TMI Tax Updates - e-Newsletter
January 4, 2014

Case Laws in this Newsletter:

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

Articles

1. APPEAL AGAINST ORDER IMPOSING PENALTY UNDER SECTION 271FA OF INCOME TAX ACT, 1961 IS NOT MAINTAINABLE

   By: DR.MARIAPPAN GOVINDARAJAN

2. DEPRECIATION AND CENVAT CREDIT

   By: Dr. Sanjiv Agarwal

Notifications

DGFT

1. 63 (RE-2013)/2009-14 - dated 3-1-2014 - FTP

Amendment in the procedure for issue of Registration Certificates (RCs) for export of various commodities

Highlights / Catch Notes

Income Tax

• Clarification on Section 12AA: Not All Knowledge Acquisition Qualifies as "Education" for Charitable Institution Registration.

  Case-Laws - AT : Application for registration u/s 12AA - The word “charitable” prefixing the word “institution” has to be given its full effect - All kinds of acquiring knowledge will not come within the meaning of “education” - AT
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• Life Insurance Company Can Deduct Share Capital Increase Costs as Revenue Expenditure.

  Case-Laws - AT : In the case of an assessee company, which is engaged in the business of Life Insurance, the expenditure incurred with regard to increase in share capital is allowable as deduction by treating it as revenue in nature- AT
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• Assessing Officer Needs Comprehensive Evaluation for Share Transactions Beyond Holding Period to Determine Trading or Investment.

  Case-Laws - AT : Assessing Officer certainly cannot decide the nature of share transaction either as trading activity or investments solely on the basis of period of holding of the shares - AT
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• Assessing Officer's 18.11% Gross Profit Rate for Assessee's Trading Turnover Declared Unfounded and Untenable.

  Case-Laws - AT : Fall in GP rate - The estimate of GP at 18.11% even in respect of turnover relating to own trading of the assessee by the AO was without any basis and consequently untenable - AT
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• AO Misinterprets "Plant" in Section 194(I) TDS; Buses Not Included in Rent Definition.

  Case-Laws - AT : TDS to be deducted u/s 194(I) of the Act – As against that, “rent“ which is defined in explanation to sec.194I inter-alia is for the use of “plant“ which according to the AO includes buses - view of AO is not Correct - AT
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• Claim of Reduction u/s 80 IC Deemed Apparent Error, Adjustable u/s 143(1) of Income Tax Act.

  Case-Laws - AT : When an incorrect claim of reduction from book profits of amount which the assessee is eligible u/s 80 IC is made, it is an incorrect claim apparent from the record, which can be adjusted u/s 143(1) - AT
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Customs

• High Court Rules Education Cess on CVD Invalid, Upholds Duty-Free Imports Under Exemption Notification No. 32/2005-Cus.

  Case-Laws - HC : Benefit of Exemption Notification No. 32/2005-Cus. - Demand of Education Cess on CVD - duty-free imports were being made under DEPB scheme - goods remain exempt - demand of eduction cess is not valid - HC
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Service Tax

• Appellant granted penalty waiver u/s 80 after proving confusion over tax liability and subsequent payment of taxes.

  Case-Laws - AT : There was some confusion about tax liability - appellant paid tax along with interest once the matter was clear to them and their customers appellant has made out sufficient cause for waiver of penalty under section 80 - AT
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• Cenvat Credit for CHA, Courier, and Air Travel Services in Export and Business Activities Deemed Admissible.

  Case-Laws - AT : Whether Cenvat Credit availed by the appellant with respect to CHA services for export of goods, courier services and air travel services availed in connection with the export of goods and business is admissible or not - credit allowed - AT
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• Service Tax on Renting, Ads, and Clubs: No Bona Fide Belief in Exemption Since 2005, Says Court.

  Case-Laws - AT : Renting of immovable property - Sale of space or time for advertisement - Club or Association Service - appellant has not challenged the levy and cannot form bona fide belief from 2005 onwards based upon a High Court judgment in 2013 - AT
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• Extended Period Not Applicable: "Commercial Concern" Excludes Individual Services per CBEC Circular and Judicial Rulings.

  Case-Laws - AT : Extended period cannot be invoked in the present proceedings, because there was a bonafide view, as per CBEC circular and various judicial pronouncements that the word ‘commercial concern’ did not include the services provided by the individuals or proprietary concern. - AT
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• Telecom Franchise Not Liable for Additional Service Tax on SIM Card Sales Already Taxed to Principal Company.

  Case-Laws - AT : Where the principal (BSNL) has already paid service tax on the full value of the SIM cards, franchise cannot be called upon to pay tax again on the same transaction on the ground that his activity is separately liable to service tax under the category of BAS - AT
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Central Excise

• Central Excise Exemption Cannot Be Denied for Delayed Certificate Submission; Substance Over Form Prevails.

  Case-Laws - AT : Exemption notification benefit cannot be denied on the procedural requirement of the production of certificate on the ground that there was delayed submission of such certificate - AT
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Case Laws:

• Income Tax

• 2014 (1) TMI 196
  Rectification of mistake – Mistake apparent on the face of record u/s 254(2) of the Act - Held that:- The mistake, if any, is in the order of DRP and not in the order of the Tribunal - This being not a mistake apparent from record is declined to be rectified - Travelling expenses to Singapore has also been restored back to the file of DRP – thus, there is no mistake on this issue also as it does not fall within the category of mistake apparent from record as envisaged in section 254(2) of the Act - As per table TPO had determined the mean margin of 26.59% - However, this has wrongly been typed as 26.39% and 26.50% respectively - The same being obvious mistake is accepted to be rectified and percentage written as 26.39% and 26.50% will be replaced with 26.59% - Decided partly in favour of Assessee.

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• 2014 (1) TMI 195
  Nature of loss – Loss from Speculative transaction or not u/s 43(5) of the Act - Actual delivery of the shares not taken – Share transaction settled otherwise than actual delivery – Held that:- Relying upon Dy. CIT v. Paterson Securities (P.) Ltd. 2010 (2) TMI 683 - ITAT, CHENNAI] - After going through the definition of stock exchange, it would be proper to refer the issue back to the AO to find out the stock exchanges in which the transactions were carried out by the assessee - After ascertaining the names of the stock exchange, then the AO is expected to examine whether those stock exchanges have fallen within the definition of "stock exchange" as given in the Securities Contracts (Regulation) Act - The AO is then also required to verify that the "Security" as mentioned in the contract note by the share-broker falls within the definition of "derivative" or "securities" as defined under the Act - the AO is satisfied that the transaction of those shares/securities/derivatives is within the parameters – Decided in favour of Revenue.

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• 2014 (1) TMI 194
  Genuineness of the expenses – Certified data purchase – Held that:- The data can be collected from any government and private agency - the Revenue authorities could not dictate to the assessee as to how and in what manner the businessman shall have to run its business - The expenditure shall have to be considered from the point of view of the businessman/assessee and not from the point of view of the Revenue authorities - Following CIT v. Dhanrajgirji Raja Narasingirji [1973 (3) TMI 6 - SUPREME Court] - The assessee on the basis of the evidences have been able to prove that the assessee actually purchased data from M/s. Shiva Fund Trust and maintained complete details on the same and same information have been used for the purpose of earning business income - The credentials of M/s. Shiva Fund Trust are also genuine because the Revenue Department has accepted the income declared by the party in their return of income which was received from the assessee - in the absence of any data purchased from this party, the assessee would not have been able to earn commission income. As compared to subsequent assessment year, the assessee has incurred lesser expenses under the head certified data purchased, thus, the history of the assessee would also suggest that the assessee has actually and genuinely incurred expenses under the head data purchased - The Assessing Officer did not point out any specific defect in any data purchased by the assessee for the purpose of business, therefore, in the absence of any incriminating material or finding against the assessee, the Assessing Officer was not justified in holding that the assessee could not substantiate the above expenses under the head data purchase - the entire disallowance under the head is wholly unjustified – Decided in favour of Assessee. Expenses relating to salary – Held that:- There are three types of salary paid as has been noted by the Assessing Officer in the assessment order, i.e., salary paid to administrative staff/supervisor and remaining salary/wages paid temporary staff, apprentice and field staff and in their cases no provident fund provisions are applicable - The assessee has filed copies of Form 16 to show that genuine payments of the salary have been made to the staffs who are employed for the purpose of the business of the assessee - the assessee maintained complete details on the same issue regarding salary payment - looking to the previous year salary paid to the staff in percentage and volume of business receipts - there is no question on inflating expenses by the assessee under the head salary as has been found by the Assessing Officer - the complete data were produced before the Assessing Officer in which no specific details against the assessee have been pointed out by the Assessing Officer Further salary accounts have been filed to show that payment of salary have been made to large number of employees and details of month-wise and namewise have been maintained - Payment of salary cannot constitute payment of commission - No specific details of violation of TDS provisions have been noted in assessment order - salary has paid for the purpose of business and the Assessing Officer has not brought any adverse material against the assessee – thus, in the absence of any material against the assessee, there was no justification to disallow 30 percent of the expenses out of salary – Decided in favour of Assessee. Expenses relating to referral fees – Held that:- All the expenses related to the earning of commission from Bajaj Allianz have been incurred wholly and exclusively for the purpose of business of the assessee - The referral fees and the disallowance should be maintained at 5 per cent. of the total expenses claimed by the assessee under this head as against proposed by the Assessing Officer of 30 per cent - the authorities were not justified in disallowing the expenses under the head certified data purchased and salary, wages and bonus - The additions made on account of disallowances of 30 per cent. of expenses under these heads – Decided partly in favour of Assessee.

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• 2014 (1) TMI 192
  Rectification of Mistake u/s 143(3) r.w Section 254 of the Act – Quantum of assessment challenged – Adoption of fair market value of the property – Held that:- For the purpose of section 50C, the Assessing Officer has adopted the value determined by the V.O. and has computed the long term capital gain at 11,38,020 - The Assessing Officer is bound by the V.O's report in case it is lower than the value assessed by the stamp valuation authority, however, the same is not binding upon the learned Commissioner (Appeals) or the Tribunal wherein the assessee can further raise objection to such valuation - If that is so, then the learned Commissioner (Appeals) and the Tribunal can also examine into the fact whether the difference of less than 15% between the actual sale consideration and the value adopted by the V.O. can be ignored on the facts and circumstances of the case. Neither the Assessing Officer nor the learned Commissioner (Appeals) entertained any such objection or has given any cogent reasons - If the assessee has made various objections to the V.O's report, the learned Commissioner (Appeals) was bound to look into these objections so as to arrive at proper fair market value - He was also bound to consider the contentions of the assessee that in case of difference of less than 15% between the value shown by the assessee and the value estimated by the V.O. - the benefit should be given to the assessee and such a difference can be ignored – Order of the CIT(A) set aside and the matter remitted back to the AO for fresh adjudication to properly acknowledge the objections of the assessee to V.O's estimate as well as his claim for benefit when the difference is less than 15% - Decided in favour of Assessee.

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• 2014 (1) TMI 191
  Interest paid to and received from Head Office – Held that:- Following Sumitomo Mitsui Banking Corporation V/s Dy.DIT (IT) [2012 (4) TMI 80 - ITAT MUMBAI] - Indian Branch of Foreign Bank being part of Foreign Bank was not separate and distinct taxable entity in India as per the domestic law - It was foreign bank i.e. Head Office which was taxable entity in India - The interest received by Indian Branch of foreign bank from its head office, therefore, does not give rise to any income which is taxable in India because one could not make profit out of itself - No deduction with respect to interest paid by the assessee Branch of the assessee-company to its Head Office is to be allowed - The DRT in its direction has also directed AO to verify that the assessee itself made disallowance in the return of income filed - Decided in favour of assessee. Transactions charges on Nostro Account u/s 40(a)(i) – Held that:- Following assessee's own case for A.Y. 2005-06 - The transaction charges paid on Nostro Account were in the nature of bank charges for maintaining the accounts with banks outside India - These charges were recovered directly by way of debits to the concerned accounts of the assessee with these banks and the same represented business income of those banks which accrued/arisen outside India - No tax was required to be deducted at source from the transaction charges paid on Nostro account - Decided in favour of assessee. Expenses specifically incurred by HO for Indian branches – Held that:- Following assessee's own case for A.Y. 2005-06 - The traveling expenses incurred by the Head Office on traveling of its own staff are directly in connection with Indian branch and are allowable u/s 37(1) of the Act - Section 44C has no application to such expenses – Decided in favour of assessee. Expenses incurred on employee of the bank – Held that:- In the appointment letter of the employee from Oman office, allowances which were to be paid to him as well as the description of work is stated. On perusal of the said letter it is observed that he has to work on full time basis for a period of two years at Mumbai Branch. Not only this, we observe that Shri Zakariya also filed return of income in India for the assessment year 2006-07 - The said expenses paid to him could not be considered a part of section 44C and the same are to be allowed u/s 37 of the Act – Decided in favour of assessee. Taxability of year-end provision – Held that:- The assessee made excessive provision for expenses - Provision for excessive expenditure was made in accordance with regular method of accounting followed by it – The excess provision was disallowed on the condition that when the assessee reverse the excess provision, the said amount should not be charged to tax in the subsequent years – Decided against assessee. Reversal of excess provision – Held that:- The AO while discussing the said amount stated that the sum of Rs.58,948/- on account of reversal of excess provision expenses taxed in assessment year 2005-06 is reduced from total income for assessment year 2006-07 - The DRP also directed the AO to verify the above claim if found credited and make necessary adjustment to the credit to the total income - The AO has not deducted the said amount - The issue was restored for fresh adjudication. Credit of TDS – Held that:- The AO while giving effect to the direction of DRP has not complied with the directions - The assessment order passed by AO is a non-speaking order and only contains computation without giving reasons - The issue was restored for fresh adjudication. Refund of income tax along with interest – Held that:- AO has not considered the direction of the DRP nor any discussion is made in the assessment order as the order of the AO is a non-speaking order - The issue was restored for fresh adjudication. Carry forward of business loss and unabsorbed depreciations – Held that:- The AO failed to follow the directions of DRP - The claim of the assessee be examined and subject to verification to allow carry forward of business loss and unabsorbed depreciations if permissible /allowable under the Income Tax Act/Rules - The AO while passing the final assessment order after considering the recommendation of DRP has neither cared to consider the DRP direction nor given effect to the direction of the DRP – The issue was restored for fresh adjudication.

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• 2014 (1) TMI 190
  Disallowance of interest u/s 40(a)(ia) - Held that:- On perusal of the amendment made by Finance Act, 2012 by inserting the proviso to section 40(a)(ia) of the Act w.e.f.1.7.2013, it is stated that " if the payer fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B of the Act on sum paid to a resident or on the sum credited to the account of resident, payer shall not be deemed to be an assessee in default if in respect of on such amount tax has been paid by the payee resident in the return filed by him - The said proviso is applicable from assessment year 2012-13 and accordingly the benefit of the same could not be given to the assessee as the assessment year involved is assessment year 2007-08 - Decided against assessee.

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• 2014 (1) TMI 189
  Deduction u/s 80IB - Held that:- There is no specific guideline with regard to the need to manufacture the same item which is mentioned in the provisional certificate so as to enable a company to claim the benefit of deduction under section 80IB of the Act - These factors were not properly examined by the tax authorities - There is no condition prescribed to continue production of the same product so long as the assessee begins manufacture and ultimately commences production before the stipulated period - The issue was restored for fresh adjudication.

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• 2014 (1) TMI 188
  Disallowance of reversal of income – Held that:- The Assessing Officer has reproduced the relevant portion of the minutes from which it is evident that the assessee is entitled to overhead charges of one and half percent on the computed cost of the project - The computed cost of the project would include cost of the entire project including general pool accommodation – Decided against assessee. Prior period expenditure – Held that:- It is a settled law that when the assessee is following mercantile system of accounting, the prior period expenses can be allowed in the subsequent year in which such expenses have crystallized - none of the lower authorities had examined this aspect - The assessee has also not given complete details of the prior period expenses and has not explained how such expenses have crystallized during the accounting year relevant to the assessment year under consideration – The issue was restored for fresh adjudication. Interest accrued but not due on foreign loans – Held that:- Following assessee's own case for AY 2001-02 - Interest accruing on loans obtained in foreign currency from Asian Development Bank and Japan Bank of International Cooperation is deductible in computing the income even though it has not become payable - Whether liability did not crystallize in the year under consideration or not, the interest is deductible since the assessee is following mercantile system of accounting - Following Bharat Earth Movers Vs. CIT [2000 (8) TMI 4 - SUPREME Court] - Deduction of interest accrued on such foreign loans is allowable – decided in favour of assessee. Financial charges written off – Held that:- Following assessee’s own case for earlier years - Assessing Officer had not examined the issue in the light of material filed before him - He has simply disallowed the claim of the assessee on the grounds that the relevant details were not filed by the assessee - The matter was restored to the file of the AO for fresh adjudication. Depreciation on assets added to the block after 30.09.2001 – Held that:- Following assessee’s own case for earlier year - Hundred per cent depreciation is deductible on books owned by lending libraries and professionals, the rate of 60% is applicable in respect of other cases - The assessee is neither a lending library nor a professional, it is held that the learned CIT(Appeals) was right in allowing depreciation @ 60% – Decided against assessee. Depreciation on estimated increase in cost of properties – Held that:- It is a settled law that depreciation is to be allowed on the actual cost of assets to the assessee and not on the basis of enhanced cost of the assets on estimate basis – Decided against assessee. Disallowance u/s 14A – Held that:- Following Maxopp Investment Ltd. & Ors. Vs. CIT – [2011 (11) TMI 267 - Delhi High Court] – The issue was restored for fresh adjudication.

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• 2014 (1) TMI 187
  Validity of assessment order - Held that:- The limitation as laid down in the amended Proviso to Section 143 (2) (ii) is applicable - Following 'C.B. Richards Ellis Mauritius Ltd. vs. Asstt. Director of Income-tax' [2012 (6) TMI 37 - DELHI HIGH COURT] - The return in this case was filed on 18.10.2007, the limitation for service of notice u/s 143 (2) would be six months from the end of the financial year in which the return is furnished - The notice u/s 143 (2) of the Act, even as per the record, was issued on 30.09.2008, which is, clearly, beyond the limitation prescribed. Date of service of notice - Following 'Commissioner of Income-tax vs. Vardhaman Estate (P) Ltd. [2006 (9) TMI 128 - DELHI High Court] - The authorities below have erred in taking the date of issuance of the notice u/s 143 (2) of the Act, as the deemed date of the service of such notice on the assessee - The date of service of such notice is the date of its actual receipt by the assessee - The notice u/s 143 (2) of the Act was served on the assessee beyond the time limit prescribed by the Proviso to Section 143 (2) (ii) as applicable - All proceedings pursuant to such notice are held to be illegal - Decided in favour of assessee.

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• 2014 (1) TMI 186
  Application for registration u/s 12AA - Held that:- Following Sole Trustee, Loka Shikshana Trust vs Commissioner of Income-tax [1975 (8) TMI 1 - SUPREME Court] - All kinds of acquiring knowledge will not come within the meaning of “education”. What “education” connotes in section 2(15) is the processing of training and developing the knowledge, skill, mind and character of students by normal schooling - The sense in which the word “education” has been used in section 2(15) is the systematic instruction, schooling or training given to the young is preparation for the work of life - It also connotes the whole course of scholastic instruction which a person has received - The word “education” has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education - Mere coaching classes may provide some kind of knowledge to the students. But that kind of acquisition of knowledge through coaching classes cannot fall within the meaning of “education” as provided in section 2(15) of the Act - There should be a normal schooling by way of regular and systematic instruction - Following Bihar Institute of Mining And Mine Surveying vs C.I.T. [1993 (12) TMI 50 - PATNA High Court] - The word “charitable” prefixing the word “institution” has to be given its full effect - It appears that one of the principal projects of the petitioner’s institution has the object of coaching and preparing the students for appearing in various examinations conducted by the Board of Mining Examination and / or MI (1) section (a)(b) and the said coaching of students in an institute is not, an imparting of education which can be said to be a process of training and developing knowledge and character of students by normal schooling - A coaching institute cannot be said to be an institution where normal schooling is done - The assessee cannot be considered to be an “educational trust” within the meaning of section 2(15) of the Act - It is not entitled for registration u/s 12AA of the Act - Decided against assessee.

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• 2014 (1) TMI 185
  Unexplained deposits u/s 69A - Held that:- when the assessee claims that he has withdrawn the amount on earlier occasion and the same was kept with him for some time and later it was deposited into the bank account, it is the duty of the assessee to establish the same - The assessee has failed to establish nexus between the earlier withdrawal from the bank account and deposited the same into the account - The issue was restored for fresh adjudication.

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• 2014 (1) TMI 184
  Unexplained unsecured loans – Held that:- On 23.11.2011, assessee was represented by its representative whereas on 30.11.2011 assessee himself had appeared personally - The gap between 23.11.2011 and 30.11.2011 was only a week - Within the short gap of time it would have been very difficult for the assessee to frame a fresh set of books of accounts avoiding all the cash loans shown earlier - Preponderance of probability tilts to assesee's side and its explanation that the book produced on 23.11.2011 was not the correct one cannot be brushed aside - Assessee had in support of the cash book produced on 30.11.2011, furnished confirmation from various parties from whom it had purchased the materials - Account of the assessee as appearing in ledgers of various parties were produced before CIT(Appeals - The auditor has certified that there were no personal loans in the books audited by him - He also filed a full copy of cash book audited by him – Ther was no reason to disbelieve the certificate and certification done by the auditors - Lower authorities ought not have brushed aside the cash book produced by the assessee on 30.11.2011 - When there were no unsecured loans appearing therein there was no question of any addition being made on the ground of any unsecured loan. Disallowance u/s 40A(3) – Held that:- The cash book produced by the assessee ought to have been considered - It is also noted that in the original assessment, Assessing Officer had made an addition under section 40A(3) considering withdrawals from the Bank account, which was deleted by the ld. CIT(Appeals), but substituted by him with the chart compiled from the cash book produced - Neither any withdrawal from Bank account could be considered as expenditure for the purpose of applying section 40A(3) of the Act, nor the payment shown in the cash book produced on 23.11.2011 for the purpose of applying section 40A(3) of the Act – Decided in favour of assessee.

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• 2014 (1) TMI 183
  Expenditure in respect of increase in share capital - Capital or revenue - Held that:- in the case of an assessee company, which is engaged in the business of Life Insurance, the expenditure incurred with regard to increase in share capital is allowable as deduction by treating it as revenue in nature. - Decided in favor of assessee. Additional grounds - requesting the Tribunal to consider the loss from Pension Fund while determining the surplus/(deficit) from the insurance business for the purpose of section 44 - Held that:- The Tribunal is empowered to admit any additional ground in the interest of substantial justice if all the facts are already on record - Following CIT vs. Life Insurance Corporation of India [2011 (8) TMI 47 - BOMBAY HIGH COURT] - Beyond the period of limitation prescribed if an assessee makes a claim such claim cannot be considered by the AO but at the same time a new ground urged before the Appellate Authority always also be considered in the light of the power vested in the Appellate Authority under the provisions of the Act - The issue was set aside for fresh adjudication.

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• 2014 (1) TMI 182
  Whether the purchase and sale of shares are 'investments' - Held that:- Following Spectra Shares and Scrips Pvt. Ltd. Vs. CIT [2013 (6) TMI 173 - ANDHRA PRADESH HIGH COURT] - The character of transaction cannot be determined solely on the application of any abstract rule, principle or test - No single criterion is decisive in determining the question whether a particular receipt is capital or revenue. The intention of the party, nature of transaction, and various other factors have to be considered cumulatively to find out whether it is investment or trading activity - For deciding whether transactions in shares entered into by the assessee is in the nature of trade, cumulative effect of the various parameters have to be looked into - From the very beginning the assessee is treating the shares as investments only and declaring income from sale of shares as long/short term capital gains - The department has also accepted the claim of the assessee in all other assessment years excepting the two impugned assessment year - The Assessing Officer apart from pointing out two instances of sale of share within a period of one month from the date of purchase has not been able to bring any material on record to disprove the assessee's claim with any cogent or valid reasons - The Assessing Officer accepts assessee's claim of exemption u/s 10(38) of the Act so far as long term capital gain further weakens the reasoning of the Assessing Officer to treat share transaction as trading activity - The Assessing Officer certainly cannot decide the nature of share transaction either as trading activity or investments solely on the basis of period of holding of the shares - During the interregnum it has parked its surplus by investing in shares for appreciation cannot be ignored - Decided against Revenue.

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• 2014 (1) TMI 181
  Fall in GP rate - Held that: - The book result cannot be rejected lightly without cogent and convincing reasons - The departmental representative could not point out any specific books of account which were not produced before the AO - The contention of the Revenue that the assessee must have maintained separate books of account for jobwork business and own trading business is without any legal basis and merely one set of books of account was maintained by the assessee for the entire business, it cannot be said that proper books of account were either not maintained or not produced - The fall in GP is explained to be attributable to commencing own production during the year - AO did not controvert this explanation - The estimate of GP at 18.11% even in respect of turnover relating to own trading of the assessee by the AO was without any basis and consequently untenable - Decided against Revenue.

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• 2014 (1) TMI 180
  Working capital adjustment - Held that:- The TPO in the first rectification order adopted a positive figure of `Trade receivables' as against 'Nil' is the original order and stuck to it in the second rectification order, the assessee is harping on the contention that the amount of `Trade receivables' is 'Nil' and the same should be adopted - TPO has kept the calculation of such a positive figure close to his heart and has not revealed its working despite repeated requests by the assessee - The issue was set aside for fresh adjudication.

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• 2014 (1) TMI 179
  Applicability of section 194C of the Act – Payment made for hiring of buses – Laibility to deduct tax u/s 194-I of the Act – Held that:- Following [2014 (1) TMI 386 - ITAT DELHI] - The services were rendered by the contractor through their own man using the cranes - The cranes were brought to the respective sites and they were operated by the staff of the contractor - Thus, assessee has not taken any machinery on hire for which it has paid the rent – It is a simplicitor service contract for transportation of the passengers and it falls within the ambit of clause (c), Sr. No.(IV) of explanation appended to sec. 194C – the assessee has just hired the transportation facilities which is akin to hiring of a taxi though on regular basis for a fixed number of hours - where a vehicle is given on hire along with provisions of a driver for use of carrying of the passengers for fixed hours than it is a service contract for carrying out the work. It will be covered under sec. 194C of the Act because the vehicle has been made available as a matter of service – thus, it is a service contract and assessee was to deduct tax under sec. 194 C of the Act - The assessee has availed the services of cranes which was operated by staff of the contractor – Thus, the Assessing Officer has erred in construing that assessee had paid rent and its case falls u/s 194I – the assessee had rightly deducted tax at source u/s 194C of the Act – Decided against Revenue.

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• 2014 (1) TMI 178
  Computation of deduction u/s 10A of the Act - Exclusion of foreign travel expenses from the total turnover – Held that:- Following Commissioner of Income-tax Versus Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] -while computing the exemption u/s 10A, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded from the total turnover in the denominator - When the statute prescribed a formula and in the said formula, 'export turnover' is defined, and when the 'total turnover' includes export turnover, the very same meaning given to the export turnover by the legislature is to be adopted while understanding the meaning of the total turnover, when the total turnover includes export turnover - If what is excluded in computing the export turnover is included while arriving at the total turnover, when the export turnover is a component of total turnover, such an interpretation would run counter to the legislative intent and impermissible - the order of the CIT(A) is correct and in accordance with law and he is justified in directing the AO to exclude the expenses both from the export turnover as well as from the total turnover while calculating deduction u/s 10A of the Act – Decided against Revenue.

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• 2014 (1) TMI 177
  Imposition of Penalty u/s 271(1)(c) of the Act – Calculation of deduction u/s 80-HHC of the Act – Held that:- The assessee was under bona fide belief that the income has been generated only from 100% export business and the disclosure was accordingly made as "business income" and claim u/s 80HHC accordingly calculated – Following CIT Vs. Reliance Petroproducts Ltd. [2010 (3) TMI 80 - SUPREME COURT ] - assessee's claim u/s 80-HHC are disclosed in the return of income - The assessee's CA certified the amount of allowability of deduction u/s 80-HHC including the said sum of Rs. 95 lacs which was treated to be earned from 100% export business - The fact that assessee is a 100% exporter and has no domestic business, has not been disputed – the order for penalty u/s 271(1)(c) of the Act set aside – Decided in favour of Assessee.

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• 2014 (1) TMI 176
  TDS to be deducted u/s 194(I) of the Act – Applicability of Section 194C of the Act on payment made for hiring of buses – Held that:- Following Lotus Valley Education Society Vs. ACIT (TDS) [2011 (1) TMI 65 - ITAT, DELHI ] - The object of the assessee to enter into such agreement was a simple activity of carrying its students and staff from their homes to the school and similarly from school to their homes - The assessee has no responsibility whatsoever regarding the buses to be utilized for that purpose which was the sole responsibility of the transport contractor - The transport contractor only was liable to keep and maintain the required number of buses for such activity at their own expenses with the specified standards – thus, the contract is purely in the nature of services rendered by the transport contractor to the assessee - The assessee was not having any responsibility whatsoever regarding the transport vehicles used in such activity - As against that, "rent" which is defined in explanation to sec.194 inter-alia is for the use of "plant" which according to the AO includes buses - assessee itself has not utilized the buses being plants but they were used by the transport contractor for fulfilling the obligations set out in the contract agreement - the provisions of Sec. 194 I could not be applied and the assessee has rightly deducted tax at source under the provisions of sec. 194C of the Act – Decided against Revenue.

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• 2014 (1) TMI 175
  Disallowance u/s.40(a)(ia) of the Act – Effect of Amendment u/s 194C(1) of the Act – Held that:- The payments are in relation to a contractual work - the assessee is an individual and the provision of section 194C(1)(k), including specified individuals/HUFs within the purview of section 194C(1), prescribing the obligation to deduct tax on the contractual payments, is only by Finance Act, 2007, w.e.f. 01.06.2007 - This is not a case of a sub-contract has been made out by the Revenue - The contracts entered into by the assessee with the different car/travel agents, as it appears, are independent contracts for car rental services, being entered into by it in accordance with the needs of its business - the assessee is hiring the cars therefrom on his own account for a cost - As far as the vendors are concerned, they are only providing cars for a hire to the assessee, which could include the services of the driver as well. It cannot be said to be a case of sub-contract – Following Mythri Transport Corporation v. Asst. CIT [2009 (1) TMI 337 - ITAT VISAKHAPATNAM] - prior to its substitution by Finance (No.2) Act, 2009 w.e.f. 01/10/2009, the hiring of vehicles by a contractor for his own use in executing the contracts undertaken by him, is not a case of sub-contract/s, so as to attract the provision of s. 194C(2) - it is not a case of a sub-contract, so as to be visited by the rigor of s. 194C(2) - The provision of section 194C is not applicable to it for the current year - the question of invocation of section 40(a)(ia) of the Act in view of the non-deduction of tax u/s.194C by it does not arise – Decided in favour of Assessee.

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• 2014 (1) TMI 174
  Application of Minimum Alternate Tax u/s 115JB of the Act – Claim of deduction u/s 80-IC of the Act – Held that:- The AO can compute the total income or loss, after making adjustment of incorrect claim, if such incorrect claim is apparent from any information in the return – Following Apollo Tyres Ltd. Versus Commissioner of Income Tax [2002 (5) TMI 5 - SUPREME Court] - while computing the book profits of a company u/s 115J under the Act, the AO has only the power of examining whether books of accounts are certified by the authorities under the Companies Act and there after as the limited power of making increase or decrease of certain items specifically provided for in the Explanation to S.115J. A deduction u/s 80-IC, is not an item of adjustment in Explanation I to S.115 JB - While so, to claim reduction of the amount deductible u/s 80-IC, while computing book profits u/s 115 JB, is not in accordance with the apparent reading of the provisions of S.115 JB - such a claim is an incorrect claim and this is apparent from information in the return as defined in the Explanation (a) to S.143(1)(a)(ii) of the Act - the AO is correct in making adjustment u/s 143(1) - the return is processed by a computer or by the Officer himself, does not make a difference, computerized processing is only an aid to the AO - computation of book profits u/s 115 JB of the Act is not done in accordance with the provisions of the Act, and when an incorrect claim of reduction from book profits of amount which the assessee is eligible u/s 80 IC is made, it is an incorrect claim apparent from the record, which can be adjusted u/s 143(1) of the Act – Decided in favour of revenue.

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• 2014 (1) TMI 173
  Computation of book profit u/s 115 JB – Reduction of book profits under Clause (iv) of Explanation I to S.115 JB for Deduction u/s 80HHC of the Act – Whether deduction u/s 80HHC was to be computed with reference to profits computed as per Companies Act or profits computed as per Income Tax Act – Held that:- Relying upon Ajanta Pharma Ltd. Vs. CIT [2010 (9) TMI 8 - SUPREME COURT] the judicial opinion got settled in favour of the assessee - Thereafter vide Finance Act 2011 the statute was amended with retrospective affect from 01/04/2005 - Thus the assessee has lost in the Quantum proceedings - Following CIT vs. Reliance Petro Products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] - the First Appellate Authority was right in deleting penalty levied u/s. 271 (1)(c) for the reason that there is neither furnishing of inaccurate particulars of income nor concealment of income - The assessee has made an honest claim and all the facts relating to the claim were on record. Levy of penalty us. 271 (1)(c) - Disallowance on depreciation – Held that:- Following M/s. Bhushan Steel Ltd. (Formerly Bhushan Steel & Strips Ltd.) Versus Dy. Commissioner of Income tax[2010 (3) TMI 996 - ITAT DELHI] - the assessee could possibly claim the whole of the expenditure as revenue expenditure in assessment year 1999-2000 and the result would have been that the deductions now claimed over a number of years might have been allowed in that year - the conduct of the assessee was not such which could establish the charge of concealment of income or furnishing inaccurate particulars of income - CIT(Appeals) was not justified in sustaining the levy of penalty – Decided against Revenue.

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• 2014 (1) TMI 172
  Addition on account of Arm’s Length Price – Purchases made from Indian branch to its AE – Held that:- Following Income-tax Officer, Ward 16(3), New Delhi Versus Tianjin Tianshi India (P.) Ltd. [2011 (5) TMI 669 - ITAT DELHI] - Once the transactions involved are international transactions within the meaning of section 92B(1) of the Act, the Transfer Pricing Provisions have rightly been involved - the issue pertaining to transfer pricing remitted back to the files of the Assessing Officer – Decided in favour of Assessee. Disallowance u/s 40(a)(iii) of the Act – Delay in deposition of taxes – Salaries paid to expatriate employees withheld – Held that:- The TDS amount deducted should be paid on or before the due date specified in sub-section (1) of section 139, and if the amount is paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as deduction in computing the income of the previous year in which such tax has been deducted - this will also apply to deduction u/s. 40(a)(iii) – thus, the issue is remitted back to the file of the Assessing Officer - The Assessing Officer shall allow the salary expenditure if the amount of tax deducted at source has been paid on or before the date specified in sub-section (1) of section 139 – Decided in favour of Assessee.

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• Customs

• 2014 (1) TMI 211
  Alleged use of false and fabricated Telegraphic Release Advice - Held that:- Similar issue already been decided in the case of KI International Ltd. Vs Commissioner of Customs, Chennai [2013 (5) TMI 383 - CESTAT, CHENNAI] - since the later decision in KI International Ltd. is canvassed for its correctness and vitality in an appeal pending before the Madras High Court, it is not appropriate to answer this reference. The pronouncement of the High Court on due consideration of the rationes of Colombowala [2007 (7) TMI 514 - CESTAT, MUMBAI] and KI International, would provide a wider jurisdictional guidance than in an order of reference - Appeal remitted for consideration and disposal on merits, to the Single Member Bench - Decided in favour of assessee.

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• 2014 (1) TMI 171
  Imposition of fiscal penalty - Confiscation of goods - Goods cleared by furnishing forged bank gurantee - Held that:- petitioner repeatedly failed to appear before the Appellate Authority despite various opportunities granted to it in this regard - Accordingly, it is directed that the impugned order dated 27.6.2013 passed by respondent no.3 be kept in abeyance, subject to the petitioner depositing Rs.one lac as cost with Delhi High Court Legal Services Committee within two (2) weeks from today. The receipt of the deposit of the costs shall be submitted by the petitioner before the Appellate Authority. The petitioner shall also appear before the Appellate Authority for the purpose of hearing on 16.12.2013 at 11 am. The Appellate Authority may either hear the appeal on that date or fix an appropriate date for the purpose of hearing it. Only one opportunity shall be granted to the petitioner to make its submissions before the Appellate Authority and if the petitioner does not appear on that date, the order passed by the Appellate Authority shall revive without any further orders from the Court. In that event, the petitioner shall have no further right to impugn the said order - Decided in favour of assessee.

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• 2014 (1) TMI 170
  Confiscation of goods - Violation of various provisions of law - De-bonding of DG Set value - Held that:- An investigation has to be done by the authorities in accordance with law and if there is any defect in the enquiry so conducted, the person aggrieved can in any way challenge the same in a manner known to law. But when the investigation is on, calling upon the investigating agency to state the nature of investigation, the documents they want and to furnish the details and the intelligence gathered and also making observations on the nature that investigation conducted, is unwarranted in the facts of this case. It is suffice to say that it would be not necessary for us to go into the details about the illegality of the order passed by the learned single Judge from time to time. In the interest of both the parties, the investigation is to be completed at the earliest. No one shall interfere with the said investigation including this Court - investigation agency shall conduct the investigation in accordance with law without anyway getting influenced by the observations made in the impugned order or in the order passed earlier to that - Decided in favour of Revenue.

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• 2014 (1) TMI 169
  Benefit of Exemption Notification No. 32/2005-Cus. - Demand of Education Cess on CVD - Whether on imports made by an importer which otherwise qualify for exemption from payment of customs duty and additional duty under Exemption Notification No. 32/2005, would still be liable to pay Education Cess on such basic duty of customs and additional duty on the ground that such duty-free imports were being made under DEPB scheme - Held that:- As goods imported under the DEPB scheme by assessee by virtue of exemption notification No.45/2002, carry 'nil' rate of customs duty and additional duty they are also not liable to pay education cess at the prescribed rate - from the nature of DEPB scheme and the exemption granted to imports made under such scheme, it can be seen that the very purpose is to neutralise the import duty component on the imported goods used for production of export items. Such object is achieved through the DEPB scheme under which the exporter is given the facility of utilising the credits in the DEPB scrips for the purpose of adjustment against the customs duty liability on the goods imported for the ultimate purpose of export on value addition. Merely because the conditions provided for adjustment of credit in the DEPB scrips, it cannot be stated that either there was no exemption from payment of customs duty or that the Central Government was levying and collecting customs duty from the importers in form of adjustment of credit in the DEPB scrips.Thus through such adjustments on the DEPB scrips at the time of further imports, customs duty component is sought to be neutralised. Circular dated 8-7-2004, the Ministry of Finance, in a question whether goods that are fully exempt from excise/customs duty or are cleared without payment of such duty would be subject to education cess, clarified that the education cess is leviable at the rate of 2% of the aggregate of the duties of excise/customs levied and collected. If goods are fully exempted from excise duty or customs duty or are chargeable to nil rate of duty or are cleared without payment of duty under specified procedure such as clearance bond, there is no collection of duty and, therefore, no education cess would be leviable on such clearances- . Duty demands, were even otherwise made without issuing any show-cause notice or adjudication. Even on such grounds, the notices are liable to be quashed - Following decision of GUJARAT AMBUJA EXPORTS LTD & 1 Versus GOVT OF INDIA THR´ UNDER SECRETARY (DBK) & 2 [2012 (7) TMI 679 - GUJARAT HIGH COURT] - Decided against Revenue.

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• 2014 (1) TMI 168
  Duty demand - Sales made from the duty-free shop - Imposition of equivalent penalty - Held that:- bond officers who were on duty during the relevant period have given statements to the effect that only sales in bulk were being escorted and individual sales to passengers/crew members were not been escorted. This being the case, we find, prima facie, no justification for confirmation of demand - A part of the demand related to vessels which were treated by the Commissioner as coastal vessels. It appears from the record that the appellant has produced evidence to the effect that such vessels, after touching an intermediate port in India, have travelled to foreign destination and claimed that they have to be treated as foreign going vessel in view of the specific definition of ‘foreign going vessel’ contained in Section 2(21) of the Customs Act - Prima facie demand is not sustainable - Stay granted.

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• 2014 (1) TMI 167
  Rejection of refund claim - Import of crude petroleum oil - Amount shown as receivable but have adjusted the same with the amount payable by them to the government - Held that:- Unjust enrichment - Held that:- ledger which shows the amount receivable and payable to the department and the certificate issued by the Chartered Accountant which explains the whole process in detail and therefore certified that there is no enrichment. ledger in respect of government dues and receivables only netting has been done and this is in accordance with accounting practice. Appellants are using crude petroleum oil and once the amount is shown as receivable in accordance with the cost accounting principles, such amount cannot be added to the cost of production - Following decision of Solar Pesticides Ltd. [2000 (2) TMI 237 - SUPREME COURT OF INDIA] - Decided in favour of assessee.

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• 2014 (1) TMI 166
  Denial of the benefit of exemption under Notification No. 21/2002-Cus. (Serial 200) - Demand of differential duty - End Use/Consumption certificate - Held that:- appellant has produced the End Use/Consumption Certificate issued by the Jurisdictional Central Excise Authorities, although there is a delay of almost three months but that is permissible as per the Notification No. 21/2002 (Sl. 200) in Condition 20 itself, Therefore, when the End use/Consumption Certificate has been produced by the appellant, the impugned order is not warranted at all - extension would have been granted by the adjudicating authority himself. As the appellant has produced End use/Consumption certificate from the Jurisdictional Central Excise authorities therefore, the appellants are entitled for the benefit of Notification No. 21/2002 (Sl. 200) - Decided in favour of assessee.

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• Service Tax

• 2014 (1) TMI 209
  Waiver of penalty u/s 80 as imposed u/s 76 and 78 - Interest u/s 75 - Held that:- Imposing penalty equivalent to service tax paid belatedly in this case will amount to putting the appellant who paid tax before issue of SCN and interest before adjudication at a more disadvantageous position as compared to an assessee who would not have filed paid any tax and did not file any return. In latter type of cases penalty under section 78 would be applicable and the assessee gets concession in paying 25% of duty as penalty if such payment is made promptly - No benefit would accrue to an assesse who makes such payment if this argument is accepted. C.B.E. & C. vide letter F. No. 137/167/2006-CX-4, dated 3-10-2007 has clarified that section 73 (3) cannot be interpreted in the way it is canvassed now by Revenue - there was some confusion about tax liability - appellant paid tax along with interest once the matter was clear to them and their customers appellant has made out sufficient cause for waiver of penalty under section 80 - Decided in favour of assessee.

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• 2014 (1) TMI 208
  Admissibility of CENVAT Credit - Service Tax paid on CHA services - Goods sold on sold on FOB/CIF basis - Held that:- for a manufacturer/consignor, the eligibility to avail credit of the service tax paid on the transportation during removal of excisable goods would depend upon the place of removal as per the definition. In case of a factory gate sale, sale from a non-duty paid warehouse, or from a duty paid depot (from where the excisable goods are sold, after their clearance from the factory), the determination of the ‘place of removal’ does not pose much problem. However, there may be situations where the manufacturer/consignor may claim that the sale has taken place at the destination point because in terms of the sale contract/agreement (i) the ownership of goods and the property in the goods remained with the seller of the goods till the delivery of the goods in acceptable condition to the purchaser at his door step; (ii) the seller bore the risk of loss of or damage to the goods during transit to the destination; and (iii) the freight charges were an integral part of the price of goods. In such cases, the credit of the service tax paid on the transportation up to such place of sale would be admissible if it can be established by the claimant of such credit that the sale and the transfer of property in goods. The services rendered at port by CHAs are after clearance of the goods from the factory gate and hence cannot be treated as input services. From this it emerges that the place of removal in that case, was factory gate. There is no doubt that in each and every case, it is necessary to consider as to exactly which is the place of removal before allowing the benefit of CENVAT credit. Therefore any decision rendered in an individual case cannot be applied to another case unless the facts happen to be same - Decided against Revenue.

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• 2014 (1) TMI 207
  Availment of CENVAT Credit - Whether Cenvat Credit availed by the appellant with respect to CHA services for export of goods, courier services and air travel services availed in connection with the export of goods and business is admissible or not - Held that:- nature of services used in both cases are though different. In the group of cases decided, question was with respect to service tax paid on GTA service on outward transportation of goods - courier service utilised by the manufacturer for transportation of goods from factory and also bringing inputs into the factory. Such service would certainly be covered within the expression: any service used by the manufacturer directly or indirectly in or in relation to the manufacture of final products and clearance of final products from the place of removal: used in Rule 2(l) - Following decision of Commissioner of Central Excise vs. M/s. Ambalal Sarabhai Enterprises Ltd. [2014 (1) TMI 118 - GUJARAT HIGH COURT] - Decided against Revenue.

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• 2014 (1) TMI 206
  Demand of service tax - Penalties under Section 76, 77 and 78 - Outdoor catering services - Held that:- Though there was a delay in payment of service tax and non-filing of returns but there is no evidence or record that there was an intention on the part of the appellant to evade payment of service tax. Financial hardship as brought out by the appellant was a reasonable cause for delay in payment of service tax - there was reasonable cause for not paying service tax and penalties imposed under Section 76 and 78 are required to be set aside. However, appellant was a service tax registered unit for a long time and was well aware of filing of ST-3 returns which was not done. Accordingly, penalty under Section 77 of the Finance Act, 1994 has been correctly imposed and upheld by the lower authorities - Decided partly in favour of assessee.

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• 2014 (1) TMI 205
  Demand of service tax - Delay in payment of service tax - Penalty u/s 76 & 77 - Held that:- there has been a delay in payment of service tax. However, the appellant has paid entire amount of tax before issue of show cause notice. Out of total amount of Rs.17,000/- due as interest, an amount of about Rs.5192/- was paid. Only 12,968/- was paid subsequent to issue of SCN. Considering the provisions of section 73 the Show Cause Notice Should have been issued for recovery of amount short paid only. Considering this aspect Penalty imposed is disproportionate to the facts of this case and therefore penalty is reduced considering the amount of interest which was not paid before issue of SCN - Decided partly in favour of assessee.

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• 2014 (1) TMI 204
  Demand of service tax - Whether appellants, is liable to service tax on the services rendered to their members under 'club or association service' - Render of public service - Penalty u/s 76, 77 & 78 - Held that:- penalties are to be imposed under Sections 76, 77 and 78 of the Finance Act are elaborated in the Sections. Only in Section 78 certain clauses require intent to evade or willful suppression. None of these Sections stipulate contumacious conduct on the part of the appellants. In fact, scheme of Service Tax Law is self determination/assessment of tax and payment in the bank. There is no requirement to interact with authority. In the present case 'club or association service' was introduced in 2005. Being a leading Club, it was expected that they would take steps to at least find out whether there is a tax liability on them. There is no evidence whatsoever that they have taken any steps to even find out whether the tax is payable by them. The appellant has not challenged the levy and cannot form bona fide belief from 2005 onwards based upon a High Court judgment in 2013. Confirmation of service tax demands under the taxable service category of Mandap Keeper Service, Club and Association service, Renting of Immovable property service and Sale of space for advertisement service is sustainable in law. In the case of Club & Association service, the tax demand has to be recomputed excluding the bar sales subject to the appellant producing satisfactory evidence in this regard - appellant is liable to pay interest on the above service tax demands in accordance with law - appellant is liable to penalty under Section 76 and 77 - appellant is also liable to penalty under Section 78 of the said Finance Act except in the case of Renting of Immovable property service - demand of service tax under the category of Business Support Services is unsustainable in law and the same is set aside. Consequently, there will be no interest and penal liability on account of this demand - Decided partly in favour of assessee.

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• 2014 (1) TMI 203
  Demand of service tax - Business Auxiliary Service - Invokation of extended period of limitation - Bar of limitation - Held that:- extended period cannot be invoked in the present proceedings, because there was a bonafide view, as per CBEC circular and various judicial pronouncements that the word ‘commercial concern’ did not include the services provided by the individuals or proprietary concern. The word ‘commercial concern’ under Section 65(105)(zzb) of Finance Act, 1994 was substituted with the word ‘Any person’ with effect from 01.05.2006. Appellant started paying Service Tax after availing the admissible value based exemption. Even services rendered prior to 01.05.2008 and amount received after 01.05.2006 was not required to be charged to Service Tax. Under the above facts and circumstances, no suppression or mis-statement with intention to evade payment of Service Tax can be attributed on the part of the appellant - Therefore, extended period of five years cannot be invoked - Decided in favour of assessee.

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• 2014 (1) TMI 202
  Demand of service tax - Penalty u/s 76 & 78 - Delay in payment of tax - Held that:- there was short payment of Service Tax due to forging of duty payment figures in the challans under which Service Tax was paid. One digit was added before the challan amount paid in the bank. Appellant has argued that this has happened due to the mis-deeds of their accountant to whom the full amount was given for payment - there is a clear cut forging of duty paying challans to project as if higher amounts of Service Tax due have been paid. Appellant cannot escape the vicarious responsibility by saying that any other person, acting as an agent on their behalf, has committed a wrong act and appellant should not be held responsible for the fraud - where in a similar situation of forging of TR-6 challans was held to be a fit situation for imposing penalty. Appellants alternative argument that penalty under Section 76 of the Finance Act, 1994 is however, required to be allowed as both penalties under Section 76 and 78 cannot be invoked as per the provisions of Section 78 of the Finance Act - Decided partly in favour of assessee.

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• 2014 (1) TMI 201
  Stay application - Eligibility of benefit of Serial No. 90/93 of the Notification No. 4/2006-C.E., dated 1-3-2006 - Discharge of duty liability at the rate of 8% on the paper and paper board manufactured by the appellant - Held that:- appellant has availed the benefit of Serial No. 93 of the notification, which talks about discharge of duty liability at the rate of 8% on the paper and paper board manufactured by the appellant. It is undisputed that the appellant is covered under serial No. 93 - On perusal of the said notification, we are of the considered view that appellant cannot be, prima facie, denied to benefit of discharging-reduced rate of excise duty as per Sl. No. 93 of the Notification No. 4/2006-C.E. - appellant has made out a prima facie case for waiver of pre-deposit of amounts involved. Accordingly, the application for the waiver of pre-deposit of the amounts involved is allowed and recovery thereof stayed till the disposal of appeal - Stay granted.

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• 2014 (1) TMI 200
  Waiver of pre deposit - Reverse charge mechanism - Demand of service tax - Arrangement for the external commercial borrowings - Banking and Financial services - Held that:- appellant had contracted with the upcountry party for the purpose of raising external commercial borrowings for setting up a unit in Special Economic Zone. It is also undisputed that the said external commercial borrowings could not be raised and arrangement had to be cancelled and the appellant has received the amount back from the agency to whom they had given advance. Be that as it may, we find that Notification No. 4/2004-S.T. specifically discuss about the exemption of taxable service of any description to a developer of Special Economic Zone or any unit in any Special Economic Zone for consumption of the services within such Special Economic Zone. It is undisputed that external commercial borrowing was for the purpose of developing a unit in SEZ; the appellant has made out a strong prima facie case for waiver of pre-deposit of amounts involved - Stay granted.

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• 2014 (1) TMI 199
  Demand of service tax - Assessee are franchises of M/s. BSNL for sale of their SIM cards and recharge coupons - Demand u/s 65(105)(zzb) for Business Auxiliary Services - BSNL already paid entire service tax on full amount including the commission amount earned by them - Assessee contends that confirmation of service tax again on the value of commission would amount to double taxation - Revenue contends that payment of service tax by BSNL was under the category of ‘telecommunication services’ whereas the demand against the respondents was under the category of BAS - Held that:- apart from Board’s Circular laying down that to avoid double taxation, payment of service tax by the principal should be taken into account while settling the responsibility of franchise - where the principal has already paid service tax on the full value of the SIM cards, franchise cannot be called upon to pay tax again on the same transaction on the ground that his activity is separately liable to service tax under the category of BAS - Inasmuch as there is no dispute about the fact of payment of entire service tax by BSNL on the full value of SIM cards/recharge coupons, we are of the view that Commissioner (Appeals) has rightly set aside the confirmation of demand - Following decision of South East Corporation reported in [2007 (5) TMI 111 - CESTAT, BANGALORE], Chetan Traders reported as [2008 (7) TMI 46 - CESTAT, NEW DELHI] and in the case of Karakkattu Communications reported as [2007 (6) TMI 209 - CESTAT, BANGALORE] - Decided against Revenue.

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• 2014 (1) TMI 198
  Waiver of pre-deposit - Demand of service tax - Business Support Services - Held that:- any commission received by the said turf club for providing facility in the turf club would not fall under the category of Business Support Services. At this juncture, we find that the appellant has made out a case for the waiver of the pre-deposit of the amounts involved as the stay orders of Coordinate Benches in the case of Madras Race Club [2008 (9) TMI 199 - CESTAT, CHENNAI] and Royal Western India Turf Club Ltd. [2012 (7) TMI 630 - CESTAT, MUMBAI] is on the same issue. Accordingly, application for the waiver of the pre-deposit of the amounts involved is allowed and recovery thereof stayed till the disposal of appeal - Stay granted.

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• 2014 (1) TMI 197
  Demand of service tax - Abatement of 67% in respect of the construction activity - Assessee claimed abatement in respect of other activities - Held that:- prima facie service could not be split into three components. In the case of material supplied free of cost, there are many such disputes pending before the High Court of Delhi and the Court has granted stay against enforcing demands based on arguments given by Revenue in this case. So we waive pre-deposit of dues arising from the impugned order for admissions of appeal. There shall be stay on collection of such dues during the pendency of the appeal - Stay granted.

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• Central Excise

• 2014 (1) TMI 165
  Clandestine Removal of Goods – Clearance made by improperly declaring the retail sale price – Undervaluation of Tiles - Waiver of Pre-deposit – Held that:- The Tribunal has been following judgment of Hon’ble High Court of Gujarat that an assessee should deposit 8% of the amount of duty confirmed - The appellant has deposited an amount which is more than 8% of the duty liability - the amount already deposited is enough to hear and dispose the appeals – Pre-deposits waived till the disposal – Stay granted.

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• 2014 (1) TMI 164
  Non-reversal of Cenvat credit – Inputs lying in stock – Benefir of SSI Exemption Notification No.8/2003 – Waiver of Pre-deposit – Held that:- The provisions of Rule 11(2) of CENVAT Credit Rules, 2004 specifically provides for payment of amount of CENVAT Credit availed by the appellant on the inputs which are lying in stock on the date of opting of benefit of Nil rate of duty under SSI exemption notification - the appellant has not made out prima facie case in their favour – appellant directed to deposit of approx.. Rupees One lakh and fifty three thousands as pre-deposits – upon such submission rest of the duty to be waived till the disposal – Partial Stay granted.

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• 2014 (1) TMI 163
  Cenvat credit availed – No necessary documents produced - Waiver of Pre-deposit – Held that:- The appellant had availed the CENVAT Credit of the inputs lying in stock as on 13.08.2006, for which there was no proof produced to show that they had a stock of material on which credit was availed - if a person is in the activity of manufacture, he would have maintained a proper record of showing consumption of the material and output of such consumption - A prudent businessman would maintain such records and defend his claim before the authorities - In the absence of any records, Prima facie, the appellant has not made out a case in their favour – Appellant is directed to deposit Rupees One lakh as pre-deposit – Upon such submission rest of the duty to be waived till the disposal – Partial stay granted.

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• 2014 (1) TMI 162
  Rectification for error apparent on the face – Incorrect amount – Incorrect amount – Held that:- There is an error in the order, dt.09.01.2013, the application for rectification of mistake accepted – Decided in favour of assessee.

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• 2014 (1) TMI 161
  Permission from Committee of Disputes – Held that:- The Appeal was filed on 06.09.2010 and no permission from the Committee of Disputes has been obtained by the Applicant/Appellant – Neither any proof that any application has been pending permission before the Committee of Disputes, has been produced – Following M/s. Burn Standard vs. CCE, Bolpur [2013 (11) TMI 615 - CESTAT KOLKATA] – permission would not be required only in those cases where appeal were filed after 17.02.2011 and where permission from Committee of Disputes was pending as on 17.02.2011 – Decided against Assessee.

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• 2014 (1) TMI 160
  Time barred appeal – Power of Commissioner (Appeals) to condone delay - Held that:- The Order-in-Original was communicated to the applicant on 09.11.2009 and the appeal was filed on 13.07.2010 - There was a delay of more than 90 days (60 days + 30 days) for filing the appeal –Following Singh Enterprises Vs. Commissioner of Central Excise, Jamshedpur [2007 (12) TMI 11 - SUPREME COURT OF INDIA] - the Commissioner (Appeals) has no power to condone the delay beyond 90 days (60 days + 30 days) – Decided against Assessee.

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• 2014 (1) TMI 159
  Denial of Benefit of Exemption Notification No.6/2006 – Necessary certificates not available at the time of clearance - Held that:- Following Commissioner of Customs, Bangalore vs. Integra Micro Systems (P) Ltd.[ 2004 (12) TMI 118 - CESTAT, BANGALORE] - Exemption notification benefit cannot be denied on the procedural requirement of the production of certificate on the ground that there was delayed submission of such certificate - late production of certificate cannot result in denial of benefit of notification - order set aside – Decided in favour of Assessee.

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• 2014 (1) TMI 158
  Inputs not received – Cenvat credit availed on the basis of invoices issued for raw materials suppliers – Waiver of Pre-deposit – Held that:- Without the receipt of the inputs, it is not only difficult but in practical to manufacture their final product, which stands cleared on payment of duty - demand of around Rs. 3.15 crores stand confirmed in respect of the waste and rejects, which came into existence during the course of manufacture of their final product. The appellants have shown the receipt of the same in their records but as they have not shown issuance of the same for further manufacture, Revenue has believed that the dross ingots received by the appellant from job worker stands removed by them clandestinely without further activities of using the same in the manufacture of alloy ingots - The appellant had earlier approached the Hon’ble High Court of Punjab & Haryana, which directed them to freeze an amount by 1.65 crores from their Cenvat account – assessee submits that they are ready to deposit such amount - an amount of Rs. 5 lakhs stand already deposited by them, but in any case that the deposit is attributable to the shortage of the final product - the applicant is directed to deposit an amount of Rs.2 crores as pre-deposit – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.

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• 2014 (1) TMI 157
  Denial of cenvat credit on Inputs – Valid documents not used – Waiver of Pre-deposit – Held that:- The appellant’s claim of having used proper invoices for taking CENVAT credit has not been substantiated - the documents were washed away in floods is a story difficult to believe - Xerox copies of invoices are not acceptable for CENVAT credit purpose – appellant is not able to establish a prima facie case in their favour - the appellant is directed to deposit an amount of Rupees One Lakh as pre-deposit – upon such submission rest of the duty to be stayed till the disposal – partial stay granted.

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• 2014 (1) TMI 156
  Denial of cenvat credit - Rubber sheets and seals quantified as capital goods under Rule 2(a)(A) of cenvat credit rules, 2004 or not - Waiver of Pre-deposit – Held that:- As per the definition, components/spares /accessories of the goods are also capital goods - Storage tank is also a capital goods but its components /spares/accessories cannot be regarded as capital goods inasmuch as these items were not so specified in the legislative wisdom - the CENVAT register containing specific mention of rubber sheets and seals has been filed with the monthly returns but he fails to substantiate this claim – appellant is not able to establish prima facie case in their favour – appellant is directed to submit full amount as pre-deposit – stay not granted.

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• 2014 (1) TMI 155
  Waiver of pre-deposit - Liability to discharge 5% of the value of the ‘Press Mud’ which is cleared without payment of duty - Held that:- manufacturer of sugar and during the course of manufacturing of sugar, a waste product namely ‘Press Mud and Waste Water’ arises which is cleared by the appellant as non-excisable product. It is the case of the Revenue that appellant has used common input services without maintaining separate accounts and hence the appellant is liable to discharge 5% of the value of the ‘Press Mud’ which is cleared without payment of duty - appellant has made out a prima facie case for the waiver of pre-deposit of the amounts involved. Application for the waiver of pre-deposit of the amounts involved is allowed and recovery thereof stayed till the disposal of appeal - Following decision of Manakpur Chini Mills [2012 (7) TMI 474 - CESTAT, NEW DELHI] - Stay granted.

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• 2014 (1) TMI 154
  Jurisdiction of first appellate authority - Power to remand the matter back to the adjudicating authority - Held that:- first appellate authority has reversed order in original on the ground that it is in violation of principles of natural justice. It is seen that he remanded the matter back which in my view is incorrect. Be that as it may, I find that there is no dispute that the adjudicating authority s order was passed without following the principles of natural justice. If that be so, the matter needs to be decided by the adjudicating authority after following the principles of natural justice - Accordingly, the matter is remanded back to the adjudicating authority to reconsider the issue afresh after following the principles of natural justice - Decided in favour of Revenue.

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• CST, VAT & Sales Tax

• 2014 (1) TMI 210
  Demand of tax - Assessment were revised treating the purchase turnover as suppression - Section 7A of the Tamil Nadu General Sales Tax Act, 1959 - Penalty under Section 16(2) of the Tamil Nadu General Sales Tax Act, 1959 - Held that:- while the element of deliberateness, wilfulness or a blameworthy conduct on the part of the assessee may not be necessary for invoking Section 12(5) of the Act, the bona fides of the assessee has to be gone into before imposing penalty. It was further pointed out by this Court that facts of each case has to be separately analysed before coming to the conclusion that the return filed by the assessee is 'incorrect or incomplete' and only with a view to postpone the legitimate due to the Government that the return was not filed in accordance with law - no such allegation that the assessee had deliberately submitted incorrect and incomplete return, we are inclined to set aside the order of the Sales Tax Appellate Tribunal - Following decision of State of Tamil Nadu vs. Indian Silk Traders [1991 (10) TMI 302 - MADRAS HIGH COURT] - Decided partly in favour of assessee.

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