TMI Tax Updates - e-Newsletter
May 17, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
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Income Tax:
Levy of penalty - defective notice - provisions of section 271AAB are not mandatory -Sub-section (1) of section 271AAB uses the word "may" not "shall". "May" cannot be equated with "shall" especially in penalty proceedings. - AT
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Income Tax:
Non-supply of the certified copies of the order sheet - Revenue directed to supply the copy of entire order sheet on deposit of applicable fee as computed and intimated to the assessee - HC
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Income Tax:
Exemption u/s 11 - On enquiry by assessing officer, it was proved that the persons who paid rent of community hall and who paid the corpus donation were same - This is an act of quid pro for hiring the hall and no question of voluntary contribution in this payment. - Exemption denied - Tri.
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Income Tax:
Disallowance of salary paid to relative - excessive and unreasonable expenses - Wife of son of the partner does not fall within the definition of the relative as defined under sub-section (2) of section 41 of the Act. In view of this fact the provisions of section 40A(2)(b) are not applicable. - AT
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Income Tax:
Disallowance of commission expenses - the agents had no knowledge of the product sold, had no links with the purchasers, had claimed the receipt of commission only for introducing the buyers and the fact that most of the buyers were known to the assessee and did not require any introduction, seals the matter against the assessee. - AT
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Income Tax:
Validity of proceedings u/s 153A - When the name of the assessee does not appear in the panchanama and no material is seized with respect to the assessee from business premises of membership of AOP searched it could not be taken as omission on the part of the search party of mentioning the name but it is clear proof and conclusive proof that no search was at all conducted - AT
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Service Tax:
CENVAT credit - classification of service at the recipient's end - case of appellant is that once the Department has accepted the service tax paid by GHIAL under Airport Services, CENVAT credit cannot be denied by changing of classification of the recipient - Credit allowed - AT
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Service Tax:
Business Auxiliary Service - activity of arranging finance/loans for various borrowers - amount received by the appellant and recorded in his books accounts as commission - whether taxable under BAS or not? - Held No - AT
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Service Tax:
Valuation - Business Auxiliary Service - deemed additional consideration - Revenue has no evidence to support the allegation that the value of iron ore fines likely to emerge during the crushing operation have impacted the crushing charges and, as such, are to be considered as additional consideration for taxable service demand set aside - AT
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Service Tax:
The phase “in respect of roads” contained in clause (25b) of Section 65 ibid has a wider connotation and bears the widest possible scope and may be taken to mean “for the provision of”. Thus, the service tax demand on Toll Plaza and Lanes will not be sustainable in this case. - AT
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Service Tax:
Business Auxiliary Service - money changers business - the relationship between the appellant and the TCIL is that of seller and purchaser and cannot be termed as principal and agent - demand set aside. - AT
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Central Excise:
CENVAT credit - spring steel bars (SS Bars) - denial on the ground that these items are not purchased from authorized dealers as approved by railways and further these items are not used in the manufacture of Elastic Rail Clips to be supplied to railways - denial of credit is not in order - AT
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Central Excise:
Cenvat Credit - scope of input service - on the definition of the words “input service” itself, the LNG, to the extent used for production of electricity wheeled out to third parties, was not an input and the service of inward transportation thereof was not an input service. - HC
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Central Excise:
SSI exemption - dummy unit - clubbing of clearances - merely because they are doing business with each other's on commercial terms, cannot be held as dummy units - SSI exemption cannot be denied - AT
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Central Excise:
Clearance made against CT-3 provided by the consignee of the goods - demand on the ground that the appellants have not produced the re-warehousing certificate in time - The duty can be demanded from the consignor under this procedure - AT
Articles
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (5) TMI 685
Reopening of assessment - addition u/s 14A and 10B - Held that:- Deduction claimed by the assessee towards expenses under Section 14A read with Rule 8D was gone into and specifically discussed by the Assessing Officer at the time of framing of the scrutiny assessment. Number of queries came to be raised, and which came to be answered by the assessee. That thereafter, even the Assessing Officer also made a further deduction of ₹ 1 lac. Therefore, the said issue was specifically discussed and gone into by the Assessing Officer at the time of framing the original assessment, which was scrutiny assessment under Section 143 [3] of the Act. Under the circumstances, this is a clear case of change of opinion and hence, reopening is bad. It cannot be said that there was any failure on the part of the assessee in disclosing true and correct facts necessary for the assessment. Even with respect to the deduction claimed under Section 10B it is required to be noted that even the said issue was gone in detail by the Assessing Officer. The assessee produced certificate asked by the Assessing Officer and thereafter, the Assessing Officer, after having satisfied with the deduction claimed under Section 10B of the Act, allowed such deduction claimed under Section 10B of the Act. Therefore, there was no failure on the part of the assessee in disclosing true and correct facts. At this stage, it is required to be noted that even in respect of some of the earlier years/previous assessment years, similar deduction under Section 10B of the Act has been allowed in the case of very assessee. At this stage, it is required to be noted that even for A.Y 2008-2009 on the very ground, the assessment was sought to be reopened, which has been set-aside by the Division Bench of this Court Thus there does not appear to be any failure on the part of the assessee in not disclosing true and correct facts. - Decided in favour of assessee.
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2017 (5) TMI 684
Reopening of the assessment - case reopened solely on the basis of DVO’s report - determination of FMV - Held that:- Supreme Court in the case of Asstt. CIT v. Dhariya Construction [2010 (2) TMI 612 - Supreme Court of India ] and held that solely on the basis of DVO’s report and without there being any further inquiry by the Assessing Officer to form an opinion that income chargeable to tax has escaped assessment and/or without applying mind to the information in the form of DVO’s report, the Assessing Officer is not justified in reopening the assessment. It appears from the DVO’s report that the Assessing Officer has erred in relying upon DVO’s report to form an opinion that the income chargeable to tax has escaped assessment. The DVO has mechanically and on the basis of rate in the case of other two properties situated in the same Town Planning Scheme has determined the fair market value of the land as on 1st April 1981 at ₹ 65/- per sqm. However, from the report, it does not appear that the DVO has applied his mind with respect to the location etc., of the land in question. As observed hereinabove, there is no further application of mind by the Assessing Officer on the basis of the information received by him in the form of DVO’s report and has mechanically and solely relied upon the DVO’s report, formed an opinion that the income chargeable to tax has escaped. Thus, there was no tangible material available with the assessing officer to form an opinion that the income chargeable to tax has escaped assessment. - Decided in favour of assessee.
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2017 (5) TMI 683
Assessment of share capital contribution in terms of Section 68 - Proof of credit worthiness or the genuineness of the parties - Held that:- The result of enquiries carried out by the department should reveal and satisfy transparently all parameters of section 68, concurrently. In the present case, the finding of fact is to the effect that neither the credit worthiness nor the genuineness of the parties has been established by the assessee. The detailed investigations carried out by the assessing officer establish the position that the contributors to share capital were persons of insignificant means and their credit worthiness to have made the contributions has not been established. The assessing authority had put the result of his enquiries to the assessee granting him opportunity to offer its explanations. The appellant however failed to establish the genuineness of the cash contributions as well as the capacity of the persons to have made such contributions in the first place. The findings of the fact arrived at by the tribunal are accepted and nothing has been placed on record to show that they are perverse. - Decided in favour of revenue.
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2017 (5) TMI 682
Non-supply of the certified copies of the order sheets - Held that:- It is the right of every assessee to seek for the certified copy of entire order sheet of any assessment proceeding. While seeking for such copies, even if details have not been provided however, since the entire order sheet has been sought for, it is open for the authorities to compute whatever is the amount payable for providing such certified copies and issue notice and demand the petitioner to deposit the same. On such deposit, the certified copies as entitled shall be handed over forthwith. In such background, we direct opposite party No. 1 to act in tune with the above observation/direction of ours.
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2017 (5) TMI 681
Disallowance of foreign agency commission - addition of the additional evidences - Held that:- There was some kind of dealing between the assessee (Proprietor of M/s Marisa International) and M/s ShoreChem LLC and its principal as well as M/s CPP International for export of paper products and stationery items to USA. Therefore, assessee’s claim that M/s ShoreChem LLC has acted as an agent cannot be discarded at the threshold without examining the evidences brought on record. In this context, the additional evidences produced by the assessee assumes importance. On perusal of the ledger copy, we have noticed that commission payment is duly reflected. Similarly, bank statement copies demonstrate remittance of money to M/s ShoreChem LLC and Lindsay Logue. Therefore, in our view, the additional evidences produced by the assessee before us will have a crucial bearing in deciding the issue relating to payment of commission. Therefore, we are inclined to admit the additional evidences submitted before us. However, since these evidences were not before the departmental authorities, to give a fair chance to the department to examine the evidences and verify the authenticity of assessee’s claim, we are inclined to restore the matter to the file of the AO for fresh adjudication. We make it clear, heavy burden is cast on the assessee to prove the genuineness of the commission payment with documentary evidences. AO is also required to verify the assessee’s claim in the context of evidences brought on record and decide the issue after proper inquiry. Needless to mention, AO must offer reasonable and fair opportunity of being heard to the assessee.
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2017 (5) TMI 680
Addition of unexplained cash credit - Held that:- In the case of Rajendra Bahadur Singh huge cash was deposited i.e ₹ 5,00,000/- on 20.7.2009 which was stated to be kept in the house of the assessee out of tuition receipts whereas in the case of Sarojini Thakur ₹ 9,00,000/- on 18.7.2009 which was stated to be out of agricultural income kept in the house. We also find that in these cases the assessees were not government employees and not filing any return of income for the reasons that they are eiher deriving income which was below the taxable income or from agriculture which we find is not convincing and satisfactory. In case of remaining ₹ 3,00,000/-, we find that the assessee has proved genuineness of the transactions, creditworthiness and identity of the creditor. In our opinion, the order of the ld.CIT(A) in sustaining the entire addition of ₹ 17 lakhs is not correct as the assessee has produced the necessary documentary evidences regarding ₹ 3 lakhs. Whereas the source of ₹ 14 lakhs is full of doubts and cannot be accepted. In view of this facts, we are inclined to uphold the addition to the extent of ₹ 14 lakhs only by deleting the remaining the addition of ₹ 3 lakhs. In the result, the appellant gets relief of ₹ 12,35,000/- and the addition of ₹ 14 lakhs is sustained. This ground is partly allowed. Disallowance of commission expenses and audit fees - non deduction of tds - Held that:- We find merit in the submissions of the AR that the TDS was deducted from the commission payment and audit fee and duly paid in the government treasury before the due date of filing the income tax return u/s 139(1) of the Act as is evidenced by the receipt placed. In our view, the matter is requires verification at the end of the AO and therefore it would be reasonable and fair if the matter is restored back to the file of the AO for verification of claim of the assessee. Accordingly the AO is directed to allow the claim of the assessee if found correct as per law. Grounds of appeal no.2 and 3 are allowed for statistical purposes. Addition of 25% of the labour charges paid to brother of the assessee treating - addition u/s 40A(2)(b) - Held that:- The authorities below have failed to point out any unreasonability or excessiveness viz-a-viz all the labour charges paid to Dhirendre T Singh vis-à-vis prevalent market rate in order to make disallowance under section 40(2)(b) of the Act. In is necessary that the AO must record satisfaction regarding the payments made to the related persons that the same is unreasonable or excessive having regard to the prevailing market rate for the said services rendered by the later party. In our opinion, the disallowance made by the AO on adhoc basis and confirmed by the FAA by just stating that the total labour charges are nominal in relation to the turnover of the assessee and was disallowed for want of evidence and reasonability. In our opinion, this cannot be the ground for making disallowance u/s 40(2)(b). - Decided in favour of assessee. Disallowance of expenses pertaining to car expenses, credit chares, hotel expenses, petrol, telephone expenses and travelling expenses - Held that:- The expenses disallowed by the ld.CIT(A) is excessive and is on higher side. In our opinion, it would be reasonable if the disallowance is restricted to 7.5% of the total expenses as against 15% confirmed by the FAA. Accordingly, the AO is directed to make disallowance to 7.5% of the total expenses. This ground is partly allowed in favour of assessee. Enhancement of the income u/s 41(1) - cessation of liability - Held that:- The assessee has shown sundry creditors and advances from sundry debtors in the balance sheet on liability side. We further find that the assessee has suomotu written back an amount of Rs. ₹ 7,04,240/- in the assessment year 2011-12 which ceased to exist for which the trading liability has extinguished. In our opinion, the action of the ld.CIT(A) in making enhancement u/s 41(1) of the Act is contrary to the provisions of law in view of the fact when the assessee himself was showing the liability as existing on the balance sheet date and the ld. FAA has no locus standi to assess the income of the assessee under section 41(1) of the Act.- Decided in favour of assessee.
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2017 (5) TMI 679
Granting exemption u/s.11 - earning income from letting out of Kalayana Mandapam for marriage and other functions - whether regard to the terms of the Trust Deed, it can be said that the activities carried on by the assessee in the form of running of community hall, viz "Chennai Kamawar Kalyana Mahal” was itself held under the Trust - Held that:- In this case, it is brought on record by the AO that the assessee collected ₹ 11,28,000/- as corpus donation from 93 persons who performed functions at “Chennai Kamawar Kalyana Mahal”. In addition to this, ₹ 4,70,000/- was rent for utilizing the facilities of “Chennai Kamawar Kalyana Mahal” by 53 persons, totaling is ₹ 15,98,000/-. As against this, in guise of corpus donation collected ₹ 11,28,000/- from the persons, who have performed the functions in the “Chennai Kamawar Kalyana Mahal”. That amount of ₹ 11,28,000/- cannot be considered as corpus donation instead it should be a rental income. On enquiry by assessing officer, it was proved that the persons who paid rent of community hall and who paid the corpus donation were same. This is an act of quid pro for hiring the hall and no question of voluntary contribution in this payment. It is also to be noted that the dates exhibited in both cases were same. Being so, the provisions of sec.2(15) of the Act is squarely applicable as total receipts of rent from community hall exceeds ₹ 10 lakhs, and we do not find any infirmity in the order of AO in rejecting the claim of exemption u/s.11 of the Act. Accordingly, the order of Ld.CIT(A) is reversed and the order of AO is restored. - Decided against assessee.
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2017 (5) TMI 678
Validity of proceedings under section 153A - Held that:- No search has taken place and no incriminating material was found and seized from the premises subjected to search which belonged to member of AOP Shri Harshad P Doshi, and the assessee has been denying the fact that the search has ever been conducted on the premises of the assessee. When the name of the assessee does not appear in the panchanama and no material is seized with respect to the assessee from business premises of membership of AOP searched it could not be taken as omission on the part of the search party of mentioning the name but it is clear proof and conclusive proof that no search was at all conducted. We are therefore of the considered view that no search has been conducted in the case of the assessee in view of the discussion hereinabove and accordingly, we are of the considered view that the order of the ld.CIT(A) deserved to be set aside and accordingly, we hold that the proceedings under section 153A of the Act is without any valid jurisdiction so is the consequent assessment order also passed u/s 143(3) r.w.s.153(A) of the Act and hence quashed. - Decided in favour of assessee. Disallowance of claim of deduction u/s 80IB(10) - necessary approvals were never obtained from the designated authorities by the assessee - Held that:- The project under consideration was approved on 27.1.2006 and the project was completed as per the occupancy certificate issued on 1.10.2007. The total area constructed and completed of building was 12439.70 Square mtr. which is equivalent to 133901 sq.ft which is more than 1 acre and the built up area of each completed flat in the said project was not more than 1000 sq. ft. The above facts have been confirmed by M/s Avinash Mhatre & Associates , architect by issuing the certificate to this effect. Thus we hold the assessee has satisfied all the conditions of section 80(IB)(10) of the Act as developer and is entitled to deduction under the said section - Decided in favour of assessee.
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2017 (5) TMI 677
Addition on account of the alleged pre-operative expenses - Held that:- Only ground of disallowance of these expenses is on the ground that they relate to the period prior to the commencement of the business by the assessee.The sum and substance of the decisions as relied upon by assessee is that the company had to file various statements and returns and has to perform various functions to retain its status as a company and had to incur certain expenditure, and such expenditure is allowable as deduction. - Decided against revenue Addition on gain due to fluctuation in foreign exchange - Held that:- There is a clear finding by the learned Commissioner of Income-tax (Appeals) that the loans were taken in foreign exchange for construction of plant and the foreign exchange gain was the result of revaluation of loan liability for capital expenditure which is a realised gain. He further recorded that no plant and machinery were acquired by the assessee during the year under consideration as such the learned Commissioner of Income-tax (Appeals) relied upon the decision reported in CIT v. Jagatjit Industries Limited (2009 (9) TMI 62 - DELHI HIGH COURT). In this decision, it is clearly held that the entire gain due to the fluctuation in foreign exchange when the source of funds was for capital expenditure, is a capital receipt. This judgment is applicable to the facts of the case on hand and following the same, we find no legal infirmity in the finding of the learned Commissioner of Income-tax (Appeals). - Decided against revenue
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2017 (5) TMI 676
Addition of sales promotion expenses and miscellaneous expenses - whether expenses being incurred for the purposes of business? - Held that:- The software has been developed by the principal company to be used by the distributor and names it as distributor's management software and by providing this software to the assessee, the principal M/s. Hero Moto Corps Ltd. billed the assessee with one-time charges-DMS. Thus, the assessee has been charged for the installation of the software package, which was designed by the principal company. The case of the assessee is duly covered by the said decision of the Hon’ble Madras High Court in CIT v. Southern Roadways Ltd. [2007 (6) TMI 193 - MADRAS HIGH COURT]. No contrary decision was brought to our knowledge. Therefore, respectfully following the decision of the Hon’ble Madras High Court, we delete the addition made - Decided in favour of assessee. Disallowance of the salary paid to Smt. Seema Gupta by applying the provisions of section 40A(2)(b) - Held that:- It is not denied that Smt. Seema Gupta is the wife of son of one of the partners. She has been appointed as a supervisory staff. Under section 40A(2)(b)(iv) of the Act, the relative of the partner is regarded to be a person referred to in section 40A(2)(a) of the Act. The relative has been defined under section 2(41) of the Act which means in relation to an individual, the husband, wife, brother or sister or any lineal ascendant or descendant of that individual. Wife of son of the partner does not fall within the definition of the relative as defined under sub-section (2) of section 41 of the Act. In view of this fact the provisions of section 40A(2)(b) are not applicable. Disallowance under the head depreciation on car, under the head car running and maintenance and under the head postage and telephone expenses - Held that:- The disallowance on account of personal expenses is on the higher side. The personal use of the car has not been ruled out. Therefore, restrict the disallowance to one-tenth of these expenses. Therefore, the disallowance is reduced from ₹ 51,058 to ₹ 30,635. This ground stands partly allowed. Sales promotion and miscellaneous expenses - Held that:- Assessing Officer has disallowed these expenses by observing that all the vouchers related to these heads were not open to verification because for some vouchers, the names and addresses were not verifiable and were also paid in cash as well as self-drawn. The assessee although went in appeal but remained unsuccessful. The disallowance, in my opinion, is merely an ad hoc disallowance. If any of the expense was of unverifiable in nature and not incurred for the purpose of the business, only that expenditure could have been disallowed. It is not a case of the Revenue that the expenses incurred in cash exceeds the limit as prescribed under section 40A(3) of the Act.
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2017 (5) TMI 675
Penalty levied under section 271AAB - notice has been issued under section 271(1)(c) of the Act and no show-cause notice has been issued under section 271AAB - denial of natural justice - Held that:- It appears that the notice in this case has been issued by the Assessing Officer just for the sake of providing the opportunity but this opportunity cannot be regarded to be a proper opportunity. We also noted that opportunity of being heard has been given to the assessee only in respect of the proceedings initiated under section 271(1)(c) of the Act. No opportunity has been given to the assessee in respect of the penalty to be levied under section 271AAB of the Act. On this basis also, the order passed by the Assessing Officer is against the principles of natural justice of providing the proper opportunity to the assessee and accordingly we quash the order of the Assessing Officer. We have also gone through the provisions of section271AAB and noted that this section specifies three different situations under which the penalty can be imposed on the assessee under different clauses (a), (b) and (c), the penalty has to be imposed on different rate. AO has not specified in the notice in respect of which clause the penalty is going to be levied on the assessee. On this basis also, in our opinion, the penalty cannot be sustained. We further noted that the provisions of section 271AAB are not mandatory which means that the penalty has to be levied in each and every case wherever the assessee has made default as stated under clauses (a), (b) and (c) of the Act. Sub-section (1) of section 271AAB uses the word "may" not "shall". "May" cannot be equated with "shall" especially in penalty proceedings. Using the word "may", in our opinion, gives a discretion to the Assessing Officer to levy the penalty or not to levy, even if the assessee has made the default under the said provision. In view of the aforesaid discussion, we set aside the order of the Commissioner of Income-tax (Appeals) and delete the penalty levied on the assessee. - Decided in favour of assessee.
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2017 (5) TMI 674
Disallowance of commission expenses - Held that:- No work was done by the agents for the assessee warranting payment of commission. This fact has not been controverted by the assessee before us. No evidence whatsoever has been produced before us contradicting this finding of the Commissioner of Income-tax (Appeals). The only evidences on which the learned authorised representative places reliance upon is the Income-tax returns of the agents which do not establish that they had done any work for the assessee. Further the statement of the three agents admitting in so many words that the commission paid was merely an accommodation entry, explaining the manner of execution also coupled with the above facts as found by the Assessing Officer that no evidence of services rendered by the agents was filed by the assessee, the agents had no knowledge of the product sold, had no links with the purchasers, had claimed the receipt of commission only for introducing the buyers and the fact that most of the buyers were known to the assessee and did not require any introduction, seals the matter against the assessee. Thus we uphold the order of the Commissioner of Income-tax (Appeals) confirming the disallowance of commission expenses paid - Decided against assessee.
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Customs
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2017 (5) TMI 687
Refund of SAD - time limit stipulated in N/N. 93/2008 dt. 01/08/2008 - denial of refund claim on account of time bar - Held that: - even if a time limit is prescribed by Notification, the same has to be reckoned from the date of payment of duty - In the present case, since the SAD has been paid by the appellant prior to 01/08/2008, there is no hesitation to hold that the refund claims are filed within time - rejection of refund claims is unjustified - appeal allowed - decided in favor of appellant.
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Service Tax
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2017 (5) TMI 705
CENVAT credit - penalty u/s 76 - the provisions of Section 78 have been amended w.e.f. 10.05.2008 - effect of amendment, whether prospective or retrospective? - Held that: - the liability for any violation of law is governed by the law applicable at the time of such violation. The amendments carried out in the statutory provisions of Finance Act, 1994 are prospective in nature unless otherwise stated. If the effect of the amendment is omission of penalty in certain cases, the general clauses Act would still be operative and penalty would be liable as per the provisions at the time of offence and not at the time of issuance of notice - penalty upheld. Regarding denial of cenvat credit - duty paying invoices - denial on the ground that no supporting documents for receipt of duty paid inputs have been submitted by the appellant - Held that: - the credit can be availed only on the basis of valid documents. In the present appeal, there is nothing to controvert the findings on facts as recorded in the impugned order - credit not allowed. Appeal dismissed - decided against appellant.
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2017 (5) TMI 704
Valuation - Business Auxiliary Service - additional consideration in the form of iron ore fines emerging during the course of such crushing - during the course of crushing some iron ore is lost due to various reasons - whether such value of iron ore fine should be added in the crushing charges for tax liability? - Held that: - the contingency of emergence of iron ore fines having some value, is not determinable at the time of fixing of crushing charges. Hence, it is not tenable to hold that the crushing charges are influenced by the possible emergence of iron ore fines and its additional value to the appellant - The Revenue has no evidence to support the allegation that the value of iron ore fines likely to emerge during the crushing operation have impacted the crushing charges and, as such, are to be considered as additional consideration for taxable service. In the absence of any indication to that effect, we are not in agreement with the proposal that there is a non-monetary consideration in the form of iron ore fine influencing the crushing charges - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 703
CENVAT credit - classification of service at the recipient's end - case of appellant is that once the Department has accepted the service tax paid by GHIAL under Airport Services, CENVAT credit cannot be denied by changing of classification of the recipient - whether the appellants have correctly availed the CENVAT credit on service tax paid by GHIAL under the Airport Services or otherwise? - Held that: - It is un-disputed that appellants employees are transported from various places in the city to registered office, which is situated in the GHIAL premises and the services rendered by the appellants are taxed, the CENVAT credit availed by the appellant cannot be called in question since the Revenue has accepted the service tax paid for the services rendered by the GHIAL for the appellants. The decision of the Hon'ble Apex Court in the case of Servesh Refractories (P) Limited [2007 (11) TMI 23 - SUPREME COURT OF INDIA] directly applies in the case in hand where it was held that in so far as the classification is arrived at by the manufacturer and discharges the duty liability, the CENVAT credit cannot be denied on such capital goods by re-classifying the same at recipients end. Credit allowed - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 702
Management, Maintenance or Repair Services - Commercial or Industrial Construction Service - Taxability - Held that: - services provided by the appellant in respect of maintenance and repair of roads during the period 16/06/2005 to 27/07/2009 were exempted from payment of service tax under Section 97 ibid - service tax demand not sustainable. Commercial or Industrial Construction service provided in respect of roads are specifically excluded from the purview of levy of service tax in terms of clause (25b) of Section 65 ibid - It is an admitted fact on record that the demand of ₹ 48,99,741/- is towards construction of Toll Plaza and Lanes, which are in relation to the service provided in respect of – roads. The phase “in respect of roads” contained in clause (25b) of Section 65 ibid has a wider connotation and bears the widest possible scope and may be taken to mean “for the provision of”. Thus, the service tax demand on Toll Plaza and Lanes will not be sustainable in this case. Appeal allowed - decided in favor of appellant.
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2017 (5) TMI 701
Scope of SCN - case of appellant is that the impugned order has travelled beyond the scope of show cause notice inasmuch as the proposal in the show casue notice was to classify the services under ECI service, whereas the impugned order has confirmed the demand under the category of commissioning and installation service, construction service and works contract service - Held that: - the law is well settled that the impugned order is not maintainable, when the same travelled beyond the scope of SCN. Since the activities undertaken by the assessee involves both supply of goods as well as provision of labour service, the same cannot be classifiable under the errection, commissioning or installation service. Further, since the contracts executed by the assessee were composite in nature, involving both supply of material as well as provision of labour, the same is not leviable to works contract tax prior to 01.06.2007. Appeal allowed - decided in favor of assessee.
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2017 (5) TMI 700
Taxability - development charges - street light charges - road cutting charges - N/N. 24/2009-ST dated 27.07.2009 - Held that: - for the period prior to 27.07.2009 and for the period post 16.06.2005, no service tax can be levied and collected for the services provided in relation to management, maintenance or repair of roads. It is also made clear that N/N. 24/2009-ST dated 27.07.2009 exempts from service tax the services covered under the category of ‘management, maintenance or repair of roads’ w.e.f. 27.07.2009. Therefore, the amount collected for the services concerning as road cutting charges by the appellant will not attract any service tax for the period invoked in both the appeal cases filed by the appellant. Development charges and street light charges collected on account of these services by the appellant there cannot be any exemption and service tax is to be levied under the head of management, maintenance or repair service - For quantifying the service tax in case of development charges and street light charges to be collected under the service of management, maintenance and repair services, the case is remanded to the Original Authority, who will decide the matter afresh. Appeal disposed off - part matter allowed and part matter on remand.
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2017 (5) TMI 699
Business Auxiliary Service - activity of arranging finance/loans for various borrowers - amount received by the appellant and recorded in his books accounts as commission - whether taxable under BAS or not? - Held that: - the issue is no more res integra as this bench in the case of Fulchand Tikamchand v. Commissioner of Central Excise & Customs, Nagpur [2016 (2) TMI 772 - CESTAT MUMBAI] has considered identical issue and has held that In view of an equation that is devoid of an agency relationship with the financier and rules out the provision of a service on behalf of the borrower from whom the appellant receives consideration, the activities of the appellant are outside the ambit of “business auxiliary service” - appeal allowed - decided in favor of assessee.
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2017 (5) TMI 698
Business Auxiliary Service - money changers business - taxability - Held that: - the relationship between the appellant and the TCIL is that of seller and purchaser and cannot be termed as principal and agent. Thus, no service tax is leviable on the appellant on the charges received by it from TCIL - demand set aside. CENVAT credit - utilisation in excess of 20% as per Rule 6(3) of CCR, 2004 - denial on the ground that the appellant had not produced any documents before them - Held that: - Since the appellant submits that the documents are available with it, we are of the view that the matter should go back to the original authority for verification of the documents - matter on remand. CENVAT credit - credit utilized exclusively for exempted service - the appellant submits that even prior to issuance of SCN, the said amount alongwith interest was paid by the appellant - benefits of sub-section 3 of section 73 available or not? - Held that: - the benefit of sub-section (3) of section 73 ibid should be available to the appellant for non issuance of SCN, especially for imposition of penalty. Therefore, penalty imposed on this count is set aside. Appeal allowed - part matter decided in favor of assessee and part matter on remand.
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Central Excise
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2017 (5) TMI 697
CENVAT credit - reversal - whether the assessee is entitled to CENVAT credit in respect of the LNG used by it to produce electricity sold to the third parties? - scope of input service as per rule 2(l)(ii) of the 2004 Rules - Held that: - For a service to fall within the ambit of the definition of “input service” in rule 2(l)(ii), the service must be used by the manufacturer/assessee in or in relation to the manufacture of the assessee’s final product and clearance of the final product from the place of removal - although a part of the LNG which is transported to the assessee is used by the assessee, it is not used in or in relation to the manufacture of the assessee’s final product, namely, vehicles but for generating electricity which is not a final product. Moreover, such LNG is not used for the manufacture of a final product clearance whereof is from the place of removal. The service of inward transportation of the LNG used by the assessee was not in relation to the manufacture of the final product or the clearance of the final product from the place of removal so far as it relates to the electricity that was wheeled out. The service of inward transportation of LNG would be an input service if that LNG was used in the production of electricity to the extent that the electricity was used by the assessee itself for manufacturing its final product. The electricity that was wheeled out to the third parties was, obviously, not used in the manufacture of the assessee’s final product. Therefore on the definition of the words “input service” itself, the LNG, to the extent used for production of electricity wheeled out to third parties, was not an input and the service of inward transportation thereof was not an input service. Moreover, the service of inward transportation of the LNG used by the assessee was not in relation to the manufacture of the final product or the clearance of the final product from the place of removal so far as it relates to the electricity that was wheeled out - The electricity that was wheeled out to the third parties was, obviously, not used in the manufacture of the assessee’s final product. Therefore on the definition of the words “input service” itself, the LNG, to the extent used for production of electricity wheeled out to third parties, was not an input and the service of inward transportation thereof was not an input service. There was no fraud or suppression on the part of the appellant. These are involved and complex questions of law. It is not the case of the Revenue that the appellant withheld any information for any mala fide reasons. Appeal dismissed - decided against appellant.
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2017 (5) TMI 696
CENVAT credit - MS plates, electrical plates, MS channels, MS angles, MS beams, joists, beams, heat rails - Held that: - Once it is admitted that these items are used as components for making platforms and ladders which were operational components of 230 TDP Rotary Kiln, there is no reason to disallow the credit on these items - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 695
CENVAT credit - credit based on a statement from their Pune office during April 2006 to the tune of ₹ 2,26,729/- for which the appellants could not produce relevant bills/invoices - air ticket - Held that: - the appellant is entitled to the CENVAT credit on ₹ 87/- on air ticket which fall in the definition of input service - As far as Cenvat credit of ₹ 2,26,729/- is concerned, the matter needs to be remanded back to the original authority with a direction to the appellant to produce the original documents before the said authority - appeal allowed by way of remand.
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2017 (5) TMI 694
CENVAT credit - spring steel bars (SS Bars) - denial on the ground that these items are not purchased from authorized dealers as approved by railways and further these items are not used in the manufacture of Elastic Rail Clips to be supplied to railways - Held that: - No evidence of these items having been not received in the premises of the appellant or having been diverted without put into use has been recorded by the lower authorities - The denial of credit cannot be only on the basis that the raw materials are from non-approved sources or similarly placed manufacturer has asserted that these items are not required even for trial or testing - the duty paid raw material if used in relation to manufacture of dutiable final products, credit cannot be denied. Seizure of 36.986 tonnes of raw material SS bars on the ground that these items are not approved raw material for the manufacture of rail clips for the railways - Rule 15 of Cenvat Credit Rules, 2004 - Held that: - the confiscation ordered in the present case is due to non-accountal of these raw materials in the statutory records. If these raw materials are not accounted in the records, the question of availing credit on them does not arise. Accordingly, for non-accounted raw material Rule 15 of Cenvat Credit Rules, 2004 has no application. Raw materials found short in the premises - demand of ₹ 4,84,586/- - Held that: - it is noticed that there is no discussion or finding in the impugned order dated 15/04/2010 by the Commissioner (Appeals). This issue has to be re-examined by the Commissioner (Appeals) for a decision - matter on remand. Appeal allowed in part - part matter on remand - appeal disposed off.
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2017 (5) TMI 693
Production capacity based duty - benefit of Rule 96ZP(3) - applicability of proviso to sub Section (3) or sub-section (4) of Section 3A - Held that: - Hon'ble High Court in the case of MALVIYA STEEL LTD. Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR [2002 (2) TMI 252 - CEGAT, NEW DELHI], while dealing with the identical issue has held that in case of manufacturer opts for Rule 96ZP(3) benefit under the proviso to sub-section (3) or sub-section (4) of Section 3A of the Central Excise Act, 1944 cannot be availed - an appellant availing the benefit of Rule 96ZP(3) cannot avail benefit of proviso to sub Section (3) or sub-section (4) of Section 3A - demand upheld. Penalty u/r 96ZP(3)(ii) - Held that: - reliance was placed in the case of M/s. Shree Bhagwati Steel Rolling Mills Versus Commissioner of Central Excise & Another [2015 (11) TMI 1172 - SUPREME COURT], where it was held that imposition of a mandatory penalty equal to the amount of duty not being by statute would itself make rules 96ZO, 96 ZP and 96 ZQ without authority of law - penalty set aside. Appeal allowed - decided partly in favor of appellant.
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2017 (5) TMI 692
Refund claim - freight and insurance - denial of rebate claim in respect of duty attributed to freight and insurance against the export of goods - denial on the ground that excess payment is not on the correct assessable value and therefore the same is not duty and not refundable u/s 11B - Held that: - the refund claim in the present case is arising due to denial of rebate claim in respect of duty attributed to freight and insurance against the export of goods. Therefore, after decision of the rebate, this amount does not remain as rebate but it is an excise duty paid on the value which is not part of the assessable value in respect of export goods. Therefore its duty and refund thereof is clearly governed by section 11B. The appellants filed refund claim as refund of duty on the freight and insurance. Therefore, the filing of refund is a fresh case which cannot be pursued by appeal remedy. Refund allowed subject to the verification on the aspect of unjust enrichment - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 691
SSI exemption - dummy unit - clubbing of clearances - benefit of N/N. 9/2001-CE dated 01.03.2001 - The department’s case is that the value of SCF should be included in the aggregate value of the appellants on the ground that there is common premises, common staff, common directors - Held that: - SCF is a partnership firm and the respondents are a private limited company. At the first instance, as per the legal statute of both the units, partnership cannot be a related person of a private limited company - As regards the transaction of the funds between both the units, since they are doing business with each other as the respondent is getting the job work done from SCF the transaction is clearly commercial transaction. Therefore, SCF cannot be treated as a dummy unit of the respondent - SSI exemption allowed - appeal allowed - decided in favor of appellant.
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2017 (5) TMI 690
SSI exemption - use of brand name of others - Held that: - there is sufficient evidence on record to establish that MBL were using Brand name/Trade mark of another person (MVF) on their products. Hence, they will become ineligible for benefit of SSI exemption under the relevant notifications - MBL is not eligible for the SSI exemption. Extended period of limitation - Held that: - details of manufacture and clearance of dutiable goods of MBL would not have come to light, but for the investigation conducted by the department - extended period invocable. Penalty - Held that: - when equal penalty amounting to ₹ 78,76,135/- has been imposed, the penalty under erstwhile Rule 173Q / Rule 25 of the Rules is not warranted and is therefore set aside. Appeal allowed - decided partly in favor of appellant.
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2017 (5) TMI 689
Clearance made against CT-3 provided by the consignee of the goods - demand on the ground that the appellants have not produced the re-warehousing certificate in time - demand of duty in terms of Rule 20(4) of CER, 2002 - Held that: - The duty can be demanded from the consignor under this procedure, only in a case where goods are diverted without delivery of the goods to the consignee against CT-3 certificate, which is not the case here - demand not sustainable. Penalty - Held that: - The appellants admittedly did not produce re-warehousing certificate, which is requirement under the Rule. The non-production of re-warehousing is contravention of the provisions - penalty u/r 27 of CER, 2002 upheld. Appeal allowed - decided partly in favor of appellant.
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2017 (5) TMI 688
Refund claim - CENVAT credit on inputs/input services for the supplies made to EOU - deemed exports - Held that: - the issue whether the supplies made to 100% EOU can be considered as physical exports for the period prior to 01.03.2015 has been considered by the Tribunal in the case of M/s Sai Polymers Vs CCE, Hyd-IV [2017 (5) TMI 671 - CESTAT HYDERABAD], where it was held that deemed exports made by assessee-EOU to another EOU has to be treated on par with physical exports - refund allowed - appeal dismissed - decided against Revenue.
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Indian Laws
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2017 (5) TMI 686
Offence punishable under Section 18 of The Narcotic Drugs and Psychotropic Substances Act, 1985 - leniency in the matter of sentence - Held that:- From the statements of the accused-appellants recorded by the learned Judge, Special Court, Panipat on the quantum of sentence, it comes out that all of them have responsibilities towards their family members. The custody certificates produced by the learned State counsel show that none of the appellant was earlier convicted under any of the provisions of the NDPS Act. Accused-appellant Balbir has already undergone the actual sentence of seven years ten months and ten days and after adding remission, he has undergone total sentence for a period of eight years ten months and ten days. Accused-appellant-Tirlok has also remained in custody for actual period of seven years ten months and ten days and after adding remission, he has undergone total sentence of eight years ten months and ten days. Similarly, appellant-Kuldeep has actually undergone seven years ten months and ten days in jail and after adding remission, he has also undergone total sentence of eight years ten months and ten days. Appellant- Wardi Chand has not earned any remission and has undergone total sentence for a period of eight years one month and four days. Thus, all the appellants have already undergone a substantial period in jail. In view of the facts and circumstances of the case, they certainly deserves leniency in the matter of sentence. As we do not find any legal infirmity in the conviction of the appellants recorded by the learned Judge, Special Court, Panipat. Thus, the conviction of the appellants recorded by the learned Judge, Special Court, Panipat for the offence punishable under Section 18 of the Narcotic Drugs and Psychotropic Substances Act, 1985 is upheld and appeal against conviction stands dismissed. However, the order on the quantum of sentence dated 15.01.2011 is hereby modified. Appellants Wardi Chand, Balbir, Tirlok and Kuldeep are sentenced to undergo rigorous imprisonment for a period of ten years and also ordered to pay a fine of ₹ 1 lac each and in default thereof, they will further undergo imprisonment for a period of one year.
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