Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 19, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Articles
News
Notifications
Central Excise
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03/2012 - dated
16-1-2012
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CE
Amends notification no. 23/2003-CE - EOUs/EHTP/STP Units – Excise Exemption on Goods Cleared to DTA .
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02/2012 - dated
16-1-2012
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CE
Amends notification no. 05/2006-CE - Effective Rate of Duty on goods of Chapter 54 to Chapter 82.
Customs
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CORRIGENDUM - dated
17-1-2012
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ADD
Corrigendum of Notification no. 8/2012-Custom (ADD).
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08/2012 - dated
16-1-2012
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ADD
Amends notification No.70/2010-Customs - Anti-dumping duty on Poly Vinyl Chloride Paste Resin also called as Emulsion PVC Resin (hereinafter referred to as the subject goods), falling originating in, or exported from European Union.
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03/2012-Customs - dated
16-1-2012
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Cus
Prescribes rate of custom duty on Import of Gold & Silver by an eligible Passenger.
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02/2012-Customs - dated
16-1-2012
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Cus
Prescribes rate of custom duty on Import of Gold & Silver when imported other then through post, courier or baggage.
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01 /2012-Customs - dated
16-1-2012
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Cus
Prescribes rate of custom duty in Respect of diamonds, Platinum, Gold and Silver.
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04/2012 - dated
17-1-2012
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Cus (NT)
Amends notification no. 36/2001-Cus (N.T.) - Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values
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03/2012 - dated
16-1-2012
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Cus (NT)
Amends notification no. 36/2001-Cus (N.T.) - Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values.
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01/2012 - dated
17-1-2012
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Safeguard
Seeks to impose safeguard duty at the rate of 10% ad valorem, on Phthalic anhydride.
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Dis-allowance of interest expense from allegadly interest income by Revenue – The interest paid to the power procurement utilities on commitment advances was capitalized. Interest paid and interest received were inextricably linked and have a commonality about their nature and character. They cannot be treated differently..... - HC
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Though assessee furnished the director’s report, the actual write off, filing of balance sheets, memorandum and articles of association, letter to DISL etc. however, the assessee did not bring to the notice of the A.O. that no interest from the converted loan had been offered and assessed to income tax in any of the earlier previous years. - Penalty confirmed.... - HC
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Treatment of Share Application money as loans & Advances(269SS) - Penalty under 271D - Share application monies received by a company, pending allotment of shares, do not amount to loan or deposit..... - HC
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Only the business loss can be carried forward u/s 72 of the Act and it can also be set off only against the business income of the assessee. In present case, assets sold were capital assets and capital gains on sale of capital assets is not to be set off against the brought forward loss of earlier years. .... - AT
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Whether a transaction is shame - held that:- The existence or non-existence of written agreement would not be fatal to claim deduction on account of expenditure on account of commission. - the finding of the AO with regard to the agreement being a sham document cannot be sustained.... - AT
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Income escaping assessment - Where AO in the original assessment order,made an addition u/s 41(1) but not in respect of other unconfirmed creditors - This was a factual lapse, which was pointed out in the audit objection and then examined by the authorities. - reassessment upheld .... - HC
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First appellate authority, namely; DCIT (Appeals) or CIT (Appeals) have inherent, implied and ancillary powers to grant stay against the recovery of disputed demand of tax while seized of the appeal filed before them in accordance with Section 246 or 246A of the Act. .... - HC
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Undisclosed income u/s 68 - genuine or bogus gifts - The assessee failed to produce the donor as also his bank statement to prove that gift was actually given by the assessee. - NRI gift from a stranger was held to be bogus.... - HC
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Assessee had no liability to pay advance tax in view of the fact that his entire income was subject to tax at source. Thus, no interest is chargeable u/s 234B..... - HC
Customs
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Amends notification no. 36/2001-Cus (N.T.) - Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values - Ntf. No. 04/2012-Customs (N.T.) Dated: January 17, 2012
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Seeks to impose safeguard duty at the rate of 10% ad valorem, on Phthalic anhydride. - Ntf. No. 01/ 2012-Customs (SG) Dated: January 17, 2012
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Corrigendum of Notification no. 8/2012-Custom (ADD). - Ntf. No. CORRIGENDUM Dated: January 17, 2012
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Drawback under Section 75 of the Customs Act - petitioner though applied for drawback at 'Brand Rate' is eligible for drawback on the copper used by them in the manufacture of the imported goods in view of the notification in which copper has been declared as deemed imported material under Section 75(1A) of the Customs Act..... - HC
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Applicability of unjust enrichment on refund of fine and penalty - in the case of refund of fine and penalty unjust enrichment is not applicable.... - AT
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Revision application - Duty drawback claim under Section 74 of the Customs Act - re-export of goods - goods being usable parts/attachments of the main equipment which were never specifically and separately mentioned in detail at the time of claimed import any benefit of doubt cannot be extended..... - CGOVT
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Prescribes rate of custom duty in Respect of diamonds, Platinum, Gold and Silver. - Ntf. No. 01 /2012-Customs Dated: January 16, 2012
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Prescribes rate of custom duty on Import of Gold & Silver when imported other then through post, courier or baggage. - Ntf. No. 02/2012-Customs Dated: January 16, 2012
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Prescribes rate of custom duty on Import of Gold & Silver by an eligible Passenger. - Ntf. No. 03/2012-Customs Dated: January 16, 2012
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Amends notification no. 36/2001-Cus (N.T.) - Palm oil, Palmolein, Soyabean Oil (Crude) and Brass Scrap (all grades) - Traiff Values. - Ntf. No. 03/2012 - Customs (N.T.) Dated: January 16, 2012
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Amends notification No.70/2010-Customs - Anti-dumping duty on Poly Vinyl Chloride Paste Resin also called as Emulsion PVC Resin (hereinafter referred to as the subject goods), falling originating in, or exported from European Union. - Ntf. No. 08 /2012 – Customs (ADD) Dated: January 16, 2012
FEMA
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Risk Management and Inter-Bank Dealings - Commodity Hedging. - Cir. No. 68 Dated: January 17, 2012
Service Tax
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Cenvat Credit of service tax paid on GTA for disposal of by product - sugarcane is definitely is a raw material for sugar and Press Mud and Ash are used as manure for growing sugarcane and therefore utilization of Press Mud and Ash are used for production of raw material which can be definitely said to be related to manufacture itselfu.... - AT
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Terms and conditions of the agreement clearly shows that though the appellant has been termed as consignment agent by the principal, the relation between them is business relation. Therefore, assessee cannot be treated as C&F agent.... - AT
Central Excise
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Whether the addition and mixing of polymer and additives to base bitumen results in the manufacture of a new marketable commodity - The said process did not result in transformation of bitumen into a new product having a different identity, characteristic and use. It is well settled that mere improvement in quality does not amount to manufacture..... - SC
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The word 'consumer' in the said Note 11 of Chapter 29 of the Central Excise Tariff Act, 1985 means any consumer including an industrial consumer and the said word is not related exclusively to retail consumer..... - AT
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Manufacture of Ion Exchange Resins – it was not necessary that identical product should be marketable. Even if similar product is proved to be marketable, the test of marketability is satisfied. - copolymer beads are marketable. .... - AT
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Cenvat credit - Cenvat credit on the goods, i.e., paints, used for repair and maintenance of various equipments and the pipes and machines - goods which are used as paint within the factory of production are eligible for availing Cenvat Creditt.... - AT
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Admissibility of CENVAT Credit of Education Cess in respect of invoices issued by 100% EOU - The issue is no longer res-integra and credit of Education Cess is admissible.... - AT
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Valuation - central excise - The Revenue cannot pick only those matters where the goods were sold at higher rates from the depot and ignore the clearances which were ultimately sold at a lower value, though the duty was paid at the higher assessable value - Hence , that such excess payment and short payment have to be neutralised.... - AT
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Notification No.7/2010-CE(NT), dt.27.2.10, replaces the words 'used in' by the words 'used in or in relation to' by amending Notification No.5/2006-CE(NT). Therefore, the services which have been used in relation to manufacture, the admissibility of CENVAT Credit cannot be disputed. .... - AT
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Amends notification no. 05/2006-CE - Effective Rate of Duty on goods of Chapter 54 to Chapter 82. - Ntf. No. 02/2012-Central Excise Dated: January 16, 2012
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Amends notification no. 23/2003-CE - EOUs/EHTP/STP Units – Excise Exemption on Goods Cleared to DTA . - Ntf. No. 03/2012-Central Excise Dated: January 16, 2012
Case Laws:
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Income Tax
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2012 (1) TMI 35
Whether the provisions of section 32 of SICA would override the effect on the provisions of section 43B – BIFR recommended to consider granting exemption from the provisions of Section 43B – Tribunal relied on circular No.523 dated 05.10.1988 and 576 dated 31.08.1990 issued by the BIFR while allowing appeals - Held that:- Circular No.523 dated 05.10.1988 relates to the provisions of section 41(1), 79 and 115J and not section 43B. Thus, such reliance placed is unsustainable. By virtue of the provisions of section 32 of SICA, the scheme framed u/s 18 shall have the effect of overriding the provisions of the Income Tax Act, be it even the provisions of section 43B. Though u/s 43B, the A.O. may not have any discretion to allow any deduction in respect of interest payable, it is the case of the revenue that by virtue of the provisions of section 32 of SICA, the assessee, who has taken over the sick industry, would have the benefit of the provisions of the scheme. Therefore, the substantial question of law is answered in the negative i.e. against the revenue.
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2012 (1) TMI 34
Fund or institution established for charitable purposes - Application for registration u/s 10(23C)(iv) rejected by the Director General of Income Tax(Exemptions) on ground that records and accounts were not properly maintained – Held that:- In the present case, the reasons given in the order do not appear to be germane to the conclusion reached. As indicated the explanation/justification of the petitioner has not been considered. Keeping in view the aforesaid aspects we set aside the order and pass an order of remit and direct the respondent to decide the application for registration u/s 10(23C)(iv) afresh keeping in mind the observations made in the case of American Hotel and Lodging Association Educational Institute vs CBDT & others (2008 - TMI - 4477 - Supreme Court Of India).
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2012 (1) TMI 25
Dis-allowance of interest expense from allegadly interest income by Revenue – assessee, wholly owned subsidiary of Power Finance Corporation (PFC) was incorporated as a special purpose vehicle (SPV) for inviting bids for construction and building of an ultra mega power project - Commitment Advance received from Power Procurement Utilities of the States concerned transferred to PFC - PFC paid interest on the unutilized Commitment Advance - interest paid to the Power Procurement Utilities on the Commitment Advance reduced from interest income received from PFC credited to the capital work in progress - Held that:- CIT (Appeals) and Tribunal have specifically held that the interest income & interest expense, both were on capital account. This is not a case of surplus funds, which were available and investment were made in fixed deposits to earn interest. The interest paid to the power procurement utilities on commitment advances was capitalized. Interest paid and interest received were inextricably linked and have a commonality about their nature and character. They cannot be treated differently. - Decided against the Revenue
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2012 (1) TMI 24
Penalty for concealment u/s 271(1)(c) – Business of money-lending – share application money deposited converted into loan in A.Y. 98-99 – non-acknowledgement of debt by receiver company(DISL) – no interest charged on such converted loans – wrote off loan as bad debts – deduction of bad debts disallowed by Department – Held that:- Though assessee furnished the director’s report, the actual write off, filing of balance sheets, memorandum and articles of association, letter to DISL etc. however, the assessee did not bring to the notice of the A.O. that no interest from the converted loan had been offered and assessed to income tax in any of the earlier previous years. If no interest was charged the amount cannot be considered as a money lending advance since the essence of money lending business is the charging of interest. When one of the important conditions for the allowability of bad debt u/s 36(2)(i) was not satisfied and the same was within the knowledge of the assessee, it was duty bound to disclose the same in order to show its bonafide. The particulars furnished by the assessee were thus not complete, and were, therefore, inaccurate. Order of the Tribunal restoring the penalty is upheld. - Decided against the Assessee.
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Customs
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2012 (1) TMI 31
Whether claim of refund arising out of final assessment to be made vide an application u/s 27 or the same has to be refunded immediately u/s 18 not requiring assessee to move an application – bill of entries of import were provisionally assessed on 24.08.98 & 02.02.99 and duty was paid – refund arised on final assessment on 21.06.99, 15.06.99 – whether clause of unjust enrichment u/s 27(2) would be applicable - Held that:- The assessee has paid provisional duty which gets reduced on final assessment. The assessee, therefore, becomes entitled to refund which is payable in terms of Rule 9B of the Excise Act, 1944 or Section 18 of the Act. For refund on this account, no application is required to be filed u/s 27 of the Act and therefore, sub-Section (2) relating to unjust enrichment is not applicable. Further, insertions vide sub-sections (3), (4) and (5) to Section 18 are effective from 13.07.06 and obviously are not applicable to the case in hand as they do not have retrospective effect. - Decided in favor of assessee.
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Service Tax
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2012 (1) TMI 33
Whether service provided to the assessee by a non-resident prior to insertion of Section 66A of the Finance Act, 1994, is exigible to service tax – provision introduced on 18.4.2006 - Held that:- The issue is no longer res integra. Any service provided to the assessee by a non-resident prior to insertion of Section 66A of the Finance Act, 1994, was not exigible to service tax. See CCE vs M/s Kansal Hosiery Exports (2012 - TMI - 208473 - Punjab And Haryana High Court ), CCE v. Bhandari Hosiery Exports Ltd. (2009 - TMI - 35335 - Punjab And Haryana High Court ), Indian National Shipowners Association v. Union of India (2008 - TMI - 32013 - High Court Of Bombay)– Decided against the Revenue.
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2012 (1) TMI 28
Whether service provided to the assessee by a non-resident prior to insertion of Section 66A of the Finance Act, 1994, is exigible to service tax – The provision was introduced on 18.4.2006 - period involved 9.7.2004 to 18.1.2006 - Held that:- Any service provided to the assessee by a non-resident prior to insertion of Section 66A of the Finance Act, 1994, was not exigible to service tax. See Commissioner of Central Excise v. Bhandari Hosiery Exports Ltd. (2009 - TMI - 35335 - Punjab And Haryana High Court ) and Indian National Ship Owners Association v. Union of India (2008 -TMI - 32013 - HIGH COURT OF BOMBAY) – Decided against the Revenue.
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2011 (12) TMI 165
Liability of Sub-Contractor to pay service tax when it stands paid by the main Contractor on the total amount inclusive of the service part, which was allotted to the assessee by the main Contractors - proof of deposit furnished - request for adjournment on medical ground rejected as the medical certificate has not been attached – plea for waiver of deposit also rejected – Held that:- Revenue was not able to dispute the argument that amount of service tax is payable in respect of the services rendered either by the contractor or by the sub contractor and that the amount of service tax in respect of the same services cannot be charged twice. Further, petitioner has produced the challans in respect of deposit of service tax by the main contractors. In view of this, the direction of the Tribunal to deposit 50% of the amount of the demand raised, is unjustified and untenable. Consequently, the order is set aside and Tribunal is directed to decide the appeal without any predeposit. Further, while seeking adjournment on the medical ground, the medical certificates are not expected to be produced. Statement made by the assessee is expected to be accepted. Thus, there was no reason to decline the request for adjournment.
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Central Excise
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2012 (1) TMI 30
Validity of power of Tribunal to grant statutory right to the assessee to deposit the amount of penalty u/s 11 AC of the Central Excise Act - Show-cause notice issued by Assistant Commissioner raising the demand and imposing penalty did not indicate regarding the benefit of depositing the amount within 30 days – Held that:- Once an earlier order was not passed in accordance with the provisions of Section 11 AC of the Act then the Tribunal was fully justified in granting one opportunity to the assessee to pay the amount of penalty in terms of proviso to Section 11 AC of the Act within a period of 30 days by earning the benefit of paying penal amount to the extent of 25% instead of amount equivalent to the amount of duty. - Decided against the revenue.
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2012 (1) TMI 27
Whether the addition and mixing of polymer and additives to base bitumen results in the manufacture of a new marketable commodity and as such exigible to Excise duty – assessee engaged in the supply of Polymer Modified Bitumen (PMB) & Crumbled Rubber Modified Bitumen (CRMB) – Revenue contended that such process carried out amounted to manufacture – Held that:- In this case, neither in the Section Note nor in the Chapter Note nor in the Tariff Item do we find any indication that the process indicated is to amount to manufacture. Thus, it is evident that the said process of adding polymers and additives to the heated bitumen to get a better quality bitumen, viz. PMB or CRMB, cannot be given an extended meaning under the expression manufacture in terms of Section 2(f) (ii) of the Act. The said process did not result in transformation of bitumen into a new product having a different identity, characteristic and use. It is well settled that mere improvement in quality does not amount to manufacture. Thus, PMB or CRMB cannot be treated as bituminous mixtures falling under CSH 27150090 and shall continue to be classified under CSH 27132000 pertaining to tariff for petroleum bitumen. - Decided against the Revenue.
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2012 (1) TMI 19
Whether the glass bottles and crates which are used for selling beverages and were re-usable would be exigible to excise duty or not – Section 35 G of the Central Excise Act - Held that:- Once there is a pure finding of fact that beverage alone are sold without selling of bottles and crates then it would be obvious that no excise duty would be chargeable on the bottles and crates. No question of law much less a substantive question of law within the meaning of Section 35G of the Act would arise. - Decided against the Revenue.
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