TMI Tax Updates - e-Newsletter
January 24, 2015

Case Laws in this Newsletter:

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

TMI SMS

• Whether remittance of salary outside India can be made for employees on deputation to a grp co. in India /for employees of LLP -RBI Says Yes

  ---

Articles

1. Audit initiated against service recipient cannot be a ground to reject VCES declaration of the Assessee

   By: Bimal jain

News

1. Auction for Sale (Re-issue) of ‘8.27 per cent Government Stock, 2020’, Auction for Sale (Re-issue) of ‘8.40 per cent Government Stock, 2024’, Auction for Sale (Re-issue) ‘8.24 per cent Government Stock, 2033’ and Auction for Sale (Re-issue) of ‘8.17 per cent Government Stock, 2044.’

2. Gross Direct Tax Collections During April-December of the Financial Year 2014-15 is up by 12.93 Percent and Stood at ₹ 5,46,661 Crore as Against ₹ 4,84,063 Crore in the same period last year

3. Grant of Presidential Awards to the Officers of the Customs & Central Excise and Directorate of Enforcement on the eve of Republic Day, 2015

4. Individuals can Now Carry Indian Currency in ₹ 500 and ₹ 1,000 Denominations to Nepal and Bhutan

5. RBI Reference Rate for US $

Circulars / Instructions / Orders

FEMA

1. 62 - dated 22-1-2015

Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2000 – Remittance of salary

2. 63 - dated 22-1-2015

Export and Import of Indian Currency

Highlights / Catch Notes

Income Tax

• Court Rules Section 194J Inapplicable: No Direct Payment in Assessee-Stockist Drug Sales Maintains Principle-to-Principle Relationship.

  Case-Laws - HC : TDS u/s 194J - sale of drugs - Principle to principle relationship - whatever be the margin made available to the stockist, so long as the assessee is not making any payment to the stockist, the question of invoking Section 194J against the assessee does not arise. - HC
  Visit to Get Source

  ---

• Software Renewal Costs for Client Deliverables are Revenue Expenses, Allowable u/s 37 of Income Tax Act.

  Case-Laws - AT : Nature of software expenses - these are towards payment for renewal of software which the assessee was using for client deliverables - software expenses are revenue in nature and allowable u/s 37 - AT
  Visit to Get Source

  ---

• Loss on Derivative Contracts Linked to Actual Merchandise Sale Not Speculative, Aligns with Case Laws and Tax Guidelines.

  Case-Laws - AT : Provision for loss on derivative contracts - There is an actual contract for sale of merchandise - the transaction in question will not qualify to be called as speculative transaction. - AT
  Visit to Get Source

  ---

Customs

• Customs Authorities Confirm No Extended Limitation on Advance License Violation; Goods Cleared with Filed Bills of Entry.

  Case-Laws - AT : Violation of Advance license - When the goods were cleared by filling bills of entry, the customs had examined the licence issued to the appellants both by the licence section and by the audit section, extended period of limitation cannot be extended - AT
  Visit to Get Source

  ---

FEMA

• RBI Allows Salary Remittance Abroad for Employees on Deputation to Group Company and LLP Staff in India.

  Circulars : Whether remittance of salary outside India can be affected for employees on deputation to a group company in India and for employees of Limited Liability Partnership - RBI says Yes
  Visit to Get Source

  ---

Indian Laws

• People Can Now Carry Indian Rs. 500 and Rs. 1,000 Notes to Nepal and Bhutan.

  News : Individuals can Now Carry Indian Currency in ₹ 500 and ₹ 1,000 Denominations to Nepal and Bhutan
  Visit to Get Source

  ---

Service Tax

• Court Rules Order by Commissioner (Appeals) u/s 86 of Finance Act with Alternative Remedy Available.

  Case-Laws - HC : Alternative remedy against the order of Commissioner (appeals) towards recovery proceedings - the matter has been decided by them rightly or wrongly. So, it is an order as defined under Section 86 of the Finance Act, 1994. Therefore, the statement made in paragraph 10 is absolutely incorrect and we hold so without any hesitation. - Alternate remedy available - HC
  Visit to Get Source

  ---

• Paying Service Tax Before Notice Doesn't Exempt Penalty for Intent to Evade u/s 78.

  Case-Laws - HC : Imposition of penalty u/s 78 - Intention to evade tax - erely because the service tax in question is paid prior to the issuance of show cause notice, the assessee cannot be exonerated from payment of penalty. - HC
  Visit to Get Source

  ---

Central Excise

• Rebate Denied Over Export Procedure Error; Challenge Argues Minor Form Mistake Shouldn't Void Substantial Compliance Benefits.

  Case-Laws - CGOVT : Denial of rebate claim - failure to follow the mandatory procedure for export - Simply ticking a wrong declaration in ARE-1 form cannot be a basis for rejecting the substantial benefit of rebate claim - CGOVT
  Visit to Get Source

  ---

• Winding Yarn from Bobbins to Cones Excluded from Manufacturing Process for Central Excise Valuation Since 1995.

  Case-Laws - AT : Captive consumption - Valuation - w.e.f. 16-3-1995, the process of winding i.e. transferring the yarn from bobbins to cones was no longer a process of manufacture - there is no question of adding the cost of winding by charging duty on the spun yarn at spindle stage - AT
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2015 (1) TMI 882
  Validity of Notice for reopening of assessment - Held that:- Appeal decided in favour of asssessee by High Court [2014 (4) TMI 479 - GUJARAT HIGH COURT] stating additions sought to be made by the assessing officer through the process of reopening of the assessment previously closed after scrutiny has not been approved by the Court. SLP dismissed in view of the Dy. CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd. [2015 (1) TMI 835 - SUPREME COURT] - Decided against revenue.

  ---

• 2015 (1) TMI 881
  Computation of deduction under Section 80HHC - sale of scrap - whether to be included in the total turnover while computing deduction? - Held that:- Here it is not disputed that the previous judgment of this Court in CIT v. Punjab Stainless Steel Ind. (2007 (1) TMI 543 - DELHI HIGH COURT) to the effect that such sales are to be excluded from the computation for the purposes of Section 80 HHC has been upheld by the Supreme Court (2014 (5) TMI 238 - SUPREME COURT). - Decided in favour of the assessee.

  ---

• 2015 (1) TMI 880
  Reopening of assessment - unaccounted share capital - ITAT and CIT(A) held that Section 148 did not apply in the facts and circumstances of the case - Held that:- Whilst the revenue could have legitimately relied upon the statement of Mahesh Garg, which sought to implicate the assessee to reopen the assessment proceedings under Section 148, to elevate that into a finding, the A.O. should have carried out some form of independent exercise as to the veracity and genuineness of the transaction furnished by the assessee. In this context, the assessee had furnished sufficient material in the form of identity documents, confirmation by the investors, copies of their return of income and bank statements and copy of the minutes of meeting of the Board of Directors of the investors wherever they happened to be companies. The least that the A.O. was expected to do, in the circumstances, was to seek recourse to his powers and verify the material by calling statement from the banks and also calling the investors by issuing summons under Section 131. Concededly, he did not adopt that course and instead rested content in relying only upon the statement of Sh. Mahesh Garg and found that in the absence of his cross-examination, the assessee did not discharge the onus of proof which lay upon it. As noted by the ITAT in its impugned order, the onus of proof is not a static one and necessarily shifts depending upon the materials placed on record. Lovely Exports (2008 (1) TMI 575 - SUPREME COURT OF INDIA) is authority for the proposition that the initial onus to show the genuineness of the transaction and creditworthiness of the investors is upon the assessee. Once some material is produced, is upto the A.O. to use his powers in the course of judicial proceedings, which he had undoubtedly to undertake. Plainly, in this case, he did not do so. His failure cannot be a ground for this Court to upheld the order of ITAT substantially in law, or even otherwise, on the facts. - Decided in favour of assessee.

  ---

• 2015 (1) TMI 879
  Rejection of books of accounts - addition of 39,15,783/- made by the AO applying the 20% of the gross profit rate on the total sale, after rejection of books of accounts - CIT(A) deleted the addition - Held that:- It must be observed here that after books of accounts had been completed, duly audited and submitted, rejection thereof by the Assessing Officer was indeed arbitrary. It is not a case where the Assessing Officer did not have the benefit of the audit report. The record reveals that the audit report had been issued on 17.02.2007 and, thus, was very much available to the Assessing Officer when he passed the order on 31.12.2008. In these circumstances, the application of 20% of the sales as gross profit, as against the claim of the assessee founded on the return for assessment year 2002-2003 (14.49%), was wholly unjustified since the Assessing Officer had not given any basis whatsoever for the same. There was no comparative data available with the Assessing Officer for inferring the gross profit at such higher rate. Thus, find no error or impropriety in the view taken by the two appellate authorities below in the impugned orders. - Decided against revenue.

  ---

• 2015 (1) TMI 878
  Deemed gift - mode or manner of valuation of unquoted share - Interpretation of Section 4(1)(a) of the Gift Tax Act, 1958 read with Rule 10(2) of the corresponding Gift Tax Rules - proceedings u/s.144B read with Section 144(3) by the IAC accepted - Held that:- Tribunal ought not to have considered it as Gift and should have accepted the valuation put forth by the assessee. In view of the above, the question no.1 as to whether the Tribunal is right in law in its interpretation of Section 4(1)(a) of the Gift Tax Act, 1958 read with Rule 10(2) of the corresponding Gift Tax Rules is answered in favour of the assessee. Tribunal has erred in applying the Gift Tax Rules for the purpose of assessment of deemed Gift under the Gift Tax Act in spite of the fact that Wealth Tax Rules are meant for notional depressed valuation in certain situations whereas, the Gift Tax provision pertaining to deemed Gift has direct nexus with the under-valuation of the market value of the property sought to be transferred. When the mode or manner of valuation of unquoted shares has undergone changes from time to time on the basis of judicial pronouncement and / or legislative changes, can it be said that appellant had made "deemed gift" with a view to avoiding tax when the sale effected by the appellant is at a value higher than that worked out by approved registered valuer but accepted under the Income-tax proceedings u/s.144B read with Section 144(3) by the is concerned, the same is answered in favour of the assessee. - Decided in favour of assessee.

  ---

• 2015 (1) TMI 877
  Interest on interest free advances/loans - ITAT deleted disallowance - Held that:- Question of law involved in this appeal is already concluded in favour of the assessee as decided in the case of S.A. Builders Ltd. v. Commissioner of Income -Tax (Appeals) and Another [2006 (12) TMI 82 - SUPREME COURT] stating that Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. - Decided against revenue.

  ---

• 2015 (1) TMI 876
  Registration u/s.12A - assessee imparting of occupational training of stitching and embroidery for women by charging fees - Held that:- Tribunal correctly held that charging nominal fee for providing training in stitching and embroidery for rural women, the dominant purpose of the assessee trust is to uplift the status of rural women, which, is charitable activity within the meaning of section 2(15) of the Incometax Act. Therefore, grant the registration u/s.12A of the Incometax Act, 1961 to assesssee is acceptable.- Decided in favour of assessee.

  ---

• 2015 (1) TMI 875
  Deduction u/s 10A - rental from temporary sublease of office premises cannot be regarded as "part of the profits of the business" - Held that:- In view of the explanation used in sub Section (4) of Section 10A of the Act for the purpose of Sub section 1, the profit derived from export of articles or things or computer software shall be the amount which bears to the profits of business of the undertaking. Though the said profits are not derived from export of articles or things or computer software, by virtue of sub Section (4) it is deemed to be the profits of the business of the undertaking for the purpose of extending the benefit of exemption of payment of tax under Section 10A of the Act to a newly established undertaking in a free trade zone. In that view of the matter, the order passed by the Tribunal is un-sustainable and contrary to law. - Decided in favour of the assessee.

  ---

• 2015 (1) TMI 874
  Section 80P(4) - difference between the co-operative bank and society - whether applicable only for the assessment year 2008-09 onwards inspite of the fact that the explanatory notes of the Finance Act 2006 makes it abundantly clear that this provision is applicable from assessment year 2007-08? - Held that:- If a Co-operative Bank is exclusively carrying banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A Co-operative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co-operative agricultural rural development bank. The Legislature did not want to deny the said benefit to a primary agricultural credit society or a primary co- operative agricultural and rural development bank. They did not want to extend the said benefit to a co-operative bank which is exclusively carrying on banking business i.e., the purport of the amendment. If the assessee is not a Co-operative bank carrying on exclusively banking business and if it does not possess a license from the Reserve Bank of India to carry on business, then it is not a Co-operative bank. It is a Co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e., carrying on the business of banking for providing credit facilitates to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(i) to the society. - Decided in favour of assessee.

  ---

• 2015 (1) TMI 873
  Application of Section 194J - sale of drugs - Principle to principle relationship - Held that:-The submission on behalf of the Revenue that this a mere device to evade the obligation to deduct tax at source is a mere conjecture as it is not supported by any evidence and/or facts on record. In the present case, the assessee has received the sale price at the rate fixed under the agreement. In such a case, where the assessee has received the amount of sale price, the question of the assessee deducting tax at source under Section 194J of the Act does not arise, because the assessee is not making any payment to the stockist. Therefore, whatever be the margin made available to the stockist, so long as the assessee is not making any payment to the stockist, the question of invoking Section 194J against the assessee does not arise. Once it is held that in the present case, Section 194J is not attracted, then, the question as to whether there was relationship of principal to principal or relationship of the manager becomes academic. - Decided in favour of assessee.

  ---

• 2015 (1) TMI 872
  Registration under Section 12AA - whether granted to the trust with both charitable and religious objects on application of Section 11(1)(a) - Held that:- It is not denied by the assessee that on the date of the application under Section 12AA, it was yet to commence its operation. But nevertheless the genuineness of the objects of the trust were not questioned.Revenue would not be justified in refusing the grant of registration at the threshold. See CIT V. Arulmighu Sri Kamatchi Amman Trust (2012 (2) TMI 159 - MADRAS HIGH COURT ) - Decided in favour of assessee.

  ---

• 2015 (1) TMI 871
  Head office liability to deduct TDS - Interest payment made by the Indian Branch to its head office abroad - whether allowed as a deduction in computing the profits of the appellant’s branch in India ? - Held that:- Interpreting section 40(a)(i ) of the Income Tax Act read with section 195 of the Act this interest must be accounted for or credited in the account of some person who is chargeable under the Act. In other words, this remittance of interest must result in an income which is chargeable under the Act. In those circumstances tax may be deducted at source. But where this interest is not so chargeable, no tax is deducted. In this case, by virtue of the above convention, the head office of the appellant is not liable to pay any tax under the Act.[ See ABN Amro Bank NV-vs-CIT, WB-III, Kolkata and Another - 2010 (12) TMI 340 - CALCUTTA HIGH COURT] - Decided in favour of assessee.

  ---

• 2015 (1) TMI 870
  Transfer pricing adjustments - payment of Account Management charges by the assessee to 12A and 12B - CIT(A) deleted the addition proposed by TPO, holding that risk factors involved in transactions carried out on the basis of contracts either by assessee himself or through subsidiaries are same and no transfer pricing adjustment is to be made - Held that:- In case of the assessee, there is an inherent transfer of risk by 12A / 12B to the assessee vide the MSA in relation to cases where the customer contacts directly with these. AEs and there are financial claims relating to the quality of deliverables. Such a transfer of risk through contractual arrangement is a common risk management practice in commercial world and should be duly recognized. The TPO made adjustment by determining a different revenue split [15% or 13% as the case may be] from the one followed by the respondent and 12A / 12B. Such an adjustment made by the TPO was without any basis or analysis. Assessee also calculated the effect of adjustment on profitability of ITC Infotech Group taking into consideration the risk adjustment envisaged by TPO for the AY 2006-07 and submitted that both 12A and 12B would make losses at net level if the risk adjusted pricing model, as proposed by the TPO were put in actual practice. Thus the risk adjusted business model as proposed by the TPO would result in an absurd situation from 12A / 12B’s perspectives defeating the concept of stable positive return for a low risk tested party. TPO totally erred in making transfer pricing adjustments in the case of assessee in both the AYs. - Decided in favour of assessee. Disallowance of software expenses - Held that:- The application software, being the subject matter of appeal, assist the already set-up business vide enhancing its efficiency and hence can be reliably related to being on revenue account. List of software purchased are enclosed in assessee’s paper book for AYs 2005-06 & AY 2006-07. On perusal of the same, we find that the parties from whom the software was acquired were Interwoven, Mercury Interactive (Singapore) Pvt. Limited, Sonata Information Technology and Tata Consultancy Services. All these companies specialize in application software which helps in increasing the efficiency of client deliverable. The details of payments made to M/s Interwoven clears that these are towards payment for renewal of software which the assessee was using for client deliverables. In view of these facts, we are of the view that software expenses are revenue in nature and allowable u/s 37 of the Act. - Decided in favour of assessee.

  ---

• 2015 (1) TMI 869
  Provision for loss on derivative contracts disallowed - speculative transaction - Held that:- Accounting Standard which is continuously adopted by an assessee can be superseded or modified by legislative intervention. However, but for such intervention or in cases falling under s. 145(3), the method of accounting undertaken by the assessee continuously is supreme. In the present batch of cases, there is no finding given by the AO on the correctness or completeness of the accounts of the assessee. Equally, there is no finding given by the AO stating that the assessee has not complied with the Accounting Standards. Thus we hold that, in the present case, the "loss" suffered by the assessee on account of the exchange difference as on the date of the balance sheet is an item of expenditure under s. 37(1) of the 1961 Act. In the case on hand there has been an existing contract with a binding obligation accrued against the assessee when it entered into for-ex forward contracts. The forward contracts are in respect of consideration for exports proceeds, which are revenue items. There is an actual contract for sale of merchandise. In this factual matrix, it is clear in our view that the transaction in question will not qualify to be called as speculative transaction. In view of the facts and circumstances of the case on hand, as discussed above, we hold that the provision for losses on derivative contracts is allowable as expenditure u/s 37. - Decided in favour of assessee. Disallowance u/s.14A - Held that:- Where the assessee has not earned any income exempt u/s. 10(38) of the Act, disallowance of expenditure u/s. 14A of the Act is not tenable. Thus we also hold that the disallowance of expenditure u/s. 14A of the Act is not tenable and therefore delete the disallowance of 7,34,975 made by the Assessing Officer. - Decided in favour of assessee. Recomputation of MAT Credit u/s.115JAA considering the enhanced income on account of the disallowance made in the order of assessment for Assessment Year 2008-09 - Held that:- It is settled principle that the provisions of section 115 of the Act is a separate code in itself and that the ‘book profits’ have to be computed as provided under that section. If the disallowances made are not as per the provisions of that section, then those cannot be considered in computing the book profits. The Assessing Officer is directed to examine and verify the disallowances made while computing the ‘book profits’ and allow credit in accordance with law. - Decided in favour of assessee for statistical purposes. Interest under section 234B - Held that:- The charging of interest is consequential and mandatory and the Assessing Officer has no discretion in the matter and we therefore uphold his action of charging the said interest. - Decided against assessee.

  ---

• 2015 (1) TMI 868
  Transfer pricing adjustment - Disregarding the ALP, as determined by the assessee in the TP documentation - Held that:- TPO has given a detailed reasoning for rejecting the assessee’s TP document, therefore we decide the issue against the asssessee. Selection of comparables - Held that:- No reason to interfere with the orders of TPO and DRP in applying filter of excluding companies with companies with employee cost of less than 25% of total cost. While selecting the comparable ld. TPO / Ld. DRP in principle were agreeable that software Product Company cannot be compared with software service provider. This is evident from the fact that TPO while applying the filters had accepted the assessee’s filter of rejecting companies undertaking significantly different functions compared to assessee. Restore this issue of inclusion of above four companies namely, Bodhtree Consul., Cat Tech., Infosys and Tata Elxsi to the TPO for fresh consideration. For Persistent Systems Limited as find from the Annual Report that it has been deriving income from sale of software service and software products and the segmental details were not available. Since this company was included as comparable by the assessee itself and not contested before the TPO/DRP and in the interest of the principles of natural justice and fairness, we direct the TPO to examine as to whether the income derived from sale of products can be excluded while working out the margin of this company. For Thirdware Solutions Ltd we are in agreement with the DRP’s observation that‘Software development, implementation and support services are various sub-segments of software development services only and require employment of software engineers’.In view of the above, the TPO is directed to include this company as comparable with a rider to exclude the figure of sale and purchase of license. For TCS it cannot be considered as comparable and, accordingly, the TPO is directed to exclude TCS from the list of comparable as it is dissimilar to that of the assessee. For L & T Infotech & Mindtree TPO was justified in including these companies as comparable as no potentially comparable company can be excluded from the list of comparable simply because of its high turnover. Risk adjustment - Held that:- The assessee has not come up with the calculation of quantified risk adjustment as pointed out by the Tribunal for the preceding AY. - Decided against the asssessee. Denying a working capital adjustment to the operating profit margins of the comparable - Held that:- Matter restored to the file of TPO for making the working capital adjustment to the profit margins of comparable subject, of course, to assessee demonstrating that there was difference in the levels of working capital employed viz-a-viz the comparable. - Decided in favour of assessee for staistical purposes. Adding FBT paid for computing the book profit u/s 115 JB - Held that:- Do not find any reason to interfere with the order of ld. DRP because as per sec. 115 WA Fringe Benefit Tax is an additional incometax and, therefore, it is to be treated at par with income-tax for computing book profit. - Decided against assessee.

  ---

• 2015 (1) TMI 867
  Denial of deduction u/s. 80P(4) - Held that:- The word "activity" is wider than the word "business". It connotes a specified form of supervised action or 0field of action. Read in the context of the profit earning activity of a co-operative society, it means the corporate activity of the society, that is to say, whether or not they amount to a business, trade or profession in the ordinary sense. Clause (c) of section 80P(2) is intended to cover receipts from sources other than the actual conduct of the business but attributable to an activity which results in profits and gains. Letting out of surplus space in the building owned and used by the assessee is not such an activity falling under clause (c). The rent thus received by the assessee is not eligible for the exemption provided thereunder. In this view, the Appellate Tribunal was justified in rejecting the assessee’s claim. Assessee is not entitled for deduction u/s. 80P of the Act. - Decided against assessee. Deduction u/s. 36(1)(viia) - provisions made for assets classified as doubtful assets or loss assets - Held that:- Only with reference to the assessment year in question appellants/assessees have created provision for bad and doubtful debts in the books of accounts. So far as this issue is concerned, opinion of the assessing officer and two appellate authorities is justified and we need not interfere with the opinion of the authorities in restricting deductions only to 7.5% of the total income as provided under sub-clause (viia) of Section 36(1). CIT(A) is justified in giving a finding that the assessee’s claim for deduction u/s. 36(1)(vii) (a) is to be considered subject to statutory limit and also the Ld. AR has not been able to show as to how this section is not applicable to the assessee’s case. Being so, we decline to interfere with the order of the CIT(A) on this issue. Accordingly, this ground of the assessee is dismissed.- Decided against assessee.

  ---

• 2015 (1) TMI 866
  Revision u/s 263 - Disallowance of interest under section 14A read with Rule 8D of the IT Rules and provision against development expenses - Held that:- The Assessing Officer has accepted the claim of assessee on raising a proper query and documents/details produced before him on which the proposed proceedings under section 263 have been initiated. The similar claims have been accepted in earlier years by the Assessing Officer. Therefore, when the Assessing Officer adopted one of the courses admissible in law, the view taken by the Assessing Officer was held not to be unsustainable in law. The ld. CIT should not substitute the opinion of the Assessing Officer on the same facts in proceedings under section 263 of the Act. It would, therefore not give revisional jurisdiction to the ld. CIT to set aside the assessment order in question. In view of the above discussion, we are satisfied that Assessing Officer has properly enquired into the claim of assessee on all above items at the assessment stage and has carried out proper verification. Therefore, ld. CIT was not justified in invoking jurisdiction under section 263 of the Act. The decisions cited by ld. DR would not, thus support the case of the revenue. In view of the above discussion, we set aside the impugned order under section 263 of the Act because the assessment order dated 29.12.2009 could not be said to be erroneous in so far as prejudicial to the interests of the revenue and quash the same. - Decided in favour of assessee.

  ---

• 2015 (1) TMI 865
  Revision u/s 263 - AO made addition towards TPO adjustment u/s 92CA - Order u/s 143(3) has not been passed in accordance with the provisions of Sec. 144C, thus the order was erroneous and prejudicial to the interest of the revenue as held by CIT(A) - Held that:- Non-compliance of the provisions of Sec. 144C i.e non complying with the natural justice of providing the opportunity to the assessee itself proves that there is error in the order passed by assessing officer and completing the assessment without complying with the provision tantamounts to order being erroneous and prejudicial to the interest of the Revenue. The Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd. (2000 (2) TMI 10 - SUPREME Court) while holding so has relied on the decision of the Hon ble Supreme Court in the case of Rampyari Devi Saraogi vs. CIT, (1967 (5) TMI 10 - SUPREME Court). The order passed u/s 263 therefore has to be upheld as, in our opinion, it has passed through the test of fulfilment of both conditions by the CIT that the order passed by the AO is erroneous as well as prejudicial to the interest of the Revenue. We, therefore, dismiss the appeal filed by the Assessee by upholding the order passed u/s 263. - Decided against assessee.

  ---

• 2015 (1) TMI 864
  Disallowance u/s 40A(2)(b) - business centre charges and administrative charges - Held that:- In the absence of any specific finding given by the Assessing Officer by the CIT(A) regarding the fair market value/fair market price of the services, the payment made by the assessee to the sister concern on account of using the business centre facility cannot be held as excessive or unreasonable. Further it is not the case of the Assessing Officer that by making the payment to the sister concern the assessee is avoiding the tax liability as the sister concern is not assessed to tax. Accordingly, we delete the disallowance confirmed by CIT(A) on this account for both the years. - Decided in favour of assessee. Disallowance of deduction u/s 80-IB in respect of other income received by the assessee from the buyers of the flat - Held that:- Following the rule of consistency, all income received in relation to the activity, which are having direct nexus with the project as Extra work,Interest from flat buyers for late payment,Car parking, Grill charges and Video door security charges are eligible for deduction u/s 80-IB except share money, society formation charges, electricity meter charges, water meter charges, legal charges and maintenance charges for 12 months which are all post completion of project activity and cannot be treated as part of the construction project. Accordingly, the income in respect of above said work are not eligible for deduction u/s 80-IB. Since the other income received for A.Y. 2006-07 is only regarding society formation and share money, therefore, the same is not eligible. - Decided in favour of assesse. Proportionate allocation of indirect expenses - Held that:- indirect expenses should be apportioned in proportion to the cost incurred on various projects during the year, as represented by the work in progress in the different projects. The figures supplied by the assessee before us however need verification. We therefore restore the issue to the file of the Assessing Officer for the limited purpose of verifying the figures of work in progress in the various projects undertaken by the assessee. - Decided in favour of assessee for staistical purposes.

  ---

• 2015 (1) TMI 863
  Addition on account of low yield of finished product - rejection of books of accounts - CIT(A) deleted the addition - Held that:- In the case of the appellant, there is no allegation that the appellant was not maintaining vouchers for the purchases or for the expenses. The indirect allegation of the Assessing Officer was that the purchases of sodium nitrate solution would have been more which would mean that the recorded purchases were supported by vouchers and the Assessing Officer had no reason to dispute the recorded purchases. Since, no expenses were disallowed on the basis of non-maintenance of vouchers, the only view can be taken that the expenses are fully supported by vouchers. The contention of the Assessing Officer that the purchases of sodium nitrate solution would have been more is not supported by any evidence on record. It is pertinent to mention here that the appellant s premises were subject to search on 30.08.2005. No incriminating documents leading to unaccounted purchases, unaccounted sales or unaccounted expenses were recovered during the course of search. The appellant s cases for the A.Y. 2006-07 and six years prior to that were completed after thorough scrutiny but no such additions of suppressed production and sales outside the books were stated to be made and if there were any, the same were not brought on record by the Assessing Officer. It is surprising that the books of accounts were accepted for seven continuous years on the basis of same accounting system by the Assessing Officer whereas the accounting system for the eighth year is being found faulty. The addition was made only on possibilities and probabilities which cannot be approved in absence of evidence and without any material on record. No specific error in the findings of the CIT(A) could be pointed out by the Departmental Representative. We also observed from the order of the CIT(A) that the Gross Profit shown by the assessee during the year is 23.63% which compares favourably with the Gross Profit of 21.38% shown in the immediately preceding assessment year. - Decided against revenue. Disallowance towards additional depreciation on plant and machinery - CIT(A) confirmed disallowance on the ground that the conditions required for claiming such depreciation are not fulfilled - Held that:- The Authorized Representative of the assessee could not file any evidence to show that the assessee acquired any new plant and machinery during the year under consideration on which it claimed additional depreciation of 90,908/-. No material was also brought on record by the Authorized Representative of the assessee to show that the said expenses of 90,908 was not incurred on the repairs of existing plant and machinery. Therefore, we do not find. - Decided against assessee.

  ---

• Customs

• 2015 (1) TMI 886
  Demand of differential duty - Mis declaration of value and goods - case was made out on the basis of the statement of Shri K. Sathyanarayana, agent of the foreign supplier as well as other relevant materials - Held that:- in the case of other importers of the same goods for the same period, the Tribunal in the case of Hindustan Sales Agencies (2008 (6) TMI 415 - CESTAT, CHENNAI), remanded the matter to the adjudicating authority with certain directions - counsel submits that the denovo proceedings in the case of Hindustan Sales Agencies (2008 (6) TMI 415 - CESTAT, CHENNAI) is still pending. In our considered view, it is appropriate that the present case should be tagged with the case of Hindustan Sales Agencies (supra) which is still pending before the adjudicating authority for denovo adjudication - Matter remanded back - Decided in favour of assesse.

  ---

• 2015 (1) TMI 885
  Violation of Advance license - notification No. 79/95-Cus dated 31/03/95 - Import of excess quantity - Held that:- When the goods were cleared by filling bills of entry, the customs had examined the licence issued to the appellants both by the licence section and by the audit section and after satisfying that the appellant complied with the requirements of the licences, the benefit of Notification No. 79/95-Cus was extended. There was no suppression or mis-statement on the part of the appellants and the customs also believed that only the value limit specified in the licence needs to be adhered to and not the quantity restrictions. Thereafter, it appears that the customs had made reference to the licensing authorities who advised that both the quantity as well as the value limits specified in the advance licence should be complied with and accordingly, show-cause notices were issued alleging suppression. At the time of clearance of the goods both the appellant and the department entertained the belief that if the value restrictions are complied with, the same would suffice and accordingly, the benefit of notification No. 79/95-Cus was extended and the assessment finalized accordingly. Therefore, the show-cause notice and the consequential demands are clearly time barred and therefore, the demand of differential duty along with interest thereon would not sustain in law. Inasmuch as there is no suppression on the part of the appellants, imposition of penalties on the employees of the importing firms and the licence broker are also not warranted. - Decided in favour of assesse.

  ---

• 2015 (1) TMI 884
  Valuation of goods - Inclusion of royalty amount - Receipt of technical know-how - Held that:- Adjudicating authority while passing order dated 13/09/2001 had examined the agreement at length and had come to the conclusion that the collaboration agreement had not influenced the price of the raw-materials imported by the appellant for undertaking further manufacturing in India. The said order also does not refer to any joint venture which revenue seeks to rely upon in their appeal. We have perused the terms and conditions of the collaboration agreement. From a reading of the clauses 8.01, 11.01 and 7.05, it is abundantly clear that royalty is required to be paid only on the value addition achieved by the appellant undertakes by the activities undertaken in India. It has nothing to do with the value of the imported raw-materials procured from the related foreign supplier or value of the imported components procured irrespective of origin. Thus, the contention of the Revenue that relationship has influenced the price of imports is not borne out from terms and conditions of the agreement which the appellant had entered into with the foreign supplier. This issue has been examined at length by this Tribunal in a number of cases and in particularly in the Foseco India Ltd. case (2014 (5) TMI 203 - CESTAT MUMBAI) wherein it was held that if the royalty is computed excluding the cost of imported material and is based on the indigenous value addition which clearly shows that the payments made by the appellant for the collaboration and consultancy services has nothing to do with the imports undertaken by the appellants and therefore, the same could not be included in the assessable value of the goods imported under Rule 9 (1) (c) & 9 (1) (e) of the Customs valuation Rules. - royalty paid by the appellant for the technical know-how received has nothing to do with the imports of raw materials. Consequently, the same is not includable in the assessable value of the goods imported - Decided in favour of assessee.

  ---

• FEMA

• 2015 (1) TMI 883
  Credit of Non-convertible Rupee Funds into the Non-Resident (External) Account of the person concerned - contravention of Section 6(4), 6(5) read with S.49 of FERA - Act done by consent, connivance of and attributable to the negligence on the part of the Officials - Held that:- The crediting of Non-Convertible Rupee Funds in the Non-Resident (External) Account of Dr. P.K.Ramakrishnan happened during the period August to December, 1991. Three officials of ANZ Grindlays Bank were involved in it and Show Cause Notice was issued by Respondent No.1 on 21.1.1994 to the Bank as well as the Officials for contravention of Section 6(4), 6(5) read with Section 49 of FERA, alleging that it had taken place with the consent, connivance of and attributable to the negligence on the part of the Officials. It is true that the respondent by letter dated 10.7.2001 ordered that the charges relating to ‘consent’ and ‘connivance’ shall stand deleted from the Show Cause Notice. Though FEMA came into force on 1.6.2000, Sunset clause under Section 49 of the said Act provided for filing of complaints under the FERA, 1973 till 31.5.2002. Taking advantage of it, the Respondent No.1 issued Opportunity Notice to all the three officials on 12.5.2002 and lodged the complaint on 29.5.2002. The Additional Chief Metropolitan Magistrate, New Delhi, on the same day took cognizance of the complaint for the offence under Section 56 of FERA and issued summons. In spite of having dropped the allegations of ‘consent’ and ‘connivance’, the respondent in their complaint levelled allegations of all the three components, namely, consent, connivance and negligence. The contention of the appellant that the cognizance was taken on irrelevant consideration, is to be countenanced. There was suppression and also material omission in nonmentioning of reply sent by the appellant to the Opportunity Notice, in the complaint. Further, to substantiate the averments in the complaint, not even a single original document was enclosed. It is not known as to, on what material the Additional Chief Metropolitan Magistrate applied his mind, while taking cognizance of the statutory offence. Though the allegation of negligence can be independently looked into, considering the standard of proof in criminal prosecution, we are of the view that, in the present case, the continuance of prosecution against the appellant is not tenable in law and the proceedings are liable to be quashed. - Decided in favour of appellants.

  ---

• Service Tax

• 2015 (1) TMI 907
  Waiver of pre deposit - Club or association service - Whether the appellant is liable to pay service tax under the category of club or association service on advance enrolment fee or corpus fund collected from the Members - Held that:- out of the amount of 12,61,322/- demanded as service tax with interest, the appellants have paid the entire amount of service tax and 50% towards the penalty as per the directions of the Commissioner (Appeals) - appellant has made out a prima facie case for waiver of predeposit of balance dues and stay against recovery during the pendency of appeal. Accordingly, the requirement of predeposit is waived and stay against recovery is granted during the pendency of appeal - Stay granted.

  ---

• 2015 (1) TMI 906
  CENVAT Credit - abatement under Notification No.1/2006-ST dt. 01/03/2006 - Held that:- Appellants have not produced any evidence to substantiate this claim. We take note of the fact that in this case the appellant is claiming abatement as per the exemption notification and burden to show the eligibility to exemption is on the assessee and prima facie other than stating that they have not taken CENVAT credit at all on the input services attributable to tour operator service, the appellants have not shown any documentary or other evidence to support the claim. At this stage, learned counsel submits that appellants may be given another opportunity to submit such evidence/documents. Having regard to the facts and circumstances discussed above, we consider this request is reasonable. Accordingly, the impugned order is set aside and the matter is remanded to the original adjudicating authority for fresh adjudication - Decided in favour of assessee.

  ---

• 2015 (1) TMI 905
  Waiver of pre deposit - Held that:- Though the position as canvassed by the learned standing counsel for the respondent is unassailable, still, fact remains that, in so far as this case is concerned, Annexure D order passed by the adjudicating officer demands an amount of 11,61,898/- towards service tax, 23,237/- towards education cess and 8,500/- towards secondary and higher education cess . An equal amount is also levied as penalty under Section 78 of the Finance Act, 1994. - direction requiring the appellant to remit an amount of 8 ,00,000 /- is too onerous. Therefore, we reduce the amount as ordered by the Tribunal and direct that the appellant shall deposit an amount of 5,00,000 within two weeks - Partial stay granted.

  ---

• 2015 (1) TMI 904
  Clearing and forwarding (C would not come within the definition of Section 65(25) of the Finance Act, 1994. For invoking Section 65 (105) of the said Act, one must act as clearing and forwarding agent and than only Service Tax can be imposed. The decision rendered by the Punjab Haryana High Court has been upheld by the Hon’ble Apex Court reported in [2009 (12) TMI 851 - SUPREME COURT OF INDIA] [Commissioner v. Kulcip Medicines (P) Ltd.]. Therefore, it is quite clear that for invoking Sections 65(25) as well as Section 65(105), a person should have acted as clearing and forwarding agent. - work done by the respondent is not resemblance to clearing and forwarding agent and it has merely distributed the things which have been sent by BMF to the distribution centre of the respondent at its. own cost and therefore, in any event the respondent cannot be mulcted with liability under the cover of Service Tax. - Decided against Revenue.

  ---

• 2015 (1) TMI 903
  Waiver of pre deposit - penalty under Sections 76, 77 and 78 - Whether, the learned Tribunal should have, on the facts and in the circumstances of this case, directed pre-deposit of 25% of the duty demanded - Held that:- Under Section 35F of the Central Excise Act, 1944, a person desirous of preferring an appeal against any order relating to any duty demand or penalty is liable to deposit the duty demanded or the penalty imposed with the Adjudicating Authority. However, where the Appellate Tribunal is of the opinion that the deposit of the duty demanded or penalty levied would cause undue hardship to such person, the Tribunal might dispense with such deposit, subject to such conditions as the learned Tribunal may deem fit to impose, so as to safeguard the interest of the Revenue. - There can be no doubt that undue hardship not only covers payment under compulsion where the appellant has a strong prima facie case, but also where the appellant has an arguable case. Where an appellant makes out a very strong prima facie case, and the Appellate Authority is satisfied that the demand is ex facie unsustainable in law, the requirement of pre-deposit may unconditionally be dispensed with. Where however, the prima facie case is not that strong, the interest of the revenue would necessarily have to he secured, and the appellant would have to be put to terms. - Decided conditionally in favour of assessee.

  ---

• 2015 (1) TMI 902
  Maintainability of petition - appointment of an Arbitrator in pursuance to Clause 26(A) of the agreement for resolution of dispute - Held that:- even though Shri Vipul Sharma, learned counsel tried to argue on merit and make out a case but in view of the preliminary objection raised, we see no reason to go into these questions in this petition as they are to be considered by the Arbitrator. The dispute in question between the parties is subject to arbitration in accordance with the agreement entered into between the parties and the petitioner having already taken recourse to the remedy of arbitration, the writ petition is not maintainable. - Decided against Assessee.

  ---

• 2015 (1) TMI 901
  Violation of principle of natural justice - Without issuance of SCN, initiation of proceedings - whether there has been any alternative remedy, contrary to what has been stated by the writ petitioner in paragraph 10 that the petitioner has no other alternative remedy except to approach this Court under Article 226 of the Constitution of India. - Held that:- Commissioner has taken decision undisputedly. The petitioner preferred appeal therefrom to the appellate Commissioner, who is the first appellate authority. We have examined the orders of both the authorities. We are of the view that the matter has been decided by them rightly or wrongly. So, it is an order as defined under Section 86 of the Finance Act, 1994. Therefore, the statement made in paragraph 10 is absolutely incorrect and we hold so without any hesitation. - Alternate remedy available - Decided in against the assessee.

  ---

• 2015 (1) TMI 900
  Waiver of the pre-deposit - violation of Sections 67 and 68 of the Finance Act read with Rules 6 and 7 of the Service Tax Rules, 1994 - Held that:- CESTAT has not recorded any reason on the merit of the said application except on the technicalities. Admittedly, the Assessing Officer passed an order after rejecting an application for adjournment and have proceeded to decide the matter ex parte. The order of the Assessing Authorities before the CESTAT is to be decided upon taking note of all materials available on the record or legally permissible to be brought on record and, therefore, the CESTAT ought to have recorded its finding on the merit and more particularly within the provisions contained under Section 35F of the Central Excise Act. The CESTAT should record its finding on the prima facie case as well as on the balance of convenience and inconvenience and the irreparable loss and injury to be caused to the petitioner and shall also take into account the interest of the Revenue at the time of passing any order on the waiver of the pre-condition deposit. - Court finds that the said order is not sustainable. The order impugned is quashed and is set aside. - Matter remanded back - Decided in favour of assessee.

  ---

• 2015 (1) TMI 896
  Imposition of penalty - Intention to evade tax - Held that:- Appellant has paid the taxes belatedly. However, the grievance of the appellant is entirely against the penalties imposed under Sections 76, 77 & 78 of the Act. Before the Tribunal, though the question of limitation was raised, no serious challenge against the payment of service tax is forthcoming. On facts, the Tribunal has concluded that there is no explanation as to the so called bona fide mistake. The Tribunal on facts has also concluded that it is not a case of bona fide mistake and has upheld the case of the Department. - Merely because the service tax in question is paid prior to the issuance of show cause notice, the assessee cannot be exonerated from payment of penalty. As has been held by the Apex Court in the case of UNION OF INDIA vs. RAJASTHAN SPINNING AND WEAVING MILLS reported in [2009 (5) TMI 15 - SUPREME COURT OF INDIA], any payment of the duty amount in question, whether before or after the show-cause notice has been issued, could not alter the penal liability under Section 11-AC of the Act. Section 11-AC of the Act appears to be pari materia with Section 78 of the Finance Act, 1994. - Decided against assessee.

  ---

• Central Excise

• 2015 (1) TMI 897
  Penalty u/s 11AC - Whether the Tribunal is correct in reducing penalty equivalent to 100% of duty evaded under Section 11AC of the CEA, 1944 and whether the Tribunal is empowered to do so - Held that:- Tribunal cannot be upheld in view of the decision of the Apex Court in the case of Union of India v. Dharmendra Textile Processors, [2008 (9) TMI 52 - SUPREME COURT] wherein it has been held that penalty imposed under the aforesaid Rule and Section is mandatory penalty and lesser penalty could not be imposed nor any discretion is available to the Tribunal or any other Authority to reduce the quantum of penalty. - Decided in favour of Revenue.

  ---

• 2015 (1) TMI 895
  Maintainability of appeal - Whether for the period March, 2001 to February, 2003, inputs on which credit has been taken are removed as such from the factory, the manufacturer of the final product shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of such removal and on the value determined for such goods under Section 4 or 4A of the Central excise Act as per Rule 57AB (1C) of the Central Excise Rules, 1944 and Rule 3(4) of the Cenvat Credit Rules, 2001/2002 - Held that:- A preliminary objection has been raised by learned counsel for the respondent assessee that this tax appeal would not be maintainable before this Court and would lie before the Apex Court in view of the provisions contained in Section 35-L of the Central Excise Act 1944 in view of the fact that rate of excise duty as well as valuation are to be determined. In this view of the matter, we dismiss this tax appeal as not maintainable with a liberty to the appellant to file appropriate appeal before the Apex Court. - Decided against Revenue.

  ---

• 2015 (1) TMI 894
  Denial of rebate claim - failure to follow the mandatory provisions as required under Notification No. 21/2004-CE(NT) dated 06.09.2004 and Notification 43/01-CE(NT) dated 26.06.2001 - Held that:- applicant prepared the ARE under claim of rebate and paid applicable duty at the time of removal of goods. The original authority in rebate sanctioning orders have categorically held that applicants have exported the goods under claim of rebate under Rule 18 of the Central Excise-Rules, 2002 read with Notification No. 19/2004-CE/(NT) dated 06.09.2004 and also that range Superintendent confirmed the verification of duty payment. As such, the exported goods are duty paid goods. Once, it has been certified that exported goods have suffered duty at the time of removal, it can be logically implied that provisions of Notification 21/04-CE(NT) dated 06.09.04 and Notification 43/01-ce(NT) dated 26.06.01 cannot be applied in such cases. There is no independent evidences on record to show that the applicant have exported the goods without payment of duty under ARE-2 or under Bond. Under such circumstances, Government finds force in contention of applicant that they have by mistake ticked in ARE-1 form declaration and they have not availed benefit of Notification 21/04-CE(NT) dated 06.09.04 and Notification 43/01-CE(NT) dated 26.06.01. There is no dispute regarding export of duty paid goods. Simply ticking a wrong declaration in ARE-1 form cannot be a basis for rejecting the substantial benefit of rebate claim. Under such circumstances, the rebate claims cannot be rejected for procedural lapses of wrong ticking. In catena of judgements, the Government of India has held that benefit of rebate claim cannot be denied for minor procedural infraction when substantial compliance of provisions of notification and rules is made by claimant. Applying the ratio of such decisions, Government finds that rebate claims in impugned cases cannot be held inadmissible. - Decided in favour of assessee.

  ---

• 2015 (1) TMI 893
  Rebate claim - discrepancies in FOB value mentioned in shipping bill and ARE-1 - Held that:- Applicant department challenged the rebate sanction order of original authority before Commissioner (Appeals) on the ground that there were discrepancies in FOB value mentioned in shipping bill and ARE-1. The applicant contended that this discrepancy is due to typographical error and that they made application for amendment through their CHA, however, the CHA has not given amended copy of shipping bill. The similar plea was taken before Commissioner (Appeals) also. The position remained same even after/at the time of hearing on 11.4.14. Applicant has not submitted any documentary evidence in support of their claim that any such request for amendment of shipping bill is still pending. It is quite clear from the available records that no amendment is carried on the shipping bill even after lapse of six years. Case cannot be kept pending and has to be decided on the basis of available records. - in the absence of any amendment in the shipping bill the value as declared in the shipping bill cannot be changed. As such, Government finds no legal infirmity in the impugned orders and upholds the same - Decided against assessee.

  ---

• 2015 (1) TMI 892
  Evasion of duty - Clandestine clearance of goods in the name of closed unit - manufacture of printing and writing paper as well as news print - Exemption Notification No. 6/2001-C.E., dated 1-3-2001 - - Held that:- It is well settled that if the appellant comes with the case before higher Court that grounds urged have not been considered, his remedy is to approach to the same Court for consideration. It is for the same Court/Tribunal to consider as to whether any ground which has been pressed has been omitted for consideration. - these appeals cannot be entertained. The appellants may seek remedy in accordance with law. - Decided against assessee.

  ---

• 2015 (1) TMI 891
  Condonation of delay - Delay of 190 days in filing of appeal - Held that:- As the lower appellate authority refused to condone the delay, the matter was carried on to the Customs, Excise and Service Tax Appellate Tribunal, which confirmed the order of the lower appellate authority. Whether the delay has been properly explained or not and notice has been served on the appellant or not is a question of fact, which had been concurrently held against the appellant by both the lower appellate authority and the CESTAT and in that context, we do not find any substantial question of law involved in this appeal. - Condonation denied.

  ---

• 2015 (1) TMI 890
  Penalty - extended period of limitation - cenvat credit on inputs and capital goods - sales of waste and scrap arising from inputs and capital goods - High Court dismissed the appeal filed by the assessee against the order of Tribunal [2011 (5) TMI 715 - CESTAT, NEW DELHI] - holding that In an excise case, interim stay has been prayed. In our opinion, the recovery of dues will not constitute irreparable injury. We do not find any ground to grant any stay.

  ---

• 2015 (1) TMI 889
  Captive consumption - Valuation of goods - assessable value of the spun yarn at the spindle stage - Held that:- During the period prior to 16-3-1995 there was Chapter Note 1 to Chapter 52 which provided that in relation to the products of Headings 52.03 and 52.04, sizing, beaming, warping, wrapping, winding, reeling or any one or more of these processes or conversion of any form of the said product to the another form of such product shall amount to manufacture and the duty on the sized yarn shall be charged on the basis of its weight before sizing and there was similar chapter note in respect of spun yarn, man-made staple fibres in Chapter 55. However, w.e.f. 16-3-1995 Chapter Note 1 of Chapter 52 was replaced by a new note providing that in relation to the products of Headings 52.04, 52.05 and 52.06 the process of printing, bleaching, mercerizing, twisting, texturising, doubling, multifolding, cabling or any other process or any one or more of these processes or the conversion of any form of the said product into another form of such product shall amount to manufacture. Similar amendment was made w.e.f. 16-3-1995 in the corresponding Chapter Note of Chapter 55. Thus, w.e.f. 16-3-1995, the process of winding i.e. transferring the yarn from bobbins to cones was no longer a process of manufacture. In view of this, there is no question of adding the cost of winding by charging duty on the spun yarn at spindle stage. - impugned order, therefore, upholding the duty demand of 1,79,269/- is not sustainable and the same is liable to be set aside. - Decided in favour of assessee. In terms of the Chapter notes to Chapters 52 and 55 the doubling/multifolding of single ply yarn was to be treated as process of manufacture. However, the duty demand on the yarn manufactured in the unit and at the spindle stage, i.e. yarn on bobbins which was in fully finished condition and whose quantity has been accounted for in the RG-1 register, by adding to its value, the value of subsequent processes - winding/cheese winding/singeing and doubling/multifolding would not be sustainable, as when the single ply yarn is in fully finished condition at the spindle stage and is issued for weaving, it has to be treated as having been cleared at that point of time and hence the cost of subsequent processes which are the processes preparatory to weaving, cannot be added to the cost of yarn, even though those processes may amount to manufacture. Moreover, the subsequent processes - winding, doubling or multifolding are fully exempt from duty in terms of Notification No. 35/95-C.E. and successor exemption Notifications No. 8/96-C.E., 4/97-C.E., 5/98-C.E., 5/99-C.E., 6/2000-C.E. and 3/2001-C.E. subject to the condition that the processes have been carried out on the duty paid yarn which is meant for weaving of fabrics within the factory and in these cases it is not in dispute that the single ply yarn was duty paid and the same had been used within the factory for weaving. Since doubled/multifolded yarn is cleared for captive consumption within the factory for manufacture of fabrics the cost of winding, sungeing doubling/multifolding gets included in the cost of fabrics which is cleared on payment of duty. Duty on cost of these processes cannot be charged at single yarn stage by including the cost of these processes in the value of yarn at the spindle stage. We, therefore, hold that the duty demand confirmed by the Commissioner by the impugned order is not sustainable and for this reason, there is also no merit in the appeal filed by the Revenue. - Decided in favour of assessee.

  ---

• 2015 (1) TMI 888
  Penalty under Rule 209A - whether penalty could be levied on the person who did not actually deliver the goods and merely issued a fake invoice which enabled wrong availing of Cenvat credit and the extent of penalty which could be levied. - Held that:- Firstly, penalty under Rule 209A cannot be invoked to the Company. Secondly, penalty under Rule 209A cannot be imposed on a person, who has not dealt with goods, liable for confiscation. As regards applicability of provisions introduced on 1-3-2007 to alleged acts committed prior to the said date, the matter is covered by orders of this Court referred to above which are not shown to be distinguishable. Accordingly, we hold that the amended provisions will not apply to the acts committed prior thereto. In spite of non-applicability of Rule 26(2), penalty could be levied as the appellant was concerned in selling or dealing with the goods which were liable to confiscation inasmuch as the appellant claimed to have sold the goods in respect of which the Cenvat credit was taken. In such a case, Rules 25(1)(d) and 26(1) are also applicable. The person who purports to sell goods cannot say that he was not a person concerned with the selling of goods and merely issued invoice or that he did not contravene a provision relating to evasion of duty. The appellant issued invoices without delivery of goods with intent to enable evasion of duty to which effect a finding has been recorded and which finding has not been challenged. We are, thus, unable to hold that appellant was not liable to pay any penalty. Appellant diverted the imported scrap without any documents for manufacturing of excisable goods by M/s. Chamak, who clandestinely removed without payment of duty. So, the appellant company by supplying the goods without documents made easier to M/s. Chamak in manufacturing and clearing the goods clandestinely which are liable to confiscation under the Act or Rules. Hence, imposition of penalty under Rule 209A is warranted. Thus, both the issues raised by the learned Counsel are not sustainable. The learned Counsel had not contested the imposition of penalty on merit. - Decided against assessee.

  ---

• 2015 (1) TMI 887
  CENVAT Credit - movement of inputs 25,78,578. However once goods came back, that credit can be taken back in the books of account. Penalty amounting to 6.50 lakhs is imposed on respondents for violations - Decided partly in favour of Revenue.

  ---

• CST, VAT & Sales Tax

• 2015 (1) TMI 908
  Liability of official liquidator to pay sales tax - Dealer - whether an "Official Liquidator" is a "dealer" within the meaning of section 2 (viii) of the Kerala General Sales Tax Act, 1963 (for short, "the Act, 1963"), and therefore would be required to collect sales tax in respect of the sales effected by him pursuant to winding up proceedings of a company in liquidation - Held that:- An Official Liquidator- (i) derives its authority from the provisions of the Act, 1956; (ii) acts on behalf of the company in liquidation for the purposes prescribed by the Act, 1956; (iii) is appointed by and is under the control and supervision of the Court while discharging his duties. It would now be appropriate for this Court to look into the nature of liability, if any, imposed on the Official Liquidator for the purposes of taxation. For this purpose, we require to consider Rule 54 of the Rules, 1963 which imposes liability, inter alia, on a receiver or manager or other person appointed by an order of the court, in the event that a business owned by a dealer, is under the control of the said receiver or manager or person, whatever be his designation, who in fact manages the business on behalf of the dealer. The aforesaid rule expressly provides that tax shall be levied upon and recoverable from such receiver, manager, etc., in the same manner, as it would be leviable upon and recoverable from the dealer. Such tax liability may be incurred by any person managing or conducting the business on behalf of the dealer. The tax liability incurred by such person will be equivalent to the liability which would be levied upon the dealer if he were conducting such business. Further that under Rule 233 of the Rules, 1959, for the purposes of acquiring and retaining possession of the property of the company in liquidation, the Official Liquidator would be in the same position as a receiver. Official Liquidator had issued a notice inviting tenders for the sale of the assets of the Company. The offer of the auction purchaser was accepted and duly confirmed by the High Court. However, the dispute herein arose in respect to determination of which party would be exigible to sales tax. - It can be concluded that an Official Liquidator is an officer of the Court and that for the purpose of discharging statutory obligations imposed under the Act, 1956, the Official Liquidator merely steps into the shoes of the company in liquidation. By virtue of the notice issued by the Official Liquidator for inviting tenders, dated 26.11.2001, it is amply evident that the liquidator intended to conduct a transfer of the said goods in liquidation. Since the conduct of an auctioned sale involved transfer of goods, it falls within the wide ambit of section 2(viii)(f) of the Act, 1963. It can be concluded that an Official Liquidator is an officer of the Court and that for the purpose of discharging statutory obligations imposed under the Act, 1956, the Official Liquidator merely steps into the shoes of the company in liquidation. By virtue of the notice issued by the Official Liquidator for inviting tenders, dated 26.11.2001, it is amply evident that the liquidator intended to conduct a transfer of the said goods in liquidation. Since the conduct of an auctioned sale involved transfer of goods, it falls within the wide ambit of section 2(viii)(f) of the Act, 1963. Company in liquidation is a "dealer" with regard to the sale of its assets by way of an auction under a winding up order. Further, we have noticed the settled law that an Official Liquidator steps into the shoes of the Director of the company in liquidation and performs his statutory functions in accordance with the directives of the Court. Furthermore, Rule 54 of the Rules, 1963 contemplates a situation where a business owned by a dealer, is under the control of a receiver or manager or any other person, irrespective of his designation, who manages the business on behalf of the said dealer. In the said scenario, the said person, in-charge of the business on behalf of the dealer, would be exigible to sales tax in the same manner as it would have been leviable upon and recoverable from the dealer itself. Therefore, it can be concluded that the liability to pay sales tax, in the present case, would be on the Official Liquidator in the same manner as the dealer, that is, the Company in liquidation. Pursuant to section 5 of the Act, 1963, the Company in liquidation, as a dealer, will incur liability to pay sales tax at the point of first sale as incurred by any other dealer under the said Act. By placing reliance upon Rule 54 of the Rules, 1963, the liability to pay sales tax is borne by the Official Liquidator as a manager or receiver of the property of the company in liquidation. Therefore, we are of the considered opinion that the Official Liquidator would be required to pay the tax payable on the sale of the assets of the company in liquidation. - in view of facts and circumstances of the case, the auction purchaser would not be liable to pay sales tax. The offer of the auction purchaser, as accepted by the Official Liquidator and confirmed by the High Court, was inclusive of all taxes. It would have been the bounden duty of the Official Liquidator to have separated an amount for the payment of taxes under the Act, 1963 to avoid any liability. It would be gainsaid in repeating that the Special Government Pleader (Taxes), on behalf of the Revenue, before the learned Single Judge of the High Court had clearly stated that the liability to pay sales tax would be on the Official Liquidator. - Decided in favour of Revenue.

  ---

• 2015 (1) TMI 899
  Imposition of penalty for contravention of carrying the goods without valid documents- contravention of Section 53(2)(b) of the Act.- Intention to evade Duty - Held that:- Transporter is transporting the goods from Surat to Hubli. The consignee has paid transportation charges for the same. The consignment copy clearly shows the place where the goods have to be unloaded. The transporter is from Hyderabad. If the driver employed by the transporter fails to unload the goods in Hubli and carries the goods nearly 400 kms., beyond Hubli, his explanation that by a bona fide mistake it was carried thus far cannot be accepted. More over the driver of the vehicle has categorically stated that he was asked to transport the goods to Trichy in Tamil Nadu and that is why the lorry was parked in the border of Tamil Nadu at Siddlaghatta. Therefore, it is clear the transporter resorted to the above modus operandi to hoodwink the authorities at the check-post and wanted to pass on the goods to the dealer in Tamil Nadu without paying any tax in the State of Karnataka. It is a different matter if the vehicle was intercepted and the vehicle was brought back to Hubli, goods were unloaded and C Forms were issued, it is an afterthought. In that view of the matter, the assessing authority was fully justified in imposing the penalty for contravention of carrying the goods without valid, documents. The First Appellate Authority was not clear in his mind, though he observed that the conduct of the transporter results in suspicion but nonetheless he reduced the penalty. Either the penalty is payable or not payable. In one breadth he cannot say there is no contravention and in another breadth he cannot say the conduct of the transporter is suspicious and reduce the penalty. The Tribunal was in total error in holding that the transporter was carrying the goods with valid documents. The documents which were carried in the vehicle had no validity beyond Hubli to transport the said consignment from Hubli to Sidlaghatta. This aspect is completely missed by the Tribunal. In that view of the matter, the order passed by both the appellate authorities are unsustainable - Decided in favour of Revenue.

  ---

• 2015 (1) TMI 898
  Levy of additional sales tax - Whether in the facts and circumstances of the case, the Tribunal is legally right in holding that the additional sales tax would be attracted for the assessment year 1996-97, since the taxable turnover did not exceed 100 crores as per amended provision of section 2(1)(aa) - Held that:- Both sides agree that the issue as regards the levy of additional sales tax in respect of the assessment year 1996-97 is covered by the decision of this court in the case of State of Tamil Nadu v. National Time Co. reported in [2010 (7) TMI 842 - MADRAS HIGH COURT] that after taking the taxable turnover for the entire year, the taxable turnover up to the date of amendment has to be assessed with reference to the relevant tax rate therein applicable to the period. - Matter remanded back - Decided in favour of Revenue.

  ---