TMI Tax Updates - e-Newsletter
January 12, 2013

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise Indian Laws

Articles

1. CORPORATE SOCIAL RESPONSIBILITY introduced in COMPANIES BILL, 2012

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. India’s Foreign Trade: December, 2012

2. NOTICE DATED 07.01.2013 INVITING EXPRESSION OF INTEREST, TECHNICAL AND FINANCIAL BIDS FOR MID CAREER TRAINING PROGRAM (MCTP) OF THE INDIAN REVENUE SERVICE (CUSTOMS & CENTRAL EXCISE) OFFICERS

3. 14 FDI Proposals amounting to Rs. 1310.60 Crore Approved by FIPB

4. Promoting Retail Investor Participation in Government Bonds

5. Statement of Srikant Kumar Jena on IIP, November 2012

6. Quick Estimates of Index of Industrial Production and Use-Based Index for the Month of November, 2012 (Base 2004-05=100)

Notifications

Customs

1. 114/2012 - dated 27-12-2012 - Cus (NT)

Amendment in On-site Post Clearance Audit at the Premised of Importers and Exporters Regulations, 2011

Circulars / Instructions / Orders

VAT - Delhi

1. PUBLIC NOTICE - dated 9-1-2013

System Assisted Assessment on the basis of 2A and 2B data mismatch for the Tax periods Second Quarter, 2012-13 and July, August, September, 2012.

Service Tax

2. F.No.01(32)/R(Judl.)/CESTAT/2012 - dated 21-12-2012

Appeals and Stay Applications are to be listed in the Cause List Chronologically age-wise.

FEMA

3. 73 - dated 10-1-2013

Uploading of Reports on FINnet Gateway

4. 74 - dated 10-1-2013

Foreign Direct Investment (FDI) in India - Issue of equity shares under the FDI scheme allowed under the Government route

5. 72 - dated 10-1-2013

Uploading of Reports on FINnet Gateway

6. 71 - dated 10-1-2013

Anti-Money Laundering (AML) standards/Combating the Financing of Terrorism (CFT) Standards - Cross Border Inward Remittance under Money Transfer Service Scheme

7. 70 - dated 10-1-2013

Anti-Money Laundering (AML) standards/Combating the Financing of Terrorism (CFT) Standards - Money changing activities

Companies Law

8. FILE NO.10/43/2005-CLB - dated 30-10-2012

Constitution Of Specified Benches Of Company Law Board - Amendment of Order [File No.10/43/2005-CLB], Dated 6-9-2012

Highlights / Catch Notes

FEMA

• Amendments to Foreign Exchange Management Regulations 2000: Streamlined Processes and Enhanced Compliance for Exporters Under FEMA.

  Notifications : AMENDMENT IN - FOREIGN EXCHANGE MANAGEMENT (EXPORT OF GOODS AND SERVICES) REGULATIONS, 2000 - Notification
  Visit to Get Source

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• Amendment to FEMA 16/2000-RB: Streamlining Transactions with Non-Residents under Foreign Exchange Management Act.

  Notifications : Receipt From, and Payment to, A Person Resident Outside India - Amendment in Notification No. FEMA 16/2000-RB Dated 3-5-2000 - Notification
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Corporate Law

• Amendment Issued to Update Company Law Board Benches, Streamlining Processes for Better Efficiency [File No.10/43/2005-CLB.

  Circulars : Constitution Of Specified Benches Of Company Law Board - Amendment of Order [File No.10/43/2005-CLB], Dated 6-9-2012 - Circular
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• Company Law Board Forms Specialized Benches for Efficient Decision-Making and Enhanced Operations Under Company Law Regulations.

  Circulars : COMPANY LAW BOARD HEREBY CONSTITUTES THE FOLLOWING BENCHES FOR THE PURPOSE OF EXERCISING AND DISCHARGING THE BOARD'S POWERS AND FUNCTIONS - Circular
  Visit to Get Source

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Case Laws:

• Income Tax

• 2013 (1) TMI 239
  Exemption under Sections 11 & 12 denied - undue advantage under the provisions of Section 80G - assessee trust treated as an AOP - assessee by way of donation received two post dated cheques from M/s Apollo Tyres Ltd. - Held that:- The post dated cheque for Rs.40 lac was given before 31st March, 2002 i.e. during the accounting year 2001-2002 and the cheque was duly honoured in April, 2002 when it was presented before the collecting bank. As the cheque had been honoured and the amount was paid to the assessee trust, the date of payment of cheque should be treated as the date on which the cheque was given. Had the cheque been dishonoured, things would have been different but as the cheque had been duly honoured, as laid down by this court in the case of The Commissioner of Income-Tax, Bombay South, Bombay vs. Messrs. Ogale Glass Works Ltd., Ogale Wadi (1954 (4) TMI 3 - SUPREME COURT) it will have to be presumed that the amount was paid on the date on which the cheque was given to the respondent assessee and, therefore, it cannot be said that any undue favour was done by the respondent-assessee to M/s Apollo Tyres Ltd - thus there was no violation of the provisions of Sections 13(2)(b) or 13(2)(h) - in favour of assessee..

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• 2013 (1) TMI 238
  Reopening of assessment - share capital received by the company was alleged to represent mere accommodation entries - ITAT deleted the addition made u/s. 68 - Held that:- A perusal of the order of the Tribunal shows that it has gone on the basis of the documents submitted by the assessee before the AO and has held that in the light of those documents, it can be said that the assessee has established the identity of the parties. Also the report of the investigation wing cannot conclusively prove that the assessee’s own monies were brought back in the form of share application money. As it is not the burden of the AO to prove that connection as u/s 68 the onus is upon the assessee to prove the three ingredients, i.e., identity and creditworthiness of the person from whom the monies were taken and the genuineness of the transaction. There has been no examination by the Tribunal of the assessment proceedings in any detail in order to demonstrate that the assessee has discharged its onus to prove not only the identity of the share applicants, but also their creditworthiness and the genuineness of the transactions. No attempt was made by the Tribunal to scratch the surface and probe the documentary evidence in some depth, in the light of the conduct of the assessee and other surrounding circumstances in order to see whether the assessee has discharged its onus under Section 68. Thus it appears that there has only been a mechanical reference to the case-law on the subject without any serious appraisal of the facts and circumstances of the case - appeal decided in favour of revenue.

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• 2013 (1) TMI 237
  Deduction u/s 54F - allowable with reference to sale consideration actually received on sale of plot of land at Lonavala reinvested in construction of the residential house OR the full value of consideration deemed to have been received as adopted by the AO - whether the appellant was entitled to deduction u/s 54F in respect of construction of only one of the two floors constructed above the existing residential house when the appellant explained that both the floors constituted one house only? - Held that:- Provisions of section 54F (1) states that the provisions of section (a) and (b) read with the explanation on 'net consideration' decides if any chargeable capital gains u/s 45 exists or not subject to the conditions specified therein. As per the provisions of section 54F(1)(a) no capital gains are chargeable u/s 45 if the cost of the cost of the new asset is not less than the net consideration in respect of the original asset. The principle of proportionate exemption vide clause (b) above is put into service. It is a settled issue that the provisions of section 54F are code by itself. Thus, provisions of sections 45, 48, 50C and 54F suggest that there is nothing to bar benefits of exemption u/s 54F in respect of the capital gains relatable to the FVC as per the deemed fiction u/s 50C. Clause (a) of section 54F(1) specifies that if the cost of the new asset is not less than the net consideration in respect of the original asset, there is no chargeable capital gains u/s 45. In the instant case, the cost of the new asset is Rs. 17,65,752/- and 'net consideration' as defined is '..the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer' i.e. Rs. 16,87,000 as per sec 50C and Rs. 8 lakhs as per the sale deed. The said clause (a) refers to the provisions of section 45. In the given facts of the instant case, no chargeable capital gains arises u/s 45, thus, in this case, with investment of Rs. 17,65,752/- in new asset, the cost of the new asset is not less than the net consideration (NC) in respect of the original asset. Of course, the 'net consideration' has two variants depending on FVC adopted and in this case, the NCs are quantitatively lesser than the cost of the new asset leaving no chargeable capital gains u/s 45. Therefore, the assessee is not chargeable to any capital gains considering the given facts of the case and also the said clause (a) of section 54F(1). The cost of the new asset is Rs. 24 lakhs and 'net consideration' as defined is '..the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer' i.e. Rs. 36 lakhs as per sec 50C and Rs. 20 lakhs as per the sale deed. Therefore, it is case where the cost of the new asset is not less than net consideration u/s 50C and more than the net consideration as per the sale deed. Therefore, the decision of the Tribunal in this case is distinguishable on facts. Therefore, clause (a) of section 54F(1) of the Act does not apply. Where the assessee invested total full value consideration of Rs. 16,87,000/- (as per the SRO) in the residential house, which is one house only as it has only one kitchen, and these FVC is less than the invested amounts of 17,65,752/-, during the specified period, the assessee is not chargeable to tax on the capital gains u/s 45. Therefore, considering the provisions of section 54F(1)(a) the order of the CIT(A) is not proper in denying exemption in respect of the capital gains relatable to the deemed full value of the consideration mentioned in section 50C of the Act. Accordingly, the grounds raised by the assessee are allowed and in favour of the assessee.

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• 2013 (1) TMI 236
  Disallowance u/s 14A r.w.r. 8D - assessee is engaged in the business of exporting goods and dealing in shares and securities - Held that:- No dispute about the fact that assessee was dealing in shares and securities and shares were held by him in stock in trade and therefore in view of the decision of Karnataka High Court in the case CCI Ltd. vs. Jt. CIT (2012 (4) TMI 282 - KARNATAKA HIGH COURT) and Apoorva Patni vs. ACIT [2012 (9) TMI 828 - ITAT, PUNE] wherein held that when the assessee has not retained shares with the intention of earning dividend income and the dividend income is incidental to his business of sale of shares, which remained unsold by the assessee, it cannot be said that the expenditure incurred in acquiring the shares has to be apportioned to the extent of dividend income and that should be disallowed from deductions. When no expenditure is incurred by the assessee in earning the dividend income, no notional expenditure could be deducted from the said income, thus no disallowance u/s 14A was called for - in favour of assessee

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• 2013 (1) TMI 235
  Reopening of assessment - loss in shares has been fraudulently claimed - bogus transactions - Tribunal dismissed the appeal of the department on technical ground without going to the merit of the case - Held that:- From a perusal of the reasons recorded by the AO it is found that he had simply recorded the finding in the assessment order passed for the assessment year 1996-97 and a vague reference was made that similar was the position in respect of the assessment year in question. Facts which have emerged from the assessment order for the A.Y.1995-96, are altogether different from those on the basis of which assessment has been reopened u/s 148 in A.Y.1996-97. Even after detailed investigation, the A.O. has not been able to find out that the appellant has purchased or sold the shares within short span of time or that shares have been purchased at a rate higher than the market rate as has been found in the A.Y.1996-97. In fact in the order of the A.Y.1996-97 there is only vague reference of A.Y.1995-96. From the perusal of the order it is absolutely clear that there is no reference to any transaction for the assessment year 1995-96. CIT was, therefore, perfectly justified in holding that the reasons recorded by the AO were not honest reason and there is nothing to show from this reason that income has escaped assessment and assessment has been primarily reopened with a view to make enquiries and conduct examination of various expenses debited to profit and loss account. This order has been affirmed by the Tribunal. The reasons recorded by the Assessing Officer do not show that they are relevant to reopen the assessment proceedings - ITAT was justified in dismissing the appeal of the department on technical ground without going to the merit of the case - in favour of assessee.

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• 2013 (1) TMI 234
  Penalty u/s 271B - Tax Audit u/s 44AB - Turnover - Speculative transaction - failure to get the accounts audited by a Chartered Accountant as per 44AB - assessee is an HUF which is engaged in online trading in commodities - Held that:- As the transaction of buying and selling of commodities is a speculative activity where no physical delivery is taken or given and in this view of the matter, following the parity of reasoning given in the case of Growmore Exports Ltd. (2000 (6) TMI 774 - ITAT MUMBAI), herein also inclined to hold that there was no turnover constituted in the amount of Rs. 1,86,66,488/- for the purposes of considering the liability of assessee to get the accounts audited u/s 44AB and hence, there was no requirement to get the accounts audited u/s 44AB. Thus, the penalty u/s 271B imposed by the AO is hereby directed to be deleted - in favour of assessee.

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• 2013 (1) TMI 233
  Exemption under section 54EC - AO allowed the claim - CIT issued notice u/s 263 as claim of deduction u/s 54EC was not acceptable as it was made beyond the time period of six months from the date of sale deed even 'beyond' the extended date i.e. 31.12.2006 - Held that:- It is evident that from the date of sale deed i.e. on 10.01.2006 the assessee had time limit of six months upto 10.07.2006 so as to invest the consideration for claiming exemption under section 54EC. However, as the paper book reveals, there is no effort stated to have been made by the assessee, which could lead to conclusion that she had applied for investment in bonds, but because of their non-availability, the investment could not be made. Notification F.No. 142/09/2006 TPL dated 30.06.2006 extended the time limit of six months envisaged by section 54EC upto 31.12.2006 which was followed by REC correspondence dated 01.08.2006. Even if it is presumed no evidence is forthcoming that the assessee ever applied for the bonds from any day upto 01.08.2006. There is no assertion on her part as to when the bonds are available thereafter. She only pleaded that on 22.12.2006, a cap was imposed on the maximum amount which could be invested in bonds i.e. Rs. 50.00 lakhs. In our opinion, the same is not relevant in the present case as the assessee's case is admittedly of investment of Rs. 35.00 lakhs. The assessee herself admitted that she did not invest in the bonds upto 31.12.2006. Rather her case is that she invested only on 27.01.2007 and the delay is attributed to non-availability of REC bonds. This, is not in consonance the express provision prescribing six months time limit which stood extended upto 31.12.2006. Unable to concur with assessee's contention that the time limit for investment which was admittedly extended by notification upto 31.12.2006 can be stretched upto 27.01.2007. Thus the assessee's claim of exemption u/s 54EC is not acceptable - against assessee.

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• 2013 (1) TMI 232
  Reopening of assessment - unaccounted cash credit with ex-MLA and an Ex-Minister - calling for total salary particulars including all allowances receivedin the capacity of Minster - Held that:- The assessee had received a gift of Rs. 22,76,750/-in U.S. dollars from an NRI, N.Mohan and the assessee had filed two confirmation letters, one in December 2006 and another on 10-07-2007 given by the donor stating that he had gifted the above amount to the assessee, his close relative. Donor is a man of means owning a software company of a net worth of US $ 25 million, that he had gifted during the year 2002-03 Rs. 2.00 crores to rebuild a government school, and got constructed a guest house for Sri Sitaramachandra Swami temple at Bhadrachalam. Copies of the income tax returns filed by the donor in USA were also filed by the assessee. Even though the assessee informed the department that the donor was available in India in December 2006 on account of the death of his mother-in-law and the contact details of the donor in India (address and mobile numbers), the department did not bother to contact him and verify the above facts. In this view of the matter, the assessee had discharged the burden cast on him to prove the identity of the creditor, the creditworthiness of the creditor and the genuineness of the transaction. Therefore, the contention of the Revenue that the said sum ought to be added to the income of the assessee cannot be accepted - no question of law, much less a substantive question of law arises for consideration in this appeal - against revenue.

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• 2013 (1) TMI 231
  Block assessment - ITAT held that two separate assessments should have been made in this case one for the block period concluded on 20.10.1995 and another on 16.07.1996 - addition made u/s 69 for Rs.30 lacs out of Rs.1.03 crore looted from the assessee to the block assessment - Tribunal deleted addition made u/s 69A - ITAT observed that the notice u/s 158BC as bad in law - Held that:- The assessment for the block period ending 31.10.1996 covers the block period from 25.8.1984 to 26.10.1995. The amount of Rs.30 lacs was requisitioned under section 132A from the police authorities on 16.7.1996 and therefore the addition of Rs.30 lacs was outside the scope of block period. The Tribunal having regard to the fact that though search and seizure action was carried out at the business as well as the residential premises of the assessee in which no document or any other evidence was found in regard to initial investment in speculation business, and in the statement dated 23.9.1996 in which the assessee had deposed that he has not made any initial investment in speculation business held that there was no scope to add any amount purely on the basis of estimate and thus directed the deletion of the amount of Rs.30 lacs, as also Rs.2 lacs. Whether deduction under Chapter VIA are to be given, if the entire income for all the years under the block period - any deduction under Chapter VIA due to the assessee in any previous year including in the block period will not form part of the undisclosed income for the block period. While computing income for the purposes of block assessment the assessee will be entitled for deduction and adjustment under Chapter IV and VIA of the Act - A.O. was accordingly directed to modify the order giving rise ot this appeal. Applying the ratio of the judgment in Chandra Prakash Agrawal (2006 (8) TMI 139 - ALLAHABAD HIGH COURT) to the present case, it is found that the Tribunal did not commit any error in recording findings that since nothing was found in the search operations on 26.10.1995 and that though the warrant of authorisation under section 132A was issued on the following day on 27.10.1995, the amount requisitioned was actually received after the permission of the Addl. District & Sessions Judge, Agra in Criminal Misc. Application no.54/95 under section 394/411 IPC for handing over amount of Rs.72 lacs to Income Tax Department, with certain conditions. The requisitioned amount was actually received on 16.7.1996 with the conditions imposed by the Addl. District & Sessions Judge that the Income Tax Department will be duty bound to produce in the Court the amount or any part or balance thereof and when so ordered by the Court or any superior court. The amount so received in pursuance to the warrant of authorisation under section 132A could not be subjected to tax in the block assessment period under Chapter XIVB. The requisitioned amount, thus, could not be added under section 69A in the block assessments of the assessees and to that effect notice under section 158BC, including the amount, which was requisitioned and brought into the hands of the income tax authorities beyond the period of block assessment, the notices under section 158BC was bad in law - in favour of assessee.

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• 2013 (1) TMI 230
  Disallowance u/s.43B (actual payment clause) - PLA balance of excise duty on vehicles,R&D Cess on vehicles and excise duty on spare parts - CIT(A) deleted the addition - Held that:- The issue stands decided in favour of the assessee by the Hon'ble ITAT in its own case for A.Y. 1999-00. The decision of the ITAT Special Bench of Chandigarh in the case of DCIT vs Glaxo Smithkline Consumer Health Care Ltd. reported in (2007 (7) TMI 334 - ITAT CHANDIGARH ) is directly on the issue of balances in PLA and is allowable deduction u/s 43B - in favour of assessee. Disallowance of customs duty paid on import of components - Held that:- Since CIT (A) had not granted relief to the assessee on this issue the ground becomes infructuous. In view of this, this ground stands dismissed - against assessee. Disallowance of customs duty on inventory in closing stock -AO disallowed the Appellant's claim u/s 43B - Held that:- This issue is covered in favour of the assessee by the decision of the ITAT in assessee’s own case for Assessment Years 1999-00, 2000-021, 2001-02 and 2005-06 in the light of the decision of Hon’ble Supreme Court in the case of Berger Paints [2004 (2) TMI 4 - SUPREME COURT] - in favour of assessee. Disallowance VRS payment u/s 35DDA - not in accordance with the Rule 2BA r.w.s.10(10C) - CIT(A) deleted the addition - Held that:- Guidelines in Rule 2BA where for the purposes of determining the taxability of the VRS payment in the hands of the individual employees and had nothing to do with the allowability of deduction of the VRS payment u/s 35DDA in the hands of the employer. As per the language of See. 35DDA, the deduction is allowable in respect of any VRS scheme and no conditions regarding the scheme are laid down. Under the circumstances, the deduction claimed would be allowable and the assessee gets relief to this extent decided by ITAT in assessee’s own case for Assessment Years 2004-05 and 2005-06 - in favour of assessee. No TDS before making more payments to non-residents u/s 40A - CIT(A) deleted disallowance - Held that:- Section 195 clearly shows that the deduction of tax is liable to be made by a person responsible for paying to the non-resident any sum chargeable under the provisions of this Act. The words “chargeable under the provisions of this Act clearly shows that the payment which is made by the assessee to the non-resident is liable to be taxed in India in the hands of the non-resident. Here it is noticed that the commission has been paid to the agents for the sale of the vehicles and re-imbursement of advertisement expenses incurred outside India. Obviously, these expenditures incurred outside India does not make them taxable in India under the Act and the non-resident itself is not taxable in India. In the circumstances, the provisions of Section 195 will not be attracted in the case of these payments and the CIT (A) was right in deleting the disallowances made - in favour of assessee. Expenses incurred for club membership of Private Clubs - CIT(A)allowed as business expenditure - Held that:- No reason to interfere with the order of the CIT(A) who has just followed the Tribunal order in the assessee’s own case for AY 2001-02 and the binding decision of the Delhi High Court CIT Versus NESTLE INDIA LTD. [2007 (4) TMI 180 - DELHI HIGH COURT] & CIT v. Samtel Color Ltd [2009 (1) TMI 26 - DELHI HIGH COURT]in respect of the issue in question - in favour of assessee. Disallowance of foreseen price increase on inputs both provision and actual payment - CIT(A) deleted the disallowance - Held that:- This issue has already been adjudicated in the assessee appeal to ITAT for AY 2003-04 wherein ITAT has remanded the matter to AO to grant appropriate relief to the assessee on this issue after considering all the relevant facts and after giving opportunity to the assessee & also mentioned that a consistent approach should be adopted by the department by allowing the deduction in question to the assessee either in AY 2003-04 or in AY 2004-05. As in AY 2003-04 CIT(A) has granted relief on above disallowance & the issue is already adjudicated in appeal for Assessment Year 2003-04, this ground of revenue’s appeal dismissed. Additional ground that the amount of subsidy raised by the applicant is in the nature of a capital receipt not exigible to tax - Held that:- It is a settled law that nature of the subsidy received has to be decided on the basis of the objective behind the grant of such subsidy. It is, thus, a mere question of applying of 'purpose test' as has been laid down recently by their Lordships of the Supreme Court in the case of Ponni Sugar (2008 (9) TMI 14 - SUPREME COURT) to the object stated in the relevant policy under which the subsidy/incentive is granted. As the entire documents are very much on records of the lower authorities, except that the said documents are not technically available in the records for the relevant assessment year 2004-05 in the interest of justice and equity, the ground taken in the cross objection by the assessee accepted and also admit the additional evidences as these additional evidences are necessary to do the substantial justice in the matter - appeal of assessee is allowed for statistical purposes.

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• Customs

• 2013 (1) TMI 229
  Benefit of BCD at the rate of 2.5% on non-coking coal - Commissioner (Appeals) has applied the notification no.21/2011-Cus. dated 01.03.2011 - concessional rate of duty of 3% BCD extended vide notification no.153/2009-Cus. dated 31.12.2009 (as amended by notification nos. 135/2010 dated 31.12.2010 and 46/2011 dated 01.06.2011 - Held that:- Impugned order is set aside to the extent it granted the benefit of concession at 2.5% as the imported goods are other than coking coal. The appeal is allowed and, consequently, the respondent shall be entitled to claim concessional rate of BCD at 3% only as was adjudged originally.

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• 2013 (1) TMI 228
  Confiscation of misbranded or unsafe goods - creamy butter peanut rejected on not conforming the standards at the purchasers end - FAA converted absolute confiscation into confiscation directed to the released on payment of redemption fine of Rs.50,000/- - Held that:- FAA while disposing the case, has recorded that the appellant had undertaken to reprocess the goods and complete details of processing will be kept and before exporting the goods it will be seen that the reprocessed the products would adhere to the conditions of Food Safety and Standards & Regulations, 2011 and the provisions of Food Safety and Standards Act, 2006 and the rules made there under. Thus FAA has correctly come to the conclusion by allowing the clearance of the consignment with a further order for redemption of the confiscated goods on payment of fine to Rs.50,000/- subject to the condition that the appellant shall furnish a bond with a bonk guarantee of Rs.l0 lakhs, undertaking to clear the impugned goods under the escort of customs officers,to keep the goods of separate place in their factory premises after verification by the Officers, maintain complete account of the process & to re-process the goods under the supervision of the Central Excise Officers, within 3 months to export the re-processed goods only after receipt of test report from the Chemical Examiner FDL, Vadodara & to pay the cost of staff (officers) deployed by the Department as prescribed by the Govt. of India, in advance.

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• Corporate Laws

• 2013 (1) TMI 227
  Whether the company court can order winding up of a company without ordering the petition to be advertised? - Held that:- The Supreme Court has observed in National Conduits (P) Ltd. (1967 (9) TMI 46 - SUPREME COURT OF INDIA) that an application for dispensing with the citation into the newspaper may be made even when there is an unconditional admission of the petition for winding up. It appears to us that that right cannot be denied.

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• 2013 (1) TMI 226
  Winding up proceedings - rights of Secured Creditors and workmen - almost 11 years have passed since the date on which the order for winding up of the company (i.e. 27.12.2001) came to be passed - Held that:- A plain reading of the Sec. 2(s) of the Act of 1947 clarifies that except the persons who stand covered under the exclusion clause all persons employed to do manual unskilled, skilled, technical, operational, clerical or even supervisory work for hire or reward are covered within the meaning of the term workmen.According to the said section, those persons who are "mainly" employed in managerial or administrative category (i.e. such duty should not be "incidental" to main duty) and/or those who are employed in supervisory category with wages exceeding prescribed limit stand excluded from the term "workmen" and consequently they would stand excluded for the purpose of section 529, section 529 A and section 530 of the Act. Therefore the submission that all those persons who were drawing Basic wages exceeding Rs. 2000/- should have been excluded, without having regard to the issue as to whether they were employed "mainly" in managerial or administrative capacity or were employed in supervisory capacity with wages exceeding prescribed limit, or not is not in consonance with the relevant provision. As the matter is required to be examined from the perspective that the company in liquidation was an engineering undertaking and that therefore while excluding the persons from the purview of the term "workmen", regard is required to be had to the definition under section 2(s) of the Act of 1947. Differently put all persons who were employed in supervisory category would not stand excluded only because they were employed in supervisory category unless each was drawing wages exceeding prescribed limit. Similarly merely because a person was drawing wages exceeding prescribed limit, he would not stand excluded (according to section 2(s) of Act of 1947), unless he was employed in supervisory category. Of course all persons employed mainly and purely in administrative or managerial capacity/category, would stand excluded. Out of the total claim amount which is determined by the chartered accountant i.e. quantification of workmen's claim, the amount allowed towards claim for wages towards privilege leave/earned leave shall be taken out. The said claim is not permissible for purpose of disbursement under Section 529A, and could not have been included in the quantification of workmen's claim. Therefore, to that extent correction shall be carried out by the chartered accountant. It is also held that in certain circumstances the secured creditors can come before the Company Court and claim priority over other creditors even though the said creditor is standing outside the winding up. On the premise that the secured creditor is standing outside the winding or that it has not relinquished its security, the disbursement under section 529-A of the Act cannot be denied to the secured creditors on the said ground, when the property over which the said secured creditors has a charge and such charge is registered under Section 125 of the Act is sold by the official liquidator and sale proceeds are received by official liquidator and are put up for disbursement under section 529-A of the Act. Creditors other than the workmen are concerned their inter-se rights (including right of priority in receiving disbursement) based on the nature and extent of charge held by them are not obliterated vis-a-vis the workmen. The provisions under section 529 and section 529-A of the Act do not, in any manner, admit or support the contention that while determining the distribution ratio for the purpose of distribution amongst the secured creditors and the workers, the debt of the secured creditors holding second charge should be excluded. The claim/debt of the secured creditors holding second charge is not to be excluded at the time of determining the distribution ratio for the purpose of distribution/payment between the secured creditors and the workmen. Workmen's claim that the dues of the mutual fund do not enjoy first charge over the properties and therefore the said claim should not have been included - As the objection against inclusion of the debt of secured creditors holding second charge is rejected, the aforesaid objection also stands rejected. The "distribution ratio" will have to be respondent-calculated and shall have to be determined afresh. Thus, the chartered accountant shall complete the entire process within two weeks and for that purpose official liquidator shall forward appropriate intimation with copy of this order to the chartered accountant. Two weeks time is granted to the secured creditors and the workmen to submit the details with supporting documents, to point out case of particular workmen, if any, in whose cases any error with regard to date of birth (and consequently in determining date of superannuation) or date of joining or date of death (in cases where any workman has died) or with regard to the wage as on relevant date (basic wage or VDA/FDA) have actually occurred. The chartered accountant shall verify as to whether cases of any person employed as senior engineer, senior engineer (project), senior programmer and senior officer treating basic wage of more than Rs. 2000/- or not and if any case of such category is found then claim of such person shall be taken out of the total claim of workmen and necessary correction shall be accordingly made. Claim of State Bank of Patiala - the claim in the sum of Rs. 27,19,360/- which is allowed by the chartered accountant vide report dated 17.2.2009 is not permissible at this stage of disbursement under Section 529A of the Act and that therefore the said amount will have to be taken out from the total claim amount quantified by the chartered accountant for State Bank of Patiala and necessary correction shall be made by the chartered accountant.

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• Service Tax

• 2013 (1) TMI 245
  Construction in respect of commercial or industrial building and civil structure services - appellants filed Six 'nil' returns in ST-3 form for the period September, 2005 to March, 2008 on 18/11/2008 - late fees on belated returns - Held that:- As the appellant were registered with the Service Tax Department for providing taxable services & during the period April 2005 to March, 2008 have not provided any service and also they have not filed any returns with the Department filling six ST-3 nil Returns belatedly on 18/11/2008. In view of the circular dated 23/8/2007 in the event no service is rendered by the service provider, there is no requirement to file ST-3 Return. Besides as per Rule 7C of the Service Tax Rule, in the event 'nil' returns are filed, the assessing officer had the discretion to waive the late fees for filing the ST-3 Returns. Thus it is a fit case to invoke the proviso to Rule 7C and waive the late fees relating to the Nil Returns filed during the period April, 2005 to March, 2008 - the appeals filed by the Appellants are hereby allowed.

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• 2013 (1) TMI 244
  Goods transport operator services - period 16.07.97 to 02.06.98 as per the retrospective amendment to the Finance Act, 1994 - Held that:- FAA held in favour of the assessee by relying upon the judgment in the case of Welspun Gujarat Stahl Rohren Ltd. (2010 (3) TMI 583 - GUJARAT HIGH COURT) and also in the case of Eimco Elecon Ltd. (2010 (7) TMI 477 - GUJARAT HIGH COURT). As in the appellant's own case, Division Bench of the Tribunal, Delhi has held in their favour holding that a show cause notice issued prior to retrospective amendment can be adjudicated while any show cause notice issued after amendment is hit by the limitation - same issue in the assessee's own case is decided in their favour by the Division Bench of the Tribunal, the impugned order passed by the first appellate authority is correct, legal and does not suffer any infirmity. The appeal filed by the Revenue is devoid of merits and hence is rejected.

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• 2013 (1) TMI 243
  Interest on delayed refunds - Held that:- Notification No 4l/07-ST dated 06.10.07 itself provides clearly that the relevant date for determination of limitation is the date on which proper officer of Customs makes an order permitting clearance and loading of the goods for exportation. Therefore the finding that the claim is time barred because it is filed beyond the period when counted from the date of ARE-1 is appears to be against the provisions Notification. This aspect has to be once again examined in the light of statute. Observation of the lower authority that interest is not admissible since provisions of Section 11BB of Central Excise Act, 1944 are not applicable is against the law. Provisions of Section 83 of Finance Act, 1994 clearly provide that provisions of Section 11BB are made applicable to service tax matters but this aspect has not been verified before rejecting the refund claim by both the lower authorities. The lower authorities appear to have not taken care to verify and record the facts correctly and have also not applied statutory provisions correctly. In the interest of justice, the impugned orders are required to be set aside and the matter is remanded to the original adjudicating authority to verify the facts within three months from the date of receipt of this order.

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• 2013 (1) TMI 242
  Residential and Industrial Construction Services - demand of service tax - Held that:- It is undisputed fact that the appellant is providing commercial construction as well as residential construction. But if any service tax liability has to be fastened upon the appellant, it is for the adjudicating authority to come to a conclusion as to what will be the amount attributable to the commercial construction activity as well as the residential construction activities. In the absence of any such bifurcation on the service tax liability, the matter needs to be reconsidered by the adjudicating authority. Set aside the impugned order of demand and remand the matter back to the adjudicating authority to reconsider the issue afresh after following the principles of natural justice.

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• 2013 (1) TMI 241
  Supply of bunkers to vessels, transportation and charter hire of assets - Supply of Tangible Goods Service (SOTG) - demand of service tax - Assessee is registered under the category of "Port Services" - Held that:- It is not permissible for anyone to supply water or bunker to vessels and to supply these items the port's authorization is a must. Further, from the sample invoices reproduced in the show-cause notice, it is seen that the invoice mentions "supply of fresh water by barge as per nomination". It has to be noted that in this case, supply of fresh water would include cost of procurement of water, transportation of the same to the vessel and other costs incurred in relation to provision of service in the port. Supply of water and bunker to vessels is part of port services. It has not been explained why the appellant suddenly came to the conclusion that supply of water is not covered by port services on 1/04/2007, except stating that the transaction is a sale and they got legal advice. Details of legal advice and whether legal advice had taken note of Board's Circular is not clear. Thus the fact that the water is supplied by barges to the vessels only by nominated persons by port and invoice is containing the description "supply of water" would, prima-facie go against the appellant. Supply of barges/vessels to the customers without agreement - The invoice raised by the appellant gives description "supply of boats/barges for transportation, port bunkering etc. and the rate shown is a specific amount per month. In the absence of an agreement, the only option available is to arrive at a conclusion based on the invoice. The invoice used the words "supply of boats/barges". Transactions where hiring/leasing were involved attract sales tax or VAT in many States. Further, allowing another person to use the goods without giving legal right or possession and effective control is treated as service. Since no Sales Tax has been paid and no evidence has been shown that the transaction is a transaction of right to use and was liable to sale tax, the natural conclusion would be that the transaction is supply of tangible goods for use without parting with the right of possession and control. In the absence of any agreement, the only document available are invoices and invoices do not support the claim of the appellant. The appellants have not made out a prima-facie case in their favour - since the matter has to be heard in greater detail to understand the nature of transaction at least a portion of the amount demanded as pre-deposit is required appropriate to Rs.3.5 crores within 8 weeks from today and report compliance on 05/02/2013.

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• Central Excise

• 2013 (1) TMI 225
  Rebate claim - excise duty paid on goods procured from manufacturers initially for home consumption but subsequently exported - Commissioner (Appeals)allowed the rebate claim - Commissioner Central Excise, Delhi-II being dissatisfied directed the Asst. Commissioner (Tech.) to file a revision application before the Central Government in terms of Section 35EE(1A) - Held that:- It is open to an assessee who feels aggrieved by an order passed by the Central Government under section 35EE to strain every nerve to challenge the same in appropriate proceedings, that is only a constitutional means of seeking redress. But that is not true in the case of an order of the Central Government passed under section 35EE which is sought to be challenged by the Central Government itself – i.e., the authorities executing the Act, which is a central Act. There is an inherent impossibility or contradiction in countenancing such a view, in addition to fostering indiscipline and chaos in the administration of the Act.The respondent is right in relying on sub-sections (5) and (6) of section 35EE to point out that in case the Central Government suo motu decides to issue notice to the assessee to enhance the penalty or fine or duty and after hearing the assessee decides to drop the proceedings, no grant of any opportunity to the Commissioner of Central Excise or any other officer executing the Act is envisaged. This shows that if the Central Government is of the view that the order of the Commissioner (Appeals) is legal and proper and requires no interference (by way of enhancement of duty, fine or penalty), there is no right conferred upon the Commissioner of Central Excise to challenge the decision to drop the proceedings. If the Commissioner of Central Excise chooses to take the appeal route against the order of the Commissioner (Appeals) to the CESTAT, he may lawfully pursue his challenge right up to the Supreme Court. But if he chooses to take the revisionary route and question the legality and propriety of the order of the Commissioner (Appeals) before the Central Government under section 35EE, he must, if the decision of the Central Government goes against him, accept it as final. The section does not recognise any grievance that the Commissioner may nurse against the decision of the Central Government. In short, the Commissioner of Central Excise cannot claim to be more loyal than the King!

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• 2013 (1) TMI 224
  Non-compliance with Section 35F - Non compliance Pre deposit orders and report compliance on time - Held that:- Not found prima facie case for the appellant before the Commissioner (Appeals) as most part of the impugned demand resulted from denial of CENVAT credit on trading activity. Prima facie, the assessee could not have staked a good claim before the Commissioner (Appeals) expressing their willingness to pre-deposit 30% of the aforesaid amount. The stand taken by the Commissioner (Appeals) cannot, on principle, be faulted. However, considering the plea of financial hardships, a little more time could have been given to the assessee for making the pre-deposit. Now that much time has elapsed since then, the appellant should be in a position to make pre-deposit of a reasonable amount, thus directed them to pre-deposit an amount of Rs.10/- lakhs within four weeks and report compliance to the Commissioner (Appeals) on or before 7.2.2013, whereupon the Commissioner (Appeals) shall take up the appeal (filed against the order-in-original) for disposal on merits without insisting on pre-deposit of any further amount.

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• 2013 (1) TMI 223
  Reversal of charge of collection of an amount of 8% of the value of exempted goods - invoking provisions of Section 11D - Held that:- The scheme of Central Excise duty payment is that a manufacturer removed goods from the factory of production after payment of duty. While selling the goods, the manufacturer recovered the duty so paid. In doing so, an assessee is recouping the tax already paid. The arrangement is not that the assessee first collected the tax from the buyer of the goods and then remits the amount to the government. Section 11D has to be read keeping this scheme in view. Therefore, the provisions for every person who is liable to pay duty........ and has collected any amount from the buyer of any goods in any manner representing as duty of excise, shall forthwith pay the amount so collected to the credit to the Central Government has application only when equivalent duty had not been deposited at the time of removal of the goods. The scheme of the law is that manufacturers shall not collect amounts falsely representing them as central excise duty and retain them, thus, unjustly, benefiting themselves. In the present cases irrespective of whether the 8% payments were duty or not) since the 8% amount remain already paid to the revenue, and no amount is retained by the assessee, Section 11D has no application. The real identity of the amount collected (whether excise duty payable or not) is of no relevance for Section 11D - the provisions of Section 11D of Central Excise Act, 1944, is liable to be set-aside.

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• 2013 (1) TMI 222
  Captive consumption of sterilized/distilled water - Excise duty on the distilled/ sterilized water cleared as a combo pack called as Rabipur vaccine - Held that:- Finding force in the contentions raised by assessee that the first appellate authority has not considered the Notification No.3/2005-CE, dt.24.02.2005, which exempts distilled or sterilized or conductivity water of similar purity used in the factory of production - the appellant has requested FAA to decide the matter on merit without appearance and hence this point, could not be properly considered by the first appellate authority. Thus set aside the impugned order and direct the FAA to reconsider the issue following the principles of natural justice.

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• 2013 (1) TMI 221
  Excise duty liability on waste & scrap arising out of the capital goods - Held that:- Persuing the annexures 1 to 6 attached to the appeal memoranda it is found that that scrap which was cleared was of various different categories like used empty oil cans/drums, electric wires, plastic bags etc. and did not include any items of a capital goods thus the issue needs to be appreciated by the adjudicating authority again as adjudicating authority has not considered the details given in annexure 1 to 6 given to him during the course of personal hearing.

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• 2013 (1) TMI 220
  Ineligible cenvat credit - claimed credit on same products doubly - rejection of appeal for non compliance of the stay order - non payment of pre-deposit of Rs. Two lakhs towards penalty - Held that:- The issue involved in this case is squarely covered by the case of Aries Dyechem Industries vs. CCE, Ahmd.(2010 (1) TMI 421 - CESTAT, AHMEDABAD) and submits that the first appellate authority has not recorded any finding on the merits of the case. The appellant has already reversed the entire amount of ineligible cenvat credit of Rs. 19,53,307/- confirmed by the adjudicating authority under protest. Thus the FAA should have considered this amount as enough deposit to hear and dispose the appeal - set-aside the impugned order and remand the matter back to FAA to take up the appeal for disposal on merits, without insisting on any further pre-deposit.

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• Indian Laws

• 2013 (1) TMI 240
  Dispute referred to arbitration - Agri Horticultural Society maintaining a huge garden with a florist shop appointment of person to look after the shop on commission basis - agreement entered initially for 13 years with option for renewal for the identical period - on December 13, 2006 the society did not renew the agreement & appellant did not vacate that resulted in a dispute - Held that:- As per Clause 3 of the agreement the society would remain in possession of the flower unit being “legal, physical and symbolic” and the appellant would have to deposit the duplicate key of the doors with the society that would remain with them. It was agreed further that the appellant would deposit the key to the security or any authorised representative after the close of the day and collect the key on the next day. Interpreting Clause 3 it could not be said, the appellant was in exclusive possession. If the appellant were not in exclusive possession neither he would be entitled to claim protection under the tenancy law as a tenant or property law as permissive occupant with exclusive possession. The agreement admittedly expired on December 13, 2006. He remained in permissive possession up to May 2007 when the society asked him to vacate. As per Clause 24, he would attract penalty of Rs.5,000/- (Rupees five thousand) per day as liquidated damage. Thus once the Arbitrator held that by virtue of the agreement the society did not part with possession of the flower unit and the appellant was only entrusted to run the unit on the terms and conditions stipulated therein including the one that he would have to collect the key every morning and deposit the same at the end of the day after close of the unit the Arbitrator was well within his right to direct delivery of possession. The Arbitrator came to conclusion that the agreement would denote the society would get back possession on the termination of the agreement by afflux of time or otherwise. From the case made out by the appellant, the breach under the agreement was a foregone conclusion, as the appellant’s claim for exclusive possession through tenancy was held to be not correct in view of well-settled principle of law. There could not be any further scope to adduce evidence. Arbitrator is the master of his own procedure. It is not expected, he would rigidly follow the procedural law that was available in a regular civil action. Resolution of a dispute through domestic forum would not attract such procedure to be rigidly followed. Once we are satisfied, ample opportunity was given by the Arbitrator to the appellant to defend the action brought against him the Award would pass through the test of “audi alteram partem”. The learned Single Judge very rightly declined to interfere with the Award, so do we.

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