September 2016 Newsletter

LEX TAXARE – SAPAA’s Insights


FOREIGN TRADE POLICY

NOTIFICATION
Public Notice No.32/2015- 2020 Addition & Enhancement in MEIS Eligibility with immediate effect. Export of various goods which were not notified earlier are now eligible for MEIS Duty Reward Scrips. Reward Rates are enhanced for certain goods.
CIRCULAR
Policy Circular no.2/2015- 2020 Merchant exporter is eligible for Free Sale & Commerce Certificate Free sale & commerce certificate will be issued to merchant Exporter if details of manufacturer is declared.

SERVICE TAX

CIRCULARS
Circular No. 201/11/2016-ST Guidelines for arrest in relation to offences punishable under ST Power to arrest a person is available if a person has collected Service Tax and fails to pay to the Govt beyond six months and such amount exceeds Rs.2Cr. Arrest of a person cannot be carried without strictly adhering to the guidelines prescribed under this circular.
CASES
Limitation for Refund Claim Mera Baba Realty Associate (P) Ltd. Vs Commr. ST 2016 (9) TMI 790

Issue:

Whether raising of protest subsequent to voluntary payment of Tax attracts limitation.

Decision:

Limitation under Sec.11B of Central Excise Act will not be applicable for claim of refund of amount paid under protest. When contentions are raised within a reasonable period of time proviso to Sec.11B (1) is strictly construed.

Remedy under Writ and Appeal Inox Air Products Ltd. Vs CST 2016 (9) TMI 1107

Issue:

Whether Statutory appeal can be dismissed as not maintainable on the ground that matter is pending before HC in Writ Petition.

Decision:

A Statutory Appeal cannot be dismissed as not maintainable just because the assesse is pursuing relief under Writ Petition and Appeal unless it is restrained by the Order of the HC.

CENVAT Credit Wipro Ltd. Vs CCE 2016 (9) TMI 537

Issue:

Whether Rent a Cab service for picking and dropping employees is eligible for input service for a manufacturer.

Decision:

CENVAT credit cannot be availed on the said service by a manufacturer of final products. The said service is not an eligible input service as per Rule 2(l) of CCR 2004.

Taxability of Financial Outflow Tech Mahindra Ltd. Vs CCE 2016 (9) TMI 191

Issue:

Whether H.O and branches outside is a separate entity to attract tax on outflows from H.O to branches.

Decision:

Export of Services rendered through branches outside India is not within the Scope of Sec.66A of F.A. 1994. Intention of Sec.66A is only to tax local commercial or business activities to H.O in India. Transfer of resources to branches outside India does not attract Sec.66A since the H.O in India itself is an exporter of service.

Refund claim Banco Products India Ltd. Vs CCE. & S.T. 2016 (9) TMI 1057

Issue:

Whether relevant date is the date when original refund application is filed or when revised refund claim is filed.

Decision:

It was held that though revised claim was filed after the prescribed time limit by rectifying bonafide error the original claim was filed within the prescribed time limit. The relevant date shall be the date on which original refund claim was filed.

CENTRAL EXCISE

CIRCULARS
Circular No. 1046/34/2016CX Supply of goods manufactured by EOUs without payment of Central Excise Duty against Advance Licence/Authorisation. The second proviso to para 6 of the notification no. 22/2003CE dated 31.03.2003 and the proviso to para 3 of notification no. 52/2003 Cus dated 31.03.2003 would notbe applicable in case of supply of manufactured goods by EOU to Advance Licence/Authorisation holder in DTA without payment of Central Excise duty.
Circular No. 1047/35/2016CX Rebate of duties paid on raw materials u used in manufacture or processing of export goods and admissibility of duty drawback in such cases. (i)On exports CENVAT credit is not availed on inputs but input stage rebate on excisable goods except diesel is availed under Rule 18 of the CER 2002 drawback of Customs portion as per rates and caps specified in column (6) and (7) of the drawback schedule shall be admissible; (ii) On exports CENVAT credit is not availed on inputs but the inputs except diesel are procured without payment of CE duty under Rule 19(2) of CER 2002 drawback of Customs portion as per rates and caps specified in column (6) and (7) of the drawback schedule shall be admissible; (iii) On exports input stage rebate on diesel under Rule 18 of CER 2002 is availed or diesel is procured without payment of Central Excise duty under Rule 19(2) of CER 2002 no drawback either under column (6) and (7) or column (4) and (5) of the drawback schedule shall be admissible. (a)Divisional Assistant/Deputy Commissioner Central Excise while sanctioning the rebate claim should verify this aspect and in case of availment of any drawback where input stage rebate on diesel under Rule 18 of CER 2002 is also availed shall deny the claim of rebate involved on diesel out of the rebate claimed for violation of the declaration (d) of the ARE 2. (b) In cases where diesel is procured without payment of Central Excise duty under Rule 19(2) of CER 2002 and the goods are exported under claim of drawback the Central Excise duty involved on diesel shall be recovered for violation of the declaration (d) of the ARE 2 while examining the proof of export.
Circular No. 1048/36/2016CX Service Tax Certificate for Transportation of goods by Rail (STTG Certificate) Railway receipts not required to be enclosed with STTG certificate to avail CENVAT credit. Procedure shall be followed as prescribed in the circular.
F. No. 275/29/2016CX. 8 A Non-compliance of the sub section 2 of Section 32K of Central Excise Act 1944 also made applicable to Service Tax matters by virtue of Section 83 of the Finance Act and subsection 2 of Section 127H of the Customs Act. Immunity granted to a person from prosecution penalty and fine Immunity granted to a person from prosecution penalty and fine shall stand withdrawn if such person fails to pay any sums specified under order of settlement within the stipulated time. In this regard it has been brought to the notice of the Board that the conditions subject to which the immunity has been granted have not been complied with by the applicants in some cases thereby rendering the order of settlement void.
CASE LAWS
Duty Liability M/s Nilons Enterprises P. Ltd. Vs CCE – E/1135 1136 & 1137/05

Issue:

Demand of the duty on the ground that cash discounts were not passed on but claimed as deduction.

Decision:

The cash and volume discount between assessee and its buyer is known at or prior to clearance of goods can be deducted from the sale price. Evidence in form of Xerox copies of credit notes before first appellate authority indicates that they have passed on the cash discount as contracted. Held that the appellant is eligible for cash discount deduction in assessable value.

  M/s Suma Pharmaceuticals Pvt. Ltd. Vs. CCE 2016 (9) TMI 34

Issue:

Duty on difference between closing stocks recorded in the Balance sheet for the years 2006-07 to 2008-09 with reference to closing stock reported in the ER-1 returns.

Decision:

As the appellant contended that the stage at which the goods are recorded as FG in the excise records is different from the stage at which the goods are recorded in the financial records and there was no other evidence of clandestine removal produced by the Revenue. Closing stock of one year appears as the opening stock of the next year in the financial records. No evidence to sustain the demand of duty. Appeal allowed.

  IFP Petro Product Pvt. Ltd. Vs CCE & S.T 2016 (9) TMI 1171

Issue:

Whether procurement and process of Waste and Used Oil into Clean Oil and in turn sold to Customers amount to manufacture.

Decision:

To establish that manufacture has taken place it is essential to establish (i) either there is labelling or relabelling of containers (ii) there is repacking from bulk packs to retail packs (iii) such treatments have adopted so that product is rendered marketable to consumer. Revenue could not establish that the goods emerged after removal of impurities from waste oil have been marketed to consumer. Further there was no evidence of labelling or relabelling or for repacking into retail packs. Hence Decided in favour of appellant.

Non speaking order Berger Paints India Ltd. Vs CCE 2016 (9) TMI 984

Issue:

Validity of order directing special audit due to breach of principles of natural justice and non-specification of any ground that the petitioner has availed of duty credit or utilised cenvat credit beyond the normal limits.

Decision:

Section 14AA of the said Act empowers the Principal Commissioner or the CCE to have the accounts of a manufacturer audited by a CWA or a CA nominated by them in the event he finds any of the grounds enumerated therein to be satisfied. The Commissioner assumed that the petitioner has availed of duty credit or utilised cenvat credit beyond the normal limits. The Commissioner has not discussed the nature of finished goods manufactured and cleared by the petitioner and the quantum of the duty credit or utilised cenvat credit by the manufacturer. Therefore the impugned order is unreasoned.

Eligibility of CENVAT Credit CCE Vs M/s Hira Ferro Alloys Ltd 2016 (9) TMI 1129

Issue:

Eligibility of respondent for various credits for inputs and capital goods which is not included in the registered premises of the respondent.

Decision:

On careful consideration of the nature of impugned items i.e. steel and copper items it has been categorically submitted that the steel items have not been used for making support or civil structure or for making foundation. The copper tube rod was used for making bus duct/bar of channels copper earthing and for instrumental in the captive power plant. There has been no attempt to independently verify the nature of items and their usage in order ascertain the respondent’s eligibility of credit on such items. Taking into consideration the detailed chart submitted by the respondent regarding usage of impugned items we find no merit in the present appeal by the Revenue. Decided against the Revenue.

Reversal of CENVAT Credit JG Sponge & Power Pvt. Ltd. Vs CCE 2016 (9) TMI 1051

Issue:

Appellant purchased input Scrap i.e. SS Scraps from a first stage dealer who was involved in passing fraudulent credit by trading in excisable goods.

Decision:

Appellant has admittedly paid duty on the inputs in question by cheque. By findings of the Commissioner the appellant seems to have received some scrap along with the duty paying document which establishes the absence of collusion and or mala fide on the part of the appellant. The fact that the appellant has suo motu reversed the Cenvat credit under dispute along with the interest prior to the enquiry initiated by the Revenue and issuing the show cause notice. No case of contumacious conduct or fraud is made out against the appellant. Hence the penalty imposed under Rule 15 of CCR read with Section 11 AC of the Act is set aside. Also the appellant will not be entitled to take re credit of the amount reversed by them suo motu. Decided partly in favour of appellant.

Interest on Refund M/s Dabur India Limited Vs. UOI 2016 (9) TMI 787

Issue:

Entitlement of Interest on Refund

Decision:

There is no time limit prescribed for taking a decision about refund but the law makes it clear that amount if not refunded within 3 months from the date of receipt of application interest shall be payable. Even if an order has been passed much later on for the purpose of interest it will relate back and the assessee would be entitled for interest after 3 months from the date he has filed application under Sec.11B.

Rebate LGW Ltd Vs UOI 2016 (9) TMI 983

Issue:

Rebate issued by petitioner disallowed and validity of Revision order under Section 35EE of the Central Excise Act.

Decision:

The Revisional authority has not found that the petitioner did not export Central Excise Duty Paid goods out of India or that the relevant ARE forms do not bear the appropriate customs endorsements. The alleged procedural lapses for the consignment under consideration have also not been alluded to or identified. Therefore the impugned order is set aside and decided in favour of petitioner.

CUSTOMS
Effective date of a Notification Agarwal Industries Ltd. Vs. UOI 2016 (9) TMI 670

Issue:

Whether the effective date of the Notification No. 36/2001 CUS (N.T.) dated 03.08.2001 was the date of publication or Notification date?

Decision:

For bringing a notification into force and make it effective two conditions are mandatory viz. 1. Notification should be duly published in the official gazette 2. The Notification should be offered for sale on the date of its issue by the Directorate of Publicity and Public Relations of the Board New Delhi. In the present case the second condition was not satisfied. Therefore the effective date of this notification was the date of offer for sale to public i.e 06.08.2001 and not date of publication i.e. 03.08.2001

Penalty CC Vs. Jewel Tech India Pvt. Ltd. 2016 (9) TMI 522

Issue:

When the goods are not physically available for confiscation whether revenue can impose only penalty under Section 112 (a) of Customs Act or should it impose Redemption fine in lieu of confiscation?

Decision:

The court observed that confiscation would mean that seized goods have become the property of the Government and the party shall pay the fine and redeem the goods. But since in the instant case the goods have been diverted and not released on execution of bond with conditions the question of confiscation of the same does not arise as the goods have already become someone else’s property. Therefore when the goods are not physically available confiscation was not ordered.

Powers of the Commissioner KMF Automotive Pvt Ltd. Vs. CC 2016 (9) TMI 466

Issue:

Whether the order of the Commissioner of Customs (Appeals) remanding the matter to the lower authority to pass necessary orders in de novo and imposing a pre- condition is right in law?

Decision:

Commissioner is empowered to give direction to the original authority while remitting back the matter but imposing a precondition is a different thing for which no power has been vested with the Tribunal. Hence imposing pre-condition is not valid.

Refund of CVD Liebherr India Pvt Ltd. Vs. CC (Port) 2016 (9) TMI 357

Issue:

When due to calculation error in the BOE w.r.t Retail sale price excess CVD got paid and reassessment was not addressed. Whether the appellants are liable for refund or not?

Decision:

Section 154 of the Customs Act empowers the proper officer of the customs to make correction in any decision or order arising therein from any accidental slip or omission. In the instant case excess duty has been paid due to incorrect invoices raised by the overseas supplier. The court observed that this is case of wrong mentioning of the price in the invoice other than the one agreed upon purchase order and hence is a clerical error covered by Sec 154 of the Customs Act. The court held that they can claim for refund vide re-assessment application.

Refund claim M.S. Metals Vs. CC (Preventive) 2016 (9) TMI 169

Issue:

Whether period of limitation for preferring refund claims given in the amending Notification has a retrospective effect in absence of a limitation period in the original Notification wherein the goods are imported prior to the issue of the amending notification.

Decision:

It was observed that amending Notification cannot be said to have retrospective effect and the time limit under Section 27 of the Customs Act cannot be made applicable to refunds under original Notification. In the instant case refund claim of additional duty of customs paid on imported goods with the jurisdictional customs officer is required to be filed within one year from the date of payment of said additional duty of customs. Since the appellants case does not fit the time period specified their case was dismissed.

Maintainability of writ petition Mishra & Mishra Agencies Vs. UOI 2016 (9) TMI 833

Issue:

Whether a writ petition can be dismissed on the ground of alternative remedy if the same has been admitted for hearing.

Decision:

Powers under Art. 226 of the Constitution are exercised by the HC in cases where the authority has acted contrary to statutory provisions or in violation of fundamental principles of judicial procedure or when order is passed in total infraction of the principles of natural justice causing undue prejudice to the aggrieved party. The petitioners in the instant case were given full opportunity of explaining the charges of irregularity/ illegality against them. Moreover they did not exhaust the alternate remedy before coming to the HC so the Court was not inclined to exercise its extraordinary power under Art. 226 of the Constitution. However the court gave an option to the petitioners that if they approach the CESTAT by way of appeal against the order under challenge in the present writ petition within 6 weeks the Tribunal will be directed to decide such appeal in accordance with law without being influenced by any observation in this order and pass an order within 6 months of appeal.

TNVAT
CASES
Powers of the Authority Frontline Engineering Services Vs CTO 2016 (9) TMI 768

Issue:

Whether the authority has sufficient power to revise and rectify his orders under section 84 of the Act.

Decision:

If the authority has missed out certain vital factual information there is sufficient power for the authority to revise and rectify his orders in terms of Section 84 of the state Act. The petitioner can point out all the factual inconsistencies and explain the scope of the contract.

Mismatched details Coromandel Engineering Company Ltd. Vs The AC (CT) 2016 (9) TMI 666

Issue:

Whether the details of invoice-wise data for the alleged mismatch be furnished.

Decision:

The court held that in cases of mismatch invoice- wise data for mismatch to each demand must be mandatorily attached to the notice either in print form or as CD or sent as email (in case it is voluminous) as per circular dated 01.04.2015 in Circular NO.10/2015/D3/8562/2014.

TRANSFER PRICING

CASES
Adjustments Silicon Graphics Systems (India) Pvt. Ltd. Vs DCIT 2016 (9) TMI 303 ITAT

Issue:

Disallowance on account of foreign exchange fluctuation loss.

Decision:

Appeal allowed in favour of assessee because the assessee has been following a consistent policy on restatement of foreign currency payables and whenever there is a gain the same is duly offered to tax. Accounting Standards 11 provides that the long term liabilities should be restated and the loss should be charged to the Profit and Loss account of each year. In view of these principles of law the finding of the ld. CIT(A) that the assessee has claimed foreign exchange fluctuation loss on the entire amount of current liabilities and not on the transactions of the current year in our opinion does not stand on sound footings and is liable to be set aside.

  Brahma Center Development Pvt. Ltd. Vs ITO 2016 (9) TMI 106 ITAT

Issue:

Disallowance of part of the interest paid by the assessee.

Decision:

The assessee had furnished additional evidences before the Tribunal. In the present case the assessee carried out analysis on BSE database which indicated that the average coupon rate of comparable instruments issued in Real Estate Industry was 14.50% as compared to the average coupon rate of 12.39% of all the instruments issued during the year.The assessee had also collected the details of interest rate by nationalized banks in India to the borrowers having similar credit rating as that of the assessee the average lending rate was computed at 13.66% the assessee claimed that the international transaction of payment of interest on CCD’s entered into by it was at arm’s length. Since the aforesaid documents are relevant to resolve the present controversy and the assessee had reasonable cause not to furnish the same before the authorities below. Therefore the additional evidences furnished by the assessee are admitted and we deem it appropriate to set aside this case back to the file of the AO/TPO to be decided afresh.

  Honda Cars India Ltd. Versus DCIT (LTU) 2016 (9) TMI 439 ITAT

Issue:

Disallowance made u/s 40(a)(i) payments to non-resident companies without deducting tax at source u/s 195.

Decision:

Out of 18 non-resident associate companies to whom payments have been made it was held that 16 associated enterprises do not have a P.E. in India. The D.R.P. in the case of Asia Honda Thailand for the A.Y. 2009-10 has held that the Non-resident company had no P.E. in India. Revenue has not filed an appeal on this finding of the D.R.P. Hence we have to reverse the finding of the CIT(A) that Asia Honda Thailand has a P.E. in India in this A.Y. Thus we have to hold that except in the case of Honda Motors Japan payments made to all other 17 non-resident associate companies do not attract the provisions of S.195 and consequently 40(a)(i) of the Act as no portion of the income of these companies arising from the supply of parts etc. was liable for tax in India. Applicability of the provisions of S.195 r.w.s. 40(a)(i) to Honda Motor Company Ltd issue decided in favour of the Assessee and against the Revenue by holding that Section 40 (a) (i) of the Act is discriminatory and therefore not applicable in terms of Article 26 (3) of the IndoUS DTAA.

  DCIT Vs M/s. Intuit Technology Services Ltd 2016 (9) TMI 405 ITAT

Issue:

Computation of deduction under section 10 A/10 B brought forward business losses as well as unabsorbed depreciation.

Decision:

In the present case before us the assessee has brought forward business losses as well as unobserved depreciation. The act specifies the sequence in which these allowances can be set off. Section 72 (3) implies that the set off of unobserved depreciation as per section 32 (2) against business income shall be given effect to only after setting off the brought forward business losses. From the calculation made by the AO it is observed that the AO has adjusted the amount of unobserved depreciation from the business income before making adjustment for brought forward business losses. The circular relied upon by the AR is not applicable to the present case under consideration as it is applicable where the set off each to be made against the profits of a STP/EOU/SEZ unit before the deduction under section 10 A/10 B of the Income tax Act is allowed. We accordingly direct the Ld.AO to allow the set off as per law.

  Sara Lee TTK Ltd. V. DCIT 2016 (9) TMI 907 ITAT

Issue:

Royalty payable to the Associated Enterprise whether to be restricted to 1 % of the qualifying Net Sales as against the rate of 50/0 of the qualifying et Sales as computed by the appellant.

Decision:

The assessee has not separately benchmarked the Royalty transaction at the time submission of Form 3CEB or at the time of preparation of TP Report. The onus is on the assessee to prove that the transactions were taken at arm’s length. Going by the relevant TP provisions and Rules it is mandatory that the appellant has to independently benchmark its international transaction with independent comparables so as to arrive at arm’s length price which has not been made in this case. The comparability analysis is the substratum of determining the ALP which has not been done by assessee at any stage. Therefore in the interest of justice and fair play this case should be restored back to the file of AO; the AO after giving adequate opportunity to the Assessee shall decide this issue in accordance with the TP regulations. Decided in favour of assessee for statistical purposes.

Applicability of TP provisions In Re : Banca Sella S.P.A. 2016 (9) TMI 163

Issue:

Applicability of transfer pricing when there is no liability to tax.

Decision:

In the course of the hearing the Revenue submitted that the transfer pricing provisions would be applicable even if there is no liability to tax. The Applicant has relied on the ruling of this Authority in Amiantit International Holding Limited in re: [2010 (2) TMI 123 AUTHORITY FOR ADVANCE RULINGS] where this Authority following its earlier ruling categorically held that the transfer pricing provisions are inapplicable if there is no charge. We respectfully agree.