Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 31, 2015
Case Laws in this Newsletter:
Income Tax
Customs
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
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Amended Exchange Rates of Foreign Currency Notified
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Gold award for the Income Tax Department under National Award on E-Governance 2014-15
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold And Silver Notified
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RBI Reference Rate for US $
Notifications
Highlights / Catch Notes
Income Tax
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Constitutional validity of section 133(6) - scope of the term "enquiry or" - The apprehension expressed from the part of the petitioners that, if the information as sought for is given to the respondent Department, there is a chance for misuse/abuse, is without any basis. - HC
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Addition under Section 68 - Accommodation entries - the addition under Section 68 cannot be made in the case of the conduit companies. - AT
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The additional compensation and interest received thereon is proposed to tax in the year of receipt. As the assessee has erroneously declared additional compensation and interest on accrual basis, the said returns will be assessed on a protective measure. - AT
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Revision u/s 263 - unaccounted cash in saving bank account - CIT was not justified in directing the Assessing Officer to make further investigations afresh when the Assessing Officer had already applied his mind and thoroughly examined the issues - AT
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Application for grant of registration u/s 12A rejected - non mentioning of date of creation of trust and absence of certain clauses in the trust deed - before refusing registration on the ground of absence of these clauses, ld. DIT(E) could have called upon assessee to explain on the issue - AT
Customs
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Denial of the benefits of the “Served from India Scheme”, as framed under the foreign trade policy - whether the petitioners could be denied the benefit of the SFIS only on the ground that they were subsidiaries of foreign companies. - Held no - HC
Service Tax
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Recovery of erroneously granted refund - Commissioner could not have passed the impugned Order in Revision without issuing notice for recovery of erroneous refund under section 73 of Finance Act, 1994 - AT
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Club and Association service - in view of the decision of HC where the levy was declared ultra vires, we hold that there are no operative legislative provisions of the Act legitimizing the levy and collection of service tax from the appellants, for providing "club or association" service, in so far as these relate to any services provided to members of these appellants. - AT
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Imposition of penalty u/s 76 - Delay in payment of service tax - There is delay involving 41 days, 10 days, 61 days and 31 days. Delays have continued over many months. - penalty confirmed - AT
Central Excise
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Reversal of Cenvat Credit – Removal as such of capital goods after use - If even after use for a couple of years, the Cenvat Credit is required to be reversed then it would certainly defeat the object of the scheme. - AT
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Valuation of the goods cleared by the job worker directly on payment of excise duty - excise duty is payable on the goods manufactured and cleared from the job worker directly to the consignment agent on the price at which consignment agents have sold to the buyers - AT
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Duty demand u/s 11D - unit is situated in duty exemption zone - revenue argued that since the price includes excise duty, the appellant is recovering this element of duty through the pricing mechanism. - prima facie case is against the revenue - AT
VAT
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The mere fact that the petitioner is importing ink for the purpose of importing books does not lead to any conclusion that the printing of books is for the purpose of execution of a works contract - there must be more material - HC
Case Laws:
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Income Tax
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2015 (1) TMI 1121
Constitutional validity of section 133(6) of the Income Tax Act, 1961 to the extent the words "enquiry or" have been added thereto, also incorporating "second proviso" - Held that:- The fact that the petitioners' Bank is a society registered under the Kerala Co-operative Societies Act/Rules and that there is a separate procedure for incorporation/registration/functioning/control and regulation including auditing of funds etc., are not at all germane to the course and proceedings to be pursued in terms of Section 133(6) of the Income Tax Act. The provisions of the Co-operative Societies Act/Rules may be relevant in so far as the day-to day activities of the Society are concerned . But scope of the enquiry under the Income Tax Act is entirely different and so also is the object/purpose to be achieved . The said enquiry is not in relation to the particulars of loans given, but in relation to the particulars of the deposits made by the depositors or as to the extent of interest received by them, to the extent it is relevant under the provisions of the Income Tax Act. In so far as 'Explanation (2)' to Section 132 of the Income Tax Act, dealing with search and seizure, categorically states that the word 'proceeding' includes a future proceeding as well; the inclusion of the word 'enquiry or' under Section 133(6) of the Act, by the law makers as per the Finance Act, 1995, is having more significance and it is incidental to the scope and object to be achieved , which cannot be nullified. A Constitution Bench of the Apex Court has held in Vivian Joseph Ferreira and another v. Municipal Corporation of Greater Bombay and others [2002 (11) TMI 112 - SUPREME COURT OF INDIA) that, taxing statute will become valid, if it is within the legislative competence, if it is for public purpose and further, if it does not violate the fundamental right guaranteed under Part III of the Constitution of India. All the said three requirements are satisfied in the instant case and as such, the challenge raised by the petitioners cannot be held good; more so when the Apex Court has made it clear in R.K. Garg v. Union of India. [1981 (11) TMI 57 - SUPREME Court], that the laws relating to economic activities should be viewed with greater latitude, than the laws touching civil rights, such as freedom of speech or religion etc. Further, in view of the law declared by the Apex Court in Punjab Distilling industries Ltd. v. Commissioner of Income Tax, Punjab [ 1965 (2) TMI 6 - SUPREME Court], constitutional validity of an Act can be supported on the ground that it was enacted to prevent evasion of tax. The amendment brought about as per the Finance Act 1995, adding the words 'enquiry or' and also the 'second proviso' is quite incidental to the 'main provision' and hence beyond challenge. The apprehension expressed from the part of the petitioners that, if the information as sought for is given to the respondent Department, there is a chance for misuse/abuse, is without any basis. The confidentiality of the information gathered by the Income Tax Department is well taken care of by Section 138 of the Income Tax Act.It is well settled that the 'taxation entry' confers powers upon the legislature to legislate for matters 'ancillary or incidental', including the provisions for evasion of tax. This has been made clear by a Constitution Bench of the Apex Court in Commissioner of Commercial Tax v. R.S. Jhavar [1967 (8) TMI 37 - SUPREME Court]. This Court finds that the petitioners have not succeeded in establishing any constitutional infirmity, to hold the statute/amendment as ultra vires to the Constitution. Accordingly, interference is declined and all the writ petitions are dismissed. - Decided against assessee.
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2015 (1) TMI 1120
Entitlement to claim deduction under section 80-IA - Held that:- All the business undertakings are wind mills and they have claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment years in question and for the subsequent years as well. Having exercised their option and their losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. - Decided in favour of assessee.
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2015 (1) TMI 1119
Addition under Section 68 - Accommodation entries - Held that:- There is an order of the Settlement Commission as well as the Additional Commissioner of Income Tax under Section 144A holding that Shri S.K. Gupta was providing accommodation entries, he used various companies as conduit for providing the accommodation entries, cash was received through mediators from the persons who wanted to avail the accommodation entries, such cash was deposited in the bank account of the conduit companies and thereafter, cheque of the similar amount was being issued to the beneficiaries (i.e. the person who wanted to avail the accommodation entry) within a day or so. The Assessing Officer himself in the assessment order has accepted these facts. Considering the totality of these facts and the logical consequences of the order of the Settlement Commission as well as of Additional CIT under Section 144A, we have no hesitation to hold that the addition under Section 68 cannot be made in the case of the conduit companies. Therefore, we delete the addition made under Section 68 in the case of all the nine companies, which are admittedly conduit companies of Shri S.K. Gupta. Decided in favour of assessee.
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2015 (1) TMI 1118
Disallowance on interest made u/s 36(1)(iii) in respect of interest free loans/advances given to its sister concerns - CIT(A) deleted part addition - Held that:- The revenue was not justified in agitating the reduction in the disallowance of interest in the year under consideration on the same facts, which was accepted by them in the immediately preceding year. - Decided in favour of assessee. Disallowance u/s 14A - Held that:- There is no finding by the lower authorities whether during the year under consideration, there was any exempt income or not,. In view of above, we deem it proper to set aside the order of the authorities below on this point and restore the matter back to the file of AO. We direct the AO to verify whether during the year under consideration, assessee received any exempt income and if no exempt income is earned then following the above decision of Hon'ble Jurisdictional High Court in CIT Vs. Holcim India Ltd.[2014 (9) TMI 434 - DELHI HIGH COURT], no disallowance u/s 14A would be made. - Decided in favour of assessee.
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2015 (1) TMI 1117
Justification to the proceedings u/s 153C - unaccounted and in genuine gifts - Held that:- The total income shall be determined in respect of assessment year for which original assessments have already been completed on the date of search by restricting additions only to those which flow from incriminating material found during the course of search. If no incriminating material is found in respect of such completed assessment, then the total income in the proceedings u/s 153A shall be computed by considering the originally determined income. If some incriminating material is found in respect of such assessment years for which the assessment is not pending, then the total income would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search. In respect of assessment pending on the date of search which got abate in terms of second proviso to section 153A(1), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material. As already observed that no incriminating material has been found relating to the year in which the assessee has received gifts. Therefore, in our opinion, no addition on account of the gifts can be sustained. Accordingly, on this basis itself, we delete the addition on account of gifts. We accordingly allow the additional grounds. Since we have deleted the addition on the basis of the additional grounds taken by the Assessee, therefore, in our opinion, the grounds taken by the Assessee on merit does not require adjudication. - Decided in favour of assessee.
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2015 (1) TMI 1116
Interest on land acquisition compensation assessed on receipt basis - CIT (A) deleted the addition - nature of interest, whether it is interest paid u/s. 28 or u/s. 34 of Land Acquisition Act, 1894.? - Held that:- Taking into account all the facts and circumstances of the issue as analysed in the foregoing paragraphs and also in conformity with (i) the ruling of the Hon’ble Supreme Court in the case of Ghanshyam (HUF) [2009 (7) TMI 12 - SUPREME COURT] and (ii) the findings of the Hon’ble Delhi Bench of the ITAT in the case of Ajay Sharma (2010 (12) TMI 548 - ITAT, Delhi ); we are of the view that the CIT (A) was not justified in allowing the assessee’s appeal. - Decided in favour of revenue. Capital gains computed on protective basis - Held that:- The additional compensation and interest received thereon is proposed to tax in the year of receipt. As the assessee has erroneously declared additional compensation and interest on accrual basis, the said returns will be assessed on a protective measure. The assessee’s claim on this count is not valid and, accordingly, the issue of ‘Capital gains computed on protective basis’ is not adjudicated. - Decided in favour of revenue.
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2015 (1) TMI 1115
Penalty levied under Section 271D - assessee firm accepted loans/deposits of ₹ 20,000/- each from 13 parties totalling to ₹ 2,60,000/- in cash, in contravention of the provisions of Section 269SS - Held that:- Looking to the facts and circumstances we are of the opinion that the loan/deposits taken to meet urgent and immediate requirements of business and the impression gathered as taxpayers from the aforesaid circular and the advertisement did constitute a reasonable cause for accepting the said loans/deposits of ₹ 20,000 from each party in cash within the meaning of 273B of the Act. It is found therein that loans/deposits raised were to meet exigencies of business. Thus the penalty levied was cancelled. Thus as relying on case of Madhukar B. Pawar (2008 (6) TMI 321 - BOMBAY HIGH COURT ), we are of the considered opinion that the Tribunal has rightly cancelled the penalty imposed on the assessee. - Decided in favour of assessee Whether the ignorance of law was a proper excuse - Held that:- This issue is answered in negative i.e. in favour of the revenue and against the department. Therefore, we hold that ignorance of law was not a proper excuse. - Decided in favour of revenue.
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2015 (1) TMI 1114
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 1113
Excess application of the earlier year set off this year disallowed - assessee is a trust registered U/s. 12AA - disallowance of ₹ 14 crores capital expenditure - Held that:- Since 85% of the assessee's income of the Trust during the relevant assessment year is ₹ 43,41,69,412/- (51,07,87,543/- ×85÷100), it is evident from the above computation that the assessee has applied more than 85% of its income for charitable or religious purpose in accordance with the provisions of Sec.11(1)(a) of the Act. Therefore, there is no shortfall in application of fund as worked out by the Ld. Assessing Officer, as a result setting off the brought forward excess application of income from the assessment year 2007-08 to the relevant assessment year is not necessary and irrelevant in the present case before us. For the above said reasons we hereby set aside the order of the Ld.A.O wherein he has disallowed the capital expenditure of ₹ 14 Crores and reduced the shortfall in application of funds from the excess brought forward application of income of the assessment year 2007-08 to the extent of the shortfall and further we hereby strike down the order of the Ld.CIT(A) wherein he has directed the Ld.A.O to bring to tax the sum of ₹ 11,05,02,792 by denying the benefit of carried forward of excess application of income. - Decided in favour of assessee.
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2015 (1) TMI 1112
Revision u/s 263 - unaccounted cash in saving bank account - no enquiry was made by the Assessing Officer for source of the total deposits appearing in the bank account as held by CIT(A) considered as erroneous to the interest of the Revenue - Held that:- In the present case, it is noticed that the Assessing Officer during the course of assessment proceedings issued a questionnaire and asked the assessee to furnish copy of bank account which was furnished and examined by the Assessing Officer thoroughly. The Assessing Officer was satisfied with the explanation of the assessee relating to the deposits and withdrawals in the bank account and no addition was made. Assessing Officer framed the assessment in accordance with law after making deep enquiry on all the issues on which the Ld. CIT presumed that proper enquiry was not made. Therefore, only on this basis that the order should be written more elaborately it cannot be said that the assessment order passed by the Assessing Officer was erroneous or prejudicial to the interest of the Revenue. We therefore, are of the view that the Ld. CIT was not justified in directing the Assessing Officer to make further investigations afresh when the Assessing Officer had already applied his mind and thoroughly examined the issues which were directed to be reexamined by the Ld. CIT. Therefore, by considering the totality of the facts of the case, we are of the view that the assessment order dated 22/07/2011 passed by the Assessing Officer was neither erroneous nor prejudicial to the interest of the Revenue. - Decided in favor of assessee.
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2015 (1) TMI 1109
Registration under section 12A declined - assessee is not engaged in charitable activity within the meanings of that expression under section 2 (15) - Held that:- An activity would be considered "business" if it is undertaken with a profit motive, but in some cases this may not be determinative. Normally the profit motive test should be satisfied but in a given case activity may be regarded as business even when profit motive cannot be established/proved. In such cases, there should be evidence and material to show that the activity has continued on sound and recognized business principles, and pursued with reasonable continuity. There should be facts and other circumstances which justify and show that the activity undertaken is in fact in the nature of business. There has to be, therefore, something more than mere charging a fees by an institution which can demonstrate that activity undertaken is in the nature of business, and the onus of demonstrating that fact is on the revenue authorities. The reason for this onus is simple; nobody can be expected to prove a negative, as was held by Hon’ble Supreme Court in the case of K P Varghese Vs ITO [1981 (9) TMI 1 - SUPREME Court], and the assessee cannot, therefore, be asked to prove that the assessee is not carrying on an activity with business motive. A perusal of the impugned order, however, indicates that the only reason for which the assessee is held to be pursuing business activity is charging of fees and there is no other legally sustainable finding to support that conclusion. In view of these facts, as also bearing in mind, we are of the considered view that the learned Director of Income Tax (Exemptions) was indeed in error in rejecting the registration under section 12 A, as sought by the assessee. We, therefore, direct the learned Director to grant the registration under section 12A. - Decided in favour of assessee.
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2015 (1) TMI 1108
Unexplained investment - validity of proceedings u/s.153C - CIT(A) deleted addition considering the additional evidence and that proceedings u/s.153C are invalid and consequently, the assessment made in pursuance of the same was also invalid - Held that:- Primary requirement of invoking the provisions of section 153C of the I.T.Act was absent in this case. The requirement of recording the satisfaction that the impugned documents belonged to a person other than the person searched was not met in form and in substance. Consequently, the proceeding initiated by the AO u/s 153C in this case was void ab initio and the assessment made by him in pursuance of the same was also invalid. The appropriate course of action in the given facts and circumstances of the case was for him to treat the copy of the impugned documents as a source of information and initiate proceedings u/s 147 of the I.T.Act on the basis of the same. Since assessment under appeal is annulled. - Decided in favour of assessee.
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2015 (1) TMI 1107
Disallowance u/s 14A r.w. Rule 8D of the IT Rules - Held that:- Keeping in view the ratio laid down by the Hon’ble Jurisdictional High Court in the case of CIT Vs Holcim India (P.) Ltd. [2014 (9) TMI 434 - DELHI HIGH COURT] are of the considered view that no disallowance u/s 14A of the Act can be made if there is no income earned. - Decided in favour of assessee. Addition to income - disallowance of 20% out of various expenses - Held that:- AO completed the assessment on 21.12.2010 whereas he has issued the show cause notice vide order dated 16.12.2010 asking the assesee to file its reply by 21.12.2010. We are of the view that the AO has not given sufficient time to the assessee to file its complete reply alongwith supporting documents for substantiating its claim. No doubt that assessee has filed its reply on the date of assessment i.e. 21.12.2010, but in our opinion sufficient time has not been granted by the AO to the assessee for substantiating its claim, which is contrary to the principles of natural justice. Similarly, the Ld. CIT(A) has also taken in a routine manner the additional evidence filed by the assessee. No doubt that after taking the Remand Report from the AO, Ld. CIT(A) has decided the issue in dispute against the assessee. Thus the issue involved require thorough examination at the level of the AO, after providing adequate opportunity of hearing to the assessee - Decided in favour of assessee for statistical purposes.
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2015 (1) TMI 1106
Non-deduction of TDS on payment of commission to Foreign Agent - CIT(A) deleted the addition - Held that:- The income of the non-resident was not chargeable to tax in India since the same was neither received in India nor had it accrued or deemed to accrue in India. Accordingly, the appellant was not required to deduct Tax at Source u/s 195 in respect of commission paid to the Foreign Agents. Disallowance u/s 40 (a) (i) is, therefore, deleted. - Decided in favour of assessee. Addition towards valuation of export debtors as on the last day of accounting year on the basis of RBI Reference Rate - assessee has valued them on the basis of actual realization - Held that:- Undisputedly assessee has been following this method of accounting in the past also and the same was accepted by the Revenue. Therefore, we find no justification to disturb the method of accounting consistently being followed by the assessee. Though the application of correct accounting policies and principles is important for determination of correct income, but concept of consistency and real income are vital principles in the Tax Law, which cannot be ignored. Had this addition been sustained, it will disturb the returned income of the appellant for subsequent Assessment Years also i.e. for A.Y. 2010-11, 2011-12 and so on. - Decided in fvaour of assessee. Ad hoc addition - Job Work Charges,Manufacturing Expenses,Checking & Inspection Charges and Export Development Expenses - CIT(A) deleted the addition - Held that:- Assessing Officer has not pointed out any specific defect either in the maintenance of the books of account or any particular expense. He has made general observation that the expenses claimed by the assessee were not fully verifiable and thereafter he started making ad hoc disallowances, which are not permissible under the law. We, therefore, find no merit in this ground of the Revenue’s appeal, as the ld. CIT(A) has properly deleted the addition made on ad hoc basis. - Decided in fvaour of assessee. Disallowance of interest paid by the assessee to his wife, Smt. Anu Gupta amounting to ₹ 1,44,427/- for not charging interest on certain loans and advances - CIT(A) deleted the additon - Held that:- Revenue is in appeal before the Tribunal, but could not establish the nexus between the borrowed funds and the interest free advances. Therefore, disallowance of corresponding interest is not permissible. Accordingly, we find no merit in this ground of the Revenue’s appeal and we confirm the order of the ld. CIT(A) on this issue. - Decided in fvaour of assessee.
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2015 (1) TMI 1105
Prior period expenses disallowed - Held that:- addition made by the Assessing Officer is not justified because prior period income reported by the assessee at ₹ 9,44,601/- is more than prior period expenses of ₹ 9,11,259/-. The Assessing Officer has wrongly made addition of ₹ 18,52,518/- by adding both the amount of prior period income and expenditure and excluding net prior period income of ₹ 33,342/- offered to tax by the assessee. Even if the entire amount of prior period expenses of ₹ 9,11,259/- is excluded then also the addition can be made of only ₹ 9,11,259/- being difference between prior period income of ₹ 9,44,601/- and ₹ 33,342/-. - Decided in favour of assessee. Depreciation on temporary sheds - treat the cost of construction as deferred revenue expenditure and to estimate the life of project and life of temporary constructions at approximately 13 years - Held that:- The first item is of ₹ 1,52,100/-, being cost of boundary wall and leveling charges. As per the detail, the boundary wall is of barbed wire and it includes the expenditure of ₹ 31,150/- on account of leveling of new store compound. In our considered opinion, such an expenditure is purely temporary in nature. The second item is of ₹ 25,000/- on account of fixing of shed. As per the bill, labour charges is paid on account of fixing of nut bolt for a shed using old materials. In our considered opinion, this is also temporary in nature. The third item is dismantling of old shed of ₹ 46,000/-. This item, in our considered opinion is allowable in full as Revenue expenditure. The 4th item is expenses of ₹ 1,05,300/- on account of earth filling. In our considered opinion, this expenditure is also allowable as Revenue expenditure in full. The next item is of ₹ 50,000/- incurred on account of cost of shifting of old store. In our considered opinion, this expenditure is also allowable as Revenue expenditure. The last item is of ₹ 9,750/- on account of labour charges for doing misc. work. In our considered opinion, as per above discussion, the entire expenses incurred by the assessee is allowable in full in the present year and hence, we delete these disallowances. - Decided in favour of assesse. Centage receivable on work in progress not reflected in the books of account - disallowance @12.5% on the closing work-in-progress without reducing it by opening work-in-progress - Held that:- Unless it is established by the assessee that closing WIP includes opening WIP also, no exclusion can be made of opening WIP from closing WIP because there is completion of work also in the present year and if opening WIP has been completed in the present year and income is accounted for on such completion of project and closing WIP is for the present year only then no such exclusion of opening WIP from closing WIP is called for. In the absence of any such details having been provided by the assessee to establish that some portion of closing WIP is including opening WIP also, the assessee cannot get any benefit on this account also. Hence, on this issue, we do not find any reason to interfere in the order of CIT(A) in the light of above discussion. - Decided against assessee.
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2015 (1) TMI 1104
Annual Value of the property u/s. 23(l)(a) - Fair rental value - CIT(A)deleted the addition made by Assessing Officer in the annual letting value of the property u/s 23(1)(a) of the Income Tax Act on account of notional interest on interest free deposits received by the assessee - Held that:- Where the Assessing Officer has not conducted any enquiry or investigation and by following the Judgment of Hon'ble Jurisdictional High Court in the case of CIT Vs. Tip Top Typography (2014 (8) TMI 356 - BOMBAY HIGH COURT), we do not find any reason to interfere with the order of CIT(A) qua this issue as AO has not determined the fair market rent of the property as per section 23(1)(a) but he has simply made the addition on account of notional interest to the actual rent received by the assessee. Therefore, the action of Assessing Officer is not sustainable when there is no finding by the Assessing Officer that the actual rent received by the assessee is less than the fair market rental value of the property - Decided in fvaour of assessee.
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2015 (1) TMI 1103
Disallowance u/s Sec. 14A - Held that:- Keeping in view the ratio laid down in the case of CIT Vs Holcim India (P.) Ltd. [2014 (9) TMI 434 - DELHI HIGH COURT] and in the case of CIT Vs M/s Lakhani Marketing (2014 (7) TMI 44 - PUNJAB AND HARYANA HIGH COURT) are of the considered view that no disallowance u/s 14A of the Act can be made if there is no income earned. In that view of the matter we delete the disallowance made by the AO and confirmed by the ld. CIT(A). - Decided in favour of assessee.
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2015 (1) TMI 1102
Application for grant of registration u/s 12A rejected - Held that:- Trust/institution having charitable and religious objects will be eligible for exemption u/s 11 unless hit by restrictions imposed u/s 13(1)(a) or 13(1)(b) of the Act. As in the present case, ld. DIT(E) has not brought any material on record to show that provisions of section 13(1)(a) or 13(1)(b) applies to the assessee, denial of registration u/s 12AA for alleged violation of section 11(1)(a), in our view, is not justified. Moreover, applicability of section 13 of the Act can be looked into by the AO at the time of assessment proceedings and not by ld. DIT(E) while exercising power u/s 12AA of the Act. In view of the aforesaid, we hold that ld. DIT(E) was not justified in refusing grant of registration u/s 12AA of the Act on the ground that assessee is having mixed objects. As far as the other objections of ld. DIT(E) relating to non mentioning of date of creation of trust and absence of certain clauses in the trust deed, we have to observe that even though it is a fact that date of creation of trust is not specifically mentioned in the trust deed, however, the date of registration of the trust deed before the SRO i.e. 13/03/13 can be considered as the date of creation of trust. In so far as the absence of certain clauses, as mentioned in para 2 of ld. DIT(E)’s order is concerned, we are of the view that before refusing registration on the ground of absence of these clauses, ld. DIT(E) could have called upon assessee to explain on the issue and if necessary, asked assessee to make necessary amendments to the trust deed considering the fact that these clauses form part of a standard trust deed. However, without giving any opportunity to assessee to explain on the issue or make necessary amendment to trust deed, ld. DIT(E) was not justified in rejecting assessee’s application for grant of registration u/s 12AA. We consider it appropriate to set aside the impugned order of ld. DIT(E) and remit the matter back to his file to consider the issue afresh. - Decided in favour of assessee for statistical purposes.
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Customs
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2015 (1) TMI 1127
Denial of the benefits of the “Served from India Scheme”, as framed under the foreign trade policy - whether the petitioners could be denied the benefit of the SFIS only on the ground that they were subsidiaries of foreign companies. And, whether it was open for DGFT to interpret the foreign trade policy to exclude the petitioners from the benefit of the SFIS - Held that:- , it cannot be disputed that DGFT is empowered to interpret the foreign trade policy, such powers can be exercised only when the plain language of the policy presents an ambiguity. It would not be open for DGFT to introduce new conditions and criteria under the guise of interpreting the policy as that would, clearly, amount to amending the provision of the foreign trade policy. The words used in paragraph 3.12.2 of FTP 2009-14 are “Indian Service Providers”. There is no scope to read into these words the condition that for service providers to be Indian, its shareholders must also be Indian. This, clearly, would amount to introducing an additional eligibility condition which is extraneous to the eligibility criteria as spelt out in paragraph 3.12.2 of the FTP 2009-14. Introduction of such condition would, in effect, amount to amending the FTP 2009-14. The conclusion of DGFT that Indian companies having foreign equity cannot be considered as Indian, militates against well established canons of company law. The petitioners are companies incorporated under the Companies Act, 1956 and are governed by the provisions of the statute (currently Companies Act, 2013). Insofar as the domicile of the petitioners is concerned, no distinction can be drawn between the petitioners and other companies incorporated under the said Act. It is also well established that the situs of shares is located in the country in which the register upon which they are registered is kept. (See: R. Viswanathan v. R.S. Abdul Wajid: [1962 (5) TMI 25 - SUPREME COURT], Vodafone International Holdings BV v. Union of India and Anr.: [2012 (1) TMI 52 - SUPREME COURT OF INDIA]. Companies incorporated under the laws of India and having their registered offices in India would undeniably be Indian companies. Decisions of DGFT/PIC, denying the benefit of the SFIS to the petitioners reflected in the impugned minutes, as well as separate communications sent to the petitioners withdrawing/recalling the said benefits (i.e. Duty Credit Scrips), are set aside. - Decided in favour of appellants.
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2015 (1) TMI 1126
Benefit of section 125 - Confiscation of currency - Currency belonged to third party - Assessee carrying the currency only as a carrier - Imposition of penalty - Held that:- Applicant had initially in his statement under Section 108 of the Act, admitted that the currency was given to him by Vinod Kumar Saini, resident of Jhunjhunu, Rajasthan for handing over to one Rakesh, who was to collect the same from Dubai. He had also given the mobile number of Rakesh and Vinod Kumar Saini. The applicant had also named Tulsi Ram, the owner of the vehicle and that he along with Vinod Kumar Saini had dropped him at the Jaipur Airport. Statement of Vinod Kumar Saini was recorded wherein he admitted that he had gone to the airport at Jaipur to see off the applicant. Vinod Kumar Saini accepted that incoming and outgoing calls were exchanged between him and Rakesh. Similar calls have been also received by Tulsi Ram, his relative. Revisionary Authority held that the applicant was merely a carrier of the said currency, which the applicant wanted to take out of India for monetary considerations. The Indian currency was concealed to avoid being detected. It is clear from the aforesaid finding that the applicant was not treated as the owner of the said currency and as far as ownership is concerned, it was clearly implied that the ownership belonged to Vinod Kumar Saini, who had given the said currency to the applicant for being taken to Dubai. It was meant to be delivered to Rakesh. Neither with the writ petition nor with the present application, any details or particulars of any order/s against Vinod Kumar Saini have been filed. It is also not indicated whether any proceedings were initiated against Vinod Kumar Saini and the effect thereof. In view of the aforesaid position and the above discussion, we do not think that the applicant is entitled to benefit of Section 125 of the Act. In our order dated 22nd July, 2013, we had noticed that there was a delay and laches in filing of the writ petition. The impugned order is dated 9th October, 2012 and the writ petition was filed in July, 2013. Before us, it was contended that the applicant was a poor man and had to arrange for resources for filing the writ petition. The aforesaid stand, we had observed, confirms and reinforces the finding that the applicant was merely a carrier. The currency belonged to a third person. The reference to the third person obviously was to Vinod Kumar Saini. It is quite apparent that the paltry fine of ₹ 2 lacs imposed on the applicant was in view of the fact that he was not the owner. No merit in the present application - Decided against assessee.
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2015 (1) TMI 1125
Confiscation of goods - Attempt to smuggle gold biscuits - at the point of import; import of gold was free - Held that:- When the situation is that importation of gold was free, a higher onus was on the Revenue to prove that the gold bars, which were seized from the possession of the appellant, were illegally imported or “smuggled”. More so, when there was no dispute that the petitioner was carrying on the business of jewellers. Appellant was able to adduce some evidence regarding the legal source of the goods under Section 123 of the Customs Act, 1961 under which the petitioner had the burden of proof, since gold items were seized. But unfortunately the Revenue has not been able to disprove the facts brought on record by the petitioner. - tribunal was acting on no evidence and if an authority acts on no evidence, the High Court can exercise its powers under Article 226 of the Constitution of India to set aside an order. - Order of Tribunal is set aside - Decided in favour of assessee.
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2015 (1) TMI 1124
Confiscation of goods - Import of prohibited goods - Imposition of penalty - held that:- All the authorities found that the goods and considering their quantity can never be said to be brought for personal consumption or use. If they were imitation articles or goods and the quantity was like 40 Sunglasses, 40 pairs of gents shoes, 30 pairs of ladies shoes, 30 wallets and there was an admission that the goods are brought for sale in India, then, all the more the conclusion reached and concurrently cannot be said to be perverse or vitiated by any error of law apparent on the face of the record. The writ petitions are devoid of any merits, frivolous and wastage of precious judicial time. They are dismissed with costs quantified at ₹ 25,000 - Decided against assessee.
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2015 (1) TMI 1123
Conviction under Sections 132 and 135(1)(b) of the Customs Act - illegal possession of diamonds - Quantum of sentence - Held that:- A reading of the judgments of the Courts below reflects the position that the sentence of 1 year R.I. and fine of ₹ 5,000/- i/d 2 months S.I. for offence u/s. 135(1)(b) of the Customs Act has been passed upon the erroneous impression that a minimum sentence of one year was mandatory except for special and adequate reasons. It presently is. However, offence under Section 135(1)(b) of the Customs Act did not attract mandatory minimum sentence as on the date of offence viz., 10-2-2007, the provision there regards having been introduced under Act 22 of 2007 and having come into force on 11-5-2007. Even if an order of quash against the petitioner had been passed on the reasoning that no sanction for prosecution under Section 137 of the Customs Act had been obtained, the prosecution could have moved afresh after obtaining the same. In the circumstances of the present case, this Court is of the view that interests of justice would be better met in reducing the sentence of imprisonment against the petitioner to the period of 80 days already undergone by him. The fine imposed by the trial Court is confirmed. - Decided partly in favour of assessee.
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FEMA
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2015 (1) TMI 1122
Contravention of Section 8(3) and 8(4) read with Section 68 of FEMA read with para-7A, 20(i) of Exchange Control Manual, 1995 (ECM) - Held that:- Impugned order of the appellate tribunal and the order-in-original suffer from serious infractions of the principles of natural justice and, even on merits, it appears that the appellants were able to provide sufficient material on record to raise a serious doubt about the alleged violation of FEMA. - In the present case, the order in original, as noticed above, is primarily founded upon the response dated 03.02.2004 received from Bank of India by the ED to its communication of 08.01.2004. It is not clear as to what is the nature and content of the information elicited by the ED from the Bank of India in its communication of 08.01.2004. It also remains in suspense as to what was the nature and content of the response sent by Bank of India in its communication dated 03.02.2004. It is not clear as to who sent the said alleged communication - i.e. whether it was sent by an authorized officer of the Bank or not. The appellants should have then approached the Bank of India and enquired about the same. This argument has only to be stated, to be rejected. Pertinently, when the appellant company demanded copies of the said communications vide their letter dated 29.03.2004, the same were not provided. Without having copies of the said communication, this Court fails to appreciate as to how the appellants could be expected to gather any information from the said Bank, or get them verified. In fact, the appellants were not even obliged to do so, and it was the primary obligation of the adjudicating authority to place all incriminating material - which was intended to be relied upon to condemn the appellants and penalize them in a quasi-criminal proceedings, before the appellants to elicit their response. The order imposing penalty is undoubtedly a prejudicial order as it entails quasi criminal and penal consequences. No such order could have been passed behind the back of the appellants, without confronting them with all the material which was sought to be relied upon and granting adequate opportunity to them to deal with the same. It was obligatory for the adjudicating authority to thereafter consider the response of the appellants, if any, and after consideration of the entire matter, pass the adjudication order. Reasoning adopted by the Appellate Tribunal in para 19 borders of perversity, when it observes that the appellant company had not approached the Bank of India to seek clarification about the said letter dated 03.02.2004. Pertinently, it appears that the Appellate Tribunal also did not even consider it necessary to go through the said correspondences dated 08.01.2004 and 03.02.2004 between the ED and the Bank of India. The Appellate Tribunal did not consider it necessary to satisfy itself as to the nature of information sought from, and provided by the Bank of India. On this short ground, the order in original and the impugned order of the Appellate Tribunal are liable to be quashed and set aside. Respondents have not established the violation of provisions of FEMA as alleged against the respondent beyond all reasonable doubt. There is likelihood of the appellant company having utilized the remittances for import as claimed by it. The situation has to be viewed from the context that the initial inquiry pertained to 64 remittances. Eventually, the same was narrowed down to only four, and thereafter in respect of the fourth alleged remittance, the respondents were satisfied with the appellants explanation. According to the appellants, remittances to the tune of ₹ 700 crores have been made in relation to the business of the appellant company. If one were to keep the entire conspectus of facts in view, it does not stand to reason that the appellant company would fall foul of the law in respect of such miniscule amounts as claimed by the respondent, compared to the total remittances made by it. - The amounts deposited by the appellants in pursuance of the original order of adjudication before the Appellate Tribunal, shall be refunded without any delay. Similarly, the amounts, if any, deposited in this Court shall also be refunded to the appellants without any delay. - Impugned order is set aside - Decided in favour of Appellant.
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Service Tax
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2015 (1) TMI 1148
Goods transport agency services - Recovery of erroneously granted refund - Held that:- Circular No. 423/56/98 dt. 22-09-1998 by referring to the decision of Hon’ble Supreme Court in the case of CCE Vs. Re-rolling Mills reported in 1997 (94) ELT 8 (SC) has clarified that timely demands should invariably be raised with in the normal period under section 11A of Central Excise Act, 1944. It also refers to the opinion of Law Ministry holding that the demand for recovery of erroneous refund has to be made under section 11A of Central Excise Act, 1944 within the limitation period. Similar view has been taken by this Tribunal in the case of Motor Industries Company Ltd Vs CCE reported in [1999 (6) TMI 124 - CEGAT, MADRAS]; in the case of Gillooram Gouri Shanker Vs CCE reported in [2000 (7) TMI 186 - CEGAT, KOLKATA] and also in the case of Rosemount (I) Ltd Vs CCE reported in [1998 (1) TMI 158 - CEGAT, MUMBAI]. I find that in the present case, show cause notice for recovery of erroneous refund under section 73 (1) has not been issued by the department. The Board Circular and the decision of Hon’ble Supreme Court as well as this Tribunal s judgment are squarely applicable in the present case. I, therefore, hold that the learned Commissioner could not have passed the impugned Order in Revision without issuing notice for recovery of erroneous refund under section 73 of Finance Act, 1994. The order is liable to be set aside on this ground alone. - Recovery of erroneously granted refund is not possible. Accordingly I set aside the impugned order - Decided in favour of assessee.
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2015 (1) TMI 1147
Denial of Input service credit - technical know-how fees and travel agent service - Held that:- the service tax paid on services provided by travel agent for travelling of company officials is eligible for CENVAT credit and even the Commissioner (Appeals) has conceded as much. However, he has not given any reason as to why the impugned credit was not admissible when the appellants clearly stated that the services were for the official travels of the officials for the purposes mentioned earlier. Thus, I do not find the denial of the said credit sustainable. - Following decision of Vidyut Metallics Pvt. Ltd. Vs. CCE [2012 (11) TMI 376 - CESTAT, MUMBAI]. Commissioner (Appeals) has denied the credit on the ground that the said amount of service tax was in relation to the technical know-how for production of two products namely Candisartan and Irbesartan and has been denied on the ground that the said products have not been manufactured by the appellants - observation of the Commissioner (Appeals) does not flow from any legal requirement. The technical knowhow once obtained begins to be utilised for the purpose of manufacture of products for which it was obtained as such technical knowhow is relevant/required right from the point of setting up the necessary wherewithals required for manufacturing the product. Further as per Rule 4(7) of Cenvat Credit Rules, 2004, CENVAT credit in respect of input services becomes available on or after the date on which payment is made for the value of the input service. Commissioner (Appeals) has stated that they should have been initiated the production of their final goods utilising the said technical knowhow within a reasonable period of time, but has failed to elaborate what in his view would be a reasonable period of time or whether there is any legal yardstick to determine such reasonable period. - Commissioner (Appeals) has attempted to distinguish the judgement [2009 (8) TMI 172 - CESTAT, AHMEDABAD] on the ground that in that case the appellant had initiated the trial production. But as is evident, in that case also no duty was paid on the final product as it never reached the market. The ratio of the CESTAT judgement in the case of Cadila Healthcare Ltd. (supra) is clearly supportive of the appellants claim. Thus, I do not find sufficient reasons for denial of the impugned credits - Following decision of Cadila Health Care Ltd. Vs. CCE [2009 (8) TMI 172 - CESTAT, AHMEDABAD] - Decided in favour of assessee.
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2015 (1) TMI 1146
Club and Association service - Chariable service - Service provided to members - Held that:- In view of the decision in Ranchi Club Limited (2012 (6) TMI 636 - Jharkhand High Court), on application of the principle of mutuality, services provided by the appellants to their respective members would not fall within the ambit of the taxable "club or association" service nor the consideration whether by way of subscription/ fee or otherwise received therefor be exigible to service tax. In view of the decision of the Gujarat High Court in Sports Club of Gujarat Limited [2013 (7) TMI 510 - GUJARAT HIGH COURT], as the relevant provisions (namely Section 65(25a), Section 65(105)(zzze) and Section 66 of the Act), to the extent these provisions purport to levy service tax in respect of services provided by a "club or association" to its members is declared ultra vires, we hold that there are no operative legislative provisions of the Act legitimizing the levy and collection of service tax from the appellants, for providing "club or association" service, in so far as these relate to any services provided to members of these appellants. Services provided to non members fall outside the ambit of "club or association" service prior to 01.05.2011 and subsequent to this date there is no specific allegation that the services provided to non-members fall within the expanded scope of this taxable service qua provisions of the Finance Act, 2011 - Following decision of M/s Federation of Indian Chambers of Commerce and Industry, M/s Electronic and Computer Software Export Promotion Council Versus CST, Delhi [2014 (5) TMI 183 - CESTAT NEW DELHI] - Decided in favour of assessee.
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2015 (1) TMI 1145
Imposition of penalty u/s 76 - Delay in payment of service tax - Held that:- There is delay involving 41 days, 10 days, 61 days and 31 days. Delays have continued over many months. Commissioner (Appeals) has rightly analysed a matter and upheld the imposition of penalty by the Adjudicating Authority - There are continuous delays. These cannot be said bonafide. I have also perused Tribunal's judgement in the case of same appellant. Delays were also referred. Such delayed cannot be continued and ignored. Penal action was rightly confirmed by adjudicating authority and approved by Commissioner (Appeals). As such, I do not find any force in the submission made by the appellant. I agree with the findings recorded by Commissioner (Appeals). - Decided against assessee.
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2015 (1) TMI 1144
Disallowance of CENVAT Credit - Various services - Held that:- Respondents are eligible for credit on Rent-a-Cab service. Regarding credit availed on Out-door catering, Insurance service, Pandal and Shamiyana services, testing and analysis, I find from the records that the respondents availed credit on these services for carrying out business activities and business meetings which are related to promotion of their business. In view of the Honble High Court of Bombay judgment in the case of CCE Vs. Ultratech (2010 (10) TMI 13 - BOMBAY HIGH COURT), the issue has already been settled in favour of the respondents and they are eligible for the credit on the above services. As regards the input credit availed on Sodexo Coupons issued to their employees which can be used by them for various purpose of transactions and it has no nexus in relation to any business activities of the respondents. Therefore, the respondents are not eligible for the credit of ₹ 31,472/- availed on sodexo coupons under Business Auxillary Service. Respondents are eligible for availing input credit on Rent-a-Cab Service, Outdoor Catering, Business Auxiliary Service, Insurance service, Pandal & Shamiana, Testing and Analysis, and Health & Fitness Service etc. other than Sodexo coupons. Accordingly, the impugned order is modified to the extent of credit allowed on sodexo coupons - Decided partly in favour of Revenue.
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2015 (1) TMI 1143
Taxability of Royalty - transfer of technology for manufacture of ball bearings - Consulting Engineer Service - Held that:- Respondent is a company incorporated in and operating from USA and has no branch office or any business establishment whatsoever in India. There is also no dispute that the service provided is transfer of technology for manufacture of ball bearings under licence agreement with M/s. NEI Ltd., Jaipur against payment of royalty. The service tax is sought to be recovered on the amount of royalty received by the respondent from M/s. NEI during the period 2003-04. First of all, in our view, the service provided by the respondent to M/s. NEI is not the service of Consulting Engineer but is Intellectual Property service, which became taxable w.e.f. 10-9-2004 under Section 65(105)(zzr) and, therefore, during the period of dispute, the service provided by the respondent would not attract any service tax. Such receipt of a taxable service by a person in India from a foreign service provider became taxable by making the service recipient as the person liable to pay the service tax with effect from 18-4-2006 by introducing Section 66A of the Finance Act, 1994 and hence, during the period of dispute prior to this date, the service tax could not be demanded even from the service recipient. We also find that the findings of the Commissioner (Appeals) that no service tax can be recovered from the respondent, a company incorporated in USA and operating from USA and not having any branch or establishment in India are based on the judgments of the Tribunal in the cases of Relax Safety Industries & Others (2002 (4) TMI 143 - CEGAT, MUMBAI) and Philcorp Pte. Ltd. (2007 (3) TMI 93 - CESTAT, MUMBAI), wherein it was held that the service tax demand was not applicable to a person or company located outside India having no business or establishment in India. In view of this, we find no illegality or impropriety in the impugned order. - Decided against Revenue.
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2015 (1) TMI 1142
CENVAT Credit - Suppression of facts - whether Cenvat credit is admissible for the port services and CHA services utilised by the appellant in respect of their exported goods - Held that:- adjudicating authority has observed that the Board’s Circular, dated 23-8-2007 is a clarification only with respect to the eligibility of Service Tax paid on GTA services and is not applicable in respect of the Custom House Agent and port service. The adjudicating authority also referred to a letter No. NSAL/2009-10/87, dated 30-9-2009 wherein the appellant has stated that the place of removal is the factory gate. The adjudicating authority further held that in their monthly returns they have simply mentioned the gross amount of Service Tax credit taken and never disclosed the input services on which it is taken and therefore they are guilty of suppression and wilful mis-statement. Adjudicating authority has not discussed the contentions of the appellant made in their submissions and have not recorded any definitive finding as to what is the place of delivery of the exported goods in the present case and yet has concluded that the place of removal for the exported goods is factory gate and not the port of shipment. The appellant’s letter, dated 30-9-2009 stating that the place of removal is factory gate is with reference to the department’s queries which did not refer to exported goods. It can be nobody’s case that an assessee necessarily has to have only one place of removal for all their clearances. It does come out from the adjudication order that the adjudicating authority may not be averse of allowing the credit of service tax paid on port services and GTA services if the place of removal is determined to be the port of loading. The adjudicating authority has also not brought out as to how the appellant is guilty of wilful mis-statement or the suppression of facts. The adjudicating authority has merely stated that in their ER-1 returns they did not declare as to on which input services the credit was taken. He has not discussed whether the appellant was required under any provision of law to declare in ER-1 returns or otherwise the names/details of services in respect of which the appellant had taken the Cenvat credit. It is settled law that mere not telling is not suppression when there is no legal requirement to tell. - Matter remanded back - Decided in favour of assessee.
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2015 (1) TMI 1141
Disallowance of input tax credit - Nexus with business - Held that:- export, port is the place of removal. Accordingly the CHA Service, Airport Service, Port Services, etc., are incurred in the Ports and accordingly the same are allowed. Services being Courier Services, Storage & Warehousing Services, Maintenance of Xerox/Fax Machines and Telephone Services are all related to the business of the appellant and same are accordingly allowed. In respect of Security Services, I find that the same is specifically included in Rule 2(l) of Cenvat Credit Rules. Having consider the rival contention, I hold Security Services is required for smooth running of industry concerned, which is located in remote area and Cenvat credit is accordingly allowed. As regards ‘Transport Services’, the appellant states that mainly transport is of the finished goods to its dealers across the country. Further on perusal of the Order-in-Original & Order-in-Appeal, I find that complete facts have not been mentioned, hence the disallowance is on ad hoc basis, which is not proper and against natural justice. Similar is the position with respect to amount of ‘other services’ head. Thus I set aside and remand to the adjudicating authority to re¬consider them as per the facts and law. As regards the penalty imposed under various Sections like 76, 77 and 78, Rule 15(3), etc., the same are set aside. - Accordingly, no case of mala fide etc. is made in availing the Cenvat credit- Decided partly in favour of assessee.
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2015 (1) TMI 1140
Authorised service station service - Free services during warranty period - reimbursement or not of amount by the Car Manufacturer i.e. M/s. Maruti Udyog Ltd. - Held that:- Liability to service tax is on account of the said service provided to a customer. The service is provided to the car buyers who are the customers. For the free services, no amount is charged from the customers. As regards the contention that amount towards the free services is reimbursed by Maruti Udyog Ltd., it is seen that Maruti Udyog Ltd. have categorically stated that they do not reimburse any amount towards such free services to the dealers. The respondents have also stated that providing such free services is part of the functions and duties of dealers who are entitled to the dealership commission. Also the free services are rendered to the car buyers and not to M/s. MUL and the car buyers pay nothing therefor. Seen in this light it is evident that the demand of service tax as per column 5 of the table above is misconceived. Coming to the demand of service tax on the amount received on account of salary of drivers of vans used for providing mobile service to the car owners shown in column 4 of the table, it is evident that the customer in this case is the car owner who is the recipient of service. M/s. MUL receive no service nor are M/s. MUL, the respondents’ customers. Thus the respondents have not provided the service of authorised service station to them (i.e. M/s. MUL). Accordingly this amount cannot be made liable to service tax under the category of authorised service station service - Decided against Revenue.
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2015 (1) TMI 1139
Cargo handling service - activity of stacking the bags on the railway wagons or trucks - Assessee contended that it did not provide cargo handling service since the urea manufactured by NFL was merely being collected in bags from bagging plants and these bags were stacked on the conveyor. - demand beyond the scope of SCN - Held that:- On analysis of the transactional documents including contract and the work orders, ld. appellate Commissioner also concluded that cleaning of the conveyor systems for transport of the fertilizer bags does not fall within the ambit of cleaning activity. Appellate Commissioner further held that assessee’s activity fall outside the ambit of manpower recruitment or supply agency since under the agreement with NFL persons employed by the assessee are its own employees and not of NFL therefore, there was no manpower recruitment or supply agency service provided to NFL by the assessee. - Neither in the show cause notice, the adjudication order nor the appellate order is there any indication which aspects of the activities of the assessee, under the same transactional documents, fall clearly within which of the three taxable services alleged. There are also no particulars provided as to what part of the consideration received by the assessee is attributable to each of the three taxable services allegedly performed/rendered by the assessee. - Decided against Revenue.
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Central Excise
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2015 (1) TMI 1137
Benefit of Notification 162/86-CE dated 01.03.1986 which granted concessional rate of duty - whether the appellant is to be fastened with the duty liability on the vehicles which was deregistered as from taxis and registered as private vehicle; which was initially cleared by the appellant by availing the benefit of Notification 162/86-CE - Held that:- while clearing the vehicles from the factory premises, the appellant had adhered to the condition laid down in such Notification - Following decision of Maruti Udyog Ltd. [1998 (8) TMI 399 - CEGAT, NEW DELHI] - impugned order is liable to be set aside - Decided in favour of assessee.
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2015 (1) TMI 1136
CENVAT Credit - Business Support Services - interest and penalty under Rule 15 of Cenvat Credit Rules read with Section 11AC - Determination of place of removal - Held that:- In view of the Circular dated 23.8.2007, it is clearly provided therein that eligibility to availing CENVAT Credit of Service Tax paid is dependent upon the place of removal, in the facts and circumstances, which may even include sale taking place at the destination point and the Hon'ble High Court of Punjab & Haryana in the case of Ambuja Cements Ltd. Vs. UOI - [2009 (2) TMI 50 - PUNJAB & HARYANA HIGH COURT] in respect of Goods Transport Agency services, being outward freight, when paid by manufacturer upto customer's door step, have found that credit availed on such services is admissible, for ownership of the goods remained with the seller till delivery at customer's door step, transit insurance borne by the assessee and property in goods not transferred to buyer till delivery and freight charges forming part of value of excisable goods and borne by the assessee on FOR destination basis, CENVAT Credit is allowable and also held that CBEC&C's Circular is binding on the Revenue - Commissioner (Appeals) has erred in the facts and circumstances of the case, that the place of removal is not port, but the factory gate. I hold that in the facts and circumstances of the case, the place of removal is port and accordingly, I set aside the impugned order - Decided in favour of assessee.
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2015 (1) TMI 1135
Reversal of Cenvat Credit – Removal as such of capital goods after use - demand of reversal of entire credit with Interest - Held that: - The capital goods loose their identity as capital goods only when after use over a period of time, the same has become in-serviceable and fit to be scrapped. The object of Cenvat Credit on capital goods is to avoid the cascading effect of duty. If even after use for a couple of years, the Cenvat Credit is required to be reversed then it would certainly defeat the object of the scheme. To avoid misuse of the scheme in the Rules, it has been provided that if the machines are cleared as such the Assessee shall be liable to pay duty equal to amount of Cenvat Credit availed. The machines which are cleared after utilization cannot be treated as machines cleared as such. - The machine cleared after putting into use for nine years cannot be treated as Cleared ‘as such’. Insertion of proviso w.e.f. 13.11.2007 makes it clear that there is difference between machines cleared without putting into use and cleared after use – Following decision of Commissioner Central Excise Commissionerate Versus M/s Raghav Alloys Ltd. [2010 (4) TMI 294 - PUNJAB & HARYANA HIGH COURT] - decided in favor of assessee.
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2015 (1) TMI 1134
Demand for CENVAT credit - inputs were wrongly shown to have been used in the manufacture in the factory - MSWPL showed that these items were sent for job work to other manufacturers for conversion into billets without actually sending the same - Held that:- Additional Director was to conduct verification and send a confirmation report and also assessee was advised to approach DGCEI office. Subsequently in the letter dated 13.04.2013, a copy of which was produced before us today, in paragraph 4 it was stated that the appellants representative had visited the DGCEI office and the concerned officer had directed them to visit their office again in the week starting from 15.04.2013. - it was the Commissioner s office who directed the assessee to go to DGCEI office and also required the Additional Director to conduct verification and send a confirmation. That being the position, it was not proper for the Commissioner to simply adjudicate the matter ignoring his own office request to the Additional Director for a report and ignoring the fact that learned counsel for the appellants had stated that the DGCEI office had asked the appellants to come after 15th April for the purpose of verification of documents/supply of documents. Having written to the Additional Director to verify and confirm and having written to the assessee to go to the DGCEI office, passing an adjudication order without getting the complete reply/proper reply and without giving an opportunity to the appellants to go through the process of verification with DGCEI was not proper. - Matter remanded back - Decided in favour of assessee.
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2015 (1) TMI 1133
Valuation of the goods cleared by the job worker directly on payment of excise duty - Held that:- Appellants have adopted provisional assessable value on cost plus conversion charge basis and paid excise duty. It is also seen that the first appellant instead of returning the finished goods to the principle manufacturer directly cleared the goods to the consignment agents on payment of excise duty. Whereas, it is seen that the consignment agents in turn collected the excise duty and sales tax from the buyers. It is also noticed that SGF has already collected the excise duty as per the value from the customers as per the price at which it was cleared from the consignment agents. Therefore, the excise duty is payable on the goods manufactured and cleared from the job worker directly to the consignment agent on the price at which consignment agents have sold to the buyers. The judgment relied upon by the Ld. AR in the case of Loharu Steel Industries Ltd (2002 (1) TMI 111 - CEGAT, BANGALORE) and I.P.F. Vikram India Ltd (2002 (4) TMI 211 - CEGAT, COURT NO. I, NEW DELHI), rightly applicable to the present case. The appellants relying on the Hon’ble Supreme Court judgment in the case of Ujagar Prints Etc. (1989 (1) TMI 124 - SUPREME COURT OF INDIA) is not applicable to the present case, as the facts are different in the present case. Accordingly, we do not find any infirmity in the findings of the adjudicating authority in confirming the demand of differential duty. However, we reduce the penalty imposed on SSTL from ₹ 25,000/- to ₹ 5,000/- and the penalty imposed on SGF is set aside. - Appeal disposed of.
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2015 (1) TMI 1132
Authorized person for filing an appeal - CENVAT Credit - Penalty u/s 11AC read with Rule 15 - Held that:- Applicant had authorized Shri Naren Banerjee for signing all documents and also for appearing before the Excise Authorities in all Central Excise matters - No merit in the submission of the Revenue that specific authorization has to be given for filing the appeal. In my opinion , even the General Authorization in favour of an employee through a Board Resolution by a Private Limited Company would suffice the requirement for filing the appeal in compliance with Rule 3 of the Central Excise (Appeals) Rules, 2001. In the result, the impugned Order is set aside and the Appeal is remanded to the ld. Commissioner (Appeals) for deciding the issue afresh, after giving a reasonable opportunity of hearing to the Appellant - Decided in favour of assessee.
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2015 (1) TMI 1131
CENVAT Credit - Capital goods - Transfer of unutilized credit - Held that:- it is only a case of leasing out of the inputs and capital goods and no removal has taken place and therefore provisions of Rule 3(5) are not applicable. The credit transferred by the appellant is to the balance 50% of the credit pertaining to capital goods procured by the appellant during 2009-10 and the unutilized credit can be transferred subject to utilization in the subsequent year - in the case of leasing out of the factory to another company, no liability arises to reverse CENVAT credit since there was no physical removal of such goods - Following decision of Dalmia Cements Bharat Ltd. v. CCE, Tiruchirapalli [2007 (11) TMI 211 - CESTAT, CHENNAI] - Decided in favour of assessee.
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2015 (1) TMI 1130
Jurisdiction of Tribunal - Revenue makes an objection stating that when the goods came in baggage but not in cargo, the dispute relating to baggage shall not be subject to jurisdiction of Tribunal under first proviso to Section 129A(1) of the Customs Act, 1962. The jurisdiction lies to the Revisional authority for revision remedy. - Held that:- Tribunal has no power to compel an authority to act under its direction usurping power of that Authority unauthorisedly. Any direction in this regard will amount to unauthorised exercise of power and excessive exercise of jurisdiction not vested. Appellant may raise all legal pleadings before appropriate authority to consider his prayer if any made for condonation of delay if it seeks revisional remedy. - Decided against assessee.
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2015 (1) TMI 1129
Duty demand u/s 11D - unit is situated in duty exemption zone - revenue argued that since the price includes excise duty, the appellant is recovering this element of duty through the pricing mechanism. - Interest u/s 11DD - Held that:- In the present case from the invoice raised by the appellant, it is seen that there is no mention of any collection of any amount as representing excise duty and it is the composite price fixed by the NPPA which has been indicated. This Tribunal had occasion to consider an identical matter in the case of IOCL (2015 (1) TMI 815 - CESTAT CHENNAI) wherein it was held that when a composite price under the administered pricing mechanism has been charged from the buyers under relevant invoices and no amount representing the same as duty of excise has been charged from the buyers, the necessary ingredients of Section 11D are not satisfied. In view of the above position, we are of the considered view that the appellant has made out a prima facie case for grant of stay. Accordingly, we grant unconditional waiver from pre-deposit of dues adjudged against the appellant and stay recovery thereof during the pendency of the appeal. - Stay granted.
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2015 (1) TMI 1128
Clandestine removal of goods - Penalty u/s 11AC - Held that:- The allegation of excess unaccounted production of sugar is purely based on the alleged excess production of molasses reported by the appellant themselves vide under letter dated 30-6-2009. There is no dispute that the quantity of molasses stored in the tank had been determined by dip reading. In my view, determining the quantity of molasses by dip reading is not a foolproof method as the volume of molasses may undergo change due to temperature during the summer season. As such, on the basis of excess molasses reported during stock taking, it cannot be alleged that there was excess production of sugar. The Supreme Court in the case of Oudh Sugar Mills Ltd. v. Union of India (1962 (3) TMI 75 - SUPREME COURT OF INDIA) has clearly held that allegation of clandestine production and clearance based upon calculations of raw material fed into the process are vitiated by error of law, being based only on inferences involving unwarranted assumptions apart from the fact of excess quantity of molasses, there is virtually no other evidence indicating any clandestine removal of the sugar. - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (1) TMI 1138
Notice for reassessment issued u/s 21(2) of U.P. Trade Tax Act – Grant of exemption on sale of books from payment of trade tax as per Notification No.TT-2-63/XI-9(116)/94-U.P. Act-15/48-Order-95 dated 16th January, 1995 – Held that:- There has been a total non-application of mind - the mere fact that the petitioner is importing ink for the purpose of importing books does not lead to any conclusion that the printing of books is for the purpose of execution of a works contract - there must be more material other than the purchase of ink to come to a prima facie satisfaction that the purchase of ink was for the execution of a works contract - mere purchase of ink is not sufficient to hold that the petitioner was engaged in the execution of a works contract - the order of authorization does not indicate that the authority had perused the terms and conditions of the contract, which led him to believe that the contract was nothing else but a works contract and was not a contract for the publication of books - The reasons given by the authority in the authorization order is, that since there exists a contract between the petitioner and the State Government, therefore, it is presumed that it is a works contract - On such presumption, notices under Section 21(2) of the Act cannot be issued nor can authorization be granted for reassessment. The contract clearly indicates that it relates to printing and supply of printed material and is not a works contract - works contract is normally done on the basis of specification of printing given by the buyer, which in the instant case is lacking - there is nothing on record to indicate that the petitioner is executing the printing of the books as a works contract for a buyer - the foundational requirement of sub-section (1) of Section 21 of the Act for reopening the assessment is lacking - The reason to believe that income had escaped assessment is not based on any tangible material and the reasons to believe that has been formed that some income had escaped assessment is not based on any relevant material nor there is a live link between the formation of the belief and the material available before the authority - in the absence of a vital link having not being established between the reasons and the evidence before the authority, the reason to believe for reopening the assessment was not given in good faith but was based on extraneous or irrelevant consideration - the reasons recorded is not based on any material evidence and the order of authorization and the consequential notice issued for reassessment cannot be sustained – Decided in favour of petitioner assessee.
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