TMI Tax Updates - e-Newsletter
January 29, 2015

Case Laws in this Newsletter:

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

Articles

1. Renting of a building for a hotel, is not liable to Service tax under 'Renting of immovable property’ services

   By: Bimal jain

News

1. RBI Reference Rate for US $

2. Amended Exchange Rates of Foreign Currency Notified

Notifications

Customs

1. 13/2015 - dated 27-1-2015 - Cus (NT)

Amends Notification No. 09/2015-Customs (N.T.), dated the 15th January, 2015.

Income Tax

2. 09/2015 - dated 21-1-2015 - IT

U/S 80C of the Income-Tax Act, 1961 – Notified plan 'Sukanya Samriddhi Account'

3. 08/2015 - dated 20-1-2015 - IT

Section 10(46) of the Income-tax Act, 1961 – Central Government notifies “National Council of Science Museums” as an autonomous body in respect of specified income arising to the Council

4. 07/2015 - dated 20-1-2015 - IT

Section 10(46) of the Income-tax Act, 1961 – Central Government notifies to “Karnataka Livestock Development Agency” constituted by Government of Karnataka in respect of certain specified income arising to the said body

5. 06/2015 - dated 20-1-2015 - IT

Section 10(46) of the Income-tax Act, 1961 – Central Government notifies “Gujarat State Council for Blood Transfusion” a trust constituted by the Government of Gujarat, in respect of the certain specified income arising to the said trust

Circulars / Instructions / Orders

FEMA

1. 67 - dated 28-1-2015

Anti-Money Laundering (AML) standards/Combating the Financing of Terrorism (CFT) Standards - Cross Border Inward Remittance under Money Transfer Service Scheme

2. 68 - dated 28-1-2015

Anti-Money Laundering (AML) standards/Combating the Financing of Terrorism (CFT) Standards - Money changing activities

Highlights / Catch Notes

Income Tax

• "Installed" in Income Tax Act 32A(1) Means More Than Fixed; Includes Inducting or Positioning for Use.

  Case-Laws - HC : Investment allowance - "The word "installed" occurring in section 32A(1) would not necessarily mean that it should be fixed in a position, but the word is also used in the sense of "induct" or "introduce" or "placing an apparatus in position for service or use" - HC
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• Deferred Expenditure Misleads Financial Health; Not Recognized by Companies or Income Tax Acts.

  Case-Laws - HC : MAT computation - Neither under the Companies Act nor under the Income Tax Act, this concept of deferred expenditure is recognized. That is a pathology used by the chartered accountants to show to the shareholders that the company has made profit though it has not earned profits. It is nothing but a window dressing and the authority should not be mislead or guided by this balance sheet which is prepared to satisfy the shareholders. - HC
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• Assessing Taxability of Income Accrued or Arising in India u/ss 5(2)(b) and 9(1) of the Income Tax Act.

  Case-Laws - AT : Payments “accrued or arise” in India - taxability need to be determined u/s 5(2)(b) OR u/s 9(1) - there is no inherent contradiction between both the sections - AT
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• Depreciation Claim Valid Even if Asset Registered Elsewhere, Provided De Facto Ownership and Business Use Exist.

  Case-Laws - AT : Depreciation - ownership - the technicality of an asset being registered in the name of the asset can not come in the way of an assessee’s eligibility for depreciation as long as such an asset is de facto owned by the assessee and is used for the purposes of the business. - AT
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• Taxpayer's Claim to Exclude Entire Sale Consideration from Capital Gains Tax Rejected.

  Case-Laws - AT : Assessee's claim that since the entire sale consideration was utilised towards discharge of the debt, the same cannot be chargeable to capital gain is not acceptable. - AT
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• Tax Revision Orders Require Fair Notice and Opportunity to Respond; Cannot Change Grounds Arbitrarily.

  Case-Laws - AT : Revision order - change of heart - a revision order can only be passed on the ground on which the assessee has been given reasonable opportunity of being heard, and as it is not open to Commissioner to set out one reason for revising the order but actually revise the order on some other ground. - AT
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• CIT Exceeded Authority by Directing AO to Deny Section 10B Claim Without Investigation; Revision Upheld for Limited Review.

  Case-Laws - AT : Revision u/s 263 upheld for a limited purpose that the claim of deduction u/s.10B was allowed by AO without proper investigation. - But simultaneously, CIT has exceeded the jurisdiction by unilaterally directing the AO to pass a fresh order by disallowing the claim u/s.10B - AT
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• Court Disallows Foreign Travel Expenses for Family Due to Lack of Detailed Documentation.

  Case-Laws - AT : Foreign travelling expenses - assessee had not furnished details of expenses of wife and children - proportionate disallowance confirmed - AT
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• Revision u/s 263 Invalid: Prior TPO Ruling on Non-Genuine Transactions Doesn't Affect Previous Year's Assessment Order.

  Case-Laws - AT : Revision u/s 263 - only because subsequently TPO in AY 2007-08 held the transaction to be not genuine on that basis alone assessment order cannot be held to be erroneous and prejudicial to the interests of revenue for the AY 2006-07 - AT
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Customs

• EOU Debonding: Duty on Raw Materials and Depreciated Capital Goods, Excluding Capitalized Spare Parts Value.

  Case-Laws - AT : 100% EOU - At the time of debonding, the duty is payable on the value of the duty free raw materials and the depreciated value of the imported or indigenously procured capital goods and for this purpose, the value of the capital goods cannot be enhanced by the value of the spare parts used from time to time, even if the same have been capitalized. - AT
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• Court Grants Stay on Import Classification Dispute Over Ship Design Materials and Accompanying CD Under CETH 85238090.

  Case-Laws - AT : Import of designs and drawings for manufacturing of ship - department was of the view that the drawings and designs cannot be classified under Chapter 49 inasmuch as there is a CD accompanying the drawings and designs and hence, the goods should be assessed under CETH 85238090 as recorded media - stay granted - AT
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• High Court Rules Battery-Operated Tricycle Without Battery Is Not a Motor Vehicle Under Import Classification.

  Case-Laws - HC : Import of all the components of a battery operated tricycle, except its battery, packed together - Whether this can be called as motor vehicle - Held no - HC
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Service Tax

• Cenvat Credit: Online Data Services Qualify as "Input Service" Under Broad "Business" Definition in Fiscal Statutes.

  Case-Laws - AT : Cenvat Credit - Online Data Retrieval or Access - confirming to the expression 'activities relating to business' as contained in the definition clause of 'input service'; as the word 'business' is one of wide import and in fiscal statutes, it must be construed in a broad rather than a restricted sense. - AT
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• Clarification Sought on Scope of "Any Service Provided" by AAI: Taxable Services or All Services u/s 12?

  Case-Laws - AT : Airport services - whether the term "any service provided" covers only the taxable services" or it covers any service provided by AAI or person authorized by it in the Airport/ civil enclaves, or its scope is limited to the services with the AAI is expected to provide under Section 12 of the Airports Authority of India Act - AT
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• Court Dismisses Demand: Payments for Technical Know-How Not Fully Examined, Misclassified as Intellectual Property Rights Services.

  Case-Laws - AT : Intellectual property rights service - Payment of royalty on account of technical know-how charges - Commissioner has failed to go into these aspects in detail and has clubbed the entire service as Intellectual Property Right service (IPR) - demand set aside as time barred - AT
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• High Court Rules Billing Activity by Chartered Accountant Not Subject to Service Tax Levy.

  Case-Laws - HC : CA services - Whether the billing activity calculation undertaken at the behest of Chartered Accountant amounts to practicing of registered Chartered Accountancy in order to levy Service Tax - Held No - HC
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Central Excise

• Interest and Penalty Waived Due to Lack of Evidence in Duty Payment Investigation; Only Shortage Noted.

  Case-Laws - AT : Imposition of penalty where duty has been paid during investigation - from the records it is not coming out that the charge of clandestine removal has been proved with any supportive evidence except the goods were found short during the course of investigation - interest and penalty waived - AT
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• Appellant Not Liable for Duty on Supplementary Invoice Due to Approved Rebate Claim for Completed Export.

  Case-Laws - AT : Appellant is not required to pay duty on the supplementary invoice raised in the case of completed export as it had exported under claim of rebate, which had been allowed on completion of the export. - AT
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• Small-Scale Industry Wins Export Benefit with Uncontested Documentation, Including H-Form and Sales Tax Assessment Order.

  Case-Laws - AT : Proof of export - procedural relaxation for SSI units - Revenue has not disputed that the appellant placed sufficient material in the nature of H-Form or ST-XXII Form, Sales Tax Assessment Order as proof of export. - Benefit of export allowed - AT
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• Exemption Granted Despite Discrepancy Between Contractor's Name on Certificate and Invoices in Notification No. 108/95-C.E.

  Case-Laws - AT : Benefit of exemption Notification No. 108/95-C.E. - while an exemption certificate has been produced, the same mentions the contractor’s name as “M/s. K. Rama Krishna, while the goods as per the invoices issued have been supplied to M/s. Nagar Engineering Co., Jaipur - exemption allowed - AT
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• MRP Consistency Leads to Revenue Neutrality: Duty Equals Countervailing Duty for Appellant Under Customs and Central Excise.

  Case-Laws - AT : MRP declared before the Customs or before the Central Excise is the same therefore, the duty payable on the said goods is equal to the CVD paid by the appellant. Therefore, the situation is of Revenue neutrality - AT
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• Businesses Can Claim Cenvat Credit for Inputs Used in Repairing u/r 16 of Central Excise Laws.

  Case-Laws - AT : Re-manufacture and re-making of tubes - There is no provisions in Rule 16 that Cenvat credit in respect of the inputs used in the process of repairing/refining would not be available - AT
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• Refund of Unutilized Cenvat Credit Denied Due to Rate Disparity and Drawback/Rebate Claims.

  Case-Laws - AT : Refund of unutilized Cenvat/Modvat Credit - The accumulation of Cenvat credit has not arisen because of exports but because of difference in rates of duty on inputs and the final products - refund cannot be allowed when the manufacturer or provider of output service avails of drawback or claimed rebate of duty - AT
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VAT

• Tribunal Rules Airtime Charges and License Fees Not Part of Sale Price for Activated Pagers u/s 2(29) Bombay Sales Tax Act.

  Case-Laws - HC : Whether the Tribunal was justified in holding that the “Airtime charges” and “License fees” charged under an contract of selling activated pager do not form a part of sale price within the meaning of Section 2(29) of the Bombay Sales Tax Act, 1959 - Held Yes - HC
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Case Laws:

• Income Tax

• 2015 (1) TMI 1025
  Disallowance of obsolescence charges in respect of certain nonmoving imported spare parts - Tribunal allowed deduction - Held that:- So far as question is concerned, the Hon ble Supreme Court in case of Commissioner of Income-tax v. Alfa Laval (India) Ltd., [2007 (11) TMI 281 - SUPREME Court] has held that (i) there was no undervaluation of stock, where the assessee had valued its obsolete stock at 10 per cent and had sold it in the next year at less than that value and (ii) the amount written back in the profit and loss account by way of adjustment on a recomputation of the depreciation on the basis of a circular of the Company Law Board could not be reduced from the profit eligible under section 32AB, and (iii) interest from customers and sales tax set off received by the assessee, being profits of the business under the head "Profits and gains of business or profession" could not be excluded while calculating the deduction under section 80HHC. An appeal was preferred to the Supreme Court by the Department against the said decision. The said appeal was dismissed by the Supreme Court leaving the question of law open. - Decided in favour of assessee. Deduction in respect of guest house disallowed - ITAT allowed the deduction - Held that:- While the two expressions, premises and buildings and residential accommodation including any accommodation in the nature of guest house can be similarly interpreted, a distinction has been sought to be introduced for the purposes of Section 37 by specifying the nature of building to be a guest house. In our view, the intention of the Legislature appears to be clear and unambiguous and was intended to exclude the expenses towards rents, repairs and also maintenance of premises/accommodation used for the purposes of a guest house of the nature indicated in Subsection (4) of Section 37. When the language of a statue is clear and unambiguous, the courts are to interpret the same in its literal sense and not to give it a meaning which would cause violence to the provisions of the statute. If the Legislature had intended that deduction would be allowable in respect of all types of buildings/accommodations used for the purposes of business or profession, then it would not have felt the need to amend the provisions of Section 37 so as to make a definite distinction with regard to buildings used as guest houses as defined in Sub-section (5) of Section 37 and the provisions of Sections 31 and 32 would have been sufficient for the said purpose. - Decided against assessee. Telephone equipment installed in the factory, mobile equipments etc. - whether eligible for investment allowance u/s. 32A of the Act? - Held that:- "The word "installed" occurring in section 32A(1) would not necessarily mean that it should be fixed in a position, but the word is also used in the sense of "induct" or "introduce" or "placing an apparatus in position for service or use" as held by the Supreme Court in CIT v. Mir Mohammad Ali [1964 (4) TMI 12 - SUPREME Court]. The word "installed" would mean to place in position for service or use or to set up for service or use. The books would be installed when they would be placed for use in the premises in question" . Hence , we answer issue No.3 in favour of the assessee

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• 2015 (1) TMI 1024
  Expenditure incurred for the expansion of existing business - Revenue v/s capital expenditure - Held that:- The amount which has never materialized, i.e. the expenses incurred towards such project is rightly treated as revenue expense and not as capital expenditure. - Decided in favour of the assessee. Exclusion of 90% of net interest for calculating the deduction under section 80HHC - Held that:- The question involved in the present appeal is governed by the decision of the Supreme Court in Distributors (Baroda) P. Ltd. v. Union of India and others [1985 (7) TMI 1 - SUPREME Court] and the deduction given under Section 80(c) is required to be upheld. Therefore, the tribunal has rightly directed exclusion of 90% of net interest for calculating the deduction under section 80HHC of the Income Tax Act, 1961. Income Tax Appellate Tribunal was right in law in allowing the expenditure of 32.05 lacs incurred on feasibility study of PET product. We also hold that the Income Tax Appellate Tribunal was right in law in directing the exclusion of 90% of net interest for calculating the deduction under section 80HHC of the Income Tax Act, 1961. - Decided in favour of the assessee.

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• 2015 (1) TMI 1023
  MAT computation - deferred revenue expenditure towards (advertisement, publicity, distribution and sales promotion) debited to the P s Board as per the Companies Act when maintaining regular books of accounts could be modified and other years expenditure can be claimed during the current assessment year itself when computing Book profits u/s.115JB of the Act upheld by Tribunal - Tribunal reversing the finding of the appellate authority that before allowing deduction under Sec. 80HHC of the Income Tax Act, the unabsorbed loss and depreciation should be carried forward and set off and only in respect of the balance deductions should be allowed, - Held that:- As is clear from Section 115JA of the Act, it deals with the deemed income . It is not the actual income earned by the assessee. The object behind it is to prevent the assessee from adjusting the accounts or manipulating the accounts so as to avoid payment of tax on the ground that they have not earned any profit at all. When once the assessee has incurred an expenditure and it is deducted in terms of Part-II of Schedule-VI of the Companies Act and the profit is arrived at, merely because in the printed P & L account for the purpose of showing to the shareholders that a profit is made by the Company, the entire expenditure is not deducted and a portion of it is shown as a deferred expenditure, the assessee cannot be denied the benefit of actual expenditure incurred. The assessee is not showing the actual expenditure incurred to avoid payment of tax. On the contrary when the actual expenditure is given deduction to, the profit margin gets reduced. It is by showing it to the P & L account, a portion of it as a deferred payment, artificially the profit has gone up. The object of Section 115JA being to avoid adjustment of account, manipulation of figures to avoid payment of tax. When the assessee has actually incurred expenditure and the tax liability is less when compared with the net profit arrived at after giving deduction to the actual expenditure, the tax payable is on that net profit and not on the fancy figure shown in the P & L account for the purpose of showing profit to the shareholders. In other words, to find out what is net profit one has to look into the books of accounts maintained by the company and the profit and loss account prepared on the basis of such book of accounts. What is shown in the printed balance sheet is for the benefit of the shareholders as it will not reflect the true state of affairs and that cannot be made the basis for levying tax under the Act. This is precisely what the Tribunal has held. Neither under the Companies Act nor under the Income Tax Act, this concept of deferred expenditure is recognized. That is a pathology used by the chartered accountants to show to the shareholders that the company has made profit though it has not earned profits. It is nothing but a window dressing and the authority should not be mislead or guided by this balance sheet which is prepared to satisfy the shareholders. It is the P & L account prepared on the basis of the books of accounts as contemplated in Part-II of Schedule VI which should form and assist to find out what is the profit earned and on that profit, tax is levied. - Decided in favour of assessee.

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• 2015 (1) TMI 1022
  GP addition - unaccounted production in absence of clear cut justification from assessee for impact of change in factors resulting in increased fuel consumption both in value and volume terms - Tribunal deleted addition - Held that:- Tribunal being ultimate fact finding authority, has found that in absence of any material to show that the transaction entered into books of account was bogus or that any entries in the books of account were not supported by vouchers, the books of account maintained by the Assessee could not have been discarded and in case of doubt, it was required for the A.O. to verify genuineness of expenditure. The Tribunal has upset the fact finding of the lower authority. In our view, the question sought to be canvassed can further be considered only if ultimate finding of fact by the Tribunal is upset after re-appreciation of evidence on record. It is hardly required to be stated that the finding of fact would be beyond the scope of judicial scrutiny in the present appeal where, the judicial scrutiny would be limited to substantial question of law. Whether books of account could be discarded or not, considering the facts and circumstances, essentially, it is a question of fact and not the question of law. - Decided against revenue.

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• 2015 (1) TMI 1021
  Reopening of assessment - ITAT held reopening as illegal as beyond four years and the assessee has fully disclosed true and complete facts, necessary for assessment - ITAT came to conclusion that the Appellate Commissioner has not committed any error in allowing the assessee to produce new material in violation of Rule 46A - Held that:- We are in complete agreement with the view taken by the Tribunal. The Tribunal has given cogent and convincing reasons in arriving at the conclusion. We do not find any reason to interfere with the order of the Tribunal. Hence, the present appeals are dismissed. Accordingly, we hold that the Tribunal was right in law in coming to the conclusion that reopening of assessment for Assessment Year 1989-90 under Section 147 read with Section 148 of the Income Tax Act is illegal. The Tribunal was also right in coming to the conclusion that the Appellate Commissioner has not committed any error in allowing the assessee to produce new material on record. - Decided in favour of assessee.

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• 2015 (1) TMI 1020
  Claim of deduction of liability - assessee failed to debit the liability in its books of accounts - Held that:- Unable to appreciate the suggestion that if an assessee under some misapprehension or mistake fails to make an entry in the books of account and although, under the law, a deduction must be allowed by the Income-tax Officer, the assessee will lose the right of claiming or will be debarred from being allowed that deduction. Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter. The Tribunal was right in confirming the order of the Commissioner of Income-tax (Appeals) and in directing the Assessing Officer to allow the deduction of the liability. - Decided in favour of assessee.

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• 2015 (1) TMI 1019
  DTAA - “Cyprus” ought not to have been declared as notified jurisdictional area by the notification dated 1.11.2013 in view of international treaty between Government of India and Government of Cyprus - Held that:- While exercising the writ jurisdiction under Article 226 of the Constitution of India, this Court ordinarily should not proceed to look into as to whether informations sought by the Indian Authorities were ever declined by the Government of Cyprus or Government of Cyprus is ready and willing to supply the informations sought by the Indian Authorities. Moreover, there seems to be no valid reason to disbelieve the satisfaction so recorded by the Indian Authorities. Consequently, petitions fail for relief No. (a). In the present writ petitions, petitioner is also challenging revised certificate dated 12.12.2014 passed by the Income Tax Authorities. Undisputedly, Income Tax Authorities are competent under Section 154 of the Income Tax Act to revise earlier orders passed, even suo moto, if any illegality or irregularity is observed therein, at the subsequent stage. Undisputedly, all orders passed under Section 154 of the Act can be assailed in statutory appeals.Since, alternative remedy of statutory appeal is available to the petitioner to challenge the revised certificate dated 12.12.2014, therefore, not inclined to invoke my writ jurisdiction under Article 226 of the Constitution of India. W.P. dismissed.

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• 2015 (1) TMI 1018
  Non deduction of tax at source on IUC payments made to non resident telecom operators and capacity transfer payments made to Belgacom - according to the assessee the order is barred by limitation, because the proceedings u/s 201 of the Act for assessment year 2007-08 were initiated and completed beyond a reasonable period of time - Held that:- When we examine the facts, then it would reveal that the Assessing Officer had issued first notice on 6th of June, 2011. The financial year 2007-08 would end on 31.03.2008. Even if we take the limitation of 4 years then this would go up to 31.03.2012. Assessing Officer had called for details of payments with regard to IUC payments on 15.05.2012 and thereafter issued notices on 10.12.2012. Thus, it cannot be said that notice was not issued within a reasonable period. The learned CIT (A) has observed that for scrutinizing the return, notice u/s 143(2) was to be issued within six months from the end of financial year in which the return is furnished and for re-opening of an assessment u/s 147; time limit has been provided from 4 to 6 years from the end of the relevant assessment year as provided u/s 149. Thus the action of the Assessing Officer is within a reasonable time. Therefore, we do not see any reason to interfere in the findings of the CIT (A) on this issue. - Decided against assessee. Order of the Assessing Officer not held to be bad in law and void ab initio by CIT(A) - Held that:- Payments made (IUC and CTA) by the assessee to NTOs and Belgacom falls within the ambit of section 5 (2) of the Income Tax Act. Alternatively, he held that these are in the shape of royalties and it can also be construed as payment of fee for technical services. The learned CIT (A) has not decided the issue with regard to the nature of the payment being FTS because in the opinion of the CIT (A) once the payment contained the nature of the royalty payment, then there is no need to look into; whether the payments in the shape of FTS is involved in these payments or not. To our mind basically no specific finding is required on this issue at our end because, this is an argument, which indicates the alternative position of the law on a particular payment made by the assessee to the non resident. We will deal with the arguments of the learned representative while taking the issue; whether these payments can be termed as royalty payments or FTS. At this stage, no specific finding is required on this ground of appeal. - Decided against assessee. Payments “accrued or arise” in India - taxability need to be determined u/s 5(2)(b) OR u/s 9(1) - Held that:- The inference drawn by the learned Revenue authorities that income is deemed to be accrued or arisen in India or accrued or arisen or received in India merely on the basis that such payments was made from India is incorrect. However, to the extent that if income is deemed to accrue, arisen or receive in India u/s 9 is concerned, if (subject to our finding on these aspects), then it will become part of total income u/s 5(2). Thus, there is no inherent contradiction between both the sections, the only thing is that Revenue authorities in the present case have erred in drawing an inference that when payment is made from India, it would be construed that income has been received, accrued or arisen in India. To this extent, we differ with the conclusions drawn by the learned Revenue authorities below, but it is an academic issue in the present case, because ultimately, taxability would be dependent upon our finding given u/s 9(1)(vi) and 9(1)(vii) i.e. whether the payments involve royalty or FTS. Decided partly for statistical purposes. Characterization of IUC payment - whether the IUC payments made by the appellant to the NTOs qualify as royalty as defined in Explanation 2 to section 9(1)(vi) and whether the appellant was under an obligation to deduct tax at source thereon u/s 185 - India-UK DTAA - Held that:- Consideration paid by the assessee as IUC charges for alleged inter connect service falls within the ambit of process royalty and element of income was involved. Therefore, the assessee was bound to deduct the TDS on such payment. [see case of Verizone Singapore Pte Ltd - 2013 (11) TMI 1058 - MADRAS HIGH COURT] - Decided against assessee. Liability to deduct tds - Held that:- Once it is found that the amount is not exempt under Art. III of the DTAA and there is no specific provision for assessment of such a receipt in DTAA, the applications of treaty comes to an end. Thereafter, one has to refer to the provisions of the Income-tax Act to assess the receipt.We are of the view that enquiry contemplated u/s.195(1) does not contemplate a wider scope equivalent to the one available in the regular assessment proceedings. In the present case, payee has no concern about the withholding of taxes that is the reason they have not opted for applying the DTAA to these payments at the time when payments were made by the assessee. Thus the assessee failed to demonstrate with sufficient material as to how it harboured a belief that taxes are not to be deducted at source while making the payments. In the enquiry thereafter the Assessing Officer has demonstrated with a reasonable degree that payments involved an element of income u/s.9(1)(vi) Explanations (2), (5) and (6). - Decided against assessee. The next contention raised by the assessee is that liability to deduct tax has been put upon it by virtue of retrospective amendment, thus it was impossible for the assessee to deduct TDS at the time of payments is not acceptable as observed that by insertion of Explanation (5) and (6) scope of expression 'Royalty' has not been expanded. These Explanations do not create a different charging position upon the consideration paid by an assessee for use or right to use of any process. These are clarificatory in nature. The position to deduct TDS at the time when assessee made the payments was categorical and it was not persuaded to perform which is impossible to perform. - Decided against assessee.

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• 2015 (1) TMI 1017
  Depreciation on goodwill - “bundle of business and commercial rights" - slump sale - Held that:- We agree with the submissions of the ld. Counsel of the assessee that the Hon’ble Delhi High Court’s decision in the case of Areva T business or commercial rights of similar nature specified in section 32(l)(ii) and were accordingly eligible for depreciation under that section. Thus we are in agreement with the submissions of the ld. Counsel of the assessee that the goodwill that has been recognized in this case represents various assets in the nature of goodwill. - Decided in favour of assessee. Depreciation denied - vehicles which were admittedly used for the purpose of business and were owned by the appellant but however, these were not registered in the name of the appellant - Held that:- It is thus clear that the technicality of an asset being registered in the name of the asset can not come in the way of an assessee’s eligibility for depreciation as long as such an asset is de facto owned by the assessee and is used for the purposes of the business. In the present case, in the light of the business transfer agreement, there is no doubt that the asset was owned by the assessee. It is not even in dispute that the asset was used for the purposes of the business, nor has that been the case of the Assessing Officer. The conditions for eligibility to claim depreciation are thus satisfied on the facts of the present case. In view of these discussions, as also bearing in mind entirety of the case, we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned disallowance of 64,821. - Decided in favour of assessee. Disallowance of 50% of legal and professional fees - CIT(A) deleted addition - Held that:- In the present case, there is no dispute about the facts of service being rendered and there is no benchmark set for as to what would constitute a fair market value of the services in question. Unless there is a clear finding that the market value of the services taken from the sister-concern is less than the price at which the services are obtained, there cannot be an occasion to apply the disabling provisions of s. 40A(2). This exercise, therefore, necessitates a finding about the fair market value of such services. There is no such finding in the present case. In these circumstances as also bearing in mind entirety of the case, we are of the considered view that the disallowance made by the A.O. was devoid of legally sustainable basis. The learned CIT(A) was thus quite justified in deleting the same. - Decided against revenue. Disallowance of the foreign travelling expenses - CIT(A) delted the addition - Held that:- no reason to interfere in the matter, since, as rightly noted by the learned CIT(A), the impugned disallowance is indeed devoid of any legally sustainable basis. No disallowances can be made simply on the basis of assumptions, surmises and conjectures. We have noted that no specific requisitions were made by the A.O. for further information in respect of details of foreign travel expenses and yet the A.O. has disallowed the expenses for want of full and complete details. As regards the A.O.’s observation of earlier expenditure incurred on exploring new market, we are in complete agreement with the learned CIT(A) that there is no basis whatsoever to come to this conclusion and it is purely an inference drawn on the basis of assumption.- Decided against revenue.

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• 2015 (1) TMI 1016
  Long term capital gains assessment arising out of property sold - assessee has claimed exemption from chargeability to capital gain by contending that as the entire sale consideration was paid to the bank towards discharge of the debt of a company and firm wherein they are directors/ partners it has to be allowed as an expenditure while computing capital gain - Held that:- As can be seen from the facts and materials on record, the sale consideration received by the assessee was deposited into his personal bank account. It is also a fact that the assessee has made FDs out of the sale consideration and also earned interest which were offered to tax in the return of income filed by the assessee. It is also a fact on record that the sale of property took place much earlier to the sanction of OTS by the bank which advanced loan to M/s Hoe Leather Garments Pvt. Ltd. and M/s. Hansa Overseas Enterprises wherein assessee along with his brother are directors/partners. Therefore, as can be seen the sale consideration received on sale of the property was not directly paid to the concerned bank towards discharge of the debt as per OTS as claimed by the assessee. Moreover, it is not in dispute that the amount claimed to have been paid by the company/firm towards OTS originated from the unsecured loan claimed to have been availed through the personal accounts of the directors/partners. In these circumstances, assessee's claim that the bank has appropriated the sale consideration towards discharge of debt as per the OTS, in our view, is not acceptable. There is no direct nexus between the receipt of the sale consideration and payment made to the bank towards discharge of the debt. Moreover, it is a fact on record that the unsecured loan of the amount claimed to have been received from the directors has been disbelieved by the Department while completing assessment in case of M/s Hoe Leather Garments Pvt. Ltd. and additions were made u/s. 68 of the Act which also stand confirmed. Therefore, in a sense the claim of unsecured loans from the directors of the amount utilised towards discharge of debt has also not been accepted by the Department. In these circumstances, assessee's claim that since the entire sale consideration was utilised towards discharge of the debt, the same cannot be chargeable to capital gain, in our view, is not acceptable. Even, assuming for arguments sake that the property in question was mortgaged as a security towards the debt availed by the company and the firm, the same cannot exempt the assessee from chargeability of capital gain on the sale of the asset. Decided against assessee.

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• 2015 (1) TMI 1015
  Assumption of jurisdiction u/s 153A by AO - addition to income - CIT(A) deleted additions - Held that:- The Department has failed to bring any material on record to show that additions made were on the basis of any incriminating material. On the contrary, it is evident on record, in the search assessment, AO has revisited the issues which were subject matter of original assessments. Even, assuming that AO has proceeded u/s 153C, we need to observe, neither the assessment order nor any other material placed before us could indicate that any valuable article, thing, document etc., belonging to assessee was found as a result of search to enable the AO to initiate proceeding even u/s 153C of the Act. Thus, the conditions of neither section 153A nor section 153C are satisfied. That being the case, proceeding could not have been initiated against the assessee either u/s 153A or u/s 153C of the Act. In the aforesaid view of the matter, we do not find any reason to interfere with the order of ld. CIT(A) in holding that AO could not have made the additions. - Decided in fvaour of assessee. Disallowance of general expenses of 34,000 - power of CIT(A) to set aside the issue to AOHeld that:- d. CIT(A) in principle, having held that expenditure incurred towards gift items is allowable as business expenditure should have deleted the addition. In the aforesaid facts and circumstances, we consider it appropriate to delete the addition of 34,000. - Decided in favour of assessee.

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• 2015 (1) TMI 1014
  Validity of reopening of assessment - Held that:- Since the approval was obtained by the Assessing Officer from the ld. Commissioner of Income-tax instead of Joint Commissioner of Income-tax or the Addl. Commissioner of Income-tax under section 151(2) of the Act, notice under section 148 of the Act is invalid and void ab initio. We accordingly quash the assessment after holding that the reopening was not done in accordance with the provisions of the Act. - Decided in favour of assessee.

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• 2015 (1) TMI 1013
  Invoking the jurisdiction under section 153C r.w.s. 153A of the Act - addition to capital gain - Held that:- Assessing Officer was holding the jurisdiction of the person searched under section 132 of the Act, from whose possession certain documents relating to the assessee were found. The said officer also held the jurisdiction of the present assessee before us and the satisfaction in such circumstances can be said to have been exercised by the Assessing Officer before initiating the proceedings under section 153C of the Act. No merit in the plea of the assessee that the document found in the present case being 7/12 extracts, landholding of the assessee, being a public document, cannot be said to be a document on the basis of which, the proceedings under section 153C of the Act could be initiated. - Decided against assessee. Addition of family income in the hands of assessee - Held that:- Once the property is being held by the assessee and their family members from year to year jointly, we find no merit in the order of the Assessing Officer, in this regard. The assessee at best could be taxed for the income arising in his hands only of his share in the property and not on account of income arising on account of share of his family members in the property, even though the 7/12 records the name of assessee. The assessee had already declared his share of income from capital gains in assessment year 2002-03. However, the gain arising from the sale of the property is now being taxed in the hands of the assessee in assessment year 2001-02 holding the assessee to be the owner of the whole property. However, we find no merit in the said stand taken by the authorities below, especially in view of the facts and circumstances pointed here-in-above. Accordingly, we direct the Assessing Officer to tax the share of the assessee in the said property in his hands and the balance share of the property is to be taxed in the hands of the other family members who are joint owners of the property. The CIT(A) has vide para 6 of the appellate order held the assessee to be entitled to the deduction under section 54F of the Act in respect of one flat owned by the assessee, against which the Revenue is not in appeal. Accordingly, we direct the Assessing Officer to re-compute the income of the assessee under the head capital gain in the hands of the assessee vis-à-vis his share in the property after allowing the benefit of deduction under section 54F of the Act. - Decided in favour of assesse.

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• 2015 (1) TMI 1012
  Disallowance of loss arose on account of revaluation of securities - Held that:- No merit in the action of lower authorities for disallowing loss arose on the year end revaluation of securities as relying on CIT Vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT], Investment Ltd. Vs. CIT, [1970 (4) TMI 15 - SUPREME Court] and CIT Vs. Bank of Baroda [2003 (3) TMI 80 - BOMBAY High Court]. - Decided in favour of assessee. Disallowance u/s.14A r.w.Rule 8D - assessee-bank has declared dividend income of 17,86,785/- and claimed it as exempt u/s10(35) - Held that:- The mutual funds under which investments were made were notified under See 10(23D) of the Income Tax Act 1961 and are exempt under Sec 10(35) of the Income Tax Act. The IPO closed on June 21, 2005 and shares were allotted on July 5, 2005. A part of the capital funds raised from the IPO were invested in mutual funds till allotment of shares. Thus, we found that its investments were from interest-free funds and accordingly, no interest expenditure can be said to have been incurred in relation to earning the tax-free dividend income and accordingly, no disallowance of interest can be made in this regard under section 14A of the Act. The AO is directed to delete the same. - Decided in favour of assessee. Disallowance of expenses other than interest, we direct the AO to uphold the disallowance at 5% of exempt income. Disallowance of provision of re-valuation of investments transferred from HTM to AFS category - Held that:- Decision of the Hon'ble Bombay High Court in the case of CIT v. HDFC Bank (2014 (7) TMI 724 - BOMBAY HIGH COURT) and that of the Bangalore bench of the Tribunal in the case of State Bank of Mysore (2009 (5) TMI 610 - ITAT BANGALORE) are in support of assessee’s claim of provision for re-valuation in respect of securities transferred from HTM to AFS category should be allowed as a deduction. - Decided in favour of assessee.

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• 2015 (1) TMI 1011
  Revision order - change of heart - whether a revision proceedings, which started with a show cause notice condemning the action of the Assessing Officer on merits, can lawfully culminate in the direction that the subject matter of revision proceedings be decided afresh in accordance with law and after making proper inquiries? - Held that:- In the impugned revision proceedings, learned Commissioner started by pointing out, what he saw as, glaring illegalities in the assessment order, which was subjected to revision proceedings, but what he concluded was that the said assessment order was passed without making “proper requisite and desired inquires”. What the assessee was required to demonstrate the incorrectness of the learned Commissioner’s stand to the effect that, because of the five additions/ disallowances, as set out in paragraph 3, not having been made, the order is erroneous and prejudicial to the interest of the assessee. Learned Commissioner proceeded to observe that “Had the said additions/ disallowances been made, there would have been substantial tax effect and thus the cause of revenue has suffered. Further, the order of the AO is in clear violation of the legal provisions as enumerated in the Income Tax Act, 1961. Thus, the very sanctity of the Act has been eroded and may serve as a very bad precedent”. Yet, finally he revised the order for want of “proper requisite and desired inquires” and thus shifted the goalpost. That’s not permissible under the scheme of the law, as a revision order can only be passed on the ground on which the assessee has been given reasonable opportunity of being heard, and as it is not open to Commissioner to set out one reason for revising the order but actually revise the order on some other ground. In our humble understanding, lack of proper inquiries, which an Assessing Officer ought to have conducted on the facts of the said case, is altogether a different reason from inadmissibility of a claim of deduction or an income which ought to have been brought to tax. In view of the above discussions, as also bearing in mind entirety of the case, we are of the considered view that the impugned revision order is contrary to the scheme of law, and should be quashed for this reason alone. - Decided in favour of assessee.

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• 2015 (1) TMI 1010
  Revision u/s 263 - claim of deduction u/s.10B was allowed by AO without proper investigation - Held that:- In a situation when the admitted factual position was that the order of the AO was a cryptic order without considering the substantial claim of exemption u/s.10B of 3,26,27,651/- then in our humble opinion such an order can be reviewed by learned Commissioner u/s.263 of IT Act. Although certain notices u/s.143(2)/142(1) were issued but we have found that the issue was not examined in the light of the provisions of Section 10B, Explanation 2(iv) of IT Act by the AO. Facts have revealed that the assessee was granted approval as 100% export oriented unit (EOU) by the Director of the Software Technology Parks of India (STPI) Gandhinagar for IT enabled services. Learned Commissioner has therefore raised objection that STPI was not competent to grant such approval being simply a Society and the approval was required to be granted by Development Commissioner under Ministry of Chemicals and Industry as prescribed in one of the CBDT instruction dated 9th March, 2009. Due to these reasons, we hereby hold that the order passed u/s.263 of IT Act is an order sustainable in the eyes of law. We uphold the order u/s.263 for a limited purpose that the claim of deduction u/s.10B was allowed by AO without proper investigation. But simultaneously we are also of the view that learned Commissioner has exceeded the jurisdiction by unilaterally directing the AO to pass a fresh order by disallowing the claim u/s.10B of IT Act. According to us, learned Commissioner could have examined both the aspects of the issue that whether the assessee is entitled for the exemption as prescribed u/s.10A of IT Act, especially under the circumstances when this legal argument was raised before him. According to us, learned Commissioner could have referred the issue of alternate claim of exemption u/s.10A back to the AO to be decided afresh after considering the provisions of the Act in the light of the evidences filed. We hereby modify the directions of learned Commissioner that instead of disallowing the claim of deduction u/s.10B, the AO is hereby directed to examine the alternate legal claim of the assessee and thereupon pass an appropriate assessment order. - Decided partly in favour of assessee.

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• 2015 (1) TMI 1009
  Disallowance on account of Bad debts - CIT(A) deleted the addition - Held that:- No material could be brought before us to show that the Ahmedabad Stock Exchange has given any assurance to meet the entire debt to the assessee which was receivable by the assessee from Shri Nagindas Chandulal Shah who was declared as defaulter by the stock exchange. Thus, in our considered view, as the broker from whom the debt was receivable has in fact become bad during the year under consideration and the assessee had not acquired any legal right to receive the same debt from Ahmedabad Stock Exchange. In our view, merely lodging of a claim does not give rise to a legal right in favour of the assessee. Further, in our considered view, after assessing badla interest as business income of the assessee, it was not open to the Assessing Officer to allege on the same breath that the transactions of giving shares in the badla transaction was not a business of the assessee. Further, in such a transaction, as per the system of accounting, simply because net badla interest was credited in the profit and loss account, it cannot be held that the entire sale value of the shares was not taken into consideration for computing the income of the assessee. Moreover, we find that it is an admitted fact that the amount in question when received in the subsequent year by the assessee, the same was assessed to tax by the Revenue in the hands of the assessee in the year of receipt. In the above facts, we do not find any good reason to interfere with the order of the CIT(A) which is hereby confirmed. - Decided against revenue. Disallowance on account of foreign travelling expenses - assessee had not furnished details of expenses of wife and children - CIT(A) deleted the addition - Held that:- It is not in dispute that the wife of the assessee is also a Director of the assessee-company and assessee claimed before the Assessing Officer that the expenditure of wife of the Director who is also a Director and looks after the business of the assessee-company was for the purpose of business. We find that no material was brought on record by the Revenue to controvert the above submissions of the assessee. Further, it is observed that the CIT(A) deleted the entire disallowance by observing increase in export turnover of the assessee-company without bring on record any material to show how the expenditure of children of the Directors were for business purposes of the company. No material was brought on record to show that the children were engaged in the business of the assessee-company or there was any agreement between the company and the children. In these circumstances, AO was justified in disallowing proportionate expenses of children relating to other expenses when the ticket expense of children was considered by the assessee itself as not relating to business and therefore, the CIT(A) was not justified in deleting the same. We, therefore, modify the order of the CIT(A) to the above extent and direct the Assessing Officer to disallow 1,50,000/- out of Foreign Travelling Expenses claimed by the assessee. - Decided partly in favour of assessee. Deduction claimed u/s 80I - CIT(A) directed AO to restrict the deduction claimed u/s 80I by excluding the amount of duty draw back received for computation of the deduction - Held that:- In the instant case, the Assessing Officer disallowed the claim made by the Assessing u/s 80I on the ground that the conditions specified in section 80I(i)(iv) were not fulfilled. The CIT(A) deleted the disallowance without recording any specific finding on the above issue. We, therefore, set aside the order of the CIT(A) on this issue and restore this issue back to the file of the CIT(A) for adjudicating the issue afresh by passing a speaking order on this issue after allowing both the parties reasonable opportunity of hearing. - Decided in favour of Revenue for statistical purposes.

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• 2015 (1) TMI 1008
  Revision u/s 263 - TPO did not go into the genuineness of the transaction in AY 2006-07 as assessee did not treat the purchase of technical know-how as international transaction in the audit report u/s 92E of the Act - Held that:- CIT has observed that the TPO in course of proceeding for AY 2006-07 could not have examined the issue as assessee has not reported such transaction in the audit report, but, on examining the facts and materials on record and more particularly the order of the TPO for AY 2006-07, it is very much evident that assessee has produced not only its books of account but its entire financial statements relating to FY 2005-06 was available before the TPO. Therefore, it cannot be said that the transaction relating to purchase of know-how/DMF could not have been considered by TPO. It is also a fact, the AO has completed the assessment after examining the issue and also in terms with TPO’s order for AY 2006-07. Only because the TPO in AY 2007-08 takes a different view, by that reason alone, assessment order cannot be considered to be erroneous and prejudicial to the interests of revenue. Moreover, when the consideration paid by assessee to Matrix has been accepted to be genuine in the assessment conducted in case of Matrix which has been confirmed by DRP, the same transaction cannot be doubted in case of assessee. An assessment order can be considered to be erroneous and prejudicial to the interests of revenue on the basis of facts and materials available on record as on the date of completion of assessment. In the present case, according to ld. CIT himself at the time of completion of assessment, AO did not have the benefit of the TPO’s and DRP’s order for AY 2007-08, which were passed subsequently. That being the case, AO having passed the assessment order on the basis of facts and materials available before him, only because subsequently TPO in AY 2007-08 held the transaction to be not genuine on that basis alone assessment order cannot be held to be erroneous and prejudicial to the interests of revenue. More so, when the TPO in his order for AY 2006-07 has not questioned the genuineness of such transaction. Therefore, on considering the totality of facts and circumstances, we are of the view that as AO has passed the assessment order after examining all the facts and evidences and after proper application of mind relating to the transaction of know-how and DMF, the assessment order cannot be revised u/s 263 of the Act by treating it as erroneous and prejudicial to the interests of revenue. In the aforesaid view of the matter, the assumption of jurisdiction u/s 263 of the Act in the present case is neither proper nor justified.- Decided in favour of assessee.

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• 2015 (1) TMI 1007
  Prescribed monetary limits for filing of appeal before ITAT - Whether, this appeal of revenue, which is below the prescribed limit of tax effect in view of the Board’s Instruction No.5/2014 issued on 10.07.2014 revising the monetary limits for filing of appeals by the Department before ITAT is maintainable or not? - Held that:- On query from the Bench, the Ld. DR could not point out any of the exceptions as provided in the Circular as that this is a loss case having tax effect more than the prescribed limit, which should be taken into account,or that this is a composite order for many assessment years where tax effect will be more than the prescribed limit as per para 5 of above instructions, or that this is a case, where, in the case of revenue, where constitutional validity of the provision of the Act or I.T. Rules 1962 are under challenge,or that Board’s order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or that Revenue Audit Objection in the case has been accepted by the Department and the same is under challenge. The Ld. DR could not point out any of the exceptions as provided above. Accordingly, this being a low tax effect case, the appeal of the revenue dismissed in limine without going into merits. - Decided against revenue.

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• 2015 (1) TMI 1006
  Interest income on Non- Performing Assets - income recognition - Held that:- the assessee herein is a cooperative bank and it is not in dispute that it is also governed by the Reserve Bank of India. Hence the directions with regard to the prudential norms issued by the Reserve Bank of India are equally applicable to the assessee as it is applicable to the companies registered under the Companies Act. The Hon ble Supreme Court has held in the case of Southern Technologies Ltd (2010 (1) TMI 5 - SUPREME COURT OF INDIA), that the provision of 45Q of Reserve Bank of India Act has an overriding effect vis-à-vis income recognition principle under the Companies Act. Hence Sec.45 Q of the RBI Act shall have overriding effect over the income recognition principle followed by cooperative banks also. Hence the Assessing Officer has to follow the Reserve Bank of India directions 1998, as held by the Hon ble Supreme Court. Based on the prudential norms, the assessee herein did not admit the interest relatable to NPA advances in its total income. The Hon ble Delhi High Court in the case of Vasisth Chay Vyapar Ltd (2010 (11) TMI 88 - Delhi High Court) has held that the interest on NPA assets cannot be said to have accrued to the assessee. We find no reasons to interfere with the ultimate conclusion of the CIT(A) in deleting the impugned addition relating to interest income in respect of NPAs. - Decided in favour of assessee.

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• Customs

• 2015 (1) TMI 1032
  Attempt to smuggle Red Sander Wooden Logs - Misdeclaration of goods - penalty under Section 114(i) - Held that:- Tribunal has rendered a categoric finding that there is no finding of a positive role of the first respondent in the attempt to smuggle out red sander wooden logs. Even in the order of the Original Authority, it is held that the custom house agent has not discharged his duty in the normal course of his service. As rightly observed by the Tribunal, for failure to discharge functions as a Custom House Agent, penalties are provided in the Customs House Agents Licensing Regulations. Therefore, imposition of penalty under Section 114(i) of the Customs Act is unwarranted. We, therefore, find no reason to differ with the finding of the Tribunal - Decided against Revenue.

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• 2015 (1) TMI 1031
  100% EOU - Valuation of goods - Enhancement in value of machinery - Extended period of limitation - Held that:- Appellant unit during its existence as a 100% EOU had imported free of customs duty certain spare parts for machinery and there is no dispute that these spare parts were used for replacement of the old and worn out machinery parts during January 2001 to May 2001 period. Even though these spare parts have been capitalized, in our view once the spare parts have been used for replacement of the old and worn out machinery parts, the same become part of the machinery and they loose their separate identity. The use of these spare parts for replacing the old and worn out parts of the machinery would not increase the value of the machinery. At the time of debonding, the duty is payable on the value of the duty free raw materials and the depreciated value of the imported or indigenously procured capital goods and for this purpose, the value of the capital goods cannot be enhanced by the value of the spare parts used from time to time, even if the same have been capitalized. It is also seen that at the time of debonding, the Jurisdictional Inspector, Central Excise, after checking their records and stock, had determined the appellant s duty liability and had communicated the same under his letter dated 09/04/04 and at that time also he had checked the account of receipt and consumption of the imported as well as indigenously procured spare parts. In view of this, the appellant cannot be accused of suppressing the relevant information from the Department and, therefore, no justification for invoking the extended period under proviso to Section 28 (1) of the Customs Act, 1962 and, as such, the show cause notice dated 03/10/07 is time barred. - Decided in favour of assesse.

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• 2015 (1) TMI 1030
  Import of designs and drawings for manufacturing of ship - department was of the view that the drawings and designs cannot be classified under Chapter 49 inasmuch as there is a CD accompanying the drawings and designs and hence, the goods should be assessed under CETH 85238090 as recorded media. - Confiscation of goods - Imposition of redemption fine - Section 125 of the Customs Act, 1962 - Held that:- From the records available and the evidence led by the appellant, it is clear that they have placed orders for import of "hard copy" of the drawings and designs of ships. They have never placed any order for import of any CD. They have also produced a letter from foreign supplier saying that the CD was sent by mistake and they should be allowed for re-export. Section 23 of the Customs Act, provides for relinquishment of the title to the imported goods by the importer before an order for clearance for home consumption is made by the Customs authority. Therefore, this request of the appellant should have been considered by the adjudicating authority. Nevertheless, inasmuch as the goods are lying with the department on confiscation, the interests of Revenue are completely secured. The question of ordering any pre-deposit under Section 129E of the Customs Act, 1962 would arise only when the goods are not available and the Revenue is at risk as held by the Hon ble Apex Court in the case of Bhavya Apparels Pvt. Ltd. [2007 (9) TMI 274 - SUPREME COURT OF INDIA]. Thus, the appellant has made out a strong case for waiver of pre-deposit and accordingly, we grant unconditional waiver from pre-deposit of the dues adjudged against the appellant and stay recovery thereof during the pendency of the appeal - Stay granted.

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• 2015 (1) TMI 1029
  Bail Application - Held that:- case is pending since last 10 (ten) years and, out of nine cited witnesses, evidence of only four witnesses have been completed so far. Besides this, the accused is in jail since last more than five years. Smti Nargis, the learned counsel for the accused further submitted that in another case under NDPS Act the High Court has very recently granted bail to the same accused and in other case under IPC also the accused is on regular bail. Besides this one more case was registered under NDPS Act in the State of West Bengal and in the said case the accused/petitioner has been acquitted. - accused is in custody since last more than five years and there is no possibility of immediate conclusion of the trial. Hence, I hold that if the accused is directed to be detained in custody it would amount to abuse of the power of Court besides violation of fundamental right of speedy trial of the accused. Hence, the bail prayer is accepted solely on the ground of long period of custody of the accused and long period of pendency of the case and not on any other ground. Trial procedure of NDPS cases instituted by way of complainants, otherwise than on police reports - What procedure to be adopted by the learned Sessions Courts for conducting trial of cases registered on the basis of complaints lodged by the Customs and Revenue Departments under NDPS Act i.e., cases instituted otherwise than on police report - held that:- Section 36 of the NDPS Act gives clear indication that Special Courts are being constituted for speedy trial of narcotic cases and to pursue this object certain special procedure for filing of the complaint directly in the Sessions Courts/Special Courts and also with regard to search, seizure and disposal of narcotics etc. have been provided in the Act. Section 35 of the Act also vests the powers of Officer-in-Charge of a police station upon the officers of DRI and Customs etc. and Section 53A provides that statements made and signed by a person before the empowered officers shall be relevant for the purpose of proving the truth of the facts under certain circumstances. Even otherwise there are scores of judgments from the Hon’ble Supreme Court and the High Courts that the statements of the accused persons recorded under Section 67 of the Act are insulated from the interdict of Sections 25 and 26 of the Evidence Act. I have already noted earlier that the law also provides taking cognizance of the complaints directly by the Sessions courts/Special Courts despite there being restrictions under Section 193 of the CrPC. In this way, all the provisions of the Act propagate the theory of speedy trial of the narcotic offences under the Act. Hence, I hold that the hurdles in between should also be removed by this Court. NDPS Act contains special provisions with regard to search, seizure, arrest, granting bail, recording the statements of witnesses and accused persons, disposal of the seized narcotics and substances etc. However, the Act is totally silent as to what procedure should be adopted for trial of the cases. Under Section 36A(1)(a) it has been provided that all offences under the Act, which are punishable with imprisonment for a term of more than 3 years shall be triable only by the special Courts. In this way the offences which attract punishment of less than 3 years are triable by the Courts of Judicial Magistrates. Section 36D provides mechanism for transitional period. It provides that until a special Court is constituted under Section 36 all the offences under the NDPS Act can be tried by a Court of Sessions. Section 36C makes it clear that all the provisions of the CrPC shall apply to the proceedings before a special Court and for the said purpose the special Court shall be deemed to be a Court of sessions. All these provisions lead to the only conclusion that the offences under the NDPS Act, which are punishable for more than 3 years, are to be tired by the Court of Sessions/Special Courts and the procedure provided for sessions trial cases under Chapter-XVIII of the Code should be followed. For removing any confusion it is further provided that the requirements and the pre-conditions of the trial provided under Sections 207 and 209 shall be followed by the Sessions Courts/Special Courts since the complaints/offence reports are directly filed in the Court of Sessions. These directions are given in exercise of powers conferred upon me u/ss 482 and 483 of the Criminal Procedure Code, 1973 and under Article 227 of the Constitution of India.

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• 2015 (1) TMI 1028
  Confiscation of goods - Import of oil - Mis declaration of goods - Held that:- assessee had produced statement of bank account and also income tax return where taxable income of only 1,95,000/- has been declared. It, thus, prima facie, appears that the matter regarding genuineness of the transactions and also the existence of the respondents is required to be examined before imposing condition for the release of the goods. - Matter remanded back - Decided in favour of Revenue.

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• 2015 (1) TMI 1027
  Import of all the components of a battery operated tricycle, except its battery, packed together - Whether this can be called as motor vehicle - Held that:- this kind of importation of an entire vehicle, except the battery, broken down into its parts, was not contemplated by the legislature - The cardinal test of a motor vehicle, appears to be that it should be capable of mechanical propulsion from power derived from a source, external or internal, in the state in which it is. - It is true that when an entire motor vehicle or a substantial part thereof is imported, which includes the description of motor vehicles in the explanatory notes cited by Mr. Bharadwaj, only accessories like wheels, tyres, batteries are to be joined to it. - This kind of importation, by the petitioner in my opinion, does not fit into this description. What is imported cannot be called a vehicle, by any principle of purposive interpretation. Therefore, the insistence of the Customs authorities on the certificates, mentioned in their query, was not proper. It is not part of their job to ask for the certificates because the vehicle has not been manufactured as yet. After the parts are assembled and the vehicle assumes its status, then it is upto some other authority to deal with it in accordance with law. The imported items may not be “parts” wholly and are not a vehicle, according to my interpretation. Then will they not be assessed to duty? While making an assessment of duty it should be the duty of every officer to make a purposive interpretation of the Act, the Rules, the subject headings and the tariff thereunder. If it is found on taking into account the entirety of the parts in one package that it is closer to a vehicle, the assessment should be made accordingly. On the other hand, if it is found that they are closer to the description “parts” and if assembled, may constitute a vehicle, assessment should be made treating them as parts. Therefore, the assessment part is left to the Customs officials. Writ application is disposed of with the direction that the respondent authorities will be free to make the assessment under Section 17 of the Customs Act without insisting on the certificates mentioned in their query - Petition disposed of.

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• FEMA

• 2015 (1) TMI 1026
  Contravention of Sections 9(1)(b) and 9(1)(d) of FERA - penalty under Section 50 of the FERA - Held that:- Retraction of the confessional statement containing admission of wrong-doings by the appellant came after more than ten years, at the stage of personal hearing only, and not before that. Had the appellant been subjected to threat, coercion or pressure – as alleged by him rather belatedly, he would have retracted his confessional statement soon after making the same, once the alleged threat, coercion or pressure ceased to influence the action of the appellant. It is not his case that the said factors continued to influence him for 10 long years. Moreover, the appellant failed to disclose as to how he was pressurized, coerced, or tortured, and by whom, when he made the earlier confessional statement. The confessional statement was also duly corroborated by the aforesaid independent evidence viz. the list of persons to whom the monies had to be distributed, received by fax from Ubaidullah of Dubai. Thus, the plea of the appellant, founded upon his so-called highly belatedly retraction of his confessional statement, has to be rejected. Pertinently, though the appellant sought to produce bank transaction statements to show that he had been receiving monies from Ubaidullah of Dubai after the incident in question, and his consistent case is that he had been receiving monies from Ubaidullah of Dubai even earlier, he did not produce any material evidence to show that monies were earlier being received through a legal banking channel. - The appellant has been let off rather lightly considering that he had admitted to having received 13 Lakhs in all, i.e. 5 Lakhs on 16.11.1994 and 8 Lakhs in all, on two earlier occasions. The maximum fine, in these circumstances, could have been to the tune of 65 Lakhs. However, the appellant has been let off with a nominal fine of 1.5 Lakhs. - Decided against assessee.

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• Service Tax

• 2015 (1) TMI 1052
  Intellectual property rights service - Payment of royalty on account of technical know-how charges - Bar of limitation - Held that:- Technology Transfer Agreement read with Share Purchase Agreement clearly points to the provision of two services by Rochem AG Switzerland, namely, the service of providing technology transfer and the service of providing intellectual property right transfer. The Commissioner is right in holding that the Share Purchase Agreement is inextricably linked to the Technology Transfer Agreement by virtue of Article 4 Non-competition. Further, Article 4 also recognizes that appellant have been using the trademark and logo “Rochem”. However, the Commissioner failed to analyze the Agreements in detail and came to a hasty conclusion that the entire amount of royalty is towards transfer of Intellectual property Right. - Only rights which are registered with the trademark/patent authorities are considered as Intellectual Property Right. The Commissioner has failed to go into these aspects in detail and has clubbed the entire service as Intellectual Property Right service. Charge of service tax is under Section 66 but the appellant being the receiver is liable to pay under Section 66A. The Commissioner's reasoning is not correct and is rejected. The appellants are eligible to benefit from notification No. 17/2004. - Commissioner has not analyzed the case on merits. He has not justified that the royalty amount is paid entirely for import of Intellectual Property Right services. He has wrongly disallowed the benefit of notification No. 17/2004. Section 78 provides that where the service tax has not been paid because of fraud, collusion, willful misstatement or suppression of facts or contravention of any of the provisions with intent to evade payment of duty, the liability of penalty will be equal to the amount of service tax not paid. We fail to understand how Commissioner has come to the conclusion that the ingredients of both the sections are different. If the reason for waiving penalty under Section 78 in terms of the provisions of Section 80 are that there was confusion about the scope of leviability on service receivers under reverse charge mechanism, then, it is the same confusion because of which the appellants had not declared the fact of receiving service by way of import. In fact, the appellants case is even stronger because it has not even been established convincingly by the Commissioner that the service receive is entirely covered under the category of Intellectual Property Right Services. - Following decision of CCE Vs. Indian Institute of Chemical Technology [2012 (9) TMI 236 - ANDHRA PRADESH HIGH COURT] - limitation period will apply and the demand is time barred - Decided in favour of assessee.

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• 2015 (1) TMI 1051
  Denial of refund claim - Merger of 2 companies - Successor company after making debit entry in CENVAT Credit account paid the liability of predecessor company - Merger sanctioned by Bombay High Court but still pending before Madras High Court - After realizing the fact predecessor filed a declaration under Voluntary Compliance Encouragement Scheme (VCES) disclosing its service tax liability to the tune of 79,92,56,919/- and discharged the same - Successor filed refund of CENVAT Credit for the debit made - Held that:- amount paid by the appellant is not required to be paid by the appellant as service tax and they have discharged the service tax liability of CNIL during the impugned period. We further note that the appellant has informed vide their letters March 2012 but their claim of re-credit arose only after the issuance of discharge certificate by the competent authority on 22.11.2013 holding that the duty liability discharged by CNIL. Therefore, the cause of action of taking re-credit of such excess amount paid by the appellant before the Hon ble Bombay High Court and disposal of the same by the Hon ble Bombay High Court on 27.01.2014, the same is within one year from the date of acknowledgement of discharge certificate issued by the competent authorities in favour of CNIL, therefore the claim of re-credit is filed by the appellant. Representation made by the appellant for re-credit of service tax paid on behalf of CNIL is within time. We further note that from the records placed before us, it is not ascertainable that whether the appellant has paid exactly an amount of 79,92,56,619/- on behalf of CNIL which is to be examined by the adjudicating authority. Therefore, for the limited purpose, quantification of the amount to be re-credited in the appellant s CENVAT credit account is required and the same is to be computed by the adjudicating authority. In these circumstances, we remand the matter back to the adjudicating authority for only limited purpose of quantification of the amount to be re-credited which shall be done by the adjudicating authority within 15 days of receipt of this order. The appellant is also directed to co-operate with the adjudicating authority for the quantification of the amount. - Appeal disposed of.

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• 2015 (1) TMI 1050
  Maintainability of appeal - argument that there has been non-application of mind, by the Committee of Chief Commissioners - Non compliance of provision of Section 86(2) of the Finance Act, 1994 - Held that:- A careful analysis of the sub-section (2) of Section 35B of CEA, 1944, it is amply clear that if in the opinion of the Committee of Chief Commissioners that the order is not legal and proper, it may direct for filing appeal against the order. The said provision was inserted into the Central Excise Act, 1944 w.e.f. 13-5-2005. Now, referring to the provisions contained in Section 86(2) of Finance Act, 1994, relating to filing of appeal under the said Act, the difference is apparent, as pointed out by the ld. Spl. Counsel for the Revenue. In Section 86(2), it is laid down that the Committee of Chief Commissioners if objects to the order passed by the Commissioner, may direct the Commissioner to file appeal against the said order. In the present case, we find that members of Committee of Chief Commissioners, sitting at different places, accepted and agreed to the analysis of the lower formation and recorded their objection against the said order and directed the Commissioner for filing of the appeal before the Tribunal. Thus, in our opinion, there is sufficient compliance of the provisions of Section 86(2) of Finance Act, 1994. - appeals filed by the Revenue-Appellant are maintainable being filed in accordance with the procedure prescribed under Section 86(2) of the Finance Act, 1994. - Decided in favour of Revenue.

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• 2015 (1) TMI 1049
  Airport services - Intrepretation of term "any service provided" - whether the term "any service provided" covers only the taxable services" or it covers any service provided by AAI or person authorized by it in the Airport/ civil enclaves, or its scope is limited to the services with the AAI is expected to provide under Section 12 of the Airports Authority of India Act; - what is the meaning of "provided in the Airport or Civil Enclave" and whether a service transaction is involved in renting of immovable property for business or commerce and in concession/licensing agreements. - Provisional assessment - Penalty u/s 76, 77 and (b) The service should have been provided in the Airport/Civil Enclave; It would not be correct to add the words "taxable" before the words "service". If the words "any service provided" in clause(zzm) of Section 65(105) are interpreted as "any taxable service provided", this clause would become redundant, as it would cover only those services which are covered by other clauses of section 65(105). An interpretation of a statutory provision, which renders the same redundant is not a correct interpretation and has to be avoided. Moreover Hon'ble Bombay High Court in case of Indian National Shipowers Associates Vs. Union of India reported in 2009 (14) STR-289 (Bom.), has held that the introduction of a new entry and inclusion of certain services in that entry presupposes that there were no earlier entry covering such services. If the words "any service provided" used in section 65(105)(zzm) is read as "any taxable service provided", it will result in the clause (zzm) becoming redundant. Therefore there would be no justification for adding the word "taxable" to "any Service provided", which would make this clause a redundant provision. In fact, section 65(105) of the Finance Act, 1994, which defines the term "taxable service" has evolved since 1994 by addition of new clauses to bring more and more services within the definition of "taxable service". While the expression "any service provided or to be provided" is common to all the clauses, the words following this expression specify the nature of the service. In clause (zzm), the qualifying words are "by Airport's Authority or any person authorised by it, in an Airport or a Civil Enclave". It is inconceivable that a new clause added to section 65(105)(zzm) would not cover any new service but would cover only the services while are already taxable i.e. are covered by other clauses of section 65(105) introduced earlier. Therefore the words "any service provided" in clause (zzm) of section 65(105) would cover any service other than those covered by other clauses of section 65(105)(zzm), which have been provided in an Airport or a Civil Enclave by AAI or a person authorised by it. Revenue from passenger service fee is accounted as Traffic Revenue. Since the general maintenance of the Airports/Civil Enclaves, providing various facilities to the passengers using the Airports/Civil Enclaves and also arranging for the security to the passengers using the Airports/Civil Enclaves is a service which the AAI is required to provide and since the service has been provided by the Appellant (AAI) within the Airports/Civil Enclaves, the same satisfies the criteria prescribed in Section 65(105)(zzm) and would attract service tax under this clause. Though in the Representation to the Committee on disputes of the Central Government, the appellant's stand was that this service is not taxable and the Appellant had been allowed to contest the issue of taxability of this service before the Tribunal, neither the impugned order nor the submissions made by the appellant mention the total amount of the Revenue earned by the appellant from the passenger service fee. Therefore, for quantification of the service tax on passenger service fee, the matter would have to be remanded, to the commissioner. Whether the letting out of the space inside the Airports/Civil Enclaves to various Airlines and other business establishments for their business activities inside an Airport Civil Enclaves is a service or not - Held that:- Circular No. 18/10/04-ST dt.17.09.04 of the Board states that no service tax under section 65(105)(zzm) would be chargeable on the rental/lease charges received by the AAI for rental of part of the premises of an Airport/Civil Enclave, as the activity "letting out premises is not rendering of service". This Circular of the Board stating that letting out of premises is not rendering of service becomes contrary to provisions of law, in view of judgment of Hon'ble Delhi High Court in Case Home Solutions Retails (India) Pvt. Ltd. (Supra) and, therefore, the judgments of various High Courts which are either based on this Circular of the Board or are based on the concession made by the Government counsels on the basis of the Board's Circular, would not be binding precedents. In view of this, we hold that renting/leasing of space inside the Airports/Civil Enclaves by the appellant to various persons for their business activity is a service and since the same has been provided by AAI inside the Airports/Civil Enclaves, and has nexus with passenger facilitation, it would be covered by Section 65(105)(zzm) and would be taxable. Whether fixed amount received by the appellant as license fee/royalty from the concessionaries/licensees operating, car parking facility, managing visitors' entry into the Airports/ Civil Enclaves and issue of season tickets and temporary passes would attract service tax or not - Held that:- Appellant cannot be treated as service provider in respect of managing car parking, visitor's entry into Airports/Civil Enclaves and issue of temporary passes/season tickets, as it is the persons licensed by the Appellant who have stepped into the shoes of the Appellant and are providing these services, who would be liable to pay service tax on the amount being received by them from the users of these services. The Appellant in terms of the provisions of Airports Authority of India Act, 1994 being the only person responsible for management of all the Airports and Civil Enclaves in India are responsible for providing various services at the Airports/Civil Enclaves to Airlines, passengers and other persons associated with transportation of goods and persons by Air and operation of Airports/Civil Enclaves. Some of the services - parking facility for visitors, providing the visitors' access to Airports/Civil Enclaves and issue of seasons tickets/passes are provided against payment though sale of tickets/passes. Provision of these services by the Appellant (AAI) represents a business which has a stream of revenue. Because of restriction put by law, only the AAI or the persons authorised by AAI can provide these services in the Airports/Civil Enclaves, as a result of which there is a premium on this business. When instead of the Appellant operating these businesses at the Airports/Civil Enclaves, they authorise other persons to operate these business and provide these services under licence/concession agreements under which the Appellant receive fixed amounts from the licensees/ concessionaires for a specified period against licence/ permission to them to operate these businesses and sell the tickets/passes during that period the Appellant have rented the business, in question, to the licensees/concessionaires. The lump sum amount/ licence fee charged by the Appellant from licensees/Concessionaires is in the nature of royalty. There is no difference between the activity of the Appellant (who by virtue of the provisions of Airports Authority of India Act, 1994 have exclusive right to manage all Airports/ Civil enclaves in India) of permitting other persons to operate and manage certain services in the Airports/ Civil enclaves like parking facility to visitors, visitor's access to Airport/ civil enclave etc. for some consideration under licence/ concessionaire agreements and the activity of a person, who owns some property, tangible or intangible, of permitting the use of that property by other persons for some consideration; in both the cases, the activities are services. Car parking areas - Held that:- Since this activity is a service which has been provided by AAI in the Airports/Civil Enclaves, and the same has nexus with the operation and management of Airport/ civil enclaves the same would be taxable under Section 65(105)(zzm). In this regard, Appellant's plea that car parking areas are outside the Airports/Civil Enclaves is not acceptable as these areas/structures are the areas/structures appertaining to the Airports/Civil Enclaves as the same are connected with the functioning of Airports/Civil Enclaves. Letting out space at the Airports/Civil Enclaves for display of Hoardings etc. - Held that:- Reasons given by the Commissioner for dropping the service tax demand in respect of Revenue earned by the appellant from the letting out space at the Airports/Civil Enclaves for display of Hoardings etc. are wrong. Even if this is treated as service of sale of space for advertisement, which as such was not taxable during the period of dispute and become taxable w.e.f. 01.05.06 - Even if this is treated as letting out of space inside the Airports/Civil Enclaves to advertising agencies etc. for putting up Hoardings for Advertisement, even then it will be an activity of letting out of immovable property in the Airports/Civil Enclaves for Commercial purposes and as discussed above, the same has to be treated as service and would be taxable under section 65 (105)(zzm) as same has been provided by AAI in the Airports/Civil Enclaves. - Therefore, the Commissioner's Order dropping the service tax demand of about 7.05 Crores on the Revenue received by the Appellant from letting out of space at Airports/Civil Enclaves for display of Hoardings etc. is not correct and has to be set aside and service tax demand on this amount has to be confirmed. Service Tax of 56,74,775/- has been demanded on an amount of 9,37,21,598/- received by the appellant as miscellaneous income. According to the appellant, this income is from unclaimed earnest money deposit/security deposit, liquidated damage, sale of tender forms, sale of scrap etc. which have nothing to do with provision of service. In our view, if this contention of the appellant is correct, service tax demand on this amount would not be sustainable. However, the impugned order does not discuss the Appellant's plea in respect of miscellaneous income. In view of this, the demand of service tax on the miscellaneous income has to be set aside and matter would has to be remanded to the Commissioner for de-novo adjudication after considering the Appellant's plea in respect of the same. Extended period of limitation - Held that:- The limitation period under Section 73(1) would be in-applicable only for the period for which provisional assessments had been ordered under Rule 6(4) of the Service Tax Rules, 1994 i.e. for period from March'05 to Sept'05. While the demand for period from Oct'05 to March'06 is within normal limitation period, the demand for period from 10.09.04 to Feb.'05 would survive only if the assessments for this period were provisional. Though the commissioner in the impugned order has confirmed the demand for period from 10.09.04 to 30.09.05 by finalising the provisional assessments for this period, in para 70 of the order, he has given a finding that assessments for period from Sept.'04 to Feb.'05 were not be considered as provisional. - Matter remanded back in respect of provisional assessment - The demand for the remaining period i.e. from March'05 to 31.03.06 is not hit by limitation. This is a fit case for invoking Section 80 according to which notwithstanding anything contained in Section 76, 77 & 78, no penalty shall be imposable on an assessee for any failure referred to in the said provisions if the assessee prove that there was reasonable cause for the said failure. - invoking Section 80, the penalty under Section 76 and Section 77 has to be set aside. - Following decisions of Flammingo Dutyfree Shops Pvt. Ltd. Vs. Union of India reported in [2013 (1) TMI 523 - DELHI HIGH COURT] - Decided partly in favour of assessee.

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• 2015 (1) TMI 1048
  Short payment of tax - Travel Agent service - Penalty u/s 78 - Held that:- Main contention put forth on the side of the appellant is that the respondent has not paid Service Tax in respect of the service rendered by it and further, the respondent has made only short payment. Under the said circumstances, the claim made by the Department is inconsonance with law and the same cannot be turned out, but both the Commissioner of Appeals as well as CESTAT without assigning proper reasons have rejected the demand, made by the Department and in view of the discussion made earlier, this Court has found considerable force in the contention put forth on the side of the appellant and the substantial question of law settled on the side of the appellant are having substance - Decided in favour of Revenue.

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• 2015 (1) TMI 1047
  Chartered Accountant service - Whether the billing activity calculation undertaken at the behest of Chartered Accountant amounts to practicing of registered Chartered Accountancy in order to levy Service Tax - Held that:- Tribunal has relied on its own decision in the case cited [2007 (10) TMI 144 - CESTAT, BANGALORE]. In that case, it was held that the billing activity, which is undertaken at the instance and on behalf of a Chartered Accountant, is not the job of Chartered Accountant professionals. We find sound logic of this conclusion as the Chartered Accountant starts his functioning the moment accounts are complete. If the accounts are not complete, the Chartered Accountants ordinarily advise their clients to prepare proper accounts, and in support of these accounts vouchers and bills are required to be prepared. Chartered Accountants themselves do not prepare bills or vouchers. This is done by ministerial staff and clerks and that is not part of the job of the Chartered Accountant. As such, we accept the findings of the Tribunal. We, therefore, do not find any merit in this appeal. - Decided against Revenue.

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• 2015 (1) TMI 1046
  Imposition of penalty - Suppression of facts - Held that:- Court has seen the entire final order passed [2009 (3) TMI 43 - CESTAT, CHENNAI], wherein it has been specifically held that the entire claim of the appellant is barred by limitation. Of course it is true that the appellant has put up its claim from October, 1998 to August, 2000. Since period of limitation is six months, rejection of the entire claim concluded by the Appellate Tribunal is erroneous and therefore, the order passed by the Appellate Tribunal is liable to be set aside and the matter is liable to be remitted to the file of the Appellate Tribunal for considering the last portion which has been mentioned in Annexure-II, started from April, 2000 to August, 2000. Since the matter is liable to be remitted to the file of the Appellate Tribunal, the substantial questions of law settled in the present Civil Miscellaneous Appeal need not be decided. - Matter remanded back - Decided in favour of Revenue.

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• 2015 (1) TMI 1045
  Denial of refund claim - Unjust enrichment - Held that:- There being no dispute that the stay application in the appeal filed by the Revenue before the CESTAT, is rejected, there is no reason for the respondent-Revenue not to effect refund. However, it is stated that there was unjust enrichment and therefore, refund amount was credited to the Consumer Welfare Fund. Therefore, the question as to whether the petitioner gained by unjust enrichment is required to be considered by the CESTAT in the appeal. Although learned counsel for petitioner submits that the said question does not arise for decision making, since CESTAT in its earlier order has opined that petitioner was the Consumer and the money had to be refunded to the petitioner, I am not impressed by that submission at this stage, since it may have to be advanced before the CESTAT in the appeal. Revenue failed to make payment by way of refund of Rs. l 5,16,992/-. If CESTAT concludes that petitioner has not made unjust enrichment, it is needless to say that the Revenue must refund the amount to the petitioner and not to the Consumer Welfare Fund. In that event, petitioner is entitled to interest on the said sum. Since the amount is lying with the revenue from 25-1-2005, and the petitioner is kept away from it, Respondent-State is directed to pay interest at 12% per annum from the date of deposit up to the date of payment and not at 6% per annum as prescribed by Section 11BB of the Central Excise Act, 1944 since it is not a case of mere delay in refund. - Petition disposed of.

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• 2015 (1) TMI 1044
  Refund claim - Whether CESTAT was right in considering the charges for Terminal Handling charges and Repo Charges covered under Sections 65(105)(zn), despite clear legal provisions given in the Finance Act, 1994 and relevant Notification issued thereunder - Held that:- Tribunal had relied on its previous decision in case of M/s. Macro Polymers Pvt. Ltd. v. CCE, Ahmedabad, dated 4-6-2010 - [2010 (6) TMI 257 - CESTAT, AHMEDABAD]. In such a decision, the Tribunal considered various aspects of exemption under the said Notification vis-a-vis services covered by virtue of Section 65(105)(zn) of the Finance Act, 1994. - Government issued another Notification No. 17/2009-S.T., dated 7-7-2009, in which for all services classified under Clause (105) of Section 65, exemption was granted from payment of Service Tax paid on services commonly known as “terminal handling charges”. Of course, as rightly pointed out by the learned counsel for the respondent, such Service Tax had to be paid by the service provider and refund thereto had to be claimed by the exporters services recipients. However, we are not concerned with the modalities of this Exemption. Suffice to note, juxta position to the earlier Notification, dated 6-10-2007, in the subsequent Notification, dated 7-7-2009, the exemption was available to all services classified under sub-clause (zn) of Clause 105 of Section 65. It is thus, not in dispute by virtue of subsequent Notification, dated 7-7-2009, there is no conflict between the department and the assessee. The period of conflict therefore, gets narrowed down to two dates between the two Notifications. - The department seems to be contending that the services provided by the respondents would not fall under sub-clause (zn) of Clause 105 of Section 65. Even if, Department has some arguable point there, however, in the present appeals, it is not disputed that in majority of the cases, Service Tax were collected under such entry. When the assessee claimed exemption, as provided in Notification, dated 6-10-2007, the Department has issued Show Cause Notice why the refund claim should not be rejected, since Service Tax does not fall under Section 65(105)(zn) at all. Having previously collected the Service Tax under such heading, we are doubtful whether such reverse stand could have been taken. In totality of the facts and circumstances of the matter, no question of law arises - Decided against Revenue.

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• Central Excise

• 2015 (1) TMI 1042
  Reversal of CENVAT Credit - Whether respondents are required to reverse the input credit availed on fuel used in the manufacture of exempted products as they manufactured both dutiable and exempted goods and availed input credit on fuel - Held that:- The Rule 6 (1) stipulates for inputs are used for dutiable and exempted goods and sub-rule (2) of CCR stipulates that respondents should maintain separate inventory of inputs exempted and dutiable except intended to be used as fuel. The present case is only on the credit availed on fuel used in the exempted product. High Court of Gujarat in case of Commissioner Vs Shell Extruders (2008 (7) TMI 947 - GUJARAT HIGH COURT) also dismissed the Revenue s appeal on the issue. In the present case, the lower appellate authority has discussed the issue in detail and rightly held that credit availed on furnace oil and oxygen which are fuel is permissible. By respectfully following the Hon ble High Court order, I do not see any infirmity in the order of Commissioner (Appeals). - Decided against Revenue.

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• 2015 (1) TMI 1041
  Manufacture of chewing tobacco - compounded levy scheme - Closure of factory - Period of closure - Held that:- factory of the appellant was closed for the period 25.07.2012 to 21.08.2012 and duty was not paid by the appellant on 05.08.2012 as their factory was not functioning but when the factory started functioning on 22.08.2012 they have paid the duty on 24.08.2012. If at all the appellant are liable to pay, they are liable to pay interest for the period of 05.08.2012 to 24.08.2012 which appellant has already paid. Therefore, following the decision of this Tribunal in the case of Shree Flavours Pvt Ltd. (2014 (4) TMI 417 - CESTAT NEW DELHI) I hold that appellant is not required to pay duty. - Accordingly impugned order is set aside - Decided in favour of assessee.

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• 2015 (1) TMI 1040
  Cenvat credit - Colour Picture Tubes (CPT) are cleared on payment of duty - Re-manufacture and re-making of tubes - Held that:- Defective CPTs, which had earlier been cleared on payment of duty, had been received back in the factory for being re-made in the terms of the provisions of Rule 16 of the Central Excise Rules, 2002. From the records, it is clear that the defective CPTs received back had been dismantled and thereafter by using salvaged parts and fresh parts, the entire process of manufacturing is undertaken on the same production line. The fresh CPTs made had been cleared on payment of duty. Under the provisions of Rule 16 of the Central Excise Rules, 2002, when duty paid goods are returned to the factory of manufacture, for being repaired, remade, refined, reconditioned, etc., the manufacturer take the cenvat credit of the duty originally paid and thereafter in terms of provisions of sub-rule (2), at the time of clearance of the repaired/remade goods, if the process undertaken does not amount to manufacture, he is required to pay the duty amount equal to the cenvat credit taken, but if the process amounts to manufacture, he is required to pay the duty chargeable on the goods at the rate applicable on the date of removal and on the value determined under the provisions of Section 3(2), Section 4 or Section 4 A, as the case may be. There is no provisions in Rule 16 that Cenvat credit in respect of the inputs used in the process of repairing/refining would not be available. Appellant had disclosed the process undertaken by them as early as in the month of May, 2001 in respect of the defective CPTs received from their customers and hence, the department cannot allege suppression of facts saying that the appellant had not disclosed that they were taking Cenvat credit on the inputs used in re-making of the goods. In view of this, there is merit in the appellant plea. In these circumstances, I hold that the appellant has correctly availed the Cenvat credit on input and the same cannot be denied - Decided in favour of assessee.

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• 2015 (1) TMI 1039
  Non maintenance of proper records - Violation of Rule 10 of the Central Excise Rules, 2002 - Confiscation of goods - enhancement of the redemption fine and penalty - malafide intention or suppression of facts or intention to fraud, collusion or for contravention of any provisions of Rule / Act or to evade payment of duty - Held that:- provisions of Rule 25 of the Rules can be invoked subject to the provisions of section 11AC of the Act. In this case provisions of section 11AC has not been invoked, consequently Rule 25 of the Rules are not invokable as held by this Tribunal in the case of BMW Steels Ltd. (2010 (10) TMI 885 - CESTAT, NEW DELHI) as well as by Hon’ble High Court of Andhra Pradesh in the case of Mahalakshmi Profiles Ltd. (2012 (9) TMI 706 - ANDHRA PRADESH HIGH COURT). In these circumstances, the impugned order is liable to be set aside to the extent of confiscation of goods seized and consequential imposing penalty. As it has been noted that the provisions of Rule 25 of CER, 2002, are not invokable, therefore, the confiscation of goods and consequently imposing redemption fine and penalty on the assessee are not warranted. - Decided against Revenue.

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• 2015 (1) TMI 1038
  CENVAT Credit - Capital Goods - Held that:- it is not disputed that subject items were used by the respondent in manufacturing of capital goods. Therefore, there is no requirement of quantification of the quantity used in the manufacture of capital goods. The respondents are entitled to take Cenvat credit of the subject items which were used by the respondent for manufacturing of capital goods. Following decision of CCE, Tiruchirapalli vs. India Cements Ltd. reported in [2013 (1) TMI 5 - Madras High Court] - Decided against Revenue.

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• 2015 (1) TMI 1037
  Manufacture of mineral water with the brand name of the appellants by the Job Worker - Who is liable to pay duty - Held that:- Observations of the learned Commissioner that the appellant has to be considered as a principal manufacturer just because the job-workers are not free to market the goods manufactured by them. We are also unable to agree with the conclusion that because they are not free to market the goods they are not independent entities. In this case, what is being manufactured is packaged mineral water and it is nobody s case that mineral water is manufactured out of raw-material supplied by the appellant. The major input for manufacture of drinking water is not supplied by the appellant. Further even if the job-workers are manufacturing the goods, legally only for the purpose of valuation, the question as to whether a person is a job-worker or not comes into consideration. In such a case, only for valuation purpose, the prices at which the goods are cleared by the principal manufacturer are taken into account. We are not aware of any precedent decision nor was any decision placed before us to support the view that if bottles are supplied or raw-materials are supplied and if the job-worker is not free to market the goods manufactured by him, the principal manufacturer or the supplier of raw-material has to be considered as the manufacturer. To decide as to who is the manufacturer, the question that has to be answered is who converted the raw-material/input into a new product with a distinct name, character and use. In this case undoubtedly it is the job-worker. - appellant has made out a case for complete waiver. Accordingly the requirement of pre-deposit of balance dues is waived and stay against recovery is granted for a period of 180 days from the date of this order - Stay granted.

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• 2015 (1) TMI 1036
  Interest and penalty for taking the Cenvat credit wrongly - credit was availed by the appellant in terms of permission granted by their jurisdictional Asstt. Commissioner - Revenue changed its opinion and withdrew the permission on 30-4-2012 and the appellant was directed by the Superintendent to reverse the credit entry on 23-5-2012 which was actually reversed on 8-6-2012 - Held that:- Following decision of Commissioner of Central Excise, Bangalore v. Bill Forge Pvt. Ltd [2011 (4) TMI 969 - KARNATAKA HIGH COURT] - where the credit availed remained as paper entry only and was not utilized at all, no interest liability would arise against the assessee - Decided in favour of assessee.

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• 2015 (1) TMI 1035
  Condonation of delay - Inordinate delay of 12-13 years in filing appeal - Non receipt of order - Held that:- When admittedly the fact of factory being closed was in the knowledge of the Revenue, surprisingly no efforts were made by the Revenue to serve the copy of the order to the assessee at their alternative addresses. The Revenue thought it fit to paste the order on the closed gate of the factory and satisfied to have completed their duty. One factor, which needs to be taken into consideration is that during the intervening period of 11 to 12 years, the Revenue has not made any efforts (at least shown to have made on record) to recover the amounts, in question. This fact also supports the appellant’s stand that they had not received the order inasmuch as no Departmental officer approached them for recovery of the dues, during the intervening period. It is only when they approached the Development Commissioner for de-bonding of their unit and were advised to obtain a no clearance certificate from the Revenue, they approached the Revenue and were informed about the passing of the present impugned order. Immediately they procured a copy of the order under RTI application and filed the appeal within the limitation period of three months. As such, we are of the view that either there is no delay in filing the appeal or even if there is a delay, the same is not intentional inasmuch as the appellant has established that the order was not received by them and as such the same requires condonation. - Decided in favour of assessee.

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• 2015 (1) TMI 1034
  Waiver of pre deposit - SSI exemption - assembly / manufacture of amplifier speakers with or without FM radio - putting brand name - Notification No. 8/2003-C.E., dated 1-3-2003 - Held that:- Prima facie, the demand relating to amplifier speakers without FM radio confirmed by treating the processes of putting others’ brand names and repacking as amounting to manufacture would be difficult to sustain in the absence of any deeming provision to treat these processes as amounting to manufacture. However, putting the brand names of others on the amplifier speakers with FM radio bought from others would amount to manufacture in view of the above-referred deeming provision and consequently these goods will be liable to duty because goods bearing brand names of others are not eligible for SSI exemption as per para 4 of SSI exemption Notification No. 8/2003-C.E., dated 1-3-2003. - amplifier speakers with or without FM radio manufactured by them and cleared under their own brand name would be eligible for SSI exemption under Notification No. 8/2003-C.E., dated 1-3-2003 as their clearances were below the threshold limit. - it is not necessary to verify these figures at this stage or to delve deep into the possibility of the suppliers/buyers of speakers being related to the appellants for the mere purpose of arriving at a reasonable figure for pre-deposit for the purpose of fulfilment of the requirements of Section 35F of the Central Excise Act, 1944. As the duty confirmed is of the order of 88 lakhs, a pre-deposit of 22 lakhs will fairly serve the said purpose. - Partial stay granted.

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• 2015 (1) TMI 1033
  Refund of unutilized Cenvat/Modvat Credit- the appellants have filed a claim for refund of cenvat credit of 14,77,508/- on the ground that they have unutilized cenvat credit on inputs used in the manufacture of electric cars cleared for export under bond during the period from 13-1-2005 to 16-9-2005 under Rule 5 of Cenvat Credit Rules, 2004 read with Notification No. 11/2002-C.E. (N.T.) dated 1-3-2002 as amended - whether the appellant is eligible for claim of refund of Cenvat credit of 14,77,508/- which was claimed on the ground that the credit on the inputs used in the manufacture of electric cars cleared for export under bond were not utilised. Held that:- appellant had cleared the goods for export on payment of duty as per ARE-1 and filed rebate claims which were sanctioned. The accumulation of Cenvat credit has not arisen because of exports but because of difference in rates of duty on inputs and the final products. It is also undisputed that there cannot be any bond or letter of undertaking when the export was made on payment of duty - It can be seen from the Rule 5, it is very clear that refund cannot be allowed when the manufacturer or provider of output service avails of drawback or claimed rebate of duty under Central Excise Rules, 2002. In this case, the appellants had claimed rebate of duty and there is no contrary submission. Therefore the rejection of refund claim on this ground has to be sustained. - Decided against assessee.

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• CST, VAT & Sales Tax

• 2015 (1) TMI 1043
  Amount paid under contract of selling formed part of sale price or not - Whether the Tribunal was justified in holding that the “Airtime charges” and “License fees” charged under an contract of selling activated pager do not form a part of sale price within the meaning of Section 2(29) of the Bombay Sales Tax Act, 1959 – Held that:- In State of Karnataka vs. Bangalore Soft Drinks Pvt. Ltd. [1998 (9) TMI 539 - SUPREME COURT OF INDIA] it has been held that the Respondent has effected sales “exworks” and had also undertaken transport of the goods to the place of the buyer - The goods were transported in the vehicles of the Petitioners only - the transfer of the property in the goods takes place at the factory gate of the Petitioner and the subsequent transportation undertaken by the Petitioner was for and on behalf of the Petitioner as his agent - The obligation of transportation was construed to be as separate contract and therefore, the freight charges cannot be included in sale price of the goods - the goods which form part of the subject matter of the contract between the Respondent and its buyer were in a specific and deliverable state - The transfer of property in the goods in pursuance of the sale contract takes place against the payment of the price of goods - The delivery of the goods is effected by the seller to the buyer and the obligation under law to obtain registration of the motor vehicle is cast upon buyer - The service of facilitating the registration of the vehicle which is rendered by the seller-assessee is to the buyer and in rendering that service, seller acts as an agent of the buyer - The handling charges for this service cannot form part of sale price - Thus, taking overall view of the matter it is clear that the sale price does not include airtime charges and/or license fees – thus, sale price will be restricted to that of the hardware, namely, pager units and will not include the cost of airtime and license fees - the tribunal was justified in holding that airtime charges and license fees charged under the contract for selling activated pager do not form part of the sale price – Decided against Revenue.

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• Indian Laws

• 2015 (1) TMI 1053
  Condonation of the delay of 2449 days - Held that:- We are of the convinced opinion that the High Court has misdirected itself by not considering certain facts, namely, (a) that the notice of the writ petition was served on the earlier managing committee; (b) that the earlier committee had appeared in the writ court and was aware of the proceedings and the order; (c) that the District Inspector of schools had communicated to the managing committee to comply with the order of the learned single Judge; (d) that the earlier managing committee had undertaken before the learned single Judge to comply with the order; (e) that the new managing committee had taken over charge from the earlier managing committee; (f) that nothing has been indicated in the affidavit that under what circumstances the new managing committee, despite taking over charge, was not aware of the pending litigation or for that matter the communication from the District Inspector; (g) that the writ court was still in seisin of the matter and no final verdict had come and hence, it would not be a case where there will be failure of justice if the appeal against the interim order is not entertained on the ground of limitation inasmuch as the final order was subject to assail in appeal; (h) that the managing committee had exhibited gross negligence and, in any way, recklessness; (i) that the conduct and attitude of the members of the committee before the writ court deserved to be decried since they should not have taken recourse to maladroit effort in complying with the order of the court; and (j) and that it was obvious that the managing committee was really taking resort to dilatory tactics by not seeking necessitous legal remedy in quite promptitude. The persons chosen to act on behalf of the Managing Committee cannot take recourse to fancy and rise like a phoenix and move the court. Neither leisure nor pleasure has any room while one moves an application seeking condonation of delay of almost seven years on the ground of lack of knowledge or failure of justice. Plea of lack of knowledge in the present case really lacks bona fide. The Division Bench of the High Court has failed to keep itself alive to the concept of exercise of judicial discretion that is governed by rules of reason and justice. Thus the appeals are allowed and the order passed by the Division Bench condoning delay is set aside. -Decided in favour of revenue.

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