Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 17, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Undisclosed Income - unable to accept that payment of Advance Tax based on “current income” involves the disclosure of “total income” - SC
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Depreciation u/s 32 - use of vehicles by way of leasing out to others and not as actual user of the vehicles - business of running them on hire - ownership established - higher depreciation allowed - SC
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Exemption from payment of income tax on interest earned - fixed deposits kept with certain banks which were corporate members of the assessee club - principle of mutuality not applicable - SC
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Waiver of Interest levied u/s 220(2) - this is not a case where the assessee had established that payment of interest would cause genuine hardship to him - HC
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Exemption from TDS on the interest income received - The terms of the notification itself show that a society like the petitioner which is registered under the Travancore-Kochi Literary Scientific and Charitable Societies Registration Act 1955 are not exempted from the levy of TDS. - HC
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Depreciation on sale and lease back contracts and lease contracts - number of transactions with different parties analyzed. - HC
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Search & Seizure – Undisclosed income - Additions towards F.D.Rs. in the names of the employees of the assessee and five relatives and friends of the Managing Director confirmed - HC
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TDS u/s 194C – Supply contract – TDS on Contract for sale – respondents shall not deduct income tax from the bills of the petitioners towards supply of salt - HC
Corporate Law
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Claim of the petitioning creditor on account of dues from its distribution agent - dues accepted in emails - Yet, on the basis of the mail exchanged at the relevant time, the exact quantum of the company's indebtedness to the petitioner cannot be assessed. - HC
Service Tax
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Ship Management Services - it is seen that prior to 1st May 2006, there is inconsistency in the stand of the Revenue. Therefore, it would be just and proper in the facts of the present case to hear the appeal on merits without insisting on any pre-deposit. - HC
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Services of a Valuer - services rendered by the petitioners as valuers would not fall within the ambit of services rendered by a “consulting engineer“ as defined under the Finance Act, 1994. - HC
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Cenvat Credit of service tax on catering, pick up service and mobile telephone services - in relation to manufacturing activity - found as eligible input services - credit allowed - HC
Central Excise
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SSI Exemption - branded goods - cookies sold even without inscription of the brand name - Failed to see how the same branded cookies, sold in containers, can transform to become unbranded ones, when sold from the same counter, or even from an adjoining counter, without packaging carrying the brand name. - SSI exemption denied - SC
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Manufacture - It is obvious that a statutory definition as contained in Section 2(f) has interpreted by a competent Tribunal could not have been modified by Board by issuing notification / circular. - HC
Case Laws:
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Income Tax
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2013 (1) TMI 345
Undisclosed Income - no return of income had been filed till the date of search - action u/s 158BD requiring the assessee to file their return of income for the block period 1993-94 to 1995-96 (ten years preceding the previous year) - assessee contested that income for assessment year 1995-96 could not be deemed to be undisclosed as for a Advance Tax had already been paid therefore - Held that:- According to Section 210(1) every person who is liable to pay Advance Tax under Section 208 shall, of his own accord, pay Advance Tax on his “current income”, calculated in the manner laid down in section 209. Section 209(1)(a) states that the assessee shall first estimate his “current income” and thereafter pay income tax calculated on this estimated income on the rates in force in the relevant financial year. It is significant to note that this income is an estimation that is made by the assessee and may not be the exact income, which may ultimately be declared in the return under Section 139 and assessed under Section 143. An estimate always has an element of guesswork. There could be various reasons due to which an estimate may be faulty and inaccurate which is why, there is a provision for payment of interest on deficient or excess payment of advance tax when there is variation between advance tax paid and actual liability to tax - See Commissioner of Income Tax Vs. Smt. Premlata Jalani [2003 (7) TMI 62 - RAJASTHAN HIGH COURT] Since the Advance Tax payable by an assessee is an estimate of his “current income” for the relevant financial year, it is not the actual total income, to be disclosed in the return of income. It will be a misconstruction of the law to construe the undisclosed income for purposes of Chapter XIVB as an “estimate” of the total income, which is assessable and chargeable to tax. Therefore, unable to accept that payment of Advance Tax based on “current income” involves the disclosure of “total income”, as defined in Section 2(45) which has to be stated in the return of income. The same is evidenced in the scheme of Chapter XIVB, in particular. As for the purposes of computation of undisclosed income under Chapter XIVB, an assessee can rebut the AO’s finding of undisclosed income by showing that such income was disclosed in the return of income filed by him before the commencement of search or the requisition. And on failure to file return of income by the due date under Section 139 payment of Advance Tax per se cannot indicate the intention of an assessee to disclose his income. If the payment of Advance Tax reflects the intention of the assessee to disclose its income, it could result in a situation where the mandatory obligation of filing a return for disclosure of income under the provisions of the Act, would not be necessary. Such a proposition would be contrary to the very purpose of filing of return, which ultimately leads to assessment of total income for the relevant assessment year. Any anomaly in the return entails serious consequences, which may not otherwise be attracted on estimation of income for the purpose of payment of Advance Tax. It would thus, be difficult to accept the plea that payment of Advance Tax is tantamount to the disclosure of income or that it indicates the intention of the assessee to disclose income - Thus as the assessee had not filed its return of income by the due date, AO was correct in assuming that the assessee would not have disclosed its total income - in favour of the Revenue. Whether tax deducted at source (and not payment of Advance Tax) amounts to the disclosure of income? - Held that:- Since the tax to be deducted at source is also computed on the estimated income of an assessee for the relevant financial year, such deduction cannot result in the disclosure of the total income for the relevant assessment year. Subject to the monetary limit of the total income, every person is obligated to file his return of income even after tax is deducted at source. Hence, for the reasons stated in the preceding paragraphs, mere deduction of tax at source, also, does not amount to disclosure of income, nor does it indicate the intention to disclose income most definitely when the same is not disclosed in the returns filed for the concerned assessment year - in favour of the Revenue.
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2013 (1) TMI 344
Depreciation u/s 32 - disallowance as assessee’s use of vehicles was only by way of leasing out to others and not as actual user of the vehicles in the business of running them on hire - assessee is a public limited company engaged in the business of hire purchase, leasing and real estate - High Court allowed the appeal of revenue - Held that:- As long as the asset is utilized for the purpose of business of the assessee, the requirement of Section 32 will stand satisfied, notwithstanding non-usage of the asset itself by the assessee. In the present case the assessee is a leasing company which leases out trucks that it purchases. Therefore, on a combined reading of Section 2(13) and Section 2(24) the income derived from leasing of the trucks would be business income, or income derived in the course of business, and has been so assessed. Hence, it fulfills the second requirement of Section 32 viz. that the asset must be used in the course of business. See CIT Karnataka, Bangalore Vs. Shaan Finance (P) Ltd., Bangalore [1998 (3) TMI 8 - SUPREME COURT] As decided in CIT v. Castle Rock Fisheries (1997 (4) TMI 13 - SUPREME COURT) the plant and machinery was nevertheless being used by the assessee for its business purpose by treating the income derived by the assessee by such letting out as business income of the assessee, the development rebate must be considered as having been rightly granted. Therefore, where the business of the assessee consists of hiring out machinery and/or where the income derived by the assessee from the hiring of such machinery is business income, the assessee must be considered as having used the machinery for the purposes of its business. Issue of ownership - if the assessee is the owner of the vehicles then only is entitled to the claim on depreciation - Held that:- It is true that a lease of goods or rental or hiring agreement is a contract under which one party for reward allows another the use of goods. A hiring agreement or lease unlike a hire purchase agreement is a contract of bailment, plain and simple with no element of sale inherent. As in the present case it is clear that the transactions occurring in the business of the assessee are leases under agreement, but not hire purchase transactions. Even viewed from the angle of the author of ‘Lease Financing and Hire Purchase’, the transactions involved in the appellant business are nothing but lease transactions. The general opening words of the Section 2(30) of the MV Act is a deeming provision that creates a legal fiction of ownership in favour of lessee only for the purpose of the MV Act. It defines ownership for the subsequent provisions of the MV Act, not for the purpose of law in general. Therefore, if the MV Act at any point uses the term owner in any Section, it means the one in whose name the vehicle is registered and in the case of a lease agreement, the lessee. That is all. It is not a statement of law on ownership in general.Therefore, the MV Act mandates that during the period of lease, the vehicle be registered, in the certificate of registration, in the name of the lessee and, on conclusion of the lease period, the vehicle be registered in the name of lessor as owner. The Section leaves no choice to the lessor but to allow the vehicle to be registered in the name of the lessee, thus, no inference can be drawn from the registration certificate as to ownership of the legal title of the vehicle. As the entire lease rent received by the assessee is assessed as business income in its hands and the entire lease rent paid by the lessee has been treated as deductible revenue expenditure in the hands of the lessee. This reaffirms the position that lessor i.e. the assessee is the owner of the vehicles. As the owner, it used the assets in the course of its business, satisfying both requirements of Section 32 of the Act and hence, is entitled to claim depreciation in respect of additions made to the trucks, which were leased out. Claim of the assessee for a higher rate of depreciation - The CBDT vide Circular No. 652, dated 14-6-1993 has clarified that the higher rate of 40% in case of lorries etc. plying on hire shall not apply if the vehicle is used in a non- hiring business of the assessee. This circular cannot be read out of its context to deny higher appreciation in case of leased vehicles when the actual use is in hiring business - import of the same term “purposes of business”, used in the second proviso to Section 32(1) of the Act gains significance the assessee fulfills even the requirements for a claim of a higher rate of depreciation - appeal in favour of assessee.
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2013 (1) TMI 343
Exemption from payment of income tax on interest earned - fixed deposits kept with certain banks which were corporate members of the assessee club - claim of invoking doctrine of mutuality - appellant is an unincorporated Association of Persons (AOP) - claim rejected on lack of identity between the contributors and the participators to the fund - High Court allowed the appeal of revenue - Held that:- The arrangement lacks a complete identity between the contributors and participators. Till the stage of generation of surplus funds, the setup resembled that of a mutuality, the flow of money, to and fro, was maintained within the closed circuit formed by the banks and the club, and to that extent, nobody who was not privy to this mutuality, benefited from the arrangement. However, as soon as these funds were placed in fixed deposits with banks, the closed flow of funds between the banks and the club suffered from deflections due to exposure to commercial banking operations. During the course of their banking business, the member banks used such deposits to advance loans to their clients. Hence, in the present case, with the funds of the mutuality, member banks engaged in commercial operations with third parties outside of the mutuality, rupturing the privity of mutuality , and consequently, violating the one to one identity between the contributors and participators as mandated by the first condition. Thus, in the case before us the first condition for a claim of mutuality is not satisfied. As the second condition demands that to claim an exemption from tax on the principle of mutuality, treatment of the excess funds must be in furtherance of the object of the club, which is not the case here. The surplus funds were not used for any specific service, infrastructure, maintenance or for any other direct benefit for the member of the club. The facts at hand also fail to satisfy the third condition of the mutuality principle i.e. the impossibility that contributors should derive profits from contributions made by themselves to a fund which could only be expended or returned to themselves. As in the present case, the funds do return to the club. However, before that, they are expended on non- members i.e. the clients of the bank. Banks generate revenue by paying a lower rate of interest to club-assessee, that makes deposits with them, and then loan out the deposited amounts at a higher rate of interest to third parties. This loaning out of funds of the club by banks to outsiders for commercial reasons, snaps the link of mutuality and thus, breaches the third condition. There is nothing on record which shows that the banks made separate and special provisions for the funds that came from the club, or that they did not loan them out. Therefore, clearly, the club did not give, or get, the treatment a club gets from its members, the interaction between them clearly reflected one between a bank and its client. This directly contravenes the third condition - the amount of interest earned by the assessee from the afore-noted four banks will not fall within the ambit of the mutuality principle and will therefore, be exigible to Income-Tax in the hands of the assessee-club.
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2013 (1) TMI 341
Exemption from TDS on the interest income received - assessee claim to fall within the purview of the notification issued by GOI u/s 194 (A)(iii) (f) - petitioner is a society registered under Travancore-Kochi Literary Scientific and Charitable Societies Registration Act, 1955 - Held that:- Reading of the provision of the notification shows that in so far as Societies are concerned, only such of those Societies which are registered under the Societies Registration Act 1860 are exempted. The terms of the notification itself show that a society like the petitioner which is registered under the Travancore-Kochi Literary Scientific and Charitable Societies Registration Act 1955 are not exempted from the levy of TDS. Dispose of this writ petition leaving it open to the petitioner to approach the AO by making an application under Section 197 of the Income Tax Act.
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2013 (1) TMI 340
Penalty under Section 271(1)(c) - ITAT deleted the levy - short term capital gains v/s income from business - Held that:- Tribunal while deleting the levy relied upon the decision in CIT Vs. Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT) wherein held that mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars. Furthermore, the record reveals that the amount in question, which formed the basis for the assessing officer to levy penalty was in fact truthfully reported in the returns. In view of this circumstance, that the assessing officer chose to treat the income under some other head cannot characterize the particulars or reported in the return as an 'inaccurate particulars' or as suppression of facts. The Court is also conscious of the decision of the Supreme Court in Calcutta Discount Co. Ltd. vs. Income Tax Officer (1960 (11) TMI 8 - SUPREME COURT) wherein held that it is up to the AO to interpret the return and discern as to which head of income the amount had to be brought to tax - no substantial question of law arises.
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2013 (1) TMI 338
Depreciation on sale and lease back contracts and lease contracts - disallowance as the supplier of the material was not traceable or for other technical reasons - Sale and lease transactions from Asian Electronics Limited - Held that:- In the light of the specific averment made by the assessee that the documents, the purchase invoices filed before this Court were also available with the Officer, in fairness to the claim of the assessee, we feel that the consideration of sale and lease back transactions has to be restored to the file of the Assessing Officer so as to enable the assessee to produce the original purchase invoices for the purpose of satisfying the Assessing Authority as regards the ownership of the machinery by the assessee. The assessee is directed to produce the same before the Assessing Officer. On such production and on satisfaction, the Assessing Officer may pass such orders on the claim in accordance with law - in favour of assessee for statistical purposes. BPL Systems and Products Limited - Held that:- The claim of the assessee was rejected was on account of discrepancies in the payment of rental by the lessee and received by the assessee and the Revenue had not disputed the purchase by the assessee from BPL Systems and Products Limited. A mere discrepancy in the lease rental payment per se does not negate the claim of the assessee as owner of the machinery. In the circumstances, reverse the order of the Tribunal, thereby allow the claim of the assessee and the Assessing Officer is directed to grant relief of depreciation - in favour of assessee. Enterprising Enterprises Limited - Held that:- The Chartered Accountant certificate dated 26.7.95 states that Tata Model 320 Crane Sl.No. T 3684 and T 3694 belonging to Enterprising Enterprises are free from encumbrance. A reading of this document starting from the invoice in the name of First Leasing Company in the year 1991 to the Chartered Accountant certificate dated 26.7.95 referring to TATA Model Crane, no ground to accept the case of the assessee. The documents produced before the authorities concerned, this had not in any manner helped the assessee in establishing the fact that the assessee had purchased these cranes from Enterprising Enterprises and leased out the same to the lessee company. In the absence of the materials to substantiate the claim, that they had purchased these cranes for the purpose of leasing out, we have no hesitation in rejecting the claim of the assessee - against assessee. Indian Organic Chemicals Limited - Held that:- Considering the nature of the machinery which was the subject matter of the sale of lease back transaction, doubting the bona fide of the transaction, the Tribunal confirmed the findings of the Officer. Even though the assessee submitted that the assets were movable asset, hence, constructive delivery concept could not be negatived, in the absence of any specific ground taken on the findings of the Tribunal that the machines in question were available as independent machinery and not part of the larger manufacturing process, no justification to accept the plea of the assessee on the aspect of constructive delivery. There is no explanation as to how the assets in question were singled out from the larger constitution of manufacturing system to contend that there was a sale of machinery for lease back transaction. In the absence of any specific explanation in this regard, the assessee is not entitled to claim on depreciation - against assessee. Patheja Forgings & Auto parts Manufacturing Limited - Held that:- Tribunal came to the conclusion that it was only a finance transaction and actually the assessee lent the money to M/s. Patheja Forgings & Auto Parts Manufacturing Limited and the assessee was not entitled for depreciation on the same transaction. Assessee contended that the lessee was manufacturer of the assets & since the matters were pending before BIFR, the assessee could not produce original invoice. On a query raised by this Court as to the stage of BIFR proceedings, it was informed that a reference was made to the Court as early as 2002, but nothing was heard about pendency of the proceedings, the assessee had not taken any steps in this regard to find out how its interest are secured. Whatever be the reasons for that, the fact remains that even the valuation report could not rest on the value indicated in the original invoices and just on the basis of the valuation report, the assessee could be said to have discharged its burden - against assessee. NEPC MICON Limited - Held that:- The assessee could not explain as to why the valuer had requested NEPC to place the name Board mentioning the details "Financed by First Leasing Company". Whatever be the correctness of the claim of the assessee, the document herein show that the transaction, even though the invoices filed by the assessee indicated that there was a sale, yet, in view of the observation made in the inspection report that boards mentioning "Financed by First Leasing Company", Madras be kept, we have no hesitation in confirming the order of the Tribunal holding that the assessee had not discharged the burden of prove - against assessee. Navbharat Industrial Linings & Equipment Limited - Tribunal rejected the assessee's plea that the actual use by the lessee was immaterial and the assessee used the assets in its business of leasing - Held that:- As decided in CIT v. SHAAN FINANCE LIMITED [1998 (3) TMI 8 - SUPREME COURT] to which the assessee is also a party, considering the nature of business of the assessee in leasing out machinery, what is required is that the asset is put to use in the business of the assessee for the purpose of granting 100% depreciation - in favour of assessee. K.K.NAG Limited - Held that:- A reading of the document filed before this court show sale of electric motor, moulding machine type and dimineralisation plant. While some of the documents related to sale by lessee company to the assessee, there are also documents evidencing sale of machineries in favour of the lessee. There are no explanation from the assessee regarding this. In the circumstances, there are no materials to substantiate the real transaction evidencing sale of machineries by lessee in favour of the assessee herein and subsequent lease in favour of the lessee - against assessee. Universal Starch Chemical Limited - Held that:- In the written submission placed before the Commissioner of Income Tax (Appeals), the assessee pointed out that the Assessing Officer had omitted to include the charges in original cost of the machineries at Rs.86,55,699/-. Taking the actual cost at Rs.75,73,737/-, the Assessing Officer allowed depreciation at 25%. The total cost claimed by the assessee as Rs.1 crore stands explained. In the circumstances, we allow the claim of the assessee in this regard. The order of the Tribunal stands set aside - in favour of assessee. Direct lease transaction with IPCA Lab Limited & Galaxy Indo Fab Limited - Held that:- Do not find that the claim of the assessee herein could be accepted considering the fact that the sale invoices given by supplier contains no evidence and even their existence through registration number quoted in the invoice before Sales Tax Authorities was not substantiated, particularly, in the case of direct lease - againt assessee.
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2013 (1) TMI 337
Search & Seizure – Undisclosed income - Assessee is a Company engaged in the manufacture of ferrous and non- ferrous castings and forgings – In course of search F.D.Rs. 29.10 lakhs found in the name of the workers/employees of the assessee as well as in the names of the assessee's relatives and friends - Revenue treated the same as undisclosed income in the hands of the assessee – Creditworthiness of depositor – Genuineness of deposits Held that:- The ITAT ought to have taken up the statement of each of the 35 persons who had spoken about the deposits made by them in the associate company HHL , should have considered the same and then give a finding why the conclusion of the assessment officer in regard to them cannot be accepted. Admittedly reasons are the links between the materials on which certain conclusions are based and the actual conclusions. In the absence of reasons based on consideration of facts by the I.T.A.T. in the impugned order to support its conclusion as regards the F.D.Rs. of Rs. 21.60 lakhs, its order to that extent cannot be sustained. Remand back to AO As regards the F.D.Rs. to the tune of Rs.7.50 lakhs comprising Rs. 6.10 lakhs in the names of the employees of the assessee and Rs. 1.40 lakhs in the names of five relatives and friends of the Managing Director are concerned, The I.T.A.T. had given reasons for concurring with the more elaborate reasons given by the A.O. As decided in case of S.N.Mukherjee (1990 (8) TMI 345 - SUPREME COURT) that an appellate authority, if it affirms an order of an original authority which contains reasons, need not give separate reasons if it agrees with the reasons contained in the order of the original authority. Therefore it's decision in regard to the FDRs of Rs. 7.50 lakhs does not warrant any interference and the substantial questions of law answered in favour of revenue
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2013 (1) TMI 336
TDS u/s 194C – Supply contract – Contract for sale – Work contract – Petitioner enter into an agreement with Government of Tripura for supply of salt on sale – As per agreement there shall be a deduction of 2% from each bill towards income tax - Circular No.13/2006 Assessee challenged incorporation of that clause that it was a contract for sale and so deduction of tax @ 2% at source from the bill is not permissible under the provisions of Income Tax Act, 1961 Held that:- The tender clause and agreement signed between the parties clearly specify that the order issued to the petitioner was for supply of ‘Super Fine Crushed White Iodised Salt’ in 1(one) kg poly packet to be supplied to the respective places as defined in the agreement at a clear rate of Rs.6,000/- per matric ton i.e. Rs.600/- (Rupees six hundred) per quintal, which makes it abundantly clear that it was a contract of supply on clear sale. There is no element of a supply on execution of a work contract. In view of circular No.13/2006, until and unless any other circular or clarification is made by the appropriate authority, the respondents shall not deduct income tax from the bills of the petitioners towards supply of salt under the agreement which is found to be agreement for supply on sale. In favour of petitioner
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2013 (1) TMI 335
Search u/s 132 was conducted at the premises of the educational institution run by the Trust and at the residences of the Trustees – Opportunity of being heard - Issuance of pre assessment notice – Assessee file an WRIT Petition against assessment order u/s 144 with High court invoking Article 226 Whether the writ petition is maintainable in view of the statutory remedy provided in law – Whether there exists any special or extra ordinary circumstances which warrants interference of this court, despite availability of an effective statutory remedy Held that:- This court is not in a position to accept contentions regarding existence of any such ground to exercise the discretionary power vested on this court. The petitioners ought to have filed statutory appeal against the impugned assessments, instead of approaching this court by invoking Article 226. The writ petitions are disposed of directing the petitioners to file appeal before the Commissioner of Income Tax (appeals) under section 246 (A), within a period of two weeks from the date of receipt of a copy of this judgment. Appeal to be filed with CIT(A)
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Customs
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2013 (1) TMI 334
Interest on warehoused goods - Deputy Commissioner of Customs (Refunds) rejected 14 numbers of refund claims in remand proceedings - unjust enrichment - Held that:- As submitted by assessee that provisions of Section 27 of the Customs Act, 1962 is not applicable to refund of interest covered under Section 61 (3) of the Customs Act relying on Ashok Leyland Ltd. Vs CC Chennai [2001 (3) TMI 786 - CEGAT, CHENNAI] case which has been upheld by Supreme Court in 2001 (11) TMI 974 - SUPREME COURT OF INDIA. As the appellant did not place decisions of the Tribunal which was upheld by the Hon'ble Supreme Court on this issue before the lower authority and the Commissioner (Appeals), however, remanded the matter to the lower authority to decide the case both on merits and on unjust enrichment. In this context, it is proper that the lower authority should examine the decision of the Tribunal as upheld by the Hon'ble Supreme Court on this issue in the context of applicability of the unjust enrichment. In view of that, the order of the Commissioner (appeals) is upheld with a direction that the lower authority would examine the applicability of unjust enrichment with the case law. The appeal is disposed in the above terms.
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2013 (1) TMI 333
Condonation of delay - Delay in complying with the pre-deposit - Assessee is a charitable institution running a charitable cancer hospital - Held that:- It would be just and proper and in the interest of justice to condone the delay in depositing the amount of pre-deposit and restore the appeal without any further deposit. In favour of assessee
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Corporate Laws
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2013 (1) TMI 332
Claim of the petitioning creditor on account of dues from its distribution agent - dues accepted in emails - Held that:- There is no doubt that the correspondence between the parties in April, 2009 gives the impression that the company admitted and acknowledged that the company owed money to the petitioner. Yet, on the basis of the mail exchanged at the relevant time, the exact quantum of the company's indebtedness to the petitioner cannot be assessed. The company did not agree to the final counter proposal made by the petitioner on April 24, 2009 nor is any sentence in the company's mail at 12:34 pm on April 24, 2009 capable of being understood to have, in any manner, acceded to the petitioner's counter proposal or admitted the amount claimed by the petitioner. For a petition to be admitted in this jurisdiction, the petitioner has ordinarily to, not only show that a sum in excess of Rs. 500 is due and owing to it from the company, but also demonstrate the quantum of the debt due. At the very least, on the basis of documents contained in the petition which have been relied upon in course of the hearing, it cannot be said that the petitioner has been able to establish the amount which is due and owing from the company.It does not appear that the defence is altogether moonshine or without basis. Though the company has not been called upon in course of the hearing, the communication exchanged between the parties in April, 2009 and the company's reply to the statutory notice indicate sufficient defence for this petition not to be admitted - petition permanently stayed.
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Service Tax
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2013 (1) TMI 350
Clearing and Forwarding Agent services - failure to pay service tax and education cess & failure to obtain registration as required under the Finance Act, 1994 - assessee paid the demand when questioned - Held that:- As assessee after realizing their mistake had voluntarily paid the entire service tax along with interest in October, 2006 & also filed necessary ST 3 Returns for the period August, 2005 to March, 2006 in November, 2006 the Department was wrong in issuing a show-cause notice in the month of June, 2007 demanding the said service tax and also accepting that the said amount had already been paid by the appellant. As from the records, it is found that the mistake committed by the appellants is a bonafide one as is evident from the facts that they have duly reflected the entire amount of service charges received in their Audited Balance Sheet and also paid the service tax on realizing their mistake voluntarily along with interest before being pointed out by the Department there is no substance proved of suppression of facts leveled by the Department against the appellants. In these circumstances, this is a fit case for invoking Section 80 - in favour of assessee.
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2013 (1) TMI 349
Ship Management Services - Management Consultancy Services - Whether the CESTAT was justified in directing the appellant to deposit for entertaining the appeal against the order - Assessee is engaged in providing ship management services to shipping companies - Show-cause notice was issued on 12th February 2009 - Demand of tax by an order-in-original dated 10th December 2009 – Against order assessee file an appeal before CESTAT for waiver of pre-deposit - In the year 2007 assessee has collected and paid tax from ABG Shipping under the heading 'Manpower Recruitment and Supply Agency Services' – Held that:- From the judgment of the Tribunal in the case of Creative Marine Services (2011 (8) TMI 610 - CESTAT, MUMBAI), it appears that the Revenue was seeking to tax such services under the head 'Management Consultancy Services'. Thus, it is seen that prior to 1st May 2006, there is inconsistency in the stand of the Revenue. Therefore, it would be just and proper in the facts of the present case to hear the appeal on merits without insisting on any pre-deposit. In favour of assessee
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2013 (1) TMI 348
Services of a Valuer - Ambit and scope of Consulting engineer services under service tax - Service provided to a client - held that:- for the purpose of falling within the ambit of "consulting engineer", a person should provide advice, consultancy or technical assistance in any one or more disciplines of engineering. From the above discussion, it is apparent that the services rendered by a valuer, whether it be by an engineer or any other person, is not in relation to advice, consultancy or technical assistance in any one or more disciplines of engineering. In the circumstances, the said services would not fall within the ambit of "consulting engineer" as defined under Section 65(31)/65(48) of the Finance Act, 1994. The services rendered by the petitioners as valuers would not fall within the ambit of services rendered by a "consulting engineer" as defined under the Finance Act, 1994. The respondents are, accordingly, restrained from levying service tax in respect of services provided by the petitioners as valuer to a client/any person as taxable service liable for payment of service tax as "consulting engineer".
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2013 (1) TMI 347
Cenvat Credit of service tax on catering, pick up service and mobile telephone services - in relation to manufacturing activity - held that:- The identical questions of law came up for consideration before this Court in the case of CCE v. Stanzen Toyotetsu India (P.) Ltd. [2011 (4) TMI 201 - KARNATAKA HIGH COURT]. This Court held that the transportation/Rent-a-Cab service is provided by the assessee to their employees in order to reach their factory premises in time which has a direct bearing on manufacturing activity. In fact, the employee is also entitled to conveyance allowance which would form part of his condition service. Therefore, by no stretch of imagination it can be construed as welfare measure by denying the availment of Cenvat credit to the assessee for providing transportation facilities as a basic necessity which has a direct bearing on the manufacturing activity. While so holding the Court was of the view that if the credit is availed by manufacturer then the question is what are the ingredients that are to be satisfied for availing such a credit. That the said service should have been utilized by the manufacturer directly or indirectly in or in relation to the manufacture of final products or used in relation to activities relating to business. If any of the test is satisfied then the service falls under input service and the manufacturer is eligible to avail Cenvat credit and the Service tax paid on such credit. In favor of assessee.
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Central Excise
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2013 (1) TMI 353
Goods Transport Agency Service - abatement of 75% of the gross amount charged from the customer under Notification No. 32/2004-S.T., dated 3-12-2004 - denial of abatement claim based on ‘general declarations’ given by the GTA - Held that:- Abatement of CENVAT Credit to the extent of 75% on the basis of the general declarations filed by the respective Goods Transport Agencies is not to be denied. The question to be decided is that how exactly it should be determined as to whether the conditions are fulfilled. The Board had clarified that the endorsement has to be made on the consignment note. Further, we have to take note of the fact that the notification, as such, does not stipulate any such condition. Notification requiring the receiver of the service to pay the tax also does not stipulate any such condition. Therefore, the requirements prescribed by the Board as per circular cannot be mandatory and cannot be used for denying substantive rights - dismissed the revenue’s appeal relying on the previous decision of the Tribunal reported in [2007 (12) TMI 74 - CESTAT AHMEDABAD].
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2013 (1) TMI 352
Utilization of Cenvat credit in basic excise duty for discharge of liability of Education Cess and Senior and Higher Education Cess - Held that:- As decided CCE Vapi Vs. M/s Balaji Industries [2008 (7) TMI 215 - CESTAT AHEMDABAD] the benefit of utilization of credit of basic excise duty for payment of education cess is to be allowed - there are several other decisions of the Tribunal rendered subsequent to the decision of M/s Sun Pharmaceutical [2006 (7) TMI 454 - CESTAT, NEW DELHI] where similar view has been taken - in favour of assessee.
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2013 (1) TMI 331
Excise duty on Blank CDs/DVDs - movable and marketable commodity - assessee availing the benefit of exemption under Notification No.6/2006-CE dated 01.03.2006 in respect of pre-recorded audio CDs/DVDs/VCDs - assessee never disclosed the fact of manufacturing blank CDs/DVDs at intermediate stage thus deliberately suppressing the vital fact from the Department - Held that:- Before a product can be classified as “goods”, it must be shown to be a complete product, having a commercial identity and capable of being sold to a consumer. And, all this must be established by the revenue as decided in Bata India Limited v. Commissioner of Central Excise, New Delhi [2010 (4) TMI 58 - SUPREME COURT] - the twin tests of manufacture and marketability would have to be satisfied. As in the present case the petitioner has categorically stated that it does not manufacture any blank CD/DVD. It has supported this contention by an expert opinion of M/s Truth Labs. There is nothing on the part of the revenue to show that the petitioner does, in fact, manufacture blank CDs/DVDs. It was incumbent upon the revenue to have discharged its burden of establishing that the petitioner, in fact, manufactures blank CDs and DVDs. Mere surmises and conjectures on the part of the revenue would not lead to the revenue discharging this burden. There must be some material on record on which the revenue can rest its opinion. On the contrary, in the show cause notice, it is admitted that the CDs/DVDs do not come into existence separately. The same position has been accepted in the adjudication order dated 24.09.2010. Thus the conclusion of the Commissioner in the adjudication order that the petitioner manufactures blank CDs/DVDs is merely based on his own ipse dixit and is not supported by any material on record as wrongly held that liquefied polycarbonate is injected to the cavity of the moulds that create component discswhich cool and solidify and the pressed discs, after cooling, are captively used for data transfer from the stamper. This is not borne out by the facts and the manufacturing process. The stamping and the moulding takes place simultaneously. It is not as if, first, a blank disc is created and then it is stamped. The process is simultaneous. While liquefied polycarbonate solidifies, it is imprinted with data by the stamper. Therefore, at no stage does a blank CD/DVD come into existence also concluded by flowchart of process of manufacture as submitted by assessee - The very first test of manufacture is not satisfied no excise duty can be demanded for blank CDs/DVDs - in favour of assessee. Legal position with regard to the exercise of writ jurisdiction in a matter such as this - Held that:- Existence of an alternative remedy does not constitute a bar against the exercise of jurisdiction under Article 226 and, in certain cases, it is open to the High Court to exercise that jurisdiction. In fact, in Calcutta Discount Company (1960 (11) TMI 8 - SUPREME COURT), the Constitution Bench has gone sofar as to state that when the Constitution confers on the High Court the power to give relief, it becomes the duty of the court to give such relief and that the existence of an alternative remedy is not always a sufficient reason for refusing a party quick relief by way of a writ. Not forgetting the circumstances in which the show cause notice was issued to the petitioner & the previous history of the petitioner having got two officers of the revenue arrested on charges of bribery this is a fit case for exercise of jurisdiction under Article 226 of the Constitution despite the fact that the petitioner has an alternative remedy.
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2013 (1) TMI 330
S.S.I. Notification No. 1/93-C.E. dated 28th February, 1993 - Whether the manufacture and sale of specified goods not physically bearing a brand name from branded sale outlets would disentitle an assessee from the benefit of SSI Notification - Held that:- A brand/ trade name must not be reduced to a label or sticker that is affixed on a good. The test of whether the good is branded or unbranded, must not be the physical presence of the brand name on the good, but as Explanation IX reads, is used in relation to such specified goods for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified goods and some person using such name or mark with or without any indication of the identity of the person. Therefore, whether the brand name appears in entirety or in parts or does not appear at all cannot be the chief criterion, primary focus has to be on whether an indication of a connection is conveyed in the course of trade between such specified goods and some person using the mark. See Commissioner of Central Excise, Trichy Vs. Rukmani Pakkwell Traders [2004 (2) TMI 69 - SUPREME COURT OF INDIA] Commissioner of Central Excise, Chandigarh-I, Vs. Mahaan Dairies[2004 (2) TMI 73 - SUPREME COURT OF INDIA] wherein held that once it is established that a specified good is a branded good, whether it is sold without any trade name on it, or by another manufacturer, it does not cease to be a branded good of the first manufacturer. The good will continue to be a branded good of the company that manufactured it. In case of goods sold from exclusive single brand retail outlets or restaurants or stores, the fact that a good is sold from such a store ought to be a relevant fact in construing if the good is its branded good or not. In the case of such goods, perhaps a rebuttable presumption arises in favour of such goods being branded goods of the specified store. Such a presumption can be rebutted if it is shown that the specified good being sold is in fact a branded good of another manufacturer. However, all other goods, sold without any appearance of a brand or trade name on them, would not be deemed unbranded goods to the contrary, they may be deemed to be branded goods of that outlet unless a different brand or trade name appears. Hence, it is not necessary for goods to be stamped with a trade or brand name to be considered as branded goods under the SSI notification. Applying the said principles on the facts at hand, failure to see how the same branded cookies, sold in containers, can transform to become unbranded ones, when sold from the same counter, or even from an adjoining counter, without packaging carrying the brand name. Admittedly, on the same cookies, physically bearing brand Cookie Man sold in containers carrying brand name duty is paid. Once established that the environment of the goods can be gone into to construe if it is branded or not, no reason to see why the environment of the goods should be limited to the plates and tissues, on which they are served. Thus as the cookies were sold from a dedicated outlet of Cookie Man where no other products but those of the assessee were sold. The invoices carry the name of the company and the cookies were sold from a counter of the store, the store s decision to sell some cookies without containers that are stamped with its brand or trade name does not change the brand of the cookies. As convinced that the cookies sold even without inscription of the brand name, indicate a clear connection with the brand name, in the course of assessee s business of manufacture and sale of cookies under the brand name Cookie Man . They continue to be branded cookies of Cookie Man and hence cannot claim exemption under the SSI Notification.
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2013 (1) TMI 329
Waiver of pre-deposit – Inclusion of Pre-delivery inspection charges and after sales service into Transaction value - Appellant is engaged in the manufacture of automobiles – Goods cleared from the factory to respective dealers on principal to principal basis - Excise duty paid on per price charge from the dealers – Held that:- As per agreement dealer is under obligation to provide free pre-delivery inspection and three free service given to customer. Appellant has a strong prima facie case which justifies waiver of condition of pre-deposit of duty demand, interest and penalty
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2013 (1) TMI 328
Appeal against Transfer Order – Assessee is an Assistant commissioner posted in Bhopal Zone - Minimum tenure not be less than 2 years - Applicant has been transferred from Bhopal zone to Cochin zone in less than 2 years along with his wife, who is also Assistant Commissioner - Transfer order was outcome of mala fide on the part of respondent No. 4 who desired that the applicant should give undue favour Gutkha manufacture in installing high speed Gutkha pouch packing machine avoiding physical verification of the actual running capacity of the pouch packaging machine Allegations - the applicant started harassing Gutkha manufacturer since the day he joined at Bhopal in an effort to extract undue benefit from the Gutkha manufacturer - Misconduct of insubordination - Anointing an assessee as Assistant Commissioner for a day - Interacting with electronic and print media against the rules which is in itself misconduct under the Conduct Rules - No departmental proceeding or vigilance inquiry has been ordered against the applicant Held that:- The applicants have been transferred before the expiry of minimum tenure of 2 years at Bhopal at the instance of respondent No. 4 and the impugned transfer order in the garb of administrative exigency has been passed with an intention to punish the applicant for the alleged insubordination. Where the applicant is able to prima facie show that the transfer is result of mala fide and the same has been resorted to in lieu of punishment, the same is liable to be set aside being wholly illegal The respondents were not justified in transferring the applicant for the alleged serious misconduct as per recommendations of respondent No. 4 as a measure of punishment in view of the fact that no departmental proceeding or vigilance inquiry has been ordered against the applicant. In favour of applicant
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2013 (1) TMI 327
Manufacture - Section 2(f) of the Central Excises and Salt Act, 1944 - Processing of concentrated basic pesticidal chemical - Activity undertaken by petitioner is already held to be not constituting manufacture by a competent Tribunal - Department show's that it becomes manufacturing activity because of notification dated 27th July, 1995 – Held that:- It is obvious that a statutory definition as contained in Section 2(f) of the Act has interpreted by a competent Tribunal could not have been modified by Board by issuing such notification. Though learned Assistant Solicitor General of India is right in submitting that this Court should not interfere at show-cause notice stage, in present facts, issuance of such show-cause notice in the light of Circular, which is not holding field, is unsustainable. Circular dated 27th July 1995 quashed - In favour of assessee
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2013 (1) TMI 326
Clearance of the inputs ‘as such’ - Denial of Cenvat credit - Rule 15(2) of Cenvat Credit Rules, 2004 - Assessee is engaged in manufacturing of detergent powder/cake, emulsifier - Under Chapter 34 of the Central Excise Tariff Act, 1985 - Appellants factory was closed and no production of said product - Avail CENVAT credit by procuring one of the raw materials during that period - Raw material so obtained was being cleared ‘as such’ under the cover of invoices - Reverse the Cenvat credit so availed - Rule 2(k)(i) of Cenvat Credit Rules, 2004 - Rule 3(4)(b) of the Cenvat Credit Rules - Held that:- In the absence of any mala fide and keeping in view that entire activity was within the framework of the provisions of Cenvat Credit Rules, it's not a justifiable reason to impose penalties on the appellants. Service tax for inward transportation of the sulphur in their factory. Admittedly, the said Service tax stand paid by them for transporting the goods in their factory and in terms of Cenvat Credit Rules, they are entitled to avail the credit of Service tax so paid. At the time of clearance of the inputs as such, there is no requirement of law for reversal of input services credit. The appellants are entitled to use said credit, as and when they start the production of their final product. As such, on this ground, also I find no reason to impose penalty. In favour of assessee
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2013 (1) TMI 325
Penalty u/s 11AC – Extended period of limitation - Valuation – Assessable value - Inclusion of the engraving charges in the value of final products – Assessee was purchasing screens and get the same engraved on behalf of the suppliers of the grey fabrics and the amount that has been received for the work of engraving and developing charges, are actual charges – Assessee contended that they were in bona fide belief that amount received for engraving charges were not to be included as they are reimbursable charges - Held that:- The statement of Office Superintendent lends credence to the bona fide belief of the assessee that the amount charged being not for manufacturing activity is not liable to be included in valuation of final products. Therefore, demand confirmed by the lower authority by invoking extended period on limitation, cannot be sustained. In favour of assessee
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CST, VAT & Sales Tax
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2013 (1) TMI 351
KVAT Act - Notices u/s 47(2)- Detention of goods - Evasion of tax - Demanding security deposit - Supply of goods - Erection and commissioning - Held that:- whether there was any element of tax evasion is a matter to be brought to light in the course of appropriate adjudication proceedings. But, for that reason, the goods need not be detained any further and the same shall be released to the petitioners forthwith, on satisfying 1/3rd of the security deposit demanded
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Indian Laws
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2013 (1) TMI 346
Dismissal of charged officer(functioning as the Deputy Manager of the Bank ) from service - High Court set aside an order passed by the State Bank of India of dismissal in exercise of powers conferred under Article 226 of the Constitution of India - Held that:- High Court has committed an error in holding that the charge-sheet should have mentioned about the details of the documents and the names of the witnesses which the Bank proposed to examine and a list to that effect should have been appended to the charge sheet as the charge-sheet need not contain the details of the documents or the names of the witnesses proposed to be examined to prove the charges or a list to that effect unless there is a specific provision to that effect. Charge-sheet is not expected to be a record of evidence. Fair procedure does not mean giving of copies of the documents or list of witnesses along with the charge-sheet. Of course, statement of allegations has to accompany the charge-sheet, when required by the Service Rules. The presenting officer had informed the inquiring authority that the list of bank’s documents was forwarded to the charged officer vide his letter dated 21.05.1997 ,27.06.1997 but the both was not responded to by the charged officer. Inspection of bank’s documents on 13.06.1997, 14.06.1997, 09.07.1997 and 10.07.1997 respectively were undertaken as instructed by Inquiring Authority & Presenting officer was also present for facilitating the inspection but the charged officer did not turn up for inspection of the bank’s documents. As 12.07.1997 was the last opportunity given to the charged officer & one more opportunity was given by the Inquiring Authority to the charged officer to submit the list of defence documents and witnesses by 19.07.1997 but the charged officer did not give any list of defence documents and witnesses and did not appear before the Inquiring Authority. On 06.11.1997, the charged officer walked out of the inquiry under such circumstances, the Inquiring Authority had no other alternative but to hold the inquiry ex parte. The Inquiring Authority and the presenting officer had followed procedures laid down under Rules 68(2)(v), 68(2)(ix)(a), 68(2)(viii) and 68(2)(xix) of the Service Rules. High Court also committed an error in holding that since no witness was examined in support of charges, it was a case of no evidence. In an ex parte inquiry, if the charges are borne out from documents kept in the normal course of business, no oral evidence is necessary to prove those charges. When the charged officer does not attend the inquiry, then he cannot contend that the Inquiring Authority should not have relied upon the documents which were not made available or disclosed to him. The Inquiring Authority has examined each and every charge levelled against the charged officer and the documents produced by the presenting officer and came to the conclusion that most of the charges were proved.The documents produced by the bank, which were not controverted by the charged officer, supports all the allegations and charges levelled against the charged officer. The High Court under Article 226 of the Constitution of India was not justified in interfering with the order of dismissal passed by the appointing authority after a full-fledged inquiry, especially when the Service Rules provide for an alternative remedy of appeal. As Appellant - Bank in this case has succeeded in establishing the charges levelled against the delinquent officer and was rightly dismissed from service which called for no interference by the High Court under Article 226 of the Constitution of India.
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