TMI Tax Updates - e-Newsletter
June 29, 2016
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
TMI SMS
Highlights / Catch Notes
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Income Tax:
Benefit of deduction contemplated u/s 80-IC - Certainly, the mere procurement of a No Objection from the Pollution Control Board cannot be determinative of a question, whether the hotel fulfills the requirement under Section 80-IC - HC
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Income Tax:
Bogus purchases - What the assessee has done is that he tried to reduce the profit by showing artificial purchases. When the assessee was unable to show genuineness of those purchases the amount of profit is bound to be increased. - HC
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Income Tax:
Clarifications on the Income Declaration Scheme, 2016 - Another set of clarification and FAQs
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Income Tax:
Relaxation from TDS @20% where PAN is not available and from payment made to non-resident, not being a company, or a foreign company, subject to conditions and providing specific details and documents - Income-tax (17th Amendment) Rules, 2016 - Notification
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Income Tax:
The principles of res judicata have no application to income-tax assessment proceedings - Simply because in the preceding year, this expenditure came to be allowed without any probe or enquiry it does not preclude the AO from making the enquiries on these issues. - AT
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Income Tax:
Business loss cannot be set off against the income assessed under the deeming provisions of section 68, which is not falling under any of the five heads of income - AT
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Income Tax:
Business loss cannot be set off against the income assessed under the deeming provisions of section 68, which is not falling under any of the five heads of income - AT
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Income Tax:
Disallowance of stamp duty expenses - The payment of stamp duty is not for business expediency but it is in the nature of a compulsory levy under the Bombay Stamp Act. It is legally settled that accounting practice cannot over rider the provisions of the Income Tax Act, 1961 - whole expenditure allowed as revenue expenditure - HC
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Income Tax:
As the international transactions of payment of royalty and fees for technical services are separate transactions and not closely linked with the other transactions with which the assessee has merged them, we cannot permit such merger or aggregation for the purpose of the determining their ALP on entity level under TNMM - AT
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Central Excise:
Common registration and return for First Stage Dealer and Importer - An assessee who conducts business both as an importer and FSD may take only one central excise registration and submit only one return
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Central Excise:
Refund claim on courier service used for export of goods - objection is only that in the invoices issued by the courier agency service, export invoice number & IEC code of the appellant are not mentioned. There is no dispute that the details of the appellant/exporter as also description of goods are mentioned in these invoices. - refund allowed - AT
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Central Excise:
Demand of duty on operational loss in excess of 0.5% - permissible limit - business of refining and marketing of Petroleum products - difference between physical stock and the book sock is called operational loss. - no upper limit fixed for operational losses - Demand of duty not correct - AT
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Central Excise:
Valuation - inclusion of the value of ECP while discharging the duty liability on RMPU - Merely because, these two items were designed for a combined working after installing them on the railway coaches does not automatically mean the value of one should be added in the other for central excise purpose - AT
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Central Excise:
Valuation - Job work - the value adopted by the appellants under Rule 8 of the Central Excise (Determination of price of Excisable goods) Rules, 2000 was not in order and that since the application of paint contains labour costs, the assessable value is to be determined under Rule 11 only after deduction of the value of labour component from the total value for supply and apply - AT
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Central Excise:
Demand of excise duty - bonafide belief that manufacture of threaded roof bolts and nuts are not liable to duty of excise - exclusion of bought out items - manufacturing of threaded roof bolts and nuts - demand of duty confirmed - levy of penalty set aside - AT
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Central Excise:
Claim of exemption - manufacturer of industrial valves - conventional energy device or non-conventional energy device - Benefit of Notification No.6/2002-CE dt. 1.3.2002 allowed - AT
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Central Excise:
Valuation - relating parties - allowed 25% discount to sole buyer - the buyer is also holding company or a subsidiary company of the assessee. - Working in the same premises or the trading firm using the logo and name of the manufacturing firm by itself are of no consequence to consider the transaction value as tainted. - Demand set aside - AT
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Central Excise:
Clandestine removal of goods - merely because figures of stock reported in their financial accounts (3 CD Returns) filed with the Income Tax authorities were different from stocks reported in their RG-1 register, no demand can be made in the absence of physical verification - AT
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Central Excise:
Cenvat Credit - allegation of non receipt of inputs - as per newspaper the owner of vehicles had transported the goods used fake vehicle registration number and a drive was launched against those vehicle owners - the adjudicating authority is required to examine the newspaper report before denial of credit to the appellants as evidence - AT
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Central Excise:
Remission of duty - destruction of indigenous / imported raw material due to fire - If the duty element is also required to be insured and reimbursed by the insurance company, then there is no need for the assessee to ask for remission of duty in which case the provision of remission of duty would become redundant. - AT
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (6) TMI 1033
Benefit of deduction contemplated under Section 80-IC - whether the deduction is available in case of a hotel which does not take steps towards ecological balance? - only reason for denying the benefits is that hotel is a stand-alone hotel and not a parcel of Ecotourism activity project - Held that:- Certainly, the mere procurement of a No Objection from the Pollution Control Board cannot be determinative of a question, whether the hotel fulfills the requirement under Section 80-IC of the Act. May be, it is not in dispute, in fact, according to Shri Pulak Raj Mullick that for all hotels of a particular type, satisfying a particular requirement, no objection is required from the Pollution Control Board. In this context, we bear in mind the argument of Shri H.M. Bhatia, that Pollution Control Board actually gives no objection consent to operate in the context of air and water Pollution. By no means, can this be the sole determinant of the question, as to whether the hotel is engaged in Ecotourism. Therefore, necessarily the order passed by the Tribunal cannot be sustained. The receipt of the subsidy cannot be a hurdle in our taking the view, which we are taking as we are called upon to decide the actual scope of the provision in this appeal. While we do not discount the fact that subsidy may have been given the actual interpretation of the provision is a task, which we cannot abdicate. The answer to the substantial question of law no.1 is given in favour of the revenue/appellant by holding that merely because a No Objection Certificate has been obtained from the Pollution Control Board, the conditions under Section 80-IC will not be fulfilled. - Decided against assessee
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2016 (6) TMI 1032
Bogus purchases - whether the assessee failed to establish the genuineness of the purchases from JKDPL as claimed by it? - Held that:- We have enquired of Mr.Biswas and from his submission we understand that the purchase bills of less than ₹ 20,000/- were not produced. The payments, according to him, were made all in cash. The stock register was not produced. The absence of these documents go to suggest that the purchase from JKDPL may be a bogus purchase. In any event the view taken by the assessing officer, CIT(A) and the learned Tribunal is not an impossible view. If the assessee chooses to withhold the best evidence and relies on the secondary evidence even assuming that any secondary piece of evidence was adduced then the presumption in law shall be against the assessee. The question of any lapse on the part of the Tribunal in accepting the sales at a sum of ₹ 1,18,82,877/- did not arise because the aforesaid figure was furnished by the assessee himself. The assessee admits that the sale was for the aforesaid sum. What the assessee has done is that he tried to reduce the profit by showing artificial purchases. When the assessee was unable to show genuineness of those purchases the amount of profit is bound to be increased. - Decided against the assessee.
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2016 (6) TMI 1031
Amortization of premium on investment - Held that:- If the income of the assessee is deductible under section 80P, then whether the income has been reduced by the amortization or not becomes only a question of academic interest which does not involve any effect on the Revenue. There has been no loss of revenue. In such a case, insisting upon refusing to allow the amortization would result in insisting upon following a practice, contrary to the circular issued by the Reserve Bank of India which is not desirable. For the aforesaid reasons, we are of the opinion that the amortization may be permitted so long as the deduction is available to the assessee under section 80P. The question formulated at the time of admission of the appeal, is as follows : “Whether the Income-tax Appellate Tribunal has substantially erred in law in holding that the amortization of premium on investment of ₹ 5,60,614/- is capital expenditure ? The question is already answered by our discussion made above in favour of the assessee.
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2016 (6) TMI 1030
Interest paid to the partners disallowance - whether there is no specific provision for claiming interest paid to the partners on their capital against the income from house property? - Held that:- The question whether the business has been closed permanently or there was any intention of resumption of the business is essentially a question of fact and that has to be decided only on the basis of documentary evidence and such other evidences which may be adduced. Similarly, whether interest was authorised by the Partnership Deed is also a question, which was never considered by any of the statutory authorities. At the same time we find some substance in the submission that the income derived by the assessee by letting out the godown may be treated as a business income. In that view of the matter, the matter is remanded to the Assessing Officer. He will consider the questions (a) whether the income can be treated as an income arising out of business; and (b) whether the payment of interest to the partners can be allowed as a permissible deduction. He will decide these questions, after taking such evidence as the assessee may adduce, in accordance with law. The questions formulated at the time of admission of appeal have now become redundant and they need not be answered.
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2016 (6) TMI 1029
Interest on delayed payment of interest - Held that:- Considering the decision of the Honble the Supreme Court in the case of Gujarat Fluoro Chemicals (2013 (10) TMI 117 - SUPREME COURT ), the question, which is raised in the present appeals is required to be answered in favour of the revenue wherein it is held that the Legislature inserted Section 244A to the Act which provides for interest on refunds under various contingencies and that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest. - Decided against assessee
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2016 (6) TMI 1028
Reopening of assessment - non deduction of TDS - Held that:- The issue with regard to tax deducted at source was raised for the purpose of scrutiny. The assessee had replied thereto. The scrutiny order had proceeded on a basis. Therefore, in such fact scenario, it cannot be said that the assessee is guilty of not disclosing fully and truly all material facts necessary for its assessment in respect of the assessment year. Thus the pre-condition for assumption of jurisdiction under the first proviso of Section 147 of the Income Tax Act, 1961, has not been satisfied for the purpose of issuance of a notice under Section 148 of the Income Tax Act, 1961. - Decided in favour of assessee
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2016 (6) TMI 1027
Disallowance of payment of luxury tax - CIT (A) deleted the disallowance which was upheld by the learned Tribunal - Held that:- Both the CIT(A) and the learned Tribunal were of the opinion that payment of tax made in the relevant assessment year or before the filing of return for the relevant assessment year was deductible under section 43B irrespective of the year in which the liability might have been incurred. Correctness of the aforesaid view has not been questioned in this appeal. We, as such, find no merit in the appeal, which is, accordingly, dismissed. - Decided against revenue
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2016 (6) TMI 1026
Liability of interest - principle business of the assessee - whether the Appellant is a credit institution under the provisions of Interest Tax Act and further liable to pay tax on chargeable interest earned by it ? - Held that:- Interest income in the three years is ₹ 14,97,441/-, Rs, 11,15,533 and ₹ 4,46,972/- whereas the service charges are only ₹ 5,40,132/-, ₹ 3,95,405/- and ₹ 2,95,098/-. From the balance sheet it is clear that the assessee had given ₹ 89,95,449/- towards unsecured loan. Therefore, in view of clause (v) of Section 2 (5B) of the Interest Act, the main activity of the assessee is to provide loan and main source of its income is interest. In view of all these, the questions of law framed for our consideration are required to be answered against the assessee and in favour of the department.
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2016 (6) TMI 1025
Reopening of assessment - Claim of bad debts u/s 36 (1) (vii) - Held that:- It was only after such detailed, minute scrutiny that the Assessing Officer, in the order of assessment, had made partial disallowance of the petitioner's claim of deduction of bad and doubtful debts. For all these reasons, therefore, the Assessing Officer cannot be permitted to reopen the assessment, on this very ground, since any such reopening, would be based on mere change of opinion. Deduction of the provision of sales return claimed - Held that:- Assessing Officer was completely against the principle of taxing these receipts. The Audit Party was of the opinion that the deduction for provision of sale return was claimed for liability which had not yet arisen nor ascertained. The Assessing Officer was steadfast in his belief that the liability had accrued and it was also ascertained. Under the circumstances, as per the settled law, Notice for reopening could not have been issued. It was not the belief of the Assessing Officer that income had escaped assessment. In fact, he was compelled to go against his own legal belief and issue notice, which was wholly impermissible under law. In fact, the spirited defence put forward by the Assessing Officer before the Audit Party gives credence to the petitioner's contention that his entire claim was minutely examined by the Assessing Officer during the original assessment proceedings. - Decided in favour of assessee
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2016 (6) TMI 1024
Additions u/s 68 - Undisclosed Cash credits - Burden of proof - Held that:- All the aforesaid 23 persons, except Shri Kailashbhai Tulsibhai Patel, from whom deposits were received are the income tax assessees. They are having PAN numbers. The amounts have been received through the banking channels. Copies of accounts of each depositor were duly filed. The assessee has duly explained in respect of each of the depositors and the circumstances under which deposits were received by the assessee. The deposited money represents the amounts towards booking received initially through M/s.Siddharth Corporation along with which the assessee has engaged in joint venture of developing the project on the land which was allotted from Surat Municipal Corporation. This is an admitted fact that the assessee has not carried out any business during the year under consideration. No evidence on record has been brought that the assessee had earned income during the year. It is rightly found by the tribunal that the assessee has duly discharged its burden of proof. In the case of Deputy Commissioner of Income Tax v. Rohini Builders reported in [2001 (3) TMI 9 - GUJARAT High Court ], amounts were received by the assessee by account payee cheques and initial burden of proving the credits was discharged. It is held that the assessee need not prove the source of the credits and the fact that the explanation was not satisfactory would not automatically result in deeming amounts as income of the assessee - Decided in favour of assessee
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2016 (6) TMI 1023
Deduction under Section 80 HHC on export profits arrived at on the basis of the export turnover and the total turnover exclusive of Excise duty and Sales-tax - Held that:- Issue is squarely covered by the decision of the Apex Court in the case of Commissioner of Income Tax v. Lakshmi Machine Works reported in [2007 (4) TMI 202 - SUPREME Court ] Sales-tax incentive - revenue or capital receipt - Held that:- he issues involved in these appeals are squarely covered by the decisions of this Court in Commissioner of Incometax v. Birla VXL Ltd. reported in (2013 (7) TMI 655 - GUJARAT HIGH COURT ) and in Deputy Commissioner of Income-tax v. Munjal Auto Industries Ltd. reported in (2013 (10) TMI 650 - GUJARAT HIGH COURT) wherein held it can thus be straightaway seen that the benefit, though computed in terms of the Sales Tax liability in the hands of the recipient, the same was not mean to give any benefit on day-to-day functioning of the business, or for making the industry more profitable. The principle aim of the scheme was to cover the capital outlay already made by the assessee in undertaking special modernization of its existing industry . Therefore, the questions of law posed for our consideration in these appeals are answered in favour of the assessee
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2016 (6) TMI 1008
Transfer pricing adjustment - whether the services are actually rendered by the AE - Held that:- As the condition of rendition of services should be satisfied by the assessee so as to allow the same as expenditure. In the present case, assessee-company had not produced any evidence in support of rendering of services before the TPO. It is only before us, by way of additional evidence, assessee-company has filed some material, in support of the actual services rendered by the AE. The CIT(A) had no occasion to examine this evidence as it was claimed that this evidence was filed for the first time before us . Therefore, the CIT(A), without examining the aspect of actual rendition of services by the AE in respect of IT services, had directed the allowance of expenditure. Therefore, in interests of justice, we restore this issue to the file of the AO for purposes of verification of this evidence and come to conclusion whether the services are actually rendered by the AE or not and direct the TPO/AO to bench mark the transaction of rendering of services of market management support services, after being satisfied himself that the services are actually rendered by the AE. On the principle of consistency, we hold that each assessment year is separate and distinct. The principles of res judicata have no application to income-tax assessment proceedings. Simply because in the preceding year, this expenditure came to be allowed without any probe or enquiry it does not preclude the AO from making the enquiries on these issues.
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2016 (6) TMI 1007
Disallowance of stamp duty expenses - expenses actually incurred by the appellant for executing contract with Maharashtra State Road Transport Corporation - Held that:- The payment of stamp duty is not for business expediency but it is in the nature of a compulsory levy under the Bombay Stamp Act. It is legally settled that accounting practice cannot over rider the provisions of the Income Tax Act, 1961. Stamp duty paid by the appellant during the year under consideration is a compulsory statutory levy and would not restrict the profits of the future years and ordinarily revenue expenditure incurred wholly and exclusively for the purpose of business must be allowed in its entirety in the year in which it is incurred and it cannot be spread over a number of years. If any statutory expense is required to be paid, in view of decision of the Apex Court in India Cements Ltd. v. Commissioner of Income Tax (1965 (12) TMI 22 - SUPREME Court ), such expense is required to be allowed in the same year. The Apex Court in the case of Taparia Tools Ltd. v. Joint Commissioner of Income-Tax (2015 (3) TMI 853 - SUPREME COURT ) also observed that as per the ordinary rule revenue expenditure incurred in a particular year is to be allowed in that year. Thus, if the assessee claims that expenditure in that year, the Department cannot deny it. However, in a case where the assessee himself wants to spread the expenditure over a period of ensuing years, it can be allowed only if the principle of “matching concept” is satisfied, which upto now has been restricted to cases of debentures. Therefore, it is rightly observed by the CIT (A) that the expense is required to be allowed in the same year. - Decided in favour of assessee
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2016 (6) TMI 1006
Inclusion of income under the deeming provisions of section 68 under the head “income from other sources” - Set off of business loss against the income under the head “income from other sources” - Held that:- Respectfully following the judgment of Fakir Mohammed Haji Hassan (2000 (8) TMI 44 - GUJARAT High Court ), Kim Pharma Private Limited Vs. CIT (2013 (1) TMI 495 - PUNJAB AND HARYANA HIGH COURT) and Gujarat Infra Pipes Private Limited (2009 (12) TMI 976 - ITAT AHMEDABAD) held that deemed income under 69, 69A, 69B, & 69C of the Act are not assessable under the head income from other sources we hold that business loss in the case of assessee cannot be set off against the income assessed under the deeming provisions of section 68, which is not falling under any of the five heads of income Addition to income - amount added by the assessee himself in his computation of income - Held that:- Commissioner of Income Tax(Appeals) has deleted these two additions on the ground that same were not discussed in the body of the assessment order. We find that whether those two additions are made by the assessee itself in the computation of income, is a matter of verification and, therefore, in the interest of justice, we restore the matter to the file of the Assessing Officer with the direction to verify whether the same was already added by the assessee in the computation of income, and if so, then the additions made by the AO are justified.
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2016 (6) TMI 1005
Transfer pricing adjustment - whether the segregation of these two transactions of payment of Royalty and Fees for technical services from the other international transactions, is justified? - Held that:- When we consider more than one separate transaction under the combined umbrella of TNMM on an entity level, it is quite possible that a probable addition on account of transfer pricing adjustment arising from one international transaction may be usurped by the income from the other international transaction giving higher income on transacted value. That is the reason for which the legislature has provided for determining the ALP of each international transaction separately from the others. As the international transactions of payment of royalty and fees for technical services are separate transactions and not closely linked with the other transactions with which the assessee has merged them, we cannot permit such merger or aggregation for the purpose of the determining their ALP on entity level under TNMM. We, therefore, reject this contention raised on behalf of the assessee. Thus the TPO was justified in segregating the international transactions of payment of royalty and fees for technical services from other international transactions as these are not linked with import of raw material etc. from its AE. The assessee’s contention in this regard is, ergo, repelled. Selection of the most appropriate method - Held that:- As fairly settled through a catena of decisions that the CUP is the most appropriate method to determine the ALP of an international transaction because it seeks to compare the price charged or paid for property transferred or services rendered provided proper comparables are available. It is under this method alone that the price charged or paid is directly compared with the price charged or paid in an uncontrolled comparable transaction. Rest of the four specific methods seek to make comparison of the price charged or paid indirectly through the medium of normal profit arising in a comparable uncontrolled transaction. Further, the CUP method is a transaction specific method which strives to determine the ALP of an international transaction on a micro level, thereby lending more credibility to the ALP of a transaction. As such, we hold that the CUP is the most appropriate method for determining the ALP of these transactions under the present circumstances and the TPO was justified in applying the CUP as the most appropriate method. Determination of ALP under CUP method - Held that:- We approve the application of the CUP as the most appropriate method in the given circumstances for determining the ALP of the international transaction of royalty and fees for technical services, but, the manner of selection of comparables also cannot be upheld. Whether rate of Royalty/FTS approved by RBI is always at ALP ? - Held that:- hat we need to do in a transfer pricing analysis is to find out a comparable case engaged in the same line of business. The rate of royalty for use of technical know-how of industrial equipments cannot be considered as comparable with that of electronic goods. Even within the overall electronic goods segment, there can be different products or components and the technical know-how required for components cannot be compared with the electronic goods on the whole. In our considered opinion, at best, the rate of royalty approved by the RBI has a persuasive value in the process of determination of ALP of Royalty for a particular case and cannot be considered as conclusive.We, therefore, refuse to accept the payment of royalty and fees for technical services at ALP simply on the ground that it was paid at the maximum rate stipulated by the Reserve Bank of India. Whether the TP provisions apply when deduction is available under the Act ? - Held that:- The eligibility of the assessee to deduction u/s 80IC of the Act does not operate as a bar on determining the ALP of international transaction undertaken by it and further the enhancement of income due to such transfer pricing addition cannot be considered for allowing the benefit of deduction under this section. Rule of Consistency - Held that:- For the year under consideration, the TPO has separated the international transactions of payment of royalty and fees for technical services from other international transactions by treating the remaining at ALP under the TNMM. There is a sea change in the approach adopted by the authorities in the preceding year vis-à-vis the current year. The fact that the TPO proceeded on a wrong premise in the preceding year without considering the international transactions of royalty and fees for technical services as separate from the others, cannot give a licence to the assessee to claim that the same wrong approach be repeated in the subsequent years as well. In an earlier part of this order, we have approved the action of the TPO in segregating these two international transactions from the remaining transactions and determining their ALP separately. Under such circumstances, the assessee cannot seek deletion of addition on the principle of consistency because of a completely changed scenario in the instant year. Such a rule of consistency, if at all, could have been pleaded if the TPO in the preceding year had also segregated such two transactions and benchmarked them same separately under the CUP method, which the DRP would have overturned. Since no such exercise was done by the TPO in the preceding year when the proceedings went on an altogether different line, we cannot approve the argument of the ld. AR for accepting these two international transactions at ALP. Thus we set aside the impugned order and remit the matter to the file of AO/TPO for a fresh determination of the ALP of the international transaction of payment of royalty and fees for technical services
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2016 (6) TMI 1004
Revision u/s 263 - genuineness of the gift proved - Held that:- Assessing Officer was satisfied, consequent to making an enquiry and examining the evidence produced by the Assessing Officer, establishing the identity and creditworthiness of the donor as also the genuineness of the gift. The CIT in his order of Revision, does not indicate any doubts in respect of the genuineness of the evidence produced by the Assessee. The satisfaction of the Assessing Officer on the basis of the documents produced is not shown to be erroneous in the absence of making a further enquiry. It is made clear that our above observations should not be inferred to mean that it is open to the Assessing Officer to enquire into the source of source for the purpose of the present facts. This is a case where a view has been taken by the Assessing Officer on enquiry. Even if this view, in the opinion of the CIT is not correct, it would not permit him to exercise power under Section 263 of the Act. In fact, the Apex Court in Amitabh Bachchan (2016 (5) TMI 493 - SUPREME COURT ) has observed that there can be no doubt that where the view taken by the Assessing Officer is a possible view, interference under Section 263 of the Act, is not permissible. - Decided in favour of assessee
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Corporate Laws
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2016 (6) TMI 1022
Scheme of Amalgamation - Held that:- The present Scheme of Amalgamation is in the interest of its shareholders and creditors as well as in the public interest and the same deserves to be sanctioned and the same is hereby sanctioned. Prayers in terms of paragraph 16(a) of the Company Petitions no. 117, 118 and 119 of 2016 for the petitioner Companies are hereby granted.
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2016 (6) TMI 1021
Scheme of capital reduction of the Company - Held that:- The present petition was admitted by this Court on 28th March 2016 and the same was ordered to be advertised in “Indian Express”, English daily and “Jaihind” Gujarati daily, both Ahmedabad editions. The same direction has been complied with by the company and the notice of the petition has been duly advertised in the aforesaid newspapers 6th April 2016. The same is confirmed by affidavit dated 11th April 2016. Pursuant to the said advertisement no one has come forward to raise any objections opposing the sanction to the proposed capital reduction. The said fact has been confirmed by the additional affidavit dated 16th June 2016 placed on record today. Having perused the Petition and more particularly the reasons given in support of the proposed reduction, in my view there is no reason not to confirm the proposed action of the Petitioner to reduce its capital. The said proposal does not prejudicially affect anyone. Accordingly the resolution dated 18th March 2016 is hereby confirmed.
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Service Tax
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2016 (6) TMI 1034
Condonation of delay of 223 days in filing the appeal before the Commissioner of Service Tax (Appeals) - disallowance and demand under Rule 14 of the CENVAT Credit Rules, 2004, r/w. Section 73(1) of the Finance Act, 1994 - Held that:- Section 85 of the Finance Act, is similar to Section 128 of the Customs Act, 1962; Section 34(3) of the Arbitration and Conciliation Act, 1996; Section 125 of the Electricity Act, 2003; Section 35-G of the Central Excise Act, 1944 and the statutes referred to above, are self contained Acts and codes by themselves. The High Court or the Supreme Court, as the case may be, cannot direct the appellate authority to condone the delay, beyond the extended period of limitation. Courts have also interpreted that when the legislative intent is reflected in the provisions of the special laws, excluding the provisions of Limitation Act, then the authorities under the statute, cannot exercise powers to condone the delay. On the aspect of the Court, exercising powers under Article 226 of the Constitution of India, to condone the delay, we are of the view that the decision of this Court in Indian Coffee Worker's Co-operative Society Ltd.,'s [2002 (1) TMI 1302 - MADRAS HIGH COURT], squarely applies to the case on hand - Condonation of delay denied - Decided against the assessee.
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Central Excise
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2016 (6) TMI 1020
Demand of duty on operational loss in excess of 0.5% - permissible limit - business of refining and marketing of Petroleum products - difference between physical stock and the book sock is called operational loss. - Held that:- It can be seen that there is no upper limit fixed for operational losses. In case it is higher that 0.5% or 1% the Board has to closely scrutinize the case and satisfy themselves. The department has not conducted any such scrutiny with regard to the operational losses. Again, they have no case that products were removed clandestinely. The operational losses incurred having been disclosed in RT-12 returns the department ought to have conducted periodical verification and satisfied themselves before raising a demand. It is revealed that respondents were disclosing their operational losses in RT-12 returns. In such circumstances, it cannot be said that respondent is guilty of commission of any deliberate act/omission to evade payment of duty. The respondent being a Government of India undertaking, there cannot be any malafide intention to evade payment of duty. The department has failed to establish that the operational loss claimed by respondent is not due to natural causes - No demand - Decided against the revenue.
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2016 (6) TMI 1019
Valuation - inclusion of the value of ECP while discharging the duty liability on RMPU - manufacture of Roof Mounted Package units (RMPU) and Electric Control Panels (ECP) for supply to the Indian Railways for air-conditioning the railway coaches - Held that:- The point for decision is whether or not to add the value of ECP in the value of RMPU for discharging duty liability. It is an admitted fact that RMPU is an air-conditioning machine falling under heading 8415 and ECP is an Electric Control Panel falling under Heading 8537. Merely because, these two items were designed for a combined working after installing them on the railway coaches does not automatically mean the value of one should be added in the other for central excise purpose. - Demand set aside - Decided in favor of assessee.
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2016 (6) TMI 1018
Valuation - Job work - Department took the view that since the goods were cleared to the work sites where the appellant had undertaken the Supply and Apply contracts, there is no sale involved in these clearances, therefore the valuations adopted should have been under Rule 11 of the said Valuation Rules. - Hence the value could be arrived by deducting the expenses incurred on application of paints (labour charges) from the contract price. Held that:- The value adopted by the appellants under Rule 8 of the Central Excise (Determination of price of Excisable goods) Rules, 2000 was not in order and that since the application of paint contains labour costs, the assessable value is to be determined under Rule 11 only after deduction of the value of labour component from the total value for supply and apply. With regard to the appellant’s other contention that there is a profit component for the apply portion, for reasons discussed supra, we uphold the lower authority s conclusion that since the sale of product viz- paint is linked to the application part of the paint at the customer's site, the application is in relation to the goods and therefore, except the value of the labour component for application no other component can be deductible from the sale value for arriving at assessable value. Demand alongwith interest confirmed - penalty u.s 11AC waived - Decided partly in favor of assessee.
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2016 (6) TMI 1017
Demand of excise duty - bonafide belief that manufacture of threaded roof bolts and nuts are not liable to duty of excise - exclusion of bought out items - manufacturing of threaded roof bolts and nuts - levy of penalty - Held that:- We find that the contention of the appellant that CENVAT credit has to be allowed on inputs and that bought out items have to be excluded from the demand raised is reasonable and acceptable. The credit admissible on inputs and value of bought out items has to be computed in order to determine the duty payable by appellants. Commissioner (Appeals) in an identical issue had held that the activity of making roof bolts did not amount to manufacture. Taking into these aspects and that the issue was an interpretational one, we hold that imposing penalty on appellants is unwarranted. Therefore the equal penalty imposed under Section 11AC of Central Excise Act, 1944 and the penalty of ₹ 10 lakhs imposed for not taking registration cannot sustain. While confirming the demand of duty with interest, penalty set aside. - Decided partly in favor of assessee.
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2016 (6) TMI 1016
Claim of exemption - manufacturer of industrial valves - conventional energy device or non-conventional energy device - Notification No.6/2002-CE dt. 1.3.2002 - Held that:- The grant of fiscal benefit being allowed to non-conventional energy device/system specified in List No.9 appended to the notification does not bring the appellant to the ambit of the notification to claim exemption. Appellant’s submission would have been considered had the appellant primarily manufactured non-conventional energy device/systems so as to attract Item No.16 of List 9. That being not shown there shall be no grant of relief under the notification following Hon'ble Supreme Court’s decision in CC (Imports), Mumbai Vs Tullow India Operations Ltd. - [2005 (10) TMI 502 - SUPREME COURT OF INDIA] - Demand confirmed - Decided against the assessee.
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2016 (6) TMI 1015
Valuation - relating parties - allowed 25% discount to sole buyer purchasing goods for above ₹ 60 lakhs - It is seen that M/s. Seth Trading Company is a partnership firm of four partners who are wives / sons of Directors of the appellant company. Hence by entertaining a view that the transaction between the appellant and M/s. Seth Trading Company can be considered as transaction between interconnected undertakings in terms of section 2(g) of MRTP Act 1969, proceedings were initiated to demand Central Excise duty short paid due to undervaluation of excisable goods. Held that:- As correctly pointed out by Ld. Commissioner (A) for rendering the buyer a related person of the respondent in terms of sub section 4(3)(b) of the Central Excise Act 1944, relationship as described in clauses (ii), (iii) or (iv) has to be established and it is to be true that the buyer is also holding company or a subsidiary company of the assessee. There is no reason to consider the existence of outstanding amount as a reason for rejecting the transaction value including the trade discount offered to all. Working in the same premises or the trading firm using the logo and name of the manufacturing firm by itself are of no consequence to consider the transaction value as tainted. - Demand set aside - Decided in favor of assessee.
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2016 (6) TMI 1014
Clandestine removal of goods - figures of stock reported in their financial accounts (3 CD Returns) filed with the Income Tax authorities were different from stocks reported in their RG-1 register. - no stock verification has been done nor any evidence of clandestine clearance has been recorded. - Held that:- The entire case has been booked on the mismatch between the figures reported in 3CD returns filed with Income Tax authorities and the RG-1 register and there has been no physical verification of stock. There is no evidence of any clandestine clearance being made. Moreover the criteria for recording stocks as per the standards of ICAI and Income Tax are different from the criteria for recording stocks under Central Excise law. - Revenue failed to prove its case - Demand set aside - Decided in favor of assessee.
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2016 (6) TMI 1013
Refund claim on the services, namely, CHA service and courier service - failure to fulfill the conditions prescribed in the Notification No. 17/2009-ST dated 7.7.2009 - Held that:- As the appellant has been able to establish correlation between the service provider’s invoice and exporter from the invoices and shipping bills, in that circumstance, the appellant is entitled for refund claim in respect of CHA service. Regarding courier service, the objection is only that in the invoices issued by the courier agency service, export invoice number & IEC code of the appellant are not mentioned. There is no dispute that the details of the appellant/exporter as also description of goods are mentioned in these invoices. Refund allowed in both the cases - Decided in favor of assessee.
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2016 (6) TMI 1012
Cenvat Credit - allegation of non receipt of inputs - investigation was conducted and it was found that number of vehicles mentioned in the invoices issued to the appellants are not capable of for transportation of goods as these vehicles registration numbers are of two wheelers /light motor vehicles. - In fact during the impugned period, the owner of vehicles had transported the goods used fake vehicles number to avoid local taxes to that effect they have produced the newspaper report which admits the during the impugned period, the owner of vehicles had transported the goods used fake vehicle registration number and a drive was launched against those vehicle owners Held that:- the adjudicating authority is required to examine the newspaper report before denial of credit to the appellants. If there is any truth in the newspaper report, the same may be considered as evidence produced by the appellants for receipt of the inputs. Both sides are at liberty to produce the evidence in their favour to reach to real conclusion whether the appellants have received inputs or not. - Matter remanded back.
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2016 (6) TMI 1011
Remission of duty - destruction of indigenous / imported raw material due to fire - Held that:- Commissioner has rejected the appellant’s remission application by simpliciter observing that the remission of duty is subject to satisfaction of Commissioner. However, no reasons stands given by the adjudicating as to why he was not satisfied about the factum of fire and the consequent destruction of the final products. Various evidences on record clearly lead one to believe that the fire had admittedly occurred, for which FIR was launched and fire brigade were summoned and insurance claim was made. Next ground adopted by the Commissioner for rejection of the remission is that assessee had not taken sufficient measures to protect the portion of the value of the goods which represent duty element while the goods were in his possession. Undisputedly the value of the goods was insured by the appellant and there is no requirement or legal provision for insuring the duty element. If the duty element is also required to be insured and reimbursed by the insurance company, then there is no need for the assessee to ask for remission of duty in which case the provision of remission of duty would become redundant. Regarding rejection of remission for loss of imported inputs - import of the inputs in terms of notification no. 52/2003-CUS, cannot be made the ground for denying the remission of duty in case of subsequent destruction of the inputs. - Remission allowed - Demand set aside - Decided in favor of assessee.
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2016 (6) TMI 1010
Cenvat Credit - reversal of credit on consumable goods - Held that:- The impugned order records the assertion that the appellant had consumed the said consumables within the factory for fabricating items and paid duty on such fabricated items. The impugned order does not deal with this issue at all. If the appellants have used within the factory for manufacture of fabricated items and paid duty thereon, they would be entitled to credit. - Matter remanded back for verification - Decided partly in favor of assessee.
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2016 (6) TMI 1009
Cenvat Credit on MS Angles, Channels, MS Plates etc., as capital goods - The appellant is engaged in manufacture of writing and printing paper, newprint and krafts paper. - Held that:- credit on MS items used for fabrication in repairs and maintenance of capital goods within the factory allowed. - Decided in favor of assessee.
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