TMI Tax Updates - e-Newsletter
August 3, 2015
Case Laws in this Newsletter:
Income Tax
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Reopening of the assessment - The assessee is not an enemy. The attitude of the revenue seems to be that the assessee has to be taxed and to achieve that object, fair play could be jettisoned. The revenue is certainly expected to ensure that every paisa due to the State is collected but the same has to be only in accordance with law and in compliance with rules of fair play. - HC
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Income Tax:
Principal amount of loans waived off by the financial institutions / banks - Loan amount had been taken for the purchase of machinery / fixed assets being on capital account and not on trading account would not be hit by Section 41(1) r.w. section 28(iv) of the Act - HC
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Income Tax:
Exemption u/s 11 - construction activity on the land belong to the trustee and used by the trust - whether application of income for the benefit of trustee u/s 13 (1)(c) - Held No - Exemption allowed - HC
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Income Tax:
MAT - rebate u/s. 88E of the Act will be allowed even though the income is to be assessed u/s. 115JB of the Act. - AT
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Service Tax:
Management and maintenance of parks and road side plantation and maintenance - levy of service tax confirmed - However, amount towards supply of different trees, for which specific rates have been mentioned, allowed to be reduced subject to verification - AT
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Service Tax:
Reversal of cenvat credit - the appellant did not charge the service tax, does not mean that appellant has provided exempted services - At the most the case could have been booked against the appellant for non payment of service tax which Revenue failed to do so - AT
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Service Tax:
Appellant has collected the Service Tax amount from the customers and not deposited in Central Government account, therefore, penalty under Section 78 is warranted - Penalty only under one Section is sufficient and adequate deterrent - AT
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Central Excise:
Reversal of Cenvat Credit - Rule 6 is not enacted to extract illegal amount from the assessee. The main objective of the Rule 6 is to ensure that the assessee should not avail the Cenvat Credit in respect of input or input services which are used in or in relation to the manufacture of the exempted goods or for exempted services. - AT
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Central Excise:
Penalty u/s 11AC - Duty was paid before issuance of SCN - This only points to wilful misstatement and suppression of facts on the part of the appellant - Penalty confirmed - AT
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Central Excise:
CENVAT Credit - Duty paying documents - whether the Cenvatable invoices issued by M/s. SSMIPL o the appellant are genuine or fake/fraudulent invoices - All the evidences leads to conclusion that the appellant has fraudulently taken the Cenvat credit on the invoices issued by M/s. SSMIPL - AT
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Central Excise:
Input services - activities undertaken by the distributors/ consignment stockists of the appellant are purely distribution/ sales and has no element of sales promotion - Cenvat Credit not allowed - AT
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VAT:
Inter-state sale or not - What is described as sale by the appellant is only the packing cartons alone which were never exported as such and the goods exported are different. That will take out the case of the appellant from the purview of Section 5(3) of the CST Act - HC
Articles
Notifications
News
Case Laws:
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Income Tax
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2015 (8) TMI 20
Reopening of the assessment - disallow an expenditure claimed for the Assessment Year 2005-06 to 2010-11 under Section 37 as advertisements, sales promotions expenses, etc. on the ground that it was incurred for the exporter of the liquor and appropriately forms part of the consideration payable for the imported goods by the petitioner - Held that:- We notice that the petitioner had sought a copy of the sanction granted to the Assessing Officer in terms of Section 151 of the Act to issue the impugned reopening notices. The orders disposing of the objections records that as it is administrative sanction and the Assessing Officer is not obliged to provide a copy of the same to assessee. The affidavit-in-reply to the above petition filed by the revenue also does not contain a copy of this sanction, although it does mention that the necessary sanction has been obtained. Mr. Chhotaray, the learned Counsel for the revenue submits that revenue cannot be compelled to give a copy of the sanction to the assessee. We find this attitude of the revenue rather strange. The law requires the sanction to be obtained while issuing notice under Section 151 of the Act as in the absence of appropriate sanction, the proceedings itself are without jurisdiction. We would have expected the revenue to have made a copy of sanction available to the assessee, when sought, of its own. This is the minimum fair play expected of the State. The assessee is not an enemy. The attitude of the revenue seems to be that the assessee has to be taxed and to achieve that object, fair play could be jettisoned. The revenue is certainly expected to ensure that every paisa due to the State is collected but the same has to be only in accordance with law and in compliance with rules of fair play. In the above circumstances, we set aside the three orders dated 15 January 2015 and restore the issue to the Assessing Officer to enable disposal of the petitioner's objections in accordance with the law. So as to avoid the reassessment proceedings becoming time barred, we make clear that the period of 15 weeks from today would stand excluded for the purpose of computing period of limitation under Section 153 of the Act.
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2015 (8) TMI 19
Principal amount of loans waived off by the financial institutions / banks - whether do not represent the assessee's taxable income in terms of Section 41(1) r.w.s.28(iv) as the loans were taken for the purpose of acquisition of capital assets? - Held that:- Be that as it may, the loan being taken was undisputedly in the Capital field then its waiver should also be in the Capital field. The sine quo non for application of Section 41(1) of the Act is that a deduction must have been claimed by assessee in the Revenue field respect of the loan taken while arriving at it's profit in the earlier years so that a subsequent benefit of the same has to be taxed as income in the assessment year in which it is received. This admittedly is not the situation here. Moreover as held by this Court in Mahindra and Mahindra [2003 (1) TMI 71 - BOMBAY High Court ]that Section 28(iv) of the Act is applicable only on the receipt of any benefit or perquisite and would not apply to benefits obtained in cash or money. In this case also the waiver of loan is not a benefit or perquisite in kind but the right to recovery money of ₹ 79.81 lakhs is given up. Thus the issue stands concluded by the decision of this Court in Mahindra & Mahindra and the addition of Explanation 10 to Section 43 of the Act, does not in any manner impact the binding nature of this Court's order in Mahindra and Mahindra. Loan amount had been taken for the purchase of machinery / fixed assets being on capital account and not on trading account would not be hit by Section 41(1) r.w. section 28(iv) of the Act - Decided in favour of assessee.
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2015 (8) TMI 18
Disallowance of Land development expenditure - CIT(A) allowed claim confirmed by ITAT - Held that:- ITAT in the impugned order noted that the contractors named by the Assessee had in fact been assessed by the Department and in many cases refund had been ordered. It was noticed that the AO had made no effort to verify the details filed by the Assessee and proceeded to inquire into the identity of the contractors through an inspector. These inquiries were conducted long after the work had been executed. The ITAT came to the conclusion that the adverse report of four contractors to whom the payments were made could not override the evidence filed by the Assessee and, therefore, the CIT(A) was justified in deleting the additions "which have been made only on the basis of a doubt created or suspicion in the mind of the AO". Significantly, the ITAT observed that nothing had been found during the search operation with regard to the land development expenses and the AO had also not taken the post search inquiries to the logical end. Both the CIT (A) and the ITAT have in fact discussed the materials on record including the statements of four of the contractors and the report of the Inspector. As rightly pointed out by the ITAT, the evidence submitted by the Assessee including photographs and DVDs demonstrating the land development was not properly verified or inquired onto by the AO. - Decided against revenue.
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2015 (8) TMI 17
Continuation of the approval granted under Section 80G(5)(vi) rejected - assessee submision that Commissioner as well as Tribunal erred in not considering the fact that assessee - Trust had not carried on any activity which was hit by proviso to Section 2(15) of the Act and reply given to the respondent indicated that donations which had been received by the assessee had been utilised for the purpose envisaged under the objects of the Trust and its fulfillment - Held that:- order of rejection of renewal of recognition dated 28.11.2008 - Annexure-G is bereft of reasons. On the ground of order of rejection being not a speaking order which has been affirmed by the Tribunal in a perfunctory manner, we are of the considered view that both the orders cannot be sustained and are liable to be set aside. In view of the fact that objections came to be filed by the assessee - applicant to the rejection proposed by respondent indicating that it had taken steps to fulfill the objects of the Trust by not only constructing 'Samudaya Bhavana' but also medical treatment said to have been given by its 'Mumbai Samithi' apart from distribution of books to the needy, are all aspects which was required to be examined by respondent and said exercise having not been undertaken, we are of the considered view that matter requires to be remitted to the respondent for being adjudicated afresh - Decided in favour of assessee.
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2015 (8) TMI 16
Deduction on account of payment of interest on interest - whether was allowable under section 36(i)(iii) and Section 37(1)? - Held that:- In the present case, there is an additional feature that assessee failed to explain the amount which was claimed to be deducted under section 36(1)(iii) of the Act. It was found that the entire capital was paid and what was remaining in the account was interest on which the interest was shown and which was sought to be deducted. The AO was not satisfied with the genuineness of the entry. He observed that since the interest amounting to ₹ 1,49,85/- has already been disallowed on ingenuine credits, the balance amount was also disallowed. He had rightly relied on the judgment of Supreme Court in Shew Kissen Bhatter V/s Commissioner of Income Tax, West Bengal (1973 (3) TMI 2 - SUPREME Court) and Jaswantrai P.Mehta V/s Commissioner of Income-tax (1991 (6) TMI 62 - GUJARAT High Court ). - Decided in favour of revenue.
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2015 (8) TMI 15
Exemption under Section 80P(2)(a)(i) - interest received from investments of its surplus funds made with the members of the Society - whether the interest income received by the appellant from investments/deposits of its surplus fund with the Member Company is exempt from tax on the Principle of Mutuality? - Held that:- As decided TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LIMITED case [2015 (2) TMI 995 - KARNATAKA HIGH COURT] in the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act. - Decided in favour of assessee.
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2015 (8) TMI 14
Exemption under Section 11 denied - construction activity on the land belong to the trustee and used by the trust - whether application of income for the benefit of trustee u/s 13 (1)(c) - Held that:- Department while accepting that the Trust has not paid any rent or any compensation to the trustee for the land used by the assessee trust which belongs to one of the trustees, the income for construction of the building on the land belonging to one of the trustee would amount to income for the benefit of the trustee which will fall under Section 13 (1)(c) of the Act unmindful of the agreement which states that in the event of the trust vacating the building in future, the trustee shall compensate the trust for the value for the building in question. De hors this agrement, there is nothing to show that there was any manner of use of application of the income or property of the Trust to the person set out in sub section 13 (1) (3) (c) of the Act. It is only when there is an application of income or any part of the property or building directly or indirectly put to use for the benefit of person referred to above, the provision will get attracted we do not find such application in the facts of the present case. We are in agreement with the decision arrived at by the Commissioner Appeals on this point. Yet another plea raised by Department is that the acquisition of ownership of the building to the trustee itself is a benefit in the form of right and therefore, it deemed to be an application of fund of the trust for the benefit of the trustee. That contention is replied by appellant / assessee stating that there is no vesting of the property on the trustee per se because, as per the agreement, on surrender of the building the trustee will have to pay compensation and, therefore, the question of application of funds for the benefit of the trustee does not arise. The definition of 'Beneficial Owner' in terms of Black Law Dictionary, relied upon by the counsel for the department, will not further the case of the department because as the definition of 'Owner' also has a restrictive meaning as in this case. We extract the said portion hereunder : "Owner. The person in whom is vested the ownership, dominion, or title of property, proprietor. He who has dominion of a thing, real or personal, corporeal or incorporeal, which he has a right to enjoy and do with as he pleases, even to spoil or destroy it, as far as the law permits, unless he be prevented by some agreement or covenant which restrains his right." - Decided in favour of assessee.
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2015 (8) TMI 13
TDS liability on term deposits - assessee is a Co-operative society engaged in Co-operative business of banking which was registered under Uttarakhand Sahkari Samiti Adhiniyam 2003 - Held that:- As far as the applicability of the relevant provision is considered, the Co-ordinate Bench in the case of Kashipur Urban Co-operative Bank Limited vs. ITO [2015 (7) TMI 760 - ITAT DELHI] relying upon the decision rendered in ACIT vs Visakhapatnam Cooperative Bank Ltd. (2011 (8) TMI 319 - ITAT VISAKHAPATNAM) has held that the assessee was not obliged to deduct TDS on the interest paid on time deposits u/s 194A of the Act. Considering the factual matrix, it is seen that the record shows that the assessee through its Branch Manager has filed written submissions on 07.05.2013 claiming that every taxpayer is a member of Almora Urban Co-operative Bank Ltd. These facts need verification. The legal issue having been decided in favour of the assessee, on facts we restore the issue back to the file of the AO for this limited purpose - Decided in favour of assessee for statistical purposes.
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2015 (8) TMI 12
Penalty under section 271(1)(c) - Held that:- In this case, the Assessing Officer has not brought out any specific charge for which the penalty has been imposed on the assessee u/s 271(1) (c) of the Act. He has not brought out whether the assessee has concealed the particulars of income or whether the assessee has furnished inaccurate particulars of income. In CIT v. Atul Mohan Bindal (2009 (8) TMI 44 - SUPREME COURT] where Hon'ble Supreme Court was considering the same provision, it observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. Thus the satisfaction of the Assessing Officer about the concealment of particulars of income or furnishing of inaccurate particulars of such income is essential before levying any penalty u/s 271(1) (c). The Assessing Officer as is apparent from the penalty order has not satisfied about the concealment of particulars of income or furnishing of inaccurate particulars of income on the part of the assessee. On this basis itself the penalty deleted. - Decided in favour of assessee.
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2015 (8) TMI 11
Disallowance u/s 40(a) - CIT(A) deleted disallowance - Held that:- The issue under consideration is squarely covered in favour of the assessee as relying on the case of ADIT, International Taxation vs. Express Drilling Systems LLC. [..] and M/s. S.K.Tekriwal [ 2012 (12) TMI 873 - CALCUTTA HIGH COURT] wherein held that Section 40(a)(ia) refers only to the duty to deduct tax and pay to government account there is nothing in the said section to treat the assessee as defaulter where there is a shortfall in deduction. And if there is any shortfall due to any difference of opinion the assessee can be declared to be an assessee in default u/s. 201 but no disallowance u/s 40(a)(ia) is allowed - Decided in favour of assessee. Disallowance on account of depreciation - CIT(A) deleted disallowance - Held that:- It is noticed in the case of CIT vs. Ceramics & Industries Ltd. (2011 (1) TMI 26 - DELHI HIGH COURT ) held that UPS is a part of the computer peripherals & accessories and accordingly depreciated @ 60%. Since the identical issue has been decided by the Hon’ble Jurisdictional High Court in the aforesaid referred to case by holding that the assessee is entitled to higher rate of depreciation @ 60% and the Ld. CIT has followed the ratio laid down by the Hon’ble Jurisdictional High Court, therefore, we do not see any merit in the appeal of the department on this issue.- Decided in favour of assessee.
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2015 (8) TMI 10
Addition u/s. 68 - CIT(A) deleted the addition - validity of proceedings initiated under section 153A - Held that:- The assessee has discharged the initial onus of establishing the bona-fides of the transactions and the AO was not justified in ignoring various evidences produced by the assessee and which were available before him on record of the department itself in reassessment proceedings of North Delhi Projects Pvt Ltd for the A.Y 2004-05 and in assessee’s own case for AY 2005-06 as stated and when no incriminating documents/ evidence is found during the search to suggest that the M/s Raf Steel Pvt Ltd and M/s Universal Electrique Motors Pvt Ltd are sham entities and when its respective balance sheet speaks otherwise. CIT(A) rightly held that the AO was not justified in treating the amount of share application money received by the assessee company as its undisclosed income because there was no material in the hands of the AO which was collected during the search/enquiry conducted by him. Therefore, Ld. CIT(A), has rightly deleted the addition made under section 68 of the Act. - Decided against revenue. Violation of Rule 46A of the Income Tax Rules, 1962 - Held that:- No new evidence was adduced before the Ld. CIT(A). He only took note of the already existing documents in the public domain. i.e. the remand report of the AO in a sister concern’s case of assessee wherein, the AO candidly accepts the identity, creditworthiness and genuineness of the share holders company (M/s Caplin For AY 2006-07 i.e. in the same assessment year under consideration). Therefore, question of admission of additional evidence does not arise. The Ld. CIT(A) while discharging his appellate jurisdiction can take judicial notice of these documents and found the contention of the assessee was right and so there is nothing illegal or perverse in it and so there is no violation of Rule 46A. Moreover, the learned DR could not point out any additional evidence which has been adduced before the ld. CIT(A) for the first time to invoke Rule 46A. Hence, the contention raised by the Department regarding violation of Rule 46A, has no merits, therefore, we reject the ground - Decided against revenue.
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2015 (8) TMI 9
Addition u/s. 68 - CIT(A) deleted the addition - validity of proceedings initiated under section 153A - Held that:- The assessee has discharged the initial onus of establishing the bona-fides of the transactions and the AO was not justified in ignoring various evidences produced by the assessee and which were available before him on record of the department itself in reassessment proceedings of North Delhi Projects Pvt Ltd for the A.Y 2004-05 and in assessee’s own case for AY 2005-06 as stated and when no incriminating documents/ evidence is found during the search to suggest that the M/s Raf Steel Pvt Ltd and M/s Universal Electrique Motors Pvt Ltd are sham entities and when its respective balance sheet speaks otherwise. CIT(A) rightly held that the AO was not justified in treating the amount of share application money received by the assessee company as its undisclosed income because there was no material in the hands of the AO which was collected during the search/enquiry conducted by him. Therefore, Ld. CIT(A), has rightly deleted the addition made under section 68 of the Act. - Decided against revenue. Violation of Rule 46A of the Income Tax Rules, 1962 - Held that:- No new evidence was adduced before the Ld. CIT(A). He only took note of the already existing documents in the public domain. i.e. the remand report of the AO in a sister concern’s case of assessee wherein, the AO candidly accepts the identity, creditworthiness and genuineness of the share holders company (M/s Caplin For AY 2006-07 i.e. in the same assessment year under consideration). Therefore, question of admission of additional evidence does not arise. The Ld. CIT(A) while discharging his appellate jurisdiction can take judicial notice of these documents and found the contention of the assessee was right and so there is nothing illegal or perverse in it and so there is no violation of Rule 46A. Moreover, the learned DR could not point out any additional evidence which has been adduced before the ld. CIT(A) for the first time to invoke Rule 46A. Hence, the contention raised by the Department regarding violation of Rule 46A, has no merits, therefore, we reject the ground - Decided against revenue. Taking note that the Hon'ble Bombay High Court [2015 (5) TMI 656 - BOMBAY HIGH COURT] has upheld the Special Bench decision of the Tribunal, in ALL Cargo (2012 (7) TMI 222 - ITAT MUMBAI(SB) ) we uphold the contention of the assessee that no addition can be made for this assessment year u/s 153A since no incriminating material was unearthed during the course of search and admittedly original assessment has not abated as on date of search. So we are inclined to follow the view of the Coordinate Bench as stated above. - Decided in favour of assessee.
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2015 (8) TMI 8
Disallowance of freehold charges - CIT(A) deleted the addition - Held that:- AO has not brought out any fact to support this allegation that the assessee made payment of freehold charges over and above the payment which was actually recorded in the books of accounts and the AO has also not brought out any fact or material to support this fact that the property in question was converted from leasehold to freehold during the year under consideration on the payment of freehold charges made by the assessee out of her books of accounts. Hence, we are unable o see any valid reason to interfere with the impugned order and hence, ground of the revenue being devoid of merits is dismissed. - Decided against revenue. Disallowance of payment of sinking fund and maintenance security - CIT(A) deleted the addition - Held that:- We are unable to see any detail, evidence or incriminating material found during the course of search and seizure operation or brought out by the AO during reassessment proceedings u/s 153C of the Act, to support this allegation that the assessee actually paid alleged amount either by cheque or in cash towards sinking fund and maintenance security to M/s Suncity Projects Pvt. Ltd. or any other entity or concern. The AO had also not brought out any fact on assessment records that the maintenance agreement was executed between the assessee and the developer i.e. M/s Suncity Projects during the FY 2009-10 pertaining to AY 2010-11 under consideration and the assessee made said payments towards sinking fund and maintenance charges during relevant financial period either by cheque or in cash over and above the expenses booked and reflected in her books of accounts and this payment was actually made by the assessee from income earned from unaccounted sources.It is also pertinent to note that the AO has not brought out any evidence or incriminating material to show that the assessee has actually made payment of sinking fund and maintenance security over and above the expenses reflected and recorded in her books of accounts and the assessee has made said payments from her unaccounted sources.- Decided against revenue. Disallowance of commission - CIT(A) deleted the addition - Held that:- The presumption and inference taken by the CIT(A) u/s 292C of the Act against the present assessee is not valid as before taking such presumption, the CIT(A) was under obligation to hold that the document in question actually and factually does not belong to the person searched and the same belongs to the other person viz. present assessee. As we have already noted that the person searched never stated that the document in question Annexure A-1 belongs to the present assessee. Further, neither the AO of the person searched nor the AO of the other person has validly held that the document in question does not belong to person searched and actually or factually belongs to the present assessee. In this situation, presumption taken by the CIT(A) u/s 292C of the Act against the assessee is not valid and sustainable. We further hold that the directions given to the AO by the CIT(A) in operative para 12.4 of the impugned order are also not in accordance with provisions of the Act and law. We may further point out that in the case of person searched, who was alleged to be a broker in the deal being recipient of alleged commission, the CIT(A) herself has deleted the addition on account of receipt of unaccounted commission, hence, addition and consequent deduction in this regard in the case of alleged payer, i.e. the present assessee on the basis of invalid presumption cannot be held as sustainable. Therefore, observations, directions and conclusion of the CIT(A) in para 12.4 of the impugned order are demolished. Decided in favour of assessee. Initiation of proceedings u/s 153C questioned - Held that:- In view of contents of the satisfaction note as reproduced hereinabove, we clearly note that the same has been recorded in the capacity of the AO of the person searched meaning thereby Shri Lalit Modi and we are unable to see any satisfaction note on record by the AO of the other person viz. the assessee of the instant appeal i.e. Smt. Vinita Chaurasia. On a specific query from the Bench, ld. DR could not assist us to see whether any satisfaction note was recorded by the AO of the present assessee (other person). Under these facts and circumstances, it can safely be held that no valid satisfaction was recorded by the AO of the other person so as to fulfil the requirement of second step of valid assumption of jurisdiction u/s 153C of the Act which is sine qua non for validly assumed jurisdiction u/s 153A of the Act. Hence, initiation of proceedings u/s 153C of the Act and all subsequent proceedings deserve to be quashed - Decided in favour of assessee. Addition on the issue of pending rent - CIT(A) has enhanced the assessment on this issue by the said amounts in respective AY 2010-11 and also in earlier AY 2009-10 but AO had not made any addition - Held that:- as per general human probability and mental level of a man of ordinary prudence, it cannot be accepted that while a property is being sold at approximately 25% higher rate as compared to circle rate and registered sale deed is executed for the consideration of ₹ 16,42,68,832 then how come said seller may be agreed to transfer an amount of pending rent of ₹ 8,91,15,757 to the purchaser under an undisclosed arrangement. That too for the period prior to actual and legal transfer of property. In this situation and under aforesaid discussion, we are of the considered opinion that in absence of any other incriminating material, evidence or document, the enhancement of income by the CIT(A) on stand alone basis of contents of document in question Annexure A-1 cannot be held to be sustainable. The CIT(A) has not made any required and appropriate inquiry in this regard and in absence of the same the enhancement of income for the year under consideration and also in the previous AY 2009-10 cannot be held as valid, sustainable and in accordance with law. - Decided in favour of assessee. Enhancement on account of excess payment - second part of contents of the document in question wherein “PDC cheque” of ₹ 16,42,68,522 has been mentioned and on the right side “recd” amount of ₹ 17,02,25,465 has been mentioned and in the last column on the right, amount of ₹ 59,56,943 has been mentioned - Held that:- Addition made by the AO on account of unexplained investment and enhancement by the CIT(A) on account of refunded excess payment on the basis of stand alone document in question Annexure A-1 is not sustainable in absence of other supportive evidence or material. Hence, without further investigation or enquiry from other related entities, addition made by the AO and enhanced by the CIT(A) cannot be held as valid and legally sustainable and we are unable to accept and uphold the same. - Decided in favour of assessee. Addition on account of brokerage - CIT(A) deleted the addition - Held that:- we are inclined to accept the contention of the assessee that the revenue has not brought any evidence on record or any such document in support of payment of brokerage or commission on the basis of which the fact of brokerage or commission or legally due or paid to the assessee can be sustained or established. The AO has not brought out any allegation, evidence, document or opinion on record during the assessment proceedings or appellate proceedings to support this fact that the deal was actually materialised through the present assessee and, therefore, the presumption made by the AO only on the basis of document in question Annexure A-1 does not seem to be well-founded that the assessee had actually received commission or brokerage from the deal or transaction or sale of property between Mrs. Vineeta Chaurasia and Suncity project. The findings and conclusion of the CIT(A) are based on the legal principles and verification of the fact and we are unable to see any infirmity, perversity or any other valid reason to interfere with the same and hence, we uphold the same - Decided against revenue. Capital gain arising out of sale of jewellery - Held that:- AO made addition on the basis of surmises and conjectures by adopting a hyper technical approach and ignoring the huge amount of surrender of ₹ 62 crore and the letter of the assessee dated 10.8.2009 explaining the statement made during the course of search wherein the factum regarding jewellery was duly elaborated by the assessee. On this issue, we are unable to see any mistake or any other valid reason to interfere with the impugned order on the issue of capital gain on sale of salary and we hold that the AO made addition without any basis on the imaginary facts ignoring the sustainable explanation of the assessee and the CIT(A) rightly deleted the same. - Decided against revenue. Disallowance u/s 14A - Held that:- DR has not disputed this fact that there was no exempt income for the assessee during the financial year under consideration i.e. AY 2009-10 relevant to AY 2010-11 and in the light of ratio of the judgment of Jurisdictional High Court of Delhi in the case of CIT vs Holcim India P. Ltd. (2014 (9) TMI 434 - DELHI HIGH COURT ), no disallowance u/s 14A of the Act can be invoked for making disallowance. The issue is squarely covered in favour of the assessee by the said decision of Hon’ble High Court of Delhi. - Decided in favour of assessee.
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2015 (8) TMI 7
Disallowance u/s. 14A - Held that:- With respect to disallowance of indirect interest as per Rule 8D(2)(ii) we find that the CIT(A), after considering the submissions of the Assessee has directed the A.O to work out the disallowance as directed by him in the order. Before us, ld. A.R. could not point out any fallacy or inconsistency of law in the directions of CIT(A) and therefore we find no reason to interfere as far as the disallowance on account of indirect interest is concerned. With respect to disallowance of administrative expenses as per Rule 8D(2)(iii) is concerned, assessee has submitted that it has incurred no expenses for earning the income but on the other hand ld. CIT(A) is of the view that the directors and other employees of the Assessee must be spending sufficient and energy in running day to day business and monitoring the business of the firms in which the Assessee is a partner. Before us, ld. A.R. has not placed any material on record like the ledger accounts of the firm, or any other material which could justify of not incurring of expenses including administrative expenses for earning tax free income. At the same time ld. CIT(A) has also presumed the spending of time and energy by the officials of the Assessee for running of the firms from which Assessee has earned tax free income. In view of the contrary submissions of both the parties before us and in the absence of any material on record, we are of the view that this aspect needs a factual verification and finding. We therefore remit the issue to the file of A.O to give a finding on the aforesaid and decide the issue afresh. - Decided partly in favour of assessee for statistical purposes.
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2015 (8) TMI 6
TP adjustments - selection of tested party in determination of Arm’s Length Price (ALP) - Held that:- Profitability of the selected Comparable companies in domestic market may vary with the profit margins available abroad, particularly in the USA market. DRP also rejected the method solely on the reason that AE was not selected as tested party. Therefore, keeping in mind the submissions made by the Ld. Counsel, the issue of selection of method of resale price method or of TNMM or any other method suitable to the international transactions is also restored to the file of A.O. to examine the suitability of various methods and consider accordingly Thus restore the issue of selection of most appropriate method as well as selection of the tested party to the file of AO/TPO to examine afresh, whether AE can be selected as tested party and RPM can be selected as most appropriate method. - Decided in favour of assessee for statistical purposes.
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2015 (8) TMI 5
Sale of land - Revaluation Reserve - land and building was transferred to Malhotra Group for ₹ 5 crore, the book value of which was ₹ 1,12,98,740/- Held that:- The main dispute revolves around the land shown in the Revaluation Reserve Account in the balance sheet. The land and building was transferred to Malhotra Group for ₹ 5 crore, the book value of which was ₹ 1,12,98,740/- The Assessing Officer held the difference of ₹ 3,87,01,260/- is nothing but a capital gain. The assessee had shown this amount of ₹ 3,87,01,260/- as Capital Revaluation Reserve in the balance sheet. The learned CIT(A) has held that there is no revaluation of asset and it was mistake on the part of the auditor to classify it as Capital Revaluation Reserve and, therefore, there is no transfer or taxability of capital gain. Since there is no clarity of facts, therefore, in the interest of justice, we are of the opinion that this matter should be restored back to the file of the Assessing Officer to correctly appreciate the facts after taking into consideration the contentions of the assessee and the observations made by the CIT(A) in the light of the material on record. - Decided in favour of revenue for statistical purpose.
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2015 (8) TMI 4
Penalty u/s 271(1)(c) - disallowance of interest paid and disallowance of the expenditure claimed - CIT(A) deleted penalty levy - Held that:- Expenditure of interest payment claimed by the appellant was not fictitious or bogus. It was a genuine expenditure claimed by the appellant and same was paid to the person from who loans were taken. There was no concealment of facts or furnishing of inaccurate particulars of income. The appellant has disclosed all the facts of the interest expenditure in the return of income and claim was made on the basis of payment made to the persons. Similarly, the deferred revenue expenditure was claimed on the basis of consistent method followed by the appellant. The expenditure in question was revenu9e but same was deferred for future years to be claimed against the income of future years. The expenditure was to be amortized in 5 years period and 1/5th was too be claimed every year. The amount debited of ₹ 22, 62,376/- consisted of ₹ 8, 04,076/- for A.Y 2008-09 and the balance amount of ₹ 14,58,300/- was pertaining to earlier years. The expenditure was revenue in nature and same was not bogus or not genuine. Everything was disclosed in the return of income and there was concealment or furnishing of inaccurate particulars. The disallowance made by the Assessing Officer was on the basis of difference of opinion. Any disallowance made on the basis of difference of opinion is not sufficient for arriving at conclusion that appellant has furnished inaccurate particulars of income or has concealed the income. The appellant has not furnished any inaccurate particulars in the return of income. Mere making a claim which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the appellant. Such claim made in the return of income cannot amount to the inaccurate particulars of income. - Decided in favour of assessee.
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2015 (8) TMI 3
Transfer pricing adjustment - international related party transaction of the Appellant with respect to the provision of software development services - selection of Wipro Technology Services Ltd. as comparable - Held that:- We uphold that the submission of the assessee that Wipro Technology Services Ltd. cannot be considered as a comparable, in view of the binding judgement of the Jurisdictional High Court in the assessee’s own case for the AY 2006-07 which was followed by the Coordinate Bench of the Tribunal in the assessee’s own case for the AY 2008-09. Consistent with the view taken therein we direct the AO to exclude Wipro Technology Services Ltd. as a comparable and recompute the Arm’s length price.
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2015 (8) TMI 2
Addition as deemed dividend u/s 2(22)(e) - AO noticed that the assessee has taken a loan from M/s Wire & Wireless Satellite Network Pvt. Ltd. and that the shareholdings of assessee and M/s. Wire & Wireless Satellite Network Pvt. Ltd., is with common shareholdings - Held that:- The assessee company is not a shareholder of M/s. Wire & Wireless Satellite Network Pvt. Ltd. Merely because, the shareholdings of both the companies are with common shareholders would not make the assessee company the shareholder of the M/s. Wire & Wireless Satellite Network Pvt. Ltd.. The provisions of section 2(22)(e) is a deeming provision and expand the ambit of expression "dividend" if the shareholder of the company has availed the benefit of loan and the company was having the sufficient funds of received and surplus then the shareholder who is having more than 25% equal capital of the company and availed the loan would be treated as reserve the deemed dividend. The dividend can be received or deemed to have been received only by shareholder of the company, therefore, the provisions of section 2(22)(e) enlarging the scope of dividend under the express deemed "dividend" cannot be invoked in case of a person who is not a shareholder of the company who has advance the loan. Thus no addition can be made on account of deemed dividend under section 2(22)(e) of the Act in the hands of the assessee who is not a shareholder of the company provided loan. See case of UNIVERSAL MEDICARE PRIVATE LIMITED [2010 (3) TMI 323 - BOMBAY HIGH COURT] and T V/s IMPACT CONTAINERS P. LTD. [2014 (9) TMI 88 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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2015 (8) TMI 1
Disallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with Rule 8D - CIT(A) deleted the addition - Held that:- The provisions of section 14A read with Rule 8D of the Rules will not apply to the shares held as stock in trade. Keeping in view the decision of Hon'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. (1973 (1) TMI 1 - SUPREME Court ) and as the Hon'ble Karnataka High Court in the case of M/s. CCI Ltd. Vs. JCIT [2012 (4) TMI 282 - KARNATAKA HIGH COURT ] and Hon'ble Kerala High Court in the case of CIT Vs. Leena Ramachandran (2010 (6) TMI 612 - Kerala High Court ), are in favour of the assessee, we decide this issue in favour of the assessee and against the revenue Rebate u/s. 88E - Whether CIT(A) erred in allowing rebate u/s. 88E even though the income is assessed u/s. 115JB? - Held that:- The issue is now settled in favour of assessee that rebate u/s. 88E of the Act will be allowed even though the income is to be assessed u/s. 115JB of the Act. See Commissioner of Income-tax Versus Horizon Capital Ltd. [2011 (10) TMI 489 - KARNATAKA HIGH COURT ] - Decided against revenue.
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Service Tax
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2015 (8) TMI 33
Management maintenance or repair service - Extended period of limitation - management and maintenance of parks and road side plantation and maintenance - Held that:- Adjudicating authority has dropped the demand pertaining to the period up to 30.4.2006 on the ground that during that period maintenance or repair of only immovable property was liable to service tax. The Commissioner (Appeals) clearly noted that with effect from 1.5.2006 the change in definition of "management, maintenance or repair" brought "maintenance or repair of properties whether immovable or not" within the scope of 'management, maintenance or repair service' and accordingly confirmed the impugned demand for the period with effect from 1.5.2006. - Demand of service tax confirmed. However, we have perused the typical work orders which apart from requiring maintenance or repair, involve supply of goods too, like supply of different trees, for which specific rates have been mentioned. On this being pointed out, Revenue conceded that service tax would not be chargeable on supply/sale of such goods and that the benefit of Notification No. 12/2003-ST would be available to the appellant if the conditions thereof were satisfied. Appellant did not take Service Tax registration and did not file ST-3 returns pertaining to the impugned service. It also did not submit the details in spite of being asked and did not even respond to summons. The required details had to be gathered from JNN/JDA. Thus, the appellant is clearly guilty of suppression of facts. - impugned service is liable to service tax under management, maintenance or repair service and the appellant is guilty of suppression of facts. - Impugned service is liable to service tax under management, maintenance or repair service and the appellant is guilty of suppression of facts. - Matter remanded back - Decided partly in favour of assessee.
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2015 (8) TMI 32
Management maintenance or repair service - Extended period of limitation - management and maintenance of parks and road side plantation and maintenance - Held that:- Adjudicating authority has dropped the demand pertaining to the period up to 30.4.2006 on the ground that during that period maintenance or repair of only immovable property was liable to service tax. The Commissioner (Appeals) clearly noted that with effect from 1.5.2006 the change in definition of "management, maintenance or repair" brought "maintenance or repair of properties whether immovable or not" within the scope of 'management, maintenance or repair service' and accordingly confirmed the impugned demand for the period with effect from 1.5.2006. - Demand of service tax confirmed. However, we have perused the typical work orders which apart from requiring maintenance or repair, involve supply of goods too, like supply of different trees, for which specific rates have been mentioned. On this being pointed out, Revenue conceded that service tax would not be chargeable on supply/sale of such goods and that the benefit of Notification No. 12/2003-ST would be available to the appellant if the conditions thereof were satisfied. Appellant did not take Service Tax registration and did not file ST-3 returns pertaining to the impugned service. It also did not submit the details in spite of being asked and did not even respond to summons. The required details had to be gathered from JNN/JDA. Thus, the appellant is clearly guilty of suppression of facts. - impugned service is liable to service tax under management, maintenance or repair service and the appellant is guilty of suppression of facts. - Impugned service is liable to service tax under management, maintenance or repair service and the appellant is guilty of suppression of facts. - Matter remanded back - Decided partly in favour of assessee.
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2015 (8) TMI 31
Condonation of delay - Delay of 319 days - Medical illness - Held that:- Reason given for delay in filing appeal is that the applicant was suffering from severe health issues since last one and half year and was admitted to Motiben Dalvi Hospital, Mumbai and Care Nursing Home Hazira Hospital, Surat. We agree with the submission of the learned Authorised Representative for the Revenue that the application is without any support of evidence. It is noted that the Hon’ble Gujarat High Court, after considering the facts and circumstances of the case and the age of the applicant, about ninety years and on the basis of medical certificate, had condoned the delay in filing the appeal. The facts in the case of Plastic Colour Corporation vs. Income Tax Officer (2014 (5) TMI 1051 - GUJARAT HIGH COURT) are not applicable to the present case. - Condonation denied.
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2015 (8) TMI 30
Denial of refund on input service credit lying unutilized in their Cenvat credit account of export of service - Various services - Held that:- For outdoor catering services, the contention of the learned AR has submitted that as there is statutory requirement for the canteen, therefore they are entitled to Cenvat credit in the light of decision of this Tribunal in the case of Semco Electricals (2009 (12) TMI 143 - CESTAT, MUMBAI) wherein this Tribunal has held that if the employees of an organization comes under the statutory requirement to maintain the canteen, then also Cenvat credit is available. Therefore I hold that appellant are entitled to claim Cenvat credit of ₹ 70,745/- on this count. Consequently entitled for refund claim under notification No. 5/2006. Both services, i.e. sewage treatment plant, garden, canteen assets, water purifier, repair of car used for business travel purpose, business premises and assets including workstations, office furniture, used for business purposes, are in the nature of services availed by the appellant in the course of their manufacture. Therefore, I hold that the appellant is entitled to avail input credit services as held by the Hon'ble High Court in the case of Ultratech Cement. Therefore I allow the input credit services of ₹ 4,78,842/-. Consequently, the appellant are entitled for refund of the same. All the invoices produced were in the name of employees and number of working days. Therefore it works out that how much time they take and the service provider has paid service tax. Further I find that for the subsequent period lower authorities have already allowed these services as man power recruitment services and allowed the Cenvat credit. Therefore, appellant is entitled to take Cenvat credit of ₹ 9,36,669/- under the category of man power recruitment service and consequently, they are entitled for refund claim under notification No. 5/2006 For ambulance services and non-mentioning of service recipient on the invoices raised by Reliance Communication, as learned Counsel conceded, therefore, I disallow the input service credit on this service - Decided partly in favour of assessee.
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2015 (8) TMI 29
Denial of the Cenvat credit on inputs / input services - Credit taken on Security service, chassis of motor vehicle and exempted service to German Embassy - Held that:- appellant is providing taxable as well exempted services but nowhere Revenue has proved that appellant has provided exempted services. Infact in two of the invoices issued by the appellant to German Embassy, the appellant did not charge the service tax, does not mean that appellant has provided exempted services. Therefore, I hold that in the absence of any contrary evidence produced by the Revenue, the provisions of Rule 6(3)(c) of Cenvat Credit Rules, 2004 are not applicable to the facts of this case. At the most the case could have been booked against the appellant for non payment of service tax which Revenue failed to do so, therefore, I hold that appellant has correctly taken the Cenvat credit Admittedly the services availed at the residence of Managing Director have no nexus with the output services provided by the appellant as held by this Tribunal in the case of Manikgarh Cement [2012 (11) TMI 601 - CESTAT MUMBAI]. Therefore, I hold that appellant is not entitled to take Cenvat credit Admittedly, carts were not registered under Motor Vehicle Act, therefore the contention of revenue that these motor vehicle are not capital goods is not acceptable. In these circumstances, I hold that appellant has correctly taken the Cenvat credit - Decided partly in favour of assessee.
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2015 (8) TMI 28
Penalty of equal amount under Sections 78, 76, 77 (1)(b), 77(1)(C) of the Finance Act, 1994 and Rule 7C of Service Tax Rules, 1994 - Maintenance or Repair Service - Held that:- Appellants had not taken this stand before the lower authorities. This document was not placed before the lower authorities and the same cannot be accepted at this stage. I find that the Appellants already paid the entire amount of tax before issue of Show Cause Notice. They have also collected the Service Tax amount from the customers and not deposited in Central Government account, therefore, penalty under Section 78 is warranted. It is clear case of suppression of facts with intent to evade payment of tax and extended period of limitation would be involved - penalties imposed under other Sections are not warranted. The Tribunal in the case of Prompt Services Vs CCE Bolpur - [2011 (5) TMI 805 - CESTAT, KOLKATA] on the identical issue held that penalty only under one Section is sufficient and adequate deterrent - demand of Service Tax alongwith interest and the penalty under Section 78 are upheld and other penalties set aside - Decided in favour of assessee.
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Central Excise
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2015 (8) TMI 35
Denial of abatement claim - whether appellant is required to pay duty for whole of the period or required to pay duty on pro rata basis after availing the abatement for closure period and consequently is entitled to claim the abatement of excess duty paid or not - Held that:- The denial of abatement is only on the ground that appellant is required to pay duty for whole of the month and thereafter to claim the abatement but that is not correct view in the light of the decision of this Tribunal in the case of Shree Flavours Pvt. Ltd. (2014 (4) TMI 417 - CESTAT NEW DELHI). Therefore, I hold that appellant is entitled for abatement of duty as claim.
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2015 (8) TMI 34
Denial of abatement claim - Closure of factory - Applicability of Rule 9 - manufacturers of retail pouches of Gutkha, pan masala and chewing tobacco. - Held that:- Conditions for claiming abatement under Rule 10 of PMPM Rules are satisfied, that the appellant had applied for rebate and that the rebate is admissible. The appellant, however, instead of paying full duty for the Month of March, 2011 by 5th March, 2011 had paid only the proportionate duty for the period from 17th March, 2011 to 31st March, 2011 on 21st March, 2011 - The duty demand of ₹ 32,25,805/- has been confirmed on this basis which represents the duty for the period from 1st March to 16th March. However, we find that this issue stands settled in favour of the appellant by the judgment of Hon'ble Allahabad High Court in the case of Steel Industries of Hindustan vs. CCE, Ghaziabad reported in [2013 (10) TMI 172 - ALLAHABAD HIGH COURT], wherein in respect of similar provisions regarding levy of duty on compounded basis in respect of iron and steel product, Hon'ble High Court had held that for claiming the abatement for the period of closure of the factory, depositing duty for the whole month is not a pre-condition and that in such cases the duty would be required to be paid only for the number of days for which a factory was working. However, since the due date for payment of duty was 5th of the month and the appellant paid the duty only on 21.03.2011, the appellant in respect of the net duty payable by them, would be liable to pay interest on it as per the provisions of PMPM Rules for the period of delay. - appellant had commenced manufacture of new RSP w.e.f. 24.07.2013 on 4 new machines. The department invoking Rule 8 of the PMPM Rules has taken the stand that since with the installation of 4 new machines on 24.07.2013, the maximum number of operating machines has increased to 25, the duty would be calculated in respect of these machines for the whole month i.e. duty payable for July 13 in respect of pan masala pouches manufactured would be - "13 multiplied by the rate applicable to MRP of ₹ 1 + 4 multiplied by the rate applicable to MRP of ₹ 4". The stand of the appellant is that the duty payable in respect of the 4 new machines installed w.e.f. 23.04.2013 would be subject to the provisions of the Fourth Proviso to Rule 9 and accordingly, in respect of these four machines, duty would be chargeable only for the 8 days from 24.07.2013 to 31.07.2013. The Fourth proviso to Rule 9 clearly states that in case a manufacturer permanently discontinues the manufacture of goods of existing RSP, his monthly duty liability shall be re-calculated on pro-rata basis of the total number of days in that month and the number of days remaining in that month counting from the date of discontinuation and incase the amount of duty is so recalculated is less than the duty paid for the month the balance shall be refunded to him by 20th of the following month. This proviso also states that in case a manufacturer in a particular month commences manufacturing of the goods of a new RSP, his monthly duty liability shall be recalculated pro-rata on the basis of total number of days in that month and the number of days remaining in that month counting from the date of commencement and duty liability for the month shall be discharged unless the differential duty is paid by him by next 5th of the following month. In respect of four machines, the duty at the rate applicable for the MRP of ₹ 4 would be chargeable only for 8 days from 24th July to 31st July and not for the entire month. The appellant have discharged duty liability on this basis only. Therefore, we hold that the duty demand of ₹ 1,51,35,483/- confirmed against the appellant on the basis that in respect of these 4 machines, the duty would be chargeable for the whole month, is not sustainable and has to be set aside. - However, in respect of March, 2011, the appellant would be liable to pay interest on the net duty payable for this month for the period of delay from the due date as per the provisions of PMPM Rules - Decided partly in favour of assessee.
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2015 (8) TMI 25
Benefit of abatement of duty - non-production of goods during any continuous period of 15 days or more - manufacture of Jarda Scented Tobacco and Chewing Tobacco - Held that:- As regards the Board’s circular dt.12.03.2009 stating that the abatements are subject to pre/post-audit, we do not necessarily see any fatally irreconcilable contradiction between the Board’s circulars dt.15.09.1999 & 30.08.1997 on the one hand and the one dt.12.03.2009 on the other in as much as when the adjustment of abatement has been made, nothing prevents Revenue from auditing the correctness thereof. More importantly, the Board’s circulars have no statutory force and have to be ignored to the extent they are in conflict with the judicial pronouncements. - claim of abatement under Rule 10 has no relation to determination of Annual Capacity of Production under Rule 6(2) of the said Rules 2010 and therefore, there is no question of challenging of order issued under Rule 6(2) of the said Rules 2010, while availing abatement under Rule 10. It is already observed that the expression in Rule 10 are clear that the manufacturer shall calculate the duty by reducing amount on a proportionate basis in respect of non-production of goods. Decision of the Tribunal in the case of Thakkar Tobacco Products Pvt.Ltd (2015 (2) TMI 606 - CESTAT AHMEDABAD) followed. It is noticed that the same view was taken by the Tribunal in the case of Trimurti Fragrances Pvt. Ltd & others (2015 (8) TMI 34 - CESTAT NEW DELHI) and Godfrey Philips India Ltd (2015 (8) TMI 35 - CESTAT NEW DELHI). Hence, the impugned orders cannot be sustained. - Accordingly, the impugned orders are set aside. - Decided in favour of assessee.
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2015 (8) TMI 24
Reversal of Cenvat Credit - various option available as per Rule 6 of CCR - whether appellant is required to pay 5% of total sale value of the goods traded by them in terms of Rule 6(3)(i) when the appellant paid the actual credit attributed to the quantum trading sale in terms of Rule 6(3A) alongwith interest following the option available under Rule 6(3)(ii) - Held that:- Appellant has availed Cenvat Credit in respect of common input services, which has been used in relation to the manufacture of the final product as well as for trading of bought out cars. Therefore they are supposed to pay an amount equivalent to Cenvat Credit which is attributed to the input service used for exempted service i.e. sale of car. In our view, three options have been provided under rule 6(3) and it is up to the assessee that which option has to be availed. Revenue could not insist the appellant to avail a particular option. In the present case the appellant have admittedly availed option as provided under Rule 6(3)(ii) and paid an amount as required under sub rule (3A) of Rule 6. - as per the provision, payment on monthly basis is provisional basis, therefore it is not mandatory that whole amount or part of the amount as required to be paid on every month. The appellant though belatedly calculated the amount required to be paid in terms provided under Rule (3A) of Rule 6, therefore to fulfil the condition, assessee should pay the said amount, which has been complied by the appellant. Rule 6 of the Cenvat Credit Rules is not enacted to extract illegal amount from the assessee. The main objective of the Rule 6 is to ensure that the assessee should not avail the Cenvat Credit in respect of input or input services which are used in or in relation to the manufacture of the exempted goods or for exempted services. If this is the objective then at the most amount which is to be recovered shall not be in any case more than Cenvat Credit attributed to the input or input services used in the exempted goods. It is also observed that in either of the three options given in sub rule (3) of Rule 6, there is no provisions that if the assessee does not opt any of the option at a particular time, then option of payment of 5% will automatically be applied. Therefore we do not understand that when the appellant have categorically by way of their intimation opted for option provided under sub-rule (3)(ii), how Revenue can insist that option (3)(i) under Rule 6 should be followed by the assessee. Demand confirmed by the adjudicating authority has no legs and therefore the same can not be sustained - Decided in favour of assessee.
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2015 (8) TMI 23
Penalty u/s 11AC - Valuation of goods - Rule 8 - appellant, at the outset, submitted that they are not disputing the duty demanded by the Revenue as the same was paid by the appellant even before issue of show cause notice, they are only disputing the penalty imposed under Section 11AC and Rule 25 of the Central Excise Rules, 2002. - Held that:- With the new cost of production it was found that there has been a short levy of ₹ 54,97,281/-. The said amount along with interest was thereafter paid by the appellant. If we see the conduct of the appellant, in our view, the ingredients of Section 11AC, i.e. wilful misstatement and suppression of facts are evident inasmuch as if the assessable value of certain goods are getting reduced w.e.f. January 2004 from the earlier assessable values, the appellant should have checked thoroughly the data. Further, when the Revenue raised the doubt about the value in August 2004, it was the duty of the appellant to recheck whether there has been any mistake on their part. Even this was not done. This only points to wilful misstatement and suppression of facts on the part of the appellant. The fact that they paid the duty in the month of February, to our mind, is of no consequence as once the Assistant Director (Costs) came into the picture and went into the various costing details, the appellant was left with no option. Under the circumstances, we are of the considered view that the ingredients of Section 11AC are satisfied and, therefore, the penalty under Section 11AC is leviable. - Decided against the assessee.
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2015 (8) TMI 22
Disallowance of CENVAT Credit - Duty paying documents - whether the Cenvatable invoices issued by M/s. SSMIPL o the appellant are genuine or fake/fraudulent invoices - Confiscation of goods - Imposition of penalty - Held that:- Appellant could not give any explanation on the report submitted by sales tax authority therefore same attained finality and this report clearly shows that no transaction has been taken place from Gujarat to Maharashtra therefore subsequent passing of Cenvat credit of transaction which has never taken place is out of question. In the various statement of the transporters they have denied having transported the goods of the dealer from Bhivandi to end user i.e. M/s. VCL. In the investigation, it was clearly found that invoices issued by ship breakers in the name of the dealer M/s. SSMIPL the vehicle numbers found to be motor cycle, light delivery vans etc. which are incapable of transporting scrap declared in the Central Excise invoices. In the several cases registration numbers borne by the vehicles in which goods were shown to have been transported were reported to be not in existence by concerned RTO authority. In some of the invoices issued by the said dealer to end users vehicles found to be tanker, which are incapable of transporting iron steel scrap. Once the concerned Government authority i.e RTO has given report wherein it was found that vehicle number mentioned on the invoices are not capable of being transporting the goods in question, purchaser if could not give any contrary evidence or he did not discard the evidence provided by RTO with appropriate counter evidences the RTO report has to be taken as correct and the lower authority has rightly used as evidence to hold that there was no transportation of the inputs either from Gujarat to dealer M/s. SSMIPL nor from said dealer to the appellant. It was found that despite all the opportunity given to the director of the appellant by way of recording the statement he could not give a single contrary material/evidence to demolish the evidences gathered by the investigation and relied upon for confirming the demand. It was also observed that on the basis of the investigation that there is no record to show that transportation charges either paid by the dealer or by the appellant in respect of purported transportation of the input. It was found that huge transaction was shown to have been made between M/s. SSMIPL and M/s. VCL, however there was not a piece of evidence of any of the participant/parties to the transaction to have ever interacted with each other directly and is aware of the other. It is beyond the imagination that plates are used for melting purpose therefore it is very clear that appellant even as per the statement of their director used melting scrap which cannot be ship breaking scrap which clearly established that the invoices received by the appellant is in respect of ship breaking scrap and the scrap used by the appellant in their manufacturing process is other than ship breaking scrap. This established that whatever scrap the appellant used but they have neither received ship breaking scrap nor used the same in the manufacture of their final product. Therefore Cenvat Credit of duty shown to have been paid on the ship breaking scrap can not be allowed to the appellant. If any genuineness in the whole transaction is there, the Director of M/s. SSMIPL would have presented himself before the investigation agency however right from the initiation of the investigation the person of M/s. SSMIPL got absconded despite court's notices and never made any presence before the investigation agency. This act of absconding of the person further reinforce the charges of fraudulent passing of the Cenvat credit and availment thereof by the appellant. In view of our above discussion we are of the view that M/s. SSMIPL have issued fake invoices without receipt and supply of any material to the appellant and accordingly passed on the fraudulent Cenvat credit to the appellant. Therefore the appellant has fraudulently taken the Cenvat credit on the invoices issued by M/s. SSMIPL. - Decided against the assessee. If the penalty under Section 11AC which is equal to the Cenvat amount has been imposed, separate penalty of similar amount imposed under Section Rule 13(1) of Cenvat Credit Rules, 2002 was not warranted. Moreover penalty of ₹ 1,29,51,948/- was imposed under Rule 13(1) towards confiscation of the 3826.790 MT on which fraudulent Cenvat credit was availed. First of all, the case of the Revenue is that that Cenvat Credit to the appellant is not admissible on the ground that they have not received the input. Secondly no goods were seized and therefore confiscation of the goods not available for seizer cannot be made, on these observations, we are of the view that penalty of ₹ 1,29,51,948/- under Rule 13(1) (correct Rule 15(1)) of Cenvat Credit Rules, 2002 was wrongly imposed. - Decided partly in favour of assessees.
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2015 (8) TMI 21
Denial of CENVAT Credit - input services - whether distributors/ consignment stockists of the appellant are doing any sales promotion activities in addition to selling of goods of the appellant or not - Held that:- Sales promotion activities are carried out as per Clause 13 and 17 of the contract entered between the appellant and the distributors/ consignment stockists. That their case is squarely covered by the judgment in the case CCE, Ahmedabad vs. Cadila Healthcare Limited (2013 (1) TMI 304 - GUJARAT HIGH COURT). On the other hand, Revenue is of the view that no sales promotion activities are undertaken by the distributors/ consignment stockists of the appellant and therefore, no CENVAT credit is admissible as per law laid down by the Hon'ble Gujarat High Court in the case of CCE, Ahmedabad-II vs. Cadila Healthcare Limited. - activities undertaken by the distributors/ consignment stockists of the appellant are purely distribution/ sales and has no element of sales promotion and, therefore, CENVAT credit taken with respect to commission paid to such distributors/ consignment stockists is not admissible. The credit so taken is required to be paid by the appellant with interest and appeal with respect to CENVAT credit on services of Sales Commission, availed by the appellant, is rejected. So far as imposition of penalties upon the appellant is concerned, it is observed that the period involved in the present proceedings is from July 2012 to March 2013. The judgment delivered by Hon'ble Gujarat High Court in the case of Cadila Healthcare Limited vs. CCE Ahmedabad (2013 (1) TMI 304 - GUJARAT HIGH COURT) is dated 07.11.2012 which settled the dispute of interpretation of admissibility of CENVAT credit, inter-alia, with respect to sales commission paid by the assessees. As the issue involved was disputable, therefore, no penalty under Rule 15(1) of the Cenvat Credit Rules, 2004 is imposable. The appeal filed by the appellant with respect to penalty is thus required to be allowed. - Decided partly in favour of assessee.
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CST, VAT & Sales Tax
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2015 (8) TMI 27
Denial of exemption claim u/s 5(3) of CST - inter-state sale of paper cartons - The case pleaded is that the firm had effected inter-state sale of paper cartons to various exporters in the course of export outside the State - Held that:- appellant will have to establish the identity of the goods sold with the goods meant to be exported out of the territory of India. It cannot be said that packing materials as such were meant for export but they were used only for wrapping the "goods which were exported". The said distinction clearly goes against the contentions of the appellant. It cannot be said that the packing materials sold by the appellant and the goods exported are the same. It is also not their case that they had sold the goods which were exported with the packing materials like paper cartons. Herein, evidently the goods exported were purchased by the exporter from other sources. What is described as sale by the appellant is only the packing cartons alone which were never exported as such and the goods exported are different. That, according to us, will take out the case of the appellant from the purview of Section 5(3) of the CST Act. The transaction, going by the provision, should be first one with the exporter and the foreign buyer and the next one is with the exporter and the penultimate seller like the appellant. That inextricable link is absent, going by the facts of this case. There is a contract or understanding between the exporter and another seller from whom the goods exported were purchased. As far as packing materials are concerned, the intention on the part of both buyer and seller to export, is absent. - As rightly pointed out by the learned Senior Government Pleader, the provisions of Section 5(3) of the CST Act will not come to the aid of the appellant for claiming exemption. - Decided against assessee.
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2015 (8) TMI 26
Detention of goods - goods were transported in a different Goods Vehicle - Held that:- when the petitioner has come forward to effect one time tax that will be quantified by the first respondent, this Court finds no impediment to direct the first respondent to release the goods in question to the petitioner on payment of such one time tax. Accordingly, on receipt of a copy of this order, the first respondent is directed to quantify the amount of tax within a day and thereafter, on proper quantification of the one time tax by the first respondent, the petitioner will pay the said amount before the second respondent-assessing officer. On proof of such payment, the first respondent is further directed to release the goods forthwith to the petitioner. - Decided conditionally in favour of assessee.
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