TMI Tax Updates - e-Newsletter
August 30, 2016
Case Laws in this Newsletter:
Income Tax
Service Tax
Central Excise
TMI SMS
Highlights / Catch Notes
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Income Tax:
Addition relating to trade creditors - additions u/s 68 - in view of the categorical finding that the loan amounts were not reflected in the returns of the 37 persons in question, we do not see how the High Court could have taken the above view and remanded the matter to the AO - SC
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Income Tax:
TDS u/s 195 - P.E. in India - The payments made by assessee to Gensler-USA were merely for project specific drawings & designs without transfer of technology or know-how or even title in drawing & designs - not in the nature of “Royalty” or “Fee for Technical Services”. - AT
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Income Tax:
The fact remains that the property was settled by way of family arrangement for convenient enjoyment and the property remains with assessee’s son and daughter. Therefore, the exemption u/s 54F/54 cannot be denied - AT
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Income Tax:
Addition u/s 68 - the amount of loan which has been returned to the respective creditors and interest paid thereon cannot be taxed in the hands of the assessee as its income. - AT
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Income Tax:
Reopening of assessment - the information was available only in the valuation report. Giving the information in this manner shall be of no help to the appellant as the Assessing Officer was not expected to go through the said information available in the valuation report for the purpose of ascertaining the actual construction of the plot - SC
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Service Tax:
CENVAT credit - capital goods or inputs? - Supply of tangible goods service – dumpers and tippers – such vehicles will be in the nature of inputs for the purposes of CENVAT Credit Rules, 2004. - AT
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Service Tax:
CENVAT credit – CHA services are utilized by the appellant before the goods were loaded on to the ship and therefore the same falls within the definition of input services- AT
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Central Excise:
Cenvat credit - manpower supply services - 75% of the service tax, which is sought to be denied is admittedly paid to the Government by the provider of service instead of recipient of service - In any case, the service tax has been discharged and denial of the credit on this ground is not sustainable. - AT
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Central Excise:
Cenvat credit - The adjudicating authority was not empowered by law to decide optimum quantity of input admissible to be procured for manufacture of unit quantity of final product and therefore, law did not empower the adjudicating authority to decide how much is the excess quantity of inputs procured by the appellant - AT
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Central Excise:
Valuation - where on account of delay in delivery of manufactured goods is liable to pay a lesser amount that the generically agreed price as a result of a clause (in the agreement), stipulating variation in the price, on account the liablility to “liquidated damages”, irrespective of whether the clause is titled “penalty” or “liquidated damages”, the resultant price would be the “transaction value” - AT
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Central Excise:
Imposition of penalty - non-filing of Annual Return containing details of inputs for the period 2004-05 - other than the non-filing of return, no other allegation has been made against the appellant. The returns stand filed thereafter. - No penalty - AT
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Central Excise:
Unjust enrichment - Refund claim - The contract is for a fixed amount and it has been categorically recorded in the impugned order that no excise duty incidence has been passed on by the respondent to NHAI. NHAI also categorically certified to that effect - refund allowed - AT
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Central Excise:
Imposition of penalty - non filling of ER-5 and ER-6 returns within the period prescribed - contravention is only a procedural violation and subsequently the required return has been filed - No penalty - AT
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Central Excise:
Eligibility - credit on capital goods and area based exemption notification no. 50/2003-CE dated 10.06.2003 - there is no valid legal ground in the present appeal for denying the credit on capital goods, - AT
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (8) TMI 1032
Allowability of expenditure incurred on removal of overburden - Held that:- As relying on assessee's own for Assessment Year 2010-11 we have no hesitation in holding that the expenditure incurred on removal of overburden is to be allowed u/ s 37 (1) of the Income Tax Act, 1961 as against 1/ 10th of the expenditure allowed u/ s 35B of the Act. Before parting, we would also like to put on record our deep sense of anguish on the conduct of the Department for perpetrating a protracted litigation spread over a number of years on an issue which had already attained finality with the department not having preferred appeals before the higher forum.
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2016 (8) TMI 1011
Addition relating to trade creditors - additions u/s 68 - Held that:- Both the Assessing Officer and the C.I.T. had recorded findings of fact adverse to the Assessee which has been upheld by the learned single judge of the High Court. The Division Bench of the High Court in the Writ Appeal thought it appropriate to reverse the said findings on the ground that the 37 persons who had advanced the loan to the Assessee ought to have been given notice. The jurisdiction of the Division Bench in a Writ Appeal is primarily one of adjudication of questions of law. Findings of fact recorded concurrently by the authorities under the Act and also in the first round of the writ proceedings by the learned single judge are not to be lightly disturbed. In the present case, in the face of the clear findings that the loan applications were processed by the Officers of the Assessee and the loan transactions in question of the aforesaid 37 persons were also handled really by the Assessee and further in view of the categorical finding that the loan amounts were not reflected in the returns of the 37 persons in question, we do not see how the High Court could have taken the above view and remanded the matter to the Assessing Officer. It has been pointed out before us that pursuant to the impugned order passed by the Division Bench of the High Court fresh assessment proceedings have been finalized by the Assessing Officer. The said exercise has been done in the absence of any interim order of this Court. However, merely because fresh assessment proceedings has been carried out in the meantime it would certainly not preclude the Court from judging the validity and correctness of the order of the Division Bench of the High Court. Thus we cannot uphold the order of the Division Bench passed in the Writ Appeal in question. Consequently, we allow this appeal and set aside the order of the Division Bench and consequently all further orders passed pursuant thereto.
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2016 (8) TMI 1010
Reopening of assessment - non entitlement for deduction under Section 80(1B) - Held that:- Information was supplied as there was some query about the value of the land. Obviously, while going to this document the Assessing Officer would examine the value of the land. However, the reason for issuing notice under Section 148 of the Income Tax Act was that the appellant had not correctly disclosed the actual assets of the plot and hence, it was not entitled for deduction under Section 80(1B) (10) of the Act. The Income Tax Authority itself has mentioned in the notice under Section 148 of the Act that such information was available only in the valuation report. Giving the information in this manner shall be of no help to the appellant as the Assessing Officer was not expected to go through the said information available in the valuation report for the purpose of ascertaining the actual construction of the plot. On the facts of this case, therefore, we find that the Revenue was right in reopening the assessment
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2016 (8) TMI 1009
TDS u/s 195 - P.E. in India - Whether the payments made by the assessee in lieu of designs, drawings, plans made by Gensler is in the nature of royalty/fee for included services and thus the assessee was liable to deduct tax at the time of making such payments? - Held that:- As from the facts and circumstances of the case and documents on record, we hold that the payment made by assessee to Gensler, USA are not in the nature of “Royalty” or “Fee for Technical Services”. No technical know-how was made available to the assessee so as to bring the payments made by assessee within the meaning of “Fee for Included Services”. The payments made by assessee to Gensler-USA were merely for project specific drawings & designs without transfer of technology or know-how or even title in drawing & designs. The impugned order is set aside and the appeal of the assessee is allowed.
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2016 (8) TMI 1008
Computation of capital gains on exemption claimed by the assessee u/s 54/54F - Held that:- When the assessee entered into an agreement with M/s Doshi Housing Ltd allowing them to retain 40% of the undivided share in the property for a consideration of 60% of the super built-up area, this Tribunal is of the considered opinion that there was a transfer of property to the extent of 40% of the undivided share in the land. The assessee has executed a power of attorney enabling the developer to sell 40% of the undivided share in the land to the proposed purchasers. Therefore, this Tribunal is of the considered opinion that there was a transfer of property within the meaning of sec. 2(47)(vi) of the Act on 20.1.2006. Hence, the capital gain arising out of the transfer has to be assessed during the year under consideration. The schedule to the development agreement clearly shows that what was transferred by the assessee is a residential house and not the vacant land, therefore, the contention of the ld. DR is misconstrued. When the assessee has transferred the residential house alongwith the land, this Tribunal is of the considered opinion that the assessee is eligible for exemption u/s 54 of the Act. Coming to the claim of the assessee u/s 54F of the Act, even assuming that what was transferred is only a vacant land, the assessee is eligible for exemption u/s 54F of the Act. The assessee’s claim for exemption u/s 54F of the Act was rejected on the ground that the assessee was having two flats and one of the flat was transferred within a period of three years. This Tribunal is of the considered opinion that even though two flats were allotted, this has to be construed as one single unit therefore, the assessee is eligible for exemption u/s 54F of the Act. The so called transfer of one of the flats is not by sale. The property was settled in favour of assessee’s son and daughter. This Tribunal is of the considered opinion that a settlement made by the assessee in favour of her son and daughter is only a family arrangement in the family and it cannot be construed as transfer of property. There may be various reasons for settling the property in favour of the assessee’s son and daughter. The fact remains that the property was settled by way of family arrangement for convenient enjoyment and the property remains with assessee’s son and daughter. Therefore, the exemption u/s 54F/54 cannot be denied. In view of the above discussion, while confirming the transfer of property during the year under consideration, we hold that the assessee is eligible for exemption u/s 54/54F of the Act. Accordingly, the orders of the lower authorities are modified and the Assessing Officer is directed to allow the claim of exemption u/s 54/54F of the Act to the assessee. - Decided partly in favour of assessee.
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2016 (8) TMI 1007
Addition u/s 68 - Held that:- The addition made on account of unsecured loans from loan creditors cannot be sustained and the consequential addition on account of interest paid to the loan creditors is also not sustainable. We may point out that during the arguments before us, the ld. DR could not controvert this fact that the assessee received all the impugned loans and returned the same during the same F.Y and interest was also paid thereon to the creditors. In this situation, the amount of loan which has been returned to the respective creditors and interest paid thereon cannot be taxed in the hands of the assessee as its income. Therefore, we have no reason to interfere with the conclusion of the CIT(A) on this issue and thus we uphold the same. - Decided against revenue.
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2016 (8) TMI 1006
Benefit of Section 32A on the investment which has been made by the respondent-assessee herein in respect of effluent treatment plant. Keeping in view the specific provisions contained in sub-section 2C of Section 32A of the Income Tax Act, we do not find any error in the view taken by the High Court in this behalf. This appeal is, accordingly, dismissed.
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2016 (8) TMI 1005
Taxability of income in India - whether income of an assessee arising from contract, in India, be treated as taxable in India as PE of an assessee exists in terms of article 5(2)(A) (B) (C) beside 5(2)(J) of DATA with USA? - review petition - Held that:- No merit in this petition. The special leave petition is, accordingly, dismissed. HC order confirmed [2015 (11) TMI 806 - UTTARAKHAND HIGH COURT].
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2016 (8) TMI 1004
Validity of order of Settlement Commission - Held that:- In the present case the disclosures revised by the assessee during the course of the settlement proceedings were substantial and, in fact, far greater than the initial disclosure made. The Settlement Commission completely ignored the opposition of the Revenue in this respect on the ground that it is difficult to ascertain with degree of accuracy the undisclosed income on the basis of impounded documents, a ground which in our opinion is not valid. In the result, the order of Settlement Commission is set aside only on this ground. It is, therefore, not necessary to examine the second contention of the Revenue.
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2016 (8) TMI 1003
Transaction of shares - capital gain or business income - whether the assessee lady was a dealer in shares and was not an investor in shares? - Held that:- Considering the decision of this court in the case of Smt. Divyaben C. Shah (2001 (4) TMI 920 - GUJARAT HIGH COURT ) where this court has observed the test to be considered that “(i) The assessee have purchased almost all the scripts from primary market. (ii) The purchases during the year under consideration from the secondary market were quite insignificant. (iii) The investments have been mostly made out of their own funds and not out of borrowed funds. (iv) The shares have been acquired by way of subscription to the public issue. (v) The shares have been held for fairly long period. (vi) The shares once sold have never been repurchased. (vii) In the immediately preceding years, the shares shown have been accepted as investments. (viii) The purchase of shares was with an intention of keeping them as investment. (ix) The shares were never held as stock-in-trade. (x) Shares purchased were never sub-divided into group with an intention to sell.", we are of the opinion that the assessee has made investment in shares as investor and therefore, the income arisen to the assessee out of sale of shares is assessable under the head capital gain and not profit and gains of business or profession. In that view of the matter, we set aside the order of the Tribunal. - Decided in favour of the appellant-assessee
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2016 (8) TMI 1002
Transfer pricing adjustment - Held that:- When an Assessing Officer holds that no services are rendered by the AE, essentially he holds that the payments made in the international transaction in question are not arm’s length payments. The ascertainment of ALP by the TPO is not a theoretical exercise inasmuch as the ALP determination is for the actual transaction and not a hypothetical transaction envisaged by the contractual arrangement. It cannot, therefore, be open for the Assessing Officer to say that even though transaction value is held to be an at ALP by the TPO, the ALP can be reduced on account of actual rendition, or non-rendition, of services. Once an international transaction is reported by the assessee, and held to be an ALP by the TPO, it cannot be open to the Assessing Officer to make the ALP adjustment, in the garb of disallowance under section 37(1), on the basis of assumption that the services are not rendered. That is clearly contrary to the scheme of the Act and would result in overlapping jurisdictions. As our day to day experience shows, the TPOs not only examine what is stated in the contract but also what has happened on the ground. In view of these discussions, and for the short reason that the payments for international transactions in question, i.e. payment of technical services fee to the AEs, have been held to be at ALP by the Transfer Pricing Officer, the impugned disallowances were wholly unsustainable in law. In any case, we have perused the nature of evidences for the rendition of services and we are satisfied that it is not a case in which services are not rendered by the AE. - Decided in favour of assessee
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2016 (8) TMI 1001
Treatment to project work as separate profit centre - segmental approach - Held that:- The inferences drawn by the TPO are incorrect and quite clearly the assessee was not doing a simple support service per se for the project work undertaken by its AEs. The assessee did act as an entrepreneur and developed this field quite substantially, and the segmental approach of the assessee has been accepting in preceding and succeeding assessment year as well. On these peculiar facts, the approach of the assessee, in treating project work as separate profit centre, is justified. The plea of the assessee was, therefore, indeed well taken and we approve the same. With these observations, the matter goes back to the TPO for reexamination of the matter. As the matter is going back to the file of the TPO, and as it is uncontroverted stand of the assessee that in the event of this basic plea being accepted, all other issues, with respect to ALP determination, will be rendered infructuous and academic, we see no need to deal with other issues, on ALP determination, raised by the assessee. TDS U/S 195 - Disallowance under section 40(a)(i) - Held that:- The requirements of tax deduction at source under section 195 do not come into play simply because an amount is being remitted abroad. The income embedded in such a payment must also be taxable in nature, and unless that is established, the tax deduction at source requirements do not come into play. Here is a case in which the payment is in the nature of reimbursement to a US resident, but even if we go by nature of expenses, recruitment fees, by the virtue of Article 12(4)(b) of India US tax treaty, is not taxable in the source country since it does “make available’ technical knowledge, experience, skill, know-how, or processes or consist of the development and transfer of a technical plan or technical design”. Since the income embedded in the payment was not taxable in India under the treaty provisions, and since treaty provisions override the provisions of the Income Tax Act- unless the latter was beneficial to the assessee, the tax withholding requirements of Section 195 were not triggered on the facts of this case. Since the assessee did not have any tax withholding obligations, non-deduction of tax at source by the assessee cannot lead to any disallowance under section 40(a)(i). We, therefore, delete the impugned disallowance.
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2016 (8) TMI 1000
Eligibility of benefits of exemption u/s. 11 and 12 - Held that:- The amendment to provisions of sub-section (2) to section 12A to be retrospective in nature, coupled with the fact that the assessee was subsequently granted registration u/s. 12AA of the Act, we are of the considered view that the Commissioner of Income Tax (Appeals) has rightly deleted the addition made by the Assessing Officer. Accordingly, the appeal of the Revenue is dismissed being devoid of any merit.
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2016 (8) TMI 999
Gain arising on sale of shares - business income OR short term capital gain - Held that:- A perusal of Clause (b) reproduced above would show that where the shares are held for a period of more than 12 months, the Revenue shall not dispute the income offered by the assessee on transfer of shares as Capital Gain, provided the assessee consistently treat those shares as investment. However, in the present case we find that the shares on which the assessee has claimed Short Term Capital Gain are held by the assessee for the period less than 6 months and in some of the cases the holding period is even less than 10 days. Therefore, the assessee cannot take the shelter of this CBDT Circular. Thus, in view of the facts of the case, we do not find any merit in submissions of the assessee to treat the income from sale of shares as Short Term Capital Gain.
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2016 (8) TMI 998
Disallowance u/s 14A r.w.s. 8D - Held that:- In the given case, where the assessee has earned exempted income and also has a substantial investments in shares the provisions of section 14A of the Act for disallowance of expenditure incurred in relation to income earning dividend income is clearly attracted. We find that ld. Assessing Officer has applied the gross amount of interest expenditure of ₹ 75,53,433/- in the formula for working out proportionate disallowance of interest. In the present case, we find that assessee has also earned interest income during the year. In various decisions of Co-ordinate Benches it has been repeatedly held that at the time of calculation of disallowance of Sec.14A of the Act net interest expenditure (i.e. gross interest paid minus interest received) should be used in the formula for calculating proportionate disallowance u/s 14A of the Act. Further we also observe that ld. AR has not brought on record audited financial statements, details of investment, partners’ capital account, indirect income earned, which could help to calculate the actual disallowance u/s 14A of the Act. We, therefore, set aside this issue to the file of ld. Assessing Officer to recalculate the disallowance u/s 14A of the Act by using net interest paid figure at the place of gross interest paid during the year in the formula. Needless to mention that ld. Assessing Officer will provide reasonable opportunity of being heard to the assessee to produce all the necessary documents/evidences etc. in support of his claim. This ground of Revenue is allowed for statistical purposes.
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2016 (8) TMI 997
Nature of income - Addition on account of treating short term capital gain as business profit - Held that:- The distinction between the two types of transaction is not always easy to make. Whether the transaction is of one kind or the other depends on the question whether the excess is an enhancement of the value by realizing the security or a gain in an operation of profit making. The assessee might have invested capital in shares with an intention to resale these if in future their sale brings in a higher price. Such an investment though motivated by a possibility of enhancement value, did not necessarily render the investment a transaction in the nature of trade.It is also an admitted fact that in the preceding years, the share transactions have been considered under the head capital gains.
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2016 (8) TMI 996
TDS liability - delay in depositing tds - Held that:- Delay in depositing the cannot be attributed to the assessee as the assessee had sufficient funds to deposit tax and he also secured ID and password to make online payment of TDS. However, the same could not be activated at the end of the bank, despite several requests by the assessee, hence the tax could not be deposited on or before 30.9.2008 as per provisions of the Act. We are satisfied that despite of all possible and sincere efforts on the part of the assessee, the delay of three days occurred which cannot be attributed or alleged against the assessee for making disallowance of the impugned amount. Thus the disallowance is demolished and the A.O is directed to allow the claim of the assessee in this regard. - Decided in favour of assessee.
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2016 (8) TMI 995
Eligibility for claiming deduction u/s. 80IA(4) - civil contract business - The work was allotted by DRDO, Ministry of Defence, Govt. of India for construction of rain water harvesting reservoir, i.e., the development of infrastructure facility. - Held that:- As per section 80IA(4), the appellant should be engaged in the eligible business as defined in the section. For this, it was also to be examined and enquired by the revenue authorities from the agreements and the ground activities of appellant in compliance thereto as to who supplied the drawings and designing etc. of the project. It was also to be enquired as to what was the assessee’s risk in the project. The Revenue authorities also did not examine the nature of payments received by the assessee – whether it was disbursed by the contractee on the basis of M.B (Measurement Books) of the project, which is the basic record for making payment by the contractee or it was disbursed otherwise. In case the assessee is found to have received the periodic payment as per periodical measure book records of the project, then the assessee cannot be termed to be developer, as in that case no financial risk of the assessee would be there in the project. Furthermore, as per provisions of section 80IA, the eligible entity who claims himself to be a developer for the purpose of this section, is required to maintain separate books of account for the project and according to those accounts, correct profit has to be calculated. This aspect has also to be enquired by the Revenue authorities. If the Revenue Authorities find that the assessee has acted as developer, then he has to examine whether correct profit is deduced from the separate accounts required to be maintained by the assessee as per provisions of section 80IA of the Act. In view of all this discussion, we conclude that the lower authorities have not made thorough enquiry in the matter regarding the nature of agreements, terms of payments, maintenance of account books with respect to the project separately etc. before denying the claim of the assessee u/s. 80IA (4). However, for want of proper enquiries and in absence of correct facts emerged out of such enquiries, the decisions relied upon by the assessee, in our opinion, do not render any help to the assessee. We accordingly deem it proper in the interest of justice to restore the matter to the file of ld. Assessing Officer to decide the matter de novo after making proper enquiry as discussed above. The assessee is also directed to cooperate with the AO in fresh assessment proceedings. Needless to say, the assessee shall be given reasonable opportunity of being heard. - Decided in favour of assessee for statistical purposes.
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2016 (8) TMI 994
Allowability of expenditure - Held that:- From the very nature of expenditure it makes clear that all the expenses are related to project itself and none of the expenditures can be presumed to be non-related one. The assessee before us produced bills and vouchers which include bills raised by the contractor and details are available in the ledger account which proves the genuineness of the expenditure related to the project “Rajkamal Heights”. We also find from the bills and vouchers that the expenditure is related to project which was incurred after taking completion certificate. It appears that the plumbing work, gardening expenses, BMC water connection charges, work related to amenities, beautification, repair, minor reconstruction, redevelopment, replacement of various items, remodeling, misc. repair of completed works incurred by assessee after completion of the building, which is very much allowable. We have seen that the assessee is able to produce bills and vouchers to the extent of ₹ 1,67,48,172/- out of total expenditure claimed by assessee at ₹ 1,84,32,204/-. To this extent the assessee‟s expenditure can be allowed and the balance sum of ₹ 16,84,032/- can be disallowed. Accordingly, we allow the claim of the assessee to the extent of ₹ 1,67,48,172/- and retain the addition in respect to disallowance of expenses in the absence of the vouchers at ₹ 16,84,032/-. This issue of Revenue's appeal is partly allowed. Estimation of cash component - Held that:- The survey party has accepted the average sale price rate @ 3750, which includes the sale price as per the sale agreement of ₹ 2,500/- and cash component of ₹ 1,250/- in the earlier year relevant to assessment year 2006-07. Even otherwise, the average PSF rate of 7 flats @ ₹ 4020/- which is almost corroborating with the statement of Shri Kamlesh Savla admitting the average rate of ₹ 4000/- PSF (per sq.feet). Even otherwise, there is no evidence relating to the assessment year 2006-07. This is merely an exploration of rate by the AO without any evidence based on earlier year evidences. In view of the above facts and circumstances of the case, we are of the view that the CIT(A) has wrongly estimated the cash component at ₹ 30 lakhs in respect of 7 flats on estimation basis. There is no basis for CIT (A) to estimate cash component in these 7 flats at ₹ 30 lakhs by taking the selling price of flat @ ₹ 3750/- per sq. ft. Accordingly, we delete the addition confirmed by CIT (A) amounting to ₹ 30 lakhs. The issue of assessee's appeal is allowed and that of the Revenue is dismissed. Disallowance of expenses of telephone, vehicle expenses and conveyance expenses - Held that:- We find that the AO has disallowed these expenses on the basis of personal element involved in the same. We also find that the assessee has also paid FBT on these expenses @ 20%. We find that the AO has made addition on ad hoc basis without any finding of personal user of these expenses. We also find that these expenses are related to assessee‟s business and there is no element of personal user particularly when the assessee has already paid FBT on such expenses. There is no reason for making disallowance of these expenses. Hence, we confirm the order of the CIT (A) deleting these additions. This issue of Revenue‟s appeal is dismissed. Genuineness of the salary paid to these employees - Held that:- We find that the AO disallowed salary of ₹ 3,45,000/- claimed by assessee to paid to four employees for supervision work. According to AO the assessee has not paid the salary on monthly basis but it was one time yearly payment. Accordingly, the AO disallowed the salary paid to the four persons mentioned in Assessment Order at page 13. Accordingly, he made disallowance of ₹ 3,45,000/-. The CIT (A) sustained the addition on the basis that salary expenditure was debited as on 31st March, 2007, i. e. at the end of the year. The assessee before CIT (A) claimed that these persons were hired to supervise the project during the year, since the work of the garden as well as club house was under progress. The CIT (A) observed that, “had any such truth been there, there would have been regular debit and receipt of the salary by these persons whereas, Appellant has only shown debit by voucher dated 22.03,2007, which is apparently unbelievable. Therefore, disallowance of salary of ₹ 3,45,000/- out of the total claim of ₹ 7,64,975/- is sustained”. We are of the view that the assessee is unable to prove the genuineness of the salary paid to these employees and CIT (A) has confirmed the disallowance with reasons. We also confirm the orders of the lower authorities. This issue of assessee's appeal is dismissed. Levy of penalty u/s 271 (1)(c) - Held that:- We find from the orders of the lower authorities that both the authorities below have assumed concealment in respect to on money received for the post survey period. The on money was received by the assessee for the assessment year 2006-07, being the date of survey on 21-02-2006, for the reason that some papers for the financial year 2005-06 were found. But, no paper relating to financial year 2006-07 relevant to this assessment year 2007-08 was found. On this basis only the Tribunal has deleted the addition of on money addition and once addition is deleted, penalty will not survive. Accordingly, we delete the penalty and allow the appeal of the assessee.
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2016 (8) TMI 993
Disallowance of expenditure as claimed by the assessee in the profit and loss account - treatment of the ‘business income’ as ‘income from other sources’- Held that:- As from the perusal of the paper book submitted before us, it is seen that assessee had furnished copy of Ledger account of medical income giving date wise details and income earned along with the copy of certificate of Life Membership of IMA and Registration Certificate allotted by MCI. Thus, the factum of income from Medical Profession cannot be disregarded once these facts have been brought on record and no adverse material has been brought or enquiry whatsoever has been done by AO. The AO has treated this income as ‘income from other sources’, which has no basis in the wake of these evidences. Accordingly, we hold that the income of ₹ 5,56,100/- shown by the assessee is nothing but medical income shown by the assessee which is chargeable under the head “income from business and profession” under section 28. Further, from the nature of expenses debited it is quite evident that these expenditures are purely for the purpose of earning of business incomes shown, like in the nature of audit fees, bank charges, interest on loan, insurances, payments made for professional fees, telephone expenses, car repairs etc. All these expenses have been incurred by way of account payee cheques barring one minor item of ₹ 11,712/-, which is in cash. Thus, neither the genuineness of the expenditure is doubted nor it is the case of the revenue that these are unverifiable. Thus, we do not find any reason to hold that these expenditures are to be disallowed. Accordingly, we allow the expenditure claimed by the assessee which has been debited in the profit and loss account against the business income. Thus, grounds raised by the assessee are treated allowed. Nature of income - Business income from real estate transaction/ commission - Held that:- We find that assessee had filed all the details of income earned and expenditure incurred. Looking to the nature of expenditure and also the fact that the same has been incurred mostly through account payee cheques, it cannot be held that either the expenses are unverifiable or they had not been incurred for the purposes of the earning of the income shown by the assessee. In any case, the AO himself has computed the income from business which is in the form of remuneration from the firm. However, he has treated the business income at ₹ 5,78,500/- as ‘income from other sources’ which, in our opinion, in wake of evidences filed cannot be upheld. Accordingly, like in the earlier appeal, we hold that income is assessable as ‘business’ income under section 28 and expenditure claimed in the profit and loss account have to be allowed as deduction which computing the income of the assessee. Thus, the ground raised by the assessee is allowed..
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2016 (8) TMI 992
G.P. determination - rejection of books of accounts - Held that:- As in the given circumstances, where the assessee has shown better GP rate and no major defect has been pointed in the books of account, ld. Assessing Officer erred in rejecting books of account and therefore, no addition is sustainable by applying estimated GP rate @ 20%. We find no reason to interfere with the finding with regard to the issue of deleting the addition on account of GP rate. However, with regard to the addition of ₹ 1,54,937/- on account of 20% disallowance on unverifiable purchases of ₹ 7,74,687/- we find that all these purchases are relating to perishable items namely, milk, fruits, vegetables, curd etc. and cooking gas which are to be sought after by the assessee from different suppliers and there is practical difficulty of gathering supporting documents and, therefore, in the given circumstances when the assessee has shown better GP rate and financial statements are audited u/s 44AB of the Act and the disallowance made by lower authorities is fairly on an estimate basis, we find no reason for such disallowance and, therefore, we delete the same. Addition made u/s 69 for unexplained investment - Held that:- As the assessee’s financial statements have been accepted by the Revenue for Asst. Year 2007- 08 and addition made during the year under appeal emanates out of the opening balance of the capital account only and there is no evidence of any unrecorded investment in the case of assessee and, therefore, no addition was called for u/s 69 Credit for TDS - reopening of assessment - Held that:- From going through the above provisions, we observe that when the assessee receives notice u/s 148 and is required to file return of income then as per the provisions of section 148 such return is treated at par as if same were required to be furnished u/s 139. Further when we move to the Rule 41 sub-rule(2) provides that the claim of TDS shall be accompanied by return in the form prescribed u/s 139 of the Act. Moving further when we go through the Rule 37BA(4) we find that credit for tax deducted at source and paid to the account of Central Government shall be granted on the basis of information relating to deduction of tax furnished by the deductor to the income-tax authority and the information provided in the return of income. Now when we link up the provisions of section 148 of the Act with Rule 41(2) and Rule 37BA(4) of IT Rules, we find that assessee filed return of income in the prescribed form in compliance with notice u/s 148 of the Act and provided all necessary information relating to TDS to the assessing authority and thereby satisfying all the conditions which are required for claiming refund. We are, therefore, of the view that in the given facts of the case when assessee’s revenue has not been questioned and all necessary information in the form of return of income and TDS certificate were before the ld. Assessing Officer then the TDS credit ought to have been allowed.
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Service Tax
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2016 (8) TMI 1031
Recovery of CENVAT credit – imposition of interest and penalty – machine tool accessories, tips and Inserts – CHA service for export of goods – Held that: - the ownership of the goods and the risk related thereto remains with the appellant up to the loading of the goods on the ship at the port of shipment. Further, Section 4 of the Central Excise Act, 1944, inter alia, states that the place of removal is any other place from where the excisable goods are to be sold after the clearance from the factory. Thus the place of removal in case of export of goods is port of shipment. CHA services are utilized by the appellant before the goods were loaded on to the ship and therefore the same falls within the definition of input services – CENVAT credit allowed – appeal allowed – decided in favor of appellant.
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2016 (8) TMI 1030
Refund - Clearing and forwarding agent – loading and unloading of cargo – demand of tax and interest on cargo service – payment by respondent, service provider – claim of refund for the period prior to the date the service became effective - reimbursement received from recipient of service – is gross amount inclusive of service tax ? – Held that: - the recipient of service objected to payment of service tax liability prior to that date and reimbursed the service tax only for the period after that date. As such, it cannot be presumed that the gross amount received by the respondent always included the service tax – appeal disposed off – refund allowed - decided against Revenue.
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2016 (8) TMI 1029
Demand of tax with interest - penalty under Sections 76, 77 and 78 of the Finance Act, 1994 – non-submission of statutory returns – Barites Ore and Iron Ore - mining service – GTA service – supply of tangible goods service - proviso to Section 73(1) of the Finance Act, 1994 - Imposition of equal penalty under section 78 of the Finance Act, 1994 – Held that: - non-payment/ short payment of service tax cannot be held to be on account of suppression of material facts with intention to evade payment of duty – penalty not imposed. Supply of tangible goods service – dumpers and tippers – CENVAT credit - capital goods or inputs? – Board's Circular dated 23.10.2008 – Held that: - as these goods are primary requirements for providing the 'output services' for such service providers, the goods including vehicles, aircrafts, vessels etc., are in the nature of 'inputs'. It is emphasized here that this clarification is valid only when the output service is in the nature of service defined under the provisions of Section 65 (105) (zzzzj) of the Finance Act, 1994 and the goods in question are the tangible goods supplied during the course of providing the taxable service. The determination of service tax liability therefore require to be predetermined after taking into account eligible input credit – matter remanded – appeal disposed off – decided in favor of appellant.
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2016 (8) TMI 1028
Refund – 100% EOU – manufacture and export of marble and granite slabs – Notification No.41/07-ST dated 06.10.2007 – port service – Held that: - the CBEC vide Circular dated 26.02.2010 has interalia clarified that irrespective of the clarification of service provided by the service provider, if the same relates to the services provided in the port, the same shall be considered for benefit of refund in terms of the Notification dated 06.10.2007. The services received by the appellant have in-fact been provided within the port – refund available. CHA service – Held that: - the service providers are duly recognized by the Customs authorities for providing such service which is evident from certificates issued in favour of the service provider by the Customs Department – refund available. GTA service – non-compliance with the requirement of the notification read with the circular – Held that: - there is co-relation between the goods removed from the factory to the port of export. Thus, even if, some of the condition of the Notification have not been complied with, such condition should be considered as procedural, for which the substantive right of the appellant to claim the benefit of refund as an exporter should not be disallowed – refund available. Appeal allowed – decided in favor of appellant.
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2016 (8) TMI 1027
Demand of tax, interest and penalty – non-payment of service tax - service tax registration – renting of immovable property - section 65(105)(zzzz) read with section 65(98) of the Finance Act, 1994 – invocation of section 80 of the Finance Act, 1994 – benefit of doubt – Held that: - Undoubtedly there was some doubt about the scope of taxability of ‘renting of immovable property’ service. However, that dispute, though resolved in due course by Hon’ble Supreme Court, did not preclude the payment of tax from others rendering the same service. Disputes raised to merely avoid or delay tax cannot be said to have originated from ambiguity or flawed mechanism – benefit of doubt not available – appeal dismissed – decided against appellant.
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Central Excise
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2016 (8) TMI 1026
Cenvat credit - manpower supply services - availed the input service in their manufacturing activity - whether 75% of service tax payable by the respondent should be considered as ineligible for credit when the provider of service was to pay only 25% of service tax having been paid 100% of the service tax - Held that:- 75% of the service tax, which is sought to be denied is admittedly paid to the Government by the provider of service instead of recipient of service. In any case, the service tax has been discharged and denial of the credit on this ground is not sustainable. - Decided in favour of appellant
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2016 (8) TMI 1025
Cenvat credit - rubber used in the factory - rubber used in excess quantity than required - Held that:- it is now settled that if following three conditions are satisfied then Cenvat credit cannot be denied. The conditions are that that the inputs have suffered Central Excise duty, inputs have entered the factory premises and inputs are used in the manufacture of final products that they are not cleared as such. We do not find any allegation in the show cause notice that the appellants had not procured the inputs nor that the inputs had not suffered Central Excise duty nor that the input were cleared as such by the appellant. In fact there is no investigation in respect of above stated aspects as reflected in the impugned order. The adjudicating authority was not empowered by law to decide optimum quantity of input admissible to be procured for manufacture of unit quantity of final product and therefore, law did not empower the adjudicating authority to decide how much is the excess quantity of inputs procured by the appellant. - Appeal disposed of
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2016 (8) TMI 1024
Valuation - Whether the payment of damages can be regarded as reducing the agreed price - liquidated damages payable by appellant for breach of contract condition - claimed as deduction for arriving assessable value - Held that:- by following the dictum of Larger Bench of Tribunal in the case of Commission of Customs & Central Excise, Hyderabad Vs Victory Electricals Ltd. [2013 (12) TMI 81 - CESTAT CHENNAI] whereby it was held that wherever the assessee, as per the terms of the contract and on account of delay in delivery of manufactured goods is liable to pay a lesser amount that the generically agreed price as a result of a clause (in the agreement), stipulating variation in the price, on account the liablility to “liquidated damages”, irrespective of whether the clause is titled “penalty” or “liquidated damages”, the resultant price would be the “transaction value”; and such value shall be liable to levy of excise duty, at the applicable rate. Therefore, demand is unsustainable. - Decided in favour of appellant with consequential relief
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2016 (8) TMI 1023
Imposition of penalty - non-filing of Annual Return containing details of inputs for the period 2004-05 - Rule 15 of the Cenvat Credit Rules, 2004 - manufacture of Pan Masala - Held that:- it is clear that both the lower authorities have seriously erred in applying the legal provisions relevant to the case. Non-filing of Annual Return, as stipulated in Rule 9 of Cenvat Credit Rules, 2004, cannot be penalized in terms of Rule 15 of the said Rules as it is only a procedural violation. It is seen that other than the non-filing of return, no other allegation has been made against the appellant. The returns stand filed thereafter. Therefore, both the lower authorities have fallen in error in not considering the correct legal position and imposing penalty based on in-applicable legal provisions. - Decided in favour of appellant
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2016 (8) TMI 1022
Unjust enrichment - Refund claim - entitlement for exemption under Notification No. 108/95-CE dated 28/08/1995 - respondents applied to the Competent Authority for required certificate but due to urgency of project, they have obtained duty paid materials and used the same in the project of NHAI - Held that:- the respondent did execute a contract covered under the scope of Notification No. 108/95-CE. They are otherwise entitled for the said exemption. As per the finding in the impugned order that the refund was rejected only on the ground of the question of undue enrichment. Regarding the duty incidence, the learned Commissioner (Appeals) has given a categorical finding after perusal of the contracts and certificate issued by NHAI, that no duty has been collected by the respondent from NHAI. There is nothing in the present appeal to contradict the said factual finding as recorded in the impugned order. The contract is for a fixed amount and it has been categorically recorded in the impugned order that no excise duty incidence has been passed on by the respondent to NHAI. NHAI also categorically certified to that effect. - Decided against the Revenue
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2016 (8) TMI 1021
Imposition of penalty - Rule 15 of Cenvat Credit Rules, 2004 - non filling of ER-5 and ER-6 returns within the period prescribed - held that:- it is found that an identical penalty was imposed on the same applicant for the earlier period, which was challenged before the Tribunal reported in [2009 (11) TMI 947 - CESTAT NEW DELHI], wherein it was held that the contravention for which penalty has been imposed, is only a procedural violation and subsequently the required return has been filed, therefore, imposing penalty for the same is unsustainable. Therefore, by following the same, impugned order is set aside. - Decided in favour of appellant with consequential relief
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2016 (8) TMI 1020
Eligibility - credit on capital goods and area based exemption notification no. 50/2003-CE dated 10.06.2003 - manufacture of sugar and molasses - undertaken substantial expansion of their existing capacity in 2005 - availed Cenvat Credit from 21.04.2006 to 06.07.2005 - on 15.11.2005 onwards started availing exemption under notification 50/2003-CE - Held that:- no legal basis found in such assertion of Revenue that when the respondent is aware that they are going to claim full exemption of their final product based on notification no. 49/03 and 50/03, they should not have availed credit. It was contended by the Revenue that the respondent postponed the availment of area based exemption only to avail credit on capital goods. but when the credit eligibility on capital goods are determined on applicable legal provisions, other presumptions or alleged motive of the respondent are of no consequence. Therefore, by referring to the decision of Hon’ble Supreme Court in the case of CCE Vs. Dai Ichi Karkara Ltd. [1999 (8) TMI 920 - SUPREME COURT OF INDIA], Tribunal’s decision in the case of Hindustan Coca Cola Beverages (P) Ltd. Vs. CCE [2005 (7) TMI 387 - CESTAT, MUMBAI] and Kerala High Court’s order in the case of CCE Vs. Premier Tyres [2001 (2) TMI 137 - HIGH COURT OF KERALA AT ERNAKULAM], and as there is no valid legal ground in the present appeal for denying the credit on capital goods, no merit found in appeal filed by Revenue. - Decided against the Revenue
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2016 (8) TMI 1019
Cenvat Credit - Job Work - whether Kraft paper is to be considered as final product or as an input / intermediate product to be sent on job work under Cenvat Rule 4(5) for further manufacture of finished products - Held that:- it is not in dispute that kraft paper manufactured by the respondent in his factory is proposed to be sent to job worker for conversion to carton boxes etc. Hence the final product of this scheme would be the cartons etc. and obviously the kraft paper is the input. Under the circumstances, we approve the view taken by the Commissioner (Appeals) and the permission granted under Cenvat Rules 4(5) and 4(6) subject to the usual procedure to be followed. - Decided against the Revenue
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2016 (8) TMI 1018
Imposition of penalty - trading of goods on commission basis - goods cleared without payment of duty - Held that:- it is found that the role of the appellant against the total quantity of 567.600 MT goods cleared clandestinely, is limited to 316.85 MT and the commission received by them as trader is around ₹ 3.16 lacs @ ₹ 1/- per kg. as claimed. Therefore, it would be appropriate to reduce the penalty on the Appellant from 25 lacs to ₹ 10.00 lacs. - Decided partly in favour of appellant
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2016 (8) TMI 1017
SSI exemption - Brand name - Whether the goods on which the full rate of duty was paid on sale to particular manufacturers and not treaded in the open market, to be traded as branded goods with in the meaning of brand name defined in the SSI exemption under notification 9/2003-CE dated 01.03.03 - Held that:- in the stay Order No. 162/07/-EX dated 09.02.2007 passed in this appeal reported in [2007 (2) TMI 674 - CESTAT NEW DELHI], a prima-facie view was taken that the assessments of goods during the year 2003-04 has become final and it is not open to revenue to contend that goods assessed to full rate of duty as branded goods in 2003-04 have changed their Character and they became un-branded. The revenue has not advanced any arguments against the said prima-facie view of this Tribunal. Therefore, the said prima-facie view has attained finality as a result the impugned Order–in Appeal is set aside. - Decided in favour of appellant with consequential relief
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2016 (8) TMI 1016
Recovery of interest and imposition of penalty - Rule 15 (2) of CCR 204 read with Section 11AC of the Central Excise Act, 1944 - period from the date of availing of credit upto the date of filing of the revised return - simultaneous availment of depreciation under the Income Tax Act and credit under cenvat scheme during the Assessment year 2007-08 & 2008-09 - filed revised return for the assessment years 2007-08, 2008-09, 2009-10 and 2010-11 on 23.3.2011 on the ground of irregularity found - Held that:- as the appellant duly filed the revised IT return foregoing the benefit of depreciation already availed, and the allowance of credit not being denied by the lower authorities, this, is a sufficient ground for setting aside the penalty. With regard to the aspect of interest, the same is payable as payment of interest is automatic and there is no reason not to levy interest as the Revenue would suffer a loss when interest is not paid. - Decided partly in favour of appellant
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2016 (8) TMI 1015
Maintainability - lack of jurisdiction of Central Excise officers in Sikar, Rajasthan for initiating action regarding the duty liability of the appellant unit which is located in Pant Nagar, Uttrakhand - Held that:- in terms of jurisdiction of various officers as notified by Ministry of Finance in terms of power conferred by sub-Rule (2) of Rule 3 of Central Excise Rules, 2002 the appellant fall under the jurisdiction of Meerut-I Commissioner. The Assistant Commissioner Sikar who is falling under the jurisdiction of Commissioner at Jaipur in Rajasthan has no jurisdiction or power to initiate action against the appellant unit. It is seen that the appellant did not take this objection before the lower Authorities. However, since this is a basic legal issue affecting the very legality of the proceedings the same has to be examined by the Tribunal for a decision. Revenue is not able to place on record any legal authority empowering the officers working in Rajasthan to initiate proceedings against the appellant unit in Uttrakhand to determine the eligibility or otherwise of the appellant for a duty benefit. Confiscation in lieu of redemption fine - seizure of goods and truck - denial of exemption under Notification 50/2003-CE - appellants were not manufacturing the aerial bunched cables in their unit at Uttrakhand whereas procuring these items from elsewhere and carrying out some process of painting, numbering and putting inspection seal and clearing them without payment of duty from their Salodipura Godown in Rajasthan - Held that:- it is noted that if the seized goods were not manufactured by the appellant in their Pant Nagar unit, the question of claiming or denying area based exemption on such goods does not arise. The duty demand, if any, should be against actual manufacturers of the said goods. The actual manufacturer has not been identified. Accordingly, the show cause notice and the proceedings consequent upon the said notice are without jurisdiction and, hence, the impugned order is not sustainable. - Decided in favour of appellant
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2016 (8) TMI 1014
Cenvat credit - service tax paid by the service provider on the services rendered i.e., garden maintenance, gutter cleaning services - Held that:- when an identical issue in respect of the very same assessee is decided by this Tribunal in respect of the eligibility to avail Cenvat Credit on the service tax paid on garden maintenance and gutter cleaning services, and on a specific question from the Bench as to whether the Revenue has contested the final order, their reply given was that they were not aware of the same; I find that the issue is no more res integra and is covered in favour of the appellant in respect of the Cenvat Credit availed on these two services. Cenvat credit - carpet cleaning services - Held that:- these service tax credit availed by the appellant may not be eligible as Cenvat credit for the reason that it is not eligible for the appellant. In view of this, the Cenvat Credit availed of ₹ 1,985/- is liable to be demanded from the appellant along with interest. Since the issue involved is of interpretation, no penalty is required to be imposed on the appellant. - Appeals disposed of
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2016 (8) TMI 1013
Payment of 5% or 10% of the value of exempted goods, i.e., bagasse and pressmud - cleared without payment of duty - Held that:- the issue is covered by the judgement of the Hon’ble Apex Court in the case of UOI Vs. DSCL Sugar Ltd. [2015 (10) TMI 566 - SUPREME COURT] wherein it was held that bagasse is not excisable, there being no manufacturing process. Bagasse and pressmud is arising during the course of manufacturing of sugar is undisputed. Therefore, the impugned order is unsustainable. - Decided in favour of appellant
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2016 (8) TMI 1012
Cenvat credit - welding electrodes and gases used in maintenance of plant and machineries used in the factory for producing goods - Held that:- by considering the decision of Hon’ble Chhattisgarh High Court in Ambuja Cement Eastern Ltd. Vs. CCE [2010 (4) TMI 429 - CHHAITISGARH HIGH COURT], where it was held that welding electrodes used in repair and maintenance of plant and machinery are eligible for Cenvat Credit and also the Tribunal's decision in appellant's own case reported in [2014 (4) TMI 1144 - CESTAT NEW DELHI], held that they are eligible for Cenvat Credit of duty paid period on the welding electrodes and gases used for repair and maintenance of the capital goods, the appeal is allowed. - Decided in favour of appellant with consequential relief
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