Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
January 6, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Expenses incurred under different heads during the year under consideration have increased even though the turnover has substantially reduced - disallowance confirmed - AT
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Since the investment in the shares was made by the assessee out of interest free funds, such as share application money received, the ordero of the CIT(A) in deleting the disallowance made u/s 14A is upheld - AT
Customs
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Extension of period for fulfilling its export obligation - inclusion of an alternate export product - Challenge in the writ petition from which this appeal arises being to the refusal of extension but even otherwise is fallacious - HC
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Detention of trucks - Trucks carrying smuggled goods - being a truck owner, the appellant has transported the goods in good faith. Therefore, the confiscation of the truck is not required - AT
Corporate Law
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Willful defaulters - The Master Circular does not impose an unreasonable restriction upon the promoters/entrepreneurs, being violative of the Article 19(1)(g) of the Constitution of India - HC
Service Tax
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CENVAT Credit - LTU - credit available to one unit availed by another unit - this would be only a procedural infraction and may not call for denial of the entire Cenvat credit availed by the appellants. - stay granted - AT
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High seas Sale Agreement - Prima facie, we find that the applicant sold the goods to TNEB and, therefore, service tax on the administrative charge is not sustainable. - AT
Central Excise
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Product to be classified as motor spirit or not - the flash point of the product is below 250C - In the absence of specific test report in support of the product and in view of the fact that the admittedly even at the time of visit of the officers, samples were not available facilitating the test for suitability of product for use in spark ignition engine, the Commissioner’s order cannot be sustained - AT
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CENVAT Credit - Loss of goods due to fire - mere receipt of the inputs will not entitle the assessee to avail the credit, when such inputs are destroyed ‘as such’ in the store section itself. - AT
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Penalty under Rule 25 of the Central Excise Rules, 2002 - on four occasions the respondent could not pay duty in time but they on their own paid the duty along with interest for the period they defaulted - penalty dropped - AT
Case Laws:
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Income Tax
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2015 (1) TMI 157
Validity of additions of share application money received – Whether the assessee had been able to furnish proof of existence of the investors, their creditworthiness and genuineness of the transaction, which an assessee is required to establish to get rid of the application of the provisions u/s 68 - Revenue was of the view that these investments are nothing but incomes generated in defence contracts in India received outside and brought into India in the garb of investments, including in the appellant company - Held that:- In order to provide satisfactory explanation as to the "nature and source" of a sum found credited in his books, the initial burden is on the assessee and the assessee is required to prove identity of the shareholder, creditworthiness of the shareholder, and genuineness of the transaction - the assessee had furnished proof of existence of the investor, proof that the money have come from the investor and has also provided financial statement of the investors, details of the investments by the investors - the statement given by the assessee to the DIT Investigation, New Delhi on 8.3.2007 does not better the case of the Revenue, as the assessee has claimed that his interest in M/s. Claridges Hotels P. Ltd. is only by way of investments made through M/s. UBS, Mauritius, in which company he has only 20% stake. Simply because the assessee is the Chairman of M/s. Claridges Hotels Pvt. Ltd. and because his son was Managing Director of the company, it does not support the addition as the investment in the hotel is made by M/s. UBS Ltd., Mauritius in while the company which the assessee controls it is a minority shareholder - assessee has demonstrated that he controls only 20% stake holder in M/s. UBS LTd., Mauritius – similar issue has been decided in M/s Russian Technology Centre (P) Ltd. Versus Dy. CIT, New Delhi [2013 (4) TMI 659 - ITAT DELHI] - moneys were received through regular banking channels, from UBSM, who was the holding company of the assessee - being the holding company, the inclusion of the shares in earlier years was proved, established and accepted by the revenue authorities - during the year, the assessee received further sums towards allotment of shares and the assessee has filed various documents in evidence to establish the identity (already accepted), creditworthiness and genuineness of the transaction – Decided against revenue. Applicability of section 68 - Receipt of money towards share capital from non-resident – Held that:- Relying upon M/s Russian Technology Centre (P) Ltd. Versus Dy. CIT, New Delhi [2013 (4) TMI 659 - ITAT DELHI] - the assessee has been able to establish the identity, creditworthiness of the share applicants and the genuineness of the transaction by furnishing several documents in evidence in support on the basis of which the CIT(A) has righty deleted the addition made u/s 68 – Decided against revenue. Disallowance made u/s 14A – Held that:- The provisions laid down under Rule 8D of the Income-tax Rules, 1962 are applicable from the AY 2008-09, which has now been upheld in Maxopp Investment Ltd. vs. CIT [2011 (11) TMI 267 - Delhi High Court] - the AO noted that the assessee had investment in subsidiary companies and holding that section 14A can be applied for disallowance, even if there is no exempt income, he made disallowance of ₹ 4,37,36,365 - CIT(A) set aside the matter to the AO to consider whether the amount of ₹ 9 crores share application money should be excluded from investment and if so recompute the disallowance under Rule 8D - both the authorities below have ignored this undisputed material fact that during the assessment year there was no exempt income, thus, there was no question of making any disallowance of expenditure under sec. 14A read with Rule 8D – thus, the AO is directed to delete the disallowance. Disallowance on claim of deduction on bad debt written off in the books of account u/s 36(1)(vi) deleted – Held that:- After amendment in section 36(1)(vii) of the Act w.e.f. 01.04.1989, in order to obtain a deduction in relation to bad debt, it is not necessary for the assessee to establish that the debt in fact, has become irrecoverable, it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee - since the AP has not denied this material fact that the bad debt has been written off in the accounts of the assessee, the CIT(A) has rightly allowed in claimed deduction – Decided against revenue. Disallowance of depreciation on health equipments – Equipments installed at the residence of MD of assessee hotel – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that when the holding company was paying for renovation made in the assessee company, there was no commercial expediency or reason for the assessee to enter into an agreement with its holding company to pay for certain services as it was simultaneously receiving substantial more capital/services by way of renovation/consultancy free of any cost from the same holding company - the agreement between the assessee and UBSM, vide which the impugned payments were made was providing understanding between two closely linked entities and was also abruptly terminated - as the expenditure was not based on commercial expediency, it was rightly disallowed – Decided against assessee. Disallowance of repair and maintenance expenses – Held that:- The claimed expenses are on repairing of Chiller Colling Tower Platform already in existence, time office ruffin, boiler pump, fabrication, fixing of angles, grating and miscellaneous repair on the already existing structure/building which requires frequent upgradation, considering the nature of the business of the assessee - keeping in view the nature of the expenditure in mind on the above items, details of which have been reproduced by the AO and the AO is directed to delete the addition of ₹ 12,97,394 made on account of disallowance of expenditure claimed by the assessee as Revenue expenditure – Decided in favour of assessee.
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2015 (1) TMI 156
Interest of ₹ 43,78,306/- on interest bearing advances to subsidiary companies disallowed - Restriction of 5% of dividend income - Held that:- Assessee has explained the availability of huge interest free funds for making the investment in subsidiary and also advances given to them on the basis of detail analysis of its fund - assessee had share capital reserve and surplus which also included cash generated from disposal of investment and issuance of furnishing equity shares which aggregated to 5968 lakhs - out of such surplus funds which are interest free the assessee has invested sum of ₹ 514,75,308 in the subsidiary - Thus, the surplus funds were sufficient to meet the advances in the investment made in the subsidiary – CIT(A) has given a categorical finding that the interest bearing funds have been used for business purpose and there is a nexus between interest expenditure incurred and loan taken by the assessee – the order of the CIT(A) is upheld and no disallowance of interest is called for. CIT(A) rigfhtly was of the view that in the year, disallowance u/s 14A cannot be made after applying rule 8D which is admittedly applicable from the AY 2008–09 - For the AY 2007–08, some reasonable disallowance should be made, which the CIT(A) has made 5% of the dividend income - Such a disallowance appears to be reasonable looking to the facts and circumstances of the case – thus, the order of the CIT(A) is upheld. Disallowance u/s 14A while computing book profit u/s 115JB – Held that:- It has already been directed by the CIT(A) to be made, which is 5% of the dividend income and accordingly, such directions of the CIT(A) is upheld – Decided against revenue.
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2015 (1) TMI 155
Cancellation of registration u/s 12AA(3) – Effect of introduction of section 2(15) w.e.f. 26.12.2011 - Introduction of proviso to section 2(15) of the Act stating that organization remained charitable or not – Held that:- In case commercial receipts exceeding the specified threshold, the intention of the legislature is not to cancel the registration u/s 12AA of the Act wherever receipts of an institution exceeds threshold limit as specified in proviso to section 2(15) of the Act – in Tamil Nadu Cricket Association Vs. Director of Income Tax (Exemptions) [2013 (12) TMI 833 - MADRAS HIGH COURT] it has been held that cancellation of registration should be with reference to the objects satisfying definition of charitable purpose at the time of registration and not by subsequent amendment to section 2(15) - since the assessee’s objects and activities are genuine registration cannot be cancelled merely because receipts are exceeding threshold limit as provided under second proviso to section 2(15) of the Act - It is open to the AO to deny exemption u/s 11 on the receipts of the assessee, if the AO feels that activities of the assessee are for general public utility and it is indulging in trade or commerce etc. – thus, the order of the DIT(E) is set aside – Decided in favour of assessee.
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2015 (1) TMI 154
Lump-sum disallowance of administrative expenses – Held that:- CIT(A) rightly of the view that the addition was made by the AO because no details / evidences were produced by the assessee during the course of assessment proceedings - Even during the course of appeal proceedings no details or evidences have been produced - Though, it has been claimed that the major expense was on account of discounts allowed to the dealers as per instructions of the company, neither details of the expenses nor instructions of the company (Celforce) was produced to justify the claim - The main plank of the appellant is that financial results of preceding year have been accepted u/s. 143(3) and therefore disallowance was not warranted. Previous year records give a basis for determination of income in case it is to be estimated, at least in the case of the assessee comparisons with the results of the preceding years do not help the assessee - The assessee has tried to compare only macro level results, i.e. net profit as percentage of turnover whereas claims under different heads need to be analysed also - expenses incurred under different heads during the year under consideration have increased even though the turnover has substantially reduced - there is no connect between turnover and discount allowed - The expenses cannot be held as incurred wholly for purposes of business - No evidences rather not even details have been made available - No specific defect in the order of the CIT(A) could be pointed out by the assessee – thus, the order of the CIT(A) is upheld – Decided against assessee.
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2015 (1) TMI 153
Ex-parte order - Assessment of income u/s 144 – Inability to attend proceedings – Reasonable cause for not attending proceedings present or not – Held that:- The assessment was framed by the AO u/s 144 of the Act due to non-appearance of the assessee before him on the date fixed for hearing - this happened as criminal cases were going on against the Directors of the assessee’s company and therefore, the notices of the lower authorities could not be complied with by the assessee - There was a reasonable cause for the assessee for not complying with the notices issued by the AO as well as the by the CIT(A) - the assessment order was passed ex-parte qua the assessee u/s 144 of the Act and the appeal before the CIT(A) was also decided ex-parte qua the assessee - the assessee should be granted one more opportunity to present its case before the CIT(A) - thus, the matter is remitted back to the CIT(A) for fresh adjudication - the assessee shall suo-moto appear before the CIT(A) within 30 days from the receipt of this order for fixing the hearing of this appeal by the CIT(A) – Decided in favour of assessee.
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2015 (1) TMI 152
Disallowance u/s. 14A - Proportionate interest expenses for earning tax free income – Held that:- The AO has noted that assessee had made investments of ₹ 2.63 cores in DSPMC fund - assessee has pointed to the balance sheet as at 31st March, 2006 and pointed to the fact that the share capital of the partners as on 31st March, 2006 was in excess of ₹ 11.86 cores as against the investments of ₹ 2.63 crore – in Reliance and Power Ltd vs. CIT [2009 (1) TMI 4 - HIGH COURT BOMBAY] it has been held that if there are interest free funds available to a assessee sufficient to meet its investment and at the same time the assessee has raised a loan it can be presumed that the investments were from interest free funds available - Revenue has not placed any material on record to controvert the submissions made by the Assessee and had also not brought on record any binding contrary decision in its support - no disallowance u/s. 14A on account of interest can be made – Decided in favour of assessee. Depreciation claimed on motorcar disallowed – Car used for wholly and exclusively for business purpose or not – Held that:- Assessee has submitted that assessee was allowed depreciation on the same car in immediately preceding financial year by CIT(A) and Revenue has not preferred appeal against the order of CIT(A) - Assessee from the bank statement of the firm has also demonstrated that the funds of the firm has been used for the purpose of purchase of car and further the car is also reflected in the balance sheet of the firm - the claim of the depreciation cannot be denied to the assessee – Decided in favour of assessee.
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2015 (1) TMI 151
Disallowance u/s 14A – investment in shares out of interest free funds - Held that:- even while applying Rule 8D, the AO should have taken into consideration, the explanation of the assessee of having made the investment in equity shares out of interest free funds because if the investment in shares is found to be made by the assessee out of its own funds or interest free funds, the disallowance u/s 14A to that extent cannot be made even as per the method prescribed in Rule 8D - Since the investment in the shares to the extent of ₹ 30.22 crores was made by the assessee out of interest free funds, such as share application money received form VTCL and unsecured loan received from Shri V. Mahindra, the ordero of the CIT(A) in deleting the disallowance made u/s 14A is upheld to the extent it was relatable to the investment of ₹ 30.22 crores made in the shares of HHEL – Decided against revenue. Sundry balances written off – Held that:- The disallowance on account of sundry balances written off was made by the AO on the basis that the relevant details and documents showing the deduction claimed to be made by Discoms on account of penalty for late delivery, were not furnished by the assessee and also relying on Explanation to S.37(1) of the Act - the assessee furnished such details and documents before the CIT(A) - But on verification of the details and documents, the AO found that the claim of the assessee for deduction on account of late delivery charges was established only to the extent of ₹ 1,78,62,107 - As regards the balance amount of ₹ 51,79,590, the required details and documents, however, were not furnished to substantiate its claim, as specifically noted by the Assessing Officer in the remand report - CIT(A) should not have deleted the entire disallowance made by the AO on account of sundry balances written off - the onus is on the assessee to establish its claim for the deduction made by the Discoms on account of late delivery charges, even for the balance amount of ₹ 51,79,590 – thus, the matter is remitted back to the AO to file the relevant details and documents to substantiate its claim for deduction on account of late delivery charges claimed to be levied by Discoms to the extent of balance amount of ₹ 51,79,590 – Decided partly in favour of revenue.
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2015 (1) TMI 150
Stay of demand - Transfer pricing adjustment - Disallowance of deduction u/s 80IB and 80IC - Held that:- Admittedly, out of the total demand of ₹ 45 crores raised in the assessment year, the AO has already adjusted the refund due to the assessee for A.Y. 2004-05 amounting to ₹ 13.26 crores, which is equivalent to 30% of the total demand raised for the assessment year. The case of the AR is that the various additions made by the AO/TPO are against the principles laid down by the Tribunal in other cases. Under these circumstances, we are of the view that the balance of convenience is in favour of granting partial stay to the assessee. Accordingly, we direct the assessee to pay a sum of ₹ 10 crores in two equal installments. The first instalment shall be paid on or before 31.10.2014 and the second installment shall be paid on or before 30.11.2014. Subject to the payment of the aforesaid amounts, the balance amount of outstanding demand is stayed for a period of six months or till the disposal of the appeal, whichever period expires earlier. - Decided partly in favour of assesse.
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2015 (1) TMI 149
Demand of difference amount of Transportation Income as per the ledger account and P&L account as the income of the assessee - Held that:- Assessing Officer considered the difference amount of Transportation Income as per the ledger account and P&L account as the income of the assessee. Further, before the ld. CIT(A), there was non-compliance of the notices and therefore, CIT(A) confirmed the addition made by the Assessing Officer. Before us, the ld. AR has assured that if the matter is remitted before the CIT(A), the assessee would be represented to present its case. Considering the submission of ld. AR, we are of the view that in the present case, in the interest of justice and fairness, the assessee is granted one more opportunity to present his case before the CIT(A). We, therefore, remit the issue to the file of CIT(A) for him to decide the issue de-novo on merits. We also direct the ld. AR to appear suo-moto before the CIT(A) within 30 days of the order and furnish all the required details called for by the CIT(A). In case of failure on the part of the assessee in submitting the necessary details, the CIT(A) shall be free to decide the issue on the basis of material on record - Decided in favour of assessee.
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2015 (1) TMI 148
Transfer Pricing Adjustment u/s 92CA(4) of the Act – Various expenses incurred – Disallowance u/s 14A of the Act - Cost of funds utilized - Held that:- Assessee made payment of the above amount on receipt of technical services pursuant to an Agreement dated 26.04.2006, a copy of which has been placed on page 196 of the paper book. Such payment was made in consideration of receipt of technical services in the preceding year as well, for which the TPO proposed and the AO made transfer pricing adjustment in the same manner in which it has been done for the instant year. The assessee preferred appeal against that order and the Tribunal vide its order [2014 (2) TMI 380 - ITAT DELHI] has restored the matter for a fresh determination of ALP with certain directions. A copy of such Tribunal order is available on record. In the absence of any distinguishing factual or legal feature having been brought to our notice in the facts for the preceding year as well as for the instant year, respectfully following the precedent, we set aside the impugned order and remit the matter to the file of the AO/TPO for a fresh determination of ALP of this international transaction in accordance with law, after allowing a reasonable opportunity of being heard to the assessee. - Matter remanded back - Decided in favour of assessee.
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2015 (1) TMI 147
Transfer Pricing adjustment - arm’s length adjustment - Held that:- Arm’s length adjustment has been made by TPO by excluding certain comparables and including some new comparables. Out of the new comparables so included, in the case of Excel Infoways Ltd., the OP/TC was 243.69% which is abnormally high. Thus, this company has made super normal profit and is found to be functionally not comparable to the assessee which is a limited risk service provider. In this case, ratio of employee expenses to sales is only 8.82% which is extremely low for service company. However, the ratio of companies selected by the TPO himself have a ratio of employee expenses to sales in the range of 30-60% and ratio of assessee for the relevant assessment year under consideration is also 60%. If this comparable is excluded, assessee’s mark-up cost would come within +5%. Accordingly, we find that assessee has prima facie case in its favour - Considering the totality of facts and circumstances of the case, we deem it fit to grant stay for six months or till the date of passing of the order by the Tribunal, whichever is earlier - Stay granted.
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2015 (1) TMI 146
Deduction u/s 10A - Disallowance u/s 40(a)(ia) - CIT (A) held that disallowance would only enhance profits otherwise entitled for section 10A deduction - Held that:- Revenue does not point out any distinction on facts in the present case vis-a-vis clause involved before the hon'ble high court (2010 (6) TMI 65 - BOMBAY HIGH COURT). It only pleads that its special leave petition is pending before the hon'ble Supreme Court of India. In our view, this contention only does not form a valid ground to adopt a different approach in the instant case. The hon'ble high court has settled the law that in case of a section 10A undertaking, a disallowance only gives rise to enhanced profits/ income otherwise entitled for deduction. The CIT(A)'s order is upheld. - Decided against Revenue.
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Customs
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2015 (1) TMI 166
Conviction u/s 135 - Recovery and seizure of 400 gold biscuits - Trial court convicting the petitioner u/s 135 of Customs Act, 1962 and sentencing him to undergo rigorous imprisonment of 3 years and to pay fine of ₹ 5000/- - Additional Sessions Judge upheld conviction - Held that:- The statement made by the accused under Section 108 of the Customs Act is not hit by the bar prescribed by Section 24 of the Indian Evidence Act - statement of the accused recorded by the Customs Officer prior to the registration of the FIR can be used against him and is not hit by Article 20(3) of the Constitution of India - non-examination of an independent witness joined at the time of alleged recovery is no disqualification to the case of the prosecution - Petitioner does not challenge the order of conviction on merits and restricts his prayer to the quantum of sentence - a lenient view can be taken on the quantum of sentence of the petitioner - As per Section 135 of the Act, the conviction for an offence which exceeds one Crore of rupees may extend to seven years and as per proviso it should not be less than one year - In the present case, 400 biscuits were recovered and their value was assessed at ₹ 1,53,91,200/- - As per the custody certificate, Roop Singh-petitioner has undergone 1 year 2 months and 12 days in custody out of substantive sentence of three years awarded to him and has not misused the concession of bail w.e.f 12.3.2006 - in view the fact that the petitioner has been facing the agony of a protracted criminal trial for the last 24 years, the sentence of the imprisonment awarded to the petitioner is reduced to the period already undergone - however, the fine is enhanced to ₹ 1,00,000 - Decided partly in favour of assesse.
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2015 (1) TMI 165
Extension of period for fulfilling its export obligation - inclusion of an alternate export product - Held that:- Additional DGFT granted extension in export obligation period for 18 months from the date of endorsement of the Licensing Authority, without composition fee and also permitted the appellant to fulfil the said export obligation by exporting goods other than 'Video Software'. In accordance with the said order, an endorsement dated 13th September, 2007 was made to the licence, extending the period for fulfilling the export obligation for 18 months therefrom. - Though the order dated 8th June, 2006 (supra) permitted the appellant to fulfil the export obligation by exporting alternate product manufactured by the appellant or its group companies in terms of the provisions contained in para 5.4(i) of the Foreign Trade Policy but while making endorsement on the licence in terms of the said order, endorsement to the said effect was not made and which resulted in the appellant being not able to fulfil the export obligation by exporting alternate product. Challenge in the writ petition from which this appeal arises being to the refusal of extension but even otherwise is fallacious. In fact, we have enquired from the counsel for the appellant that even if that be so, what prejudice thereby has been caused to the appellant; what else could the appellant have said even if had been served with a fresh notice. The counsel for the appellant has fairly agreed that neither any prejudice has been caused to the appellant nor did the appellant make any attempt to export any alternate product - Decided against assesse.
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2015 (1) TMI 164
Misdeclaration of goods - Imposition of penalty - Whether the Appellate Tribunal is correct in holding that the impugned items are "electronic scrap" on the basis of the invoices of M/s.Canon Singapore raised in favour of M/s.Cimelia Singapore against the expert opinion of Chartered Engineer who has done the detailed examinations of the goods - Held that:- there is no specific finding by the Tribunal as has been raised in the substantial question of law. All that the Tribunal has ordered is remanded the matter back to the Commissioner to redo the exercise after giving detailed analysis on the issues pointed out in paragraph 9 of the order. Hence, the substantial question of law does not requires to be answered in a case of open remand. All other findings of the Tribunal are not challenged. Accordingly, we find no question of law arises for consideration in this appeal. - Decided against Revenue.
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2015 (1) TMI 163
Seizure of goods - Single Judge directed to release the goods subject to deposit of 40% of the differential duty and to execute bond for the remaining amount - whether the first respondent has made out a case for release of goods pending adjudication proceedings - Held that:- interest of justice would be subserved by directing the first respondent to pay 50% of the differential duty instead of 40% as a condition precedent for releasing the goods during the currency of the proceedings. - Accordingly in modification of the order passed by the learned Single Judge, the appellants are directed to release the goods subject to payment of 50% of the differential duty as assessed by the department. All other conditions imposed by the learned Single Judge would remain without any change. The appellants are directed to release the goods within a period of one week from the date of payment of 50% of the differential duty and execution of bond - Decided partly in favour of Revenue.
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2015 (1) TMI 162
Waiver of pre deposit - Financial hardship - Held that:- At the stage of deciding the question of predeposit , we would not like to dwell deeply into the merits of the case. Prima facie, it appears that against the duty demand of ₹ 1.13 crores with interest and matching penalty, condition of predeposit of ₹ 10 lakhs is imposed. No case for financial hardship was made out before the authority. No documents have been presented before us nor such case argued. Merely because there is prima facie arguable case of assessee, would not warrant total waiver of predeposit . The element of undue hardship, does carry the question of financial hardship as well as issue on merits. However, mere prima facie case would not warrant total waiver of predeposit condition - Decided against assesse.
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2015 (1) TMI 161
Denial of refund claim - Unjust enrichment - Commissioner decided claim on basis of documents provided - Held that:- Commissioner (Appeals) has examined the issue as to whether the respondent has passed on the bar of unjust enrichment or not. As per the observations made by the learned Commissioner (Appeals), I hold that on production of the CA’s certificate and the balance sheet wherein it has been clearly mentioned that the amount is receivable from the department, therefore, the respondent has passed on the bar of unjust enrichment. Accordingly, the impugned order is upheld and the appeal filed by the Revenue is not on merit hence the same is dismissed. - Decided against Revenue.
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2015 (1) TMI 160
Refund claim - Notification No. 102/2007-Cus., dated 14-9-2007 - Refund of SAD - when the goods were cleared by the customs on 22-5-2012, how can the appellant raise the invoice on 19-5-2012 - Held that:- advocate has drawn my attention to the registration certificate granted by Delhi Pollution Control Committee for the import of Hazardous Waste on behalf of actual users. The said registration number requires the appellant to clear the imported waste directly to the actual users from the port. As such the appellant contention that they raised the invoice on 19-5-2012, expecting the clearance of the goods on the same very day, as the duty was paid by them on 19-5-2012, has to be accepted. In terms of the said registration the appellant were required to transport the imported waste directly to the actual users from the port of import. Merely because there was delay in passing out of charge order or in clearance of the imported goods, the invoice raised by them on 19-5-2012 cannot be held to be an invoice in respect of the some other goods. The original adjudicating authority has examined the said invoice and found the goods mentioned therein are relatable to the imported goods. There is no evidence on record indicating that the goods sold by 19 May 2012 invoice was different then the goods imported or the imported goods have been sold by the appellant to any other person. No reasons to uphold the impugned order of Commissioner (Appeals). The same is accordingly set aside - Decided against assessee.
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2015 (1) TMI 159
Detention of trucks - Trucks carrying smuggled goods - Imposition of penalty & redemption fine - Held that:- During the course of the investigation, a statement of the appellant is recorded and as per the statement, it is mentioned that the driver i.e. Shri Nagesh Vithal approached Mahananda Transport on the direction of Wilfred Transport Margoa for delivery of some goods. The owner of M/s. Mahananda Transport took his truck for loading; that they are concerned with transport of goods loaded by their transport agent and they are not concerned with the contents of the packages; that the driver was unaware of the contents of the packages or their origin; the goods were loaded from the container which according to him lies under the customs control; that they are innocent and the truck was used for earning freight charges only. This statement has not been controverted and being a truck owner, the appellant has transported the goods in good faith. Therefore, the confiscation of the truck is not required. Accordingly, redemption fine is also not required to be imposed. - Decided in favour of assessee.
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Corporate Laws
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2015 (1) TMI 158
Legality and validity of a Master Circular - Legality and validity of a Master Circular dated 2nd July 2012 issued by the Reserve Bank of India in respect of 'willful defaulter' - notices were issued by the respective banks, calling upon the petitioners to show-cause as to why they should not be declared as willful defaulters in terms of the Reserve Bank of India's Master Circular - petitioners availed of a loan facility – Bank noticed that the loan account of the petitioners was a Non-Performing Asset (NPA) since 30th June 2012 with the outstanding of ₹ 1027 lac (as on the date of the NPA) including the interest at the applicable rate – whether the petitioners are entitled to any of the reliefs as prayed for in their petitions – Held that:- A statute can be invalidated or held unconstitutional, if it is ultra vires the Patent Act, if it is contrary to the statutory provisions other than those contained in the Parent Act, if law making power has been exercised in bad faith, if it is not reasonable and it goes against the legislative policy; and if it does not fulfill the object and purpose of the enabling Act - while examining the constitutionality of a statute it must be assumed that the legislature understands and appreciates the needs of the people and the laws it enacts are directed to problems which are made manifest by experience and that the elected representatives assembled in a legislature enact laws which they consider to be reasonable for the purpose for which they are enacted - There is a presumption in favour of constitutionality and a law will not be declared unconstitutional unless the case is so clear as to be free from doubt - A statute should not be declared unconstitutional merely because in the opinion of the Court it violates one or more of the principles of liberty, of the spirit of the Constitution, unless such principles and that spirit are found in the terms of the Constitution. Power of the Reserve Bank of India to issue the Master Circular – Held that:- The failure of one bank can have a disastrous effect on the whole banking system, having the potential of leading to systematic crisis with prejudicial effect on the economy as a whole - the banking sector has been a highly regulated area all over the world - It is beyond dispute that banks, as financial instrumentalities are required to strive to fulfill, not only the object of achieving commercial efficiency, but also to serve the object of public interest. In fact, without serving public interest, no bank can legitimately claim any right to exist. It is inconceivable that a bank, as an instrumentality of, and also being capable of, wielding powerful weapons for transformation of the socioeconomic structure of the society, can act without taking into account the public interest and can act for furtherance of private interests of a limited group of persons. Whether it will be open for the court to review the decisions which have been taken by a specialised body like the Reserve Bank of India and arrive at different conclusions - Held that:- In Joseph Kuruvilla Vellukunnel v. Reserve Bank of India [1962 (3) TMI 78 - Supreme Court of India] - the law is well-settled that the Reserve Bank of India, which is described as the supreme bank of the country, is empowered to regulate the banking system and certain regulatory functions have been assigned to it by the provisions of the Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949 - It is in exercise of such powers that the Reserve Bank of India has thought fit to issue the Master Circular. Delegated legislation - Scope and power of the Reserve Bank of India to issue the Master Circular in exercise of powers under the delegated legislation – Held that:- If power is conferred to legislate only with respect to certain topics or for certain purposes or in certain circumstances, the limits of the power must not be crossed - the phraseology of the delegating provision becomes relevant - in applying the doctrine, the Court has a three-fold task: first, to determine the meaning of the words used in the Act itself to describe the delegated legislation which the delegate is authorised to make; secondly, to determine the meaning of the subordinate legislation itself, and, finally, to decide whether the subordinate legislation complies with that description - an overall responsibility to find out the well-being of a Banking Company, in improving monetary stability and economic growth as well as keeping in view the interests of depositors, the Reserve Bank of India has to formulate its policy vis-a-vis Banking Companies. 'Banking' as defined in Section 5(b) only gives a grammatical meaning of the transactions of a bank and nothing more - If any management or supervision is to be done over the banking activities of a bank, it will have to be governed by banking policy - The 'banking policy' and 'banking' are not independent but coordinating subjects and both are covered within the supervisory powers of the Reserve Bank of India within the meaning of Section 35A of the Banking Regulation Act - Even otherwise, the directions issued by the Reserve Bank of India are in the larger interest of the public and it being a body of experts in banking, the directions given by it should not be lightly brushed aside. Statutory status of the Circular – Held that:- The Master Circular has been issued with a particular object - whether a circular issued by a statutory authority would be binding or not, or whether the same has a statutory force or not, would depend upon the nature of the statute - for the said purpose, the intention of the Legislature must be considered – in Sudhir Shantilal Mehta v. C.B.I. [2009 (8) TMI 693 - SUPREME COURT OF INDIA] it has been held that the Reserve Bank of India exercises control over the Banking Companies, the Circular letter was binding on the Banking Companies. Application of maxim nemo judex in causa sua – Held that:- The authorities disclose that mere appointment of an officer of the corporation does not by itself bring into play the doctrine that 'no man can be a judge in his own cause' - for that doctrine to come into play it must be shown that the officer concerned has a personal bias or a personal interest or has personally acted in the matter concerned and/or has already taken a decision one way or the other which he may be interested in supporting - a mere possibility or likelihood of abuse of power does not make the provision ultra vires or bad in law. Violation of Article 19(1)(g) of the Constitution of India or not - Imposition of unreasonable restriction - Held that:- All the directors irrespective of their type are brought within the purview of the circular for the purpose of declaring them as willful defaulters - Although in clause (5.2), the Reserve Bank of India has tried to clarify the position as regards the independent and nominee directors, yet a plain reading of clause (5.2) would suggest that even the independent and nominee directors are not spared but it would be within the discretion of the committee of high functionaries headed by the Executive Director to take a decision as regards the role of the independent and nominee directors - all the directors cannot be held liable for the default in repayment of the loan which might be for varied reasons beyond the control of such directors – there was some element of arbitrariness in the policy of the Reserve Bank of India. A director of a company other than the promoter or a direct borrower of the loan from the bank and could also be a director who has a limited role to play and not directly or indirectly responsible for the company going in a debt cannot be restrained, if he himself on his own, wants to start a business or a new venture, from approaching a bank for financial assistance - apart from a social stigma, it is a direct infringement on the right of such a director to carry on trade or business under Article 19(1)(g) of the Constitution of India - the Master Circular, so far as it is sought to be made applicable to all the directors of the company is arbitrary and unreasonable – there was an element of arbitrariness in such policy decision – to this limited extent, it has been held that the Master Circular is violative of Article 19(1)(g) of the Constitution of India and deserves to be struck down partially. Except stating that the accounts have been classified as "NPA" and that the unit has defaulted in meeting with its payment/repayment obligation to the bank, no other materials have been disclosed with a view to give an opportunity to the petitioners to meet with the show cause notice - the show cause notice is absolutely vague and contains no factual or other materials – it could not be understood as to on what basis the bank has alleged in the show cause notice that the funds provided by the bank have been siphoned of and the same were used for the purpose other than the project for which the loan was sanctioned - If such are the nature of the allegations, then at least it is expected of the bank to provide some materials so that the petitioners can meet with the same - there is violation of the principles of natural justice - one of the facets of the principles of natural justice is fairness which, we do not find on the part of the bank in the proposed action - since the show cause notice is bereft of basic details and material particulars, the same deserves to be quashed and set-aside. Thus, summarily, the Reserve Bank of India was within its powers to issue the Master Circular relating to the willful default and willful defaulters as it is empowered to regulate the banking system and certain regulatory functions have been assigned to it by the provisions of the Reserve Bank of India Act, 1934, and the Banking Regulations Act, 1949 - The Master Circular has been issued by the Reserve Bank of India in public interest - Although it has not been stated in so many words to have been issued in public interest and also the source of power, yet if the source of power is traceable, exercise of such power cannot be set-aside merely because the same has not been disclosed - The Master Circular does not suffer from the vice of impermissible delegation of a legislative power - It confirms exactly to the power granted - The Master Circular has the force of law and could be termed as a statutory circular - The application of the maxim "nemo judex in causa sua" on the part of the petitioners on the premise that the bank itself will be a judge in its own cause is completely misplaced - In a given case, if the court finds the action to be tainted with malafide or bias, then the same could always be condemned and set at right - On mere apprehension of misuse of such provision, an otherwise valid statute, should not be struck down or condemned - a mere possibility or likelihood of abuse of power does not make the provision ultra vires or bad in law. The Master Circular does not impose an unreasonable restriction upon the promoters/entrepreneurs, being violative of the Article 19(1)(g) of the Constitution of India as it has the effect of debarring them from availing of any additional facilities for floating a new venture for a period of five years from the date the name of the willful defaulter is published in the list of "willful defaulters" by the Reserve Bank of India - The Master Circular, so far as it is sought to be made applicable to all the directors of the company, is arbitrary and unreasonable - To this limited extent, part of the Master Circular is to be declared as ultra vires the powers of the Reserve Bank of India and is violative of Article 19(1)(g) of the Constitution of India - The Master Circular seeks to paint all the directors with the same brush - The provisions in the circular shatter the concept of identity of a company being different and distinct from its directors without providing any safeguards - The show cause notice issued to the petitioners of Special Civil Application No.645 of 2014 is held to be bad as it is bereft of the basic details and material particulars - The Standard Chartered Bank although has been included as one of the Scheduled Banks in the Second Schedule to the Reserve Bank of India Act, 1934, yet, being a private bank, is not amenable to the writ jurisdiction of the Court - Merely because a company is carrying on the banking business, it cannot per se become a public authority nor can be considered as discharging public functions – Decided partly in favour of petitioner.
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Service Tax
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2015 (1) TMI 188
Waiver of pre deposit - Condonation of delay - Delay in receipt of order - Held that:- On perusal of the COD applications we are of the view that the impugned orders were sent through “Speed Post” which is not a proper service as held by the Hon'ble Bombay High Court in the case of Amidev Agro Care Pvt. Ltd. (supra). As also the Revenue has failed to produce an acknowledgement receipt of the said order therefore, we find that the service of the impugned orders by way of “Speed Post” is not a valid service. Accordingly, the applications for COD in filing the appeals are allowed. Matter is squarely covered by the decision of M/s Reliance Michigan (JV) - [2013 (7) TMI 236 - CESTAT MUMBAI] wherein for the same activity this Tribunal has confirmed the demand against the assessee, therefore, the revenue is having the case on merits. - applicants have failed to make out a case for complete waiver of pre-deposit. Therefore, the applicants are directed to make a pre-deposit the service tax as demanded in the show-cause notices - Partial stay granted.
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2015 (1) TMI 187
Demand - Consulting Engineer Service - levy of tax on Development expenses - Taxability of royalty amount on receipt basis - Held that:- As regards the development expenses, the fact that these expenses were incurred by the appellant in India and were not paid to SII, proves that no service has been rendered to the appellant. - The Commissioner's order is very vague and without reasoning. We have no hesitation in holding that service tax is not payable on the development expenses. Regarding royalty - Held that:- Measure of taxation does not determine the nature of taxation. But the pertinent fact of this case is that whereas the show cause notice was issued in September 2003, the royalty on account of technical services for the years 2000-2001 and 2001-2002 was paid in 2004. This fact has been also certified by the Chartered Accountant and not controverted by Revenue. The service tax provisions under the Service Tax Rules, 1994, as applicable during the period in dispute, clearly provided that service tax is payable when the value of taxable services is received. The relevant provisions in law was Rule 6(1) which stated that service tax is payable when payments are received towards the value of taxable services. Therefore, clearly service tax was not leviable on royalty paid for the years 2000-2001 and 2001-2002. Having held that the royalty was on account of providing technical services in India and such technical services are clearly covered under the Consulting Engineering Services, tax is leviable for the year 1999-2000 agreed to by both sides. The amount of service tax payable at the rate of 5% which was the prevailing tax rate at that time, works out to ₹ 2,89,777/-. - Decided partly in favour of assesse.
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2015 (1) TMI 186
Waiver of pre deposit - Construction of Residential Complex service - contravention of the provisions of Section 68 of Chapter V of Finance Act, 1994 read with Rule 6 of Service Tax Rules, 1994 - Held that:- applicant constructed 72 flats. Out of that, the dispute relates to 24 flats of the land owner's share. The Revenue determined the value on the basis of the value of the similar flats. The main contention of the Ld. Advocate is that the applicant had not received any consideration in the form of money in respect of these 24 flats of the land owner's share and only the land is the consideration and therefore, tax would demanded on the basis of the cost of the land. Prima facie, we are unable to accept the contention of the Ld. Advocate. In the present case, there is no dispute regarding the consideration received for the service is not wholly or partly consisting of money and therefore Rule 3 of the Service Tax (Determination of Value) Rules, 2006, would be invoked. tax was assessed on the basis of the value of the similar flats and therefore, prima facie, the tax was determined properly. On a query from the Bench, the Ld. Advocate submits that the Revenue has already allowed abatement while determining the tax. Hence, the applicant is failed to make out a prima facie case for waiver of pre-deposit of entire amount of duty along with interest and penalty. - Partial stay granted.
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2015 (1) TMI 185
Business of retreading of old and used tyres - management, maintenance or repair service - appellants contended that they are paying sales tax/VAT on the materials at the time of purchase and also at the time of delivery of retreaded tyres since it is a works contract service and the transfer of property amounts to 'sale" as per Article 366 (29A) of the Constitution of India - Held that:- service tax can be levied on service component - Following decision of G.D. Builders Vs Union of India [2013 (11) TMI 1004 - DELHI HIGH COURT] - matter should be re-examined by the adjudicating authority and decided in the light of the decision of the Hon'ble Delhi High Court in the case of G.D. Builders Vs UOI (supra). Accordingly, we set aside the impugned orders. All the appeals are remanded to the adjudicating authority - Decided in favour of assesse.
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2015 (1) TMI 184
Liability of service tax - Recipient of service u/s Section 73 - Held that:- Section 68 of the Finance Act, 1994, deals with persons liable to pay service tax. The demand for short levy or non-levy, if any, has to be made under Section 73 and not under Section 68. Therefore, the argument of the department that Section 68 has been amended retrospectively making the person receiving the service tax liable to service tax has no merits. Demand for short levy/non-levy, etc., if any, has to be made under Section 73 and during the relevant time Section 73 did not provide for demand of service tax from the persons who were recipients of the service. Therefore, the demand is unsustainable in law, in view of the decision of the Apex Court in the case of L.H. Sugar Factories Ltd [2005 (7) TMI 106 - SUPREME COURT OF INDIA]. Accordingly, we do not find any merit in the appeal filed by the Revenue - Decided against Revenue.
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2015 (1) TMI 183
Clearing and forwarding agent service - Recipient of service - Held that:- Demands under Section 73 towards short levy/non-levy of the Service Tax could have been made only in respect of service providers who were required to file returns under Section 70 and not under Section 71A. Filing of returns by recipients of service was provided under Section 71A in 2003 and thereafter, in 2004, Section 73 was amended for recovery of duty from those persons who are required to file return whether under Section 70 or 71A. No such notice has been issued in the present case quoting the correct legal provisions. Therefore, the show cause notice issued in the present case and the impugned orders confirming the demand are unsustainable in law. - Decided in favour of assessee.
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2015 (1) TMI 182
CENVAT Credit - credit available to one unit availed by another unit - Investor Consultancy Services - Held that:- According to Rule 12A of Cenvat Credit Rules, any branch of LTU can transfer the Cenvat credit to other branches of the same company without any limit. However we find that the procedure followed by the appellants in availing the entire credit in one unit whereas the same was attributable to all the units may not be correct procedurally. However this would be only a procedural infraction and may not call for denial of the entire Cenvat credit availed by the appellants. Therefore we find that appellants have made out a prima facie case for waiver of pre-deposit and stay against recovery. Accordingly the application for waiver of pre-deposit and stay against recovery is allowed during the pendency of appeal - Stay granted.
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2015 (1) TMI 181
Waiver of pre deposit - Warranty service - CENVAT Credit - Nexus with manufacturing activity - Held that:- As per the terms of relevant contract, the assessee was under obligation to repair and maintain the transformers manufactured and cleared by M/s. Danke Products and, hence, they were entitled to Cenvat credit on the said service rendered during the warranty period. It is also not out of place to mention that the warranty service was undisputedly one attached to the very sale/clearance of the equipments by the appellant. It can, therefore, be reasonably argued that the warranty services, though provided after the clearance of the goods from the factory, had a certain nexus with the sale/clearance of the goods itself. It is, therefore, arguable that the provision of warranty services by M/s. Videocon Industries Ltd. to the customers of the appellant in terms of the contract of sale between the appellant and their customers can be considered to be covered by the definition of ‘input service’ - Prima facie case in favour of assessee - Stay granted.
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2015 (1) TMI 180
Waiver of pre deposit - High seas Sale - Commission income or sales activity - Held that:- Prima facie, that the applicant sold the goods to the TNEB as evident from the purchase order and Highseas Sale Agreement. There is a tripartite agreement between M/s. Adani Global Pte. Ltd., Singapore, the seller, MMTC the buyer and M/s. Adani Export Ltd., the seller's agent. The Commissioner confirmed the demand of tax on the basis of combined reading of agreement and Highseas Sale Agreement. Prima facie, we find that the applicant sold the goods to TNEB and, therefore, service tax on the administrative charge is not sustainable. Accordingly, we find it a fit case for granting waiver of pre-deposit of entire amount of tax and penalty. Pre-deposit of entire amount of tax and penalty and stay recovery thereof till disposal of the appeal - Stay granted.
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Central Excise
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2015 (1) TMI 176
Denial of refund claim - Rule 5 of Cenvat Credit Rules - GTA services - transporting the finished goods upto the port of shipment - Held that:- Since the export documents in the instant case clearly show that terms of delivery on payment is upto port on FOB basis - Following decision of Assessee's own previous case [2009 (11) TMI 167 - CESTAT, CHENNAI] - Decided in favour of assessee.
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2015 (1) TMI 175
Valuation of goods - Inclusion of freight charges - Revenue contends that the freight discount extended by the appellant to their customers cannot be deducted from the assessable value on an average basis and as such, the same has to be added back to the value for the purpose of duty payment - Held that:- original adjudicating authority, in principle, has held that the freight deduction has been confirmed on account of the fact that the freight from the factory gate to the depot also is required to be included and there is no segregation of the same in the Chartered Accountant s certificate. As per the appellant, such freight already stands included in the assessable value and as such, the question of showing it separately does not arise. Inasmuch as, 1.5% deduction was only on rough estimation which stands reconciled by them at the end of the financial year based upon the actual quantum of freight, the matter needs re-consideration. - Matter remanded back - Decided in favour of assessee.
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2015 (1) TMI 174
Valuation - Abatement of equalized/averaged sales tax - Whether the appellants are eligible for abatement of equalized / averaged sales tax from transaction value under Section 4 of the Central Excise Act - Held that:- There is no dispute about the eligibility for deduction on account of octroi and additional sales tax. The original authority has accepted this in principle. He has disallowed the deduction only based on the grounds that the Respondent have claimed the same on a weighted average basis as mentioned earlier. The Commissioner (Appeals) have allowed the deduction without specifically giving a finding on each of the above three grounds raised by the original authority. We are of the considered view that in the given facts and circumstances of the case, the deduction towards additional sales tax and octroi can be allowed on equalised basis - Following decision of assessee's own previous case [2014 (10) TMI 190 - CESTAT CHENNAI] - appellants are entitled to claim the abatement of equalized sales tax from the transaction value - Decided in favour of assessee.
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2015 (1) TMI 173
Denial of CENVAT Credit - advance declaration for prior permission to avail credit - procedure contravention in the form of not filing declaration under Rule 57 - Held that:- Rule 57Q did not require any declaration during the relevant period - As regards Rule 57T, no doubt, this rule provides for declaration before receipt of capital goods but in view of the decision of Hon’ble High Court of Madras cited supra covering the issue, it is felt that as held by Hon’ble High Court, it has to be treated as procedural lapse. Moreover, the credit can be taken immediately, it is not mean that credit cannot be taken at later date at all. Once the admissibility of credit is not denied and utilization of capital goods for the purpose for which they received is accepted and it has been held by Hon’ble High Court [2007 (11) TMI 188 - HIGH COURT MADRAS] that this has to be treated as procedural lapse, following the judicial precedence and discipline, I am inclined to allow the credit in this case. - Decided in favour of assessee.
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2015 (1) TMI 172
Classification of goods - Product to be classified as motor spirit or not - the flash point of the product is below 250C - condition of use of fuel in power ignition engine - Held that:- directions of the Tribunal have not been carried out in view of the fact that the second requirement of suitability for use spark ignition engine has not at all been examined. The opinion of CTSM of IOCL Vadodara is also not conclusive since he himself has clarified that from the given distillation range of solvents, it appears that these solvents can be blended with other petroleum streams to meet the specifications for motor spirit. This cannot be considered as conclusive opinion. Further, Tribunal in case of M/s. Indu Nissan Oxo Chemical Industries Ltd. v. CCE, Vadodara as reported in [1998 (3) TMI 220 - CEGAT, MUMBAI], had held relying on U.S. Customs case that the term ‘suitable for use’ means actually, practically and commercially fit for such use and not casually incidental or possible use. In view of the above, Commissioner s reliance upon the opinion of CTSM cannot be held appropriate. In the absence of specific test report in support of the product and in view of the fact that the admittedly even at the time of visit of the officers, samples were not available facilitating the test for suitability of product for use in spark ignition engine, the Commissioner’s order cannot be sustained. - Following decision of AVANI PETROCHEM LTD. Versus COMMISSIONER OF C. EX., VADODARA-II [2009 (8) TMI 442 - CESTAT, AHMEDABAD] - Decided in favour of assessee.
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2015 (1) TMI 171
CENVAT Credit - Loss of goods due to fire - Held that:- There is no dispute about the fire accident in the appellants factory. The Revenue explanation that fire has occurred on account of negligence on the part of assessee cannot be appreciated inasmuch as nobody invites fire. Inputs which have already been issued from the inputs store section, to be used in the manufacture of final product, have to be treated as the inputs used in the manufacture and no Cenvat credit reversal is required to be asked for. As regards the inputs lying in store, the Tribunal in the case of Panacea Biotech Ltd. [2012 (9) TMI 870 - CESTAT NEW DELHI] has taken into consideration the entire case law and has held that mere receipt of the inputs will not entitle the assessee to avail the credit, when such inputs are destroyed ‘as such’ in the store section itself. Cenvat credit of duty of ₹ 70,578/- involved is ‘in-process goods’ is not to be reversed, whereas the Cenvat credit of ₹ 1,14,003/- as availed in respect of goods lying in stock is required to be reversed. Accordingly a part of the demand is set aside whereas the other part is confirmed - However, penalty is set aside - Decided partly in favour of assesse.
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2015 (1) TMI 170
Shortage in stock and raw material - Clandestine removal of goods - Non verification of statement of assesse - Held that:- Revenue’s entire case is based upon the alleged shortages detected at the time of visit of officers, read with statement of partner recorded on 10-1-2011. However, it is seen that on 11-1-2011, the said partner addressed a letter to their Assistant Commissioner, Anti-Evasion, the concerned officer, making reference to the visit of officers in his factory and clarifying that though he had given the explanation that short found goods were lying red hot in the furnace but the officers did not make any verification of the same. there is no evidence to show that furnace area was also checked to verify the fact that as to whether any final product was lying there or not. It is otherwise also seen that to weigh such heavy stock of raw material as also the final product, the inventory are required to be made and that such heavy stock cannot be weighed. There is no evidence on record to show as to how such weighment was undertaken by the visiting officers. There is no evidence of clandestine removal except the alleged shortages, which are also doubted. In the absence of evidence of clandestine removal, the confirmation of demand of duty based upon the alleged doubtful shortages read with statement of authorised person recorded at the time of search of the factory itself, cannot be considered to be sufficient evidence so as to lead to inevitable conclusion of clandestine removal. Tribunal in the case of Commissioner of Central Excise, Meerut-I v. Silvertone Papers Ltd. - [2013 (3) TMI 184 - CESTAT NEW DELHI] has considered the entire case law on the issue and has held that the alleged shortages read with statement of one of authorised representative, cannot be held to be sufficient evidence so as to uphold the finding of clandestine removal. Revenue, after recording the statement, which stand retracted immediately on the next date, has not bothered to make further investigation and to record statement of persons who are actually concerned with the manufacture of goods as also of the clearance and marketing of the same. No identity of the buyers of the raw material, etc., stand identified. As such, by extending the benefit of doubt to the appellant, I set aside the impugned order - Decided in favour of assesse.
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2015 (1) TMI 169
Denial of CENVAT Credit - credit of additional duty of Customs - Non proper document - benefit of exemption Notification No. 102/2007-Cus. - Refund of additional duty of Customs - Held that:- appellate authority have observed that there is no evidence to show that the importer has not claimed the refund of Additional Duty of Customs. The appellant contention is that the period of import is from January to March, 2007 whereas Notification No. 102/2007-Customs was issued on 14-9-2007 the said notification is prospective in nature and would not be applicable to the period prior to the same. This stands clarified by the Board vide their Circular No. 102/2007-Cus., dated 14-9-2007. It stand held that only those cases where 4% CVD was paid on or subsequent to 14-9-2007, will qualify for refunds under this scheme subject to fulfilment of prescribed condition. - notification was not in existence on the relevant point of time I also find that the said notification was allowing refund of CVD, subject to fulfilment of certain conditions. One of the condition was that the sale invoices would bear an endorsement that the same are not cenvatable. There is no such endorsement on the invoices. Importer of the raw material would not have claimed the refund of the Additional Duty of Customs paid by him. As such the same would be available as Cenvat credit to the appellant. Accordingly, the impugned orders are set aside - Decided in favour of assesse.
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2015 (1) TMI 168
Clearance of goods without payment of duty - Held that:- Revenue’s entire case is based on the percentage wastage itself, declared by the appellant and actually arisen and reflected in Form IV register. Whereas the declared percentage is 4 to 5% and the actual percentage wastage varies from 7 to 16%. Apart from the above difference, there is virtually no other evidence on record, indicating any clearance of the duty free procured fabrics. In fact, the declared percentage is also by the appellant and they were free to declare the same in their ARE-2 declaration, on the higher side. In fact, the one of the reasoning by the Revenue is that the appellant should have filed a fresh declaration, disclosing the higher percentage wastage. - appellate authority is only going by the differential wastage and by considering the same as sufficient evidence for clandestine removal, is rejecting the appeal. Tribunal in the case of Klene Paks Ltd. v. CCE, Bangalore-I reported in [2009 (3) TMI 837 - CESTAT, BANGALORE] has held that confirmation of demand on the allegation of clandestine removal based upon the excess wastage is only an assumption and in the absence of any evidence as to the purchaser of the alleged removed goods, demand cannot be confirmed. - Decided in favour of assesse.
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2015 (1) TMI 167
Penalty under Rule 25 of the Central Excise Rules, 2002 - on four occasions the respondent could not pay duty in time but they on their own paid the duty along with interest for the period they defaulted - Commissioner (Appeals) he dropped, the penalty on the premise that the provisions of Section 11AC of the Central Excise Act, 1944 were not invoked in the facts of the case which is prime condition for imposition of penalty - Held that:- Commissioner (Appeals) dropped the penalty on the premise that provisions of Section 11AC of the Act have not been invoked. There is no finding of the lower authorities that the respondent has not paid the duty in time by way of fraud, collusion, misstatement, suppression of fact or contravention of provisions of Act/Rules with an intend to evade payment of duty, to invoke the provisions of Section 11AC of the Act. When these findings are not there, therefore the provisions of Rule 25 cannot be invoked. Further, the case law relied upon by the ld. AR for imposition of penalty under Rule 27 ibid relevant to the facts of this case. As in that case, the lower authorities imposed the penalty under Rule 25 ibid. But in this case, the penalty under Rule 25 ibid is dropped. Further, on perusal of the record, I find that there is no prayer in the appeal to impose penalty under Rule 25 ibid. Therefore, at this stage, the prayer for imposition of penalty under Rule 27 cannot be accepted. - Decided against Revenue.
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CST, VAT & Sales Tax
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2015 (1) TMI 179
Maintainability of Writ petition - efficacious alternative remedy available to petitioner or not – Assessee has made strenuous efforts to convince the Court by submitting that an expeditious decision on the issue of exigibility of interconnection charges is warranted, since it will have a huge impact on the services being provided by the appellant to the general public at large - Held that:- It is axiomatic that when an objection is raised regarding the very maintainability of the proceedings, the issue, as it goes to the root of the matter, shall be decided first - any positive finding on the issue renders the whole exercise of adjudication on the merits of the matter an exercise in futility - It only serves, conversely, the avoidable purpose of clipping the adjudicatory wings of the lower forum, which ought, ex debito jusitiae, to decide the lis untrammelled by any observations at higher judicial echelons - in a proceedings where trial is to take place, by recording the evidence, only pure questions of law can be decided as a preliminary issue, leaving the issues of mixed questions of fact and law to be decided in the end, but before considering the merits of the matter. In Tin Plate Co. of India Ltd. v. State of Bihar [1998 (11) TMI 532 - SUPREME COURT OF INDIA] the SC has observed that when an alternative and efficacious remedy is open to a person, he should be required to pursue that remedy and not to invoke the extraordinary jurisdiction of the High Court under Article 226 of the Constitution - where such a remedy is available, it would be a sound exercise of discretion to refuse entertainment of the writ petition under Article 226 of the Constitution - if the writ petition under Article 226 is to be dismissed on the ground of alternative remedy, the Court is not required to express any opinion on the merits of the case which is to be pursued before an alternative forum. Whether it is a proper or improper exercise of taxing power on the part of the respondents – Held that:- It bears reiteration, if not repetition, that it is the inherent lack of power, as is not the case presently, that could give rise to the necessary cause of action for the appellant to knock at the doors of this Court, notwithstanding the availability of an alternative remedy - refusal to entertain a petition under the writ jurisdiction by the High Court when an efficacious alternative remedy is available to the party is a self-imposed limitation - it is within the discretion of the High Court to grant relief under Article 226 of the Constitution despite the existence of an alternative remedy - neither the urgency of adjudication, nor the gravity of the issue, leave alone the status of the appellant being a public sector undertaking, can be judicially acknowledged as an exception to the rule of alternative remedy - without disturbing the direction of the single Judge to the appellant to avail itself of the alternative of remedy of appeal and the protective measure of deferment of collection of tax provided thereby, the petition is to be dismissed – Decided against petitioner assessee.
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2015 (1) TMI 178
Entitlement to set off under Rule 41D of the Bombay Sales Tax Rules, 1959 - Export sales of the fountain pens sold at ₹ 30/- per piece and ball pens sold at ₹ 25/- per piece during the period 01-04-1995 to 30-09-1995 covered by Notification Entry 304 and export sale of fountain pens and ball pens sold at a price upto ₹ 30/- per piece during the period 01-10-1995 to 31.03.1997 covered by Notification Entry A-23 – Held that:- The Applicant contended that they have not claimed any exemption from the sales tax u/s 41 and, therefore, the standard condition No.3 in Annexure-1 referred to in column (4) of Entry A-23 was not applicable to them as far as the export of goods are concerned - Goods are either taxable or tax free - Taxable goods are either chargeable with tax or exempt from tax - The product sold by the assessee are in the exempted goods category - Section 2(33) determines whether goods are taxable or tax free and not Section 41 - The Applicant has sold pens locally in the course of inter State trade and also in the course of exports - The basic conditions were, set off under Rule 41D require the dealer to be a registered dealer having purchased goods covered by Schedule C, using the goods to manufacture taxable goods contemplated in Section 2(33) of the Bombay Sales Tax Act for sale or export - The goods manufactured should in fact have been sold or exported and goods purchased should have been used in the manufactured goods - since taxable goods include goods exempt from tax and the assessee has not claimed exemption from sales tax u/s 41, there is no reason to apply standard condition No.3 of Annexure-1 to notified entry A 23 – the Applicant’s rightly contended that they did not have claimed exemption from Sales Tax u/s 41, the condition No.3 cannot be imposed upon them – thus, the disallowance of set off is unsustainable – thus, the Tribunal was not justified in holding that the Applicant was not entitled to set off in respect of the export sales of the goods for the relevant period – Decided in favour of Applicant-Assessee.
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2015 (1) TMI 177
Notice for assessment of tax issued for production of books of account and documents without complying with section 9C(2) - Held that:- When the statute requires to do certain thing in certain way, the thing must be done in that way or not at all - other methods or mode of performance are impliedly and necessarily forbidden - the legal proposition is based on a legal maxim "Expressio unius est exclusion alteris", meaning thereby that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner and following other course is not permissible - the same has been decided in Y. Narayana Chetty -vs- Income-tax Officer, [1958 (10) TMI 10 - SUPREME Court] - notice for assessment of tax as a result of audit in Form E-30 dated 19.06.2009 was issued requiring the petitioner to appear in person or through his authorized agent before the AO on 06.09.2009 at 11 A.M. to produce or cause to be produced books of account for the period 2005-06 to 2009-10 - Thus, notice in Form E-30 itself shows that minimum thirty days’ time as provided under sub-section (2) of Section 9C of OET Act has not been granted to the petitioner - Thus, it is a case of clear violation/infraction of the mandatory provisions of Section 9C of the OET Act and proceedings initiated by the AO in pursuance of such invalid notice would be illegal and void. Scope of the powers of AO - Whether the AO who is the creature of the OET Act can act contrary to or de hors the provisions of the Act – Held that:- The Assessing Authority who has issued the notice for assessment of tax as a result of audit in Form E-30 is the creature of the OET Act - he cannot in any manner act contrary to or de hors the provisions of the OET Act - Since sub-section (2) of Section 9C of the OET Act mandates that the dealer shall be allowed time for a period of not less than thirty days for production of relevant books of account and documents, the assessing officer being the creature of the statute cannot allow time less than thirty days - On this score, the notice issued under Annexure-2 for assessment of tax as a result of audit is invalid – the same has been held in COMMISSIONER OF CUSTOMS, MUMBAI Versus VIRGO STEELS [2002 (4) TMI 53 - SUPREME COURT OF INDIA]. Validity of assessment order u/s 9C of the Orissa Entry Tax Act, 1999 - Whether the order of assessment dated 06.07.2009 passed u/s 9C of the OET Act for the period 01.04.2005 to 31.05.2009 is sustainable in law – Held that:- Order of assessment passed in pursuance of notice in Form E-30 issued in violation of requirement of Section 9C(2) of the OET Act is not sustainable in law – thus, the order passed under Section 9C of the OET Act for the period 01.04.2005 to 13.05.2009 is set aside and the matter is remitted back to the AO for fresh assessment – Decided in favour of petitioner.
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