TMI Tax Updates - e-Newsletter
October 15, 2014

Case Laws in this Newsletter:

Income Tax Customs Service Tax Central Excise Indian Laws

News

1. 25 Proposals of Foreign Direct Investment Amounting to ₹ 1546.12 Crore Approved

2. Indirect Tax revenue (provisional) collections during April-September 2014

3. RBI Reference Rate for US $

4. Index Numbers of Wholesale Price in India (Base: 2004-05=100), Review for the month of September, 2014

5. CONSUMER PRICE INDEX NUMBERS ON BASE 2010=100 FOR RURAL, URBAN AND COMBINED FOR THE MONTH OF SEPTEMBER 2014

Circulars / Instructions / Orders

Service Tax

1. 180/06/2014 –ST - dated 14-10-2014

Levy of service tax on activities involved in relation to inward remittances from abroad to beneficiaries in India through MTSOs- reg.

Highlights / Catch Notes

Income Tax

• Assessee Claims Unused Plant and Machinery Should Not Be Included in Business Assets, Resulting in Capital Loss.

  Case-Laws - AT : As the assessee has stated that the plant and machinery has never been used in the hotel right from the beginning, such plant & machinery cannot be considered as part of the block of asset of the assessee's business - loss on account of capital field - AT
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• Excise Duty Payments to Government Not Subject to TDS u/s 194C; No Contractor Involvement.

  Case-Laws - AT : TDS on amount of excise duty - Since the amounts are paid to the Government directly by assessee company - The question of covering the amounts under 194C does not arise - AT
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• Shareholders Agreement Key in Determining Allowability of Special Bonus Expenses u/s 37(1) of Income Tax Act.

  Case-Laws - AT : Treatment of special bonus expenses u/s 37(1) – the shareholders agreement is the basic document for determining the allowability or otherwise of the expenditure relating to special bonus paid - AT
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• Land Sale Classification: Future Potential Doesn't Change Agricultural Status at Sale Time.

  Case-Laws - AT : At the relevant point of sale of the land in question, the surrounding area was totally undeveloped and except mere future possibility to put the land into use for non-agricultural purposes would not change the character of the agricultural land into non- agricultural land at the relevant point of time when the land was sold by Assessee - AT
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• Section 10A of Income Tax Act Applies; Business Not Created by Splitting or Transfer.

  Case-Laws - AT : The assessee is not formed by splitting up or transfer to a new business and got registration even since 2002, the fact that it has been in existence ever since 1999, does not militate against the applicability of Section 10A of the Act - AT
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• AO's Failure to Invoke Section 145(3) Invalidates Use of Decreased Gross Profit Rate for Application.

  Case-Laws - AT : Addition on account of fall in GP - The AO has not invoked section 145(3) in its terms - Therefore, fall in G.P. rate cannot be made a reason for involving section 145(3) - AT
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• Court Rules: Assessing Officer Cannot Add Expenses Without Evidence, Avoiding "Fiction" on "Fiction.

  Case-Laws - AT : Without bringing on record any material or information in support of the estimate of household expenses made by the AO, no such addition can be made as it amounts to raising a “fiction“ to the “fiction“ which is not permissible - AT
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Customs

• Duty Drawback Claims Denied for Reconditioned or Refurbished Machines u/s 75 for Non-Compliance with Requirements.

  Case-Laws - CGOVT : Duty drawback claim - The export of imported machines by carrying out mere reconditioning / refurbishing operation without complying with substantial requirements of said Section 75, renders the said drawback claims inadmissible under Section 75.- CGOVT
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• Courier Agencies' Demand Limited to One Year Before Show Cause Notice with Authorization Proof Required for Earlier Periods.

  Case-Laws - AT : Authorization to be submitted by the courier agencies - prima facie, the demand can be limited only for a period of one year prior to issue of show cause notice, if authorization has been obtained by the appellants and the authorization relating to earlier periods could not be produced - AT
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Service Tax

• Sahara India TV Network's discharge of service tax is lawful, not a misuse of CENVAT credit.

  Case-Laws - AT : So long as Sahara India TV Network is a part and parcel of Sahara India Commercial Corporation Ltd. and they have received consideration for services rendered by the parent company and discharge service liability, the same cannot be said to be a wrong discharge of tax liability or misutilisation of cenvat credit. - AT
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• Indian Premier League cricket team's match participation agreement examined under Business Auxiliary Service; stay granted in favor of assessee.

  Case-Laws - AT : Business Auxiliary Service - Agreement for playing matches for Royal Challengers Bangalore in IPL - prima facie case is in favor of assessee - stay granted - AT
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• CENVAT Credit Approved for Techno-Economic Feasibility Study on Factory Rehabilitation Ordered by BIFR.

  Case-Laws - AT : CENVAT credit - Input service - service of preparing Techno-Economic feasibility of rehabilitation of the factory proposed by BIFR had been received by the appellant from SSI Capital in terms of the order of the BIFR - credit allowed - AT
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Central Excise

• Interest Liability Due to Duty Payment Delay Applies Even with Provisional Assessment, Regardless of Pre-Final Order Rectification.

  Case-Laws - AT : Interest demand - Delay in payment of duty - Liability to pay interest would accrue, even in the case of provisional assessment where the short payment of duty was made good before the final assessment order was issued - AT
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• Upward Price Revision at Depot Doesn't Affect Assessable Value u/s 4 of Central Excise Act.

  Case-Laws - AT : Demand u/s 11D - subsequent upward price revision and the goods were sold from the depot at a higher price - What happened to the goods subsequently does not influence the assessable value under Section 4 of the Act. - AT
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• Product "Rexona" likely classified under Chapter sub-heading 3401.10, not 3401.00 or 3307.30 as initially considered.

  Case-Laws - AT : Classification of “Rexona” under Chapter sub-heading No. 3401.00 or under 3307.30 - prima facie view at this stage that the applicant’s products are classifiable under Chapter sub-heading 3401.10 as claimed by the applicant - AT
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• No Need to Reverse Cenvat Credit If Inputs Result in Waste, Confirms Central Excise Case Decision.

  Case-Laws - AT : Cenvat Credit - emergence of waste - there cannot be a demand to reverse any Cenvat credit for the reason that a part of the input is covered in the waste that arises - AT
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Case Laws:

• Income Tax

• 2014 (10) TMI 349
  Validity of cross objection filed by the legal heir of the assessee - Authorization by the wife of the deceased assessee - Held that:- the demise of Sh. Sudhir Sareen with the request to bring Sh. Siddharth Sareen as his legal heir on record - The request was acted upon and assessment was concluded after bringing Sh. Siddharth Sareen as legal heir on record by the AO - the arguments of the CIT DR dehors facts cannot be accepted - Sh. Siddharth Sareen is accordingly taken as the sole legal heir of the Late Sh. Sudhir Sareen in the absence of any fact or evidence to the contrary placed on record by the Ld. CIT DR – Decided against revenue. Condonation of delay of 855 days - Whether on facts the delay of 855 days in filing the cross-objections can be condoned or not – Held that:- Sh. Sudhir Sareen was only physically unwell which did not make him mentally incapacitated as a little out of sync with how families are normally bound by emotions of love, care and consideration - The scenario of a family battling with natural tragedies on account of illness and subsequent demise resulting in a period of grieving, confusion and loss cannot be expected to exhibit a level of alertness towards its financial affairs - the delay of 855 days in filing the Cross objection is condoned. Status of the assessee - Resident & Ordinarily Resident or Non resident - Whether the status of the assessee can be varied for 2002-03 to 2008-09 assessment years where admittedly no incriminating material was found? - Held that:- The status on facts of the present case determined by the CIT(A) as NRI has been upheld as departmental appeals have been dismissed as admittedly nothing has been found in the search. The status change accordingly on facts was not correctly made by the AO. - Decided in favor of assessee. Inclusion of sum of being amounts remitted from abroad and a gift to the maternal grand- daughter Sesha Gupta out of his overseas bank account – Held that:- Since the additions has been deleted by the CIT(A) which stood made only on account of the status change made in the assessment order dehors facts and the Cross Objections filed are partly supportive of the impugned orders and the impugned orders in each of the years stands upheld in toto the Cross Objections filed are partly allowed – Decided in favour of assessee.

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• 2014 (10) TMI 332
  Reopening of assessment u/s 147 r.w section 148 – Reason to believe - Land situated within 8 kilometers of municipal limits of Jhansi and hence, being a capital asset within the meaning of section 2(14) of the Act and the gain arising on sale of such land will be chargeable to capital gain tax or not - Held that:- Following the decision in Shri Badam Singh Rajpali Vs. ITO [2012 (7) TMI 160 - ITAT, AGRA] - the reasons for reopening of assessment have been incorporated in the order, which is also reproduced above - The words “reason to believe” suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the ITO may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour - The Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section - The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court - the only information was that the assessee had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque for that amount - The information did not indicate the source of the capital gains which in this case were shares - There was no information which shares had been transferred and with whom the transaction had taken place - The AO did not verify the correctness of the information received by him but merely accepted the truth of the vague information in a mechanical manner - The AO had not even recorded his satisfaction about the correctness or otherwise of the information for issuing a notice u/s 148 - the AO has not satisfied the ingredients of section 147 of the Act in the reasons recorded for reopening of assessment - the AO has not correctly assumed jurisdiction u/s 147 / 148 of the IT Act – the order of the CIT(A) is set aside – Decided in favour of assessee.

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• 2014 (10) TMI 327
  Power of revision by Commissioner u/s 263 - Prejudicial to the interest of the Revenue or not – Held that:- The Tribunal had rightly found that after the property was developed in phases and the Assessee was partly compensated by giving the share assured under the agreement, later on, the Assessee decided to terminate the agreement and give up all the right, title and interest which vested in him in respect of the property - That was in lieu of payment of a sum of Rs. 3 crores and built up area of 2200 sq. ft. approximately comprising of two flats - The Tribunal has rightly understood this not as a joint venture or a development activity jointly undertaken but a pure investment in the project and for which the returns were assured in the form of 10% - The Assessee shared the costs to the extent indicated but this cannot in any manner be termed as an association with the project and particularly as a joint venture – these are the finding of fact and no substantial question of law arises for consideration – Decided against revenue.

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• 2014 (10) TMI 326
  Addition of on money received outside books of accounts – Assessment u/s 153A - Opportunity to cross examine not provided - Assessee contended that he has not received any extra consideration other than those specified in the agreement for sale – Held that:- The search and seizure operation were conducted at MIs. Rochem Separation System and Shri K.K. Goel - the payment of 'on money' was accepted by Shri K.K. Goel in his statement recorded u/s 132(4) of the Act - no opportunity was given to the assessee to cross examine the statement of Shri K.K. Goel - The assessment was made on 13.06.2008 whereas Shri K.K. Goel expired in May, 2008 and thus the assessee could not get opportunity to cross examine the concerned person - Representative of Shri K.K. Goel, i.e. M/s. Vinodkumar Bindal & Co., Chartered Accountants, in response to the summons issued by AO, appeared and stated that the purchaser never paid any on-money to the assessee and it was spent towards interior work in the flat as per the resolution of the Board of Directors of the company – Following the decision in ACIT Versus Rochem Separation Systems India (P) Ltd. & others [2011 (5) TMI 370 - ITAT, Mumbai] - an addition made on mere statement of the purchaser, i.e. K.K. Goel, HUF, cannot stand - the order passed by the CIT(A) is upheld – Decided against revenue.

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• 2014 (10) TMI 325
  Loss on sale of machinery disallowed u/s 14A - Whether the purchase of plant & machinery is under revenue field and therefore the loss arising from the sale of the same would constitute the revenue loss – According to the assessee, he had not used the plant & machinery for his business but had sold that as "scrap". - Held that:- the sale of such plant & machinery which was purchased along with the building but found to be unfit for use still to be sale of capital asset and not stock in trade - the loss arising from sale of plant & machinery would constitute capital loss As the assessee has stated that the plant and machinery has never been used in the hotel right from the beginning, such plant & machinery cannot be considered as part of the block of asset of the assessee's business. The argument of the assessee that the purchases of plant & machinery alone is solitary transaction in the nature of adventure in trade cannot be accepted - The sale by the official liquidator is for the entirety of land, building and plant & machinery and all of them would constitute capital asset in the hands of the assessee in his business of running a hotel - the argument that the plant & machinery purchased would constitute stock in trade is acceptable and the loss on sale should be assessed as capital loss – Decided in favour of revenue.

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• 2014 (10) TMI 324
  Unexplained credit u/s 68 – Held that:- This is only an isolated transaction in the relevant bank account, but as far as the assessee is concerned, it is demonstrated that the assessee has received the money through banking channels, viz. through that account - The creditor might have declared smaller amounts of income in the returns filed, but merely on that count alone, credit-worthiness of the creditor cannot be brushed aside, as she may be having receipts by way of agricultural income and capital gains which are tax free - Those factors may give rise to a doubt as to the genuineness of the transaction, but cannot clinch the issue against the assessee - The addition has been made by the Revenue authorities by expecting the assessee to establish the source of the source, which is not permissible under law - it may be in the hands of the creditor, if she is not able to explain the credit in her bank account, but not in the hands of the assessee, who has discharged the onus on him, by demonstrating that the amount in question has been received by him from the bank account of the creditor, establishing not only identity, but also the credit-worthiness of the creditor and the genuineness of the transaction – the order of the CIT(A) is set aside – Decided in favour of assessee. Capital gains addition – Whether the capital gains arising out of a property given for development are liable to be taxed - Held that:- Year of assesability of capital gains arising out of a development agreement, depends more importantly terms and conditions of the development agreement and flow of consideration in terms of the development agreement - the development agreement has not envisaged any consideration to be passed on to the land owner, viz. the assessee, at the time of signing of the development agreement - The development agreement categorically declared the assessee and his wife to be the owners of the property being developed until the completion of all the development work and till the handing over of the completed portion coming to the share of the assessee and his wife, with the title in relation to the other constructed areas being transferred by the assessee himself, to the nominees of the developer - The development agreement has specifically provided that the possession handed over to the developer by the land owners was only a permissive one, for the limited purpose of developing the property in terms of the agreement, and the same shall not be construed or treated as part performance of the agreement u/s 53A of the Transfer of property Act. The title over the property continues to rest with the land owners irrespective of handing over of the possession to the developer, and passes from the land owners only on the completion of the construction by the developer and registration of the completed flats in favour of the nominees of the developer, and does not indicate/prescribe any consideration in terms of money or otherwise flowing to the land owners before the completion of construction and handing over of constructed area coming to the share of the land owners, by the developer, it is not correct for the Revenue authorities to say that the consideration flowed to the assessee on account of the expenditure incurred by the developer on the development of the property - the capital gains have to be brought to tax only in the AY 2007-08, when the development of the property in terms of the development agreement has been completed and the constructed area coming to the share of the land owners has been handed over by the developer – Decided in favour of assessee. Addition u/s 40(a)(ia) – Held that:- There is a change in the version of the assessee as to the nature of the payment made by her to Dr. K. Ramchandra - While the payment was claimed in the first instance as consultancy charges, and the same stood disallowed in the original assessment proceedings u/s 40(a)(ia) of the Act, in the return filed in response to the notice u/s.153A of the Act, the disallowance has not been offered to tax, and in the assessment proceedings that ensued assessee came with the plea that what was paid was by way of fixed amount of salary and not consultancy charges - since such consultancy charges were paid without complying with the TDS provisions, the AO made disallowance of the amount u/s 40(a)(ia) of the Act, while originally completing the assessment – the disallowance made in terms of u/s 40(a)(ia) of the Act, as the income of the assessee, even in the assessment proceedings initiated, subsequent to the search action, by issuance of notice u/s 153A of the Act – Decided against assessee. Addition u/s 69 – Held that:- The wills of testament on which reliance was placed by the assessee for explaining the jewellery have been found/furnished by the assessee at the time of search - The wills found at the time of search may not be registered documents - But non-registration of the will by itself does not warrant any adverse inference against the assessee - the fact that a will was found at the time of search itself, leaves no scope for implying it to be a fabricated or non-genuine document, and being a document produced spontaneously to substantiate the contention of the assessee while explaining the jewellery found, leads one to believe it to be an authentic one, in the absence of any material found to suggest the non-genuineness of such a document - That reasoning given is also not correct because the averments made in the will, free English translation of which has been furnished to us, speak otherwise and state that the assessee is only grand-daughter of the deponent, Dr. G. Lakshmamma - The other averments made such as the Lakshmamma, on account of her old age, staying with the assessee, who alongwith other family members, including her husband, Dr. K. Ramachandra and daughter, Chetana taking care of her and her husband, Late Venkataiah 1995, and her continuing to stay with the assessee and her family even after the death of her husband, only justify the action of the deponent in bequeathing her entire jewellery in favour of the assessee and her daughter - there is no justification to disbelieve the version of the assessee – Decided in favour of assessee.

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• 2014 (10) TMI 323
  Revision u/s 263 – Held that:- Even though AO made an enquiry about the amount claimed in the course of assessment, the issue is not examined in its correct perspective by the AO - First of all, whether the entire amount is assessee’s liability or not is required to be examined and further if it is considered as liability to be discharged by assessee, whether the entire amount requires to be claimed in the year under consideration also was not examined - assessee paid an amount to the Excise authorities directly by way of cheques/DDs during the year and the balance interest has been paid subsequently, but not in the year under consideration - to the extent of interest payable provided in the books of accounts are to be examined under provisions of section 43B - There seems to be no enquiry on this aspect - to the extent of invoking jurisdiction by CIT u/s 263, the order of the CIT is upheld that AO has not examined the issue in correct perspective, therefore, these proceedings under section 263 to that extent are upheld. - Decided against the assessee. Genuineness of payments - Disallowance u/s 40(a)(ia) - Manufacturing companies made any profit on account of payments or not – Held that:- The transactions are so arranged that excise duty was paid first and then claim as refund later - There is evidence on record that assessee was providing funds to the OCMs for payment of excise duty which as and when refunded were passed to Assessee company/ or to the bank who provided loans as per arrangement - Consequent to the withdrawal of the notification, those assessees have become liable to pay the excise duty and since they were only getting service cost for manufacturing cigarette, the liability in a way is passed-on to assessee company - whether the amounts were paid as compensation or whether amounts are paid for business expediency or against the notice issued by Excise Department to Assessee, the fact is that ultimate liability is that of assessee company. In that view, assessee’s claim of entire amount being paid directly to the Excise Department is to be accepted - ultimate liability is that of assessee company as the cigarettes were manufactured at the instance of Assessee company and any excise duty liability is on Assessee company - assessee has claimed the excise duty liability correctly as a business expenditure in the year under consideration. Since the amounts are paid to the Government directly by assessee company - The question of covering the amounts under 194C does not arise - as submitted by Assessee the amounts paid to the contract manufacturers for manufacturing the cigarette were already subjected to TDS - These amounts paid are not to be paid to the OCMs as part of manufacturing charges, but it is a liability arising because of statutory levy by the Government and ultimately borne by assessee company, which on facts of the case was discharged by assessee company by direct payment and not routed through the four OCMs - amounts cannot be considered as a liability as per provisions u/s 194C - provisions of section 40(a)(ia) does not arise – Decided in favor of assessee. Whether assessee has discharged the balance of the interest provided at the end of the year u/s 43B – Held that:- Excise duty liability is to be considered under provisions of section 43B - Even though assessee contended that this amount is a compensation paid to the four contract manufacturers, that arguments can be negatived, these four companies are front companies and they have immediately closed down the operations within few days on withdrawal of benefits - The promptness with which the units went into commercial production and the fact that most of the machinery was also provided on hire by assessee company and also assessee company provided finance for payment of tax which were refunded as admitted by assessee itself indicate that those companies are only front companies for assessee company for manufacturing cigarette at a low cost availing the benefit given by the Government of India at that point of time to the companies in North-East - Since the liability has come on to Assessee by virtue of withdrawal of notifications and as part of the agreement, the amounts are to be considered as direct liability of assessee company - Assessee also received notices from Excise department for discharge of liability. Provisions of section 43B are applicable, since excise duty liability was being discharged by assessee company - Interest amount on such levy also is to be examined in the light of provisions of section 43B - since the payment details of interest liability is not available on record, the matter is to be remitted back to the AO to examine whether any disallowance is required to the extent of interest amount provided at the end of year, if paid immediately as provided u/s 43B - the amount has been paid during the year, the amount is correctly allowed by the AO even though he did not examine it completely - the directions of CIT is modified given in the order u/s 263 and the AO is directed to examine the amount of interest provided under the provisions of section 43B - If the same is not discharged under the provisions, it may require disallowance u/s 43B – Decided partly in favour of assessee.

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• 2014 (10) TMI 322
  Accrual of income - Difference in gross receipts as per TDS certificates vis-à-vis as per books of account – Held that:- There was a difference in the amount of payments as mentioned in TDS certificate of RSMM Ltd. and the receipts shown in the books of accounts maintained by the assessee - the assessee explained the difference through reconciliation statement which was forwarded by the CIT(A) to the AO for his comments - nothing is brought on record to substantiate that the explanation along with reconciliation statement furnished by the assessee was incorrect – the order of the CIT(A) is upheld – Decided against revenue. Miscellaneous expenses disallowed – Held that:- The gross profit rate declared by the assessee was progressive in comparison to the preceding years and the AO had not pointed out any specific instance where the expenses were not incurred for the business purposes or claim of the assessee was bogus and non-genuine - the addition made by the AO on the basis of assumption and presumption was rightly deleted by the CIT(A) – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (10) TMI 321
  Treatment of special bonus expenses u/s 37(1) – Held that:- The payment of special bonus was disallowed by the AO on the ground that the assessee did not produce the full copy of the shareholders agreement which is the basic document for determining the allowability of the payment of special bonus - Despite being asked by the Assessing Officer the assessee did not produce the same on the ground that the same was not available at the time of assessment proceedings - assessee submitted that given an opportunity the assessee will produce the shareholder’s agreement before the AO which could not be produced before the lower authorities since the same was not available at the relevant point of time - the shareholders agreement is the basic document for determining the allowability or otherwise of the expenditure relating to special bonus paid, the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of assessee. Reduction of claim of deduction u/s 10B – Interest as income derived from eligible business – Held that:- Since the assessee has not justified before the AO the reasons for not excluding the other income while working out the exemption u/s.10B and since nothing is coming out of the records as to what has happened finally in the preceding assessment years, therefore, the matter is to be remitted back to the AO for passing a speaking order – Decided in favour of assessee.

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• 2014 (10) TMI 320
  Validity of proceedings initiated u/s 153C – Addition of STCG – Held that:- The seized material on the basis of which the AO has initiated the proceedings u/s 153C - A reference to the seized material indicates that the same is an account relating to Sri S. Venkateswara Rao in which certain payments have been recorded – the seized material was not seized from assessee but from Sri D. Nagarjuna Rao in whose case search and seizure operation was conducted u/s. 132 - seized material has neither any reference to the assessee, even remotely, nor to the property sold by her - the seized material cannot be said to be belonging to assessee - Hence the pre-condition for initiating proceedings u/s 153C is not satisfied – following the decision in M/s Shouri Constructions, T. Jaipal Reddy Versus Asst. Commissioner of Income-tax [2013 (9) TMI 486 - ITAT HYDERABAD] - as the seized material was neither seized from assessee nor has any reference to her or her property, it cannot be said to be belonging to assessee - the proceedings initiated u/s. 153C is not valid - the assessment order passed in is also invalid - the AO without allowing an opportunity to assessee to cross examine Sri S. Venkateswara Rao was not correct in making the addition by relying upon the statement of Sri S. Venkateswara Rao - The AO having not brought any other corroborative evidence on record to establish that assessee had actually received the sale consideration, the computation of short term capital gains made by him cannot be sustained. Unexplained investment in purchase of property – Held that:- It is not justified in considering the fact that assessee has explained the source of such investment by producing necessary evidence - assessee at the time of assessment proceedings as well as before the CIT(A) had stated that the amount of Rs. 3 lakhs was received from her uncle who is an agriculturist and she has also filed a confirmation in support of such claim - it is not understood what more supporting evidence assessee could have produced in support of her claim - When assessee has explained her source by producing evidence in the form of confirmation it is duty of the Departmental authorities to make enquiry and ascertain whether assessee's claim is correct or not - assessee's claim cannot be rejected merely on doubts and suspicion - the addition of Rs. 3 lakhs sustained by the CIT(A) is to be deleted – Decided in favour of assessee.

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• 2014 (10) TMI 319
  Claim of deduction u/s 54F - capital gain from the sale of land - agriculture land or not - intention of the assessee - adventure in the nature of trade or not – Held that:- Following the decision in ACIT, Central Circle-5, Hyderabad vs. M/s. Bhavya Constructions P. Ltd. [2014 (9) TMI 85 - ITAT HYDERABAD] - the gain on sale of an agricultural land would be exigible to tax only when the land transferred is located within the jurisdiction of a municipality - The fact that all the expressions enlisted after the word municipality are placed within the brackets starting with the words 'whether known as' clearly indicates that such expressions are used to denote a municipality only, irrespective of the name by which such municipality is called - it is important to note that what was the intention of Assessees at the time of acquiring the land or interval action by Assessee between the period from purchase and sale of the land and the relevant improvement/ development taken place during this time is relevant for deciding the issue whether transaction was in the nature of trade. In the instant case, at the relevant point of sale of the land in question, the surrounding area was totally undeveloped and except mere future possibility to put the land into use for non-agricultural purposes would not change the character of the agricultural land into non- agricultural land at the relevant point of time when the land was sold by Assessee The intention of Assessee from the inception was to carry on agricultural operations - Merely because of the fact that the land was sold in a short period of holding, it cannot be held that income arising from the sale of land was taxable as profit arising from the adventure in the nature of trade or capital gain - The period of holding should not suggest that the activity was an adventure in the nature of trade. The land is not situated within the Qutubullapur municipality, but, the same situated in the Dundigal village and the evidence brought on record suggest that the land is an agricultural land, hence, it is not liable for taxation - the addition made is deleted in all the appeals - No evidence suggests that Dundigal village falls within Qutubullapur Municipality and also this Qutubullapur Municipality has not notified in the year u/s 2(14)(iii) and Qutubullapur Municipality abolished and merged with Municipal Corporation of Hyderabad with effect from 16/04/2007 - when the land which does not fall under the provisions of section 2(14)(iii) of the IT Act and an assessee who is engaged in agricultural operations in such agricultural land and also being specified as agricultural land in Revenue records, the land is not subjected to any conversion as non-agricultural land by Assessee or any other concerned person, transfers such agricultural land as it is and where it is basis, such transfer like the case before us cannot be considered as a transfer of capital asset or the transaction relating to sale of land was not an adventure in the nature of trade so as to tax the income arising out of this transaction as business income - as the land sold is not only agricultural in nature but is also situated beyond 12 kms from the limit of a municipality notified by the central govt. - land sold by assessee not being a capital asset, the gain derived there from is not taxable at the hands of Assessee – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (10) TMI 318
  Eligibility to claim deduction u/s 10A – Software Technology Park (STPI) Unit – Held that:- Following the decision in Nagesh Chundur Vs. CIT [2013 (9) TMI 883 - MADRAS HIGH COURT] - The assessee took advantage of the scheme notified by the Government of India in the Ministry of Commerce and Industry of the "software technology park" and sought for registration as STPI on 2002 - In order to claim deduction, an undertaking in hardware technology park or software technology park must be in existence commencing its production on or after the 1st day of April, 1994 - the assessee is not formed by splitting up or transfer to a new business and got registration even since 2002, the fact that it has been in existence ever since 1999, does not militate against the applicability of Section 10A of the Act - Section 10A(2)(i) of the Act shows that it has relevance to industry that has begun to manufacture or produce articles or things or computer software on or after the 1st day of April, 1994. The moment the assessee satisfies this clause and it goes for the second requirement namely, registration as a Software Technology Park in accordance with the scheme of Government of India, the assessee stands benefited by the provisions of Section 10A of the Act -Decided against revenue. Amount spent on Work in Progress deleted - Held that:- CIT(A) did not adjudicate any such issue in those years - CIT(A) has accepted the contentions of the assessee that the work is normally completed within 12 years without causing any verification of the claim - it is also the contention of the assessee before CIT(A) that the AO has made the addition without providing an opportunity to the assessee – the matter is to be remitted back to the AO for fresh adjudication – Decided in favour of revenue.

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• 2014 (10) TMI 317
  Deduction u/s 80HHC - Business of mining and export of marble blocks - Reduction of 90% of export incentive – Held that:- CIT(A) has correctly allowed the claim of deduction u/s 80 HHC – following the decision in The Commissioner of Income Tax and others Versus M/s. Aravali Minerals & Chemical Industries Pvt. Ltd. and others [2013 (6) TMI 190 - RAJASTHAN HIGH COURT] - Tribunal was justified in allowing the deduction u/s 80HHC of the Act regarding export of cut and polished marble blocks during relevant years by the assessee - since the Circular No.693 dated 17th November 1994 does not adversely affect claims of the assessee and the assessees are entitled to benefit of deduction u/s 80HHC. Addition on account of fall in GP – Held that:- The G.P. rate in this year has been on lower side - the decrease in G.P. rate stands explained by the undeniable reasons that there is heavy increase in purchase price, freight cost and export cost. The books of accounts were lost and assessee has filed an FIR - The assessee has produced particulars of blocks-purchased and purchase bills were made available vide letter dated 05.12.2005 - The AO has not invoked section 145(3) in its terms - Therefore, fall in G.P. rate cannot be made a reason for involving section 145(3) – Decided against Revenue.

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• 2014 (10) TMI 316
  Maintainability of appeal – Tax effect less than Rs. 4 lacs - Whether the appeal of revenue, which is below the prescribed limit of tax effect in view of the Board's Instruction No.5/2014 issued on 10.07.2014 revising the monetary limits for filing of appeals by the Department before ITAT is maintainable or not – Held that:- As decided in CIT Vs M/s. P. S. Jain & Co. [2010 (8) TMI 702 - Delhi High Court] - the Board has rightly taken a decision not to file references if the tax effect less than the amount prescribed - The same policy for old matters needs to be adopted by the Department – also in The Commissioner of Income Tax v. Smt. Vijaya V. Kavekar [2013 (2) TMI 451 - Bombay High Court] the applicability of circular was considered and the monetary limit was increased and appeals were to be filed only in cases where the tax effect exceeded Rs. 4 Lacs - no appeals would be filed in the cases involving tax effect less than Rs. 4 Lacs notwithstanding the issue being of recurring nature - the prevailing instructions fixing the monetary limit for the tax effect would hold good even for pending cases – revenue could not point out any of the exceptions - this being a low tax effect case, the appeal cannot be admitted – Decided against revenue.

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• 2014 (10) TMI 315
  Revision u/s 263 – Reopening of assessment u/s 147 – New issues can be introduced or not – Held that:- Income chargeable to tax, in terms of bogus gift has escaped assessment as per provisions of s.147 of the I.T. Act, 61 - Therefore action u/s 147 is being initiated and notice u/s 148 is being issued and any addition made beyond the issue covered by the said "reasons recorded" or any other issue incidental to the same is wholly illegal - the assessee's contention that scope of revision under section 263 in relation to an assessment made under section 147 is circumscribed by issues directly arising out of "reasons recorded" and assessment made in pursuance thereof - New issues cannot be roped-in in the proceedings u/s 263. Addition of gifts and expenses – Held that:- In relation to the said gifts aggregating Rs. 6,00,000/- and also earlier gifts of Rs. 4,00,000/- , which had already been included in the revised return filed on 28.03.2003, the AO had added further sums aggregating Rs. 50,000 - It is stated that first of all the gifts were genuine and not managed and in any case, no material has been brought on record to justify the addition. Disallowance out of telephone expenses – Held that:- Assessee has debited Rs. 58,360/- on account of Telephone Expenses - the expenses in this respect were not open to full verification and log book was being maintained in respect of these expenses - a disallowance is being made to cover up for any personal use of Telephone. Ad hoc addition of low withdrawals for house hold expenses – Held that:- Without bringing on record any material or information in support of the estimate of household expenses made by the AO, no such addition can be made as it amounts to raising a "fiction" to the "fiction" which is not permissible – following the decision in Raj Kumar Jain vs. Asstt. CIT [1994 (5) TMI 234 - ITAT ALLAHABAD] - once the entire assessment is open before the AO after validly reopening the assessment, then the jurisdiction of the CIT u/s 263 of the Act would extend to entire assessment order and cannot be confined to the items which formed part of reasons recorded for reopening of assessment – Decided against assessee. Suppressed sales – Held that:- CIT(A) rightly was of the view that the sale is consignment sale and the commission income of such consignment business is recorded in the books of the assessee which has not been questioned and this is continuing from year to year - the reconciliation furnished by the assessee seems to be valid and there is no adverse finding in respect of the explanation of the assessee on this issue given by the AO. Interest paid on unsecured loan – Applicability of section 40A(2) – Held that:- The assessee has made total sales of Rs. 239.81 lac to M/s Shiva Tea Company and the entire outstanding debit balance in the account of the firm is against sales made during the year under consideration – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (10) TMI 314
  Reopening of assessment proceedings u/s 147 – Addition u/s 68 and 69 – Genuineness of loan taken - Held that:- The reopening has been done only on the basis of the statement and disclosure petition filed by Shri Suresh Kejriwal - This so-called statement and disclosure are the foundation along with the appraisal report - a perusal of the statement from Shri Kejriwal shows that this is the statement taken in the course of survey - This statement loses its evidentiary value in so far as the statement recorded in the course of survey has no conclusive evidentiary value. It is not recorded under oath - the reference to the statement recorded from Shri Kejriwal for the purposes of reopening in the case of the assessee again fails without a foundation, as the assessee’s name is nowhere referred to in the statement recorded on the confessional disclosure - even if an attempt to protect the reopening is made by reference to the disclosure made by Shri Kejriwal even there, there is no reference to the assessee - prima facie, there is no live link nor direct nexus to the statement of Shri Kejriwal of having provided any accommodation entry to the assessee - the reopening is liable to be held to be bad in law. Relying upon Income-Tax Officer, I Ward, Distt. VI, Calcutta, And Others Versus Lakhmani Mewal Das [1976 (3) TMI 1 - SUPREME Court] - reopening of assessment in the case of the assessee for both the assessment years stand cancelled and the assessment orders passed for both the assessment years as a consequence of such reopening also stand cancelled - revenue has not been able to produce any evidence to show that the loan taken by the assessee is an accommodation entry - There is neither any statement nor documentary evidence to question the genuineness of the loan taken and repaid by the assessee – there is no reason to accept the submissions of the department that the additions are required to be made, as suggested by the department - the genuineness of the loan transaction of the assessee with M/s. Saket Vinimay Pvt. Ltd. is liable to be treated as a genuine transaction and the additions upheld by the CIT(A) are to be set aside – Decided in favour of assessee.

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• Customs

• 2014 (10) TMI 333
  Import of Sodium Cyanide - non production of the CIB certificate as required in terms of the provisions under Section 3(e) of the Insecticide Act, 1968. - Confiscation of goods - Redemption fine - Penalty u/s 112 - Held that:- Provisions of the Insecticides Act provide for registration being taken by any person desiring to import or manufacture any insecticide, may apply to the Registration Committee for the importation of such insecticide. It is further provided that where any person referred to in the preceding proviso fails to make an application under that proviso within the period specified (seventeen months), he may make such application at any time thereafter on payment of a penalty as specified. Further Section 17 of the Insecticides Act has provided no person shall, himself or by any person on his behalf, import or manufacture any insecticide except in accordance with the condition on which it was registered under the Insecticides Act, the Legislation has used the word manufacture i.e. manufacture or home consumption under Section 17 of the Insecticides Act, read with para 2.36 of the Foreign Trade Policy 2009-2014. It is very clear that restricted goods may be imported under Customs Bond for the purpose of re-export, the provision of the Insecticides Act is not attracted. I follow the view taken by the Hon'ble High Court of Kerala in the case of Maliakkal Industry Enterprises (2013 (8) TMI 100 - KERALA HIGH COURT), which is also affirmed by clarification dated 23.06.2003, issued by DGFT, Ministry of Commerce & Industry - Decided in favour of assessee.

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• 2014 (10) TMI 330
  Authorization to be submitted by the courier agencies - Proceedings were initiated on the ground that these courier agencies who are authorized to act as couriers were importing unaccompanied baggages of passengers and goods intended for trade/business in the guise of bona fide gifts, in order to illegitimately avail the benefit of duty free provisions granted for bona fide gifts under Notification No.171/1993-Cus. dated 16.9.1993 read with CIECR. - whether Revenue can demand duty for beyond one year when the Regulation itself requires authorization should be kept only for one year - Held that:- prima facie, the demand can be limited only for a period of one year prior to issue of show cause notice, if authorization has been obtained by the appellants and the authorization relating to earlier periods could not be produced. Therefore what becomes important is that a proper conclusion as to whether authorizations were available, whether authorizations were obtained, whether authorizations were handed over to customs and there is also a dispute on the issue as to whether the officer who received the authorization and other documents has to be cross-examined or not. Therefore, the Commissioner concerned is requested to ensure that the officers in airport should ascertain whether documents were recovered from these agents and if available, appellant should be provided with copies. If not, we also do not find any harm in permitting cross-examination of the officers whom the appellants claim to have handed over the documents, if requested for. it would be appropriate that the matter should be remanded at this stage itself. Accordingly, all the impugned orders are set aside and the matters are remanded for fresh decision on merits - Decided in favour of assessee.

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• 2014 (10) TMI 329
  Duty drawback claim - Section 75 of the Customs Act, 1962 - Import of second hand machines - Since these press machines could not be installed, the applicants withdrew the same from the EPCG Scheme and paid the applicable Customs Duty of Rs. 2,18,50,325/- and appropriate interest amounting to Rs. 61,62,413/-. On such uninstalled press machines, the applicants carried out various operations viz. refurbishing, painting, modifications, rewinding works, etc. and thereafter, the same were exported in CKD/SKD condition by classifying them under Customs Tariff Item 8462 29 10, under UT-1 Bond, under claim of Duty Drawback. - Their applications were rejected by the original authority. Commissioner (Appeals) upheld the impugned Order-in-Original Held that:- The applicant has contended that process carried out by them in the imported capital goods can be considered as input used in the manufacture of finished product i.e. reconditioned machine. As observed in para above, the provisions of Section 75 unambiguously state that drawback under Section 75 is available only on imported materials used in manufacture of final product. In this case the impugned goods were capital goods i.e. imported second hand machinery on which some operations were claimed to be carried out. Whereas the applicant had no Central Excise Registration for manufacture of such machines. No imported materials were used in processing of impugned goods so as to make the impugned goods eligible for drawback under Section 75 of the Customs Act, 1962. The export of imported machines by carrying out mere reconditioning/refurbishing operation without complying with substantial requirements of said Section 75, renders the said drawback claims inadmissible under Section 75. There is specific provision of claiming drawback on re-exported goods under Section 74 which applicant has failed to avail. Applicant has heavily relied upon Circular No. 57/95-Cus., dated 30-5-1995, wherein the scope of Section 75 has been enlarged to include admissibility even for goods processed or on which any operation has been carried out in India, in view of the definition of manufacture. Government observes that any such enlargement of scope of Section 75 has to be seen in light of basic provision of Section 75. In this case the repaired/refurbished capital goods were exported and no imported materials are used in the manufacture/processing of exported goods. Since the instant claims do not fall in the ambit of Section 75 of Customs Act, 1962, the provisions of said circular are not applicable to this case. instant drawback claims are not covered by the provisions of Section 75 of Customs Act, 1962 and lower authorities have rightly rejected the said duty drawback brand rate fixation applications. Government finds no infirmity in the impugned orders and therefore uphold the same - Decided against appellant assessee.

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• Service Tax

• 2014 (10) TMI 348
  Condonation of delay - Penalty u/s 76 - Held that:- Commissioner is empowered to condone the delay for one month in addition to the statutory time-limit of two months, pursuant to the amendment inserted to Section 85 of the Finance Act, 1994, which have been made effective w.e.f. 28.08.2012, and applicable to the orders passed thereafter. Undisputedly, in the present case, the Order is passed on 03.05.2012, accordingly, the said provision is applicable. In view of the above position and since the ld. Commissioner is empowered to condone the delay upto one month. I do not find merit in the present Appeal. - Decided against assessee.

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• 2014 (10) TMI 347
  Condonation of delay - Appeal filed beyond period of 3 months - Held that:- appellant has filed the appeal on 20.03.2014 while the appeal should have been filed on or before 17.01.2013 and seek the condonation of delay. We are of the view that the appeal filed beyond the period that could be condoned by the first appellate authority could not have been entertained and disposed of by him, is the law which has been settled by the apex Court in the case of Singh Enterprises - [2007 (12) TMI 11 - SUPREME COURT OF INDIA] - Decided against assessee.

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• 2014 (10) TMI 346
  Waiver of pre deposit - payment of service tax by demerged company - The department is disputing the payment by Sahara India TV Network and insists that the payment should have been made by Sahara India Commercial Corporation Ltd. only and not by Sahara India TV Network, Mumbai, since it is only a division of the former. - Held that:- From the show cause notice, it appears that the charge against the appellant is that Sahara India TV Network which is a division of Sahara India Commercial Corporation Ltd., cannot discharge the tax liability on behalf of Sahara India Commercial Corporation Ltd. We do not find any provision in law which supports this proposition. So long as Sahara India TV Network is a part and parcel of Sahara India Commercial Corporation Ltd. and they have received consideration for services rendered by the parent company and discharge service liability, the same cannot be said to be a wrong discharge of tax liability or misutilisation of cenvat credit. Thus the appellant has made out a prima facie case for waiver of the dues. Accordingly we grant unconditional waiver of the dues adjudged against the appellant and stay recovery thereof during the pendency of the appeal - Stay granted.

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• 2014 (10) TMI 345
  Waiver of pre deposit - Business Auxiliary Service - Agreement for playing matches for Royal Challengers Bangalore in IPL - Held that:- Payment of USD 50,000 is for playing 20 matches and if the player deliberately absents himself or does not give a proper reason for not playing the amount will be deducted proportionately. The amount payable directly relates to number of matches played. Prima facie it appears that amount paid is mainly for playing cricket and the amount is based on number of matches. The dominant intention of both the parties in the agreement appears to be that the player has to play cricket and wear the logo and other things but the main objection of agreement is to ensure that the appellant played as per the requirement of franchisees. At this stage in our opinion, appellant has made out a prima facie case in his favour and accordingly there shall be waiver of pre-deposit and stay against recovery during the pendency of appeal - Stay granted.

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• 2014 (10) TMI 344
  GTA service - Restospective amendment to file returns under Section 71A - Held that:- demand has been confirmed under Section 73 of the Finance Act. At the relevant time, demand under Section 73 could be made only from persons filing the returns under Section 70. In the case of service recipient, the requirement of filing returns was introduced under Section 71A by Finance Act, 2003, retrospectively. And thereafter Section 73 was amended vide Finance Act, 2004, with effect from 10-9-2004 which provided for demand of Service Tax and confirmation thereof under Section 73. In the present case, the show-cause notice was issued in November 2002 and at that time, Section 73 did not provide for demand of Service Tax from recipients of service. In view of the above, the demand and its confirmation are not sustainable in law - Decided in favour of assessee.

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• 2014 (10) TMI 343
  Classification of service - Intellectual property service or Consulting Engineer’s Service - Royalties paid to appellants - Held that:- From a perusal of the agreement, it is seen that the technical know-how supplied by the appellant consisted of the patents, secret information, licence fee for use of trade mark and so on. These fall under the category of Intellectual Property Rights which came under the tax net only in 2004. The period in dispute is 1999-2002 which is well before the levy of service tax on Intellectual Property Rights. Therefore, the appellant is right in contending that the demands are not sustainable in law as the services provided do not come under the category of ‘Consulting Engineer’s Service’ - Stay granted.

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• 2014 (10) TMI 342
  Service tax on activity of lottery business - Service Tax on the lottery business was not applicable before May 2008 - Held that:- period covered by adjudication was 1-7-2003 to 15-11-2003. Tribunal has advantage of reading the law laid down by Apex Court on the subject of implication of an explanation appearing as a substantive provision in statute book in the case of UOI v. Martin Lottery Agencies Ltd. - [2009 (5) TMI 1 - SUPREME COURT OF INDIA]. It has been held that by an explanation, a substantive law may also be introduced and if such law is introduced, it will have no retrospective effect. Tribunal at the stage of stay hearing holds good and gets support of law declared by Apex Court. Therefore, following the Apex Court decision in the case of Martin Lottery Agencies Ltd. (supra) - Decided in favour of assessee.

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• 2014 (10) TMI 341
  Denial of CENVAT Credit - inputs were issued by the service provider in the name of their head office whereas the credit stands taken by their unit located at Mohali - Held that:- There is otherwise no dispute about the receipt of the service, service tax paid on the same and utilisation of the services. In a nutshell the dispute involves around the invoices being issued in the name of head office instead of being in the name & address of the appellant - procedural violation cannot result in denial of the substantive right of Cenvat credit especially when there is no dispute about the same. Accordingly, I set aside the impugned order and allow the appeal with consequential relief to the appellant - Decided in favour of assessee.

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• 2014 (10) TMI 331
  Denial of CENVAT credit - Input service - service of preparing Techno-Economic feasibility of rehabilitation of the factory proposed by BIFR had been received by the appellant from SSI Capital in terms of the order of the BIFR - Held that:- The appellant had filed an application before BIFR and in term of BIFR’s orders had got a study conducted by SBI Capital regarding techno-economic feasibility of rehabilitation and modalities of finance. Without such feasibility report from the SBI Caps, it was not possible for the BIFR to finalize the rehabilitation package for the appellant. In my view, therefore, the service received by the appellant from SBI Caps has nexus with their manufacturing business and would be covered by the terms ‘activities’ relating to business. In view of this, I hold that impugned order denying Cenvat credit in respect of the service in question not sustainable - Decided in favour of assessee.

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• Central Excise

• 2014 (10) TMI 340
  Interest demand - Delay in payment of duty - Held that:- It is a settled position in law as laid down by the Hon'ble Apex Court in the case of International Auto Ltd. [2010 (1) TMI 151 - SUPREME COURT OF INDIA], SKF India Ltd. (2009 (7) TMI 6 - SUPREME COURT) that interest liability accrues whenever there is a delay in payment of duty and interest is a compensatory payment. In the case of J.K. Industries Ltd. [2011 (3) TMI 373 - KARNATAKA HIGH COURT] the Hon'ble Karnataka High Court held that the liability to pay interest is not dependent upon whether the payment is made before finalization or after finalization of the provisional assessment. Liability to pay interest would accrue, even in the case of provisional assessment where the short payment of duty was made good before the final assessment order was issued. As regards the reliance placed on the Single Member decision dated 10/03/2004, the Division Bench decision in the case of CEAT Ltd. case was not brought to the notice of the Single Member Bench. In these circumstances, the appellant has not made out any case at all for grant of waiver of pre-deposit. - appellant to deposit entire interest liability - stay denied.

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• 2014 (10) TMI 339
  Clandestine removal of goods - Clearance of sample fragrances without payment of duty - Held that:- Goods were cleared under covering letter mentioning the name of the item, its price, suggested application and dosage, if any, and the reference for submitting those samples. If the goods were not marketable, the question of mentioning a name, its price, application and dosage would not have arisen at all. Therefore, we do not find any merit in the contention that the goods are not marketable. As regards the reliance place on Bayer Diagnostics India Ltd. case [2001 (3) TMI 168 - CEGAT, MUMBAI], the facts of the said case were completely different and distinguishable. In that case, the goods under clearance were diagnostic regent kits and diagnostic reagent strips falling under the purview of Drugs and Cosmetics Act, 1940. Drugs samples were cleared without any packages and therefore, it was held that since there was a statutory requirement of packaging, which has not been complied with, it cannot not be held that the goods are marketable. In the case before us there is no mandatory or statutory requirement of packaging of the goods and therefore, the ratio of the said decision cannot apply. We uphold the confirmation of duty demand and consequently, the appellant also would be liable to pay interest on the duty demand confirmed. As regards the penalty imposed on the appellant, Section 11A (2B) provides for non-issue of a show-cause notice in case the duty demand is paid before the issue of show-cause notice. In the present case the appellant has fulfilled this condition and therefore, the question of imposition of penalty under Section 11AC would not arise at all. Accordingly, we set aside the penalty imposed on the appellant - Decided partly in favour of assessee.

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• 2014 (10) TMI 338
  Demand u/s 11D - subsequent upward price revision and the goods were sold from the depot at a higher price - revenue of the view that Since the price at the depot is a cum duty price, it implies that the appellant collected a higher amount of excise duty from the customers; therefore, the demand is sustainable. - Held that:- The liability to discharge duty arises when the goods are cleared from the factory. When the goods cleared and sold through the depot, the law mandates that duty liability has to be discharged on the price prevailing at the depot at the time of clearance of the goods from the factory. There is no dispute in the present case that the appellant has discharged the duty liability in accordance with the law. What happened to the goods subsequently does not influence the assessable value under Section 4 of the Act. This is the view taken by this Tribunal in the case of BPCL case (2002 (5) TMI 107 - CEGAT, COURT NO. III, NEW DELHI) affirmed by the Hon'ble Apex Court - Decided against Revenue.

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• 2014 (10) TMI 337
  Seizure of goods - Discrepancy in stock - Excess goods found - held that:- 74 ingots were not entered in the RG-1 register Even if 20 ingots are taken to be production of the day of visit of the officer, 54 ingots were in excess then the recorded balance. Normally, in the absence of any evidence to show that non-recording was with mala fide intention to clear the goods clandestinely, confiscation and imposition of higher redemption fine may not be justified. However, in the present case, I find that the appellant were not having sufficient stock of raw material in their records for manufacture of the said unaccounted goods. As such it becomes clear that there was an intention on the part of the assessee to remove the goods clandestinely. Accordingly, I uphold the confiscation of the goods and imposition of penalty on M/s. Kunal Enterprises. Keeping in view the fact that the said seized goods were subsequently released to the appellant and were cleared by them on payment of Central Excise duty, I reduce the redemption fine from Rs. 1,80,000/- to Rs. 75,000/- and penalty from Rs. 1,00,000/- to Rs. 50,000 - decided partly in favour of assessee.

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• 2014 (10) TMI 336
  Waiver of pre-deposit of duty - Classification of goods - classification of “Rexona” under Chapter sub-heading No. 3401.00 or under 3307.30 - Held that:- Issue relates to classification of the goods manufactured by the applicant viz. Lux, Rexona and between two competing sub-headings viz. 3401.10 and 3307.30 of CETA, 1985. It is the claim of the Department that the goods in dispute are classifiable under sub-heading 3307.30 and not as bathing bar as claimed by the appellant under Chapter sub-heading 3401.10. We find this Tribunal in the case of Wipro Ltd. and also in the applicant’s own case discussed in detail the merit of classification of similar products and arrived at a conclusion that the said goods are classifiable under Chapter Heading 3401.10 and not under 3307.30 as claimed by the Revenue - from the record that for subsequent periods following the said decision similar goods had been classified under Chapter sub-heading 3401.90 which had also not been appreciated by the ld. Commissioner even though the said orders were placed before him. Taking into consideration the aforesaid circumstances, we are of the prima facie view at this stage that the applicant’s products are classifiable under Chapter sub-heading 3401.10 as claimed by the applicant. - Stay granted.

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• 2014 (10) TMI 335
  Cenvat Credit - emergence of waste - Exemption under Notification No. 77/86-C.E., dated 14-2-1986 - Held that:- Sludge emerging from effluent treatment plant in the nature of waste cannot be considered a manufactured product in view of various decisions of the Hon’ble Apex Court in the similar matters. Further there cannot be a demand to reverse any Cenvat credit for the reason that a part of the input is covered in the waste that arises. Following decision of ITC LTD Versus COMMISSIONER OF CENTRAL EXCISE, SALEM [2013 (12) TMI 928 - CESTAT CHENNAI] - Decided in favour of assessee.

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• 2014 (10) TMI 334
  Condonation of delay - appeals have been rejected on the ground that they were filed beyond the period which could not have been condoned by the Commissioner (Appeals) and the Order-in-Original was passed on 7-3-2006 and was sent to the addresses of the factory as in the show cause notice. The learned counsel submitted that the factory was closed even at the time of investigation taken up by the Revenue in 2003 - Held that:- once the Department knew that the addresses for correspondence was different and not the factory and having sent the intimation for final hearing to such addresses, the order also should have been sent to the same addresses to ensure delivery - According to Section 37C of Central Excise Act, 1944 (the Act), the service would be complete if the same is sent by registered post with acknowledgement due to the person for whom it is intended. Sending to a wrong address is definitely not covered by Section 37C of the Act. when the order cannot be served by registered post with acknowledgment due or by tendering the decision directly, other options would be available. Since the adjudicating authority knew the addresses for correspondence as it emerges from the notice for final hearing, there is no need for sending the order to a different address - Matter remanded back - Decided in favour of assessee.

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• Indian Laws

• 2014 (10) TMI 328
  Ponzi schemes - Transfer of investigation from the State Agencies to the Central Bureau of Investigation (CBI) under the Delhi Special Police Establishment Act - major financial scam nicknamed Chit Fund Scam affecting lakhs of depositors across several States - Held that:- no basis of the apprehension expressed by the State Governments. It is true that a lot can be said about the independence of CBI as a premier Investigating Agency but so long as there is nothing substantial affecting its credibility it remains a premier Investigating Agency. Those not satisfied with the performance of the State Police more often than not demand investigation by the CBI for it inspires their confidence. We cannot, therefore, decline transfer of the cases only because of certain stray observations or misplaced apprehensions expressed by those connected with the scam or those likely to be affected by the investigation. We may in this regard gainfully extract the following passage from the decision of this Court in Sanjiv Kumar v. State of Haryana and Others [2005] 5 SCC 517, where this Court has lauded the CBI as an independent agency that is not only capable of but actually shows results. Transfer of investigation to the Central Bureau of Investigation (CBI) in terms of this order shall not, however, affect the proceedings pending before the Commissions of Enquiry established by the State Government or stall any action that is legally permissible for recovery of the amount for payment to the depositors. Needless to say that the State Police Agencies currently investigating the cases shall provide the fullest cooperation to the CBI including assistance in terms of men and material to enable the latter to conduct and complete the investigation expeditiously. - The Enforcement Directorate shall, in the meantime, expedite the investigation initiated by it into the scam and institute appropriate proceedings based on the same in accordance with law.

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