TMI Tax Updates - e-Newsletter
October 13, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise

Articles

1. FREQUENT ISSUES IN CENVAT CREDIT - PERSPECTIVE OF A MANUFACTURER

   By: Srikanth Rao

2. ‘CONSIDERATION’ UNDER THE DEFINITION OF ‘SERVICE’

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. QUICK ESTIMATES OF INDEX OF INDUSTRIAL PRODUCTION AND USE-BASED INDEX FOR THE MONTH OF AUGUST, 2014 (BASE 2004-05=100)

Notifications

SEZ

1. S.O. 2505(E) - dated 24-9-2014 - SEZ

To set up a sector specific Special Economic Zone for Engineering at village Alwa and Pipalia, Taluka Waghodia, District Vadodara in the State of Gujarat.

Highlights / Catch Notes

Income Tax

• Shares Issued at Premium to Non-Resident Parent Not Taxed as Income; Chapter X Inapplicable.

  Case-Laws - HC : TPA - issue of shares at a premium by the Petitioner to its non resident holding company does not give rise to any income from an admitted International Transaction – there is no occasion to apply Chapter X of the Act - HC
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• High Court Rules AO's Income Estimation Invalid for Not Disclosing Evidence or Allowing Response; Violates Natural Justice.

  Case-Laws - HC : The estimation of income made by the AO without disclosing the materials relied on and also denying them an opportunity was not only in violation of the statutory provisions, but also in violation of the principles of natural justice - HC
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• Court Rules Stadium Land Not Agricultural, Denies Capital Gains Tax Exemption u/s 2(14) of Income Tax Act.

  Case-Laws - HC : Capital asset u/s 2(14) - Claim of exemption of capital gains on sale of land – nature of land – Agricultural or not – land was used for conducting football tournament and they themselves described the land in the conveyance deed as stadium land - not the agriculture land - HC
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• Deduction Issue u/s 80IB(10) for Two Contiguous Flats Exceeding 1000 Sq. Ft. Before Act Amendment.

  Case-Laws - AT : Deduction u/s 80IB(10) - Two contigoues flats purchase by buyers is only one residential unit which were having built up area more than 1000 sq. ft. or not - assessee is entitled to deduction u/s 80IB(10) of the Act in respect of the 94 flats prior to amendment - AT
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• Unexplained Cash Credits Examined u/s 68: Notices to 22 Parties Returned Unserved, Additions Confirmed.

  Case-Laws - AT : Unexplained cash credits u/s 68 – Out of the 23 parties, notices received back unserved in case of 22 parties, because of the reason that the persons were not available at the said addresses - additions confirmed - AT
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• Assessing Officer Can Reassess Returns u/s 153A for Undisclosed Income and Original Assessment Materials.

  Case-Laws - HC : Assessment u/s 153A – AO has the power to reassess the returns of the assessee not only for the undisclosed income, which was found during the search operation but also with regard to the material that was available at the time of the original assessment - HC
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• High Court Rules Share Allotment at Concessional Rates Not a Benefit Under Income Tax Act Sections 2(24)(vd), 28(iv).

  Case-Laws - HC : Benefit / perquisit u/s 2(24)(vd) r.w. section 28(iv) – Difference in value of shares alloted at concessional rate – Tribunal was rightly was of the view that as long as the bar operated, the question of any benefit in the form of differential price, accruing to the respondents, does not arise - HC
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Customs

• India Imposes Customs Duty on Imported Pre-Casted Line Pipes for Water Injection in Oil Production.

  Case-Laws - AT : Import of pre-casted line pipes - The said pipes were required to be installed for water injection to augment oil production. - since the pipe lines are used/consumed in India, they are liable to customs duty - AT
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• Bakery Shortening Imports, Including Fats and Oils, Classified Under Heading 15.17 for Customs and Tax Considerations.

  Case-Laws - AT : Classification - import of Bakery Shortening - Fats and oils are essential ingredients in nearly all bakery products. Actually common fats used in bakery product are lard, beef fats and hydrogenated vegetable oils - classifiable under heading 15.17. - AT
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• Supreme Court Mandates Refund Issuance Within 3 Months; Delay Incurs Interest Penalty on Department.

  Case-Laws - HC : Interest on delayed refund - it was the duty of the department to grant refund at least within three months from the date of judgment of the Supreme Court. - HC
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Service Tax

• Appellant Denied CENVAT Credit for Inputs and Capital Goods in Mall Construction; Eligible Only for Input Services.

  Case-Laws - AT : Denial of CENVAT Credit - prima facie view that the appellant is not eligible to take cenvat credit on inputs and capital goods used in the construction of the mall and would be eligible to credit only in respect of input services used in the construction of the mall - AT
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• Copyright Excluded from IPR Service; Imposing Service Tax on Copyright Work Deemed Invalid.

  Case-Laws - AT : Copyright - Intellectual Property Rights Service - Since copyright is specifically excluded from the IPR service during the relevant time, the question of levy of service tax on a copyright work under IPR service does not stand the scrutiny of law. - AT
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• Service Valuation Must Include Office Costs, Electricity, Cold Storage, and Documentation for Tax Purposes.

  Case-Laws - AT : Valuation of services - Inclusion of various services - electricity charges - running of the office or providing cold storage facilities or for issuing various documents in relation to C&F agency functions - these amount are to be included - AT
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• Service Tax Exclusion for C&F Agents: Loading and Unloading Charges Not Valued for Tax Purposes.

  Case-Laws - AT : Valuation of service - respondents as C&F Agent are getting a fixed amount on which Service Tax has been paid. Loading and unloading is arranged on behalf of the company and the respondents were not retained any amount in respect of loading and unloading, not to be included - AT
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• Broader Interpretation of Input Services for Cenvat Credit to Align with Business Needs, Not Limited to Factory or Depot.

  Case-Laws - AT : Cenvat Credit - input services - definition of input service has to be interpreted in the light of the requirement of the business and it cannot be read restrictively so as to confine only upto the factory or upto the depot of the manufacture. - AT
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• Services Not Taxable Under Scientific and Technical Consultancy Category, Exempt for Both Public and Private Agencies.

  Case-Laws - AT : Scientific and Technical Consultancy Services - Services are rendered by public funded institutions or private agencies - service rendered by the respondent in this case does not fall within the purview of taxable service of Scientific and Technical Consultancy - AT
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Central Excise

• Court Rules Education Cess Must Be Included in CVD Calculation for 100% EOU DTA Clearance; Demands Deemed Unlawful.

  Case-Laws - AT : 100% EOU - DTA clearance - Education Cess taken into account while computing the CVD element of the customs duty - there is no need to include the cess again on the Excise duty equal to the aggregate of the Customs duty and, therefore, the impugned demands are not sustainable in law. - AT
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• Duty Exemption Denied for Power-Operated Units Handling Raw Materials under Notification No. 28/96-CE.

  Case-Laws - AT : Whether use of power in handling raw materials would disentitle them of the duty exemption given to non-power operated units vide Notification No. 28/96-CE dated 11/09/1996 - held yes - AT
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• Interest Demand Justified for Delayed Input Clearance, Resulting in Monthly Revenue Loss and Input Credit Reversal.

  Case-Laws - AT : Demand of interest - reversal of input as such - If the inputs entering into premises of the manufacturer vanishes on the next day by clearance as such, certainly revenue suffers for the entire month - demand of interest was justified - AT
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Case Laws:

• Income Tax

• 2014 (10) TMI 278
  Transfer pricing adjustment - Whether issue of shares at a premium by the Petitioner to its non-resident holding company gave rise to any income from an admitted International Transaction - Held that:- The amounts received on issue of share capital including the premium is undoubtedly on capital account - Share premium have been made taxable by a legal fiction under Section 56(2)(viib) of the Act and the same is enumerated as Income in Section 2(24)(xvi) of the Act - what is being sought to be taxed is capital not received from a non-resident i.e. premium allegedly not received on application of ALP – following the decision in Cadell Weaving Mill Co. vs. CIT [2001 (2) TMI 105 - BOMBAY High Court] – the contention of the assessee is correct that neither the capital receipts received on issue of equity shares to its holding company, a non-resident entity, nor the short-fall between the so called fair market price of its equity shares and the issue price of the equity shares can be considered as income within the meaning of the expression as defined under the Act. Jurisdiction to apply Chapter X – Held that:- As the assessee itself had filed Form 3CEB for purposes of Chapter X of the Act – it has already been decided that the issue of jurisdiction as raised by the Petitioner of income arising, is a condition precedent for applicability of Section 92(1) of the Act - although the words International Taxation has been defined in Section 92B of the Act for the purposes of Chapter X of the Act, the words 'Income' has not been defined - it was not open to DRP to seek aid of the supposed intent of the Legislature to give a wider meaning to the word 'Income'. The issue of shares at a premium does not exhaust the universe of applicability of Chapter X of the Act - There are transactions which would otherwise qualify to be covered by the definition of International Transaction. The transaction on capital account or on account of restructuring would become taxable to the extent it impacts income i.e. under reporting of interest or over reporting of interest paid or claiming of depreciation etc. It is that income which is to be adjusted to the ALP price - It is not a tax on the capital receipts - section 92(2) of the Act deals with a situation where two or more AE's enter into an arrangement whereby they are to receive any benefit, service or facility then the allocation, apportionment or contribution towards the cost or expenditure is to be determined in respect of each AE having regard to ALP. The definition of income under Section 2(24)(xvi) of the Act includes within its scope the provisions of Section 56(2) (vii-b) of the Act - This indicates the intent of the Parliament to tax issue of shares to a resident, when the issue price is above its fair market value. In the instant case, the Revenue's case is that the issue price of equity share is below the fair market value of the shares issued to a non-resident - Thus Parliament has consciously not brought to tax amounts received from a non-resident for issue of shares, as it would discourage capital inflow from abroad - None of the notices issued to the Petitioner on the draft order passed by AO on the order passed by DRP even proposes to assess the Petitioner in its representative capacity - the Petitioner had no occasion to challenge the jurisdiction of the Revenue on the above aspect – thus, issue of shares at a premium by the Petitioner to its non resident holding company does not give rise to any income from an admitted International Transaction – there is no occasion to apply Chapter X of the Act – Decided in favour of assessee.

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• 2014 (10) TMI 266
  Appeal pending before CIT(A) – Notice u/s 279(1) served – Held that:- Assessee has submitted a detailed reply - But without any regard to the same, proceedings were pursued by the respondent department and it was only on coming across the summons served upon the petitioners, that they could realise that the proceedings had already been initiated, which according to the petitioners is without considering their objections and hence not correct or sustainable - The reliefs sought for is of limited nature, it is not necessary to deal with the merits of the case – revenue is directed to consider Ext.P14 representation and pass appropriate orders, after affording an opportunity of hearing to the petitioners.

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• 2014 (10) TMI 265
  Undisclosed investment and depreciation disallowed – Held that:- There was no reason to accept the contention raised by the appellant that the AO ought not to have been rejected the books of accounts - parties are in agreement that once the books of accounts are rejected by the AO, the income of the assessee can be estimated either by taking recourse to the orders pertaining to the previous assessment years or by relying on cases which are comparable in nature - The right of the assessee to have such an opportunity is statutorily recognized in Section 142(3) of the Income-tax Act and relying upon Yaggina Veeraraghavulu and Mavuleti Somaraju & Co. v. Commissioner of Income-tax [1980 (5) TMI 22 - DELHI High Court] - the estimation of income made by the AO without disclosing the materials relied on and also denying them an opportunity was not only in violation of the statutory provisions, but also in violation of the principles of natural justice - the proceedings will have to continue afresh from the stage of estimation of the income and the AO disclosing to the assessee the materials that are relied on by him and after affording the assessee an opportunity to rebut those materials – thus, the assessment order is set aside and the matter is remitted back to the AO for the limited purpose of estimating the income – Decided in favour of assessee.

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• 2014 (10) TMI 264
  Determination of amount of deduction u/s 80HHC – Held that:- The tribunal has correctly appreciated the nature of amounts - They were sundry credit balances returned back - each of the amounts and which have been expended do not constitute receipts and are items of expenses, then, such findings of fact cannot be termed as perverse - this explanation was totally misread and misapplied by the AO and the Commissioner in their orders – the order of the Tribunal is upheld – Decided against the revenue.

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• 2014 (10) TMI 262
  Chargeability of interest u/s 234D – Held that:- Following the decision in The Commissioner of Income Tax Versus M/s. Indian Oil Corporation Ltd. [2012 (9) TMI 517 - BOMBAY HIGH COURT] - a declaratory amendment in an Explanation 2 to section 234D which specifically provides that it shall also apply to an assessment year commencing before 1/06/2003 - The only qualifying criterion is that proceedings in respect of such assessment is completed after 1/06/2003 - once the Explanation is held to be retrospective in relation to the assessment years commencing before 1/6/2003 it would not be open to restrict the operation of section 234D only with effect from 1/6/2003 - Under the Act what is brought to tax is not the income of the assessee in the assessment year but the income of the assessee in the previous year - The liability to tax arises on account of the Finance Act which fixes the rate at which the tax is to be paid - The law to be applied is as existing on the 1st day of April of the previous year – Decided in favour of revenue. Grant of interest u/s 244A(1)(b) – Held that:- Following the decision in Commissioner of Income Tax v/s Sutlaj Industries Limited [2010 (3) TMI 449 - DELHI HIGH COURT] - the assessee should be, on principle entitled to interest thereon since the self-assessment tax falls within the expression “refund of any amount” - The computation of interest on self-assessment tax has to be in terms of section 244A(1)(b), i.e., from the date of payment of such amount up to the date on which refund is actually granted – Decided against revenue.

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• 2014 (10) TMI 261
  Capital asset u/s 2(14) - Claim of exemption of capital gains on sale of land – nature of land – Agricultural or not – Held that:- The certificates produced by the assesses before the FAA, which are also referred to in the Tribunal's were totally insufficient to conclusively prove that the land in question was an agricultural land at the time of the sale – Following the order in Rasiklal Chimanlal Nagri v. CWT [1988 (8) TMI 117 - HIGH COURT AT CALCUTTA] - the situation of the land and its surroundings, physical characteristics of the land, the intention of the owner as gathered from the relevant circumstances, environment and situation of land, the previous, present and future use to which the land is put and the intention of the assessees at the time of sale were also appreciated by the lower authorities - in the absence of any satisfactory evidence produced by the assessees to hold that the land was an agricultural land, the finding of the lower authorities cannot be disturbed. None of the assesses had declared any agricultural income even in the returns filed after the date of search and even though the assesses had admitted that the possession of the land was given in January, 2006, for the subsequent years also they showed agricultural income - This showed that the cash flow statements were without any basis - the land was used for conducting football tournament and they themselves described the land in the conveyance deed as stadium land - the land was located very near to the Kottakkal Bus stand. Immediately after the land was handed over to the purchaser, he constructed a commercial complex in that land – thus, the order of the Tribunal is upheld – Decided against assessee.

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• 2014 (10) TMI 260
  STCG on sale of shares – Transaction treated as business income – Held that:- The assessee is a house wife and she has carried out the purchase and sale of transactions in the past years also - In AYs 2007-08 and 2008-09, the assessments were completed by accepting the activity of the assessee as Investment activity - the assessee has incurred Long term Capital loss and only in the present AY, the assessee has incurred net Short term Capital gain and Long term Capital gain - the assessee has used her own funds only for making investments - the assessee has placed a fund flow statement for the year under consideration and for the three years immediately preceding - The assessee has not invested her funds only in share trading activity - She has invested in property, Shares, Jewellery, PPF and also for giving loans to others - The assessee has also parked her funds in banks – thus, assessee should be considered as an Investor only - the profits arising on sale of shares should be assessed under the head “Capital gains” only – thus, the order of the CIT(A) is set aside – Decided in favour of assessee.

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• 2014 (10) TMI 259
  Deduction u/s 80IB(10) - Two contigoues flats purchase by buyers is only one residential unit which were having built up area more than 1000 sq. ft. or not – Held that:- Except the advertisement/pamphlet in question, the Revenue has not produced any evidence on the file that the flats in question have been adjoined by the assessee to make it a unit - the assessee has produced the documents, which forms part of the official records, the separate sale deeds were executed for each of the flats and separate electricity connections were obtained for each of the flats - The assessee has not sold the said flats as a single unit but as separate units to the purchasers - It is not the case of the Revenue that the assessee had violated any of the provisions of section 80IB(10) of the Act at the time or before the sale of flats in question - Even if we assume that end users might have joined the two flats on a floor so as to make it one unit, then no fault can be attributed on the part of the assessee. Following the decision in Emgeen Holdings (P.) Ltd. Versus Deputy Commissioner of Income-tax, Range 9(1) [2011 (7) TMI 199 - ITAT MUMBAI] - the amendment has been brought with prospective effect i.e. from 1st day of April, 2010, and there is no indication whatsoever to suggest that these restrictions need to be applied with retrospective effect - The amendment seeks to plug a loophole but restricts the remedy with effect from 1st day of April, 2010, i.e. AY 2010-2011 - The law is very clear that unless provided in the Statute, the law is always presumed to be prospective in nature - there was no need of the insertion of clause (f) to section u/s 80IB(10) - It will be unreasonable to proceed on the basis that legislative amendment was infructuous or uncalled for -particularly as the amendment is not even stated to be 'for removal of doubts'. On the contrary, this amendment shows that no such eligibility conditions could be read into pre-amendment legal position – thus, the assessee is entitled to deduction u/s 80IB(10) of the Act in respect of the 94 flats – Decided in favour of assessee.

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• 2014 (10) TMI 258
  Unexplained cash credits u/s 68 – Held that:- Out of the 23 parties, notices received back unserved in case of 22 parties, because of the reason that the persons were not available at the said addresses - The assessee had claimed before the AO that the said persons were his business partners, but, despite given sufficient opportunities by the AO, the assessee could not produce them for examination before the AO - all the facts on the file prove beyond doubt that the evidences have been managed by the assessee to conceal the truth and to justify the genuineness of the transactions - The AO has observed from the balance sheet of two persons that the total capital of the parties was a little more than the amounts claimed to have been paid for subscription to the share capital of the assessee - She has also noticed that both the parties owed more than Rs. 1,00,000/- plus as labour charges - the ways and means of sustenance of the persons for the period under consideration was a big mystery - The balance sheet indicated that the said persons had no creditworthiness to carry out the transactions. The explanation of the assessee to the effect that the subscribers were away to their work when the summons were sent to them does not seem to be justified or probable - It is hardly possible that all the persons were away and no one was present at their addresses to receive the summons during the period - It is not a case where summons were served on some persons and could not be served upon other persons - Thereafter the evidences/ affidavits submitted by the assessee, as observed above, are also found to be managed and even the transactions, though claimed to be done through banking channel, but, the circumstances showing the opening of the account in a particular branch on a particular date, issuance of cheque books of the same series and the payment through first leaf of the cheque book of every person, reveals that all the transactions were stage managed - the assessee had failed to establish the creditworthiness of the subscribers and the genuineness of the transactions – thus, the CIT(A) was not justified in deleting the additions made by the AO – Decided in favour of revenue.

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• 2014 (10) TMI 257
  Deduction u/s 80HHC - Computation of total turnover - Non-inclusion of excise duty and sales tax – Held that:- Following the decision in Commissioner of Income-Tax vs Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME Court] - The intention was to exempt profits relatable to exports - Just as interest, commission, etc., do not emanate from the "turnover" so also excise duty and sales tax do not emanate from turnover - Since excise duty and sales tax did not involve any turnover such taxes had to be excluded - excise duty and sales tax also cannot form part of the "total turnover" under section 80HHC(3)" – Decided against revenue. Receipts from sale of scrap – Held that:- Following the decision in Commissioner of Income-Tax –vs- Punjab Stainless Steel Industries & Others [2014 (5) TMI 238 - SUPREME COURT] it has been held that the raw material, which is not capable of being used for manufacturing the goods will have to be either sold as scrap or might have to be re-cycled of disposed of to someone who would re-cycle the scrap - when such scrap is sold, the sale proceeds of the scrap cannot be included in the term "turnover" - the proceeds of sale of such scrap would not be included in "sales" in the profit and loss account of the assessee. 90% of the fees received from Robert Bosch – Held that:- Following the decision in Commissioner of Income-tax Versus Motor Industries Co. Ltd. [2010 (8) TMI 333 - Karnataka High Court] - the assessee was in the business of export of goods and merchandise - The assessee was earning foreign exchange out of that export business - The disputed income was earned by the assessee for its fees towards developmental work from the foreign enterprise - The developmental work was intimately connected with the business of manufacture and sale of goods by the assessee - There was immediate nexus between the activity of export and the developmental work - The consideration received for developmental work was not liable to be deducted under clause (baa) in computing the profits of the business" – Decided against revenue.

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• 2014 (10) TMI 256
  Benefit of section 41(1) - Entitlement for refund on Conversion Unit - Cessation of liability or not - addition during the assessment year 1992-93 or assessment year 1994-95 - Whether the Tribunal was correct in holding that a sum is a contractual liability in terms of agreement between the assessee company and the conversion unit, even though the liability to assessee company arises only when the conversion unit pays the amount to the Central Excise Department – Held that:- The adjudication under the Central Excise Act vis-a-vis the Conversion Unit has taken place only in the hands of the Assistant Commissioner - It has also been mentioned that the Assistant Commissioner, Central Excise, did nothing more than indicating the parameters for determining or reckoning the excise duty - he directed that the nearest comparable unit must be taken as the basis for determining the excise duty for the products manufactured by the Conversion Unit. Barring that, he did not undertake any calculation or reckoning - It was only the Superintendent of Central Excise that had undertaken the entire exercise - once the respondent is relieved of the liability to pay the amount covered by bonds, Section 41 (1) of the Act gets attracted and the liability can be said to have ceased – assessee had to pay the tax on the amount, regarding which he cleared exemption in the returns for the earlier AYs - The only difference would be that since the actual determination emerged only in May, 1993, it shall be under obligation to reflect the same in the returns for the year 1994-95 - So the amount was ordered to be refunded – Decided against revenue.

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• 2014 (10) TMI 255
  Assessment u/s 153A – Scope of total income u/s 2(45) - Addition made for gifts made – Held that:- Under section 153A of the Act, the AO is bound to issue notice to the assessee to furnish return for each AY falling within six AYs immediately preceding the AY relevant to the previous year in which such search is conducted or requisition is made - under the block assessment proceeding under Chapter XIV-B only the undisclosed income found during the search and seizure operation were required to be assessed and the regular assessment proceedings were preserved - even though an assessment order has been passed u/s 143(1)(a) or u/s 143(3) of the Act, the AO would be required to reopen these proceedings and reassess the total income taking notice of undisclosed income even found during the search and seizure operation - The fetter imposed upon the Assessing Officer u/s 147 and 148 of the Act have been removed by the non obstante clause u/s 153A. In cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed, which were subsisting when the search was made, the AO would be competent to reopen the assessment proceeding already made and determine the total income of the assessee - the reasons given by the Tribunal that no material was found during the search cannot be sustained, since it has been held that the AO has the power to reassess the returns of the assessee not only for the undisclosed income, which was found during the search operation but also with regard to the material that was available at the time of the original assessment - relying upon CIT v. Anil Kumar Bhatia [2012 (8) TMI 368 - DELHI HIGH COURT] - the Tribunal has committed an error in dismissing the appeal of the Revenue – thus, the order of the Tribunal is set aside and the matter is remitted back for re-consideration – Decided in favour of revenue.

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• 2014 (10) TMI 254
  Assessment u/s 158BBC - Tribunal cancelled the assessment for the reason that notice was issued under section 158BD and not under section 158BC read with section 158BD. - Whether the rejection of the plea by the assessee to raise an additional ground is justified or not – Held that:- The view expressed by the Tribunal in the impugned order, annexure H, is that the legality of the proceedings has been admitted by the High Court and the matter was restored back to the file of the Tribunal for a fresh decision and in such a situation can the Tribunal entertain another ground with regard to the validity of the proceedings - It was the view of the Tribunal that when this court upheld the validity of the proceedings with regard to the block assessment, it cannot be reagitated again by raising another ground with regard to the same proceedings - as far as the views taken by the Division Bench are concerned, it is clearly discernible that the validity of the notice alone was considered by the Division Bench - That was the pointed question raised before the Division Bench which was answered after analysing various aspects. It is not correct to say that the decision of the Division Bench concerning the validity of the notice will prevent the Tribunal to consider any other ground which the appellant has raised for consideration. - It cannot be said that when the court sent back the matter for fresh consideration, no other points than those raised in the grounds of appeal can be considered and no additional ground can be allowed to be raised for consideration – thus, the annexure H order passed by the Tribunal is set aside - The Tribunal is directed consider the matter afresh in the light of the findings rendered by us above and it is up to the Tribunal to consider the additional ground raised by the appellant and take appropriate decision as enjoined by law – Decided in favour of assessee.

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• 2014 (10) TMI 253
  Benefit / perquisit u/s 2(24)(vd) r.w. section 28(iv) – Difference in value of shares alloted at concessional rate – profits and gains of business or profession - According to the ITO, the market price was Rs. 455 per share, whereas it was allotted at Rs. 90 per share, on preferential allotment - Held that:- Even if all the subsidiary contentions advanced by the respondents in this behalf are rejected, the fact remains that there is a clear bar for a block period of three years prohibiting the sale of shares.- the benefit can be said to have arisen to an individual, if only, any person in his place, would have got the differential price, by selling the shares - Irrespective of the willingness or otherwise of the person holding such a share, if the bar operates, it is difficult to imagine that the sale of the shares would take place or that it would yield the differential price – the Tribunal was rightly was of the view that as long as the bar operated, the question of any benefit in the form of differential price, accruing to the respondents, does not arise – Decided against revenue. Whether the benefit has accrued at all to the respondent – Held that:- There exists a distinction between the "accrual of income", on the one hand, and "arising of income", on the other - while accrual is almost notional in nature, the other is factual - in its complex nature, the Act covers not only the "income" that, in fact, has arisen, but also the one that has accrued - The sole basis for levying income-tax on the amount was on the assumption that in case the shares are sold, they would have yielded the differential price and that, in turn, can be treated as "income" - the Tribunal has explained the subtle distinction between the two, in a perfect manner and arrived at the correct conclusion – no substantial question of law arises for consideration – Decided against revenue.

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• 2014 (10) TMI 252
  Interest receivable on investment in capital WIP – Explanation 8 to section 43(1) ignored or not – Held that:- Following the decision in Deputy CIT v. Core Health Care Ltd. [2008 (2) TMI 8 - SUPREME COURT OF INDIA] - the provisions of Explanation 8 to section 43(1) of the Act has no relevance in respect of section 36(1)(iii) of the Act - the proviso to section 36(1)(iii) of the Act inserted by the Finance Act, 2003, with effect from April 1, 2004, is only prospective and would not apply to the earlier AYs – Decided against revenue. Interest u/s 36(1)(iii) disallowed - Whether interest-free loan given by the assessee to its sister concern was admissible as deduction u/s 36(1)(iii) - Held that:- The Tribunal rightly was of the view that the assessee had charged interest on loans to its sister concern not below the interest paid on the funds utilized for the said purpose as the plea of the assessee was that it had been charging interest at the rate of 15.5 per cent. from its sister concern and the average cost of borrowings to the assessee was also 15.5 per cent – Decided against revenue. Deduction u/s 80HHC - Whether deduction u/s 80HHC of the Act is to be restricted in view of section 80-IB(13) read with section 80-IA(9) – Held that:- Following the decision in Commissioner of Income-tax (Central), Ludhiana Versus M/s Davinder Exports, Guru Nanak Dev Nagar, Rahon Road, Ludhiana [2011 (4) TMI 96 - PUNJAB AND HARYANA HIGH COURT] - if deduction u/s 80-IA has been taken, deduction u/s 80HHC was not admissible in view of section 80-IB(13) read with section 80-IA(9) of the Act – Decided in favour of revenue. Computation of deduction u/s 80HHC - Exclusion of export turnover – Held that:- The Tribunal rightly held that the plea of the assessee is that it has realised certain portion within the period extended by the competent authority - out of the total outstanding export invoices the assessee realized a sum within the extended period - the competent authority has allowed the assessee to realise the outstanding export invoices - there is no justification for excluding a sum from the export turnover for computing the deduction u/s 80HHC of the Act – th matter is rightly remitted back to the AO – Decided against revenue. Claim of proportionate indirect expenses - Whether the assessee was entitled to claim proportionate indirect expenses only in respect of the unit which was carrying on export activity whereas the assessee was carrying business in two units, i.e., Barnala I and Barnala II – Held that:- The Tribunal was rightly of the view that following the decision in Surendra Engg. Corp. Versus Assistant Commissioner Of Income-Tax [2002 (12) TMI 199 - ITAT BOMBAY-H] - The Tribunal had only remanded the matter to the AO to decide the issue in the light of the aforesaid judgment – Decided against revenue.

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• 2014 (10) TMI 251
  Deduction u/s 80HHC of the Act – Receipts arising out of fluctuation of rate of foreign exchange – Held that:- Following the decision in Commissioner of Income Tax Versus M/s. Priyanka Gems [2014 (3) TMI 938 - GUJARAT HIGH COURT ] - The foreign exchange gain arising out of the fluctuation in the rate of foreign exchange cannot be divested from the export business of the assessee - once export is made, due to variety of reasons, the remission of the export sale consideration may not be made immediately - Under the accounting principles, the assessee, on the basis of accrual, would record sale consideration at the prevailing exchange rate on the quoted price for the exported goods in the foreign currency rates - There is no distinction possible on the basis of different situations under which foreign exchange fluctuation may result - law permits hedging of foreign exchange fluctuation risk to an importer or an exporter - The exporter may take steps as found commercially prudent to safeguard himself against drastic foreign exchange rate fluctuations and in the process may also limit the possibility of gain in case of favourable currency rate trends - the resultant gain in foreign exchange rate would still be due to the export made by the assessee – order of the Tribunal upheld - Decided against Revenue. Amount received on sale of DEPB licence – Held that:- Following the decision in Commissioner of Income Tax Versus M/s. Priyanka Gems [2014 (3) TMI 938 - GUJARAT HIGH COURT] - mere change in the accounting year can have no real impact on the nature of the receipt. The conclusion of the AO that since the year during which such sale proceeds were received by the assessee export was not made, would not in any manner change the situation - The assessee being engaged in the business of export and having made the export, mere fact of the remittance being made after 31st of March of the year when export was made, would not change the situation in so far as, relation of such income to the assessee's export business is concerned. Clause (baa) to the Explanation to section 80HHC provides for exclusion of certain incomes for computation of export profit under section 80HHC – the appeal is allowed in part to the extent the Tribunal's decision relates to section 80-IA of the Act - with respect to deduction u/s 80-IA of the Act on sale of DEPB licence – Decided against revenue.

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• 2014 (10) TMI 250
  Revision u/s 263 – Prejudicial to the interest of revenue - Benefit of exemption u/s 10(38) - Held that:- The Tribunal was rightly of the view that in the face of the materials before him, the CIT could not have formed any opinion that the assessment order was erroneous - It recalled the findings of the AO and concluded that the CIT not having come to the conclusion that the assessment order was erroneous and no reasons having been recorded to demonstrate that the same was prejudicial to the interests of the Revenue, he was not justified to refer the matter back to the AO and that too, without examining the materials produced before him on the merits. The AO had consciously examined all relevant records in accepting the return submitted by the respondent assessee – CIT in spite of his incisive analysis of the factual details, did not find fault with any of the findings of the AO, culminating in the ultimate conclusion that the return of the assessee was acceptable as a whole – CIT did neither reject the said documents/records to be irrelevant, nor lacking in their probative worth - the revisional jurisdiction available to a Commissioner u/s 263 of the Act is essentially circumscribed by the determinant that the order of the AO is erroneous so much so that it is prejudicial to the interests of the Revenue - The word "considers" applied in the statutory provision involved, signifies a genuine satisfaction of that authority that the order of the AO is erroneous and that the interests of the Revenue is prejudicing thereby – the order of the Tribunal is upheld – Decided against revenue.

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• 2014 (10) TMI 249
  Imposition of penalty u/s 271(1)(a) - delay in filing the returns - Nexus between assessment proceedings of the firm and the obligation of the assessees to file individual returns – Whether imposition of penalty u/s 271(1)(a) or section 271(1)(c) was justified - Held that:- The Tribunal was rightly of the view that the assessee have made out a reasonable cause for not filing the returns in time and, therefore, the penalties levied u/s 271(1)(a) and sustained in the cases of Somanadri Bhupal for the assessment years 1983-84 and 1985-86 and in the case of Smt. Shalini Bhupal for the assessment year 1983-84 are liable to be cancelled - the delay was sufficiently explained and there was no reason to impose the penalty – the order of the Tribunal is upheld – Decided against revenue.

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• Customs

• 2014 (10) TMI 270
  Import of pre-casted line pipes - The said pipes were required to be installed for water injection to augment oil production. - revenue of the view that even if part of the goods remained outside India since use of the goods is in India, has held that the goods are liable to import duty on the entire length - Confiscation under Sections 111(f), 111(l) and 111(m) - Penalty u/s 112(a) and (b) - Held that:- as the goods were being taken to a territory which would be deemed to be a part of the territory of India though the goods have left the territorial waters, the same would be exigible to levy of duty when they are taken and consumed within the deemed territory of India. There would be no customs duty or any other duty levied while the goods are in transit to the deemed territory of India by any other country although they have gone out of the territorial waters of India. it is clear that the Customs Act, 1962 and the Customs Tariff act, 1975 extends to the Continental Shelf Life and Exclusive Economic Zone of India as notified in the Notifications issued under the Maritime Zone act, 1976 and merely because the goods are the pipelines passing through a non-designated area, it does not mean that they cannot be subject to levy of customs duty. Since the goods are not in transit to any other country but are in transit to the deemed territory of India, they are liable to customs duty in India and we hold accordingly. There are many situations where the goods are used/consumed in India even though they may not be physically present in India. Consider the case of a telecommunication satellite which beams communication signals for viewing/hearing in India. The satellite is physically situated in the outer space but its use is in India and when such satellites are brought to India for launching in outer space customs duty will apply. Similarly, in the case of ships or aircrafts brought to India for registration in India, they are subjected to Customs duties even though most of the time, they may not be physically present in India but might be plying outside India. Therefore, in the present case, since the pipe lines are used/consumed in India, they are liable to customs duty and we hold accordingly - Decided in favour of assessee.

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• 2014 (10) TMI 269
  Classification - import of Bakery Shortening - reclassification of the goods from CTH 1516 to CTH 1517 - Held that:- As shortenings are specifically mentioned in explanatory notes to T.H.15.17 and these are in the nature of mixtures and preparations of animal or vegetable fats or oils, these are covered under 15.17 and hence not eligible for exemption under Notification No.4/2005-CE dated 1.2.2004 - Shortenings have a tenderizing effect in the finished product and often aid in the manipulation of doughs. In addition to modifying the mouth feel or texture, they often add flavour of their own and tend to round off harsh notes in some of the spice flavours - it is evident that shortenings are rightly classifiable under heading 15.17. From the detailed material, it also comes out that fats and oils are further worked up by way of emulsification texturation to cause changes in the basic nature to make a product which is tender in nature. Fats and oils are essential ingredients in nearly all bakery products. Actually common fats used in bakery product are lard, beef fats and hydrogenated vegetable oils - No valid ground to intenfere in the findings recorded by Commissioner (Appeals) - Decided against assessee.

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• 2014 (10) TMI 268
  Interest on delayed refund - Held that:- Court is unable to sustain the Tribunal’s order because the amount became refundable to the respondent only based on the judgment of the Supreme Court dated 11-11-2003. Within three months, the respondent made application for refund and within the following two months, department granted refund. The claim for refund based on judgment of the Supreme Court is not comparable with refund on pre-deposit which is a deposit of duty or other demand paid for maintainability of appeal. When such amount paid or bank guarantee furnished is adjusted towards duty payable based on appellate order of the Tribunal, it ceases to be an amount of pre-deposit. So much so, the circular issued by the Board has no application. However, since Supreme Court judgment is binding judgment, it was the duty of the department to grant refund at least within three months from the date of judgment of the Supreme Court. To this extent, we uphold the claim of the respondent put forward before us by the counsel. We, therefore, hold that on general principles the assessee respondent is entitled to interest from 1st March, 2004 till the date of actual refund. - Decided partly in favour of Revenue.

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• 2014 (10) TMI 267
  Confiscation of foreign currency - Whether the Tribunal was justified in reducing the redemption fine and penalty without assigning any reasons - Held that:- The Appellate Commissioner who passed an order for redemption of the confiscated currency in his order has stated in the light of the case law cited by the assessee in favour of release of seized currencies on redemption fine, he was inclined to agree with their contention for the reason that the absolute confiscation was rather very harsh on them and therefore he ordered for release of the seized foreign currencies with redemption fine - The adjudicating authority after enquiry, on the basis of the legal evidence on record has recorded a finding of fact which is not found fault with by any of the authorities. Even the assessee did not contest those finding of fact, it is thereafter he has passed an order of confiscation and also imposed penalty. Such a well considered order cannot be interfered with by the higher authorities even though they have the power to modify or vary such orders, without assigning any reasons. In that view of tin matter, the approach of the higher authorities are whimsical, unsupportable and contrary to law - Decided in favour of Revenue.

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• Service Tax

• 2014 (10) TMI 287
  Denial of CENVAT Credit - Capital goods - Construction service - Held that:- As regards input services, which have gone in the construction of mall which is being used for rendering output services, the Tribunal has been consistently holding the view that credit of input services can be taken. IN the case of City Central Mall Nashik P. Ltd. [2014 (5) TMI 68 - Bombay High Court], the Tribunal took a view that cenvat credit on inputs and capital goods which has been used in construction of immovable property cannot be taken and only input service credit would be permissible. In view of the above factual and legal position, we are of the prima facie view that the appellant is not eligible to take cenvat credit on inputs and capital goods used in the construction of the mall and would be eligible to credit only in respect of input services used in the construction of the mall - Partial stay granted.

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• 2014 (10) TMI 286
  Copyright - Intellectual Property Rights Service - Held that:- From the agreement entered into by the appellant with Universal Studio, it is seen that the appellant has been permitted to use property in the name and likeness of the legendary martial artist "Bruce Lee" embodied in visual images supplied to them for which the appellant has paid consideration to the foreign service provider by way of royalty. The property embodied in visual images would come squarely within the definition of copyrights as defined in Copyright Act, 1957 as artistic work as defined in Section 14 (c) of the Copyright Act. Even if it is treated as a computer programme, it would still fall under copyright as defined in Section 14 (b). Since copyright is specifically excluded from the IPR service during the relevant time, the question of levy of service tax on a copyright work under IPR service does not stand the scrutiny of law. Therefore, the impugned orders are clearly unsustainable. Accordingly, we set aside the same and allow the appeal with consequential relief, if any, in accordance with law - Decided in favour of assessee.

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• 2014 (10) TMI 285
  Admissibility of appeal - whether, reversal of credit taken on common input services used in or in relation to taxable service as well as exempted service would suffice or the appellant should be compelled to pay an amount @ 8% of the value of the exempted service as provided for in Rule 6 (3) of the CENVAT Credit Rules, 2004 - Held that:- The cap of 20% for availing of credit was lifted w.e.f. 01/04/2008 and the assessees were permitted to avail CENVAT credit without any limit. Therefore, as clarified by the Board, what could have been demanded from the assessee is only interest liability on the excess credit availed and not denial of the entire credit. In these circumstances, there is a question of law involved for consideration of the appeal and, therefore, the appeal deserves to be admitted even though the amount involved is less than Rs. 50,000 - Decided in favour of assessee.

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• 2014 (10) TMI 284
  Valuation of services - Inclusion of various services - electricity charges - running of the office or providing cold storage facilities or for issuing various documents in relation to C&F agency functions - Held that:- Service recipient had entered into a separate agreement with the transporter for transporting of goods from Pune to various destinations and in terms of the agreement it was the service recipient's obligation to discharge the freight expenses. The appellant only paid these expenses and got them reimbursed from M/s. Abbot India Ltd. Thus, they were acting as a pure agent as the transportation was undertaken not as part of C&F agency functions but independently of the said function and, therefore, the question of including the expenditure incurred on freight in the consideration received is clearly unsustainable in law. As regards the reimbursement towards statutory levies such as octroi, we have seen the invoices and it is clear from these invoices that the statutory levies are on the service recipient, and the appellant has paid these charges and got it reimbursed from the service recipient. Here also, the appellant has acted as a pure agent and, therefore, these costs are also not includable for the purpose of levy of service tax. As regards DFC unloading charges, the said charges are for transportation of the goods from the premises of the loan-licensee of Abbot India Ltd to the appellant's warehouse and it has no relation with the C&F agency agreement between the appellant and M/s. Abbot India Ltd. Therefore, the question of adding these charges as part of the consideration received will not sustain. Charges have been incurred by the appellant as part of the C&F agency function which they have undertaken and are towards running of the office or providing cold storage facilities or for issuing various documents in relation to C&F agency functions. It is also noticed that the electricity charges are reimbursed only for a quantity of 3000 units per month and in respect of such electricity charges over and above 3000 units the appellant have to bear the cost. Therefore, it cannot be said that the electricity charges are not part of cost for providing the service. Therefore, in respect of these three charges, the consideration received by the appellant have to be added to the taxable value of the service and the service tax levied accordingly. The appellant also would be liable to pay interest on the service tax liability attributable to these charges - However, penalty is set aside - matter remanded back - Decided partly in favour of assessee.

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• 2014 (10) TMI 283
  Transmission and distribution of electricity - Exemption under Notification No. 45/2010-Service Tax dated July 20, 2010 - Whether the appellant is entitled to immunity to the liability to service tax qua Notification No. 45/2010- Service Tax - Held that:- Prima facie, the Notification No. 45/2010-Service Tax provides a generic immunity to service tax liability in respect of taxable services provided in relation to transmission and distribution of electricity. The several taxable services allegedly provided by the appellant herein are claimed to have been provided to the Andhra Pradesh Central Power Distribution Company Ltd. (APCPDCL), an electricity distribution agency. According to the appellant, no service tax is therefore leviable on the services provided by it - Decided in favour of assessee.

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• 2014 (10) TMI 282
  Valuation of service - Inclusion of loading and unloading charges - C&F Agent service - Held that:- Respondents are paying Service Tax as C&F Agent service as per the terms and conditions of the agreement. The respondents are paying Service Tax on C&F Agent service as fixed in the agreement i.e. Rs. 14 PMT. As per the agreement the respondents are to arrange labours for loading and unloading on behalf of the company. By doing so, the respondents were receiving the actual charges for loading and unloading which was given to the Mathadi Board. We have gone through the terms and conditions of the agreement. As per clause 17 of the agreement as reproduced in the adjudication order where the respondents are to carry out the responsibilities and duties on behalf of the company to arrange for loading and unloading of the cement. In view of the terms and conditions of the agreement, we find that the respondents as C&F Agent are getting a fixed amount on which Service Tax has been paid. Loading and unloading is arranged on behalf of the company and the respondents were not retained any amount in respect of loading and unloading. - Decided against Revenue.

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• 2014 (10) TMI 281
  Cenvat Credit - input services - whether the appellant are eligible for Cenvat credit of service tax on commission paid to overseas commission agents for procuring export orders for them - Business Auxiliary Service - Held that:- The definition of ‘input service’ during the period of dispute covered the activities of advertisement or sales promotion and also the activities related to business. The service of procuring export order is, obviously, the service of marketing and sales promotion. It is also an activity related to the manufacturing business of the appellant, I, therefore, hold that the service of procuring export orders received by the appellant from the overseas commission agents is covered by definition of ‘input service’ and the respondent are eligible for Cenvat credit. The Commissioner (Appeals) has rightly held that the definition of input service has to be interpreted in the light of the requirement of the business and it cannot be read restrictively so as to confine only upto the factory or upto the depot of the manufacture. I, therefore, do not find any infirmity in the impugned order - Decided against Revenue.

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• 2014 (10) TMI 280
  Scientific and Technical Consultancy Services - Services are rendered by public funded institutions or private agencies - Held that:- Scientific or technical consultancy means any advice, consultancy, or scientific or technical assistance, rendered in any manner, either directly or indirectly, by a scientist or a technocrat, or any science or technology institution or organization, to any person, in one or more disciplines of science or technology - appellant herein is a manufacturer of textiles and by no stretch of imagination, it can be perceived that the appellant is a science or technology institution or Organisation. Therefore, the Appellate Commissioner is right in holding that the service rendered by the respondent in this case does not fall within the purview of taxable service of Scientific and Technical Consultancy - Decided against Revenue.

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• 2014 (10) TMI 279
  Waiver of pre deposit - Section 35F - Held that:- Appellants have failed to make a pre-deposit of the entire amount of Service Tax and interest, directed during the course of personal hearing held on 16-11-2011, as required in terms of the provisions of Section 35F of the Central Excise Act, 1944, till date, although they were required to submit compliance thereof by 7-12-2011 - appellant has been orally communicated and the order of pre-deposit has not been issued as envisaged under Section 37C of the Central Excise Act read with Section 83 of the Finance Act, 1994. Matter remanded back - Decided in favour of assessee.

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• Central Excise

• 2014 (10) TMI 277
  100% EOU - DTA clearance - Education Cess taken into account while computing the CVD element of the customs duty - cess again included in the aggregate of the customs duty - Held that:- Issue involved in the present appeal is identical to that considered by the Larger Bench in the Kumaran Arch Tech Pvt. Ltd. case (2013 (4) TMI 482 - CESTAT NEW DELHI). Therefore, the ratio of the said decision would squarely apply. Accordingly, we hold that there is no need to include the cess again on the Excise duty equal to the aggregate of the Customs duty and, therefore, the impugned demands are not sustainable in law. Accordingly, we set aside the impugned order and allow the appeal with consequential relief, if any, in accordance with law - Decided in favour of assessee.

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• 2014 (10) TMI 276
  Whether use of power in handling raw materials would disentitle them of the duty exemption given to non-power operated units vide Notification No. 28/96-CE dated 11/09/1996. - Held that:- Appellant is liable to discharge the duty demand confirmed along with interest thereon and we hold accordingly. As regards the penalty of Rs. 10,63,645/-, at the material time, there was an order in favour of the appellant by this Tribunal and therefore the appellant could not have been alleged to have indulged in suppression of facts. Therefore, imposition of penalty is not warranted. Since the issue relates to interpretation of law in respect of an exemption notification, we set aside the penalty imposed on the appellant. Following decision of assessee's own previous case [2011 (7) TMI 26 - SUPREME COURT OF INDIA] - Decided partly in favour of assessee.

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• 2014 (10) TMI 275
  Waiver of pre-deposit - availment of in-eligible CENVAT Credit - Held that:- appellant herein is a manufacturer of insecticides for various purchasers and manufactured the same out of the raw materials and packing material supplied by such companies. Appellant herein discharges the Central Excise duty on such insecticides on the value as declared by the raw material supplier and it is not in dispute that appropriate duty was discharged. We prima facie find that the appellant being a manufacturer of final goods, if discharges appropriate Central Excise duty, denial of CENVAT Credit of Excise duty on the inputs and services rendered during the manufacturing activity of the final product, seems to be incorrect as the adjudicating authority has mis-directed his finding on the ground that the records maintained by the appellant were of raw material suppliers. Prima facie, the records which were produced before us and on perusal, we find that these records indicated the quantity of the inputs and CENVAT Credit available on such inputs on the raw materials and packing materials supplied by the company who got their goods i.e. insecticides manufactured from the appellant. Prima facie, we are of the opinion that the main appellant as well as all other appellants have made out a strong case for waiver of pre-deposit of amounts involved in these Stay Petitions - Stay granted.

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• 2014 (10) TMI 274
  Deletion of penalty under Rule 13 - contravention of provisions of Rule 6(3) of the Cenvat Credit Rules, 2002 - Held that:- On perusal of the record, there is no specific clause of Rule 13 of the Cenvat Credit Rules, 2002 has been mentioned in the show cause notice. In the absence of allegation against the appellant for contravention of specific clause, no penalty is warranted relying on the decision in Raymond Apparel. Therefore, I confirm the impugned order - Decided against Revenue.

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• 2014 (10) TMI 273
  Imposition of interest - amendment of Chapter 15 came on 13-5-2005 with retrospective effect - Whether the appellant is liable to pay interest on the duty amount of Rs. 1,66,220/- already paid by them or not - Held that:- when liability is extended by way of amendment to Finance Act with retrospective effect, retrospectivity is not permissible to create an offence retrospectively and further liability to payment of interest cannot be said to have been created with retrospective effect. In my opinion both these decisions apply to the facts of this case. As regards the decision in the case of SKF India Ltd. [2009 (7) TMI 6 - SUPREME COURT] in that case Hon’ble Supreme Court was not considering the consequences of retrospective amendment and therefore the decision of the Hon’ble Supreme Court where the issue involved is same has to be preferred to the one where a general decision in principal has been taken. In any case the decision in the case of SKF India Ltd. was relevant to the cases where supplementary invoice has been issued by a party whereby the value has increased - Decided in favour of assessee.

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• 2014 (10) TMI 272
  Demand of interest - reversal of inputs as such - Modus operandi to deffer the payment of duty in cash - Held that:- The reason why the appellant was following the aforesaid modus operandi does not appeal to commonsense to appreciate. Bona fide of such action has become questionable. Inputs when enter into the factory premises, those are meant for use in manufacture. Upon such entry, credit is availed by a manufacturer. But without using those inputs, when those are cleared as such, credit of duty taken on such duty was reversible on the date of clearance. If the inputs entering into premises of the manufacturer vanishes on the next day by clearance as such, certainly revenue suffers for the entire month. Therefore, demand of interest was justified. - Decided against assessee.

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• 2014 (10) TMI 271
  Cenvat Credit - Exempted goods - Revenue is of the opinion that the appellants should have paid 10% of the value of zinc dross under Rule 6(4) of Cenvat Credit Rules, 2004 because there was no excise duty paid on the zinc dross cleared by them - Held that:- Inasmuch as the said Zinc dross, so imported by them was found to be of low quality and not fit for use, the same were removed/sold by them, as such, without payment of duty, in the month of March, 2008 itself. Inasmuch as no CVD was paid on the said imported material, they never availed any credit and as such, were not required to reverse any credit at the time of clearance of the same - neither adjudicating authority nor Commissioner (Appeals) adverted to the above factual position, though the same were specifically placed before them. I have seen the Bill of Entry under which Zinc dross was imported by the appellant. The same Zinc dross stand cleared by them in the same very month as the appellant found the same to be of low quality. If that be so the invocation of the provisions of Rule 6, etc., for confirmation of demand of duty against the appellant are not proper and justified - Decided in favour of assessee.

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