Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 31, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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Product Registration Expenses - the expenditure is neither for the creation of an asset nor an advantage for ever - held as revenue in nature - AT
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Valuation - A.O. has made his own exercise for valuation of the asset in question although it cannot be accepted that the A.O. is a technical expert for valuation of the asset in question. - AT
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Current Repairs - capital v/s revenue - though each of the item is useable independently but that such items have been used for repair and maintenance. With such finding, the expenditure was allowed. - HC
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Family arrangement - Since the amount paid during the course of partition is to settle the inequalities in partition, therefore deemed to be immovable property. - Such amount is not an income liable to tax. - HC
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Challenge to the letter regarding payment of arrears of tax and interest accrued. - What the petitioner failed to achieve directly is trying to achieve indirectly. - HC
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Rectification of mistakes -The power to rectify a mistake u/s 254(2) cannot be used for recalling the entire order. No power of review has been given to the Tribunal under the IT Act. - AT
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TDS on Subscription for e-magazine/journal - no TDS was required to be deducted as the payment was for a subscription of financial e-magazine - AT
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Tax Credit - Once the TDS certificate has been issued by deductor he cannot claim refund of the amount deducted because the tax deducted primarily constitutes income of deductee and he can only claim the refund of the amount - AT
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Addition on account of income as per TDS certificate - Difference in books of accounts and TDS certificate - addition wholly unwarranted. - AT
Customs
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Inclusion of freight in value of imported goods - when despatch money is a part of freight, such deduction granted will be eligible for exclusion from the assessable value, because only the noted cost of transport would be added to the assessable value. - AT
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Fraudulent claim of duty drawback - there is no provision in the Customs Act 1962 similar to Section 179 of the Income Tax Act 1971 or Section 18 of the Central Sales Tax Act 1956 where the dues of a private limited company can be recovered from its directors - HC
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Order of the Settlement Commission cannot be dissected and challenged only in respect of interest and accepting the rest. - HC
Service Tax
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Cenvat credit - Event management service and clearing & forwarding service - These services does not fall within the category of input credit service as defined in Rule 2 (1) of the Cenvat Credit Rules 2004. - AT
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There is no concept of assessment on a regular basis or acceptance of details in the service tax returns as correct officially by the Department unless documentary evidence is produced to show that the Department has accepted the assessment made by the assessee - AT
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Demand - supply of technical know-how cannot be taxed under "Consulting Engineering Service" - AT
Central Excise
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Extended period of limitation - no suppression of facts - the Tribunal was justified in reversing the finding to the effect that the process of manufacture had not been disclosed in the declarations - SC
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Confiscation of goods Unaccounted goods - Non-entry of goods in RG-I register Intention to evade duty - the wire in question is not liable to confiscation for their non-entry in RG-I register. - AT
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Penalty u/s 11AC - Clandestine manufacture of goods - Principle of Rule of evidence is that facts admitted need not be proved. - AT
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Rule 18 of CER 2002 Rebate of duty CBEC has relaxed the condition of export of tea direct from factory Rebate claims under Rule 18 should be sanctioned - CGOVT
Case Laws:
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Income Tax
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2013 (1) TMI 655
Product Registration Expenses and reimbursement of Product Registration Support Services expenses - Trademark Registration Fees and Patent Registration Fees - capital v/s revenue - Held that:- Assessee has not acquired any new right of permanent character. The licenses or the registrations are required to be renewed and therefore part of the day to day running expenditure of the business. [ACIT v. Vodafone Essar Gujarat 2010 (1) TMI 941 - ITAT, AHMEDABAD]. If an expenditure can give a benefit which is said to be endured for one year or even annually year after year then it is unreasonable to hold that any enduring benefit taken place to the assessee. [Comsat Max Limited. 2009 (1) TMI 314 - ITAT DELHI-H]. An expenditure incurred in the existing line of business in order to run the business smoothly in the years to come but in the absence of creation of "any new asset we hereby held that such an enduring benefit may not tantamount to rendering of capital expenditure. [DCIT v. Core healthcare 2008 (10) TMI 74 - GUJARAT HIGH COURT]. Also as decided in CIT v. Finley Mills Ltd. [1951 (10) TMI 1 - SUPREME COURT] that an expenditure incurred in registering for the first time its trademark, then by registration the owner is merely absolved thereafter from obligation to prove his ownership of trademark. Thus the expenditure is neither for the creation of an asset nor an advantage for ever - in favour of assessee. Weighted deduction for expenditure on Scientific Research u/s. 35(2AB) in respect of Clinical Trial and Bio-equivalence Study disallowed - Held that:- From the contents of the explanation of Section 25(2AB) it is found that not only the expenditure incurred on clinical drug trial but the expenditure incurred for obtaining approval from any regulatory authority under any Central, State or Provincial Act and also the expenditure incurred for filing an application for a patent under the Patent Act 1970 are stated to be covered within the definition of expenditure on scientific research. For a clinical drug trial, the first stage is to enroll volunteers and/or patient into small pilot studies and subsequently large scale studies are carried out on patients and such clinical drug trial may be in one country or in multiple countries. Carrying out drug trial is essential for approval of the drug in question to be sold in the public and hence, clinical drug trial cannot be carried out inside an in-house research facility i.e. usually the laboratory. Hence, this explanation to Section 35(2AB)(1) does not require that these expenses which are included in this explanation are essentially to be incurred inside an in-house research facility because in our considered opinion, it is not possible to incur these expenses inside in-house research facility - in favour of assessee. Disallowance u/s. 14A - Held that:- Matter be restored back to the file of the A.O. for a fresh decision as was done by the tribunal in assessment year 2006-07 because as per this judgement of Godrej & Boyce Manufacturing Co. Ltd. v. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] as Rule 8D is applicable from assessment year 2008-09 - in favour of assessee for statistical purposes. Unexplained investment u/s. 69 - purchase of Hummer H2 imported motor car - Held that:- As per the provisions of Section 69, addition can be made only if it is found that the assessee has made investments, which are not recorded in the books. Hence, it is essential that first it has to be established that some investments are made by the assessee which have not been recorded in the books of the assessee. Regarding the alleged difference in the price of imported car, it is the explanation of the assessee that whatever had been paid by the assessee is properly accounted for in the books and disclosed. Regarding the cost of US$20,800 in respect of conversion of this car from LHD to RHD, it is the submission of assessee that this payment is not actually made and is still outstanding. Once this explanation is furnished by the assessee, it was incumbent upon the A.O. to bring evidence on record to establish that payment was in fact made by the company. The A.O. has not done so. It could have been done by obtaining the confirmation from the concerned party as to whether the payment is received by that party or not and if received, in which year. Even this simple exercise was not even attempted to by the A.O. and hence, the addition is not justified in the absence of any evidence regarding actual payment by the assessee on this cost of conversion of the car - in favour of assessee. Disallowance of depreciation on Hummar H2 motorcar - Held that:- As decided in CIT Vs Varanasi Auto Sales Pvt. Ltd. [2010 (1) TMI 19 - ALLAHABAD HIGH COURT ] even if the trucks are in the name of the Director, depreciation is allowable to the assessee because the trucks were purchased in the name of the Director just for the convenience but the funds have been invested by the assessee company and hiring rent received from such tucks have been credited by the company in their account. As in the present case there is no finding by the authorities below on the aspect whether the car in question was used for the business purpose the assessee and disallowance was made merely on this basis that the car in question is in the name of the Director of the assessee company - restore this matter back to the file of the A.O. for a fresh decision & burden is on the assessee to establish the business use of this car and, thereafter, the A.O. should pass necessary order - in favour of assessee for statistical purpose. Restricting the deduction u/s. 80IC & 80IB - Held that:- The stand of the A.O. cannot be approved because it is not a reasonable basis for computation of profit of an eligible unit. The profit has to be computed on the basis of selling price less cost of goods produced along with various overheads and only where there is some inter unit transfer of goods or service between various units of the same assessee, then it has to be ensured that recording of such transfer of goods or services should be at market value of such goods or services on the date of transfer and even if such recording of transfer is not as per market value, the A.O. can bring it to market value and he cannot proceed to estimate the profits and gains on a reasonable basis unless he establishes that there is any exceptional difficulty in adopting the market value and even then, the basis adopted by the A.O. to compute the profits and gains, should be reasonable basis. In the present case, we have seen that neither the pre requirement of sub-section (8) or its proviso to section 80-IA has been fulfilled by the A.O. nor the basis adopted by him is a reasonable basis and, therefore, we do not find any basis to confirm or approve the action of the A.O. - in favour of assessee. Disallowing the mark to market exchange loss on foreign exchange derivatives - Held that:- Decided in favour of assessee relying on DCIT v. Bank of Bahrain & Kuwait [2010 (8) TMI 578 - ITAT, MUMBAI]. Addition as upward adjustment on international transactions - Transfer Pricing adjustment - Held that:- Since in the earlier year, similar issue was restored back to the file of the A.O. for a fresh decision, we restore this mater back to the file of the A.O. for a fresh decision for this year also with similar directions - in favour of assessee for statistical purposes. Adjustment on account of 'Expenses disallowed u/s. 14A' for purposes of computation of book profit u/s. 115JB - Held that:- Decided in favour of assessee in the case of Goetz (India) Ltd. v. CIT [in the case of [2009 (5) TMI 615 - ITAT DELHI] & there is no contrary decision on this issue till date - in favour of assessee
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2013 (1) TMI 654
Reopening of assessment - assessee has claimed deprecation on non compete territory right - Held that:- As seen that not only query was raised by the A.O. in the course of original assessment proceeding but reply was also submitted by the assessee and, thereafter, in the assessment order also, it is noted by the A.O. that assessee has made claim of depreciation on these intangible assets @ 12.5% and he did not make any disallowance and under these facts, we are of the considered opinion that in the present case, the reopening done by the A.O. is on mere change of opinion and, therefore, the same is not valid as per this judgement rendered in the case of Gujarat power Corporation Ltd. (2012 (9) TMI 69 - GUJARAT HIGH COURT) and also CIT v. Kelvinator of India Limited (2010 (1) TMI 11 - SUPREME COURT OF INDIA) - in favour of assessee. Applicability of Explanation 3 to section 43(1) to assessee's case - Held that:- As per this explanation 3 to section 43(1) the A.O. can determine the original cost of the assets for allowing depreciation to the assessee only if he is satisfied that the main purpose of transfer of such asset, directly or indirectly to the assessee, was the reduction of liability to income tax by claiming extra depreciation with reference to an enhanced cost. This is the first prerequisite that the A.O. has to establish that the main purpose of transfer of such asset was the reduction of liability to income tax by claiming extra depreciation on enhanced cost. In order to establish this, it has to be established that apart from claiming additional deprecation on enhanced cost, there is no other main purpose for acquiring the asset in question. Valuation of intangible asset i.e. the trademark acquired - held that: - A.O. did not fulfill the pre requirement of invoking Exp.(3) to Section 43(1) & even after invoking this Exp.(3) to Section 43(1) rightly or wrongly, the A.O. has not worked out the value of the asset in question in the proper manner. - He has ignored the valuation report of various technical experts such as RSML & Co. C.A. and others and instead of obtaining the departmental valuation report or any other report of any other independent valuer, the A.O. has made his own exercise for valuation of the asset in question although it cannot be accepted that the A.O. is a technical expert for valuation of the asset in question. - the valuation done by the A.O. is not proper and therefore, the action of the A.O. is not justified - in favour of assessee. Addition as interest on Deep Discount Bonds - Held that:- Assessee is entitled to proportionate claim of expenditure towards discount/interest of DDBs on actual basis in the year of appeal and the A.O. was directed to correctly work out the same and to allow deduction to the extent it relates to the year under appeal.
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2013 (1) TMI 653
Repair & maintenance expenses - Current Repairs - capital v/s revenue - Held that:- Repair and maintenance is in fact necessary not only for achieving the optimum utilization of machinery but also if possible to extend its economic life. Therefore, the fact that such installation has increased life beyond their original economic life cannot be a ground to conclude that the expenses incurred were not for repair and maintenance. Similarly, the ground of increase in the profitability of concern is again a totally alien to determine the nature of the repair and maintenance. Increase in profit would lead to increase in income, which would be separately taxable but could not be a ground for declining the expenses incurred by the assessee for repair and maintenance. Though the findings returned is that new identifiable assets have been created but the Tribunal has returned a finding that though each of the item is useable independently but that such items have been used for repair and maintenance. With such finding, the expenditure was allowed. The findings recorded by the Tribunal are the findings of fact - no substantial question of law arises for consideration.
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2013 (1) TMI 652
Demand of tax dues and equivalent amount of penalty - communication directing the petitioner to pay Rs. 5,00,000/- by 10.1.2013 whereas the remaining demand was stayed up to 31.1.2013 - Held that:- Petitioner is duty bound to pay the duty amount of tax and the penalty as assessed by the AO. The petitioner was granted indulgence at one stage by deferring the payment of tax and penalty but subsequently, on a request made by the petitioner, a conditional order has been passed as mentioned above. Since, the payment of tax and penalty is a statutory duty, do not find that any case is made out for interference in the writ jurisdiction of this Court - against assessee.
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2013 (1) TMI 651
Family arrangement - Capital gain on the compensation received - Whether the amount of compensation paid to the assessee to settle inequalities in partition represents immovable property and is not an income exigible to tax? - Held that:- As decided in R. Nagaraja Raos case (2012 (5) TMI 184 - KARNATAKA HIGH COURT) partition is not a transfer and adjustment of shares, crystallization of the respective rights in the family properties cannot be construed as a transfer in the eye of law. When there is no transfer of asset, there is no capital gain and consequently there is no liability to pay tax on capital gains. In view of the above payment of Rs.24 crores to Group A is to equalize the inequalities in partition of the assets of M/s Hind Samachar Ltd. The amount so paid is immovable property. If such amount is to be treated as income liable to tax, the inequalities would set in as the share of the recipient will diminish to the extent of tax. Since the amount paid during the course of partition is to settle the inequalities in partition, therefore deemed to be immovable property. Such amount is not an income liable to tax. Thus, the amount of owelty i.e. compensation deposited by Group B is to equalize the partition represents immovable property and will not attract capital gain. The argument that the assessee is liable to tax being interest on cash, suffice it to say, that such question or fact does not arise from the orders of the Tribunal - question of law is answered against the Revenue.
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2013 (1) TMI 650
Addition on estimate basis by arbitrarily rejecting the books being duly audited - assessee is using old machinery and oil cakes have has to contain appreciable amount of oil for sale in market towards animal feed - Held that:- The sales of oil and oil cakes have been shown in the manufacturing account in consolidated form although there is wide variation in the market price in these products best known to him. Also there was wide variation in the percentage of yield of oil, sale rates of oil and oil cakes in the market, but keeping in view the yield disclosed by the appellant in the consolidated form not only the books of account were rejected but also the yield was assessed in a particular manner. The order passed by the Tribunal is based upon pure findings of fact. No substantial question of law arise for consideration. Addition on account of interest on business loan - Held that:- Since the assessee has advanced loan from his cash credit account on which the interest was paid by the appellant, therefore, such interest has been rightly disallowed as expenditure. The plea of the assessee the amount being advance interest free loan has rightly been not accepted - appeal against assessee.
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2013 (1) TMI 649
Research & Development expenses - capital or revenue expenditure - product already being marketed - Held that:- Development of new project through Research is a continuous process because technology is changing very fast . Thus, even if assessee has developed 14 Pin Double Decker Relay Socket and 48x96 panel meter but still the prototype may require further improvement. Mere selling of units will not show that the assessee already has the technology of the same product Even if a specific product has been sold at one stage, but still the developments in the product can be carried out. It is finding of fact recorded by the Tribunal that the assessee has incurred expenditure for research and development activities, thus no substantial question of law arises for consideration.
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2013 (1) TMI 648
Challenge to the letter regarding payment of arrears of tax and interest accrued. - Expenditure on replacement of machinery in the spinning mills - AO passed orders treating the expenditure incurred as capital expenditure and allowed depreciation thereon - notice of demand for the balance tax payable including interest u/s 234-B, 234-C - Held that:- Plea of the petitioner that the demand of interest u/s 234-B and 234-C is not sustainable in law,as the assessment order does not include the demand of interest u/s 234-B and 234-C, it is an issue which has to be raised by the petitioner in the appeals said to have been filed challenging the orders of assessment. At this stage, this Court is not inclined to go into the veracity of the legal plea taken, since what has been challenged before this Court is not the fine assessment orders, but only a letter demanding the payment of arrears of tax and interest accrued. Therefore, the Court is not inclined to go into the merits of the contentions raised, as the substantial issue challenging the assessment orders is admittedly pending before the appellate forum. Thus when appeal on substantial plea is pending, the writ petition raising certain legal pleas based on a letter is totally untenable and misconceived. What the petitioner failed to achieve directly is trying to achieve indirectly. The petitioner's attempt before this Court lacks bona fide and the writ petition is filed raising irrelevant legal plea only to delay the payment of tax and interest. The writ petition, therefore, lacks bona fide and amounts to abuse of process of Court. No case is made out to approach this Court under Article 226 of the Constitution - writ petition filed with mala fide intention with an object of delaying recovery of tax is condemned - against assessee.
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2013 (1) TMI 647
Rectification of mistakes - Exclusion of US Branch sales from the total turnover as well as from the export turnover while computing the deduction u/s 10B - Held that:- The power to rectify a mistake u/s 254(2) cannot be used for recalling the entire order. No power of review has been given to the Tribunal under the IT Act. The assessee has not fulfilled the conditions laid down in section 10B as it speaks only of exports out of India, irrespective of the purchases & the facts remain that the goods have not been physically exported out of India and therefore the important and necessary condition precedent for claiming deduction u/s 10B has not been satisfied. As such, the assessee wants to review the order of the Tribunal in the instant case u/s 254(2) which is not permissible under ITAT Rules - against assessee.
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2013 (1) TMI 646
Disallowance of depreciation on intangible asset Depreciation on Goodwill - Assessee is a share broker and the main source of income is generated through brokerage Assessee has purchased entire clientele business of M/s. AFC Pvt. Ltd. by assigning all clients to the assessee for a consideration of ₹ 2.50 crores. - Booked these expenses as purchase of goodwill and has claimed 25% of depreciation - Held that:- It cannot be denied that by getting a right over 3709 clients of M/s. AFC, such right is used as a tool to carry on the business by the assessee. Merely because the assessee showed the payment to be on account of goodwill in the books of account, no adverse inference could be drawn against the assessee. Following the decision in case of Smifs Securities Ltd. (2012 (8) TMI 713 - SUPREME COURT) that goodwill is an asset eligible for depreciation. It can also be seen from the angle of purchase of entire marketing network by the assessee from M/s. AFC even if considered from this angle the assessee is eligible for depreciation In favour of assessee TDS on Subscription for e-magazine/journal Disallowance u/s 40(a)(ia) Held that:- Assessee made the payment for terminal charges for on line information and data base access and retrieval services and therefore, no TDS was required to be deducted as the payment was for a subscription of financial e-magazine In favour of assessee
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2013 (1) TMI 645
Addition on account of income as per TDS certificate - Difference in books of accounts and TDS - TDS certificate issued by Mysore Breweries Limited, the total reimbursement made to the assessee Due to clerical mistake debit note in excess of amount resultant shown higher reimbursement to assessee - Held that:- Following the decision in case of SUDHIR SEKHRI (2010 (4) TMI 50 - DELHI HIGH COURT) that addition wholly unwarranted. The assessee had explained that a credit note of Rs. 80,88,000/- issued by it in favour of Mysore Breweries Limited was not accounted for by them and, therefore, by this amount they had shown higher reimbursement to assessee In favour of assessee Tax Credit - Where the income component was neither being admitted, nor was being offered to tax TDS certificate issued by deductor - Held that:- Following the decision in case of Lear Automotive India Ltd. (2010 (2) TMI 963 - DELHI HIGH COURT) that credit is to be allowed to the deductee in respect of TDS made on higher amount of reimbursement than was actually offered to tax. Once the TDS certificate has been issued by deductor he cannot claim refund of the amount deducted because the tax deducted primarily constitutes income of deductee and he can only claim the refund of the amount In favour of assessee Contravention of Rule 46A of the Income Tax Rules, 1962 - AO had required the assessee to submit the invoices/vouchers - the relevant documents were not available since the same got mutilated/ destroyed while shifting of office Held that:- In regard to personnel expenses are concerned, no interference is called for with the said findings because the impugned amount was part of the overall salary payments debited to P&L A/c. And provision for audit fees is concerned, assessee had submitted a bill vide ADB-101/04 dated 12/06/2003 issued by Price Waterhouse mentioning that the same is claimed towards statutory audit fee. To examine genuineness of evidence - Remand back to AO
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Customs
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2013 (1) TMI 644
Fraudulent claim of duty drawback - notice to show cause under Section 124 was not issued to the Petitioner - fine in lieu of confiscation and personal penalties on the noticee - Held that:- The notice to show cause under Section 124 was not issued to the Petitioner. The order of adjudication dated 20 September 2007 was similarly not in respect of the Petitioner. The certificates that were issued under Section 142(1)(c) (ii) on 19 March 2010 were in the names of (i) Mehul Exports of which the proprietor is Nirmal Agarwal, the spouse of the Petitioner, (ii) Nisum Exports and Finance Private Limited of which the director is stated to be Nirmal Agarwal in the certificate, and (iii) Nisum Global Limited of which again the director is stated to be Nirmal Agarwal. The Petitioner at the highest, as the affidavit in reply states, is one of the directors of Nisum Global Limited and of Nisum Exports and Finance Private Limited. But that is not sufficient to follow the recoveries that are due and payable by the two companies in the hands of the Petitioner who is a director. As decided in Vandana Bidyut Chaterjee (2012 (4) TMI 42 - BOMBAY HIGH COURT), there is no provision in the Customs Act 1962 similar to Section 179 of the Income Tax Act 1971 or Section 18 of the Central Sales Tax Act 1956 where the dues of a private limited company can be recovered from its directors. Whether the Petitioner is in breach of any of the provisions of the Income Tax Act 1961 is not an issue which falls for determination in these proceedings. Thus concluded that the action of the Revenue in seeking to issue a notice of demand dated 1 November 2011 upon the Petitioner and the levy of attachment to the extent of the interest of the Petitioner in flat 1501B are unlawful and would have to be set aside.
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2013 (1) TMI 643
False Telegraphic Release Advice (TRA) used for clearance of kerosene - demand of duty and penalties - Settlement Commission after petitioner surrendered the balance DEPB licence gave the benefit of settlement of the case by granting immunity from prosecution and penalty and the duty paid was acknowledged and discharged the petitioner from further payment of duty - Held that:- This Court, sitting under Article 226, is not inclined to go into the merits of the discretion exercised by the Settlement Commission one way or other. The factum of full disclosure and co-operation is not the matter in dispute, but, as to what will be the interest that may be levied on the duty that has not been paid in time, is a matter for the Commission to decide from case to case. Further, as held in Union of India v. Ind-Swift Laboratories Ltd. [2011 (2) TMI 6 - SUPREME COURT] the order of the Settlement Commission cannot be dissected and challenged only in respect of interest and accepting the rest. It is to be noticed that Revenue has lost substantially due to non-payment of duty at the time of import. In the result, this Court finds that the order of the Settlement Commission is a well-considered order based on the materials disclosed. The exercise of discretion with regard to interest alone does not require to be interfered with. Further, when the Revenue is entitled to interest in terms of Chapter XVI-A of the Customs Act as well, the levy of interest stands justified - writ petitions stand dismissed.
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2013 (1) TMI 641
Advance license - Non-supply of quantity of goods as indicated in the licence - waiver of interest - Held that:- Looking at the Scheme, it is a Quantity/Value Based Duty Exemption Entitlement Certificate and not with reference to quantum of foreign exchange earned. Therefore, so far as this concession, irrespective of earning foreign exchange, shortage of supply of goods would come in the way of appellant and the claim in question cannot be accepted. License ending with No.906 - Held that:- Once the exporter gets the benefit on the import of goods, having earned the benefit, it is not open to say that there is violation of obligation under the licence. Therefore, the Settlement Commission was justified in rejecting both claims. Waiver of interest as contemplated under Section 127(h), either wholly or in part, a benefit can be extended to the licensee in respect of penalty, fine and interest prior to the amendment in accordance with the procedure applicable at the relevant point of time and not in accordance with the existing Section 127(h). So far as payment of 50% of the impugned demand as indicated in the judgment of the learned Single Judge, the time up to 28.02.2013 extended.
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2013 (1) TMI 638
Refund of duty - Cost of transportation Despatch money - Deduction in freight for unloading the vessel before stipulated time - Rule 10 of Customs Valuation Rules Whether any deduction is given in the cost of transport in the form of despatch money, entitled for deduction from assessable value u/s 14 of the Customs Act read with Rule 9(2)(a) of the Customs Valuation (DOP of Imported Goods) Rules, 1988 Department argue that Rule 10 of the Customs Valuation Rules allows only addition of certain items of cost and not deduction and cannot be treated on the same footing as demurrage charges - Held that:- Following the decision in case of ASSOCIATED CEMENT CO. LTD. (1998 (5) TMI 128 - CEGAT, MADRAS) and later affirmed by Supreme Court of India that deduction granted by the Shipping Company as despatch money on the cost of transport. When this point is clear then the question gets answered automatically inasmuch as that when this despatch money is a part of freight, such deduction granted will be eligible for exclusion from the assessable value, because only the noted cost of transport would be added to the assessable value. In favour of assessee
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Corporate Laws
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2013 (1) TMI 642
Scheme of Compromise - Directors of company-in-liquidation submitted scheme of revival of company-in-liquidation - sanction to such scheme refused by Single Judge - The applicant preferred appeal before the Division Bench who passed interim order directing to implement the revival scheme and directing Official Liquidator (OL) to handover the possession within the prescribed time-limit - the applicant/appellant agreed to deposit the amount of Rs. 25,00,000 towards cost, since it was so demanded by the OL - matter carried in SLP by the OL before the Apex Court who directed the Division Bench for de novo consideration of the scheme in accordance with law who after hearing both the sides & the jugement and order, dated 7-10-2011 came to be passed - applicant sought for review of the decision of the Court, dated 7-10-2011 as OL had to recover the shortfall from the assets of the company-in-liquidation, since the Court rejected the revival scheme and the OL was not entitled to keep the balance of Rs. 25,00,000 - engagement of the advocate appearing for OL in the appeal was not approved by the Company Court - Whether judgment passed in appeal seeking scheme of revival of company-in-liquidation was to be reviewed or re called? Held that:- As out of the amount of Rs. 25,00,000, since the OL has already borne the expenses of Rs. 12,43,960 towards security expenses for preservation of property and amount of security expenses are already paid by the OL, the OL cannot be directed to refund the said amount. Further, after excluding the amount of security expenses already paid, net balance comes to Rs. 12,56,040. As against the same, the bills of security agencies deployed from 23-6-2003 to 20-3-2009 of Rs. 74,64,342 are pending, for which the matters are also pending before the Company Court and, hence, the order for refund of the amount of Rs. 12,56,040 does not deserve to be passed at this stage. But it is directed that the OL shall separately mark and maintain the fund of Rs. 12,56,040 and after the dispute with the security agencies towards the bill of Rs. 74,64,342 is finalized, the OL shall make use of the amount of Rs. 12,56,040, if required, and thereafter if any surplus balance remains, the same shall be refunded to the applicant. In the present case, the OL had engaged Advocate in view of the facts and circumstances that engagement of an advocate was required. If the Company Court has declined to ratify the action of the OL, the consequence may arise that the Advocate may not get his fees for his engagement, but thereby, per se, it cannot be said that all his action, including that of defending the proceedings on behalf of the OL would be vitiated. Considering the submissions on behalf of the OL, it cannot be said that any contentions of the OL on behalf of the company-in-liquidation, may be through Advocate appointed were against the interest of the company-in-liquidation. Thus merely because the Advocate was lacking authority, per se, is no ground to review and recall the order, more particularly when it is not found that any action is taken by the OL or by the Advocate engaged by the OL against the interest of the company-in-liquidation for opposing the appeal preferred by the applicant. Thus considering the facts and circumstances, it is found that no valid ground is made out to recall and review the order, dated 7-10-2011 as where appointment of advocate by OL against order refusing sanction of revival scheme was not approved by company court, same would not be valid ground to recall and review order passed in that appeal, but it is observed that the present order shall not operate as a bar to the applicant in resorting to appropriate proceedings for protecting the interest of the company-in-liquidation, as a shareholder of the company, if otherwise permissible in law.
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Service Tax
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2013 (1) TMI 661
Waiver of penalty - Stay of recovery - Denial of Cenvat credit - Rule 2 (1) of the Cenvat Credit Rules 2004 - Rent-a-cab service - Out-door catering service - Event Management service - Clearing and Forwarding service Held that:- Rent-a-cab service has been availed for picking up and dropping their employees and outdoor catering service provided to the employee of applicants are allowed to take cenvat credit on the basis of decision in case of Stanzen Toyotetsu India (P.) Ltd.(2011 (4) TMI 201 - KARNATAKA HIGH COURT). Therefore, they are entitled to take input CENVAT credit. In favour of assessee Event management service and clearing & forwarding service - These services does not fall within the category of input credit service as defined in Rule 2 (1) of the Cenvat Credit Rules 2004. Therefore, prima facie, the applicants are not entitled for the benefit of input service credit. As the Applicant has already reversed the said amount, we waive the requirement of pre-deposit of the balance amount of service tax, interest and penalty. In favour of assessee
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2013 (1) TMI 660
Waiver of demand Stat petition - Air Transport of Passenger service - Management, Maintenance or Repair service - Supply of tangible goods services - Assessee is providing chartered flights to various organizations Held that:- The service is provided to various companies, who chartered the air craft for specific time or for specific journey. The payment is not based on number of passengers and the appellant is not concerned with travelling also. No tickets are issued to the passengers and no charges are collected from the passengers. Therefore, the service provided cannot be considered as transport of passengers, but has to be considered as charter of air craft. In the present system of taxation, the assessee himself classifies the service, quantifies the Service Tax liability and pays the same. There is no concept of assessment on a regular basis or acceptance of details in the returns as correct officially by the Department and therefore the claim of subsequent assessment have been accepted cannot be accepted unless documentary evidence is produced to show that the Department has accepted the assessment made by the assessee and has agreed that the classification of the service is not under SOTG service. No conclusive documentary evidence was produced for this purpose - pre deposit ordered partly.
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2013 (1) TMI 659
Non-compliance of Stay order - Neither is there any compliance report on record nor is there any representation on behalf of the assessee - Held that:- Therefore appeal decides in favour of revenue
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2013 (1) TMI 658
Demand - Consulting Engineering Service - Assessee a 100% EOU Division transfer the technical know-how - Appellants have never provided any service and no consideration for the service have been received - Appellants made a debit entry for the services to be provided in future - Held that:- As neither there is service provided nor any consideration have been received. Moreover, supply of technical know-how cannot be taxed under "Consulting Engineering Service", therefore, the impugned orders are set side. In favour of assessee
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Central Excise
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2013 (1) TMI 639
Clandestine removal Confiscation of goods Unaccounted goods - Non-entry of goods in RG-I register Intention to evade duty - Appellant is engaged in the manufacture of catenary copper wire 8 containers of wire were found on the road which is dead end of the road between the two premises of the appellants - whether the non-entry of copper catenary wire in RG-I register was with any mala fide intention Held that:- There is no other evidence to reflect upon the fact that non-entry in RG-I was with any intent to evade duty. The goods were kept outside the factory gate but has nowhere has agreed that the same were meant for clandestine removal. The said copper catenary wire was meant for supplies to railways and as such the clandestine removal of the same is a non-possibility. Therefore, the wire in question is not liable to confiscation for their non-entry in RG-I register. The goods were removed from the factory premises to near the factory gate. Though the same might be on account of constraint of space in the factory premises but fact remains that such removal is not permissible. Admittedly there was violation of provisions of law, though technical. For such violation, appellant is liable to penalty. The goods were kept outside the factory, premises without any intention to evade payment of duty and having already penalised the manufacturing unit for technical violation of rules. Penalty imposed upon him is set aside.
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2013 (1) TMI 637
Waiver of pre-deposit - Penalty u/s 11AC - Clandestine manufacture of goods - Unaccounted manufacture - Clandestine removal from their registered factory premises without payment of duty - Assessee is engage in manufacture of M.S. Bars and Rods - under Chapter 72 of CETA - Statements were recorded u/s 14 of the CEA, 1944 - Directors admit that manufacture and clearances of excisable goods without payment of excise duty in a clandestine manner - Appreciation of evidences collected by the Department from the possession of applicants/appellants Held that:- Principle of Rule of evidence that facts admitted need not be proved. There is a prima facie case against the appellants that they have indulged in unaccounted manufacture and clearance of excisable goods without payment of duty from their registered factory premises. Appellants could not able to make out a prima facie case in their favour for total waiver of pre-deposit of the dues. Hence, direct to deposit 25% of the duty confirmed. Directors are directed to deposit 10% of the penalty imposed on each of them.
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2013 (1) TMI 636
Rule 18 of CER 2002 Rebate of duty Whether rebate should be allowed, where goods are not cleared form the factory gate at the time of clearance for export Assesse filed rebate claims of duty paid on tea and packaging materials used in the blending/processing of Indian Black Tea exported Adjudicating authority sanctioned the rebate claim on the quantity of tea which was purchased from market but did not consider part quantity of tea which was purchased from the tea gardens who were availing benefit of Area Based Exemption Notification No. 33/99-C.E. (N.T.) Held that:- Assesse have followed the procedure laid down in Notification No. 21/2004-C.E. (N.T.), Notification No. 41/2001-C.E. (N.T.), and Part VI of Chapter 8 of C.B.E. & C. Excise Manual of Supplementary Instructions . Moreover assessee had procured tea for further processing direct from manufacturer/gardener on valid duty paying documents and had also obtained permission to process/export the tea, in terms of Notification No. 41/2001-C.E. (N.T.) Part VI of Chapter 8 of C.B.E. & C. Excise Manual of Supplementary Instructions has relaxed the condition of export of tea direct from factory Rebate claims under Rule 18 should be sanctioned Govt. therefore sets aside the impugned order-in-appeal Revision application succeeded Decided against the revenue.
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Indian Laws
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2013 (1) TMI 656
Dismissal from service by the management - Whether it was illegal and/or unjustified and to what relief is he entitled - whether the non-supply of the Inquiry Report to the respondent workman before the imposition of the punishment of dismissal from service would vitiate the entire disciplinary proceedings and entitle the respondent workman to reinstatement with full back wages and seniority, etc.? - Held that:- Even if Labour Court were to come to the conclusion that the respondent did suffer prejudice on account of non-supply of the Enquiry Report, while setting aside the dismissal order, it would be required to grant liberty to the petitioner management to proceed with the enquiry by placing respondent employee under suspension and continuing the enquiry from the stage of furnishing him with the Report. In that event, the reinstatement that may be ordered as a result of setting aside of the order of punishment for failure to furnish the Enquiry Report would be treated as reinstatement for the purpose of holding a fresh enquiry from the stage of furnishing the report and no more, where such fresh enquiry is held. Unfortunately, the Labour Court has not adopted the aforesaid approach while passing the impugned award dated 04.09.2009, though the judgment of the Constitution Bench has held sway since 1993. On this short ground, the impugned award dated 04.09.2009 deserves to be set aside and the matter remanded back to the Labour Court for consideration of the aforesaid aspect and for proceeding further in terms of the decision of the Supreme Court in B. Karunakar (1993 (10) TMI 310 - SUPREME COURT). Finding merit in the petitioner's submission that there was no question of the past record of the respondent being put to him as perusal of the order of dismissal dated 30.03.1992 shows that the management did not hold the respondent's past record against him for dismissing him from service. All that was observed was that no extenuating circumstances were found in the past record in favour of the respondent. Also that the misconduct, if taken as proved against the respondent, was sufficient to warrant his dismissal from service. There is also merit in the petitioner's submission that Section 25-F of the act had no application in the facts of the respondent's case since his dismissal from service was by way of punishment and this species of termination is excluded from the definition of retrenchment. Thus fail to appreciate how the Industrial Adjudicator could have observed that in view of Section 25-F, dismissal without any notice is in violation of principles of natural justice. The Industrial Adjudicator, while directing the respondent's reinstatement with full back wages, allowances, seniority, etc. has not even applied its mind to the fact that the Enquiry Report had found the respondent guilty of misconduct. It is not that in all cases the Labour Court is bound to reinstate the workman with full back wages. There is no application of mind by the Labour Court to this aspect. Thus the present petition succeeds and the impugned award is quashed & set aside with the matter is remanded back to the Labour Court concerned in terms of the observations made above.
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