TMI Tax Updates - e-Newsletter
October 18, 2014

Case Laws in this Newsletter:

Income Tax Customs PMLA Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

Articles

1. ELIGBLE INPUT SERVICE TAX CREDIT AS PER JUDICIAL DECISIONS

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Illegal Import, Possession and Sale of Fireworks of Foreign Origin

2. RBI Reference Rate for US $

3. Last date of filing of the TDS/TCS Statements for the 2nd Quarter of Financial year 2014-15 for the deductors/collectors in the States of Andhra Pradesh, Jammu & Kashmir, Odisha & Telangana extended

4. Revenue Secretary Sh. Shaktikanta Das and his Swiss counterpart, State Secretary Jacques de Watteville, sign Joint statement in Bern

5. National Financial Literacy Assessment Test (NCFE-NFLAT 2014-15) for students of Class VIII, IX and X

Notifications

Customs

1. 98/2014 - dated 16-10-2014 - Cus (NT)

Rate of exchange of conversion of each of the foreign currency with effect from 17th October, 2014

Circulars / Instructions / Orders

Income Tax

1. PRESS RELEASE - dated 17-10-2014

Last date of filing of TDS/TCS Statements for 2nd Quarter of Financial year 2014-15 for deductors/collectors in States of Andhra Pradesh, Jammu & Kashmir, Odisha & Telangana extended.

FEMA

2. 36 - dated 16-10-2014

Foreign Exchange Management Act, 1999 (FEMA) Foreign Exchange (Compounding Proceedings) Rules, 2000 (the Rules) - Compounding of Contraventions under FEMA, 1999

Customs

3. 10/2014 - dated 17-10-2014

Import of Pesticides-reg.

4. Office Order 3/2014-CUS - dated 15-10-2014

Constitution of Review Committee of Chief Commissioners of Customs - Reg.

Central Excise

5. OFFICE ORDER - 2 / 2014 - dated 15-10-2014

Constitution of Review Committee of Chief Commissioners of Central Excise - Reg.

6. F. No. 354/156/2014-TRU - dated 10-10-2014

Discontinuation of Certain Reports

Highlights / Catch Notes

Income Tax

• Assessing Officer Incorrectly Classifies Share Sale Proceeds as Income; Should Be Taxed as Capital Gains Instead.

  Case-Laws - AT : Sale proceeds of shares treated as income from other sources – Genuineness of transaction - capital gains earned by the assessee is to be taxed as such and AO erred in considering the entire sale proceeds as income from other sources - AT
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• Cash Credit Addition u/s 68 Challenged Due to AO's Lack of Verification; Case Remanded for Further Probe.

  Case-Laws - AT : Addition of cash credit u/s 68 – There is a time gap of near about 5 years, the share applicant might have changed their addresses, which could be verified from the ROC by the AO to substantiate his findings, which has not been done by him - matter remanded back - AT
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• Court Rules School Goodwill Not Technical Know-How; Denies Depreciation Claim for Intangible Asset.

  Case-Laws - AT : Depreciation - assessee treated the acquisition of goodwill as technical know how - intangible assets - since imparting of education in school cannot be equated with the information or technique helping in industrial manufacturing - depreciation not allowed - AT
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• Penalty Waived for Assessee as Section 271AAA Immunity Mirrors Clause (2) of Explanation 5, Section 271(1)(c).

  Case-Laws - AT : Penalty u/s 271AAA in case of search – Provisions of clause (2) of explanation 5 appended to section 271(1)(c) are similar to immunity granted to assessee under clause (2) of section 271AAA - penalty waived - AT
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Customs

• Court Rules Appellant Cannot Contest Duty Demand After Withdrawing Challenge to Exemption Withdrawal Under Notification No. 64/88.

  Case-Laws - SC : Exemption under Notification No.64/88 dated 1.3.1988 - withdrawal of the exemption certificate - Since having questioned the said withdrawal and having withdrawn it later on, we are of the opinion that the appellant cannot take exception to the duty demand made by the respondent - SC
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Wealth-tax

• Security for Lease Not a Debt Under Wealth Tax Act, Section 2(ea) Ruling Clarifies Asset Lease Terms.

  Case-Laws - AT : Valuation of property - Section 2(ea) of Wealth Tax Act, 1957 - whether security taken for lease of asset would be treated as debt - held No - AT
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Service Tax

• New Circular on Service Tax for Sub-Contractors Does Not Invalidate Past Circulars.

  Case-Laws - AT : Levy of service tax on sub-contractor - Issuance of new circular does not mean that the past circulars were necessarily held to be invalid for the period during which they existed. - AT
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• Assessee Denied Natural Justice: Procedural Irregularity Found in Service Tax Demand Audit; Matter Remanded for Further Review.

  Case-Laws - AT : Demand of service tax based on audit of records - the assessee should be given an opportunity to make a submission/rebuttal on those facts, failing which there would be a procedural irregularity leading to denial of natural justice. Matter remanded back - AT
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• Refund Denial Overturned: Revenue's Appeal Exceeded Limits of Show Cause Notice and Original Orders.

  Case-Laws - AT : Denial of refund claim - Revenue’ appeal has transgressed even the outermost boundaries of the Show Cause Notice and the Order-in-Original and the Order-in-Appeal taken together and is therefore not sustainable - AT
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Central Excise

• Court Rules Export Obligation Rests with Petitioner, Not Transferees, for Exemption Fulfillment.

  Case-Laws - HC : Non fulfillment of export obligation - Since the exemption was granted only to the petitioner on condition that the petitioner fulfills an export obligation, the petitioner cannot turn around and say that the transferees are the beneficiaries of the exemption and that the responsibility to fulfill export obligation should be fixed only upon the transferees. - HC
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• Supreme Court Orders 18% Interest from August 2012 on Installment Payment Proposal Accepted by Petitioners.

  Case-Laws - HC : Liability to pay interest being reiterated in the acceptance of the proposal for instalments and the Petitioners having acted upon the same, the Petitioners are bound to pay interest at the rate of 18% per annum from the date of the order of the Supreme Court dated 29th August, 2012 till the date of realisation as demanded - HC
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• Cenvat Credit Allowed on Capital Goods for Exempt Intermediate Products Used in Taxable Finished Goods Production.

  Case-Laws - HC : Cenvat credit cannot be denied on capital goods used in the manufacture of exempt intermediate products exempt from payment of duty, which are used captively in the manufacture of finished goods chargeable to duty. - HC
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• Air Brake Equipment Installation Costs Excluded from Assessable Value for Tax Purposes Under Manufacturing Process Rules.

  Case-Laws - AT : Valuation of goods - the installation of the Air Brake equipment has nothing to do with the manufacture of the equipments and hence the charges for the same are not includible in the assessable value of the Air Brake equipment - AT
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• CENVAT Credit on Exempted Finished Goods: Legal Mandate Effective March 1, 2007, Not Applicable to Current Appeals.

  Case-Laws - AT : CENVAT Credit - finished goods become exempted subsequent to availing credit - mandate of law was effective with effect from 1-3-2007, i.e., after the period involved in the present appeals. - AT
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VAT

• Gambier Not Considered Kattha in Indian Usage Despite Usability for Catechu Production and Alternative Manufacturing Processes.

  Case-Laws - HC : Merely because Gambier may be used to obtain Catechu or after applying certain process of manufacture it may be used as an alternate for Catechu, it cannot be called as Kattha, as understood in common parlance in India. - HC
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Case Laws:

• Income Tax

• 2014 (10) TMI 434
  Validity of notice u/s 148 – Validity of the reassessment proceedings - Held that:- As per the reasons recorded by the AO, not only the statement of persons involved in the racket of bogus entry providers were obtained by Investigation Wing of the Department wherein they admitted regarding providing bogus entry but the complete list is available along with the DD no., date and amount etc. and thereafter, the AO has examined this aspect also that these drafts are in fact deposited in the bank account of the assessee – AO also noted that although the drafts were deposited in the bank account in the present year but no income has been declared by the assessee on account of capital gain in respect of these sale of shares for which drafts were deposited – the order of the CIT(A) is upheld – Decided against assessee. Treatment of LTCG from undisclosed sources – Income from other sources – Admission of additional evidence under Rule 46A – Held that:- The transaction of sale of shares was made through different brokers and M/s CMS Securities Ltd. happens to be one of such brokers - The transaction of sale is supported by contract note/sale bill corresponding bank statement and confirmation of account by broker - without giving a finding that M/s CMS Securities Ltd. was still broker inspite of statement of Shri Mukesh Kumar Gupta that the licence of M/s CMS Securities was cancelled in the year 1998, how the CIT(A) can say that the transaction of sale of shares was made through broker - There is no mention in the order of CIT(A) that the distinctive numbers of the shares purchased and sold were made available before him – the shares of M/s B.T. Technet Ltd. were purchased by the assessee in AY 2000-2001 but still he has not mentioned the distinctive numbers of the shares - It is also not mentioned as to whether the shares were standing in the name of the assessee or not. The address of the company is also not available in the order of CIT(A) - It is also not coming out as to whether the delivery of shares was given by the assessee at the time of sale in physical form or through DEMAT account - No enquiry was made from the concerned company as to whether any shares were standing in the name of the assessee during AY 2000-01 to present AY i.e. 2002-03 and whether the shares were transferred in some other name after the date of stated sale and when the shares were so transferred and in whose name - the assessee has not been able to establish the factum of shares sold by the assessee - It is also not coming out that the shares of this company were listed share or not and what was the listed price on the date of purchase and sale - when the assessee is not furnishing any evidence before us also regarding the contract note in respect of stated sale of shares along with the distinctive numbers etc. the order of CIT(A) is not sustainable when such details were not furnished – the order of the CIT(A) is set aside – Decided in favour of revenue.

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• 2014 (10) TMI 433
  Maintainability of appeal – Tax effect less than Rs. 4 lacs – whether, this appeal of revenue, which is below the prescribed limit of tax effect in view of the Board's Instruction No.5/2014 issued on 10.07.2014 revising the monetary limits for filing of appeals by the Department before ITAT is maintainable or not – Held that:- As decided in CIT Vs M/s. P. S. Jain & Co. [2010 (8) TMI 702 - Delhi High Court] - the Board has rightly taken a decision not to file references if the tax effect less than the amount prescribed - The same policy for old matters needs to be adopted by the Department – also in The Commissioner of Income Tax v. Smt. Vijaya V. Kavekar [2013 (2) TMI 451 - Bombay High Court] the applicability of circular was considered and the monetary limit was increased and appeals were to be filed only in cases where the tax effect exceeded Rs. 4 Lacs - no appeals would be filed in the cases involving tax effect less than Rs. 4 Lacs notwithstanding the issue being of recurring nature - the prevailing instructions fixing the monetary limit for the tax effect would hold good even for pending cases – revenue could not point out any of the exceptions - this being a low tax effect case, the appeal cannot be admitted – Decided against revenue.

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• 2014 (10) TMI 432
  Unexplained credits on withdrawals from firm and banks – Held that:- There was no transaction in the account of the appellant in UCO Bank and hence its old balance was placed along with cash and advances under the head "Cash advance and UCO Bank" in absence of copy of the bank account - to prove the availability of cash in hand the assessee has made a long drown process of working out cash in hand as on 31-03-2007 after taking into consideration all transactions of the year - Through this process cash in hand is worked out at Rs. 13,60,954/- in place of Rs. 13,57,269/- shown through statement of affairs and hence cash in hand and advances shown in the statement of affairs deserve to be held as proved and acceptable on facts and in law and according to the principle of accountancy. CIT(A) has made a finding that on 31.03.2007 the assessee was having total cash of Rs. 13,60,954/-; and the assessee had filed all the details in respect to his withdrawals from the account of the assessee in the firm M/s. Approve Home Developers and Withdrawal from the account of the assessee in the firm M/s. Sharda State Promoters and cash drawn from other bank accounts of the appellant as indicated in the statement - CIT(A) rightly held that the AO erred in arriving at the correct figure of cash in hand with reference to the income shown in the P & L account & aforesaid withdrawal from firms of banks – the order of the CUT(A) is upheld – Decided against revenue. Expenses on car – Household expenses – Failure to discharge onus and to prove genuineness of expenses – Held that:- All expenses disclosed are comparable to the earlier years - There is no material to show that there is any exorbitant increase in expenditure - The AO proceeded on assumption which is not permissible - All expenses are supported by necessary evidence which has been placed on record before AO and the revenue has not brought to our notice any material so as to show that no evidence was furnished before the AO - the nature of expenses claimed by the assessee does not warrant any addition - There is no dispute as to the existence of car and the car loan, facts of which was duly reflected in the statement of affairs, which has been accepted by the AO - depreciation of cost of car and interest on car loan are statutory deduction which must be granted to the assessee and the insurance has been paid by account payee cheques – the order of the CIT(A) is upheld. In respect to the deletion of addition made on account of low withdrawal for house hold expense - the assessee along with HUF together has withdrawn Rs. 54,000/- considering the fact & circumstances of the assessee – there is no reason to disagree with the order of the CIT(A) in this respect – Decided against revenue.

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• 2014 (10) TMI 431
  Reopening of assessment u/s 147 r.w section 148 – True and full disclosure - Unexplained cash credit u/s 68 - Held that:- Assessee’s case falls within the proviso to section 147 because assessment had been completed u/s 143(3) and the reopening has been made after 4 years from the end of relevant assessment year - on a mere change of opinion on the same set of facts, there cannot be any reopening - In order to clothe with the jurisdiction of reopening to assessing officer after four years from the end of relevant assessment year, there should be failure on the part of the assessee to disclose fully and truly all material facts, necessary assessment - Mere escapement of income is not sufficient, but it should be coupled with the omission on the part of assessee to disclose fully and truly all material facts - once the information has been received by assessing officer regarding accommodation entries being taken by assessee from the Investigation Wing, then he has no course of action open except to resort to the provisions of section 147 - in case of assessment completed u/s 143(3) after four years, mere escapement of income, cannot give jurisdiction to him to reopen the assessment - The reasons recorded by AO have to be examined to find out whether the mandate of proviso to section 147 in such cases have been met or not. Relying upon CIT. Versus VINIYAS FINANCE AND INVESTMENT PVT LTD. [2013 (3) TMI 35 - DELHI HIGH COURT] - assessee had filed all the details in regard to the loans in the original assessment proceedings u/s 143(3), which were examined by AO, the escapement cannot be said to be on account of failure on the part of assessee to disclose fully and truly all material facts, necessary for assessment – thus, the reopening of assessment proceedings, initiated by the AO u/s 147 is are bad in law – Decided in favour of assessee.

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• 2014 (10) TMI 430
  Non-speaking order by the CIT(A) - Rejection of books of accounts us 145(3) - Allowability of exemption u/s 10AA – Failure to establish the manufacturing of goods in SEZ or not - The assessee claimed exemption u/s. 10AA on the ground of income derived from manufacturing and export of diamond studded gold and silver jewellery from its SEZ unit – Held that:- Revenue pointed out that nowhere in the operative portions of the order, the CIT(A) has given a finding about the adverse observation of the AO in respect of availing of time for manufacturing of silver articles of 317 pieces and the abnormally low consumption of electricity during the relevant period - assessee could not controvert the submission of the revenue to the effect that the order of the CIT(A) is a non-speaking order and was passed without dealing with the findings of the Assessing Officer – the order of the CIT(A) could not be sustained as nothing has been stated in t in respect of the merit of the issue involved - simply because after rejecting the books of account, if turnover and profit as claimed in the return is not varied by the AO, it cannot be held that the claim for deduction u/s. 10AA has also to be accepted – CIT(A) has not dealt with the relevant observations made by the AO for deriving an adverse inference against allowability of exemption u/s. 10AA – thus, the matter is to be remitted back to the CIT(A) for fresh adjudication after passing speaking order on the issue – Decided in favour of revenue.

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• 2014 (10) TMI 429
  Validity of reopening of assessment u/s 147 – Jurisdiction of the AO – Escapement of income or not – Held that:- Reassessment was initiated on the basis of material already on record and there was no fresh material to initiate such proceedings – it is a settled position that where there is no fresh material in the possession of the AO, reassessment proceedings are not valid – relying upon THE COMMISSIONER OF INCOME TAX-V Versus ORIENT CRAFT LTD. [2013 (1) TMI 177 - DELHI HIGH COURT] - having regard to the Explanation I of section 147 read with section 143(1) the reopening of the assessment in this case was justified - the note forming part of the return clearly mentioned and described the nature of the receipt under a non-compete agreement - The reasons for the notice u/s 147 nowhere mentioned that the revenue came up with any other fresh material warranting reopening of assessment - mere conclusion of the proceedings u/s 143( I) ipso facto does not bring invocation of powers for reopening the assessment – Tribunal was rightly of the view that it was merely a change of opinion on the part of the AO and it could not initiate reassessment proceedings – Decided against revenue. Deletion on account of mould expenses - Expense or rent on moulds relate to M/s Dart India & ITL and not to the assessee company – Held that:- Following the decision in Asstt. Commissioner of Income Tax Versus M/s. Tupperware India Pvt. Ltd. [2014 (3) TMI 725 - ITAT DELHI] - mould rentals was payable by the assessee under a contractual obligation with contract manufacturer - The contract manufacturer have also given a certificate to the extent that mould rentals was to be borne by the assessee pursuant to the agreement - There is no change in the facts, situation or in law – thus, the Revenue cannot be allowed to adopt a different stand - when in earlier asstt. years the revenue accepted the order of the tribunal in favour of the assessee, then Revenue cannot be allowed to flip flop on the issue and it ought let the matter rest rather than spend the tax payers money in pursuing litigation for the sake of it - the expenditure on mould is allowable in the hands of the assessee - The payment of mould rental was done by the assessee under a contractual obligation with the contract manufacturer. The company had to import the molds from overseas group company on hire basis and provide the same to contract manufacturers to enable them to manufacture the products - Once the contract manufacturer completes the order placed by the assessee, the molds are returned back to the company and therefrom to the molds owners in case the particular molds, is not required for use of manufacturer – the contract and molds borrowed by the assessee can by no stretch of imagination be considered as a colorable device. If it was to be presumed that the payment of mould rentals is the liability of the contract manufacturers and so incurred by them in that case the cost of such mould rentals would be part of 'purchases' as it would increase the production cost of the contract manufacturer and accordingly, the purchase price bargained by the appellant would be increased by the same amount of mould rental - the assessee would not incur rental expenses, but will have to pay resultant higher purchase price to the contract manufacturer – Decided against revenue.

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• 2014 (10) TMI 428
  Sale proceeds of shares treated as income from other sources – Genuineness of transaction - Held that:- Assessee has filed necessary documents evidencing the purchase of shares as well as getting them transferred in its name and later on dematerialized form through HDFC Bank and subsequent sale - AO did not doubt sale of shares through stock exchange - transaction of sale of shares results in capital gain only – As decided in The Income Tax Officer Versus Smt. Aarti Mittal And Others [2013 (11) TMI 968 - ITAT HYDERABAD] – wherein Arun Kumar Agarwal (HUF) & Others [2012 (8) TMI 398 - JHARKHAND HIGH COURT] was followed - Where the share broker was found involved in unfair trade practice and was involved in lowering and rising of the share price, and any person, who himself is not involved in that type of transaction, if purchased the share from that broker innocently and bonafidely and if he show his bonafide in transaction by showing relevant material, facts and circumstances and documents, then merely on the basis of the reason that share broker was involved in dealing in the share of a particular company in collusion with others or in the manner of unfair trade practices against the norms of S.E.B.I and Stock Exchange, then merely because of that fact a person who bonafidely entered into share transaction of that company through such broker then only by mere assumption such transactions cannot be held to be a shame transaction. No suspicion can be raised when the shares were purchased years before the unusual fluctuation in the share price - The shares of some of the companies were purchased by the assessees even five years ago from the time of sale and those purchasers were already disclosed in the Balance Sheet of the assessee – the assessee's transactions are genuine transactions - In the absence of any evidence on record that assessee has indulged in making adjustment entries the contentions of the AO which is based on presumptions and conjectures cannot be accepted - capital gains earned by the assessee is to be taxed as such and AO erred in considering the entire sale proceeds as income from other sources - AO is directed to accept the gain as long term capital gain – Decided in favour of assessee.

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• 2014 (10) TMI 427
  Addition of cash credit u/s 68 – Genuineness of the transactions, identity of the cash creditor and creditworthiness of the cash creditors - AO was of the view that the assessee had increased share capital to the tune of Rs. 3 crores - Held that:- During the course of search, relevant to AY 2009-10, no incriminating documents were found in Kamdhenu group cases - appellant filed confirmation of PAN No. addresses of the subscribers & company master detail of ROC - The share capital was received through proper banking channels - The AO collected information u/s 133(6) of the Act, which was served on all the subscribers - therefore, these are the sufficient proof of identity, genuineness and creditworthiness of the subscribers - AO heavily relied upon the Inspector's report, which was against the natural justice as the copy was provided on 06/6/2011 to the appellant whereas assessment order was completed by the AO - Jawahar market is evident from the copy of bank account of subscriber, on which this address had been mentioned as well as on master detail of ROC - The share capital was subscribed in FY 2005-06 and inquiries were made in FY 2010-11 - There is a time gap of near about 5 years, the share applicant might have changed their addresses, which could be verified from the ROC by the AO to substantiate his findings, which has not been done by him - CIT(A) has called for remand report from the AO on furnishing of copy of bank account of M/s Megatronics Systems Pvt. Ltd. at the time of appellate proceedings – revenue has not controverted the findings given by the CIT(A) – Decided against revenue.

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• 2014 (10) TMI 426
  Depreciation - assessee treated the acquisition of goodwill as technical know how - intangible assets - After considering the mode of acquisition of technical knowhow by the assessee company, the assessing officer pointed out that assessee failed to explain how the amount of Rs. 2.50 crores on account of goodwill had become technical know-how in the hands of the assessee company. - Held that:- The assessee had acquired the business of M/s Little Kingdom Edutech Ltd., which in turn had acquired the business of partnership firm of Little Kingdom Nursery School. Ms. Neeru Kukreja and Rajesh Kukreja (HUF) managed all these three entities since beginning - The definition of know-how clearly contemplates that some specific technique is to be developed which can assist in the manufacture or processing of goods or in the working of a mine, oil-well or other sources of mineral deposits – relying upon CIT Vs. Elecon Engg. Co. Ltd. [1974 (2) TMI 7 - GUJARAT High Court] - there should be something concrete available with the assessee in the form of formulae, drawings, patterns, blue prints, specifications etc. to come within the ambit of know-how - the know-how is mainly with reference to industrial manufacturing process and not with reference to any innovative technique allegedly developed by the managing director of assessee company for better imparting of education to children - The assessee's claim, inter alia, is that academic gadgets developed by it constitute 'know-how' - since imparting of education in school cannot be equated with the information or technique helping in industrial manufacturing, we are of the opinion that technical know-how in the books of assessee acquired from M/s Little Kingdom Edutech Ltd. cannot be held to be entitled for depreciation in view of statutory provisions of section 32 – Decided against assessee. Penalty u/s 271(1)(c) – Inaccurate particulars furnished or not - Held that:- All the facts were accurately disclosed by assessee and the depreciation had been claimed treating the same as technical know-how - It is only because of difference of opinion on the scope of term 'know-how' as per Explanation 4 to section 32 that the assessee's claim was not accepted - assessee's claim was bona fide inasmuch as in the case of M/s Little Kingdom Edutech Ltd. assessment had been completed u/s 143(3) for A.Y. 2001-02 wherein in the balance-sheet stood accepted showing software at Rs. 2.25 crores and good-will at Rs. 2.50 crores - the bona fides of the assessee's claim cannot be doubted – Following the decision in COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] - mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee - Such claim made in the Return cannot amount to the inaccurate particulars – thus, there is no reason to interfere in the order of the CIT(A) – Decided against revenue.

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• 2014 (10) TMI 425
  Claim of deduction u/s 80IB(10) on sale of houses – AO had denied the claim of deduction u/s. 80IB(10) to the assessee for the reason that the assessee was not the owner of the land and was merely a contractor - Held that:- Following the decision in M/s. Satsang Developers Versus ACIT, Circle-2(2), Baroda [2014 (5) TMI 184 - ITAT AHMEDABAD] - the claim of the assessee for deduction u/s.80-IB (10) of the Act cannot be declined if other conditions are being satisfied - the land was sold separately along with partial and unfinished construction flats and, thereafter, construction agreement was entered into to carry out the balance construction work - such agreement for construction to complete the balance work is only an incidental facilitation to protect interest of the parties and the assessee is eligible for deduction u/s. 80-IB(10) of the Act - the assessee had chosen to register the plot in the name of the buyer on payment of specified amount in order to achieve cost saving and to ensure reliability and the assessee had needed to construct the house as per building plan obtained in the name of plot-owners on payment of subsequent installments - the assessee had also developed various public amenities within the project – the assessee is eligible for deduction u/s 80IB – Decided in favour of assessee.

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• 2014 (10) TMI 424
  Selection of comparables – Functionally different unit – Difference in assets employed and risks assumed – Held that:- The assessee itself considered this company as functionally comparable by including it in the accept/reject matrix, but, rejected it on the ground that advertisement expenses were more than 3% - the TPO has taken the figures of this company’s Software services segment alone, which is admittedly akin to that of the assessee and that the Advertisement, marketing and distribution spend in this segment is less than 3%, being the filter applied by the assessee - the inclusion of the Software service segment of Accel Transmatic Limited in the list of comparables is upheld - from the description of business activity of this company, it is a pure software development service provider - In the absence of any other specific objection against this company, From the annual accounts of this company that it is engaged in rendering ITES BPO services, Application management services, Offshore delivery, Project management services, Public sector services, Maritime practice and Executive education information systems, etc. - the TPO has taken the figures of this company which represent `Income from software sales and services’ - the assessee is not engaged in software sales - the comparability of Flextronics Software Systems Limited is upheld, as the company cannot be considered as comparable and is directed to be excluded from the list of comparables. Ishir Infotech Limited – Held that:- This company to be comparable to that of the assessee - the company has included Professional fees along with Director’s salary, etc., under the head ‘Administrative expenses’ - When the objection was taken by the assessee before the TPO that the employee cost was only 4% viewing only the ‘Establishment expenses’ in isolation without considering the employee cost included under the head ‘Administrative expenses’, the TPO corrected the position by observing that the employee cost was more than 25% by impliedly including the personnel cost included under the head ‘Administrative expenses’ - The assessee did not challenge the TPO’s calculation before the DRP on this issue - filter of 25% of RPT is good enough to make a controlled transaction and thus expunging it from the list of comparables, which can only be uncontrolled transactions - the view taken by the TPO is upheld in including this case in the list of comparables. KALS Information Systems Limited – Held that:- The company was engaged in Software development and training - the TPO adopted Software development segment of this company by noticing that this segment also included revenues from software products and training - the assessee is not engaged in imparting any training on commercial basis or selling its software products, the financials of the company under this segment cannot be compared with the assessee - The contribution by the sale of software products or training to the overall revenue of this segment cannot be precisely ascertained to determine the question of its comparability – Decided partly in favour of assessee.

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• 2014 (10) TMI 423
  Addition u/s 14A and 80HHC made – DEPB benefits – Held that:- No fresh investments were made during the year - CIT(A) was partly influenced by the market research and day to day analysis of market trends for taking investment decisions - Since no fresh investment decision has been taken, therefore, considering the role of administrative machinery in collection of dividend - the nature of interest received is to be examined by assessing officer and to the extent the interest income is to be treated as income from business, only 90% of the interest is to be excluded while computing deduction u/s 80HHC, treating the same as business income and not 100% - thus, the matter is to be remitted back to the AO for fresh adjudication. Addition of commission paid – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been rightly held that the legislative intention of the explanation inserted in the statute by the Finance (No.2) Act, 1998 with retrospective effect from 1.4.1962 was also considered by the Tribunal in the light of budget speech of the Finance Minister as well as Circular no. 772 dated 23.12.1998 issued by the Board and on such consideration, it was held that the said Explanation was not applicable to the facts of the assessee’s case - the disallowance made by the AO as deleted by CIT(A) is upheld on account of payment of commission by invoking explanation to Section 37(1) – Decided against revenue. Deduction u/s 80HHC – Inclusion of income – Held that:- Explanation (baa) to section 80HHC specifically defines profits of the business and, only those profits of business can qualify for deduction u/s 80HHC as are contemplated in the explanation - the profits of the business as computed under the head ‘profits and gains of business or profession’ forms the basis out of which the items mentioned in clause (1) & (2) are to be excluded – the order of the CIT(A) is upheld – Decided against revenue.

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• 2014 (10) TMI 422
  Basic deduction u/s 80P - Co-operative society registered under the Karnataka State Co- operative Societies Act – Effect of amendment - Whether the Assessee is entitled for deduction u/s 80P(2)(a)(i) and whether the Assessee is hit by the provisions of Sec.80P(4) which was introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007 - Held that:- If a co-operative society is engaged in carrying on these activities/facilities for the persons other than its members, the co-operative society will not be eligible for deduction u/s 80P(2)(a)(i) on the income which it derives from carrying on the activities not relating to its members - where a co-operative society is engaged in carrying on business of banking facilities to its members and to the public or providing credit facilities to its members or to the public, the income which relates to the business of banking facilities to its members or providing credit facilities to its members will only be eligible for deduction u/s 80P(2)(a)(i) - There is no prohibition u/s 80P not to allow deduction to such co-operative societies in respect of business relating to its members. Status of assessee - Whether the Assessee is a co-operative bank or not – Held that:- Banking means accepting deposit of money from the public which is repayable on demand or otherwise and withdrawal of these deposits by cheque, draft, order or otherwise and these deposits are accepted for the purpose of lending or investment - These deposits must be accepted from the public, not only from the members - These deposits must be repayable on demand or otherwise and could be withdrawn by the depositor by cheque, draft or otherwise - the Assessee has categorically accepted before the authorities below that the Assessee was accepting deposits of money only from members - The income has to be assessed u/s 14 of the Income Tax Act under the same head even if the nature of the business is illegal - the types of the deposits which the assessee has accepted as per bye-laws are the same as are being accepted during the course of the carrying out the banking activities - the paid up share capital and reserves in the case of the Assessee is more than Rs. 1 lac - Therefore, the Assessee satisfies the second condition - Sec.16 of The Karnataka State Co-operative Societies Act, 1959 permits admission of any other co-operative society as a member. The society being a co-operative bank providing banking facilities to members is not eligible to claim deduction u/s 80P(2)(a)(i) after the introduction of sub-section (4) to section 80P - Section 80P(4) clearly excludes primary agriculture credit society from its domain - the Assessee has not to be regarded to be a primary co-operative bank as all the three basic conditions are not complied with, therefore, it is not a co-operative bank and the provisions of Sec.80P(4) are not applicable in the case of the Assessee and Assessee is entitled for deduction u/s 80P(2)(a)(i) - the order of the CIT(A) is to be set aside and the AO is directed to allow deduction to the assessee u/s 80P(2)(a)(i) on the income generated for providing banking or credit facilities to its members – Decided in favour of assessee.

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• 2014 (10) TMI 421
  Penalty u/s 271AAA in case of search – AO was of the view that the assessee did not specify the manner in which undisclosed income was derived and also did not substantiate - Held that:- The assessee surrendered Rs. 20 lakh during search and seizure operation conducted on 28/09/2007 and the department treated the same as income from undisclosed sources - the statement of the assessee was recorded in question and answer form and during the statement recorded u/s 132(4) of the Act on oath she was asked to explain the source of jewellery – if the statement of the assessee recorded u/s 132(4) of the Act does not specify the manner in which the income is derived, if the income is declared and tax thereon has been paid, there would be substantial compliance not warranting any further denial of the benefit under exception no. 2 in Explanation 5 attached to section 271(1) of the Act - relying upon Mothers Pride Education Personna P. Ltd. Versus Deputy Commissioner of Income Tax, CC 5 New Delhi [2012 (10) TMI 774 - ITAT, DELHI] - during assessment proceedings u/s 271AAA the question about manner in which income was derived were asked to assessee and she had replied to that - the penalty provisions on search and seizure were contained in section 271(1)(c) and immunity was granted to the assessee vide clause (2) of explanation 5 appended to section 271(1)(c). Provisions of clause (2) of explanation 5 appended to section 271(1)(c) are similar to immunity granted to assessee under clause (2) of section 271AAA – thus, the order of the CIT(A) is to be set aside – Decided in favour of assessee.

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• 2014 (10) TMI 420
  Addition on share capital – Shares issued to Shri Deepak Gupta – Unexplained cash credits – Held that:- The assessee has not given any details with regard to the share capital of Rs. 1 lakh, not even the name of the shareholder and the confirmation of the shareholder - Before the CIT(A), the assessee explained that it had received the sum of Rs. 10,10,000/- by cheque from Shri Anupam Nagalia, out of which, Rs. 50,000/- is credited to the share capital account of Shri Anupam Nagalia, Rs. 50,000/- to the share capital account of Shri Deepak Gupta and balance Rs. 9,10,000/- in the loan account - Except this explanation, no confirmation from anybody was produced and moreover, why the cheque received from Shri Anupam Nagalia was credited by share capital by Shri Deepak Gupta is explained - the matter needs proper examination at the end of the AO. So far as cash deposit in the bank is concerned, the only explanation of the assessee is cash withdrawal from the banks two and half months before - the assessee has not produced the cash book from which the AO may verify whether the cash withdrawn two and half months back is available - The assessee is a company which is in the business of real estate – revenue rightly pointed out that it needs to be verified whether no expenditure is incurred by the assessee company during the two and half month period. Similarly, with regard to mutation expenses, no vouchers for the expenses are submitted. The only explanation of the assessee is that the payment has been made by M/s Vatika Limited and the expenses were incurred for identification of land, inspection thereof, searching of registrar's record, expenses incurred on reports from advocates, brokerages etc. - Now, if a third party is debiting some account in the name of the assessee, the third party would certainly give the details to the assessee to whom they have made the payment and for which purpose - No such vouchers/details or evidence are produced before the AO either in original assessment proceedings or in remand proceedings despite assurance given to CIT(A) - before the CIT(A), the assessee agreed that he will produce the books of account and supporting evidence for verification before the AO and the CIT(A) directed the AO to call for the relevant vouchers and books of account for verification – revenue rightly contended that the entire matter needs complete relook and re-examination by the AO – thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication – Decided in favour of assessee.

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• Customs

• 2014 (10) TMI 458
  Fraudulent claim of draw back - Misdeclaration of goods - Overvaluation of export - Involvement of officers of customs - Imposition of penalty -Held that:- M/s.H.M.Impex was nonexistent and there was an organised bid made by all the appellants in this batch of appeal to create that concern to make export of overvalued, inferior, discarded and valueless goods to make fraudulent claim of drawback. Extensive enquiry and investigation discovered commitment of fraud by the appellants - Attempt to export inferior goods overvaluing the same was successfully proved from the C.R.C.L. as well as report of NITRA. So also the Apparel Export Promotion Council (AEPC) reported that the garments attempted to be exported were inferior quality not commanding the value as declared by the appellant. Similarly, the textile machinery parts were totally inferior and were of very low value. Customs Officer Shri Suraj Prakash was named by Shri Vijay Kumar Gupta in his statement dated 22.07.2003 while he was in judicial custody. He being involved in the Customs fraud, he was before the Court of ACMM. Shri Suraj Prakash allotted both the impugned shipping bills in his name for examination. He manipulated the data in the computer through one Shri Narender Singh. That manipulation was done in the computer terminal of Shri D.V. Sidhmukh since that was open. Mischievous act of Suraj Prakash was corroborated by statement of Narender Singh and Sanjay Kumar Pandey as well as Deeraj Kumar, ‘H’ card holder of M/s.Kunal Travels, the CHA. As per the work allocation order issued by Assistant Commissioner, Shri Suraj Prakash was posted at the Customs Station on 18.06.2003 under the supervision of Shri Ravinder Mohan. However, the shipping bills of M/s. H.M. Impex were taken by him to Shri D.V. Sidhmukh, Superintendent without the same being presented to Shri Ravinder Mohan. He admitted such crucial fact. His connection with the smuggling racket was also corroborated from the call details register and his involvement in committing fraud against Revenue remained uncontroverted except inviting misplaced sympathy in the course of argument submitting that the appellant was a Customs Officer. So far as the case of Shri Poonam Chand Gupta is concerned, his involvement is vividly clear from para 108 of the adjudication order. Although he claimed to be an Advocate, he was involved in purchasing all spurious goods from one M/s. Jyoti Enterprises and that was corroborated by the proprietor thereof. He (Proprietor) admitted to be a dealer of junk garments and Shri Vijay Kumar Gupta as well as Poonam Chand used to purchase such goods from him for export. Recovery of the blank letter heads from premises of Shri Poonam Chand could not be ruled out. He was also brought to record from the evidence of Shri Sanjay Kumar Pandey when he was accompanying him for the clearance of the fraudulent exports attempted to be done by both the shipping bills. He was found to be a master mind behind this to defraud Revenue. Entire investigation pointed at him which was well considered by ld. adjudicating authority in para 108 of his order. Drawing of the draw-back amount from the fake bank account of the said non-existent concern i.e. M/s. H.M. Impex was proved unerringly by investigation supported by cogent evidence. When involvement of this appellant was confirmed by all the appellants, he could not come out from the cluster of allegation made against him by investigation. He was unerringly proved to be manufacturer of fraudulent documents and defrauded Revenue. The appellant was examined under section 108 of Customs Act, 1962 by customs authority and the evidence gathered during that process is valuable evidence which is admissible in law not being recorded by a police officer. Such evidence being given in the course of judicial proceedings, that is creditworthy and the appellant has no right to go back from that. That may be confessional statement. The statement given by the appellant in the present case corroborated by cogent evidence gathered by investigation inculpated him to the commitment of offence by him under law for which he was rightly penalised. When the appellant faced penalty only, there is no further necessity of dealing with the plea of joint liability raised by the ld. counsel. Law is well settled that fraud and justice do not well together and fraud is sworn enemy of justice. When the appellant made every successive effort to de-fraud Revenue, it was bound to suffer consequence of law. The manner how the appellant acted in defiance of law and deceived Revenue, that has vitiated his solemn act. Tainted illegality committed by appellant brought him to the vice thereof and he was penalised. That has come to an end by the right dose of penalty, not calling for interference. Shri Vijay Kumar Gupta and Shri Poonam Chand Gupta were so intimately connected with each other, they could not dissociate themselves from the racket attempting to export the offending goods. While M/s. H.M. Impex was proved to be a fake concern and this appellant played a pivotal role to defraud Customs Authority impressing them that M/s.H.M. Impex was an existed concern in the eyes of law, he was perpetrator of fraud. M/s.H.M. Impex having been proved to be fake concern and attempted to export inferior goods overvaluing the same and draw back having been claimed fraudulently as well as depositing the same in bank account were drawn for their enjoyment, commitment of fraud against Revenue was established. All such factors call for dismissal of all the appeals - Decided against the appellants.

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• 2014 (10) TMI 440
  Exemption under Notification No.64/88 dated 1.3.1988 - withdrawal of the exemption certificate as earlier granted by DGHS - challenge to the duty demand - diagnostic centre run by a private individual purely on commercial basis - Held that:- DGHS duly issued an exemption certificate but subsequently the same was withdrawn by the same authority. If for any reason the appellant was aggrieved by such withdrawal, it should have questioned the same. Since having questioned the said withdrawal and having withdrawn it later on, we are of the opinion that the appellant cannot take exception to the duty demand made by the respondent - Decided against assessee.

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• 2014 (10) TMI 439
  Suspension of CHA license - Non following of prescribed norms and contravention of the provision of Regulation 13 of the CHALR - Held that:- Charges against the CHA are not very serious so as to call for his suspension. It is a fact on record that CHA was not involved in presenting the papers before the Customs. The work is being done through his ‘G’ card holder. Secondly, the imports took place in January whereas the impugned order stands passed in October, 2012 and still continuing even after lapse of more than one year. Thirdly, we are informed that show cause notice for cancellation of licence stands issued and the proceedings would be finalised soon. Taking note of all the facts of the above, we deem it fit to set aside the suspension of the CHA licence.

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• 2014 (10) TMI 438
  Waiver of pre deposit - Anti dumping duty - Held that:- The brief facts of the case are that the appellant made import of goods declared as viscose filament yarn from the People’s Republic of China. The adjudicating authority held that the goods are liable for anti-dumping duty as provided under serial No. 5 under Notification No. 45/2006-Cus., dated 24-5-2006 - There is no dispute that the goods are imported from the People’s Republic of China and the country of manufacture is the People’s Republic of China. Therefore the imposition of anti-dumping duty as provided under serial No. 5 of the Notification, which is in respect of any goods imported from any other country except the People’s Republic of China, is not sustainable - Decided in favour of assessee.

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• PMLA

• 2014 (10) TMI 436
  Attachment of property - Prevention of Money Laundering Act, 2002 - Held that:- One is hard pressed to imagine how a trial for an offence of money laundering can continue where the fundamental basis – the commission of a schedule offence – in this case offence under Section 307 IPC – has been found to be disproved - attachment of a property is liable to be vacated if the existence of a scheduled offence is negated. Clearly, attachment of proceeds of crime cannot continue if the alleged scheduled offence is not established after trial. Given the scheme of the PMLA, attachment of property (proceeds of crime) must be lifted if it is found that the scheduled offence, on the basis of which attachment was effected, does not exist. In absence of a scheduled offence, the question of existence of any proceeds thereof, do not arise. The proceedings before the Appellate Tribunal emanate from the order of an Adjudicating Authority passed on 04.02.2011. It is, thus apparent that the Appellate Tribunal would consider the merits of that order. In the present case, an intervening event has occurred inasmuch as the accused of the schedule offence has been acquitted. In the circumstances, it prima facie appears that the attachment order ought to be vacated. The petitioner has already filed a representation before the respondent on 23.04.2013, which is not disposed of as yet. - Decided in favour of assessee.

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• Service Tax

• 2014 (10) TMI 457
  Extended period of limitation - Management consultancy service - levy of service tax on sub-contractor - Held that:- It is also seen that the Trade Notice No. 53-CE/97 dated 04.07.1997 in its para 4.4 quoted earlier clearly creates an impression that sub-consultants are not required to pay service tax. Even if the contention of the Ld. AR is conceded that the said Trade Notice does not reflect the correct legal position, it is totally reasonable to accept the appellants contention that at the material time, the said Trade Notice very much existed and was a valid and authorised guide to the trade. Indeed, the CBEC’s circular dated 23.08.2007 consolidated the various clarifications issued in the past and superceded the past circulars. That does not mean that the past circulars were necessarily held to be invalid for the period during which they existed. Thus it is untenable to allege suppression/wilful mis-statement of fact to evade duty in the wake of the said Trace Notice. Therefore, the demand beyond the normal period is prima facie unsustainable - Partial stay granted.

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• 2014 (10) TMI 456
  Waiver of pre deposit - Business auxiliary service - Imposition of Penalty - SSI exemption - benefit of duty exemption under Notification 6/2005-ST dated 01/03/2005 - Held that:- For computing the eligibility to the exemption under Notification 6/2005-ST, as amended, the turnover of the taxable service, whether exempted or otherwise, have to be taken into account. If this is done, it seen that the appellant had crossed the exemption limit of Rs. 8/10 lakhs as the case may be. In these circumstances, the finding of the lower appellate authority cannot be faulted. However, considering the fact that the appellant is an APMC rendering services in the field of agriculture predominantly and also keeping in mind the financial hardship pleaded, we direct the appellant to make a pre-deposit of Rs. 1 lakhs within a period of eight weeks and report compliance by 08/09/2014. On such compliance, pre-deposit of the balance of dues adjudged against the appellant shall stand waived and recovery thereof stayed during the pendency of the appeal - Partial stay granted.

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• 2014 (10) TMI 455
  Manpower Recruitment or Supply Agency Services - demand based on audit of records - demand of service tax on TDS amount as well as difference in ST-3 return and value reflected in books of accounts - Held that:- While the department had opportunity to verify whatever information / statements furnished by the appellant, a copy of the verification report should have been provided to the appellant to make their submission/rebuttal. Inasmuch as a copy of the verification report has not been given to the appellant for their comments/rebuttal, there is a violation of principles of natural justice. The adjudication manual of the CBE&C also lays down guidelines to the effect that if a new fact is emerging from the verification/investigation caused by the department, the assessee should be given an opportunity to make a submission/rebuttal on those facts, failing which there would be a procedural irregularity leading to denial of natural justice. Matter remanded back - Decided in favour of assessee.

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• 2014 (10) TMI 454
  Denial of refund claim - Port services - The original adjudicating authority also held that the services in respect of which the refund was claimed by their very nature did not qualify to be port services. The Commissioner (Appeals) found that the impugned services are classifiable as port services and the respondents were eligible to claim refund of the service tax paid on the said services under Notification No. 41/2007-ST and after detailed discussion allowed the refund to the respondents. - Held that:- Ground on which Revenue has filed this appeal was not at issue at all in the Order-in-Original or the Order-in-Appeal. - Obviously the Revenue’ appeal has transgressed even the outermost boundaries of the Show Cause Notice and the Order-in-Original and the Order-in-Appeal taken together and is therefore not sustainable - Decided against Revenue.

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• 2014 (10) TMI 453
  Management, Maintenance or Repair Service - GTA service - Whether service tax is leviable on the value of goods supplied while rendering management, maintenance or repair service - Held that:- Hon’ble High Court of Delhi the case of G.D. Builders & Others v. Union of India - [2013 (11) TMI 1004 - DELHI HIGH COURT], has clearly held that Section 67 of the Finance Act, 1994 enables the Government to levy Service Tax only on the consideration received for rendering of taxable service and it prohibits inclusion of value of goods supplied while rendering of a service. The same decision was followed by the Larger Bench of this Tribunal in the case of Hindustan Aeronautics Ltd. v. Commissioner of Service Tax, [2013 (11) TMI 1410 - CESTAT CHENNAI (LB)]. In view of the above decisions it appears that the impugned order is not sustainable in law and the matter has to be considered afresh by the adjudicating authority with respect to the appellant’s claim that the Service Tax confirmed in the impugned order pertains to the value of goods supplied and not on the consideration received for rendering of service on which they have already paid the Service Tax. The appellant is also at liberty to submit before the adjudicating authority evidences in support of their claim that the present demand pertains to value of goods supplied/sold to the recipient - Matter remanded back - Decided in favour of assessee.

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• 2014 (10) TMI 452
  Denial of CENVAT Credit - Outdoor Catering Service - Convention Service - Event Management Service - Market Research Service - Held that:- The credit of Service Tax paid on outdoor catering service cannot be denied since reclassification of services is to be considered at the receiving end. Therefore, what is required to be considered at the receiving end is whether Service Tax was paid or not; and whether the services received were covered under the definition of input service or not. In the absence of clear finding whether services received were covered by the definition of input service, the ground on which credit denied cannot be sustained. In any case, after going through the invoices, I find that services were received for business promotion and sales promotion of the appellant and therefore, credit of Service Tax paid cannot be denied. Credit of Service Tax paid on this service cannot be denied since reclassification of service is to be considered at the receiving end. What is required to be considered at the receiving end is whether the service was covered by input service under Cenvat Credit Rules or not; and under which category invoices have been issued. In any case, invoices were issued by two Hotels in relation to activities of sales promotion/business of the appellant. Therefore, appellant is eligible for credit of Service Tax paid. - entire amount is in relation to one invoice. Since ‘event management service’ was rendered for their customers and employees and it was done for sales promotion/business of the appellants, I consider that credit of Service Tax paid on this service cannot be denied. Credit of Service Tax paid amounting to Rs. 62,424 has been denied on Market Research Service. Learned Chartered Accountant submits that company conducted a survey to find out about women employees leadership. I do not understand and appreciate on what basis and under which manner this service can be covered by definition of ‘input service’. I find this activity undertaken by appellant to understand the position of women in society has nothing to do with the business. This being the case, credit has been correctly denied. - Decided partly in favour of assessee.

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• 2014 (10) TMI 451
  Waiver of pre-deposit of Service Tax - Cable Operator Service - Small scale exemptions - Use of brand name of other operator - Notification No. 6/2005 - Held that:- Prima facie we find that the applicants are not using the brand name of other cable operator but only distributing various TV Channels like Sony, ESPN, Star, ZEE, UTV using their own cable network. In these circumstances, the applicants are able to make out a prima facie case for total waiver of pre-deposit. Accordingly, all dues adjudged is waived and its recovery stayed during the pendency of the appeal - Stay granted.

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• 2014 (10) TMI 450
  Cargo handling service - Assessee pleaded that he was only handling the goods in the factory and also removing the garbage (malba) and pleaded that his activity is not cargo handling - Held that:- Activity of the respondent was unloading of the store material, gunny bags, chemicals, etc. in the factory, shifting of the sugar bags from one place to another, removing garbage (malba), etc. There is nothing on record to indicate that the respondent was involved in packing and loading of the sugar onto vehicles/railway wagons for transport. The Division Bench of this Tribunal in the case of Sainik Mining & Allied Services Ltd. v. CCE, BBSR reported in [2007 (11) TMI 90 - CESTAT, KOLKATA] has held that transportation of the coal in the colliery and deployment of machines and tipper trucks for transport of coal from quarry beds to surface stocks/railway sidings is not covered by cargo handling service - cargo handling service is an adjunct service to the actual transportation of the goods and that pre-transportation activities like packing, loading and post-transportation like unloading/unpacking, etc. would be covered under “cargo handling service” category. Since in this case, activity of the Respondent is handling of the goods in the factory or godown or removing of garbage, the same cannot be said to be an activity adjunct to transportation of the goods. Therefore, the respondent’s activity would not be covered by cargo handling service as defined under Section 65(23) as he has not handled any cargo i.e. the goods meant for transport. - Decided against Revenue.

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• Central Excise

• 2014 (10) TMI 448
  Non fulfillment of export obligation - transfer of LOP - STPI unit - Jurisdiction of Commissioner of Central Excise to issue show cause notice - The petitioner attempts to project the show cause notice as one that has been issued without jurisdiction, by contending that once the transfer of the letter of permission is permitted by the Software Technology Parks of India, the Commissioner of Central Excise would not have jurisdiction to proceed against the petitioner. - Held that:- A careful look at the above circular would show that the circular deals with an entirely different contingency. Whenever a unit fails to achieve the target fixed (non fulfillment of export obligation), after a block of five years, the Development Commissioner would take a final decision within a period of six months after the expiry of five years. Based upon the said final decision, the Customs/Central Excise Authorities have to take action for recovery of duty. circular has no application to cases of this nature. In this case, we are not concerned with the shortfall in the achievement of target. We are concerned with serious allegations made in the show cause notice. Therefore, what applies to a genuine exporter under the circular bearing No.12/2008, cannot be used as a shield by the petitioner. Hence, the first writ petition challenging the show case notice is liable to be dismissed. There is one more reason as to why the first writ petition deserves to be dismissed. The show cause notice impugned therein is dated 18.4.2011. The petitioner kept on dillydallying for a period of more than a year seeking time to submit objections. It is only in August 2012, after a gap of about 16 months of dillydallying, that the petitioner came up with the first writ petition. Therefore, there are no bona fides in the challenge made by the petitioner to the show cause notice. The first respondent issued the impugned show cause notice to the petitioner as well as the transferees. In the event of the first respondent fixing the responsibility jointly and severally upon all of them, the petitioner can always proceed against the transferees in accordance with the terms and conditions of the contract that they have with the transferees. Since the exemption was granted only to the petitioner on condition that the petitioner fulfills an export obligation, the petitioner cannot turn around and say that the transferees are the beneficiaries of the exemption and that the responsibility to fulfill export obligation should be fixed only upon the transferees. - Decided against assessee.

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• 2014 (10) TMI 447
  Waiver of pre deposit - Interest under section 11AB - Penalty under Rule 173Q(1) - Whether, under the facts and circumstances of the case, the CESTAT was justified in directing to deposit interest liability for the period 14-5-2003 (when Section 11DD came into force) till the day demand of differential amount was paid - Held that:- provisional assessment was made on account of the disputed classification of the product. The relevant date in cases where duty of excise is provisionally assessed is the date of adjustment of duty after the final assessment. As a result Section 11A comes into reckoning only after the final assessment has taken place. If the Central Excise Officer concludes that duty has been short levied, the officer is empowered to take proceedings under section 11A within limitation after issuing show cause notice. Final assessment is a condition precedent for invocation of section 11A. Clearance was made on the basis of provisional assessment. This being undisputed position, there is no justification in directing pre-deposit of the interest amount from the day Section 11DD came into effect till payment of differential duty especially in view of the fact that section 35-F of the Central Excise Act does not provide for pre-deposit of the interest demand prior to 11th May, 2007. The impugned order dated 7th October, 2013 is, therefore, uncalled for. Perusal of the impugned order reveals that the tribunal has proceeded on the basis that the order in original relates to assessment during the relevant period. proceeds to record that the appellant did collect duty liability at enhanced rate applicable to tariff item 14F even though they were discharging the duty liability only at the lower rate applicable to Tariff Item 68. That the appellant wanted to enjoy the benefit of duty collected at the higher rate from the customers without remitting the same to the exchequer and therefore the Appellant was liable to discharge interest liability on the duty amount, the tribunal therefore arrived at the prima facie conclusion that the Appellant has not made out a case for the complete waiver of dues adjudged against them and directed the Appellant to remit the interest liability from 14th May, 2003 till the date of which duty liability was discharged. - Partial stay grated.

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• 2014 (10) TMI 446
  Refund of Terminal Excise duty – Non speaking order - Petitioner, a 100% EOU receiving goods from units in DTA – duty paid by DTA not claimed as CENVAT credit but the petitioner seeking refund of the TED paid by the DTA – claim rejected by DGFT authorities by a letter citing Circular No.16(RE-2012/2009-14) dated 15.3.2013 issued by the Director of Foreign Trade clarifying that no refund of TED should be provided by RAs of DGFT / Office of Development Commissioners, because such supplies are ab initio exempted from payment of excise duty – Held that:- Communication of the nature relied upon cannot be termed as an order dealing with and disposing of a refund application - Minimal request of the petitioner for a personal hearing and a speaking order dealing with all the contentions and objections could have been fulfilled had the respondents complied with the same - once the petitioner is given an opportunity of personal hearing and raising all contentions, then, a speaking order assigning reasons can be passed by the respondents dealing with them - It could not be that a cryptic communication satisfies the requirement of a proper and speaking order being passed - fresh order to be passed expeditiously as possible within a period of 8 weeks - Petition disposed of.

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• 2014 (10) TMI 445
  Challenge to levy of interest - finalization of provisionsal assessment - differential duty - period from June 1996 to February 2000 - Notification No.68/63-CE dated 4th May, 1963 - Liability for interest - Petitioners contend that circular of 21st June, 2001 clarifies that the interest is chargeable under Rule 7 only when the provisional assessment is finalised after 1st July, 2001. In the present case, the Petitioners contend that for the period April 1998 to June 2001 being prior to 1st July, 2001, no interest is payable. - Held that:- Petitioner has retained money owing to the Respondents without authority of law and engaged the Respondents in a series of litigations. They then filed Civil Appeals before the Supreme Court which were disposed of on 16th October, 2012 with liberty to file Review Petition. The Review Petition was filed on 19th October, 2012. The review petition came to be dismissed on 27th November, 2012. The Petitioners did not stop there. They then filed a curative petition on or about 2nd January, 2013 which came to be dismissed on 20th February, 2013. Thus, at every opportunity the Petitioners sought to defeat the Revenue's right to amount of duty and there is no reason for the Petitioners to be excused from paying interest. - it is matter of record that the demand for interest in the present case does not emanate purely from the statute but from negotiated demand for instalments pursuant to the final order of the Hon’ble Supreme Court fixing liability to pay the principal amount. Had the Petitioners paid the entire sum as on the date of the order of the Supreme Court they may have been in position to contend in the facts of the present case that no interest is liable to be paid. However, we clarify that this observation is made specifically in the facts and circumstances of the present case and not to be considered as precedent of any kind. Liability to pay interest being reiterated in the acceptance of the proposal for instalments and the Petitioners having acted upon the same, the Petitioners are bound to pay interest at the rate of 18% per annum from the date of the order of the Supreme Court dated 29th August, 2012 till the date of realisation as demanded pursuant to Notification No.5/2011 Central Excise (NT) dated 1st March, 2011 read with CBEC circular No.208/42/96-CX dated 2nd May, 1996. While computing the interest the Respondents shall consider whether or not the payments were made towards principal sum and following the rules of appropriation of payments in this behalf by crediting the instalments to principal amounts and charging interest on the balance amount after each instalments was paid and appropriated and arriving at interest amount of the liability - Decided against assessee.

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• 2014 (10) TMI 444
  Denial of CENVAT Credit - Job work - credit availed by the Job worker on capital goods - contravention of Cenvat Credit Rules, 2001 - held that:- Cenvat credit cannot be denied on capital goods used in the manufacture of exempt intermediate products exempt from payment of duty, which are used captively in the manufacture of finished goods chargeable to duty. Cenvat credit is permissible to a job worker or even to a manufacturer at intermediate stage in respect of inputs like lubricants, soaps, chemical etc. where on final products, duty is admittedly paid. The Court held that the object of Cenvat credit is to avoid cascading effect of duty. SEIITL only manufactured the chassis, which is only a part of a TV. It is not a finished product and is only an intermediary product. We also find that SEIITL supplied intermediary product to SEIL, which manufactured the TV and paid duty on it. Consequently, it was entitled to avail Cenvat Credit in order to prevent the cascading effect, if duty was levied. We are of the opinion that SEIITL, which was the job worker was entitled to duty paid on inputs and used in the manufacture of intermediary product. Consequently, for the reasons stated aforesaid, the appeal fails and is dismissed. - Decided against Revenue.

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• 2014 (10) TMI 443
  Valuation of goods - Inclusion of assessable value of the Air Brake equipment manufactured and cleared by assessee for Railways - Held that:- Appellant manufactured certain Air Brake Equipments and cleared the same from their factory to Integrated Coach Factory, Chennai of the Railways. Pipes and pipe fittings of the Air Brake systems were bought from the outside and supplied separately to the ICF, Chennai and thereafter the goods manufactured and cleared by the appellant along with bought out pipes and pipe fittings were installed in the Railways Coaches as Air Brake Systems. In our view since what had been manufactured and cleared by the appellant was Air Brake Equipment and this is not a case of where bought out items had been brought to the factory for use in the manufacture of the final products, the value of bought out items would not be includible in the assessable value. Similarly the installation of the Air Brake equipment has nothing to do with the manufacture of the equipments and hence the charges for the same are not includible in the assessable value of the Air Brake equipment - Decided in favour of assessee.

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• 2014 (10) TMI 442
  CENVAT Credit - finished goods become exempted subsequent to availing credit - Held that:- obligation on the part of the assessee to reverse the credit is only in that case where he opts for exemption from the duty based upon a Notification relatable to value or quantum of the clearances. Inasmuch in the present case, the appellants’ final product became unconditionally exempt and the exemption was not dependent upon the value or quantum of clearance in a financial year, it has to be held that the said Rule 9(2) is not applicable. In fact, I find that the provisions were subsequently changed in the new CENVAT Credit Rules, 2002, with the introduction of Rule 11(3), with effect from 1-3-2007. In terms of the said Rule 11(3)(ii), where the final product become exempted absolutely under Section 5A of the Act, the quantum of CENVAT credit lying in his balance credit shall lapse and shall not be available for utilisation for payment of duty on any other product whether cleared for home consumption or for export - The said mandate of law was effective with effect from 1-3-2007, i.e., after the period involved in the present appeals. - Decided in favour of assessee.

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• 2014 (10) TMI 441
  Classification of micronutrient fertilizers - Classification under CETH 31 or under CETH 3808 - Held that:- The Junior Scientist had stated that micronutrients such as Iron, Copper, etc. are known as trace elements and are essential for plant growth in small amounts only. If these elements are made available in minor quantities, they regulate the formation of hormones etc. in the plants which in turn alter life process of the plant so as to accellerate growth, enhance yield and improve quality. Thus they internally contribute to regulate the plant growth. We cannot say that this supports the case of the Department. Moreover, in the pouches in which the products are sold, it is stated “All these micronutrients play a very significant role in physiological growth and biochemical process of crop/plants”. This label also does not support the case of the Revenue since it does not say that the products are plant growth regulators. In fact it supports the case of the appellant that is a mixture of micronutrients. Learned AR also relied upon the decision of this Tribunal in the case of Karnataka Agro Chemicals v. CCE, Bangalore [2012 (11) TMI 865 - CESTAT, BANGALORE]. However, in that case the product contained Urea, Calcium Nitrate, Potassium Nitrate, Zinc Sulphate, Magnesium Sulphate, Manganese Sulphate, Ferrous Sulphate, Copper Sulphate, Borax, Boric acid and others. The products are not comparable. The sum and substance of the above observations is that the issue involved is classification of the product which requires a detailed study - appellant has been able to make out a case that the products cannot be called as plant growth regulators. Under these circumstances, the requirement of pre-deposit against the appellant-company of the entire dues is waived and stay against recovery is granted - Stay granted.

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• CST, VAT & Sales Tax

• 2014 (10) TMI 449
  Classification of goods - Applicable rate of tax - Whether Gambier is catechu liable to tax at the rate of 4% or it is an unclassified item liable to tax at the rate of 12.5% - Held that:- Applicant deals in Gambier, which is a non-edible commodity. Catechu is an edible commodity, which is specified in Entry-68 of Part-A of Schedule II to the Act. The assessing authority assessed to tax the sale turnover of Gambier as an unclassified item vide assessment order dated 19.10.2012 for the Assessment Year 2009-10. - If any term or expression has been defined in the enactment then it must be understood in the sense in which it is defined. In the absence of any definition of such term or expression in the enactment, the meaning of the term in common parlance or commercial parlance has to be adopted. If a person goes to a shopkeeper and ask for Gambier, he shall not be given KATTHA. Merely because Gambier may be used to obtain Catechu or after applying certain process of manufacture it may be used as an alternate for Catechu, it cannot be called as Kattha, as understood in common parlance in India. The main use of Gambier and KATTHA are also different. While the general use of Gambier is in dyeing and tanning, the use of KATTHA commonly known to Indian people is its consumption with betel for chewing and also for some medicinal purposes. Gambier and KATTHA are not one and the same commodity and Gambier is an unclassified item under the Act. - Decided against assessee.

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• Wealth tax

• 2014 (10) TMI 435
  Valuation of property - Section 2(ea) of Wealth Tax Act, 1957 - whether security taken for lease of asset would be treated as debt - Held that:- a security deposit taken by the assessee-lessor leads to an inflow of funds with it. He is thus without doubt better placed than a person not a receipt of the security deposit, result as it does in a corresponding increase in his cash/bank balance, which could be profitably deployed/invested. Of course, there is a concomitant liability to repay the debt on the termination of the agreement, i.e., the assessee’s assets and liabilities both undergo an increase by the same amount. It would therefore be at best a tax-neutral exercise in-as-much as, though it makes the assessee cash rich, does not enhance his net worth in view of the funds carrying an obligation of repayment, but shall not cause a decrease in his net wealth. The security deposit received from a lessee or tenant, result as it does in a corresponding asset/s with the assessee, rather places him in a more favorable position than he is on its’ non-receipt, so that the same is not a debt owed u/s.2(m). The assessee’s claim is thus not maintainable either on facts or in law. - Decided against the assessee.

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• Indian Laws

• 2014 (10) TMI 437
  Jurisdiction of Court - application under Section 34 of the Arbitration and Conciliation Act, 1996 - Held that:- There are a variety of reasons as to why the Supreme Court cannot possibly be considered to be “court” within the meaning of Section 2(1)(e) even if it retains seisin over the arbitral proceedings. Firstly, as noted above, the definition is exhaustive and recognizes only one of two possible courts that could be “court” for the purpose of Section 2(1)(e). Secondly, under the 1940 Act, the expression “civil court” has been held to be wide enough to include an appellate court and, therefore would include the Supreme Court as was held in the two judgments aforementioned under the 1940 Act. Even though this proposition itself is open to doubt, as the Supreme Court exercising jurisdiction under Article 136 is not an ordinary Appellate Court, suffice it to say that even this reason does not obtain under the present definition, which speaks of either the Principal Civil Court or the High Court exercising original jurisdiction. Thirdly, if an application would have to be preferred to the Supreme Court directly, the appeal that is available so far as applications under Sections 9 and 34 are concerned, provided for under Section 37 of the Act, would not be available. Under Section 2(1)(e), the competent Court is fixed as the Principal Civil Court exercising original jurisdiction or a High Court exercising original civil jurisdiction, and no other court. For all these reasons, we hold that the decisions under the 1940 Act would not obtain under the 1996 Act, and the Supreme Court cannot be “court” for the purposes of Section 42. Whether Section 42 applies after the arbitral proceedings come to an end - Held that:- If an application were to be preferred to a Court which is not a Principal Civil Court of original jurisdiction in a district, or a High Court exercising original jurisdiction to decide questions forming the subject matter of an arbitration if the same had been the subject matter of a suit, then obviously such application would be outside the four corners of Section 42. If, for example, an application were to be filed in a court inferior to a Principal Civil Court, or to a High Court which has no original jurisdiction, or if an application were to be made to a court which has no subject matter jurisdiction, such application would be outside Section 42 and would not debar subsequent applications from being filed in a court other than such court. Nothing has been shown as to how the High Court of Calcutta does not possess jurisdiction. It has been mentioned above that leave under Clause 12 has been granted. In the circumstances of the present case, therefore, the judgment dated 11th April, 2005 passed by the High Court of Calcutta is correct and does not need any interference.

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