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2009 (9) TMI 951
Issues Involved:
1. Whether the duty-paid goods procured by the dealers can be treated as excisable goods.
2. The meaning and scope of "dealing in goods" and whether possession is necessary.
3. Applicability of Rule 25 for imposing penalties on dealers and manufacturers issuing invoices without supplying goods.
4. Liability of registered manufacturers for duty on goods cleared using Cenvat credit.
5. Validity of invoices issued without supplying goods for taking and passing on Cenvat credit.
6. Impact of Settlement Commission decisions on earlier transactions.
7. Imposition of penalties on directors, partners, proprietors under Rule 26 prior to its amendment.
Detailed Analysis:
1. Excisable Goods:
The term "excisable goods" includes goods specified in the Central Excise Act subject to duty. The duty-paid goods procured by dealers and manufacturers, who took Cenvat credit, are considered excisable goods. This imposes an obligation to account for the receipt, storage, and disposal of such goods.
2. Dealing in Goods:
"Dealing in goods" includes activities beyond physical possession, such as purchasing or selling. The dealers who diverted goods to the grey market and issued invoices without supplying goods were held to have dealt with the goods. The issuance of invoices for passing on Cenvat credit is considered dealing with goods "in any other manner."
3. Rule 25 Penalties:
The registered dealers and manufacturers who issued invoices without supplying goods rendered the goods liable for confiscation under Rule 25. Their actions justified penalties under Rule 25 of the Central Excise Rules, 2002.
4. Liability of Registered Manufacturers:
Manufacturers like M/s United Chain Industries and M/s Kay Iron Works, who availed credit on inputs without receiving goods, were liable to pay back the irregularly taken credit along with interest. They were also subject to penalties under Rule 13(2) of the CENVAT Credit Rules, 2001/2002, Rule 15(2) of the CENVAT Credit Rules, 2004, and Section 11AC of the Central Excise Act, 1944.
5. Validity of Invoices:
Invoices issued without actual supply of goods are invalid for taking and passing on Cenvat credit. The fraudulent issuance of such invoices by dealers and manufacturers led to the denial of credit and imposition of penalties.
6. Impact of Settlement Commission Decisions:
The Settlement Commission's decisions for ultimate users do not affect the liability of earlier parties (dealers and manufacturers). Each party's offense is considered separately, and the settlement by ultimate users does not waive the duty payable by manufacturers at earlier stages.
7. Penalties under Rule 26:
Penalties under Rule 26 can be imposed on individuals involved in dealing with goods liable for confiscation. However, penalties on proprietors of proprietary concerns were set aside as the concern and proprietor are not distinct entities. Penalties on brokers and commission agents were also set aside as their roles did not attract Rule 26 before its amendment. For directors and other individuals, penalties were reduced considering their roles and the penalties imposed on their respective companies.
Judgment:
- Appeals by M/s United Chain Industries and M/s Kay Iron Works were rejected.
- Appeals by various dealers were rejected.
- Appeals by proprietors and brokers were allowed.
- Penalties on directors and other individuals were partly allowed with reduced penalties.
- Stay petitions were disposed of.
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2009 (9) TMI 950
Disallowance u/s.14A - investments in shares and mutual funds - interest free funds - the assessee is engaged in the business of manufacturing of washing powder, detergent cakes, tooth paste, etc. in the name of ‘Hipolin’. It was explained to the AO that the assessee has made investment in shares out of the huge interest-free funds available in the form of paid up share capital and accumulated reserves. The total investment in shares is less than 1% of the said interest-free funds. AO disallowed proportionate expenses which amounted to ₹ 53,027/- which included interest of ₹ 9,403/- and administrative expenses of ₹ 43,624/-. the Ld CIT(A) deleted the addition.
HELD THAT:- the Hon'ble Bombay High Court in the case of CIT vs. Reliance Utilities Power Ltd.[2009 (1) TMI 4 - BOMBAY HIGH COURT] has held that it has to be first presumed that the investment were made out of interest-free funds available with the assessee. Therefore, no disallowance is called for. It is an undisputed fact that the assessee has substantiate share capital and reserves. Therefore, it cannot be said that investments in shares were made out of interest-bearing funds.
After hearing the parties, we decline to interfere with the order of the Learned CIT(Appeals), which is confirmed. Hence, this ground of Revenue is dismissed.
Taxability of Income - purchasing and selling shares - Long term capital gains or “business income”- issued a show-cause notice - AO treated a sum of ₹ 15,80,202 (Rs.7,85,405 + 7,94,796) as “business income” and taxed it accordingly. the Ld CIT(A) deleted the addition by holding that the scale of activities is not substantial and the assessee has shown the shares as investments in this balance-sheet. Dealing in shares is not a principal object of the appellant as can be seen from Memorandum of Association.
HELD THAT:- The assessee then referred to the decision of the ITAT Ahmedabad Bench “A” in the case(s) of ACIT vs. Himanshu J.Shah & Others in ITA wherein reliance was placed on the decision of ITAT Lucknow Bench in the case of Sarnath Infrastructure (P) Ltd. Vs. ACIT[2007 (12) TMI 261 - ITAT LUCKNOW-B], wherein it was held that if shares are transferred in the name of the assessee, then presumption is that the assessee does not intend to deal in shares.
After considering above rulings we cull out following principles, which can be applied on the facts of a case to find out whether transaction(s) in question are in the nature of trade or are merely for investment purposes : we find that:-
(1) the assessees did not have dealings in large number of scripts or large frequency of transactions which would warrant interference that it is trader.
(2) in the books of accounts the assessees has never treated the shares as stock in trade. Return of income have been filed prior to the search showing them as investments and profit there from as capital gains;
(3) the assessees have retained the shares for enjoying appreciation in value and not for the purpose of realization of profit. There is apparently no commercial motive which is an essential ingredient to be a trader. It is clearly shown by them in the returns of income filed that they are enjoying dividend income from holding shares as investment;
(4) It is not shown by the Revenue that stock of shares have been valued at cost or market price whichever is low but they have been valued at cost while computing the capital gains;
(5) the assessees have apparently discharged the primary onus by keeping record of investment showing holdings only as investment and not stock in trade. The primary onus has not been rebutted by the Revenue. The case of the Revenue is thus based merely on suspicion and on number of transactions carried in one or two years though which are not frequent if we spread them on monthly basis as observed by us above;
(6) assessees have always taken the delivery of shares and made them registered. It has been held in Sarnath Infrastructure (P) Ltd v. ACIT [2007 (12) TMI 261 - ITAT LUCKNOW-B] that once shares are registered in the name of the assessee, intention is clear that it is an investment and not a trade;
(7) There is no material on record to suggest that the assessee has fulfilled the legal requirement for dealing as a trader in shares.
These decision has been followed by the Mumbai Bench in the case of Gopal Purohit v. JCIT [2009 (2) TMI 233 - ITAT BOMBAY-G] and CBDT in Circular No.4/2007 dt.15.6.2007 has laid down the principles for holding as to when profits earned from transactions in share should be held as business or should be treated as investment.
Thus, the perception of the Department is that the nature of transactions in shares is trading in the case of the assessee on the ground of re-shuffling its portfolio is misplaced because once the assessee got the shares registered in its name, it has discharged the primary onus and it is now with the Revenue to show that in spite of shares being transferred/registered in the name of the assessee, the assessee could still be dealing in shares. This could be done by showing that frequency transaction is quite high or it is complying with the legal requirements of being a trader in shares.
Having not collected adequate material, we are of the view that the assessee cannot be treated as trader in shares particularly when its main business is in manufacturing and trading of detergent. It is also not correct to say that Memorandum and Articles of Association has not authorized the assessee to make investment in shares and securities.
Accordingly, we hold that the Learned CIT(Appeals) was justified in treating the gain in shares as “capital gain” and not as “business income”. In the result, appeal filed by the Revenue is dismissed.
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2009 (9) TMI 949
Expenditure incurred on payment of service charges to State Government - Nature of expenditure - ''business or personal''- Whether service charges paid by the respondent company to the State Government is eligible for deduction u/s 37(1) as held by the first appellate authority in the appeal filed against revised assessment which is confirmed by the Tribunal? - HELD THAT:-The claim of deduction has to be considered with reference to the peculiar circumstances of the company which has no discretion in regard to the payment of the service charges to the Government as it is bound to comply with the Government Orders. So much so, we are of the view that the parameters applicable in the case of a private company that too with respect to the claim for business expenditure, are exactly not applicable in the case of public sector company whether it is under the control of the State Government or Central Government. In fact, many public sector companies are not formed just to make profit alone but are supposed to achieve larger objectives for the Society and the State.
Section 37(1) is the residuary provision provided under the Income-tax Act enabling assessee engaged in business to claim all expenditure laid out or expended wholly and exclusively for the purposes of the business. By making payment of service charge, the respondent company has discharged only the obligation under Government Orders. It cannot carry on business by violating Government Orders and remain as a defaulter to the Government. Therefore, on the face of it, payment of service charge to the Government is a business expenditure and it is paid every year and the payment is mandatory for carrying on business. The expenditure so incurred by the company is not hit by the negative clauses in section 37 which are in the nature of capital or personal expenditure of assessee. Besides this, the payment is also not prohibited by law and so much so it is not hit by the Explanation contained in section 37(1). Therefore the payment is a bonafide expenditure incurred by the company for carrying on business which is not prohibited by law.
Whether the department’s case that the Government does not render service justifying payment of service charges by the company is tenable or not? - HELD THAT:- Government has charged only paltry sum per year. In the affidavit filed by the MD, the new lease rental payable at normal rate to the State Government during the years 1992-93 to 2001-02 by taking the land value at moderate rate. There can be no doubt that the Government has made major sacrifices by retaining the lease rental on a paltry sum. In fact, if lease rentals were increased by the Government instead of demanding and recovering service charges from the company, the department could not have raised objection against the payment of lease rental as a claim not allowable under the Act.
We notice from the Tribunal’s order that in respect of other companies under the control of the Government, the Government is charging various charges for their services in some cases based on turnover income and in certain cases based on quantity produced. On the whole, we find from the Tribunal’s order that the successful management of the company is mainly on account of the control and patronage from the Government. Therefore, the demand of payment of service charge is essentially a business expenditure allowable u/s 37(1).
Incentive given by the Government is in the form of sacrifices to its revenue by way of reduction or exemption for sales tax when the company finds it difficult to market the products - We notice from the Tribunal’s order that in respect of other companies under the control of the Government, the Government is charging various charges for their services in some cases based on turnover income and in certain cases based on quantity produced. On the whole, we find from the Tribunal’s order that the successful management of the company is mainly on account of the control and patronage from the Government. Therefore, the demand of payment of service charge is essentially a business expenditure allowable u/s 37(1).
Only the amount of service charges paid each year by the company. It may not be possible to exactly identify and value the services rendered by the Government every year and the incentives provided every year also may be varying. However, so long as the company made payment for all these years pursuant to Government orders, there is no justification for disallowing the amount in computation of the income. However, it will be open to the Central Board to take up the matter with the State Government so that service charges can be fixed by the Government on a rational basis.
We dismiss the appeals but with the above observation.
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2009 (9) TMI 948
Issues involved: Denial of deduction u/s 80-IA and disallowance of provision for leave encashment.
Denial of deduction u/s 80-IA:
The appellant, engaged in aluminum extrusions and wind energy generation, claimed 100% deduction u/s 80IA for profit earned by one unit, but AO treated all power generation units as a single 'eligible business' resulting in a negative profit. CIT(A) upheld AO's decision citing Supreme Court precedents emphasizing sec.80AB overriding effect. Appellant contended each power generation unit should be considered independently for deduction u/s 80IA. ITAT referred to a similar case where deduction was allowed on a unit-wise basis, not offsetting losses from other units. Thus, ITAT directed AO to allow deduction u/s 80IA on an undertaking-wise basis.
Disallowance of provision for leave encashment:
AO did not address this issue, and ITAT advised the appellant to approach the assessing authority for redressal. ITAT directed AO to review the grievance if within the stipulated time frame, dismissing the ground as premature.
In conclusion, the appellant's appeal was partly allowed by ITAT on September 4, 2009.
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2009 (9) TMI 947
Issues Involved:1. Whether the business activity of the assessee amounts to manufacturing activity. 2. Eligibility for deductions u/s 80HHA and 80-I of the Income-tax Act. Summary:Issue 1: Whether the business activity of the assessee amounts to manufacturing activity.The assessee, M/s. J.D. Farms, engaged in poultry farming, claimed that its activities amounted to manufacturing. The activities included hatching eggs, feeding, rearing, and slaughtering chickens using sophisticated machinery, producing various meat products. The Assessing Officer disagreed, citing the Supreme Court's judgment in CIT v. Venkateshwara Hatcheries (P.) Ltd. [1999] 237 ITR 174, which held that the business of hatcheries did not amount to manufacturing or production of articles or things. The Court noted that the formation of chicks is a natural process, and the assessee merely aids this process without contributing to the formation of chicks. Similarly, the Madhya Pradesh High Court in Indian Poultry v. CIT [1998] 230 ITR 909 held that rearing chicks to broilers did not amount to manufacturing. The Supreme Court affirmed this view in Indian Poultry v. CIT [2001] 250 ITR 664, stating that dressing poultry did not constitute manufacturing. The Supreme Court in CIT v. Relish Foods [1999] 237 ITR 59 also held that processing shrimps did not involve production or manufacture. The Court concluded that the assessee's activities did not amount to manufacturing or production of an article or thing. Issue 2: Eligibility for deductions u/s 80HHA and 80-I of the Income-tax Act.The assessee claimed deductions u/s 80HHA and 80-I, asserting itself as an industrial undertaking. The Assessing Officer disallowed these deductions, stating that the assessee was not engaged in manufacturing or production. The CIT(A) upheld this view. The ITAT, however, allowed the appeals partly, holding that the assessee's activities amounted to manufacturing. The High Court, referencing the Supreme Court's judgments, held that the assessee's activities did not qualify as manufacturing or production. Consequently, the assessee was not eligible for deductions u/s 80HHA and 80-I. The Court set aside the ITAT's orders and restored the assessment order passed by the Assessing Officer, ruling in favor of the Revenue. Conclusion:The High Court concluded that the assessee's activities did not constitute manufacturing or production of an article or thing, thereby disqualifying it from deductions u/s 80HHA and 80-I of the Income-tax Act. The appeal was allowed, and the assessment order was restored.
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2009 (9) TMI 946
The respondent-assessee borrowed funds for business purposes, paid interest, and claimed it as a business expenditure. The Assessing Officer disallowed the claim, but it was later allowed by higher authorities. The interest paid on the borrowed funds was considered a legitimate deduction under section 36 of the Income Tax Act, 1961. The appeal was dismissed as no question of law arose.
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2009 (9) TMI 945
Whether Education Cess levied and collected under Section 91 of the Finance Act, 2004 can be considered as a duty of excise for the purpose of grant of refund in cash or by way of self credit under N/N. 56/2002-CE - the decision in the case of COMMR. OF CUS. & C. EX., JAMMU Versus BHARAT BOX FACTORY LTD. [2008 (4) TMI 254 - JAMMU AND KASHMIR HIGH COURT] contested, where question is directly related to rate of duty, hence only remedy open to the Commissioner is to move the Supreme Court and this Court cannot entertain these applications under Section 35G, and the appeal was dismissed - Held that: - The appeal is admitted for hearing.
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2009 (9) TMI 944
Issues Involved:
1. Jurisdiction of Small Causes Court, Bombay.
2. Definition and rights of a tenant under the Bombay Rents, Hotel and Lodging Houses Rates Control Act, 1947.
3. Application of Article 142 of the Constitution of India.
Issue-wise Detailed Analysis:
1. Jurisdiction of Small Causes Court, Bombay:
The primary issue for consideration was whether the suit filed by the owner of the suit premises was maintainable before the Small Causes Court, Bombay. The defense argued that the Small Causes Court did not have jurisdiction if the plaintiff asserted that the respondent was not a tenant. The court referenced Section 28 of the Bombay Rents, Hotel and Lodging Houses Rates Control Act, 1947, which provides exclusive jurisdiction to specific courts, including the Small Causes Court in Greater Bombay, to entertain suits or proceedings between a landlord and a tenant relating to recovery of rent or possession of premises. The court concluded that the Small Causes Court at Bombay had no jurisdiction to entertain the suit filed by the owners because the appellants did not recognize the respondent as a tenant.
2. Definition and Rights of a Tenant under the Act:
The court examined the definition of "tenant" under Section 5(11) of the Act, which includes any person by whom or on whose account rent is payable and extends to members of the tenant's family residing with the tenant at the time of death. The respondent claimed tenancy rights as she was residing with the deceased tenant and was considered a family member. The Small Causes Court initially dismissed the suit, recognizing the respondent's claim to tenancy rights under Section 5(11)(c)(i) of the Act. The appellate court upheld this decision, noting that the respondent was a member of the deceased tenant's family and residing with her at the time of death, thus fulfilling the requirements to be considered a tenant under the Act.
3. Application of Article 142 of the Constitution of India:
The appellants requested the Supreme Court to exercise its power under Article 142 of the Constitution to direct the respondent to vacate the suit premises, citing prolonged litigation. Article 142 allows the Supreme Court to pass orders to ensure complete justice. However, the court noted that this power should not supplant substantive law or statutory provisions. The court referenced past judgments, emphasizing that Article 142 should be used sparingly and not to contravene statutory provisions. Consequently, the court declined the appellants' request to use Article 142 to order eviction.
Conclusion:
The Supreme Court dismissed Civil Appeal No. 5786 of 2002, concluding that the Small Causes Court at Bombay lacked jurisdiction to entertain the suit. Consequently, Civil Appeal No. 5787 of 2002 was also dismissed. The court directed that if the appellants filed a new suit along with an application under Section 14 of the Limitation Act, 1963, the time from the original suit's institution to the present day would be excluded from the limitation period. The court also directed that any such new suit and consequent appeals or revisions be disposed of within one year, given the prolonged duration of the case.
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2009 (9) TMI 943
Reopening of assessment - Nature of expenses incurred - revenue or capital - HELD THAT:- The scope of the proceedings u/s 147/148 are now well established by a catena of judicial precedents. By virtue of proceedings u/s 147/148 completed assessments cannot be reopened on a mere change of opinion i.e., on the basis of the same set of facts and material which were in the knowledge of AO, the AO cannot issue notices u/s 148 merely because it felt that a decision which has been taken earlier is not correct and needs to be corrected. The proceedings for reopening of assessment on the ground of income escaping assessment is an exception to the finality of the proceedings arrived at u/s 143(3) during the regular assessment proceedings of the assessment years.
The facts clearly show that since this very issue of the expenditure being treated as revenue or capital with respect to the expenditure incurred in the lease hold premises was dwelt upon by the AO. The impugned notices are, therefore, clearly misconceived and bound to be quashed. A reference to the reasons for reopening of the assessments, the italics portions, shows that there is no new material for reopening of the assessments and the officer issuing the notices in fact relies upon the record and the correspondence on the very subject in the regular assessment proceedings.
Clearly therefore, the notices are an abuse of the process of law because in the facts, such as those found in the present cases, if harassment to a citizen is allowed, then, the conclusiveness of the regular assessment proceedings will have no meaning because the very issue which was considered and mind applied, would lose its finality.
Therefore, the present writ petitions are allowed quashing the impugned notices issued u/s 148 and all the proceedings emanating therefrom. In view of the facts of the present cases, costs of ₹ 25 ,000 are awarded in favour of the petitioner and against the respondent.
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2009 (9) TMI 942
The Appellate Tribunal CESTAT Chennai allowed the appeal by remanding the case to the Commissioner for a fresh decision. The appellant can produce evidence of paying sales tax on material components to benefit from Notification No.12/2003-ST. The appeal was allowed by way of remand.
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2009 (9) TMI 941
Valuation - related person - the decision in the case of MODI SENATOR (I) PVT. LTD. Versus CC. (IMPORTS & GENERAL), NEW DELHI [2009 (3) TMI 808 - CESTAT, NEW DELHI] contested, where it was held that mere holding of shares by one party with proportional nominee Directors in the other company is not amounting to relationship to disqualify the transaction price - Held that: - the decision in the above case upheld - appeal dismissed - decided against Revenue.
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2009 (9) TMI 940
Issues Involved:
1. High Court's interference in the investigation process.
2. Jurisdiction and power of the High Court under Articles 226 and 227 of the Constitution of India.
3. The role of the courts in monitoring investigations.
Detailed Analysis:
1. High Court's Interference in the Investigation Process:
- The appeals challenge the Gujarat High Court's orders directing the manner and mode of investigation in FIR No. 254 of 2008.
- The High Court directed the Assistant Commissioner of Police, "C" Division, Ahmedabad City, to file a progress report and not to submit the final report without prior intimation to the Court.
- The appellant argued that the High Court's orders hampered the investigation and caused severe prejudice by taking over the investigation.
- Reference was made to Supreme Court decisions disapproving court interference in ongoing investigations, such as *Director, Central Bureau of Investigation & Ors. Vs. Niyamavedi* and *M.C. Abraham & Anr. Vs. State of Maharashtra & Ors.*, which emphasized that courts should refrain from directing investigations.
2. Jurisdiction and Power of the High Court under Articles 226 and 227 of the Constitution of India:
- The respondents argued that the High Court has wide powers under Articles 226 and 227 to direct public authorities to perform their duties in accordance with the law.
- The High Court's intervention was justified due to the tardy and slow progress of the investigation.
- The Supreme Court acknowledged that while courts generally do not interfere with investigations, they possess the power to do so in extraordinary circumstances to prevent miscarriage of justice.
- Cases cited by the respondents, such as *S.N. Sharma vs. Bipen Kumar Tiwari & Ors.* and *Kashmeri Devi Vs. Delhi Administration & Anr.*, supported the view that courts could intervene if the investigation was not conducted properly.
3. The Role of the Courts in Monitoring Investigations:
- The Supreme Court recognized that courts, particularly the High Courts and the Supreme Court, are the sentinels of justice and have extraordinary powers to ensure the protection of citizens' rights.
- The High Court's repeated intervention and orders were necessary to ensure diligent investigation.
- The Supreme Court disagreed with the appellant's contention that the High Court directed the investigation's manner and mode, noting that the High Court's monitoring was due to the slow progress of the investigation.
- The Supreme Court upheld the High Court's orders, stating that courts could monitor investigations when satisfied that the investigation was not proceeding properly or was influenced by interested persons.
Conclusion:
The Supreme Court dismissed the appeals, upholding the High Court's orders. It emphasized that courts have the power to monitor investigations in appropriate cases to ensure justice and proper conduct of investigations, particularly when there are extraordinary circumstances or indications of improper investigation.
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2009 (9) TMI 939
Legal Judgment: Supreme Court dismissed Civil Appeal. Delay condoned. (Citation: 2009 (9) TMI 939 - SC Order, S.H. Kapadia and Aftab Alam, JJ.)
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2009 (9) TMI 938
What is the classification of the four individual products namely Proactiv Solution Revitalizing Toner, Proactiv Solution Renewing Cleanser, Proactiv Solution Repairing Lotion and Proactiv Solution Refining Mask?
Whether CVD is required to be paid at the time of import of the Category-I products on a value determined under Section 4 or Section 4A of the Central Excise Act, 1944?
Whether CVD is required to be paid at the time of import of Category-II Products on a value determined under Section 4 or Section 4A of the Central Excise Act, 1944?
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2009 (9) TMI 937
Issues involved: Interpretation of Section 41C of the Bombay Sales Tax Act u/s Package Scheme of Incentive 1979, impact of subsequent legislative amendments, application of promissory estoppel, alleged discrimination and unreasonableness in legislation.
Summary:
The petitioners established Small Scale Industrial Units in a backward area under the Package Scheme of Incentive 1979. An Ordinance and subsequent Acts introduced limitations on gross fixed capital investment for entitlement under the Scheme. The petitioners challenged Act 16 of 1995, which imposed a limit not present in the original Scheme. The subsequent amendment to Section 41C by Act 19 of 1996 was not contested by the petitioners, despite being retrospective. The petitioners argued that Act 16 of 1995 was unreasonable and violated the doctrine of promissory estoppel, citing relevant case law. They claimed that denial of benefits due to subsequent legislation amounted to discrimination. The Court noted that the challenge was based on Act 16 of 1995, which was substituted by Act 21 of 1996, not under consideration. The entitlement certificate issued to the petitioners covered the period of operation of Act 16 of 1995, but their entitlement under Act 21 of 1996 was not raised. The Court held that the challenge to Act 21 of 1996 was not before them, and thus, the petition was dismissed. The petitioners were allowed to challenge Act 21 of 1996 separately if they deemed it necessary.
In conclusion, the Rule was discharged, and no costs were awarded. The Court clarified that the dismissal of the petition regarding Act 16 of 1995 would not prevent the petitioners from challenging Act 21 of 1996 independently in the future.
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2009 (9) TMI 936
The Supreme Court dismissed the appeal in the case with citation 2009 (9) TMI 936 - SC. Justices S.H. Kapadia and Aftab Alam presided over the case.
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2009 (9) TMI 935
The Delhi High Court dismissed the appeal as the assessee had established the identity and genuineness of companies investing in its share capital. The court held that if the companies had received cash deposits, it was the Income Tax Department's responsibility to take action against them. The judgment referenced the case of Commissioner of Income Tax Vs. Lovely Exports Pvt. Ltd. (216 CTR 195).
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2009 (9) TMI 934
Issues involved: Admissibility of cenvat credit of duty paid on tattoos used under sales promotion scheme; imposition of penalty.
Admissibility of cenvat credit of duty paid on tattoos:
The appeal addressed the issue of admissibility of cenvat credit of duty paid on tattoos used by the assessee under the sales promotion scheme for finished goods during the period from April 2003 to December 2003. The Tribunal had previously ruled on a similar issue for the appellant for the period from October 2001 to March 2003, concluding that the appellant was not eligible for the credit on merits. However, it was established that the duty demand was within the normal period of limitation, and no penalty was imposable. In the current case, the appellant sought the vacation of the penalty imposed, emphasizing that the duty demand fell within the normal period of limitation.
Imposition of penalty:
The facts of the present case were acknowledged to be identical to a previous case decided by the Tribunal, where it was determined that the demand of duty was sustainable but no penalty was imposable. Based on the reasons outlined in the earlier order dated 04.07.2008, the Tribunal held that the demand of duty was justified, while the penalty was deemed not imposable. Consequently, the appeal was rejected concerning the demand of duty and interest, while the penalty was set aside.
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2009 (9) TMI 933
Issues Involved:
1. Deduction of depreciation on plant and machinery.
2. Deduction of interest charged by clients, postage, telephone, telex expenses, and vehicle tax.
3. Levy of turnover tax (TOT) on materials supplied by clients.
4. Restrictive legal scope of charging provisions under Section 5B of the Act read with Rule 6(1)(c) of the Rules.
Detailed Analysis:
1. Deduction of Depreciation on Plant and Machinery:
The petitioner argued that depreciation on plant and machinery should be deductible as it is akin to hire charges for machinery used in the execution of works contracts. The Tribunal had disallowed this deduction, but the court found the argument persuasive. The court noted that the value of the machinery's wear and tear, quantified as depreciation, should be considered a deductible expense under Rule 6(4)(n)(iv) Explanation I, which includes "charges for obtaining on hire or otherwise machinery and tools used for execution of works contract." The court concluded that the depreciation claim is valid and should be allowed as it aligns with the statutory provisions and the principles laid down in the Supreme Court's judgment in Gannon Dunkerley & Co.
2. Deduction of Interest Charged by Clients, Postage, Telephone, Telex Expenses, and Vehicle Tax:
The petitioner claimed deductions for interest charged by clients, postage, telephone, telex expenses, and vehicle tax. The Tribunal did not address these deductions, but the court found that these expenses fall within the scope of "cost of establishment to the extent relatable to supply of labour and services" as per Explanation I to Rule 6(4)(n)(iv). The court held that these deductions should be allowed to avoid taxing amounts over and above the actual value of the goods, ensuring compliance with constitutional limitations.
3. Levy of Turnover Tax (TOT) on Materials Supplied by Clients:
The Tribunal upheld the levy of TOT on materials supplied by clients for use in the execution of works contracts, following the Supreme Court's judgment in Karya Palak Engineer, CPWD, Bikaner vs. Rajasthan Taxation Board, Ajmer. The court agreed with this position, stating that the value of materials supplied by the client, which goes into the execution of the works contract, should be included in the taxable turnover of the contractor.
4. Restrictive Legal Scope of Charging Provisions under Section 5B of the Act read with Rule 6(1)(c) of the Rules:
The court examined the restrictive legal scope of the charging provisions under Section 5B of the Act read with Rule 6(1)(c) of the Rules. The court emphasized that the charge under Section 5B should be confined to the value of the goods involved in the execution of the works contract and not exceed this value. The court interpreted Rule 6 in a manner that aligns with this principle, ensuring that the taxable turnover reflects only the value of the goods and not other components of the works contract.
Conclusion:
The court allowed the petition, setting aside the Tribunal's judgment to the extent it disallowed deductions for depreciation, interest charged by clients, postage, telephone, telex expenses, and vehicle tax. The court affirmed the levy of TOT on materials supplied by clients. The court's interpretation aimed to ensure that the taxable turnover under Section 5B reflects only the value of the goods involved in the execution of the works contract, in line with constitutional provisions and the Supreme Court's guidance in Gannon Dunkerley & Co.
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2009 (9) TMI 932
Issues involved:
1. Interpretation of Section 257 of Maharashtra Land Revenue Code, 1966 regarding the exercise of revisional power without a prescribed time limit.
Detailed Analysis:
The judgment in question revolves around the interpretation of Section 257 of the Maharashtra Land Revenue Code, 1966, specifically focusing on the exercise of revisional power without a prescribed time limit. The central issue addressed in the appeal is whether the power of revision under Section 257 can be exercised at any time, even in the absence of a specified time frame for such exercise. The case involves a land dispute concerning the ownership of a specific portion of land originally belonging to a landlord, which was later resumed by the state due to non-payment of occupancy price. The dispute arises from the subsequent allocation of portions of the land to different individuals, leading to a challenge of the original order passed by the Tahsildar in 1976.
The judgment highlights the sequence of events leading to the legal dispute, starting from the original landlord's failure to pay the occupancy price, resulting in the land being regranted and sold to tenants. The specific portion of land occupied by one of the tenants, Tukaram Sakharam Shevale, was not paid for and was eventually resumed by the state. The subsequent allocation of portions of the land by the Tahsildar in 1976 led to a challenge by the legal heirs of Tukaram Sakharam Shevale in 1993, seeking revision of the order.
The legal analysis delves into the provisions of Section 257 of the Maharashtra Land Revenue Code, emphasizing the absence of a specified time limit for the exercise of revisional power by the authorities. Drawing upon precedents and legal principles, the judgment cites relevant cases to establish the principle that where a statute does not prescribe a time limit for the exercise of revisional power, it must be done within a reasonable time frame. The judgment underscores the importance of maintaining legal certainty and preventing undue delay in the revision process.
Furthermore, the judgment scrutinizes the actions of the Sub-Divisional Officer in invoking revisional power after a significant lapse of time, highlighting that a delay of 17 years in exercising such power is unreasonable. The court deems the invocation of revisional power in this case as an abuse of process, especially considering that the affected party did not challenge the original order during his lifetime. Ultimately, the court allows the appeals against the legal heirs of Tukaram Sakharam Shevale, quashing the impugned orders and directing each party to bear their own costs.
In conclusion, the judgment provides a comprehensive analysis of the interpretation of Section 257 of the Maharashtra Land Revenue Code, emphasizing the need for the exercise of revisional power within a reasonable time frame to uphold legal certainty and prevent undue delay in legal proceedings.
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