Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 25, 2014
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
Notifications
Highlights / Catch Notes
Income Tax
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Buffer stock subsidy - Nature of Receipt – whether grain-in-aid received by the assessee would be revenue receipts - Held yes - HC
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Interest on fixed profit – Benefit of Section 10A and 10B - what is exempted is not merely the profits and gains from the export of articles but also the income from the business of the undertaking - HC
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Block assessment - sections 147/ 148 of the Act are not applicable to the assessment under Chapter XIVB of the Act - HC
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There cannot be any levy of penalty u/s. 271C, more so, where there was a reasonable cause for not deducting the TDS on the payment made by the assessee - AT
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The additions over and above the assessed income cannot be made dehors the incriminating material found at the time of search while completing the assessment under section 153A - AT
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Application of principle of mutuality – Transactions with non-members Reimbursement of cost to income – Application of section 44C - CIT(A) was more than justified in estimating the income at 5% of the gross receipts from non-members - AT
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Whether the deduction granted to the assessee u/s. 10A can be be withdrawn u/s. 154 on the reason that the assessee filed return of income belatedly – An issue when it is debatable, it cannot be dealt with by the proceedings u/s. 154 - AT
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Disallowance u/s 36(1)(iii) - Revenue cannot decide what the assessee has to do and cannot compel the assessee to maximise the profit so as to pay higher income tax - AT
Customs
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Illicit import and export of currency - it is only a case of contravening prohibition on dealing in foreign currency and holding such currencies which can be dealt with only under FEMA and not under Customs Act - AT
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Penalty cannot be imposed on the Bank Manager for not taking due caution before opening current account in the name of proprietor and company will not attract penalty under Section 114 - AT
Service Tax
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As the show-cause notices were issued demanding duty as provider of Stock Broking Services, whereas the adjudicating authority has confirmed the demand as provider of Stock Exchange Service, demand set aside - AT
Central Excise
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Rejection of the rebate claim - Export of quilt cover - Quilt shell/cover cannot be called as quilt until it is stuffed with the stuffing materials which can be feather/cotton/polyester fibre. - HC
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Service of order on an unauthorised representative - The submission that it is only a legal practitioner who can be an authorised representative is misconceived. - HC
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Non-accounting of manufactured goods in the statutory records falls within the ambit of Rules 173Q(1)(b) attracting provision of confiscation and penalty - HC
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Period of limitation for filing export proof under Rule 19 - No time limit is prescribed - Earlier documents were seized by the custom authorities - petitioners allowed to produce additional documents - HC
VAT
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Release of vehicle in connection with the offence under the Delhi Excise Act - The High Court was in error in taking a view to the contrary and in setting aside the orders passed by the Magistrate - SC
Case Laws:
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Income Tax
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2014 (1) TMI 1243
Whether exclude erection and installation charges are excluded for deduction u/s 80HHC - Held that:- Following assessee's own case for A.Y. 2002-03 - These amounts are to be treated as part of the business profits for the purpose of computing the income derived from export by virtue of the provisions of section 80HHC(3) of the Act - Decided against revenue. Whether only net interest be reduced from income for deduction u/s 80HHC - Held that:- Following Lalsons Enterprises [2004 (2) TMI 294 - ITAT DELHI-E] - For the purpose of applying Explanation (baa) below subsection 4B) of section 80HHC and while reducing 90 per cent of the receipt by way of interest from the profits of the business, it is only the 90 per cent of the net interest remaining after allowing a set-off of interest paid, which has a nexus with the interest received, that can be reduced and not 90 per cent of the gross interest - Decided against revenue. Whether the claim raised subsequent to filing of the return of income during the course of assessment proceedings be allowed - Held that:- The assessee had not claimed expenditure of Rs.10,13,759/- due to oversight in its P&L account, but subsequently made the claim before the AO and also filed an application for rectification of mistake, after original assessment proceedings were concluded - Following CIT vs. K.N.Oil Industries [1982 (3) TMI 16 - MADHYA PRADESH High Court] - if it is apparent from the record that the assessee was entitled to relief admissible under the Income Tax Act, that relief can be granted to him by an order under section 154 by rectifying the assessment even though relief under that section had not been claimed by the assessee in the original assessment proceedings - Decided against Revenue.
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2014 (1) TMI 1242
Validity of notice u/s 153C r.w.s. 153A - Held that:- the AO must be satisfied that documents, money bullion etc belonged to other person and on being recording satisfaction the case record/seized material is required to be forwarded to the AO of such other person - This is not the question of an incompetency in the jurisdiction but if a satisfaction is not recorded then this is an irregular exercise of assumption of jurisdiction - The learned CIT(A) had given ample opportunity to the Revenue Department to place the required “satisfaction” if available on record - The Revenue Department had failed to place on record any such “satisfaction note” - The learned CIT(A) was justified in quashing the asessment order. Undisclosed income - Held that:- No evidence was detected at the time of search through which it could have been demonstrated that the assessee had earned the impugned unaccounted income so assessed - The AO had taxed merely on presumption that the assessee might have earned some professional income being an architect pertaining to the project supervised by him - The provisions of Section 68 were not related to the seized material but based upon the books of account of the assessee, hence, out of the purview of the search assessment - Decided against Revenue.
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2014 (1) TMI 1241
Income from sale of land - Income from business or capital gains - Held that:- The sum was received by the assessee on account of sale of small portion of 0.18 Bigas of land, which was earlier sold in the financial year 2000-01 - The entire land was sold in such earlier year and the amount of gain resulting from such transfer was declared and accepted as ‘Capital gains' - Now the income from sale of smaller portion of land cannot be said to be income from business - Decided against Revenue. Disallowance of prior period expenses - Held that:- The payment made to the party on 19.01.2006 was simply in the nature of advance for which the services were rendered and the bill was raised in the previous year relevant to the assessment year under consideration - Since the assessee is a company following mercantile system of account, the expenditure would call for deduction at the time when the liability is finally settled and not when the amount was paid in advance - The reason for deduction of tax at source at the time of payment is the applicability of provisions of section 194J which provide for deduction of tax at source either at the time of credit of the sum to the account of the payee or at the time of payment there of, whichever is earlier - Decided against Revenue. Deemed dividend u/s 2(22)(e) - Held that:- The assessee company is not a shareholder in the companies advancing loans to it - The shareholders of the assessee are shareholders of such companies - There is no question of assessing deemed dividend in the hands of the assessee - Following CIT vs. Navyug Promoters (P) Ltd. [2011 (11) TMI 318 - Delhi High Court] - An assessee who is not a shareholder of the company, from which he received a loan or an advance cannot be treated as being covered by the definition of the word "dividend" as provided in s. 2(22)(e) - Decided against Revenue.
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2014 (1) TMI 1240
Deduction u/s 80IB - Held that:- Following assessee's own case for A.Y. 2004-05 - When complete facts are not evident from the relevant orders while the learned CIT(A) have not recorded any findings on the specific issues - The issue has been restored for fresh adjudication. Unsecured loan taken - Held that:- The ld.CIT(A) has given a finding that the ld.AR failed to put up the details of confirmation and creditworthiness of these parties - However, the contention of the assessee is that all the confirmations were duly placed on record of the ld.CIT(A) - The order of the ld.CIT(A) is cryptic and, therefore, in the interest of justice - The issue has been restored for fresh adjudication. Disallowance u/s 40(a)(ia) - Held that:- The appellant had deducted TDS on commission and interest expenses and the payment has been made before the due date - As regards freight and octroi it is seen from the ledger account produced before him that the sum paid on each occasion is not exceeding Rs.20,000/- and not liable for deduction of TDS - The order of CIT(A) was justified in deleting addition - Decided against Revenue. Addition on account of capital introduced - Held that:- The appellant submitted before him evidences like copy of receipt of income-tax of all the partners along with statement of total income and copy of accounts of the partners as appearing in the books of account of the appellant firm in support of capital introduced by the appellant which has been verified - Decided against Revenue. Penalty u/s 271(1)(c) - Held that:- Following COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD [2010 (3) TMI 80 - SUPREME COURT] - Any details supplied by the assessee in its return were not found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c) - A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars - Decided against Revenue.
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2014 (1) TMI 1239
Buffer stock subsidy - Nature of Receipt – Liability for taxation u/s 28(4) of the Act – Deduction on account of buffer stock subsidy - Whether grain-in-aid received by the assessee would be revenue receipts – Held that:- The subsidy was received for holding buffer stock by the appellant and to meet expenditure incurred to hold on the buffer stock as required and all expenses relatable to maintaining buffer stock were debited. The subsidy given by the Central Government to compensate or reimburse the expenses was a revenue and taxable receipt - Relying upon Commissioner of Income Tax Vs. Ponni Sugars & Chemicals, Ltd.& Ors [2008 (9) TMI 14 - SUPREME COURT] - the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given - The subsidy was given to compensate the burden on account of interest, storage and insurance etc. for holding the Buffer Stock of sugar i.e. to compensate the assessee in running his business which is clearly revenue receipt - No substantial questions of law arises in the appeals – Decided against Assessee.
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2014 (1) TMI 1238
Revival of appeal – Approval from Committee on Disputes – Pending appeal before SC Held that:- The appeal is dismissed as the matter is already pending before the SC - The appeal pertains to assessment year 2002-03 and the Revenue had also preferred an application before COD for grant of approval – the Revenue is given liberty to revive the appeal in case favourable decision comes from the Supreme Court – Decided against Revenue.
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2014 (1) TMI 1237
Block assessment - Application of section 147/148 of the Act - Whether sections 147/ 148 of the Income Tax Act, 1961 (the Act) providing for reassessment are applicable to the block assessment under Chapter XIVB of the Act or not – Held that:- In case sections 147/ 148 of the Act are applicable to the block assessment, it will amount to reassessment of the reassessment proceeding - Section 147 of the Act has not used the word 'the block period' - The reason seems to be simple that the block assessment itself is the re-assessment proceedings - There was no necessity for providing reassessment of the reassessment proceedings - Cargo Clearing Agency (Gujarat) v. Joint Commissioner of Income Tax [2008 (8) TMI 86 - GUJARAT HIGH COURT] sections 147/ 148 of the Act are not applicable to the assessment under Chapter XIVB of the Act – Decided against Revenue.
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2014 (1) TMI 1236
Validity of order passed u/s 127(2) - Held that:- The power to transfer proceedings from one place to another under Section 127 of the Act cannot be exercised arbitrarily - Neither any notice was issued to the Petitioner nor was any personal hearing was granted to the Petitioner before passing the impugned order of transfer - Decision in Shikshan Prasarak Mandali vs. CIT [2013 (3) TMI 153 - BOMBAY HIGH COURT] followed - Giving of notice of the proposed transfer and hearing before passing any order of transfer under section 127 of the Act is necessary otherwise it is in breach of audi alteram partem rule - The notice should also give reasons of the proposed transfer - In the case of assessee order passed was in breach of natural justice i.e. not giving of notice, not giving a personal hearing and passing the order without reasons - Decided in fvaour of petitioner.
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2014 (1) TMI 1235
Benefit of Section 10A and 10B - Interest on fixed profit - Whether the interest received and the consideration received by sale of import entitlement is to be construed as income of the business of the undertaking? - Held that:- There is a direct nexus between this income and the income of the business of the undertaking - Though it does not par take the character of a profit and gains from the sale of an article, it is the income which is derived from the consideration realized by export of articles - In view of the definition of Income from Profits and Gains incorporated in Subsection (4), the assessee is entitled to the benefit of exemption of the said amount as contemplated under Section 10B of the Act. Profits and gains derived from export of articles is different from the income derived from the profits of the business of the undertaking - The profits of the business of the undertaking includes the profits and gains from export of the articles as well as all other incidental incomes derived from the business of the undertaking - what is exempted is not merely the profits and gains from the export of articles but also the income from the business of the undertaking - thus, the Tribunal was justified in extending the benefit to the amounts also there was no merit in these appeals Decided against Revenue.
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2014 (1) TMI 1234
Status of assessee in which income to be assessed - Held that:- When the Canara Bank Account was opened, it was not opened as HUF - No details of HUF were furnished to the Bank for opening the said account as HUF account nor could the assessee demonstrate on the basis of any other material to show that it was HUF account - The bank account is operated by the assessee-individual and there is nothing on record to suggest the impugned bank account belongs to HUF - Decided against assessee.
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2014 (1) TMI 1233
Validity of admission of Additional grounds – penalty u/s 271C - period of limitation - Held that:- The CIT (A) is correct in admitting the additional ground raised before him for adjudication as this additional ground raised by the assessee goes to the root of the matter in deciding the case - The Assessing Officer has been requested to submit his comments on the additional ground raised - the additional ground raised by the assessee has been admitted by the CIT (A) in view of the Hon'ble Supreme Court's decision in the case of NTPC vs. CIT [1996 (12) TMI 7 - SUPREME Court] – there was no infirmity in the action of the CIT (A) for admitting the additional ground raised by the assessee. Deletion of penalty u/s 271C of the Act – Held that:- Bona-fide belief in non-deduction of TDS would constitute a reasonable cause - Ignorance of law may be no excuse but simultaneously it is also true that there is no presumption that everyone knows the law - The assessee submitted evidence from hospitals wherein the payment received was reflected in their incomes and paid tax - Thus, the assessee is not treated as an assessee in default for the purpose of section 201(1) of the Act – Relying upon Hindustan Coco Cola Beverage Pvt. Ltd. vs. CIT [2007 (8) TMI 12 - SUPREME COURT OF INDIA] - interest u/s. 201(1A) is mandatory and is required to be charged – thus, it is evident from the assessment order that the assessee was not treated as an assessee in default u/s. 201(1) of the Act. When the AO himself treated the assessee as an assessee not in default in respect of the amounts of TDS to be deducted, then there cannot be any scope for levying penalty u/s. 271C of the Act - the amount of tax has been paid by the recipient of the income - the provisions of section 271C cannot be applied to the assessee's case as these provisions clearly state that if any person fails to deduct whole or any part of the tax as required under the provisions of Chapter XVII-B, then such person shall be liable to pay by way of penalty an amount equal to the amount of tax which such person failed to deduct or pay as above said – thus, the assessee is not in default in respect of the amount of tax itself, there cannot be any levy of penalty u/s. 271C, more so, where there was a reasonable cause for not deducting the TDS on the payment made by the assessee – Decided against Revenue.
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2014 (1) TMI 1232
Eligibility for Deduction u/s 80IB of the Act – Project not completed within stipulated time – Completion certificate not furnished – Held that:- The building plan approval was obtained on 10.3.2004 and there is no dispute - As is evident from the substitution of Section 80IB(10)(a) of the Act, prior to the amendment, there was no such requirement as regards furnishing of completion certificate and the deduction provision pointed out to the grant of 100% deduction on the profits derived from a housing project, if the undertaking had commenced development and construction of the housing project on or• after 1st October, 1998 - Thus, till 2005, there was no clause dealing with completion, in which event, one cannot read into the provision as a condition, which is not specifically provided. Though the assessee's case is related to A.Ys. 2007-08 and 2008-09, the project was got approved by the concerned local authority before 1.4.2004 - The provisions of section 80IB as stood prior to the amendment are applicable to the assessee's case - As the substitution of Explanation to clause (a) to subsection (10) of section 80IB of the Income-tax Act, 1961 was brought in under Finance (No. 2) Act of 2004, effective from 1.4.2005 - Thus, in the absence of any such requirement read into the section, it would be difficult to accept the observation of the AO that the claim for deduction was rejected on the ground that the assessee had not furnished the completion certificate – Relying upon Madras High Court in the case of CIT vs. Jain Housing & Construction Ltd. [2012 (11) TMI 588 - MADRAS HIGH COURT] – the order of the CIT(A) upheld – Decided against Revenue.
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2014 (1) TMI 1231
Disallowance of the provision for bad or doubtful debts u/s 36(2)(1) of the Act - Held that:- The decision assessee's own case for the previous years has been followed - Bad debt in respect of sales turnover which has been recognized as income is allowable subject to furnishing of details required in this behalf - the amount written off in respect of bad debts is allowable even though the individual account of debtor is not written off but a consolidated entry is passed in respect of the same by debit to P&L account - The issue need to be reconsidered – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Disallowance of the provision for warranty and filed services - Disallowance u/s 37(2A) of the Act – Entertainment expenses - Held that:- Following the decision in assessee’s own case for the previous year, the order of CIT(A) has been confirmed and the AO is directed to re-work the disallowance on account of provision made for warranty and field services – matter remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Disallowance made under Rule 6D of the Act – Held that:- The decision in Aorow India ltd. Vs CIT [1997 (7) TMI 92 - BOMBAY High Court] followed - The computation has to be made in accordance with rule 6D – the decision of the CIT(A) upheld – Decided against Assessee. Deduction u/s 80-O of the Act – Net income from service – Held that:- the decision in Commissioner of Income-Tax Versus Asian Cables Corporation Ltd. (No. 2) [2003 (3) TMI 87 - BOMBAY High Court] followed - for special deduction gross receipts cannot constitute the basis for deduction u/s. 80-O of the Act - Deduction to be allowed is only on net income basis – Decided against Assessee. Disallowance of depreciation on assets on lease - Held that:- The claim of the depreciation by the assessee is totally based on paper evidence whereas the AO has rejected the claim based on the categorical denial by Gujarat Energy Development Agency (GEDA) which is an autonomous body of the State of Gujarat - the lower authorities have accepted this to be a financial transaction, in that case, the other claims of the assessee has to be verified – thus, the matter remitted back to the AO for fresh adjudication – Decided partly in favour of Assessee. Disallowance towards cost of sales – Held that:- There is no dispute that such expenditure is allowable as deduction, provided it is in regard to an expenditure incurred during the year, even if it is not due for payment on account of bill/debit note having not been received - However, no such evidence was brought before the lower authorities nor before us – there was no reason to interfere with the findings of the Ld. CIT(A) – Decided against Assessee. Deletion made on account of fees paid for technical services – Deletion on disallowance of notional Interest - Held that:- The issue has already been settled in assessee’s own case for the previous years, and was decided in the favour of Assessee – Thus, the Appeal of the Revenue dismisses – Decided against Revenue.
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2014 (1) TMI 1230
Applicability of section 50C of the Act – Addition made in sale consideration – Nature of payment made - Assessee is a shareholder in company along with other shareholders and sold his shares for a consideration – Held that:- The decision in Irfan Abdul Kader Fazlani Versus Assistant Commissioner of Income-tax, Central Circle-44, Mumbai [2013 (2) TMI 350 - ITAT MUMBAI] followed - The assessee transferred the shares in the company and not the land or building or both - Assessee does not have full ownership on the flats which are owned by the company - The transfer of shares was never a part of the assessment of the Stamp duty Authorities of the State Government - The company was deriving income, taxable under the head ‘income from property’ for more than a decade – thus, the AO’s decision to invoke the provisions of section 50C to the tax planning adopted by the assessee is not proper and it does not have the sanction of the provisions of IT Act - The provisions of section 50C are deemed provisions which are required to be strictly interpreted - The addition made by the AO and confirmed by the Ld. CIT(A) on account of Long Term Capital Gain by enhancing the value of sale consideration set aside – Decided in favour of Assessee.
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2014 (1) TMI 1229
Disallowance made u/s 14A of the Act r.w. Rule 8D of the Rules - Disallowance of expenses incurred in relation to the exempt income – Income received as dividend on shares – Held that:- After going by the magnitude of the investment activity of the assessee and the quantum of exempt income earned, certain common expenses incurred on office and administration incurred by the assessee should be attributable partly to the investment activity of the assessee which resulted in substantial exempt income - Relying upon Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - The manner and method of computing such in-direct expenses attributable to the earning of exempt income is now provided in Rule 8-D and the same being applicable to the year under consideration i.e 2008-09 - thus, the disallowance made by the A.O. u/s 14A of the Act by applying the said Rule was fully justified – the order of the CIT(A) confirming the disallowance made by the A.O. u/s 14A read with Rule 8-D of the Income tax Rules 1962 upheld – Decided against Assessee.
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2014 (1) TMI 1228
Validity of assessment and assumption of jurisdiction under section 153A r.w. 143(3) of the Act – Addition made on entrance fee collected - Held that:- The decision in Jai Steels India, Jodhpur v/s ACIT [2013 (6) TMI 161 - RAJASTHAN HIGH COURT] followed - If no incriminating material has been found, then no addition can be made in the assessment completed under section 153A which has not been abated - The assessments were not pending and had attained finality and thus, the assessments completed in the assessment years will not get abated - Once that is so, the legal position as of now is that the additions over and above the assessed income cannot be made dehors the incriminating material found at the time of search while completing the assessment under section 153A. Incriminating material - Whether the statement recorded under section 132(4) or the Annexure-B which has been referred to by the learned Departmental Representative can be said to be incriminating material – Held that:- The assessee has clearly stated that it has claimed the membership fee as capital receipt based on the decision of the Hon'ble Jurisdictional High Court and such a claim has also been accepted by the Assessing Officer in scrutiny proceedings - Neither in the question nor in the answer thereto, there is any reference to any document or seized material, much less any incriminating material to show that the assessee's claim which was allowed by the Department has been negated - this claim is purely based on legal principle as upheld by the Hon'ble Jurisdictional High Court. The statement as such cannot be said to be incriminating material so as to infer that any addition is warranted on this issue while completing the assessment under section 153A, when the earlier assessments have attained finality at the time of search - the document does not show that the assessee's claim for capital receipts will automatically be inferred as revenue receipt - The period of membership of 25 years also is a part of the record and no new information or material can be said to have come into picture as a result of search - Thus, neither the statement recorded under section 132(4) nor the document mentioned at Annexure-B can be inferred as incriminating material for the purpose of making addition under section 153A – Decided in favour of Assessee.
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2014 (1) TMI 1227
Application of principle of mutuality – Transactions with non-members also – Failure to produce documentary evidences - The survey divulged that the assessee was also entering into transactions with non-members – Held that:- The decision in Deputy Director of Income-tax (International Taxation)-21, Mumbai Versus Societe International De Telecommunication [2012 (11) TMI 948 - ITAT MUMBAI] followed - In a case of a non-mutual organization, a few transactions with the members do not convert its non-mutual status to mutual – also, the otherwise status of mutuality of an organization cannot be destroyed because of a few transaction with the non-members - What extent of participation by non-members destroys the otherwise mutual status of an organization or what extent of participation by members changes the otherwise status of non-mutuality depends on the consideration of the totality of facts and circumstances of each case - mere fact that a person at the time of resignation or retirement is not entitled to share in the reserves of the organization, would not damage the mutuality so long as the persons who are entitled to share such reserves continue to be the members as a class. The assessee is covered by the principle of mutuality to the extent of its transactions with the members - Income from transactions with non-members is outside the purview of mutuality – thus, the income is exempt from taxation and only the income from the transactions from non-members is outside the purview of principles of mutuality – Decided against Revenue. Reimbursement of cost to income – Error in Calculating net income - Application of section 44C of the Act – Application of section 40(a)(iii) of the Act - Estimation of income at 5% of the gross amount recovered from non-members – Disallowance made u/s 32 of the Act – Held that:- the decision in Deputy Director of Income-tax (International Taxation)-21, Mumbai Versus Societe International De Telecommunication [2012 (11) TMI 948 - ITAT MUMBAI] followed - Both the sides of the assessee's Income and expenditure are matching paisa to paisa and there is no under-recovery or over-recovery shown as an asset or a liability in its balance sheet - the accounts of the assessee were maintained at the HO level, there remains nothing to doubt the correctness view taken by the CIT(A) that the accounts of the assessee do not divulge the correct income - Not only the basis of allocation of expenses but also that of the revenue, as done by the HO is not known to the assessee. Section 44C only talks of HO expenses, which mean executive and general administrative expenditure incurred by the assessee outside India including expenditure in respect of rent, rates, repairs etc - It is only the allocation of general and administrative expenses which is covered within the purview of section 44C - neither the income side nor the expenditure side of the assessee's Income and expenditure account is fully capable of verification - It is in such circumstances that Rule 10 of Income-tax Rules, 1962 comes to the rescue of the Revenue for determination of income in the case of non- residents - It is this very rule which has been invoked by the Assessing Officer and also applied by the learned CIT(A) in estimating the income of the assessee – thus, the CIT(A) was more than justified in estimating the income at 5% of the gross receipts from non-members – there was no merit in the grounds of the assessee – Decided against Assessee. Levy of interest u/s 234D of the Act – Held that:- The decision in CIT v/s Common Effluent Treatment Plant, (Thane-Belapur) Association, [2010 (6) TMI 52 - BOMBAY HIGH COURT] followed - interest received from F.D. with the bank does not possess the same character of "Mutuality" and the interest income would, therefore, be taxable under the head "Income From Other Sources" – Decided against Assessee.
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2014 (1) TMI 1226
Deduction granted u/s 10A of the Act – Failure to produce FIRCs – Held that:- CIT(A) held that The AO had not given even one week time to the assessee to produce FIRCs and the same was produced before the CIT(A) - The claim was duly examined by the CIT(A) and found correct – thus, the AO directed to grant the deduction after due verification of the FIRCs - The CIT(A) has given a categorical finding that the assessee has produced the FIRCs from the Bank to show that the funds have been brought into India in convertible foreign exchange – Revenue is not able to controvert the finding of the CIT(A) – order of the CIT(A) upheld – Decided against Revenue. Disallowance of vehicle maintenance and general expenses – Disallowance of conveyance and travelling expenses - Held that:- The assessee is a public limited company whose accounts are audited by statutory auditors and approved by its General Body and there cannot be any expenditure of personal nature - Unless and until the AO points out any specific discrepancy on the expenses incurred by the assessee, any amount on this count cannot be disallowed – the order of the CIT(A) reversed – Decided in favour of Assessee. Withdrawal of deduction granted u/s 10A as per section 154 of the Act - Whether the deduction granted to the assessee u/s. 10A can be be withdrawn u/s. 154 on the reason that the assessee filed return of income belatedly – Held that:- Relying upon ACIT vs. Dhir Global Industries (P) Ltd [2010 (7) TMI 619 - ITAT, DELHI] – An issue when it is debatable, it cannot be dealt with by the proceedings u/s. 154 of the Act - The AO in his order u/s. 154 of the Act is very much debatable and a debatable issue cannot be considered in the proceedings u/s. 154 of the Act – thus, the CIT(A) is justified in annulling the order u/s. 154 of the Act – Decided against Revenue.
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2014 (1) TMI 1225
Disallowance u/s 36(1)(iii) of the Act – Proportionate interest expenditure – Validity of investments made in sister concern – Held that:- It cannot be said that the assessee used borrowed funds for non-business purposes - The Department contended that instead of making interest free investment in M/s. GSPL, the assessee should have used the same for the purpose of clearing loans and it could have very well saved the interest payment - When the assessee not used borrowed funds for the purpose of investment, the Department cannot say that interest free funds availed by the assessee should have been used for the purpose of clearing the existing loans - It is the prerogative of the assessee to take a business decision in what manner the assessee has to deploy its funds. Relying upon SSPDL Ltd. vs. DCIT [2013 (7) TMI 18 - ITAT HYDERABAD] - unless and until borrowed funds are used as investment in sister concern, disallowance of interest is not possible - The Revenue cannot decide what the assessee has to do and cannot compel the assessee to maximise the profit so as to pay higher income tax - The assessee is engaged in the business of real estate - Same is the position with the sister concern, M/s. GSPL - There are common interests among the companies - the assessee advanced the interest free funds to the sister concern which is received from M/s. PPPL - Being so, the interest bearing funds were not at all diverted by the assessee to make investment in the sister concern – thus, no disallowance could be made on notional basis and it cannot be disallowed even if it has not resulted in any income to the assessee – Decided in favour of Assessee.
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2014 (1) TMI 1224
Deletion made u/s 68 of the Act – Purchase of land from unsecured loans - Held that:- The assessee stated that the company purchased land in earlier years with unsecured loans - During this assessment year, the assessee-company allotted shares with premium in support of which the Balance Sheet, Form 2 of allotment shares also submitted by the assessee before the AO also – thus, there is no justice or substantial reason to add the share premium as unexplained cash credit u/s 68 of the Act - the CIT(A) was convinced with the details filed by the assessee-company and he was of the opinion that the addition made on this account is unjustified and illogical - The business of the assessee was set up and the AO recognized the same by accepting the return of income filed by the assessee- company and the assessments also completed for the A.Ys. 2007-08 and 2008-09 - The AO has not taken up any enquiry or verified and not gathered evidential proof to disallow these expenses – thus, the additions made by the AO set aside. The Revenue authorities cannot question charging of premium unless there is a provision under the Income-tax Act, 1961 - The AO having examined the parties (creditors) u/s. 133(6) of the Act and found nothing adverse against the assessee to show that the assessee's own money flew back to the assessee to these three creditors as a conduit, the AO cannot question the raising of funds by the assessee-company - having cash/fund flow is important rather than having depreciable assets - even the provisions of section 56 are not applicable to the assessment year under consideration which came into effect only from 1.10.2009 i.e., relevant to the A.Y. 2010-11 – thus, the CIT(A) has rightly deleted the addition made by the AO u/s. 68 of the Act – Decided against Revenue. Nature of activity and expenditure – Necessary for the purpose of carrying out business or not – Held that:- The assessee filed returns of income for A.Ys. 2007-08 and 2008-09 - The loss returned by the assessee for these assessment years was accepted in summary assessment - Being so, after accepting the return of income for A.Ys. 2007-08 and 2008-09, the AO cannot dispute the same figure in subsequent assessment year - Had the AO has any doubt regarding allowability of loss, first he should have questioned the same in earlier assessment year and not in the assessment year under consideration – Relying upon Deccan Goldmines Ltd. vs. ACIT [2013 (11) TMI 185 - ITAT MUMBAI] - thus, the AO is precluded in rejecting the claim of carried forward loss in the assessment year under consideration as the business was already set up – the order of the CIT(A) upheld – Decided against Revenue.
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Customs
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2014 (1) TMI 1222
Confiscation under section 111(d) and under section 113(d) - Penalty u/s 112 and 114 - Illicit import and export of currency - Proceedings under Custom Act or FEMA - Held that:- Section 111(d)makes it amply clear that the goods are liable to confiscation under Customs Act if the goods are imported or attempted to be imported contrary to any prohibition under Customs Act or under any other law for the time being in force. So the prohibition imposed under Customs Act or any other law for the time being in force referred therein has to be a prohibition on import [prohibition on export in the case of section 113 (d)]. The prohibition in FEMA on trading and possession of foreign currency will not come within the scope of section 111(d) because this section deals with import and prohibitions on import and no other prohibition. Customs does have jurisdiction to seize the currency because there is clearly an attempt to import or export foreign exchange illegally and there is a prohibition on such import or export as per Regulation 5 of Foreign Exchange Management (Export and Import of Currency) Regulation 2000, issued in exercise of powers under section 6 (3) (g) of FEMA. But the situation in this case is quite different in as much as seizure was not when the attempt to illegally import or export was taking place. The proof of illegal import or export in this case is not reliable as already explained. Then it is only a case of contravening prohibition on dealing in foreign currency and holding such currencies which can be dealt with only under FEMA and not under Customs Act - Indian Currency equivalent of seized and confiscated currency is already released to the respondent and there is no chance a release of foreign currency to a person not authorized to hold foreign currency taking place as a result of this order - Decided against Revenue.
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2014 (1) TMI 1221
Waiver of pre deposit - Penalty u/s 114 - Confiscation u/s 113 - Over valuation of goods - Held that:- goods have been held liable to confiscation under the provisions of Section 113(i) of the Customs Act for overvaluation of the goods under export. The overvaluation has been done by the exporter and the appellant-bank has no role to play in such overvaluation. No doubt there has been some negligence on the part of the bank in not properly verifying the export documents and recommending to the RBI for allowing remittance to the exporter under the Rupee-Rouble Trade Agreement. However, such omissions on the part of the bank do not fall within the scope of Section 113(i) and consequently no penalty is imposable on the appellant-bank under Section 114 - penalty cannot be imposed on the Bank Manager for not taking due caution before opening current account in the name of proprietor and company will not attract penalty under Section 114 - appellant-bank has made out a strong case in their favour for grant of stay - Stay granted.
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2014 (1) TMI 1220
Valuation goods - Import of palm fatty acid distillate - Mis declaration of goods as “mixed acid oil or palm fatty acid or mixed fatty acid” - Confiscation of goods - Held that:- from the perusal of the show cause notice, it is clear that the statement of Shri Rakesh Kumar, the indenter of the foreign supplier has been relied upon as evidence of under-invoicing against the appellants as in this statement he had implicated the appellants by stating that while it is palm fatty acid distillate, which was being imported, the same in order misdeclared its value was being mis-declaring as “mixed fatty acid” and that as against prevailing price of 340 U.S. $ per M.T. for palm fatty acid distillate, the suppliers were declaring the price as 180 U.S. $ per M.T. and the balance was being paid to the suppliers by the importers in advance through unofficial channels - since the appellant had given reasons for seeking cross- examination of Shri Rakesh Kumar, the same cannot be denied just on the ground that he is a co-noticee and cannot be compelled to give evidence which will incriminate himself - Decided in favour of assessee.
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2014 (1) TMI 1219
Rectification of Mistake - Grant of interest - Refund claim sanctioned within 3 months - Held that:- Tribunal has clearly observed that the Tribunal has passed the order in favour of the appellant on 4-7-2002. Therefore, in terms of Board’s Circular the appellants are entitled for the interest on delayed refund after three months from the date of issue of the order. Therefore, there is no question for the appellant to file any refund claim application in pursuant to the order passed by this Tribunal as no stay has been obtained by the Revenue against the said order from any higher Courts - applicants are entitled for refund within three months from 4-7-2002. Therefore, if there is any delay in payment of refund, interest is payable. From the above said Circular there is no requirement for filing an application for the refund claim - As it is only a ROM application wherein the findings of this Tribunal cannot be challenged by way of this ROM application. Therefore, the contention raised by the learned A.R. is totally mis-conceived, hence rejected - as per Board Circular dated 8-12-2004, the appellant are entitled for interest on pre-deposit after three months from the date of order passed by this Tribunal - Rectification denied.
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2014 (1) TMI 1218
Confiscation of goods - Imposition of penalty - Goods confiscated to be smuggled from other country - Held that:- lower authorities have absolutely confiscated the iron drum sheets on the findings that the same stands smuggled from Nepal - The absence of any generator of such iron drum sheets in that area may lead to some doubt of the goods having been smuggled from Nepal but in the absence of any evidence, such doubt cannot be converted into a judicial order. We have to keep in mind that iron drum sheets are not notified items under the provisions of Section 123 of the Customs Act. In that case the onus to prove, beyond doubt, by production of sufficient positive and tangible evidence showing illegal entry of the goods into the country, lies very heavily on the Revenue - apart from a hear-say evidence, there is no other evidence on record indicating movement of goods from Nepal to India. In the absence of such a evidence, the impugned order cannot be upheld. Accordingly, I set aside the absolute confiscation of iron drum sheets along with setting aside of penalties - Decided in favour of assessee.
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Corporate Laws
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2014 (1) TMI 1217
Trademark infringement - Use of plaintiff's registered trademark 'REAL' - Whether an action for infringement is made out by the Plaintiff, prima facie - Held that:- Plaintiff has applied for rectification of the mark of Defendant No.1 and the proceedings arising therefrom is pending before the Intellectual Property Appellate Board (ÍPAB’). Therefore, it is possible for the Plaintiff to contend that the question whether Section 28 (3) of the TM Act precludes the Plaintiff from seeking to restrain Defendant No.1 from infringing its mark will have to await the decision of the IPAB on the Plaintiff’s challenge to the validity of the registration in favour of Defendant No.1. That stage is yet to be reached. Therefore, the fact that Defendant No.1 is a registered proprietor of an identical mark in the same class cannot preclude the Plaintiff from seeking to restrain Defendant No.1 from using the mark ‘REAL.’ Therefore, it is not using the whole mark for which it has registration, but only a part of it. Also, Defendant No.1 has recently changed the writing style of the word ‘REAL’ on the label of its products thus bringing it closer to the Plaintiff’s manner of writing ‘REAL’. The defence under Section 28 (3) of the TM Act would be available only if Defendant No.1 was using the entire mark for which it holds registration and not only a part of it - The invoices and other material produced by the Plaintiff show prima facie that it has been extensively marketing its ‘REAL’ juices throughout India for several years. The volume of sales is considerably higher than the products of Defendant No.1 in the State of Goa. The Plaintiff has been prima facie able to show that its products sold under the REAL label enjoy reputation and goodwill. Permitting Defendant No.1 to use the mark ‘REAL’ at this stage outside Goa will adversely impact the distinctiveness, reputation and goodwill enjoyed and will dilute the mark ‘REAL’ registered in favour of the Plaintiff. In terms of Section 29(2) read with Section 29(3) of the TM Act, identical marks in relation to cognate and allied goods, and in this case, similar goods, viz., Soda, aerated drinks and fruit juices of Defendant No.1 and fruit juices of the Plaintiff, are bound to cause confusion in the mind of a consumer of average intelligence. The manner of writing ‘REAL’ by Defendant No.1 brings it closer to the Plaintiff’s mark. It is clearly different from the style in which “REAL’ is written in the marks REAL MANIK and REAL SODA for which Defendant No.1 holds a registration. There is no satisfactory explanation as to why it chose to do so. In the circumstances, there is prima facie merit in the contention of the Plaintiff that the adoption of the aforementioned manner of writing ‘REAL’ by Defendant No.1 cannot be said to be honest - Decided in favour of Petitioner.
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FEMA
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2014 (1) TMI 1223
Failure to furnish Exchange Control Copy of the Bill of Entry in the bank - Contravention of provisions of FERA - Penalty u/s 50 - Tribunal dismissed appeal for bar of limitation - Whether the appeals before this Court are barred by limitation prescribed in Section 35 of FEMA or not - Held that:- The aforesaid Section prescribes a period of 60 days from the communication of the decision of the Appellate Tribunal for filing an appeal to this Court, but this Court can condone the delay in filing an appeal for a further period not exceeding 60 days if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the prescribed period - if an appeal preferred by the appellants before the Tribunal, it was required to be dealt with under Section 19 of the FEMA and, therefore, the Appellate Tribunal could entertain the appeals, even after the expiry of 45 days from the receipt of the order of the adjudicating authority if it was satisfied that there was sufficient cause for not filing the appeal within the aforesaid 45 days’ period. There is no upper cap on the delay which could be condoned by the Appellate Tribunal, in the event of its being satisfied that there was sufficient cause for not filing the appeal within the prescribed period. It can hardly be disputed that the Tribunal ought to have considered the application of the appellants for condonation of delay in filing the appeals on merits instead of dismissing them on the ground that the delay beyond 45 days from the prescribed period could not be condoned by it - impugned order dated 5.2.2007 passed by the Appellate Tribunal is hereby set aside and the matter is remanded back to the Tribunal for deciding the application for condonation of delay on merit and in case the delay in filing the appeals is condoned, the said Tribunal shall also decide the appeals on merit - Decided in favour of assessee.
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Service Tax
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2014 (1) TMI 1254
Waiver of pre-deposit of service tax - Commercial or Industrial Construction Service - Repair and renovation of office premises/commercial premises - Benefit of Notification No.1/2006-ST dated 1.3.2006 - Held that:- applicants are undertaking renovation and alteration of the existing building such as banks and call centres. There is no evidence on record that the applicants have undertaken any activity of completion or finishing as provided under clause (c) of the scope of commercial construction service. The activity undertaken by the applicants comes under clause (d) of commercial construction service. Therefore, prima facie, the applicants have made out a strong case in their favour. Therefore, pre-deposit of the dues adjudged is waived and recovery thereof is stayed during the pendency of the appeal - Stay granted.
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2014 (1) TMI 1253
Demand of service tax - Business Management Consultancy Services - Held that:- what is envisaged from a consultant is advisory service and not the actual performance of the management function. In the present case, the appellant was in-charge of the operation of the factory and thus was performing the management function - where the agreement conferred operational autonomy and responsibility on the contracted party, the relationship is not one of consultancy - Following decision of Basti Sugar Mills Co Ltd vs CCE, Allahaba [2007 (4) TMI 25 - CESTAT,NEW DELHI] - Decided in favour of assessee.
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2014 (1) TMI 1252
Commercial Coaching and Training Institutes - Period of service is before, 1.7.2003 - Held that:- as the taxable service is provided after 1.7.2003 and the payments were received in respect of the taxable service which is provided after 1.7.2003 - service tax liability arises on which the taxable service is provided and not on the date of consideration amount is received - Following decision of Sudesh Sharma vs. CCE. Ludhiana [2009 (9) TMI 529 - CESTAT, NEW DELHI] - Decided against assessee. Statutory interest is to be paid by the assessee when the taxable amount is not paid by due date. Penalty u/s 76, 77 & 78 - Applicability of Section 80 - Held that:- service tax is introduced in respect of Coaching and Commercial Institutes with effect from 1.7.2003 and the demand is for the initial period and the assessee had not paid the service tax on the belief that the consideration amounts were received prior to 1.7.2003. As the period relates to initial period, we find that it is not a case for imposition of any penalty as per Section 80 of the Finance Act, 1994 wherein it is provided that notwithstanding anything contained in the provisions of section 76, section 77 1 [or section 78] no penalty shall be imposable on the assessee for any failure referred to in the said provisions, if the assessee proves that there was reasonable cause for the said failure - Decided in favour of assessee.
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2014 (1) TMI 1251
Valuation of service - Industrial Construction Service - Benefit of Notification No. 15/2004-ST dated 10.9.2004 - Value of free supply material - Held that:- value of free supplies by service recipient do not comprise the gross amount charged under notification NO.15/2004-ST, including the Explanation thereto as introduced by Notification NO.4/2005-ST - Following decision of M/s Bhayana Builders (P) Ltd. & Others Versus CST, Delhi & Others. [2013 (9) TMI 294 - CESTAT NEW DELHI] - Decided against Revenue.
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2014 (1) TMI 1250
Selling Agency Agreements - Clearing and Forwarding Agent - Adjudicating authority dropped the proceedings - Held that:- Applicant had not undertaken the activity warehousing the goods or receiving the goods from the factory or premises of M/s. Raymond Ltd. In these circumstances, we find no infirmity in the impugned order whereby the adjudicating authority held that respondents are not undertaking any activity which falls under the name and scope of C&F service - Decided against Revenue.
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2014 (1) TMI 1249
Waiver of pre-deposit of Service Tax - Penalty u/s 78 - Business Auxiliary Service - Held that:- Applicant are engaged in the production and supply of the coal; and sizing of coal is one of the activities of their integrated process in production and supply of the coal. They are required to supply coal of the size not exceeding 200 mm. to 250 mm., for which they undertake the activity of sizing of coal. Prima facie, we find that the element of cost of sizing of coal is included in the assessable value for payment of sales tax, which is also revealed from the sales tax receipt. The fact that the activity was brought under the Central Excise net with effect from March, 2011, also is not in dispute. Prima facie, we find that sizing of coal is part of the integrated process of mining and sale of coal. In these circumstances, we find that the Applicant are able to make out a prima facie case for total waiver of the pre-deposit - Stay granted.
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2014 (1) TMI 1248
Order beyond the scope of Show Cause Notice (SCN) - Stock Broker Services - Stock Exchange Service - Held that:- As the show-cause notices were issued demanding duty as provider of Stock Broking Services, whereas the adjudicating authority has confirmed the demand as provider of Stock Exchange Service, which is a different and distinct service. In these circumstances, we find merit in the contention of the appellant that the impugned order is beyond the scope of show-cause notice - Decided in favour of assessee.
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2014 (1) TMI 1247
Waiver of pre deposit - Imposition of equal penalty u/s 78 - Availment of CENVAT Credit - Credit on input services used in their captive mines - Services in relation to the manufacture of sponge iron - Held that:- Rule 3(1) of Cenvat Credit Rules, 2004, does not restrict the receipt of input services at the factory premises of the assessee like inputs and capital goods to be eligible for availment of credit on the same. In these circumstances, I find that the applicants are able to make out a prima facie case for total waiver of pre-deposit of Service tax and penalties. Accordingly, the requirement of pre-deposit of all dues adjudged is waived and its recovery is stayed during pendency of appeal - Stay granted.
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2014 (1) TMI 1246
Waiver of pre-deposit of Service Tax - Imposition of equivalent penalty - Site formation service - Held that:- site formation activity performed by the applicant, is only incidental to their main service, i.e. mining service and undisputedly, the contract is a composite contract, which cannot be vivisected. We have gone through the definition of site formation service. We find that the activity carried out by the applicant, does not fall under the site formation service - Conditional stay granted.
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2014 (1) TMI 1245
Works Contract - Availment of CENVAT Credit - Held that:- appellant has reversed an amount of Rs. 75,13,839/- and the only balance amount stands ordered to be recovered. Further we, prima facie, hold that the appellant may be eligible for credit on some of the services and therefore, the amount already reversed by them should be treated as sufficient for the purpose of hearing the appeal - there shall be waiver of pre-deposit of the balance of dues as per the impugned order and stay of recovery thereof till the disposal of the appeal - Stay granted.
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Central Excise
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2014 (1) TMI 1216
Rejection of the rebate claim - Export of quilt cover - Revenue rejected rebate claim holding that list of the products appended to notification issued under Rule 191A, the entry at serial No.17 was only “Cotton Quilts” and there was no entry of “Quilt Cover” - Held that:- what has been exported is scourd quilt cover as described in Form AR5s on which refund has been claimed. The shipping Bills relevant to the rebate claims in question described the goods as 100% cotton Fabrics Millmade scoured feather proof quilt covers double stitched. In the relevant contract copy produced by the assessee, the description of the goods exported reads as 100% Cotton Made in India Scoured Feather Proof Silicon Finish Piped Seam Quilt Shells”. At the time of personal hearing I have been shown a sample of Quilt Shell which had a small opening at one side through which the feathers or cotton can be pumped in the said shell. There was no stuffing in the said Quilt Shell/Cover. Thus it is abundantly clear that what has been exported is not the Quilt (Rajais) as it is known in the trade but Quilt Cover/Shell without any stuffing therein. The party themselves have admitted that there is no stuffing inside the said so called shell/cover. The Quilt/Rajais in India or abroad is known as such only with stuffings of feather/cotton/polyester inside two layers of fabrics stitched together from all sides. Quilt shell/cover cannot be called as quilt until it is stuffed with the stuffing materials which can be feather/cotton/polyester fibre. Description Quilt (Rajais) therefore does not cover Quilt Shell/Cover which is a component of Quilt. Since the rebate is allowed only in respect of Quilt (Rajais) only, and not on Quilt Shell/Cover, party is not entitled to rebate in terms of Rule 191A read with Notification/Declaration issued by Central Board of Excise and Customs in this regard. There is no other Notification/Declaration of C.B.E.C. under which the rebate claim under Rule 191A could be allowed to Quilt Shell/Cover - Decided against assessee.
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2014 (1) TMI 1215
Rectification of mistake - Bar of limitation - Service of order on an unauthorised representative - Held that:- it is evident that Vijay Kumar Agarwal was infact an authorised signatory of the appellant-assessee. The submission that it is only a legal practitioner who can be an authorised representative is misconceived. Section 35-Q (1) provides that any person who is entitled or required to appear before a Central Excise Officer or an Appellate Tribunal in connection with any proceedings under the Act, otherwise than when required to appear personally for examination on oath or affirmation, may appear through an authorised representative. Sub-section (2) defines the expression 'authorised representative' for the purpose of sub-section (1) as inter alia being a regular employee. Section 35-Q, which has been relied upon by the appellant would, therefore, not carry its case any further. In the present case, service was effected on an authorised representative and the order of the Tribunal does not suffer from any error - The Commissioner (Appeals) was correct in holding that he could not have condoned a delay beyond the period of thirty days under the proviso to Section 35(1) - Following decision of M/s. Singh Enterprises Vs. Commissioner of Central Excise, Jamshedpur & Ors. [2007 (12) TMI 11 - SUPREME COURT OF INDIA] - Decided against assessee.
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2014 (1) TMI 1214
Rectification of mistake - Held that:- An authorised signatory who has received an adjudication order on behalf of the Company, which is an assessee, may not necessarily be an authorised signatory to receive a copy of the order on behalf of the Director. Since this aspect has not been considered in the order of the Tribunal, we are of the view that the appropriate course of action would be to set aside the impugned order of the Tribunal only in so far as it relates to the appellant. We clarify, by way of abundant caution, that the present order will not affect the order of the Tribunal on the rectification application in relation to the assessee Company against which an appeal has been dismissed by an order passed separately - Application restored.
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2014 (1) TMI 1213
Confiscation and penalty under Rule 173Q - Mens Rea - Clandestine removal of goods - Whether the provisions of Rule 173Q of the Central Excise Rules, 1944 is attracted in the absence of any intention to waive the payment of central excise duty and/or in absence of removal of any excisable goods or any entry of any excisable goods in RG-1 Register - Held that:- show cause notice was issued to the appellant not only for holding of excess stock with the intention to clear the goods clandestinely and evade payment of central excise duty but also for deliberately mis-stating the production figures in RG-1 Register and filing of returns giving false production figures. It cannot, therefore, be contended that the show cause notice was issued only for violation of Rules 53 and 54 - Rule 173Q deals with confiscation and penalty and Rule 209 deals with penalty provision. Rule 173Q – confiscation and penalty – arise under breach of duty provided in the Central Excise Act and Central Excise Rules, which creates strict liability without proof of mens rea. As per Rule 173G(4)(a), every assessee to maintain such accounts, as the Commissioner may from time to time require of the production. Rule 53 deals with daily stock account and Rule 54 deals with monthly returns. Non-maintaining of accounts and non-accounting of the manufactured goods in the statutory records attracts the provision of Rule 173Q. Unless there is something in the language of the statute indicating the need to establish the element of mens rea, it is generally sufficient to show that a default to comply with the Rules has occurred attracting confiscation and penal provisions. There is nothing in Rule 173Q or Rule 209, which required that mens rea/intention need to be established - The Legislature used the conjunction “or” in Rule 173Q for Rule 173Q(1)(a) and Rule 173Q(1)(d), the Court cannot read into Rule 173Q(1)(b) that there should be the intention to evade payment of excise duty - mens rea of the appellant to remove the manufactured goods with intention to evade payment is not essential - appellant had not accounted for the manufactured goods and had not made entries in RG-1 Register. Non-accounting of manufactured goods in the statutory records falls within the ambit of Rules 173Q(1)(b) attracting provision of confiscation and penalty - Tribunal had taken a lenient view reducing the redemption fine to ₹ 3 lakhs and also penalty to ₹ 3 lakhs - Decided against assessee.
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2014 (1) TMI 1212
Penalty u/s 11AC - Mandatory or directory - Held that:- penalty provision under section 11AC and also Rule 96-ZQ and 96ZO of Central Excise Rules,1944 as to whether the penalty provision is mandatory or discretionary, rejecting the plea that Rules 96ZQ and 96ZO have a concept of discretion inbuilt - reference was made for determination as to whether Section 11AC of the Central Excise Act, 1944 inserted by the Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mens rea as an essential ingredient and whether there is scope of levying penalty below the prescribed minimum - Observing that the levy of penalty is a mandatory penalty and there is no scope for any discretion and rejecting the plea that Rules 96ZQ and 96ZO have a concept of discretion in-built - The matter is remitted to CEGAT for reconsidering the matter afresh in the light of the law laid down by the Hon’ble Supreme Court in the case of Dharamendra Textile Processors & Ors. reported in (2007 (7) TMI 307 - SUPREME COURT OF INDIA) and further clarified in the case of Union of India Vs. Rajasthan Spinning & Weaving Mills reported in (2009 (5) TMI 15 - SUPREME COURT OF INDIA) - Decided in favour of Revenue.
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2014 (1) TMI 1211
Period of limitation for filing export proof under Rule 19 - Applicant had cleared the goods for export viz. Chlorinated Paraffin wax vide ARE-1 under letter of undertaking (LUT) under Rule 19 of Central Excise Rules, 2002 – Held that:- There is no time limit provided either in Rule 19 of the Central Excise Rules, 2002 or in the Notification dated 26-6-2001 referred to by the revisional authority in the impugned order. Such Notification, which is issued in exercise of powers under Rule 19 of the Central Excise Rules, 2002 lays down the procedure and condition on which the goods can be so removed. Condition No. (ii) in para-1 of the Notification requires the manufacturer to export such goods within six months from the date of which they were cleared for export from the factory of the production or the warehouse, etc. This condition does not provide for filing of original documents within any time limit. This is not to mean that no time limit is fixed would permit a party to produce such documents at any time howsoever late. In the present case, such documents were seized by the Customs Authority. Therefore, the petitioners could not produce the same before the adjudicating authority and the higher authority, till the documents were released in June-2012 as noted above. Therefore, no fault can be attached on the petitioners. Before the Appellate as well as Revisional Authorities also the petitioners had taken a stand that such documents are in the custody of the Customs Officer and therefore, could be produced - The proceedings are placed back before the adjudicating authority - Decided in favour of assessee.
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2014 (1) TMI 1210
Denial of refund claim - Invocation of extended period of limitation - Whether the extended period of time can be invoked – Held that:- Since the finding of CESTAT that the respondent was adding DEP in duty paid procured ENA which was within the knowledge of the Excise is a finding of fact, leave was sought by the appellant to amend the said Excise appeals. Despite several adjournments being given the said amendment could not be carried out since the relevant files could not be traced - Since the relevant material could not be produced on record, it is now not open for the appellant to challenge the finding of fact recorded by the CESTAT and as such, in our view, therefore, there is no substantial question of law involved in both the appeals - Decided against Revenue.
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2014 (1) TMI 1209
Availment of MODVAT Credit - Whether Rule 57G, sub-rule (5) of Central Excise Rules can be applied to deny the balance amount of Modvat credit when portion of the credit has already been availed by the appellant against the invoices - Held that:- The present case is not a case of taking credit beyond six months, but of taking balance credit amount, which the appellant wrongly availed only 50%. Since the input (furnace oil) was entered in Part I and since the appellant has already availed 50% of the Modvat credit, for availing of the balance 50% Modvat, six months time cannot be computed as contemplated by Rule 57G, sub-rule (5). The authorities did not keep in view that availing of balance 50% was only rectification of the earlier inadvertent mistake committed by the appellant and the order of the Tribunal cannot be sustained - Decided against assessee.
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CST, VAT & Sales Tax
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2014 (1) TMI 1256
Waiver of pre deposit - 50% amount already deposited by appellant - Amount directed by Court also deposited by appellant - Held that:- they have produced a certificate issued by the Commercial Tax Officer, Thiruchendur, dated 23.12.2013 which was given subsequent to the filing of the Writ Petitions under which the department has accepted that they have already collected a sum of Rs.3,83,09,388/- in respect of the ineligible ITC. This is for the year 2009-2010. It is also brought to the notice of this Court that subsequent to the passing of the impugned orders, the department have attached the bank account of the petitioner. In view of the order now passed and the petitioner is permitted to file appeal and they have already deposited a sum of Rs.50,00,000/- and a sum of Rs.17,73,707/- was appropriated from the bank account, the order of attachment of bank account will be raised - Decided in favour of assessee.
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2014 (1) TMI 1255
Waiver of pre deposit - conduct of tribunal in handling stay application - Held that:- What has been done by Tribunal in the present case is something which is not contemplated in the statute. As a matter of fact, I can understand if Tribunal would have said, passing final order under clause (b) that instead of one-third, some lessor amount must be deposited so as to satisfy requirement of clause (a), but for this purpose also Tribunal is required to record special and adequate reasons since it amounts to partial waiver or relaxation of requirement of clause (a) but statute does not authorise Tribunal that even before considering application of appellant- assessee, for exercise of power of waiver or relaxation, it would require assessee to deposit some amount. This part of the order of Tribunal has resulted in doing something which is not provided in the statute. In my view, to this extent the impugned order need be modified. The Tribunal must pass final order on the stay application of petitioner considering whether appellant is entitled for any waiver or relaxation under second proviso to Section 57(9) of Act, 2008 with regard to compliance of requirement of clause (a) regarding payment of one third of disputed amount or not - Decided partly in favour of assessee.
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2014 (1) TMI 1208
Release of vehicle in connection with the offence under the Delhi Excise Act - Metropolitan Magistrate, Rohini refused to release the vehicle - High Court released vehicle using power u/s 451 - Held that:- the general provision of Section 451 of the Code with regard to the custody and disposal of the property or for that matter by destruction, confiscation or delivery to any person entitled to possession thereof under Section 452 of the Code or that of Section 457 authorising a Magistrate to make an order for disposal of property, if seized by an officer and not produced before a criminal court during an inquiry or trial, however, has to yield where a statute makes a special provision with regard to its confiscation and disposal. In the present case, the Legislature has used a non-obstante clause not only in Section 59 but also in Section 61 of the Act. As is well settled, a non-obstante clause is a legislative device to give effect to the enacting part of the section in case of conflict over the provisions mentioned in the non-obstante clause. Hence, Section 451, 452 and 457 of the Code must yield to the provisions of the Act and there is no escape from the conclusion that the Magistrate or for that matter the High Court, while dealing with the case of seizure of vehicle under the Act, has any power to pass an order dealing with the interim custody of the vehicle on security or its release thereof. The High Court was in error in taking a view to the contrary and in setting aside the orders passed by the Magistrate and the Sessions Judge on that basis - impugned order of the High Court is found to be vulnerable and, therefore, the same cannot be allowed to stand - High Court exceeded in its jurisdiction in directing for release of the vehicle on security - Decided in favour of Revenue.
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2014 (1) TMI 1207
Suppression of facts - Kerala Abkari Act - In the inspection conducted in the business premises of the appellant, it was found that there was a shortage of 620.95 litres of Government sealed arrack and an excess of 620.95 litres of unsealed arrack in the bottles found in the business premises of the appellant/assessee - Imposition of penalty and six tines differential duty - High Court reduced penalty and differential duty - Held that:- commissioner (appeal) hold that, apart from the stock variation found in the inspection, no actual case of suppression of unaccounted arrack was found - assessment is modified by limiting the addition by three times from six times, accordingly, turn-over quantified of the appellant/assessee and also the tax liability both on the Sales Tax as well as on the turn-over tax - Following decision of A.Raghavamma vs. A. Chenavamma [1963 (4) TMI 67 - SUPREME COURT] - order of commissioner (Appeals) sustained by the tribunal and High Court. None of these authorities have committed any error whatsoever, which would call for our interference. - Decided against assessee.
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Indian Laws
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2014 (1) TMI 1244
Right to information - Incomplete and incorrect information in reply - Held that:- A bare reading of the RTI application inclusive of all the paras leaves no matter of doubt that the appellant was seeking information about only one enquiry report under reference. Shri Victor James’ plea that contradictory information happened to be supplied in response to paras (A) and (F) of the RTI application due to possibility of the appellant seeking information on two distinct enquires appears to be an after thought and can not be accepted. It also appears to me that non-supply of copy of the enquiry report under reference has caused genuine detriment to the appellant inasmuch as he cannot tell the Bar that he has been exonerated of the allegations made against him by the Bangalore Bar Association. I am, therefore, not satisfied with the explanation given by the CPIO - penalty should be imposed on the CPIO - Decided in favour of appellant.
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