TMI Tax Updates - e-Newsletter
October 27, 2014

Case Laws in this Newsletter:

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

TMI SMS

• Date of filing of Service tax return (ST-3 Form) extended from 25-10-2014 to 14-11-2014 - Order no. 2/2014

  ---

Articles

1. HISTORY OF JUDICIAL SYSTEM IN TAXATION

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. The Ministry of Micro, Small and Medium Enterprises gets ISO 9001: 2008 Certificate

2. RBI Reference Rate for US $

Notifications

Service Tax

1. ORDER NO. 02/2014 - dated 24-10-2014 - ST

In view of the recent Natural calamities in certain parts of the country CBEC has extended the date of submission of the Form ST-3 for the period from 1st April 2014 to 30th September 2014, from 25th October, 2014 to 14th November, 2014

SEZ

2. S.O. 2605(E) - dated 8-10-2014 - SEZ

To set up a sector specific Special Economic Zone for Information Technology and Information Technology Enabled Services at Village Behrampur, Balola and Bandhwari, Tehsil, Sohna, District Gurgaon in the State of Haryana.

Highlights / Catch Notes

Income Tax

• Bogus sale transaction leads to sale proceeds being added as income u/s 68 of the Income Tax Act.

  Case-Laws - HC : Addition u/s 68 – nce the transaction of purchase and sale was found to be bogus then the sale proceeds had to be added as income of the assessee u/s 68 of the Act because the money received on the basis of bogus transaction had been credited by the assessee in the books of account which remained unexplained - HC
  Visit to Get Source

  ---

• Court Grants Assessee Society Registration u/s 80G(5) for Charitable Medical Services to All Without Discrimination.

  Case-Laws - HC : Entitlement for registration u/s 80G(5) – to provide medical facilities in their hospital to all persons of any caste, creed, race, religion etc. - the activities carried out by the assessee society are charitable in nature - HC
  Visit to Get Source

  ---

• High Court rules notional interest on security deposits excluded from annual letting value under Income Tax Act, Section 23(1)(a).

  Case-Laws - HC : Scope of income from house property u/s 23(1)(a) - The notional interest on security deposits cannot be taken into consideration for determining and computing the annual letting value - HC
  Visit to Get Source

  ---

• High Court Rules Against Tribunal's Penalty for Seizures, Citing Unwarranted Reliance on Hyper-Technicalities u/s 271(1)(c.

  Case-Laws - HC : Penalty u/s 271(1)(c) – Tribunal proceeded on hyper- technicalities and acted as though every seizure must entail initiation of proceedings u/s 271 of the Act - no penalty - HC
  Visit to Get Source

  ---

• High Court Rules Asset Transfer from Partnership to Private Company Exempt from Capital Gains u/s 45(4.

  Case-Laws - HC : Capital gain u/s 45 - Transfer of assets from partnership firm to Private limited company – section 45(4) is not attracted as the very first condition of transfer by way of distribution of capital assets is not satisfied - HC
  Visit to Get Source

  ---

• Court Upholds Validity of Search Authorization u/s 132 and Notice Issuance u/s 158BD.

  Case-Laws - HC : Validity of authorization of issue u/s 132 – Notice issued u/s 158BD – at the time of search of the premises, the petitioner infact signed the panchnama, claiming to be the heir of deceased person - subsequent also no protest was made - it cannot be said that search warrant was null and void - HC
  Visit to Get Source

  ---

Customs

• Detention of Goods Due to Distinct Shape, Size, and Quality Differences in Betel Nuts of Indian vs. Foreign Origin.

  Case-Laws - AT : Detention of goods - If there are significant differences in shape, size, test etc. of betel nuts of Indian origin than the betel nuts of foreign origin the person in trade may form an opinion that it is of foreign origin which in the facts of the case may be accepted. - AT
  Visit to Get Source

  ---

Service Tax

• Service Tax ST-3 Form Filing Deadline Extended to November 14, 2014, per Order No. 2/2014.

  Notifications : Date of filing of Service tax return (ST-3 Form) extended from 25-10-2014 to 14-11-2014 - Order no. 2/2014
  Visit to Get Source

  ---

• Interpretation of Excess Service Tax Adjustment u/r 6: Are Provisions Directory or Mandatory?

  Case-Laws - AT : Adjustment of the excess service tax deposited - relevant provisions of Rule 6 may perhaps have to be interpreted by directory and not mandatory. - AT
  Visit to Get Source

  ---

Central Excise

• Assessee Claims Refund After Reversing Cenvat Credit for Goods Transferred to EHTP Unit.

  Case-Laws - HC : 100% EOU - assessee rightly availed the Cenvat credit and then reversed it when those goods were moved to EHTP unit and claimed refund. - HC
  Visit to Get Source

  ---

• Job Workers Can Claim CENVAT Credit for Furnace Oil if Principal Manufacturer Pays Duty on Final Products.

  Case-Laws - AT : CENVAT Credit - if the job worker has taken any input credit on furnace oil which has been used in the job work goods and same has been cleared without payment of duty but the principal manufacturer has paid the duty on the final product, in that case Cenvat Credit on furnace oil is available to the job worker. - AT
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2014 (10) TMI 588
  Application of res-judicata – Justification of remitting the matter to AO – Held that:- Since the issues have been set aside for fresh adjudication by the AO the grounds of appeal challenging the confirmation of the disallowances are not correct - the CIT(A) has observed that as per counsel of the assessee, the issue required further investigation and the AO had no objection to the restoration of these issued for fresh examination - during the course of the arguments, both the parties have agreed that the FAA has restored the matter back to the AO pertaining to the addition of Rs. 21,398/-. The claims were not adjudicated by the FAA - the Tribunal had no occasion to adjudicate the claim of the assessee on merit - it would be proper to modify the order passed by the Tribunal and restore the issue pertaining to above mentioned additions only to the C.I.T.(A) to examine the same denovo – Decided in favour of assessee.

  ---

• 2014 (10) TMI 587
  Interest from security received as income - Principle of consistency – Held that:- The Tribunal had applied and followed its order in the case of the same assessee for prior AY 2000-01 - the only question of law projected as substantial one, cannot be entertained - A pure factual finding cannot be re-appreciated and reapprised - That finding has been consistently rendered by the Tribunal and for prior assessment years in the case of the very assessee - If the Tribunal follows and applies it on the same facts for a subsequent assessment year, that exercise undertaken by the Tribunal cannot be termed as perverse or vitiated by any error of law, apparent on the face of record – Decided against revenue.

  ---

• 2014 (10) TMI 586
  Effect of amendment u/s 40(a)(ia) w.e.f. 1.4.2010 - TDS deducted deposited after 31.5.2005 – Contractor's payment and professional expenses made after due date - Held that:- Tribunal was rightly of the view that relying upon CIT Vs. Virgin Creations [2011 (11) TMI 348 - CALCUTTA HIGH COURT] - if payment of TDS is made before the due date of filing of the return as envisaged u/s 139(1), addition could not be made - Since the payment of balance amount of TDS has been made in the month of June, 2005, which is much before the due date for filing of the return as envisaged u/s 139(1), therefore, addition U/s 40(a)(ia) could not be made – the order of the Tribunal is upheld – Decided against revenue.

  ---

• 2014 (10) TMI 585
  Validity of rectification order – Amount seized u/s 132 - Advance tax constitutes the existing liability as per specific provision of Section 132B or not – Held that:- The Tribunal has answered the question of chargeability of interest, against the revenue by relying upon Commissioner of Income-tax Versus Ashok Kumar [2010 (9) TMI 771 - Punjab and Haryana High Court] – the assessee is entitled to adjustment of seized amount towards advance tax liability from the date of making the application in that regard - The Tribunal has rightly held that the assessee was entitled to adjustment of the amount and no interest could be charged on that basis - Therefore, no fault could be found with the approach adopted by the Tribunal – Decided against revenue.

  ---

• 2014 (10) TMI 584
  Assessment order u/s 144 – Ex-parte order - Proper explanation made for non-appearance - Held that:- Assessee submitted that an application for adjournment was sent on 16.7.2012 as the counsel was not in a position to appear on 18.7.2012, the date fixed in the appeal due to problem in the back whereas the Tribunal has wrongly recorded that no request for adjournment was made - The non-appearance of the counsel on 18.7.2012 was unintentional and beyond his control - the reason given for non-appearance of the counsel for the assessee before the Tribunal on the date fixed appears to be unintentional and bonafide – thus, the order is to be set aside and the matter is remitted back to the Tribunal for fresh adjudication – Decided in favour of assessee.

  ---

• 2014 (10) TMI 583
  Addition u/s 68 – Income already shown as income under capital gains – Genuineness of transaction of sale and purchase of shares – Held that:- The Tribunal was rightly of the view that the assessee had manipulated the accounts - no sale or purchase of the shares was done by the assessee but only entries of the capital gains were given to the assessee on receipt of cash payment - since the assessee had only filed copy of sale and purchase bill and showed inability to produce the broker, the AO was right in conducting the enquiries on his own - the bogus capital gains have been generated by the assessee and, therefore, the quotations in a Gujarati Diary was of no help to the assessee - the assessee had not done any share business before financial year 2003-04 and after financial year 2004-05 in which he had earned capital gains of Rs. 51 lacs - the assessee had failed to prove the genuineness of the transaction of sale and purchase of shares - once the transaction of purchase and sale was found to be bogus then the sale proceeds had to be added as income of the assessee u/s 68 of the Act because the money received on the basis of bogus transaction had been credited by the assessee in the books of account which remained unexplained – thus, the order of the Tribunal is upheld – Decided against assessee.

  ---

• 2014 (10) TMI 582
  Income disclosed under Voluntary Disclosure of income Scheme 1997 - invocation of section 69A – Failure to justify source of investment – Held that:- Tribunal was rightly of the view that where the assessee has failed to offer an explanation about the nature and source of acquisition of the items of jewellery in financial year 1986-87, statutory presumption provided u/s 69A of the Act comes into play and the value of the jewellery is deemed to be income of the assessee for the financial year 1997- 98 – following the decision in CIT vs. Prem Pal [2010 (12) TMI 108 - Punjab and Haryana High Court] - the AO was justified in initiating the proceedings for reassessment u/s 148 of the Act and holding that the valuables found were liable to be added to the income of the assessee for the AY 1998-99 in the absence of valid explanation - since the assessee failed to explain the nature and source of acquisition of the items of jewellery in the financial year 1986-87, presumption u/s 69A of the Act came into play and the value of the jewellery was deemed to be income of the assessee for the AY 1998-99 in which the assessee was found to be in possession of the items of jewellery- the order of the Tribunal is upheld as no substantial question of law arises for consideration – Decided against assessee.

  ---

• 2014 (10) TMI 581
  Entitlement for registration u/s 80G(5) – Primary aim of Society charitable or not – Society used to train Christian men and women as health professionals – Held that:- The Tribunal was rightly of the view that the assessee was registered as a charitable institution u/s 12A of the Act and the registration granted thereunder was valid even for the current AY - The primary aim of the assessee society was to train men and women as health professionals in the spirit of Jesus Christ and the facility of training health professionals and medical care was to be provided without consideration of caste, race, creed, language and religion - The assessee society was established and run by a minority Christian community, but as the aim and object of the assessee society is to train professionals in the field of medical and health care and also to provide medical facilities in their hospital to all persons of any caste, creed, race, religion etc., the activities carried out by the assessee society are charitable in nature and consequently, the assessee is entitled to the registration under section 80G(5) of the Act – thus, the renewal of registration u/s 80G(5) is to be granted to the assessee society – the order of the Tribunal is upheld – Decided against revenue.

  ---

• 2014 (10) TMI 580
  Scope of income from house property u/s 23(1)(a) - Whether the Tribunal was justified in holding that the notional interest income free security deposit and advance rent cannot be included in the income from property for the purpose of section 23(1)(a) – Held that:- The notional interest on security deposits cannot be taken into consideration for determining and computing the annual letting value, is to be decided against the revenue - Relying upon Commissioner of Income Tax V/s. J.K. Investors (Bombay) Ltd. [2000 (6) TMI 9 - BOMBAY High Court] – no substantial question of law arises for consideration – Decided against revenue.

  ---

• 2014 (10) TMI 579
  Imposition of penalty u/s 271(1)(c) – Various additions made by AO - Held that:- The first addition made by the AO pertains to ad hoc disallowance out of various expenses debited in the P&L account - This disallowance has been made by the AO on the ground that in the immediately preceding year, the ratio of the expenses qua the total receipts is on the lower side in terms of percentage - This year, it has been increased and assessee failed to show the reasons for such an increase - it is an ad hoc disallowance – AO has not pointed out that which particular submitted by the assessee is inaccurate - Therefore, no penalty can be imposed for this addition. Disallowance of bad debts – Held that:- The reasons for making the disallowance is that assessee failed to furnish the basis of identifying the debt as bad and from which date it has become bad. W.e.f. 01.04.1989, the assessee is not supposed to demonstrate the fact that debt has become bad - Its allowance can be made only on the ground that such debt has been written off in the books - there is nothing in the assessment order which can justify the imposition of penalty - AO has not pointed out which particular pertaining to bad debt is incorrect. Ad hoc disallowance out of training and recruitment expenses - disallowance out of claim of depreciation – Held that:- The assessee has claimed the depreciation on computer peripheral @ 60%, - relying upon Income-tax Officer, Ward-31(4), Kolkatta. Versus Samiran Majumdar [2005 (8) TMI 293 - ITAT CALCUTTA-B] - depreciation on printer etc. would be admissible @ 60% - there cannot be any disallowance, the AO did not point out which particular submitted by the assessee is incorrect - The Tribunal has enquired into each of the four heads in which additions were made, examined the nature and character of the addition and the explanation offered by the assessee and whether this would satisfy the needs and requirements of the Explanation No.1 - assessee has been able to discharge the onus in respect of each addition - The claim of the assessee in the return was bona fide and it cannot be that full and true particulars and details were not submitted before the AO – thus, the order of the Tribunal is upheld – Decided against revenue.

  ---

• 2014 (10) TMI 578
  Computation of value of fringe benefits - Inclusion of expenses in the taxable value of fringe benefit - Assessee engaged in the business of growing, manufacturing and sale of tea – Held that:- Following the decision in CIT vs. Doom Dooma India Ltd. [2009 (2) TMI 9 - SUPREME COURT] - the amount of expenditure incurred by the assessee in extending fringe benefits to its employees was not solely for the purpose of business - The expenditure incurred is both for the purpose of business and for the purpose of agriculture - The provisions contained in Chapter XII H of the Income Tax Act have to be read subject to Section 10 of the Income Tax Act – the order of the Tribunal is to be set aside – Decided in favour of assessee.

  ---

• 2014 (10) TMI 577
  Maintainability of appeal - Miscellaneous application u/s 254(2) – Rectification of mistake apparent from record - Whether the order on the rectification application is traceable to section 254(1) of the I.T. Act or the same is passed under section 254(2) of the I.T. Act – Held that:- There is a fundamental error on the part of the revenue in submitting that the order under challenge is a consequential one and, therefore, appealable - once a party has challenged the order of the Tribunal on an application for rectification, the appeal u/s 260A of the I.T. Act is not maintainable as decided in Chem Amit Versus Assistant Commissioner of Income-Tax [2004 (11) TMI 24 - BOMBAY High Court] - the Tribunal has allowed the miscellaneous application dated 25th March, 2011 - That was an application by the assessee - The Tribunal has recalled its original order for a de novo consideration of the issue of depreciation and partially restored the appeal to its file - the appeal cannot be said to be challenging the order in appeal passed by the Tribunal –Decided against revenue.

  ---

• 2014 (10) TMI 576
  Penalty u/s 271(1)(c) – Explanation submitted by assessee satisfactory or not – 200% of penalty levied of the value of gold seized by AO which CIT(A) reduced to 100% - Value of gold treated as undisclosed income u/s 69A – Gold seized during search u/s 132 – Held that:- The assessee’s case falls into sub-clause (b) - by the time the search was undertaken, the assessee had time to file returns, and as a matter of fact, the returns were filed on 30.09.1986, wherein the income through which the seized gold was acquired, was also disclosed – relying upon Assistant Commissioner of Income Tax, Udaipur Versus M/s. Gebilal Kanhaialal HUF, Through Karta, Udaipur [2012 (9) TMI 297 - SUPREME COURT] - three conditions must be fulfilled by an assessee, before claiming the immunity under clause (2) of Explanation 5 to Section 271 of the Act - the search was made on 26.06.1985, and the returns were filed within time, on 30.09.1986 - There was no finding at any stage of the proceedings that the acquisition of the seized gold was during any earlier AY - the first condition can be deemed to have been complied with by the appellant - what is required in the context of clause (2) of Explanation 5 to Section 271 of the Act is making of a statement by the assessee and not the acceptability or otherwise of it - Since the assessee made the statement, this condition is complied with. The value of the seized gold was treated as income of the assessee and he paid thereon - the case fits into clause (2) of Explanation 5, which in turn, would bring about immunity to the appellant vis--vis Section 271 of the Act - The Tribunal proceeded on hyper- technicalities and acted as though every seizure must entail initiation of proceedings u/s 271 of the Act - Such an approach cannot be countenanced - the case of the assess is covered by clause (2) of Explanation 5 of Section 271 of the Act – thus, the order of the Tribunal is set aside – Decided in favour of assessee.

  ---

• 2014 (10) TMI 575
  Issues not raised before Tribunal – Held that:- The issues which are not raised before the Tribunal could not be raised in front of HC – thus, the primary three issues needs to be set aside – Decided against revenue. Classification of expenses – Revenue expenses or not - Amount paid to Rajapalayam Mills Ltd. for the purpose of construction of Kalyanamandapam - Held that:- Assessee paid an amount to the workers on the occasion of Founder's day Centenary Celebration and that was treated as revenue expenditure - The AO was of the view that the amount paid by the assessee for the construction of Kalyanamandapam along with other Group Companies for the benefit of workers is to be treated as Donation and it should not be treated as Revenue – Tribunal took a different view and held in favour of the Assessee - – assessee agreed that in the SLP before the SC the claim of the revenue is accepted, therefor the case of the revenue is accepted – Decided in favour of revenue.

  ---

• 2014 (10) TMI 574
  Capital gain u/s 45 - Transfer of assets from partnership firm to Private limited company – Taxability u/s 45(4) - Held that:- Under the Income Tax Act, a firm can be charged as a distinct assessable entity as distinct from its partners who can also be assessed individually - Following the decision in Commissioner of Income-Tax Versus Texspin Engineering And Manufacturing Works [2003 (3) TMI 56 - BOMBAY High Court] - an existing firm was transformed into a company under Part IX of the Indian Companies Act - the erstwhile firm has been treated as a Limited Company by virtue of Section 575 of the Companies Act - Section 45(4) clearly stipulates that there should be transfer by way of distribution of capital assets - section 45(4) is not attracted as the very first condition of transfer by way of distribution of capital assets is not satisfied - the latter part of Section 45(4), which refers to computation of capital gains u/s 48 by treating fair market value of the asset on the date of transfer, does not arise. The shares of the respective shareholders in the respondent-company were defined under the partnership deed - The only change that has taken place on the respondent being transformed into a company was that the shares of the partners were reflected in the form of share certificates - beyond that, there was no physical distribution of assets in the form of dividing them into parts, or allocation of the same to the respective partners or even distributing the monetary value – thus, the order of the Tribunal is upheld – Decided against revenue.

  ---

• 2014 (10) TMI 573
  Validity of authorization of issue u/s 132 – Notice issued u/s 158BD – Petition filed in the name of individual persons and not in the capacity of heirs of deceased person - Held that:- So far as challenge to the warrant of authorization issued u/s 132 of the Act and to quash the assessment order dated 11.09.2003 framed u/s 158BC of the Act is concerned, it is mainly on the ground that the warrant of authorization issued u/s 132 of the Act was in the name of a dead person i.e. Late Shri Girishbhai K. Mehta and therefore, the warrant of authorization issued u/s 132 of the Act and subsequent assessment order dated 11.09.2003 framed u/s 158BC of the Act are illegal – Relying upon Commissioner of Income Tax – III Versus M/s. Calcutta Knitwears, Ludhiana [2014 (4) TMI 33 - SUPREME COURT] - as such the search warrant was issued for the premises, however such authorization was in the name of the head of the family – Late Shri Girishbhai K. Mehta - However, as such the search warrant was with respect to the premises i.e. 9, “Gayatri”, Motinagar Society and as part of the search in Nirma Group - at the time of search of the premises, the petitioner No.1 infact signed the panchnama, claiming to be the heir of deceased person - Not only that even thereafter when the proceedings u/s 158BC of the Act came to be initiated, no protest was raised by the petitioners and on the contrary, the returns of the income for the block period was filed on 03.10.2002 and the same was also signed by the petitioner No.1 and thereafter the assessment order determining the income as “NIL” has been passed on 11.09.2003 - when the search warrant was issued, it was for the premises and as such as a part of search in Nirma Group, it cannot be said that search warrant was null and void as sought to be contended on behalf of the petitioners. Whether during the search u/s 132 of the Act, the AO finds that any undisclosed income belongs to any person other than the person with respect to whom the search was made u/s 132 of the Act or whose books of account or other documents or any assets were requisitioned u/s 132A of the Act is traced out, the proceedings u/s 158BD of the Act against any other person, other than the person with respect to whom the search was made would be permissible and/or maintainable or not –Held that:- As decided in Commissioner of Income Tax – III Versus M/s. Calcutta Knitwears, Ludhiana [2014 (4) TMI 33 - SUPREME COURT] the courts while interpreting the provisions of fiscal legislation should neither add nor subtract a word from the provisions of instant meaning of the sections - any taxing statute should ordinarily be read, understood in the sense in which it is harmonious with the object of the statute to effectuate the legislative animation - nothing is to be read in, nothing is to be implied; one can only look fairly at the language used and nothing more and nothing less - while interpreting the machinery provision, the courts would interpret a provision in such a way that it would give meaning to the charging provisions and that the machinery provisions are liberally construed by the courts - machinery provisions must, be so construed as would effectuate the object and purpose of the statute and not defeat the same. For invoking a block assessment, there must be a search conducted u/s 132 of the Act, or documents or assessed requisitioned u/s 132A and the AO is satisfied that there exists any undisclosed income which may belong to other person other than the person with respect to whom the search was conducted or requisition was made - the word used under section 158BD of the Act is “where the AO is satisfied that any undisclosed belongings to any person, other than the person with respect to whom search was made under section 132” and it does not say that “where the AO is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom the valid and legal search was made under section 132” - Under the circumstances and assuming without prejudice to the findings with respect to the authorization u/s 132 of the Act, that the search was against a dead person and not valid, in that case also, the block assessment proceedings initiated under section 158BD of the Act by the impugned notices cannot be said to be illegal and/or contrary to the provisions of the statute - as such all the conditions / requirements of section 158BD of the Act are satisfied – thus, the petitioners are not entitled to any reliefs more particularly with respect to the challenge to the notices u/s 158BD of the Act – Decided against assessee.

  ---

• 2014 (10) TMI 572
  Estimation of GP @ 2% of average of subsequent three years - Whether the Tribunal was correct in holding that the net profit should be estimated at 2% of the turnover, as against computation of undisclosed income by the AO based on the deposits discovered in search in undisclosed bank accounts in respect of suppressed sales – Held that:- The Tribunal was rightly of the view that when the FAA is relying on comparable cases, first there should be factual foundation showing the total turnover of that business and then the profit margin - there is no material to show as to what is the total turnover of M/s. SRV and Sons and therefore, the Tribunal was not prepared to accept the basis - it took note of the orders passed in the case of the assessee for the AY 2003-04, 2004-05 and 2005-06 u/s 143(3) of the Income Tax Act, 1961 - when the total turnover was much more than the turnover for the AY 1996-97, 1997-98 and 1998-99, 2% was held to be the gross profit - 2% gross profit has to be taken for the relevant AYs during the block period - Even though the higher margin of turnover is shown for the subsequent years and the very same AO has recorded the finding of 2% profit margin for the period earlier to that where the total turnover is less, the Tribunal was justified in taking the gross profit at 2% - the order of the Tribunal is upheld – Decided against revenue.

  ---

• 2014 (10) TMI 570
  Stay application - Demand raised by Excise department – Held that:- As decided in assessee’s own case in Belgium Glass And Ceramics (P) Ltd. Versus Union of India [2013 (8) TMI 123 - GUJARAT HIGH COURT] and with respect to the demand raised by the Excise Department with respect to the very transaction by which the Division Bench has stayed the demand raised by the Excise Department during pendency of the appeal before the CESTAT on condition that the assessee shall deposit 10% of the total demand raised by the Excise Department – thus, the assessee is directed to deposit Rs. 1 Crore till the disposal – Partial stay granted.

  ---

• Customs

• 2014 (10) TMI 593
  Misdeclaration of goods - Courier Agency service - Held that:- There is no categorical finding that the goods were different consignments, there is no evidence to support the claim that the goods were actually unaccompanied baggage and in the absence of details of consignments verified and found to be fictitious, we consider that at this stage itself the matter should be remanded to the original adjudicating authority for fresh adjudication. Further we also consider that since the appellants were to keep the authorization only for one year, the question as to whether the demand could have been made for more than one year from the issue of show cause notice is also required to be considered. All these aspects have not been considered in a perspective manner by the adjudicating authority and therefore, the impugned order is set aside and the matter is remanded to the original adjudicating authority for fresh adjudication in accordance with law - Decided in favour of assessee.

  ---

• 2014 (10) TMI 592
  Detention of goods - consignment consisting 30 bags of betel nuts - Goods appeared to be of foreign origin - validity of trade opinion - Imposition of penalty - Held that:- Goods were detained in this case on 25.09.2005, but Shri Gopinath Chaurasia, Prop. of M/s.Arti Enterprises and the consignee of the said goods submitted photocopy of the few bills after a period of about four months i.e. on 23.09.2005. He submitted that the payment in this case was made on 14.01.2006 i.e. much after the seizure. No purchase documents has also been produced in this case and therefore it is clear that the subsequent bills and the proof of payment furnished were only the after-thought. trade opinion may not be an expert opinion, but opinion based on long experience in the trade considering significant difference in the items of Indian origin and foreign origin may be of persuasive value and may not be thrown out only on the ground that trade opinion is not an expert opinion. If there are significant differences in shape, size, test etc. of betel nuts of Indian origin than the betel nuts of foreign origin the person in trade may form an opinion that it is of foreign origin which in the facts of the case may be accepted. It is evident from trade opinion that the recovered betel nuts on the basis of their shape, size and appearance appeared to be of foreign origin. - Decided against assessee.

  ---

• 2014 (10) TMI 591
  Clearance of crude oil - whether the Crude Palm Oil imported by the appellant can be cleared availing exemption under Notification No. 12/2012, dated 17-3-2012 - Held that:- Taking note of the regulations and also taking note of the fact that appellants are expected to refine the oil and thereafter only release the oil into the market and therefore at the stage of import, the oil cannot be considered as a non-edible crude, Hon’ble High Court of Gujarat as well as the Hon’ble High Court of Calcutta held that exemption benefit under Notification No. 21/2002 has to be allowed. The present notification is a successor notification of the earlier notification and the conditions remain the same. - Following decision of Cargill India Pvt. Ltd. & Ors. v. Union of India reported in [2013 (6) TMI 40 - GUJARAT HIGH COURT] - Decided in favour of assessee.

  ---

• 2014 (10) TMI 590
  Restoration of appeal - Bar of limitation - Held that:- It is not appreciated that a person becomes aggrieved only when the order to that effect sees light of the day. The order appealable emerges on 14-10-2008 which is apparent from page 12 of the appeal folder. Therefore, the appellant being aggrieved on that day i.e. 14-10-2008, the limitation for filing appeal shall be counted from that day, which was the date of communication about the final assessment of bill of entry by Customs. Accordingly, ld. Commissioner to pass appropriate order on merit of the appeal for which the order dated 27-1-2009 is set aside. The appellant shall make application before ld. Commissioner (Appeals) within a month of receipt of this order requesting him to fix the date of hearing and on the date fixed, without any adjournment the appellant shall be present with its pleadings and evidence to contest its appeal - Appeal restored

  ---

• Service Tax

• 2014 (10) TMI 607
  Waiver of pre deposit - Manpower recruitment and supply agency’s service - penalties under Section 77 & 78 - Held that:- Issue involved requires consideration of the contract, decisions relating to reimbursement of expenses of various High Courts and Tribunals, definition of ‘manpower supply service’ as applicable to the facts of this case, facts as to whether extended period could have been invoked, etc. which can be done at the time of final hearing. At this stage, we consider that the amount already deposited by the appellant is sufficient for the purpose of hearing the appeal. Accordingly, there shall be waiver of pre-deposit and stay against recovery of the balance dues for 180 days from the date of this order - stay granted.

  ---

• 2014 (10) TMI 606
  Reversal of differential duty of 50% of CENVAT credit - Benefit of Section 80 - Held that:- Since there is direct judgement on the issue in the case of Ceolric Services [2011 (2) TMI 764 - CESTAT, BANGALORE] remanding the matter to the adjudicating authority, I set aside the impugned order and remand the matter back to the adjudicating authority for reconsideration in view of provisions of Rule 7C of the Rules and after verification of the records. This has to be done as ld. Advocate has contended that they have actually taken cenvat credit of 50% on capital goods but due to mistake it was shown as 100% - Adjudicating authority shall pass order within three months from the date of issue of this order after affording a reasonable opportunity of producing records - Decided in favour of assessee.

  ---

• 2014 (10) TMI 605
  Waiver of pre deposit - Information Technology services - service consumed in SEZ - Held that:- In the case of Adani Power Ltd. (2014 (1) TMI 200 - CESTAT AHMEDABAD), unconditional stay was granted on the ground that the Notification No.4/2004-ST dt. 31.3.2004 specifically extended to the consumption of taxable service of any description to a developer of Special Economic Zone or any unit in any Special Economic Zone for consumption of the services within such Special Economic Zone. The other issues would be examined in detail at the time of appeal hearing - deposit of Rs. 14.53 lakhs is sufficient for waiver of predeposit of balance amount of tax along with interest and penalty. Accordingly, predeposit of balance amount of tax along with interest and penalty would be waived and recovery be stayed till disposal of appeal - Stay granted.

  ---

• 2014 (10) TMI 604
  Waiver of pre deposit - Eligibility of Cenvat Credit - construction of an immovable property - Held that:- in the case of Sai Sahmita Storages (P) Ltd. [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT] and this tribunal in the case of Navratna S.G. Highway Pro. (P) Ltd. [2012 (7) TMI 316 - CESTAT, AHMEDABAD] has held that Cenvat Credit of service tax paid on input services used in the construction of immovable property would be available if such immovable property is used for rendering other taxable services. Following the same in the present case also, we hold that the appellant has made out a prima facie case for grant of stay. Accordingly, we grant unconditional waiver from pre-deposit of dues adjudged against the appellant and stay recovery thereof during the pendency of the appeal - Stay granted.

  ---

• 2014 (10) TMI 603
  Penalty u/s 78 - erection, commissioning and installation services - Held that:- During the impugned period, Service Tax was payable on receipt basis. Therefore the allegation of the ld. AR that the appellant has utilised the Service Tax is not sustainable in the facts that still the appellant has not received 100% remuneration of the services provided by them. We further find that the appellant have calculated the liability on accrual basis and paid Service Tax payable along with interest as pointed out by the department. In these circumstances, it cannot be said that they had mala fide intention to evade payment of service tax. Therefore, the appellants need immunity from imposing penalty under Section 78 of the Finance Act, 1994. Accordingly, we set aside the penalty under Section 78 of the Finance Act, 1994 - Decided in favour of assessee.

  ---

• 2014 (10) TMI 602
  Adjustment of tax - Management and repair services - money deposited by the respondent in the old Service Tax registration code belonging to the partnership firm - Held that:- Admittedly, the Service Tax was wrongly deposited in a wrong code belonging to partnership firm which was dissolved at the relevant time. As such, it is a mistake on the part of the respondents which is required to be rectified and the amount deposited in the partnership firm is required to be adjusted in the assessee’s registered code - Decided against Revenue.

  ---

• 2014 (10) TMI 601
  Denial of remission claim - adjustment of the excess service tax deposited - Authority rejected the claim for availing the benefit of this deposit on the ground that the assessee had filed only a photocopy of the internet banking challan dated 31-3-2008 without attestation - Held that:- Adjustment claimed of the excess service tax remitted just about 9 months prior to the due date on which the service tax liability accrues cannot be rejected on the basis of conditions spelt out in Rule 6(4A) and (4B). If an excess amount of service tax has been remitted and within a reasonable period thereof adjustment of this excess amount deposited is sought in respect of a service tax liability arising in subsequent months, there cannot be appropriation of the excess service tax deposit. Of this prima facie premise, the relevant provisions of Rule 6 may perhaps have to be interpreted by directory and not mandatory. demand of Rs. 58,36,314/- relatable to services provided to M/s. HCL Infinite, it is incumbent upon the Adjudicating Authority to verify the records to ascertain whether the amount was deposited by internet banking, particularly when the assessee provides a copy of a challan purportedly in proof of such deposit. since an amount of nearly Rs. 89,00,000/- was deposited, either in respect of the taxable services provided to M/s. HCL Infinite or by way of excess remittance of service tax on 30th June, 2006, we find a strong prima facie case in favour of the assessee. Accordingly, we grant waiver of pre-deposit and stay all further proceedings for recovery of the assessed liability, during pendency of the appeal - Stay granted.

  ---

• 2014 (10) TMI 595
  Waiver of pre deposit - Business Support Service - petitioner was having two divisions, namely, Textile Division and Online Business Marketing Division ('SOBM'). In Textile Division, three units were engaged in multi level marketing of various types of goods. It was observed that SOBM were making payment of commission to their distributors after deduction of renewal fees and card charges; and the amount so deducted was taken as liable to service tax w.e.f. 2005-06 under the category of "Business Support Service". - Held that:- it would serve the cause of justice if the requirement of the order passed by the Appellate Authority is modified and the condition of pre-deposit is reduced to an amount of Rs. 13,61,321/- (thirteen lacs sixty one thousand three hundred twenty one), which has already been deposited by the petitioner. - stay granted.

  ---

• Central Excise

• 2014 (10) TMI 599
  Power of tribunal to grant stay beyond the total period of 365 days - extension of stay granted earlier - extension order should be speaking or not - Held that:-in case and having satisfied that delay in not disposing of the appeal within 365 days (total) from the date of grant of initial stay is not attributable to the appellant / assessee in whose favour stay has been granted and that the Appellate Tribunal is satisfied that such appellant / assessee has fully cooperated in early disposal of the appeal and/or has not indulged into any delay tactics and/or has not taken any undue advantage, the learned Appellate Tribunal may, by passing a speaking order as observed hereinabove, extend stay even beyond the total period of 365 days from the date of grant of initial stay. However, as observed by the Hon’ble Supreme Court in the case of Kumar Cotton Mills Pvt. Ltd (2005 (1) TMI 114 - SUPREME COURT OF INDIA), it should not be construed that any latitude is given to the Appellate Tribunal to extend the period of stay except on good cause and if the Appellate Tribunal is satisfied that the matter could not be heard and disposed of by reason of the fault of the Appellate Tribunal for the reasons not attributable to the assessee. It also may not be construed that the Appellate Tribunal can extend stay indefinitely. It also may not be construed that the Appellate Tribunal can extend stay indefinitely. On expiry of every 180 days the concerned assessee / appellant is required to submit an appropriate application before the learned Appellate Tribunal to extend the stay granted earlier and the Appellate Tribunal may extend the stay for a further period but not beyond 180 days at a stretch and on arriving at the subjective satisfaction, as stated hereinabove, the Appellate Tribunal may extend the stay even beyond 365 days from the date of grant of initial stay and even thereafter. - Thus, on expiry of maximum period of 180 days the assessee / appellant is required to submit application for extension of stay each time and the Appellate Tribunal is required to consider the individual case and pass a speaking order, as stated hereinabove. - Matter remanded back - Following decision of Commissioner Versus Small Industries Development Bank of India[2014 (7) TMI 738 - GUJARAT HIGH COURT] - Decided partly in favor of revenue.

  ---

• 2014 (10) TMI 598
  Imposition of penalty - Failure to pay tax by due date - Held that:- provision for minimum mandatory penalty equal to the amount of duty even for slightest bonafide delay without any element of discretion is beyond the purpose of legislation. The object of the rule is to safeguard the revenue against loss, if any. The penalty has been provided in addition to interest. Mere fact that without mens rea, an can be punished or a penalty could be imposed is not a blanket power without providing for any justification. In the Indian Constitutional scheme, power of legislature is circumscribed by fundamental rights. Judicial review of legislation is permissible on the ground of excessive restriction as against reasonable restriction which is also described as proportionality test. impugned provision to the extent of providing for mandatory minimum penalty without any mens rea and without any element of discretion is excessive and unreasonable restriction on fundamental rights and is arbitrary. Moreover, exercise of such power by way of subordinate legislation is not permissible when rule making authority for levying penalty is limited to default "with intent to evade duty" - no substantial question of law arises - Following decision of Bansal Alloys & Metals (P.) Ltd.'s case [2010 (11) TMI 83 - PUNJAB & HARYANA HIGH COURT] - Decided against Revenue.

  ---

• 2014 (10) TMI 597
  Prayer to quash demand notice - Held that:- 1st petitioner had preferred an appeal and an interim order had been passed. The appeal being a special bench appeal, there was a direction to transfer the same to CEGAT, New Delhi. Stay was also granted pending disposal of the appeal. There is no material to indicate that the appeal has been disposed of so far. Ext. P2, an answer to the query under the Right to Information Act, indicates that the Assistant Registrar of the 1st respondent Tribunal has informed that the status of the special appeal could not be traced out and efforts were taken to trace the relevant records and registers and that after the records are traced out, the status of the appeal will be intimated. Ext. P2 communication is dated 8.8.2008. The fact remains that so far the abovementioned appeal has not been decided by any of the authorities. As matters stand now, Ext. P2 is the last communication by which the petitioner was informed that the records are not available. Under such circumstances, it is necessary in the interest of justice that the records are re-constructed and for that purpose, the petitioners as well as respondent authorities shall make necessary arrangement for production of copies of the available records, ie. memorandum of appeal as well as connected records and the 1st respondent has to consider the matter and pass appropriate orders in accordance with law. Until such time, recovery pursuant to Ext. P7 has to be kept in abeyance. - Until disposal of the appeal, recovery of amounts pursuant to Ext. P7 shall be kept in abeyance - Decided partly in favour of assessee.

  ---

• 2014 (10) TMI 596
  100% EOU - reversal of Cenvat credit - assessee contended that the clearances were made against CT-3 certificate issued in terms of Notification No.22/2003 dated 31.03.2003 by the customs authorities and that such clearances made to EOUs/EHTPs have the status of deemed exports and therefore, there is no need to reverse the credit involved. - Held that:- EOU is entitled to procure goods duty free. Such procurement is permissible only subject to fulfillment of condition of the exemption notification. Further, the decision of Larger Bench of the Tribunal in Lakshmi Automatic Loom Works Ltd., [2008 (10) TMI 57 - CESTAT CHENNAI] deals with only reversal of input as such and not removal of used capital goods. In the instant case, the assessee is having Domestic Tariff Area (DTA) Unit in the ground floor. It is having Electronic Hardware Technology Parks (EHTP) Unit in the first floor. The assessee while purchasing the capital goods as well as inputs to its DTA unit has paid duty. Therefore, it has availed Cenvat credit. In so far as the capital goods are concerned, it was used by the assessee in DTA unit. Thereafter, with the permission of the authorities in terms of the Rules 11 and 20 of the Central Excise Rules 2002 and Clause (6) of the Notification No.22/2003, the assessee removed the said goods from DTA unit to EHTP unit. Capital goods purchased for DTA unit was used, it was not removed as such and when it was removed to EHTP unit again, they have no liability to pay the credit. This aspect has been completely missed by the authority. They proceeded on the assumption that user industry thereby mean EHTP unit was not bringing excisable goods directly from the factory of manufacture or warehouse and therefore they are not eligible for exemption. In the light of the aforesaid Notification which granted exemption, it is very clear that EHTP unit is entitled to exemption of payment of duty. Therefore, the assessee rightly availed the Cenvat credit and then reversed it when those goods were moved to EHTP unit and claimed refund. - Decided in favor of assessee. Whether the assessee was not liable to pay any duty when capital goods after it is being used was removed to the EOU unit - Held that:- In so far as the inputs are concerned, it is not in dispute that the assessee while purchasing the said goods for its DTA unit has paid duty. It is only when those inputs as such were removed to the EHTP unit, the Cenvat credit availed was reversed. It is because, if the assessee had purchased those inputs for its EHTP unit by virtue of aforesaid Notification, there was no duty payable, as the said inputs were removed with the previous permission of the department as reflected in CT-3. There was no liability to pay the duty and already Cenvat credit had been taken, it was reversed under protest and therefore, they were entitled to the refund of the said amount. - Decided against Revenue.

  ---

• 2014 (10) TMI 594
  CENVAT Credit - Credit taken on furnace oil - furnace oil used in manufacturing of job work goods which were cleared without payment of duty - Held that:- As the issue has been settled by the Hon'ble High Court of Bombay in the case of Sterlite Inds. [2004 (12) TMI 108 - CESTAT, MUMBAI] wherein it has been held that if the job worker has taken any input credit on furnace oil which has been used in the job work goods and same has been cleared without payment of duty but the principal manufacturer has paid the duty on the final product, in that case Cenvat Credit on furnace oil is available to the job worker. - Decided against Revenue.

  ---

• CST, VAT & Sales Tax

• 2014 (10) TMI 600
  Exemption from payment of tax - Exemption to sub-contractor - Suppression of facts - Abuse of Court - Contempt of Court - Held that:- petitioner received the show- cause notice dated 12.08.2013 on 14.08.2013. It is also not in dispute that no reply was filed thereto by the petitioner before the first respondent, prior to the assessment order being passed on 31.08.2013. The petitioner claims to have submitted their objections, vide letter dated 30.08.2013, not to the first respondent, but to the office of the second respondent on the same day. The letter dated 30.08.2013 contains initials, which the Learned Counsel for the petitioner contends is the signature of the person, in the office of the 2nd respondent, who received the said letter. The letter does not even bear the stamp or seal of the office of the second respondent. The writ affidavit is silent regarding the name and identity of the person who is alleged to have received the said letter. The petitioners contention that their employee had, by mistake, delivered the said letter to the office of the second respondent cannot be readily accepted as, even subsequent thereto, in the correspondence between the petitioner on the one hand and respondents 1 to 3 on the other, no reference is made to their having submitted their objections, to the show cause notice dated 12.08.2013, on 31.08.2013. The affidavit, filed in support of the Writ Petition, makes no mention of any of the events which took place subsequent to the assessment order dated 31.08.2013. As is evident from the facts narrated hereinabove, the petitioner was repeatedly called upon to pay the tax due; proceedings under Section 29 of the Act was instituted; and both the petitioners bankers and the contractee i.e. SRMT were called upon to pay, the amounts due from them to the petitioner, directly to the 2nd respondent. The petitioner received the assessment order dated 31.08.2013 on the same day. It is only after several letters were issued calling upon them to pay the demanded amount, and proceedings under Section 29 of the Act were initiated for recovery of the arrears, did the petitioner make an application on 19.02.2014 seeking payment of the tax and penalty in instalments. The Deputy Commissioner (CT) granted instalments by his proceedings dated 05.03.2013. The petitioner was required to pay the first instalment on 25.03.2014. Suppressing all the facts, subsequent to the assessment order dated 31.08.2013 including their having sought for and being granted instalments for payment of the tax with penalty, the petitioner invoked the jurisdiction of this Court under Article 226 of the Constitution of India on 20.03.2014, and obtained an interim order of stay on 21.03.2014. While every abuse of the process of the Court may not necessarily amount to Contempt of Court, abuse of the process of the Court calculated to hamper the due course of a Judicial proceeding, or the orderly administration of justice, is Contempt of Court. It may be that certain minor abuses of the process of the court may be suitably dealt with as between the parties or in some other manner. But it may be necessary to punish as a contempt, a course of conduct which abuses and makes a mockery of the judicial process, and which thus extends its pernicious influence beyond the parties to the action and affects the interest of the public in the administration of justice. The public have an interest, an abiding and a real interest, and a vital stake in the effective and orderly administration of justice, because, unless justice is so administered, there is the peril of all rights and liberties perishing. The Court has the duty of protecting the interest of the public in the due administration of justice and, so, it is entrusted with the power to commit for Contempt of Court, not in order to protect the dignity of the Court against insult or injury as the expression "contempt of Court" may seem to suggest, but to protect and vindicate the right of the public that the administration of justice shall not be prevented, prejudiced, obstructed or interfered with. Deceiving the Court by deliberately suppressing a fact, or giving false facts, may be a punishable contempt. Certain acts of a lesser nature may also constitute an abuse of process as, for instance, initiating or carrying on proceedings which are wanting in bonafides. In such cases the court has extensive alternative powers to prevent an abuse of its process. Where the Court, by exercising its powers under rules of court or its inherent jurisdiction, can give an adequate remedy, it will not in general punish the abuse as a contempt of court. On the other hand, where an irregularity or misuse of process amounts to an offence against justice, extending its influence beyond the parties to the action, it may be punished as a contempt. Both on merits and for abuse of process of Court, the Writ Petition is liable to be, and is accordingly, dismissed. While initiation of contempt proceedings for such misrepresentation and suppression of facts is in order, we refrain from doing so and, instead, dismiss the Writ Petition with exemplary costs of Rs. 25,000/- which the petitioner shall pay to the State Government within four weeks - Decided against assessee.

  ---

• Indian Laws

• 2014 (10) TMI 589
  Validity of award passed by Arbitral Tribunal - delay in the return of the vessel to the Corporation after upgradation. - Who is responsible for this delay is the essence of the dispute between the parties. - ‘Fundamental policy of Indian Law’ - Held that:- The Arbitrators have after examining the material placed before them recorded a finding to the effect that the delay between 10th July 2001 and 31st March 2001 was entirely attributable to the respondent. From the findings of the fact recorded by the arbitrators with which we see no reason to interfere or disagree, it is evident, that the appellant-corporation was solely responsible for the delay in taking a decision in the matter between 24th October, 2001 and 26th November, 2001. The arbitrators have found and, in our opinion, rightly so that the respondent-claimant had by its letter dated 24th October, 2001 clearly informed the appellant that there was no use pursuing the matter with the U.S. Authorities any further. It is neither necessary nor proper for us to attempt an exhaustive enumeration of what would constitute the fundamental policy of Indian law nor is it possible to place the expression in the straitjacket of a definition. What is important in the context of the case at hand is that if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an arbitral tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest. Inasmuch as the arbitrators clubbed the entire period between 16th October, 2001 and 21st March, 2002 for purposes of holding the appellant-Corporation responsible for the delay, they committed an error resulting in miscarriage of justice apart from the fact that they failed to appreciate and draw inferences that logically flow from such proved facts. We have, therefore, no hesitation in rejecting the contention urged on behalf of the respondent that the arbitral award should not despite the infirmities pointed out by us be disturbed. Deduction on account of taxes not paid should have been allowed by the respondent-arbitral tribunal. The Tribunal has, in our opinion, correctly held that no part of the work was undertaken outside Singapore which was to be executed on a turnkey basis for a price that was pre-determined. The arbitrators have, in our opinion, rightly held that no taxes were payable under the Indian Income tax Act so as to entitle the Corporation to deduct any amount on that account by reason of non-payment of such taxes. The challenge to the award to that extent must fail and is, hereby, rejected. Out of the period of 4 months and 22 days which the arbitrators have attributed to the appellant-Corporation a period of 56 days comprising 42 days of the first interval and 14 days of the second referred to in the judgment shall be reduced. Resultantly, deductions made by the appellant- Corporation for the said period of 56 days shall stand affirmed and the award made by the arbitrators modified to that extent with a proportionate reduction in the amount payable to the respondent - Decided partly in favour of appellant.

  ---