TMI Tax Updates - e-Newsletter
January 2, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax

News

1. RBI Reference Rate for US $ and Euro

2. President of the ICAI to Head the South Asian Federation of Accountants (SAFA)

Notifications

Central Excise

1. 16/2013 - dated 31-12-2013 - CE (NT)

Seeks to fixes tariff value in respect of excisable goods falling under heading 3304 in retail packages and in respect of which the provisions of section 4A of the Central Excise Act, 1944 do not apply

Customs

2. 34/2013 - dated 31-12-2013 - ADD

Seeks to amend notification No. 98/2010-Customs dated 28th September, 2010 to modify the amount of anti-dumping duty on imports of DVD originating in or exported from Vietnam.

3. 33/2013 - dated 31-12-2013 - ADD

seeks to levy anti-dumping duty on imports of Phosphoric Acid- Technical grade and Food grade (including Industrial grade) originating in or exported from China PR for a further period of five year..

4. 57/2013 - dated 31-12-2013 - Cus

Seeks to amend Notification No. 46/2011-Customs, dated 01-06-2011 (India-ASEAN FTA)

5. 56/2013 - dated 31-12-2013 - Cus

Seeks to amend Notification No. 53/2011-Customs, dated 1-7-2011 (India-Malaysia CECA)

6. 55/2013 - dated 31-12-2013 - Cus

Seeks to amend Notification No. 69/2011-Customs, dated 29th July, 2011 ( India-Japan CEPA)

7. 54/2013 - dated 31-12-2013 - Cus

Seeks to amend Notification No. 152/2009-Customs, dated 31-12-2009 (India-Korea CEPA)

VAT - Delhi

8. F.3(384)/Policy/VAT/2013/1188-1200 - dated 31-12-2013 - DVAT

Extension in date of submission of AR-1

Circulars / Instructions / Orders

VAT - Delhi

1. 31/2013-14 - dated 31-12-2013

Filing of information in block R.10 of CST return Form 1.

Customs

2. 45/2013 - dated 31-12-2013

Regarding Handling of Cargo in Customs Area Regulations, (HCCAR) 2009

Highlights / Catch Notes

Income Tax

• Appeal on penalty u/s 271FA dismissed; not maintainable before ITAT due to omission in Section 253.

  Case-Laws - AT : Appeal is provided before this Tribunal against the order levying penalty u/s 271FA - he omission to include section 271FA in section 253 may be unintended, but appeal is not maintainable before ITAT - AT
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• Order Issued Unfairly: Petitioner Given Less Than 24 Hours to Respond, Violating Fair Justice Principle.

  Case-Laws - HC : Order passed without giving fair opportunity of making a representation - petitioner was given less then 24 hours to respond to the show cause notice - Justice must not only be done but also appear to have been done - HC
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• Sale Breakdown Doesn't Alter Slump Sale Tax Status, Consideration Remains Unaffected by Assessee's Itemization.

  Case-Laws - HC : Taxability of sale consideration of a going concern - Merely because the assessee has given split up figures of how he has claimed and received the consideration from the purchaser, it would not take the goods out of slump sale - HC
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• High Court Rules Interest on Sticky Loans Taxable Upon Realization, Not Accrual, Affecting Income Tax Treatment.

  Case-Laws - HC : Taxability of interest on sticky loans - Interest on such loans would have to be accounted for and paid as and when it is realised - HC
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• Court Rules Mortgage Clearance Not a Capital Improvement for Tax on Inherited Property.

  Case-Laws - AT : Cost of acquisition - succession or inheritance - cost of improvement - if the previous owner had mortgaged the property and the assessee and his co-owners cleared off the mortgage so created, it could not be said that they incurred any expenditure by way of effecting any improvement to the capital asset - AT
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• Assessee's Claim for 80% Depreciation Rate Denied Due to Lack of Adequate Certification and Documentation.

  Case-Laws - AT : The copy of certificate of the engineer of vendor is not sufficient to allow the claim of assessee at higher rate of 80% - assessee has failed to furnish the product catalogue and certificate from the competent authorities to establish the nature and use of the asset to show that it is energy saving device - AT
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• Tax Authority Validates Cash Profit/Operating Cost as Profit Level Indicator, Leading to Depreciation Adjustment Reversal.

  Case-Laws - AT : Transfer pricing adjustments - Reduction in amount of Depreciation - CIT(A) was justified in applying Cash profit/Operating cost as the correct PLI under Transactional Net Margin Method and resultantly deleting the addition - AT
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• Depreciation on Non-Functional Units' Machinery Allowed Using Block of Assets Method Without Revenue Loss.

  Case-Laws - AT : Depreciation on plant and machinery of non-functional units - depreciation was allowable on the basis of concept of block of assets - The Revenue is not put to any loss by adopting such method - AT
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• Section 68 Inapplicable to Bank Deposits If No Books Maintained for the Year, Assessee Protected from Tax Liabilities.

  Case-Laws - AT : Provisions of section 68 cannot be invoked on various deposits/credits found recorded in the bank account of the assessee in the absence of books maintained for that previous year - AT
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• Society Must Actively Engage in Charitable Activities for Section 12A(a) Registration; MOA Inclusion Alone Isn't Enough.

  Case-Laws - AT : Merely mentioning about various objects in the nature of charitable activities in the MOA, does not mean that the society is doing any charitable activities as general public utility and is entitled for registration under section 12A(a) - AT
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• DRP Can Enhance TPO Variations; Case Remanded for Fair Assessee Hearing Opportunity.

  Case-Laws - AT : Power to modify TPO’s order – DRP is fully empowered to enhance the variations proposed in the draft order - however matter remitted back to the DRP for giving an effective opportunity to the assessee - AT
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Customs

• Misuse of Exemption in Notification No.38/96-Customs: Raw Silk Imported from China Without Customs Duty.

  Case-Laws - HC : Exemption in terms of Notification No.38/96-Custom in respect of border trade - Import of raw silk from China - entire goods reached at Delhi from China without paying any custom duty - it is evident that the transaction is misuse of the provision - HC
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Service Tax

• Court Rules Land Value Excluded from Service Tax on Erection, Commissioning, or Installation Services for Land Development Charges.

  Case-Laws - AT : Demand of service tax - while demanding tax on land development charges, value of land should not form part of the taxable service of erection, commissioning or installation service. - AT
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• CENVAT Credit Denial Overturned for Gurgaon Property Renting; Manufacturing Activity Not Location-Restricted.

  Case-Laws - AT : Denial of CENVAT Credit - Availment of credit on renting of immovable property - since that activity of manufacture was taking place in the premises at Gurgaon benefit of CENVAT credit cannot be denied to the respondents - AT
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• Transaction Deemed Supply of Tangible Goods Service Due to Lack of Sales Tax and Transfer of Possession Rights.

  Case-Laws - AT : Supply of Tangible Goods Service - Since no Sales tax has been paid and no evidence has been shown that the transaction is a transaction of right to use and was liable to sale tax, the natural conclusion would be that the transaction is supply of tangible goods for use without parting with the right of possession and control - AT
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• Rainwater Harvesting System Architectural Services Eligible for CENVAT Credit for Beverage Manufacturer's Business Operations.

  Case-Laws - AT : CENVAT Credit - The architectural services having been used for putting in place the rain water harvesting system cannot be treated as having no nexus with the business activities of the appellant which relates to manufacture of carbonated beverages and aerated water - AT
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Central Excise

• Slurry Yeast's Marketability Questioned as Excisable Commodity Due to Limited Shelf Life and Lack of Evidence.

  Case-Laws - AT : Whether slurry yeast is an excisable commodity or not - There is no corroborative evidence adduced by the department to establish the marketability of slurry yeast which has a shelf life of two days - AT
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VAT

• Vend Fee from TASMAC u/r 15(2) not part of taxable turnover for assessee.

  Case-Laws - HC : Vend Fee collected from the licensee-viz., TASMAC as per Rule 15(2) of the Tamil Nadu Indian made Foreign Spirits (Supply by Wholesale) Rules, 1981 cannot be included in the taxable turnover of the assessee - HC
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Case Laws:

• Income Tax

• 2014 (1) TMI 103
  Disallowance of deduction u/s 80IB(10) of the Act – Conditions not satisfied – Entitlement for proportionate deduction – Held that:- High court dismissed the appeal of the revenue – The court ordered the Tribunal to allow proportionate deduction to the assessee u/s 80IB(10) of the Act – Following ITO vs. AIR Developers [2008 (5) TMI 333 - ITAT NAGPUR] and ACIT vs. Sheth Developers (P)Ltd. [2009 (6) TMI 670 - ITAT MUMBAI] - assessee is entitled for deduction u/s.80IB(10) in respect of flats having built up area not exceeding 1500 sq. ft and not entitled for deduction in respect of those flats having their built up area exceeding 1500 sq.ft. – deduction u/s 80IB(10) allowed on pro-rata basis - the assessee is entitled for deduction on pro-rata basis u/s.80IB(10) of the Act for the flats having built up area less than 1000 sq.ft i.e. for 312 flats of 65% of the profit – Decided in favour of Assessee.

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• 2014 (1) TMI 102
  Appeal is provided before this Tribunal against the order levying penalty u/s 271FA - Penalty for failure to furnish annual information return (AIR) - Held that:- It is well settled principles of law that consent of a litigant party will not confer any jurisdiction on a judicial or quasi judicial authority unless and until it is otherwise conferred by the legislature - The consent/direction of the Director of Income-tax (Intelligence) will not confer any jurisdiction on the Tribunal unless it is provided for in the Income-tax Act by the Parliament - Unless and until an appeal is specifically provided in section 253 of the Act against the order levying penalty u/s 271FA, the present appeal is not maintainable before the Tribunal - The provisions of section 271FA was introduced in the statute by the Finance Act, 2004 with effect from 01-04-2005 the consequential amendment to section 253 was omitted to be carried out - The omission to include section 271FA in section 253 may be unintended - It is open to the department to bring to the notice of the concerned authority about the omission to provide appeal before the Tribunal for making consequential amendment to section 253 of the Act in case the department found that the omission is unintended - Decided against assessee.

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• 2014 (1) TMI 101
  Cost of acquisition - Held that:- The assessee has acquired the property on on account of succession, the cost of acquisition would get restricted only to that in the hands of his ancestors, which excludes the cost of any encumbrance created by them - Following Salay Mohamad Ibrahim Sait v. ITO [1994 (5) TMI 18 - KERALA High Court] - Encumbrance created by the earlier owner was clearly not a part of such of cost of acquisition - The cost of improvement includes - The expenditure incurred in making any additions or alterations to the capital asset that was originally acquired by the previous owner and if the previous owner had mortgaged the property and the assessee and his co-owners cleared off the mortgage so created, it could not be said that they incurred any expenditure by way of effecting any improvement to the capital asset that was originally purchased by the previous owner - Decided against assessee. Applicability of section 50C - Held that:- The properties got registered only after 01/04/2003 i.e. after the provisions of section 50C were brought on the statute - The contention that the land has been sold away by way of an agreement of sale in 2000 and 2001 itself, has not been substantiated by the assessee with enough evidence and documents - It cannot be concluded that the agreement had actually acted upon - Decided against assessee.

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• 2014 (1) TMI 88
  Order passed without giving fair opportunity of making a representation - Held that:- The petitioner was given less then 24 hours to respond to the show cause notice - If the petitioner had already been given sufficient opportunity and the petitioner had failed to lead the appropriate evidence then there was no occasion for the Assessing officer to have issued the Show cause notice dated 28 November 2013 calling upon the petitioner to show cause why its claim for deduction under Section 80IA should not be disallowed - It is incumbent upon the notice issuing authority to grant reasonable opportunity to the petitioner to respond to the notice - Granting of an opportunity to respond to the show cause notice in less then 24 hours is a flaw in the decision making process and therefore amenable to judicial review - Justice must not only be done but also appear to have been done - The non consideration of the petitioner's response to the notice by making it impossible to the petitioner to file its reply for the consideration of the Assessing Officer does cause prejudice to the petitioner leading to palpable injustice - Decided in favour of assessee.

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• 2014 (1) TMI 87
  Taxability of sale consideration of a going concern - Slump sale or not - Held that:- Following CIT v. B.C. Srinivasa Setty [1981 (2) TMI 1 - SUPREME Court] - When in a case, the computation provisions do not apply, such a case would not come within the ambit of Section 45 - In the case of assessee - The material on record discloses that it is a case of slump sale - The said sale has taken place prior to the amendment introducing Section 50B, which has come into effect from 01.04.2000 - As per the law stood then, it was not taxable - Merely because the assessee has given split up figures of how he has claimed and received the consideration from the purchaser, it would not take the goods out of slump sale -Tthe authorities were justified in holding that Section 45 of the Act is not attracted - Decided against Revenue.

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• 2014 (1) TMI 86
  Taxability of interest on sticky loans - accrual of income - Held that:- Following UCO Bank Vs. Commissioner of Income Tax [1999 (5) TMI 3 - SUPREME Court] - Interest on ‘Sticky Loans’, recovery whereof is doubtful, if not shown in ‘Profit and Loss Account’ should be treated as not forming part of the income of the assessee, irrespective of whether the assessee otherwise follows the mercantile system of accounting - Interest on loans and advances, of which recovery has become extremely doubtful, and which is written off for all practical purposes, but recorded separately, in the faint hope of recovery at some future point of time, does not come within the purview of chargeable interest within the meaning of Sections 5 and 6 of the Interest Act - As per the proviso to Section 5 of the Interest Act - Interest in relation to categories of bad or doubtful debts, referred to in Section 43D of the Income Tax Act, shall be deemed to accrue or arise in the previous year in which it is credited to the profit and loss account for that year - Non-operational sticky loans in respect of which mercantile actual of interest was shown in the suspense account and not the profit and loss account, would not, be payable on mercantile accrual basis - Interest on such loans would have to be accounted for and paid as and when it is realised - Decided in favour of assessee.

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• 2014 (1) TMI 85
  Validity of revision order passed u/s 263 - Held that:- Though Section 80HHC and 80IA are independent of each other, the deductions to the extent of such profits and gains shall in no case exceed the profits and gains of such eligible business of undertaking or enterprises - It was not open to the A.O. to allow deduction to the extent of 100% of the profits and gains of the eligible business - The Commissioner had rightly found that the A.O. had erred in allowing the deduction under Section 80IA on the reducing balance after deduction under Section 80HHC - The Commissioner acted within his jurisdiction under Section 263 of the Income Tax Act, 1961 to revise the order - Following Joint Commissioner of Income Tax v. Mandideep Eng. & Pkg. Ind. (P) Ltd. [2006 (4) TMI 75 - SUPREME Court] - The Ao shall allow deduction under section 80HHC and 80IA while keeping in view of the restrictions of Section 80IA (9) of the Act - The issue was restored for fresh adjudication.

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• 2014 (1) TMI 84
  Disallowance of losses incurred in trading in Commodities Futures - Held that:- A person transacting through a registered broker cannot have any excess to the terminal of the registered broker with the exchange be it stock exchange or commodity exchange - The allegations of the Revenue authorities that the assessee has modified the client code does not have any basis - The transactions of the assessee are supported by various contract notes - No material evidence has been brought on record to defy these transactions by any denial from the exchange authorities nor there is any evidence on record to show that the broker RSBL has denied to have entered into these transactions on behalf of the assessee - The entire additions have been made on surmises and conjectures which are not permissible - Decided in favour of assessee.

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• 2014 (1) TMI 83
  Undervaluation of closing stock - Held that:- Following CIT v. Loknete Balasaheb Desai S.S.K. Ltd. [2011 (6) TMI 48 - BOMBAY HIGH COURT] - The goods manufactured have not been sold during the year under consideration nor have been cleared from assessee's premises - Central excise liability cannot be said to have been incurred on such unsold manufactured goods lying in stock and consequently the addition of excise duty made by the Assessing Officer was rightly deleted by the learned CIT(A) - Decided against Revenue. Employees' contribution to provident fund - Held that:- Following CIT v. Aimil Ltd. [2009 (12) TMI 38 - DELHI HIGH COURT] - The assessee had made the payment before the due date of filing of the return - If the employees’ contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act - As the Income Tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed - Decided against Revenue.

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• 2014 (1) TMI 82
  Disallowance of bad debts - Held that:- Following CIT Vs. Shreyas S. Morakhia [2012 (3) TMI 103 - BOMBAY HIGH COURT] - The commission income from clients which has been taxed in the hands of the assessee as business income, the debt or part thereof fulfils the requirements of s. 36(1)(vii) r.w.s. 36(2). Decided in favour of assessee. Notional income from house property - Held that:- The flats have been held as 'stock in trade' - Following Tuticorin Alkali Chemicals & Fertilizers Ltd. vs. CIT [1997 (7) TMI 4 - SUPREME Court] - The treatment in the books of accounts, cannot be the sole basis for arriving at a conclusion - Following CIT vs. Neha Builders Pvt. Ltd. [2006 (8) TMI 105 - GUJARAT HIGH COURT] - If property is used as stock-in-trade, then said property would become or partake character of stock and any income derived from stock would be 'income from business' and not 'income from property' - The authorities below are not justified in adding the notional rent computed in respect of the properties under the head 'income from house property' - Decided in favour of assessee.

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• 2014 (1) TMI 81
  Disallowance of depreciation - Held that:- M/s. Universal Exports in itself is a distinct person assessable to income tax - The claim of the assessee company is only on the profit of the proprietary concern which is to be added to its net profit at the end of the year - It maintains its books of accounts separately - The assessee cannot be allowed once against depreciation from the profits so determined - Decided against assessee.

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• 2014 (1) TMI 80
  Cost of acquisition - succession or inheritance - cost of improvement - Held that:- Following Salay Mohamad Ibrahim Sait v. ITO [1994 (5) TMI 18 - KERALA High Court] - The capital asset had become the property of the assessee by succession or inheritance on the death of the previous owner under section 49(1) of the Act and the cost of acquisition of the asset is to be deemed to be the cost for which the previous owner acquired it, as increased by the cost of any improvement of the assets incurred or borne either by the previous owner or by the assessee - Having regard to the definition of the expression "cost of improvement" contained in section 55(1)(b) of the Act - In order to claim cost of acquisition - The expenditure should have been incurred in making any additions or alterations to the capital asset that was originally acquired by the previous owner and if the previous owner had mortgaged the property and the assessee and his co-owners cleared off the mortgage so created, it could not be said that they incurred any expenditure by way of effecting any improvement to the capital asset that was originally purchased by the previous owner - Decided against assessee. Applicability of section 50C - Held that: - Following Smt. Farida Alladin V/s. Asst. CIT [2014 (1) TMI 101 - ITAT HYDERABAD] - The claim of the assessee that land has been sold by the an agreement of sale in the earlier years has not been substantiated by evidence - The only material is available with the assessee is that the preamble of the document, which states that the agreement has been entered into at a prior date and this by itself cannot be sufficient to conclude that the agreement has been honoured by the assessee and acted upon prior to the enactment of section 50C - Decided against assessee.

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• 2014 (1) TMI 79
  Penalty u/s 271(1)(c) - Held that:- Following Ekta Sankalp Developers V/s Addl. CIT [2014 (1) TMI 103 - ITAT MUMBAI] - Deduction shall be allowed to the assessee u/s 80IB(10) on pro-rata basis for the flats having built up area less than 1000 sq. ft - The disallowance made by department was not justified and does not qualify as a basis for levying penalty u/s 271(1)(c) - Decided against Revenue.

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• 2014 (1) TMI 78
  TP adjustment in respect of royalty paid by the assessee-company to its associate enterprises – Held that:- The strange method followed by the TPO to make a TP adjustment in respect of royalty payment is not sustainable in law - She has neither rejected the method followed by the assessee to bench-mark the transaction in respect of payment of royalty nor has been adopted any recognized method to determine the ALP of the said transactions - The approval of SIA adopted by the TPO as basis to make TP adjustment in respect of royalty payment was untenable - As per the said basis, the net sales of the assessee after excluding export sale and other income and the royalty paid thereon were less than the rate of 3.5% approved by SIA, there was no case of any excess payment made of royalty by assessee than approved by SIA to justify its disallowance by way of TP adjustment - The ld. CIT (A) could not appreciate these infirmities in the order of the TPO – Decided in favour of assessee. Arm's length price in respect of COE-3 related expenses – Held that:- Following assessee’s own case for A.Y. 2002-03 - It is incumbent upon the TPO to work out the ALP of the relevant transactions by following some authorized method and the entire cost borne by the assessee cannot be disallowed by taking the ALP at Nil, keeping in view the facts and circumstances of the case and the relevant details furnished by the assessee - The exercise of ascertaining ALPs has to be done by the TPO keeping in view the well laid down scheme in the relevant provisions of the Act – The issue was restored for fresh adjudication. TP adjustment in respect of sharing of cost advertising campaign – Held that:- The total cost of David Beckham advertising campaign was clearly stated by the assessee in its submissions made before the TPO as £ 25,00,000/- and its share in the said cost was stated to be USD 2 lakhs - The basis of this cost allocation has not been explained by the assessee by producing relevant documentary evidence either before the authorities below or before the Tribunal - The share was agreed after due negotiation considering the benefits of the campaign - The onus in this regard is on the assessee to produce the relevant documentary evidence to support and substantiate the said claim - It is also incumbent upon the TPO to work out the ALP of the relevant transactions following some specified method on the basis of details and documents available on record - The entire cost borne by the assessee cannot be disallowed by simply taking the ALP at NIL – The issue was restored for fresh adjudication. Deduction u/s 80IB – Held that:- Following assessee's own case for A.Y. 2002-03 - The provisions of section 80IB are code by themselves as they contain both substantive as well as procedural provisions. The word 'derived from' is narrower in connotation as compared to the words 'attributable to'. By using the expression 'derived from' Parliament intended to cover sources not beyond the first degree. The assessee has claimed deduction u/s 80IB in respect of receipts which are incidental to the business and so beyond the first degree - The disallowance on account of assessee's claim for deduction u/s 80IB in respect of first four items of other income is confirmed - The disallowance to in respect of income from insurance claim is deleted – Partly allowed in favour of assessee. Proportionate management expenses – Held that:- Following CIT vs. Central Bank of India [2003 (4) TMI 49 - BOMBAY High Court] - Deduction u/s 80M is allowable on net dividend arrived at after taking into account actual expenditure incurred for the purposes of earning such dividend and not the estimated proportionate expenditure – The issue was restored for fresh adjudication. Travel expenses of spouse of employees – Held that:- Following assessee's own case for A.Y. 1997-98 – The expenses are disallowed – Decided against assessee. Depreciation at higher rate of 80% - Held that:- The copy of certificate of the engineer of vendor is not sufficient to allow the claim of assessee at higher rate of 80% - The assessee has failed to furnish the product catalogue and certificate from the competent authorities to establish the nature and use of the asset to show that it is energy saving device eligible for depreciation at higher rate of 80% - The assessee has also not produced any evidence in support of its alternative claim of depreciation at the rate of 60% applicable to computer systems - Decided against assessee. Advertisement expenses – Held that:- Following assessee’s own case for A.Y. 2001-02 - The advertisement expenses were treated as capital expenditure – Decided against Revenue.

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• 2014 (1) TMI 77
  Disallowance made u/s 144C(5) of the Act - Transfer pricing adjustment - Management fees paid to its Associated Enterprise (AE) – Held that:- The assessee has filed additional evidence which was not available before the authorities below - The assessee has forcefully contended that this new material which has been collected by the assessee subsequent to the orders and this is a material evidence in support of the assessee's claim to show that the payment of management fee was paid by the assessee against the service rendered by the AE - order set aside and the matter remitted back to the record of the Assessing Officer/ TPO for verification and examination of the fresh evidence filed by the assessee. Disallowance of claim u/s 40(a)(ia) of the Act – Held that:- There are conflicting observations by DRP & AO on the aspect - the factual aspect requires verification whether the expenditure in question pertains to the assessment year 2005-2006 or to the assessment year under consideration and whether the same were disallowed in the assessment year 2005-06 for want of deduction of tax at source - order set aside and the matter remitted to Assessing Officer for limited purpose of verification – Decided in favour of Assessee.

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• 2014 (1) TMI 76
  Deletion of Payments made to subcontractors – Non-desposition of TDS u/s 40(a)(ia) of the Act – Held that:- The DR has not disputed the point that the assessee has made required deduction of TDS on the payments made to the sub-contractor on or before 31.3.2008 and the same was deposited to the exchequer on 10.04.2008 - TDS has been deducted on the last day i.e. 31.3.2008 by the assessee on the payment made to the sub-contractor and subsequently, it was deposited to the exchequer on 10th April, 2008 - the Commissioner of Income Tax(A) rightly held that the Assessing Officer was not justified in making disallowance u/s 40(a)(ia) of the Act as the appellant had deducted the TDS on 31.03.2008 and deposited the same on 10.04.2008 i.e. within time – there was no reason to see any perversity or any other valid reason to interfere with the order – Decided against Revenue.

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• 2014 (1) TMI 75
  Disallowance of Interest on Inter Company Deposit u/s 36(2)(iii) of the Act – Held that:- Unsecured loans on which assessee had paid interest were carried over from the earlier year and in the earlier year interest was claimed - A part of the unsecured loans which was outstanding in the beginning of the year was reduced during the year - between the period from April, 2004 to 31st March 2005 the company had raised a significant amount in the form of equity shares and as on 31.3.2005 it had a cash and bank – thus, the assessee had sufficient interest free funds which were placed as an ICD without interest - This fact is further strengthened from the fact that unsecured loans raised by assessee raised in earlier years were already invested into business assets – Following CIT v. Reliance Utility & Powers Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - assessee was having a mixed pool of interest bearing funds and non interest bearing funds and since the unsecured loans were carried over from earlier years, it can safely be concluded that interest bearing funds raised in the earlier years and brought forward in the current year were for deployed in the business of the company which means that interest free ICDs were made out of interest free funds of the company – Decided in favour of Assessee. Disallowance of amount paid to ROC towards expenses – Expenses incurred for increasing authorized share capital of the Company – Held that:- Following CIT v. Multi Metals Ltd. [1990 (10) TMI 55 - RAJASTHAN High Court] - expenditure to be eligible u/s 35D(2)(c)(iv) of the Act being allowable as 1/10th of the expenditure for a period of ten years – thus, the assessee can claim only 10% of such expenditure in this year u/s 35D – Decided partly in faovur of Assessee.

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• 2014 (1) TMI 74
  Transfer pricing adjustments - Reduction in amount of Depreciation - Cash profit to Total cost as Profit Level Indicator (PLI) - The assessee demonstrated through its TP study that the price charged or paid to its AEs was at the ALP - The TPO made certain exclusions from the list of comparables which led to the making of TP adjustment - the TP adjustment was eventually made by the AO, it was naturally possible for the assessee to take up its matter before the learned CIT(A) for the first time - the claim of having higher rate of depreciation did not come to be considered for the first time - all the relevant details were already available on record and the assessee simply required the examination of its claim before the CIT(A) – Following Dy. CIT v. Quark Systems (P) Ltd.[2009 (10) TMI 591 - ITAT, CHANDIGARH] – Decided against Revenue. Adoption of Cash profit to Operating cost as the PLI – Held that:- The CIT(A) has allowed the claim of exclusion of depreciation by considering the fact that in subsequent assessment year i.e. 2007-2008 TPO has accepted the same, thus, the principle of consistency cannot be ignored – the CIT(A) was justified in applying Cash profit/Operating cost as the correct PLI under Transactional Net Margin Method and resultantly deleting the addition – Decided Against Revneue.

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• 2014 (1) TMI 73
  Deletion of Disallowance on account of excess claim of Deduction u/s 10B of the Act – Held that:- Both section 80HHC & 10B deal with computation of deduction of total income on account of export profits - The manner of computation of export profit for the purpose of section 10B is given in section 10B(4) for the exports of 100% export oriented units while it is given in section 80HHC(3)(a) for exports by others – Following C.I.T. vs. Lakshmi Machine works [2007 (4) TMI 202 - SUPREME Court] - the excise duty and sales tax have be excluded from the total turnover - the export turnover does not include excise duty, so the total turnover should also not include excise duty - section 145A(1) requires that the excise duty should be taken into account for determination of income and not for the purpose of computation of export profit. It cannot be construed as apparent mistake liable to be rectified u/s. 154 of the I.T. Act - Relying upon T.S. Balram, ITO vs. Vokart Brothers & Others [1971 (8) TMI 3 - SUPREME Court] - “a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions” – Decided against Revenue. Deletion of Disallowance on account of depreciation on plant and machinery of non-functional units – Held that:- Following Commissioner of Income Tax Versus Oswal Agro Mills Ltd. & Oswal Chemicals and Fertilizers Ltd. [2010 (12) TMI 947 - Delhi High Court] - As per amended s. 32, deduction is to be allowed in the case of any block of assets, such percentage on the WDV thereof as may be prescribed as per Circular No. 469, dt. 23rd Sept., 1986 - the depreciation was allowable on the basis of concept of block of assets - The Revenue is not put to any loss by adopting such method and allowing depreciation on a particular asset, forming part of the block of assets even when that particular asset is not used in the relevant assessment year - Whenever such an asset is sold, it would result in short term capital gain which would be exigible to tax and for this reason, we say that there is no loss to Revenue either – Decided against Revenue.

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• 2014 (1) TMI 72
  Transfer pricing adjustment - Selection of comparables – Held that:- Following Deputy Commissioner of Income-tax, Circle-1(2), Hyderabad Versus Deloitte Consulting India (P.) Ltd. [2011 (7) TMI 583 - ITAT HYDERABAD] - The giant companies namely Wipro and Infosys which are taken as comparables as turnovers of these companies are multiple number of times higher compared to that of the assessee are excluded – Thus, the Dispute Resolution Panel erred in considering their profit level indicator to arrive at the arithmetic mean. TPA - Rejection of including amount received as reimbursements – Arithmetic mean profit level indicator applied for adjustment – Held that:- The difficulty in adjudicating the issue agitated by the assessee is that there is absence of clarity on the subject - As the assessee has not clearly explained its case, the Dispute Resolution Panel refused to interfere with the order of the Transfer Pricing Officer – no materials brought out in respect of the claim of the assessee against including the amount received as reimbursement while applying arithmetic mean, profit level indicator for adjustment - In the absence of any additional information on this issue, the Commissioner of Income-tax (Appeals)'s order is upheld – Decided partly in favour of Assessee.

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• 2014 (1) TMI 71
  Deletion of additions made u/s 68 of the Act - Identity of the Creditors and the genuineness of the transactions could not be proved – Evidences to prove the source of lenders could not be established – Held that:- The assessee has not maintained any books of account and whatever credit entries are found by the Assessing Officer, it was from the bank accounts of the assessee in which deposits were made at different point of time - Even the passbook issued by the bank cannot be termed to be the book of the assessee – Relying upon Commissioner of Income-Tax, Poona Versus Bhaichand H. Gandhi [1982 (2) TMI 28 - BOMBAY High Court] – Thus, the provisions of section 68 of the Act cannot be invoked on various deposits/credits found recorded in the bank account of the assessee in the absence of books of the assessee maintained for that previous year - Provisions of section 68 of the Act cannot be invoked on the deposits made in the bank account of the assessee, the veracity of the additions made by the Assessing Officer on certain deposits by invoking the provisions of section 68 of the Act - the CIT(A) stated that the assessee has furnished reasonable and plausible explanations along with confirmation with regard to the different deposits – Decided against Revenue.

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• 2014 (1) TMI 70
  Rejection of application for registration u/s 12AA of the Act – Held that:- The society has been established for maintaining the agencies and franchisees in the district to conduct business of the society, which clearly establishes that the present society is doing business with other agencies and franchisees in the district – none of the object of the society which shows that the present society is doing any charitable activities for the general public utility - Even otherwise the assessee-society has failed to establish that the assessee-society is doing any charitable work keeping in view its object - Merely mentioning about various objects in the nature of charitable activities in the memorandum of association, does not mean that the society is doing any charitable activities as general public utility and is entitled for registration under section 12A(a) of the Act. The activities of the assessee-society are not charitable in nature within the meaning of provisions of section 2(15) of the Act – thus, it does not qualify to be treated as charitable institution - the assessee has not established that its society is formed with objects of any charitable purpose – the society is doing its business and charging huge fees from the public which is in addition to the prescribed fee of the Punjab Government - the fees charged by the present society are in addition to the burden forced upon the common man - Because of this, service has to be rendered by the Punjab Government free of cost to the public against the fee – Decided against Assessee.

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• 2014 (1) TMI 69
  Power to modify TPO’s order – Objection taken against draft order u/s 144C(2) of the Act – Held that:- DRP is fully empowered to "enhance the variations proposed in the draft order" - The natural corollary which follows is that so long as there is some variation proposed in the draft order, it is open to the DRP to enhance the amount of such variation, apart from confirming or reducing such variation - There can be no embargo on the power of the DRP, on a reference made by the assessee seeking relief against the proposed adjustment, to enhance the transfer pricing adjustment made by the A.O. pursuant to the TPO's order. One more opportunity be granted to the assessee since the process of collection of all the necessary documents stood completed by the assessee as of now was prayed - No serious objection was taken by the Departmental Representative - thus, order set aside and the matter remitted back to the DRP for giving an effective opportunity to the assessee – Decided in favour of Assessee.

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• Customs

• 2014 (1) TMI 68
  Duty demand - Enhancement in duty demand - Denial of right of cross-examination - Held that:- tribunal has correctly recorded that the enhanced demand was on account of examination of records and new facts coming to light for the Revenue. In these circumstances, the second show cause notice was issued. This notice was in fact akin to rectification or corrigendum to the original show cause notice. Tribunal has also mentioned that the original show cause notice did not take into account the Special Duty of Customs while computing quantum of duty evaded. It has been recorded that the second show cause notice itself was within five years from the disputed period and, thus, the question of limitation did not arise - findings recorded by the tribunal are perverse, or based upon no material or evidence - appellant has not been able to point out and show that the findings recorded by the tribunal are perverse or based upon no evidence or material - Decided against assessee.

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• 2014 (1) TMI 67
  Duty exemption - Exemption in terms of Notification No.38/96-Custom dated 23.07.1996 - Import of raw silk from China - Held that:- entire goods reached at Delhi from China without paying any custom duty - trade between India and China through Gunji shall be the 'border trade' as per the practice "exchange of commodities" (barter) by the residents along with the border of Tibet Autonomous Region of Chine and Pithoragarh (India) in the 'border trade market'. The exemption under notification No.38/96-Cus is thus permissible only in respect of border trade in the true spirit of provisions of Memorandum of Understanding between two governments. In the instant case, the assessees have misused this provision just to evade the custom duty. Hence, we are of the view that the import of the raw silk from Gunji by M/s. Elegant Industries, Delhi through M/s. Krishna Enterprises is not in accordance with the aforementioned provision of law - it is evident that the transaction is misuse of the provision. Neither M/s. Krishna Enterprises nor M/s Elegant Industries, Delhi are entitled to import the raw silk without paying the custom duty in a huge quantity. The transaction was performed as per the MOU executed between the parties. The raw silk was transported to the main land of the country to earn profit. Intention for the import of these goods has nothing to do with the object of the treaty i.e. to promote the border trade between the local residents of India and China. Dharchula is located about 80 Kilometer from the Gunji, Indo China border. The exemption granted by both the Government of India was misused just to evade the custom duty - Order is set aside - Decided in favour of Revenue.

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• 2014 (1) TMI 66
  Validity of tribunal's order - disciplinary inquiry against the respondent under Rule 14 of the CCS (CCA) Rules - Inordinate delay and laches in order - Imposition of penalty under Section 114 (i), 114 (ii) and 117 - Mis declaration of goods - Duty drawback - Order already attained finality - Held that:- there was delay not only in initiation of the disciplinary proceedings and issuance of the charge-sheet, but also gross and unexplained delay in appointment of the inquiry officer which was effected only on 4th March, 2008. The respondent has submitted that the purpose of the inquiry was to harass him despite his innocence - respondent was promoted; the order quashing the penalty which had been imposed upon the respondent were accepted by the petitioner herein; as well as the fact that the Central Bureau of Investigation found no culpability of the respondent also lend substance to the case of the respondent - Decided against Revenue.

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• 2014 (1) TMI 65
  Failure to clear goods - Goods left uncleared in warehouse beyond permissible warehousing period of 12 months - Adjudicating authority permitted the re-export of balance quantity of un-cleared imported goods granting exemption from payment of interest - Imposition of penalty - Held that:- The main reason advanced by the importer is that due to lack of market demand for the product, they are not clearing the goods, but wish to re-export the balance unclerared quantity to the foreign buyers. They have informed this vide letter dated 4-12-2009. Order of adjudicating authority while permitting re-export of the balance goods and exempting payment of interest, imposing penalty of Rs. 1 lakh (Rupees One Lakh), which I find is without any reason or evidence. Though, the Commissioner (Appeals) observed that the ratio in the case of Syndicate Shipping Services Pvt. Ltd. v. CC Chennai - [2003 (3) TMI 158 - CEGAT, CHENNAI], is not applicable as the facts are different, I find the ratio of this order will be squarely applicable, in the instant case as the order deals mainly with the grounds for imposition of penalty under Section of Customs Act, 1962. As it is clear, penalties under Section 117 are for contravention, not expressly mentioned. But, there should be sufficient evidences to show mala fide intention resulting in contravention of any provisions warranting penalty - Decided in favour of assessee.

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• 2014 (1) TMI 64
  Valuation of goods - Enhancement in valuation - Commissioner set aside enhancement - Held that:- The assessed Bill of Entry having been appealed against by the importer is itself indicative of the fact that the enhanced value does not stand accepted by them. The importers cannot be precluded from challenging the assessed Bill of Entry on the sole ground that they have cleared the goods on the enhanced value, as rightly held by Commissioner (Appeals) - Decided against Revenue.

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• 2014 (1) TMI 63
  Rejection of drawback claim - Bar of limitation - Applicability of clause 3(d)(ii) of CBEC Circular No. 14/2003, dated 6-3-2003 - Held that:- applicable circular nowhere excludes the status of validity of Brand Rate Letters in respect of Shipping Bill or otherwise and the restriction of one year is a binding for all kinds of Brand Rate Letters except in a case when Brand Rate is calculated by taking into account All Industry Rate of Drawback admissible for any of the input which is not the subject matter herein. Further, Government does not find any “legality” so as to override and negate the above applicable Statute. The applicant in his grounds is either trying to circumvent the exact status of impugned claims or is citing examples/cases which are not directly/mandatorily applicable for the case matter and proceedings herein - Revision dismissed.

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• Service Tax

• 2014 (1) TMI 98
  Denial of cenvat credit on various input services – Waiver of Pre-deposit – Held that:- Following M/s SANMAR FOUNDRIES LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, TRICHY [2013 (7) TMI 340 - CESTAT CHENNAI] – The Tribunal granted waiver of dues on services other than Rent-a-cab service - in respect of Rent-a-cab service, the Tribunal observed that as the amount was recovered from employees, there was no reason to claim Cenvat credit on such amount – Assessee directed to deposit Rupees Ten thousand as pre-deposit – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.

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• 2014 (1) TMI 97
  Demand of service tax - Manufacture/sale and erection, commissioning, installation and maintenance of Wind Energy Generators (WEG) - Held that:- Tribunal in the applicants own case granted unconditional stay on the issue of NOC charges paid to Tamil Nadu Electricity Board. However, the demand of tax on land development charges, we find that stay was granted on the ground that classification was not done correctly. In the present case, while demanding tax on land development charges, value of land should not form part of the taxable service of erection, commissioning or installation service. Therefore, the demand of tax on the entire value, prima facie, is not sustainable - Partial stay granted.

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• 2014 (1) TMI 96
  Demand of service tax - Business Auxiliary Service - Management Consultancy Services - Supply of manpower - Held that:- appellant entered into contract with M/s.Futura Polymers Ltd to transfer their Commercial Division. During the agreement period agreement could not be implemented immediately and during the intervening period the appellant also provided necessary for Management of the Commercial Division - appellant had collected the service tax and has been paid also. As the appellant had undertaken the activity in respect of Management of the Commercial division which was transferred to M/s Futura Polymers Ltd - appellant had received commission of 1% in respect of sale of goods - appellants are not liable to pay service tax in view of the provisions of Notification No. 13/2003-ST - Demand and penalty is set aside - Decided in favour of assessee.

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• 2014 (1) TMI 95
  Denial of CENVAT Credit - Availment of credit on renting of immovable property - Commissioner allowed credit - Held that:- Show Cause Notice dated 12.05.2011 it was alleged by the Department that "Rent Services" did not appear to be input services as these services are not used by the respondents directly or indirectly in or relation to the manufacture of their final products and clearance thereof and these services did not fall under the definition of "input service" under Rule 2(1)(ii) of the Cenvat Credit Rules, 2004. Renting of immovable property services received by the respondent are covered in the definition of input services. On going through the case records, I find that eligibility of CENVAT credit of renting services was already accepted by the original authority and the same was not challenged before the Commissioner (Appeals) by the Department. The original authority has denied the benefit only on the ground that renting of the property was located on different address than that of the registered premises of the respondents. The respondents have produced copies of the invoice issued by their address located at Gurgaon before the adjudicating authority and Commissioner (Appeals) in support of their contention that the manufacturing activities were taking place on that premises also. Therefore, since that activity of manufacture was taking place in the premises at Gurgaon benefit of CENVAT credit cannot be denied to the respondents - Decided against Revenue.

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• 2014 (1) TMI 94
  Waiver of pre deposit - Demand of service tax - Receipt of storage and warehousing service from the foreign service provider - Reverse charge mechanism - Held that:- applicants are importing helium gas in the tanks and the tanks are subsequently re-exported. There is no evidence to show that the supplier of gas has any responsibility in respect of the gas exported in tanks in the factory of the applicants - In respect of the rental charges received by the applicants from their clients in respect of the tanks in which the gas is supplied, we find that the applicants are paying excise duty on the rental charges, therefore we find that the applicants have made out a strong case in their favour. Therefore, the pre-deposit of the dues is waived and recovery of the same is stayed during the pendency of the appeals - Stay granted.

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• 2014 (1) TMI 93
  Demand of service tax - Supply of Tangible Goods Service - Held that:- any service provided by a port or any person authorized by the port in relation to port service in any manner. Port service means, “any service rendered in a port in relation to vessels or goods”. In this case, there is no doubt that supply of bunkers is in relation to vessels. The question that arises is whether it can be considered as a sale only. In this case, it is not permissible for any one to supply water or bunker to vessels and to supply these items the port’s authorization is a must. Further, from the sample invoices reproduced in the show-cause notice, it is seen that the invoice mentions “supply of fresh water by barge as per nomination”. It has to be noted that in this case, supply of fresh water would include cost of procurement of water, transportation of the same to the vessel and other costs incurred in relation to provision of service in the port. From the invoice it is quite clear that it is not the cost of water alone that is charged, but it include cost of charges of other elements. Boat/barges have been supplied as seen from invoice. Since no Sales tax has been paid and no evidence has been shown that the transaction is a transaction of right to use and was liable to sale tax, the natural conclusion would be that the transaction is supply of tangible goods for use without parting with the right of possession and control. While the appellants have made a claim that the expenses incurred by them on fuel has not been proved to be incurred for the boats and barges supplied to their sister concern, they have also not shown that they had other barges and boats and the expenses incurred were in relation to other items and not to the boats/barges supplied. In the absence of any agreement, the only document available are invoices and invoices do not support the claim of the appellant. Appellants have not made out a prima facie case in their favour. At the same time, it also cannot be said that the case against the appellant is hundred per cent against them, since the matter has to be heard in greater detail to understand the nature of transaction and interpretations that are possible on the basis of facts. In these circumstances, it can be said that the appellants have not made out a case for complete waiver - Conditional stay granted.

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• 2014 (1) TMI 92
  Restoration of appeal - Restoration on production of necessary clearance from the Committee on Disputes - Held that:- appellants have filed restoration application which was disposed of by the Bench vide their order dated 12-3-2008. The Bench felt that the appellants had not been given permission or clearance to pursue the appeal before the Tribunal. We fully agree with the learned AR that once the Tribunal has taken a decision, the second ROA is not maintainable - Board’s instructions dated 24-3-2011 are very clear to the effect that the proposals which had already been sent to the Committee and no decision have been taken till 17-2-2011, shall be deemed to be covered by the decision of the Hon’ble Supreme Court and permission from COD would not be required. In this case, the application made before COD already stands decided by the minutes of meeting held on 2-11-2006 vide which the appellant was not granted permission to pursue the appeal - Restoration denied.

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• 2014 (1) TMI 91
  Waiver of pre deposit - Manpower Recruitment or Supply Agency Services - Agreement for cleaning premises of D.Y. Patil Hospital & Research Centre - Held that:- As per the agreement, the applicants are engaged in the Cleaning services of D.Y. Patil Medical Hospital and Research Institute. As per Section 65(105) of the Finance Act, 1994, the Cleaning service is taxable, if provided to any Commercial or Industrial institution. We have seen that the cleaning activities have been provided by the applicant to D.Y. Patil Medical Hospital & Research Institute, which is neither commercial nor a Industrial institution. Therefore, the activity undertaken by the applicant is not taxable - applicant has made out a case for 100% waiver of pre-deposit of Service tax - Stay granted.

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• 2014 (1) TMI 90
  Waiver of pre deposit - Demand of service tax - Business auxiliary service - Eligibility to Notification 13/2003-S.T. - Held that:- appellant has undertaken the activity of harvesting sugarcane and its transportation to sugar factory from the fields of farmers and this activity is in relation to sale of sugarcane by farmers and purchase of sugarcane by the sugar factory and service provided of a commission agent. In view of this finding, we find that the appellant is entitled for the benefit of Notification No. 13/2003-S.T., which provides exemption from payment of service tax in respect of service provided under “Business Auxiliary Service” in relation to the sale of agricultural products - Decided in favour of assessee.

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• 2014 (1) TMI 89
  CENVAT Credit - Architecture services - Eligibility of Credit - Credit stands denied on the ground that it is not essential part for obtaining water for manufacture of the aerated water and carbonated beverages - Held that:- As the appellants are in the manufacture of carbonated beverages and aerated water, water is an important input. Putting up the rain water harvesting system is integrally connected to harnessing water. The architectural services having been used for putting in place the said rain water harvesting system cannot be treated as having no nexus with the business activities of the appellant which relates to manufacture of carbonated beverages and aerated water. Therefore, the appellants are eligible for the credit taken by them - Decided in favour of assessee.

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• Central Excise

• 2014 (1) TMI 62
  Cenvat credit on capital goods - The appellants may have the prima facie case on merits in respect of the cenvat credit availed by the appellant on capital goods i.e. cables which are used for installing 66 KV electric plants for supply of power to their manufacturing unit and also the input service credit for installation of such 66 KV electric plants. Cenvat credit on service tax – Held that:- Following MODERN PETROFILS Versus COMMISSIONER OF C. EX., VADODARA [2010 (7) TMI 319 - CESTAT, AHMEDABAD] - There is no dispute as to receipt of input services. Availment of Cenvat credit Waiver of Pre-deposit – Held that:- The issue is disputable - MS channels, angles etc. used in the manufacturing premises for supporting steam line, water line etc.- the appellant directed to deposit Rupees four lakhs as pre-deposit – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.

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• 2014 (1) TMI 61
  Restoration of Appeals – Clearance from Committee of Disputes – Held that:- There is no subsisting issue between the assessee and the Revenue inasmuch as the decision taken by the tribunal on the substantive issue was upheld in Commissioner vs. BPCL [1998 (12) TMI 580 - SUPREME COURT OF INDIA] - express permission is not required for the appellant to pursue the appeals - the appeals for want of clearance has to be recalled – ROA application allowed – Decided in favour of Assessee.

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• 2014 (1) TMI 60
  Restoration of appeal - No Clearance from Committee of Disputes – Held that:- The Tribunal in the case of Burn Standard Co. Ltd. Vs. Commr. of Central Excise, Kolkata II [2013 (11) TMI 615 - CESTAT KOLKATA] - the second and subsequent application filed before the Committee of Disputes seeking permission, were not considered as an application pending - the application that was filed earlier seeking clearance from the COD on 02.11.2006, was dismissed - The second application filed on 11th February, 2011, therefore, cannot be considered as an application pending before the Committee on Disputes as on 17.02.2011 – there was no merit in the appeal – Decided against Assessee.

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• 2014 (1) TMI 59
  Condonation of delay – Delay beyond 30 days not condonable – Held that:- The application filed before the Tribunal is infructuous as the appeal was filed before this Tribunal is not in time – Following Singh Enterprises Vs. CCE, JSR [2007 (12) TMI 11 - SUPREME COURT OF INDIA] - the Commr. (Appeal) has dismissed the appeal on the ground that the appeal was filed beyond 90 days i.e. condonable period of 30 in addition to the statutory 60 days - the Commissioner (Appeal) has no power to condone the delay beyond 30 days in addition to statutory period of 60 days in filing the appeal –Decided against Assessee.

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• 2014 (1) TMI 58
  Clearance made by 100% EOU on Transaction value - Duty demanded as per the proviso to Section 3(1) of the Central Excise Act r.w Notification No. 23/2003 - Waiver of Pre-deposit – Held that:- Prima facie, the appellant was liable to pay duty of Excise quantified on the basis of duties of Customs in terms of the proviso read with the notification - the appellant paid duty of Excise albeit on a wrong basis - assessee offered to make a pre-deposit of Rs. 1,00,000 - the amount offered is inadequate to suffice the present purpose – appellant directed submit an amount of Rupees One lakh fifty thousand as pre-deposit – upon such submission rest of the duty to be waived till the disposal – Partial stay granted.

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• 2014 (1) TMI 57
  Cenvat credit utilized for exempted as well as dutiable goods - Waiver of Pre-deposit of Cenvat credit under Rule 6(3) of the CENVAT Credit Rules, 2004 - Revenue was of the view that the appellant should have maintained separate accounts in respect of common inputs which were to be used in the manufacture of pig iron (dutiable product) and un-granulated slag (the so-called exempted product) – Held that:- Following M/s. Chamundeswari Sugars Ltd. vs. CCE, Mysore [2013 (12) TMI 53 - CESTAT BANGALORE] - Prima facie, for the application of Rule 6 (3) to a given case, a manufacturer should be shown to have manufactured both dutiable and exempted final products without maintaining separate accounts – It is difficult at this stage to hold that the appellant manufactured un-granulated slag – Prima facie the appellants are able to establish the case in their favour – Pre-deposits waived till the disposal – Stay granted.

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• 2014 (1) TMI 56
  Reversal of credit to be made – No separate accounts maintained for taxable as well as exempted goods or exempted services - Waiver of Pre-deposit – Held that:- As per Rule 6(3) the applicant has to opt for Rule 6(3)(i) or Rule 6(3A) - If they have opted to pay 5% value of the exempted goods as per Rule 6(3)(i), they cannot take option separately for exempted services as per Rule 6(3A) – the applicants have failed to make a prima case for waiver of amount - the value prescribed as per Rule 6(3) of CENVAT Credit Rules, 2004 is sale price less cost price of goods which is 5% of amount roughly – the applicant has already paid Rs. 95,77,184 - the applicants is directed to make a further deposit of Rupees two crores fifty lakhs as pre-deposit – upon such submission rest of the duty to be stayed till the disposal – partial stay granted.

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• 2014 (1) TMI 55
  Services in relation to manufacture of goods OR not - Denial of credit on banking and financial services and business auxiliary services – Held that:- The appellant paid the service tax as recipient of service under the reverse charge mechanism in respect of banking and financial services and business auxiliary service - There is no evidence on record to show that these services are not in relation to the goods manufactured and exported by the appellant - The services are specifically covered under the definition of ‘input service' – there was merit in assessee’s contention – order set aside – decided in favour of Assessee.

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• 2014 (1) TMI 54
  Process amount to manufacture or not - Waiver of Pre-deposit – Held that:- The appellant cannot claim full waiver of pre-deposit – further the appellant is not pleading limitation against the demands - there is also no plea of financial hardships in the stay applications - Balance sheet and profit & loss account do not reflect any uncomfortable financial situation of the assessee as on 31-3-2012 - there appears to be considerable improvement of their financial status as decipherable from the documents presented as on 31-3-2012 and as on 31-3-2011 – thus, the appellant is directed to pre-deposit 25% of the duty – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.

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• 2014 (1) TMI 53
  Manner of Amortization of cost – Amortization cost to be included in Assessable value or not - Revenue was of the view that instead of amortizing the cost of moulds/dies of bumpers over their normal life expectancy period, the amortization should be done over period during which these moulds/dies were actually used – Held that:- The appellant have paid duty on the value which included the amortization cost of the moulds/dies and that the amortization cost has been determined on the basis of the total cost of the moulds/dies and the total number of parts which could be manufactured by using the moulds/dies during their total life expectancy - in terms of the Board’s Circular No. 170/4/96-CX, dated 23-1-1996, the amortization cost of patterns which are used for making castings is to be determined on the basis of their expected life and capability of the patterns and the quantity of castings that can be manufactured from them and thus working the cost to be apportioned per unit - Following South East Electronic Components Pvt. Ltd. v. CCE, Meerut [2002 (12) TMI 517 - CEGAT, NEW DELHI] – order set aside – Decided in favour of Assessee.

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• 2014 (1) TMI 52
  Interest on delayed payment under Rule 8 of Central Excise Rule, 2002 r.w Section 11AB of Central Excise Act, 1944 – Held that:- The appellant consumed the intermediate products within the factory premises/refinery - if the assessee would have availed the benefit of the provisions of Rule 6(3) of Cenvat Credit Rules, 2004, he need not have discharged the duty liability on the intermediate products -whatever duty liability has been discharged by the appellant, he has availed the Cenvat credit for discharging the duty liability on various other products - both the lower authorities have confirmed the interest liability on the appellant, which seems to be not in consonance with the law - the appellant is eligible for the Cenvat credit of duty payment made by them, when the fuel is used for generation of electricity, which was specifically consumed for manufacture of excisable as well as non-excisable goods – Following COMMISSIONER OF CENTRAL EXCISE & CUSTOMS, VADODARA-II Versus M/s GUJARAT NARMADA FERTILIZERS CO LTD [2012 (4) TMI 309 - GUJARAT HIGH COURT ] – order set aside – Decided inf avour of Assessee.

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• 2014 (1) TMI 51
  Whether slurry yeast is an excisable commodity or not - Held that:- Following Nicholas Piramal India Ltd. v. CCE, Mumbai [2010 (11) TMI 36 - SUPREME COURT OF INDIA] - The marketability of a product has to be established by the department by leading evidence to the fact that how the product is commercially known and how it is capable of being marketed - Shelf life of a product would not be a relevant factor to test the marketability of a product unless it is shown that the product has absolutely no shelf life or the shelf life of the product is such that it is not capable of being bought or sold during that shelf life - There is no corroborative evidence adduced by the department to establish the marketability of slurry yeast which has a shelf life of two days - The department has failed to establish the marketability of the goods - Decided against Revenue.

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• 2014 (1) TMI 50
  Classification of Wokadine Surgical Scrub - Held that:- Following assessee's own case [2003 (6) TMI 258 - CESTAT, MUMBAI] - The product in question is primarily intended for and actually used for, its antiseptic properties, the classification claimed by the appellant therefore will have to be accepted - Decided against Revenue. Whether the physician’s samples cleared by the respondent are entitled for duty exemption under Notification No. 48/77 - Held that:- The colour, contour, type size of packing of the physician samples are same as those of regular trade packing - All the conditions for benefit of Notification No. 48/77-C.E. are not fulfilled and the same has been wrongly allowed by the Commissioner (Appeals) - Decided in favour of Revenue.

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• CST, VAT & Sales Tax

• 2014 (1) TMI 100
  Tax on the turnover upto the level of base production - Section 4-A of the U.P. Trade Tax Act, on prescribed Form 46 under Rule 25 of the U.P. Trade Tax Rules - Non inclusion of stock transfer and consignment - Exemption on turnover of sales - Under Section 4-A of the Act and the notifications issued thereunder the benefit of exemption to the existing units, which have undergone expansion, diversification or modernisation is contemplated on the quantity of the goods in excess of the base production. The quantity of base production is determined only once on the consideration of the capacity of the production and maximum production of any one year of preceding five consecutive years. Such determined quantity of base production is the basis for the exemption for the period, for which the unit is entitled for exemption. The unit which has undergone expansion is thus entitled for the exemption on the turnover of the quantity in excess of the "quantity of base production" plus stock of the base production of the previous years - assessment/reassessment/penalty/deferment proceedings will be decided by the Assessing Authority in accordance with law laid down by the Full Bench - Following decision of Ambika Steels Pvt Ltd Vs. State of U.P. & others [2007 (9) TMI 541 - ALLAHABAD HIGH COURT].

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• 2014 (1) TMI 99
  Demand of tax - Valuation of taxable turnover - Whether the Vend Fee paid by the licencee-TAMIL NADU STATE MARKETING CORPORATION LIMITED was to be included in the taxable turnover of the assessee - Penalty under Section 12(5)(iii) - Held that:- Under Section 17-C of the Tamil Nadu Prohibition Act, 1937, the State has the authority to grant to any person or persons on such conditions and for such period as it deemed fit an exclusive or other privilege insofar as manufacture or selling by retail within any local area of Indian Made Foreign Liquor. As far as Section 17-C(1-A) is concerned, the exclusive privilege on wholesale vending is given to TASMAC, a Corporation wholly owned and controlled by the State Government, for the whole of the State of Tamil Nadu and the provision is emphatic that no other person is entitled to any privilege of supplying, by wholesale Indian Made Foreign Spirit for the whole or any part of the State. Vend fee payable under the The Tamil Nadu Indian Made Foreign Spirit (Supply by Wholesale) Rules, 1981 has nothing to do with the manufacturer - it essentially deals with the grant or privilege and licence to sell the Indian Made Foreign Spirit on a whole sale basis. As may be noted from the provisions of the Act and the Rules made, the privilege and the license granted to manufacture and the privilege and the licence to sell as a whole sale dealer is treated differently from the licence/ privilege given to the wholesale dealer, by framing two different rules namely, Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981 and The Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules 1981 respectively. As far as the whole sale dealer licensee is concerned, apart from discharging the liability of the manufacturer to pay the excise duty and the vend fee, the whole sale dealer is also obliged to pay vend fee. In accordance with the provisions of sub-rule (1), there is also the levy of vend fee at the rates, which would be collected from the licensee, TASMAC on the stock of Indian Made Foreign Spirits either received from a manufactory inside the State or removed from the manufactory outside the State or removed from the bonded ware house licensed under the Tamil Nadu Indian made Foreign Spirits (Storage in Bond) Rules, 1981. Vend fee paid by the licencee-TASMAC as per rule 15(1) of the Tamil Nadu Indian Made Foreign Spirits (Supply by Whole sale) Rules, 1981 has no relevance to what is paid under Rule 22(2) of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981, which is for the discharge of the liability on the manufacturer and were liable to be included in the taxable turnover of the assessee. Consequently, the Rules thus being very clear, we have no hesitation in holding that the Sales Tax Appellate Tribunal committed serious error in holding that the contention of the Revenue that the Vend Fee paid by the licensee- TASMAC should be included in the assessees' taxable turnover - Therefore, assessment included Vend Fee paid under Rule 15(1) of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981 by TASMAC, does not form part of the taxable turnover of the assessee. Assessment in all these cases were made under Section 16 of the Tamil Nadu General Sales Tax Act, which deals with assessment of escaped turnover. Sub-Section (1) of Section 16 of the Act, speaks about the jurisdiction of the Officer to assess the turnover escaping assessment and Section 16(1)(b) refers to the turnover, which has been assessed at a rate lower than the rate at which it is assessable. Sub Section (2) of Section 16 of the Act, speaks about the levy of penalty in a case of assessment under clause (a) to Sub Section 1 of Section 16 of the Act. Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act relates to a regular assessment. Section 12(5) of the Act is a provision relating to penalty under three categories. For the purpose of this case, Section 12(5)(iii) is the provision invoked by the Officer, which relates to the submission of incorrect and incomplete return. Thus, while making an assessment, if the Officer is satisfied that the accounts maintained by the assessee are correct and the returns submitted by the assessee is found to be incorrect or incomplete, the Assessing Officer may either by a separate order or in the order of assessment, levy penalty at a sum not less than 50% of the sum and not more than 150% of the difference in the tax payable on the turnover disclosed in the return and thus determined by the Officer. The proviso to said Section says that no penalty under Sub Sections (3) and (5) shall be imposed after a period of five years from the expiry of the year to which the assessment relates to and unless a dealer affected has had a reasonable opportunity of showing cause against the imposition - Vend Fee collected from the licensee-viz., TASMAC as per Rule 15(2) of the Tamil Nadu Indian made Foreign Spirits (Supply by Wholesale) Rules, 1981 cannot be included in the taxable turnover of the assessee and consequently, the assessment cannot be sustained. On the same line of reasoning, the question of levying of penalty also does not arise in these cases. - Decided in favour of assessee.

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