TMI Tax Updates - e-Newsletter
April 17, 2017

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

TMI SMS

• Removal of a Chartered Accountant firm as auditor of the Company without prior notice/seeking his comments would not be proper

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• TDS - acquisition of property - levy of income-tax is barred u/s 96 of LA Act - deduction of tax u/s 194LA is impermissible - HC

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Highlights / Catch Notes

• Income Tax:

  Deduction u/s 80IA(4) - looking to the facilities provided by Container Freight Stand, the Container Freight Stand is an Inland Port as it carries out functions of warehousing, customs clearance and transport of goods from its location to sea-port and vice versa by rail or by trucks in containers - Deduction allowed - HC
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• Income Tax:

  Validity of order of transfer of a case u/s 127 - There is no mention of any reason as to why case of the petitioner or any other case of the aforesaid group of companies requires to be transferred outside New Delhi to NOIDA - order cancelled - HC
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• Income Tax:

  Revenue seems to have been entirely motivated in ensuring that the refunds due to the petitioner / assessee are somehow not given effect to and that the demand is made so as to ensure that all other periods, available to the petitioner, are shortened. This is a plain case of abuse of power under Section 220(1) which no Court can countenanc - HC
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• Income Tax:

  TDS u/s 194LA - There is no use in giving effect to the provisions of Section 96 of the 2013 Act by first asking the Land Acquisition authority to deduct tax under Section 194LA and then driving the poor land losers from pillar to post to get a refund of the amount from the Income Tax Department - HC
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• Income Tax:

  Disallowance of claim u/s 10AA - Reference to Dispute Resolution Panel - considering the entire scheme of Section 144C of the Act, the Assessing Officer cannot make any addition and/or disallowance then what is proposed in the draft assessment order. - HC
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• Income Tax:

  Payment of agency fees - construction of toll rod / Noida DND fly over - Revenue expenditure or capital expenditure - activities of these agents during the post commissioning period - when the AO did not question these expenses for the earlier years, not justified to disallow for the current year - AT
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• Income Tax:

  Trading addition on account of bogus purchase - Merely non-appearance of the supplier in absence of any other corroborate evidence cannot be a basis to justify the stand of the Revenue that the transaction of purchase is bogus - AT
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• Income Tax:

  Assessee is a credit cooperative society. It is entitled for deduction u/s 80P(2)(1) on the interest income earned by it from its members. The interest income earned on the investment of surplus fund with nationalized bank is only to be excluded from the claim of 80P(2)(a)(i) - AT
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• Customs:

  Benefit of exemption - When the products are being exported after packing in containers, the appellants cannot be expected to reuse such containers for further packing. The appellant cannot be compelled to do something which is practically not possible for them - rejection of benefit of exemption by the authorities below is unjustified - AT
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• Corporate Law:

  Removal of Petitioner firm as auditor of the Company - removal/non-ratification of the Auditor without prior notice/seeking his comments would not be proper - Tri
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• Indian Laws:

  Power to file a Complaint under NI act - whether 'Power of Attorney Holder' and a 'Special Power of Attorney Holder' can file a Complaint on behalf of the Complainant? - the evidence of the Complainant is necessary to prosecute the complaint - HC
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• Service Tax:

  Clearing & Forwarding Agency Service - appellant did not undertake any clearing activity. Since the appellant is not undertaking the activities of both clearing and forwarding, service tax would not be leviable on the activity of mere forwarding and other incidental and ancillary activities, with reference to goods. - AT
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• Service Tax:

  The activities of services under consideration are to be treated as an activity auxiliary to the mining, their contract being indivisible contract. Such services are not taxable under the category of site formation clearance service, but they would be covered under the category of mining service - AT
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• Service Tax:

  When the appellants were showing and discharging service tax on receipts for various promotional activities it is apparent that significant portion of receipt under the category of ‘pouring fees’ received for such activities should have been included in the tax returns during the material time - demand invoking extended period of limitation and penalty was rightly imposed - AT
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• Service Tax:

  Business Auxiliary service - for every event for which the appellant gives their auditorium on hire, they are collecting empanelment fee from the respective vendors - the amounts collected as empanelment fee would be chargeable to service tax under BAS - AT
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• Service Tax:

  Rebate claim - GTA service for transportation of export consignmen - It is not in dispute that the service tax was paid by the appellant and such services have been used for export of the goods by the appellant, the rebate is required to be paid to the appellants - AT
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• Service Tax:

  CENVAT credit - the service provider has not paid the said amount collected to the account of revenue. This definitely cannot be a ground to deny the credit to the appellant who has paid service tax and produced the invoices/hand written bills. - AT
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• Central Excise:

  Classification of goods - Laces having plain border on either side which were declared as braided fabrics - the item in question is classifiable under chapter heading 58.08 of First Schedule to the CETA, 1985 - AT
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• Central Excise:

  Classification of goods - Aluminium Bobbin - the description article for conveyance or packing of goods is more specific description - the bobbins of the kind manufacture by the appellant and consisting predominantly of plastic are classifiable under heading No. 3923.90 - AT
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• Central Excise:

  Classification of goods - paper stickers and labels - the printed matter (motifs, pictures and sentences) provide the primary use/purpose of the goods in question. - The printed adhesive labels are more appropriately and specifically can be categorized as printed material covered under Heading 4911 - AT
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• Central Excise:

  Penalty - if the liability of the co-noticees arise from different act they will not get immunity from further proceeding - automatic immunity cannot be granted to the appellants who were not before the Settlement Commission - AT
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• VAT:

  Detention of goods - stock transfer - The only mistake committed by the petitioner, which according to the learned counsel for the petitioner, is due to inadvertence, is in not obtaining the transit pass in Form LL at the entry point check post of the state of Tamil Nadu - goods to be released on payment of composition fee - HC
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Articles

• CESTAT – CONTINUING?

Circulars / Instructions / Orders

• Service Tax - 206/4/2017-Service Tax - dated 13-4-2017
  Issues related to levy of service tax on the services provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India to the customs station in India

News

• CBEC sanctions ₹ 1 cr to each zone for GST outreach

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• Commerce and Industry Minister highlights the investment opportunities available in India to increase the contribution of manufacturing sector to 25% of GDP

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Case Laws:

• Income Tax

• 2017 (4) TMI 671
  Income from house property - annual value of any property - Held that:- HC order confirmed [2016 (12) TMI 1298 - PUNJAB AND HARYANA HIGH COURT] Annual value of the properties like the ones in the case in hand which are more than one, owned by the assessee and which admittedly remained vacant throughout the previous year would not be assessed under Section 23(1)(c) but under Section 23(1)(a). The annual value would, therefore, be determined notionally as done in the case in hand by the Assessing Officer and concurrently upheld by the Commissioner and the Tribunal. Question of law answered in favour of the Revenue.

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• 2017 (4) TMI 670
  Penalty under Section 271(1)(c) - the assessed income is loss, as a result of reduction at the time of final asssessment as against the amount of loss declared in the Income Tax Return - Held that:- This Court in the case of Commissioner of Income Tax I, Ahmedabad versus Gold Coin Health Food Private Limited [2008 (8) TMI 5 - SUPREME COURT ] has held that penalty can be levied even if no tax is payable on the total income assessed and the court has analysed the nature of the amendment to come to a conclusion whether it is in reality a clarificatory or declaratory provision. In view of the law laid down in the aforesaid decision, the Tribunal was not right in cancellation of the penalty under Section 271 (1) (c) of the Income Tax Act, 1961 merely on the ground that no penalty can be levied if returned income and the assessed income is a loss under Section 271 (1) (c) of the Income Tax Act, 1961 in as much as this amendment has been held to be retrospective in operation. In view of the above, the appeal is allowed and the impugned judgment passed by the High Court as also the order of the Tribunal are set aside and the matter is remitted back to the Tribunal to decide on the quantum of the penalty after giving opportunity of hearing to the respondent herein. - Decided against assessee.

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• 2017 (4) TMI 669
  Nature of expenditure - interest and other expenditure incurred towards creation assets - revenue or capital expenditure - HC [2006 (2) TMI 677 - GUJARAT HIGH COURT] confirms ITAT order in allowing expenditure claimed as followed the decision of the Gujarat High Court in the case of CIG v. Core Health Care (2001 (4) TMI 46 - GUJARAT High Court) - Held that:- We find that this Court in the case of Deputy Commissioner of Income Tax, Ahmedabad v. Core Health Care Ltd. (2008 (2) TMI 8 - SUPREME COURT OF INDIA) has affirmed the view taken by the Gujarat High Court as relied upon by ITAT. Income Tax Appellate Tribunal was justified in allowing the expenditure towards the interest paid on the loans taken and expenditure on other items connected connected herewith for establishment of the unit, while affirming the order of the Commissioner of Income Tax (Appeals). Depreciation on the amount of interest which has been allowed as revenue expenditure - Held that:- Be that as it may, if as a fact the respondent has taken any depreciation on the amount of interest and other items which has been allowed as revenue expenditure that much depreciation should be reversed by the assessing authority.

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• 2017 (4) TMI 668
  Entitlement for exemption under Section 10 (37) - payment of compensation on agreed terms in respect of the land acquired - Held that:- This Court in the case of Balakrishnan v. Union of India & Ors. [2017 (3) TMI 745 - SUPREME COURT OF INDIA] has held that even if the amount of compensation is paid on agreed terms it would not change the character of the acquisition from that of compulsory acquisition to the voluntary sale and the exemption provided under the Income Tax Act would be available and such negotiations would be confined to the quantum of compensation only. No ground to interfere with the impugned order passed by the High Court.[2008 (10) TMI 638 - KERALA HIGH COURT] - Decided against the revenue.

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• 2017 (4) TMI 667
  Disallowance of deduction u/s 80IA(4) - income derived from the industrial undertaking of Container Freight Stand at JNPT - Held that:- Issue is squarely covered against the revenue in light of the decision of the Delhi High Court in the case of Container Corporation of India Limited Vs. Assistant Commissioner of Income-tax [2012 (5) TMI 260 - DELHI HIGH COURT] as well as the decision of the Bombay High Court in the case of Commissioner of Income-tax II, Thane Vs. Continental Warehousing Corporation [Nhava Sheva] Limited (2015 (5) TMI 656 - BOMBAY HIGH COURT). In the aforesaid two decisions, Delhi High Court as well as Bombay High Court, after considering CBDT Circular No.10 of 2005 dated 16/12/2005 have specifically observed and held that looking to the facilities provided by Container Freight Stand, the Container Freight Stand is an Inland Port as it carries out functions of warehousing, customs clearance and transport of goods from its location to sea-port and vice versa by rail or by trucks in containers. Under the circumstances, the learned tribunal has rightly deleted the disallowance of deduction claimed by the assessee under Section 80IA(4) of the Act. At this stage, it is required to be noted that with respect to the earlier orders the assessee has been granted the deduction under Section 80IA(4) of the Act pursuant to the order passed by the learned tribunal and the same has attained finality.

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• 2017 (4) TMI 666
  Eligibility to exemption under section 11(1)(a) - Held that:- The revenue is not in a position to point out that there is any change in the constitution of the assessee. It is required to be noted that in the present case the dispute is with respect to A.Y. 2007-08. For the earlier assessment year i.e. A.Y. 2006-07 and even subsequent assessment year i.e. A.Y. 2009-10, the assessee has been allowed exemption under section 11(1)(a) of the Act. Under the circumstances, it cannot be said that the learned tribunal has committed any error in deleting disallowance made by the A.O. on the exemption claimed by the assessee under section 11(1)(a) of the Act. Now, so far as the submission on behalf of the revenue relying upon the decision of the Division Bench of this Court in the case of Gujarat State Board of School Textbooks (2016 (11) TMI 71 - GUJARAT HIGH COURT) that the registration under section 12AA of the Act and exemption under section 11 of the Act both are distinct and different and/or separate and therefore, the learned tribunal has materially erred in observing that as the assessee is already granted registration under section 12AA of the Act and therefore, is entitled to the exemption under section 11 of the Act is concerned, it is required to be noted that the impugned judgement and order passed by the learned tribunal is not solely based upon the aforesaid finding. As observed hereinabove, previously for the A.Ys. 2006-07 and 2009-10 in the case of the very assessee exemption under section 11(1)(a) of the Act has been granted pursuant to the order passed by the learned ITAT. Under the circumstances, keeping the aforesaid question open present appeal deserves to be dismissed.

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• 2017 (4) TMI 665
  Validity of order of transfer a case u/s 127 - in all 48 companies of the group were involved, all of whom have their head offices in Delhi and out of which, 40 companies were filing returns in Delhi. - Held that:- The case of the petitioner cannot be separated from the other cases of the aforesaid group of companies and that the petitioner is one of the directors, who had admitted undisclosed income. The holding of the office of a director by the petitioner and his admission to the undisclosed income, if any, is not at all relevant for transfer of the case. The petitioner had not demanded separation of his case from other cases rather wanted all of them to be proceeded in Delhi, but no reason was assigned for shifting it from Delhi to Noida. The reply of the petitioner was not dealt with either by the two authorities in their report, which forms the basis for transfer of the case or by the Principal Commissioner in passing the impugned order. Moreover, there is no categorical consent or agreement of the Principal Commissioner, C.I.T. (Central), Kanpur, for the transfer of the case. The aforesaid reasons have been recorded by the two authorities by simply stating that the objections/reply of the petitioner are not satisfactory. There is no whisper with regard to contention/objection of the petitioner that all the companies of the group are having Head Office in Delhi and that most of them at least 40, are filing the returns in Delhi. There is no mention of any reason as to why case of the petitioner or any other case of the aforesaid group of companies requires to be transferred outside New Delhi to NOIDA. The aforesaid two reasons are not relevant for the transfer of the petitioner's case from one Assessing Officer(s) to one or more Assessing Officer(s) either subordinate to the same competent authority or outside his jurisdiction. - Transfer order cancelled.

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• 2017 (4) TMI 664
  Penalty under Section 271(1)(c) - violation of proviso to Section 220(1) - precipitate discretion to shorten the normal period of demand was made - Held that:- In the present case it appears that the AO was authorized to file an appeal to the Income Tax Appellate Tribunal (ITAT) and did so against the findings of the CIT(A). Given the fact that the additions were made on account of a highly contentious and an entirely debatable issue, and the fact that the assessee had succeeded in past years – and at least in one year the penalty imposed was deleted, the exercise of discretion in this case under proviso to Section 220(1), in this Court’s opinion was unwarranted. Furthermore, if one keeps the logic in Sony India Ltd. (2005 (5) TMI 39 - DELHI High Court) in mind, the reasons to believe in exercise of discretion should be actuated by some external fact such as the assessee’s imminent threat of decamping from the jurisdiction or liquidating its assets. In fact the Division Bench in Sony India Ltd. (supra) even drew an analogy that the provisions of the Code of Civil Procedure, 1908 relating to attachment before judgment and like circumstances, impel a Court to exercise restraint before passing an attachment order. In the present case no such factor appears on the record. The Revenue seems to have been entirely motivated in ensuring that the refunds due to the petitioner / assessee are somehow not given effect to and that the demand is made so as to ensure that all other periods, available to the petitioner, are shortened. This is a plain case of abuse of power under Section 220(1) which no Court can countenance. - Decided in favour of assessee.

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• 2017 (4) TMI 663
  Benefit of deduction u/s 80P(2)(a) - interest income receipt - Held that:- When a Co-operative Society engaged in anyone of the activities stipulated in sub- Clauses (i) to (vii) of clause (a) makes profits and gains out of business attributable to anyone of those activities, the case would fall under Clause (a). The moment the income derived from one of those activities is invested in another Co- operative Society and an interest or dividend is derived therefrom, the case would be covered by Clause (e). In case the profits and gains of business arising out of the activities listed in sub-Clauses (i) to (vii) of Clause (a) is invested in immovable properties, such as, godowns or warehouses and an income is derived therefrom, the case would be covered by Clause (e) of Section 80P (2). As rightly contended by the learned senior counsel for the petitioners, the investment made by the petitioners in fixed deposits in nationalised banks, were of their own monies. If the petitioners had invested those amounts in fixed deposits in other Co-operative Societies or in the construction of godowns and warehouses, the respondents would have granted the benefit of deduction under Clause (d) or (e), as the case may be. The original source of the investments made by the petitioners in nationalised Banks is admittedly the income that the petitioners derived from the activities listed in sub- Clauses (i) to (vii) of Clause (a). The character of such income may not be lost, especially when the statute uses the expression attributable to and not anyone of the two expressions, namely, derived from or directly attributable to. Therefore, we are of the considered view that the petitioners are entitled to succeed. Hence, the Writ Petitions are allowed, and the order of the Assessing Officer, insofar as it relates to treating the interest income as something not allowable as a deduction under Section 80P (2) (a), is set aside. - Decided in favour of assessee.

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• 2017 (4) TMI 662
  Liability to deduct u/s 194LA despite the provisions of Section 96 of the Central Act 30 of 2013 - Held that:- Section 96 mandates that no income-tax shall be levied on any award made under the Act except under Section 46. Section 46 deals with the purchase of land by a person other than a specified person through private negotiations. The benefit of Section 96 is not available when a land is purchased through private negotiations by a person other than a specified person under Section 46(1). Therefore, in cases other than those covered by Section 46 of the 2013 Land Acquisition Act, the levy of income-tax is barred by Section 96 and as a consequence, the deduction or collection under Section 194LA of the Income Tax Act, 1961, is impermissible. Section 194LA uses the expression any sum and not the expressions income, payment or amount. The primary object of Section 194LA is to oblige the payer of a sum of money to deduct something towards income-tax. Therefore, the expression any sum is actually controlled by the expression income-tax. Section 96 of the 2013 Act was intended to be a tool towards securing the laudable objectives of the 2013 Act. Therefore, it can never be contended that Section 194LA of the Income Tax Act will make in roads into the welfare provision contained in the 2013 Land Acquisition Act. There is no use in giving effect to the provisions of Section 96 of the 2013 Act by first asking the Land Acquisition authority to deduct tax under Section 194LA and then driving the poor land losers from pillar to post to get a refund of the amount from the Income Tax Department. An interpretation that will lead the farmers and land losers to go from the Collectorate to the Income Tax Officer, is antithetic to the objects and reasons of the 2013 Act. Writ petitions are allowed and there shall be a direction to the respondents not to deduct tax at source, whenever any compensation is paid for the acquisition of a land under the 2013 Land Acquisition Act, except those covered by Section 46 of the 2013 Act. In cases where by way of an interim order the tax deducted at source was directed to be kept in a Fixed Deposit in the name of the Registrar (Judicial) of this Court, the Registry shall either liquidate the deposit and transfer the funds to the account of the petitioners or makeover/transfer the Fixed Deposit in the name of the concerned petitioners to enable them to encash the same

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• 2017 (4) TMI 661
  Penalty levied under section 271 (1)(c) - income from other sources - Held that:- Tibunal's conclusion with regard to the treatment of interest income cannot be found fault with. The reason for the same is that not only was the issue debatable, but also there was no attempt to either conceal the particulars of the said income, or, to furnish inaccurate particulars as alleged or at all. That the issue is debatable is also apparent upon reading of the judgement in the matter of Indian Oil Panipat Power consortium Limited, New Delhi V. Income Tax Officer, (2009 (2) TMI 32 - DELHI HIGH COURT). Loss returned by the Assessee is concerned, to our minds, that aspect of the matter needs re-examination by the Tribunal, as there is no discussion qua that aspect of the matter. As to whether the Assessee was entitled to book losses, when commercial production had not commenced, though, business had been set up - was an issue, which had to be examined, in the light of the facts obtaining in the matter and the judgements on the point, including the judgements rendered in CIT V. Samsung India Electronics Limited, (2013 (7) TMI 335 - DELHI HIGH COURT) and CIT V. ESPN Software India Private Limited, (2008 (3) TMI 90 - DELHI HIGH COURT). The Tribunal should have held one way or the other as to whether, the issue was debatable; an aspect which has not been satisfactorily dealt with by the Tribunal. Matter remanded back to the Tribunal - Appeal partially allowed.

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• 2017 (4) TMI 660
  Disallowance of claim u/s 10AA - Reference to Dispute Resolution Panel - Held that:- Considering the entire scheme of Section 144C of the Act, it appears that in conformity with the principles of natural justice, the assessee is required to be given an opportunity to submit objections with respect to the variation proposed in the income or loss returned. Therefore, while passing the final assessment order, the Assessing Officer cannot go beyond what is proposed in the draft assessment order. If the submissions made on behalf of the Revenue are accepted that the Assessing Officer, while passing the final assessment order can also go beyond the variation proposed in the draft assessment order, then in that case, it can be said that the assessee shall not given any opportunity to raise objections against such additions or disallowances which were not even proposed in the draft assessment order. Therefore, the same can be considered to be in breach of the principles of natural justice. At this stage, it is required to be noted that even while passing the regular assessment order, if the officer proposes to make any further addition and/or disallowances, in that case also, the Assessing Officer is required to issue required notice under Section 142 of the Act and the assessee is required to be given an opportunity to raise objection against such addition and/or disallowance. Under the circumstances, considering the entire scheme of Section 144C of the Act, the Assessing Officer cannot make any addition and/or disallowance then what is proposed in the draft assessment order. The contention raised on behalf of the Revenue that the aforesaid lapse can be said to be a procedural lapse has also no substance. Such additions/disallowances other than those proposed in the draft assessment order cannot be said to be a mere procedural lapse. Under the circumstances, we are of the opinion that the learned Tribunal has not committed any error in deleting the disallowance made by the Assessing Officer with respect to the claim of the assessee under Section 10AA of the Act, as the same was not proposed by the Assessing Officer in the draft assessment order and for which, no opportunity was given to the assessee to submit the objections against such disallowance. - Decided in favour of assessee

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• 2017 (4) TMI 659
  Claim of deduction under section 80IC - Held that:- Claim of deduction under section 80IC has been allowed by Assessing Officer in the preceding Assessment Years i.e. 2007-08 and 2008-09. So, this is a case where Assessing Officer has not followed rule of consistency. In view of the above discussion and putting reliance on the Tribunal’ decision in assessee’s own case for Assessment Year 2009-10 as discussed above, it was rightly held that assessee is eligible for deduction under section 80IC for its Paonta Sahib Unit, Himachal Pradesh. Hence, the in view of the above discussion, grounds of appeal were rightly allowed in favour of the assessee, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on the issue in dispute and accordingly, we dismiss the grounds in dispute raised by the Revenue.

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• 2017 (4) TMI 658
  Reopening of assessment - assessment of loss - Held that:- AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. In our considered view the reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law. The AO has mechanically issued notice u/s. 148 of the I.T. Act, 1961 on the basis of information allegedly received by him from the Directorate of Income Tax (Inv.), New Delhi. Thus the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. - Decided in favour of assessee

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• 2017 (4) TMI 657
  Fringe benefit tax - sales promotion expenses - proof of employer and employee relationship between the payer and recipient - Held that:- The assessee has incurred sales promotion expenditure in the nature of trade schemes and discounts, which is paid to the retail traders based on the quantity of stock purchased from M/s. A.P. State Beverages Corporation Limited and directly paid to the retail traders in the form of reduction in selling price. We further noticed that clause (d) of sub section (2) makes it clear that any sales promotion expenditure incurred by the assessee in the nature of payment to any person of repute for promoting the sale of goods or services of the business of the employer, then such expenditure shall not be considered as expenditure on sales promotion including publicity. The assessee has incurred sales promotion expenditure, which is directly paid to the retail traders. In the absence of employer and employee relationship between the payer and recipient, the question of applicability of fringe benefits on sales promotion expenses does not arise. We further noticed that the CBDT has issued a circular vide circular no.8 of 2005 dated 29.8.2005, to clarify the applicability of fringe benefits tax on sales promotion expenses and sales promotion includes sales discounts or rebates to wholesalers or customers and while answering question nos.58 and 60, clarified that brokerage and selling commission paid for selling goods is not expenditure for the purpose of sales promotion including publicity within the meaning of clause (d) of sub section (2) of section 115WB of the Act. The Board further clarifies that sales discount or rebates allowed to wholesale dealers or customers are in the nature of selling expenses and outside the scope of the provisions of clause (d) of sub section (2) of section 115WB of the Act. Therefore, we are of the view that any expenditure incurred is in the nature of sales promotion and publicity, which is incurred for promoting the sale of goods or services is outside the purview of the fringe benefit tax. The CIT(A) after considering the relevant facts has rightly deleted additions made by the A.O. - Decided against revenue

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• 2017 (4) TMI 656
  Estimation of net profit from business - Held that:- Respectfully following the decision of coordinate bench in assessee’s own case for the assessment year 2009-10, we direct the A.O. to estimate net profit of 8% on main contract works, 5% on sub contract works and 1% on sub contract works given to third parties. Deductions towards depreciation, remuneration to partners and interest on partner’s capital accounts - Held that:- We are of the view that depreciation, interest on capital and remuneration to partners is deductible even after estimation of net profit from the contract receipts. Therefore, we direct the A.O. to allow depreciation, interest on partner’s capital account and remuneration to partners against income estimated from contract receipts. Additions towards income from other sources being interest earned on fixed deposits - Held that:- Interest earned from fixed deposits kept in banks for the purpose of obtaining bank guarantee is assessable under the head ‘income from other sources’, but not under the head ‘income from business’. The CIT(A) after considering the relevant provisions has rightly upheld the action of the A.O. treating interest income under the head ‘income from other sources’.

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• 2017 (4) TMI 655
  Payment of agency fees - construction of toll rod / Noida DND fly over - Revenue expenditure or capital expenditure - activities of these agents during the post commissioning period - Held that:- Agreements to wrongly conclude that since the works assigned to independent Engineer, independent Auditor and, retainer is related to establishment, construction and commissioning of the DND Fly over and to oversee and review position of recovery for the fly over vis-a-vis the cost involved, the expenses incurred by the assessee in this regard is capital in nature. In this context it is also worthwhile to mention the fact that the Tax authorities never questioned the deductibility of above expense (i.e. Agency Fee) while dealing with assessee's case in respect of AY 2002-03 to 2005-06 which speaks for inconsistency in the approach and also go to support the claim of the assessee that the expenses in question were allowable revenue expenditure. In view of the above, we are of the considered view that the services performed by these agents are revenue in nature and fulfills the conditions prescribed under section 37(1) of the Act. Therefore, the agency fees incurred by the assessee during the F.Y. 2005-06 are allowed as revenue expenditure and the addition made by the Assessing Officer has rightly been deleted by the ld. CIT(A) and we find no infirmity in his order. Bonus paid is exclusively has to be dealt by Section 36(1)(ii) of the Act and which does not distinguish between capital and Revenue and therefore has to be allowed. Advance payments received on account of toll and advertisement - Held that:- In the instant case, the assessee recoqnised advertisement revenue proportionately on the basis of period falling under the particular financial year. So far as toll fee is concerned while issuing new cards (Silver and Gold cards) the assessee collects administration fees, security deposit and toll usage fees. While administration fees was recognised as revenue immediately, amounts received on account of toll fees from issuance I recharge of Silveri Gold Card was recognised as revenue on the basis of actual number of passages availed by the card users during a particular financial year. We have also noticed that the assessee has been following the same practice consistently since the commencement of its operations and the same had never been questioned by income tax department. Even in the subsequent financial years, the assessee has followed the same practice and was allowed by the department. The Assessing Officer ought not to have disturbed the method of accounting adopted by the assessee in one assessment year when the same is accepted in the earlier as well as the subsequent assessment years as any change to the treatment would have a corresponding ripple impact on the other assessment years. Accordingly, the grounds of the Revenue are dismissed.

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• 2017 (4) TMI 654
  Addition on account of capital gain for conversion of capital asset into stock entry - Held that:- It is not in dispute that the capital asset has been converted into stock-in-trade by the assessee. The limited issue under dispute relates to the date of actual conversion of capital asset into stock-in-trade. The balance sheet date reflects the position as on the year-end and the said date cannot be taken as date of conversion unless the conversion or treatment of the capital asset into stock-in-trade has happened on the said date. The undisputed facts are that conversion or treatment of the capital asset into stock-in-trade has not happened on 31.03.2006. The ld. CIT(A) after into consideration the signing of the development agreement on 8.01.2005, Board Resolution dated 9.4.2005 and accounting entry passed by the assessee in its books of account on 10.04.2005 has rightly held that the date of conversion of capital asset into stock-in-trade should be taken as 10.4.2005. Accordingly, we do not find any infirmity in the order of the ld.CIT(A) which is hereby confirmed. Addition on account of trading/business profit - Held that:- CIT(A) has held that it is not correct to hold that the proportion in which the sale proceeds are to be divided between the assessee and the developer should be considered and the land cost to be divided in the same proportion. Accordingly, the action of the AO was held not justified by the ld CIT(A) and it was held that the business profit for the appellant cannot be computed by just allowing 18% of the land cost as its expenses. We agree with the said findings of the ld. CIT(A) that the profit sharing ratio of the sale proceeds should not be a basis to limit the proportion of land cost in the hands of the assessee. It is undisputed fact that the assessee has contributed whole of its land which has subsequently been developed by developer who is responsible for the construction and development of the project including sales thereof. The profits that has to be computed in the hands of the assessee should therefore take into consideration the whole of land cost in hands of the assessee. It is unclear how the sale proceeds have been determined by the assessee and what was the corresponding DLC rate prevailing at that point of time and the reasons for the variance. It is also unclear how the profit sharing ratio of 18:82 has been determined between the assessee and the developer in terms of the development agreement executed on 8.1.2005. Further, it is unclear how the ld. CIT(A) while upholding the observations of the AO regarding the sales realization and profit sharing ratio has estimated the business profit at ₹ 2 lacs for AY 2007-08. In our view, the matter requires a fresh examination and we deem it fit to restore it back to the file of the ld. CIT(A) to examine the same afresh taking into consideration the above discussions. In the result, ground No. 2 of the revenue is allowed for statistical purposes. In the result, appeal of the revenue is party allowed for statistical purposes.

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• 2017 (4) TMI 653
  Trading addition on account of bogus purchase - Held that:- CIT(A) while confirming the disallowance has stated that though confirmation has been obtained from the party, however, a simple confirmation is not sufficient to establish the fact of purchase without elaborating what more is required from the assessee to justify its claim. Regarding non appearance of the supplier, the assessee has submitted that the supplier was based in Delhi and he has denied coming to Jaipur but at the same time, he has sent its requisite confirmation directly to the department by the registered post. Further the amount outstanding against the said purchases has been paid by account payee cheque in April and May, 2015 and now there is no outstanding amount against the said supplier. Regarding the other details submitted by the assessee, namely copy of Ledger amount and purchase bill of M/s Mahaveer Textiles, copy of the confirmation of the amount sent by M/s Mahaveer Textile Mills to the department and the fact that the materials so purchased form part of the turnover and which has been exported, there is no finding by the Assessing Officer as to reasons for nonacceptance of the said documents and in absence of that, the stand taken by the Revenue cannot be accepted. Merely non-appearance of the supplier in absence of any other corroborate evidence cannot be a basis to justify the stand of the Revenue that the transaction of purchase is bogus. In the result the purchases made from M/s Mahaveer Textiles have not been proved to be bogus by the Revenue and the said additions cannot be sustained in the eye of law in absence of any conclusive evidence brought on record. The ground of appeal taken by the assessee is thus allowed.

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• 2017 (4) TMI 652
  Granting exemption under section 80P(2)(a)(i) - whether cooperative credit society could claim deduction under section 80P(2) of interest income earned by it with investment in nationalized banks? - Held that:- Deduction under section 80P(2)(1) is not available on the interest income earned on surplus money deposited with Nationalised Banks. But if assessee has incurred any expenditure, which is attributable to the earning of interest income, then, the AO shall examine that aspect and exclude the interest expenditure if any incurred by the assessee for earning this interest from bank. In other words, the only net interest income is to be excluded from the claim of deduction under section 80P(2) of the Act. Respectfully following the judgment in case of State Bank of India Vs. CIT [2016 (7) TMI 516 - GUJARAT HIGH COURT] we set aside by the orders of the Revenue authorities and restore this issue to the file of the AO for re-adjudication. The ld.AO shall work out net interest income earned by the assessee from the FDRs. with nationalized banks. He thereafter disallow that amount only from the exemption admissible to the assessee under section 80P(2). We make it further clear that the assessee is a credit cooperative society. It is entitled for deduction under section 80P(2)(1) on the interest income earned by it from its members. The interest income earned on the investment of surplus fund with nationalized bank is only to be excluded from the claim of 80P(2)(a)(i) of the Act. The ld.AO shall carry out this exercise after providing due opportunity of hearing to the assessee. In the result appeal of the assessee is allowed for statistical purpose.

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• Customs

• 2017 (4) TMI 681
  Revocation of CHA licence - CHA claims that those charges which are held to be proved are not serious enough to warrant the strict penalty of revocation of the licence - Held that: - though there was a difference of opinion, but the majority view is that there is a technical breach or violation, then, this Appeal does not raise any substantial question of law - We cannot re-appreciate the factual findings and come to a different conclusion - there is no merits in this Appeal - appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 680
  Provisional release of goods - perishable goods - valuation - initially the goods in question were released on payment of duty. Later on, investigation was conducted and it was charged by DRI that the goods are undervalued and the same are seized - The adjudicating authority in the impugned order has directed the appellants either to deposit full differential duty or bank guarantee - Held that: - the direction of adjudicating authority is not correct - the adjudicating authority has relied upon CBEC Circular No. 38/2016 dated 22.08.2016. The said Circular do not bound this tribunal to liberalise the condition of provisional release in the light of the decision of the Hon'ble Gauhati High Court in the case of UOI vs. Amalgamated Plantation (P) Limited [2016 (8) TMI 124 - GAUHATI HIGH COURT] - the goods to be released on a condition of furnishing bank guarantee of 30% of the differential duty to the satisfaction of the Commissioner of Customs. In the case of Bill of Entry No. 5369202 dated 24.05.2016, condition for furnishing bank guarantee equal to 20% of the value of goods, is also harsh as the appellant has already paid duty at the time of clearance of goods and the same may be treated as sufficient for release of goods for re-export. It is made clear that the adjudicating authority shall redraw remnant samples of the impugned goods for verification of description, identity, MRP printed, quality and other details for adjudication. Appeal allowed - decided partly in favor of appellant.

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• 2017 (4) TMI 679
  Imposition of ADD - PVC paste resin - Sunset review - the case of appellant is that the final order did not examine non-compliance, of the original remand directions of the Tribunal, by the DA - Held that: - the appellant could not bring out any error apparent on record in the said final order. The grievance of the appellant is that the customs tariff classification was restricted to four digit and thereby the scope of Anti-Dumping levy was expanded when compared to the original investigation. These aspects have been examined in detail by the DA and has been taken note of in the final order by the Tribunal. The Customs Notification dated 03.07.2013 mentions four digit classification and the description of the product, alongwith an Explanation listing out the exclusion of certain products from the purview of Anti-Dumping duty. Appeal dismissed.

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• 2017 (4) TMI 678
  Benefit of exemption N/N. 104/94-CUS, dt. 16.03.1994 - denial on the ground that containers are not durable containers - The word used in the N/N. 104/94 is containers of durable nature. The authorities below relied upon the Board Circular to interpret the word durable as capable of being reused. It is thus observed by the department that since the containers used for packing the perishable products are of disposable nature, they cannot be considered as durable containers - Held that: - The said view of the department is highly imaginary. The appellants are using containers for exporting perishable products. The packing is done as per the specifications of the overseas purchaser of the product. Further, the department cannot insist that the containers should be capable of reuse when the products are being exported. When the products are being exported after packing in containers, the appellants cannot be expected to reuse such containers for further packing. The appellant cannot be compelled to do something which is practically not possible for them - rejection of benefit of exemption by the authorities below is unjustified - appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2017 (4) TMI 674
  Removal of Petitioner firm as auditor of Respondent No.2 Company - Held that:- Though the Petitioner was not ratified in AGM held on 26.09.2016, Principles of Natural Justice demands that he should have been provided with sufficient opportunity before his non-ratification. Auditor acts as a bridge between management and shareholders of the Company and is an important professional in the whole eco system of the corporate world. Therefore, removal/non-ratification of the Auditor without prior notice/seeking his comments would not be proper. Before getting into the merits/ rival contention of removal/non-ratification of the Petitioner firm, we are of the prima facie view that the Respondent No. 1 Company is not eligible to be appointed as Auditor of R2 Company as per Explanation 11(b) to Rule 6 to the Companies (Audit and Auditors) Rules, 2014. Therefore, we admit the present CP No. 21/140/HDB/2016 with following declarations/directions: (1) The removal of petitioner firm as the auditor of R2 Company and the appointment of Rl Company as Auditor of R2 Company is improper. (2) We direct the R2 Company to continue the Petitioner firm as the Auditor of R2 Company till the next AGM and subsequently necessary course of action can be taken by R2 Company regarding the continuation of Petitioner firm, in accordance with law. (3) We further direct that R2 Company to take necessary steps to appoint the petitioners' firm as Auditor of R2 Company. (4) We direct the Rl Company to submit all the records available in their possession, if any, and to cooperate with the Petitioner firm to conduct the audit of books of account of R2 Company.

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• Insolvency & Bankruptcy

• 2017 (4) TMI 675
  Initiating corporate insolvency resolution process - Held that:- The figures extracted indicate the losses and fall in revenue. It seems that the applicant has fallen into debt trap and is competent to set in motion the insolvency resolution process as contemplated under the Code'. On the basis of the aforesaid statements the total debt raised by the 'Corporate Applicant' with regard to the financial and operational creditors is ₹ 18.48 crores and it is further represented that the total amount of default is ₹ 18.29 crores. In view of the aforesaid discussion, the instant petition deserves to be admitted, it is, however, observed that the Applicant Company save some sketchy particulars has not given any road map as to how it is going to keep itself afloat as a going concern. However, keeping in perspective the objects for which 'the Code' has been brought into force and to balance the interest of all stakeholders, we are satisfied that the instant application warrants to be admitted to prevent further erosion of capital and to safeguard the assets of the Applicant Company/Corporate Debtor Directions to Appoint Mr. Jalesh Kumar Grover resident of House No.202, GH No,40, Sector 20, Panchkula-134113 (Haryana), Mobile No.09501081808, emait; jk.grover27@gmail.com Registration No. IBBI/IPA-G01/IP-00136/2Q16-17/1259, a Registered insolvency Professionat (IRP) as the Interim Resolution Professional as contemplated under Section 16 of 'the Code1 and his term of appointment shall be for a period of thirty days from the date of this order or as may be determined by the Committee of Creditors whichever is earlier; In terms of Section 17 of 'the Code', from the date of his appointment, the powers of the Board of Directors shall stand suspended and the management of the affairs shall vest with the Interim Resolution Professional and the officers and the managers of the 'Corporate Debtor' shah report to the interim Resolution Professional.It is hereby directed that the 'Corporate Debtor', its properties, personnel and persons associated with the management shall extend all cooperation to the Interim Resolution Professional in managing the affairs of the 'Corporate Debtor1 as a going concern and extend ail cooperation in accessing books and records as well as assets of the 'Corporate Debtor'.

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• Service Tax

• 2017 (4) TMI 705
  Clearing & Forwarding Agency Service - case of appellant is that pursuant to the agreement entered with various client companies, the goods were consigned by them (clients) to the godown of the appellant and the appellant merely forwarded the goods to the persons as instructed by the principals, in the whole exercise of handling the goods, there was no clearing of goods by the appellant from the factory of the clients and thus, such activity will not fall within the ambit or scope of Clearing & Forwarding service for levy of service tax - Revenue claims that appellant has undertaken various activities as per the instructions of its clients; such activities, under the agreements, confirm to both clearing as well as forwarding of goods. Held that: - to fall under the purview of taxable service, both clearing and forwarding activities should be provided by the service provider. This fact is evident from the word 'and' used after the word 'clearing', but before the word 'forwarding' in clause (j) of Section 65 (105) ibid. Thus, the word 'and' placed in between the words 'clearing' and 'forwarding' should be considered in a conjunctive sense. The goods were consigned by the principals to the appellant’s premises and the appellant did not undertake any clearing activity. Since the appellant is not undertaking the activities of both clearing and forwarding, service tax would not be leviable on the activity of mere forwarding and other incidental and ancillary activities, with reference to goods. Appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 704
  Site formation service - contract for production, Drilling & Associates Work in Underground Sindesar Khurd Mine - case of appellant is that impugned order failed to examine the limited scope of definition of site formation service and when several activities are undertaken, ultimately leading to mining then the gamut of activities cannot be taxed under site formation service - Held that: - the activities of services under consideration are to be treated as an activity auxiliary to the mining, their contract being indivisible contract. Such services are not taxable under the category of site formation clearance service, but they would be covered under the category of mining service, which has become taxable w.e.f. 01.06.2007 only - CESTAT, Delhi in the case of M/s.Aravali Construction Co. Pvt. Ltd. vs. CCE, Jaipur-II [2016 (8) TMI 675 - CESTAT NEW DELHI] has held that such services are not covered under the category of site formation and clearance, excavation and earth moving and demolition - service tax demand of ₹ 21,58,467/- under the category of site formation service cannot be sustained and is hereby dropped. Chargeability of the value of free supplies which include electricity and other items - appellant case is that it is only consideration paid which is taxable and not any material supplied for use during the course of rendition of service - Held that: - the issue is covered in favour of the appellant by the Larger Bench decision in the case of Bhayana Builders P. Ltd. [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)], where it was held that free supplies made by the service receiver shall not be added to the value of the services - the demand of service tax of ₹ 44,66,679/- confirmed on the free supplies, which includes the value of electricity and other items is not sustainable and is hereby dropped. Appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 703
  Business Auxiliary service - “pouring fees” from Pepsi, the soft drink company with whom they have a contractual arrangement for display and sale of various products of the client - Held that: - pouring fees as received by the appellant cannot be considered as a discount for sale transaction or as a payment for non-compete reason as given by the appellant. The indication is that it is more in the nature of fee received for promotion of Pepsi products - there is no merit in the appellant’s plea regarding non-taxability of the said consideration received by them. Extended period of limitation - penalty - Held that: - even on enquiry the appellants did not take any effort to get the issue clarified except seeking advice from Pepsi. When the appellants were showing and discharging service tax on receipts for various promotional activities it is apparent that significant portion of receipt under the category of ‘pouring fees’ received for such activities should have been included in the tax returns during the material time - extended period and penalty rightly imposed. Appeal dismissed - decided against appellant.

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• 2017 (4) TMI 702
  Business Auxiliary service - empanelment fee - charge-ability to service tax - Held that: - for every event for which the appellant gives their auditorium on hire, they are collecting empanelment fee from the respective vendors. From the arrangement, it is evident that the business of Vendors’ gets promoted by the appellant for which they are collecting the said fee. The same would be covered by the definition of BAS as defined under Section 65(105) (zzb) read with Section 65(19) of the FA, 1994 and, therefore, the amounts collected as empanelment fee would be chargeable to service tax under BAS - In order to quantify the confirmed demand for normal period the matter is remanded to the original adjudicating authority. Extended period of limitation - Held that: - there has not been any evidence available on record to state that the appellant suppressed the facts from the Department with the intention to evade the service tax on the empanelment fee collected by them - the extended period in this regard cannot be invoked u/s 73(1) of the FA, 1994. Appeal is partly allowed and matter remanded for quantification of demand.

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• 2017 (4) TMI 701
  Maintainability of appeal - time limitation - Held that: - in view of the affidavit submitted by the appellant stating that the adjudication order was not received by the appellant prior to 25-6-2010, there is no other option, but to accept the submission of the appellant that the adjudication order was received by it on 25-6-2010 and thereafter, within the stipulated time frame provided in Section 85 ibid, the appeal was filed before the Commissioner (Appeals). Thus, there is no delay in filing the appeal before the Commissioner (Appeals) - appeal allowed by way of remand.

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• 2017 (4) TMI 700
  Rebate claim - GTA service for transportation of export consignment - Clause 3(b) of N/N. 41/2012-S.T - reverse charge - rejection on the ground that exporter had paid the service tax under reverse charge mechanism - Held that: - The N/N. 41/2012-S.T. has been issued in terms of Section 93A of the Fa, 1994. The notification provides for grant of rebate by way of refund of the service tax paid on the specified services used for export of goods. It is nobody’s case that the GTA services for which the appellant has claimed rebate of service tax under the notification has not been used for export of goods. Consequently, there is no doubt that the appellant falls within the gamut of the notification whose stated purpose is to grant refund of service tax on services used for export - It is not in dispute that the service tax was paid by the appellant and such services have been used for export of the goods by the appellant, the rebate is required to be paid to the appellants - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 699
  CENVAT credit - duty paying invoices - the service provider did not remit the service tax collected from the appellant to the Central Government - Held that: - the service provider has not paid the said amount collected to the account of revenue. This definitely cannot be a ground to deny the credit to the appellant who has paid service tax and produced the invoices/hand written bills. Though it is stated in the impugned order that the hand written bills do not contain essential details, it is not stated as to what are the essential details in terms of Rule 4(A) of STR, 1994 that is required to make the invoices in order - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 698
  Refund claim - denial on the ground that appellant has not co-related the payment to the service provider from the bank statement and in the absence of any cheque No., demand draft No., pay order, no co-relation is possible to ascertain the actual date of payment of service tax to the service provider - Held that: - there is a co-relation with payment made to service provider and also that claim is within one year of the payment made to the service provider, appellant is eligible for refund of the amount - these documents were enough to come to a conclusion whether the appellant had made any payment to the service provider or not. To that extent both the lower authorities have erred in coming to a conclusion that the refund claim filed by the appellant is not co-relatable with the input services and exports - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 697
  Principles of natural justice - the assessee did not reply to the notice nor did he appear for personal hearing fixed - Held that: - this Court should not interfere with Ext. P2 order especially on account of the fact that the period for filing the appeal has already expired. That apart, the contention regarding violation of principles of natural justice is belied on the basis of the documents now made available - petition dismissed - decided against petitioner.

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• Central Excise

• 2017 (4) TMI 696
  Waiver of pre-deposit - the decision in the case of ARCL ORGANICS LTD. & ANR. Versus COMMISSIONER OF CENTRAL EXCISE-V COMMISSIONERATE [2016 (9) TMI 786 - CALCUTTA HIGH COURT] contested - HC dismissed the review petition - Held that: - no merit in these special leave petitions. - SLP dismissed.

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• 2017 (4) TMI 695
  Benefit of N/N. 50/2003-CE dated 10.06.2003 - setting up of new industrial unit - enhancement of installed capacity - manufacture of LPG Cylinders - the stand of the Department was that there were two types of manufacturing divisions, namely, the Cylinder Division and the Conductor Division. Therefore, the installed capacity must be of both the Divisions together. The enhancement of installed capacity only relating to the Cylinder Division would not suffice to claim benefit under Clause 2(b). Whether these appeals lie under Section 35G of the Excise Act and is maintainable? - Held that: - in a case CCE, Mangalore vs. Mangalore Refineries & Petrochemicals Ltd., [2010 (9) TMI 756 - KARNATAKA HIGH COURT ], a Bench of the Karnataka High Court took the view that an order of the appellate Tribunal deciding the issue whether the goods are entitled to exemption relates to the rate of duty and the appeal before the High Court was not maintainable. We may, incidentally, notice from para 7 of the said judgment that, actually, the order of the Tribunal was that the product in question was not marketable and it is not exigible; but the assessee questioned the maintainability of the appeal also on the ground that, even if the goods were exigible, the further question would arise as to whether the duty payable was completely exempted by way of a notification. By virtue of sub-section (2) to Section 35L, the courts are obliged to proceed on the basis that a decision relating to “taxability” or “excisability” is to be treated as a question which has a relation with the rate of duty. This is virtually a deeming provision and, therefore, we need not actually explore the question even as to whether it really has a relation with the rate of duty. The appeals are not maintainable for the reason that the appeals are maintainable only before the Supreme Court under Section 35L of the Excise Act in the context of the interpretation we have placed on the words “taxability” and “excisability”. We need not, therefore, further explore the question whether de hors sub-section (2), the case would fall under sub-section (1) of Section 35G or Section 35L, as the case may be. Appeal dismissed being not maintainable.

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• 2017 (4) TMI 694
  Interest - Section 11AA of the CEA, 1944 - BIFR Scheme by which appellant was granted permission to pay duty in five instalments with waiver of interest and penalty - The sheet anchor of the case of the petitioner is the scheme sanctioned by BIFR on 21.07.2008 and the order passed by AAIFR on 03.12.2014 - whether petitioner is liable to pay interest or not? Held that: - the petitioner has to be seen as a person who gained advantage from a Civil Court by way of an interim order and by the time the interim order got vacated, the petitioner secured protection under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985. This protection was enjoyed by the petitioner from the year 1990 till the year 2008 when the modified scheme was sanctioned. It must be remembered that the scheme first sanctioned, failed due to the inability of the company to get revived and BIFR recommended winding up. But by repeatedly litigating, the petitioner survived. A person, who gained an advantage by an interim order of the Court, cannot subsequently turn around and seek umbrage under Section 32 of the Sick Industrial Companies (Special Provisions) Act, 1985. De hors the above, the Delhi High Court and AAIFR granted liberty to the Department to examine the question of waiver of interest and penalty. This has been done by the 1st respondent, with specific reference to the mandate of Section 11AA of the Central Excise Act, 1944. Therefore, there are no merits in the writ petition - petition dismissed - decided against petitioner.

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• 2017 (4) TMI 693
  Pre-deposit - condonation of delay - the petitioner was not able to make the pre-deposit within the time stipulated by the Tribunal and there was one day’s delay in depositing such amount - Held that: - there does not appear to be any deliberate intention on the part of the petitioner to delay payment of the pre-deposit. On account of some server problem the amount, though arranged for could not be deposited within the time granted by the Tribunal and there as a delay of two days in making the pre-deposit - the delay of two days in making the pre-deposit in the circumstances, cannot in any manner be said to be so considerable so as to warrant dismissal of the appeals. Delay in filing present petition - Held that: - the second petitioner, Mr. Gautam Shantilal Shah, who was managing the affairs of the company, was hospitalised and was undergoing medical treatment during the said period - no prejudice would be caused to either of the parties, more so, having regard to the fact that the amount directed by the Tribunal to pre-deposit had ultimately been deposited within a day from the expiry of the extended period of one day granted by the Tribunal, the court is of the view that the petitions deserve to be allowed. Petition allowed - decided in favor of petitioner.

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• 2017 (4) TMI 692
  SSI exemption - use of brand name - brand name belongs to assessee or not? - Revenue's claim is that the goods of the respondents bearing the brand name RIAT connect to M/s RMT, who are the owners of the said brand to leverage its goodwill and simultaneously avail the benefit of SSI Exemption - whether for the purpose of N/N. 8/2003-CE dated 1.3.2003, the respondents were owners of the brand, which they were using on the machines manufactured by them? - Held that: - While deed of dissolution gave the right to use the RIAT trade mark to respondents, the other partners also committed that they would have no objection to registration of the above trade mark by retiring partners and shall give no objection certificate for the same. Subsequent to that, the respondents had taken registration for RIAT brand under the Trade and Merchandise Marks Act, 1958 for Centreless Grinding Machines, Planning Machines, Surface Grinding Machines vide Registration No. 457653 on 30.11.1999 and for Round Bar Straightening Machines on 15.10.2001. Thus they became owners of the brand from 30.11.1999 / 15.10.2001 respectively - Commissioner has rightly concluded that the brand name was the trade mark registered in the name of the respondents prior to the period of demand under the SCN which is from 2003-04 (26.8.2003-03/2004) to 2007-08. Appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 691
  CENVAT credit - GTA services for outward transportation of goods till destination - Held that: - service tax paid availing transportation service in such cases as per contractual obligation to deliver the goods at the destination shall be admissible to cenvat credit - appellants were not able to produce documents due to disturbed conditions in their factory either before the original authority or lower appellate authority, it is considered fair and proper to remand the matter to the original authority to address on this issue who shall dispose of the claim of the appellant after granting an opportunity of hearing to them - appeal allowed by way of remand.

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• 2017 (4) TMI 690
  Clandestine removal - consignments of grey fabrics - demand - seizure 9933.75 mtrs. of processed fabrics valued at ₹ 5,96,025/- under the reasonable belief that the same were offending in nature and liable for confiscation, since the same were manufactured out of the unaccounted grey fabrics and kept unaccounted in RG-1 register in the factory with an intention to remove the same without the cover of Central Excise invoice(s) and without payment of Central Excise duty. Held that: - there are sufficient incriminating evidences available on the record to sustain the demand of duty of Central Excise of ₹ 1,54,87,744/- against the appellant assessee M/s RKSM. The argument of the assessee-appellant that they have inflated their production figures of receipt of grey fabric to avail bank loan facility for replacing old machinery of the factory does not carry sufficient force as there is no evidence to corroborate the same. On the other hand, there are enough corroborative evidences to prove that the appellant-assessee namely M/s RKSM procured extra grey fabrics and clandestinely manufactured and removed the processed fabrics from their factory - demand upheld. Extended period of limitation - Held that: - considering the suppression of facts with intention to evade payment of duty it cannot be said that show cause notice was to be issued within one year from the relevant date. The period involved is from April, 2002 onwards and demand has been issued within the five year period from the relevant date as per the provisions of Section 11A of the Central Excise Act, 1944. Therefore, it cannot be said that on this count that the demand is not recoverable from the assessee-appellant. Penalty on 4 companies - Held that: - Rule 26 of Central Excise Rules, 2002 (Rule 209A of erstwhile Central Excise Rules, 1944) is not imposed on a company but only on a person - penalty imposed on these four companies is hereby dropped. Penalty on proprietorship concerns being on higher side, were reduced. Appeal dismissed - decided partly in favor of appellant, as regards penalty.

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• 2017 (4) TMI 689
  Classification of goods - Laces having plain border on either side which were declared as braided fabrics - classified under chapter heading 58.04 of CETA or under chapter heading 58.08 of CETA - Held that: - the assessee has been manufacturing the product by using briading or spindle machine, which are used for manufacturing braid only and when there are clear cut reports of two experts, who visited the factory and seen the manufacturing process and the machine, clearly holding that the assessee is manufacturing braids on their Hacoba Machine there is no scope to differ from the stand of the assessee that the item in question is classifiable under chapter heading 58.08 of First Schedule to the CETA, 1985 - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 688
  CENVAT credit - duty paying invoices - demand of ₹ 30,060/- on the ground that original invoices have been misplaced - Held that: - the Commissioner (Appeals)'s direction to disallow the credit for which only photo copies are available and there are no original invoices cannot be faulted. If photo copies as an alternative are accepted for allowing cenvat credit, it enhances the chances of fraud and mis-use of facility - credit rightly denied. Demand of ₹ 1,19,844/- on the ground that the activities in Delhi office related to business - Held that: - During the material period, the Delhi office was not registered as input service distributer and it has rightly been observed by Commissioner (Appeals) that the proper procedure for availment of the credit of such invoices was for the Delhi office to have got themselves registered as input service distributer - credit rightly denied. Penalty in respect of seized goods - Held that: - The Commissioner (Appeals) has rightly upheld imposition of penalty only after 27.02.2010 when the law was amended to impose penalty for wrong availment of credit of Service Tax by suppression of facts with an intent to evade Central Excise duty. Hence there is no infirmity in the order of Commissioner (Appeals). Extended period of limitation - penalty - Held that: - there was clearly suppression with an intent to service tax. Hence penalty as well as extended period have been rightly applied. Appeal dismissed - decided against appellant.

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• 2017 (4) TMI 687
  Classification of goods - Aluminium Bobbin - classified under heading No. 7616.90 or under heading No. 39.23.90/8448. of CETA? - Held that: - the heading which provides the most specific description needs to be preferred to a general description - A perusal of the headings 3923.90 and 7616.90 clearly shows that the heading No. 3923.90 a specifically covers articles for conveyance or packing of goods of plastic whereas the heading No. 7616.90 is a residuary heading covering Other articles of Aluminium. It is apparent that the description article for conveyance or packing of goods is more specific description - the bobbins of the kind manufacture by the appellant and consisting predominantly of plastic are classifiable under heading No. 3923.90. Consequently, the appeal of E/1654/2008 is allowed. Rejection of refund claim - Held that: - Since the appeal is E/837/2008 is in respect of consequent refund on the same ground, the same is also allowed. Appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 686
  Classification of goods - paper stickers and labels - classified under Chapter 48 of Central Excise Tariff or under Chapter 49 as product of printing industry? - penalty - Held that: - the items in question are not simple paper or paper board labels with or without printing, rather they are printed matter and primarily understood as printed labels for publicity - the printed matter (motifs, pictures and sentences) provide the primary use/purpose of the goods in question. Further, the printed adhesive labels are more appropriately and specifically can be categorized as printed material covered under Heading 4911. Penalty - Held that: - the SCN has not brought out any specific role or malafide intention which will establish that the partner had knowledge or reasons to believe that the goods cleared by the respondent were liable for confiscation nor any goods have been proposed to be confiscated in the SCN - there is no justification to impose penalty on the partner of the respondent firm. Appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 685
  Clandestine removal - principles of natural justice - the allegation made by the department and cenvat demand confirmed against the appellant on the ground of non-receipt of inputs in the factory - Held that: - Since onus to prove transportation of goods from the supplier’s premises and receipt of the same within the factory for use in the intended purpose have not been satisfactorily discharged, the appellant does not make out any case against confirmation of the adjudged demand - appeal dismissed - decided against appellant.

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• 2017 (4) TMI 684
  Classification of goods - Tamarind Kernal Powder (TKP) - classifiable under Chapter sub-heading 1101.00 of CETA, 1985 or under Chapter sub-heading 1301.10? - Held that: - this Tribunal in the appellant’s own case M/s Hindustan Gum & Chemicals Ltd. Versus CCE, Ahmedabad [2012 (7) TMI 748 - CESTAT, NEW DELHI], after analyzing the process of manufacture, relevant tariff entry and HSN Notes concluded that the product TKP is classifiable under Chapter sub-heading13.01 of Central Excise Tariff Act, 1985 - the matter is remanded to the adjudicating authority to re-compute the demand - appeal allowed by way of remand.

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• 2017 (4) TMI 683
  CENVAT credit - fake invoices issued by dummy firms - Held that: - even though sufficient opportunities were allowed to the Appellant during the period February 2006 to October 2006 to appear and participate in the adjudication proceedings by furnishing their reply, the Appellants had failed on both the counts, that is, neither furnished the reply to notice nor appeared before the learned Commissioner during personal hearing resulting to present ex-parte Order - Considering huge amount of liability and the gravity of charges and the quantum evidences gathered by the department during investigation and relied by the adjudicating authority in confirming the demand, the Appellants be given a last opportunity for furnishing the reply and participate in the adjudication proceeding before the learned Commissioner by rebutting the allegations framed against them in the Notice - appeal allowed by way of remand.

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• 2017 (4) TMI 682
  Penalty - case of appellant is that since the main noticee M/s Siimalin Chemicals Industries Pvt Ltd was granted immunity by the Settlement Commission by an Order u/s 32M of CEA, 1944, penalty cannot be imposed on the other co-noticees as well whether they had approached the Settlement Commission for immunity or other wise - Held that: - there is no reason to deviate from the said decision of the Tribunal in Motilal Gupta’s case [2016 (5) TMI 608 - CESTAT MUMBAI], where it was held that if the liability of the co-noticees arise from different act they will not get immunity from further proceeding - automatic immunity cannot be granted to the appellants who were not before the Settlement Commission - appeal dismissed - decided against appellant.

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• CST, VAT & Sales Tax

• 2017 (4) TMI 677
  Detention of goods - stock transfer - The first respondent detained the goods on 25.03.2017, on the reason that the goods did not accompany transit pass in Form LL - The first respondent refused to accept the documents produced by the petitioner and informed that the goods will be released only if the petitioner pays the tax and compounding fee, by treating the goods, as though, deemed to have been sold within the state of Tamilnadu for not possessing the transit pass - Held that: - Perusal of those documents filed in the typed set of papers would clearly indicate that the petitioner sought to stock transfer the goods from their Bangalore office to their Ernakulam Office. The only mistake committed by the petitioner, which according to the learned counsel for the petitioner, is due to inadvertence, is in not obtaining the transit pass in Form LL at the entry point check post of the state of Tamil Nadu. The first respondent is not justified in detaining the goods any more, if the petitioner pays a sum of ₹ 2000/- towards composition fee for not producing the transit pass - goods to be released on payment of composition fee - appeal allowed - decided in favor of assessee.

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• 2017 (4) TMI 676
  Validity of reassessment proceedings - The case of the department is that Form-C by which the petitioner has been given the benefit of 4% tax rebate was not liable to be given to the petitioner, and therefore, the proceedings for reassessment were initiated - The case of the petitioner would be that once his appeals have been admitted regarding the recovery stay, the appellate court ought to have stayed the proceedings for recovery - Held that: - under the statute an appeal can only be heard if the statutory award under sub-section (4) of Section 51 of the Act is first deposited. This has not been done. No relief as sought by the petitioner can therefore be granted - petition dismissed - decided against petitioner.

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• Indian Laws

• 2017 (4) TMI 673
  Unpaid luxury tax payable to the State Government - Held that:- Today at the time of hearing of present application Mr. Vakil and Mr. Dave, learned advocates jointly submitted that so far as claim by the respondent Gujarat Industrial Investment Corporation (“GIIC” for short) is concerned, the said claim is also settled between the parties outside the Court and terms of settlement are reduced into writing by way of letter of agreement dated 18.3.2017. Mr. Vakil and Mr. Dave, learned advocates jointly submitted that the respondent GIIC has accepted offer for One Time Settlement and the terms and conditions are agreed upon which are enumerated in the letter of agreement dated 18.3.2017. The said letter of agreement is tendered on record. 8. Having regard to the above stated facts the only claim which now survives is with reference to Industrial Financial Corporation of India (“IFCI” for short). In that view of the matter, this Court is of the view that present application can be disposed of with following order:- (i) The parties i.e. applicant and opponent GIIC will act in accordance with and will abide by the terms and conditions contained in the letter of agreement dated 18.3.2017; (ii) The parties are permitted to give effect to their “One Time Settlement” on payment of ₹ 39,50,000/- as agreed between the parties according to the terms and conditions of the letter of agreement dated 18.3.2017; (iii) Registry of this Court shall issue a cheque for ₹ 39,50,000/- (Rs. Thirty Nine Lakhs Fifty Thousand) after breaking Fixed Deposit, if required, out of the amount lying with it (pursuant to order dated 15th January, 2009 in Special Civil Application No.11524 of 2002) so as to issue cheque in the name of Gujarat Industrial Investment Corporation on or before 29.3.2017; (iv) Upon receipt of the aforesaid amount, opponent No.5- IDBI Bank shall issue No Due Certificate to the applicant preferably within four weeks; (v) Balance amount shall remain invested in the Fixed Deposit on same terms and conditions (as per the order dated 15.1.2009). It is further clarified that so far as respondent IFCI is concerned the applicant shall be at liberty to file appropriate fresh application.

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• 2017 (4) TMI 672
  Power to file a Complaint under NI act - whether 'Power of Attorney Holder' and a 'Special Power of Attorney Holder' can file a Complaint on behalf of the Complainant? - Held that:- In the instant case on hand, before the trial Court on 06.02.2014 the Power of Attorney Agent and Manager of the Appellant /Complainant's Firm was examined as P.W.1 and Exs.P1 to P7 were marked. The Learned Judicial Magistrate, Fast Track Court No.1, Erode had opined that a prima facie case was made out as against the Accused (Respondent) under Section 138 of the Negotiable Instruments Act and took the Complaint on file in S.T.C.No.206 of 2015 and directed the issuance of summons to the Accused on payment of process fee and directed the matter to be called on 06.05.2015. Although the Complainant was not examined under Section 200 Cr.P.C., yet, the cognizance taken by the trial Court on the Complaint is perfectly maintainable in Law, in the considered opinion of this Court. Before the trial Court, P.W.1 in his cross examination, had stated that he had not produced any document to show that he continues to be the Manager of the Appellant/ Complainant Firm. In fact, in his evidence, he had admitted that he had not filed any license for the Appellant's Finance Firm to run the Finance Business. Even in the notice, complaint and in his chief examination and in Power Deed, P.W.1 had not stated that he knows about the money financial dealing details in a complete fashion. At best, atleast on behalf of the Appellant/Complainant, one of the Partners might have been examined before the trial Court in the main case. But that is not the position in the present case. The Account Book, separate Register, registered pertaining to the Appellant/ Complainant's Finance Company was not produced before the trial Court and marked as an Exhibit. In the present case, P.W.1 was examined on behalf of the Appellant/Complainant and since he had not appeared as a witness in his personal capacity, he could not appear as a witness on behalf of the Appellant/Complainant in the capacity of Complainant. Also that, before the trial Court, no documents were produced to show that within six months of commencement of its business, the Appellant/ Complainant had the capacity to lend a sum of ₹ 5,90,000/-. In view of the aforesaid forgoing discussions, as far as the present case is concerned, this Court is of the earnest view that in the present case, based on the materials available on record, it is not possible for this Court to deliver a Judgment and therefore, is of the considered opinion that the Remand of the matter is Just, Fair and necessary. Otherwise, there would be a failure and miscarriage of Justice. Besides this, this Court opines that the evidence of the Complainant is necessary to prosecute the complaint filed by P.W.1 in order to render correct Judgment in the case, atleast a single Partner from the Appellant/Complainant's Firm who had lent money to the Respondent/Accused should be examined as witness on behalf of the Appellant/Complainant.

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