TMI Tax Updates - e-Newsletter
October 17, 2013

Case Laws in this Newsletter:

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

News

1. Last Date for Submitting Suggestions for the 2nd Tranche of Draft Rules under the Companies Act 2013 Extended by 4 Days

2. Investor Awareness Programmes during the Current FY Cross the 500 Mark

3. Exchange Rate of Foreign Currency Relating to Imported and Export Goods Notified

4. Creation of additional Benches of the Customs, Excise and Service Tax Appellate Tribunal

5. RBI Reference Rate for US $ and Euro

6. Change in Tariff Value of Crude Palm Oil, Rbd Palm Oil, Others – Palm Oil, Crude Palmolein, Rbd Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass SCRAP (all Grades), Poppy Seeds, Areca Nuts, Gold And Silver Notified

Notifications

Customs

1. 105/2013 - dated 17-10-2013 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from October 18, 2013

FEMA

2. 292/2013-RB - dated 4-10-2013 - FEMA

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Sixteenth Amendment) Regulations, 2013

3. 290/2013-RB - dated 4-10-2013 - FEMA

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Fourteenth Amendment) Regulations, 2013

4. 289/2013-RB - dated 4-10-2013 - FEMA

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Thirteenth Amendment) Regulations, 2013

Circulars / Instructions / Orders

DGFT

1. 31 (RE-2013)/2009-2014 - dated 17-10-2013

Mono cartons to be treated as primary level packaging of export consignment of pharmaceuticals and drugs.

Highlights / Catch Notes

Income Tax

• Court Examines TDS Applicability on Printer's Material Procurement u/s 40a(ia) for Works Contracts.

  Case-Laws - AT : Deduction u/s 40a(ia) - Works contract - Material for the labels was procured by the printer though the specification of the printing material was given by the assessee-company - No TDS - AT
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• Court Rules on Gifts in Marriage Ceremonies: Tax Department Must Investigate Donors Before Disallowing Gifts u/s 153C.

  Case-Laws - AT : Proceedings u/s 153C - when there is a customary practice in this part of the country to give and receive gifts on the occasion of marriage, in the absence of any other investigation carried out by the department on the basis of the list of donors filed by the assessee, disallowing any part of the gift may not be justified - AT
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• Court Allows 18% Interest Rate u/s 40A(2)(a), Balancing Fairness for Directors and Shareholders in Tax Case.

  Case-Laws - AT : Disallowance u/s.40A(2)(a) - reasonableness of interest paid @24% to directors / shareholders - taking a liberal view of the matter, an interest rate of 18% p.a. allowed to meet the ends of the justice. - Decided partly in favor of assessee. - AT
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• Assessee Qualifies for Tax Exemption u/s 54 by Building New Home Within Three Years of Asset Transfer.

  Case-Laws - AT : Deduction u/s 54 - , the assessee fulfilled the condition in respect of construction of residential house within a period of three years from date of transfer of the original asset - exemption allowed - AT
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• Debate on Classifying Sales Tax Exemption Entitlement as Business Income or Capital Gain; Subsidies as Revenue Receipts.

  Case-Laws - AT : Business income or capital gain - Sale of Sales Tax Exemption Entitlement - there is no dispute that the subsidies granted are revenue receipts and have been granted after setting up of the new industries and after commencement of production. - AT
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• Tax Officers Must Exclude Comparables with Related Party Transactions Over 15% of Revenue After Verification.

  Case-Laws - AT : Transfer pricing adjustment - Assessing Officer/TPO is directed to exclude, after due verification, comparables from the list with the related party transactions or controlled transactions in excess of 15% of the total revenue - AT
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• 300% Tax Penalty Not Applicable Post-June 1, 2007, u/s 271AAA for Section 132 Actions.

  Case-Laws - AT : Penalty u/s 271(1)(c) - Penalty levied @ 300% - From the provisions of Section 271AAA it is clear that in the case where action U/s 132 is initiated on or after 01/06/2007, penalty cannot be levied U/s 271(1)c) of the Act. - AT
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• Application for Section 12AA Registration Denied as Society Had Not Commenced Activities Since 2012 Registration.

  Case-Laws - AT : Regidtration u/s 12AA - though the assessee society was registered with Registrar of Societies on 13.4.2012 but no activity had been started up to the date of present proceedings - application for registration rightly rejected by the CIT - AT
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• TDS on Specialized Works: Applicable u/s 194C, Not 194J, for Computer Jobs and Landmark Marking.

  Case-Laws - AT : TDS u/s 194J or 194C - disallowance u/s 40(1)(ia) - Specialized works involving computer job work, marking of landmarks & door to door collection of information - TDS required to be deducted u/s 194C - AT
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• Land Beyond 8km from Municipal Limits Excluded from "Capital Asset" Definition per Section 2(14)(iii)(b) of Income Tax Act.

  Case-Laws - AT : Capital asset u/s 2(14)(iii)(b) - land in question which was located beyond 8 kms from the Municipal Limits as on 6-01-1994 when the notification was published in the official gazette, the same would fall under the exclusion clause of the term 'capital asset' as per provisions of 2(14)(iii)(b) of the Act. - AT
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• Section 194C inapplicable to TDS on payments for Digital Satellite Receiver use; not a contract for work/services.

  Case-Laws - AT : TDS deduction u/s 194C - distribution of signals - It is a case of simple using of plant & machinery i.e. DSR Digital Satellite Receiver for the purpose of distribution and transmission of signals against payment and while making such payment, we are of the considered view that section 194C of the Act including Explanation (iv)(b) of Section 194C is not applicable. - AT
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• Brand-Building Transaction Classified as International Under Transfer Pricing Rules; Tax Compliance Ensured by Revenue Authorities.

  Case-Laws - AT : Transfer Pricing adjustment - Revenue authorities were fully justified in treating the transaction of brand building an international transaction in the facts and circumstances of the present case - AT
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• TPO Must Prove Companies Are Consistently Loss-Making for Arm's Length Price Adjustments in Transfer Pricing Cases.

  Case-Laws - AT : Adjustment of Arm's length price - Though we agree with the TPO that some of the comparables for the purpose of PLI adopted by the assessee are showing the loss, but the burden is on the TPO to prove where those companies are consistently loss making companies. - AT
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Customs

• Court Rules CA Certificates Valid for Refund Claims, Not Just Opinions, Backed by Primary Accounting Documents.

  Case-Laws - AT : Refund – Unjust Enrichment - CA certificates are not blank certificates containing mere opinion of an Auditor but give detailed and specific reference to the primary documents of accounting entries - refund not to be rejected - AT
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• Court Rules Imported Telephone Software Value Included in Equipment Cost for Customs; Stay Granted Pending Appeal.

  Case-Laws - AT : Valuation - Import of telephone software - inclusion of value of software in the cost of equipments - prima facie case is against the assessee - stay grantned. - AT
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• Assessee Retains Concessional Duty Benefits on Soya Bean Oil Import Despite Alleged Rule Violation Under Notification No. 16/2000.

  Case-Laws - AT : Benefit of Notification No. 16/2000 – The assessee made import of Soya bean Crude Oil at concessional rate of duty - Revenue was of the view that sending the goods to another factory the respondents had contravened the Rules and were not eligible for the benefit of the Notification - demand set aside - AT
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• Goat Shoe Suede Upper Leather Classified as Finished Leather; Retesting Requests Denied in Appeals, Partial Stay Granted.

  Case-Laws - AT : Export of Goat Shoe Suede Upper Leather - finished leather or not - After accepting the test reports and agreeing for adjudication without show cause notice, there was no reason to encourage such request for retest at the first appeal stage or second appeal stage - stay granted partly - AT
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Service Tax

• Court Grants Stay on Service Tax for Driver Training Services; Implications for Road Transport Sector Under Review.

  Case-Laws - AT : Commercial coaching or training services in relation to road transport service - The applicants were imparting training to the drivers and conductors after recruitment and charges from the trainees - stay granted - AT
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• Court Rules Residential Complex Construction as Service, Not Sale; 50% Stay Granted on Pre-deposit Requirement.

  Case-Laws - AT : Construction of Residential Complexes – Waiver of Pre-deposit - Therefore it is a clear case of providing service and not the case of sale of flats - 50% stay granted - AT
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• Tribunal Stay Application Delays Lead to Unjust Recovery Actions Against Assessees; Proceedings Deemed Unfair and Unwarranted.

  Case-Laws - AT : Recovery proceedings - initiation of recovery proceeding for not disposal of the stay applications before this Tribunal for no fault of the assesses, is unfair and unwarranted - AT
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• Discrepancy in Income Reporting Not Enough to Extend Service Tax Assessment Period, Show-Cause Notice Deemed Insufficient.

  Case-Laws - AT : Extended period of limitation - Only on the ground that there is a difference in the income between Profit and Loss Account and the amount of service tax paid, a show-cause notice has been issued which in our opinion is not a sufficient ground. - AT
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• Interest on Service Tax is Due When CENVAT Credit is Debited, Not Just Available in Books.

  Case-Laws - AT : Levy of interest - Even though the claim of the appellant that CENVAT credit was available in the books and therefore interest could not have been levied from that date looks logical, unfortunately unless the CENVAT credit available in the books is debited, legally it cannot be said that the service tax has been paid. - AT
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Central Excise

• CENVAT Credit Denied Due to Incorrect Excise Number in GAR-7 Challan; Error Doesn't Justify Denial.

  Case-Laws - AT : Denial of CENVAT Credit on Goods Transport Agency Service – duty paying document - excise number of other unit was mentioned wrongly in GAR-7 challan - apparently credit cannot be denied - AT
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• Dealer's Unregistered Excise Invoice Denies CENVAT Credit to Buyer, No Penalty for Dealer's Non-Registration.

  Case-Laws - AT : CENVAT Credit – Penalty on dealer who issued excise invoice was not registered under central excise - penalty cannot be imposed on such dealer - credit denied to the buyer / manufacturer - AT
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• Cookie Manufacturer Denied Section 4A Benefits; Charged u/s 4 for Excise Valuation, Prima Facie Against Assessee.

  Case-Laws - AT : Valuation - manufacture of cookies and dough - the appellant is not entitled to claim any benefit under Section 4A, since his goods are chargeable under Section 4 - prima facie case is against the assessee - AT
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• CENVAT Credit on Input Services Can Be Used to Pay Excise Duty on Manufactured Goods, Court Rules.

  Case-Laws - AT : Whether the CENVAT credit of input services required for providing output service could be utilized for payment of excised duty on the goods manufactured by the appellant - Held yes - AT
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VAT

• Tribunal's Rejection of Certificate of Entitlement u/s 42(3)(a) Legally Flawed Due to Fixed Capital Investment Exemption.

  Case-Laws - HC : UPVAT - The Tribunal had committed an error of law in rejecting the application for grant of Certificate of Entitlement under Section 42(3)(a) as not maintainable even though the exemption was based on the fixed capital investment - HC
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Case Laws:

• Income Tax

• 2013 (10) TMI 610
  Deduction from Long Term Capital Gains - cost of improvement - Compensation paid to tenant for alternate accommodation - Held that:- the said amount of Rs.4,25,00,000/- was paid by the assessee for getting the entire land free from all types of encumbrances, which enabled the assessee to transfer the property as per agreement dated 28.03.1994. However, out of the entire property only 2/3rd of the same was transferred. Hence, the cost of acquisition is required to be calculated in proportion to the portion of land sold/transferred. Thus, the assessee for this year is entitled to claim deduction to the extent of 2/3rd of the total amount - Decided partly in favour of assessee. Determination of consideration for sale of 2/3rd share in property - Held that:- once the assessee has claimed and furnished a value of consideration to the statutory authorities, he is now estopped from claiming any other value for the purpose of computation of income. The assessee cannot be allowed to approbate and reprobate at the same time. He cannot claim one value before the statutory authorities so as to defeat or escape out from the statutory provisions under the Act and, at the same time, claim another value to avoid tax. Such a conduct is not only hit by principles of estoppels, but is also unreasonable and against the principle of equity, justice and good conscience. It is settled position of law that a person who seeks equity must do equity. In our view, such a conduct of the assessee is not appreciable. - Decided against the assessee.

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• 2013 (10) TMI 609
  Block assessment - Undisclosed income - Advance amount received - unaccounted assets - Held that:- There has been no addition qua the cost of the construction of the project - which in fact is not the subject matter of dispute - in which case, the assessee could be considered to have been called upon to adduce evidence to substantiate its claim. The reliance on the valuation report is, thus, of little moment. Could, one may ask, the Revenue assess ‘undisclosed income’ on the basis of valuation report consequent upon a search, case law on which is legion. The valuation report could be sought by the Revenue, in satisfying itself with regard to the construction cost as debited or claimed by the assessee per its regular books of account, or verifying the assessee’s claim with regard thereto, even independent of a search or requisition. The said report becomes relevant in block assessment proceedings u/c. XIV-B and, accordingly, reliance thereon for assessment of undisclosed income becomes understandable, as where the assessee is ‘found’ during search to have placed no value on some or a specific part of the construction, or some other defect in the assessee’s claim discovered in search, viz. as where a difference or discrepancy is found with regard to the materials or the quality of goods used in construction, which is not consistent with that reflected per the books of account. It is in that case that the valuation report, pressed for by either party, in respect of its claim/s, may assume significance. The deduction of Rs.75.93 lakhs claimed and allowed to the assessee, it may be clarified, is not for under-valuation of the cost of project with reference to the regular books of account, but on account of it having established utilization of the money toward construction of the project, income from which is being brought to tax as undisclosed income, to that extent and, thus, deductible in computing the undisclosed income earned therefrom. The same is in our view rightly restricted by the Revenue to the sum as borne out of the materials as found as a result of search, i.e., Annexure A-1. The Revenue, by doing so, we may again clarify, is not in any manner certifying the construction cost of the project or in any manner validating the same at the said amount, i.e., in addition to the amount that may have been disclosed in its respect per the assessee’s regular accounts, but only basing the assessee’s claim for deduction in computing the undisclosed income, found to have been earned by way of on money on a project, against its utilization to the extent stands substantiated by the assessee with reference to the materials found as a result of search, which is the mandate of law - Decided against assessee.

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• 2013 (10) TMI 608
  Assessment u/s 153C - Unexplained income - Cash credit in bank account - CIT sustained partial addition - Held that:- assessee derived income from job receipts of Rs. 1,15,312/- and agricultural income of Rs. 30,000/- and the said incomes were admitted in the return of income filed. The Assessing Officer completed the assessment u/s 153C on 18/12/2009 determining the total income at Rs. 3,50,370/- which included agricultural income of Rs. 30,000/- treating the same as income from other sources and he also added Rs. 2,05,059/- being the amount credited in the bank account holding that such credits were not explained. We are of the opinion that the Assessing Officer while making addition of Rs. 2,05,059/- did not consider the fact that the assessee was carrying on business and such receipts were available for depositing in the bank account. The gross amount, therefore, would be much higher and was available for the assessee to be deposited and the assessee also receiving agricultural income of Rs. 30,000/-. Hence, taking into facts of the case, we delete the addition of Rs. 89,747/- as against the addition of Rs. 2,05,059/- made by the Assessing Officer - Decided in favour of assessee. Assessee located the property only in April, 2007 i.e. immediately after the end of the previous year. The agreement of sale cum general power of attorney was executed by Smt. A Renuka in favour of the assessee wherein it is mentioned that an amount of Rs. 15 lakhs was paid by the assessee, a copy of which has been filed at pages 88 to 98. It is clear from the above that the assessee paid Rs. 15 lakhs and incurred expenses in acquisition of the property by way of General Power of Attorney. The said property was ultimately transferred in favour of Radha Realters vide sale deed dated 01/01/2009 for a consideration of Rs. 18,15,000/-. Also the expenditure on stamp duty is to be considered, the cost would be more than Rs. 20 lakhs. Therefore, this clearly indicates that the amount of Rs. 20 lakhs received during the previous year is for the acquisition of the property. In our considered opinion, the transaction is genuine as the property was registered in favour of the person, who has advanced the amount. Advance given for land - Held that:- It can be said that if the creditors are close relatives of the assessee or his employees the burden of the assessee to prove the creditworthiness of the creditors and genuineness of the transactions will be heavier in relative terms than in a case where the creditors are the outsiders. Therefore, the contention of the learned Counsel for the petitioner that under Section 68 of the Act the assessee is not expected to establish the capacity of the creditors to advance money and genuineness of the transactions is not acceptable to us, and we hold that the assessee is expected to establish proof of identity of his creditors, capacity of his creditors to advance money and genuineness of the transactions in order to discharge the onus imposed on him under Section 68 of the Act - Assessee has established identity of his creditors, capacity of his creditors to advance money and genuineness of the transactions in order to discharge the onus imposed on him under Section 68 of the Act - Following decision of R.B. Mittal Vs. CIT [2000 (8) TMI 54 - ANDHRA PRADESH High Court] - Decided in favor of assessee. Disallowance u/s 40A - Held that:- amounts paid to various persons is on behalf of the principals and not on his own behalf and each of the receipt clearly indicate that they have been paid the amount only for clearing the property which was purchased by DLF. Therefore, the payments do not represent the expenditure but represents the payments made on behalf of and for the purpose acquisition of the property by DLF and hence, the provisions of u/s 40A(3) have no application to the facts of the case of the assessee. The addition of Rs. 2,95,50,000/- sustained by the CIT(A) on account of amounts paid in cash on behalf of the principals is hereby deleted - Decided in favour of assessee.

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• 2013 (10) TMI 607
  Payment of fringe benefits - it was contended that the assessee provided Fringe Benefits to its employees in course of his business activities and incurred expenses. Therefore Rule-8 will also apply to value of Fringe Benefit.- CIT rejected revised computation of Taxable Fringe Benefit by excluding 60% of the expenditure as relatable to agricultural activities - Held that:- an employer assessee is liable to pay Fringe Benefit Tax u/s. 115WA of the Income Tax Act, in relation to Fringe Benefits provided by him to its employees - an employer is liable to pay Fringe Benefit Tax even when no income-tax is payable by an employer on his total income computed in accordance with the provisions of the Income Tax Act - Fringe Benefit Tax is not payable on the income of an assessee but only Fringe benefits provided by an employer to its employees - Decided against assessee.

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• 2013 (10) TMI 606
  Section 145A of the Income Tax Act – Valuation of closing stock, inclusive of excise duty or exclusive of it – Effect of valuation on the profit of the company – Held that:- the proper manner in which the correct profit in terms of section 145A could be determined is by scrupulously following the mandate of section 145A - All the constituents of the manufacturing account that are subject to levy/incidence of excise (or any other tax for that matter) are to be loaded therewith. That the provision is tax-neutral is no argument for not observing the same, as the same (tax neutrality) would have to be established in each case with reference to the accounts as being maintained. This is as in practical situations, a one-to-one correspondence between input/s and outputs, as manifest and apparent in the examples of different trading scenarios assumed by the assesse, and adopted by us (for the sake of simplicity), is difficult to establish in real life manufacturing cases, where a variety of inputs, if not also outputs, obtain. Secondly, the closing inventory, loaded with all input duties/levies, would only state the same at actual cost, even as advocated by AS-2 by ICAI. Again, this only would state the current asset, which it represents, at its proper value, i.e., in the balance sheet, and at which the same is to be carried forward to the following year - Only a correct statement of the current assets and liabilities, i.e., which are not on capital account, in the balance-sheet, would enable reflection of the correct operating results for the relevant accounting period. Toward this, only the booking of profit (against excess recovery of excise duty) would enable an agreement of the outstanding balance in the UCC a/c with the excise component in the closing inventories, so that the accounts whether maintained on gross or net basis, reflect the current asset in respect of excise paid thereon at the same, correct value - Further, it is only this, reckoning the `profit' on excess recovery as the difference between the profit per the two statements prepared on net and gross basis, that would state the UCC a/c at the correct value of the current asset represented by it, where the accounts are maintained on net basis, bringing the profit per the two methods at par. Thirdly, the provision becomes tax-neutral only when duty is paid on value addition, else not, in view of the non obstante provision of s.43B, which has to be given effect to – In any case, cannot be a ground for not observing the method of accounting that yields correct profits or operating results. Further, even where the accounting treatment provides correct results, the provision of s. 43B would have to be given due effect. The same cannot be defeated by non-booking the statutory liability in respect of excise in accounts, even if payable in due course, understating simultaneously the corresponding asset/s, to contend non-difference in operating results - In final analysis, the tax neutrality of the net method is subject to it being established, with the non obstante provision of s. 43B, which in fact obtains irrespective of the method of accounting followed. The total expenditure on telephone and internet expenses as claimed is at Rs.1.56 lakhs – The A.O. effected the disallowance only in respect of the expenditure qua the telephones installed at the residences of the partners, i.e., Rs.0.37 lakhs, estimating the personal (non-business) user thereof at 50% - Held that:- Rs.0.37 lakhs of the total expenditure of Rs.1.56 lakhs being on telephone at the partners/s residences, the same could not be subject to FBT. This is for the reason that the same is, on account of the manner of its incurring, considered by the Revenue as toward personal purposes of the partners, i.e., for non-business purposes, while the FBT could only be in respect of the expenses incurred for the purposes of its business by the assessee - Disallowance effected only on the ground of it's being personal or non-business in nature, the said disallowance would not stand to be impacted by the mere fact of charge of FBT – The disallowance not to be impacted.

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• 2013 (10) TMI 605
  Deduction u/s 40a(ia) - Works contract - Payment made to printers - TDS not deducted - Held that:- As far as the payment to printer is concerned, it is found that M/s. Jayant Printary had printed labels for chutney and other materials that were sold/exported by the assessee. Material for the labels was procured by the printer though the specification of the printing material was given by the assessee-company - it cannot be held that it was a work contract - Following decision of The Commissioner of Income Tax Versus M/s. Glenmark Pharmaceuticals Ltd. [2010 (3) TMI 289 - BOMBAY HIGH COURT] - Decided against Revenue. Supply of mango slices - Non-deduction of tax - Held that:- assessee had not paid nay amount to procurement agencies.In the present case, it appears that assessee had paid commission to HAKAMC as per the bills issued by the HAKAMC.It is not clear from the order of the AO/FAA as what was the nature of commission paid to HAKAMC.We feel that this aspect needs further verification. Whether the commission was paid only for carrying out certain processing activities or it was paid for procuring the mangoes on behalf of the assessee .This vital fact is not clear from the bills or the order of the lower authorities - Matter is restored back - Decided in favour of Revenue. Disallowance expenses incurred through Credit Cards - Expenditure made on name of Directors - Held that:- AO had dis-allowed the said expenditure because he was of the opinion that expenditure was not incurred for wholly and exclusively for the business purpose. He has not alleged that expenditure incurred by the Directors was of personal nature. He has not brought on record anything to prove that said expenditure was not incurred for business purpose of the company. Mere making an allegation is not sufficient for fastening tax liability to an assessee. FAA had given a categorical finding that expenditure incurred on Credit Cards issued by the company was allowable expenditure.In our opinion,his order does not suffer from any legal or factual infirmity - Decided against Revenue.

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• 2013 (10) TMI 604
  Proceedings u/s 153C - Incriminating documents against assessee - Held that:- A bare reading of section 153C makes manifestly clear that the assessing officer has to satisfy himself that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A. Section 153C makes it very clear that the proceedings under that section has to be initiated only in case the material found during the course of search operation relates to the person other than searched person. Therefore, for initiation of the proceedings, the material found during the course of search operation is relevant for initiation of proceedings u/s 153C of the Act. In the case before us, only for the assessment year 2005-06 a balance as on 31-03-2005 was found which relates to the present assessee. Apart from this, a sale deed was also found. However, no addition was made on the basis of the sale deed. Therefore, the only document available on record is the balance-sheet as on 31-03-2005 which relates to assessment year 2005-06 - addition can be made only on the basis of the material available on record. In respect of other years, there cannot be any addition in the absence of any material. When there is a customary practice in this part of the country to give and receive gifts on the occasion of marriage, in the absence of any other investigation carried out by the department on the basis of the list of donors filed by the assessee, disallowing any part of the gift may not be justified. Accordingly, the orders of the lower authorities are set aside and the addition of Rs.5 lakhs is deleted. In the absence of any other material to show that the assessee has received on money over and above that disclosed in the sale deed, this Tribunal is of the considered opinion that there cannot be any presumption that the assessee has received any on money. Moreover, the sale of land was disclosed in the regular return of income filed on 27-04-2004 and the assessment proceedings were not pending. Therefore, in the absence of any further material found during the course of search operation, no proceedings could be initiated u/s 153C of the I.T. Act. Therefore, the CIT(A) has rightly deleted the addition. Telescoping of investment in the unaccounted profit of the firm - Held that:- the document SSA- 29 discloses capital contribution by the assessee to the firm M/s P.A. Kuriakose Jewelleries. It is also an admitted fact that unaccounted income was determined in the hands of Ms P.A. Kuriakose Jewellers on the basis of material found during the course of search operation. Therefore, there is an obvious nexus between the investment shown in the balance-sheet found during the course of search operation and the unaccounted income determined in the hands of M/s P.A. Kuriakose Jewellers - Following decision of Sinhagad Technical Education Society Versus Commissioner of Income Tax [2012 (3) TMI 262 - BOMBAY HIGH COURT] - Decided in favour of assessee.

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• 2013 (10) TMI 603
  Disallowance u/s 40(a)(ia) - Disallowance of PF dues - Held that:- It is found from the assessment record that the return of income was filed by the assessee on 31-10-2007 and it is not in dispute that the TDS was deposited in the Government account on 7-6-2007. That being the fact of the matter, as per the amended provisions of section 40(a(ia) of the Act, the same is to be allowable - payments of PF have been made well before filing of the return - Decided in favour of assessee. Nature and effect of amendment to Section 43B – payment of contribution to provident fund - the amendment is made applicable from the assessment year 2004-05 - held that amendment is retrospective - the contribution has been paid prior to the filing of the return. The Supreme Court decision in Vinay Cement Ltd.’s in which the the benefit extended to assessee squarely covers the issue and the assessee is entitled to the benefit under section 43B of the Income-tax Act – amendment retrospective in nature. - deduction allowed. Professional fee expenditure - whether related to business - development of new product - Services of Dr. Dilip Sanvordekar have been utilized for the purposes of assessee's business. It is also not in dispute that the payments made by the assessee are genuine. As per the record, it is seen that and which has also been accepted by the A.O. that the services of Dr. Dilip Sanvordekar, Consultant have been utilized for some projects which are part of assessee's running business. Valuation of stock - addition on account of cenvat credit - Held that:- The A.O. gave a finding that the opening stock for the year under consideration stands increased by the said amount. According to the A.O., after giving credit for the said increase, the net addition on account of unutilized Cenvat credit amounts to Rs. 24,05,558/-. Since the A.O. has himself given a categorical finding in the assessment order which is identical to the directions given by the ld. CIT(A), we do not find any reason why the Revenue has shown its grievance on this account. The A.O. is directed to follow his finding given in the assessment order and restrict the disallowance to Rs. 24,05,558/-.

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• 2013 (10) TMI 602
  Disallowance u/s.40A(2)(a) - reasonableness of an expenditure - f interest paid by the assessee-company on the deposits by its directors and principal shareholders - assessee paid interest @24% - AO restricted the claim to 15% - Held that:- an interest rate in the range of 16% to 18% p.a., i.e., 33% to 50% over the PLR, would represent the FMV of the interest on the unsecured deposits as raised by the assessee. The Revenue has also not brought any material on record to justify the assessed rate of 15% p.a. and, besides, the assessee has claimed its business to be relatively new. - taking a liberal view of the matter, an interest rate of 18% p.a. allowed to meet the ends of the justice. - Decided partly in favor of assessee. Depreciation on Motor car - Vehicle not registered under name of assessee but purchased in the name of employee - Held that:- the basis on which the assessee claims the beneficial ownership of the said asset is not clear or understood. Have the parties entered into an agreement or understanding to this effect? This is as the law deems the registered owner to be the owner proper. How would, and on what basis, one may ask, the assessee claim the vehicle from the concerned employee when required, as when the employee leaves the service? Who, of the two, has its possession? It is only where the beneficial ownership is not disputed that it has been held by the hon'ble courts that the absence of registration or legal title would not operate to preclude the claim for depreciation on the relevant asset. - matter remanded back for reconsideration.

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• 2013 (10) TMI 601
  Deduction u/s 54 - Procurement of new flat within 2 years of sale of land - A.O. disallowed deduction - Held that:- developer was not entitled to enter into any agreement of sale in respect of the share of the assessee. Accordingly, the CIT(A) agreed with the contention of the assessee that agreement in substance was an agreement for construction of residential and other properties. Therefore, a period of 3 years was available to the assessee to take possession of the residential house. It is apparent that assessee was in possession of this property before 31.05.2007 i.e., before a period of three years from date of transfer of property at H.No.4-3-540 as according to the assessment order, telephone got installed on 07.12.2006 and Passport to one of the assessee's nephew was issued on 08.02.2007, i.e., before three years from the date of transfer of original asset. Therefore, the assessee fulfilled the condition in respect of construction of residential house within a period of three years from date of transfer of the original asset - Following decision of CIT vs. Mrs.Shahzada Begum [1988 (3) TMI 39 - ANDHRA PRADESH High Court] - Decided against Revenue.

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• 2013 (10) TMI 600
  Business income or capital gain - Sale of Sales Tax Exemption Entitlement - Incentive granted by Government for setting up a Wind-Mill Power Generation Unit - Whether the subsidy received by the assessee-company from the Government is taxable as revenue receipt or not - Held that:- Mere setting up of the industry did not qualify an industrialist for getting any subsidy. The subsidy was given as help not for the setting up of the industry which was already there but as assistance after the industry commenced production - there is no dispute that the subsidies granted are revenue receipts and have been granted after setting up of the new industries and after commencement of production. Deduction u/s 80IA - The expression "derived from" occurring in section 80-IB of the Act in relation to the business of an industrial undertaking is narrower in connotation than the expression "attributable to" the business of an industrial activity - subsidy cannot be said to be "derived from" the industrial undertaking of the assessee - it can only be ancillary to the profits and gains relatable to or "attributable to" the business of the industrial undertaking and not in the category of profits and gains "derived from" its industrial activity - Following decision of Commissioner of Income-tax Versus Meghalaya Steels Ltd. [2010 (9) TMI 679 - GAUHATI HIGH COURT] and Sahney Steel And Press Works Limited And Others Versus Commissioner of Income-Tax [1997 (9) TMI 3 - SUPREME Court] - Decided against the assessee.

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• 2013 (10) TMI 599
  Exemption u/s 10A - Transfer pricing adjustment - Business of software development with associated enterprise - Exclusion from export turnover - Held that:- if any expenditure is to be reduced from the export turnover, then the same is to be excluded from the total turnover also - As per ITO v. Sak Soft Ltd.(2009 -TMI - 70681 - ITAT MADRAS-D), There should be uniformity in the ingredients of both the numerator and the denominator of the formula, Section 10-A is a beneficial section. It is intended to provide incentives to promote exports. If the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator. The reason being the total turnover includes export turnover. The components of the export turnover in the numerator and the denominator cannot be different - Following decision of Commissioner of Income-tax Versus Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] - Decided in favour of assessee. Rejection of comparable - Held that:- TPO in his order has brought out the differences between a product company and a software development services provider. Thus, it is clear that he is aware of the functional dissimilarity between a product company and a software development service provider. Having taken note of the difference between the two functions, the Assessing Officer ought not to have taken the companies which are into both the product development as well as software development service provider as comparables unless the segmental details are available. Even if he has adopted the filter of more than 75% of the revenue from the software services for selecting a comparable company, he ought to have taken the segmental results of the software services only. The percentage of expenditure towards the development of software products may differ from company to company and also it may not be proportionate to the sales from the sale of software products. Under section 133(6) of the I.T. Act, the TPO has the power to call for the necessary details from the comparable companies. It is seen that the Assessing Officer/TPO has exercised this power to call for details with regard to the various companies. As seen from the annual report of Foursoft Limited which is reproduced inthe TPO's Order, the said company has derived income from software licence also and AMCs - The method adopted by the TPO to allocate expenditure proportionately to the software development services and software product activity cannot be said to be correct and reasonable. Wherever, the Assessing Officer/TPO cannot make suitable adjustment to the financial results of the comparable companies with the assessee-company to bring them on par with the assessee, these companies are to be excluded from the list of comparables. Therefore, we direct the Assessing Officer/TPO to exclude these three companies from the list of comparables - Decided partly in favour of assessee. Assessing Officer/TPO is directed to exclude, after due verification, comparables from the list with the related party transactions or controlled transactions in excess of 15% of the total revenue for the financial year 2006-07 - Following decision of Sony India (P) Limited. Versus Deputy Commissioner Of Income-tax, Circle - 9(1) [2008 (9) TMI 420 - ITAT DELHI-H] - Decided partly in favour of assessee.

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• 2013 (10) TMI 598
  Penalty u/s 271(1)(c) - Penalty levied @ 300% - Held that:- There is no dispute with reference to the fact that the amounts ultimately accepted by the Assessing Officer in the assessments were almost the same as that of the amounts admitted by the assessee in the returns, except for a small amount of Rs.31,770 added in assessment year 2008-09. It is also not in dispute that the assessee is a resident of Kolwada Village of Mehsana District in Gujarat and on seizure through his employees on respective dates, the assessee had to file the returns at Hyderabad, consequent to assigning the jurisdiction to the Assessing Officer at Hyderabad by the CIT Gujarat. It is also not in dispute that the assessee's returns were sent by post and has furnished evidence of dispatching them by post before the authorities - AO has not invoked the correct provisions of law for levying the penalty. In this case search was conducted in the premises of the assessee on 24-09-2008, thus the date of initiation of search was on 24-09-2008. From the provisions of Section 271AAA it is clear that in the case where action U/s 132 is initiated on or after 01/06/2007, penalty cannot be levied U/s 271 (1)(c)of the Act. Penalty can be levied only U/s. 271AAA of the Act when certain conditions stipulated therein is not complied - Decided in favour of assessee.

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• 2013 (10) TMI 597
  Penalty u/s 271(1)(c) - Disallowance of expenses on foreign travel - Held that:- not only the levy of penalty on the issue of disallowance of the above expenditure is erroneous but also the findings of the learned Commissioner (Appeals) are also untenable because, no addition has been made on account of these two additions in the assessment order, which is the basis for initiation and levy of penalty under section 271(1)(c). The additions were made by the Assessing Officer after working out the difference in the reduction of proportionate cost of land as highlighted above and not on the disallowance relating to foreign travel and donation because the assessee itself has disallowed the said expenditure from the cost of the construction and the Assessing Officer has also agreed to the same. On these facts, the levy of penalty under section 271(1)(c) by the Assessing Officer as well as confirmation thereof by the learned Commissioner (Appeals) on such disallowance of foreign travel and donation, has no legs to stand and, consequently, penalty is hereby deleted - Decided in favour of assessee.

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• 2013 (10) TMI 596
  Registration u/s 12AA - Commencement of charitable activity - taking over the management of another school - CIT(A) observed that the creation of this new society without carrying out such an exercise can best be described as an attempt of the assessee to split up assets of an already existing society and conveniently pass it over to a new one with sole intention of evading tax liability. This if allowed unchecked would in all probability defeat the very purpose for which the exemption provisions have been contained in the I.T. Act. - Held that:- some of the objects of the assessee society are not charitable in nature - though the assessee society was registered with Registrar of Societies on 13.4.2012 but no activity had been started up to the date of present proceedings and in the absence of the same there was no material to verify the objects and activities of the society and their genuineness - order of CIT refusing the registration sustained - Decided against Revenue.

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• 2013 (10) TMI 595
  TDS u/s 194J or 194C - disallowance u/s 40(1)(ia) - Specialized works involving computer job work, marking of landmarks & door to door collection of information - Works contract or professional / technical services services - Held that:- The bare perusal of section 194C would reveal that in case payment is being made with regard to a contract entered for the purpose of dealing with and satisfying the need for housing accommodation for the purpose of planning, development or improvement of cities, towns and villages then such payment would come within the ambit of section 194C. On the other hand, explanation appended to section 194J suggest that professional service would be constituted, all those services which are rendered by a person in the course of carrying on legal, medical, engineering or architectural profession etc. The jobs availed by the assessee from the persons did not fall within the ambit of this explanation, rather they are ancillary jobs connected with main performed by the assessee, which falls within the ambit of clause F & I of Explanation-1 to section 194C - Decided against Revenue. In case there is a difference of opinion regarding rate of deduction under various provisions of Chapter-XVII-B, there are separate TDS provisions under the Income Tax Act and matter can be separately examined by ITO(TDS). But that legal debate cannot be made a basis for applying section 40(a)(ia). Section 40(a)(ia) has no role to play in such circumstances when the assessee under bonafide belief complied the provisions of Chapter-XVII-B & deposited the tax in time. - Decided against the revenue.

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• 2013 (10) TMI 594
  Capital asset u/s 2(14)(iii)(b) - Whether the land in question though located beyond 8 kms from the Municipal Limits of Jaipur Municipality as on the date of notification dated 06-01-1994 but subsequently it falls within the distance of 8 kms from the Municipal Limits due to the expansion of the Municipal Limits would still be regarded as agricultural land not falling in the definition of capital asset - Held that:- in order to determine whether the land in question falls under mischief of sub-clause (b) of Section 2(14(iii) of the Act, the distance of 8 kms has to be taken into account in terms of notification dated 6-01-1994 - Therefore, land in question which was located beyond 8 kms from the Municipal Limits as on 6-01-1994 when the notification was published in the official gazette, the same would fall under the exclusion clause of the term capital asset as per provisions of 2(14)(iii)(b) of the Act. Whether the land in question can be termed as an agricultural land and not falling under the definition of expression asset - Held that:- It is not the mere potentiality but its actual condition and intended user which have to be seen for the purpose of exemption. The determination of character of land, according to the purpose for which it is meant or set apart and can be used, is a matter which ought to be determined on the facts of each particular case - the issue has not been examined by the lower authorities by considering this aspect of actual use of the land in question by the assessee and the purchaser because it has been treated as capital asset by invoking the provisions of sub-clause (b) of clause (iii) of Section 2(14) of the Act. Therefore, this issue is required to be examined after verification of the relevant facts - Following decision of Sarifabibi Mohmed Ibrahim And Others Versus Commissioner of Income-Tax [1993 (9) TMI 10 - SUPREME Court] and CIT v. Raja Benoy Kumar Sahas Roy [1957 (5) TMI 6 - SUPREME Court] - Decided partly in favour of assessee.

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• 2013 (10) TMI 593
  TDS deduction u/s 194C - distribution of signals - distribution of television channels through the distribution system. - sequence of transaction i.e. channels - assessee - cable operator - customers. - Relationship of manufacturer and distributors or contractor and subcontractor - Held that:- For the purpose of distributing subscribed channels, the assessee approached Star India Pvt. Ltd. - assessee is to distribute the subscribed channels in its entirety as it is delivered by Star India Pvt. Ltd. without any cutting, editing, dubbing, scrolling or ticker tape, voice-over, sub title, substituting or any other modification, alternation, addition, deletion or variation. The Star India Pvt. Ltd. is the owner/broadcaster of the subscribed channels as it is provided clearly in clause 9(c) of the agreement. In other words, broadcasting and telecasting work was to be done only by Star channels and others and not by the assessee. The assessee is to distribute the signals without any alteration and modification. The assessee is not authorized to produce any programme and not to broadcast and telecast any programme at the level of the assessee. The assessee is not authorized to change either in programme or create or produce any programme of his own. As regards the judgement of Hon'ble Punjab & Haryana High Court in the case of Kurukshetra Darpans (P) Ltd. vs. Commissioner of Income Tax, [2008 (3) TMI 48 - High Court Punjab and Haryana] relied upon the Revenue, the same distinguishable on facts as in that case the cable operator was engaged in broadcasting and giving signals to the customers whereas in the case under consideration the assessee received packed signal from channels i.e. Star TV and others and giving to cable operator without modification. It is a case of simple using of plant & machinery i.e. DSR Digital Satellite Receiver for the purpose of distribution and transmission of signals against payment and while making such payment, we are of the considered view that section 194C of the Act including Explanation (iv)(b) of Section 194C is not applicable. Since section 194C is not applicable, the assessee is not liable to deduct tax at source - Decided against Revenue.

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• 2013 (10) TMI 592
  Transfer Pricing adjustment - International transaction with Associated enterprise - Held that:- It is relevant to note that sub-sec. (2A) is a general provision on the issue of the TPO suo motu taking up an international transaction not referred by the AO, whereas sub-sec. (2B) is a special provision limited in its scope only to such international transactions in respect of which the assessee did not furnish report u/s 92E - when there is special provision governing a particular types of cases, then such cases stand excluded from the general provision governing all the cases - it is palpable that all the three necessary ingredients as culled out from a bare reading of section 92B are fully satisfied in the present case. There is a transaction of creating and improving marketing intangibles by the assessee for and on behalf of its foreign AE; the foreign AE is non-resident; such transaction is in the nature of provision of service. Resultantly, the Revenue authorities were fully justified in treating the transaction of brand building an international transaction in the facts and circumstances of the present case - Following decision of LG Electronics India Pvt. Ltd., Noida vs. ACIT [2013 (6) TMI 217 - ITAT DELHI] - Decided against assessee. Transfer pricing adjustment of AMP expenses - Held that:- expenses in connection with the sales do not lead to brand promotion and thus cannot be brought within the ambit of advertisement, marketing and promotion expenses for determining the cost/value of the international transaction. In view thereof, we direct the Assessing officer to exclude the expenses incurred by the assessee in connection with the sales totaling 5500.86 lacs as the same do not fall within the ambit of AMP expenses and hence not to be considered for computing the cost/ value of international transaction - expenditure relating to sales do not lead to the brand promotion and thus cannot be brought within the ambit of advertisement, marketing and promotion expenses for determining the cost / value of the international transaction - Following decision of Glaxo Smithkline Consumer Healthcare Ltd. Versus Additional Commissioner of Income-tax, Range-IV, Chandigarh [2012 (4) TMI 279 - ITAT CHANDIGARH] - Decided in favour of assessee. Capital or Revenue expenditure - Disallowance of advertisement expenditure - Held that:- Revenue expenditure which is incurred and exclusively for the purpose of business must be allowed in its entirety in the year in which it is incurred. It cannot be spread over a number of years even if the assessee has written it off in his books over a period of years - It has not deferred the expenses at its end in the books rather it claimed that total expenses in the return. The Assessing Officer himself allowed only to the extent of 1/5th - Following decision of Madras Industrial Investment Corporation Limited Versus Commissioner of Income-Tax [1997 (4) TMI 5 - SUPREME Court] - Decided in favour of assessee. Deduction u/s 32 - Held that:- Assessing Officer is right in observing that provisions of section 32(1)(iii) should be applied for treating the damages to glow sign boards. These glow sign boards pertain to block of assets of furniture and fixtures which is still appearing in the schedule of assets - Matter remitted back - Decided in favour of assessee.

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• 2013 (10) TMI 591
  Adjustment of Arm's length price - Held that:- The basis of the adjustment made by the TPO is that while reporting the transactions of the related party, the assessee has shown the value of the purchases more than the sales disclosed by CTTL India by Rs.9,72,874/-. The DRP has not at all discussed anything on the submission made by the assessee nor has taken any pains to verify the correctness of the assessee's claim. The assessee has filed the Paper book in which the revised copy of the audit report is also filed - the difference in the figure cannot be treated only on the surmises and presumption basis for making the adjustment u/s.92CA(3) of the Act. Moreover, it is purely a purchase transaction and assessee has no PE in India. Otherwise also there is no tax implication even though there is a difference - Decided in favour of Assessee. Rejection of Comparables - Onus of reasons to disapproval - Held that:- Data base adopted by the assessee for selecting the comparables can be tested on FAR and there is likely to be some difference. Merely because some loss making companies are there those cannot be straightly rejected as comparables unless the abnormal loss is projected. As the same way, super profit comparables also should not be included. Transfer Pricing adjustment is not a law in strict sense though base on certain legal principles but it is arithmetic and while making the plus minus, the balance is required to be maintained - in respect of the selection of the comparables, the Tribunal has taken the consistent stand that as the super profit companies should not be included, the same way, super loss making companies should also be excluded. Though we agree with the TPO that some of the comparables for the purpose of PLI adopted by the assessee are showing the loss, but the burden is on the TPO to prove where those companies are consistently loss making companies. Moreover, except unsupported reasoning, no data has been brought on record by the TPO for excluding the comparables selected by the assessee in the Transfer Pricing study report - Decided in favour of assessee

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• Customs

• 2013 (10) TMI 628
  Application for Stay of Operation or order – assessee imported Heavy Melting Scrap – Confiscation of Goods – Redemption Fine – Held that:- Revenue contended that Section 24 of the Customs Act. 1962, provides for mutilation - But there was no rules prescribed by the Central Government for mutilation of HMS and therefore, the allowing of mutilation of the goods by the Commissioner (Appeals) was not legal and proper - Relying upon Sri Tirupathi Plastics Vs. UOI and others [1992 (3) TMI 352 - MADRAS HIGH COURT] - case laws cited by both sides and the matter was an arguable one, which will be decided at the time of appeal hearing at length - stay of operation of the impugned order was allowed – Stay Petition allowed.

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• 2013 (10) TMI 627
  Refund – Unjust Enrichment - Held that:- Commissioner of Customs vs Virudhunagar Textile Mills Ltd. [2008 (1) TMI 350 - HIGH COURT MADRAS ] - the legal presumption of unjust enrichment gets rebutted if the assessee produces a certificate of Chartered Accountant together with the balance sheet - not only has the balance sheet been produced in support of the CA's certificate but ledger accounts, journal voucher entries as well as certificates of the Accounts personnel and clarificatory certificate of the Auditor have been placed on record - These certificates are not blank certificates containing mere opinion of an Auditor but give detailed and specific reference to the primary documents of accounting entries, i.e. journal vouchers and trace such entries right till the published balance sheets. The CA’s certificate does not refer to any entry posted after 17.02.2009 - Even though the balance sheet of the company is drawn up on 31.3.2009, an auditor can always issue a certificate in the course of the financial year, certifying the entries made in the books of account in the course of the year - The revenue, while alleging lacunas in the certificate presumes that accounts are drawn up only at the year end and not before that - This assumption is absurd as any assessee, particularly companies of the assessee's size and operations, would maintain regular books of account in the course of the year - The certificate of the Chartered Accountant dated 17.02.2009 clearly states that in the beginning itself that the said certificate was issued on verification of the books of account of the company - There is nothing wrong in the CA's certificate. The other discrepancy which has been pointed out in the revenue's appeal is that the assessee had initially claimed before the lower authority that it was not maintaining a bill of entry-wise ledger, though later on the auditor was able to give reconciliation between the balance sheet and the bill of entry - It was clarified by the counsel for the respondent that no ledger is ever maintained bill of entry wise and therefore the clarification given by the assessee to the lower authority was perfectly correct - The clarification, however, did not imply that no ledgers are maintained by the assessee - From the ledgers, the journal vouchers and the journal entries contained in the ledgers it was possible to correlate the excess payments shown as "receivable" with the specific bill of entry - There was, therefore, no contradiction whatsoever in the stand taken by the assessee. The costs which are required to be added under the established cost accounting principles are obviously costs which are in the nature of expenses incurred and debited to the books of account - If a particular amount has not been debited as expenditure in the books and shown straightway as "receivables from the customers", the same would naturally be accounted towards cost of the finished product - The cost of products as per the CAS-4 can only include expenditure which is shown in the books and not amounts deposited which are receivables from the party with whom it had been deposited – Decided against Revenue.

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• 2013 (10) TMI 626
  Valuation - Benefit of notification 21/2002-Cus - Import of telephone software - inclusion of value of software in the cost of equipments - Held that:- facts of the case as brought out in the investigation prima facie supports the case of Revenue. The initial agreement do not indicate any separate supply of software. Only at the stage of issuing purchase order and the invoice the value is split. The case of Revenue is that the equipment as presented were loaded with software and the separate import of the software was a sham. The fact that Revenue did not notice it at the time of clearance of the import of the equipment may not come to the help of the applicants - The case laws cited by the counsel relates to software for ordinary computers and not for telecom equipment where hardware and software are developed and supplied by the same supplier in a pre-loaded manner - Thus the nature of the equipment vis-a vis the software is prima facie similar to that in that in the case of Anjaleem Enterprises Pvt. Ltd (2006 (1) TMI 271 - SUPREME COURT OF INDIA) and Bharti Airtel Ltd. (2012 (7) TMI 233 - CESTAT, BANGALORE) where the cases stand decided in favor of Revenue. In view of the Apex Court decision in the case of Anjaleem Enterprises which is not considered in the case of Vodofone Essar Digilink (2008 (10) TMI 173 - CESTAT, MUMBAI) we do not want to go by the said decision at this stage. Therefore, we consider it proper to call for a pre-deposit of Rs. one crore within eight weeks for admission of appeal - stay granted partly.

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• 2013 (10) TMI 625
  Benefit of Notification No. 16/2000 – The assessee made import of Soya bean Crude Oil at concessional rate of duty - Revenue was of the view that sending the goods to another factory the respondents had contravened the Rules and were not eligible for the benefit of the Notification- Held that:- Revenue was not disputing the fact that imported goods were used for the intended purpose i.e. for the manufacture of refined oil - The Commissioner (Appeals) also noted that for subsequent period the jurisdictional Deputy Commissioner had allowed the respondents to send the imported material to M/s Warana Soya Industries for processing i.e. refining - we agree with the findings of the Commissioner (Appeals) that the requirement of bring the imported goods for use in the respondent's factory was a procedural one – there was no infirmity in the order and the appeal filed by the Revenue was dismissed.

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• 2013 (10) TMI 624
  Waiver of Pre-deposit - Mis-declaration of Goods - export of Goat Shoe Suede Upper Leather - finished leather or not - Held that:- The applicant did not ask for any re-test - Further that applicant waived the right for receiving written show cause notice though they expressed surprise at the test report - After foregoing his right for asking for retest at that time and even right for show cause notice, they cannot be asking for retest in appellate stages in order to prolong this old matter - The right for retest should have been exercised as soon as the test rest results were known to the applicant - After accepting the test reports and agreeing for adjudication without show cause notice, there was no reason to encourage such request for retest at the first appeal stage or second appeal stage - Considering facts and circumstances of the case we order the applicant to make a deposit - pre-deposit of balance dues arising from the impugned order is waived and its collection is stayed during pendency of appeal - Partial stay granted.

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• 2013 (10) TMI 623
  Waiver of Pre-deposit – Held that:- The issue was before the Tribunal and as the amount of refund was already sanctioned to the assessee, we find that the issue needs to be considered by us - Accordingly, we allow the application for the waiver of pre-deposit of the amounts involved and direct the registry to link this appeal with appeal No. C/78 of 2012 and list the same for disposal - Since the issue involved in both the cases can be disposed of by Single Member Bench, registry was directed to list the appeals before Single Member Bench for disposal in its due course.

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• Corporate Laws

• 2013 (10) TMI 622
  Dishonour of Cheque u/s 138 of the Negotiable Instrument Act – Held that:- The complainant had failed to prove his case and acquitted the accused - The complainant had failed to prove that the accused borrowed and issued cheque Ext.P1. On the other hand, the version of DW1 that while he had subscribed to a kuri conducted by Parur Kuries in which PW1 was the Manager, the accused had entrusted two blank signed cheques to him and he misused one of the same and created Ext.P1 - That being so, I find no merit in the appeal and the same was liable to be dismissed - The counsel for the appellant canvassed for a remand so that the appellant will get an opportunity to prove the transaction in dispute - After a lapse of so many years, I am not inclined to grant his request. Further, I have accepted the case of the accused regarding the issuance of a blank signed cheque - Therefore, the request of the counsel for the appellant for a remand was rejected.

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• 2013 (10) TMI 621
  Oppression and mismanagement of company - Application for Rejection of Plaint under Order 7, Rule 11 of the CPC – Held that:- The application of principles of partnership to the concept of company was not alien and while deciding the question of "oppression" the utmost good faith exercised by a shareholder will be relevant - if a simpliciter declaration for cancellation was sought the bona fides of the plaintiff could not be doubted - By seeking framing of a scheme for administration of the asset of defendant No. 1, the plaintiffs are seeking to by-pass the provisions of the Companies Act which contemplates convening board meetings as any decision in respect of defendant No. 1 which was an asset company must be by a resolution - It was quite possible that such relief had been sought as the plaintiffs have been reduced to a minority - In that event the plaintiffs ought to have restricted themselves to a derivative action - Instead the main relief sought is administration of the assets of defendant No. 1 by fair participation of the plaintiffs. The plaintiffs have sought to set aside some of the board resolutions so far so good but the prayer for administration in the light of the prayer for declaration was misdirected - Both the prayers cannot be allowed - The plaintiffs have not abandoned either of the reliefs - Another reason for this order was misjoinder of the different causes of action which was apparent on a reading of the plaint and for which reason the plaint cannot be allowed in its present form.

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• Service Tax

• 2013 (10) TMI 638
  Penalty u/s 76 - Held that:- Ongoing through the Annual Report submitted by the appellant, it is found that the appellant has made huge losses as claimed. Moreover, it is also found that there are lots of dues from the customers to the appellant. Under these circumstances, some lenient view is warranted as regards penalty imposed under Section 76 which is the only subject matter of dispute in this case at present - Therefore, if the appellant deposits an amount of Rs. 5,00,000 within six weeks, it would be sufficient towards predeposit.

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• 2013 (10) TMI 637
  Commercial coaching or training services in relation to road transport service - The applicants were imparting training to the drivers and conductors after recruitment and charges from the trainees – Held that:- The applicant was a transport corporation providing training to their employees, drivers and conductors after appointment which was part of their job - The charges were in the nature of the expenses between the employer and the employee and no service tax was leviable - The transport corporation was not an institute or establishment for providing commercial training or coaching - Whether the transport corporation was an institute or an establishment providing commercial training to their employees which will be looked into at the time of appeal hearing at length. Relying upon Delhi Transport Corporation Vs. Commissioner of Service Tax [2013 (9) TMI 866 - DELHI HIGH COURT] - the demand was raised on the basis of insertion of Explanation to Section 65 (105) (zzc) by Finance Act, 2010, which had retrospective effect from 1.7.2003 - The applicant is a State Government undertaking and prima facie, there was no rational to invoke extended period of limitation - the applicant is incurring huge loss as evident from the balance sheet - it was a fit case for waiver of predeposit of entire amount of tax along with interest and penalty and stay its recovery during the pendency of the appeal – Stay Granted.

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• 2013 (10) TMI 636
  Construction of Residential Complexes – Waiver of Pre-deposit - The applicant was engaged in the business of construction of residential complexes - Held that:- Following LCS City Makes Vs CST Chennai [2012 (6) TMI 363 - CESTAT, CHENNAI ] - Already in large number of cases of this type order had been passed - Most of the issues raised are decided in favour of Revenue - There are certain issues relating to valuation of service rendered to the owner of the land which may need to be considered in view of certain guidelines issued by CBEC – construction was done collecting money from the persons for whom the flats were being constructed and at the end of construction, there was no registration of flat - Therefore it is a clear case of providing service and not the case of sale of flats - To be fair to all the parties concerned, we follow the norm of ordering 50% of the service tax demanded for admission of appeal - Consideration the fact that applicant already has already deposited amount for pre-deposit – stay granted partly.

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• 2013 (10) TMI 635
  Cargo Handling Services – Waiver of Pre-deposit - The appellant was engaged in Cargo Handling Services for Tata Chemicals Limited - Held that:- There were no findings of the lower authorities as to whether loading of the bags of soda ash was done out-side the factory premises or otherwise - any activity undertaken by the assessee within the factory premises would not qualify for taxable services under Cargo Handling Service - The definition of Cargo Handling Service was being interpreted by their Lordships in the case of CCE, Ranchi vs. Modi Construction Company [2011 (4) TMI 598 - JHARKHAND HIGH COURT] - if an activity of packing, loading and unloading is done within the factory premises, the said service would be out of the purview of Cargo Handling Service - the appellant had made out a prima-facie case for the waiver of the confirmed demands - application for waiver of pre-deposit of the amounts involved was allowed and recovery thereof stayed till the disposal of appeal – Stay granted.

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• 2013 (10) TMI 634
  Penalty u/s 76 and 78 - Whether construction services provided by the petitioner were wholly in relation to completion and furnishing services enumerated in sub-clause (c) of Section 65(25b) of the Act or services falling under sub-clause (d) as well relating to alteration and renovation - Held that:- it appropriate to grant waiver of pre-deposit and stay all further proceedings pursuant to the adjudication order pending disposal of the appeal, on condition that the petitioner remits Rs.15,50,000 plus the applicable interest on this amount to the credit of Revenue within four weeks from today. - stay granted partly.

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• 2013 (10) TMI 633
  Restoraion of appeal - Held that:- Applicant are not serious in pursuing their Application, as is evident from the fact that the present Application was filed after a period of 5 years. Also, we find that in spite of a direction from this Bench to file an affidavit explaining the delay and grounds for restoration, no affidavit has been filed by them. We also do not find any proper explanation in the Miscellaneous Application, which would warrant interference - Decided against assessee.

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• 2013 (10) TMI 632
  Recovery proceedings while stay application is pending for disposal - Non disposal of stay application - Held that:- delay in disposal of stay applications before this Tribunal, the Department is also equally responsible in as much as for the last one year, the Commissioner’s post has been lying vacant and also, the senior most AR (Additional Commissioner), posted in this Bench has been on training for last two months and no replacement has been provided. Besides, sufficient number of ARs has not been posted. The Department, accordingly, has been taking adjournments frequently. In these circumstances, initiation of recovery proceeding for not disposal of the stay applications before this Tribunal for no fault of the assesses, is unfair and unwarranted - department directed not to take coercive action against the Applicant.

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• 2013 (10) TMI 631
  Difference in Profit and Loss Account and the amount of service tax return - Show cause notice issued - Held that:- appellant, paid the difference service tax worked out by the Accountant Generals audit. Therefore as per the provisions of Section 73(3) of Finance Act 1994, if there was a difference, show-cause notice should have issue within one year. If show-cause notice has to be issued after one year, suppression or mis-declaration should have been invoked. Only on the ground that there is a difference in the income between Profit and Loss Account and the amount of service tax paid, a show-cause notice has been issued which in our opinion is not a sufficient ground. In any case the appellant during the hearing today submitted a statement of the taxable services rendered and amount payable by them and actually paid by them - appellant has paid an excess service tax of Rs. 27,013/- without taking into the appellant’s claim regarding certain portion of the activities not attracting taxes at all - stay granted.

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• 2013 (10) TMI 630
  Demand - Manpower Recruitment or Supply Agency Service - Held that:- The appellants have undertaken chipping and painting work to Indian Navy Vessels and after going through the notification and the documents we find that this work was undertaken for navy and is exempted as claimed. Similarly we also find that the appellants have made out a prima facie case in respect of road and drainage system. As regards the miscellaneous work, the learned consultant would not provide any details. He submits that the portion on which VAT was paid should be deducted - approximately the appellant on a prima facie basis will be liable to pay about 7 lakhs and since they have already paid an amount of 1,34,226/- in our opinion appellant should be required to deposit another 5 lakhs for hearing the appeal - stay granted partly.

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• 2013 (10) TMI 629
  Levy of interest - CENAVT Credit - Suppression of facts - Delhi International Airport construction and implementation - Self adjustment of CENVAT Credit - Held that:- Even though the claim of the appellant that CENVAT credit was available in the books and therefore interest could not have been levied from that date looks logical, unfortunately unless the CENVAT credit available in the books is debited, legally it cannot be said that the service tax has been paid. The actual debit in the CENVAT account took place only in November 2008 and the question that arises is whether the appellant is liable to pay interest for two years on this portion of the amount. Unfortunately, legally appellants do not seem to have a case and therefore in our opinion, appellant is required to be put to terms for at least interest portion - stay granted party.

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• Central Excise

• 2013 (10) TMI 620
  CENVAT credit on input services – Waiver of Pre-deposit - Eligibility of the appellant for Cenvat credit in respect of input services availed for erection, installation, commissioning, repair and maintenance of the wind mills is in question – Held that:- Credit in respect of the service tax paid on maintenance and repairs of windmill which is situated outside the factory - Following Maharashtra Seamless Ltd. vs. CCE, Raigad [2012 (11) TMI 241 - CESTAT MUMBAI ] - Applicants are entitled for credit in respect of the service tax paid for maintenance and repairs of the windmill situated outside the factory as the electricity produced is used in the factory of production – the requirement of pre-deposit of Cenvat credit demand, interest and penalty is waived for hearing of the appeal - Stay granted.

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• 2013 (10) TMI 619
  Denial of CENVAT Credit on Goods Transport Agency Service – duty paying document - excise number of other unit was mentioned wrongly in GAR-7 challan - Waiver of Pre-deposit - The only objection of the department is that in the GAR-7, the excise registration of the appellant is wrongly mentioned – Held that:- The credit had been taken on the basis of GAR-7 under which this amount of service tax on GTA service received had been paid - Ongoing through the GAR-7 it is seen that while the name of the appellant and address is correctly mentioned and the mistake is only the Central excise registration which is of the Khandsa road unit - Prima facie for this mistake the denial of Cenvat credit is not correct. The credit had been taken are bear the address of Khandsa road unit, the service providers had issued letters making corrections in these invoices - the appellant have prima facie case in their favour - The requirement of pre-deposit of Cenvat credit demand, interest and penalty waived for hearing of the appeal and recovery stayed till the disposal of the appeal – stay granted.

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• 2013 (10) TMI 618
  CENVAT Credit – Penalty on dealer who issued excise invoice was not registered under central excise - Revenue was of the view that M/s. Chemical Sales is not a registered dealer, the invoices issued by them were not valid documents for availing Cenvat Credit - Held that:- M/s. Chemical Sales were a genuine dealer and goods supplied by them under their invoices had been received by M/s. Hindustan Unilever Ltd - Just because M/s. Chemical Sales issued invoices to M/s. Hindustan Unilever Ltd. without being a registered dealer, on the basis of which the M/s. Hindustan Unilever Ltd. availed the Cenvat Credit, Penalty cannot be imposed on M/s. Chemical Sales, as it was for M/s. Hindustan Unilever Ltd. not to take Cenvat Credit on the basis of the invoices issued by an un-registered dealer - For some contravention of Rules by M/s. Hindustan Unilever Ltd., penalty cannot be imposed on M/s. Chemical Sales and as such imposition of penalty on them does not appear to be sustainable. Reversal of CENVAT Credit – Waiver of Pre-deposit - M/s. Hindustan Unilever Ltd. have reversed Cenvat Credit - But in respect of spare parts of capital goods they would be eligible for Cenvat Credit - However, as regards the Cenvat Credit on the basis of the invoices issued by M/s. Chemical Sales, M/s. Chemical Sales were neither a manufacturer nor a registered dealer, the invoices issued by them was not valid documents for Cenvat Credit - Thus, in respect of alleged wrong credit this is not a case for total waiver – M/s. Hindustan Unilever Ltd. are directed to deposit an amount - On deposit of this amount within the stipulated period, the requirement of pre-deposit of balance amount of Cenvat Credit demand, interest and penalty imposed on the appellant would stand waived – Partial stay granted.

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• 2013 (10) TMI 617
  MODVAT credit – Determination of Duty under Rule 57-I - Appellant contended that there was no determination of the amount payable under Rule 57I (1)(iii) - the question of payment of interest does not arise – Held that:- Rule 57-I (1)(ii) envisages a situation where demand is to be raised by the department within six months or within five years as the case may and sub-rule (1)(iii) provides that the proper officer to determine the liability - Sub-rule (2) provides for a situation where a demand is made, the assessee pays with interest and the matter ends there. Whether the demand is confirmed after quantification under sub-rule (1)(iii) or the amount is paid under sub-rule (2), the assessee is required to pay interest as per the provisions of sub-rule (3) read with Section 11AA of the Act - Where an amount is determined under sub-rule (1)(iii) or the amount demanded has been paid under sub-rule (3), the interest is to be paid - even if the duty amount was paid, the provisions of sub-rules (1) & (3) of Rule 57I would be attracted - in earlier proceedings, the appellant had challenged the liability before the Tribunal and the Tribunal dismissed the appeal - The consideration of the statutory provisions reveals that once the duty amount is paid, the interest becomes payable and whether duty is determined under Rule 57-I (iii) or it is paid under Rule 57I (2), the interest liability would be attracted – Decided against Assessee.

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• 2013 (10) TMI 616
  Rectification in Final order - Rectification of error apparent on the face of record – Held that:- Appellant has not contested the duty liability before the Bench - Tribunal has recorded clearly that the duty which has been reversed by the appellant was voluntary and, as the same was taken inadvertently in excess to whatever was due to them - there is no error apparent on the face of records which needs rectification by the Bench - By raising this new point in the applications of rectification of mistakes appellant is trying to re-argue the case, which is not permissible at this stage - If the appellant is aggrieved by any portion of the order, there are legal remedies available which can be explored – Decided against Assessee.

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• 2013 (10) TMI 615
  Clandestine Removal of Goods – Waiver of Pre-deposit – Held that:- The goods were removed from the factory premises of the Applicant without payment of duty - the particulars of vehicles were also mentioned on the sheets and weighment Supervisor confirmed that the entries were for clearances from the factory - a large number of vehicles that carried goods from Dankuni godown to M/s. Rosedale, Kolkata also crossed Palsit toll plaza, the toll collecting point on NH2 on way from Durgapur to Kolkata, on the same very day – the dispatch point was shown as Durgapur and receipt point was shown as Rajarhat - goods were actually cleared from factory and not from Dankuni - the details are available at various loose sheets recovered from the premises of the Applicant - both the sides have produced evidences in favour of them and the same can be examined at the time of final disposal of the Appeal - the Applicant has not been able to make a case for full waiver of the pre-deposit and therefore we direct the applicant to pay Rs.12.00 Lakhs – upon such submission rest of the duty to be waived till the disposal – Partial Stay granted.

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• 2013 (10) TMI 614
  SSI exemption - Clubbing of value of clearance of the other units – Waiver of Pre-deposit – Held that:- Applicant are engaged in the manufacture of coal handling system for use in the thermal plant by TNEB for generation of electricity - applicants has already deposited 50% of the duty – pre-deposit of balance duty interest and penalty waived and its recovery stayed during pendency of the appeals – Stay granted.

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• 2013 (10) TMI 613
  Valuation - MRP Based value or Transaction Value – Either under Rule 4A OR 4 of Central Excise Act - manufacture of cookies and dough classifiable under sub-heading 1905 31 00 and 1902 10 00 of the Schedule to the Central Excise Tariff Act, 1985 – Held that:- The appellant is not obliged to declared the Maximum Retail Price on the packages and he has not declared the Maximum Retail Price on the packages supplied by them to their institutional customers at the relevant point, thus availing and enjoying the exemption granted under Rule 34(a) of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 and only after initiation of the present proceedings, with a view to illegally claim the benefits under Section 4A of the Central Excise Act, he started printing the Maximum Retail Price on the packages being supplied by them to their institutional customers also, which act will not, in any way, absolve them of their liability during the relevant point of time of committing the evasion of duty. The Department is right in contending that the appellant is not entitled to claim any benefit under Section 4A of the Central Excise Act, since his goods are chargeable under Section 4 of the Central Excise Act. Waiver of Pre-deposit - The applicant failed to make out a prima facie case for waiver of entire amount of duty along with interest and penalty – the order of the Settlement Commission that the applicant has already paid excess amount – Applicant was directed to submit the amount as pre-deposit – upon such submission rest of the duty to be waived till the disposal – Partial stay granted.

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• 2013 (10) TMI 612
  Shortages of Inputs - Availment of Ineligible Cenvat credit – Waiver of Pre-deposit – Held that:- The issue involved in the case needs to be gone into detail as both the lower authorities have recorded the finding that there is confessional statements of the persons - they have only received the documents for availment of cenvat credit - the entire findings are incorrect as they had produced the invoices which indicate the payment of VAT and in some situations, payment of GTA by the appellant was also brought to the notice, which was not considered - all these issues needs to be appreciated in detail, which can be done only at the time of final disposal of the appeals - appellant should be put to some condition for hearing and disposing the appeals - appellant has already deposited an amount of Rs. 2.60 Lakhs, the main appellant to further deposit an amount of Rs. 1,50,000 – upon such submission applications for the waiver of pre-deposit of balance amounts involved are allowed and recovery stayed till the disposal of appeals – Partial stay granted.

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• 2013 (10) TMI 611
  Utilization of CENVAT Credit - Whether the CENVAT credit of input services required for providing output service could be utilized for payment of excised duty on the goods manufactured by the appellant – Held that:- Rule 3 of the CENVAT Credit Rules, 2004 does not stipulate maintaining separate account as a manufacturer and as a service provider - Third proviso to sub-rule (4) of Rule 3, provides that no credit of the additional duty leviable under sub-section (5) of Section 3 of the Customs Tariff Act, shall be utilized for payment of service tax on any output service, Similar restrictions are in other proviso - there are certain restrictions on the utilization of particular type of duties which are elaborated in sub-rule (b) of Rule 7 of the CENVAT Credit Rules - These restrictions do not cover cross utilization of credit of excise and service tax, as a general proposition. Sr. no. 8 and the Table details the CENVAT credit taken and utilized - In ER-1 return, in Table at Sr. no. 8, in column (9), details about service tax are specifically listed - On careful analysis of the said format, the intention appears to be to permit cross utilization of the credit of excise duty and service tax – Decided in favour of Assessee. Following CCE, Coimbatore vs. Lakshmi Technology and Engg. Industries Ltd. [2011 (2) TMI 1275 - CESTAT, CHENNAI] decided in favor of assessee.

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• CST, VAT & Sales Tax

• 2013 (10) TMI 640
  UPVAT - Exemption Notification No.780 - Exemption Based on Fixed Capital Investment – Revenue had rejected the application for certificate of entitlement by wrongly interpreting the provisions of section 42(3)(a) of the Act – Held that:- Section 42 and Section 81 were amended by Amending Act No.11 of 2009 dated 28.2.2009 retrospectively w.e.f. 1.1.2008 and benefit of exemption was converted into benefit of refund by net tax payable by the unit - The Tribunal had committed an error of law in rejecting the application for grant of Certificate of Entitlement under Section 42(3)(a) as not maintainable even though the exemption was based on the fixed capital investment - In the case of electronic industries monetary limit was not in view of the Notification dated 16.11.1995 there but the exemption was based on fixed capital investment – Order set aside - The matter was remanded back to the Tribunal to decide the matter expeditiously in view of the preposition of law – Decided in favour of Petitioner.

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• 2013 (10) TMI 639
  Violation of principle of natural justice - Ex parte assessment order - Held that:- Court directed Assessing Officers that, the record shall be maintained up to date and when the dealer or his authorised representative appears before the Assessing Authority or any other Appellate Authority, his signature shall be taken on the body of the order sheet on the date of his appearance - It appears that the aforesaid direction has not been carried out in the present case. Therefore, we hold that the impugned ex parte assessment order is passed without due notice to the petitioner or his representative in violation of the principles of natural justice as well as the circular dated 30.11.2009 and the judgment of this Court - Therefore impugned orders are quashed - Decided in favour of assessee.

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