TMI Tax Updates - e-Newsletter
October 29, 2013

Case Laws in this Newsletter:

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

Articles

1. CLAIMING OF HIGHER POST ON COMPASSIONATE APPOINTMENT

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. MCA 21 Portal Crosses the Milestone of 1 Lakh Filings on One Single Day

2. Government Approves Thirteen Proposals of Foreign Direct Investment (FDI) Amounting to About Rs. 1258.53 Crore

3. RBI Reference Rate for US $ and Euro

4. Draft Rules (4th phase) under Companies Act 2013

5. Second Quarter Review of Monetary Policy 2013-14 : Statement by Dr. Raghuram G. Rajan, Governor, Reserve Bank of India

6. Macroeconomic and Monetary Developments, Second Quarter Review 2013-14

7. E-Return of income and E-tax audit report (with original due date as 30.09.13 ) can be filed electronically by 31.10.13 so as to be deemed as filed within due date u/s 139(1)- board will do well to clarify that the order amount to extension of due date for all purposes.

8. US Chamber of Commerce and Anand Sharma Share Concern on Immigration Reform Bill

Notifications

Central Excise

1. 13/2013 - dated 25-10-2013 - CE (NT)

Amendment in the notification No. 20/2006-Central Excise (N.T.)

Income Tax

2. 84/2013 - dated 25-10-2013 - IT

Section 118 of the Income-tax Act, 1961 - Control of income-tax authorities - Notified subordinate officers

Circulars / Instructions / Orders

Income Tax

1. F. NO. DIT(S)-III/CPC/2013-14/UNPAID SELF-ASSESSMENT TAX - dated 22-10-2013

SECTION 139 OF THE INCOME-TAX ACT, 1961 – DEEMED DEFECTIVE RETURN - E-RETURNS OF A.Y. 2013-14 WHERE UNPAID SELF-ASSESSMENT TAX EXISTS ON THE DATE OF FILING OF RETURN.

2. F. NO. DIT(S)-III/CPC/2013-14/REFUND ADJUSTMENT - dated 22-10-2013

SECTION 245 OF THE INCOME-TAX ACT, 1961 - DEMAND/REFUND IS GREATER THAN RS. 5000 - REFUNDS - SET OFF OF REFUNDS AGAINST TAX REMAINING PAYABLE - DATA PERTAINING TO NOTICES ISSUED UNDER SECTION 245 BY CPC, BANGALORE

DGFT

3. 34/(RE:2013)/2009-2014 - dated 29-10-2013

Amendments in Appendix 5 of the Handbook of Procedures (Vol.I)

Customs

4. 42/2013 - dated 25-10-2013

Encouraging stakeholder participation in Customs functioning- reg.

Highlights / Catch Notes

Income Tax

• Trust for Trading Platform Qualifies for Registration u/s 12A, Deemed Charitable u/s 2(15) of Income Tax Act.

  Case-Laws - AT : Charitable purpose u/s 2(15) - A trust for providing a common platform for trading in shares and securities - registration u/s 12A to be granted - AT
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• Compensation for Business Termination Before Operations is Capital Receipt, Not Taxable Income.

  Case-Laws - AT : Even before the assessee's actual business could start, there was a breach by the other party which ended up the said business itself. Thus, clearly this is a case of loss of source of income itself and hence, the compensation which was received by the assessee is on capital field i.e., capital receipt which cannot be taxed under the income laws - AT
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• Taxpayer Challenges Interest Penalty Due to Lack of Control Over Funds in Advance Tax Case.

  Case-Laws - AT : Levy of Interest for failure to pay advance tax - Assessee did not have control over the her funds/assets,that she could not be held as defaulter for failure in payment of advance tax - AT
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• Income from Insurance Investments Exempt from Section 14A Due to Changes in Section 44, First Schedule.

  Case-Laws - AT : Determination of Income u/s 44 from Insurance Business - Disallowance u/s 14A – the provisions of s. 14A need not to apply while granting exempt ion to an income earned on sale of investment primarily because of the reason of the withdrawal or deletion of sub-r. 5(b) to First Schedule of s. 44 of IT Act - AT
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• Section 12AA Eligibility Confirmed: No Profit Motive in Services, Exempt from Section 2(15) Proviso Impact.

  Case-Laws - AT : Eligibility of registration u/s 12AA - When services are rendered without profit motive, the element of trade, commerce or business disappears from such activities. Therefore, it can be safely construed that the activities of the assessee are not hit by the newly added proviso to Section 2(15) of the Act - AT
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• Section 80IB: Income Tax Deductions Must Align with Year Income is Taxed, Not Deferred to Project Completion.

  Case-Laws - AT : Deduction u/s 80IB - This is not the scheme of the Act, to first tax an income in a particular year and grant deduction on that very income in a different later year i.e., on completion of the project as was canvassed by the Department - AT
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• Resulting Company Cannot Claim Expenditure on Non-Transferred Assets in Demerger Scenario.

  Case-Laws - AT : Expenditure in relation to demerger - in a situation when an asset and the connected liability in demerger is not transferred by the Demerged Company to a Resulting Company then naturally the Resulting Company shall not in any way be concerned about that asset, so even can not claim expenditure - AT
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• Court Rules Reimbursements Excluded from Export and Total Turnover for Section 10A Deductions Calculation.

  Case-Laws - AT : Computation of deduction u/s 10A - Amounts in dispute are in the nature of reimbursement, therefore to be excluded in the export turnover and total turnover for computation u/s 10A of the Income tax act - AT
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• Revenue Authorities Directed to Grant TDS Credit Based on Documents Despite Discrepancy in Form 26AS Reflection.

  Case-Laws - AT : Credit for TDS - The credit of TDS has been denied to the assessee on the ground that the claim for TDS was no reflected in the computer generated form 26AS - revenue directed to give credit on the basis of documents / certificate - AT
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• Payments to Canara Bank Ordered by DRT Allowable as Business Expenses Under Income Tax Act Section 37(1.

  Case-Laws - AT : Allowance u/s 37(1) - Expenditure pertaining to the payment made to Canara Bank on the direction of DRT, the hypothecation defalcation - any damages allowed in this behalf even referred to as penal by DRT, do not constitute payment for infraction of law - AT
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Customs

• Court Finds No Evidence of Abetment in Red Sanders Export Case Against Company General Manager.

  Case-Laws - AT : Penalty of appellant being GM of the company - Abetment means a positive act on the part of the appellant and as can be seen from the facts and circumstances, there is no evidence forthcoming to show that the appellant had given any assistance in the attempted export of red sanders - AT
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• Amendments Exclude Pre-April 2007 Authorizations; Demand Confirmation Against Appellants Deemed Unjustified.

  Case-Laws - AT : Date of applicability of new policy - transfer of DIFA - Inasmuch as the circular in clear terms clarifies that the amendments made in the Policy would not be applicable to the authorization issued prior to 1.4.07, we are of the view that confirmation of demand against the appellants is not justified - AT
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• False Office Declaration in Kolkata Leads to Penalties Under Notification No. 97/2004-Cus for EPCG License Violation.

  Case-Laws - AT : Confiscation of goods - Violation of the conditions of Notification No. 97/2004-Cus - False declaration of registered office in Kolkata with the intention of obtaining an EPCG licence from Kolkata - penalties imposed - AT
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• Anti-dumping duties protect local industries from unfairly priced imports, balancing domestic interests with fair trade practices.

  Case-Laws - AT : Anti-dumping duty being a trade measure remedy and affect the economy, safeguard measure is to be taken and ascertain whether the exporters have preferred appeal before Anti-dumping Bench - AT
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Service Tax

• Court Denies Relief from Stay Order as Appellant Fails to Prove Financial Hardship in Revenue Dispute.

  Case-Laws - HC : The appellant has not pleaded any financial hardship or financial distress in support of its plea of “undue hardship” and has mainly confined its pleadings to the merits of the demand raised by the revenue - no relief from stay order - HC
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• Refund Claim for Pre-April 2006 Service Tax on Imported Services Denied Due to Late Filing Beyond One-Year Limit.

  Case-Laws - AT : Refund of service tax paid on import of services for the period prior to 18.4.2006 - claim for refund filed beyond one year - period of limitation - claim of refund rejected being the levy has to considered only as ‘without authority of law’ and not as ‘unconstitutional’ - AT
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• Service Tax Demand on Broadcasting Services Under Reverse Charge Mechanism Overturned; Incorrect Service Recipient Identified by Commissioner.

  Case-Laws - AT : Demand of service tax - Reverse charge mechanism - Broadcasting service - a service provider and not a service recipient, as held by the Commissioner. - demand set aside - AT
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• Partial Stay on Cenvat Credit for Service Tax on Employee Household Transport to Another Unit Granted.

  Case-Laws - AT : Cenvat credit of service tax paid on the transportation and receiving of house hold items of their employees, which stand transferred to another unit of the same employee - stay granted partly - AT
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• Tribunal Dismisses Sai Service Station Ltd.'s Application to Modify Stay Order in Dealership Dispute with Maruthi.

  Case-Laws - AT : Application for modification of Stay application based on the stay order in case of Sai Service Station Ltd [2013 (10) TMI 1155 - CESTAT MUMBAI] - Dealership agreement with M/s Maruthi - application dismissed - AT
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• Service Tax Demand on Sales Incentives Categorized as Trade Discount, Demand Set Aside by Court Decision.

  Case-Laws - AT : Demand of service tax in respect of sales/target incentive, the revenue wants to tax this activity under the category of business auxiliary service found as trade discount - demand set aside - AT
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Central Excise

• Pending Appeals Don't Justify Provisional Classification of Goods Under Central Excise Law, Order Confirms.

  Case-Laws - AT : Assessment Provisional OR Not - Order classifying the goods not to be treated provisionally merely because the appeal or other proceedings questioning the correctness of the such order are pending before the higher authorities - AT
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• HDPE Tapes from Aug 1989 to Oct 1992 Not Classified Under Heading 3920.32 in Central Excise Case Law.

  Case-Laws - AT : Classification of HDPE Tapes – for the disputed period August, 1989 to 14.10.92, the classification would not be under heading 3920.32 - AT
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• Valuation Dispute Over Packaged Water u/r 4A; Appellant Must Pre-Deposit 25% of Duty Due to Price Evidence Issues.

  Case-Laws - AT : Valuation as per MRP under Rule 4A of CE Rules – packaged drinking water - the declaration of retail sale price by the appellant is not borne out from the evidences available on records - the appellant directed to make a pre-deposit of 25% of duty - AT
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• Notification No. 67/95: No 8% Duty on Exempt or Nil Rate Products Before June 1, 2001; Limitation Period Demand Dismissed.

  Case-Laws - AT : Benefit of Notification No. 67/95 – Captive consumption - prior to 01/06/2001, there was no provision in Notification No.67/95-CE for discharge of a sum @8% on the value of the final products which were chargeable to ‘nil' rate of duty or exempted from payment of duty - however on the period of limitation demand set aside - AT
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• Cenvat Credit Rules: Resins Coated Jute Fabrics Not Wholly Exempted, Affects Application u/r 6, Notification 7/2003-CE.

  Case-Laws - AT : Cenvat Credit - Rule 6 of CCR - Exemption under Notification 7/2003-CE availed for basic duty whereas additional duty was paid – the product i.e. resins coated jute fabrics cannot be itself treated as wholly exempted product - AT
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VAT

• Understanding Dealer Tax Liability: How "Sale" Definition in 1963 Act Differs from Sale of Goods Act, 1930 and Affects Tax.

  Case-Laws - HC : Dealer's liability to pay tax - Hypothecation of goods - definition of the word “sale“ under the 1963 Act is not the same as under section 4 of the Sale of Goods Act, 1930. The definition of the word “sale“ in section 2(xxi) in the 1963 Act is very similar to section 2(g) of the Central Sales Tax Act, 1956 - transaction liable to tax - HC
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Case Laws:

• Income Tax

• 2013 (10) TMI 1136
  Interest on borrowed funds to be part of cost of acquisition for the purpose of section 48 of the Income tax act on purchase and sale of shares – Applicability of section 14A of the Income tax act – Held that:- Entire interest has been paid by the assessee as a part of cost of acquisition of shares allotted, is to be treated as cost of acquisition - There is a direct nexus between the borrowed money and the cost of acquisition of shares by assessee. The assessee is entitled to capitalize the said interest as part of cost of acquisition as per section 48 of the Act. Hence, short term capital gain as accrued to the assessee on the sale of shares of NTPC Ltd., NDTV Ltd, and Datamatics Ltd has to be considered after considering the payment of the said interest as part of cost of acquisition. Since, the short term capital gain is taxable under the Act, the provisions of section 14A is not applicable on the facts and circumstances of the case – Appeal allowed – Decided in favor of Assessee.

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• 2013 (10) TMI 1135
  Penalty u/s 271(1)(c) – Held that:- No penalty u/s 271(1)(c) of the Act is leviable in the given facts and the circumstances of the case - There can be no dispute with regard to the position of law that under section 271(1)(c) penalty can be levied only if either the act of "concealment of particulars of income" or "furnishing of inaccurate particulars of income" is found to have been committed by the assessee - By the mere reason of such concealment or of furnishing of inaccurate particulars alone, the assessee does not, ipso facto, become liable to a penalty - 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 - the Penalty Deleted – Decided in favour of Assessee.

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• 2013 (10) TMI 1134
  Charitable purpose u/s 2(15) - A trust for providing a common platform for trading in shares and securities - Revenue has denied the benefit of registration u/s 12A on the ground that the same does not cater to the members of the public at large, but only to the members of the public who invest in shares - Funding of Corpus fund is in dispute – Held that:- if the said funding by way of contribution by the stock exchanges is, in turn, recovered from the individual member brokers, the arrangement would in essence becomes one of insurance by the individual brokers of the stock exchange to meet their liabilities arising in the course of their trade. This is as, simply put, the loss to the investor arising on account of the default of the broker is only the broker's liability, and a trade liability at that. This then assumes the form of an underwriting arrangement, or an insurance scheme under the aegis of the stock exchange, which is only a trade association set up or formed for the benefit of its members. The only difference is that such a fund instead of being created by the settlor stock exchange within itself, is so done by way of a separate fund. The word 'consideration' in proviso to section 2(15) is, to our mind, wide enough to cover such indirect funding, if any. An individual member of a particular member stock exchange is not called upon to pay any direct charges to the applicant fund. In fact, a part of the auction money of the defaulting money is also, in terms of the SEBI circular (FITTC/FII/02/2002 dated 15.05.2002), made over to the corpus of the fund. Accordingly, the object of the applicant cannot be as a service in relation to any trade, etc. Further, even assuming so, the same does not involve any consideration inasmuch as no quid pro quo can be attributed to the mandatory contributions to the fund by the participating stock exchanges – Therefore, applicant fund is a public charitable fund, set up to advance an object of general public utility, and has been wrongly denied registration as one by the Revenue – Decided in favor of Assessee.

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• 2013 (10) TMI 1133
  Nature of compensation received for breach of contract - capital receipt or revenue receipt or casual income or to be taxed as long term capital gain or short term capital gaine - Compensation amount of Rs. 16,05,82,500 is capital receipt or revenue receipt that is whether it is non-taxable or taxable receipt – Held that:- The Hon'ble Supreme Court in Kettlewel Bullen & Co. Ltd.[ 1964 (5) TMI 4 - SUPREME Court] have observed that where on a consideration of the circumstances, payment is made to compensate a person for cancellation of a contract which does not affect the trading structure of his business, nor deprive him of what is substance of his source of income, termination of the contract being a normal incident of the business, and such cancellation leaves him free to carry on his trade the receipt is revenue. However, where by the cancellation of an agency, the trading structure of the assessee itself is impaired or such cancellation results into loss of what may be regarded as the source of the assessee's income, the payment made to compensate for cancellation of the agency agreement is normally a capital receipt. In the present case, what the assessee has lost, is the very source of his business and loss of a trading structure. If the right given by the ROFR would have continued, the assessee would have the source of income from the bottling business and this would have constituted its profit making apparatus - Even before the assessee's actual business could start, there was a breach by the other party which ended up the said business itself. Thus, clearly this is a case of loss of source of income itself and hence, the compensation which was received by the assessee is on capital field i.e., capital receipt which cannot be taxed under the income laws – Decided in favor of Assessee. Whether the receipt is casual income - taxability u/s 10(3) -Held that:- the receipt cannot be said to be casual because it has not been incurred by chance or by fortuitous. Here, it is a case of breach of an agreement and the amount has been settled after a dispute among the parties. This receipt cannot be termed as neither casual nor non recurring - Decided in favor of assessee. Higher rate of depreciation to be allowable to the assessee, when the vehicle is used by the third party instead of assessee – Held that:- Once it is not disputed that the assessee was the owner of the vehicle and its business is for hiring and leasing of vehicles to the third parties, the higher rate of depreciation has to be allowed – Reliance has been placed upon the decision of Delhi High Court in MGF India Ltd., [2006 (7) TMI 125 - DELHI High Court] Professional fee paid for negotiation with Coca-cola Co., a business expenditure to be deductible – Held that:- He was a person who was instrumental in carrying out the negotiation with The Coca Cola Co. for settling the dispute and for awarding the compensation, such an expenditure has to be allowed as business expenditure and no disallowance can be made – Decided in favor of Assessee.

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• 2013 (10) TMI 1132
  Levy of Interest for failure to pay advance tax - Interest u/s 234B & 234C of the Income Tax Act – Held that:- Assessee was a notified entity under the provisions of Special Court Act,that no interest u/s.234A,234B &234C of the Act could be charged in her case,that her bank account were operat -ed under the directions of the Special Court,that the provisions of Special Court had overriding effect over the Act,that all the assets were under the control of the custodian,that the appellant could not have paid the advance tax unless directed by the Special Court,that the assessee did not have control over its income/assets,that she could not be penalised for non-payment of advance tax – Assessee did not have control over the her funds/assets,that she could not be held as defaulter for failure in payment of advance tax – Penalty levied is deleted.

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• 2013 (10) TMI 1131
  Rectification of mistake - Earlier ITAT had remanded back the case to the CIT(A) with direction to given an opportunity to AO before allowing expenses - appellant contended that the Hon'ble ITAT has exceeded its jurisdiction by adjudicating beyond the grounds of appeal. Accordingly, he argued that it is an apparent mistake on the part of the Bench - Held that:- After carefully considering the issues of the assessee, we do not find any apparent mistake on record and detailed findings have been given in respective paras. If we entertain the argument of the assessee through M.A., it tantamount to review of our own case. The law doesn't permit us to review our own judgment - Decided against the assessee.

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• 2013 (10) TMI 1130
  Determination of Income u/s 44 from Insurance Business - Disallowance u/s 14A – Held that:- Sec. 14A contemplates an exception for deductions as allowable under the Act are those contained under ss. 28 to 43B of the Act, Sec. 44 creates special application of these provisions in the cases of insurance companies - It is not permissible to the AO to travel beyond s. 44 and First Schedule of the IT Act – Reliance has been placed on the Dy. CIT v. Oriental General Insurance Co. Ltd. [2004 (9) TMI 323 - ITAT DELHI-C], wherein it was held that section 44 creates a special provision in the cases of assessment of insurance companies therefore it was not permissible to the AO to travel beyond s. 44 of First Schedule of IT Act. In the present situation the provisions of s. 14A need not to apply while granting exempt ion to an income earned on sale of investment primarily because of the reason of the withdrawal or deletion of sub-r. 5(b) to First Schedule of s. 44 of IT Act – Decided in favor of Assessee. Allowance of amount transferred to Unexpired Risk Reserve (URR) on terrorism – Held that:- As per Rule 5, of Schedule I, read with Rule 6E, the appellant is entitled to claim deduction for any reserve for unexpired risks at the rate of 100% on account of terrorism. This is also in keeping with IRDA Regulations 2002 - A.O's discretion is limited to the adjustments provided in Rule 5, to schedule 1; other than which he is liable to accept the figures of profit as computed under the insurance Act. In the circumstances, this ground of appeal is allowed and the A.O is directed to allow URR on terrorism @ of 100% - Unexpired Risk Reserve on terrorism created at 100% of the net premium income of such business is allowable in view of the Rule 5 of Schedule 1 r.w.r. 6E of the Income Tax Rules – Decided in favor of Assessee.

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• 2013 (10) TMI 1129
  Disallowance u/s 14A of the Income Tax Act – Held that:- Assessee had made investment of Rs. 22. 58 lacs for purchasing shares of Barak Valley Cheents Ltd. and Reliance enterprises Ltd - On 1. 11. 2007 closing balance of the HDFC bank account was Rs. 12. 9 lacs - If the said amount is considered along with the balance available with the Corporation Bank it can be safely held that assessee had his own funds to make investment in the shares purchased - if borrowed funds have no proximate connection with the investment in shares proportionate disallowance should not have been made. Provisions of Rule 8D (2)(ii) of the Rules have to be invoked in certain eventualities only - AO/FAA has not mentioned such eventualities. If the assessee has not claimed any expenditure for earning exempt income, it cannot always be held that there were always a cost involved. Reliance has been placed upon the judgment in the case of Hero Cycles Ltd.[ 2009 (11) TMI 33 - PUNJAB AND HARYANA HIGH COURT], wherein Hon’ble Punjab & Haryana High Court has held that contention of the Revenue that directly or indirectly some expenditure is always incurred which must be disallowed under section 14A and the impact of expenditure so incurred cannot be allowed to be set off against the business income which may nullify the mandate of section 14A, cannot be accepted. Disallowance under section 14A requires finding of incurring of expenditure where it is found that for earning exempted income no expenditure has been incurred, disallowance under section 14A cannot stand – Decided in favor of Assessee.

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• 2013 (10) TMI 1128
  Classification of heads of Income on sale of shares to be under head ‘Capital Gains’ or ‘Business Income’ – Held that:- There is thin line demarcation between the activities of such kind which can be considered purely for investment purpose or for trading purpose. The guiding parameters like volume and frequency of transactions, holding period of shares, intention of the assessee, treatment given in the books of account and host of other factors that are very relevant for such transactions whether they are for investment purpose or for trading purpose. However, these parameters may break down in certain cases and there cannot be all embracing formula or guideline to these kinds of transactions. In the instant case, assessee is mainly engaged in the business of partnership firm wherein, he is a whole time partner. For the purchase of shares, he has not borrowed any funds and has used his own fund from which is evident from the capital account. Further, right from the earlier years, he has shown these shares as investment in the balance sheet which have been accepted by the Department also. The gain from such investments has also been assessed as capital gain, even though such assessments have been completed under section 143(1) but the same have not been disturbed. From these facts, it can be gathered that the assessee's intention in the purchase of shares was mostly for investment purpose and to have maximum gain - It cannot be held that the assessee was engaged in organized and systematic activity of trading of shares - Learned Commissioner (Appeals) was not correct in holding that the assessee was carrying out the business of purchase and sale of shares for the motive of business profit. Even in case of purchase of shares for the purpose of investment, motive is only maximizing gain only – From the facts and circumstances of the present case, income from purchase and sale of shares is to be assessed under the head "capital gain" and not under the head "business income" – Decided in favor of Assessee.

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• 2013 (10) TMI 1127
  Re-opening of assessment u/s 147 – Reasons to be given for re-opening u/s 148 – Held that:- As no previous assessment was framed nor any return of income was filed by the assessee, the AO has issued notice u/s 148 only asking the assessee to file its return of income, therefore, no any reason why the AO should have given any reason for reopening the assessment – Decided against the Assessee. Addition being amount credited to capital reserve on account of waiver of principal amount of loan allowed by Centurian Bank – Held that:- The statement of loan amount as exhibited clearly shows that the assessee has transferred the waiver to its capital reserves amount totaling to Rs.9,23,16,891/- - Settlement agreement between assessee and the bank does not specify the principal amount and the interest and other charges. However, the AO has given a very categorical finding by bifurcating the principal amount and the interest amount - CIT(A) has very correctly excluded the principal amount from the clutches of the provisions of section 41(1) of the Act and restricted rightly the interest part to be taxed u/s 41(1) of the Act – Decided against the Assessee. Depreciation on BSE card – Held that:- Claim of depreciation on BSE Card is disallowed as there is no business activity. Disallowance of expenditure as there is no business activity – Held that:- Reliance has been placed upon the judgment of Hon’ble Co-ordinate bench in the identical case of Classic Shares & Stock Broking Pvt. Ltd [2010 (11) TMI 716 - ITAT, Mumbai] – It is held relying upon the above case that assessee is carrying on the business activity – Decided in favor of Assessee.

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• 2013 (10) TMI 1126
  Eligibility of registration u/s 12AA of the Income Tax Act - The Director of Income Tax (Exemptions) has held that the activities of the Society are not restricted to India alone – Held that:- Director of Income Tax (Exemptions) has erred in taking such a view. In rule 1.4 of the Rules and Regulations of the Society, it has been specifically mentioned that the Society shall function under the jurisdiction of the Registrar of Societies, Chennai Central. Thus, the activities of the Society cannot extend beyond the State of Tamil Nadu. A further perusal of Rule 4.1 of the Rules makes it clear that the membership is open to Japanese Corporations and their subsidiaries & joint venture companies and Indian individuals in Chennai. With these rules, it is highly improbable to say that the benefit of the activities would extend to Japan. It is abundantly clear that the view of Director of Income Tax (Exemptions) that the benefits of the activities of the assessee-society would flow outside India is misconceived. Aims and objects of the society are not hit by the newly introduced proviso to sub-section (15) of Section 2 of the Act. The assessee is charging admission fee and monthly subscription fee from its Members. Apart from this, the assessee is also accepting grants and special contributions, admission/registration fee for seminars/conferences conducted by the Society. The assessee is not charging any fee for the services rendered by it. The fees charged by way of admission fee, monthly subscription, admission and registration fee etc., are utilized only for the promotion of the aims and objects of the Society. Clause-1 of the aims and objects put complete embargo on earning profit from any of the activities of the Society. Profit is the essence of trade, commerce or business. When services are rendered without profit motive, the element of trade, commerce or business disappears from such activities. Therefore, it can be safely construed that the activities of the assessee are not hit by the newly added proviso to Section 2(15) of the Act - Assessee deserves to be registered under the provisions of Section 12AA of the Act – Decided in favor of Assessee.

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• 2013 (10) TMI 1125
  Levy of interest u/s 234A, 234B, 234C of the Income Tax Act – Held that:- Relying upon the judgment in the case of CIT vs. Divine Holdings Pvt. Ltd[2012 (4) TMI 100 - BOMBAY HIGH COURT], it has been held that levy of interest u/s. 234A, 234B and 234C is mandatory – Decided against the Revenue.

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• 2013 (10) TMI 1124
  Disallowance of Credit Card Expenses of Rs.3,37,245/- - The assessee has challenged the retention of disallowance of 50% of the total disallowance made by the AO amounting to Rs.3,37,245/- whereas the Revenue has challenged the deletion of the 50% of the disallowance made by the AO – Held that:- AO has rightly disallowed the 25% of the total expenses incurred through credit card amounting to Rs.6,74,490/-. The ld. CIT(A) while further reducing 50% of the said disallowance made by the AO has not given any cogent and convincing reasoning in this respect. Though, in the discussion part of the order he has observed that the disallowance made by the AO in this respect was justified, however, he has deleted the 50% of the disallowance without giving any reasoning for the same - Deletion of the disallowance made by the ld. CIT(A) in this respect was not justified. Addition of Prior Period Expenses – Held that:- Disallowance made by the authorities below under this head, only on the ground that the expenses were relating to prior period, was not justified. The AO should have examined the evidences/documents to ascertain as to whether the liability was ascertained during the financial year in question and if so no disallowance was required to be made - Set aside the finding of the ld. CIT(A) on this issue and restore the matter to the file of the AO with a direction to verify as to whether the bills were raised and liability was ascertained during the financial year in question and if found true then no disallowance be made in this respect – Decided against the Revenue.

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• 2013 (10) TMI 1123
  Deduction u/s 80IB of the Income Tax Act – Held that:- Approved building plan as per which total area of the project is 4310.89 sq. metres, East side road widening area is 1089.21 sq. metres, West side road widening area is 8439 sq. metres and the net plot area is 3127 sq. metres - Total plot area is 5130 sq. yards which more than one acre - If a portion of the plot area is earmarked for roads after the assessee entered into development agreement and the plan was duly sanctioned by the competent authority, deduction u/s 80IB can not be denied - Area of the plot available to the assessee for housing project is more than 1 acre. Accordingly, the claim of the assessee cannot be denied on this ground if it is available at the time of entering into development agreement and deduction u/s. 80IB(10) is to be given to the assessee – Decided against the revenue. Production of completion certificate for availing deduction u/s 80IB of the Income Tax Act - Objection of the Department is that the assessee has not produced the completion certificate – Held that:- Reliance has been placed on the judgment in the case of Keerthi Estates Pvt. Ltd [2012 (11) TMI 467 - ITAT HYDERABAD] - Proposition of the Department that the deduction u/s. 80IB(10) has to be granted only a tax payer who follows only "Project Completion Method" it leads to an absurd situation as the developer who is following Percentage Completion Method is not entitled for deduction u/s. 80IB(10) of the Act though all other requirements of the section being fulfilled. It would tantamount to denial of valid exemption for which an assessee is entitled. In the present situation, the Revenue is taxing the profit on Percentage Completion Method but suggesting to grant deduction only on completion of the project. If the stand of the Revenue is accepted then only on completion of project an assessee would be entitled for deduction u/s. 80IB(10), then undisputedly an anomaly shall arise as to how and when the tax should be charged. This is not the scheme of the Act, to first tax an income in a particular year and grant deduction on that very income in a different later year i.e., on completion of the project as was canvassed by the Department. The accepted principle is that the year of the assessment of income and connected deduction shall fall in the same assessment year – Decided against the Revenue.

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• 2013 (10) TMI 1122
  Expenditure in relation to demerger - Whether expenditure, being related to pharma division and specifically agreed upon, is allowable as deduction u/s.37 – Held that:- The assets and liabilities of that pharma division, which was transferred, did not contain the OFCD. Meaning thereby, in a situation when an asset and the connected liability in demerger is not transferred by the Demerged Company to a Resulting Company then naturally the Resulting Company shall not in any way be concerned about that asset, so even can not claim expenditure. On account of these facts, it is held that the premium on redemption of debenture was not the liability of the assessee. Hence, it was wrongly claimed for year under consideration. The provision of Section 37(1) are unambiguous that an expenditure is allowable only if the expenditure is laid out or expanded wholly and exclusively for the purpose of business of the assessee - Alleged expenditure in question did not pertain or relate to the assessee – Decided against the Assessee.

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• 2013 (10) TMI 1121
  Computation of deduction u/s 10A - deduction of communication and insurance charges from the export turnover without deducting them from total turnover while computing deduction u/s 10A of the Act – Held that:- Reliance has been placed upon the judgment of Hon'ble Bombay High court in case of Gemplus Jewellery India Ltd., [2010 (6) TMI 65 - BOMBAY HIGH COURT] - Directed the Assessing Officer to compute deduction u/s 10A of the Act by reducing the communication charges and insurance charges from export turnover as well as the total turnover. Amounts in dispute are in the nature of reimbursement, therefore to be excluded in the export turnover and total turnover for computation u/s 10A of the Income tax act – Held that:- When the Assessing Officer has not disputed that the amounts in dispute are in the nature of reimbursement, hence, should not form part of the export turnover for the purpose of computing deduction u/s 10A of the Act, then, the same cannot also form part of the total turnover for the said purpose - No profit element is embedded in the aforesaid amounts. Therefore, the direction of the CIT(A) to reduce the aforesaid amounts from the export turnover as well as total turnover while computing deduction u/s 10A of the Act is perfectly in order and requires no interference – Decided against the assessee.

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• 2013 (10) TMI 1120
  Penalty u/s 271(1)(c) of the Income Tax Act – Held that:- Reliance has been placed on the case of CIT vs Reliance Petro Products (P) Ltd. [2010 (3) TMI 80 - SUPREME COURT], wherein it has been held that when no information given in the return is incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. Merely because the assessee claimed a deduction which has not been accepted by the department, penalty u/s.271(1)(c) is not attracted – In the present case, penalty cannot be levied – Decided against the Revenue.

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• 2013 (10) TMI 1119
  Credit for TDS - The credit of TDS has been denied to the assessee on the ground that the claim for TDS was no reflected in the computer generated form 26AS – Held that:- Reliance has been placed on the judgment of Hon’ble High Court of Bombay in case of Yashpal Sahwney Vs. DCIT [2007 (7) TMI 7 - HIGH COURT , BOMBAY], wherein it was held that even if the deductor had not issued TDS certificate, the claim of the assessee has to be considered on the basis of evidence produced for deduction of tax at source as the revenue was empowered to recover the tax from the person responsible if he had not deducted tax at source or after deducting failed to deposit with Central Government – Reliance has also been placed on the judgment of Hon’ble High Court of Delhi in case of Court On Its Own Motion Vs. CIT [2013 (3) TMI 316 - DELHI HIGH COURT], wherein the court has directed the department to ensure that credit is given to the assessee, where deductor had failed to upload the correct details in Form 26AS on the basis of evidence produced before the department. Therefore, the department is required to give credit for TDS once valid TDS certificate had been produced or even where the deductor had not issued TDS certificates on the basis of evidence produced by assessee regarding deduction of tax at source and on the basis of indemnity bond – Decided in favor of Assessee. Grant of interest on delayed payment of interest – Held that:- Relying upon the judgment in the case of Sandvik Asia Ltd. Vs. CIT and others [2006 (1) TMI 55 - SUPREME Court], it has been held that, in case the assessee has paid excess advance tax or excess TDS, the assessee is liable for refund with interest and in case the interest is not granted on the due date, the assessee is liable for further interest on interest – Decided in favor of Assessee.

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• 2013 (10) TMI 1118
  Condonation of delay – Held that:- The facts of the delay, which are specified by affidavits and death certificates indicate the unfortunate circumstances which the litigant had to face - The Hon’ble Supreme Court in the case of Mst. Katiji & others [1987 (2) TMI 61 - SUPREME Court] has held that when the technical consideration and cause of substantial justice are pitted against each other the cause of substantial justice has to prevail. It has been further held that while considering the issues of condonation of delay, a rigid and pedantic approach should not be adopted and the issue should be decided conforming to natural justice – Decided in favor of Assessee. Re-opening of assessment when objection raised by assessee is not considered by AO i.e. when the order is not a speaking order – Held that:- Reliance has been placed on the judgment of Supreme Court judgment in the case of G.K.N. Driveshafts [2002 (11) TMI 7 - SUPREME Court] - In view of Hon’ble Supreme Court judgment that the objections are mandatory to be decided by assessing officer. Consequently, no choice but to set aside the assessment back to the file of assessing officer to decide the objections of the assessee by speaking order and then to consider proceeding with reassessment – Decided in favor of Assessee. Allowance u/s 37(1) of the Income Tax Act – Held that:- Expenditure pertaining to the payment made to Canara Bank on the direction of DRT, the hypothecation defalcation and its consequent effect on the immovable property placed by the assessee is purely a civil dispute and any damages allowed in this behalf even referred to as penal by DRT, do not constitute payment for infraction of law – Therefore, deduction allowed – Decided in favor of Assessee. 50% disallowance u/s 40A(ia) – Held that:- Commission payment has been made to foreign parties for procurement of foreign business and they had no presence or office in India – Disallowance deleted – Decided in favor of Assessee.

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• 2013 (10) TMI 1117
  Addition made u/s 40(a)(ia) – TDS u/s 194C - Job work or sale purchase contract - packing material and printing and statutory - Held that:- Relief with respect to packing material, printing and stationary charges have been granted to the assessee because it does not involved any job work and hence the provisions of section 194C are not applicable – Decided in favor of Assessee. Addition u/s 69C of the Act - Addition on account of unexplained expenditure/investment being work in progress – AO asked the assessee to furnish the party wise details of work-in-progress amounting to Rs. 1,50,19,180/- along with the proof of TDS made thereon. The assessee submitted the grouping of the amounts but did not furnish any bills, vouchers of proof of TDS as well as addresses of the party – Held that:- The addition is made u/s 69C then the claim of expenditure is not a pre-condition of such addition – Decided against the Assessee. Allowance as a revenue expenditure or expense as a capital expenditure – Held that:- On a perusal of the break of the sum of Rs. 2,58,87,664/- it is seen that extensive work has been carried out on the structure of the factory building as well as with respect to the equipment. Executive cabins have been made, it floors related, AC sheets were installed on the top of the factory roof, the broken roof in the milk section was replaced, cables replaced, cooling tower and affluent plant revamped, angles and still rods replaced, iron rods and channels replaced in molasses tanks, installation work done in power house and milk section brass cables replaced structural repairs in mill section and boiling section and so on. Thus, exhaustive and extensive overhauling of the structure and equipment with regard to factory building and equipment have been carried out which was certainly necessitated on account of the fact that the appellant had taken over a factory that had remained closed. Current repairs - Expenditure has been incurred for replacing the broken part of the factory/plant in question and making the plant fit for use - Thus, when the expenditure has been incurred prior to the use of the plant and machinery in question then it does not fall under the category of current repairs – Decided against the Assessee.

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• Customs

• 2013 (10) TMI 1153
  Penalty of appellant being GM of the company - stuffing of red sanders in teh guise of polished granites - Held that:- appellant gives containers on request made by importers/exporters; in the case of container, the appellant does not require to be informed of what is contained in the container; the appellants have deployed surveyors in different places. It is the responsibility of the surveyors to receive the empty containers back from the importers, handing over the empty containers for export to the party on production of the Delivery Order, receipt of stuffed containers duly sealed by the Customs on proper documents. The appellants do not exercise control over transportation of containers. The only aspect that is verified when the container is handed over back is whether it is damaged or not. Once the container is not damaged, it again enters in to the trading channels for stuffing and destuffing and moves from place to place. After going through the statement of the appellant and the circumstances under which the container has been intercepted, I find that there is no evidence to show that that the appellant had actually assisted in loading red sanders or tampering the container or they were even aware that red sanders had been filled into the container somewhere on the way until the container was recalled and examination was conducted. Under these circumstances, in this case, apparently penalty has been imposed on the appellant on the ground that he has abetted in stuffing and attempted export of red sanders in the container. Abetment means a positive act on the part of the appellant and as can be seen from the facts and circumstances, there is no evidence forthcoming to show that the appellant had given any assistance in the attempted export of red sanders. In my opinion, negligence on the part of the appellant has not been proved by the revenue. Under these circumstances, a penalty imposed on the appellant has to be set aside and the same is set aside - Prima facie case in favour of assessee - Stay granted.

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• 2013 (10) TMI 1152
  Date of applicability of new policy - whether foreign trade policy; as was available on the relevant date when the DIFA were transferred to the appellant and endorsed by the authorities i.e. on 7.11.06 are required to be taken or subsequent amendment in the policy, which was applicable on the date of import is required to be adopted - Held that:- while endorsing the transferability, authorization is required to bear the note as to liability of such additional customs duty/ customs duty which would be reimbursed to exporter as draw back. One thing becomes clear from said para that such note is required to be put on authorization, by the authorities, at the time of endorsing transferability. Admittedly, such a note can be put to authorization only in respect of those documents which are endorsed after coming into existence of the new provisions. Such note cannot be put on the documents issued prior to April, 2007. In the present case, the documents were issued prior to April, 2007. This leads us to conclude that new policy is applicable in those documents which are endorsed for transferability after April, 2007. Circulars issued by the Board clarifying the disputed issues are binding on the departmental authorities deciding the same very issue and they cannot be heard arguing the same. Inasmuch as the said circular in clear terms clarifies that the amendments made in the Policy would not be applicable to the authorization issued prior to 1.4.07, we are of the view that confirmation of demand against the appellants is not justified - Decided in favour of assessee.

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• 2013 (10) TMI 1151
  Confiscation of goods - Violation of the conditions of Notification No. 97/2004-Cus - False declaration of registered office in Kolkata with the intention of obtaining an EPCG licence from Kolkata - Installation of the imported capital goods at the mines of M/s.KJS Ahluwaia on hire basis and not at their own mines or factory - Installation certificate not submitted in the case of one machine to Customs/DGFT as required under the conditions of the licence - Held that:- appellant has not used the machinery as a manufacturer-exporter but he has used the same in the mines of M/s. KJS Ahluwalia. The appellant is not a lessee of the said mines. What he has done is, he has rented out the machinery to M/s. KJS Ahluwalia for a consideration of Rs. 180/- per MT. In other words, the appellant has not utilised the machinery for his own purposes but merely rented out the machinery to somebody else. Secondly, the appellant could not be to the ‘actual user (non-industrial)' as defined under the EXIM Policy. Once the actual user condition is violated, condition No. 5 of Notification No. 97/2004 dated 19/07/2004 automatically comes into picture and the appellant would no longer be eligible for the benefit of the said Notification. Consequently, the goods imported is liable to confiscation under Section 111(o) of the Customs Act, 1962 inasmuch as the end-use condition stands violated and the appellant would be liable to penalty apart from losing the benefit of Notification NO. 97/2004. In view of deemed definition of manufacturer, the appellant is a ‘manufacturer-exporter' and an actual user (industrial). If that be so, the appellant has to utilize the goods for the manufacture of goods on his own account and not on account of somebody else whose name does not figure in the EPCG licence. It is also an admitted position that the name of the mine owner, M/s KJS Ahluwalia does not figure in the EPCG licence issued to the appellant. If that be so, violation of condition NO.5 of Notification NO. 97/2004-Cus stands clearly established and accordingly, the appellant would not be eligible for the benefit of the aforesaid exemption. A fine imposed should have nexus with the profit that could have been made on the sale of the goods. The fine imposed in the present case is approximately 16% of the value of the goods. Considering the fact that the goods have been imported more than 5 years back and the value would have depreciated substantially, a fine of Rs. 30 lakhs would suffice. As regards the penalty of Rs. 10 lakhs imposed on Shri Bidyadhar Palei, proprietor of Sushant Tradings under Section 112(a) of the Customs Act, Shri Bidyadhar Palei has admitted to violation of conditions of EPCG licence and the wrong availment of Notification No.197/2004. Therefore, he is liable to penalty under Section 112(a) and the fine imposed on the proprietor cannot be said to be harsh or unreasonable - Following decision of Surya Samudra Holiday Resorts (P) Ltd. vs. Commissioner of Customs (Export), Mumbai [2008 (11) TMI 407 - CESTAT, MUMBAI] - Decided against assessee.

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• 2013 (10) TMI 1150
  Stay applications - CENVAT credit - out of turn hearing - Held that:- stay order passed by the Kolkata Bench of the Tribunal is an ex party order. It is seen that the issue has a recurring nature and the issue is also a contentious one. Hence, we fix the appeals for out-of-turn hearing on 17.6.2013. Status quo shall be maintained till the disposal of the appeals - Stay granted.

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• 2013 (10) TMI 1149
  Waiver of Pre-deposit - Whether the matter shall be jurisdiction of Anti-dumping Bench as export was made from China and the goods covered by Notification No. 39/2010-Cus as indicated in the table thereunder are liable to Anti-dumping duty – Held that:- Learned A.R. was requested to find out whether the exporter covered by Anti-dumping notification is in appeal before Anti-dumping Bench - If their appeal is pending, it would not be proper to decide the appeals by Customs Bench hurriedly as that shall have serious repercussion on the economy - Anti-dumping duty being a trade measure remedy and affect the economy, safeguard measure is to be taken and ascertain whether the exporters have preferred appeal before Anti-dumping Bench - Revenue is informed to keep note that they should inform the status on the aspect to the Bench when appeal reaches for hearing - To work out interim modality and also to strike a balance of case of both sides, assessee was directed to submit the amount as pre-deposit – Partial stay granted.

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• 2013 (10) TMI 1148
  Waiver of pre deposit - Held that:- appellant who has not refuted charge of abatement against it at the adjudication stage. The appellant was found to be conduit in the fraudulent claim of drawback as was inferred by adjudicating authority - Prima-facie appellant’s appeal has no merit for waiver of pre-deposit. Accordingly, stay application is dismissed.

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• Corporate Laws

• 2013 (10) TMI 1147
  Auction sale under order 21 Rule 90 CPC – Fraud During Auction - Plaintiff contended that a fraud has been played on the Court by the Court Auctioneer and his associates – Held that:- There is also nothing to substantiate the contention of the plaintiff that the three bidders are nothing but an extension of the defendants - even otherwise, provisions of Order 21 Rule 72 CPC would have no application - None of the arguments raised by the plaintiffs in any way would materially prejudice the plaintiffs - It cannot be said that the auction process suffers from any fraud or material irregularity so as to vitiate the auction process. Application under Order 151 CPC - Extension of Time for Depositing Pre-deposit – Held that:- In view of the injunction orders passed by the Division Bench of this Court on 26.07.2013, the Court Auctioneer rightly did not accept the balance 15% of the bid amount from the applicant - The stay now stands vacated - the time for depositing the balance 15% of the bid amount is extended till today - The applicant may deposit the said amount by cheque in favour of Registrar General of this Court today itself - the balance sale price may also be deposited within 15 days from today as provided in the conditions of sale and subject to other terms and conditions of the proclamation of sale – Decided against Petitioner.

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• Service Tax

• 2013 (10) TMI 1165
  Waiver of Pre-deposit – Appeal u/s35F – Whether its activities fall within the definition of “Business Auxiliary Service”, so as to eligible to service tax - Receipt of incentives from M/s Maruti Suzuki India Limited - Held that:- It is for the appellant to establish undue hardship and the mere fact that the demand of duty and penalty may appear to be excessive, is irrelevant if the appellant has not been able to establish “undue hardship” - The expression “undue hardship” relates not only to the economic wellbeing of the appellant but also to the merits of the case, thus, requiring the CESTAT to also prima-facie appraise the merits and record an opinion for or against the appellant - An appellate forum cannot where the opinion recorded does not suffer from the aforesaid defects, impose its own perception of the merits of the case whatever be the nature of “undue hardship”. The appellant has not pleaded any financial hardship or financial distress in support of its plea of “undue hardship” and has mainly confined its pleadings to the merits of the demand raised by the revenue - A perusal of the orders passed by the Assessing Officer and the Appellate Authority do not enable us to record an emphatic finding in favour of the appellant that duty demanded and penalty levied are illegal or could not have been imposed - Assessee directed to make a pre deposit of 50% of demand - Decided against assessee.

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• 2013 (10) TMI 1164
  Demand of service tax - Service provider or Service receiver - Held that:- order passed by the Additional Commissioner, Central Excise, Ranchi, has travelled beyond show-cause notice given to the service provider i.e. respondent no. 3. The present petitioner is service receiver. Thus, the directions and observations made by the Additional Commissioner, Central Excise, Ranchi, are hereby quashed and set aside because the same are observed in the impugned order without giving any notice and without giving any opportunity of being heard and the said directions are travelling beyond the show-cause notice. All these writ petitions (Tax) are hereby allowed and the aforesaid paragraphs insofar as these affect the petitioner, are hereby quashed and set aside - Decided in favour of assessee.

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• 2013 (10) TMI 1163
  GTA service – eligibility for input service credit on the outward freight - entire cost of freight is paid by the manufacturer up to customer’s doorstep –place of removal - in view of Circular No. 97/6/2007-ST, dated 23-8-2007, credit is admissible if ownership of goods remain with seller till delivery of goods at customer’s doorstep – since sales is based on basis of “FOR destination”, transit insurance and freight charges are borne by appellant, so credit is admissible on outward freight - Following decision of Ambuja Cements Ltd vs. Union of India [2009 (2) TMI 50 - PUNJAB & HARYANA HIGH COURT] - No substantial question of law arises - Decided against the revenue.

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• 2013 (10) TMI 1162
  Refund of service tax paid on import of services for the period prior to 18.4.2006 - claim for refund filed beyond one year - period of limitation - Rule 2 (1) (d) (iv) of Service Tax Rules, 1944 - Receipt of services of testing, evaluation and consulting engineering services from service providers located abroad during the period 01-04-05 to 17-04-05 - Held that:- no claim for refund is permissible except under and in accordance with Rule 11 and Section 11B. An order or decree of a court does not become ineffective or unenforceable simply because at a later point of time, a different view of law is taken. If this theory is applied universally, it will lead to unimaginable chaos. It is, however, suggested that this result follows only in tax matters because of Article 265. The explanation offered is untenable as demonstrated hereinbefore. As a matter of fact, the situation today is chaotic because of the principles supposedly emerging from Kanhaiyalal and other decisions following it. Every decision of this Court and of the High Courts on a question of law in favour of the assessee is giving rise to a wave of refund claims all over the country in respect of matters which have become final and are closed long number of years ago. We are not shown that such a thing is happening anywhere else in the world. Article 265 surely could not have been meant to provide for this. We are, therefore, of the clear and considered opinion that the theory of mistakeof law and the consequent period of limitation of three years from the date of discovery of such mistake of law cannot be invoked by an assessee taking advantage of the decision in another assessee’s case. All claims for refund ought to be, and ought to have been, filed only under and in accordance with Rule 11/Section 11B and under no other provision and in no other forum. An assessee must succeed or fail in his own proceedings and the finality of the proceedings in his own case cannot be ignored and refund ordered in his favour just because in another assessee’s case, a similar point is decided in favour of the manufacturer/assessee. In the case of Indian National Ship Owners’ Association, the Hon. Bombay High Court and Apex Court did not consider the levy to be unconstitutional in the sense it was not a levy beyond the powers given by Constitution. This position is clear because after insertion of section 66A of the Act, now such tax is being collected without any successful challenge to the said section. Prior to 18-04-2006 when 66A was introduced the only issue was that the Rule under which the tax was collected was considered to be not authorized by provisions in Finance Act, 1994. So the levy has to considered only as ‘without authority of law’ and not as ‘unconstitutional’ Following decision of Mafatlal Industries Ltd. Vs UOI [1996 (12) TMI 50 - SUPREME COURT OF INDIA] - refund not to be allowed - Decided in favor of revenue.

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• 2013 (10) TMI 1161
  Demand of service tax - Reverse charge mechanism - Broadcasting service - Sections 65(105)(zzzu) read with 65(86a) and 86(b) - Whether Appellants are liable to pay service tax as recipients of broadcasting Service under reverse charge mechanism - Held that:- Appellants do not have any technology for receiving signals or downlinking facilities. Signals are directly received by the MSOs/cable operators from the satellite through Set Top Boxes and smart cards supplied by the Appellant. Technically they are not recipients of any broadcasting service. However, ongoing through the definition of Broadcasting we note that in the definition after the ‘means part’ and first inclusive part the words ‘and in case of broadcasting agency or organisation having its head office situated any place outside India includes the activities of selling time slot or obtaining sponsorship for channels or collecting broadcasting charges’ also exist. Definition is to be read as a whole and so read cannot be interpreted to conclude that the Appellant is a service recipient as per the ‘means’ and first inclusive part of the definition and a service provider under the second inclusive part of the definition. From the second inclusive part of the definition that only permitting the right to receive signals in any form by transmission through electromagnetic waves through space or cable to MSO/cable operators is an aspect covered as taxable and Distribution rights given by ESSD to the Appellant and which are not covered under the definition are not taxable and therefore this finding of the Commissioner is not sustainable - ESSM is not a service provider and Appellants are not recipient as held by the Commissioner and the distribution rights given by ESSM to the appellants are not taxable. Appellant is covered under second inclusive part of the definition of Broadcasting. Similarly appellant is a broadcasting agency also by virtue of inclusive definition of Broadcasting agency. Taxable service under Section 65(105)(zk) means any service provided or to be provided by a Broadcasting Agency and providing broadcasting service by virtue of being based in India and having a head office outside India. The finding of the Commissioner that the appellant is service recipient on the basis of the second inclusive definition is not therefore sustainable. Moreover, the foreign broadcaster is engaged in uplinking the signal to a satellite outside India and downlinking of signal is done by MSOs/Cable operators in India and appellants technologically does not receive any broadcasting service. Appellant is covered under broadcasting agency and broadcasting and also under definition of taxable service in the capacity of branch office, subsidiary representative/agent in India and having head office outside India and is thus a service provider and not a service recipient, as held by the Commissioner. The demands on the both Appellants are not sustainable under the reverse charge mechanism and consequently interest and penalty are also not imposable. Service tax on Intellectual property - Business Auxiliary service - Held that:- Where service tax has not been levied or short levied, tax can be demanded within one year from the relevant date. However if tax has not been levied or short levied by reason of, fraud, collusion, wilful, misstatement, suppression of fact etc tax can be demanded within 5 years from the relevant date. The Commissioner has discussed the invocation of extended period in para 46 of Order-in-Original and has held that appellant has suppressed the facts from the department as they did not get themselves registered for these services, pay the service tax and file ST-3 returns. The appellant did not pay any service tax under Intellectual Property Service, Business Auxiliary Service in respect of Product Licensing Agent/promotion licensing Agent and on Programme Producer Service and did not file any Return for these services. We do not find any fault in finding of the Commissioner in invoking extended period of limitation and consequently Appellant is liable to interest and penalty - Decided in partly in favour of assessees.

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• 2013 (10) TMI 1160
  Cenvat credit of service tax paid on the transportation and receiving of house hold items of their employees, which stand transferred to another unit of the same employee - Waiver of Pre-deposit – Held that:- The amount confirmed against the appellant is much on the lower side and deposit of part amount would not cause any financial difficulty to the appellant - the issue is contentious and arguable and requires lot of consideration - the appellant is directed to deposit a part amount of Rs.50,000 as a condition of hearing of their appeal - Partial stay granted.

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• 2013 (10) TMI 1159
  Cenvat Credit – input services - service tax paid on group insurance policy of Employees including family members - Waiver of pre-deposit - Held that:- The issue of Medical Insurance Employees and Product Liability Insurance stands fully covered by the precedent decision of the Tribunal, there is no direct decisions covering the Insurance of the dependent of the employees - it is clear that there is no legal mandatory requirement of law to get the family of the employees in insured – the issue is an arguable and contentious issue. The entire credit was availed by the appellant by reflecting the same in their statutory record as also in the quarterly reports filed with their jurisdictional central excise authorities - Though the demand in the case of appeal no. e/57813/2013 is within the limitation period but the same in the case of e/58223/2013 is barred by limitation leaving the balance of Rs. 4.5 lakhs approximately within the limitation period - the applicant is directed to deposit a total amount of Rs. 6.50 lakhs as condition of hearing of their appeal - Subject to the deposit, the pre deposit of balance dues and penalty stand dispensed with and its recovery stayed during the pendency of the appeal – Partial stay granted.

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• 2013 (10) TMI 1158
  Application for modification of Stay application based on the stay order in case of Sai Service Station Ltd [2013 (10) TMI 1155 - CESTAT MUMBAI] - Dealership agreement with M/s Maruthi - Held that:- order was passed by this Tribunal after taking into account all the submissions made by learned consultant as well as the departmental representative. Both sides were present in the court. One of the grounds taken by the appellant was ‘dealership agreement’ is a part of the records of department but they forgot that the department is also a party before us and the departmental record was not a part of the records before the Tribunal. Further, without producing the ‘dealership agreement’, the case of Sai Services Station Ltd. was compared to the present case. Without ‘dealership agreement’ entered into by appellant and M/s Maruthi and without examining the terms and conditions of the agreement, vis-`-vis agreement of Sai Services Station Ltd. it would not be possible to come to a conclusion that the issue involved in the present case is similar to that of Sai Services Station Ltd. as claimed by the appellant now. We do not understand what purpose it would serve since the appellant had enough time to report compliance of the order. In the result, none of the applications deserves consideration. In fact, the appellant bombarded the Tribunal with four misc. applications and have forgotten the primary requirement of proper presentation of their case with all documentary evidence at the time of hearing the stay petition - Stay denied.

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• 2013 (10) TMI 1157
  CENVAT Credit – Goods Transport Service - Whether the appellants are eligible for CENVAT credit of service tax amount paid on transportation of goods upto the customer premises during the period June 2005 to March 2008 – Held that:- Following COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, BANGALORE Versus M/s ABB LTD. and others [2011 (3) TMI 248 - KARNATAKA HIGH COURT] - the CENVAT credit of service tax in respect of the goods transported agency used for transportation of finished goods upto the customer’s premises is admissible to the assessee –The portion of the definition to which the word means applies has to be construed restrictively as it is exhaustive. However, the portion of the definition to which the word includes applies has to be construed liberally as it is extensive - The exhaustive portion of the definition of 'input service' deals with service used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products - the appellants have a strong case for waiver of pre deposit – pre-deposits waived till the disposal of the appeal – Stay Granted.

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• 2013 (10) TMI 1156
  Authorised Service Station – belated deposit of service tax - Wrong Accounting Heads - Interest and Penalty – Waiver of Pre-deposit - Held that:- The service tax amount had been deposited by the appellants but by mistake it was deposited in the wrong head and the assessee code was also wrongly mentioned - Similarly, for the period July 2005 to December 2010, the service tax amount pertaining to the period has been deposited by the appellant after the due dates and also service tax returns are filed after the due dates - Prima facie, the appellant does not have a strong case for complete waiver of pre deposit - the appellant was directed to pay the interest amount - there shall be a stay against the recovery of penalty and the late fee amount till the disposal of the appeal – partial Stay granted.

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• 2013 (10) TMI 1155
  Authorized service station - nature of commission received from various banks and financial institutions, through M/s. Maruti Udyog Ltd - Commission received from M/s. Maruti Udyog Ltd. (M/s. MUL) on account of sales/target incentive, incentive on sale of vehicles and incentive on sale spare parts for promoting and marketing the products of M/s. MUL. - Held that:- commission received from various bank/finances institution for arranging loan to their prospective buyers comes under the business auxiliary service - the issue is settled in favour of the Revenue in the case of CCE, Jaipur vs. Chambal Motors (P) Ltd. 2008 (9) STR 275 [2007 (10) TMI 552 - CESTAT NEW DELHI] - demand confirmed - decided against the assessee. Extended period of limitation - Held that:- In respect of time bar, the contention of the assessee is that there was a confusion in the Board's circular whether the activity comes under the business auxiliary service or not. We find that MUL was paying service tax on the commission received from various banks/finances institutions. MUL advised the assessee to get registered with the Service Tax department and to pay service tax on this activity. In spite of this, the assessee had not paid service tax though got registered with the Revenue as provider of taxable service in October, 2004. - Decided against the assessee. In respect of sales/target incentive, the revenue wants to tax this activity under the category of business auxiliary service -Held that:- We have gone through the circular issued by MUL which provides certain incentives in respect of cars sold by the assessee respondent. These incentives are in the form of trade discount. - no demand - decided in favor of assessee.

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• Central Excise

• 2013 (10) TMI 1146
  Classification of HDPE Tapes – Assessment Provisional OR Not - Held that:- For the assessment to be provisional, the elaborate procedure as prescribed under Rule 9B has to be followed by the Revenue as also by the assessee - Such procedure envisaged by Rule 9B of the erstwhile Central Excise Rules, require an order to be passed by the proper officer in terms of provisions of Rule 9B (1) - The assessee is required to execute a Bond and the expression 'under protest has to be written on each and every documents including the invoices and the returns to be filed by the assessee - Such provisional assessment has to be converted into a final assessment under Rule 9B(5). Order classifying the goods not to be treated provisionally merely because the appeal or other proceedings questioning the correctness of the such order are pending before the higher authorities and for establishing the clearances to be on the provisional basis, an order under Rule 9B of the erstwhile Central Excise Rules, 1944 and clearances / payment of duty on provisional basis is essential. As such, we hold that the assessment were not provisional as held by Commissioner (Appeals). If the assessments were not provisional, the question whether the classification has to be done under 3920.32 in terms of Board's circular No. 54/12/91-CX.1 dated 24.9.92 is to be decided. We find that exact issue stand decided by the Hon'ble Supreme Court in the case of H M Bags Manufacturers [1997 (7) TMI 119 - SUPREME COURT OF INDIA] as also in the case of Jai Fibres referred [2007 (11) TMI 22 - SUPREME COURT OF INDIA]. In that scenario, the said decisions would become applicable to the facts of the present appeals. By following the same, we hold that for the disputed period August, 1989 to 14.10.92, the classification would not be under heading 3920.32 as held by the Commissioner (Appeals). - Decided in favor of assessee.

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• 2013 (10) TMI 1145
  Valuation as per MRP under Rule 4A of CE Rules – packaged drinking water - domestic and industrial supply - Waiver of Pre-deposit – Held that:- There is no ascertainment at the retail market as prescribed under the Rule, if one examines the purchase orders placed by the institutional customers it is seen that the goods have been sold at prices ranging from Rs.43/- and Rs. 48/- during July 2008 to July 2010. Such prices also envisage rendering of additional services such as providing free water dispensers and supply of goods free of delivery charges - There is no nexus between the declaration of retail sale price and the prices at which the goods are sold to institutional customers - some of the institutional customers have also admitted that in the water jars received by them, the MRP was printed as Rs.50 - the declaration of retail sale price by the appellant is not borne out from the evidences available on records - the appellant directed to make a pre-deposit of 25% of duty – upon such submission rest of the duty to be waived till the disposal – Partial stay granted.

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• 2013 (10) TMI 1144
  Benefit of Notification No. 67/95 – Captive consumption - Held that:- Molasses has been utilised in the manufacture of rectified spirit on which the duty liability is ‘nil' and such rectified spirit has been cleared by the appellant as such - thus the conditions of Notification No. 67/95-CE stands violated and the appellant is not eligible for the benefit of the said exemption - This situation got rectified only in 01/06/2001 when Notification No. 67/95-CE was amended, which provided for payment of duty of a sum on the exempted final products as prescribed under Rule 57AD - prior to 01/06/2001, there was no provision in Notification No.67/95-CE for discharge of a sum @8% on the value of the final products which were chargeable to ‘nil' rate of duty or exempted from payment of duty - the contention of the appellant that, they were discharging a sum @8% on the value of the exempted final products would entitle them to the benefit of Notification No. 67/95-CE is without any merit. Demand Time-Barred – Held that:- The period of demand pertains to April 2000 to May, 2001 and the show cause notice has been issued only on 30/04/2005 - the allegation that the appellant suppressed the facts from the Revenue with intent to evade payment of excise duty is not sustainable in law - If the applicant has not indulged in suppression of facts, there is no reason as to how the extended period of time could have been invoked at all - if the appellant pays duty, he is entitled for the credit – thus it leads to a revenue neutral situation – order not sustainable as time barred – decided in favour of assessee.

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• 2013 (10) TMI 1143
  Interpretation of eligibility of CENVAT Credit – Waiver of Pre-deposit – cenvat credit on items like, H.R. Plates, Joists, Beams, Channels etc. - Held that:- Following Vandana Global Ltd. vs. CCEX, Raipur [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] - This Tribunal has been taking a consistent view by allowing stay petition of the assessee where extended period of limitation is involved but directed predeposit, wherever demand is for normal period of limitation - the Applicant are directed to make amount as pre-deposit – upon such submission the balance dues would stand waived and its recovery stayed during pendency of the Appeal - Partial Stay granted.

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• 2013 (10) TMI 1142
  Interpretation of eligibility of CENVAT Credit – Waiver of Pre-deposit – cenvat credit on items like, H.R. Plates, Joists, Beams, Channels etc. - the applicants have not specifically mentioned that the details of disputed items as structural items while reversing the cenvat credit - Held that:- Following Vandana Global Ltd. vs. CCEX, Raipur [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] - This Tribunal has been taking a consistent view by allowing stay petition of the assessee where extended period of limitation is involved but directed predeposit, wherever demand is for normal period of limitation - the Applicant are directed to make amount as pre-deposit of 25% of the CENVAT credit – upon such submission the balance dues would stand waived and its recovery stayed during pendency of the Appeal - Partial Stay granted.

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• 2013 (10) TMI 1141
  Cenvat Credit - Rule 6 of CCR - Exemption under Notification 7/2003-CE availed for basic duty whereas additional duty was paid – Waiver of Pre-deposit - Held that:- The applicants have cleared resins coated jute fabrics during the period from April, 2003 to July, 2004 by availing exemption under Notification 7/2003-CE for basic excise duty, but did not avail the exemption for additional excise duty - There is only one product manufactured and cleared which attract two types of duty, i.e. Basic Excise duty and Additional Excise duty - Prima-facie the applicant has paid additional excise duty at the time of its clearance as claimed, the product i.e. resins coated jute fabrics cannot be itself treated as wholly exempted product - the applicants are able to make out a prima-facie case for total waiver of pre-deposit - the dues waived and its recovery stayed during pendency of the appeal – Stay granted.

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• 2013 (10) TMI 1140
  Input Service Distributor – Waiver of Pre-deposit of Cenvat credit and Penalty - Held that:- The applicant had made a categorical statement about the error in computation of the demand while filing their reply to the respective show-cause notices - the Commissioner has recorded the tables in the order but failed to record any findings on the same - The A.R. for the Revenue also could not place before us anything contrary to the claim of the applicant - there is no other option but to accept the submissions made by the C.A. for the applicant that prima-facie, the total liability for the said period post registration as ‘Input Service Distributor’ is around Rs.53.00 lakhs - The claim of the ld. C.A is that they have already deposited an amount of Rs.19.00 lakhs - the applicant directed to deposit of Rs.5.00 lakhs (Rupees five lakhs only) – upon such submission the balance amount of all dues would stand waived and its recovery stayed during pendency of the appeal – Partial Stay granted.

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• 2013 (10) TMI 1139
  Application for Relief from Detention/attachment of Stock of sugar and molasses - Held that:- The Department has initiated action against the possessor/lessor of the said factory premises – there was no reason to accept the application field by the present applicant as the applicant had never been before this Tribunal as an appellant and it is immaterial that they might be an affected party by the outcome of the Appeal - Prima facie, the facts were perhaps not brought to the notice of Hon’ble High Court and the Hon’ble High Court under the impression that the appeal of the petitioner has been pending before this Tribunal, directed to pursue the alternate remedy - the applicant being not a party to the Appeals before this Tribunal, do not have any locus standi in approaching this Tribunal for relief against recovery proceeding by the Department – there was no substance in their prayer seeking modification of the order of this Tribunal - the Miscellaneous application is dismissed – Decided against Assessee.

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• 2013 (10) TMI 1138
  Modification of Stay Order – Rectification of Mistake – Waiver of Pre-deposit - Held that:- There is a factual dispute of the use of these items - The applicant placed the Chartered Engineer’s certificate in order to establish that these items are used for fabrication / support of the machinery which is not clear from the order of the Commissioner - the applicants have not made out a prima facie case for total waiver of pre-deposit of duty and penalty - the applicant is directed to deposit amount as pre-deposit – upon such submission balance dues shall stand waived and recovery stayed till the disposal of the appeals. The main contention of the AR is that the direction of pre-deposit is related to only one appeal as the amount of cenvat credit as mentioned in memo in respect of that appeal. The words the applicant filed these applications for waiver of pre-deposit as mentioned in the first para of Tribunal stay order make it clear that the stay order was passed taking into consideration of five appeals and not one appeal – there was no force in the submission of the Ld. AR that Tribunal should direct the assessee to deposit 50% of the total amount of duty in these cases - the amount involved in the first paragraph of the stay order is a clerical error, and therefore it is directed that the amount mentioned in the first paragraph as Rs.53,57,484/- should be read as Rs.1,82,22,414 – Decided in favour of Revenue.

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• 2013 (10) TMI 1137
  Waiver of MODVAT Credit and Penalty under Rule 57U of the CE Rules – Reversal of CENVAT credit - Held that:- The evidence produced by the Applicant stating reversal of the CENVAT Credit - Prima facie the Applicant has reversed the entire amount of CENVAT Credit of Rs.1.03 crore - the Applicant has deposited the entire amount of CENVAT Credit confirmed – pre-deposit of the said amount is sufficient for hearing of the Appeal – Pre-deposit of the balance dues waived and its recovery stayed during pendency of the Appeal - Stay granted.

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• CST, VAT & Sales Tax

• 2013 (10) TMI 1167
  Waiver of pre deposit - because all the business premises, accounts, etc. have been taken into possession by the respondents for recovery of the due amount - Held that:- under the provisions of M.P. V.A.T. Act, there is a provision of filing of second appeal against the appellate order and if the petitioner is having efficacious statutory remedy of filing second appeal then normally this court should not entertain the writ petition merely on the ground that the petitioner is required to make statutory pre-deposit or does not possess the liquidated amount for deposit of the statutory amount before filing of the second appeal. The petitioner may move an application before the Board for seeking exemption from deposit of such an amount as the entire properties including the bank accounts, etc. have been seized by the respondents and the petitioner is not having any liquidated amount for deposit of the same, which would be considered by the Board on its merits.

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• 2013 (10) TMI 1166
  Dealer's liability to pay tax - Hypothecation of goods - Whether in respect of disposal of the vehicle for recovery of the loan the petitioners are liable for tax as dealers as per the definition in Section 2(11) of the Act - Held that:- Even if the sale of pledged ornaments takes place outside the banking business, the 1963 Act would cover even such transactions. Therefore, once such transactions fall under section 2(viii)(g) of the 1963 Act, banks become "dealers" and they are liable to pay sales tax under the said 1963 Act. It is true that the definition of the word "sale" under section 2(xxi) of the 1963 Act does not include mortgage, hypothecation, charge or pledge, however, the important point to be noted is that the definition of the word "sale" under the 1963 Act is not the same as under section 4 of the Sale of Goods Act, 1930. The definition of the word "sale" in section 2(xxi) in the 1963 Act is very similar to section 2(g) of the Central Sales Tax Act, 1956 which is held to be having a very wide meaning as compared to the definition of the word "sale" in section 4 of the Sale of Goods Act, 1930. Further, when charge or pledge is enforced that enforcement is by way of sale of the pledged or hypothecated goods; that sale is for consideration and, therefore, it falls within the ambit of section 2(xxi) of the 1963 Act - Decided against assessee.

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• Indian Laws

• 2013 (10) TMI 1154
  Right to not to vote - None of the Above (NOTA) option - Constitutional validity of Rules 41(2) (3) and 49-O of the Conduct of Election Rules, 1961 - Violation of the secrecy of voting - Held that:- Free and fair election is a basic structure of the Constitution and necessarily includes within its ambit the right of an elector to cast his vote without fear of reprisal, duress or coercion. Protection of elector s identity and affording secrecy is therefore integral to free and fair elections and an arbitrary distinction between the voter who casts his vote and the voter who does not cast his vote is violative of Article 14. Thus, secrecy is required to be maintained for both categories of persons - Giving right to a voter not to vote for any candidate while protecting his right of secrecy is extremely important in a democracy. Such an option gives the voter the right to express his disapproval with the kind of candidates that are being put up by the political parties. When the political parties will realize that a large number of people are expressing their disapproval with the candidates being put up by them, gradually there will be a systemic change and the political parties will be forced to accept the will of the people and field candidates who are known for their integrity - Rules 41(2) (3) and 49-O of the Rules are ultra vires Section 128 of the RP Act and Article 19(1)(a) of the Constitution to the extent they violate secrecy of voting. In view of our conclusion, we direct the Election Commission to provide necessary provision in the ballot papers/EVMs and another button called None of the Above (NOTA) may be provided in EVMs so that the voters, who come to the polling booth and decide not to vote for any of the candidates in the fray, are able to exercise their right not to vote while maintaining their right of secrecy. Inasmuch as the Election Commission itself is in favour of the provision for NOTA in EVMs, we direct the Election Commission to implement the same either in a phased manner or at a time with the assistance of the Government of India. We also direct the Government of India to provide necessary help for implementation of the above direction. Besides, we also direct the Election Commission to undertake awareness programmes to educate the masses - Decided in favour of petitioner.

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