TMI Tax Updates - e-Newsletter
October 15, 2013

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. FRINGE BENEFIT TAX ON EMPLOYERS SEEMS ULTRA VIRSE THE CONSTITUTION OF INDIA – BECAUE TAX ON INCOME CAN BE LEVIED ON PERSON WHO HAS EARNED INCOME AND NOT WHO PAID INCOME TO OTHERS OR INCURRED EXPENESES FOR FRINGE BENEFITS.

   By: DEVKUMAR KOTHARI

2. DEDUCTION OF INTEREST ON BORROWED CAPITAL

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Reserve Bank Cancels the Licence of The Konkan Prant Sahakari Bank Ltd., Mumbai, (Maharashtra)

2. RBI Reference Rate for US $ and Euro

3. Status of cases where penalties have not been paid under Competition Act, 2002

4. Reserve Bank Cancels the Licence of Shri Siddhi Vinayak Nagari Sahakari Bank Ltd.,Rasayani, Raigad Dist.,(Maharashtra)

Circulars / Instructions / Orders

VAT - Delhi

1. 21/2013-14 - dated 14-10-2013

Advisory to CAs on VAT Audit Report AR1 & Special Audit

2. F. 1/2010-11/EDP/CTT/2169 - dated 11-10-2013

Processing of refund claims expeditiously through System

Income Tax

3. F. No. HRD/AD/870/4/2008-09/2868 - dated 14-10-2013

Designation of officers in first appellate authority in the office of directorate of income tax (HRD)

FEMA

4. 62 - dated 14-10-2013

Closing of Old Outstanding Bills: Export-Follow-up –XOS Statements

Highlights / Catch Notes

Income Tax

• Assessing Officer Can't Conduct Broad Inquiries for Escaped Income in Section 153A Reassessment Proceedings.

  Case-Laws - AT : Assessment u/s 153A - AO has no jurisdiction to make or to resort to roving and fishing inquiries to find out whether any income has escaped assessment during these reassessment proceedings. - AT
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• Payment for Cancelled Agency Agreement Considered Capital Receipt, Not Income Source, for Assessee's Tax Treatment.

  Case-Laws - AT : Capital or Revenue receipt - Where by the cancellation of an agency source of the assessee's income, the payment made to compensate for cancellation of the agency agreement is normally a capital receipt - AT
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• Building Construction Costs: Not Always Capital Expenditure, Depends on Nature and Purpose of Expense.

  Case-Laws - AT : Expenditure to be treated as Revenue or Capital Expenditure – Merely because the amount spent has been used for construction of a building or structure of permanent nature is not the decisive test for holding the expenses to be of capital outlay or revenue outlay - AT
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• AO Could Have Referred Capital Asset u/s 55A During Assessment, But Did Not; Capital Gains Taxable Upon Transfer.

  Case-Laws - AT : Assessment u/s 153A - The Assessing Officer was fully empowered to refer capital asset to the District Valuation Cell u/s 55A of the Income-tax Act. AO had not done so. - entire income by way of capital gains is chargeable to tax in the year in which the transfer took place. - AT
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• Court Dismisses All Appeals on Party Involvement in Litigation Post-Demerger of Company.

  Case-Laws - AT : Party to litigation - aggrieved person / party - In case of demerger of a company, who should be made the party to the litigation - all appeals dismissed - AT
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• Tax Deduction Allowed for Film Roll Conversion u/s 80-IC, Excludes DEPB Benefits in Manufacturing Activity Dispute.

  Case-Laws - AT : Disallowance of Deduction u/s 80-IC - manufacturing activity - conversion of Jumbo Rolls of photographic films into small flats and rolls in desired sizes - deduction allowed excluding DEPB - AT
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• Court Invalidates Notice u/s 148 of Income Tax Act Due to Reliance on Borrowed Satisfaction.

  Case-Laws - AT : Jurisdiction to issue Notice u/s 148 of the Income Tax Act - Issuance of Notice u/s 148 for income escaping assessment on the basis of ‘Borrowed satisfaction’ - reassessment not valid - AT
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• Tax Case: Secured Loans Must Be Deducted from Total Assets in Slump Sale u/s 50B for Accurate Net Worth.

  Case-Laws - AT : Computation of short term capital gains - Slump sale -CIT(A) has not reduced the amount of secured loans from the amounts of total assets to arrive at the net worth of undertaking which is not a correct position as per provisions of section 50B - AT
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• Assessing Officer Can Use Additional Evidence Beyond Search Findings u/s 153C for Comprehensive Evaluation.

  Case-Laws - AT : Assessment u/s 153C - The Assessing Officer was not constrained by the fetters of evidence found at the time of search alone. Assessment under Section 153C/153A cannot be treated on par with block assessments done under Chapter XIVB of the Act. - AT
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Customs

• Stay Granted: No Prima Facie Demand Against Seller of VKGUY Licenses, Not an Importer.

  Case-Laws - AT : WaiInvalid VKGUY credit - t is an admitted fact that the appellant herein is not an importer and he has only sold the VKGUY licences. - prmia facie demand can not be made from the appellant - stay granted - AT
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• Court Rules Imported Cotton Seed Oil as Edible Grade if Refinable; Stay Granted in Classification Dispute.

  Case-Laws - AT : Classification of Imported Goods – Import of Cotton seed oil - benefit of Exemption - once goods which were imported are edible after the refining, they have to be held as edible grade when imported - stay granted - AT
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• Appellant's Appeal Faces Dismissal for Non-Appearance u/r 20 of CESTAT (Procedure) Rules, 1982.

  Case-Laws - AT : There is constant non-appearance of the appellant before this Tribunal - appeal is liable for dismissal for non-prosecution under Rule 20 of CESTAT (Procedure) Rules, 1982 - AT
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Corporate Law

• ICAI Disciplinary Committee Proceeds with Inquiry Despite Charge Not Persisting and No Settlement Consideration.

  Case-Laws - HC : Disciplinary proceedings against the member of ICAI -Complaint as regards the charge under reference, did not survive but the Disciplinary Committee for reasons best known to it, proceeded with the inquiry and avoided a reference to the settlement - HC
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• Court Rules in Favor of Plaintiff: "TOLD MOM" Infringes "OLD MONK" Trademarks in Rum Dispute.

  Case-Laws - HC : Plaintiff has been successful in making out a case of infringement by the defendant of its registered trademark “OLD MONK” and “OLD MONK Label” by use of the mark “TOLD MOM” and “TOLD MOM Label” in relation to rum - HC
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Service Tax

• Appellant seeks waiver of pre-deposit for construction services in Special Economic Zone, citing prima facie case.

  Case-Laws - AT : Construction of Building - When it was undisputed that the said services rendered by the appellant were consumed within Special Economic Zone - appellant had made out a prima-facie case for the waiver of pre-deposit of amounts involved - AT
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• Classification of Insulation Replacement Services for Tax: Maintenance or Installation? Partial Stay Granted.

  Case-Laws - AT : Classification of Services – replacement of old insulation - Maintenance or Repair Services or Erection, Commission and Installation Services - stay granted partly - AT
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• Court Grants Stay in Case Over Tax Status of Construction Services for Agricultural Market Platform.

  Case-Laws - AT : Commercial and industrial construction service - applicant had constructed platform in the open place for platforms of Agricultural Product Market Committee - prmia facie not table - stay granted - AT
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Central Excise

• Water Purification Equipment Manufacturer Granted 4% Concessional Duty Rate Under Notification No. 6/2006 Without Conditions.

  Case-Laws - AT : Benefit of Notification No. 6/2006 - The appellant is a manufacturer of water purification/filtration equipment – appellant is eligible for the concessional rate of duty of 4% without satisfying any condition - AT
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• Court Grants Stay in Dispute Over Excise Duty Collection u/s 11D of Central Excise Act.

  Case-Laws - AT : Collection of incentives from the customer - whether an amount collected in the name of duty of excise - demand u/s 11D of the Central Excise Act - stay granted - AT
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• Stay Granted: Rule 9 Valuation Rules May Not Apply as Entire Quantity Not Sold via Related Person.

  Case-Laws - AT : Valuation - sale thorough related persons – Rule 9 of Valuation Rules may not be applicable in this case in view of the fact that the entire quantity manufactured is not sold through related person - stay granted - AT
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• Court to Decide if Shoe Duty is Based on MRP or Transaction Value u/ss 4A and 4, Amid SWM Rule Amendments.

  Case-Laws - AT : MRP Based duty u/s 4A or Transaction value u/s 4 on clearance of shoes - Effect of Amendment SWM Rule to the definition of ‘retail packages’ and Rule 2A - issue involved is pure question of law - stay granted - AT
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VAT

• Penalty Confirmed for Overcharging Sales Tax Rate to Government; Exemption u/s 3(B)(2-a) Misinterpreted.

  Case-Laws - HC : Exemption under Section 3(B)(2-a) - Work contract - Assessee charged sales tax at 12% as against 4% on sales to the Government department - levy penalty confirmed - HC
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Case Laws:

• Income Tax

• 2013 (10) TMI 528
  Exemption u/s 11 and Deduction u/s 80G of the Income Tax Act – educational institution - Held that:- Assessee are charitable within the meaning of section 2(15) and the Income Tax Appellate Tribunal was right in holding that the respondent is entitled to exemption under section 11 of the Income Tax Act - authorities were fully satisfied that the activities of the assessee are for charitable purpose while granting the registration u/s 25 of the Companies Act and u/s 12A as well section 80G of the Income Tax Act. Therefore, in the facts and circumstances of the case when no such objection was raised at the time of granting the earlier registration not once but at four occasions and under different provisions of Income Tax Act as well as under companies Act then the objections raised by the DIT are not sustainable – Directed the DIT (Exemption) to grant approval/renewal u/s 80G(5)(vi) of the assessee – Decided in favor of Assessee.

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• 2013 (10) TMI 527
  Scope of power u/s 254(2) of the Income tax act – Power to review, whether available to the Tribunal – Held that:- The scope of section 254(2) of the Act is limited and power of rectification does not empower to review of our own order – Decided against the Revenue.

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• 2013 (10) TMI 526
  Review/rectification of Order passed by the Tribunal – Held that:- Decision of the Hon'ble jurisdictional High Court in assessee's own case was not available, at the time of hearing of the appeal - As regards, the decision of the Hon'ble Kerala High Court, as mentioned in our order dated 30.12.2011, the same was not available while passing order of the ITAT for A.Y.2001-2002 - In the facts and circumstances of the case, no mistake apparent from the record, and the application filed by the assessee will tantamount to review of our own order, which is outside the scope of section 254(2) of the I.T.Act – Decided against the Assessee.

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• 2013 (10) TMI 525
  Allowability of Depreciation on fixed assets utilized for the charitable purpose – Society registered u/s 12A – Held that:- Having regard to the consensus of judicial opinion on the precise question it is held that claim of depreciation on fixed assets utilized for the charitable purposes has to be allowed while arriving at the income available for application to charitable and religious purposes, since the income of the society should be computed on the basis of commercial principles - Following decision of DIRECTOR OF INCOME TAX VERSUS VISHWA JAGRITI MISSION [2012 (4) TMI 289 - DELHI HIGH COURT] - Decided against Revenue.

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• 2013 (10) TMI 524
  Disallowance u/s 14A - Application to A.Y. prior to 2008-09 - Held that:- High Court in the case of Godrej & Boyce Ltd. Mfg. Co. v. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] has held that the provisions of Rule 8D cannot be applied to any assessment year prior to 2008-2009. Since the assessment year under consideration is prior to assessment year 2008-2009, as such Rule 8D cannot be invoked for the purposes of computing disallowance u/s 14A. We, therefore, vacate the orders of the lower authorities in this regard. The matter is accordingly sent back to the AO for working out the disallowance under this provision on some 'reasonable basis’ - Decided in favour of assessee. Valuation of closing stock - Under valuation of closing stock - Held that:- there is no material on record to indicate the method of valuation of closing stock by the assessee. Since the assessee sold power units at the average rate of Rs.3.17 per unit, we are of the considered opinion that the same rate can be applied for valuing the closing stock on market value basis. The learned AR did not raise any objection to the sustenance of addition but requested that the same value of closing stock for this year should be directed to be adopted as a value of opening stock for the subsequent year. There can be no doubt on the proposition that the value of closing stock for one year has to be taken as the value of opening stock for the subsequent year. The assessee in this case valued stock at the rate of Rs.2.32 per unit by considering the purchase price of MSEDCL, whereas we have held that such closing stock should be valued at average sale price of Rs.3.17 per unit. It is quite natural that if the closing stock for the current year is held to be liable for valuation at Rs.3.17 per unit, then the opening stock for the next year should also be valued accordingly - Decided against assessee.

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• 2013 (10) TMI 523
  Disallowance u/s 40(a)(i) - Foreign consultancy and commission charges - Held that:- authorities below have covered this amount u/s 9(1)(vii) as, 'fees of technical services' in the nature of 'inspection services' for purchase order. The Ld. AR contended that the authorities have gone by the nomenclature given in the Agreement without ascertaining correct nature of amount which was simply in the nature of commission. From the orders of the authorities below, we find and there is insufficient discussion about the nature of the amount paid by the assessee. Both the sides are in agreement that the matter can be restored to the file of AO for afresh adjudication. We, therefore set-aside the impugned order and remit the matter to the file of the AO for deciding this issue afresh as per law after allowing a reasonable opportunity of being heard to the assessee - Decided in favour of assessee.

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• 2013 (10) TMI 522
  Interpretation of Section 92C(2) - Benefit of -5% - Held that:- The benefit under the proviso to Section 92C(2) is only in the nature of tolerance range of 5% and not standard deduction. By virtue of retrospective amendment in the proviso to Section 92C(2) of the Income Tax Act, the legislature has made it clear that the benefit of ±5% is only a tolerance range and therefore it is available only when the prices of international transaction is within the range of 5% of the arithmetic mean of more than one comparable prices - Decided against assessee.

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• 2013 (10) TMI 521
  Determination of Cost of Acquisition of the Plot - Assessment of Long Term Capital Gain - Lack of Adequate Opportunity by the Valuation Officer - Held that:- The DVO had prepared the draft report on 18.12.2009 and vide notice dated 18.12.2009 had fixed the hearing of the case on 28.12.2009 - Assessee had submitted that notice had been received by him on 26.12.2009 which was Saturday followed by two public holidays i.e. Sunday on 27.12.2009 and Muharram on 28.12.2009 - It was thus clear that the DVO had fixed the hearing of the appeal on a public holiday - There was nothing on record to show that assessee had been provided any further opportunity by the DVO as the order had been passed on 30th December 2009 - The DVO had also not considered the value of terrace admeasuring about 600 sq. ft. - The assessee could also provide further material in support of the higher market value if the opportunity had been provided to it which had been done by the DVO - AO had completed the assessment only on the basis of draft valuation report as on the date of order the formal valuation report had not been received by AO - Therefore, in our view the valuation of the property was required to be made a fresh after allowing proper opportunity of hearing to assessee by the DVO - the order of CIT (A) was set aside and the matter was restored to the AO for passing a fresh order after obtaining fresh report from the DVO after hearing assessee. Reference u/s 55A - Whether in the absence of mandatory recording of satisfaction by the AO, there was no justification for making reference u/s 55A - Held that:- There was nothing in the section 55A which debars AO from making reference under clause (b) even when registered valuer report had been filed - In cases where registered valuer report had been filed reference under clause (a) of section 55A can be made if the AO finds the valuation lower than the market value - In any other case, clause (b) was applicable - Therefore, it was clear that clause (b) applies in situations where either no registered valuer report had been filed or if the registered valuer report had been filed but the valued determined was higher than the market value - Thus in case the AO was of the opinion that the value as per the registered valuer was higher than the market value, he could make reference u/s 55A (b) (ii) – Following ACC Ltd. Versus District Valuation Officer [2012 (5) TMI 505 - DELHI HIGH COURT] - the reference made by AO to DVO on the facts of the case was justified and order of CIT (A) on this point was therefore upheld – Decided in favour of Assessee.

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• 2013 (10) TMI 520
  Assessment u/s 153A - Addition made, when no incriminating evidence found in the course of search - Held that:- No incriminating document found relating to the land development expenses debited in the books of accounts. No material was on the record on that basis which income of assessee could be further assessed by Assessing Officer. Therefore, the assessing officer has no jurisdiction to make or to resort to roving and fishing inquiries to find out whether any income has escaped assessment during these reassessment proceedings. Particularly, when there is no incriminating material found and seized during the course of search u/s 132(1) of the Act and nothing is available in record to reassess the income of assessee – Decided against the Revenue. The expiry of time for issuing notice u/s 143(2) of the Act takes away the jurisdiction of the AO for issuing notice u/s 143(2). It is jurisdictional power available with the AO to be exercised in a given period. Once, it is exercised then it can be completed only by making order u/s 143(3) of the Act within the time available u/s 153(1) of the Act. Once search takes place u/s 132(1) of the Act and completion of proceeding is pending on that date then such proceedings abate. Thus, the scope of assessment u/s 153A depends upon whether any assessment or reassessment proceedings were pending or completed on the date of the search. Whenever the abated proceedings are merged with the proceedings u/s 153A then scope of assessment is vide and it will cover all issues arising from the original return and issue arising on the basis of incriminating documents, and assets found and seized during the search. Wherever the proceedings are completed prior to the search then nothing merges with proceding u/s 153A of the Act and nothing abates. In such a situation, the AO has to respect the completeness of the proceedings. Admittedly, in the case of assessee, no incriminating documents were found and seized. The provisions of section 153A give power to assessing officer to assess and reassess the income. The assessing officer is empowered to make addition on account of undisclosed income or income escaped assessment. In the case under consideration, there is no incriminating material found during the course of search relating to the assessment year under consideration. The time period for issuing notice u/s 143(2) was already expired prior to the date of search. Therefore, the proceedings do not get abated by virtue of proviso to Section 153A.

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• 2013 (10) TMI 519
  Validity of reopening assessment - Whether there was change of opinion - Held that:- assessment was reopened by issuing notice u/s 148 of the Act on 21.3.2011. It is noticed that the assessment has been re-opened within four years from the end of the assessment year and hence the restrictions placed in the proviso to sec. 147 are not applicable to the instant case - assessing officer did not make any enquiry about the issue during the course of assessment proceeding and was satisfied with the reply given by the assessee in that regard. In the absence of any discussion in the assessment order and also in the absence of any enquiry relating thereto, it cannot be said that the Assessing Officer had formed an opinion with regard to the assessment of goodwill. In that case, it cannot be said that the view entertained by the Assessing Officer that the goodwill amount has to be assessed as revenue receipt was on account of mere change of opinion - Decided against assessee. Capital or Revenue receipt - Goodwill amount - Held that:- Though the AO states that the partnership firm (purchaser) did not show the amount of Rs.24.00 lakhs as good will, yet AO did not make any enquiry in that regard with the partnership firm. Generally, the nature of payment could be determined by examining the agreement entered between two parties. In the instant case, there is no discussion about the existence of agreement, if any, towards payment of Rs.24.00 lakhs to the assessee - even if it is considered that the assessee did not receive the amount of Rs.24.00 lakhs towards good will, the said amount should be considered as having been received only towards transfer of land and building, in which case also, the above said amount of Rs.24.00 lakhs is liable to be taxed as Long term capital gain only - there is no reason to suspect the claim of the assessee that he received the amount of Rs.24.00 lakhs towards good will. - Decided in favour of assessee. Taxability of amount received towards transfer of Bar Licence - Held that:- Even though the partnership deed states that all the assets of the erstwhile proprietary concern shall become the proprietary of the partnership firm, what is relevant for the purposes of taxation in the hands of the assessee herein is the nature and quantum of amount received by him towards compensation for transferring his business to the partnership firm. - the amount of Rs.18.00 lakhs received by the assessee has to be necessarily treated as received as compensation towards the advance licence fee paid by the assessee by March, 2006. - not liable to be taxed - Decided in favor of assessee.

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• 2013 (10) TMI 518
  Capital or Revenue receipt - Compensation received was for loss of "source of income" - CIT held it as capital receipt - Held that:- Where on a consideration of the circumstances, payment is made to compensate a person for cancellation of a contract which does not affect the trading structure of his business, nor deprive him of what in substance is his source of income, termination of the contract being a normal incident of the business, and such cancellation leaves him free to carry on his trade (freed from the contract terminated) the receipt is revenue: Where by the cancellation of an agency source of the assessee's income, the payment made to compensate for cancellation of the agency agreement is normally a capital receipt - Decided against Revenue.

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• 2013 (10) TMI 517
  Expenditure to be treated as Revenue or Capital Expenditure – Reliance is placed upon the judgment in the case of Commissioner of Income-Tax Versus Abhishek Industries Limited [2006 (8) TMI 123 - PUNJAB AND HARYANA High Court] - Interest on loan of Rs.1,37,61,301/- - Held that:- The assessee has raised unsecured loans of Rs.1,37,61,301/- and the same from a common fund/kitty. These funds are available with the assessee for utilization by it either for extension or operation of its own business or for providing interest free advances - As per judgment of Hon’ble High Court in the case of Abhishek Industries, there should be a nexus of use of borrowed funds for the purpose of business for the claim u/s 36(1)(iii) of the Act. In the present case, finding of the authorities as well as findings of the Tribunal that there is no escape for the assessee from the finding that interest being paid by the assessee to the extent the amounts borrowed on interest are diverted to sister concern on interest free basis are to be disallowed - Restriction of the disallowance to 40% of the interest has been upheld. Where the expenses are incurred by the assessee towards repairs of the premises taken on lease so as to make it fit for its business activity, such expenditure would fall within the expression of 'repairs' as appearing in Section 30(a)(i) of the Act - In the instant case, there is nothing to distract from the plea set up by the assessee that the impugned expenditure has not resulted in demolition of old structure and construction of a new structure. The assessee has, therefore been successful in establishing that the impugned expenditure was revenue in nature. Merely because the amount spent has been used for construction of a building or structure of permanent nature is not the decisive test for holding the expenses to be of capital outlay or revenue outlay. The two tests emerging from the aforesaid decisions are that firstly where the building or construction of any permanent structure is brought into existence that is by itself is not sufficient to hold the expenses to be capital nature invariably. Where such construction does not result in acquisition of any capital assets to the trade of the assessee or the property does not become the property of the assessee, it does not result in acquisition of capital assets of enduring nature by the assessee. Secondly, it is also clearly discernible that if such expenses are incurred for the purpose of business for deriving any benefit whether to preserve the business or to facilitate the running of the business more smoothly or to make the business more profitable to secure any other advantage for the assessee’s business or incurring expenditure by seeking exemption from or reduction in incurring of other expenses which would have been ordinarily allowable as revenue expenditure of the assessee’s business, such expenses are to be treated as having been incurred wholly and exclusively for the business of the assesses and revenue expenditure. Such expenses cannot be construed as a capital expenses.

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• 2013 (10) TMI 516
  Assessment u/s 153A - Difference of long term capital gain on sale of unquoted equity shares - Search and seizure done - CIT deleted addition - Held that:- There was no evidence found and seized during the search operation with regard to the valuation of shares transferred which were from Aggarwal Group to the Mittal Group. The only basis for not accepting the assessee's valuation of shares was valuation report obtained u/s 133(6) from the banker for availing the loan to M/s. Superior Builders Limited. This valuation report was also not confronted with assessees. There is nothing on the record that shareholders had received more than what is disclosed in the books of account. The fact that company was also having huge liabilities outstanding at relevant time cannot be ignored for valuing the value of unquoted shares. The Assessing Officer was fully empowered to refer capital asset to the District Valuation Cell u/s 55A of the Income-tax Act. Assessing Officer had not done so. The Assessing Officer simply relied on the valuation report made for obtaining the bank loan and made the addition - Decided in favour of Revenue.

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• 2013 (10) TMI 515
  Capital or Revenue expenditure - Disallowance of royalty expenses - CIT held that payment of royalty was partly towards capital and partly towards the revenue - Held that:- know-how was granted by the foreign company solely for the purpose of manufacture, assembly and sale of products during the term of the contract and the licensee was to pay royalty to the licensor. The drawings and designs which were supplied by the licensor only enabled the assessee to manufacture the goods, namely, the shock absorbers. The assessee was required to change the design of such shock absorbers from time to time for which new drawings and designs were required. For the aforesaid purpose, the training of the personnel of the assessee was imperative. If the agreement is read in entirety in a purposeful manner, there can be no trace of doubt that the know-how acquired relates to the process of manufacturing and for a tenure and the documents, designs and specifications which have been supplied by the licensor are only for facilitating the said purpose of manufacturing - Following decision of CIT v. T.E.I. Technologies P. Ltd. [2008 (2) TMI 275 - DELHI HIGH COURT] - Decided in favour of assessee.

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• 2013 (10) TMI 514
  Party to litigation - aggrieved person - In case of demerger of a company, who should be made the party to the litigation - Held that:- Undisputedly this is a case of Court approved demerger - High Court of Judicature at Bombay had approved the scheme vide an order 22nd June, 2010 - Under the scheme, the entire business relating to the Indian undertakings of the 'transferor companies' were to stand transferred to and vested in the petitioner i.e. CIL w.e.f. the 'appointed date' in pursuant to the provisions of section 391 and 394 of the Companies Act - Not only the legal proceedings but as per clause 12 of the scheme it was specifically provided that the transferee company shall be responsible for the income tax proceedings and also shall be entitled to claim refund. - As per sub clause (a) of Section 170 the 'predecessor' is subject to assessment in respect of the income of the previous year in which the succession took place upto the date of the succession. However, as per sub clause (b) of section 170 (1) the 'successor' shall be assessed in respect of the income of the previous year after the date of succession. In our humble understanding a "successor" is held responsible for assessment after the date of succession. We hereby take a little liberty with due respect to the legislatures that if the meaning of clause (b) is slightly extended than it can be supposed that a 'successor/transfree' shall be held responsible for the legal proceedings after the date of succession. Rather sub section (3) of Section 170 prescribes that when any sum payable under this Section in respect of the income of such business for the previous year in which the succession took place upto the date of succession assessed on the 'predecessor' cannot be recovered from him, then the said sum shall be payable and recoverable from the successor. Meaning thereby the successor/transferee is liable for any liability of the predecessor/transferor - burden of liability gives an inherent right to defend a litigation, therefore the successor within his rights can file an appeal - it is apparent that a resulting company on one hand acquires the assets, side by side, on the other hand, responsible for the liabilities, including tax liability. Further, it is important to note that sub-sec. (vi) says that the transfer of the undertaking is on a going concern basis, meaning thereby, as a result of demerger the effected undertaking looses it's independent legal identity which merges with the resultant company. It's entity thereafter vests with the resulting company. As a natural corollary the litigation can not be pursued against a non-existing legal body. That is why in case of a 'wound-up' company the Tribunal Rules have laid out a procedure of filing of appeal - where an assessee whether an appellant or a respondent dies or become insolvent or in the case of a company being wound up, then that appeal shall not abate and shall be continued by the executor, legal representatives or the administrator or the liquidator. This Rule further provides that a revised Form 36 giving revised names of the party can be filed. The revised Form 36 shall specify the appeal number as originally assigned and shall be made part of the original file. We have cited Rule 26 with a definite purpose because at present we are dealing with those appeals which have been recently filed under the apprehension that the original appeals filed by the transferee company may be held as not maintainable. Even in that event, there was no requirement to file fresh appeals in the name of the transferor i.e, Cairn Energy Gujarat BV and remedy lies by filing a revised form 36 as suggested in Rule 26 of Tribunal Rules - Decided against Assessee.

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• 2013 (10) TMI 513
  Disallowance of Deduction u/s 80-IC - manufacturing activity - conversion of Jumbo Rolls of photographic films into small flats and rolls in desired sizes - when assessee came into existence and whether geographically it is located with the notified area contemplated in sub-clause (ii) of sec. 80-IC(2)(a) or (2) (b) – Held that:- assessee partnership firm came into existence on Ist of December 2003. It is situated at Plot No.11 Sector 4, Sidcul, integrated industrial estate, Haridwar. It had commenced the production on 18th October 2004. The A.O. himself admitted that deduction under sec. 80-IC was granted to the assessee continuously since assessment year 2005-06. Whether the activity is manufacturing activity or not - Held that:- the assessee has carried out the manufacturing activity. It has been granted deduction under sec. 80-IC of the Act from the last four assessment years. The department is unable to lay its hands on any concrete material which can force us to take a different view then the stand of the Assessing Officer in earlier four assessment years. Assessee is entitled for deduction under sec. 80-IC of the Act. Deduction on account of DEPB Credit - Held that:- the issue is covered against the assessee in Liberty India v. CIT [2009 (8) TMI 63 - SUPREME COURT] - DEPB receipts were not derived from an industrial undertaking rather their genesis was from the beneficiary scheme formulated under Central Excise Act etc. They were the ancillary profit - amendment suggests that on sale of DEPB receipts, if there was any profit, then it will be a revenue receipts - We find that this amendment was brought by Act of 2005, w.e.f. 01.04.1998 - the Assessing Officer was directed to allow the deduction under sec. 80-IC of the Act as per law excluded on the DEPB receipts. – Decided partly in favour of Asseessee.

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• 2013 (10) TMI 512
  Jurisdiction to issue Notice u/s 148 of the Income Tax Act - Issuance of Notice u/s 148 for income escaping assessment on the basis of ‘Borrowed satisfaction’ - Information was received from DDIT (Inv.), Gurgaon regarding bogus claim of long-term capital gains shown on account of purchase and sale of shares through M/s. R.K. Agarwal & Co., New Delhi by the assessee. The notice u/s. 148 was issued with the approval of additional CIT, Range-I, Agra by the ITO 1(4), Agra on 28.03.2003 - In response to notice u/s. 148, the assessee filed written reply that he is filing return of income with the Income-tax Officer 3(4), Mathura, hence, the notice u/s. 148 was wrong and incorrect - Then this case was transferred to ITO, Mathura and, therefore, notice u/s. 142(1) was issued on 22.09.2003, 06.10.2003 and the assessee submitted that he has already filed return on 26.03.1999 - Assessee challenged the proceedings u/s. 147 and subsequently notice u/s. 142(1) on the plea that notice u/s. 148 was without jurisdiction – Held that:- It is clear that the Assessing Officer at Agra was not having jurisdiction over the assessee. Therefore, he should not have recorded the reasons for reopening of assessment and further he did not examine any information supplied by DDIT(Inv.) and that he was having no reasons to believe that income chargeable to tax has escaped assessment and such facts are also not mentioned in the reasons recorded for reopening of assessment. The AO at Mathura did not do anything in the matter and merely followed the reasons recorded by ITO at Agra and that he has initiated the proceedings u/s. 148 against the assessee on borrowed satisfaction of ITO, Agra - ITO, Mathura has also not examined any record of the case or the information received from DDIT(Inv.). The reasons which are not in accordance with law have been recorded at Agra by the ITO, who was not authorized to do so and was not having jurisdiction over the assessee and the Assessing Officer having jurisdiction over the assessee at Mathura did not do so and merely acted on the above borrowed satisfaction - Re-assessment proceedings u/s. 147 of the IT Act is clearly bad in law and against the provisions of law – Decided in favor of Assessee.

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• 2013 (10) TMI 511
  Computation of short term capital gains - Valuation u/s 50B - Slump sale - Reduction of secured loans from total assets - Held that:- The Assessing Officer has taken the consideration value of Rs.25 crores by making an adjustment of current liabilities and current assets. The sale consideration has been specifically mentioned in the business acquisition agreement vide article 8.1. at page 61 of paper book which is at Rs.21,90,18,640/-. The Ld CIT(A) has taken this value as sale consideration and we are of the opinion that this is the correct value which should be considered for the purpose of calculation of capital gain. The Ld CIT(A) has not reduced the amount of secured loans from the amounts of total assets to arrive at the net worth of undertaking which is not a correct position as per provisions of section 50B of the Act - Section 50B is a special provision which is applicable in the case involving slump sale and which prescribes a particular method to calculate the capital gain earned by the assessee. Section also prescribes the method of calculating net worth of the undertaking - Following decision of Gopee Nath Paul And Sons And Another Versus Deputy Commissioner Of Income-Tax [2005 (3) TMI 73 - CALCUTTA High Court] - Decided in favour of Revenue.

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• 2013 (10) TMI 510
  Assessment u/s 153C - Addition on account of search conducted on assessee under the Income Tax Act - Assessee had in the regular returns admitted income only from the jewellery business. Nothing regarding his money lending business was ever disclosed - In his statement given after the search, assessee admitted that he was running a financing business since three decades. He never cared to show the existence of such business or income therefrom in the regular returns filed. Even for the jewellery business, income returned was negligible, when compared to the actual turnover and this can clearly be discerned from surplus stock found at the time of search – Held that:- Clearly established that assessee was having Sahukhari Byaj business and was also earning substantial interest therefrom. Admission of the assessee regarding such interest income could, therefore, be extrapolated to various years other than the years for which the books were found, because, even in respect of assessments done pursuant to search, rules of preponderance of probability will apply. What is specifically noted is that these assessments were done under Section 153C read with Section 143(3) of the Act - The Assessing Officer was not constrained by the fetters of evidence found at the time of search alone. Assessment under Section 153C/153A cannot be treated on par with block assessments done under Chapter XIVB of the Act. Contents of the books found at the time of search, has to be considered as true by virtue of Section 132(4A) of the Act, though it is a rebuttable presumption. Admittedly, nothing was seized which would show that opening balance as on 8.11.99 was the income of the assessee for assessment year 2000-01. Considering these aspects, addition made for investment in Sahukhari Byaj business for assessment year 2000-01 was not warranted and rightly deleted by the CIT(Appeals). However, the additions made by the Assessing Officer for interest earned by the assessee in such business for various years were, unjustly deleted by ld. CIT(Appeals). Such additions are reinstated. Order of the CIT(Appeals) to this extent is set aside. In regard to the addition to be made in the jewellary business, there were more than sufficient evidence found at the time of search to show that assessee was having substantial gold and silver jewellery business in addition to what was returned by him in his regular returns. Admittedly, there was a surplus stock of more than Rs. 95 lakhs found at the time of search. Admission of the assessee in the statement recorded on 29.5.2005 has to be seen in the light of such excess stock found at the time of search. Assessee might have retracted the statement at a later date. Nevertheless, such retraction without any corroborative evidence will have no value whatsoever - Hon'ble Apex Court in the case of Pullangode Rubber Produce Co. Ltd. [1971 (9) TMI 64 - SUPREME Court] has clearly held that an admission was an extremely important piece of evidence though not conclusive. Here, the assessee was unable to establish that admission made by him at the time of search was not correct. Even if there was retraction, it was only a hollow one - In the result, confirmed the orders of CIT(Appeals) insofar as it relate to deletion of additions made for investment in Sahukhari Byaj business and excess stock in gold and jewellery business. However, set aside his orders in relation to addition made for interest in Sahukhari Byaj business and income from jewellery business. - Decided partly in favor of revenue.

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• 2013 (10) TMI 509
  Reassessment u/s 147 - whether the statutory requirement of section 151(2) regarding satisfaction by the Jt. CIT is absent - Unexplained cash credit - Held that:- On the facts and circumstances of the case, in our considered opinion, interest of justice will be served if the matter is remitted to the file of the Ld. CIT(A). Ld. CIT(A) is directed to consider the issue afresh, after giving the assessee adequate opportunity of being heard - Decided in favour of assessee.

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• Customs

• 2013 (10) TMI 508
  Waiver of pre-deposit - Invalid VKGUY credit - Held that:- amending VKGUY licences in order to restrict the eligibility of duty free imports the power vests with DGFT authorities and not the Commissioner of Customs, Ahmedabad. We also find strong force in the contentions raised by the ld. counsel that for the demand of duty under Section 28 of the Customs Act, 1962, on the goods imported, the show cause notices needs to be issued to importers who had imported the goods through Tuticorian or Kandla ports. We are unable to understand the adjudicating authority’s findings as to demand of the customs duty on the appellant under provisions of Section 28 of the Customs Act, 1962 as it provides for demand of the duty only from the importer; it is an admitted fact that the appellant herein is not an importer and he has only sold the VKGUY licences. As of today, we find that the licences are not yet cancelled or revoked by the DGFT authorities and hence any imports, prima facie, under these licences are valid imports - appellant has made out prima facie case for the waiver of the pre-deposit of the amounts involved - stay granted.

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• 2013 (10) TMI 507
  Classification of Imported Goods – Import of Cotton seed oil - Exemption under Notification No.21/2002 - Revenue was of the view that the classification of the imported goods as claimed by the appellant is not eligible for exemption under Sr. No. 33 A of notification No. 21/2002 – Held that:- The issue of proper classification of the product and all the penalties imposed which are placed on record need deeper consideration - As to the what classification, prima facie, we find that test report of CFL Mysore has tested the samples after refining and has opined that the said goods/product is fit for human consumption. The test report also confirms that the goods which were imported in the form, they would not have been fit for human consumption unless refining takes place would also mean that the serial No. 33 A of notification No. 2212002 would apply as notification does not specify last four digit - Even Central Board of Excise and Customs has held that once goods which were imported are edible after the refining, they have to be held as edible grade when imported - Relying upon Cargill India Pvt. Ltd Vs. Union of India [2013 (6) TMI 40 - GUJARAT HIGH COURT] - the appellants have made out a prima facie case for the waiver of pre-deposit of the amounts involved - the appellant was directed not to apply for refund deposited by them during the investigation, during the pendency of appeal - Applications for waiver of pre-deposit of the amounts involved are allowed and recovery stayed till the disposal of appeals – Stay granted.

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• 2013 (10) TMI 506
  Penalty - Export of pan masala and gutakha - Held that:- Appellants are not interested in pursuing their matter inspite of number of notices have been issued to them. Even notice was issued for today s hearing. I find that sufficient time was given to them. Notice for 18.4.2013 was duly acknowledged by the appellant. Further notices have been issued to give sufficient time to the appellant to appear before the Tribunal. There is constant non-appearance of the appellant before this Tribunal - appeal is liable for dismissal for non-prosecution under Rule 20 of CESTAT (Procedure) Rules, 1982 - Decided against assessee.

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• 2013 (10) TMI 505
  Waiver of pre-deposit - Confiscation of a vessel which was imported - mis-declaration of vessel- Held that:- The show cause notice itself records that the vessel was released after getting bank guarantees from M/s. Snow Drop Co. Ltd., M/s. Vihar Shipping Agency Pvt. Ltd., Shri Prakash Ajmera, Shri Rajesh Parekh, M/s. Shirdi Steel Traders, Shri Manish L. Vyas and M/s. Labdhi Shipping (Agency) Pvt. Ltd. who are all appellants before us. Since the amount of bank guarantee which is executed by these appellants is more than the amount of the penalties that have been imposed by the adjudicating authority and on an undertaking given by the ld. consultant that these bank guarantees will be kept alive till the disposal of appeals, stay granted.

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• 2013 (10) TMI 504
  Export of prohibited items - Penalty u/s 114(i) - Waiver of pre-deposit of penalties - Held that:- the claim that there being no knowledge which can be ascertained only at the time of final disposal of appeal - stay granted partly.

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• 2013 (10) TMI 503
  Imposition of penalty - Import of Base Oil in the guise of Rubber Processing Oil - Held that:- prima facie conclusion is that the department has made out a case in their favour and not the importer. At this stage, learned counsel submits that they have bills to show that the major portion of the imported goods as RPO. However, in the absence of any proper explanation with regard to note book / private records seized and with regard to the huge amounts transferred through non-banking channels and through other persons to Shri Mohammed Sameer’s Dubai Account and investigation details and records found and the test report of M/s Shriram Institute of Industrial Research stating that the imported goods was not RPO, we find that no documents have been submitted by the appellants to support their claim - appellant is required to be put to terms. - stay granted partly.

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• Corporate Laws

• 2013 (10) TMI 502
  Disciplinary proceedings against the member of ICAI - irregularities in audit report - MAOCARO, 1988 - Temporary cancellation of membership - Professional misconduct - Held that:- A perusal of the record shows that the Company, whose Audit Report is stated to have been prepared by respondent No.1 contrary to the prescribed norms, has not made any complaint against respondent No.1. One of the Directors of the Company, namely, Vipan Gupta, appeared before the Disciplinary Committee as a witness but he did not state a word about the aforesaid Audit Report. He also did not say what damage or prejudice has been caused to the Company on account of that report. Amarjit Kamboj, the complainant, in our opinion had no locus standi to make a complaint in this respect - The Disciplinary Committee while returning the aforesaid finding of guilt against respondent No.1, has not referred to particular portions of the report, which according to the findings, were not in conformity with the prescribed norms. It has not pointed out, what matters were not commented upon and what was the effect of this omission. Similarly, it is not pointed out what matters were not applicable, which were omitted by respondent No.1 and how and to what extent has it harmed the interests of the Company. It has also not been pointed out by whom and in what manner the Audit Report was proved. Witnesses examined during the course of inquiry are found to have been cross-examined by the members of the Disciplinary Committee and by the complainant. Such a procedure is unknown to Indian jurisprudence and it in our opinion vitiates the entire proceedings of the Disciplinary Committee, being contrary to the settled principles of natural justice that one cannot be a judge and a prosecutor at the same time - proceedings of the Disciplinary Committee are found to be based on no evidence and are even otherwise vitiated. The Council did not apply its mind to the facts and circumstance of the case, accepted the report of the Disciplinary Committee in a mechanical manner and has made this reference to this Court - Disciplinary Committee is found to have observed that the proceedings could not continue in the absence of Registrar of Companies. However, the Registrar of Companies never participated in the proceedings - Another circumstance that needs to be highlighted is that the Company went before the Companies Law Board and entered into a compromise with the auditors' company. Complaint as regards the charge under reference, did not survive but the Disciplinary Committee for reasons best known to it, proceeded with the inquiry and avoided a reference to the settlement, referred to above. This renders approach of the Disciplinary Committee biased and, therefore, unacceptable - Decided against petitioner.

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• 2013 (10) TMI 501
  Trademark infringement - Permanent injunction - Deceptively similar trademark - Held that:- tests of deceptive similarity in the case of infringement is the same as in the case of passing-off action, where the marks are not identical but in my humble opinion the said test in the case of infringement is to be confined only to comparison of the marks and the factors of pricing, trade channels etc., which in a passing-off action, in spite of similarity of marks may deprive the plaintiff of an injunction, can have no applicability in a infringement action once similarity is established - The Act, in Section 29 lays down the test of identity, similarity or deceptive similarity with the registered trademark only and not of confusion as in the case of passing-off, on the anvil of not only similarity of marks but also of prices, trade channels etc. The Act, in Section 2(h) defines deceptive similarity also on the touchstone of resemblance likely to deceive or cause confusion and not extending to pricing, trade channels etc. In my view, since the infringement action is statutory, the test of infringement cannot be extended beyond the parameters of the statute, by incorporating therein factors of pricing, trade channels etc. which are not laid down as tests of infringement in the statute. While comparing only the broad and essential features are to be considered and it would be enough if the impugned mark/label bears such an overall similarity to the registered mark as would be likely to mislead a person usually dealing with one to accept the other if offered to him - Following decision of Parle Products (P) Ltd. Vs. J.P. & Co., Mysore (1972 (1) TMI 98 - SUPREME COURT). Plaintiff has been successful in making out a case of infringement by the defendant of its registered trademark “OLD MONK” and “OLD MONK Label” by use of the mark “TOLD MOM” and “TOLD MOM Label” in relation to rum, even though falling in the Excise category of country liquor - permanent injunction is accordingly passed in favour of the plaintiff and against the defendant, restraining the defendant its directors, wholesalers, distributors, officers and agents from manufacturing, selling, offering for sale, distributing, advertising or directly or indirectly dealing in alcoholic beverages bearing the trademark “TOLD MOM” and under the “TOLD MOM Label” or any other mark or label identical and/or deceptively similar to the registered trademark “OLD MONK” and “OLD MONK Label” of the plaintiff - Decided in favour of appellant.

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• 2013 (10) TMI 500
  Trademark infringement - Passing off action - Infringement of trademark 'Aaj Tak' - Defendant published newspaper with the name 'Aaj Tak' - Email adrees with similar name also made - Held that:- Under Section 29 (4) of the TM Act, where the registered mark is shown to have a reputation in India and the use of the impugned mark by the Defendant results in taking unfair advantage of the registered mark or is detrimental to, the distinctive character or repute of such registered mark there is no need for the owner of the registered trade mark to demonstrate the likelihood of confusion in the mind of the public. As far as the present case is concerned, the uncontroverted evidence of the Plaintiffs clearly establishes that the Plaintiff No.2 is assignee and Plaintiff No.1 is the registered proprietor of the word mark ‘Aaj Tak’. Secondly, the registrations are in respect of services under Classes 38 and 41 of the Fourth Schedule to the TM Rules. By virtue of Rule 22(2) of the TM Rules read with the Fourth Schedule these classes cover news reporting and dissemination of news as well. Thirdly, the Defendants are not the registered proprietor of the trade mark ‘Aaj Tak’. The impugned mark ‘Aaj Tak’ adopted by the Defendants is identical to the registered mark ‘Aaj Tak’ phonetically, structurally and visually. The statements made on affidavits by the Plaintiffs regarding the reputation enjoyed by the registered mark in India and worldwide and the demonstrable exploitation of that mark by the Defendants by inviting applications for ‘Aaj Tak Models ‘and for advertisements by issuing tariff rates remains uncontroverted. It has been satisfactorily proved by the Plaintiffs that that the adoption and use of the impugned mark by the Defendants will cause detriment to the distinctive character and repute of the registered mark of the Plaintiffs. It is also been shown that the Defendants have by such use taken unfair advantage of the goodwill and reputation of the Plaintiffs’ mark. There is nothing in the cross-examination of Plaintiffs’ witnesses which disproves their case. Plaintiffs have been able to demonstrate that there has been an infringement of the Plaintiffs’ registered trade mark in terms of Section 29(1) and 29 (2) (b) of the TM Act. Further by the material brought on record, the Plaintiffs have been able to demonstrate that the trade mark ‘Aaj Tak’ has a distinctive character and reputation in India and that the Defendants have sought to take unfair advantage of the reputation and goodwill of the Plaintiffs’ mark and that such use is detrimental to the distinctive character and reputation of the registered trade mark thus attracting infringement in terms of Section 29(4) of the TM Act - Defendants should be asked to pay the Plaintiffs punitive damages in the sum of Rs. 5 lakhs to act as a deterrent against the Defendants infringing the registered mark of the Plaintiffs - Following decision of Time Incorporated v. Lokesh Srivastava [2005 (1) TMI 630 - DELHI HIGH COURT] - Decided in favour of appellant.

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• Service Tax

• 2013 (10) TMI 537
  Reimbursement Expenses – Renting of Commercial Property - Held that:- The reimbursement expenses received by the appellant and including the same for discharging the service tax liability may not arise as the Hon'ble High Court of Delhi has struck down the Valuation Rules in the case of INTERCONTINENTAL CONSULTANTS AND TECHNORATS PVT. LTD. Versus U. O. I. & ANR. [2012 (12) TMI 150 - DELHI HIGH COURT] - As regards the claim of which was demanded as service tax was on renting of Commercial Property - the appellant himself, in their records had indicated the amount received as commission - the issue needs to be considered in depth which can be done only at the time of final disposal of the appeal. – Partial stay granted.

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• 2013 (10) TMI 536
  Construction of Building - Benefit of Notification 4/2004 – Waiver of Pre-deposit – Held that:- Prima-facie, the findings recorded by the adjudicating authority seems to be at variance from the wording of notification - The wordings of indicate that the Central Government intends to exempt the taxable services of any description provided to a unit (including a unit under construction) of Special Economic Zone by any service provider for consumption of services within such Special Economic Zone - When it was undisputed that the said services rendered by the appellant were consumed within Special Economic Zone - appellant had made out a prima-facie case for the waiver of pre-deposit of amounts involved - Stay granted.

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• 2013 (10) TMI 535
  Classification of Services – replacement of old insulation - Maintenance or Repair Services or Erection, Commission and Installation Services - Benefit of Notification No 1/2006 – Waiver of Pre-deposit - Held that:- The appellant was in fact discharging the service tax liability under the category of Erection, Commission and Installation Services by claiming the benefit of Notification No 1/2006 and filing the returns regularly with the authorities - the question of limitation as raised by the learned counsel may arise - At the same time, on perusal of the definition of Maintenance or Repair Services, the services rendered by the appellant for replacement of old and worn out insulation can, prima-facie, merits classification under the head ‘Maintenance or Repair Services’ - the arguments raised by both sides need deeper consideration – stay granted partly.

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• 2013 (10) TMI 534
  Service provided by the Indian Railways - Retrospective amendment - Held that:- retrospective amendment very clearly states that any service provided by the Indian Railways during the period prior to 01.07.2012 is not taxable under Finance Act, 1994, nothing survives as the issue involved in this case being prior to 01.07.2012. It is also undisputed that appellant is Indian Railways - Decided in favor of assessee.

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• 2013 (10) TMI 533
  Condonation of delay - Waiver of pre deposit - Held that:- appellants have claimed that there was a delay of 119 days which they had explained with cogent reason. Unfortunately according to the Hon’ble Supreme Court’s decision in the case of Singh Enterprises reported in [2007 (12) TMI 11 - SUPREME COURT OF INDIA] - once the statute does not give the power for condonation of delay, even the appellate authority has no power to condone such delays in filing the appeal before the Commissioner (A) if Commissioner (A)does not have the power - Decided against assessee.

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• 2013 (10) TMI 532
  Commercial and industrial construction service - Held that:- applicant had constructed platform in the open place for platforms of Agricultural Product Market Committee. The platforms are used to facilitate the sale of cotton by the farmers. In these circumstances, prima facie we find that the applicant has made out a strong case in their favour - stay granted.

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• 2013 (10) TMI 531
  Demand - Sale of Space or time for Advertisement Service - Held that:- in the absence of any indication as to the quantum of service tax relatable to properties belonging to the Agra Municipal Corporation, we consider it appropriate to grant waiver of pre-deposit and stay of all further proceedings pursuant to the adjudication order dated 31.12.2012, on condition that the petitioner remits approximately 20% of the tax component - stay granted partly.

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• 2013 (10) TMI 530
  Condonation of delay - Late delivery of adjudication order - Held that:- The adjudication order was thereupon pasted on the front door of the appellant by drawing up a panchnama - no affidavit has been filed to the said effect nor the original of the panchnama is filed, for perusal of the Court. In the circumstances, petitioner s assertions are neither traversed nor rebutted by Revenue. The petitioner’s assertion is therefore considered to have been established. Consequently, there being no delay in filing of the appeal, this application is ordered - Decided in favour of assessee.

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• Central Excise

• 2013 (10) TMI 499
  Encashment of Bank Guarantee – Held that:- Relying upon Mahindra & Mahindra v/s. Union of India [1992 (4) TMI 42 - HIGH COURT OF JUDICATURE AT BOMBAY] - The action of the revenue in encashing the bank guarantees before the expiry of the period for filing an appeal is declared as bad in law - The revenue is directed to refund the amount to bank - bank would issue bank guarantees in favour of the revenue so as to maintain the status quo ante as existing prior to encashment of the bank guarantee – Decided in favour of Petitioner.

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• 2013 (10) TMI 498
  Application for early hearing – Refund of unutilized CENVAT credit - Whether the appellant was entitled to refund of unutilized Cenvat Credit in terms of Rule 5 of the Cenvat Credit Rules, 2004 – Held that:- Following COMMISSIONER OF C. EX., NASIK Versus JAIN VANGUARD POLYBUTLENE LTD. [2010 (6) TMI 171 - BOMBAY HIGH COURT] - the CESTAT should have allowed the early hearing application and heard the petitioner on merits, in view of the fact that during the hearing of the application for early hearing of appeal before the CESTAT - the issue in appeal before CESTAT prima facie appears to be covered and should be decided by the CESTAT while hearing the appeal – order set aside – matter remanded back to the CESTAT – Decided in favour of Assessee.

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• 2013 (10) TMI 497
  Benefit of Notification No. 6/2006 - The appellant is a manufacturer of water purification/filtration equipment – Held that:- There are two rates prescribed for the goods in the notification - The appellant chose the latter one and paid duty of 4% - Revenue has misread the notification and is trying to impose a condition, which does not exist - Serial No. 8-D of the notification no. 6/2008-CE as amended which prescribes a concessional rate of duty of 4% ad valorem on water filtration or water purification equipment - There is no dispute that the goods supplied by the appellant conform to this description - There is no condition prescribed against the Serial no. 8-D and in the condition column, the entry is blank – thus the appellant is eligible for the concessional rate of duty of 4% without satisfying any condition – Decided in favour of Assessee.

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• 2013 (10) TMI 496
  CENVAT Credit - issue of invoice without supply of material - Held that:- M/s. Bhagwati Trading Company, (as first stage dealer) were engaged in passing of inadmissible Cenvat Credit to various manufacturers/dealers by issuing invoices, without actually sending the duty paid goods shown as manufactured by M/s. Khemka Ispat Ltd. – They issue the cenvatable invoices to the manufactures of the goods and the second stage dealers - The invoices showed the goods manufactured by M/s. Khemka Ispat Ltd. - the cenvatable invoices on which the Cenvat Credit has been taken by M/s Anurag Alloys & Die Cast (P) Ltd. were not the genuine invoices as no goods manufactured by the manufacturer were supplied in these invoices - no credit is admissible to M/s Anurag Alloys & Die Cast (P) Ltd. Penalty - Imposition of Penalty under Rule 15 of Cenvat credit Rules r.w section 11AC of the CE Act – Held that:- There is no reason to interfere with this finding of the Commissioner (Appeal) in upholding penalty equal to inadmissible Cenvat Credit amount - there is no ground for interfering penalty imposed on M/s Jagdamba Metal Store also -the Order-in-Appeal was upheld – Decided against Assessee.

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• 2013 (10) TMI 495
  Waiver of Pre-deposit - collection of incentives from the customer - whether an amount collected in the name of duty of excise - the amount to be credited to the Government account under rule 9(2) of the erstwhile Central Excise Rules,1944 read with Section 11A and Section 11D of the Central Excise Act – Held that:- Following Kisan Sahkari Chini Mills Ltd. Vs CCE Meerut [2005 (3) TMI 116 - SUPREME COURT OF INDIA ] - They have cleared entire quantity of sugar during the material period as the additional entitlement under the incentive scheme at a concessional rate of duty vide notification No.130/83-ST - applicant mentioned duty @ Rs.17/- per quintal in their Central Excise Gate Passes - during the material period 1.10.91 to 31.3.92, the incentive amount was mentioned separately as incentive in the commercial invoices - Subsequently, the incentive amount was added to the value of sugar in the commercial invoice - there is not a single evidence that they have collected incentive amount as duty in any document and therefore Section 11D cannot be invoked - applicant has made out a prima facie case for waiver of pre-deposit of entire amount duty – Stay granted.

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• 2013 (10) TMI 494
  Valuation - sale thorough related persons – Applicability of Rule 9 of Valuation Rules - Extended period of limitation - Waiver of pre-deposit – Held that:- The same issue was the subject matter of the appeal filed by them before the Tribunal and this tribunal had taken a view that Rule 9 of Valuation Rules would not be applicable since the entire goods manufactured are not sold through related person - Rule 9 of Valuation Rules may not be applicable in this case in view of the fact that the entire quantity manufactured is not sold through related person - the question whether extended period could have been invoked again is also relevant and there are decisions to support this submission - the entire demand is beyond the normal period of limitation, the appellant has made out a prima facie case for waiver - the requirement of pre-deposit waived during the pendency – Stay granted.

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• 2013 (10) TMI 493
  Cenvat Credit of service tax paid on commission charged by commission agents, bank guarantee commission – Held that:- Banks are recovering the service tax which are paid in respect of bank guarantee charges and the bank guarantees are in respect of the manufacture, erection and commissioning of the turbines manufactured by the applicant - Prima facie the same is in respect of the business activity therefore applicant had a strong case in their favour. Credit of Service Tax paid by Commission Agents – Held that:- CCE, Ahmedabad Vs. Cadila Healthcare Ltd. [2013 (1) TMI 304 - GUJARAT HIGH COURT ] the credit of service tax which is paid by commission agents denied - commission agents directly concerned with the sales rather than sales promotion and such service provided by such commission agent would not fall within the purview of main or inclusive part of definition of input service as provided under Rule 2(l) of the CENVAT Credit Rules. Waiver of Pre-deposit – Time Barred Demand - The major portion of the demand is time-barred and demand of Rs. 12,68,136/- is within the normal period of limitation - Prima facie appellant has a strong case on the ground of time-bar - The applicants are directed to deposit the duty amount which is within the normal period of limitation - On deposit of the amount, pre-deposit of the remaining dues are waived – Partial stay granted.

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• 2013 (10) TMI 492
  Condonation of Delay – Held that:- Three opportunities were given to the appellant and they did not turn up - Even after receiving the Order-in-Appeal, no steps were taken to file the appeal in time - I also note that the preamble of the order itself specifies the time limit and the authority to whom the appeal is to be filed - copies of the medical certificates produced are one from a surgeon and is not clear from the certificate that he is a specialist on the subject - The second certificate is from a doctor from different place - the condonation of delay application does not merit consideration - the offer made by the Consultant to allow condonation with cost was accepted - the applicant is directed to deposit Rs. Ten thousand only with the Commissioner – Decided in favour of Assessee.

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• 2013 (10) TMI 491
  MODVAT/Cenvat credit – issue of invoice without supply of material - Penalty - Held that:- The statement of the authorized representative of Khemka reveals that with the loss of business in the year 2002, they entered into an arrangement with the first stage dealer for issuing invoices without the supply of goods so as to reflect some sale purchase books on accounts - the disputed period in the present appeal is February and March 2004. Rule 7(2) of Cenvat credit rule requires the recipient of the inputs to know the identity of the supplier of the goods, was second stage dealer, the rule stand satisfied by the manufacturer with Shri Amit Kumar proprietor of second stage dealer having deposed that they had in fact supplied to the manufacturer, payment for which were made by them in cheque. Recipient of the inputs is expected to know his immediate supplier and there is no further requirement to find out as to from where his supplier has procured the inputs - the confirmation of demand of duty and imposition of penalty on M/s. Faridabad Autocomp Systems and Super Trading Company set aside - the imposition of penalty of M/s. Ayushi Steels Company, even if the Revenue's case is accepted that they dealt only with the invoices without actually dealing with the goods even then no penalty can be imposed upon them inasmuch as the provision for imposition of penalty on the dealers were introduced vide Notification No.8/2007 CE (NT) - the period for the present case is prior to the date, the penalty imposed upon M/s. Ayushi Steels Company Pvt. Ltd. also set aside – Decided in favour of Assessee.

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• 2013 (10) TMI 490
  CENVAT Credit on inputs - Reversal - Computation - Waiver of Pre-deposit - The applicants are using inputs in the manufacture of dutiable as well as exempted shoes - Revenue was of the view that under the Rule 6(3)(b) of CENVAT Credit Rules, 2004 deduction on account of, sales tax, would be admissible only if it is paid - Held that:- The goods were cleared from the factory for ultimate sale from the depot and the applicant could not able to establish payment of sales tax, therefore, no deduction on account of sales tax claimed to have been paid, were admissible to them in computing the liability under Rule 6(3)(b) of the Cenvat Credit Rules, 2004. - Prima facie case is against the assessee - directed to make a pre-deposit of 25% of the duty confirmed - the amount already deposited would be allowed to be deducted from the said amount of 25% - Partial Stay granted.

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• 2013 (10) TMI 489
  MRP Based duty u/s 4A or Transaction value u/s 4 on clearance of shoes - Effect of Amendment SWM Rule to the definition of ‘retail packages’ and Rule 2A - Held that:- Prior to the amendment of the Standard Weights and Measures (Packaged Commodities) Rule,1977, the clearances made to industrial consumers/institutional consumers were falling outside the purview of in view of the specific provisions contained - The Tribunal has interpreted the relevant provision, Rule 34 of the said Rules, Relying upon Maxim Adhesive Tapes Pvt. Ltd. vs. CCE, Daman [2013 (6) TMI 238 - CESTAT AHMEDABAD] The provision of Sec.4A cannot be made applicable when the goods are cleared to industrial/institutional consumers and accordingly such clearances were held to be assessed under Section 4 of Central Excise Act, 1944 - Prima facie, it is a fact that the Rules have been amended from 13.01.2007, but the impact of the amendment needs detailed deliberation and analysis - the issue involved in the present case is a pure question of law and highly debatable one and apparently covered by a judgement of this Tribunal for pre-amendment era, the Applicant could able to make out a prima facie case for total waiver of pre-deposit of dues adjudged - all dues waived and its recovery stayed during pendency of the Appeal – Stay granted.

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• CST, VAT & Sales Tax

• 2013 (10) TMI 539
  Tax exemption - Sale of tree - Agricultural produce - Held that:- Appellate Assistant Commissioner was convinced of the expenditure incurred for reusing the trees, there was no material produced to prove that standing trees were cut and sold - Thereore, proper course herein is to set aside the order of the Sales Tax Appellate Tribunal and restore the matter to the file of the Assessing Officer to consider the claim of the assessee in proper perspective in the light of the materials produced. The assessee is directed to place all necessary materials that are in their possession, as far as cutting of trees are concerned and in support of the claim for exemption - Decided in favour of assessee.

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• 2013 (10) TMI 538
  Exemption u/s 3(B)(2-a) - Work contract - work of erection and commissioning of diesel engine generators - Held that:- assessee has no where stated in the appeal grounds or in reply that the work contract was executed from outside the State of Tamil Nadu and they purchased the materials and other connected parts and accessories from other States only for the purpose of job work undertaken by them with the Telecommunication department. In the circumstances, there was absolutely no material to substantiate the claim for deduction under Section 3-B (2-a) and the same was rightly rejected by the authorities concerned Penalty u/s 22(2) Held that:- Assessee charged sales tax at 12% as against 4% on sales to the Government department. Thus, the Tribunal held that the levy of penalty was in accordance with the provisions of law - Decided against assessee.

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• Indian Laws

• 2013 (10) TMI 529
  Granting Licence for establishing Distilleries under the Foreign Liquor (Compounding, Blending and Bottling) Rules, 1975 r.w Section 14 of the Abkari Act – Right to carry on trade or business in liquor – Held that:- Article 47 is one of the Directive Principles of State Policy which is fundamental in the governance of the country and the State has the power to completely prohibit the manufacture, sale, possession, distribution and consumption of liquor as a beverage because it is inherently dangerous to the human health - A citizen has no fundamental right to trade or business in liquor as a beverage and the activities, which are res extra commercium, cannot be carried on by any citizen and the State can prohibit completely trade or business in portable liquor and the State can also create a monopoly in itself for the trade or business in such liquor. LIQUOR POLICY - Liquor policy of State is synonymous or always closely associated with the policy of the Statute dealing with liquor or such obnoxious subjects - Monopoly in the trade of liquor is with the State and it is only a privilege that a licensee has in the matter of manufacturing and vending in liquor - It is trite law that a Court of Law is not expected to propel into “the unchartered ocean” of State’s Policies - State has the power to frame and reframe, change and re-change, adjust and readjust policy, which cannot be declared as illegal or arbitrary on the ground that the earlier policy was a better and suited to the prevailing situations. Situation which exited in the year 1998 had its natural death and cannot be revised in the year 2013, when there is total ban. DISCRETION AND DUTY - The powers, conferred on the Commissioner as well as the Government, have to be understood in the light of the Constitutional scheme bearing in mind the fact that the trade or business which is inherently harmful can always be restricted, curtailed or prohibited by the State, since it is the exclusive privilege of the State - State can always adopt a “restrictive policy”, even in cases where the applicants have satisfied all the conditions stipulated in the rules and the policy permits granting of licences - the satisfaction of the conditions laid down in 1975 Rules would not entitle an applicant as a matter of right to claim a distillery licence which is within the exclusive privilege of the State. MANDAMUS – TO ISSUE LICENCE - The High Court cannot direct the State Government to part with its exclusive privilege – Granting liquor licence is not like granting licence to drive a cab or parking a vehicle or issuing a municipal licence to set up a grocery or a fruit shop - Before issuing a writ of mandamus, the High Court should have, at the back of its mind, the legislative scheme, its object and purpose, the subject matter, the evil sought to be remedied, State’s exclusive privilege etc. and not to be carried away by the idiosyncrasies or the ipse dixit of an officer who authored the order challenged - applicant has failed to establish a legal right or to show that there is a legal duty on the Commissioner or the Government to issue a distillery licence. DISCRETIONARY ORDER – ARTICLE 14 – Held that:- The Respondent could lay a claim only if it establishes that a preferential treatment has been meted out to M/s Amrut Distilleries, Bangalore and M/s. Empee Distilleries, Madras while granting licences for establishing the respective distillery units in the Palakkad District on the ground of discrimination violating Article 14 of the Constitution of India - Respondent has prayed for another licence for it as well which cannot be claimed as a matter of right - Citizens cannot have a fundamental right to trade or carry on business in the properties or rights belonging to the State nor can there be any infringement of Article 14, if the State prefers other applicants for the grant of licence, during the pendency of some other applications, unless an applicant establishes a better claim over others - The learned single Judge as well as the Division Bench of the High Court was not justified in issuing a Writ of Mandamus directing the issuance of a distillery licence to the respondent – order set aside – Decided in favour of Petitioner.

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