Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 14, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Waiver of interest imposed u/s 234A - delay in filing the returns for the assessment year 2001-02 and 2002-03 - No reason to find any illegality or arbitrariness in the said decision nor can it be stated to be unreasonable. - HC
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Additions u/s 68 and section 2(22)(e) - addition made is on account of gift which is nothing but loan - addition if any could have been made in the year of loan - AT
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Revision of orders prejudicial to revenue - There was a failure on the part of the AO to make such enquiry in order to ascertain the nature of the expenses whether capital or revenue, thus the order was erroneous and prejudicial to the interest of the Revenue - AT
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Exemption under Sections 11 & 12 denied - 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) - SC
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Deduction u/s 54F - 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. - AT
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Disallowance u/s 14A r.w.r. 8D - 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 - AT
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Tax Audit u/s 44AB - Turnover - Speculative transaction - there is no physical delivery hence no turnover constituted in the amount of Rs. 1,86,66,488/ - Tax audit not required. - AT
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Exemption under section 54EC - 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. - AT
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Unaccounted cash credit with ex-MLA and an Ex-Minister - Even though the assessee informed the department that the donor was available in India in December 2006, the department did not bother to contact him and verify the facts - No addition - HC
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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 - HC
Customs
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Differential duty arising as a result of finalisation of provisional assessment - order taking a view that the assessment is final and therefore the show-cause notice and further proceedings initiated were unwarranted and therefore was invalid cannot be sustained. - AT
Service Tax
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A government authority doing an activity as per a mandate in an Act of the legislature by itself cannot take away the character of service from the activity. - AT
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Whether long term lease of 90 years will be covered by the meaning of “renting“ or “leasing“ used in section 65 (105) (91a) - prima facie in favor of assessee - AT
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Late filing of Service Tax Returns (ST-3) - 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 - AT
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Interest on delayed refunds - service tax - Provisions of Section 83 of Finance Act, 1994 clearly provide that provisions of Section 11BB are made applicable to service tax matters - AT
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Supply of bunkers to vessels, transportation and charter hire of assets - Supply of Tangible Goods Service (SOTG) - demand of service tax - pre-deposit is required appropriate to Rs.3.5 crores - AT
Central Excise
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Making of ‘Prasad’ and ‘Mishri’ from sugar does not amount to manufacture and hence ‘Prasad’ and ‘Mishri’ can neither be charged to duty of excise by classifying them neither under 1704.90 nor under any sub-heading of 1701. - AT
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Whether the revenue with the aid of Rule 9 of PMPM Rules, 2008 framed u/s 3A CEA, 1944 can levy and charge excise duty for the period before the commencement of production in the unit - Pan Masala Packing Machines - held no - AT
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Extended period of limitation - demand - changes in tariff structure of Chapter 52 by introducing a new heading 5202 - non-payment of duty cannot be attributed to fraud, willful misstatement, suppression of facts on contravention of provision of Rules with intent to evade the payment of duty. - AT
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Commissioner of Central Excise cannot claim to be more loyal than the King! - HC
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Reversal of charge of collection of an amount of 8% of the value of exempted goods - invoking provisions of Section 11D - The real identity of the amount collected (whether excise duty payable or not) is of no relevance for Section 11D - AT
VAT
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KVAT Act - demand of additional security f Rs.50,00,000/- - orders demanding additional security and registration cancelled set aside - matter remanded for fresh decision - HC
Case Laws:
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Income Tax
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2013 (1) TMI 266
Waiver of interest imposed u/s 234A - delay in filing the returns for the assessment year 2001-02 and 2002-03 - Held that:- It is a fact that the documents were given to the petitioner only after more than two years. But the reasons stated by the Chief Commissioner would unequivocally indicate that initially the request was made to release the books of accounts and documents; then the returns were prepared even without the originals. The assessee had requested for copies of the books and documents only by 23/03/2004 which was later supplied after the alleged delay. But it is indicated that from the returns it was found that unaccounted transactions have been included, the same could have been done without verification of the records. Though the assessee was requesting for the records it did not make any difference as the returns were not in terms with the documents produced and there were unaccounted transactions. This finding of fact by Chief Commissioner has resulted in not exercising the jurisdiction to waive interest completely. However, a small concession has been granted on account of the fact that there had been some delay on the part of the department in providing the copies of the documents. Therefore, this is a case where the assessee was only trying to point out the non-availability of records as a reason for not filing the returns in time. Returns were considered and Exts.P12 and P13 assessment orders were passed intimating the unaccounted transactions also. That being the situation, there will be no justification for this Court to extend the scope of judicial review to Ext.P15 order. No reason to find any illegality or arbitrariness in the said decision nor can it be stated to be unreasonable. This Court cannot sit in appeal against the said finding of fact by the Chief Commissioner. In the light of the above discussion, the writ petition fails and the same is dismissed.
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2013 (1) TMI 265
Addition on account of foreign traveling expenses - A.Y. 2006-07 - Held that:- The assessee, for the first time, has taken a plea that these expenses were subject to FBT and there was payment on FBT also by the assessee and therefore, no further disallowance was called for placing reliance on unreported decision in the case of Hansraj Mathuradas (2012 (10) TMI 300 - ITAT, MUMBAI) however, copy of the same was not furnished. Therefore, the benefit of the decision cannot be given - matter restored back to the file of the A.O. for fresh adjudication - in favour of assessee by way of remand. Expenses incurred by the assessee on foreign travels of third party - Held that:- during the assessment year 2005-06 relief was given to the assessee by CIT(A) on the ground that assessee was able to make out a case that the persons who made foreign trips also conducted business on behalf of the assessee and therefore, restricted the disallowance of the foreign traveling expenses to 50% of the expenses claimed and that order of ld. CIT(A) was confirmed by the ITAT, however, in the year under consideration no such case was made out on behalf of the assessee that the persons who made foreign trips conducted business on behalf of the assessee and therefore, CIT(A) has categorically mentioned that the expenses incurred by the assessee on foreign travels of third party including sons and nephews of the partners were not incurred wholly and exclusively for the purpose of business and therefore he has confirmed the action of the A.O. in disallowing expenses of Rs.14,55,625/- - against assessee. Bifurcation of exhibition and advertisement expenses towards EOU units - Held that:- CIT(A) has confirmed the addition made during the year under appeal on the ground that assessee has not been able to produce any evidence in support of its contention that the expenditure was incurred only for the purpose of non- EOU division. There is no dispute about the fact that these expenses have been entirely debited to the non-EOU division. CIT(A), therefore, was of the view that these expenses have been debited to the non-EOU division to reduce its tax liability. Before us also the assessee has failed to substantiate its claim that this expenditure was incurred only for non-EOU division. Only general submissions have been made and in support of that submission no evidence whatsoever has been put on record - against assessee. Lumpsum addition out of factory expenses, sawing labour, postage and angadia expenses - Held that:- CIT(A) found that most of these expenses have been incurred in cash and were not supported by vouchers. Thus, these expenses, according to AO were not verifiable and he, therefore, disallowed 10% of these expenses amounting to Rs.4,69,474/- and added the same to the income of the assessee - no evidence was produced to interfere with the order passed by the CIT(A) - against assessee.
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2013 (1) TMI 264
Business income derived from “Trade Mark Licence Fee” - whether directly connected with exploitation of business asset treated as income from other sources - Held that:- Undisputably, the income from royalty in respect of Liberty brand earlier used by the other group entities has been assessed under the head ‘Income from Other Sources' and the decision of the AO/ CIT(A) has been accepted by the assessee. The aforesaid agreement dated 31.12.2003 further mentioned that LSL had been using Liberty brand since 1986 and shall continue to use it till perpetuity irrespective of the said agreement. Though the assessee tried to distinguish the facts on the ground that in the year under consideration exclusive right of use of brand 'Liberty' was allowed to Liberty Shoes Ltd., the assessee did not explain as to how this fact can change the nature of income. Accordingly, following the past history of the case and orders of his predecessors, CIT(A) held that fees received in lieu of allowing the use of brand 'Liberty' is to be assessed under the head 'Income from other sources'. In the decision relied upon by the assessee in Rieta Biscuits Company P. Ltd.,(2007 (8) TMI 311 - PUNJAB AND HARYANA HIGH COURT) keeping in view the principles of consistency once the issue on the merits has been decided against the Revenue on the same issue during the subsequent assessment years, Hon’ble High Court did not take a different view on a technical reason. This decision rather supports the case of Revenue, the assessee having all along accepted that income from royalty for use of Liberty brand by LSL since 1986 is to be assessed under the head ‘Income from Other sources’ - against assessee. Disallowance of advertisement and sales promotion expenses - Held that:- Liberty Footwear Company in the AY 2004-05, the AO made an adhoc disallowance while the CIT(A) called for the relevant bills and vouchers. Since the assessee failed to produce certain bills for the AY 2004-05 mentioned in the name of Liberty Shoes Ltd., CIT(A) upheld the disallowance. The assessee though referred to the details placed in the paper book, did not explain as to why the relevant bills and vouchers were not placed before the lower authorities. Even before us situation is no better. In the absence of relevant bills ,no interference with the findings of the CIT(A) in the AY 2004-05 is called for - In the AY 2005-06, the assessee did not dispute the findings of the AO that since the assessee has given all the rights to Liberty Shoes Ltd., it did not carry on any business in the period relevant to AY 2005-06 & similar is the position in the AY 2006-07 - no hesitation in upholding the disallowance confirmed by the CIT(A) to the extent of Rs.11,61,401/- out of golden Jubliee Celebration expenses & Rs.2,01,648/- out of advertisement expenses in the AY 2005-06 & Rs.44,770/- in the AY 2006-07 - against assessee. Disallowance of written of assets and receivables, depreciation in respect of Central House and Saharanpur Office, property tax - Held that:- Since the assessee did not furnish any details & evidence regarding the assets written off and receivables either before the AO or the CIT(A) and nor even before us, in the absence of any basis, no interfere is called for - against assessee. Disallowance of 1/4th car expenses and depreciation on car - Held that:- Submissions of the assessee that all cars were used by the Directors of the Liberty Shoes Ltd. and also by its partners to carry out administrative, manufacturing and sales activities and the assessee having not produced any evidence such as log book etc. while the entire business was let out as a going concern to Liberty Shoes Ltd. with the stipulation that the assessee firm will not engage itself in the business (clause 4(a) of the Agreement), CIT(A) upheld the disallowance. Since the assessee did not place any material controverting the aforesaid findings of the CIT(A) to take a different view in the matter grounds relating to disallowance of car expenses and depreciation on car are dismissed - against assessee. Disallowance of legal expenses for renewal of registration of ‘Liberty’ brand - Held that:- No evidence in support of the aforesaid claim or the bills of Law Firm, M/s Anand & Anand, Advocates, New Delhi and correspondence ,if any carried out with the competent Authority was placed before the lower authorities and nor even before us. Moreover clause 4(f) of the agreement between the assessee ,Liberty Footwear Company and Liberty Shoes Ltd. entitles the assessee to reimbursement of these expenses from LSL. In the case of Liberty Group Marketing Division, the ld. CIT(A) observed that it is difficult to appreciate as to how a trade mark can be owned by two firms nor the assessee furnished a copy of relevant bills of the advocate in order to ascertain the exact nature of services rendered by the said advocate - against assessee. Disallowance of bonus expenses- Held that:- Exgratia paid to same staff had been allowed by the AO but not the bonus. Considering the facts and circumstances of the case, especially when the AO did not record any findings as to whether or not the amount was claimed on payment basis, we consider it fair and appropriate to vacate the findings of the CIT(A) and restore the matter to the file of the AO with the directions to allow another opportunity to the assessee to establish its claim of bonus on payment basis - in favour of assessee for statistical purposes. Disallowance of depreciation on additions to building - Held that:- Since the new building was not used for the purposes of business of the assessee, CIT(A) rejected the submissions of the assessee. Similar is the position in the AY 2007-08 in Liberty Enterprises and in the AY 2006-07 in the case of Liberty Group Marketing Division. Since the assessee did not dispute these findings recorded by CIT(A) nor placed before any material controverting the aforesaid findings disallowance warranted - against assessee. Disallowance of claim of passenger tax - Held that:- Indisputably. the entire business activities of the assessee have been transferred to M/s Liberty Shoes Ltd. to whom the assessee leased its assets, including the personnel and all the expenses relating to manufacturing and carrying of business are to be met by the lessee. The ld. CIT(A) observed that as per clause 6(i) & (iii) of the agreement, reimbursement of employee costs included wages and other statutory payments by the LSL while reliance placed on clause 4(4) and 4(i) was of no help since the same did not cover payment of passenger tax on the buses - against assessee. Disallowance of transfer of duty entitlement - Held that:- As the assessee did not rebut the findings of the AO that the liability did not relate to the year under consideration before the CIT(A) and nor even before us disallowance is warranted - against assessee. Disallowance of establishment expenses - Held that:- There is no apparent basis for restricting the disallowance to 50%, especially when the CIT(A) did not dispute the submissions of the assessee that services of the minimum staff kept with assessee were essential. In the absence of any cogent basis for restricting the disallowance to 50%, the findings of CIT(A) reversed and allow the claim of the assessee - in favour of assessee.
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2013 (1) TMI 263
Penalty u/s 271(1)(c) - notice under Section 153A - Held that:- A plain look at the copies of the seized material discloses that recordings were made in a systematic manner in a tabular form. The other papers when perused disclose that they are entries made on plain paper with calculations, initials and signatures. When confronted with these pages a group company of the assessee M/s BPTP Ltd. submitted that the expenditure does not pertain to it. It further argued that there is no question of booking the same in its books of accounts. There after M/s Business Park Construction Co.Ltd. the assessee company stated on 24.12.2009 that they are unable to explain these documents. It further stated that, it has no grievance if addition is made on account of these papers subject to no penalty being levied. Thus on facts, the assessee company failed to explain these seized papers and offered the amounts mentioned therein to tax with a condition that no penalty should be levied. On these facts the penalty was rightly levied and upheld by the Ld.CIT(A) as assessee M/s Business Park Construction Co.Ltd. has at no stage attempted to explain the seized documents. The explanation given by M/s BPTP Ltd. of the seized documents, does not come to the rescue of the assessee. The assessee in this case has not stated that the documents in question does not belong to it. It is not the case of the assessee that entries recorded in these documents are not expenditure incurred by it or that they are dumb documents. All that the asssessee stated is that, it is unable to explain the documents. It is well settled that there is no estoppel against law. There is no agreement possible for non levy of penalty. Had the assessee furnished an explanation as regards the seized documents, the question of considering whether such explanation is bonafide or not would arise. In this case the assessee has not attempted to explain any of the seized documents, even during the course of penalty proceedings - appeal decided against assessee.
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2013 (1) TMI 262
Seeking rectification of the order of the Tribunal - the ratio laid down by the Hon'ble AP High Court in the case of Rajlaxmi Trading Co. v. CIT 2001 (2) TMI 84 - ANDHRA PRADESH HIGH COURT] is not applicable to the facts of the assessee's case as the same is not concerned with stock-in-trade, but deals with capital assets valuation on dissolution of the firm - Held that:- As seen from the arguments of the assessee's counsel, the assessee wants to re-argue the issue before the Tribunal once again which is not permitted u/s. 254(2). The Tribunal while adjudicating the issue on earlier occasion considered the entire arguments of the assessee's case and given the finding, incidentally, not in favour of the assessee. As the issue is decided against the assessee, now the assessee finds that there is mistake apparent on record which is actually not so. It is well settled that statutory authority cannot exercise power of review unless such power is expressly conferred. There is no express power of review conferred on this Tribunal. Even otherwise, the scope of review does not extent to re-hearing of the case on merit as decided in CIT v. Pearl Woolen Mills [2009 (11) TMI 48 - PUNJAB AND HARYANA HIGH COURT] The words used in Section in 254(2) are 'shall make such amendment, if the mistake is brought to its notice'. Clearly, if there is a mistake, then an amendment is required to be carried out in the original order to correct that particular mistake. The provision does not indicate that the Tribunal can recall the entire order and pass a fresh decision. Thus the argument of the assessee's holds no merit and deserves to be rejected.
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2013 (1) TMI 260
Revision of orders prejudicial to revenue - Jurisdiction u/s 263 of CIT(A) - deduction u/s 36 - Held that:- Persuing the Schedule X filed by assessee it shows that interest income of Rs.197.82 crores was received by the assessee during the year under consideration of which major amount was relating to housing loans given to the individuals and corporate. A copy of return filed by the assessee to NHB is also placed on record and a perusal of it shows that the principal business transacted by the assessee company during the year under consideration was clearly indicated as financing housing loans and sourcing and servicing home loans for ICICI Bank. The details of disbursement of housing loans during the year were also given which shows that 709 new housing loans were disbursed by the assessee during the year under consideration involving total amount of Rs.15.06 crores. Thus it can be concluded assessee’s case are sufficient to show that it was very much carrying on the business of providing long term finance for development of housing in India making it entitled for deduction u/s 36(1)(viii) and there was no error in the order of the AO in allowing such deduction to the assessee in the assessment completed u/s 143(3). Other income on account of fees, interest etc. was not in the nature of income from eligible business entitled for deduction u/s 36(1)(viii) - Held that:- Since there is no discussion in the assessment order passed by the AO u/s 143(3) on this aspect the assessment order suffers from an error to the extent of non-examination of this aspect and the same being prejudicial to the interest of the Revenue, the direction given by the CIT to the AO to the extent that he should examine this limited aspect of assessee’s claim for deduction u/s 36(1)(viii) afresh. Deduction on account of bond issue expenses - Held that:- There is nothing brought on record to show that the claim of the assessee for deduction on account of bond issue expenses was allowed by the AO in the assessment completed u/s 143(3) after making proper and adequate enquiry. There was a failure on the part of the AO to make such enquiry specifically as pointed by CIT in order to ascertain the nature of the said expenses whether capital or revenue, thus the order of the AO was erroneous and prejudicial to the interest of the Revenue on this issue as rightly pointed out by the CIT.
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2013 (1) TMI 259
Validity of the orders passed under section 153C - Permanent Establishment (PE) in India through which assessee carries out its sales in India - AO held that 90% of the business income of assessee is attributable to its Indian PE - interest u/s. 234A and 234B - Held that:- There is no satisfaction recorded by AO before initiating proceedings under section 153C. Inspite of giving sufficiently adequate time to the Revenue for production of the necessary records and considering the fact that AO refused to allow inspection to assessee as recorded by the bench on 20.04.2011 no option but to conclude that no satisfaction was recorded by AO before issuance of notice under section 153C. The Revenue has not been able to show any satisfaction recorded either in the case of searched person or in the case of assessee and consequently in view of the principles laid down by the Hon'ble Supreme Court in the case of Manish Maheshwari vs. ACIT [2007 (2) TMI 148 - SUPREME COURT OF INDIA] a notice issued under section 153C r.w.s. 153A is liable to be held as invalid. Thus, the consequential assessments passed under section 153C r.w.s. 144C are annulled on account of the invalidity of the notices under section 153C. Assessee’s additional grounds are accordingly allowed in all the impugned assessment years. Since assessee’s additional ground is allowed on the preliminary issue of jurisdiction, there is no need for adjudicating the issues on merit in any of the assessment years. Accordingly, the other grounds raised are considered academic and hence, not adjudicated - in favour of assessee.
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2013 (1) TMI 258
Default u/s 277 - False statement in verification - petitioner no.1 imposed with a penalty of Rs.4000/- and petitioner no.2 sentenced to undergo rigorous imprisonment for a period of six months and pay a fine of Rs.1000/- - Held that:- As appeal of the petitioner was not heard on merits as the petitioner was confined in Central Jail, Jalandhar, therefore, the impugned order is liable to be set aside relying on Md. Sukur Ali vs. State of Assam (2011 (2) TMI 514 - SUPREME COURT OF INDIA) wherein held that in the absence of a counsel, for whatever reasons, the case should not be decided forthwith against the accused but in such a situation the Court should appoint a counsel who is practising on the criminal side as amicus curiae and decide the case after fixing another date and hearing him. Order of Additional Sessions Judge set aside and the case is remanded to the learned Lower Appellate Court for fresh decision by following the principles laid down in Md. Sukur Ali's case (supra).
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2013 (1) TMI 257
Jurisdiction of AO in remand proceedings - Reducing 90% of other income u/s 80HHC(4C)(baa), which was neither an issue in the original assessment nor remanded by CIT(Appeals) in the first round of litigation - assessee appeal against CIT(A)'s notice u/s 251 for enhancement as it consequently resulted in lesser deduction being allowed u/s 8OHHC(3)(c)(i) - Held that:- As regards to the dispute of turnover, the CIT(A) has accepted the claim of the assessee and directed the AO just to verify and compute the deduction u/s 80HHC accordingly. Whereas the issue of indirect cost allocated to the export of goods traded as per sec.80HHC(3)(b), the CIT(A) has remanded the issue to the record of the AO to compute the deduction after discussing each and every claim of the assessee. Thus, so far as the issue of deduction u/s 80HHC which was remanded to the AO pertains only to the computation of attributable indirect cost to the export of trading goods. Reduction of 90% of the receipts on account of sales tax refund and processing charges from the profit of business under clause (baa) of Explanation to section 80HHC - Held that:- Since the issue of reduction of 90% under clause (baa) of Explanation to sec. 80HHC was neither raised before the CIT(A) in the appeal of the assessee nor it was taken up by the CIT(A) in the first round of litigation, therefore, the said issue was not at all involved and consider in the appeal of the assessee by CIT(A) while passing the order dated 18.5.2001 whereby the issue of indirect cost allocable to the export of traded goods was remanded to the AO - thus when the limited aspect/dispute of allocation of indirect cost to the export of trading goods was remanded to the record of the AO then in the giving effect proceedings in pursuant to the directions of the CIT(A) the jurisdiction and power of the AO is confined only to the issue and aspect, which has been remanded for reworking and re-determination. Hence, in the proceedings pursuant to the directions of the CIT(A), AO cannot go beyond the issue and aspect which was directed to be reconsidered and decided. - thus by taking up the issue of reduction of 90% of the receipts arising from sales tax refund, processing charges and sale of scrap, the AO has travelled beyond his jurisdiction limited to the direction of the CIT(A). As decided in Indo-Aden Salt Works Co [1958 (10) TMI 29 - BOMBAY HIGH COURT] scope of the enquiry is restricted only to the question of merit related to the matter of relief from super tax as directed by the Tribunal, thus the AO while making certain additions by restricting 90% of the receipts by applying clause (baa) of Explanation to sec. 80HHC has travelled beyond his jurisdiction. Indirect cost allocable to export of trading goods - Held that:- For the purpose of sec. 80HHC(3)(b) r.w.clause (e) of Explanation, the indirect cost to be allocated in the ratio of export turnover of trading goods to the total turnover has to be taken as the total figure of the indirect cost incurred for the total turnover and not the indirect cost directly related to the export turnover as held by the CIT(A) - It is clear from the working of the AO that for determining the indirect cost, the AO has reduced from the total cost of business, cost of goods as well as the other items. Therefore, no error as far as the formula adopted by the AO for computation of indirect cost allocated to the export of trading goods - CIT(A) has proceeded on wrong principle which is contrary to the provisions of sec. 80HHC(3)(b) r.w. clause (e)of Explanation and therefore, the revenue succeeds.
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2013 (1) TMI 256
Penalty u/s 271(1)(c) - demand notice while appeal against penalty pending consideration - Held that:- Once the appeal is preferred against the order passed under section 271(1)(c) and the petitioner has filed application for stay of the payment, the least that is expected is to hear the applicant and decide the application on merits. Without allowing the petitioner to avail such a chance, the recovery notice trying to recover the amount by coercive method, may not be appropriate. Thus CIT(A) directed to decide the application for stay within one month from today with no coercive steps taken for recovery of the amount of tax at least after a period of one week after the decision.
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Customs
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2013 (1) TMI 255
Non issue of notice for personal hearing for personal hearing - jurisdiction of Commissioner of Customs (Imports), Nhava Sheva - Held that:- In this case, the principles of natural justice has been violated as the information sought by the appellant under RTI Act shows that there is no record of notice for personal hearing sent to the appellants. Further, agreeing with the argument of assessee that the show cause notice merged with the order of the Commissioner of Customs (Adjudication), Mumbai dated 31/12/2007 and attained finality which has been set aside by this Tribunal on 04/09/2009. Therefore, Commissioner of Customs (Imports), Nhava Sheva has got the jurisdiction to adjudicate the show cause notice. Thus the impugned order set aside and remand the matter back to the Commissioner of Customs (Imports), Nhava Sheva to adjudicate afresh after giving a reasonable opportunity to the appellants to present their case, keeping all the issues open.
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2013 (1) TMI 254
Differential duty arising as a result of finalisation of provisional assessment - Imported non-coking steaming coal - Sample was tested and the same was found to have Gross Calorific Value (GCV) higher than the declared GCV - Purchase contract had a price variation clause - Assessment was finalised for higher duty adopting higher price proportionate to higher GCV - Bills of entry were finally assessed, simultaneously on the very same day show-cause notice was issued to the appellant Held that:- Bill of Entry has to be assessed and returned to the importer. Further Section 47 of Customs Act, 1962, an importer is required to pay duty within 5 days from the date on which the bill of entry is returned to him for payment of duty and interest becomes payable thereafter. It can also said that in this case the bills of entry were returned with the remarks so that differential duty as and when adjudicated and approved, it would become payable by taking date of return of all bills of entry as the date of finalisation. In this case the bills of entry have been returned and simultaneously the show-cause notice has been issued. If the importer accepts the revision of assessment and differential duty is payable, he can pay the same immediately and in that case no further proceedings are required. Appellant submitted that if he were to challenge the bills of entry assessment order, that also would have been rejected on the ground that the show-cause notice has been issued giving an opportunity to challenge revision of value and differential duty. Even though the Superintendent put the remarks that the bill of entry is assessed finally, he issued the show-cause notice proposing to give an opportunity to challenge the differential duty and merits thereof. This would mean that the assessment was finalised subject to the show-cause notice. This is the only proper and legal interpretation of the proceedings in this case. In view of above discussions, we find that the impugned order taking a view that the assessment is final and therefore the show-cause notice and further proceedings initiated were unwarranted and therefore was invalid cannot be sustained. In favour of assessee
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2013 (1) TMI 253
Smuggling - Notification 9/96-Cus - Consignment seized from railway station on belief that the goods were smuggled into India from Nepal - Confiscation u/s 111(d) of Custom Act - Held that:- To invoke notification 9/96-Cus first it has to be proved that the goods were exported to Nepal from a country other than India and then that the goods have been imported from Nepal to India. None of these two facts are proved. An expert’s opinion that the goods are not produced in India does not mean that the above two facts are proved. Notification No. 9/96-Cus., dated 22-1-1996 cannot be interpreted to mean that customs authorities can seize any goods anywhere in India alleging that the goods have been first exported from countries other than India to Nepal and then imported into India from Nepal For confiscating the goods Revenue should have discharged the burden to prove that the goods were exported to Nepal from a country other than India and then the goods were imported into India from Nepal. In both the matters Revenue has failed to discharge the onus. The reason that the mandi receipt and the Railway Receipt were in the names of a firm not found at the address given does not discharge this onus Revenue is not challenging the appellant’s ownership of the goods inasmuch as penalty has been imposed on the appellant. If the appellant had bought the goods from another party with name of R.P. Enterprises whose address was fake or if the appellants themselves have transacted the business in the name of a fake company that cannot constitute an offence under the Customs Act enabling the customs officers to seize and confiscate the goods. In favour of appellant
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Corporate Laws
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2013 (1) TMI 252
Powers of CLB - Whether allowed to transfer matters between Regional Benches of the CLB under section 10E(4B) - Company Application to Southern Bench of the Hon'ble Company Law Board for hearing - Held that:- The power in law to form a Bench and to authorize such Bench to discharge the powers and functions of the CLB as may be specified is exclusively that of the CLB as a whole as provided in section 10E(4B)- Transfer of matters and hearing of them by particular Benches or Members are obviously matters relating to the procedure of the CLB. These matters could very well be regulated by the CLB acting as a whole. The CLB Regulations provide for delegation to the Chairman of the CLB of the powers of the CLB for formation of Benches, and specification of powers and discharge of functions by the respective Benches and their members and transfer of matters pending before any Bench. Regulation 3 of the CLB Regulations makes it clear beyond any doubt that the Chairman of the CLB is empowered by the Board to constitute the Benches of the Board as per the composition of Benches prescribed under section 10E(4B) - Regulation 3(3) of the CLB Regulations empowers the Chairman to specify the member of the Bench before whom every matter requiring decision by the Board shall be placed for orders and in the absence of such Member so specified every such matter shall be placed before any other member of the Bench who is present. Thus, regulation 3(3) of the CLB Regulations delegates the power of intra Bench allocation of matters to the Chairman, i.e., transfer of a matter from one Member of a Bench to another Member of a Bench but not inter Bench transfer, i.e., from one Member of the Bench to a Member of another Bench. Matters pending before Principal Bench shall continue to be disposed by it By proviso (2) to regulation 4(3), it was provided that notwithstanding anything contained in regulation 7, the Chairman could transfer any matter pending before the Regional Benches to the Principal Bench either at the joint request of all the parties or for other reasons to be recorded in writing. The power delegated to the Chairman is the power to transfer matters before the Regional Benches only to the Principal Bench since any other transfer inter se between Regional Benches would otherwise violate the mandate of regulation 7(1), and this is not the power that the Company Law Board has delegated to the Chairman. Thus, the subject of 'power to transfer' has been expressly and exhaustively provided in and limited by the second proviso to regulation 4(3) of the CLB Regulations. The Chairman cannot have direct recourse to the powers of the CLB over and above what is delegated to him under the CLB Regulations.Thus, as per second proviso to regulation 4(3), there was no right or authority in the Chairman to transfer matters, not even an 'inherent power' to transfer matters pending before the Regional Bench to the Principal Bench. The position cannot be any different with regard to the Chairman's power to transfer any matter pending before a Regional Bench to another Regional Bench. A Regional Bench has no power to pass any order in exercise of its inherent powers that go beyond the jurisdiction of that Regional Bench. Hence, one Regional Bench cannot direct another Regional Bench to do anything or to hear a matter. Similarly a Regional Bench cannot direct that a matter before it be transferred to another Regional Bench for hearing nor can it transfer a matter pending before another Regional Bench to itself for hearing. This is because inherent powers cannot transcend jurisdiction. Thus the Chairman's decision is certainly not based on subjective satisfaction or on reasons which are otherwise unsustainable. In any event, even assuming that some reasons given by the Chairman are not relevant whilst exercising his discretion in the matter, only one reason of the Chairman namely that he has made enquiries with the Benches and has been informed that there are many such pending part heard matters and that in such circumstances if orders as sought are passed, it would create a chaotic situation at Benches, is enough for the Court to come to the conclusion that the Chairman could have passed the same order, that is dismissal of the Company Application on that ground alone. The Company Appeal and the Company Application are, therefore, dismissed
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Service Tax
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2013 (1) TMI 272
Whether long term lease of 90 years will be covered by the meaning of "renting" or "leasing" used in section 65 (105) (91a) - Held that:- The ordinary meaning of "renting" will not cover long term leasing. The inclusive definition given in section 65 (105) (zzzz) including renting, letting, leasing and licensing in the same type of services would suggest that the word "leasing" used in the said section does not cover long term leasing where a property is given to a person with rights to transfer, assign and mortgage the rights. Such transfers are more akin to sale and less to renting of property. Such view is supported by the decision of Delhi High Court in the case of Krishak Bharati Co-operative Ltd Vs. Dy. CIT [2012 (7) TMI 526 - DELHI HIGH COURT] holding that payments made to GNIDC is an expenditure in the nature of capital expenditure and not a revenue expenditure. The question whether the functions carried out by the appellant is a service also needs to be examined. A government authority doing an activity as per a mandate in an Act of the legislature by itself cannot take away the character of service from the activity. If that is not the case transportation functions done by Indian Railways would not amount to service. Considering such legal aspects and also in view of the fact that the appellant is an Authority set up by a State Government, which should not be put to hardship that may be caused by ordering pre-deposit in such a matter involving basic legal issues, it is proper to grant waiver of pre-deposit of dues for admission of appeal. Further there shall be stay on collection of dues arising from the impugned order during the pendency of the appeal.
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2013 (1) TMI 271
Waiver of Pre-deposit - Stay of recovery - Construction of Complex Services - Appellant constructed houses for low-income groups of people under two schemes of Andhra Pradesh State Housing Corporation Ltd. - whether service tax is applicable to construction of such houses for the benefit of low-income group of people - the residential units were constructed as two-storeyed blocks, each consisting of less than 12 units - Held that:- The leviability of service tax under the above Head on construction of Residential complex cannot depend on economic status of the ultimate beneficiaries/residents. Following the decision in case of MACRO MARVEL PROJECTS LTD.(2008 (9) TMI 80 - CESTAT, CHENNAI) a residential complex comprising more than 12 dwelling units would attract service tax under the aforesaid Head but individual residential units could not be considered as residential complex hence its construction would not attract the levy. Grant waiver of pre-deposit and stay of recovery.
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2013 (1) TMI 270
Penalty u/s 76 - Business auxiliary services - Delay in deposit of service tax - Bills for the services rendered during the period April, 2006 to December, 2006 raised in December, 2006 - The cheque for the same was received on 4.1.2007 - Deposited in the bank account on 5.2.2007 - The Service Tax was to be paid by 5.3.07 - Held that:- Since cheque was received on 4.1.2007, the same was actually deposited in the bank on 5.2.2007 and must have been encashed on a date after that. As such, it is to be considered as if the consideration for the services was received by the appellant in the month of February itself, thus requiring them to deposit the tax with the department in March, 2007. No delay in depositing the service tax. No imposition of penalty. In favour of assessee
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2013 (1) TMI 269
Stay petition - Extended period of limitation - Real Estate Service - The sum of Rs.8 crores was given to Shri Benny Joseph and the said amount was meant to meet the expenses for settlement of labour - Held that:- The activities undertaken by the appellant, as per the agreement, prima facie, fall under the category of "Real Estate Services". However, the claim of the Department that the amount of Rs.8 crores paid into the account of Shri Benny Joseph should also be treated as service charges received by the appellant, prima facie, is not acceptable. Therefore, if Rs.4.88 crores is taken as the service charges received by the appellant, the tax liability comes to around Rs.49 lakhs only. They ought to have taken registration and filed half yearly returns for the period April to September by 25th of October, 2005 and the notice has been issued on 06/10/2010 which is within 5 years from the relevant date, prima facie, extended time limit is invocable. Appellant has claimed that he has already deposited a sum of Rs.27.85 lakhs. There shall be waiver of pre-deposit of balance of dues
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2013 (1) TMI 268
Waiver of pre-deposit - Stay of recovery - Real Estate Agency Service - Section 65 (88) – Modus operandi - Assessee was a partnership firm in relation to real estate business - Assessee executed agreements with prospective sellers of property - Obtained General Power of Attorney (GPA) from the prospective sellers - the properties of the aforesaid sellers sold to M/s Sahara India Commercial Corporation - The amount so received as sale consideration in each transaction was higher than the amount shown in the corresponding purchase agreement – Assessee contended that it’s trading activity inasmuch as the appellants were purchasing and selling immovable properties – Held that:- The modus operandi of the appellants, which we have briefly stated herein before, is crystal clear. They suppressed the relevant facts before the department. Therefore, we are in agreement with the findings recorded by the adjudicating authority on the limitation issue also. We have gone through the facts of the case covered by stay order No. 1280/2011 and have found the same to be distinguishable vis-a-vis the facts of the present case. There is no plea of financial hardships in the stay application. Waiver denied. In favour of revenue
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Central Excise
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2013 (1) TMI 251
Manufacture - Classification – Department classify Prasad and Mishri as sugar confectionery under sub-heading 1704.90 – Assessee contended that it’s classifiable under sub-heading 2108.30 Held that:- The new commercial commodity emerging by a process of “manufacture” must also have character and hence usages different from the original material from which the new commodity has been made. In this case, the character and usage of the goods - ‘Prasad’ and ‘Mishri” remain the same as sugar from which the same have been made, as both the products have more than 90% sucrose and both the products are used for sweetening the foods and beverages, which is the same as the use of sugar from which the same are made. These are just a form of sugar. Mishri is nothing but a form of sugar with bigger crystals and “Prasad” in this case is an amorphous form of sugar. Just because by subjecting a material to some process, a product with a new name emerges, the process cannot be called manufacture - for manufacture to take place, the resulting product must have a new commercial identity and must have character and usages different from the character and usages of the material from which it has been made Therefore for making of ‘Prasad’ and ‘Mishri’ from sugar does not amount to manufacture and hence ‘Prasad’ and ‘Mishri’ can neither be charged to duty by classifying them neither under 1704.90 nor under any sub-heading of 1701.
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2013 (1) TMI 250
Compounded levy scheme - Whether the revenue with the aid of Rule 9 of PMPM Rules, 2008 framed u/s 3A CEA, 1944 can levy and charge excise duty for the period before the commencement of production in the unit - Pan Masala Packing Machines (Capacity Determination & Collection of Duty) Rules, 2008 – Assessee manufactures Gutkha - Under Chapter 2403 - Rule 9 of PMPM Rules, 2008 - Excise duty on the basis of capacity of production – Held that:- Section 3 of the Excise Act is the main charging section which provides that there shall be levied and collected excise duty on excisable goods which are produced or manufactured in India. From this, it is evident that excise duty is an incidence of tax on production or manufactured of the goods. It is difficult to sustain the plea that the appellant assessee can be charged excise duty for the period during which his unit had not even commenced the production Following the decision in case of GODWIN STEELS (P) LTD. (2010 (5) TMI 322 - PUNJAB & HARYANA HIGH COURT) that it was wholly unjust for the department to recover the duty for the whole month, during which, its factory had not commenced production. When the factory of the petitioner was not in production, then obvious, it is not liable to pay the duty during the period of non-production Therefore the impugned order confirming demand for first three days of May 2009 when the production had not even commenced cannot be sustained. In favour of assessee
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2013 (1) TMI 249
Manufacture – Clearance to DTA - Appellant are a 100% EOU engaged in manufacture of 100% cotton yarn - Under Chapter heading 52.05 - Soft waste arises at carding and combing stage, which was being cleared by the appellant to DTA without payment of duty - Whether DTA clearances of "soft cotton waste" by 100% EOU would attract duty in terms of proviso to Section 3 (1) of Central Excise Act, 1944 – read-with exemption Notification No. 2/95-CE – Held that:- The obtaining soft cotton waste, in course of carding and combing of ginned cotton does not amount to manufacture and no new product with distinct name, usages and character emerges more so when the Department has not led any evidence in this regard. In the decision in case of AHMEDABAD ELECTRICITY CO. LTD. (2003 (10) TMI 47 - SUPREME COURT OF INDIA) that the onus to show that particular goods on which excise duty is sought to be levied have gone through the process of manufacture in India is on the Revenue. In favour of assessee Extended period of limitation – Held that:- In Show Cause Notices department had sought clarification as to whether DTA clearances of soft cotton waste would attract duty. It is absolutely clear that the Department was aware of the fact about emergence of soft cotton waste in course of manufacture of cotton yarn from ginned cotton and clearance of soft cotton waste into DTA. Department with changes in tariff structure of Chapter 52 by introducing a new heading 5202 for cotton waste w.e.f. 16/3/95, the position with regard to duty on DTA clearance of soft cotton waste changed, the department should have advised the appellant accordingly and even if it is held that w.e.f. 16/3/95 the DTA clearance of soft cotton waste attracted duty, the non-payment of duty cannot be attributed to fraud, willful misstatement, suppression of facts on contravention of provision of Rules with intent to evade the payment of duty. We, therefore, hold that in respect of both the show cause notices only normal limitation period would be available. In favour of assessee
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2013 (1) TMI 248
Compounded levy scheme - Rule 96 ZO(3) - Appellant manufactures ingots and billets - Failure to discharge duty liability by the due date - Department impose penalty under provision of said rule 96 ZO(3) - Held that:- Following the decision in case of Bansal Alloys & Steel Pvt. Ltd. (2010 (11) TMI 83 - PUNJAB & HARYANA HIGH COURT ), that the impugned Rule 96ZO(3) of the Central Excise Rules to the extent of providing for mandatory minimum penalty without any men rea and without any element of discretion is excessive and unreasonable restriction on fundamental rights is arbitrary. Moreover, exercise of such power by way of subordinate legislation is not permissible when rule making authority for levying penalty is limited to default “with intent to evade duty”. The aforesaid finding by implication means that the adjudicating authority have discretion to impose lower penalty in case of failure of the assessee to discharge the obligation of duty liability by the due date. The excise duty was paid by the appellant though after due date but the payment was made much before issue of SCN. Thus there is no justification for imposing penalty equivalent to duty not paid within due date. Accordingly, taking into account the overall facts of the case, penalty imposed on the appellant is reduced to Rs. 1,00,000/-. Partly allowed in favour of assessee
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2013 (1) TMI 247
Power to remand the matter for de novo adjudication u/s 35A by Commissioner (Appeals) - Section 228 of the Customs Act – Held that:- Following the decision in case of () that there is no specific power of remand given u/s 228 of the Customs Act to the Commissioner (Appeals), yet the power to remand the matter to the adjudicating authority is inbuilt in the said provision. Therefore, we do not find merit in the plea of the revenue that the Commissioner (Appeals) after the amendment of Section 35A has no power to remand the case for de novo adjudication. Decides against revenue Remanded back for de novo adjudication - Department failed to supply to the respondent un-relied upon documents seized during investigation despite of request – Circular No. 42/88-CX, dated 24-5-1988 - Circular No. 48/88-CX.6, dated 10-6-1988 - Held that:- As per these circulars, the documents/records which are not relied upon in the Show Cause Notice are required to be returned under proper receipt to the persons from whom they are seized. Therefore, we do not find any fault with the above approach adopted by the Commissioner (Appeals), therefore, the impugned order remanding the matter for de novo adjudication after supply of copies of relevant documents to the respondent cannot be faulted. Against revenue
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2013 (1) TMI 246
Imposition of penalty - Rule 209A of Central Excise Rules, 1944 – Penalty imposed on directors - Clandestine removal of goods without payment of duty - Short payment of duty - Assessable value determined u/s 4A i.e. declared MRP minus abatement – Misdeclaration of MRP - MEL are the owner of brand name ‘ONIDA’ - M/s. Onida Saka Ltd. (OSL) manufacture ‘ONIDA’ brand colour TVs which are sold through the group company MEL – Assessee (OSL) contended that as manufacturer had no control over the price at which the CTVs were sold by the dealers to the retail customers and, therefore, neither any duty can be demanded from OSL on the basis of higher MRP nor any penalty can be imposed on OSL and its Director Held that:- As concluding from the facts of the case Director would also stand accused of knowingly dealing with the goods which he knew were liable for confiscation and as such the penalty. MEL who was controlling the marketing of the CTVs of ONIDA brand manufactured by OSL and it is MEL who were communicating the MRP to OSL for being declared to Central Excise Department and on the basis of which assessable value was to be determined and was also circulating the price lists to various dealers containing the retail prices at which various models were to be sold. MEL have also dealt with the goods in respect of which they knew that full duty liability has not been discharged and for this reason, the same are liable for confiscation. In favour of revenue
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CST, VAT & Sales Tax
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2013 (1) TMI 273
KVAT Act - demand of additional security of ₹ 50,00,000/- - dealer obtained registration during the year 2011 furnishing security of ₹ 75,000/- - cancelling of registration on non submitting of security - Held that:- Section 17 of the KVAT Act is concerned, sub section (1) enables the registering authority to demand security from the dealer for an amount not exceeding one half of the tax payable for the year on the turnover of the dealer as estimated by him. Sub section (2) deals with the case of dealers effecting first sale of goods within the State, in whose case also, security of an amount not exceeding one half of the tax payable on the turn over as estimated by the registering authority can be demanded. Proviso states that the registering authority shall have the power to demand at any time additional security only in a case where he is satisfied that the turn over estimated by him under sub section (1) or (2) for the purpose of fixing one half of the tax payable for the year is too low. Once registration is granted accepting security as above, when turnover estimated based on which one half tax payable is fixed, is found to be too low, for making up the shortage of the one half of the tax payable as security, additional security can be demanded. As far as the provisions of the CST Act are concerned, here also, Section 7(3A) provides not only for furnishing of security but also additional security. However, maximum amount for which additional security can be demanded is prescribed in sub section (3BB) related to the turnover estimated by the registering authority. Therefore, under the CST Act also, additional security can be demanded only to make up shortage of security which is subject to the maximum limit prescribed in the Act - thus orders demanding additional security and registration cancelled is to be set aside.
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Indian Laws
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2013 (1) TMI 267
Default in return of advances - onus to prove - Advance of money to the agriculturists and charging commission on the sale price of the agricultural produce - All the transactions between the parties were entered in the books of accounts - a sum of Rs.5,80,000/- stood in the name of the defendant towards outstanding balance as acknowledged under his signature in the corresponding account entry in the account books of the plaintiffs - defendant neither returned the money nor brought any agricultural produce for sale to the shop of the plaintiffs - defendant denied his signatures - Held that:- The present case is not one such case where the plaintiffs have chosen not to adduce any evidence. They have examined witnesses, proven entries in the books of accounts and also proven the acknowledgements duly signed by the defendant. The defendant, on the contrary, except making a bald denial of the averments, had not stated anything else. That apart, nothing was put to the witnesses in the cross-examination when the documents were exhibited. He only came with a spacious plea in his evidence which was not pleaded. Thus, no hesitation in holding that the High Court has fallen into error in holding that it was obligatory on the part of the plaintiffs to examine the handwriting expert to prove the signatures. The finding that the plaintiffs had failed to discharge the burden is absolutely misconceived in the facts of the case. It is obligatory on the part of the defendant to specifically deal with each allegation in the plaint and when the defendant denies any such fact, he must not do so evasively but answer the point of substance. It is clearly postulated therein that it shall not be sufficient for a defendant to deny generally the grounds alleged by the plaintiffs but he must be specific with each allegation of fact as decided in Badat and Co., Bombay v. East India Trading Co. [1963 (5) TMI 45 - SUPREME COURT) Variance in the pleadings in the plaint and the evidence adduced by the plaintiffs - aspect impressed by High Court - Held that:- There is one variation, i.e., at one time, it is mentioned as Rs.6,64,670 whereas in the pleading, it has been stated as Rs.6,24,670 and there is some difference with regard to the date. In our considered view, such a variance does not remotely cause prejudice to the defendant - it cannot be said that because of variance between pleading and proof, the rule of secundum allegata et probate would be strictly applicable. In the present case, we are inclined to hold that it cannot be said that the evidence is not in line with the pleading and in total variance with it or there is virtual contradiction. Thus, the finding returned by the High Court on this score is unacceptable. Rejection of books of accounts - Held that:- The plaintiff No. 2, his accountant and other witness have categorically stated that the books of accounts have been maintained in the regular course of business applying the principle as laid in CIT, Delhi v. Woodward Governor India Private Limited [2009 (4) TMI 4 - SUPREME COURT] to the pleadings and the evidence on record no reason that the books of accounts maintained by the plaintiff firm in the regular course of business should have been rejected without any kind of rebuttal or discarded without any reason - thus set aside the judgment of the High Court.
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