Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 10, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Classification of head of income – Merely this scrip was held only for one day would not be sufficient to hold that the assessee was in the business of trading in shares - HC
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Genuineness of gifts received from different sources - All the donors were assessed to tax except one who was based at USA - Identity of the donors so also creditworthiness and genuineness of the transaction having been established, gifts were not bogus - HC
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Attachment of bank accounts for recovery in case of sick industries - No permission from AAIFR - Action of the respondents by attachment of the bank accounts is illegal - HC
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Receipt to be treated as capital receipt or revenue receipt - Amount was received by way of share capital which was compulsorily required to be invested by SKSE as per the directives of SEBI. - held as capital in nature - HC
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Waiver/reduction of penalty and interest u/s 273A - Section 273A does not confer absolute discretion upon the Commissioner to pass any order which he pleases to make. He is required to consider the application on the merits. - HC
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Interest payable by assessee - Amendment to section 139(8) and 215(3) is retrospective or prospective - this was an additional liability of payment of tax, this will have the effect prospectively and not retrospectively - HC
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Department has no discretion to prescribe what expenditure the assessee should incur and in what circumstances he should incur the expenses - HC
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Accrual of Income - entitlement to make duty free imports of raw materials obtained by the assessee through advance licences and duty entitlement pass book issued against export obligations is an income of year in which the import is made - SC
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Year in which income to be taxed - rate of tax remained the same in the present assessment year and subsequent assessment year - the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect - SC
Customs
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Import of deodorant at Tuticorin port which was not allowed - non Fixation of MRP – Undervaluation – in view of sufficient bank grantee, stay granted - AT
Corporate Law
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Maintability of appeal - It would be unsafe to match the colour of one case with that of the other indiscriminately - CLB was right in its view that ITNL was a “member” for the purpose of maintaining an action under sections 111A, 397 and 398, 399 read with sections 402 and 403 of the Companies Act. - HC
Service Tax
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Goods Transport Agency - transportation of flavoured milk - whether exempt - it was not clear whether the expression ‘milk’ covers flavoured milk also - stay granted partly - AT
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Outdoor Catering Service u/s 67(76a) r.w. 65(24) - The assessee provided food to NTPC employees from a premises provided by NTPC under a license granted to the assesse - demand and penalty confirmed - AT
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Manpower Supply Service – employees on deputation - one of the features of manpower supply service was that the salary of the persons supplied was paid by the manpower supply agency in full and payment by the service receiver was made to the supplier of the service and not to the employee - stay granted - AT
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Taxable service to SEZ unit – refund rejected - provisions of the 2005 Act are provided an overriding effect vide Section 51 - the immunity to service tax in respect of taxable services provided in relation to SEZ is a legislatively enjoined immunity - AT
Central Excise
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SSI Exemption Benefit – calculation of turnover of 1.5 crore and 4.0 crore - Clubbing of clearance - Larger bench decision by majority - Prima facie case is against the assessee - stay granted partly - AT
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CENVAT Credit – when the job worker had paid duty even though he was not required to pay the duty, the Cenvat credit cannot be denied to the assessee who had received the duty paid goods from the job worker - stay granted - AT
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Scope of Input Service under Rule 2(I) - Rent-a-cab Service availed for workers - the issue of nexus in respect of the service, in question, has been examined and the High Courts and the Tribunal have expressed the view that there is nexus - AT
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Clearance of Goods – Exempted OR Not - upplies made to SEZ are held to be “export” provisions of Rule 6 of CCR does not arise at all - AT
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Eligibility of Availment CENVAT Credit on Capital Goods - CENVAT credit eligibility is to be determined with reference to the dutiability of the final product on the date of receipt of capital goods - AT
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CENVAT Credit – Revenue was of the view that the equipment’s and machineries were erected in the factory and thus became immovable property and, therefore, cannot be considered as capital goods - prima facie contention of revenue is not correct - AT
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CENVAT Credit - Scope of the terms 'means and includes' - Rule 2(l) of CCR - The expression ‘includes’ cannot be used to oust any activity from the main body of the definition if it is otherwise covered by the expression ‘means’ - AT
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Refund Claim – Since classification and liability to Central Excise duty have attained finality, the refund claim has no merit - AT
VAT
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Validity of writ petition - Tribunal has jurisdiction to entertain the question of law as well as violation of principles of natural justice (with some exemptions) - petitioner to exhaust alternative remedy - HC
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Offence - The petitioner being a simple agent acting on behalf of the proprietor, cannot be held to have any sales tax liability and he cannot be held to have conspired with the Sales Tax Authority to transport the goods without complying the relevant provisions - HC
Case Laws:
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Income Tax
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2013 (10) TMI 324
Accrual of Income - mercantile system of accounting - whether the benefit of an entitlement to make duty free imports of raw materials obtained by the assessee through advance licences and duty entitlement pass book issued against export obligations is income in the year in which the exports are made or in the year in which the duty free imports are made. - Held that:- income does not accrue in the year of export but in the year in which the imports are made. Even if it is assumed that the assessee was entitled to the benefits under the advance licences as well as under the duty entitlement pass book, there was no corresponding liability on the customs authorities to pass on the benefit of duty free imports to the assessee until the goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialise and its money value is therefore not the income of the assessee. There is no dispute that in the subsequent accounting year, the assessee did make imports and did derive benefits under the advance licence and the duty entitlement pass book and paid tax thereon. Therefore, it is not as if the Revenue has been deprived of any tax. We are told that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect. There was, therefore, no need for the Revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers. - Decided against the revenue.
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2013 (10) TMI 323
Addition on account of bogus purchases – Held that:- As per the quantity details to Tax Audit Report in form No. 3 CD as appearing on the paper book, it is seen that there is discrepancy of 104500 kg. even after considering this claim of the assessee that the assessee has already taken the income on account of sale of the scrap to the extent of 105500 kg. for the value not shown before us. The assessee has not submitted a copy of the trading and profit and loss account to show that the assessee has credited sale proceeds of 105500 kg. of metal scrap for which it is an allegation of the Excise Department that such sale was made by the assessee without paying Central Excise duty but even if accepted this claim of the assessee because the same was accepted by the authorities below, there is still a difference of 104500 kg. of metal scrap as per the quantity details submitted by assessee and hence, no infirmity in the order of the Ld.CIT(A) wherein it was held by him that the claim of the assessee regarding purchase for trading to the extent of 105000 kg. is bogus – No evidence is brought on record – Decided against the Assessee.
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2013 (10) TMI 322
Remanding the issue of eligibility of the Assessee to claim deduction under Section 10A/80-IB(8A) of the Act to the Assessing officer for his fresh consideration – Held that:- Remand order is not sustainable as for no reason, the matter is remanded to the Assessing Officer; that the Assessing Officer had no role to play as this was a case involving transfer pricing and it was scrutinized by the Dispute Resolution Panel comprising of three Commissioners - Order passed by the assessing authority is following the directions issued by the Dispute Resolution Panel; that the remand order is clearly not sustainable - The order of the Tribunal is set aside and is remanded to the Tribunal for examination of the appeal of the assessee on merits – Decided in favor of Assessee.
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2013 (10) TMI 321
Classification of head of income – Income on sale of scrip to be taxed under head ‘Business Income’ or ‘Income under the head Capital gains’ – Held that:- Assessee had held three scrips for period of 1380 days which were then sold for a gain of ₹ 61.11 lacs. Other lone transaction during the year under consideration was sale of one scrip valued at ₹ 672/- - Merely this scrip was held only for one day would not be sufficient to hold that the assessee was in the business of trading in shares – Decided against the Revenue.
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2013 (10) TMI 320
Correctness of orders u/s 264 and u/s 154 of the Income Tax Act – Held that:- From perusal of record, it is evident that the assessee did not produce any evidence for the payment of interest on loan to lenders - Assessee himself revised his claim of deduction of interest on borrowed capital to Rs. 31,000/- as against Rs. 1,96,231/- claimed by the assessee, on the basis of the revised computation of income filed by the assessee. The difference of the amount has been added by the authority which cannot be said to be a mistake on the face of record. The Commissioner of Income Tax has rightly passed orders under section 264 as well as under section 154 of the Act as the assessee did not produce any evidence in support of his claim. The Commissioner has rightly observed that merely submitting details of income of borrowers would not entitle the assessee to claim interest paid on borrowed capital. The law requires that assessee has to furnish necessary proof of actual payments of interest to the borrowers – Decided against the Assessee.
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2013 (10) TMI 319
Additional ground for re-opening of Assessment - DEPB - deduction u/s 80 HHC – Held that:- In the present case, there are peculiar facts which convince not to carry further inquiries in this respect. Such facts are that the additions deleted by the CIT(Appeals) and which has been confirmed by the Tribunal in the impugned judgment are now squarely covered against the Revenue by a decision of the Supreme Court in the case of Topman Exports v. CIT [2012 (2) TMI 100 - SUPREME COURT OF INDIA] - No purpose would be served in entertaining this Tax Appeal – Decided against the Revenue.
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2013 (10) TMI 318
Exemption u/s 10A - Technical and infrastructure facilities - Held that:- both the CIT(Appeals) and Tribunal have concurrently held in favour of the assessee-respondent, on the basis of cogent material and clinching evidences adduced before both these authorities and they have elaborately discussed the material evidence and satisfied themselves rightly and they have also recorded their sound reasonings for concluding as to why availability of the benefit to the assessee-respondent in terms of exemption under Section 10A of the Act was wrongly denied by the Assessing Officer. Predominantly, we find that on the basis of the factual matrix, both these authorities have held in favour of assessee. There is nothing contrary either in law or on facts emerge before us to lead us state that any of these findings are perverse and as such give rise to any substantial question of law - Decided against Revenue.
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2013 (10) TMI 317
Addition u/s 69C - proof of Deposit of sales tax with authorities - The Tribunal remanded the proceedings back to the Commissioner of Appeals on the ground that if the assessee had retained three percent of the Sales Tax out of the payment made by the Swamy Chemicals, but, no tax is deposited with the Government, surely, the same would become the income of the assessee. - Held that:- it was not open for the CIT(Appeals) to examine the entire nature of the payment of Rs.18,83,000/-, to consider, whether, the same can be considered as taxable in the hands of the assessee. It was only for the CIT(Appeals) to examine that any part of the three percent of the Sales Tax element was or was not deposited by the assessee with the Government and to decide the assessee's tax liability to pay tax - Decided in favour of assessee.
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2013 (10) TMI 316
Unexplained income u/s 68 - Held that:- The Tribunal while appreciating the factual matrix came on record observed that after the summons were issued U/s 131 of the Act,1961 to the applicant/creditors and their confirmation letters were filed and the companies were assessed to tax being private limited companies the existence of their separate legal entity ordinarily could not have been challenged more so when the identity of existence of the investor is not disputed and accordingly upheld the view of Commissioner (Appeals), at the same time further observed that merely on the basis of oral statement of Kripa Shanker Sharma recorded before the search authorities that the assessee provided accommodation entries was not sufficient for the income to be assessed in the hands of the assessee - Decided against Revenue.
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2013 (10) TMI 315
Deduction u/s 80HHC(3) - Amendment of Taxation Laws (Second Amendment) Act, 2005 - Held that:- Keeping in mind that the Supreme Court had transferred all the matters to the Gujarat High Court in order to avoid confusion and difficulties in enforcement of conflicting judgments of different High Courts, we are of the view that it would be appropriate in these writ petitions to follow the judgment of the Gujarat High Court - In the circumstances, for the above reason, the Writ Petitions, other than the first four Writ Petitions, are disposed of in the terms of the order and judgment of the Gujarat High Court. The first four writ petitions, in any event, stand disposed of by the order and judgment of the Gujarat High Court.
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2013 (10) TMI 314
Genuineness of gifts received from different sources - Respondent assessee had shown receipt of gifts to the tune of Rs. 65,75,272/- from 12 different persons received through 11 demand drafts issued on a single day i.e. on 21.3.2003. One of the gifts amounting to Rs. 4,75,272/- was received from one Michael Gags of USA – Held that:- Assessing officer had issued the letters under section 133(6) of the Act. Assessing Officer had also called for confirmation letters which were received by it - The assessee had furnished all other requisite documents like copies of DD, gift deed, copy of PAN cards, copy of acknowledgment of returns of the donors along with computation and balance sheet - All the donors were assessed to tax except one who was based at USA - Identity of the donors so also creditworthiness and genuineness of the transaction having been established, gifts were not bogus. Reliance is also placed upon the judgment of Hon’ble Gujarat High court in the case of Muralidhar Lahorimal v. Commissioner of Income-tax [2005 (11) TMI 32 - GUJARAT High Court], wherein identity of the donor had been established beyond any semblance of doubt and genuineness of the transaction was also established not only by the receipt of bank draft but also by other contemporaneous record. - Decided against the revenue.
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2013 (10) TMI 313
Genuineness of gifts received from different sources - Gifts to the tune of Rs. 74,40,000/- from 24 different persons received through 24 demand drafts issued in December 2002 – Held that:- Assessing officer had issued the letters under section 133(6) of the Act. Assessing Officer had also called for confirmation letters which were received by it - The assessee had furnished all other requisite documents like copies of DD, gift deed, copy of PAN cards, copy of acknowledgment of returns of the donors along with computation and balance sheet - All the donors were assessed to tax except one who was based at USA - Identity of the donors so also creditworthiness and genuineness of the transaction having been established, gifts were not bogus. Reliance is also placed upon the judgment of Hon’ble Gujarat High court in the case of Muralidhar Lahorimal v. Commissioner of Income-tax [2005 (11) TMI 32 - GUJARAT High Court], wherein identity of the donor had been established beyond any semblance of doubt and genuineness of the transaction was also established not only by the receipt of bank draft but also by other contemporaneous record. - Decided against the revenue.
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2013 (10) TMI 312
Reassessment u/s 147 - Whether on the facts and the circumstances of the case and in law the Tribunal was justified in holding that there was no failure on the part of the assessee to disclose fully and truly all material facts for his assessment when the material facts were neither submitted in return or accompanying documents and not in the documents submitted during the course of the assessment, despite the specific query of A.O. for the same - Held that:- two authorities i.e. CIT(A) and the Tribunal have come to a concurrent finding of fact that all material facts necessary for assessment have been disclosed by the assessee during the course of original proceedings. Thus, we see no reason to entertain the proposed questions of law - Decided against Revenue.
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2013 (10) TMI 311
Attachment of bank accounts for recovery in case of sick industries - Attachment of the bank accounts and recovery proceedings initiated against the petitioner – Held that:- Reliance has been placed upon the judgment in the case of Tata Davy [1997 (8) TMI 78 - SUPREME COURT OF INDIA], wherein it has been held that until and unless permission is obtained from AAIFR, such recovery cannot be affected - Action of the respondents by attachment of the bank accounts is illegal and accordingly the attachment of the bank accounts of the petitioner for enforcing the recovery under the assessment order is hereby quashed – Revenue is free to move an application before the AAIFR for seeking its permission for affecting the recovery under the assessment order, and shall act in accordance with the permission as may be granted by the said Board – Decided in favor of Assessee.
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2013 (10) TMI 310
Receipt to be treated as capital receipt or revenue receipt - Granting reduction of Rs. 3,01,60,000/- made on account of capital receipts from total assessed income of Rs. 3,29,51,982/- - Received the corpus fund from the holding company i.e. Saurashtra Kutch Stock Exchange Ltd. ('SKSE' for short) by way of share capital - Such investment was necessary due to directives of SEBI providing that SKSE and its members together shall hold 100% equity shares of the company and that the holding of SKSE should not be less than 51% of the value – Held that:- Amount was received by way of share capital which was compulsorily required to be invested by SKSE as per the directives of SEBI. Payment was made through cheque - The amount was for the purpose of creating the share capital – Amount to be treated as capital receipt – Decided against the Revenue.
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2013 (10) TMI 309
Power of tribunal to rectify its order and to recall it – Held that:- Tribunal proceeded to decide certain issues on merits without giving full opportunity to the aggrieved party to make submissions thereon, the order did certainly suffer from an error apparent on the record - Tribunal, therefore, committed no error in exercising power of rectification - By recalling the said order, the Tribunal cannot seem to have recalled its earlier conclusions – Reliance has been placed upon the judgment in the case of [2011 (3) TMI 706 - Gujarat High Court]- Decided against the Revenue.
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2013 (10) TMI 308
Waiver/reduction of penalty and interest u/s 273A of the Income Tax Act – Held that:- The Commissioner is given the discretion, when the requisite conditions envisaged are satisfied, that he may waive or reduce the penalty or the interest imposable under the Act. However, the exercise of discretion cannot be either arbitrary or capricious and has to be judicious and objective. Section 273A does not confer absolute discretion upon the Commissioner to pass any order which he pleases to make. He is required to consider the application on the merits. The waiver of only 70% of the interest and penalty was held not to be proper - A reading of the order of Commissioner waiving 70% of interest and penalty shows that no legal and valid reason has been given therefor - Assessee fulfilled the requirements as envisaged under Section 273A of the Act and the present case calls for complete waiver of interest and penalty for the assessment years 1982-83 to 1988-89 – Decided in favor of Assessee.
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2013 (10) TMI 307
Interest payable by assessee - Amendment to section 139(8) and 215(3) of the Act is retrospective or prospective - Assessing Officer, while rejecting the application for rectification preferred by the assessee charged interest under section 139(8) on the assessed income and interest under section 215(3) from 1.4.84 to 30.3.09 – Held that:- As per the old provision of section 139(8), interest for late filing of return was to be calculated on the tax paid as per the regular assessment originally framed and not on the enhanced amount of tax payable as per the new order. Keeping in view the fact that this was an additional liability of payment of tax, this will have the effect prospectively and not retrospectively - Interest for the period from 1.4.84 to 30.8.88 was therefore correctly held admissible – Decided against the Revenue.
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2013 (10) TMI 306
Discretion of department to prescribe what expenditure the assessee should incur and in what circumstances he should incur the expenses – Held that:- Reliance has been placed upon the judgment in the case of Commissioner of Income Tax, Andhra Pradesh Vs. Dhanrajgirji Raja Narasinghirji reported in [1973 (3) TMI 6 - SUPREME Court] - Maintenance of books of accounts for the assessee and absence of any defect in such record and therefore, it rightly held that merely because in the subsequent year more expenses are incurred by the assessee by making such comparison, disallowance was not justified. Unexplained cash credit u/s 68 of the Income Tax Act – Held that:- Having found complete details of the receipt of share application money, along with the form names and addresses, PAN and other requisite details Revenue found complete absence of the grounds noted for invoking the provision of section 68 of the Income tax Act - Reliance has been placed upon the judgment of Hon’ble Supreme Court in the case of Commissioner of Income Tax. Vs. Lovely Exports (P) Ltd. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] – Decided against the Revenue.
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2013 (10) TMI 305
Condonation of delay for filing refund application - Request for refund of the advance tax was rejected by the Chief Commissioner – Held that:- Reliance has been placed upon the judgment in the case of Pala Marketing Co-op. Society Ltd. v. Union of Indian and Ors.[2007 (11) TMI 294 - KERALA HIGH COURT], wherein it has been held that failure to condone the delay causes genuine hardship to the assessee – In the present case, delay even though due to the fault of the petitioner, should liberally be condoned in filing the application for refund – Decided in favor of Assessee.
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2013 (10) TMI 304
Application for stay to be decided expeditiously – Held that:- Respondent No. 3 directed to consider and decide the application for stay expeditiously as far as possible within a period of 30 days from the date of such applications. Recovery against the Petitioner – Held that:- For a period of one month or till the decision on the applications, whichever is later, no coercive action shall be taken against the petitioner for enforcing recovery in question – Stay granted.
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Customs
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2013 (10) TMI 338
Import of deodorant at Tuticorin port which was not allowed - non Fixation of MRP – Undervaluation – Waiver of Pre-deposit - Held that:- From the adjudication order, we note that differential duty is determined at Rs.8,04,175/-. There is a redemption fine of Rs.2 lakhs and personal penalty of Rs.5 lakhs - dues adjudged itself is only around Rs.15 lakhs - As against that, applicants have been made to execute a bank guarantee of Rs.25 lakhs which was not a fair and arrangement for release of the goods - the valuation of the goods also needs to be examined in view of the issues being pointed out by the applicant - we consider it proper to waive pre-deposit of dues arising from the order for admission of appeal - It is so ordered subject to the condition that the bank guarantee is kept alive till disposal of the appeal - Stay granted.
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2013 (10) TMI 337
Benefit of Notification No. 55/2009-14 - Appellant had exported the prohibited basmati rice - appellant had claimed benefit of Notification No.55(RE-2008)/2004-2009, dt.05.11.2008 as amended by Notification No.57/2009-14, dt.17.08.2010 issued by DGFT authorities - Held that:- The issue involved in the case covered by the decision of the co-ordinate Bench of the Tribunal GLOBAL AGRO IMPEX Versus COMMISSIONER OF CUSTOMS, NOIDA [2013 (9) TMI 851 - CESTAT NEW DELHI] - Under Section 129E of Customs Act there was no requirement of pre-deposit of redemption fine - The detained goods were sufficient security for realising the dues from the order and therefore there was a considerable merit in the argument of the appellants. - Stay Granted.
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Corporate Laws
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2013 (10) TMI 336
Maintability of appeal - Whether the petitioner (ITNL) before the CLB was a member of the SPV so that it can maintain an action under sections 111A, 397, 398 read with sections 402 and 403 of the Act - Held that:- ITNL also gave two bank guarantees amounting to app. Rs. 20 crores. The finding of the CLB that Mukund Sapre did not attend the board meetings because there was no background material/documentation supplied with regard to them and also the finding that the petitioner before it had sent a specific request to include the item relating to the allotment of shares in the agenda for the meeting to be held on 20-8-2012 are findings of fact; they are not challenged on the ground of perversity. The learned counsel for the appellants placed reliance on the judgment of the Supreme Court in Chatterjee Petrochem (I) Pvt. Ltd. vs. Haldia Petrochemicals (2011 (9) TMI 842 - SUPREME COURT OF INDIA). Non-allotment of shares in that case was on account of the fact that theperson who claimed to be a member did not attend the meeting. That single fact alone cannot turn the present case. All the facts, including the conduct of the company in treating the person as a member/shareholder, the entries made in the balance-sheet, the reasons for not attending the meeting in which the shares were to be allotted, whether there was any clear and unambiguous abandonment of the claim and similar such facts have to be cumulatively considered; the inference or conclusion would depend upon the facts and circumstances and the conduct of the parties in each case. It would be unsafe to match the colour of one case with that of the other indiscriminately - CLB was right in its view that ITNL was a “member” for the purpose of maintaining an action under sections 111A, 397 and 398, 399 read with sections 402 and 403 of the Companies Act. Oppression and mismanagement - Rectification of the register of members - Held that:- a complicated matter involving serious questions such as fraud or malpractice, manipulation of accounts and finances, etc., requiring detailed investigation and production of elaborate evidence, would be more appropriately tried and decided by a Court of law and not by an arbitrator. It is submitted that there are serious manipulations committed by the appellants such as siphoning off the monies from the SPV to RAHI, back dating board resolutions, fabrication of board resolutions, etc. and in such a situation it would be more appropriate if the CLB decides the matter and not the arbitrator. This argument would arise for consideration only if there was a provision for arbitration of the dispute and it is a question of balancing which course to pursue – whether to pursue the dispute in the Court or the CLB, or to go before the arbitrator. Such a situation does not arise on the facts of the present case and, therefore, this argument need not be addressed by me. In the present case, the petition is pending decision before the CLB in which all these allegations will have to per force be examined. Moreover, proceedings under Section 11 of the Arbitration and Conciliation Act are stated to be pending before this Court and, therefore, it would not be appropriate to say anything more with reference to this argument - Appeal dismissed.
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2013 (10) TMI 335
Sanction of the Scheme of Amalgamation - Alteration of MOA and AOA - Held that:- No objection has been received to the Scheme from any other party. Mr. Rajib Routray, authorized representative of the Petitioner companies has filed an affidavit dated 21st May 2013 confirming that neither the Petitioner companies nor their counsel have received any objection from public pursuant to publication of citations in the newspapers - In view of the approval accorded by the shareholders and creditors of the Petitioner companies ; representation / reports filed by the RD and the OL to the proposed Scheme, there appears to be no impediment to grant of sanction to the Scheme. Consequently, sanction is hereby granted to the Scheme under Sections 391 and 394 of the Act. The Petitioner companies will comply with the statutory requirements in accordance with law - The certified copy of the order shall be filed with the Registrar of Companies within 30 days from the date of receipt of the same. In terms of Section 391 and 394 of the Act and in terms of the Scheme, the whole or part of the undertakings, the properties, rights and powers of the Transferor companies shall be transferred to and vest in the Transferee company without any further act or deed. Similarly, in terms of the Scheme, all the liabilities and duties of the Transferor companies shall be transferred to the Transferee company without any further act or deed. Upon the Scheme coming into effect, the Transferor companies shall stand dissolved without winding up - Petition allowed.
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Service Tax
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2013 (10) TMI 344
Goods Transport Agency - Benefit of Notification No. 33/2004 - Whether the appellant was liable to pay service tax in respect of GTA services availed by them for transportation of flavoured milk – Whether the flavoured milk can be considered as milk or not – Held that:- There was a decision that it was not a milk product, it was not clear whether the expression ‘milk’ covers flavoured milk also - Further the exemption notification also includes milk along with fruits, vegetables and eggs which were all unprocessed and what emerges from the list of items was that once the goods were processed they may not be covered by the notification. In any case prima facie from the chapter note it appeared that milk as defined in the chapter note does not cover the product of the appellant - the issue required more detailed consideration of the exemption notification, the consideration of provisions relating to interpretation of statutes etc. which can be done at the time of final hearing only - At this stage we consider that the appellant had not been able to make out a prima facie case in their favour - the appellant was directed to deposit the amount within the normal period of limitation – Appellant was directed to submit the Pre-deposit – upon such Submission rest of the duty to be waived – partial stay granted.
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2013 (10) TMI 343
Outdoor Catering Service u/s 67(76a) r.w. 65(24) - The assessee provided food to NTPC employees from a premises provided by NTPC under a license granted to the assessee in the NTPC premises – Revenue was of the view that the assessee provided the taxable services as outdoor caterer, defined in 65(76a) read with Section 65(24) of the Finance Act, 1994 – Held that:- Following Rajeev Kumar Gupta vs. CCE, Jaipur [2009 (3) TMI 122 - CESTAT, NEW DELHI ] - it was apparent that the assessee was himself engaged in the preparation of food items in the company premises with all the infrastructure for such service having been provided to the service recipient - It was not the case of the assessee that the assessee, a co-operative society was itself engaged in preparing the food and serving the same to the NTPC or Lanco employees - It had deputed personnel to perform these services for the benefit of service recipients - In Raj Kumar Jain vs. CCE, Jaipur-I [2008 (8) TMI 62 - CESTAT NEW DELHI ] - the contention of the assessee was rejected to immunity to tax for having provided outdoor catering service on the ground that the assessee was providing outdoor services in the premises of the service recipient and therefore the service falls within the specified taxable service – assessee was admittedly engaged in supply of food and beverages to air companies for inflight service to passengers on board and therefore the taxable outdoor catering service had occurred. In the totality of circumstances, we are not persuaded as to existence of any circumstances justifying a bonafide belief of the appellant that on a true and fair construction of relevant provision of Sections 65(24), 65(76a) and Section 65(41)(n), the appellant was not providing the taxable outdoor catering service - The levy of penalties was thus vitiated by no error – there was no merit in the assessee’s appeal – Decided against assessee.
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2013 (10) TMI 342
Stay application - Service of holiday resorts - Held that:- already the applicant has substantially reversed the disputed credit involved which is sufficient for admission of the appeal considering the legal submissions of both sides. Therefore, predeposit of the balance dues stands waived and its collection stayed during the pendency of the appeals - Stay granted.
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2013 (10) TMI 341
Mining Service - Mining of Minerals - Whether the transportation of iron ore in goods carriage within the mine, from mine head to the bottom plot and bottom plot, outside the mine, to the Railway yard is liable to service tax under ‘mining of minerals’ or not – Held that:- Besides undertaking transportation activity they also supplied some mining equipments to the service receiver and in respect of that service they had paid the service tax and also mining services undertaken by them. As regards transportation, each trip undertaken by the appellant was charged and the service tax liability was on the service receiver and the activity was one of transport by road and therefore there was no liability under mining service category - the reliance placed by the appellant on the circular issued by the Board which also clarifies that post-mining activity of transportation of the iron ore cannot be covered under mining service – Relying upon Indian National Shipowners’ Association vs. UOI [2009 (3) TMI 29 - BOMBAY HIGH COURT ] - activities which had direct relation to mining were covered under transport of goods by air and road was covered by separate entries - There was no separate entry for transport by sea - The fact that charter hire of vessels was brought to tax indicated that the said entry was to cover transport by sea - the appellant had made out a prima facie case for waiver and accordingly, there shall be waiver of pre-deposit and stay against recovery during pendency of the appeal – Stay granted.
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2013 (10) TMI 340
Manpower Supply Service – Held that:- From the agreement it appears that the employees deputed by TPSC were actually appointed by the appellant in India and a portion of their salary which was required to be delivered in their home country was paid to the employee by the Japanese counterpart and this was reimbursed on actual basis - We also find that the reliance of the appellant on the decisions in the case of ITC Ltd. [2012 (7) TMI 744 - CESTAT, NEW DELHI] and in the case of M/s. Bain & Company India Pvt. Ltd. Versus CST, DELHI [2012 (6) TMI 524 - CESTAT, NEW DELHI ] was also appropriate - one of the features of manpower supply service was that the salary of the persons supplied was paid by the manpower supply agency in full and payment by the service receiver was made to the supplier of the service and not to the employee - This significant feature does not appear to be in existence in the present case - Under these circumstances, the appellant had made a prima facie case for waiver and accordingly the requirement of pre-deposit was waived and stay against recovery granted during the pendency of appeal – Stay granted.
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2013 (10) TMI 339
Taxable service to SEZ unit – refund rejected - refund claimed by the assessee as the recipient of the taxable service of Architect, Interior Decorator and Consulting Engineer services provided - Held that :- Rejection of the assessee’s claim was unsustainable - Notification No. 9/2009-ST enable claim of exemption by developers or units in SEZ by way of refund of service tax paid for services used in relation to authorized operations in SEZ - insofar as the claim for refund is filed within six months or within such extended period as the AC or DC of Central Excise shall permit - provisions of the 2005 Act are provided an overriding effect vide Section 51 - the immunity to service tax in respect of taxable services provided in relation to SEZ is a legislatively enjoined immunity - any service tax paid/ remitted by a service provider is liable to be refunded to the provider who has remitted service tax in relation to taxable services provided to the unit to carry on authorized operations in a SEZ – order set aside – Following decision of M/s. Intas Pharma Ltd. vs. Commissioner of Service Tax, Ahmedabad [2013 (7) TMI 703 - CESTAT AHMEDABAD] - appeal decided in favour of assessee.
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Central Excise
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2013 (10) TMI 334
SSI Exemption Benefit – calculation of turnover of 1.5 crore and 4.0 crore - Clubbing of clearance - Waiver of Pre-deposit - manufacturers against loan licence agreement or on job work basis. - Held that:- From the combined reading of para 2 and 3 of the notification it is noticed that the value of duty paid clearances cleared by a manufacturer are also to be included while computing the value of clearances of all excisable goods in the preceding financial year for computing the limit of ₹ 4 crores for the purpose of eligibility of the exemption notification for the current financial year. Therefore the value of the goods cleared by the appellant against loan license or job work basis from other units are to be clubbed for the purpose of ascertaining ₹ 4 crore limit in the preceding financial year. However, as regard the value of the clearances made in the current financial year under condition 3(b) the clearances bearing the brand name or trade name for other persons which are ineligible for exemption are to be excluded for computing the first clearances of ₹ 1.5 crore. I find the goods cleared under a brand name or a trade name which are ineligible for exemption are cleared on payment of duty. Therefore the duty paid clearances bearing a brand name or trade name of other persons are to be excluded for computation of ₹ 1.5 crores in the current financial year. Larger bench decision by majority - Prima facie case is against the assessee - stay granted partly
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2013 (10) TMI 333
CENVAT Credit – Waiver of Pre-deposit - Revenue was of the view that the credit represents excess amount of duty paid by their supplier in as much as while the supplier were required to discharge the duty liability @ 10%, they had paid the duty @ 14% - Held that:- CCE vs. MDS Switchgear Ltd. [2008 (8) TMI 37 - SUPREME COURT] - the Cenvat credit at the recipients end cannot be denied by seeking reassessment of the duty at the suppliers end - when the job worker had paid duty even though he was not required to pay the duty, the Cenvat credit cannot be denied to the assessee who had received the duty paid goods from the job worker – Prima facie the appellant have a strong prima facie in their favour - stay granted.
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2013 (10) TMI 332
CENVAT Credit – Waiver of Pre-deposit - The appellant are manufacturers of sponge iron chargeable to Central Excise duty - Revenue was of the view that the items being neither inputs nor capital goods are not eligible for Cenvat credit – Held that:- The steel items are not covered by the definition of capital goods as given in Rule 2 (a) of Cenvat Credit Rules - These items would be eligible for Cenvat credit as input in terms of Rule 2 (k) only if the same have been used in fabrication of capital goods for use in the factory. Neither there is any communication to the Central Excise authorities regarding their use in fabrication of the capital goods -Bag Filter, Conveyer feeding material and Gantry EOT cranes nor the fabrication of the capital goods has been reflected in ER-1 returns - The extract of RG-1 register placed on record shows fabrication of gantry, the bag filter etc. in December 2011 and from this, it cannot be said that these items of capital goods had been fabricated by using the steel items received during July 2010 to December 2010 - prima facie case is against the assessee - Partial stay granted.
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2013 (10) TMI 331
CENVAT Credit – Waiver of Pre-deposit – duty paying documents - Held that:- The allegation against the appellant unit located at Manesar, Gurgaon is that they have availed Cenvat Credit on the basis of invoices which mentioned the consignees address as the address of the Naharpur Unit - out of seven machines covered by the invoices, five machines were found installed in Naharpur Unit and there is no evidence produced that the same have been returned back to Manesar Unit which had taken the Cenvat Credit - There is no verification done to ascertain that the Naharpur Unit has not taken Cenvat Credit on the basis of the same invoices - In view of this, this is not the case of total waiver - Partial Stay gratned.
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2013 (10) TMI 330
Scope of Input Service under Rule 2(I) - Rent-a-cab Service - Whether the service of rent a cab availed by the appellant for bringing workers to the factory and dropping them back to their residence can be treated as input service under Rule 2 (l) of the Cenvat Credit Rules, 2004 – Held that:- Following CCE, Bangalore - III vs. Stanzen Toyotetsu India (P) Ltd. [2009 (5) TMI 371 - CESTAT, BANGALORE ] - an input or input service, which has no nexus with the manufacture of a particular final product would not be eligible for Cenvat credit - While, this general principle guides the availability of Cenvat credit in respect of inputs and input services used in connection of manufacture of a particular final product, the existence of nexus is a matter of fact, which has to be determined in each case - the issue of nexus in respect of the service, in question, has been examined and the High Courts and the Tribunal have expressed the view that there is nexus between availing of rent a cab service to enable the workers to reach the factory in time and manufacture of final product - the order is not sustainable - The same is set aside – Decided in favour of Assessee.
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2013 (10) TMI 329
Clearance of Goods – Exempted OR Not - Whether during the period November 2007 to December 2008 had cleared excisable goods to SEZ developer under bond / letter of undertaking without payment of duty, to be considered as exempted goods – Held that:- Following Sujana Metal Products vs. CCE [2011 (9) TMI 724 - CESTAT, BANGALORE ] - Supplies made to SEZ shall be treated as export - supplies made to SEZ are held to be “export” provisions of Rule 6 of CCR does not arise at all - The demand is of 10% of the value of the goods cleared by the appellant to SEZ developers and having not maintained separate accounts, is required to pay the amount as per the provisions of Rule 6(3) of the CENVAT Credit Rules, 2004 - As the issue has attained finality in the hands of High Court of Andhra Pradesh on an identical issue - the order is unsustainable and liable to be set aside – Decided in favour of Assessee.
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2013 (10) TMI 328
Eligibility of Availment CENVAT Credit on Capital Goods - Revenue was of the view that the appellant to be denied of the CENVAT credit availed on capital goods – Held that:- Following Spenta International Ltd. vs. CCE, Thane [2007 (8) TMI 25 - CESTAT, MUMBAI ] - CENVAT credit eligibility is to be determined with reference to the dutiability of the final product on the date of receipt of capital goods - Both sides have not brought to our notice any contrary view expressed by any higher forum. The first appellate authority has also imposed penalties on the appellant - since the issue involved in this case was referred to Larger Bench and decided by the Larger Bench, there cannot be any reason for visiting the appellants with the penalty - As the issue was of interpretation, we are of the view that penalty imposed on the appellant by the first appellate authority is unwarranted and needs to be set aside - the confirmation of the demand of the ineligibility of CENVAT credit is upheld along with interest but penalty imposed by the first appellate authority are set aside – Decided partly in favor of Assesse.
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2013 (10) TMI 327
CENVAT Credit – Waiver of Pre-deposit - Revenue was of the view that the equipment’s and machineries were erected in the factory and thus became immovable property and, therefore, cannot be considered as capital goods and they proposed to deny CENVAT credit taken on such goods brought into the factory – Held that:- In the history of MODVAT/CENVAT scheme for duty paid on capital goods credit has not been denied for the reason that machineries brought into the factory on payment of duty were erected before it was put in use in the manufacturing processes - Machineries are erected to make it do the manufacturing process - Credit cannot be denied for the reason that machinery became immovable after erection - The dispute relating support structures built as immovable property in a factory are on a different footing about which there have been many disputes - Since this case is about credit on equipments and machineries the applicant has a very strong prima facie case in their favour and calling for any pre-deposit will tilt the balance of convenience against the applicant – Pre-deposit was waived – Stay granted.
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2013 (10) TMI 326
CENVAT Credit on GTA services - Scope of the terms 'means and includes' - Rule 2(l) of CCR - Admissibility of GTA input service credit in view of the definition of input services given in Rule 2(l) of CENVAT Credit Rules, 2004, as it existed during the period of demands - Held that:- Main body of the definition of term ‘input service’ is wide and expansive and covers variety of services utilized by the manufacturer - By no stretch of imagination can it be stated that outward transportation service would not be a service used by the manufacturer for clearance of final products from the place of removal. The period involved is upto October 2005 when the definition of input service under Rule 2(l) specifically included admissibility of input service credit with respect to input services utilized from the place of removal is admissible - Only with effect from 01.04.2008 (under Notification No.10/2008-CE (NT), dt.01.03.2008), the words ‘clearance of final products from the place of removal’ were submitted with the words ‘clearance of final products upto the place of removal’ - Following CCE Vs. Parth Poly Woven Pvt.Ltd. [2011 (4) TMI 975 - GUJARAT HIGH COURT] - The expression ‘includes’ cannot be used to oust any activity from the main body of the definition if it is otherwise covered by the expression ‘means’ - The expression ‘includes’ followed by ‘means’ in any definition is generally understood to be expanding the definition of the term to make it exhaustive, but in no manner can the expression ‘includes’ be utilized to limit the scope of definition provided in the main body of the definition – Decided in favour of Assessee.
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2013 (10) TMI 325
Refund Claim – Held that:- The refund claim should have been and could have been filed only after the issue of classification and liability to duty had been determined especially in view of the fact that the show cause notice proposing to demand Customs duty was issued on 25.10.2002 - It has to be noted that Hyundai preferred refund claims on 05.7.2002 and 21.01.2003 and both of them were rejected on 23.12.2003 by which time show cause notice had already been issued proposing demand of Customs duty which was the claim of the Hyundai for claiming the refund - After the rejection of both the refund claims on 23.12.2003 and 07.4.2003 ignoring the subsequent development of passing the order of the adjudicating authority, the Commissioner on 24.9.2003, Hyundai have continued parallel litigation in respect of the refund claims never disclosing the fact that the very same facts have already been considered and decided and had attained finality. These were totally new grounds whereas the Commissioner had rejected the claim on the ground that the respondent is not eligible for exemption; goods cannot be considered as exported and cannot be considered as non-excisable - Since classification and liability to Central Excise duty have attained finality, the refund claim has no merit - the refund claim also does not have any merit and has thus been correctly rejected by the original adjudicating authority and upheld by Commissioner (Appeals) – Decided against Assessee.
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CST, VAT & Sales Tax
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2013 (10) TMI 346
Validity of writ petition - alternative remedy - Validity of assessment order - Jurisdiction of assessing officer - Violation of principle of natural justice - Held that:- Tribunals are competent to hear matters where the vires of statutory provisions are questioned. However, in discharging this duty, they cannot act as substitutes for the High Courts and the Supreme Court which have, under our constitutional set up, been specifically entrusted with such an obligation. Their function in this respect is only supplementary and all such decisions of the Tribunals will be subject to scrutiny before a Division Bench of the respective High Courts. The Tribunals will consequently also have the power to test the vires of subordinate legislations and rules. However, this power of the Tribunals will be subject to one important exception. The Tribunals shall not entertain any question regarding the vires of their parent statutes following the settled principle that a Tribunal which is a creature of an Act cannot declare that very Act to be unconstitutional. In such cases alone, the High Court concerned may be approached directly. All other decisions of these Tribunals, rendered in cases that they are specifically empowered to scrutiny before a Division Bench of their respective High Courts. We may add that the Tribunals will, however, continue to act as the only Courts of first instance in respect of the areas of law for which they have been constituted. By this, we mean that it will not be open for litigants to directly approach the High Courts even in cases where they question the vires of statutory legislations (except, as mentioned, where the legislation which creates the particular Tribunal is challenged) by overlooking the jurisdiction of the Tribunal concerned. - Following decision of L. Chandra Kumar –vs- Union of India & ors. [1997 (3) TMI 90 - SUPREME Court] - Decided against assessee.
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2013 (10) TMI 345
Offence u/s 13(2) r.w.13(1)(d) of Prevention of Corruption Act – Section 120-B of IPC - Offence u/s 25 of the Sales Tax Act – Held that:- No offence under Section 120-B, I.P.C. was made out against the petitioner, and for that matter no offence under Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 was also made out against the petitioner - The prosecution had been launched against the petitioner on the misconceived notion that M/s. Bondia Flour and Oil Mills was liable to pay sales tax on receipt of 21 wagons of wheat, and the petitioner being the agent had conspired to evade tax - The very basis of accusation therefore was misconceived and the prosecution lunched had no legs to stand. The consignment of wheat having been purchased from outside the State of Odisha, the taxable event shall not come till it was sold by the consignee in the of State of Odisha after its receipt by the consignee - If the consignee had brought the consignment of wheat for its own consumption, no Sales Tax shall be leviable on consumption of wheat by the company and Sales Tax can only be leviable on by-product of the wheat when such by-product was dispatched to market for sale - there was no occasion for collection of tax in respect of the consignment of wheat at the Railway Receipt Unit, Jharsuguda on taking delivery of the wheat either by M/s. Bondia Flour and Oil Mills Ltd or their agent - Therefore, the allegation of the Vigilance Department to the effect that Sales Tax had not been collected on consignment of wheat as shown in the entry of Goods incoming Register of Railway Receipt Unit, Jharsuguda, was totally misconceived. K. Neelaveni vrs. State Rep. by Insp. Of Police & Ors [2010 (3) TMI 990 - SUPREME COURT] - While considering the application for quashing of charge-sheet, the allegations made in the F.I.R. and the materials collected during the course of investigation were required to be considered - Truthfulness or otherwise of the allegation was not fit to be gone into at this stage, as it was always a matter of trial - Sales Tax Authority was entitled to impose sales tax in accordance with the relevant Act and Rules, upon a person, who carried on the business of selling goods and who had, in the customary course of business, authority to sell goods belonging to the Principal - A clearing or forwarding agent like the petitioner or a person transporting goods on behalf of the dealer does not carry on the business of selling goods and does not have, in the customary course of the business, authority to sell goods belonging to the dealer, whose goods he books or receives - There had to be a reasonable and proximate connection between the transaction of sale and the clearing or forwarding agent or person transporting the goods before the Sales Tax Authority can, in exercise of the power, levy sales tax. There was nothing to show that there was such close and direct connection between the transaction of sale of goods by the dealer and the clearing or forwarding agent or the agent who booked or received such goods or a person, who transports such goods like the petitioner - The petitioner being, therefore, a simple agent acting on behalf of the proprietor, cannot be held to have any sales tax liability and he cannot be held to have conspired with the Sales Tax Authority to transport the goods without complying the relevant provisions, as he was acting under the instruction of the Principal.
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