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TMI Tax Updates - e-Newsletter July 13, 2017 Case Laws in this Newsletter: Income Tax Customs FEMA PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Highlights / Catch Notes Income Tax: Revision order u/s. 263 - CIT(A) was not justified in directing additional claim of ₹ 20 lakhs based on the fresh claim by the assessee. The provisions of section 263 of the Act is for the benefit of Revenue and not for assessee. Visit to Get Source Income Tax: Un-explained deposit into bank - proof of fund available with the HUF - when the particulars of the cash flow statements are accepted by the AO then the source as explained by the assessee as fund available with the HUF cannot be denied. Visit to Get Source Income Tax: Entitlement to registration u/s 12A - DIT(Exemptions) as well as the Tribunal committed 2 mistakes, namely, (a) that of overlooking the first 6 activities covered by Section 2(15) and focusing on the 7th activity which has a correlation to the first proviso and (b) that of looking at the gross receipts even before the grant of registration - HC Visit to Get Source Income Tax: Sale of plot - STCG OR LTCG - The mere fact that the sale of the property in the earlier AY and the resultant reduction of the ‘stock in trade’ was not questioned by the AO will not relieve the Assessee from having to demonstrate that the sale of the plot in question in the AY under consideration was not by way of an investment resulting in short term capital gains. - HC Visit to Get Source Customs: A benefit that was not claimed at the time of import is not available for being extended in recovery proceedings. Accordingly, there is no merit in the claim of the appellant for discharge of duty liability by recourse to the exemption to the extent of credit available under the scheme. Visit to Get Source Service Tax: Abatement of value of material - N/N. 12/2003-ST dated 20th June 2003 - discharge of VAT liability would preclude the levy of service tax on the value of those goods Visit to Get Source Service Tax: Sub-contract - tax liability - Service Tax is leviable on any taxable services provided, whether or not the services are provided by a person in his capacity as a sub-contractor and whether or not such services are used as input services - demand upheld Visit to Get Source Service Tax: CENVAT credit - input services - club services - whether the appellant who is a manufacturer of excisable goods, is eligible to avail CENVAT credit of the service tax paid by the various service providers or otherwise? - Credit allowed Visit to Get Source Service Tax: Cenvat Credit - demand of interest - appellant had taken input service credit even before payments were made, in contravention of Rule 4(7) of CCR, 2004 - appellant contended that they have utilized the credit only after making payment to the input service provider - No interest subject to verification Visit to Get Source Central Excise: Recovery of interest amount in respect of rebate claim, without issuance of SCN - once it has been held that the appellant is entitled for rebate claim, in absence of any specific provision for recovery of interest amount there-from, suo motu recovery of such amount by the Department is contrary to the statutory provisions Visit to Get Source Central Excise: Write-off of inputs and finished goods - Since the period covered in this case is prior to insertion of sub rule (5B) in Rule 3 of Credit Rules, 2004, the embargo created therein is not applicable retrospectively for denying the cenvat credit to the appellant. Visit to Get Source Central Excise: Re-crdit of duty on goods returned by the customer - the appellants modus operandi does not exhibit that it has come out with clean hands when procedural deviation was made depriving Revenue to have control on appellant - demand confirmed Visit to Get Source Central Excise: 100% EOU - clandestine removal of raw materials - When the impugned goods not found at the EOU unit have, however, been subsequently found in their adjacent DTA unit, there cannot be any demand of customs duty on such goods. Visit to Get Source Central Excise: Refund claim of excess duty paid - valuation of Physician's sample - The assessable value, as indicated in the 2002 circular, is 115% of the cost of production. The Tribunal having come to this conclusion, in our opinion ought not to have taken recourse to the 2003 circular which adverts to the CAS-4 methodology - matter remanded back to ascertain cost of production - HC Visit to Get Source Articles Gifts from the employers - GST provisions Enclosed withering trough to wither tea leaves is energy saving and pollution reduction Notifications GST - States VVK-502017-771-TH-3 - dated 30-6-2017 - Gujarat SGST New Nomenclature of Commercial Tax Department Gujarat State VVK-502017-771-TH-3 - dated 30-6-2017 - Gujarat SGST Designation of Commissioner in Goods and service Tax Act 18/2017-State Tax (Rate) - dated 30-6-2017 - Gujarat SGST Notification of fertilizer Entry after Sr No.182 Schedule-I 17/2017-State Tax (Rate) - dated 30-6-2017 - Gujarat SGST Tax shall be paid by the Electronic Commerce operator for the certain category of the Services under 16/2017-State Tax (Rate) - dated 30-6-2017 - Gujarat SGST Refund for UN and foreign diplomatic mission under section 55 of the Gujarat Goods and Services Tax Act, 2017 15/2017-State Tax(Rate) - dated 30-6-2017 - Gujarat SGST No refund for unutilized tax credit of certain supply of services under section 54(3) of the Gujarat Goods and Services Tax Act, 2017 14/2017-State Tax (Rate) - dated 30-6-2017 - Gujarat SGST Activities not to be considered neither supply of goods nor services 13/2017-State Tax (Rate) - dated 30-6-2017 - Gujarat SGST Reverse charge for specified supply of services under section 9(3) Gujarat Goods and Services Tax Act, 2017 13/2017-State Tax - dated 30-6-2017 - Gujarat SGST Rate of interest under section 50 54 56 of the Gujarat Goods and Services Tax Act, 2017 12/2017-State Tax(Rate) - dated 30-6-2017 - Gujarat SGST Exempted supply of goods under section 11(1) of the Gujarat Goods and Services Tax Act, 2017 11/2017-State Tax (Rate) - dated 30-6-2017 - Gujarat SGST Rate of tax for services under section 9(1) of the Gujarat Goods and Services Tax Act, 2017 10/2017-State Tax (Rate) - dated 30-6-2017 - Gujarat SGST Gujarat Goods and Services Tax (Second Amendment) Rules, 2017 09/2017-State Tax - dated 30-6-2017 - Gujarat SGST Appointed date for remaining sections of GGST Act 2017 07/2017-State Tax(Rate) - dated 30-6-2017 - Gujarat SGST Exemption for inward supply to Canteen store department under section 11(1) of the Gujarat Goods and Services Tax Act, 2017 07/2017-State Tax - dated 30-6-2017 - Gujarat SGST Amendmend in composition and registration Rules 06/2017-State Tax (Rate) - dated 30-6-2017 - Gujarat SGST Entitlement to claim refund for the purpose of canteen store department under section 55 of the Gujarat Goods and Services Tax Act, 2017 04/2017-State Tax (Rate) - dated 30-6-2017 - Gujarat SGST Reverse charge on specified supply of goods under section 9(3) of the Gujarat Goods and Services Tax Act, 2017 03/2017-State Tax (Rate) - dated 30-6-2017 - Gujarat SGST Concessional rate of petroleum operations for supply of goods under section 11(1) of the Gujarat Goods and Services Tax Act, 2017 02/2017-State Tax(Rate) - dated 30-6-2017 - Gujarat SGST Exempted supply of goods under section 11(1) of the Gujarat Goods and Services Tax Act, 2017 (GHN-50)GSTR-2017(4)/TH - dated 30-6-2017 - Gujarat SGST e WAY BILL-GGST SRO-GST-17. - dated 8-7-2017 - Jammu & Kashmir SGST FOLLOWING CATEGORIES OF SERVICES, THE TAX ON INTRA-STATE SUPPLIES SHALL BE PAID BY THE ELECTRONIC COMMERCE OPERATOR SRO-GST-16. - dated 8-7-2017 - Jammu & Kashmir SGST REFUND IN CASE OF (I)UNITED NATIONS, FOREIGN DIPLOMATIC MISSION OR CONSULAR POST IN INDIA, OR DIPLOMATIC AGENTS OR CAREER CONSULAR OFFICERS POSTED THEREIN SRO-GST-15. - dated 8-7-2017 - Jammu & Kashmir SGST NO REFUND OF UNUTILIZED INPUT TAX CREDIT IN CASE OF SUPPLY OF SERVICES SPECIFIED SRO-GST-14. - dated 8-7-2017 - Jammu & Kashmir SGST ACTIVITIES OR TRANSACTIONS UNDERTAKEN BY THE CENTRAL GOVERNMENT OR STATE GOVERNMENT OR ANY LOCAL AUTHORITY IN WHICH THEY ARE ENGAGED SRO-GST-13. - dated 8-7-2017 - Jammu & Kashmir SGST LIST OF SERVICES ON WHICH STATE TAX SHALL BE PAID ON REVERSE CHARGE BASIS BY THE RECIPIENT OF THE SUCH SERVICES SRO-GST-12. - dated 8-7-2017 - Jammu & Kashmir SGST LIST OF EXEMPTED SERVICES. SRO-GST-02. - dated 8-7-2017 - Jammu & Kashmir SGST LIST OF EXEMPTED GOODS (INTRA-STATE SUPPLIES) SRO-282. - dated 8-7-2017 - Jammu & Kashmir SGST THE JAMMU AND KASHMIR GOODS AND SERVICES TAX RULES, 2017 News Mobile app “GST Rates Finder” which is available on android platform to be soon available on ios platform as well SBI waives charge on IMPS fund transfer of up to ₹ 1,000 GST: SFI activists post sanitary pads to Jaitely ITPO SIGNS MoU 2017-18 WITH DoC Workshop on Enforcement of Intellectual Property Rights for Police Officials in collaboration with Telangana Police. Cabinet approves Joint Interpretative Notes on the Agreement between India and Bangladesh for Promotion and Protection of Investments RBI Reference Rate for US $ Shri Subhash Chandra Garg, IAS (RJ:83) assumes office as the New Secretary, Department of Economic Affairs, Ministry of Finance Case Laws: Income Tax 2017 (7) TMI 371 Reopening of assessment - reasons to believe - accommodation entries addition - Held that:- In the present case, the Court is unable to discern the link between the tangible material and the formation of the reasons to believe that income had escaped assessment. In the present case too, the information received from the Investigation Wing cannot be said to be tangible material per se without a further inquiry being undertaken by the AO. In the present case the AO deprived himself of that opportunity by proceeding on the erroneous premise that Assessee had not filed a return when in fact it had. To compound matters further the in the assessment order the AO has, instead of adding a sum of ₹ 78 lakh, even going by the reasons for reopening of the assessment, added a sum of ₹ 1.13 crore. On what basis such an addition was made has not been explained. This Court is satisfied that no error was committed by the ITAT in holding that reopening of the assessment under Section 147 of the Act was bad in law. - Decided in favour of assessee. 2017 (7) TMI 370 Sale of plot - STCG OR LTCG - AO concluded that the Assessee had shown its assets as ‘stock in trade’ in order to avoid Section 50C - Held that:- There were only two properties shown as ‘stock in trade’ by the Assessee. The mere fact that the sale of the property in the earlier AY and the resultant reduction of the ‘stock in trade’ was not questioned by the AO will not relieve the Assessee from having to demonstrate that the sale of the plot in question in the AY under consideration was not by way of an investment resulting in short term capital gains. The Court is unable to find anything perverse in the factual and concurrent determination of the AO, the CIT(A) and the ITAT that the plot in question was the investment of the Assessee and not its ‘stock in trade’. 2017 (7) TMI 369 Revision u/s 263 - expenses on account of CSR - Held that:- When a questionnaire was issued by the AO raising a specific query as regards the CSR expenses that was answered by the Assessee. The AO could have made further enquiries on this explanation but chose not to do so. That by itself does not make the AO's order erroneous. In the order of the CIT itself in para 6 the explanation offered by the Assessee is noted. According to the Assessee the expenses on account of CSR comprised of expenses on helping the poor children in their study, providing medical care to the poor and downtrodden section of society, rehabilitation of mentally handicapped children, providing basic amenities like water etc to the poor and other CSR related activities. It was sought to be explained by the Assessee that being a public sector undertaking its objective was not only earning profit but also serving the society. One of the essential components to justify the invocation of Section 263 of the Act is that the order of the AO must be erroneous. In this case the said requirement cannot be said to be fulfilled. - Decided in favour of assessee. 2017 (7) TMI 368 Unexplained credit under section 68 - Held that:- Assessee had placed before the AO the following documents of the investing companies: Memorandum of Association, Articles of Association, certificates of incorporation, bank accounts indicating the source of payment, copy of confirmations, Income Tax particulars, audited balance sheets, Profit and Loss Account etc. AO disregarded the above documents and came to the conclusion that transaction of receiving money as share capital was not a genuine one primarily because the premium charged by the Assessee was much higher than the prevalent market trend. As rightly observed by the CIT (A) unless the AO had brought on record some material to show that confirmation and other evidence placed by the Assessee was not genuine, he could not have simply discarded the documents produced by the Assessee. The Court too finds that there is no discussion of the above documents by the AO. In the circumstances, the conclusion reached by the CIT(A) that the addition under Section 68 of the Act was not justified appears to be unexceptionable. 2017 (7) TMI 367 Reopening of assessment - unsecured loans from the share holders - escapement of income - Held that:- The documents available before us including Exts.P13 document produced by the petitioner, which is an extract from the balance sheet of the company that was made available before the Assessing Officer at the time of initial assessment, clearly reveal that the figure mentioned above was wrongly adopted by the Assessing Officer as representing the total unsecured loans from the share holders. As a matter of fact, the figure adopted by the Assessing Officer is one that is inclusive of the interest component of the unsecured loans. Assessing Officer arrived at a wrong conclusion that there had been an escapement of income in the assessment. If the correct figures had been taken, then there would have been no escapement of income. Thus the proceedings initiated against the petitioner under Section 148, on a wrong premise, cannot be legally sustained. It is also relevant to note that, there is nothing to suggest that there was any non-disclosure, by the petitioner assessee, of the full and true facts that were necessary for the purposes of the assessment, so as to justify the invocation of the 1st Proviso to Section 147, while issuing the notice under Section 148 to the petitioner - Decided in favour of assessee. 2017 (7) TMI 366 Addition on unexplained credit under Section 68 - Held that:- Any sum which is found credited in the books of an assessee remains unexplained in the terms provided in Section 68 or the explanation is not found to be satisfactory by the Assessing Officer, the said sum can be charged to income tax as income of the assessee. Once it is determined that a sum which is credited to the account of the assessee is unexplained, then Section 68 gets triggered. It is well settled that under Section 68 of the said Act, once a credit in the books of assessee is found to be unexplained, a presumption is drawn against the assessee that the said credit is part of the income of the assessee. Of course, the presumption is rebuttable by the assessee by producing relevant cogent evidence in that behalf other than a bald statement about the nature of source of the credits in question. The stand adopted by the CIT(Appeals) was the appropriate one whereby he had directed that the addition of ₹ 18,00,704/- made by the Assessing Officer may be deleted but only after the assessment records of the partners were verified and checked and it was verified that the income had been properly assessed or accounted for in the hands of the partners. Therefore, this question is answered accordingly and the view taken by the Tribunal is set-aside and that of the Commissioner of Income Tax (Appeals) is upheld. 2017 (7) TMI 365 Disallowing the charter hire charges of Barges as being excessive under Section 40A(ii)(a) - Held that:- The records reveal that there is no undue advantage by the Directors by the arrangement and there is no loss to the Revenue as the subject amount has already been taxed in the hands of the HUF. It is further noted that the case of the HUFs has not been reopened and there is no reopening of the assessment of the individual Directors. It is also pointed out that the records reveal that the barges were taken on payment of time charter charges of income earned from the transportation of iron ore on the basis of per tonne rate as prescribed by the Goa Barge Owners Association. Thus the factual findings are that there is no excessive payment or that the arrangement has in any way enriched the respondents which cannot be faulted as they are based on the appreciation of evidence by the learned Tribunal and no perversity has been shown to such findings by the appellant. - Decided in favour of assessee. 2017 (7) TMI 364 Entitlement to registration under Section 12A - whether some of the activities of the assessee are found to be commercial in nature and its gross receipts from such activities exceed, year on year, the limit set out in the proviso to Section 2(15) ? - Held that:- Section 13(8) of the Income Tax Act, 1961, inserted by the Finance Act, 2012 with effect from 01-4-2009 makes it clear that nothing contained in Section 11 or 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof, if the provisions of the first proviso to Section 2(15) become applicable in the case of such person in the said previous year. Therefore, at the stage of grant of exemption, the question of looking at the gross receipts does not arise. To understand it in simple terms, we must look at the provisions as providing 2 gate passes. The 1st gate pass is in Section 12AA. The 2nd is under various provisions which deal with exemptions or exclusion of income. The respondent/assessee is actually at the outer gate. The very 1st entry pass is denied to the respondent, on a wrong application and understanding of the scope of Section 2(15). It is only after an institution is granted registration under Section 12AA that the examination of the gross receipts year after year for the purpose of finding out the eligibility for exemption would arise. Therefore, we are of the considered view that the Director of Income Tax (Exemptions) as well as the Tribunal committed 2 mistakes, namely, (a) that of overlooking the first 6 activities covered by Section 2(15) and focusing on the 7th activity which has a correlation to the first proviso and (b) that of looking at the gross receipts even before the grant of registration. - Decided against revenue 2017 (7) TMI 363 TPA - price/cost of international transactions compared with the uncontrolled independent price - CIT (Appeals) proceeded to consider the AE of the assessee as tested party to compare the margin with the comparable price - Held that:- TP Analysis of the assessee as well as the CIT (Appeals) are not in accordance with the provisions of Transfer Pricing and therefore, the impugned order of the CIT (Appeals) is set aside and the TP issue is remitted to the record of the TPO for deciding the matter afresh by comparing the margins of the international transactions with the uncontrolled comparable price. Needless to say the assessee be given an appropriate opportunity of hearing. Reduction of deduction under Section 10B in respect of expenditure incurred in foreign currency - Held that:- Identical issue has been decided by the Hon'ble jurisdictional High Court in assessee's own case for the Assessment Year 2003-04 decided issue in favour of assessee wherein held that the software Engineers deputed abroad who among other things have to do testing, installation and monitoring of software supplied to the client. Though the said services are technical in nature it does not fall within clause (ii) of subsection (1) of section 80HHE of the Act of providing technical services outside India in connection with the development or production of computer software. It falls under sub-clause (1) of sub-section (1) of Section 80 HHE of the Act. Therefore, the said expenditure cannot be excluded in computing export turn over. In that view of the matter we do not see any merit in this appeal. Disallowance of deduction under Section 10B in respect of on site development work subcontracted to and income derived by the AE - Held that:- This issue is covered in favour of the assessee however, to verify certain facts regarding quantum of work subcontracted to the AE and whether the assessee was having total supervision and control over the work executed by the AE this issue is remitted to the record of TPO / A.O. The Assessing Officer is directed to examine the relevant fact and then decide this issue. Deduction under Section 10B in respect of interest income and profit on sale of assets - Held that:- We find that the interest income from the deposits in the bank has no direct first degree nexus with the business activity of the undertaking therefore the same is not eligible for deduction under Section 10B of the Act. Similarly the profit on sale of asset is not an income derived from the business activity of the assessee-undertaking. Hence we do not find any error or illegality in the order of the Assessing Officer in denying the claim of deduction under Section 10B in respect of interest income and profit o sale of asset. Disallowance u/s 40(a)(i) - non deduction of tds on Fees for Technical Services - Held that:- We are of the view that the disallowance of expenditure under Section 40(a)(i) would result enhancement of the income of the assessee. Since the income of the assessee is eligible for deduction under Section 10B therefore, the said disallowance made under Section 40(a)(i) is also eligible for deduction under Section 10B of the Act. Accordingly, the alternate plea of the assessee is allowed. Reduction of the expenditure incurred in foreign currency from export turnover as well as total turnover while computing the deduction under Section 10B - Held that:- The issue of expenditure incurred towards telecommunication charges in foreign currency attributable to the delivery of computer software abroad is reduced from export turnover an equal amount should also be reduced from total turnover while computing the deduction under section 10B of the Act, is covered in favour of the assessee by the decision of the Hon’ble Karnataka High Court in the case of CIT Vs. Tata Elxsi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT). - Decided in favour of assessee. 2017 (7) TMI 362 Un-explained deposit into bank - proof of fund available with the HUF - Held that:- HUF has shown the availability of fund of ₹ 62,67,451/- in the cash flow statement along with the application of fund was also explained which includes the deposits made in the bank in the name of Smt. B. Jayashree of ₹ 23 lakhs and further a sum of ₹ 25 lakhs in the name of the assessee then in the absence of any contrary record or fact to dispute the details pointed out in the cash flow statement, the addition made by the AO is not sustainable. The cash flow statement of the affairs of the HUF was accepted in the case of the wife for the purpose of source of deposit and the AO has clearly stated in the remand report that all the particulars as shown in the cash flow statement are also found in the assessment record of the HUF. Therefore, when the particulars of the cash flow statements are accepted by the AO then the source as explained by the assessee as fund available with the HUF cannot be denied. In view of the above facts and circumstances of the case the addition made by the AO is not sustainable and the same is deleted. - Decided in favour of assessee. 2017 (7) TMI 361 Reopening of assessment - reasons to believe - eligible issue of notice - Held that:- After issuing the notice under section 148 within a period of four years from the end of the relevant assessment year, i.e. on 22.03.2011, the reasons were also communicated by the Assessing Officer to the assessee on 29.08.2011 in response to the request made by the assessee on 29.06.2011. It is also noted from the letter dated 29.08.2011 issued by the Assessing Officer to the assessee communicating the reasons for reopening that it was specifically brought by him to the notice of the assessee that during the course of assessment proceedings for A.Y. 2007-08, undisclosed Savings Bank Account No. 9348 maintained by the assessee with Bank of India, Baghajatin Branch was found where there was credit of ₹ 4,25,079/- appearing during the year under consideration. Since this reason communicated by the Assessing Officer to the assessee was very much there in the reasons recorded by the Assessing Officer and even addition of ₹ 4,25,079/- was made by him to the total income of the assessee in the assessment completed under section 147/144, thus find that there was no variation at least in one of the reasons communicated by the Assessing Officer to the assessee from the one recorded by him. Thus there was no legal infirmity in the reopening of assessment made by the Assessing Officer by issuing notice under section 148 as allegedly pointed out by the ld. CIT(Appeals) in his impugned order while annulling the assessment made by the Assessing Officer under section 147/144 - Decided in favour of revenue 2017 (7) TMI 360 Condonation of delay - settlement commission proceedings - Held that:- The assessments have been reopened on 31.12.2008, but before any assessment could be passed petitions for other years admitted by the Settlement Commission were also abated on 31.3.2008 because of the amendment made in the Income Tax Act by way of Finance Act, 2007. Thus, a very vexed situation developed. On one hand, the assessee has filed writ petition before the Hon’ble High Court challenging order of the Settlement Commission dated 31.3.2008 vide which, their applications admitted for consideration for some of the years, were treated as abated by operation of law. On the other hand, the AO has initiated reassessment proceedings in some of the years giving a belief to the assessee that now the proceedings are pending in other years. They can also be taken into Settlement Commission. The important fact which weigh with us for accepting bonafide of the assessee is that even in 2013, the ld.CIT(A) has haboured a belief that proceedings are pending before the Settlement Commission, and therefore, the ld.CIT(A) has no jurisdiction to entertain the issue agitated by the assessee on merit. This findings of the ld.CIT(A) supports bona fide of the assessee in believing that their applications under section 245E would be entertained by the Settlement Commission and there is no need to challenge the order of the CIT(A). It is also important to note that there is no adjudication on merit on the issues involved in these appeals by the ld.CIT(A). The appeals were dismissed for the reason that they are not maintainable. Considering this aspect and in the interest of justice, we deem it appropriate to condone the delay in filing the appeal. We proceed to decide the appeal on merit. 2017 (7) TMI 359 Re-opening of assessment - Held that:- In this case, the assessee has made the High Sea sales of ₹ 1,03,55,040/- and received the income of ₹ 1,75,01,599/- which has come to the notice of the Income Tax Department from the commercial tax Department and the assessee has not disclosed the above receipts in the income Tax returns. From a query raised from the Bench, the Ld.AR fairly conceded that the information regarding the High Sea sales and the Exchange fluctuation was not disclosed in Income Tax Return in the original Return. Thus there is a failure on the part of the assessee in not disclosing the income. - Decided against assessee. Estimation of income on High Sea Sales - Held that:- In the Assessment Order, the AO has given a finding that the assessee is entitled for the consideration of 2% over and above the invoice value on High Sea sales. All the expenses would be borne by either purchaser or seller. The Ld.AR has not brought any evidence to prove that the assessee has not received the consideration over and above 2% on High Sea Sales. The Ld.A.R also did not bring any evidence relating to the expenditure incurred on High Sea sales over and above the amount debited to P&L account. Therefore, we do not find any infirmity in the order of the Ld.CIT(A) and the same is confirmed.- Decided against assessee. Addition in respect of the Exchange Rate - Held that:- Whether the exchange rate fluctuation was loss or gain, whether it should be reduced from the sales or to be taxed separately, required to be verified from the bills and invoices raised by the assessee, books of accounts and the records. No such exercise was done by either the AO or the Ld.CIT(A). Therefore, we are of the considered opinion that the issue should go back to the file of AO to verify whether the exchange rate fluctuation was in fact loss or gain. Both the parties have agreed for remitting the matter back to the file of AO. Accordingly, we set-aside the orders of the lower authorities on this issue and remit the matter back to the file of the AO to decide the issue afresh 2017 (7) TMI 358 TPA - ALP determination - power of DRP to remit case - Held that:- In the instant case, the DRP has remitted the matter back to the file of TPO to take fresh look of the issues as discussed above. As discussed earlier, the DRP has no power to remit the matter back to the file of the TPO and the DRP alone has to determine the quantum of addition or relief and issue direction to the Assessing Officer. Therefore, we are of the considered opinion that the issue should be remitted back to the file of DRP to consider the submissions made by the eligible assessee and to decide the issue afresh on transpricing adjustments. Accordingly, we set aside the transfer pricing issues and remit the matter back to the file of DRP to decide all the transfer pricing issues afresh on merits. The assessee is free to take up all the transfer pricing issues before the DRP Addition on account of provisions made by the assessee for obsolete stocks - Held that:- In the instant case the assessee has not established such fool proof method of identification of slow moving and dead stock and ascertained the liability as per the consistent reliable system. Therefore, the facts of the case relied upon by the assessee are not applicable and the addition made by the AO is confirmed and this ground of appeal of assessee is dismissed. Eligibility for deduction u/s.35D - Held that:- The assessee is entitled for amortization of expenses incurred before the commencement of business and after commencement of business for extension or in connection with the setting up of new unit. In this case, the assessee has incurred the expenditure before setting up of the unit as evidenced from the details and nature of expenditure referred above and as stated by the assessee the expenditure was incurred in 1996-97 relevant to the AY 1997-98. The assessee has made the claim from AY 1997-98 onwards and no disallowance was made during any of the previous years. The AO has not brought on record any evidence controvert the submissions made by the assessee. No new fact has been brought on record to disallow the expenditure in the year under consideration to make the disallowance, having allowed in the earlier Assessment years. Therefore, we hold that the assessee is eligible for deduction u/s.35D. Carry forward and set off of unabsorbed depreciation - Held that:- We direct the AO to allow the unabsorbed depreciation of AY 1997-98, 1998-99, 1999-2000 to the extent not set off against the income of the AY 2005-06 for future years. The appeals of the assessee on this issue for the AY 2005-06 & 2008-09 are allowed. Depreciation on UPS - Held that:- UPS is an integral part of computer and eligible for Depreciation @60%. See Sundaram Asset Management Co. Ltd. Versus DCIT [2014 (2) TMI 224 - ITAT CHENNAI ]. Refund due to the company on withholding tax - Held that:- The AO allowed the interest on refund due to the Company as per the credit available according to NSDL records but not on the actual TDS receivables claimed by the company. The AO is directed to verify the receivables and allow interest as permitted by the law. This ground of appeal is allowed for statistical purposes. 2017 (7) TMI 357 Revision order u/s. 263 - payment of compensation - acceptance of fresh claim of the assessee - Held that:- The fact that the assessee is one of the co-owner and the coowners claimed deduction of ₹ 50 lakhs paid as compensation to M/s. Opal Constructions. We perused the documents and material in support of payment of ₹ 70 lakhs where it was stated in the joint development agreement executed on 20.05.2003 between the assessee and other co-owners and Allied Majestic Developers confirming that the Opal Constructions, at the time of execution of development agreement paid sum of ₹ 20 lakhs to the co-owners and after the discussions and arrangements between the co-owners and erstwhile developer Opal Constructions the present developer Allied Majestic made arrangement for payment referred at page 163 and inner page 3 of the Memorandum of understanding that out of ₹ 70 lakhs (Rs. 20 lakhs pertains to initial payment plus a compensation of ₹ 50 lakhs) was paid as the full and final settlement towards dues. We found the assessee has claimed in the Return of income filed for the assessment year 2004-05 compensation of ₹ 50 lakhs paid to Opal Constructions and subsequently in the order passed u/s. 143(3) r.w.s. 263 of the Act. The Ld. AO allowed the compensation claim of ₹ 50 lakhs only, but before the Ld. CIT(A), assessee made fresh claim of ₹ 20 lakhs, which is not allowable after passing the assessment order u/s. 143(3) r.w.s. 263] in confirmity with Revision order. Hence, we are of the opinion that Ld. CIT(A) was not justified in directing additional claim of ₹ 20 lakhs based on the fresh claim by the assessee. The provisions of section 263 of the Act is for the benefit of Revenue and not for assessee. Accordingly, we are inclined to set aside the order of CIT(A) on this ground and restore the order of Assessing Officer allowing the claim of ₹ 50 lakhs only and allow this ground of the appeal of the Revenue. Work out the appropriate cost of indexation of old building, on par with index value of land. The Ld. - Held that:- there seems to be a building existing right from the purchase of the property from the year 1997 to the year 2001 and the fact being that the building was under existence. Now the question arises the assessee has claimed indexation on the value of building as per the valuer report. We find the Assessing Officer has not referred to the valuation report and made observations only on Hibbah document executed on 02.05.2003 between co-owners, where these facts of the old building was not mentioned. Prima Facie, on perusal of the supportive documents there was existence of building but the value was not determined. Even the valuation report was not produced before us by the Ld. AR. We are of the opinion that the assessee should get the benefit of existence of building and are of the opinion that the reasonable amount should be quantified based on the location of the property and the commercial infrastructure available in the area. We find the Ld. CIT(A) has directed the Assessing Officer to workout the appropriate cost which we consider it as reasonable as the assessee substantiated with evidence of building till year 2001. Accordingly, we are not inclined to interfere with the order of the CIT(A) on this disputed issue. Revenue appeal is partly allowed. 2017 (7) TMI 356 Disallowance u/s 14A r.w. rule 8D - appellant company neither received nor claimed any dividend income in its return which is exempt u/s 10(34) - Held that:- The undisputed fact in this case is that the assessee had shown investment of ₹ 5,65,00,000/- in non-current investment. It is also not disputed that no dividend income was earned on the same during the year. The Jurisdictional High Court in the case of CIT Vs. Lakhani Marketing (2014 (7) TMI 44 - PUNJAB AND HARYANA HIGH COURT ) has held that no disallowance u/s 14A is warranted in the absence of exempt income. Thus in the facts and circumstances of the present case and the legal precedence on the issue, no disallowance u/s 14A is warranted since the assessee has not earned any exempt income during the year. The order of the Ld. CIT(A) is, therefore, set aside and appeal of the assessee stands allowed. 2017 (7) TMI 355 Disallowance of the commission payment - there is no evidence produced and only statements were provided on availing services through E-mail correspondence - Held that:- We find strength in the arguments of Ld. AR and the commission is paid for the purpose of business wholly and exclusively based on the turnover. We found similar disputed issue was considered in assessee own case by the co-ordinate bench of this Tribunal for the assessment year 2001-02 where the Tribunal has remitted the disputed issue to be re-examined by the Assessing Officer. We respectfully following the co-ordinate bench decision and in the interest of justice, we remit the disputed issue to the file of the Assessing Officer to decide the matter afresh based on the available supporting material and evidence Claim of deduction u/s. 10B - exclusion of foreign currency from export turnover and 30% telecommunication expenses from the export turnover - Held that:- For calculation of deduction under section 10B of the Act, by excluding from export turnover, freight, telecommunication charges and expenses incurred in foreign exchange, we are of the opinion that such amounts will have to be excluded from total turnover also as held by the Special Bench of the Tribunal in the case of Sak Soft Ltd.,(2009 (3) TMI 243 - ITAT MADRAS-D ). Assessing Officer is directed to rework the deduction Disallowance u/s. 14A r.w.r. 8D - Held that:- We found that the Assessing Officer has applied the provisions of section 14A r.w.r. 8D and the DRP has considered these facts and directed the Assessing Officer to re-work the computation of disallowance and Accordingly remitted to Assessing Officer. We find the provisions of section 14A r.w.s. 8D are mandatorily applicable w.e.f. 24.03.2008 and accordingly, we are not inclined to interfere with the order of DRP and upheld the action of DRP and dismiss the assessee ground. Further, direct the AO to adopt correct profit for assessing the income and levy of interest u/s. 234B & C is consequential and shall be calculated on assessed income. Accordingly, the assessee appeal is partly allowed for statistical purpose. 2017 (7) TMI 354 Assessment u/s 153C - whether any incriminating documents found for making addition of cash receipts - Held that:- Neither the seized documents pertained to the impugned assessment year, nor any other document was found, which reflected the addition made in the case of the assessee. Therefore, there was no incriminating material available with the Assessing Officer which pertained to the impugned assessment year and which could have led to the addition made in the present case. Further it is not denied that the assessment in the present case was completed on the date of search, since the time limitation for issue of notice u/s 143(2) had expired on 30-09-10 while search was conducted on 17 11-10. AO had no jurisdiction to interfere in the completed assessment in the present case and frame the assessment u/s 153C making addition therein in the absence of any incriminating material. - Decided in favour of assessee. Addition made u/s 68 - Held that:- In the present case we hold that the assessee had given a credible explanation that the amount received in cash of ₹ 49,50,000/- was money refunded by one Sh. Balwant Rai Rehawar given to him on account of a land deal and refunded since the deal did not mature. The explanation was duly substantiated by the various documents produced. The onus now rested with the Assessing Officer to prove that the explanation of the assessee was false. The AO having failed to discharge this onus, has made the addition merely on the basis of suspicion which is not permissible as held by the jurisdictional high court. Thus no addition under section 68 of the Act is called for - Decided in favour of assessee. 2017 (7) TMI 353 Eligibility to deduction u/s 54 - Held that:- The provisions of section 54 of the Act are beneficial and are to be considered liberally for reasonable bonafide cause but investment in residential property is mandatory which the assessee has proved with substantial evidence before the lower authorities. Prime facie, the total amount paid for acquisition of new Flat got constructed through the builder much before the extended due date under section 139(4) of the Act. The assessee has direct investment in house property and therefore not opted in capital gain account scheme. The assessee entered into construction agreement and agreement for land purchase on 03.02.2011, which was not at all disputed by the Department, very much before provisions of section 139(1) of the Act. In the case of Jagtar Singh Chawla of Punjab and Haryana High Court [2013 (4) TMI 499 - PUNJAB AND HARYANA HIGH COURT] the assessee has paid substantial amount for purchase of residential property before the extended due date of filing of return and the assessee was eligible for exemption and not liable to pay any capital gain tax. Assessee complied the conditions and is eligible for exemption under section 54 of the Act - Decided in favour of assessee. 2017 (7) TMI 352 TPA - rejection of CUP Method as the most appropriate method and following TNMM by the TPO - Hel that:- As seen from the order of DRP, the assessee has only filed the purchase invoice relating to its purchase from its AE and also filed back to back invoice copies relating to AE purchasing to the tune of ₹ 286,289,140.43. However, the assessee had not substantiated that AE has not derived any benefit or mark up on the price charged by the vendor for supply of material to it (AE), which it has sold to the present assessee. Unless the assessee filed full details of financial statement to show that the assessee’s AE has not derived any benefit, it is not possible to apply the CUP method. In view of this, in the interest of justice, we remit the issue regarding application of the method whether the CUP Method or TNMM as a most appropriate method, to the file of AO to see whether the AE derived any benefit or mark up on the price charged by the vendor for supply of raw materials to assessee’s AE, which it has sold to assessee. - Appeal of assessee is partly allowed for statistical purposes. Customs 2017 (7) TMI 322 Extension of stay - extension of stay sought for without the stay application being disposed - Held that: - appellant is directed to file affidavit stating that as to the time of inscriptions/insertions and also the person who made such inscriptions/insertions to the aforesaid document in the affidavit directed to be filed on 12th July 2017, in view of doubts about the insertions/inscriptions arose - appeal disposed off. 2017 (7) TMI 321 N/N. 21/2002 - benefit of concessional rate of duty - metering pumps - Held that: - No evidence has been adduced to demonstrate the fallacy in the submissions made before the assessing authority implying the lack of any controverting evidence. It is also clear from the records that neither of the two authorities had the benefit of any other expertise to reach their respective conclusions - appellant eligible for the benefit of concessional rate of duty - appeal allowed - decided in favor of appellant. 2017 (7) TMI 320 Unjust enrichment - refund claim - whether the refund which was sanctioned by the original authority and credited into Consumer Welfare Fund is hit by unjust enrichment or otherwise? - Held that: - the most important evidence produced by the respondent is the sale invoice of the imported goods which was sold @ of ₹ 90/- per kg. whereas the total cost of importation comes to ₹ 314/-per kg. which shows that the duty incidence has not been passed on. The respondent also submitted the Chartered Accountant certificate and also the Balance Sheet which shows that the amount refundable is accounted for under the group head of current asset. With these two evidences, I am of the view that proof that the incidence of duty has not been passed on is clearly established - refund allowed - appeal dismissed - decided against Revenue. 2017 (7) TMI 319 Valuation - the declared value was accepted while the contemporaneous evidence forming part of adjudication proved that the value declared by respondent was lower - Held that: - None of the authorities below have at all examined the contents of the contemporaneous evidence threadbare to adopt to ascertain appropriate transaction value nor called for defence of the respondent on each contemporaneous evidence sought to be used. Their orders are neither un-reasoned nor speaking - respective contemporaneous evidence sought to be used in adjudication should be confronted to the respondent and opportunity of defence against each Bill of Entry should be provided. When declared value is rejected, such rejection should undergo determination of proper transaction value under the codified procedure of Rule of valuation if contemporary evidence is not available. A detailed scrutiny against Bill of Entry shall meet the ends of justice. That not being done, in the present case, the respondent is entitled to proper opportunity of defence, confronting the evidence gathered by Revenue too the respondent for rebuttal. Appeal allowed by way of remand. 2017 (7) TMI 318 Benefit of N/N. 92/04-Cus dated 10th September 2004 - whether credit is permitted to be used, when duty was not paid at the time of import? - Held that: - The nomenclature of the various export promotion schemes under the Foreign Trade Policy notwithstanding, they are, in essence, exemption from duty that are operated through notification issued under section 25 of Customs Act, 1962 for imports that are conditional upon compliance with the notification. A benefit that was not claimed at the time of import is not available for being extended in recovery proceedings. Accordingly, there is no merit in the claim of the appellant for discharge of duty liability by recourse to the exemption to the extent of credit available under the scheme. The goods are not available for confiscation. In the absence of the availability of said goods or its lien, with the confiscating authority, redemption is an impossibility and the quid pro quo, sanctified by law, for such redemption is evidently absent - the redemption fine set aside. The disallowance of recourse to the exemption notification and the imposition of penalty is upheld. Appeal allowed - decided partly in favor of appellant. 2017 (7) TMI 317 Jurisdiction - power to adjudicate the case - Held that: in the event the Tribunal after examination come to the conclusion that the matter should be remanded, then there is no need to argue on the merits - appeal allowed by way of remand. 2017 (7) TMI 316 Misdeclaration of goods - synthetic organic dyes - The goods had claimed credit by virtue of the latter description in each of the shipping bills at 11%/12%/9% at different points in time whereas, being ‘synthetic dyes’, these were entitled only to credit of 4%/5% at different periods in time - whether the exporter had misdeclared the goods? - Held that: - The adjudicating authority has unambiguously asserted that ‘synthetic dye’ and ‘dimethoxy Diben-zanthrone’ are two distinct items. If that be so, the two descriptions in each of the shipping bills should have alerted the proper officer as to the ineligibility for higher credit on account of the goods being ‘synthetic dye’. In these circumstances, we cannot come to the conclusion that the goods had been misdeclared and, therefore, confiscation under section 113 of Customs Act, 1962 with consequent imposition of penalty under section 114 of Customs Act, 1962 is not justifiable. Jurisdiction to determine the DEPB rate - Held that: - with the DEPB scheme no longer being in vogue, re-determination is an academic exercise which we need not overly concern ourselves with. Appeal allowed - decided in favor of appellant. 2017 (7) TMI 309 Seized goods - The grievance of the Petitioner is that although the consignments, which were brought in containers, have been examined in the presence of the Customs House Agent (‘CHA’) of the Petitioner, there is no intimation received till date as regards the outcome of such examination. A reference is made to a recent circular issued on 8th February, 2017 by the Central Board of Excise & Customs about timely action to be taken by the Department on goods that have arrived at the port but are held-up without any separate seizure orders being passed - Held that: - all orders after examination with respect to all B/E should be passed on or before 2nd June, 2017 - The Court directs that an affidavit of compliance be filed by the Department before the next date of hearing. FEMA 2017 (7) TMI 312 Penalties on account of violation of Sections 9(1)(b) and (d), Section 68(1), Section 64(2) and 63 of FERA - Whether the show cause notice is void being received by appellant after the sun set period? - Whether the statements given under section 108 of the Customs Act can be used as evidence against the accused? Held that:- The new law (FEMA) continues to govern action vis-à-vis all offences under the repealed law (FERA) in accordance with the provisions of the latter, the only restriction being that notice of contravention under Section 51 of FERA had to be taken by the adjudicating officer before the expiry of two years from the date of commencement of FEMA – that is to say, by 31.05.2002. Since the show cause notice in the present case was issued by the adjudicating authority on 31.05.2002 which would be within the sunset clause under FEMA, its validity cannot be questioned, the fact that such show cause notice was served only in 2003 being inconsequential. Since the action was initiated within the period provided in law, delay (if any) in relation to the directions in the order of CEGAT would not render it bad. In the present case, noticeably, the statements under Section 108 of the Customs Act have been taken note of by the authorities below for recording re-assurance on the ground the same corroborated the main incriminating circumstances, the same being seizure of unaccounted money and incriminating documents showing the infringing activity. The submissions that the order of the Customs authorities has been set aside by CEGAT takes the appellants nowhere. The said order only brought to an end the proceedings taken out under the Customs Act. The said result can have no effect on proceedings taken out under FERA, its provisions being distinct from those of the Customs Act. The questions of law raised in this appeal, thus, are answered against the appellants. PMLA 2017 (7) TMI 310 Offense under Money Laundering - application filed under Section 210 Cr.P.C. for clubbing the complaint case bearing under Sections 5(5) and 45 (1) of the Prevention of Money Laundering Act, 2002 with case bearing FIR No.131 registered at Police Station Nawanshahr, under Sections 420, 177, 191, 206, 207 and 120-B of the Indian Penal Code - Held that:- The provisions of Section 210 Cr.P.c. would show that when investigation is in progress in a police case, only then proceedings should be stayed in a complaint case, but once investigation has been completed, then the provisions of Section 210 Cr.P.C. has no application. It is stated that charge-sheet in the case instituted on police report has already been submitted, therefore, no investigation by the police was in progress in relation to the said offence at the point of time. The Court after discussing the law held that the police has already submitted the final report under Section 173 Cr.P.C. before learned Additional Chief Judicial Magistrate, Nawanshahr on 15.12.2014. Though, the case was committed on 30.04.2015, the complaint was filed on 04.12.2014. At the time of filing the complaint, no investigation was pending before the police. Thus, the provisions of Section 210 Cr.P.C. are not applicable in the present case. The learned trial Court has correctly held that the offences under the complaint and in the FIR case are entirely different and both the cases cannot be clubbed together. Service Tax 2017 (7) TMI 351 Liability of interest u/s 75 of FA - appellant had taken input service credit even before payments were made, in contravention of Rule 4 (7) of CCR, 2004 - Held that: - although appellant had represented that they have utilized the credit only after making payment to the input service provider, however they had not submitted necessary evidence thereof to the adjudicating authority - decision in the case of CCE Madurai Vs Strategic Engineering (P) Ltd. [2014 (11) TMI 89 - MADRAS HIGH COURT] squarely covers the issue, where it was held that mere taking of cenvat credit wrongly would not compel the assesee to pay interest as well as penalty. The matter requires to be remanded to the adjudicating authority for de novo consideration keeping in mind the ratio of Strategic Engineering case as also to give another opportunity to the appellant to produce bill wise details to establish that the credits availed by them have been utilized only after payments were effected to the concerned service provider - appeal allowed by way of remand. 2017 (7) TMI 350 Penalty u/s 76 and 78 - Rent a Cab Scheme Operator Service - case of appellant is that Since, the service tax was levied for the first time w.e.f. 01.06.2007, there was confusion on the applicability of service tax for supply of buses to Ahmedabad Municipal Transport Corporation (AMTC) - Held that: - undisputedly the appellant had been providing Rent a Cab Service to Ahmedabad Municipal Corporation (AMC) under an agreement dated 25.09.2006 and the levy was brought into w.e.f 01.06.2007. In the initial period, there was confusion about the applicability of levy to owners who supply of buses to various State transport corporations - Under the circumstance of uncertainty in law, the appellant could not pay the service tax for about six to eight months ie.e for the period from 01.06.2007 to 01.01.2008, which was paid by them on 31.03.2008 alongwith interest - it is a fit case for invoking under Section 80 of the Finance Act, 1994 - penalty set aside - appeal allowed - decided in favor of appellant. 2017 (7) TMI 349 CENVAT credit - duty paying invoices - denial of credit on the ground that they availed input service credit on the strength of invoices/challans raised against Head Office at Shakespeare Sarani and not distributed by the Head Office to their unit - Held that: - Revenue has not disputed on the facts that all the invoices on which credit has been taken, have been endorsed to the respondents factory. It is also not in dispute in the Revenues appeal that the services rendered have direct nexus with the factory of the respondent and the products manufactured therein - reliance placed in the case of MODERN PETROFILS Versus COMMISSIONER OF C. EX., VADODARA [2010 (7) TMI 319 - CESTAT, AHMEDABAD], where it was held that no allegation of non receipt of input service or the allegation of service not relatable to the factory and also in view of the fact that invoice was in the name of head office of the same factory and not in the name of some one else, credit allowed - appeal dismissed - decided against Revenue. 2017 (7) TMI 348 CENVAT credit - various input services - Held that: - all the services referred are eligible to be availed as CENVAT Credit and since the appellant is exporting the services, is eligible for the refund of the service tax paid on such services - credit allowed - appeal dismissed - decided against Revenue. 2017 (7) TMI 347 Manpower recruitment service - N/N. 30/2012 and 45/2012 - reverse charge - Held that: - there is no dispute service tax liability of the services rendered by the service the appellant stands discharged. Again taxing the appellant 75% of the amount of the value of the services as a recipient of the service, would amount to double taxation which is not the mandate of FA, 1994 - reliance placed in the case of Navyug Alloys Pvt Ltd. [2008 (8) TMI 100 - CESTAT AHEMDABAD], where same issue came up before the Bench in respect of the services rendered by GTA services wherein the service provider discharged the service tax liability and demands were raised from the service recipient, and it was held that once the tax is already paid on the services, it was not open to the Department to confirm the same against the appellant, in respect of the same services. CENVAT credit - reverse charge - Held that: - if the service provider discharges the entire service tax liability, the appellant is eligible to avail the CENVAT Credit of the said amount which has been taxed and deposited with the government as it is settled law that an assessment cannot be called in question in the hands of the recipient of the services. Appeal allowed - decided in favor of appellant. 2017 (7) TMI 346 CENVAT credit - input services - club services - whether the appellant who is a manufacturer of excisable goods, is eligible to avail CENVAT credit of the service tax paid by the various service providers or otherwise? - Held that: - input service means any service used by manufacturer whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products. It is undisputed that appellant is a manufacturer of dutiable final goods and hence the CENVAT credit availed on the above services is correctly availed by them and to that extent, the impugned order is in error holding that CENVAT credit needs to be rejected. CENVAT credit - insurance for vehicles - Held that: - the CENVAT credit availed of ₹ 7,711/- on the insurance for the vehicles after 01.04.2011 is also to be held as ineligible CENVAT credit and the appellant is directed to reverse the same along with interest - appellant is required to discharge the amount of interest. Penalty - Held that: - Since the issue is of interpretation of the provisions of Rule 2 (l) of the CENVAT Credit Rules as to the availment of CENVAT credit on the various input services received by them, the penalty is not warranted. Appeal allowed - decided partly in favor of appellant. 2017 (7) TMI 345 Sub-contract - tax liability - the respondent failed to produce any evidence that the main contractor discharged the tax liabilities - Held that: - Circular No.96/7/2007-S.T. dated 23.8.2007, with reference to Code 999.03/23.08.2007, it is clarified that a sub-contractor is essentially a taxable service provider. The fact that services provided by such sub-contractors are used by the main service provider for completion of his work does not in any way alter the fact of provision of taxable service by the sub-contractor. Services provided by the sub-contractors are in the nature of input services - Service Tax is, therefore, leviable on any taxable services provided, whether or not the services are provided by a person in his capacity as a sub-contractor and whether or not such services are used as input services - demand upheld - matter is remanded to the Adjudicating Authority to re-determine the quantum of demand, interest and penalty u/s 76 of the Act for the normal period of limitation - appeal allowed by way of remand. 2017 (7) TMI 344 Abatement of value of material - N/N. 12/2003-ST dated 20th June 2003, as amended by N/N. 12/2004-ST dated 10th September 2004 - Held that: - reliance placed in the case of Sobha Developers Ltd. Versus Commissioner of Central Excise and Service Tax, Bangalore [2009 (9) TMI 342 - CESTAT, BANGALORE], where it was held that the decision of the commissioner to collect service tax on the value on which the assessee had already paid State Vat was contrary to the principal of fiscal federalism adopted in the constitution. Thus the demand is not sustainable - the appellant had discharged VAT on the materials supplied in those composite contracts undertaken by them. The decision of the Tribunal is unambiguously clear that discharge of VAT liability would preclude the levy of service tax on the value of those goods - appeal allowed - decided in favor of appellant. 2017 (7) TMI 343 Business Auxiliary Services - Export of services - short levy of tax - Held that: - The notices have sought classification of the service under section 65(105)(zzb) of Finance Act, 1994 which is covered by rule 3(iii) of Export of Service Rules, 2005 and hence, under section 93 of Finance Act, 1994, is exempted from levy if recipient of service is located outside India - The consideration received from or on behalf the overseas client is, consequently, beyond the pale of taxing jurisdiction under Finance Act, 1994 and the demand in the impugned orders must, necessarily, be set aside - penalties also set aside - Appeal allowed - decided in favor of appellant. 2017 (7) TMI 342 Erection, Commissioning, Installation service - Commercial construction service - man power supply agency services - N/N. 11/2010-ST dated 27.02.2010 - Held that: - N/N. 45/2010 ST dated 20.07.2010 decreed that all taxable services relating to transmission of electricity shall not be levied during the period upto 26.02.2010, and, for the period upto 21.06.2010 for all taxable services relating to distribution of electricity. Thus, after 21.06.2010, any such services provided relating to distribution of electricity would be taxable at applicable rates unless they have been further exempted by any Notification issued in that regard - the exemption provided in earlier N/N. 45/2010-ST dated 20.07.2010 for services provided in relation to distribution of electricity upto 21.06.2010 have been further continued vide N/N. 32/2010-ST dated 22.06.2010. In consequence, the demand of tax liability beyond 21.06.2010, on the appellant, for 2011-12, also cannot sustain - appeal allowed - decided in favor of appellant. 2017 (7) TMI 341 Business Auxiliary services - commission received for ‘promoting or marketing the service of a client’ - Held that: - the consideration received from a recipient of service for the services rendered by the provider alone is taxable - a demand for alleged short-paid tax must be based on a finding that a specific taxable service has been provided, as agreed to be provided and on the consideration that was paid or payable by the recipient of that service to the provider of the service - appeal allowed - decided in favor of appellant. Central Excise 2017 (7) TMI 340 Pre-deposit - the present writ petitions have been filed praying that this Court should direct the CESTAT to accept the entire amount of pre-deposit made by each of the Petitioners, notwithstanding the earlier withdrawal, and hear the appeals of the Petitioners on merits - Held that: - there has been a chronic delay in making pre-deposits far beyond the time granted by the Court - the Court is not inclined to grant any further indulgence to the Petitioners - petition dismissed - decided against petitioner. 2017 (7) TMI 339 Principles of Natural Justice - copies of documents relied upon by prosecution not made available - procedure prescribed under the notification issued in respect of Excise Rule 12 CCC - It is alleged that, the petitioner had availed of CENVAT Credit on the strength of invoices which are doubtful - Held that: - an opportunity of hearing to a delinquent would encompass within its wake the materials sought to be relied upon against him in the proceeding to be made over to him so that the delinquent is in a position to make an effective representation on the charges levelled against him - The impugned order stands vitiated by the non-adherence of the principles of natural justice. A post facto so called compliance thereof will not cure the proceedings which stands already vitiated - petition allowed - decided in favor of petitioner. 2017 (7) TMI 338 Refund claim of excess duty paid - valuation of Physician's sample - Board Circular dated 01-07-2007 - where it is well settled that the Board circular would be applicable only prospectively, whether the 1st respondent was correct in directing the authority to follow the Board circular dated 13.02.2003 for the past period? - Held that: - the assessable value of the Physician's sample can only be based on the actual cost of production to the assessee. The assessable value, as indicated in the 2002 circular, is 115% of the cost of production. The Tribunal having come to this conclusion, in our opinion ought not to have taken recourse to the 2003 circular - the Tribunal quite clearly, seeks to apply the 2003 circular which adverts to the CAS-4 methodology. Furthermore, as it appears, the Tribunal only to obtain more clarity qua the ascertainment of cost of production has remanded the matter to the Adjudicating Authority - appeal allowed by way of remand. 2017 (7) TMI 337 100% EOU - clandestine removal of raw materials from JDL-EOU to JDL-DTA, without any approval from concerned authorities - Held that: - from the SCN itself, it clearly emerges that the goods so found removed from JDL-EOU were very much located and detained in JDL-DTA unit. In the circumstances, taking note of the fact that both the units are adjacent to each other under a common management, the averment that removal of goods had only been necessitated due to destruction caused in one unit due to Tsunami, should not be summarily rejected. The only infraction that comes up is that appellants have removed the goods without any prior permission or for that matter, any post-facto permission. But given the facts that the goods removed to the adjacent unit have been found available, even such infraction would only have to be considered as a procedural lapse which should not be given the colour of clandestine removal with intent of evading duty. When the impugned goods not found at the EOU unit have, however, been subsequently found in their adjacent DTA unit, there cannot be any demand of customs duty on such goods. Penalty u/s 11AC - Held that: - Imposition of equal penalty u/s 11AC ibid on JDL-EOU and confiscation of the detained goods valued at ₹ 3,01,98,135/- will also, in consequence, not sustain. Penalty u/r 25 - Held that: - Penalty of ₹ 15 lakhs imposed u/r 25 of CER on JDL-EOU is therefore, unnecessary and excessive - what that has happened is a procedural violation for which, in our considered opinion, imposition of such huge penalty is an overkill. We therefore hold that interest of justice for such a procedural lapse would be best served by limiting the penalty to ₹ 25,000/-. Penalty u/r 26 - Held that: - there is no justification for imposition of penalty of ₹ 1 lakh on JDL-DTA u/r 26 ibid since the adjacent unit was only used to store the goods temporarily. It is also pertinent to note that JDL-DTA has not been issued a SCN. This penalty against JDL-DTA is therefore set aside. Appeal allowed - decided partly in favor of appellant. 2017 (7) TMI 336 SSI exemption - dummy units - Revenue entertained a view that Kores had floated many units in order to improperly avail small scale exemption - N/N. 8/2003-CE - Held that: - The thrust of the Revenue’s appeals against the findings of the Original Authority is revolving around the financial and managerial controls alleged to have been exercised by Kores on these small scale units - the notice issued to demand Central Excise duty should clearly identify the person from whom such duty is being demanded. There can be no demand invoking the concept of jointly and severally. The plea of the Revenue is that notices were issued to the dummy units in order to satisfy the principals of natural justice. In such case, the notices are to be restricted, if at all, only to penal proceedings as no duty can be demanded from such purported dummy units. The rural SSI units were engaged in packing of staple pins with Kores brand. This was evidenced even during the searches conducted by the officers, in two of the such units. The Original Authority also found that while the demand was raised against the rural units, no such demand was made from urban units in the proceedings. Appeal dismissed - decided against Revenue. 2017 (7) TMI 335 CENVAT credit - input services - Call Centre Services received by the appellant after clearance of goods for sale promotion - Held that: - the services provided by Call Centres are in nature of sale promotion, as the services of sale promotion is covered under Rule 2(l) of the Cenvat Credit Rules, 2004, therefore, the Ld. Commissioner (A) has rightly allowed cenvat credit on the services received from the call centres as sale promotion services. Scrap cleared without payment of duty - time limitation - Held that: - the generation of scrap in the factory of the respondent was well with the knowledge of the Revenue. In that circumstances, the extended period of limitation is not invokable and the Ld. Commissioner (A) has rightly dropped the demand on scrap which is beyond normal period of limitation. Appeal dismissed - decided against Revenue. 2017 (7) TMI 334 Reversal of CENVAT credit - the appellant reversed the cenvat credit on capital goods on depreciated value as per Rule 3(5A) of the CCR, 2004 - Revenue is of the view that the appellant is entitled to avail cenvat credit upto 50 % of the value of capital goods, therefore, for the intervening period the appellant is required to reverse more cenvat credit at the time of clearance of the capital goods - Held that: - The appellant has rightly reversed the cenvat credit on appropriate value of the capital goods. - The interpretation made by the Revenue is only on assumption and presumption which is not sustainable in the eyes of law. - demand set aside - decided in favor of appellant. 2017 (7) TMI 333 Levy of interest - wrongful availment of CENVAT credit which was reversed, but interest was not paid - Held that: - it is clear that the recovery of wrongly availed/utilised credit is to be accompanied by recovery of interest and, for such recovery, section 11A and section 11 AB shall be the instruments. Extended period of limitation - Held that: - The proceedings against the appellant were initiated on 12th April 2011 which is clearly beyond the normal period of limitation in connection with the alleged incorrect availment of credit. The period of limitation is liable to be extended only upon a finding of existence of ingredients such as fraud, suppression etc. Invoking of the extended period would, therefore, not be consistent with the findings of the first appellate authority that the wrong availment is nothing but a mistake on the part of the assessee. In these circumstances, the invoking of provisions in section 11A of Central Excise Act, 1944 is not tenable. It is clear from the record that the appellant had reversed the wrongly availed credit immediately upon it being pointed out. Hence, there was no further scope for initiating recovery proceedings in relation to this credit. The charging of interest in the impugned order is not valid and must be set aside - appeal allowed - decided in favor of appellant. 2017 (7) TMI 332 Refund claim - unjust enrichment - Held that: - It is not in doubt that the assessee had deposited the duty liability on ‘road delivery charges’ subsequent to the discharge of duty liability on clearance of the vehicles manufactured by them. It is also not in doubt that the Tribunal had held this levy to be beyond the scope of the provisions of section 4 of Central Excise Act, 1944 with consequential relief in the form of refund - It is also common ground that the respondent had made entries in the books of accounts leading to the inclusion of the disputed amount as ‘receivables’ in the final accounts pertaining to 2011 and that a Chartered Accountant had certified that the duty burden had not been passed on to customers. The original authority having found that this was not sufficient evidence and the first appellate authority having taken the contrary view that deposit of duty made after clearance was sufficient to establish the incidence of duty having been borne by the assessee, the sole point for determination is the sufficiency of compliance with the requirement to establish that the burden of duty had not been passed on - appeal dismissed - decided against Revenue. 2017 (7) TMI 331 CENVAT credit - omission of rule 12B of Central Excise Rules, 2002 - it is alleged that the appellant, though no longer entitled to the facility of credit, continued to do so even after the deletion of the said rule and hence was determined as being liable to the duties and penalties as ordered by the original authority - Held that: - we find no flaw in the contention of Revenue that the credit lying in balance after adjustment of the duty on the unsold stock would no longer be available to the respondent - it is also seen that there is no evidence that the respondent had utilised credit after 9th July 2004. Indeed, it is inconceivable that this should have been so for the claim of the respondent to have become a manufacturer in its own right is based on acquisition of a production facility at Bhiwandi which is in a different Central Excise jurisdiction and it would have been impossible for that unit to escape payment of duties on clearance - The determination of duty liability is therefore without authority of law and liable to set aside - penalty also set aside - appeal dismissed - decided against Revenue. 2017 (7) TMI 330 Service of order - case of applicant is that they have not received the impugned order and they received the impugned order only 04.07.2016 on the directions of the appellate authority in RTI - whether the Revenue has complied with the provisions of Section 37C of the Central Excise Act, 1944 for delivery of impugned orders on the applicants or not? - Held that: - if the order is sent by speed post, there should be proof of delivery is to be provided by the Revenue - Admittedly, no such proof has been produced by the Revenue. In that circumstances, presumption goes in favour of the applicant that they have not received the impugned orders in time, therefore, it is held that the Revenue has failed to prove the compliance of the provisions of Section 37(C) of the Act - the applications for Condonation of delay are allowed by condoning the delay in filing the appeals. 2017 (7) TMI 329 Refund claim - time limitation - whether the refund claim filed by the appellant, which was rejected as being filed beyond the period of limitation is correct or otherwise? - Held that: - refund claim rejected only on the ground that the appellant had not filed requisite documents in furtherance to the letter on 04.06.2007. It is to be noticed that the gist of the letter dated 04.06.2007, only seeks some clarification as to whether the amount has been debited or otherwise and they have not submitted the cancelled invoices or the subsequent invoices. The said letter has not rejected the refund claims - time limit of refund claim has to be counted from the date of filing of the refund claim - the appeal is allowed and remitted back to the adjudicating authority to process the refund claim - appeal allowed by way of remand. 2017 (7) TMI 328 Penalty u/r 209A of CER, 1944 - CENVAT credit - Held that: - there being no suppression of facts and/or contumacy conduct on the part of the appellant, the penalty is set aside - the appellant is entitled to take back the CENVAT Credit debited in their register by way of pre deposit during the pendency of this appeal with interest, as per Rules - penalty set aside - appeal allowed - decided in favor of appellant. 2017 (7) TMI 327 Valuation - related party transaction - Held that: - the impugned order did not explain how two Private Limited Companies having separate legal existence, can be considered as “relatives”. Relationship between natural persons holding position in these companies cannot make these two companies automatically “relative” within the meaning of Section 4. Also, there is no cost calculation based CAS-4. It is not clear how the value of 110% is arrived at by the lower authorities - matter remanded for fresh consideration - appeal allowed by way of remand. 2017 (7) TMI 326 CENVAT credit - Appellant's grievance is that before incorporation of sub-rule (3) to Rule 3 of CCR 2004, CENVAT credit availed on the written off goods shall not be liable to duty which is equivalent to CENVAT credit availed - Held that: - in absence of a specific provision, the claim of availment of CENVAT credit thereon and not used in manufacture should not result in denial of CENVAT credit availed - appeal allowed - decided in favor of appellant. 2017 (7) TMI 325 Re-crdit of duty on goods returned by the customer - Held that: - The appellant has no answer why such a procedure has been followed especially when jurisdiction is separate and the goods were received elsewhere is also not made known to the jurisdictional officer of Pune. Therefore, the appellants modus operandi does not exhibit that it has come out with clean hands when procedural deviation was made depriving Revenue to have control on appellant - appeal dismissed. CENVAT credit - fake and fictitious invoices - Held that: - details of invoices involving the above said duty not being available on record for examination at this stage, to reach to rational a conclusion, as to whether the invoices raised were fake and fictitious, the matter is remanded to the adjudicating authority to examine the genuinity of such invoices, the time gap between raising of the invoices and cancellation thereof, etc. - matter on remand. Generation of scrap - demand - Held that: - records do not reveal why that has not suffered duty. On that count, the appeal is dismissed. Penalty - interest - Held that: - to the extent of duty demand sustained as discussed thereinbefore, penalty shall be leviable and duty unpaid shall follow interest. Appeal allowed by way of remand. 2017 (7) TMI 324 Write-off of inputs and finished goods - whether the appellant is required to pay Central Excise duty/reverse the Cenvat Credit, so availed on the goods (inputs and finished products) written off in the books? - Held that: - The period involved in this case is from 2002-2003 to 2003 2004. The provisions for writing off the value of inputs / capital goods were inserted under Rule 3(5B) in the CCR, 2004 by N/N. 26 /2007 CE (NT) dated 11.5.2007. Since the period covered in this case is prior to insertion of sub rule (5B) in Rule 3 of Credit Rules, 2004, the embargo created therein is not applicable retrospectively for denying the cenvat credit to the appellant. With regard to packing material, inputs and finished goods, the learned advocate submits that embargo under Rule 3(5B) ibid will not have any application inasmuch as those goods are very much available and were not removed from the factory. However, this particular aspect was not dealt with by the lower authorities - Therefore the matter should go back to the original adjudicating authority for verification. Appeal allowed in part and part matter on remand. 2017 (7) TMI 323 Recovery of interest amount in respect of rebate claim, without issuance of SCN - Held that: - Out of the sanctioned rebate amount, an amount of ₹ 26,76,321/- was adjusted by the Asstt. Commissioner towards interest liability, relatable to earlier erroneous refund. Such action on the part of the Department, does not appears to be is in conformity with the statutory provisions, inasmuch as, for recovery of the interest amount, no SCN was issued by the Department, as provided under section 11A of the CEA, 1944 - once it has been held that the appellant is entitled for rebate claim, in absence of any specific provision for recovery of interest amount there-from, suo motu recovery of such amount by the Department is contrary to the statutory provisions - appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2017 (7) TMI 315 Natural justice - The petitioner's contention is that the impugned order has been passed without issuing any notice and without affording an opportunity of personal hearing - Held that: - The change of officer cannot be a reason for violating the procedure required to be followed under the TNVAT Act. The principles of natural justice requires that the dealer is given adequate and reasonable opportunity to putforth their submissions. The earlier notice clearly stated that the petitioner will have an opportunity of personal hearing - matter is remanded to the respondent for fresh consideration - appeal allowed by way of remand. 2017 (7) TMI 314 Principles of natural justice - The primary ground on which the petitioner has challenged the impugned order is by contending that an opportunity of personal hearing was not granted as required to be granted under section 27 of the TNVAT Act - Held that: - Considering the complexity of the transaction and the large turnover involved, this Court is of the view that the respondent Assessing Officer should have afforded an opportunity of personal hearing, especially when the present assessment order is pursuant to the revised notice issued by him dated 14.12.2016 - When the fact remains that the earlier officer while issuing his notice dated 26.08.2016 in no uncertain terms stated that the records filed by the petitioner are sufficient to hold that the goods have been actually exported outside the Country and granted exemption claim on direct export sales for the entire amount claimed by the petitioner. The matter requires to be remanded for fresh consideration on this aspect as well as with regard to the defective C Forms which according to the respondent is not acceptable - appeal allowed by way of remand. 2017 (7) TMI 313 Principles of Natural justice - application filed under section 84 of the TNVAT Act for rectification of the order of assessment not considered - Held that: - it is evidently clear that the petitioner did not have an opportunity to putforth their objections to show cause as to why a deduction of a sum of ₹ 26,56,749/- is not sustainable. In the impugned order, the respondent has admitted the fact that the petitioner has filed a petition under section 84 of the TNVAT Act requesting to revise order of assessment in the year 2013-14 and accepting the Form C and Form F declaration, revision order was passed for the said year by order dated 14.06.2016 resulting in balance of tax due of ₹ 3,95,18,210/- - the matter is remanded to the respondent for fresh consideration - appeal allowed by way of remand. Indian Laws 2017 (7) TMI 311 Offence punishable under Section 138 of the Negotiable Instruments Act - whether an unregistered partnership firm is entitled to maintain a complaint under Section 138 NI Act?- Held that:- It is apparent that on finding of the guilt arrived at by the criminal Court the accused is liable to a sentence of imprisonment which may extend to two years, or fine or with fine which may extend to twice the amount of cheque, or with both. Thus discretion is granted to the criminal Court to either award imprisonment or fine or both. Thus proceedings under Section 138 of the NI Act are not recovery proceedings and in a given case the criminal Court may only award sentence of imprisonment. Irrespective of a complaint proceeding under Section 138 of the NI Act, a creditor has the right to institute civil suit for recovery of his debt in which case the same would be recoverable only if it is a legally enforceable debt or other liability. Following the decision of the Supreme Court in BSI Ltd. (2000 (2) TMI 719 - SUPREME COURT OF INDIA ) this Court is of the considered view that the decisions of the Kerala High Court, Karnataka High Court and Punjab & Haryana High Court as noted above lay down the correct law. Thus the issue raised by learned counsel for the petitioner that since the complainant respondent is not a registered firm it cannot maintain a complaint under Section 138 of the NI Act is rejected.
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