TMI Tax Updates - e-Newsletter
March 19, 2016

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise Indian Laws

Highlights / Catch Notes

• Income Tax:

  Income-tax (6th Amendment) Rules, 2016 - Method of determination of period of holding of capital assets, being a share or debenture of a company, which becomes the property of the assessee in the circumstances mentioned in clause (x) of section 47. - Notification
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• Income Tax:

  Recovery of tax dues - Consent from BIFR - even coercive action to recover the dues in terms of the Income Tax Act would require the consent from BIFR in terms of the said Act as an inquiry under Section 16 of the SICA is pending - HC
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• Income Tax:

  Short term capital loss on sale of shares - When the provisions of Section 43 (5) is not applicable to the facts of this case, the contention that the case of the assessee would be covered under explanation to Section 73 of the Income Tax Act, 1961, cannot be accepted. - HC
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• Income Tax:

  TDS U/S 194I - disallowance u/s 40(a)(ia) - compensation paid by the assessee to the tenants towards alternative accommodation not being in the nature of rent as defined in section 194I, there is no requirement for deduction of tax under the said provisions. - AT
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• Income Tax:

  Expenses incurred during the year on account of advertisement and publicity - here is no concept of deferred revenue expenditure in Income-tax laws. The genuineness of the expenditure has not been doubted by the revenue authorities - entire expenditure allowed - AT
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• Income Tax:

  TDS u/s 194C - disallowance u/s 40(a)(ia) - the hardship in such an event would be taxing an Assessee on a higher income in one year and taxing him on lower income in a subsequent year. To the extent the Assessee is made to pay tax on a higher income in one year, there would still be hardship. - AT
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• Income Tax:

  Revenue Audit objection should be accepted and remedial action should be taken in a case where the audit objection relating to an error of facts or an issue of law is found to be correct. - CBDT issues instructions
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• Income Tax:

  Disallowance of speculation loss - purchase and sale of silver and other metals by holding such loss as bogus and inadmissible -Both the parties are confirming the transactions which have been duly supported with the books of accounts and bank transactions - The broker was expelled from the commodity exchange cannot be the criteria to hold the transaction as bogus - AT
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• Income Tax:

  Nature expenditure incurred on repairs and maintenance - This repair necessitated due to use of high V.M. and low ash contents of imported coal, which resulted in increase in temperature, repair had to be done by using good quality of fire bricks to safeguard the ovens from melting, bending and other damages - allowed as revenue expenditure - AT
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• Income Tax:

  Addition on capital gains - the expenditure recorded by the developer being business expenditure having no direct nexus with construction cannot be adopted as cost of construction for the purpose of capital gains in the hands of the assessee. - AT
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• Service Tax:

  Imposition of penalty - amended Section 78 shall clearly apply at the time of Adjudication of the show cause notice. Therefore, the penalty is imposable equal to 50% of the Service Tax amount not paid. - AT
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• Service Tax:

  Leviability of Service tax - Works Contract - Services rendered both labour and supply of material for the period prior to 01.06.2007 - no service tax is leviable here for the period prior to 01/06/2007 - AT
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• Service Tax:

  Imposition of penalty under Section 77 & 78 of Finance Act, 1994 - When there was amendment of the law to grant immunity from persecution in terms of the Finance Act, 2010, the penalty proceeding being quasi-criminal in nature, so the appellant also deserves consideration for exoneration from levy of penalty. - AT
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• Service Tax:

  Business auxiliary services or mailing list compilation and mailing services - taxability of Commission received on franking received from the Department of Posts - We cannot but be surprised by the discriminatory approach in the two impugned orders situated in identical circumstances by the same appellate authority. - AT
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• Central Excise:

  Computation of assessable value - integration and commissioning charges of the machines cannot be included in the transaction/assessable value of the machines. - AT
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• Central Excise:

  Duty demand on the clearance of coffee decoction for testing and destruction in the appellant's factory premises - the testing of the coffee decoction is in the appellant's own in-house laboratory and there is no remanents - testing of the samples of coffee decoction are not liable to duty - AT
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• Central Excise:

  Valuation of physician samples manufactured by the appellant and sold to the brand owner - Applicability of provisions of Section 4(1)(a) - . When we find that price was charged by the assessee from the distributors, the show cause notice is clearly founded on a wrong reason - AT
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• Central Excise:

  Classification - Oxy-Tetracycline Hydrochloride Skin Ointment 5G/15G, Oxy-Tetracycline Hydrochloride AF Tabs and Oxy-Tetracycline 500mg Capsule - Ld. Commissioner has rightly classified the products in question under Chapter 3003.20. - AT
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• Central Excise:

  Duty demand on the removal of scraps - assessee availed CENVAT credit on the capital goods - e appellant had not disclosed the clearance of scrap to the Department and therefore, extended period of limitation would be invoked. - AT
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Articles

• BUDGETARY NOTIFICATIONS – SERVICE TAX

Notifications

• Income Tax

• 18/2016 - dated 17-3-2016 - IT
  Income-tax (6th Amendment) Rules, 2016 - Method of determination of period of holding of capital assets, being a share or debenture of a company, which becomes the property of the assessee in the circumstances mentioned in clause (x) of section 47.

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Circulars / Instructions / Orders

• VAT - Delhi - 41/2015-16 - dated 16-3-2016
  Seating and de-sealing of the premises.
• Income Tax - 8/2016 - dated 17-3-2016
  Modification of Instruction 9/2006

News

• Third Tranche of SGB from 8th March, 2016 to 14th March, 2016, as per initial figures, show more than 64,000 Applications received for a total subscription of 1128 Kilograms of Gold amounting to ₹ 329 crore; SGB to be issued on March 29, 2016.

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• RBI Reference Rate for US $

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• Participation of Standalone Primary Dealers in Currency Futures Market

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• Scheme for Collection of Dues of (i) Central Board of Direct Taxes (ii) Central Board of Excise and Customs (iii) Departmentalised Ministries Account - Reporting and Accounting of March Transactions - Special Arrangements - Financial Year 2015-16

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Case Laws:

• Income Tax

• 2016 (3) TMI 600
  Taxability of income - Whether 50% of the sale consideration received by the assessee with respect to the matrimonial house situated at 25, Mandeville Gardens, Calcutta was taxable in the hands of the assessee despite the fact that the Tribunal arrived at a finding that the said amount was paid on account of alimony? - Held that:- The amount received by the assessee was a capital receipt and hence not taxable. - Decided in favour of assessee

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• 2016 (3) TMI 599
  Notice under section 226 (3) of the IT Act - attachment orders - Sick Industrial Companies (Special Provisions) Act, 1985 - Held that:- In the light of the provisions of section 22 of SICA, permitting the attachment to continue, prima facie, would be contrary to the provisions thereof as the same would amount to distraint against the properties of the petitioner. Besides, continuance of the attachment would not serve any useful purpose inasmuch as the petitioner would not be able to operate its bank accounts and the revenue would not be able to make any recovery. This court is of the view that the interest of the revenue would best be served by directing the petitioner to file an undertaking to an effect that in case it ultimately does not succeed in the petition, it would deposit an amount equal to the amount standing as on date in the above two bank accounts of the petitioner. However, in the opinion of this court, at this stage, it is not permissible for the respondent-authorities to continue with the attachment of the bank accounts of the petitioner. In the aforesaid premises, by way of interim-relief, the impugned notices dated 27.01.2016 issued to the Branch Manager, ICICI Bank, Ahmedabad and the notice dated 28.01.2016 issued to the Branch Manager, Bank of India, Ahmedabad, under section 226 (3) of the Income-Tax Act, 1961, are hereby stayed till the final disposal of the petition. The petitioner, however, shall furnish an undertaking before this court to an effect that in case, it does not succeed in the petition, it shall abide by any order that may be passed by the court, including deposit of the amount equal to the amount standing in the above bank accounts of the petitioner.

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• 2016 (3) TMI 598
  Waiver of interest levied under Sections 234A, 234B and 234C denied - non payment of taxes - Held that:- In the case on hand, the petitioner has stated that his accounts were being taken care by his father, who died in the year 1991, but the Voluntary Disclosure of Income Scheme came into force in the year 1997 only. Therefore, by stating that his father was looking after the tax affairs of the petitioner and that there was strained relationship between his brother, cannot be a ground to waive the interest, which was rightly imposed by the 2nd respondent. The petitioner has thrown the blame on his father and his brother for not paying the tax in time. Therefore, in the absence of any acceptable reason shown by the petitioner, the 1st respondent had rightly rejected the petition. The impugned order passed by the 1st respondent is just and proper. - Decided against assessee

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• 2016 (3) TMI 597
  Computing deduction u/s.10A - Interpretation of Total Turnover & Export Turnover under 10A - Held that:- Any expenditure which is excluded from the export turnover will have to be excluded from the total turnover as well for computing deduction u/s.10A of the Act. See CIT vs. Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT ]

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• 2016 (3) TMI 596
  Computing deduction u/s.10A - Interpretation of Total Turnover & Export Turnover under 10A - Held that:- Any expenditure which is excluded from the export turnover will have to be excluded from the total turnover as well for computing deduction u/s.10A of the Act. See CIT vs. Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT ]

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• 2016 (3) TMI 595
  Eligibility for approval under Section 80 G(5)(vi) - Whether approval under Section 80 G(5)(vi) can be granted before the end of financial year, when the trust/institution had not appended the accounts for the accounting year? - Held that:- The assessee commenced activity by providing notebooks to school children and publication of development of the region and in order to support the activity was only by way of flow of finance, which can happen on receipt of donations. Recognition under Section 80G of the ‘Act’, as observed by the Tribunal will be one of the factors to induce donors to donate funds to trusts, to encourage such kind of activity by the trust for the development of the society as well as the Nation. For the said reasons the ‘Tribunal’ allowed the appeal, set aside the order of the CIT, Gulbarga and directed grant of recognition under Section 80G(5)(vi) read with rule 11AA(5) of the ‘Act’. - Decided against revenue

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• 2016 (3) TMI 594
  Revision u/s 263 to revise the reassessment order - as separate books of account were not being maintained in respect of MBF unit and therefore the said unit was not eligible for deduction under section 80IB - Held that:- The petitioner has a statutory efficacious/alternative remedy of appeal before the Tribunal under section 253(1) of the Act. Thus the petitioner has a statutory efficacious/alternative remedy of appeal before the Tribunal under section 253(1) of the Act.

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• 2016 (3) TMI 593
  Recovery of tax dues - Consent from BIFR - consent in terms of Section 22 of the SICA Act - Held that:- On plain reading of the provisions of Section 22 of the SICA, it cannot be disputed that even coercive action to recover the dues in terms of the Income Tax Act would require the consent from BIFR in terms of the said Act as an inquiry under Section 16 of the SICA is pending. The learned Counsel appearing for the Respondents also does not dispute that the Respondents would take steps to obtain such consent. It cannot be disputed that without obtaining consent in terms of Section 22 of the SICA Act, the Assessing Officer cannot implement the impugned Demands dated 07.12.2015 and 14.12.2015.

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• 2016 (3) TMI 592
  Short term capital loss on sale of shares - treated as a speculative loss by virtue of Explanation to Section 73 of the Act when actual delivery and possession has been made in respect of sale of shares - Held that:- The nature of the transaction alleged is important, it has been stated the order of Commissioner of Appeals that the appellant has not purchased the shares as a dealer; shares were purchased because of certain financial problems of the sister company viz., Madras Cements Limited. Subsequently, when the shares were sold the market had not been favourable to the assessee and that is how he sustained loss. There is no intention to speculate and to benefit out of the speculation as there was a clause in the Memorandum of Association to invest surplus funds in shares, the appellant has chosen to invest fund in shares. Moreover, the transaction is not periodic. It was also not settled otherwise than by actual delivery. Only when there is settlement otherwise than by delivery speculative transaction can be thought of. In the present case, it is not so. As the main activity is only in manufacture and sale of yarn, the purchase of shares, having not been regular, should be construed only as an investment. When there is no systametic or organised course of activity and when there is no regularity in the transaction and as the purchase is infact an one time activity it cannot be construed as a speculative transaction. When the purchase of shares cannot come within the definition of business, under Section 2(13) of the Income Tax Act, 1961, there is no point in contending that the assessee is engaged in the business muchless in a speculative business. Therefore, the Assessing Officer ought to have allowed the loss, as short term capital loss and set off against the other business income of the appellant Company. As the appellant Company had properly delivered the shares at the time of selling, the transaction would not come under the provisions of Section 43 (5) of the Income Tax Act, 1961. When the provisions of Section 43 (5) is not applicable to the facts of this case, the contention that the case of the assessee would be covered under explanation to Section 73 of the Income Tax Act, 1961, cannot be accepted. As the genuineness of the transaction is not doubted the contention of the Revenue that it is a case of avoidance of tax liability by dubious means also cannot be accepted. - Decided in favour of assessee

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• 2016 (3) TMI 591
  TDS U/S 194I - disallowance u/s 40(a)(ia) - compensation paid by the assessee to the tenants towards alternative accommodation - Held that:- On a plain reading of the definition of rent, it becomes clear that the payment made by the assessee does not come within the purview of rent as prescribed in the said provision as the assessee is not making such payment for use of any land, building, etc. On the contrary, if the facts involved are considered as a whole the payment made by the assessee is nothing else but in the nature of compensation. The Tribunal in case of Jitendra Kumar Madan ( 2012 (5) TMI 316 - ITAT MUMBAI ) while considering the nature of payment received for alternative accommodation by the recipients held such payments at their hand as income from other sources instead of income from house property. That being the case, the payment made by the assessee also being in the nature of compensation for alternative accommodation cannot be treated as rent. Moreover, such compensation cannot be treated as rent for the simple reason that not only the assessee is not using any land and building but it may also be a fact that persons to whom such payments have been made may not be incurring any expenditure on account of rent. In any case of the matter, payments made by assessee under no circumstances can be construed to be coming within the meaning of “Rent” as provided under section 194I. Thus, we are of the considered opinion that compensation paid by the assessee to the tenants towards alternative accommodation not being in the nature of rent as defined in section 194I, there is no requirement for deduction of tax under the said provisions. Therefore, the disallowance made under section 40(a)(ia) of the Act cannot be sustained. Consequently, we delete the addition made on that account. - Decided in favour of assessee

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• 2016 (3) TMI 590
  Expenses incurred during the year on account of advertisement and publicity - assessee submitted that marketing costs incurred during the product campaign were deferred and amortized over a period of 4 years - Held that:- As decided in assessee's own case the revenue has failed to bring out a case to establish that any capital assets had come into existence. Further, as held by the Hon'ble High Court, there is no concept of deferred revenue expenditure in Income-tax laws. The genuineness of the expenditure has not been doubted by the revenue authorities. Keeping all these facts in view expenditure to be allowed - Decided in favour of assessee Depreciation on goodwill - Held that:- As decided in assessee's own case AO is directed to grant the depreciation on the consideration for the purchase of the exclusive business rights which are to be treated as intangible assets - Decided in favour of assessee Depreciation on WDV of patent, trademark and intellectual property rights paid to Ciel Aircon Ltd - Held that:- once the completion of the agreement is done by payment of the consideration as on the completion date specified in the agreement the assessee would be in possession of the duly executed instruments of transfer, assignment and Conveyances of the assets as specified in the agreement which are basically the intellectual property' rights and the fixed assets. This being so, as also the principles as laid down by the Hon'ble Supreme Court in the case of Mysore Minerals Ltd. [1999 (9) TMI 1 - SUPREME Court ] it would have to be held that the assessee was the owner of the property and the assessee having used the same in its business was entitled to depreciation on the same. - Decided in favour of assessee

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• 2016 (3) TMI 589
  Denial of deduction u/s.80IA on the profits from the windmills - claim for initial assessment year - that:- Recently, the Coordinate Bench of the Tribunal in the case of D.J. Malpani [2015 (12) TMI 896 - ITAT PUNE] has reiterated the position with regard to the ‘initial assessment year’. Accordingly, we are of the considered view that the assessee is eligible to claim deduction u/s.80IA on the profits from the windmill for the impugned assessment year. All the business undertakings are wind mills and they have claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment years in question and for the subsequent years as well. Having exercised their option and their losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. See CIT Vs. See Velayudhasamy Spinning Mills (2010 (3) TMI 860 - Madras High Court ) - Decided in favour of the assessee.

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• 2016 (3) TMI 588
  TDS u/s 194C - disallowance u/s 40(a)(ia) - whether the amendment made as above is prospective or retrospective w.e.f. 1.4.2005 when the provisions of Sec.40(a)(ia) were introduced? - Held that:- Reasoning of the Hon’ble Supreme Court in the case of Alom Extrusions Ltd (2009 (11) TMI 27 - SUPREME COURT) will equally to the amendment to Sec.40(a)(ia) of the Act whereby a second proviso was inserted in sub-clause (ia) of clause (a) of Section 40 by the Finance Act, 2012, w.e.f. 1-4-2013. The provisions are intended to remove hardship. It was argued on behalf of the revenue that the existing provisions allow deduction in the year of payment and to that extent there is no hardship. We are of the view that the hardship in such an event would be taxing an Assessee on a higher income in one year and taxing him on lower income in a subsequent year. To the extent the Assessee is made to pay tax on a higher income in one year, there would still be hardship. Hon’ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Towship (I) Pvt.Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] has taken the view that the insertion of the second proviso to Sec.40(a)(ia) of the Act is retrospective and will apply from 1.4.2005 Disallowance of carriage expenses for want of vouchers - Held that:- As submitted that the vouchers could not be produced earlier because the issue was argued on legal grounds before CIT(A) and the counsel for the Assessee in the proceedings before the lower authorities did not think it fit to file the vouchers, though they were available. In view that the vouchers now sought to be filed by the Assessee as additional evidence is required to be admitted as additional evidence as they are material for deciding the issue in the appeal. Since, the additional evidence requires verification by the AO, deem it fit and proper to remand the issue to the AO for fresh consideration in the light of the additional evidence now filed. The AO will afford opportunity of being heard to the Assessee before deciding the issue.

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• 2016 (3) TMI 587
  Income from profit in future and option transactions - whether assessable u/s.68? - business income v/s income from other sources - setting off the assessed business loss against the income denied - Held that:- The admitted facts are that the Assessee has shown the profit in transactions of futures and options of ₹ 5,51,362/- in his profit and loss account and the resultant income of ₹ 89,200/- was declared in the return of income. The aforesaid income of ₹ 5,51,362/- was treated as income from business. The AO was not satisfied with the explanation with regard to the source of income as one from business. After doing so, the AO has no other option but to classify the income in question under any of the heads of income given in Sec.14 of the Act. Income which does not fall under any other head of income had to be necessary classified under the head “Income from other sources”, if the AO wants to bring the same to tax. This aspect is clear if one reads the decision of the Hon’ble Supreme Court in the case of Nalinikant Ambalal Mody Vs. CIT (1966 (5) TMI 13 - SUPREME Court) wherein it was held that if income cannot be taxed under any of the heads mentioned in Sec.14 of the Act, then it cannot be taxed at all. The AO in coming to the conclusion that the sum of ₹ 5,51,362 had to be taxed separately had not made any reference to any provision of law in the Act under which he is resorting to such a course. Consequently, even assuming the income in question is not treated as income from business, it has to be treated as income from other sources. If so treated, there can be no tax on the said income separately without set off of loss from business u/s.71 of the Act. Thus the levy of tax on the sum of ₹ 5,51,362/- cannot be sustained. Therefore of the view that the addition made by the AO cannot be sustained and the same is directed to be deleted. Decided in favour of assessee Addition for deemed interest income of the appellant - Held that:- The entire basis of addition made by the AO was erroneous. It is not the case of the AO that borrowed funds on which interest was paid were not used for the purpose of business and therefore the interest expenditure cannot be allowed u/s.36(1)(iii) of the Act. Therefore the non-payment of interest on loans borrowed has no relevance whatsoever. As far as interest received by the Assessee is concerned, so long as borrowed funds on which interest is paid and claimed as deduction is not given as interest free loans, the AO cannot compel that the Assessee should earn interest on any lending by it. There is no provision in the Act by which notional income on such lending can be brought to tax. The decision of the Hon’ble Madras High Court in the case of CIT Vs. J Chelladurai (2011 (12) TMI 41 - MADRAS HIGH COURT) clearly supports the stand of the Assessee in this regard. - Decided in favour of assessee

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• 2016 (3) TMI 586
  Disallowance of speculation loss - purchase and sale of silver and other metals by holding such loss as bogus and inadmissible - Held that:- The assessee has incurred losses from the off market commodity transactions and the AO held such loss as bogus and inadmissible in the eyes of the law. The same loss was also confirmed by the ld. CIT(A). However we find that all the transactions through the broker were duly recorded in the books of the assessee. The broker has also declared in its books of accounts and offered for taxation. In our view to hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence. Here in the case the transactions of the commodity exchanged have not only been explained but also substantiated from the confirmation of the party. Both the parties are confirming the transactions which have been duly supported with the books of accounts and bank transactions. The ld. AR has also submitted the board resolution for the trading of commodity transaction. The broker was expelled from the commodity exchange cannot be the criteria to hold the transaction as bogus - Decided in favour of assessee Speculation loss while computing the income u/s 115JB - Held that:- Having considered the decision of Hon’ble Supreme Court in the case of Apollo Tyres Ltd. (2002 (5) TMI 5 - SUPREME Court), we are of the view that the AO cannot reopen the accounts of a company, which have been audited and certified by the statutory auditor, passed by the members of the company in general body meeting, filed before the ROC, and to which he has not taken any objection under that Act. The impugned amount was not entered in the books as liability and the auditor had made certain remarks only in regard to the impugned amount. No objection has been taken by the registrar to the accounts field before him. Therefore, the book profit has to be taken as per the aforesaid P&L a/c. No adjustment is permissible in the book profit in respect of aforesaid amount under any of the cls. (i) to (vii) of the Explanation to s. 115JB. IN view thereof, it is held that the learned CIT(A) erred in directing the AO to reduce this amount from the book profit. - Decided in favour of assessee

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• 2016 (3) TMI 585
  Addition u/s. 68 as 'unexplained credit' - assessee filed reconciliation statement - Held that:- This is verified from assessee’s Paper Book page 163 being the Debtor A/c of assessee in RSIC, where, on 31st August 2005, the said entry has been reflected as "AHW Steel Limited CRS". The Creditor A/c ledger as referred to herein above also confirm the same. Next amount of ₹ 2,88,574/- and ₹ 2,93,150/- is with regard to two sale bills as issued by RSIC as per detail mentioned in the reconciliation statement, but were not entered by them in their ledger of assessee. The bills are at assessee’s Paper Book page 90 & 91. The assessee had shown it as their purchase and had recorded it in their books of account accordingly. Next amount is with regard to the amount of excess debited by assessee in their books in the Ledger A/c of RSIC for a sum of ₹ 27,91,751/- . Ld. Counsel for the assessee referred to assessee’s Paper Book page 86 being the credit Ledger A/c of RSIC in the books of assessee, and assessee’s Paper Book page 180 being the Debit A/c of assessee in RSIC. Two sale bills on 28th March 2006 of ₹ 28,60,000/- each was wrongly entered by assessee in their Ledger as ₹ 2,86,000/- and ₹ 28,60,000/- which was subsequently rectified by the parties in the next year. With regard to the entries where RSIC has shown as sales by them totaling to ₹ 1,54,78,255/- and the assessee has categorically denied that they have not received any such materials under the bill nos. and the quantity and amount as mentioned in the reconciliation as alleged by the party. We find that no opportunity of cross-examination was provided to the assessee. It was only on the statement of the Chief Finance Controller, the AO relied upon his statement and made addition of ₹ 2l.88 crores. Ld. Counsel for the assessee referred to Short Notes on Grounds of Appeal. According to him, the AO should have asked RSIC to produce the bills and the evidence of delivery of the material i.e. Road Challan and accepted Challan copy by assessee of the materials. No enquiry whatsoever was made by the AO. It was simply on the statement of Sri Navin Gupta, the CFO of RSIC was relied upon by him and addition was made. Next amount of ₹ 2,88,60,143/- is with regard to the sale bill, as reflected as on 31st March 2005, in the Debtor A/c of assessee, in the books of RSIC as sale bill. But, once again, no such purchases have been made by assessee and no verification with regard to the sale bill of RSIC and/or Road Challan and/or Delivery Evidence was verified by the AO. From the Ledger A/c which is at assessee’s Paper Book at page 160, RSIC is showing the sum as on 31st March 2005. This amount in any case is of the earlier year and not of the year under consideration. From the Ledger A/c in the books of assessee of RSIC which is at assessee’s Paper Book page 66, there is no opening balance and the first entry of purchase was made on 27th April 2005. Next amount of ₹ 8,088/- is with regard to the purchase bill less credited by assessee in their books. Reference was made to Paper Book page 180, where, on 16th March 2006, the entry in the RSIC in the debit ledger account of assessee, amount shown as ₹ 2,08,388/- , whereas assessee in their books have made an entry of ₹ 2,00,300/- that's the difference amount comes to ₹ 8,088/-. The last entry is with regard to the purchase bill wrongly entered by assessee in the account of Ram Swarup Bars & Roes instead of RSIC amounting to ₹ 4,36,436/-. The copy of the bill has been filed at assessee’s Paper Book at Page 88 being the bill issued by RSIC. From these reconciliations and the explanations and also the explanations and clarifications submitted in the Short Notes on Grounds of Appeal, we find that the reconciliation is supported by evidence which are on record, and there is no difference in the balance in the books of account of assessee that of RSIC, and hence, the difference of the addition as made by the AO of ₹ 21.88 crores is rightly deleted by CIT(A) and hence we confirm the same. - Decided in favour of assessee

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• 2016 (3) TMI 584
  Addition made on account of expenditure incurred on repairs and maintenance treating the same as capital expenditure - Held that:- in the present case simply because there was massive repairs and substantial expenditure incurred by assessee on repairs the same cannot be treated as capital in nature for the reason that there was no expansion of the coke ovens but the number of ovens remained the same at 46 as in 1989. No new coke ovens were add-up by incurring the expenditure and moreover there was no vacant space in the factory to set up additional coke ovens. The expenditure was incurred only on fire bricks, fire clay and tiles and no expenditure on steel and other materials were required for construction of new coke ovens as is evident from bills and vouchers. Secondly, repairing was done from outer side of the ovens and the platform from where the heated coal is dragged out after production. This repair necessitated due to use of high V.M. and low ash contents of imported coal, which resulted in increase in temperature, repair had to be done by using good quality of fire bricks to safeguard the ovens from melting, bending and other damages. In view of these facts, we consider the repairs carried out by the assessee as revenue in nature and we confirm the order of CIT(A) on this issue. - Decided in favour of assessee Disallowance made by AO u/s. 35D - Held that:- We find that the assessee has claimed deduction of expenditure at one-fifth u/s. 35D of the Act in respect of expenditure of ₹ 75,000/- incurred in FY 2001-02 relevant to AY 2002-03 and subsequent years the same has all along been allowed being one-fifth as per the provisions of section 35D of the Act. We find no infirmity in the order of the CIT(A) in allowing this claim of assessee. Disallowance u/s 40(a)(ia) of the Act for non-deduction of TDS on the expenses of security guard and import expenses as well as interest on loan - Held that:- We find from the order of the CIT(A) that the assessee has made payments of TDS and these payments are made within the due date of filing of return of income by the assessee as is evidenced from the details given before the CIT(A). We find that this issue is squarely covered in favour of the assessee by the decision of Hon'ble Calcutta High Court in the case of CIT v Virgin Creations [2011 (11) TMI 348 - CALCUTTA HIGH COURT] - Decided in favour of assessee

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• 2016 (3) TMI 583
  TDS u/s 194C - Disallowance made u/s. 40(a)(ia) - non tds on freight charges - Held that:- We find that the assessee had only made purchase of goods and there was no freight charges incurred by the assessee on these purchases, which is evident from the ledger account as filed at pages 33-39 of the paper book. We also verified the sample invoices, that are kept at pages 40-47 of the paper book containing the freight charges and the details of the freight charges payable by the assessee on behalf of the said suppliers [M/s. Sangam and M/s. Ganpati Road Lines]. Hence, we are satisfied that the provisions of section 194C are not at all attracted to the present facts of the case and consequently, the disallowances/additions made u/s. 40(a)(ia) is not warranted. - Decided in favour of assessee In respect of freight charges paid to Shri Gautom Majee we deem it fit and appropriate to set aside the issue to the file of the ld.AO to decide the same made u/s. 40(a)(ia) in the light of applicability of second proviso to section 40(a)(ia) as mentioned herein above and in the light of said decision of the Hon’ble Delhi High Court in the case of Ansal Land Mark Township (P) Ltd (2015 (9) TMI 79 - DELHI HIGH COURT). The assessee is at liberty to adduce fresh evidences, if any, to substantiate its contentions. - Decided in favour of assessee by way of remand Disallowance of interest - Held that:- Considering balance sheet and the business balance sheet of the assessee, that the assessee has borrowed monies from said two private individuals on his personal account in the assessment year 2004-05 and invested the same in his proprietary concern of the assessee, which is evident from the pages 53-55 of the paper book. Hence, it is proved beyond doubt that borrowings made by the assessee are only for the purpose of his business. Accordingly, interest thereon is squarely allowable as deduction. - Decided in favour of assessee

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• 2016 (3) TMI 582
  Waiver of loan amount - Scope of section 28(iv) - Addition under the regular provisions of the Act and under section 115JB on account of waiver of loans by the National Housing Bank - waiver of principal portion of the refinance loan by the National Housing Bank - Held that:- Under a one-time settlement entered into between the assessee and the bank, the bank accepted the ad-hoc payment of ₹.5 crores made by the assessee and waived a sum of ₹.5,07,78,410/- being the remaining principal and a sum of ₹2,02,60,247, the outstanding interest. However, in the instant case, the assessee has entered into a onetime settlement of refinance loan with National Housing Bank. The assessee has shown a loss after depreciation and tax at ₹.4,18,41,839/- on a total receipt of ₹.2,65,18,784/-. Against this loss of ₹.4,18,41,839/-, the assessee has adjusted a sum of ₹.5,77,40,964/- which represents waiver of refinance loan of National Housing Bank, resulting in a profit of ₹.1,58,99,125/-. However, the amount of ₹.5,77,40,964/- representing waiver of refinance loan of National Housing Bank has not been considered both for normal computation and for the purpose of computation of book profit under section 115JB of the Act. Since the waiver of loan is nothing but income of the assessee within the meaning section 28(iv) of the Act, and the same was availed during the course of regular business, the waiver of the principal portion of the loan clearly forms benefits assessable to tax under section 28(iv) of the Act. Therefore, the reliance placed by the assessee in the case of Iskraemeco Regent Ltd. v. CIT (2010 (11) TMI 43 - Madras High Court) has no application to the facts of the present case. CIT(A) confirmed the addition made by the Assessing Officer rightly - Decided against assessee

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• 2016 (3) TMI 581
  Transfer pricing adjustment of advertisement, marketing and promotion (AMP) expenses - Held that:- We find that the Hon’ble jurisdictional High Court of Delhi in the case of Sony Ericsson Mobile Communication India (P) Ltd. [2015 (3) TMI 580 - DELHI HIGH COURT] has been pleased to hold that marketing and selling expenses like trade discount etc. are not AMP expenses. As there is inappropriate discussion about the precise nature of expenses which have been assailed before us, we consider it expedient to direct the AO to first ascertain the correct nature of such expenses. If these expenses are found to be in the nature of Selling expenses directly in connection with sales, then, they should be removed from the base amount for computing the ALP of AMP expenses. In the otherwise scenario, the AMP expenses, which are not in the nature of Selling expenses incurred directly for sales, should continue to include in the base amount. Under such circumstances, we set aside the impugned order and send the matter back to the file of the TPO/AO for determining the ALP of the international transaction of AMP spend afresh in accordance with the manner laid down by the Hon’ble High Court in Sony Ericson Mobile (supra) - Decided partly in favour of assessee for the statistical purposes.

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• 2016 (3) TMI 580
  Penalty u/s 271(1)(c) - disallowance of deduction u/s 80HHC for furnishing of inaccurate particulars of income - Held that:- The issue in controversy is covered by the decision of Hon'ble Madras High Court in the case of CIT vs. Caplin Point Laboratories Limited (2007 (6) TMI 38 - HIGH COURT, MADRAS ), wherein the Hon'ble Madras High Court has held that mere rejection of claim of assessee u/s 80HHC by relying on different interpretation did not amount to concealment or furnishing of inaccurate particulars of income and the penalty u/s 271(1)(c) cannot be levied. We, respectfully following the decision of Hon'ble Madras High Court (supra), delete the penalty. - Decided in favour of assessee

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• 2016 (3) TMI 579
  Validity of reopening of assessment - whether non sanction was duly granted / approved by the competent authority? - Held that:- In response to the objections, the learned Departmental Representative has produced the assessment record before us indicating the requisite sanction was duly granted by the CIT. On perusal of the record, we find that the notice under Section 148 dt.16.3.2012 issued by the Assessing Officer after the sanction was duly granted / approved by the competent authority. Therefore, in view of the fact that the Assessing Officer obtained the necessary approval / sanction of the competent authority, the objections raised by the learned Authorised Representative against the validity of the notice under Section 148 does not survive. Addition on capital gains - Held that:- We find that the Assessing Officer has not conducted any enquiry to but just adopted the figure as given in the report of the Investigation Wing sent to the Assessing Officer for reopening of the assessment. There is no dispute that at the time of execution of the sale deed dt.15.2.2006, the parties have determined the value of the constructed share of the assessee to the extent of 53% at ₹ 6,22,72,000. There is also no dispute that the cost of land in question was ₹ 6,22,72,000 which has been admitted by the Assessing Officer in the assessment order. Therefore as per the claim of the assessee there was no capital gains on transfer of land in question in favour of the developer because cost as well as the sale consideration is same. The learned Authorised Representative has also relied upon the guideline value as notified by the Govt. of Karnataka in respect of the area in question and thus contended that the guideline value prescribed by the Govt. is much less than the sale consideration agreed between the parties. We find force in the contention of the learned Authorised Representative that the cost recorded by the developer in the books of accounts may also include some of the expenditure which have not directly related to the construction activity but may have been incurred in relation to the general administration and other business expenditure. Since income in the hands of the developer is assessed to tax as business income, therefore, the said expenditure which are in the nature of business expenditure are allowable from the sale consideration of the constructed area belongs to the developer. Accordingly, in the absence of any enquiry or any other material or evidence to show that the actual cost of construction or the value of the constructed area belonging to the assessee is more than the value shown by the assessee at ₹ 6,22,72,000 we do not approve the action of the Assessing Officer to compute the capital gains by adopting the figure of expenditure recorded in the books of the developer. There is a substantial difference between the cost of construction for the purpose of computing the capital gains on sale of capital asset and expenditure booked by the developer in the course of construction activity being the business activity of the developer. Therefore, the expenditure recorded by the developer being business expenditure having no direct nexus with construction cannot be adopted as cost of construction for the purpose of capital gains in the hands of the assessee. Accordingly, we delete the addition made by the Assessing Officer on account of capital gains. - Decided in favour of assessee

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• Customs

• 2016 (3) TMI 560
  Validity of Trial Court order - Contravention of provisions of NDPS Act - Illegal possession and transportation of 342 kgs. of ganja punishable under section 20(b)(ii)(C) of N.D.P.S. Act - Surmises and conjectures - Held that:- even though the samples were handed over to P.W.4 on 13.06.2008 by the Court but P.W.4 kept the samples with him because it was handed over to him in the evening hours on 13.06.2008 and thereafter there were three Government Holidays for which he kept the samples and produced it at the S.D.T & R.L. on 17.06.2008 and therefore the chance of tampering with the same cannot be ruled out. The samples were received at the S.D.T. & R.L. on 17.06.2008 and the seals on the sample cartoon and seventeen numbers of sample envelopes were found intact and identical with the specimen impression of the seal given on the forwarding memo. Therefore, the submissions based on surmises and conjectures cannot be accepted. Validity of Trial Court order - Contravention of provisions of NDPS Act - Illegal possession and transportation of 342 kgs. of ganja punishable under section 20(b)(ii)(C) of N.D.P.S. Act - Non-seizure of original of Ext.14 which was the full report in compliance of section 57 of the N.D.P.S. Act - Held that:- in the column No.5, 6, 7 and 8 where name and address of the witness, points to prove, whether personally detected or on information and order of superior officer are required to be mentioned here have not been filled up. Similarly on the reverse side of C-4 where date and hour of submission of report, explanation of delay, if any in submission, date of receipt of the report in Excise Superintendent’s office and brief history of the case are required to be mentioned and date have been left blank. No endorsement of Excise Commissioner regarding receipt of the report and date is available in Form No.C-4. Nobody has been examined from the office of Commissioner of Excise to prove the receipt of such report. The copy of the report which was sent to the Office of Commissioner of Excise has not been seized. Therefore, Ext.14 is not a full report as envisaged under section 57 of the N.D.P.S. Act and a reasonable doubt is created regarding submission of such report in the office of Commissioner of Excise. Therefore, in view of the glaring inconsistencies in the evidence of prosecution witnesses, non-compliance of provisions under section 100(4) of Cr.P.C., sections 52 (3) and 57 of the N.D.P.S. Act, absence of any clinching materials that the seized articles were kept in safe custody till its production in the Court, non-examination of relevant witnesses, non-production of brass seal in Court and other suspicious features, the Trial court order is set aside. Appeal disposed of

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• 2016 (3) TMI 559
  Seeking grant of bail - Consignment of gold seized - No procedure under Chapter XIV of the Act, has been initiated for confiscating the goods - Held that:- the applicant was arrested on 24.02.2015 and was in judicial custody pursuant to the lodgment of FIR by the police department, the Custom Department has arrested the applicant on 28.08.2015 i.e. after more than six months. There might be some investigation during this period, however it is desirable to comment anything about the reasons for not arresting the applicant for considerable long time. The complaint has also been filed on 60th day from his arrest. This also suggests that customs department has sufficient time to investigate the case i.e. from 24.02.2015 to 27.10.2015 i.e. date of filing the complaint before the learned Magistrate. As far as allegations that in past also, the applicant had indulged in similar activities, which is under investigation, that would not be the ground to reject the application, since the authority had sufficient time to complete the investigation. By relying upon the decision rendered by Apex Court in the case of State of Kerala V/s. Raneef [2011 (1) TMI 1396 - SUPREME COURT] and in the case of Sanjay Chandra[2011 (11) TMI 537 - SUPREME COURT], the applicant is behind bar since more than 10 months which is considered as long period and it is equally true that investigation is almost over. Therefore, this is a fit case to exercise the discretion and enlarge the applicant on regular bail and hence the applicant is ordered to be released on regular bail. - Decided in favour of appellant

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• 2016 (3) TMI 558
  Provisional release of aircraft - Seizure under Section 110 of the Customs Act, 1962 - Seeking relief from conditions imposed - Held that:- as the appellant possess a valid DGCA Licence for operating as Non Scheduled Passenger Aircraft and did not exported the aircraft for any other purpose which are re-imported but was sold the aircraft to the overseas buyer. Therefore, provisional release under Section 110 A of the Customs Act is allowed subject to execution of bond equivalent value of the goods of ₹ 128 crores(Rupees One hundred twenty eight crores only) and the bank guarantee is reduced from ₹ 25,89,44,000/- to ₹ 5,00,00,000/- (Rupees five crores only). - Decided partly in favour of appellant

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• 2016 (3) TMI 557
  Validity of show cause notice - Issued by DGCEI officers of Mumbai - Held that: it is seen from the Bills of Entry for warehousing that the goods were imported at Mumbai Port and it was transhipped to the said unit at Surat, which is a customs station. Therefore as the goods were imported at Mumbai port, the DGCEI officers of Mumbai has jurisdiction to issue show cause notice. Imposition of penalty - Under Section 112, and/or 114A of the Customs Act, 1962 - Conspiracy to defraud by indulging in selling duty free imported materials in the local market and forge of documents - Held that: Shri Ganatra is the master mind of the entire episode therefore, he has been imposed the penalty of such quantum as was warranted by Adjudication Authority. Penalty raised on other appellants is reduced by considering the role of the dealers. - Decided partly in favour of appellant

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• 2016 (3) TMI 556
  Imposition of penalty under Section 112(a) of the Customs Act, 1962 - Aware CHA not intimated the department about correct classification of goods imported i.e Paraquat Dichloride - Held that:- appellant admitted that as per the direction of the importer it had filed bills of entry claiming classification of the same goods under CTH 3808 before budget but under CTH 2933 after the Budget 2007-8. It was the responsibility of the CHA to not only guide the importer properly but also bring to the notice of the assessing officers any change in the classification claimed by the importer, which appellant was aware of. By keeping the eyes closed appellant knowingly allowed the importer to pay lower duty. Therefore, penalty under Section 112(a) ibid has to be imposed on CHA. - Decided against the appellant

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• 2016 (3) TMI 555
  Validity of Commissioner (Appeals) order - Time for re-export extended - Imported goods on 3.12.2012 under A.T.A. Carnet valid upto 15.5.2013 but importer requested for extension of A.T.A. Carnet for export which is opposed by the department - Held that:- the proviso to clause 4 to the notification provides that Government can extend the period of re-export by six months if it is necessary to do so in public interest. While issuing show cause notice, the provision of notification No. 157/90 ibid must be interpreted by the authorities below. As the provision of notification were interpreted in true sense, no show cause notice was required to be issued to the respondent. Therefore, the learned Commissioner (Appeals) has interpreted the provision of notification correctly and extended the time for re-export. - Decided against the revenue

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• 2016 (3) TMI 554
  Reduction of Redemption fine and penalty imposed - In lieu of confiscation - Appellant accepted enhancement of value and Pre-shipment inspection certificate produced was not in consonance - Held that:- the importer have attempted to comply with the statutory conditions prescribed in the handbook of procedures under the Foreign Trade Policy regarding import of scraps, though the certificate produced, as a pre-shipment inspection certificate, was not accepted by the department and also by the Adjudicating Authority for the sole reason that the name had not been listed in the appendix 28. It appears that while the Head Office was recognized, the branch was not so recognized. Though there were violations of the Foreign Trade Policy read with Handbook of Procedures, the goods are liable to confiscation in view of section 111(d) of the Customs Act, 1962 and levy of penalty is also justified but as the redemption fine and the penalty imposed are on the higher side the fine in lieu of confiscation imposed are reduced from ₹ 5,09,000/- to ₹ 50,000/- and penalty penalty from ₹ 1,30,000/- to ₹ 30,000/-. - Decided in favour of appellant

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• Corporate Laws

• 2016 (3) TMI 553
  Scheme of amalgamation - whether the non-receipt of communication issued to seek consent/ no-objection to the then proposed scheme of amalgamation would effect the said scheme as ultimately, sanctioned? - Held that:- The applicant, if anything else, would be deemed to have knowledge of the proceedings pending in this court for obtaining sanction of the then proposed scheme of amalgamation. Undoubtedly, an affidavit was filed at the relevant stage by the petitioners before this court that they had not received any objections to the scheme from any of its shareholders and/or creditors. The applicant, before the sanction of the scheme of amalgamation, admittedly held, in transferor company no.9, only 4.5% of the equity stake, while, in transferor company no.10, the applicant held 21% of the equity stake. At the first motion stage, consents were obtained from shareholders of transferor company no.9 which amounted to 95.5% in value, whereas in numbers, 27 out of the 28 shareholders, in transferor company no.9, had given their consents. Similarly, in so far as transferor company no.10 was concerned, 79% in value, had given their consents. In terms of numbers, 11 out of the 12 shareholders of transferor company no.10, had given their consents.Quite clearly, a majority comprising of more than 3/4th in value of the shareholders in both, transferor company no.9 and 10, had given their consents. Therefore, even if, it is assumed that notice was not issued to the applicant, the scheme could not be set aside on this ground alone. The other argument of Mr Mehta that share valuation is faulty, is not supported by any cogent material. These are bald submissions, which are not backed by any cogent material. The mere fact that the shareholding of the applicant in the transferee company has got reduced to 2.97% (from 4.50% and 21%, as held in transferor company no. 9 and 10, respectively), will not, to my mind, help the cause of the applicant. Therefore, find no merit in the application. It is, accordingly, dismissed.

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• 2016 (3) TMI 552
  Restoration of the name of the company struck off - Held that:- Respondent No. 1 had already filed its reply in which it is averred in paragraph No. 11 that it has no objection if the name of respondent No. 2 Company is restored to the Register of Registrar of Companies. However, it has referred to Rule 94 of the Companies(Court) Rule 1959 to contend that necessary orders may be passed by this Court by imposing some cost upon the petitioner and be awarded to the Registrar of Companies. Section 560(6) of the Act, 1956 enables the petitioner creditor to file an application for restoration of the name of the company which has been struck off from the Register of Registrar of Companies if the dues of the said creditors has not been paid. Keeping in view the facts and circumstances of the case and the averments made in Paragraph 11 of the reply filed by respondent No. 1, the present petition is hereby allowed. Name of respondent No. 2 is ordered to be registered in the Register of Registrar of Companies.

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• Service Tax

• 2016 (3) TMI 577
  Rectification of Tribunal's order - Setting aside Section 78 penalty - Held that:- the tax was collected and paid in time to the department and also appropriated only after detection by the department as they had not voluntarily paid and not registered with service tax and not filed returns. Therefore, there is no apparent mistake found to rectify the same. Appellants seeking to set aside penalty would amount to review of the order and this Tribunal has no power to review its own order as held by various High Courts and the Hon'ble apex Court, the one being held by the Supreme Court in the case of CCE Belapur Mumbai Vs RDC Concrete (India) P. Ltd. [2011 (8) TMI 25 - SUPREME COURT OF INDIA]. - Decided against the appellant

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• 2016 (3) TMI 576
  Waiver of pre-deposit - Management Consultancy Service - Export of service - Held that:- applicant has filed F.I.R.C.s for the demand pertains to export of service and it has neither disputed in the show cause notice nor verified by the Adjudicating Authority. Therefore, the demand covers under the export of service and pre-deposit is allowed to be waived off. Waiver of pre-deposit - Management Consultancy Service - Services provided to foreign service recipient but nor recieved remuneration in foreign convertible exchange - Held that:- these services do not qualify under Export of Service Rules as these services have been rendered by the applicant as representational services on behalf of their client by appearing before the various Authorities to defend the service recipient. Therefore, it covers under the Notification No. 25/2006, dated 13.07.2006 and the applicant is not liable to pay service tax. The pre-deposit is waived of.

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• 2016 (3) TMI 575
  Imposition of penalty - Whether unamended provision of Section 78 according to which 100% penalty or amended provision of Section 78 according to which 50% penalty is applicable - Adjudication was done after 8.4.2011 but offence of evasion of service tax has taken place prior to 8.4.2011 - Transactions are recorded in the books of the assessee, when the offence was taken place during the period of unameded Section 78 - Held that:- there is no saving clause in Section 38A of the Central Excise Act, for saving erstwhile Section 78 of the Finance Act, nor even anything provided in the amended Section 78 regarding the non applicability of the amended provisions in the case pertaining to the period prior to amendment. In such situation amended Section 78 shall clearly apply at the time of Adjudication of the show cause notice. Therefore, the penalty is imposable equal to 50% of the Service Tax amount not paid. - Decided against the revenue

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• 2016 (3) TMI 574
  Leviability of Service tax - Works Contract - Services rendered both labour and supply of material for the period prior to 01.06.2007 - Held that:- whatever amount is recovered in the name of service tax for service rendered prior to 1.6.2007 was required to be deposited in the government account in terms of section 73A of the Finance Act 1994. The introduction of works contracts service w.e.f. 01/06/2007 (under which the impugned service is classifiable), the government introduced Works Contract (Composition Scheme for Payment of Service Tax) Rules 2007 and also incorporated Rule 2A of the Service Tax (Determination of Value) Rules 2006, for determination of value of service portion in the execution of works contracts. In the light of these developments, no service tax is leviable here for the period prior to 01/06/2007 and for the remaining period. - Matter remanded back

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• 2016 (3) TMI 573
  Imposition of penalty under Section 77 & 78 of Finance Act, 1994 - Tax paid with interest - Held that:- When there was amendment of the law to grant immunity from persecution in terms of the Finance Act, 2010, the penalty proceeding being quasi-criminal in nature, so the appellant also deserves consideration for exoneration from levy of penalty. therefore, levy of penalty under section 78 is waived of. However, the penalty under section 77 shall be maintained since there is concurrent liability. - Decided partly in favour of appellant

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• 2016 (3) TMI 572
  Business auxiliary services or mailing list compilation and mailing services - taxability of Commission received on franking received from the Department of Posts - from 1 st July 2003 to 31 st March 2006 - Held that:- We cannot but be surprised by the discriminatory approach in the two impugned orders situated in identical circumstances by the same appellate authority. The more specific taxable service of 'mailing list compilation and mailing' was notified only from 16 th July 2005 and taxing that very service under any other entry that existed till then is an act of overreach contrary to legislative intent of taxing the rendering of that service only with effect from 16th June 2005. The later order in the matter of M/s Sai Mailing Service was decided without taking into account the benefit of enlightenment in the form of the order in the matter of M/s United Mailing Service and has, therefore, erred in upholding the decision of the lower authority for the demand prior to 16 th June 2005. The transaction of franking or usage of the postal service is solely between the appellants and the post office with the former as the customer of the latter. The depiction of the latter as a client is not consistent with this reality and the categorization under section 65(19)(vi) fails the test of rationality. Demand prioro to 16-6-2005 dropped - demand on service charges collected from clients for the period from 16 th June 2005 to 31 st March 2006 confirmed - Decided partly in favor of assessee.

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• 2016 (3) TMI 571
  Waiver of pre-deposit - Sustainability of Service tax demand - Works Contract - Construction of Post Graduate Girls Hostel at Sardar Vallabhbhai National Institute of Technology (SVNIT) Surat and constructed /modernised ESIC hospital at Jaipur - Held that:- demand relating to construction of ESIC hospital would not be covered under construction of new building or structure for the purpose of commercial or industry as ESIC hospitals are not commercial or industrial ventures. Therefore, demand relating thereto do not sustain. As regards the girls hostel, it would get covered under the scope of construction of new residential complex as is evident from the definition of residential complex service under Section 65(105)(91a) because it will not get covered under the exclusion category as the construction was not done by directly engaging the appellant inasmuch as SVNIT did not directly engage the appellant who is a sub-contractor of NBCC which was directly engaged by SVNIT. Thus the demand pertaining to construction of girls hostel sustains. - stay granted partly.

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• Central Excise

• 2016 (3) TMI 578
  Writ petition - Claim of refund / rebate simultaneously while claiming benefit of duty drawback - Export of Textile products - Entitlement to claim rebate under Notification No. 19/2014-CE (NT), dated 06.09.2004 - Held that:- as per decision in the case of M/s Raghav Industries Ltd. Versus Union of India and Others [2016 (3) TMI 550 - MADRAS HIGH COURT], it is clear that the benefits claimed by the petitioner are covered under three different statutes under the Customs, Central Excise Duties and Service Tax Drawback Rules. When the petitioner had availed the duty drawbacks on Customs, Central Excise and Service Tax on the exported goods, they are not entitled for rebate under the Central Excise rules by way of cash payment as it would result in double benefit. Therefore, as per the proviso to Rule 3 of the Central Excise Duties and Service Tax Drawback Rules, 1995, the petitioner is not entitled to claim both the rebates. - Decided against the petitioner

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• 2016 (3) TMI 570
  Computation of assessable value - exclusion/ inclusion of installation/erection/commissioning charges at site of the customer - Held that:- The appellant have raised two invoices one is towards sale of the machines and second for integration and commissioning of the machines supplied to the customers. Integration and commissioning is an independent activity which can be performed either by the appellant or any out side agency, charges recovered towards integration and commissioning charges is not related to the sale of the goods but it is for independent and distinct identified activity. Once the goods are fully manufactured and cleared from the factory activity of erection installation carried out subsequently the charges therefore cannot be included in the assessable value. It is not the case of the Revenue that in the light of integration and commissioning charges appellant have suppressed the sale value of the machines, but it is also not the case that value charged for the integration and commissioning is over valued therefore the amount charged for intimation and commissioning has to be accepted for the activity carried out by the appellant at site of the customers. This Tribunal in various judgments time and again held that installation/erection/commissioning charges at site of the customer is not includible in the assessable value. SEE Commissioner of C. Ex. Chandigarh Vs. Khosla Machines Pvt. Ltd [2014 (3) TMI 375 - CESTAT NEW DELHI], ) Erricsson India Pvt. Ltd Vs. Commissioner of Central Excise, Jaipur-I [2013 (8) TMI 846 - CESTAT NEW DELHI ] AND Commissioner of Central Excise, Nashik Vs. Kirloskar Oil Engines Ltd [2012 (5) TMI 547 - CESTAT MUMBAI ]. Thus it is very clear that integration and commissioning charges of the machines cannot be included in the transaction/assessable value of the machines. - Decided in favour of assessee

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• 2016 (3) TMI 569
  Duty demand on the clearance of coffee decoction for testing and destruction in the appellant's factory premises - duty liability on the samples which are collected from the shop floor and tested in the in-house laboratory - Held that:- Collection of the samples of finished goods and testing the same for ascertaining the quality is part of the manufacturing process. The assessee, has to ascertain that the final products manufactured by them are conforming to the standards laid down by themselves or as per requirement of the law, which requires, testing of the samples which do get destroyed during such testing. It is common sense, manufacturing of a final product is not complete without the testing of the final products in the in-house laboratory or any agency; as the marketing of final products can be done only if the final products are up to a standard. This cannot be said or equated with the clearances of the goods and duty liability can be fastened. We find from the show-cause notice as well as the adjudication order and the order of the first appellate authority, that there is no dispute that the testing of the coffee decoction is in the appellants own in-house laboratory and there is no remanents. On the face of such factual matrix, we have to hold that both the lower authorities have misdirected their findings in coming to a conclusion that the testing of the samples of coffee decoction are liable to duty. - Decided in favour of assessee

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• 2016 (3) TMI 568
  Cost of design and development charges incurred for manufacture of the pumps - inclusion to the price of the pumps for payment of an amount equal to 8% of the price as per provisions of Rule 6(3)(b) of the Cenvat Credit Rules 2004 - Held that:- Appellants have taken cenvat credit on the common inputs used for dutiable as well as exempted goods, is required to reverse an amount which is equal to 8% of the value of the goods. The records revealed that the appellant has reversed an amount of ₹ 32,000/- (Rupees Thirty Two Thousand only) on the clearances of exempted goods to defence establishment. In our view, this amount which has been reversed is more than enough or sufficient compliance of the provisions of Rule 6 of Cenvat Credit Rules 2002 which was amended retrospectively by the Government of India. The retrospective amendment talks about reversal of an amount of proportionate cenvat credit availed on the inputs which are consumed for the manufacturing of exempted goods is sufficient compliance of law for availing the cenvat credit on the common inputs. We find from the records that the appellant had specifically stated before the lower authorities that the cenvat credit attributable to the pumps which are sold to defence establishment, comes to about ₹ 4250/- (Rupees Four Thousand Two Hundred and Fifty only). We accept the contentions raised by the learned CA that the amount of ₹ 32,000/- (Rupees Thirty Two Thousand only) deposited/paid by the appellant at the time of clearance of the pumps to defence establishment is more than enough to cover the cenvat credit availed on the common inputs used by them for manufacturing of the pumps which were cleared to defence establishment without payment of duty. Whether the cenvat credit availed in respect of sales returns on the basis of documents under Rule 16 of Central Excise Rules 2002 is correct or otherwise? - Held that:- There is no dispute that the appellant is eligible to avail the cenvat credit on the pumps on which appropriate duty of excise was paid and cleared to their purchasers. We find that the lower authorities have not appreciated the details given by the appellant as annexed at Page No. 55 of the appeal memo. We, on perusal find that the appellant had correlated all the incoming payments with the documents which were available with them and the set was produced. The issue has been held against the appellant only on the ground that he was not able to justify that the pumps which were cleared from the factory on payment of duty were only in fact received back. We find from the papers produced before us, the findings by the lower authorities on this point are incorrect. The said document revealed that the appellant had correctly availed the cenvat credit on the pumps which were received back from their purchasers. On factual matrix, we hold that the appellant has correctly availed the cenvat credit on the sales returns of the pumps - Decided in favour of assessee

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• 2016 (3) TMI 567
  Damaged goods beyond recovery - partial damage - Export of damaged goods reprocessed - Claim of recovery - demand duty on 11786.30 mtrs of fabrics on the grounds that it was not possible to verify the correctness of the claim that the goods which have been cleared are re-processed goods - benefit of Notification No. 24/2003-CE dated 31.3.2003 denied - Held that:- We find that it is not disputed that the damaged goods were brought back into the factory. The argument of the Revenue that it is not possible to reprocess the goods in 2007 which were considered unfit for reprocessing in 2003, is not sustainable in view of the facts that the technology keeps improving and any claim made in 2003 is based on the appellants knowledge at the material time. The appellants have argued that in 2006, they come to know the chemicals which can reprocess the said materials and they reprocessed the material. We do not find that there is anything which cannot be taken at face value. The appellants have not only shown the details of clearance of reprocessed materials in export/DTA on payment of duty and Revenue has not challenged that fact. Revenue has only raised the suspicion that the records produced by the appellant are not authenticated. The assertion of the appellant cannot be set aside merely on suspicion. It has not stated by the Revenue at any stage as to what records were required to be produced that the appellant failed to produce. The facts of the case are not exactly similar but it is seen that the appellants are not much better footing than Madhav Marbles (2008 (10) TMI 209 - CESTAT, CHENNAI) in so far as the goods have not been totally lost but have been only partially damaged. If benefit can be given in case of goods totally lost then there is no reason to deny benefit in case of appellants where the goods were only partially damaged and they were able to reprocess the goods. - Decided in favour of assessee

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• 2016 (3) TMI 566
  Valuation of physician samples manufactured by the appellant and sold to the brand owner - Applicability of provisions of Section 4(1)(a) - Held that:- The issue is no more res integra and is covered by the recent judgment of the apex court in the case of CCE & C, Surat vs. Sun Pharmaceuticals Inds. Ltd.Commr. of Central Excise & Customs, Surat Versus M/s Sun Pharmaceuticals Inds. Ltd. & Ors. [2015 (12) TMI 670 - SUPREME COURT ] wherein held that the transaction in question was between the assessee and the distributors. Between them, admittedly, price was charged by the assessee from the distributors. What ultimately distributors did with these goods is extraneous and could not be the relevant consideration to determine the valuation of excisable goods. When we find that price was charged by the assessee from the distributors, the show cause notice is clearly founded on a wrong reason. The case would squarely be covered under the provisions of Section 4(1)(a) of the Act. In view thereof, the Central Excise Rules would not apply in the instant case. - Decided in favour of assessee

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• 2016 (3) TMI 565
  Classification - products manufactured namely Oxy-Tetracycline Hydrochloride Skin Ointment 5G/15G, Oxy-Tetracycline Hydrochloride AF Tabs and Oxy-Tetracycline 500mg Capsule - classifiable under 3003.20 as medicaments other than Patent or Proprietary medicaments or under 3003.10 as Patent or Proprietary medicaments - Held that:- Definition of ‘Patent or Proprietary Medicaments’ it can be seen that if the name of the medicament is appearing in any of the above pharmacopoeia, it shall not be classifiable as ‘Patent or Proprietary Medicaments’ therefore it is not medicament as such but only name is significant. In the present case the Oxy tetracycline IP and oxy tetracycline Hydrochloride IP is admittedly appearing in the Indian pharmacopoeia. It is also observed that Oxytetracycline capsule is specifically appearing in the Indian pharmacopoeia. The product name Oxytetracycline Hydrochloride skin ointment and Oxytetracycline Hydrochloride (AF) tablet though not verbatim appearing in the pharmacopoeia, medicaments are generic medicament and the name of the drug and medicament is appearing in the Indian Pharmacopoeia, therefore in our view the medicament produced by the respondent have names appearing in the ‘Indian pharmacopoeia’ and therefore the same are not ‘Patent or Proprietary Medicaments’. Our this view is supported by the judgment of Endolabs Ltd ( 2004 (3) TMI 456 - CESTAT, NEW DELHI ) wherein division bench of this Tribunal held that name ‘Norfloxacin’ ‘Piroxicam capsule’ specified in Indian Pharmacopoeia whereas assessee was manufacturing ‘Norfloxacin 100 DT’ and Piroxicam Gel despite this itself Tribunal as held that the products manufactured by the assessee are not ‘Patent or Proprietary Medicaments’ classifiable under sub heading 3003.20. In the case of Hindustan Biologicals Vs Commissioner of Central Excise, Mumbai [2004 (6) TMI 341 - CESTAT, MUMBAI] the fact was that drugs name ‘Domperidone Paediatric suspension’ is specified in Indian Pharmacopoeia and the label of the medicament bearing the name of ‘Albenzole Suspension’, the Tribunal held that since the drug name is appearing in the Indian Pharmacopoeia, the product of the assessee could not be treated to fall under the heading 3003.10 as ‘Patent or Proprietary Medicaments’. In view of the above discussion and the case laws, we are of the considered view that the Ld. Commissioner has rightly classified the products in question under Chapter 3003.20. - Decided against revenue

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• 2016 (3) TMI 564
  Benefit of exemption under Notification No.12/2012-CE, dt.17.03.2012 as amended on POY and Notification No.89/95-CE, dt.18.05.1995 on Waste and Scrap of POY and PSF denied - Held that:- We find from the report that PFY covers UDF (Undrawn Yarn), POY (Partially Oriented Yarn), or FDY (Fully Drawn Yarn), depending upon the winder speed and heat setting methods. In our considered view, the PFY as mentioned in the exemption notification, would also cover the POY as per the report of DSIR. So, we agree with the earlier order dt.20.05.2015. Regarding the demand of duty on waste of PSF and POY, the Tribunal already remanded this matter for examination of this issue in the light of exemption Notification No.89/1995-CE, dt.18.05.1995. On a query from the Bench, the learned Advocate submits that in earlier case, the de-novo adjudication is still pending. So, it is appropriate that in the present appeal, this issue should be remanded to the Adjudicating authority. The demand of duty alongwith interest on POY is set aside. The penalties are set aside. The Adjudicating authority is directed to examine the demand of duty on waste of POY and PSF in the light of the earlier Tribunal order. Needless to say that the Adjudicating authority shall give proper opportunity of hearing before passing the order. The appeal filed by the appellant is disposed of in the above terms. Early hearing application is dismissed on infructuous.

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• 2016 (3) TMI 563
  Extended Period of limitation invoked - Duty demand - department was not aware whether the products in question is for use in the manufacture of Air Conditioners, therefore there is suppression of fact on the part of the Appellant - Held that:- Show cause notice dated 09.09.98 was issued for the period 14.09.93 to 31.03.97 i.e. entire demand raised is for the period before one year of the issue of show cause notice. Hence the total demand is covered under extended period as provided in the first proviso to Section 11A of Central Excise Act, 1944. From the records, it is revealed that the goods in question manufactured by the Appellants are solely supplied to Voltas Ltd to their Aircondioning manufacturing unit. We find that the Appellant were submitting their Classification List during the aforesaid period from time to time in respect of the goods manufactured by them which were supplied to Voltas Ltd. We also observed that alongwith the Classification Lists, the appellant were also filing drawings of the products supplied by Voltas Ltd. to the department. On careful perusal of the drawings, we have seen that the drawing clearly indicates Air-condition and it’s model, for example: “1.5 T RAC”, “1.5 TON NEW SPLIT RAC”, “1.5 TON RAC HI-TECH”. From the said details given in the drawings submitted alongwith classification list, it can be known that the parts being manufactured by the appellant is meant for use in the manufacture of Air Conditioners. However from the above discussed facts, it is clear that the drawings of the parts was showing the description of Air Conditioners for which these parts were being supplied by the appellant. Moreover, the appellant is a manufacturer of the various sheet metal parts for different buyers and not only to Voltas Ltd. therefore from their point of view they are of bonafide belief that all the items such as washers, springs and other articles of steel manufactured by them are classifiable in the specific tariff entry given therefor. We find that the bonafide belief of the appellant for classification of the goods can not be doubted in view of the above undisputed facts. The Ld. Adjudicating Authority should not have invoked the extended period as there is no suppression of the facts on the part of the appellants. The entire demand, therefore, is hit by limitation. - Decided in favour of assessee

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• 2016 (3) TMI 562
  Denial of small scale exemption - Held that:- Classification list and period in the present case is different from the period and classification list involved in the case of Commissioner (Appeals)'s Order dated 06-4-1994. In the present case which is based on Commissioner (Appeals)'s Order dated 04-7-2001 which was accepted by the revenue cannot be influenced by any out come in the appeal filed by the revenue in the New Delhi Tribunal. We, therefore, do not find any infirmity in the impugned order of Commissioner (Appeals). Therefore the same is upheld and revenue's appeal is dismissed. CO also stands disposed of accordingly.

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• 2016 (3) TMI 561
  Duty demand on the removal of scraps - assessee availed CENVAT credit on the capital goods - Held that:- As find from the statement of Shri D. C. Goyal, General Manager that they were unable to segregate pertaining to the scrap of capital goods on which they have taken CENVAT credit from those normal scraps. It is revealed from the record that the appellant availed Cenvat credit on the capital goods, which were cleared as scrap materials. The claim of the appellants that they have not availed Cenvat credit on capital goods of scrap material, required to be established by them. Thus find both authorities below had examined the issue in detail and thereafter modified the demand. If the appellant fails to demonstrate that they had not used CENVAT credit on the scrap of the capital goods, they are liable to pay duty on the clearance on such scrap material. The appellant had not disclosed the clearance of scrap to the Department and therefore, extended period of limitation would be invoked. In view of the above discussions, the demand of duty alongwith interest and penalty is upheld. Both the authorities below had not given option to pay penalty 25% of the duty under section 11 AC of the Act. The appellant is entitled to pay penalty 25% of the duty alongwith entire amount of duty and interest within 30 days from the date of communication of this order. The appeal filed by the appellant is disposed of in the above terms.

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• Indian Laws

• 2016 (3) TMI 551
  Validity of auction orders - auction conducted by respondent No.1 - Bank of Baroda, ARM Branch, Himayath Nagar, Hyderabad, and consequential issuance of Certificate of sale of moveable properties in favour of respondent No.2 in respect of movable properties of the petitioner - non receipt of balance 75% of the bid price within fifteen (15) days after confirmation of sale - contravention of the mandatory requirement provided by the provisions of Sub-Rule (4) of Rule 9 of Rules 2002 Held that:- The Bank is attempting to take shelter under the interim order passed which was dismissed on 01-06-2015, and also the factum of preferring appeal by the petitioners which was also dismissed on 20-08-2015, and stating that only on obtaining certified copy of the order of dismissal of the writ appeal on 04.08.2015, it has informed the auction purchaser to deposit the balance bid price; (b) further reason assigned by the Bank is that the movables sought to be auctioned were, in fact, fixtures attached to the lands, which are secured assets in the form of immovable properties sought to be sold in the auction held on 13-03-2015, and therefore, the Bank has waited till disposal of writ appeal on 04-08-2015 for demanding the auction purchaser to deposit the balance 75% of bid price which was deposited on 02-09-2015. The reasons assigned by the Bank are absolutely unconvincing, since, though, the movables were attached to the lands sought to be sold in the auction held on 13-03-2015 and the sale was effected, nothing prevented it to receive the balance 75% of the bid price within fifteen (15) days after confirmation of sale. Thus, we are of the strong view, that there has been contravention of the mandatory requirement provided by the provisions of Sub-Rule (4) of Rule 9 of Rules 2002. Further, even a perusal of the letter addressed by the Bank to the auction purchaser on 04-08-2015 shows that the Bank has congratulated the auction purchaser and requested him to pay the remaining balance amount of ₹ 63.50 lakhs immediately to avoid forfeiture of the amount paid and further mentioning that on receiving full amount, it will issue sale certificate. The auction purchaser given a reply to the Bank on 11-08-2015 stating that he was inclined to pay total balance amount before the end of that month i.e., 31-08-2015 and requested to cooperate and oblige. But, the auction purchaser has paid the balance amount of ₹ 63.50 lakhs on 02-09-2015. The Bank in its additional counter, conveniently mentioned that the auction purchaser has sought time till 31-08-2015 basing on the reply given by him, but the said correspondence would not satisfy the requirement of Sub-Rule (4) of Rule 9 and, therefore, absolutely, there is no reason leaving apart plausible reason in getting over the time limit prescribed by Sub-Rule (4) of Rule 9 of Rules 2002. The auction conducted on 13.03.2015 by the Bank in favour of the auction purchaser - respondent No.2 is liable to be set aside on account of contravention of mandatory provisions of Rules 9(3) and (4) of Rules 2002, and, therefore, the same is set aside. However, we direct the Bank - respondent No.1 to return the bid amount of ₹ 85,00,000/- (Rupees eighty five lakhs only), without any interest thereon, to the auction purchaser - respondent No.2; granting liberty to take measures in accordance with law.

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