TMI Tax Updates - e-Newsletter
October 19, 2013

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise Indian Laws

Articles

1. Same activity cannot be considered as manufacturing and service at a time

   By: Bimal jain

2. Tax Recovery Officer vs. Recovery of Tax Officer

   By: Harish Chander Bhatia

3. FRANCHISE AGREEMENT WILL NOT ATTRACT VALUE ADDED TAX

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Meeting of the India Russia Working group on priority investment projects and Working Group on Modernization and Industrial Cooperation

2. RBI Governor launches new ISO 20022 compliant RTGS System

Highlights / Catch Notes

Income Tax

• Inquiry u/s 133 IT Act Separate from DVO Referral; Internal Officer Correspondence Not AO Proceeding Pendency.

  Case-Laws - HC : Power to make inquiry versus power to make reference to valuation officer (DVO) u/s 133 - Any internal correspondence between an officer of the department to AO would not amount to pendency of the proceeding before the AO - HC
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• Business Advances Not Deemed Dividends u/s 2(22)(e) of Income Tax Act.

  Case-Laws - HC : Deemed Dividend u/s 2(22)(e) –If the amounts advanced are for business transactions between the parties, such payment would not fall within the deeming dividend under section 2(22)(e) - HC
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• High Court Rules Section 80IB Amendment on Commercial Space Limit in Housing Projects Applies Prospectively Only.

  Case-Laws - HC : Deduction u/s 80IB of the Income Tax Act – ceiling of commercial construction in housing projects - Amendment in ceiling limit from 5% to 3% to apply retrospectively or prospectively - held as prospective only - HC
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• Trust's 12AA(3) Registration Canceled for Profit-Driven Operations, Violating Charitable Purpose u/s 2(15) of Income Tax Act.

  Case-Laws - AT : Cancellation of registration u/s 12AA(3) - Assessee trust is not merely a mediator in buying and selling of land to the general public. Rather it operates in a business oriented way on the well known principles of profit generation - not a charitable purpose u/s 2(15) - AT
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• Penalty Imposed u/s 271(1)(c) for Unjustified Repair and Maintenance Expenses; Asset Completion Defined by Working Condition.

  Case-Laws - AT : Penalty u/s 271(1)(c) – disallowances, i.e., qua repair and maintenance and depreciation - The construction or the acquisition of an asset cannot be said to be complete prior to it attaining a working condition - no justification to incur such huge expenditure on repair - AT
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• Court Upholds Disallowance of Commission Expenses Due to Lack of Evidence Beyond Book Entries and TDS Records.

  Case-Laws - AT : Disallowance of Commission expenditure – what appears on record is merely book entries coupled with TDS the amount which will be claimed as a refund by the recipient being a loss making concern - disallowance confirmed - AT
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• Section 41(1) Income Tax: No Double Cessation of Liability Allowed for Different Assessment Years.

  Case-Laws - AT : Additions u/s 41(1) - There cannot be cessation of liability twice - Therefore, when as per Explanation (1) there would be cessation of liability in the FY 2012-13 i.e. relevant to the assessment year 2013-14, the addition for the same cannot be made by presuming remission or cessation of liability in the year under consideration i.e. AY 2007-08 - AT
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• Revisional Order u/s 263 Invalid If Issued on Different Grounds Than Show Cause Notice.

  Case-Laws - AT : Jurisdiction u/s 263 - where the show cause notice issued is on one ground and the revisional order is passed on an entirely different ground, the order cannot be sustained in law - AT
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• Penalty u/s 158BFA Requires Evidence Found During Search for Block Assessment; Mere Surrender Insufficient.

  Case-Laws - AT : Penalty u/s 158BFA - Block assessment - De hors the surrender, there is no evidence which could have been said to have been found as a result of the search and, therefore, the 'computation' of undisclosed income by the Assessing Officer in the block assessment proceedings is not a ground to levy penalty - AT
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Customs

• Customs Can't Demand Duty from Exporters for DPEB Irregularities, Must Refer to DGFT for License Cancellation.

  Case-Laws - AT : Denial of DPEB benefit – Customs authorities cannot demand duty from the exporters on any irregularity noticed by them and they should necessarily refer the matter to DGFT authorities for cancellation of such licence - AT
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Corporate Law

• Written Borrower-Creditor Agreements Must Be Registered u/s 17 of the Registration Act.

  Case-Laws - SC : Registration fee and stamp on mortgage - when the borrower and the creditor choose to reduce the contract in writing and if such a document is the sole evidence of terms between them, the document shall form integral part of the transaction and same shall require registration under Section 17 of the Registration Act - SC
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Service Tax

• Tax Classification of Services: Section 65A Analysis on Tangible Goods vs. Mining vs. Exploration Services; Penalty Waived.

  Case-Laws - AT : Classification of taxable services u/s 65A - Supply of Tangible Goods service u/s Section 65(105)(zzzzj) versus Mining of Mineral, Oil or Gas service' u/s Section 65(105)(zzzy) versus Survey and Exploration of Mineral, Oil and Gas service – Rules of interpretation – use of own equipment for providing services - demand confirmed but penalty waived - AT
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• Debit Notes Valid as Duty-Paying Documents for CENVAT Credit u/r 9(1); Stay Granted in Case.

  Case-Laws - AT : CENVAT credit on input services - Debit Notes - Duty paying document - Rule 9(1) of the CENVAT credit Rules – prima facie credit is allowable - stay granted. - AT
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• CENVAT Credit Denied for Tug and Barge Operations u/r 2(l) of Cenvat Credit Rules; Stay Granted.

  Case-Laws - AT : CENVAT credit - Merely because the appellant had undertaken the operation of the tugs and barges, it cannot be said that such services would be an eligible input service as defined in Rule 2 (l) of the Cenvat Credit Rules, 2004 - however stay granted - AT
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• Assessee Claims Limited Role to Ash Evacuation, Not Involved in Cleaning; Preliminary Assessment Supports Their Position.

  Case-Laws - AT : Cleaning activity - Assessee contends that that they are only evacuating ash from the silos and hydrobins and they are in no way concerned with the cleaning activities - prima facie case is in favor of assessee - AT
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Central Excise

• Company Penalized for SSI Exemption Lapses but Granted Stay; Lacked Excise Registration and Statutory Records.

  Case-Laws - AT : SSI Exemption – clearance of goods without obtaining central excise registration number and non maintenance of statutory records - penalty for procedural lapse - stay granted - AT
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Case Laws:

• Income Tax

• 2013 (10) TMI 743
  Computation of profit earned by non-resident from Shipping business u/s 44B of the Income Tax Act – Held that:- Demurrage charges and handling charges are specifically included in the aggregate amount as prescribed under sub-section 2 - Amount received or receivable/paid or payable to the assessee on account of carriage of passengers etc. or goods shipped would be part of such amount for computation of profit and gains u/s 44B - Theory of element of profit would not apply to the aggregate amount as specified in sub-section (2) of section 44B. Moreover service tax is incidental to the transactions of carriage of passengers etc. and goods shipped and the amount paid or payable to and received or receivable by the assessee on account of service tax is very much part of the amount received on account of the business of shipping. According to the normal commercial practice, levy of tax on sale of goods or service is reflected in the bills either as merged in the price or being shown separately. Therefore, the amount received on account of service tax as part of the price of carriage/shipped service is very much a trading/business receipt and would be part of the aggregate amount for presumptive profit and gain to be determined u/s 44B - Service tax collected by the assessee would form part and partial of the aggregate amount as specified under sub-section 2 of section 44B for the purpose of determining the profit and gain under this section – Decided against the Assessee. Interest u/s 234B of the Income Tax Act – Held that:- This issue is covered by the decision of Hon ble Jurisdiction High Court in case of DIT (International Taxation) v. NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT] in which the Hon ble High Court has held that when a duty is cast on the payer to deduct tax at source then on failure of the payer to do so, no interest can be charges from the payee u/s 234 – Decided in favor of Assessee.

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• 2013 (10) TMI 742
  Computation of profit from Shipping business u/s 44B - inclusion of service tax - Whether statutory due paid to be included in the gross receipts for computation of profit u/s 44B of the Income Tax Act – Held that:- Issue decided in favour of the assessee holding that the amount of service tax, being in the nature of statutory payment which does not involve any element of profit, cannot be included in the gross receipts for the purpose of computing the presumptive income of the assessee under section 44B – Decided in favor of Assessee. Levy of interest u/s 234B of the Income Tax Act – Held that:- Assessee in the present case is admittedly a Non Resident in India and its entire income is liable for deduction of Tax at source. As held by the Hon'ble Bombay High Court in the case of DIT (International Taxation) v. NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT], when a duty is cast upon payer to pay tax at source, on its failure to do so, no interest can be imposed upon payee Assessee under section 234B - Following the decision of Hon'ble Jurisdictional High Court, in the present case, interest under section 234B cannot be imposed on the Assessee on failure of payer to deduct tax at source from the payments made to the Assessee – Decided in favor of Assessee.

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• 2013 (10) TMI 711
  Additions u/s 68 - genuineness of gift - Held that:- assessee has submitted all the necessary documents which were required. As is evident from the Hon'ble Apex Court decision in C.I.T. vs. Orissa Corporation Pvt. Ltd. [1986 (3) TMI 3 - SUPREME Court] non-turning up of the donor on Assessing Officer's summons, cannot be fatal to make the gift bogus. Accordingly, in the background of the aforesaid discussions and precedent, we set aside the orders of the authorities below on this issue and hold that the assessee has properly explained the gift of Rs. 2,00,000/- and addition made in this regard is deleted - Decided in favour of assessee.

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• 2013 (10) TMI 710
  Power to make inquiry versus power to make reference to valuation officer u/s 133 - Reference to DVO u/s 131(1)(d) when no assessment proceedings are pending - issuance of notice under Section 147/148 on the basis of DVO's report - Held that:- The AO did not have authority to refer the matter to DVO under Section 131 (1) (d) on 15.5.1998 as no proceedings were pending on that date - Neither any return was filed nor any notice under Section 147/148 was issued by the AO to the assessee by that date. Whether a letter written by senior revenue officer to AO would make an assessment pending - Held that: Since no return of income was filed till 11.2.1998, there was no question of any assessment proceedings pending before the AO prior to that date - No other proceedings were pending for the assessment year 1997-98 - Any internal correspondence between an officer of the department to AO would not amount to pendency of the proceeding before the AO - There was no other material for recording reasons for the AO for re-opening the proceedings under Section 148 of the Act. Relying upon Smt. Amiya Bala Paul vs. Commissioner of Income Tax [2003 (7) TMI 4 - SUPREME Court] - the power of enquiry under Section 133 (6) and 142 (2) does not include the power to refer the matter to the Valuation Officer for an enquiry by the latter - If the power to refer any dispute to a Valuation Officer is available under Section 131 (1), 133 (6) and 142 (2), there was no need to specifically empower the Assessing Officer to do so under Section 55-A - It is not open to the Valuation Officer to act in his capacity as Valuation Officer otherwise than in discharge of his statutory functions - He cannot be called upon, nor would he have the jurisdiction, to give a report to the Assessing Officer under the Act except when a reference is made under and in terms of Section 55A or to a competent authority under Section 269-L – Decided against Revenue.

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• 2013 (10) TMI 709
  Deemed Dividend u/s 2(22)(e) – The Assessing Officer invoked provisions of Section 2(22)(e) of the Income Tax Act, 1961 and had made an addition as deemed dividend in the hands of the respondent assessee - Held that:- The recipient would be a shareholder by way of deeming provision - It is not correct on the part of the Revenue to argue that if this position is taken, then the income ‘‘is not taxed at the hands of the recipient” - such loan or advance is not an income - Such a loan or advance has to be returned by the recipient to the company, which has given the loan or advance - If the amounts advanced are for business transactions between the parties, such payment would not fall within the deeming dividend under section 2(22)(e) of the Act – Decided against Revenue.

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• 2013 (10) TMI 708
  Assessment of Share Application Money - Whether the ITAT was right in observing if the share application money was assessed in the hands of the share applicants, the same would not be assessed in the hands of the respondent-assessee – Held that:- Relying upon CIT Vs. Orissa Corporation (P) Ltd. [1986 (3) TMI 3 - SUPREME Court ] - Only clarification is required - The issue on merits has been remanded to the Assessing Officer - the observations made by the tribunal implies and means that the Assessing Officer should objectively examine the whole issue and in case he finds that the transactions are genuine and are fully recorded by the share applicants, then no addition shall be made in the hands of the respondent-assessee - the two conditions have to be satisfied - Firstly the transaction should be genuine, true and not a camouflage, and secondly the transaction should be duly recorded in the books of the share applicants - In case, any of the two conditions are not satisfied, then it will be open to the Assessing Officer to act in accordance with law and made appropriate additions if justified and mandated by the Statute - Decided in favour of Revenue.

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• 2013 (10) TMI 707
  Deduction u/s 80IB of the Income Tax Act – ceiling of commercial construction in housing projects - Amendment in ceiling limit from 5% to 3% to apply retrospectively or prospectively – Held that:- Reliance has been placed upon the judgment in the case of Manan Corporation vs. Asstt. Commissioner of Income-Tax [2012 (9) TMI 700 - Gujarat High Court], wherein assessee had claimed deduction under section 80IB(10) of the Act for having developed a housing project. The assessee had conformed to the ceiling of the commercial construction in such housing project as was applicable when the housing project was approved. Subsequently, however, such ceiling was reduced. Revenue contended that since the housing project was not yet completed, the reduced ceiling of permissibility of commercial construction should be applied. This court held that such reduced limit could not be applied – It was held in that case that there was no such restriction in taxing statute and the permissible ratio for commercial user made 5% to the total built up area by way of amendment and reduction of which by further amendment to 3% of the total built up area, has to be necessarily construed on prospective basis – Decided against the Revenue.

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• 2013 (10) TMI 706
  Cancellation of registration u/s 12AA(3) of the Income tax act – Activities of general public utility u/s 2(15) of the Income Tax Act – Held that:- Assessee-trust sells off all these plots by organizing a public auction, where through the bidding process and the competition generated in it, the prices of their land keep escalating and finally, the land is sold off to the highest bidder. The surplus income which is generated through the sale of land is again used for buying more land, developing it and selling it the same way, thereby generating more profit. Assessee trust is not merely a mediator in buying and selling of land to the general public. Rather it operates in a business oriented way on the well known principles of profit generation. Therefore, the activities of the assessee trust clearly constitute activities in the nature of trade, commerce or business because no plots are reserved for any socio- economically lower society, there is no element of donation or support to any cause, none of the land is earmarked to be sold at no profit, no loss basis to any person whatsoever, which clearly establish that the element of charity is clearly absent from the activities of the trust, which is contrary to the provisions of section 2(15) of the Act amended w.e.f. 01.04.2009 and the Ld. CIT Bathinda has rightly issued show cause notice to the assessee-trust for canceling the registration already granted to the assessee-trust which the ld. CIT, Bathinda has the power under section 12AA(3) of the Act – Decided against the Assessee. Penalty u/s 271(1)(c) of the Income Tax Act – Held that:- The reasons for levying penalty by the A.O. on account of difference in valuation of closing stock, difference in sale receipts of land sold and other receipts, discrepancies in expenditure account and difference in Bank Balances which could not be explained by the assessee are therefore the concealment of income and therefore, Penalty u/s 271(1)(c) of the Income Tax Act is legal – Decided against the Assessee.

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• 2013 (10) TMI 705
  Penalty u/s 271(1)(c) – disallowances, i.e., qua repair and maintenance and depreciation - Held that:- The building is in the process of completion, work for which has been contracted and, in any case, was in progress - The construction or the acquisition of an asset cannot be said to be complete prior to it attaining a working condition, which has to be reckoned with reference to its intended user, as for the purpose of guest house - It is not the case, as has been sought to be projected by the assesse, that the Revenue has not accepted its claims in the absence of actual user, even though the building is ready for use, so that it is a case of passive user - Why, the detail of the expenditure itself reveals a good part of the expenditure to be on furniture and which has also been factored into in arriving at our foregoing inferential finding of the building being readied for its intended user, as admitted in the quantum proceedings. It would be fit and proper to remit the matter with respect to the claim qua Bhiwandi property back to the file of the ld. CIT(A), to allow the assessee an opportunity to substantiate its case in respect of cost incurred toward the Greenhouse, if any, included therein, as well as of the same as not representing a capital expenditure - For the balance expenditure qua the Bhiwandi property, we confirm the levy of penalty u/s. 271(1)(c), save qua expenditure for which it has a plausible explanation; the assessee having completely failed to explain the same as representing repair and maintenance of building; rather, its explanation having been found as contrary to facts as well as inconsistent with the material on record - Its claim for depreciation on the Bhiwandi building would also follow suit inasmuch as there has been no explanation, much less its substantiation, as to the user of the Bhiwandi property or even of its being ready for its intended user – Decided partly in favour of Assessee.

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• 2013 (10) TMI 704
  Actual Owner of Bank Account - Whether the bank account in the HDFC Bank was belonging to the appellant or to his HUF – Held that:- The documentary evidence also clearly shows that the amounts credited in the said bank account were belonging to the HUF and the investment in bank deposits was made out of the funds of the HUF - the interest on FDs as well as the dividend income credited in the relevant bank account was belonging to the HUF and the same was duly offered to tax in the return of income filed by the HUF - As rightly held by the ld. CIT(A) on the basis of this documentary evidence, the relevant bank account thus was maintained in the individual name as "karta" of the said HUF and the action of the A.O. in treating the said bank account as well as investment made from the said bank account as well as income credited therein as the income of the assessee merely going by the title of the account was totally unfounded when it was satisfactorily established by the assessee that the same was belonging to HUF and was duly disclosed/declared in the returns of income and balance sheets of the HUF not only for the year under consideration but even in the earlier years – there was no infirmity in the impugned order of the ld. CIT(A) deleting the addition made by the A.O. on this issue and upholding the same – Decided against Revenue.

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• 2013 (10) TMI 703
  Disallowance of Commission expenditure – Foreign traveling expenses - genuineness of expenditure - diversion of income - Held that:- Thus a full- fledged exercise was to be carried out by the assessee and its agent as per MOU for rendering the services and earning the commission - No record or evidence what-so-ever has been produced to this effect. The assessee has utterly failed to demonstrate the nature, extent of service rendered by the agent and availed by the assessee for its business of modular kitchens - what appears on record is merely book entries coupled with TDS the amount which will be claimed as a refund by the recipient being a loss making concern - the assessee has produced only skeletal paper work of the arrangement without any iota of evidence about actual business services rendered. CIT Vs. Imperial Chemical Industries Ltd. [1969 (2) TMI 15 - SUPREME Court] - the burden of proving that a particular expenditure has been laid out or incurred wholly and exclusively for the purpose of business is entirely on the assessee - The discharge of the burden has to be effective and meaningful and not to cover up by merely book entries and paper work – there was no infirmity in the order of lower authorities in making this disallowance which is upheld – Decided against Assessee.

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• 2013 (10) TMI 702
  Reassessment u/s 147 - Storage Charges – Income from House Property OR Not - The assessee has declared 'storage charges' as income from house property and accordingly claimed statutory deduction of 30% - Held that:- From the reading of the letter dated 5.8.2009 sent by the AO, we notice that the AO has sufficiently explained the grounds on the basis of which he has entertained the belief about the escapement of income - Relying upon GKN Driveshafts (India) Ltd Vs. ITO and Others[2002 (11) TMI 7 - SUPREME Court] - the communication cannot be found fault with - the assessee has sought the reasons for issuing the notices and the AO has supplied the reasons - Thereafter the assessee did not object to the reopening nor did it pointed out the alleged insufficiency of reasons - Instead, we notice that the assessee has participated in the assessment proceedings without raising any objection - Since the assessee did not object to the said communication, there was no occasion for the AO to address the contentions urged. Deduction on Income from House Property - The assessee has claimed 'Plot rent' paid to Cochin Port Trust as deduction while computing the income from house property – Held that:- The provisions of Income tax provide for method of computation of income under the head Income from house property - Section 24 of the Act provides for the specific deductions to be allowed from the Annual rental value determined in the manner prescribed in the Act - Sec. 24 of the Act does not provide for deduction of ground rent (plot rent) while computing the income under the head Income from house property – there was no infirmity in the decision of Ld CIT(A) on the issue. Disallowance u/s 40(a)(ia) of the Act – the assessee did not deduct tax at source from the payments made for transport and delivery charges, which attract disallowance u/s 40(a)(ia) of the Act – Held that:- The Ld CIT(A) called for a remand report from the AO - In the report, the AO recommended for disallowance of only Rs.2,52,779/- and Rs.3,47,482/- respectively for assessment years 2005-06 and 2006-07. Accordingly, the Ld CIT(A) sustained the addition to the extent recommended in the remand report and granted relief in respect of balance amounts. Still aggrieved, the assessee is contesting the additions sustained by the ld CIT(A). Addition made u/s 41(1) of the Act - the assessee has written off balances from Sundry creditors account, but did not declare it as income u/s 41(1) of the Act – Held that:- The assessee has written off sundry creditors' balances in assessment year 2005-06 and credited the same in the Profit and Loss account - However, while computing the total income, the assessee excluded the above amount - the liability so written off by the assessee is assessable u/s 41(1) of the Act - The assessee has also failed to show that the amounts have not been allowed as a deduction - the assessee, instead of proving its claim with material evidences, simply finds fault with the assessing officer, that too with oral submissions - such types of oral contentions cannot be recognized - the Explanation 1 to sec. 41(1) provides for assessing of liabilities written off by unilateral act also – Decided against Assessee.

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• 2013 (10) TMI 701
  Revision Order u/s 263 – Held that:- The assessing officer did not discuss anything in the assessment order about the claim of advertisement expenses made in this year - the Ld A.R claimed that the AO did examine this issue during the course of assessment proceedings, but he did not file any material to support his claim – Relying upon Grasim Industries Ltd. V CIT [2010 (2) TMI 4 - BOMBAY HIGH COURT ] - Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the Act and, if he considers that any order passed therein, by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or canceling the assessment and directing a fresh assessment - The key words that are used by section 263 are that the order must be considered by the Commissioner to be "erroneous in so far as it is prejudicial to the interests of the Revenue". The provision "cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer" and "it is only when an order is erroneous that the section will be attracted" - an incorrect assumption of fact or an incorrect application of law will satisfy the requirement of the order being erroneous - An order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category - the Assessing Officer has failed to examine the issue relating to advertisement expenses - the assessment order is rendered erroneous and prejudicial to the interests of the revenue - the CIT was justified in passing the revision order by invoking the provisions of sec. 263 of the Act – Decided against Assessee.

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• 2013 (10) TMI 700
  Disallowance u/s 14A of the Income Tax Act - Method of computation of disallowance u/s 14A of the Act – Counsel of the assessee contends that Assessing Officer has included the "profit on sale of investments" amounting to Rs. 67.25 crores as exempted income and accordingly, computed the disallowance u/s. 14A of the Act – Held that:- Assessee has paid tax on the above said amount and hence, the Assessing Officer was not correct in treating the same as exempted income - Restored the issue to the file of the Assessing Officer with a direction to examine the above said claim of the assessee and, if satisfied with the same, re-compute the disallowance u/s. 14A accordingly – Decided in favor of Assessee. Interest u/s 244A of the Income Tax Act – Claim of interest by assessee on the statutory interest – Held that:- Reliance has been placed upon the judgment in the case of Sandvik Asia Ltd. vs. CIT [2006 (1) TMI 55 - SUPREME Court] - There was an inordinate delay on the part of the Revenue in refunding certain amount which included the statutory interest and therefore, directed the Revenue to pay compensation for the same not an interest on interest - Section 244A to the Act which provides for interest on refunds under various contingencies - It is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest – Issue to be set aside to the file of the assessing officer.

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• 2013 (10) TMI 699
  Applicability of section 41(1) of the Income Tax Act – Held that:- Section i.e. 41(1) would be applicable where the assessee has obtained some benefit in respect of any trading liability by way of remission or cessation thereof - Merely because a liability has become time barred or is outstanding for a longer period, it cannot be presumed that there is a remission or cessation of the liability - Explanation (1) to Section 41(1) is a deeming provision by which remission or cessation of liability would be presumed in the year in which the debtor has written off the liability in his books of account - Explanation (1) to Section 41(1) would be squarely applicable for the FY 2012-13 - There cannot be cessation of liability twice - Therefore, when as per Explanation (1) there would be cessation of liability in the FY 2012-13 i.e. relevant to the assessment year 2013-14, the addition for the same cannot be made by presuming remission or cessation of liability in the year under consideration i.e. AY 2007-08 – Decided in favor of Assessee.

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• 2013 (10) TMI 698
  Whether the income declared is agricultural income – Reduced the agricultural income out of declared income - Land having an extent of 1.30 acres, though acquired in April, 2007, yet he was in possession of the same even prior to March, 2007 - Rubber estate was located in a fertile area at Perunad village of Pathanamthitta district and accordingly, contended that the income estimated by the Assessing Officer is very much on the lower side – Held that:- Assessee has failed to furnish any evidence in support of the claim of availability of agricultural income to the extent declared by him - Assessee has not furnished any evidence before the tax authorities to substantiate the claim of agricultural income declared by him. The assessee has also not furnished any evidence to show that the land purchased on 12-04-2007 was in fact in his possession prior to March, 2007 – Decided against the Assessee. Disallowance of 1/5th of depreciation claimed on vehicles towards personal use – Held that:- Assessee had claimed depreciation on four motor cars, viz., Corolla, Gypsy, Bolero and Scorpio – A.O. estimated the personal use at 1/5th and accordingly disallowed the 1/5th of the depreciation amount claimed on these vehicles - Assessee did not file any material to substantiate his contention that these vehicles were exclusively used for business purposes only – Decided against the Assessee.

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• 2013 (10) TMI 697
  Allowability of expenses shown in P&L Account only - Assessee had claimed 50% of reimbursement expenses in the P&L Account and 50% amounting to Rs.34,59,78,545/- were claimed in the computation of income - The disallowance was calculated after considering the fact that assessee had not claimed entire expenditure in the P&L Account – As per Assessing Officer, allowable expenses @ 3% work out to Rs.15,25,81,675/- as against Rs.79.98,76,204/- claimed by the assessee. Thus balance expenses to the tune of Rs.64,10,96,533/- are disallowed. However, since total amount debited to P&L Account is Rs.44,76,99,661/- (Rs.34,59,78,545/- + Rs.10,17,81,116/-, addition in computation of income will be made at Rs.29,51,17,988/- (Rs.44,,76,99,661/- - Rs.15,25,81,875/- - Held that:- Since the Assessing Officer started his computation in the assessment order from the profit as per P&L Account, therefore, the claim of the assessee made in the computation of income amounting to Rs.34,59,78,545/- remained unadjusted. The Assessing Officer in the original assessment order did not give credit for claim of this amount as he started for making computation of income by taking first figure as per P&L Account. Had assessee claimed full claim in P&L Account, the assessed income of the assessee would have been lower by the same amount – Decided in favor of Assessee.

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• 2013 (10) TMI 696
  Unexplained cash credit u/s 68 - Held that:- assessee filed inundated evidence in support of the genuineness of the transaction. The AO chose to ignore the same without showing how it was wrong and was needlessly swayed by the mere fact the T.S. Motors had not separately demonstrated this sum in its balance sheet. The assessee cannot be faulted if T.S. Motors clubbed such advance of Rs.15 lac with other advances instead of showing it separately. It was incumbent upon the AO to conduct inquiry and verify the correctness of the documents with M.S. Motors, if he was not ready to accept them as correct. Nothing adverse has been brought on record in this regard. In the given circumstances, we are unable to find any flaw in the impugned order in deleting this addition on the basis of the overwhelming evidence filed by the assessee in support of the genuineness of the transaction - Decided against the revenue. Unexplained investment - Held that:- it is patent that the difference in the cost of construction between the assessee and DVO for the current year stands only at Rs.2.05 lac. Such difference constitutes and minuscule 3%. As against the assessee's declared investment at Rs.1.22 crore over the period, the DVO has estimated cost of construction at Rs.1.25 crore. It is crystal clear that the year-wise figures as declared by the assessee and as estimated by the DVO are almost in the same vicinity. The difference between two values is minimal. After all, estimate is an estimate and cannot take the place of actual. Such a meager difference does not require any addition. The exercise embarked upon by the AO in treating 80% of the total investment over the years as having been made in the year under consideration is whimsical and capricious devoid of any legally sustainable reasons - Decided against Revenue.

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• 2013 (10) TMI 695
  Disallowance u/s 14A - CIT (A) sustained the disallowance - Expenditure in relation to income which does not form part of Total Income - Held That:- In case, the assessing officer is not, on the basis of objective criteria and after giving the assessee a reasonable opportunity, satisfied with the correctness of the claim of the assessee, he shall have to reject the claim and state the reasons for doing so. Having done so, the assessing officer will have to determine the amount of expenditure incurred in relation to income which does not form part of the total income under the said Act. He is required to do so on the basis of a reasonable and acceptable method of apportionment - Following decision of Maxopp Investment Ltd. & Others Versus Commissioner of Income Tax [2011 (11) TMI 267 - Delhi High Court] - Decided against assessee.

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• 2013 (10) TMI 694
  Jurisdiction u/s 263 - Whether CIT is justified in setting aside the assessment order passed u/s 143 (3) for making it afresh holding it to be erroneous and prejudicial to the interest of revenue within the meaning of section 263 - Held that:- As per the notice u/s 263 of the Act, one of the issues on which the ld. CIT has sought to revise the assessment order was that the assessee ought to have written off and claimed only 1/5 of its advertisement expenditure, since the assessee had been following the concept of deferred revenue expenditure. However, a perusal of the impugned order shows that while passing the said order, the ld. CIT dropped this issue. Instead, he directed the Assessing Officer to inquire as to whether the advertisement expenditure of the assessee contained any capital expenditure or not. Therefore, evidently, there is a change in the impugned order vis-a-vis the show cause notice qua the issue of advertisement expenditure - where the show cause notice issued is on one ground and the revisional order is passed on an entirely different ground, the order cannot be sustained in law - Following decision of Asia Resort Ltd. vs. ACIT [2003 (3) TMI 269 - ITAT CHANDIGARH-A], Star India Ltd. vs. ACIT, Range 11(1) [2011 (11) TMI 117 - ITAT MUMBAI] - Decided in favour of assessee. Capital or Revenue expenditure - Advertisement expenses - CIT held expenses as capital in nature - Held that:- details were asked for of the assessee by the AO by putting a specific query, all possible details were duly furnished by the assessee in response, and no further question was asked by the AO. This conduct shows that the AO had duly considered the details called for by him and supplied by the assessee and that the AO stood satisfied from such details. Therefore, the ld. CIT, evidently, is not justified in observing that no inquiry was carried out by the AO. In this regard, the assessee is correct in contending that the ld. CIT was himself not sure that the AO had not carried out any inquiry. It is as such, that the CIT observed in the impugned order that it appeared that the AO had not caused any inquiry to ascertain the nature of the expenses. The CIT, as available from the order, had no basis for such finding of no inquiry into the nature of the expenses by the AO. Rather, instead of relying on anything in the assessment order to perceive such lack of inquiry by the AO, the CIT was swayed by his own misconceived opinion that since the incurrence of the expenditure had brought enduring benefit to the assessee, this was reason enough to disallow some part of the expenses as being capital in nature. Now this, in our considered opinion, cannot be the basis for invoking revisional jurisdiction by the CIT. As correctly contended, the mere factum of enduring benefit having accrued to the assessee is not, by itself, a decisive factor to hold the nature of the expenses incurred to be capital - The CIT was not justified in directing the AO to carry out inquiry to ascertain the nature of the expenses and to reframe the assessment by disallowing the expenses to be found to be capital in nature - Decided in favour of assessee.

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• 2013 (10) TMI 693
  Penalty u/s 158BFA - Block assessment - undisclosed income - Held that:- No evidence found as a result of search - undisclosed income has been computed merely on the basis of the surrender made by the assessee in the course of the block assessment proceedings. De hors the surrender, there is no evidence which could have been said to have been found as a result of the search and, therefore, the 'computation' of undisclosed income by the Assessing Officer in the block assessment proceedings cannot be construed as a 'determination' of undisclosed income contemplated under section 158BC(c) or 158BB, addition is not made on the basis of any evidence found in the course of search, the penalty imposed by the Assessing Officer under section 158BFA(2) is not sustainable - Following decision of Beena Rani Versus Deputy Commissioner of Income-tax [2010 (5) TMI 648 - ITAT DELHI] - Decided in favour of assessee.

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• 2013 (10) TMI 692
  Penalty under section 271(1)(c)– Concealment of Income –In this case Supreme Court held that Tribunal, as well as, the Commissioner of Income-tax (Appeals) and the High Court have correctly reached this conclusion as where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars - Following decision of CIT vs. Reliance Petro Products Ltd. [2010 (3) TMI 19 - SUPREME COURT] – Decision in favor of assessee.

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• Customs

• 2013 (10) TMI 732
  Demand - Confiscation of gold ornaments - Held that:- Duty was determined only for 28 persons separately and therefore prima facie, demand of duty on Masilamani is not sustainable. However, we find force in the submission of Ld. AR on the imposition of penalty as three applicants already admitted the offence which was merely retracted in reply to the show cause notice, cannot be acceptable. The department also proceeded on the basis of passengers photographs and the e-mail communication found from the three applicants and these 3 applicants also identified Masilamani. Therefore, penalty prima facie would be imposable on Masilamani and other 3 applicants. Considering the facts and circumstances and after hearing both sides, we direct the applicant S.Masilamani to deposit Rs.10,00,000 and Rs.1,00,000 each by Shri A. Senthilkumar, N. Senthilkumar and Shri R. Gopinathan within 6 weeks. However, since the Commissioner has already adjusted Rs.49,000/- against penalty of Rs.2 lakhs on Shri A. Senthilkumar, he is directed to deposit Rs.51,000 within six weeks. - stay granted partly.

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• 2013 (10) TMI 731
  Stay Application - Electronic paver finisher - matter referred to larger bench with the following question: Whether the machine imported by the respondents i.e. "Electronic Sensor Pavers Vogele - Model Super 1800-2 with AB 600-2 TV Screed of working width upto 9.5 meters for laying Bituminous Pavement" is entitled for exemption under Notification No. 21/2002-Cus dated 01.03.2002, Sr. No. 230 (Sl. No.2 of List 18) or not.

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• 2013 (10) TMI 730
  Stay application - Classification of woven polyester ladies stole - Section 129E - Held that:- provisions of Section 129E do not apply, as far as duty deposit is concerned. As regards penalty, we find that the goods worth Rs.68,20,000/- approximately are lying with the Revenue, which are sufficient to cover the penalties imposed upon the appellants. Learned advocate also undertakes not to redeem the goods during pendency of the appeals and prays for fixing the appeal itself for final disposal as a live consignment is involved. Inasmuch as the goods are with the Revenue, we dispense with the condition of pre-deposit of duty and penalties and allow all the stay petitions unconditionally - Stay granted.

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• 2013 (10) TMI 729
  Confiscation - CD Writers of foreign origin - Held that:- In view of the first proviso to Section 128A( 3) of the Customs Act, 1962, the ld. Commissioner (Appeals) ought to have followed the procedure laid down under the said provisions of the Customs Act. Not following the laid-down procedure, in my opinion, the Order of the ld. Commissioner (Appeals) becomes bad in law and accordingly, the same is liable to be set aside. Consequently, the Order of the ld. Commissioner (Appeals) is set aside and the Appeal is remitted to the ld. Commissioner (Appeals) for deciding the issue afresh, after following the procedure laid down under Section 128A(3) of the Customs Act, 1962. Needless to mention that a reasonable opportunity of hearing be granted to the Appellant - Decided in favour of assessee.

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• 2013 (10) TMI 728
  Waiver of pre deposit - Import of goods as processed coral waste were found as not waste - under valuation- Held that:- The amount of duty confirmed against the applicant is also on the lower side. As such, we are of the view that pre-deposit of 50 % (Fifty per cent) of duty amount would serve the interest of justice. - stay granted partly.

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• 2013 (10) TMI 727
  Denial of DPEB benefit – Waiver of Pre-deposit – export of frozen / fresh chilled meat - certain certificates duly signed by the Doctors were found in the appellants factory at the time of their search and it is also a matter of record that Veterinary Doctor available in the Country were not sufficient to carry on said ante mortem and post mortem investigation. - Held that:- Without going into the other factual and legal aspects are of the prima facie view that Customs authorities cannot demand duty from the exporters on any irregularity noticed by them and they should necessarily refer the matter to DGFT authorities for cancellation of such licence - law was amended in the 2012 Budget and a new section 28 AAA was introduced - The section is to the effect that where instrument (defined in the Explanation) stand obtained by an exporters by means of collusion, wilful misstatement, suppression of facts etc., and such instruments are issued by the DGFT, duty can be demanded from the person who obtained such instruments by fraud and mis-representation - explanation to the section may clarify that said section would be applicable to the use of such instruments after the date of ascent of the President - it is clear that to undo the effect precedent decision of the Tribunal, section 28AAA stands introduced in the Act but the same is only applicable prospectively and not retrospectively - appellant is entitled to unconditional stay – Stay granted.

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• 2013 (10) TMI 726
  Waiver of pre deposit - Benefit of exemption notification - imported into India for the purpose of organizing Common Wealth Games - import by contractors / sub contractors - Held that:- while issuing clarification on the said notification, Board vide its circular No. 28/2010-Cus dated 13.8.2010 clarifies that if the importers are on record i.e. contractors/ vendors/ sub-vendors and amended the bill of entry to reflect the organising committee, Common Wealth Games and Prasar Bharti as the case may be as new importer, the benefit of notification would be available to the importer. In any case, it is seen that notification in question was subsequently amended vide notification No. 84/2010 Cus dated 27.8.10, extending the benefit to the vendors/ sub-vendors etc. After the amendment of the notification in question another circular being Circular No. 31/2010 Cus dated 30.8.10 was issued by the Board - Boards intention, as revealed from the beginning was to extend the benefit to the imports made by vendors/ sub-vendors /suppliers, in respect of goods to be used in the Common Wealth Games. This is clear from the earlier circular issued by the Board, subsequent amendment made to the notification and the subsequent notification dated 30.8.10 after the amendment . As such, the amendment of the earlier notification is only clarificatory in case which the benefit of the same would be available to the assessee. As such, at this stage, we are of the view that appellant has prima facie case in its favour so as to allow stay petition unconditionally

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• 2013 (10) TMI 725
  Stay application - fraudulent export to claim duty drawback and DEPB - Export of readymade garments - Held that:- Applicants do not deserve any leniency having indulged in fraudulent export using currency declaration form showing receipt of foreign currency and requires to be put to some terms of deposit. We also find that the applicants have not pleaded any financial difficulty and accordingly we direct all the four exporting firms to deposit 50% of the amount in each case within a period eight weeks, subject to which pre-deposit of balance amount and penalties imposed upon the applicants shall stand dispensed with and its recovery stay till disposal of the appeals - stay granted partly.

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• 2013 (10) TMI 724
  Waiver of pre deposit - overvaluation to claim higher duty drawback - Export of readymade garments - Held:- There is enough evidence on record to show that the exports made by him were grossly over-valued and were to the firms which were not actual buyers. The entire scenario in Russia was being managed by his close relataive, Shri Surinder Singh. The said exporting firms have already been received the drawback amount and as such, cannot plead any financial difficulty. As such, we deem it fit to direct the exporting firms to deposit 50% of the drawback availed by them as a condition of hearing their appeals - Any deposit made by any exporting firms during the course of investigation would be taken into consideration for calculating amount of 50%. - stay granted partly.

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• Corporate Laws

• 2013 (10) TMI 722
  Registration fee and stamp on mortgage - Whether ‘charge’ of mortgage can be entered in the revenue record in respect of a mortgage effected by deposit of title-deeds without its registration and payment of registration fee and stamp duty - Held that:- it may be effected in specified town by the debtor delivering to his creditor documents of title to immoveable property with the intent to create a security thereon. No instrument is required to be drawn for this purpose. However, the parties may choose to have a memorandum prepared only showing deposit of the title-deeds. In such a case also registration is not required. But in a case in which the memorandum recorded in writing creates right, liability or extinguishes those, same requires registration - letter of the Finance Commissioner would apply in cases where the instrument of deposit of title-deeds incorporates terms and conditions in addition to what flow from the mortgage by deposit of title-deeds. But in that case there has to be an instrument which is an integral part of the transaction regarding the mortgage by deposit of title-deeds. A document merely recording a transaction which is already concluded and which does not create any rights and liabilities does not require registration. Nothing has been brought on record to show existence of any instrument which has created or extinguished any right or liability. Original deeds have just been deposited with the bank. In the face of it, we are of opinion that the charge of mortgage can be entered into revenue record in respect of mortgage by deposit of titledeeds and for that, instrument of mortgage is not necessary. Mortgage by deposit of title-deeds further does not require registration. Hence, the question of payment of registration fee and stamp duty does not arise. By way of abundant caution and at the cost of repetition we may, however, observe that when the borrower and the creditor choose to reduce the contract in writing and if such a document is the sole evidence of terms between them, the document shall form integral part of the transaction and same shall require registration under Section 17 of the Registration Act - Decided against petitioner.

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• Service Tax

• 2013 (10) TMI 741
  Classification of taxable services u/s 65A - Supply of Tangible Goods service u/s Section 65(105)(zzzzj) versus Mining of Mineral, Oil or Gas service' u/s Section 65(105)(zzzy) versus Survey and Exploration of Mineral, Oil and Gas service – Rules of interpretation – use of own equipment for providing services - drilling of wells for production/exploitation Hydrocarbons (developmental drilling) is put along with site formation and clearance and excavation and earth moving, which are not part of Survey and exploration of mineral service - contemporanea exposito and intention of the Government – Held that:- There are five elements [i.e. A source rock, Migration, Trap, Seal or cap rock and Reservoir] which are required to be complied with to identify source of potential petroleum Hydrocarbon drill location. - In our opinion, this is what is covered by the definition of Survey and Exploration as far as oil/gas is concerned. - the wells drilled as per the GSPC's specification in the location identified after ensuring that the five elements of prospect are existing in the activity subsequent to survey and cannot be said to be a part of the service which is preliminary to mining or drilling activity - Follwoing decision of Atwood Oceanics Pacific Ltd. Versus Commissioner of Service tax, Ahmedabad [2012 (12) TMI 425 - CESTAT, AHMEDABAD] - Decided against assessee.

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• 2013 (10) TMI 740
  Extended Period of Limitation – Cenvat Credit on service tax paid on commission - Waiver of Pre-deposit - The show cause notice is issued on 08.02.2011 by invoking extended period – Held that:- The extended period cannot be invoked in cases like this - Prima facie, any amount which is beyond the period of limitation is hit by time bar - the amount of commission paid by the appellant within the period of limitation from the date of issuance of show cause notice needs to be directed as pre-deposit, as the issue is debatable one – Appellant is directed to submit the amount as pre-deposit – upon such submission rest of the duty to be stayed till the disposal – Partial stay granted.

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• 2013 (10) TMI 739
  CENVAT credit on input services - Debit Notes - Duty paying document - Rule 9(1) of the CENVAT credit Rules – Waiver of Pre-deposit - Held that:- The appellant had availed cenvat credit on the debit notes issued by a service provider for the commission received by them indicating on the debit notes clearly the service tax liability - the service provider has given the details of service tax registration number and classification of the services as Business Auxiliary Services - service provider has also given a certificate of registration under service tax which is, subsequently reflected on the debit notes - service provider to the appellant had registered himself with the department on 07.03.2006 and the debit notes/ documents on which the credit was availed, are of the period later than the registration - the appellant had received the services rendered by the service provider and has also paid the service tax to the service provider - There was strong force in the contention of the assessee - the application for the waiver of pre-deposit of balance amounts involved allowed and recovery stayed till the disposal of appeal – Stay granted.

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• 2013 (10) TMI 738
  CENVAT credit - input services in respect of port services - Nexus of credit with manufacturers of hot briquetted iron and sponge iron - Held that:- The shipping fee has been paid for the usage of tugs and barges for the transportation of the goods from the high seas to the jetty. If the service has been provided by an outside agency and not by the appellant themselves, the question of taking Cenvat credit by the appellant of the service tax paid by the provider such services would not have arisen at all. Therefore, there is merit in the contention of the Revenue that the service tax paid on shipping fee is not an eligible input service as defined in Rule 2(l) of the Cenvat Credit 2004. Merely because the appellant had undertaken the operation of the tugs and barges, it cannot be said that such services would be an eligible input service as defined in Rule 2 (l) of the Cenvat Credit Rules, 2004. However, this issue will have to be examined in depth at the time of final disposal of the appeal. Inasmuch as in appellant's own case for the previous period, credit has been allowed without examining the issue in detail, at the interim stage of stay, stay granted.

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• 2013 (10) TMI 737
  Demand - SSI exemption - Held that:- there is a need for examination of liability in terms of SSI exemption notification. The appellant has not at all registered and they were not paying service tax. When they were not registered and not paying service tax, the question of proving that they have not availed CENVAT credit in terms of para 2 of the notification may not arise. Further the claim about bona fide belief also is to be considered. At this stage, we feel that the amount deposited by the appellant is sufficient for the purpose of waiver of predeposit of balance dues. - stay granted.

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• 2013 (10) TMI 736
  Interest u/s 75 - whether the liability to remit tax on the enhanced rate of 4.12% enures in respect of the services rendered after 01-03-2008 or is also leviable at the higher rate where the consideration for services rendered prior to 01-03-2008 is paid to the provider after 01-03-2008 - Held that:- it appropriate to grant waiver pre-deposit and stay all further proceedings pursuant to the adjudication order, on condition that the appellant remits 50% of the service tax assessed and the corresponding interest thereon (excluding however the component penalty imposed under Section 76 of the Act) within 4 weeks from today and report compliance by 12-09-2013. - stay granted partly.

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• 2013 (10) TMI 735
  Penalty u/s 78 - service tax and interest was deposited before issuance of show cause notice - Service from foreign service providers - Held that:- waiver of pre-deposit of penalty and stay all further proceedings pursuant to the adjudication order, for realization of the liability, pending disposal of the appeal. Stay application is disposed of accordingly - Decided against assessee.

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• 2013 (10) TMI 734
  Valuation - inclusion of food value into the value of club services - Stay application - Waiver of pre deposit - Whether the value of the food items provided should be deleted from the gross value of the taxable service - Held that:- it is appropriate to grant waiver of pre-deposit and stay of all further proceedings pursuant to the adjudication order as confirmed, on condition that the petitioner remits the assessed interest component on the service tax assessed within four weeks from today. - stay granted partly.

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• 2013 (10) TMI 723
  Stay application - Cleaning activity - Assessee contends that that they are only evacuating ash from the silos and hydrobins and they are in no way concerned with the cleaning activities - Held that:- As the applicants are only removing fly ash from the ash pond to the other area, therefore prima facie we find that it is not covering under the cleaning service therefore pre deposit of service tax and penalties are waived and recovery of the same is stayed during pendency of the appeal - Stay granted.

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• Central Excise

• 2013 (10) TMI 721
  SSI exemption - Contravention of CE Rules – Non-accountal of Raw Material – No statutory obligation to maintain accounts of production and clearance - Held that:- The clearances during the financial year were not even required to file a declaration, which is required when the clearances cross Rs. 90,00,000/-, that registration is required when the clearances cross Rs. 1.3 crores, that since on the date of the officers visit, the appellants unit was not even declarant unit - they were not even required to maintain the statutory records thus for non-accountal of the raw material and the finished goods, there is no contravention of Central Excise Rules so as to attract confiscation of goods and penalty - Relying upon Dayal Industries vs. CCE, Delhi - II [2006 (4) TMI 12 - CESTAT, NEW DELHI]. Waiver of Pre-deposit – Held that:- The only basis for confiscation of the goods is that the appellant were required to maintain the statutory Central Excise records and the seized goods were not accounted for - It is well settled that a unit, which is well within the SSI exemption limit and is not even required get registered with Central Excise, is not required to maintain statutory Central Excise records and no penalty can be imposed for non-accountal of the excisable goods - Though the learned Jt. CDR pleads that the appellant were not eligible for SSI exemption as their clearances were required to be clubbed with the clearances with the other group units, in the show cause notice, there was no such allegation - the appellant have a strong prima facie case - the requirement of pre-deposit of penalty is waived for hearing of their appeals and recovery stayed till the disposal of the appeal - stay granted.

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• 2013 (10) TMI 720
  Confiscation of Goods – weighment of goods outside the factory premises - Waiver of Pre-deposit – Held that:- The appellant had general permission from the Central Excise authorities for outside weighment, but since he had gone for lunch, the same was not handed over to the driver, who was waiting for the same, confiscation of the goods is not sustainable, the goods had been cleared on payment of duty thus there is no question of recovery of duty once again. Prima facie there is merit in the appellant's plea that the goods loaded in the truck which had been seized were being taken to the Dharamkanta for weighment, as the officers on checking the records in the factory, found a weighment slip already prepared by the factory Manager - the appellant have a strong prima facie case in their favour - The requirement of pre-deposit of duty demand and penalty waived for hearing of the appeal and recovery stayed - stay granted.

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• 2013 (10) TMI 719
  Revision in price – supplementary invoice - payment of duty on differential amount – Whether interest is imposable on revision of prices having retrospective effect - Held that:- Following Commissioner of Central Excise, Pune Versus M/s SKF India Ltd. [2009 (7) TMI 6 - SUPREME COURT] - The assessee gave its reply stating that the payment of differential duty was made by it at the time of issuing supplementary invoices to the customers and, therefore, there was no question of charging interest much less any penalty - The differential duty was paid only later when the assessee issued supplementary invoices to its customers demanding the balance amounts - it was clearly a case of short payment of duty though indeed completely unintended and without any element of deceit etc. The payment of differential duty thus clearly came under sub-section (2B) of section 11A and attracted levy of interest under section 11AB of the Act – Partial Stay granted.

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• 2013 (10) TMI 718
  Shortage of Stock – Waiver of Pre-deposit - Held that:- The shortages of stocks as ascertained by the officers during their visit to the factory premises of the main appellant M/s. Sabero Organics Gujarat Limited - Since the appellant is disputing the entire proceedings, the amount deposited by the appellant as enough deposit to hear and dispose the appeals - applications for waiver of pre-deposit of balance amounts involved are allowed and recovery stayed till the disposal of appeals – Stay granted.

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• 2013 (10) TMI 717
  Extended Period of limitation – manufacturing activity - repacking of the item called Slapton 10L, imported by appellant and repacking the same in smaller packs for home clearances for domestic market - Waiver of Pre-deposit – Held that:- There was strong force in the contentions raised by the counsel that at least the show cause notice invoking extended period is incorrect as the department himself had finally assessed the product repacked by them, in 2002 - in order to hear and dispose the appeal, the appellant need to put to some condition at least for the demand which is within limitation – Partial stay granted.

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• 2013 (10) TMI 716
  Extended Period of Limitation – ineligible availment of cenvat credit of NCCD credit on the captive consumption of POY yarn - Waiver of Pre-deposit - Held that:- Following MODERN PETROFILS Versus COMMISSIONER OF CENTRAL EXCISE, VADODARA [2010 (259) E.L.T. 411 (Tri. - Ahmd.)] - The period involved is December 2005 to March 2006 and the show cause notice was issued by invoking extended period - When department was aware of violation of procedure in availment of cenvat credit by the assessee for the period March 2003 to July 2004, we are unable to understand why the department did not issue a show cause notice for the subsequent period within the period of limitation - prima facie the extended period cannot be invoked in the case - the appellant has made out a case for the waiver of pre-deposit of amounts involved only on the ground of limitation - pre-deposit of amounts involved is allowed to be waived – Stay granted.

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• 2013 (10) TMI 715
  Cenvat Credit - Input Services – cleaning activity of factory premises - Amendment of Rule 2(l) of CENVAT Credit Rules - Waiver of Pre-deposit – Held that:- Cleaning factory premises is a statutory requirement as per provisions of section 11 of Factories Act 1948 and therefore this activity has a clear nexus with manufacturing process and the order of lower authorities is wrong because the main part of the definition covers ‘input services used by manufacturer whether directly or indirectly in relation to manufacture of final products’ - these activities are in relation to manufacture of final product and therefore the order is without any basis - Following NTF (India) Pvt. Ltd. Vs CCE Delhi [2013 (6) TMI 618 - ITAT DELHI] – the activities would constitute ‘input services’ - The amendment made in definition of ‘input services’ on 01-04-2011 does not alter this position prima facie - the requirement of pre-deposit of dues arising from the order for admission of appeals waived - Stay granted.

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• 2013 (10) TMI 714
  SSI Exemption – clearance of goods without obtaining central excise registration number and non maintenance of statutory records - penalty for procedural lapse - Waiver of Pre-deposit – Held that:- Following Deccan Industrial Products Pvt. Ltd. vs. CCE, Hyderabad [2002 (8) TMI 743 - CEGAT, BANGALORE] - they were not even required to observe Central Excise formalities - The departments allegation against the appellant unit would be valid only if on the basis of their clearances, they were required to obtain Central Excise registration or they were not eligible for Central Excise registration - There is no seizure of any documents from the unit showing that their clearances during 2010-2011 or 2011-2012 were beyond the threshold limit for SSI exemption - Up till now no show cause notice has been issued to the unit for denying SSI exemption to them and demanding duty - Prima facie during the period of dispute, the appellant unit was not even required to obtain Central Excise registration and was not even to required to maintain the statutory record, and therefore, the imposition of penalty for clearing without invoice and not maintaining records of the impugned goods, does not appear to be correct - The appellant have strong prima facie case in their favour - The requirement of pre-deposit of penalty waived for hearing of appeals and recovery stayed till the disposal of the appeals – stay granted.

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• 2013 (10) TMI 713
  Restoration of appeal - Delay and Laches – Held that:- The appellants appeal was rejected in December 2005 - The restoration application stands filed after eight years i.e. in 2013 - Apart from latches, when order passed by the Tribunal gets merged with the order of the Hon’ble High Court and subsequently with the order of Supreme Court, to recall such final order passed by the Tribunal which already stands merged with the higher court, would amount to upsetting the order of Hon’ble High Court as also Supreme Court which the Tribunal has no power or jurisdiction to do so. Restoration of Applications – Impact of order of BIFR on order of CESTAT directing to make pre-deposit - Jurisdiction of BIFR - Whether BIFR has the jurisdiction to direct CESTAT to recall an order which has already been approved by the High Court and Supreme Court and has merged with their orders – Held that:- Following GLOBAL SYNTEX (BHL) LTD. Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II [2012 (11) TMI 867 - CESTAT, NEW DELHI] - The BIFR passed the order on reference under Section 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985 - the BIFR is not an appellate authority and as such we fully agree with the learned SDR that the direction contained in the said order of BIFR were not called for and are beyond their jurisdiction and power - The CESTAT is not bound to follow the same - Learned Advocate has not been able to show as to how BIFR is exercising as an appellate authority over the Tribunal and is directing to recall the order – there was no reason to recall the final order - restoration application filed by the appellant is rejected – Decided against Assessee.

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• 2013 (10) TMI 712
  Waiver of Pre-deposit - Duty Demanded – difference in closing balance and opening balance - salvage of ship - scrap on the ship - Held that:- The payments already made by the appellants is towards admitted liability and interest thereon - this amount cannot be taken into consideration while determining the amount of pre-deposit required to be made by the appellants - appellants have not been able to make out a prima facie case in their favour - It is difficult to imagine how an assessee would not notice that quantity of 227.86 MT was not at all available to show it in the ER-1 return when no stock was available - One would expect that appellant would have informed the department as to how the closing balance or opening balance shown in the ER-1 returns were wrongly shown and why they were shown in that manner. The mistake becomes multiplied when we notice the fact that appellant had informed the Pollution Control Authorities and Port Authorities about the salvage activities but failed to inform the Customs Authorities or Central Excise Authorities to whom the returns were filed - the departmental officers cannot be found fault with for going by the documents submitted by the appellant - If the documents submitted showed a closing balance of 227.86 MT in the month of May and it became zero as opening balance in the month of June, prima facie the appellant may be required to pay duty on this amount. Goods Transport Agency Service – it was contended that we have to go by agreement and we cannot go only by the invoice - This would require examination of the agreement vis-a-vis invoices issued and etc. which can be done at the final stage - Therefore at this stage the benefit can go to the assessee - the appellant is directed to deposit an amount as pre-deposit – Partial stay granted.

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• Indian Laws

• 2013 (10) TMI 733
  Blacklisting of company for allotment of future contract - Misconduct and irregularity - Receipt of excessive payments - Held that:- ‘debarment’ is recognised and often used as an effective method for disciplining deviant suppliers/contractors who may have committed acts of omission and commission or frauds including misrepresentations, falsification of records and other breaches of the regulations under which such contracts were allotted. What is notable is that the ‘debarment’ is never permanent and the period of debarment would invariably depend upon the nature of the offence committed by the erring contractor - according to the respondent-BSNL, the appellant had fraudulently withdrawn a huge amount of money which was not due to it in collusion and conspiracy with the officials of the respondent-corporation. Even so permanent debarment from future contracts for all times to come may sound too harsh and heavy a punishment to be considered reasonable especially when (a) the appellant is supplying bulk of its manufactured products to the respondent-BSNL and (b) The excess amount received by it has already been paid back. Because blacklisting is in the nature of penalty the quantum whereof is a matter that rests primarily with the authority competent to impose the same. In the realm of service jurisprudence this Court has no doubt cut short the agony of a delinquent employee in exceptional circumstances to prevent delay and further litigation by modifying the quantum of punishment but such considerations do not apply to a company engaged in a lucrative business like supply of optical fibre/HDPE pipes to BSNL. Secondly, because while determining the period for which the blacklisting should be effective the respondent- Corporation may for the sake of objectivity and transparency formulate broad guidelines to be followed in such cases. Different periods of debarment depending upon the gravity of the offences, violations and breaches may be prescribed by such guidelines. While, it may not be possible to exhaustively enumerate all types of offences and acts of misdemeanour, or violations of contractual obligations by a contractor, the respondent-Corporation may do so as far as possible to reduce if not totally eliminate arbitrariness in the exercise of the power vested in it and inspire confidence in the fairness of the order which the competent authority may pass against a defaulting contractor - Decided in favour of Appellant.

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