-progress. In the absence of details, this Tribunal is of the considered opinion that the Commissioner of Income-tax (Appeals) has rightly confirmed the addition made by the Assessing Officer. - Decided against assessee
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2017 (2) TMI 325
Short deduction of TDS - Liability deduct TDS on interest payment - non availability of PAN - @ 20% OR 10% - Held that:- We find that it is not a case that PAN of payees available with the assessee was not correct but this is a case where due to typographical error or much volume of entries in TDS return, wrong PAN of only one payee was mentioned in the original TDS return though the payee appears to have supplied correct PAN to the assessee. Similarly, Shri Prafull Kumar Jain is old assessee. Therefore, it is a clerical and typographical error while feeding data in TDS return which led to wrong application of tax rate of 20% in the case of one deductee whereas the assessee might have paid interest to a large number of persons, the assessee being a public sector bank. Since the mistake of quoting wrong PAN has been rectified in the revised TDS return filed by the assessee which has been accepted by the department, therefore, there is no justification in raising a demand on account of short deduction of TDS.
Assessing Officer was not justified in adopting the rate of 20% as against 10%. We, therefore, delete the demand and interest thereon - Decided in favour of assessee
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2017 (2) TMI 338
Recovery of dues - Auction purchaser failure to remit the balance consideration of sale - sale in favour of the predecessor-in-interes - Held that:- This is a case in which the petitioner has been in possession of the property prior to the date of sale. The petitioner had, in fact, filed a claim petition at the relevant time, which was rejected as per Exhibit P8. The petitioner, admittedly, was in possession of the Cashew factory in the property purchased by him, as is seen from Exhibit P9; a licence issued in the name of the petitioner's father on 22/07/1985. In such circumstance, equity demands that the petitioner be given a chance to settle the entire dues under the IT Act created by the 4th respondent, which also occasioned the charge being created on the property purchased by the petitioner.
The respondents 1 to 3 shall, hence, intimate the amounts due as on 10th November, 2016 with any interest accruing to the dues and the petitioner shall be permitted to pay the said amounts within the said period; i.e., on or before 10.11.2016. The intimation of computation of amounts with interest shall be served on the petitioner within three weeks from the date of receipt of a certified copy of this judgment. If the petitioner makes the payment prior to 10/11/2016, deduction in the interest shall also be made so as to compute the interest only till the date of payment. If such payment is made, attachment shall be lifted. It is also directed that if amounts with respect to the dues have already been received, the same shall be deducted; for which the petitioner relies on Exhibit P10. The petitioner then shall be retained and reverted with unencumbered title of the property covered by Exhibits P1 and P2. The balance property covered by Exhibit P 5 shall then be enjoyed by the legal heirs of the 4th respondent or their assignees.
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2017 (2) TMI 329
Entrance fee received from members - capital receipts or revenue receipt - facilities that are made available to the members are done in the normal course of its business as the assessee is engaged in the business of race course - Held that:- There is no dispute to the fact that right from practically the date of incorporation, i.e., 1925 onwards, the entrance fee from the members was treated as capital in nature. As explained by the learned counsel that majority of the orders were passed under section 143(3) of the Act. We have noted the facts of the assessment year 2005-06, the order passed by the learned Commissioner of Income-tax (Appeals), wherein, vide ground No. 2 (page-2 onwards), entrance fee, received from its members held that the one-time entrance fees, received from its members is in the nature of lifetime membership fees, hence, it cannot be treated as annual subscription as the same is collected once in lifetime, therefore, it is a capital receipt. The hon'ble jurisdictional High Court in CIT v. Diners Business Services P. Ltd. [2003 (4) TMI 56 - BOMBAY High Court] held that any sum paid by a member to acquire the rights of a club is a capital receipt. We further note that for the assessment year 2003-04, while framing the assessment under section 143(3) of the Act and also for the assessment year 2001-02, identically the claim of the assessee was allowed. No contrary material was brought to our notice. It is also noted that even the revisional jurisdiction under section 263 was invoked by the Department and, finally, the entrance fees was treated as capital receipt, therefore, we find force in the contention of the assessee.
If this issue is analysed on the principle of consistency, we note that in earlier years, identically the claim of the assessee was decided in favour of the assessee by accepting the entrance fees as capital receipt, therefore, we are of the view that unless and until contrary facts are brought on record by the Revenue, no U-turn is permissible - Decided in favour of assessee
Receipt of interest-free deposits - capital receipts or revenue receipt - Held that:- As per the agreement, the first security deposit of ₹ 10 crores stand forfeited, as liquidity damages if due to any reason, the work related to "new development" is not completed by M/s. Pegasus Resorts and Hotels Pvt. Ltd. Since the new development could not be started due to inability of M/s. Pegasus Resorts and Hotels Pvt. Ltd., the aforesaid amount was forfeited by the assessee. We are of the view that since the amount of ₹ 10 crores was in the nature of deposits, i.e., capital receipts, in the hands of the assessee, the forfeiture of the same cannot change the nature of receipt, therefore, it is capital receipt. - Decided in favour of assessee
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2017 (2) TMI 291
Addition of cash deposited in to the bank accounts - peak deposits surrendered by assessee - Held that:- Admittedly, neither any other source of income has been pointed out by AO nor any investment out of withdrawals from bank has been shown. Under such circumstances, assessee’s explanation that both the bank accounts were in relation to its business, cannot be doubted. In our opinion, the peak surrendered by assessee should have been accepted by lower revenue authorities, in the absence of books of a/c. - Decided in favour of assessee
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Customs
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2017 (2) TMI 294
Import of rigs for repair and reexport - non filing of Import General Manifest of the towing rigs - Confiscation of goods - foreign going vessel - imposition of redemption fine and penalty - benefit of N/N. 153/94-Cus - whether foreign going vessels cease to be so when they enter into Indian territorial waters only for repairs? - goods for the purposes of Section 46(1) of the Act - Held that: - the vessel was in operation and primarily used within the territorial waters of India and was not used as an ocean going vessel. As a sequitur, it was held that the vessel were “goods” imported into India for home consumption for they were primarily to be used as a vessel in India, i.e., in the territorial waters. However, the Court was conscious and expressly guarded the said proposition clarifying that it was not pronouncing any dictum as to what would be the position if these goods (the vessel) were not intended to be primarily used in India or used occasionally for short period in India and whether in such situation, the vessel should be treated as a good for home consumption. As the vessel in the said case was brought in India and was primarily used as a transshipper and occasionally in the open seas, it was held to be a good imported for home consumption.
Release of foreign exchange, approval and licence, etc. are prior to the import. Import may not take place in spite of this aforesaid clearances/licence and release of foreign exchange. There may have been violation of another enactment/provision as the rig was not imported, albeit for deciding the question whether the rig was imported into India, the requirement of home consumption has to be satisfied. Then alone, the ‘good’, i.e., the vessel/rig would be taxable and customs duty payable under the Act. Pertinently, the adjudication order does not hold that the import had taken place in 1987 when the rig first put into operation in the high seas. This was not treated as the date of import or home consumption. The import as per the authorities had taken place when the rig was brought for repairs. The evaluation of the rig has been done on the basis of the last visit of the rig for repair in 1998.
While we are disposed to accept that there was no import, we would not on the said finding hold that the owner had not violated the provisions of the Act, which are much broader and wider in scope. The Act regulates and mandates compliance by the foreign going vessels when they enter the territorial waters. Provisions of the Act are required to be met and complied with even when no goods are to be unloaded for import into India or the vessel is not a ‘good’ meant for home consumption. Thus, violations recorded by the tribunal cannot be found fault with.
Though Goods are liable to confiscation, reduction in redemption fine by the tribunal is justified.
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2017 (2) TMI 295
Import of cosmetics - Loomy Tunes Room Air Fresheners - misdeclaration - jurisdiction - power of Competent Authority to pass discretionary order.
Held that: - no cosmetic, shall be imported into India unless that product is registered under the rules by the licensing authority. Rule 129A dealt with the Form and manner of application for Registration Certificate for importing cosmetics referred to above. Such application shall be made for Registration of cosmetics intended to be imported into India in Form 42 by every importer and shall be accompanied by a fee of 250/- US dollars or its equivalent to Indian rupees for each brand of cosmetics. Under Rule 129(C), the licensing authority was required to issue a Registration Certificate in Form 43 subject to the conditions contained therein. There is no material available on record to vouch for any such Registration Certificate in Form 43 has been obtained by or on behalf of the importer.
The goods which are liable to be imported subject to fulfillment of certain conditions, when so imported without fulfilling or satisfying such conditions amount to importing prohibited goods in terms of Section 11 read with Section 125 of the Act. Therefore, we find no merit in the contention canvassed that such of those clandestinely imported cosmetics and toiletries goods should also be permitted to be redeemed by the Commissioner of Customs and failure to do so vitiates the order is without any merit or substance. The Commissioner of Customs has no power to waive the conditions subject to which such cosmetic products can be imported as he is not the Competent Authority but someone else. Hence, the exercise of discretion has been properly carried out by the Commissioner of Customs.
There are no valid mitigating factors or compelling circumstances warranting the exercise of discretion to offer payment of redemption fine in lieu of confiscation. Neither are there any special equities calling for such an exercise.
Appeal dismissed - decided against appellant.
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2017 (2) TMI 296
EPCG Scheme - breach of condition of EPCG - import of Rolls Royce Ghost model car - the car was lying at the residence of one Prakash Shetty, Chairman and Managing Director of the appellant-assessee. Ordinarily, therefore, there was an appeal by the assessee and that is why he is styled as appellant in some part of the Tribunal's order, equally the Revenue was also an appellant.
Held that: - The Revenue found that there is no basis for the presumption that the assessee would not complete the obligations and within the stipulated period. The Department could not prove that the actual user condition has been violated by disposing of or transferring the vehicle by sale or lease or in any other manner before completing the export obligation. There is no condition and which can be found to be violated by mere parking of a vehicle. If the vehicle has been imported, there is nothing that could be enforced as far as its parking or its plying within the State of Karnataka or its registration with a particular Regional Transport Office. Therefore, such of these conditions which are read into the licence and not found cannot be held to be violated.
Appeal dismissed - decided against appellant.
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2017 (2) TMI 293
Benefit of N/N. 94/96-Cus dated 16.12.1996 - Section 111(m) of the Customs Act, 1962 - denial on the ground that the re-imported goods is not the same goods which were exported by the appellant - Held that: - the description of goods has not been mis-declared. Documents clearly described the nature of imported goods as non-standard quality drugs and thus the import of the rejected goods cannot be considered to be prohibited in the country attracting Section 111(d) especially when the said goods have been declared to be so. The description of goods given in the Bill of Entry is not incorrect. The Order-in-Original only contested a part of the description where it is claimed that it is re-import of exported goods.
If the goods are not re-imported, Section 111(m) is attracted. However, the goods contain two stickers and one of them matches in batch number with the export goods. The other also differs marginally and could be, possibly, a result of clerical error - invocation of Section 111(m) of the Customs Act, 1962 not correct.
Penalties set aside - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 292
Imposition of penalty u/s 114A of Customs Act, 1962 - failure to specify the name of the firm or individual on whom the penalty u/s 114A of CA, 1962 was fastened - Held that: - penalty u/s 114A is liable to be imposed on the person liable to pay duty as determined in proceedings under section 28 - The importer in the present matter has been identified in the impugned order as ‘noticee’ and has been fastened with differential duty on the enhanced value. Doubtlessly, it is the same entity that is liable to be penalised. There is no requirement for a specific mention of the importer to validate the penalty under section 114A of Customs Act, 1962. The order is not invalidated on that count - imposition of penalty justified.
Penalty u/s 112 of CA, 1962 - Held that: - While one penalty has been imposed u/s 114A, the penalty of ₹ 10,99,000/- is without reference to any provision, let alone section 112 as presumed by the appellant. Even if such penalty was imposed u/s 112 of Customs Act, 1962, this is a consequence of holding the goods liable for confiscation u/s 111(m) and the adjudicating Commissioner has rendered a finding for doing so - imposition of penalty presumed to be u/s 112, cannot also be faulted.
Imposition of penalty both u/s 114A and u/s 112 of Customs Act, 1962 is not improper - revenue dismissed - decided against revenue.
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Corporate Laws
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2017 (2) TMI 287
Grant of bail - detention in custody of under-trial prisoners - “Chit Fund Scam” involving the Saradha Group of Companies - Held that:- Having regard to the materials available, we are of the opinion, mainly in the face of the disclosures in the latest status report, that presently further confinement of the appellant in judicial custody is not an indispensable necessity for the unhindered investigation, that is in progress.
In the above view of the matter, the appeal is allowed and the appellant is ordered to be released on bail in FIR RC-04/S/2014-(SIT) Kolkata of ₹ 1 (One) crore and on furnishing two local sureties each of the like amount to the satisfaction of the Additional Chief Judicial Magistrate Alipore, Kolkata, West Bengal and also subject to the following conditions :
1) The appellant would surrender her passport to the Trial Court.
2) She would not leave the territorial limits of the city Kolkata without the written permission of the Trial Court and without informing the investigating agency.
3) She would report before the Trial Court and the investigating officer once a month, till the investigation in the case is completed in full.
4) She would not in any way hinder or try to influence the investigation in any manner whatsoever and would not endeavor to either tamper with any evidence or induce/influence/dissuade/intimidate any witness or deal with any record relevant to the case.
5) She would cooperate with the investigation and would always be available to be interrogated by the Investigating Agency.
6) Any other condition as the Trial Court may consider to be appropriate if and as and when necessary.
7) We hereby clarify that breach or non-compliance of any of the above conditions would entail immediate cancellation of the bail granted, either suo motu or on any complaint made by any quarter whatsoever.
8) Apart therefrom, such a breach or non compliance would be viewed very seriously and would visit the appellant with stringent adverse consequences as contemplated in law. The Trial Court as well as the Investigating Agency are directed to keep continuous vigil in the matter so as to, if need be, bring to the notice of this Court any conduct or action of the appellant warranting recall of this order.
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2017 (2) TMI 288
Penalty under Section 15A(b) of SEBI Act - appellant acquired and sold shares of Target Company in excess of the limits prescribed under regulation 7(1) read with regulation 7(2) of the SAST Regulations, 1997/ regulation 13(1) of PIT Regulations - Held that:- Admittedly, the appellant has failed to make disclosures as stipulated under those provisions. It is also admitted that the appellant has failed to make disclosures as contemplated under regulation 13(3) read with regulation 13(5) of the PIT Regulations. Where a person violates the provisions contained in the Regulations framed by SEBI then that person is inter-alia liable for monetary penalty as stipulated under SEBI Act.
Argument of the appellant that inspite of the violations committed by the appellant, no penalty could be imposed on the appellant, because the proceedings have been initiated after several years from the date on which violations took place is without any merit. Neither the SEBI Act nor the Regulations framed thereunder stipulate that proceedings for imposing penalty must be initiated within a specified time from the date on which violations are committed.
Argument advanced on behalf of the appellant that substantial shares of the Target Company were acquired by the appellant under a pledge and disclosure provisions would not apply to the pledged shares is equally without any merit. Once the shares are transferred to the demat account of the appellant, the appellant becomes absolute owner of the said shares with all the benefits attached to those shares. In such a case, appellant is bound and liable to make disclosures especially when such acquisitions are in excess of the limits prescribed under the respective regulations. Since the appellant has failed to make disclosures, appellant cannot escape penal liability.
Argument of the appellant that the penalty imposed against the appellant is exorbitant and excessively high and that the said penalty has been imposed without considering the mitigating factors set out under Section 15J of the SEBI Act is also without any merit. The disclosures were not made the penalty imposable for violating regulation 7(1) read with 7(2) of the SAST Regulations, 1997/ regulation 13(1) of the PIT Regulations would be ₹ 1 crore and for violating regulation 13(3) read with regulation 13(5) of the PIT Regulations the penalty imposable would be ₹ 1 crore. Thus, as against the penalty of ₹ 2 crore imposable against the appellant, the AO of SEBI after taking into consideration all mitigating factors has imposed penalty of ₹ 13 lac which cannot be said to be excessively high or exorbitant.
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Service Tax
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2017 (2) TMI 319
Rejection of VCES declaration - clerical error - the appellant had wrongly mentioned in Sl.No.6 of the said declaration. The tax liability of ₹ 4,08,857/- admitted by them was correctly declared in the enclosures attached to the said declaration. The appellants have also admittedly paid 50% of the said liability amounting to ₹ 2,04,429/- at the time of filing the declaration - Held that: - it was not intended to file a wrong declaration but it was a typographical error - the appellant has fulfilled his actual tax liability at the time of filing the declaration and the enclosures contained correct amount disclosed, one typographical error cannot dis-entitled the appellant from the benefit of the scheme in so far as the amount declared therein dues concerned.
APMC contract - some amount was held back by APMC as security deposit. The Service Tax liability on the said amount works out to ₹ 44,903/-, appellant had accidentally failed to consider the said liability while declaring the VCES declaration - Held that: - the appellant had failed to consider this said amount in VCES declaration, no benefit in respect of said duty and penalty can be granted to the appellant.
Appeal disposed off - decided partly in favor of appellant.
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2017 (2) TMI 318
CENVAT credit - various types of insurance policies - policies taken by appellant are in respect of various machineries, tugs, vessels etc and also for public utility insurance for more than one unit situated in different locations under a single policy - Held that: - all these insurance policies which have been taken by appellant are connected with the activity of the appellant i.e. manufacturing of Hot Iron and Sponge Iron on which appellant discharges Central Excise duty as applicable - reliance placed in the case of Commissioner of Central Excise, Bangalore-III, Commissionerate Versus Stanzen Toyotetsu India (P.) Ltd. [2011 (4) TMI 201 - KARNATAKA HIGH COURT] - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 317
Waiver of penalty imposed u/s 78 of the FA, 1994 - invocation of Section 80 after it has been omitted form the statute - reliance placed by Revenue in the decision of the Apex Court in the case of Kolhapur Canesugar Works Ltd. v. UOI [2000 (2) TMI 823 - Supreme Court of India] to state that the Commissioner had no power to invoke Section 80 after the same has been omitted from the statute - Held that: - the Tribunal has been consistently invoking the Section 80 after the same has been omitted from the statute. The decision cited by Revenue is in respect of omission of Rule and not omission of Section from the Finance Act. In fact, the decision of the Apex Court is based on the very distinction.
Since it not the case of omission of a rule but that of a Section, the entire premise of appeal does not survive - appeal dismissed - decided against Revenue.
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Central Excise
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2017 (2) TMI 316
Reversal of MODVAT credit on defective machinery - whether the defective parts were not used therefore the credit of such defective parts which is equivalent to the CVD paid on the imported spares cannot be allowed?
Held that: - Credit was taken on the CVD paid on entire machine including the damaged parts as well as CVD paid on spare parts imported subsequently. In these fact the parts which got damaged and the same got removed and taken out and in place of the same new parts were fitted. Therefore, in the machine certain parts which were removed were not used in the machine. Therefore, the goods which were not used by the appellant credit of the same cannot be allowed.
As regards the subsequent import of the spare which were used for replacement credit is available for the simple reason that those parts were used in the capital goods which is for further manufacture of final products. For allowing the credit it is the primary condition that goods should be used in the factory of the manufacturer in or in relation to the manufacture of final product. It is undisputed that the parts which got damaged in the capital goods, the modvat credit proportionate to said damaged parts shall not be available to the appellant as the same were not used.
Extended period of limitation - Held that: - there is suppression of fact on the part of the appellant therefore; demand is not hit by limitation.
Appeal dismissed - decided against appellant.
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2017 (2) TMI 315
Imposition of penalty - job-work - manufacture of physicians samples on job work basis - Rule 4 of the Central Excise Valuation Rules applicable or not?
Held that: - identical issue has been decided by the Tribunal in the case of Omni Protech Ltd 2011 [2011 (6) TMI 532 - CESTAT, MUMBAI], where it was held that in the case of Themis Laboratories Pvt. Ltd. (2011 - TMI - 207729 - CESTAT, MUMBAI - Central Excise) appellant has correctly valued their product i.e. cost of raw material inputs + job charges - Rule 4 not applicable.
Appeal allowed - decided in favor of appellant.
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2017 (2) TMI 314
CENVAT credit - supplementary invoice - denial on the ground that the supplementary invoice was issued by M/s. Lotus Chocolate Co. in respect of duty short paid by suppression of facts - Held that: - in terms of sub section (2B) of Section 11A, if the assessee pays duty either on their own or determined by the department, alongwith interest no SCN should have been issued - As per sub section (2B) no show cause notice should be issued and question of invoking proviso to Section 11A does not arise.
The entire transaction from M/s. Lotus Chocolate Co to the appellant and then with the Cadbury are on job work basis and no sale purchase transaction is involved - appellant is entitle for the Cenvat credit on the supplementary invoice - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 313
Valuation - demand of duty on value of tools - Department is of the view that the appellant has neither paid the duty on the value of the tools nor amortised the cost of the tools in the value of the motor vehicle parts manufactured and supplied to Eicher Motors - Held that: - It is settled position that excise duty is payable only on the clearance of the goods from the factory of the manufacturer. However, it is also a settled law that the amortisation cost has to be apportioned in the value of the component manufactured when the tools is belonging to the principal manufacturer.
The tools were used for manufacture of components under job work in terms of Rule 4(5)(a). In such case no excise duty is payable. Therefore, no question of inclusion of amortisation cost of the tools arise. However, the adjudicating authority has not given any finding on the issue of job work under Rule 4(5)(a). Therefore, the matter needs to be remanded to the original authority - appeal allowed by way of remand.
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2017 (2) TMI 312
Valuation - inclusion of amortized cost of dies/tools in assessable value - appellant has relied on the decision of Hon’ble Apex Court in the International Auto Ltd Vs. Commissioner of Central Excise, Bihar [2005 (3) TMI 132 - SUPREME COURT OF INDIA], to claim that the demand be set aside - Held that: - It is seen from the decision of the Tribunal that the said goods were supplied free of cost under Rule 57F(2) and the said goods were components - In the instant case the goods are dies/tools and not components and same are not supplied under Rule 57F(2) but under Rule 57AC(5) (b). The provisions being different the decision of Hon’ble Apex Court in case of International Auto Ltd cannot be applied to the instant case - value to be included in assessable value - appeal dismissed - decided against appellant.
Clearance of defective goods as waste - valuation - Electrical insulation tapes - whether the Tribunal was justified in seeking assessment at the price which M/s. Leo Pack (to whom defective goods were cleared) sold the goods? - Held that: - It is seen that on the one hand appellant have not provided any basis for arriving at assessable value at which the said defective tapes were cleared. On the other hand, the revenue has adopted the sale price of the goods after clearance from job worker as the assessable value. Neither Revenue nor appellant has cited any rule under which the said value has been adopted. In that respect order of the Original authorities are not speaking order and therefore matter has to be remanded back to the original adjudicating authority to spell out under which rules the value was enhanced - Appeal allowed by way of remand.
Refund claim - adjustment of refund against pending dues - Held that: - The impugned orders are set aside as one of the demand has been set aside. The matters are remanded to the original adjudicating authority for the purpose of adjustment of dues - matter on remand.
Appeal disposed off.
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2017 (2) TMI 311
Refund of unutilized cenvat credit - whether clearances made to 100% EOU should be considered at par with exports of the goods out of country and consequently whether for such supplies, refund u/r 5 is admissible?
Held that: - as per the Rule 5 of CCR, no exclusion was provided to deemed export i.e. supplies made to 100% EOU therefore bare term Export includes export of goods out of India as well as deemed export - This very issue has been considered in detailed by the Hon’ble Gujarat High Court in case of E.I. Dupont India Pvt Ltd [2014 (5) TMI 128 - GUJARAT HIGH COURT], wherein it was held that deemed export ie. Supplies made to 100% EOU is at par with the physical export and all the benefit otherwise available to the export out of India shall be mutatis mutandis applicable to the clearances made to the 100% EOU - refund u/r 5 is admissible to the clearances of goods made to 100% EOU - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 310
Rejection of Chartered Certificate - natural justice - Valuation - whether the depreciation and financial expenses consisting of various percentages of the cost of production as per the profit and loss accounts were required to be added to the assessable value?
Held that: - If a Chartered Accountant s certificate needs to be rejected then there has to be some concrete basis for rejection of the same. Similarly, if any amount needs to be included in assessable value that revenue has to be some concrete basis for quantification of such amount. The same also needs to be communicated to the appellant to enable them to defend their case - In the instant case, revenue has failed to do so. In the absence of any reasonable ground for rejection of the Chartered Accountant's certificate, the same cannot be rejected - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 309
Valuation - physician samples manufactured and supplied either on loan license basis or on job-work basis - Section 4 of the Central Excise Act apply or not? - Held that: - Rule 4 of Central Excise Valuation Rules, 2000 shall apply only in those cases where the manufacturer manufacturing the physician samples and they themselves supplying free sample in the market - In the present case, all the three appellants are not supplying physician samples free of cost either in case of job-work basis or in the sale basis, the goods are sold to the principal. In such case, irrespective it is physician samples, the valuation shall be governed by Section 4 of the Central Excise Act.
The valuation shall be determined on the basis of cost of raw material + job charges including the profit of the job worker.
Appeal allowed - decided in favor of appellant.
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2017 (2) TMI 308
Valuation - royalty - Whether royalty as per the agreement between the buyer of the goods and Abbott, USA is includible in the assessable value of the appellant, who is manufacturer supplier? - Held that: - there is an agreement between the Pharmacia and Abbott, USA with regard to payment of royalty of 2% of sale of the goods, but the fact is that no such payment/transactions were made either between Abbott USA and Pharmacia or even with the appellant. Therefore, even though there is a clause of royalty payment but since payment transaction was not made, there is no question of inclusion of any amount in the assessable value of the goods - no addition on account of royalty in the assessable value of the goods is sustainable - duty demand set aside.
Levy of duty - control samples - Whether the control sample is liable to excise duty? - Held that: - control sample drawn from the production stock and preserved for check for purpose of market complaint or the complain from the patient, is not liable for excise duty - the issue has been decided by the Tribunal in the case of Dabur India [2005 (2) TMI 166 - CESTAT, NEW DELHI], where it was held that the drawal of control sample is not liable to duty.
Demand set aside - penalty set aside - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 307
Valuation - composite contract - project work of supply, erection, installation and commissioning of lifts at the customer site - Against the total value of the composite contract the appellant received advance payment, whether the addition of notional interest on advance amount is includible in the assessable value? - Held that: - the supply portion in the over all project which represent the clearance of assessee’s manufactured goods is less than 50% of the over all value of the project cost. Therefore for this reason interest is not prima facie includible in the assessable value - in the appellant’s own case Commissioner of Central Excise, Mumbai-IV Vs. Otis Elevator Co. (I) Ltd. [2011 (6) TMI 569 - CESTAT, MUMBAI] it was held that interest on advances cannot be included in the assessable value.
It prima facie appears that interest in not includible in the assessable value however, since the Commissioner (Appeals) has not passed the final order, at this stage, we cannot dispose of the matter finally - appeal allowed by way of remand.
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2017 (2) TMI 306
Refund claim - unjust enrichment - Held that: - in the appeal before the Commissioner (Appeals) against order-in-original, the Revenue has not challenged the admissibility of deduction as is apparent from the grounds of application where it is specifically stated that the deductions are not in dispute. In these circumstances, it is not open to Revenue to challenge the admissibility of deductions before the Tribunal.
The provisions of unjust enrichment cannot be applied to the assessment when the period prior to 25/06/1999.
The first order of finalisation of assessment was directed to be withdrawn by the Hon’ble High Court as the same was issued without a show-cause notice. In these circumstances, the order-in-original seeking refund claim become of first order of finalisation of provisional assessment - Appeal allowed - decided in favor of appellant.
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2017 (2) TMI 305
Denial of CENVAT credit - fake CENVAT invoices - Held that: - Rule 13 of CCR, 2002 deals with various situations and one of the situation covered by the said Rules is that, "If a person contravenes any of the provision of said CCR, 2002 in respect of any inputs, then such person shall be liable to penalty not exceeding the duty on the excisable goods in respect of which any contravention has been committed".
The appellants have issued invoices without payment of duty and issue of invoice without payment of duty is contravention of provision of Cenvat Credit Rules. The penalty u/r 13 of CCR is not dealt with in any of the case laws relied upon by the appellants - appellants were liable to be imposed with penalty.
Appeal dismissed - decided against appellant.
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2017 (2) TMI 304
Clandestine removal - the quantity of Ethyl Acetate that should have been manufactured by them during the year 2005-06 should have been 1887825 kg., wheras the actual quantity manufactured was 1985245 kg. - whether demand of duty on differential quantity of goods justified?
Held that: - input/output data in ER-5 return for the year 2007-08 is used to estimate quantum of goods manufactured in the year 2005-06. This estimated manufacture is not covered by any of the provisions of Central Excise Act or Rules made thereunder. The said Show Cause Notice has not invoked any enabling provisions which enables Revenue to use input/output data given in ER-5 return for charging Central Excise duty on estimated goods that should have been manufactured by the appellant.
The principle laid down is that if the provisions of erstwhile Rule 173E of Central Excise Rules, 1944 are invoked then it was mandatorily required to fix norm for electricity consumption, notify them to manufacturers and thereafter ascertain reasons for deviations, and after taking into account the consumption of various inputs, requirements of labour, material, power supply and conditions for running the plant together determine the goods manufactured and demand duty on the differential quantity of goods. Since such exercise was not carried out, therefore, I find that the impugned Show Cause Notice is not sustainable in law - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 303
Interest on delayed refund - whether the liability of Revenue to pay interest under Section 11BB of the Central Excise Act, 1944 commences from the date of expiry of three months, from the date of receipt of application for refund or on the expiry of the said period from the date on which the order of refund is made?
Held that: - the liability of Revenue to pay interest under Section 11BB of the Central Excise Act, 1944 commences from the date of expiry of three months, from the date of receipt of application for refund under Section 11BB of the Central Excise Act, 1944 and not on the expiry of the said period from the date on which order of refund is made - the appellant entitled to refund of interest for the period, 07/03/2000 till 13/06/2005, the date on which refund was granted finally - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 302
CENVAT credit - denial on the ground that the documents on which the credit was taken, are debit notes, vouchers and statements which are not the valid documents for taking cenvat credit under the provisions of Rule 9 of Cenvat Credit Rules, 2004 - Held that: - though it is not pre-printed commercial invoice but it is either in letterhead on the lesser of the premise or in the printed form of the invoice is in terms of Rule 9 of the Cenvat Credit Rule , the only requirement is that certain information should be incorporated in the documents. Even though it is called by “name invoice, if any document issued by the service provider,” which contained all the information as required under Rule 4 of the Service Tax Rules, credit should be allowed - From the documents, I observe that all such informations are given in the so called invoices therefore credit on such invoices cannot be denied.
Appeal allowed - decided in favor of appellant.
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2017 (2) TMI 301
CENVAT credit - duty paid by 100% EOU under N/N. 2/95-CE dt. 4.1.1995 - The differential cenvat credit between the CVD & total duty was denied by the adjudicating authority interpreting the restriction provided under Rule 57AB (2) of the Central Excise Rules, 1944.
Held that: - whatever duty was paid by EOU is available as credit. Subject to restriction upto the additional duty of Customs leviable on the like goods if imported into India. That means in a normal course, if the goods are imported into India then whatever CVD is payable the credit of duty paid by EOU shall be restricted to that CVD. Therefore, the contention of the Revenue is absolutely incorrect that the credit only in respect of CVD paid by the EOU is available.
The CVD payable in case of import is ₹ 20/-whereas the total duty paid by EOU is ₹ 25.40/-but the Cenvat credit will be admissible to the extent of ₹ 20/-. In view of above, neither the respondent s claim is correct nor is of the department. However, from the above calculation it can be seen that the total duty paid by the EOU is not available as a credit to the respondent, therefore it needs to be re-quantified and credit will be restricted to the CVD payable on the like goods as if imported into India.
Appeal allowed by way of remand.
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2017 (2) TMI 300
CENVAT credit - Hot Rolled Plate - Sleeve Washer - Runner Washer - M S Billets - H.R. Coils - M.S. Angel - M.S. Channel - M.S. Bars - T.O. R. Steel Bar - H.R. Non Alloyed Steel Plate - Round - G.S. Thermax-415 - Grease - Industrial Lubricant etc. - denial on the ground that these goods are not falling under the definition of Capital goods - Held that: - It is necessary to find out the use of the goods without that it cannot be concluded whether its credit is admissible or otherwise - the impugned order set aside and matter remanded to the original adjudicating authority for passing a fresh speaking order after verifying the facts of use of the material in the factory of the appellant - appeal allowed by way of remand.
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2017 (2) TMI 299
Refund claim - cenvat credit - Rule 5 read with N/N. 11/2002-CE(NT) dated 1-3-2002 - denial on the ground that appellant have not justified that why accumulated credit was not utilized for the domestics clearances - Held that: - From the plain reading of the Rule 5, it is provided that for any reason adjustment of the credit is not possible, the refund shall be granted to the assessee against the export of the goods, therefore Commissioner(Appeals) had no jurisdiction to question the appellant that why credit could not be utilized for clearance of the goods for home consumption. The only condition is required that if there is accumulated Modvat credit in the modvat account and goods have been exported, modvat credit attributed to the export of goods should be refunded in terms of Rule 5 - refund allowed - appeal allowed - decided in favor of appellant.
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2017 (2) TMI 298
Interest - penalty - Reversal of CENVAT credit - service tax paid for inspection of goods - Held that: - The issue in question is no longer res integra and has been settled by a number of High Court decisions including that of Billforge Pvt. Ltd. [2011 (4) TMI 969 - KARNATAKA HIGH COURT], where it was held that mere taking of cenvat credit facilities is not at all sufficient for claiming interest as well as penalty.
I have no hesitation in holding that no interest liability will arise in the present case also and, consequently, there cannot be any imposition of penalty.
Appeal allowed - decided in favor of appellant.
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2017 (2) TMI 297
CENVAT credit - whether the finished goods manufactured by the appellant, notified to be exempt with effect from 09.07.2004 disentitles the appellant to the Cenvat credit on inputs lying in stock, and inputs used in manufacture of finished goods prior to 09.07.2004 but such goods not cleared as on 09.07.2004 as well as input lying in work in progress (WIP) remaining in stock as on 09.07.2004?
Held that: - Law is well settled in Dai Ichi Karkaria Ltd.[], that there is no provision in the rule to recover Cenvat credit in the event the goods manufactured prior to a cutoff date are cleared at a subsequent date. The Cenvat credit earned being permitted to be used with indefeasible right that cannot be denied in absence of any express provision of law in that behalf. None can say out of which raw material the finished product was manufactured and credit is not attributable to a specific input used in manufacture. One-to-one correlation not being contemplation of law, credit is available to a manufacture on very day when raw material reaches factory, with a right to set off such credit against liability to discharge duty on clearance of output - appeal allowed.
Rule 8 of Cenvat credit Rules 2002 permitting carry forward of the unutilised Cenvat credit remained in the hands of the amalgamating company to be utilized by the amalgamated company, there is no question of any demand or recovery of the Cenvat credit amount from the appellant for which appeal is allowed.
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CST, VAT & Sales Tax
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2017 (2) TMI 290
Detention of goods - goods were not accompanied by an inward way bill - in order to avoid further delay, the petitioner is willing to pay the one time tax - The petitioner, hereafter, will have liberty to challenge not only tax imposed, but also the compounding fee levied - petition disposed off.
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2017 (2) TMI 289
Exemption from sales tax - Entitlement certificate - backward area - Vires of notification - Graphite Electrodes - the Petitioners are seeking a direction to the State Government, firstly to issue a Notification to amend Rule 31B in the same manner as amended Rule 31AA and remove a discrimination which according to them is to be found between similarly situated industrial units - alternatively, prayer that two Notifications dated 1st November, 2004 be declared as ultra-vires Article 14 of the Constitution of India - Held that: - Rule 31AA prescribes the method of computation of the cumulative quantum of benefits enjoyed by the eligible units over a specified period. It is, therefore, clear that a separate regime was provided for those who have opted or chosen the deferral mode of incentives.
Perusal of both Rules, namely, 31AA which provides for calculation of the cumulative quantum of benefits and Rule 31B, which provides for conditions for permission to defer payment of total amount of tax as per the return for a specified period being incentives to certain eligible industrial units and falling in Chapter-V-A of the BST Rules, 1959, are not comparable. Rule 31B is specific and clear in terms. Once the underlying difference as pointed out cannot be lost sight of, then, the argument based on discrimination has no merit. It may be that there is a credit of DEPB. That is an incentive provided under the Foreign Trade Policy and to an exporter. It may be a transferable benefit and treated as intangible goods liable to tax under the Sales Tax Act.
The Court in this case cannot even issue a declaration as prayed as an alternate relief once it finds that the fundamental and underlying difference between the two schemes and the two modes is the factor and which has weighed with the State. That is the real basis and which distinguishes the case of the Petitioners from those units under the exemption mode. Once this difference is noted, then, we do not see any reason to interfere with the impugned Notifications. We do not see how we can grant a declaration that the mandate of Article 14 of the Constitution of India is violated and breached.
Petition dismissed - decided against petitioner.
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Indian Laws
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2017 (2) TMI 286
Industrial area under U.P. Indusrial Area Development Act, 1976 - claim exemption from taxation - exemption under Article 12A of the 1976 Act - Held that:- Section 12A specifically contemplates issuance of notification under proviso to clause (1) of Article 243Q and exclusion from Panchayat area is consequent and dependent upon such notification. Notification under proviso to clause (1) of Article 243Q has to be subsequent to declaration of an area as industrial development area, which itself indicates that declaration of development area under 1976 Act is not sufficient to treat an area as an industrial township. As noted above, industrial township as contemplated by Article 243Q( 1) proviso has to be specifically a public notification after consideration of relevant statutory ingredients referred therein. The exclusion of industrial development area from Panchayat has a serious consequence since persons residing within the industrial development area are immediately deprived of facilities and benefits extended to them by the respective Panchayats. The deprivation of the said benefits has to be thus a conscious decision in accordance with condition as contained in Article 243Q. In the case before us, it has not been pleaded that any notification referable to proviso to Article 243(Q)(1) has yet been issued.
Thus it was rightly held by the High Court that exemption under Article 12A of the 1976 Act was not available in the facts of the above case.
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