TMI Tax Updates - e-Newsletter
October 31, 2015

Case Laws in this Newsletter:

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

Articles

1. *COMPLIANCE MANAGEMENT UNDER SERVICE TAX (PART-II)

   By: Dr. Sanjiv Agarwal

News

1. Government to issue Sovereign Gold Bonds with effect from 26th November, 2015; Bonds to be sold through banks and designated post offices

2. Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified

3. Government conducts raids against Illegal import and Sale of Chinese Fire Crackers at godowns in Mumbai, Bangalore, Chennai, Trichy, Vijawada, Madurai, Ludhiana etc.

4. Government Announces Enhanced Support for Export of Various Products and Covers Some Additional Products Through Merchandise Exports from India Scheme (MEIS)

5. RBI Reference Rate for US $

Notifications

Central Excise

1. 22/2015 - dated 29-10-2015 - CE (NT)

To further amend Cenvat Credit Rules, 2004, so as to allow credit of Education Cess and Secondary and Higher Education Cess paid on inputs/input services and capital goods, to be utilized for payment of service tax in specified circumstances.

Customs

2. 102/2015 - dated 30-10-2015 - Cus (NT)

Tariff Notification in respect of fixation of T V of Edible oil, Brass, Poppy seed, Areca nut, gold and Sliver

Income Tax

3. 86/2015 - dated 29-10-2015 - IT

Transfer pricing - Computation of Arm's length price - Notified percentage under third proviso to section 92C

Circulars / Instructions / Orders

Income Tax

1. F.No.225/207/2015/ITA.II - dated 29-10-2015

Corrigendum with reference to order under Section 119 of the Income-tax Act, 1961 dated 01.10.2015

Highlights / Catch Notes

Income Tax

• Addl. CIT New Delhi can't act as Assessing Officer without section 120(4)(b) order; assessment order invalid.

  Case-Laws - AT : In absence of an order u/s 120(4)(b) of the Act the Addl. CIT Range-6, New Delhi lacks jurisdiction to exercise the functions of the AO and therefore consequently the order of assessment framed is without jurisdiction. - AT
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Customs

• Capital Goods Import Under SHIS Scheme Qualifies for Duty Exemption via Notification No.104/09-Cus, Consistent with FTP Definitions.

  Case-Laws - AT : Import of capital goods under SHIS scheme - Supply of equipment for continuous annealing line for cold rolling mill – Definition of "capital goods" given in FTP are same for EPCG licence or for SHIS Licence – Notification No.104/09-Cus. clearly allows exemption of capital goods imported into India against Duty Credit Scrip issued under SHIS Scheme thus respondents are eligible for benefit - AT
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• Import Exemption for Electrode Grade Calcined Petroleum Coke under Notification No.20/2006-Cus Confirmed for Appellant.

  Case-Laws - AT : Import of Electrode Grade Calcined Petroleum Coke – The benefit of the exemption Notification No.20/2006-Cus dated 01.03.2006 as amended, is available to "Electrode Grade Calcined Petroleum Coke" imported by the Appellant - AT
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Service Tax

• Charitable Institution Wins Appeal: Vocational Courses Qualify for Benefits Under Notification No. 9/2003-ST.

  Case-Laws - AT : Commercial training or coaching service – Appellant contested SCN on grounds that they are charitable institution and courses conducted by them are of vocational in nature thus eligible for benefit of Notification No.9/2003-ST - demand set aside - AT
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• Court Stays Refund of CENVAT Credit; Banking Charges Should Be Included as 'Input Service' in Manufacturing Business.

  Case-Laws - AT : Stay on Refund of cenvat credit - Definition of 'input service' on banking charges has to be allowed as they are in relation to business of manufacture whether same is prior or subsequent to manufacture - AT
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• Computer Software Classified as "Goods" u/s 65(64) for Service Tax; Changes Not Retrospective Before June 1, 2007.

  Case-Laws - AT : Maintenance of computer software - Board clarified that software is considered as "Goods" under section 65 (64) towards "Maintenance or Repair Service" - Amendment cannot have retrospective effect prior to 1.6.2007 - AT
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• Refund Validity Upheld: Payment in Indian Rupees Qualifies as Convertible Foreign Exchange u/r 3(ii), Export of Service Rules 2005.

  Case-Laws - AT : Even though appellant received payment in Indian rupees but same is deemed to be convertible foreign exchange and condition provided under Rule 3(ii) of Export of Service Rules, 2005 stand complied with and refund should not be rejected only on ground that foreign remittance received in Indian Rupees - AT
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• Labeling an Agreement as Franchise Doesn't Meet Service Tax Criteria if Franchise Services Aren't Provided.

  Case-Laws - AT : Franchise Service – manufacturing activity - Merely because words 'franchise' and 'franchisee' have been used in agreement does not ipso facto mean that as per that agreement franchise service was rendered and thus agreement miserably fails to qualify as franchise agreement - AT
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• Refund Claim Rejected for EOU u/r 5 of Cenvat Credit Rules; Case Remanded for Further Examination.

  Case-Laws - AT : Rejection of Refund Claim under Rule 5 of Cenvat Credit Rules, 2004 – 100% EOU – Commissioner (Appeals) did not examine all contracts in order to decide whether the activity is of "maintenance or repair" and has to quantify separately the amount involved relating to maintenance and repair service as also other service - matter remanded back - AT
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• Cenvat Credit Allowed for Airport Service Capital Goods: Chassis Converted to Toilet and Water Carts Qualify.

  Case-Laws - HC : Cenvat Credit - Use of capital goods in providing Airport services – Chassis of motor vehicles were converted into toilet carts and water carts - Used only for cargo handling services and not on roads - credit allowed - HC
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• Appellant's Request to Exclude Writ Petition Time Denied; Limitation Period Strictly Enforced u/s 14 of Limitation Act.

  Case-Laws - HC : Condonation of Delay under Section 14 of Limitation Act, 1963 – Appellant claims to exclude time consumed in disposal of writ petition before Court in computation of delay – No reason found to entertain this writ petition as period of limitation is sixty days and delay can be condoned by Commissioner (Appeals) if there is reasonable reason but not beyond thirty days - HC
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Central Excise

• Appellants Entitled to CENVAT Credit for Capital Goods Used in Manufacturing at Registered Factory Premises.

  Case-Laws - AT : CENVAT Credit - use of Capital goods in different premises - The machine was used by appellants for the production of final products. Thus the activity of appellants in using the machine (capital goods) can be said to be part of its manufacturing activities of final products in its registered factory premises. There is no justification for denying credit - AT
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• UDMH and HH Mixing Doesn't Create New Product; Duty Liability Applies to UDMH Used In-House.

  Case-Laws - AT : Manufacture - captive consumption - when by mixing UDMH and HH a new product is not emerging, it cannot be said that UDMH has been captively consumed in the manufacture of a product which is exempted and therefore duty liability has to be discharged on UDMH manufactured by the appellants and used within the factory. - AT
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• Refractory bricks' performance bonus excluded from assessable value under Central Excise laws; not subject to additional duty.

  Case-Laws - AT : Valuation - there is no justification for treating the bonus amount as part of the price of the goods and demanding duty on the basis of bonus received from the buyers for better performance of the bricks was not includible in the assessable value of the refractory bricks - AT
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• Cutlery Pack Preparation for Airlines Not Considered Manufacturing; Demands Beyond Limitation Period Set Aside.

  Case-Laws - AT : Manufacturing activity or not - preparation of cutlery pack for airlines - They put such items on the tray, along with bread, etc. and these are handed over to the airlines in the aircraft - demands are beyond the normal period of limitation - demand set aside - AT
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• ISD CENVAT Credit Self-Assessment Not Mandated; Demand on Credit-Availing Unit Confirmed as Valid.

  Case-Laws - AT : CENVAT Credit - credit of input services distributed by the Input Service Distributor - it cannot be claimed that input service distributor is making self assessment and that self assessment is required to be challenged. No rule provides for assessment/self-assessment by ISD - demand raised on the unit availing credit confirmed - AT
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VAT

• Shipping Vessel's HSD Purchase Triggers MVAT Provisions; Petitioner Invoices Shipping Line Based on Bunker Delivery Note.

  Case-Laws - HC : Back to Back transactions - The shipping vessel places an enquiry for required quantity of HSD with the Petitioner - Petitioner in turn places a back to back purchase order/nomination of the same quantity on any of the Oil Marketing Companies - After the delivery of the HSD to the nominated vessel is complete, the Petitioner raises an invoice on the shipping line, based on the BDN - Provisions of MVAT are applicable - HC
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• High Court Rules Movement of Levy Rice from Pondicherry to Andhra Pradesh as Interstate Sale, Exempting Local Control Orders.

  Case-Laws - HC : Inter state sale or intra state sale - movement of levy rice from Yanam in the Union territory of Pondicherry to Kakinada (AP) - The petitioners, rice millers carrying on business at Yanam, cannot be brought within the ambit of the Control Orders which, as noted hereinabove, is limited in its operation only to the territorial limits of the State of Andhra Pradesh, and not beyond. - HC
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Case Laws:

• Income Tax

• 2015 (10) TMI 2385
  Entitlement to carry forward and set-off of business loss - assessee not owning 51% voting powers in the company as per Section 79 of the Act by taking the beneficial share holding of M/s. Amco Properties & Investments Ltd. - Held that:- Dealing with a case under Section 79(a) and (b) of the unamended Section [Clause (b) was deleted w.e.f. 01.04.1988] and while relating to Clause (a) of Section 79 of the Act, the Apex Court in Commissioner of Income Tax V/S Italindia Cotton Private Limited (1988 (9) TMI 1 - SUPREME Court), held that the Section would be applicable only when there is change in shareholding in the previous year which may result in change of control of the Company and that every such change of shareholding need not fall within the prohibition against the carry forward and set-off of business losses. In the present case, though there may have been change in the shareholding in the assessment year 2002-03, yet, there was no change of control of the Company, as the control remained with the ABL as the voting power of ABL, along with its subsidiary Company APIL, remained at 51%. The Supreme Court further observed that the object of enacting Section 79 appears to be to discourage persons claiming a reduction of their tax liability on the profits earned in the Companies which had sustained losses in earlier years. In the present case, the control over the Company, with 51% voting power, remained with ABL and, as such, in our view, the provisions of Section 79 of the Act would not be attracted. - Decided in favour of assessee. Entitlement to claim deduction in accordance with Section 35AB - transfer of technical knowhow, which amount was payable in installments between 31.5.1998 to 31.5.2006 - Held that:- The assessee would be entitled to claim deduction in accordance with Section 35AB of the Act in respect of sum of Rs. 5 Crores for transfer of technical know-how, even though the amount was payable and paid in instalments on subsequent dates. This we say so, also because the law is well settled that while interpreting the provisions of taxing statutes, where two views are possible, the one which is in favour of the assessee should be adopted. - Decided in favour of assessee.

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• 2015 (10) TMI 2384
  Deduction u/s 80IB (10) (a) - whether the stipulation in Section 80IB(10)(a) of completion certificate issued by the Local Authority before the cut off date, cannot be applied in the case of assessee following the work in progress accounting method? - Held that:- Issuance of completion certificate, after the cut off date by the Local Authority but, mentioning the date of completion of project before the cut off date, does not fulfil the condition specified in clause (a) of Section 80IB (10) read with Explanation (ii) thereunder. We reject the argument of the assessee that the effect of amended clause (a) of sub-Section 10 of Section 80IB, which has come into force with effect from 1st April, 2005, has retrospective effect or that it is unjust in any manner or incapable of compliance at all. Similarly, the requirement of securing completion certificate issued by the Local Authority before the cut off date is not directory, in view of the express provision in Section 80IB(10)(a) and the Explanation (ii) thereunder. The completion certificate granted by the Local Authority must bear the date of having been issued before the cut off date. The provision in the form of Section 80IB(10)(a), applies uniformly to all the assessees - be it following work in progress accounting method or otherwise. The benefit of deduction under this provision can be availed by the assessee following the work in progress accounting method, provided he has complied with the stipulation of having produced completion certificate issued by the Local Authority before the cut off date, as may be applicable in his case. In other words, if the housing project was approved by the Local Authority before 1st April, 2004, he must submit completion certificate issued by the Authority having been issued before the 31st March, 2008. Whereas, in the case of housing project approved on or after 1st April, 2004, the assessee can avail of the benefit provided completion certificate issued by the Local Authority is within four years from the end of the financial year in which the concerned housing project was approved by the Local Authority. If this condition is not fulfilled, the assessee who maintains work in progress accounting method and has claimed deduction under Section 80IB(10)(a) must suffer the consequence of disallowance or withdrawal of the benefit claimed by him on that count. Thus the decision of the Assessing Officer to disallow deduction under Section 80IB(10)(a) of the Income Tax Act is upheld. - Decided against assessee.

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• 2015 (10) TMI 2383
  Reopening of assessment - AO received information from the Enforcement Directorate (ED) that in the books of the Assessee there were huge cash deposits - Held that:- The nature of the information provided by the governmental agency in that case did not itself refer to any amounts or entries in the books of accounts of the Assessee. In the present case, however, the information received from the ED makes a reference to what was found in the books of accounts of the Assessee. The next question that had to be examined by the AO was whether what was disclosed in the books of accounts was also disclosed in the returns filed by the Assessees. If it was not disclosed, then possibly the AO could have reasons to believe that the cash deposits reflected in the books of accounts may have escaped assessment. However, no effort appears to have been made by the AO to examine the returns filed by the Assessee in either of these cases. As far as RL Travels is concerned, the further information concerning payments made to third parties, which were unable to be verified by the ED, also required to be assessed by the AO by examining the returns filed to discern whether the said transaction was duly disclosed by the Assessee. It is the treatment of the entries in the books of accounts in the returns filed by the Assessee that would be determinative of whether in fact there was any concealment of relevant information or whether any income had in fact escaped assessment. With the AO in either of these cases not having adopted that approach, it could not be said that the jurisdictional requirement of the AO having to form reasons to believe on the basis of some tangible material that income had escaped assessment was fulfilled.Consequently, the Court finds no error having been committed by the ITAT in the impugned orders in coming to the conclusion that the reopening of the assessments was bad in law. - Decided in favour of assessee.

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• 2015 (10) TMI 2382
  Re-opening of assessment - interest free loan to the partners who were also partners of Gujarat Tea Limited - Held that:- From the material on record and even show cause notice / queries / questionnaires and the reply of the asssessee, it appears that as such there was no inquiry and / or application of mind by the AO with respect to interest free loan to the partners and / or any query with respect to the interest on the amount advance to the partners, more particularly, with respect to reasons recorded while reopening of the assessment. Whatever the question that was with respect to interest paid to Jivraj Tea Limited and the petitioner assessee was requested to show cause as to why the interest paid to Jivraj Tea Limited disallowed and even assessee also replied to the same. AO at the time of framing original assessment did not address himself with respect to interest free loan paid to the partners and with respect to the case on the disallowance to the interest at the rate of 12% p.a. on the amount advance to the partners. Under the circumstances, it cannot be said that reopening of the assessment for AY 2009-10 is mere change of opinion of the AO. It is required to be noted that reopening of the assessment is within the period of four years. Having reasons to believe that assessee had used interest bearing funds for non business purpose by giving interest free loans to its partners and therefore, interest expenses corresponding to the interest chargeable on the amount so diverted to the partners of the assessee firm for non business purposes has escaped assessment in the hands of the assessee firm within the meaning of Section 147 of the Act and having so satisfied when the impugned notice under Section 148 of the Act has been issued, it cannot be said that the AO has committed any error and / or illegality and / or assumption of jurisdiction by the AO to reopen the assessment for AY 2009-10,is invalid and / or not justified. - Decided against assessee.

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• 2015 (10) TMI 2381
  Expenditure on medical treatment of eyes for improving the vision - whether a business expenditure u/s 37 (1) ? - Held that:- We are not persuaded to accept the submission on behalf of the applicant that eyes are required to be exclusively used for the purpose of profession by the applicant. As observed above eyes are an important organ of the human body and is essential for the efficient survival of a human being. Eyes are thus essential not only for the purpose of business or profession but for purposes other than these which are so many. It is therefore clear that the said expenditure as claimed by the applicant is not in the nature of the expenditure wholly and exclusively incurred for the purposes of the profession of the applicant and thus this expenditure cannot be claimed by the applicant to be allowed as deduction in computing the income chargeable under the head profits and gains from business or profession in case of the applicant as per the provisions of Section 37 of the Act. - Decided in favour of revenue.

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• 2015 (10) TMI 2380
  Reopening of assessment - royalty payments received by the assessee from its Indian subsidiary (Oracle Indian Private Limited – OIPL) - INDIA USA DTAA - allegation of AO that since the assessee has a Permanent Establishment (PE) in India and that the receipts by the assessee from licensing of the duplicate software has been treated as "royalty" the "force of attraction rule" would be attracted and that the income in the nature of royalty should also be attributed to the Permanent Establishment by virtue of the said rule - whether as per Section 44D no expenses would be allowable and the receipts are to be taxed as royalty under section 115A @20% in place of 15% as was done and accepted in the assessment order - Held that:- In the present case, in the circumstances narrated above, it is evident that the when the Assessing Officer was examining the entire issue of royalty and its taxability the Assessing Officer must have examined Article 12 of the DTAA in its entirety, which also contained the exception mentioned in clause (6) thereof. When a regular assessment is completed in terms of Section 143(3), a presumption can be raised that such an order has been passed upon a proper application of mind. See CIT vs. Kelvinator of India Ltd [2002 (4) TMI 37 - DELHI High Court] . Therefore, in our view, what the Assessing Officer is now seeking to do amounts to a clear change of opinion and that is not permissible. The escapement of income by itself is not sufficient for reopening the assessment in a case covered by the proviso to section 147 of the said Act, unless and until there was failure on the part of the assessee to disclose fully and truly all the material facts necessary for assessment. It was also made clear that unless and until the recorded reasons specifically indicated as to which material fact or facts was/were not disclosed by the petitioner in the course of the original assessment under section 143(3), there could not be any reopening of assessment. See Swarovski India Pvt. Ltd. Vs. Deputy Commissioner of Income Tax (2014 (9) TMI 4 - DELHI HIGH COURT) - Decided in favour of assessee.

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• 2015 (10) TMI 2379
  Addition u/s 69 - Whether ITAT has erred in not appreciating that once the entries appearing on any seized document in the course of search are credible and shows that outstanding liability of the assessee amounting to Rs. 1,28,89,362/- was in respect of an investment and by virtue of section 69 of the Act should have been treated as income and could not have been restricted to part payment? - Held that:- CIT(A) restricted the addition of Rs. 59,43,115/- as against the addition of Rs. 1,28,69,362/- made by the Assessing Officer as the said amount depicted the payments actually made to Mr. Monga. The amount paid to Mr. Monga was to the tune to Rs. 46,43,115/- and the balance was shown as receivable by Mr. Monga and his family members from the assessee vide letter dated 10.08.2008. A sum of Rs. 13,00,000/- as mentioned in the said letter was also received by him. In totality thus the total payments made by the assessee to Mr. Monga were of Rs. 46,43,115/- + Rs. 13,00,000/- and the addition had been restricted to Rs. 59,43,115/-. The Assessing Officer had erred in making addition of Rs. 1,28,69,362/- to the income of the assessee. The balance amount payable by the assessee to Shri Monga and his family members which was shown in the books of account of the assessee as outstanding could not be termed as undisclosed income and included in the total income of the assessee. The CIT(A) and the Tribunal were right in sustaining the addition of Rs. 59,43,115/- in the hands of the assessee for the assessment year 2009-10. - Decided against revenue.

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• 2015 (10) TMI 2378
  Rectification of mistake - Search and seizure operation challenged - Held that:- The plea for the quashing of the assessment order was neither raised nor considered by the Court nor the amendment application was ever pressed. The reason for not pressing the application could be for a variety of reasons and one of them could be the plea of an alternative remedy, namely, an appeal before the first appellate authority against the assessment order. According to the respondents, an appeal had already been filed before the first appellate authority. Whatever may be the reason, the fact remains that the validity and legality of the assessment orders were never argued before the Court nor the amendment application was pressed. There is no error apparent on the face of the record which requires reconsideration or rectification. Since the amendment application was not pressed, it was not open for the Court to consider the validity of the assessment orders so passed during the pendency of the writ petition.

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• 2015 (10) TMI 2377
  Short term capital gains - whether volume and frequency of trades indicated that the respondent was a trader? - Held that:- There are concurrent findings of facts recorded by the Commissioner of Income Tax (Appeals) and the Tribunal holding that the respondent-assessee is engaged in investment activities resulting in 'Short Term Capital Gains.' In fact in the preceeding Assessment year on identical facts the respondent-assessee 's claim for loss under the head 'Short Term Capital Gains had been accepted by the Assessing Officer. The view taken by the Tribunal upholding the order of the CIT (A) confirming the fact of short term capital gains - Decided against revenue.

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• 2015 (10) TMI 2376
  Adjustment made on account of arm's length price of interest receivable transaction from the Netherland based associate enterprise company - Held that:- Hon’ble Bombay High in Court CIT Vs. Tata Autocomp Systems Ltd. (2015 (4) TMI 681 - BOMBAY HIGH COURT ) has held that while computing arm's length price of international transaction, where the assessee had advanced loan to its associate enterprises situated in Germany, then the rate of interest was to be determined on the basis of rate prevailing in Germany, where the loan had been consumed and not to be determined on the basis of rate prevailing in India. The issue arising in the present appeal is identical to the issue before the Tribunal in assessee’s own case relating to assessment year 2008-09 and before the Hon’ble Bombay High Court in CIT Vs. Tata Autocomp Systems Ltd. (supra) and following the same parity of reasoning, we direct the Assessing Officer to re-compute arm's length price of international transaction entered into by the assessee with its associate enterprises, following the directions in our earlier year. The learned Authorized Representative for the assessee pointed out that though in the earlier, there was discrepancy in the picking up of figure interest receivable from associate enterprises, but in the year under appeal, there is no such issue. Decided in favour of assessee. Disallowance of additional depreciation under section 32(1)(iia) of the Act on items of fixed assets - Held that:- We direct the Assessing Officer to allow the additional depreciation under section 32(1)(iia) of the Act on trolley and industrial fans - Decided in favour of assessee in part Deduction claimed on account of payments to PF / ESCI - Held that:- Perusal of the details tabulated in assessment order reflect that the payments have been made by the assessee within a delay of few days and much before the due date of filing the returns. Following the ratio of CIT Vs. Ghatge Patil Transports Ltd. (2014 (10) TMI 402 - BOMBAY HIGH COURT ), we hold that the assessee is entitled to the claim of deduction in this regard. Accordingly, we direct the Assessing Officer to disallow the addition - Decided in favour of assessee

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• 2015 (10) TMI 2375
  Disallowance u/s 14A - Held that:- Already DRP has taken note of the fact that; firstly, Rule 8D is not applicable in this year; and secondly, there is no interest expenditure attributable for the earning of exempt income; and lastly, for the purpose of indirect expenses, already direction have been given to the AO to identify the manpower cost of the persons directly concerned with the making of the decision of the investments and to work-out the disallowance. The AO after analyzing the entire details has restricted the disallowance at Rs. 1 lakh on account of manpower / administrative cost, which can be said to be attributable for earning of exempt income. Such a finding of AO cannot be faulted with in absence of any proper rebuttal and also the disallowance as it is appears to be quite reasonable. Thus on the facts if the case, disallowance u/s 14A as restricted after DRPs direction is confirmed - Decided against asseessee. Depreciation allowance on purchase of printers and UPS - Held that:- So far as claim of depreciation on UPS and printer is concerned the same is to be allowed @ 60% as they are part and parcel of computer itself and are peripheral component/equipment connected with the computer. In the decision of Omini Club Informational Technology Ivt P Ltd. [2010 (4) TMI 769 - ITAT, DELHI] and also in catena of other decisions by the co-ordinate Benches of the Tribunal there has been a consistent view that printer and UPS are part of computer and hence depreciation has to be allowed @ of 60%. However, so far as claim of depreciation on air-conditioners installed in server’s room, the same cannot be treated as part of computer and therefore, restricting the claim of depreciation @ 15% by the AO is fully justified - Decided partly in favour of assessee. Disallowance of software expenses incurred on purchase of printer-server software - Held that:- Of the expenditure incurred on the software is to facilitate the assessee’s business or enable the management to conduct the business more efficiently or profitably, then it has to be treated as revenue expenditure. In all these cases, the expenditure incurred on the software expenses were allowed as revenue expenditure. Here also, the software purchase for print server is nothing but to facilitate the assessee’s business and to conduct day-to-day activity in an efficient manner and, therefore, it has to be allowed as revenue expenditure. Thus, following the principle and ratio laid down in the case of CIT vs Raychem RPG Ltd [2011 (7) TMI 953 - Bombay High Court] and CIT vs Amway India Enterprise [2011 (11) TMI 4 - DELHI HIGH COURT] we allow the claim incurred on print software as revenue expenditure - alternate contention of allowing depreciation @ 60%, in case it is treated as capital expenditure have been rendered purely academic - Decided in favour of assessee Addition on account of “container detention charges (CDC) - collection by the assessee on behalf of the principal and retained in terms of RBI direction, which has been treated as income accrued to the assessee during the year by the AO - Held that:- The assessee has offered the entire amount of CDC charges collected right from year 1993 to December, 2008 as income and paid the entire taxes in AY 2010-11. This has been done so only when the principal had written a letter dated 25th May, 2009, whereby, the principal has authorized the assessee to retain the CDC charges collected on its behalf right from period 1st April, 1993 to 31st March, 2009. By virtue of this letter, the principal has authorized its agent to treat the amount as agent’s income. Hence forth, now it can be held that this income belongs to the agent and hence it has been rightly taxed by the Department in the AY 2010-11. Thus, on these facts and circumstances, we hold that the taxing of CDC charges in AY 2007-08 or 2008-09 is not sustained and is uncalled-for. Therefore, the additions made by the AO are deleted. - Decided in favour of assessee. Transfer pricing adjustments - Held that:- Wuhu Cold Storage and Transportation Co. is a complete service provider, whereas, the assessee is more of service recipient of such activities. Once it has been found that this comparable is performing activities and functions which are different from the functions carried out by the assessee, then without there being any change in the facts and circumstances in this year, the said company cannot be held to be a good comparable in this year. Simply the assessee has included this comparable in Transfer Pricing Study Report in this year as well as in the earlier years, it does not preclude the assessee from raising the objection that the said comparable cannot be included in this year, if the assessee is able to demonstrate the factors and circumstances leading to its exclusion, specifically functional dissimilarity and also the factors leading to huge variation in profit margin. Here in this year, the assessee before the TPO as well as before the DRP has disputed the comparable based on high margins. This plea of the assessee has been accepted by the department in the subsequent year. Thus, following subsequent order of the DRP, we exclude the Wuhu Cold Storage and Transportation Co. from the list of final comparables. Accordingly, the Assessing Officer is directed to exclude the same and benchmark the average margin of other comparables with that of the assessee and if the margin of such comparables falls within the range of ± 5% of the Arm’s length price, then needless to say, no adjustment should be made - Decided partly in favour of assessee. Disallowance of claim of expenditure on account of feasibility study - Held that:- The assessee has made the payment to professional firm, McKinsey & Co. for conducting a Feasibility Study Report for establishing a BPO business for assessee’s own function. Nothing has been brought on record that some kind of new line of business was to be set up or was to be controlled by different management. Hence, it cannot be treated as capital expenditure, or for non business purpose or any kind of pre-operative expenses. Here in this case, BPO business could not take off and whatever expenditure has been incurred has to be allowed either as business expenditure or as a business loss incurred during the course of business. Thus, the claim of such an amount cannot be disallowed either as a capital expenditure or for non-business purpose

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• 2015 (10) TMI 2374
  Taxability of profits from operation of ships in international traffic - benefits of India UAE Double Tax Avoidance Agreement - Held that:- Assessing Officer was clearly in error in invoking the provisions of Article 29 on the facts of this case. The conditions precedent for invoking this provision, i.e. creation of the assessee entity wholly or mainly, to obtain the benefits of the India UAE tax treaty which “would not be otherwise available”, could not have been fulfilled on the facts of this case as the assessee was anyway liable for treaty protection of its India sourced income from operations of ships in international traffic whether the business was carried out from Switzerland or from UAE and irrespective of the fact whether owner of the vessel was in Marshall Islands or anywhere else. The apprehensions raised by the Assessing Officer are devoid of any legally sustainable basis and are not supported by any cogent material. The LOB clause, as set out in article 29 of the India UAE treaty, as see have seen earlier in this order, could not have been invoked on the facts of this case either. In such a situation, once there is reasonable evidence to suggest that the affairs of the company are conducted from UAE, as is the case before us, and there is no material to controvert the same or to establish that the company is controlled or managed from outside UAE, learned CIT(A) was indeed quite justified in reversing the action of the Assessing Officer and in granting the benefits of India UAE tax treaty. The profits arising out of operations of ship in question in international water, by the appellant is not subject to taxation in India due to applicability of Article 8 read with Article 4 of India-UAE DTAA. - Decided in favour of assessee.

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• 2015 (10) TMI 2373
  Loss in share business claimed as business loss - treated as speculative loss in terms of Explanation to section 73 by the Revenue - Held that:- From the perusal of the CIT Vs. Darshan Securities (P.) Ltd. [2012 (2) TMI 117 - BOMBAY HIGH COURT] it is evident that Explanation to section 73 cannot be invoked only for the reason that the assessee is engaged in the share trading activity and does not fall within the exceptions laid down therein. Before applying deeming provisions and explanations to the sections, it is essential to refer to substantive provisions of the Act. Thus, we are of the considered view that the case of the assessee is squarely covered by the judgment of Hon'ble Bombay High Court. Accordingly, this ground of appeal of the assessee is accepted. - Decided in favour of assessee. Accrual of Interest - AO held to be taxable in impugned assessment year whereas the assessee has claimed the same in assessment year 2009-10 and the TDS certificate have also been issued in the assessment year 2009-10 - Held that:- The assessee is following mercantile system of accounting and recognizing the revenue on accrual basis. Since, the interest has accrued to the assessee in the period relevant to assessment year 2008-09, the same has to be taxed in the relevant assessment year. However, we find force in the submissions of the assessee that once income has been offered to tax in assessment year 2009-10 and the tax has been paid thereon the same income should not be taxed twice. The addition of Rs. 3,81,863/- with regard to the interest income received by the assessee in the impugned assessment year is sustained. The Assessing Officer is directed to delete the interest income that has been added in assessment year 2008-09 from the income of assessee in assessment year 2009-10. This ground of appeal of the assessee is partly accepted.- Decided in favour of assessee in part. Interest on borrowed funds allegedly diverted by the assessee for non-business purposes disallowed u/s. 36(1)(iii) - contention of the assessee is that the assessee has diverted borrowed interest bearing funds for non-business purposes - Held that:- Although, the ld. AR has argued that the assessee has sufficient own funds but at the same time has also conceded that proportionate disallowance can be made by considering the availability of own funds. We remit, this issue back to the file of the Assessing Officer to decide this ground afresh after taking into consideration the availability of own funds and the use of same for advancing loans for non-business purposes.- Decided in favour of assessee by way of remand. Commission paid to M/s. Eagle King Investments Development Ltd., Singapore disallowed - no TDS was deducted thereon - Held that:- It is a well settled law that if the payment made is commission simpliciter, for the services rendered abroad to an overseas concern having no PE in India, such payment is not taxable. Since, the income accrued to the overseas non-resident concern is not taxable, there is no question of deduction of tax at source on the said payments. Our view is supported by the judgment of the Hon'ble Madras High Court in the case of CIT Vs. Faizan Shoes Pvt. Ltd. reported as (2014 (8) TMI 170 - MADRAS HIGH COURT). We remit this issue back to the Assessing Officer for re-examination. In case the assessee is able to show that the payments were made through proper banking channel for the services rendered abroad, the payments were in the nature of commission and the overseas concern has no PE in India, the Assessing Officer shall allow the same. - Decided in favour of assessee for the statistical purpose. Disallowance made u/s. 14A r.w. Rule 8D on shares held as stock-in-trade - Held that:- It is an undisputed fact that the shares are held by the assessee as stock-in-trade. The assessee has earned dividend income on such shares. The assessee has not held the shares for earning dividend income. Dividend income is incidental to the share trading business of the assessee. Thus, no disallowance u/s. 14A is warranted on dividend earned on shares held as stock-in-trade. Our view is fortified by the decision of Mumbai Bench of the Tribunal in the case of DCIT Vs. M/s. India Advantage Securities Ltd. [2012 (11) TMI 458 - ITAT, MUMBAI]. Also see CCI Ltd. Versus Joint Commissioner of Income-tax [2012 (4) TMI 282 - KARNATAKA HIGH COURT] - Decided in favour of assessee.

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• 2015 (10) TMI 2372
  Claiming the balance amount of discount also as expenditure of the year u/s 37(1) - Held that:- Hon’ble Supreme Court in the case of Madras Industrial Investment Corporation Vs. CIT [1997 (4) TMI 5 - SUPREME Court], which is directly applicable to the facts of the case as considered by the Ld. CIT(A). Moreover, the judgment in the case of Taparia Tools Limited Vs. JCIT, Nasik (2015 (3) TMI 853 - SUPREME COURT) is under the provisions of Section 36(1)(iii) whereas the decision of the Hon’ble Supreme Court in the case of Madras Industrial Investment Corporation Vs. CIT [1997 (4) TMI 5 - SUPREME Court] is directly U/s. 37(1) and that too on the issue of discount on debentures. Since there is a direct judgment of the Hon’ble Supreme Court covering the facts of the case, we do not see any reason to interfere the order of the Ld. CIT(A). This is also in tune with the claim of ‘premium’ considered in later grounds, principles being same. Accordingly, we uphold the spreading over of the discount on debentures over period of debentures i.e., five years. Accordingly, we uphold the allowance of 1/5th of the discount only in the year under consideration - Decided against assessee. Issue of claim of ‘premium’ which was disallowed U/s. 40(a)(ia) - Held that:- Even if the amount is credited to Suspense A/c, but is claimed in the Books of Accounts of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of payee and the provisions of this Section shall apply accordingly. There is no dispute that assessee has provided the amount in the Books of Accounts and also claimed in the P&L A/c as an expenditure. Consequently, the credit of such in books of account shall be deemed to be income to the account of payee and provisions of Section 194A do apply to the facts of present case. Consequently, for the failure of deduction of tax at source, we are of the opinion that amount is disallowable under the provisions of Section 40(a)(ia). - Decided against assessee.

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• 2015 (10) TMI 2371
  Revision u/s 263 - Assessing officer has accepted VDIS claim without enquiry - Held that:- It is a matter of fact that the Assessing officer being an adjudicating officer has to form an opinion on the basis of evidence, which he has duly done. If the Ld. CIT on the same set of evidence forms an opinion, it being a question of fact, does not given him jurisdiction to revise the same u/s 263 of the Act. This is certainly a case of difference of opinion between Assessing officer and CIT. The only contention of the CIT seems that the Assessing officer should have made further enquiries / investigation, which he has not done. However, for assuming jurisdiction u/s 263, one has to keep in mind the distinction between lack of inquiry and inadequate enquiry. If there was an enquiry, even inadequate, that would not by itself give occasion to the CIT to pass order u/s 263, merely because he has a different opinion in the matter. It is only in case of 'lack of inquiry' that such a cause of action could be open. Assessing officer called for action, assessee replied to the Assessing officer, Assessing officer accepted and even in the office note meant for internal purposes he mentions that the assessee has substantiated the jewellery seized. In view of these evidences, this is not a case of lack of inquiry either. In view of the above analysis, we do not find any error in the order of Assessing officer. Hence, we set aside the order of Ld. CIT made u/s 263 of the Act as the order of the Assessing officer is not found to be erroneous. - Decided in favour of assessee

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• 2015 (10) TMI 2370
  Deduction towards bad debts claimed - CIT(A) allowed the claim - whether the principal amount of a term loan, given by the assessee as a NBFC, to be written off as bad debt when the said amount is in the nature of capital of the assessee? - Held that:- The assessee’s primary business is only money lending through hire purchase scheme and hence the instalments receivable becomes the stock in trade of the assessee and all these monies were advanced during the course of business of the assessee. Hence any loss arising out of it could only be treated as business loss u/s 28 of the Act. We are not inclined to interfere with the findings given by the Learned CITA in this regard. Decided against revenue.

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• 2015 (10) TMI 2369
  Penalty levied under section 271(1)(c) - disallowance of Legal Charges, treating the same as disallowance u/s 14A - Held that:- We find no merit in the order passed by the Assessing Officer in this regard, where no satisfaction was recorded for initiating the penalty under section 271(1)(c) of the Act in respect of disallowance made under section 14A of the Act, while completing the assessment under section 143(3) of the Act, by the Assessing Officer or while making the enhancement by CIT(A). Though the provisions of section 14A of the Act were brought on statute on an earlier date, however, the provisions of Rule 8D of the Rules were introduced w.e.f. 01.04.2008 only. Before the insertion of Rule 8D of the Rules, no set procedure was laid down under the statute to work out the disallowance under section 14A of the Act. The disallowance made in the hands of the assessee before us is an ad-hoc disallowance, which admittedly has been accepted by the assessee because of no tax effect. But merely because an addition has been made in the hands of the assessee on a debatable issue, it cannot be held that the assessee has furnished inaccurate particulars of income in respect of the said disallowance under section 14A of the Act. Where the question of disallowance and its quantification are contentious, which lead to inference that difference of opinion between the assessee and the authorities were bona-fide and in such circumstances, it cannot not be said that the assessee has furnished inaccurate particulars of income. Such was proposition laid down by the Delhi Bench of the Tribunal in Jindal Equipment Leasing & Consultancy Services Ltd. (2011 (4) TMI 130 - ITAT DELHI). Thus no merit in the levy of penalty under section 271(1)(c) of the Act and we direct the Assessing Officer to delete the same. - Decided in favour of assessee.

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• 2015 (10) TMI 2368
  Depreciation at higher rates on hydraulic crane - CIT(A) allowed the claim - not the commercial vehicle as held by the AO - Held that:- Similar issued has been decided by this Bench in the case of M/s. Narayani Cranes vs. DCIT (2014 (2) TMI 662 - ITAT JAIPUR) wherein this Bench has allowed depreciation @ 30% on Hydraulic Cranes - Decided against revenue. Disallowance of crane operating expenses and wages - CIT(A) allowed part relief - Held that:- It is observed that the assessee had claimed Rs. 18,60,539/- under the head crane operating expenses. The AO observed that the assessee had made payment of wages in cash and no supporting bills were available. The assessee did not maintain the wages register. The AO observed that only self made vouchers were available which were not subject to verification. Thus in the absence of proper records and primary records the AO made a lump sum addition of Rs. 1.50 lacs which has been reduced by the ld. CIT(A) to Rs. 1.00 lac by considering all the aspects in this case and we find no infirmity in the order of ld. CIT(A) on this issue.- Decided against revenue. Disallowance of conveyance, telephone, advertisement and general expenses - CIT(A) allowed part relief - Held that:- The percentage of conveyance and telephone expenses claimed against the turnover has increased while the turnover has declined as compared to previous assessment year. Therefore, the disallowance of conveyance expense is restricted to 10% of Rs. 2,17,006/- depreciation has not been included in this disallowance. This results in a confirmation of disallowance from conveyance expenditure of Rs. 21,700/-. Similarly, the disallowance on account of telephone expenses is restricted to 10% of the claim resulting in a confirmation of disallowance of Rs. 14,340/-. Regarding the advertisement and general expenditure, it is seen that the percentage of expenses have decline since last year and so ad hoc disallowance of Rs. 10,449/- is not sustained under the head advertisement and general expenses - CIT(A) has taken into consideration all the aspects with regard to claim of the assessee as referred in the above Grounds - Decided against revenue.

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• 2015 (10) TMI 2367
  Revision u/s 263 - listed securities of which sales was made by Assessee has suffered security transaction tax and therefore, the provisions of section 10(38) of the IT Act is squarely applicable and the income generated from sale and purchase of securities being long term capital asset is exempted - Held that:- The application of section 10(38) will warrant, only when the transaction had suffered STT. In the present case, the contention of assessee has been that transaction has not suffered any STT, we observe that ld. CIT ought to have enquired with the AO since all the material facts are very much available on assessment records. We have carefully considered the contention of ld. DR that the listed shares have to be transacted only through stock exchange. It is the businessman who will decide the mode of transaction, how it has to be done to his business exigencies. Particularly in the situation, where the shares value is not in favour of the assessee. The assessee has decided to deal directly with the counter part and closed the deal. We do not see anything contrary to any statute and the revenue has not doubted the genuineness of the transaction. Hence, the transaction is complete even without transacting through stock exchange. On perusal of the ratio laid down in case of Spectra Shares & Scrips (P) Ltd. (2013 (6) TMI 173 - ANDHRA PRADESH HIGH COURT), it is clear that the impugned order should be erroneous and prejudicial to the interests of revenue. We observe that the original assessment order was not erroneous as the material facts were already available on record of the AO. The AO has already dealt with the matters by carefully applying his mind and he has satisfied with his views. In the interest of justice, we have asked the ld. DR to verify the assessment file, whether the material facts like copy of agreements to sell and balance confirmation of the respective companies were available and considered by the AO before passing of the assessment order. It was observed that all the relevant papers were available as part of the assessment file. Hence, we conclude that ld. CIT has not enquired properly into the issue before coming to the conclusion that the assessment order was erroneous and prejudicial to the interests of revenue. Therefore, we quash the order of ld. CIT passed u/s 263 and restore the order of the AO - Decided in favour of assessee.

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• 2015 (10) TMI 2366
  TDS liability from the discount offered to various persons - nature of relationship - Held that:- The hospitals/laboratories are doing dual roles. This is particularly in view of the fact that the assessee is also widely advertising its services through the media and also through display of their name before the laboratories/hospitals. Further, if any of the laboratory is dedicated only for the assessee, then the discount paid to such kind of laboratories would fall in the category of “Commission” only, since the patients should be approaching them to get their tests conducted through the assessee. Neither the assessee nor the tax authorities have brought on record as to how the hospitals/laboratories have approached the assessee, i.e. whether on the specific instruction of the patient or on its own and whether the laboratories/hospitals are dedicated to the assessee only or not, i.e., whether they have such kind of business link with the competitors of the assessee or not. It is also required to be seen as to whether the test reports are given by the assessee directly to the patients referred to by the hospitals/laboratories or they are issued to the hospitals/laboratories, who in turn issue the test results in their own letter heads. This factor will also help to decide about the nature of relationship. Thus all the above facts need to be examined before answering the question about the nature of relationship between the assessee and hospitals/laboratories. This issue requires fresh examination at the end of the assessing officer. Maintenance charges paid to the professionals for maintaining the medical equipment - TDS u/s 194C or 194J - Held that:- Routine, normal maintenance contracts which includes supply of spares will be covered under section 194C. However, where technical services are rendered, the provisions of section 194J will apply in regard to tax deduction at source. CIT(A) was justified in holding that the maintenance charges paid to the professionals for maintaining the medical equipments is a payment falling in the category of contract payments requiring deduction of tax at source u/s 194C of the Act - Decided in favour of assessee.

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• 2015 (10) TMI 2365
  Jurisdiction of the Additional CIT to frame the impugned order of assessment u/s 143(3) - as per assessee assessment framed by the Additional CIT Range-6, New Delhi is without jurisdiction as firstly, he was not an Assessing Officer under section 120(4)(b) of the Act and furthermore, there was no order under section 127(1) of the Act for transfer of jurisdiction from DCIT, Circle 6(1), New Delhi to Additional CIT, Range 6, New Delhi - Held that:- It is an undisputed position and not challenged by the revenue in the present appeal either by placing on record any order or any notification supporting the position that an order was made under section 120(4)(b) of the Act so as to confer jurisdiction of the Additional CIT to exercise the powers or perform the functions of an Assessing Officer under section 2(7A) of the Act read with section 120(4)(b) of the Act. In view of the above factual and judicial position, we are of the view that the order of assessment so framed is without jurisdiction in as much as the Additional CIT did not have the requisite mandate power under the law to frame the impugned assessment under section 143(3) of the Act. This order apparently is neither an order under section 120(4)(b) of the Act and nor it otherwise directs the Additional Commissioner to exercise or perform all or any of the powers and functions conferred on or assigned to an Assessing Officer under the Act. As regards the notification no. 267/2001 dated 17.9.2001 we notice that such notification by CBDT u/s 120(4)(b) of the Act directs that Joint Commissioner of Income Tax or Joint Director shall exercise the power and function of an Assessing Officer in respect of specified cases in respect of which such Joint Commissioner or authorized by Commissioner of Income Tax vide CBDT notification dated 14.9.2001 and 31.7.2001. It is thus apparent that the said notification is applicable in respect of Joint Commissioner authorized by Commissioner of Income Tax under notification as specified therein and no more. In the instant case it is admitted position that none of the notifications as specified therein confer powers of an Assessing Officer to the Additional Commissioner of Income Tax, Range 6, New Delhi. We thus find merit in the claim of the appellant that in absence of an order u/s 120(4)(b) of the Act the Addl. CIT Range-6, New Delhi lacks jurisdiction to exercise the functions of the AO and therefore consequently the order of assessment framed is without jurisdiction. Assessment has to be completed by the authority who has initiated the proceedings for making assessment and any other authority can take over the proceedings only after a proper order of transfer u/s 127(1) or 127(2) of the proceedings. The revenue has not brought any order for transfer of the proceedings from DCIT, Circle-6(1), New Delhi to the Additional CIT, Range-6, New Delhi and therefore it is quite evident that the Additional CIT, Range-6 took over the assessment proceedings without there being an order u/s 127(1). - Decided in favour of assessee.

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• Customs

• 2015 (10) TMI 2394
  Confiscation of goods – Imposition of penalties – Revenue contended that pulses carried in trucks was meant for illegal export to Nepal and goods were correctly confiscated under Section 113(d) and vehicle was correctly confiscated under Section 115 – Goods were also prohibited as per were also prohibited by DGFT Notification No. 35/2009-2010 – Respondent contended that goods were not intended to be exported to Nepal and were being transported to Manjharia Godowns within the territory of India and pulses seized were meant for sale within India. Held That:- There is no evidence to rebut the argument of Respondent that pulses were meant for sale only within India – Information gained by Department was on mere hearsay of driver and cannot be taken as evidence - Impugned pulses were not liable to confiscation under Section 113 (d) as these were moving within the territory of India - Pulses have not been shown to have been notified as specified goods under Section 111 - No evidence on record that owner of truck had knowledge of smuggled nature of goods – Decided against Revenue

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• 2015 (10) TMI 2393
  Duty demand - Import of Electrode Grade Calcined Petroleum Coke – Classified goods under CSH No.2713 11 12 and claimed benefit of exemption Notification No.20/2006-Cus - Show-cause cum demand notice issued for wrong availment of benefit under exemption – Appellant states that word "coke" is generic term and not indicative of any particular source of origin and different tariff heads cover different varieties of coke - Benefit of exemption should be allowed to all varieties of coke and same cannot be narrowed down - Demand is barred by limitation – Held That:- Under notification, petroleum crude, kerosene, LPG, petrol, diesel coal, coke etc., have been allowed benefit thus coke derived from coal only, cannot be read into Notification, while allowing exemption to coke derived from other sources, like petroleum. The benefit of the exemption Notification No.20/2006-Cus dated 01.03.2006 as amended, is available to "Electrode Grade Calcined Petroleum Coke" imported by the Appellant. – Decided in favour of Appellant.

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• 2015 (10) TMI 2392
  Import of capital goods under SHIS scheme - Supply of equipment for continuous annealing line for cold rolling mill – Claimed clearance under Status Holder Incentive Scheme (SHIS) scheme vide Customs Notification No. 104/2009 – Revenue contended that goods are not capital goods thus not liable for exemption. Held That:- Definition of "capital goods" given in FTP are same for EPCG licence or for SHIS Licence – Notification No.104/09-Cus. clearly allows exemption of capital goods imported into India against Duty Credit Scrip issued under SHIS Scheme thus respondents are eligible for benefit – Decided in favour of the assessee.

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• 2015 (10) TMI 2391
  Export of Leather Pouches - 100% EOU - Reimported goods under Notification No. 158/95-Cus - Appellant contended that reimport was within 3 years from date of report and delay of a few months is well within Commissioner's power to condone - Held That:- Condition No. II of Notification No. 158 / 1995-Cus. required that goods be re-exported from date of importation within 6 months of date of re-importation or such extended period not exceeding a further period of six months as Commissioner may allow - Appellant did not seek any permission to re-export the goods beyond the period of 6 months and as such none was granted - Benefit of exemption notification cannot be allowed as one condition is not satisfied - Decided in favour of Revenue.

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• 2015 (10) TMI 2390
  Transaction Value – Rule 4(1) of the Customs Valuation Rules – Department has not been able to dispute the genuineness of the transaction value nor adduced any evidence of contemporary import – Appellant contends that once the Transaction Value is determined under Rule 4(1) there is no question for determining the value under subsequent rules. Held That:- Reliance on only one part of the Chartered Engineers certificate and ignoring the other part is a misdirected step in arriving at a conclusion - Revenue could have accepted the Transaction Value or the value could be determined under the Residual Rule 8 of Customs Valuation Rules - Order of Commissioner (Appeals) is not sustainable – Decided against the Revenue.

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• 2015 (10) TMI 2389
  Enhancement of Redemption fine and penalty - Non-declaration of MRP on package of goods - Redemption fine and penalty imposed, reduced by appellate authority - Held That:- Considering minimum profit of 10% of value of goods the redemption fine shall be Rs. 2,00,000/- - Omission of declaration of MRP brought Respondent to fold of law - Penalty imposed imposed by Commissioner (Appeals) has to send message to society that breach of law is mildly punished and such approach shall be bonus to evasion - Penalty enhanced to Rs. 1,00,000/- under section 112(a) looking to gravity of the matter - Decision made in case of Commissioner of Customs, Mumbai Vs. Mansi Impex [2011 (8) TMI 470 - Supreme Court of India] followed - Decided in favour of Revenue.

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• 2015 (10) TMI 2388
  Penalty under Section 112 of Customs Act, 1962 - Polyester yarn imported - Goods seized under Section 123 - Appellant contends that goods were purchased from open market and believed to be duty paid and since he is neither a Central Excise assessee nor a registered dealer, he did not maintain prescribed documents - Revenue contends that goods were imported availing the duty benefit under Export Promotion Scheme thus escaped customs duty - Goods purchased without invoices thus penalty imposed is warranted - Held That:- Role of appellant is limited to buying the seized goods from Shri Jitendra Shah, Broker without invoices, taking a lenient view penalty imposed upon appellant reduced from Rs. One lakh to Rs. 25,000/- - Decided in favour of appellant.

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• 2015 (10) TMI 2387
  Utilisation of Advance Licensing Scheme – Matter Remanded back for De-Novo consideration - Tribunal vide impugned order remanded matter back to Commissioner for denovo consideration, and to re-adjudicate show cause notice in its entirety – Whether tribunal was justified in remanding matter back for de-novo consideration – Supreme Court after allowing the exemption dismissed the appeal on the ground of delay. The appeal was filed by Revenue against the decision of High Court [2015 (9) TMI 511 - BOMBAY HIGH COURT]; wherein High Court held that Tribunal clearly concluded issue that activity of respondent assessee could be termed as “manufacture” – Only limited issue which was being dealt with by Tribunal is whether assessee has produced documents to satisfy that imported materials under Advance Licensing Scheme have been correctly utilised as per terms and conditions of scheme read with relevant notifications – Tribunal noticed in order under Appeal that adjudicating authority did travel beyond its earlier direction – Therefore, present court of opinion that Appeal does not raise any substantial question of law.

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• Service Tax

• 2015 (10) TMI 2415
  Condonation of Delay under Section 14 of Limitation Act, 1963 – Appellant claims to exclude time consumed in disposal of writ petition before Court in computation of delay – Appellant contends that matter has not been properly appreciated by Commissioner (Appeals) and delay may be condoned which is approximately of 16 months and matter may be remanded back – Revenue contends that no error committed by Commissioner (Appeals) - Delay was not condonable under section 85(3A) of Finance Act, 1994 – Appeal could have been preferred within 60+30 days maximum if preferred beyond 90 days, delay is not condonable - Section 14 is not applicable as there was no want of jurisdiction. Held That:- No reason found to entertain this writ petition as period of limitation is sixty days and delay can be condoned by Commissioner (Appeals) if there is reasonable reason but not beyond thirty days - No error committed by Commissioner(Appeal) in not condoning delay as it was beyond period of condonable delay – Section 14 not applicable as writ petition which was preferred after limitation period was over for preferring appeal U/s 85(3A) and is applicable only when the proceeding is bonafide in court without jurisdiction – Appeal dismissed – Decided in favour of Revenue.

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• 2015 (10) TMI 2414
  Cenvat Credit - Use of capital goods in providing Airport services – Chassis of motor vehicles were converted into toilet carts and water carts - Revenue alleged that during the period in question Respondent was providing both taxable and exempted services – Further alleged that credit availed in excess of permissible limit of 20% on output services and motor vehicle chassis do not qualify capital goods in relation to airport services – Respondent contended that Notification No. 33/2007-SERVICE TAX only exempts services provided to a foreign diplomatic mission or consular post in India. Held That:- No factual basis found for CCE(A) to have concluded that on account of bills for providing services having been raised on German Embassy and payments having been made by German Embassy, nature of services rendered was an exempted service - It was incumbent on Revenue to have placed some material on record to prove that services were provided not to German Air Force but to German Embassy. Eligibility of credit on Capital Goods - Chassis of motor vehicles were converted into toilet carts and water carts and were not registered - Used only for cargo handling services and not on roads – Same eligible to be capital goods – credit allowed. Decided against the Revenue.

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• 2015 (10) TMI 2413
  Rejection of Refund Claim under Rule 5 of Cenvat Credit Rules, 2004 – 100% EOU – Period pertaining to July 2005 to December 2005 - Maintenance or Repair of Software (MRS) - Refund not claimed on software development and software consultancy – Appellant stated that maintenance of software is a taxable service under category of 'management, maintenance or repair service' under Section 65 (64) – Revenue contends that appellant could not have got refund under Rule 5 but they could have got rebate under Notification No. 12/2005-ST - Appellant did not produce all export invoices and corresponding agreement to prove they are providing service of management, maintenance and repair of computer software. Difference in opinion – Majority order. Held That:- In order to claim refund it is necessary to provide copy of invoices issued during July to December 2005 and corresponding agreement between appellant and service receiver and along with category of service under which service claimed is provided - Commissioner (Appeals) did not examine all contracts in order to decide whether the activity is of "maintenance or repair" and has to quantify separately the amount involved relating to maintenance and repair service as also other service - It is necessary to examine whether appellant is eligible for availing the credit under Rule 3 before granting of refund under Rule 5 - Matter remanded back to Commissioner.

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• 2015 (10) TMI 2412
  Franchise Service – appellant, it is alleged, granted franchise for manufacture of firebricks of specifications, design and quality prescribed by it to some other small manufacturing units located at Katni. - Whether service rendered by appellant to manufacturers fell under scope of franchise service? - Appellant contends that it is not a franchise agreement and there was no franchise fee and goods manufactured were property of appellant and so called franchisees had no right over them - Sales tax was paid on entire value and thus service tax could not be levied on the same. Held That:- It comes out loud and clear from agreement that manufacturers did not have any representational right to manufacture goods identified with appellant - Appellant did not provide any service to manufacturers nor did manufacturers make any payment to appellant for any service - Merely because words 'franchise' and 'franchisee' have been used in agreement does not ipso facto mean that as per that agreement franchise service was rendered and thus agreement miserably fails to qualify as franchise agreement - Goods were sold to appellant and were consigned only to those persons whom he directed manufacturer to consign them to – Actual transactions between appellant and manufacturer are also in conformity with agreement – Impugned demand not sustainable – Decided in favour of assessee.

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• 2015 (10) TMI 2411
  Rejection of Refund Claim – Management Consulting Services - Exported “Banking and other Financial Services”– Appellant contends that remittance against export of services was received in Indian Rupees but through foreign bank and have issued FIRC - CENVAT credit for Clearing services, Car Hire Charges, Professional charges for assisting in MIS reporting requirement are used for providing output services which has been exported thus qualifies as input services, credit is admissible. Held That:- Even though appellant received payment in Indian rupees but same is deemed to be convertible foreign exchange and condition provided under Rule 3(ii) of Export of Service Rules, 2005 stand complied with and refund should not be rejected only on ground that foreign remittance received in Indian Rupees – Services, whether it falls under banking and financial services or under management consultant services, services have been exported thus admissible to be input service – Appeal allowed - Decided in favour of appellant.

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• 2015 (10) TMI 2410
  Liability of Service Tax and Penalty Imposed – CENVAT Credit on input services – Maintenance of computer software and Manpower recruitment service – Appellant contended that as per specific amendment under section 65 of Finance Act under category of maintenance and repair service w.e.f. 1.6.2007 where maintenance of software specifically includes computers and will have retrospective effect – Further contended that they are providing IT Services which became taxable only w.e.f. 16.5.2008 where software services brought under service tax net and were entitled to avail 20% credit - service tax was demanded on the gross value of service, without allowing cum tax benefit. Held That:- Maintenance of computer software - Board clarified that software is considered as "Goods" under section 65 (64) towards "Maintenance or Repair Service" - Amendment cannot have retrospective effect prior to 1.6.2007 – Demand liable to be set aside. Man Power Recruitment Service - Appellant's contention that they are not covered under Man Power Recruitment Service on ground that they have not utilized service and their another contention that providing of technical engineers from company is only incidental to software service is not acceptable – Demand is sustainable. Credit on input service utilized towards "Man Power Recruitment Service" during the period 10.9.2004 to 31.3.2006 - Once held that service tax is payable on Man Power Recruitment Service, appellants are entitled to avail credit on input service subject to verification by authorities - When service tax demanded, cum tax benefit is eligible on total gross value of services on Man Power Recruitment Service – Penalty set aside – Decided partly in favour of assessee.

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• 2015 (10) TMI 2409
  Stay on Refund of cenvat credit - Banking and financial services and technical inspection and certification services – Import of Rough Diamonds - Revenue contends that scope of Notification 17/2009-S.T is very specific and no scope for allowing refund of credit pertaining to services utilised by Respondents. Held That:- Contentions of Revenue that service tax paid on 'banking and other financial services' and 'technical inspection and certification services' cannot be correlated to export of goods manufactured and that services are also in respect of rough diamonds imported, are totally baseless - Banking services are utilised for raising finance for import as well as for export of goods manufactured - There cannot be two different yardsticks, one for permitting credit and other for eligibility for granting rebate - Definition of 'input service' on banking charges has to be allowed as they are in relation to business of manufacture whether same is prior or subsequent to manufacture – Decision made in case of Meghmani Dyes & Internationals Ltd. v. CCE [2014 (1) TMI 558 - CESTAT AHMEDABAD] followed – Stay rejected.

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• 2015 (10) TMI 2408
  Commercial training or coaching service – Appellant contested SCN on grounds that they are charitable institution and courses conducted by them are of vocational in nature thus eligible for benefit of Notification No.9/2003-ST - extended period of limitation – Revenue contends that there is nothing on record to show that after completing the training, students would get employment or self-employed – Held That:- Notification No.9/2003-ST exempted services provided by Commercial Training or Coaching Institutes if they impart skills to enable trainee to seek employment or undertake self-employment – Impugned order set aside – Decision made in case of Doon Institute of Information [2014 (4) TMI 253 - UTTARAKHAND HIGH COURT] followed – Decided in favour of assessee.

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• 2015 (10) TMI 2407
  Valuation – Demand of service tax on reimbursable/out of pocket expenses incurred by appellant while rendering services to various service radicands – Held That:- Issue is no more res integra as demand on reimbursable services cannot now survive in light of case of Enter Continental Consultants and Technocrats pr. Ltd. vs. Union of Indian [2012 (12) TMI 150 - DELHI HIGH COURT] which struck down the provisions of roll find (1) of service tax valuation rolls – Impugned order set aside – Decided in favour of assessee.

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• Central Excise

• 2015 (10) TMI 2404
  MODVAT Credit - Availment on HSD - Held that:- Rule 57A was substituted by notification dated 01.03.1997, but thereuneder also we do not find any substantial alteration so as to exclude HSD from being treated as 'input' and to attract benefit of MODVAT credit. - Explanation to Rule 57A (Clause d), clearly takes within its ambit 'inputs' used for generating electricity which is used within the factory of production for manufacture of final products or for any other product. It is not the case of Revenue that HSD, used in the case in hand by assessee for generating electricity, is not used within the factory of production for manufacture of final products or HSD is not used in generation of such electricity. The exclusion clause, as it stood in explanation does not bring within its ambit HSD used for generation of electricity. - Decided in favour of assessee.

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• 2015 (10) TMI 2403
  Penalty under Rule 26 - fraudulent availment of CENVAT credit - Fraudulent rebate claim - Confiscation of goods - Held that:- so called merchant exporters or Rule 12B manufacturers have dealt with the goods inasmuch as they purchased the goods from market and in order to claim the rebate/or avail CENVAT credit they approached Muni Group of Companies and purchased certain invoices from them so as to fraudulently show as if the goods were purchased from Muni Group of Companies on the invoices of Muni Group and thereafter exported or used in processing. Thus, there are excisable goods which are purported to be cleared on the invoice of Muni Group. In all cases, the investigations have indicated that the goods were never transported from Muni Group of Companies to the appellants or to the port of export. Investigations revealed that the goods were lifted from some dealers in Surat, etc. Further, investigations indicate that some payments were made to Muni Group of Companies through account payee cheques. However, immediately, thereafter, Muni Group of Companies have issued cheques in the name of some other entities. These cheques were, in turn got discounted by the merchant exporter/appellants. In some cases, the amounts were paid by crossed bearer cheques to Muni Group of Companies. However, these cheques were, in reality, not deposited in the accounts of Muni Group of Companies, but were deposited either in the name of certain dealers or got discounted from various bill discounters/shroffs. In nutshell, the money which was purported to have been paid to Muni Group of Companies for purchase of material was not paid to them but either was taken back by the appellants-merchant exporters, or in some cases, some amount was paid to certain dealers in fabric. Invoices of Muni Group of Companies and the goods purported to be covered by such invoices were dealt by the merchant exporter-appellants. There can be no doubt, that these goods are liable to confiscation under Rule 25(1)(d) of the Central Excise Act, 1994. In view of the above said position, there can be no doubt that penalty is imposable under Rule 26 on the merchant exporter/manufacturer under Rule 12B. Goods procured from some other sources would be non-duty paid goods otherwise, there was no need for them to get the invoices from Muni Group of Companies. The findings recorded above in respect of merchant exporters equally be applicable in the case of Rule 12B manufacturers and, therefore, penalty is imposable. Thus, these are the cases of fraud wherein the appellants as also Muni Group of Companies were equally involved and would be equally benefitted by getting the money from the government exchequer, in the name of rebate even though in reality, no duty was paid in the scheme of the above fraud, it was fraudulently shown that the duty was paid and the appellants or Muni of Group of Companies would be able to get refund of the duty in the form of rebate which thereafter will be distributed among themselves. Penalty on merchant exporters is allowed or dismissed on the basis of their involvement in fraudulent transaction. - Appeal disposed of.

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• 2015 (10) TMI 2402
  Valuation of goods - Undervaluation of goods - Job works - conversion of DTA unit into EOU unit - Benefit of notification 23/2003 - Held that:- During investigations of contract between one party and the respondents was recovered. In terms of the contract with M/s Sulakhi Limited it is clear that it is valid for 10 years from 1 may 2003 as per clause 2.1 and 11.2 of the agreement. It prescribes in paragraph 4 that the material supplied by the respondents to the processor would be the property of the respondent, proper records of the raw materials will be made and reported to the respondents by the processes. It described in paragraph 4 and 5 that the product will be of a particular specification, failing which the processor has to pay damages. The agreement also fixes the processing charges for the job. There was however, no such agreement recovered in respect of M/s Sahastra and M/s Sangadeep. During the examination of various employees of the respondent and one of the processors following has emerged. From the statements recorded it is apparent that the price at which spent goods were being cleared from the respondent s premises was linked to the price at which the processed goods were to be sold back to the respondents. This is clear from the statements recorded and from the terms of the contract. In the circumstances it cannot be said that the price negotiated between the respondent and the processors was price determined on an arm s length. The price of spent goods was directly linked to the price of the processed goods received back from the Processor. There may or may not have been a written contract between the parties to the contract but there was a clear understanding. Therefore in addition to the sale by the respondents to the processor not being an international transaction, it was also not at arm s length. - The Commissioner has failed to appreciate that the transaction in case of a DTA sale is a local transaction price whereas in case of clearance of an EOU unit the assessable value should be the price in the course of International trade. Having arrived at the conclusion that the domestic transaction value is to be accepted as the assessable value, due consideration has not been given to the arguments regarding alternate method of valuation in case the domestic transaction value is not accepted as assessable value. The respondents have raised many issues, like using common processing charges for calculations, regarding the method adopted in the show cause notice which have not been answered in the order of Commissioner as he has accepted the domestic sale price as the assessable value. - Cenvat credit rules limit the amount of credit available in respect of duty paid by EOU and therefore credit of entire duty is not available to the processor and hence it is not the revenue neutral situation. From the above it is clear that it is not a case of revenue neutral situation and Commissioners observation regarding with any neutrality is misplaced. Extended period has been invoked on account of recovery of the contract between the respondents and one of the processor’s in the year 2008. The said agreement was not in the knowledge of the revenue and the terms of transaction between the respondents and the processor’s were not in the knowledge of the Department and were not declared to the Department. I find that the terms between the respondents and it processor’s are of extreme importance in determining the assessable value and therefore non-consideration and nondisclosure of the said terms amounts to misdeclaration and suppression. - impugned order is set aside and the matter is remanded to adjudicating authority for ascertainment of the assessable value after giving due consideration to the arguments of the respondent in this regard. - Decided in favour of assessee.

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• 2015 (10) TMI 2401
  CENVAT Credit - credit of input services distributed by the Input Service Distributor - Jurisdiction - appellant submitted that show cause notice should have been issued to ISD located at Thane and not to them (unit availing credit). - Held that:- Distinction between the location of ISD and that of a manufacturing unit itself is immaterial. Credit is finally availed and utilised by the manufacturing unit. What learned counsel is trying to say is that show cause notice should be issued to head as hand has acted as per the direction of head. In our view, as rightly pointed out by learned AR, cause of action stands with availment and utilization of credit at the manufacturing unit. Of course, ISD and manufacturing unit are integrally connected, and both of them unitedly has to resolve the issue with the department. - Decided against the assessee. Input service distributor is not providing either any service or manufacturing any goods. There is no requirement of assessment or self-assessment. Input service distributor is only receiving the invoices of service tax paid which in turn are being distributed to different manufacturing units/service providing units. ISD per se does not value, classify or decide the rate of duty relating to the services so received. Therefore there is no question of his assessing such services. All that he does is distributing the same. Role of ISD is very different than that of a registered dealer and it is because of this reason that there is a separate return in case of a registered dealer which is not so in case of ISD. In case of ISD, the normal service tax return has a column for the distribution of credit of service tax and that is sufficient to ensure that the distributed service tax is not more than that shown in the invoices. - All that input service distributor is to certify in clause (b) that they have distributed cenvat credit correctly. Based upon the heading given in the return which is a common heading for service provider as well as input service distributor, it cannot be claimed that input service distributor is making self assessment and that self assessment is required to be challenged. No rule provides for assessment/self-assessment by ISD. In view of the said position, we find that the claim of the learned counsel is required to be out rightly rejected and we accordingly do so. In case of availment of cenvat credit the primary responsibility that the credit has been correctly taken, is on the manufacturer or availer of cenvat credit as per Rule 9(5) and 9(6). Rule 9(5) very clearly provides that the burden or proof regarding admissibility of the cenvat credit shall lie upon the manufacturer or provider of output service taking such credit. In view of this position, we have no hesitation in holding that the extended period of limitation has been correctly invoked. We also note the judgment of hon’ble Madras High Court in the case of F.L. Smidth Pvt. Ltd. (2014 (12) TMI 699 - MADRAS HIGH COURT). - Demand with penalty confirmed - Decided against assessee.

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• 2015 (10) TMI 2400
  Manufacturing activity or not - preparation of cutlery pack for airlines - they put a card showing their name on the cutlery pack so that it is known to the passengers that the catering is by them - items like dal, rice, curry, etc. which are separately packed. - In addition to these items, appellants also bought other items like butter, jam, pickles, etc. manufactured by other manufacturers which are excise duty-paid, if applicable. They put such items on the tray, along with bread, etc. and these are handed over to the airlines in the aircraft. In the aircraft, the heated items are also put in such trays and served to the passengers. - Invocation of extended period of limitation. Held that:- just because particular goods are classifiable under a particular heading, it will not automatically mean that the activities carried out by an appellant amounts to manufacture. It is for the Revenue to prove that the activity carried out by the appellant amount to manufacture and it satisfies the criteria prescribed by the hon ble Supreme Court, viz. new name, character and use. In our view, adjudicating authority has not given any findings on this issue. Extended period of limitation - Held that:- the appellants were registered with the department either for payment of excise duty or for payment of service tax. Some of the appellants were manufacturing cake pastries, chocolates and were regularly paying excise duty. Further, it is very well known that the appellants are engaged in providing catering services to the various airlines. In fact, catering to the airline is their main business. Moreover, no such caterer was paying excise duty on meals. In these facts, it is difficult to say that there was suppression of facts or willful misstatement of facts or intention to evade duty. Whether goods are branded goods - Held that:- Passengers understand that the catering is being done by the appellants. Thus, the meals get connected with the appellants and, therefore, in our considered view, the goods being supplied are branded goods and we find that, almost identical situation existed in the case of Australian Food India (P) Ltd. (2013 (1) TMI 330 - SUPREME COURT) decided by the hon’ble Supreme Court - For the first issue whether the activity amounts to manufacture or not, we would have normally remanded the matter to the Commissioner for examining the same and give his finding. In the facts and circumstances of the case, in our view, the extended period of limitation is not invokable, we therefore do not consider it necessary to remand the matter to the Commissioner on the issue of manufacture. - demands are beyond the normal period of limitation - Decided in favour of assessee.

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• 2015 (10) TMI 2399
  Demand of differential duty - valuation - whether the amount received as bonus by the appellant-assessee from its buyers for the performance of converter bricks/refractory bricks would be included in the assessable value of the refractory bricks sold by the appellant-assessee - Held that:- Refractory bricks were sold by the appellant-assessee based upon the terms and conditions as envisaged in the purchase orders. In the purchase order it is specifically stipulated for performance guaranteed bonus which indicated that the appellant-assessee should stand guarantee for the number of heat per set as per the agreements and bonus shall be awarded if the life achieved is above guaranteed heats and there is a penalty clause also that if the refractory bricks do not sustain the guaranteed heats then penalty would be recovered from the appellant-assessee. We find that the issue is no longer res integra as this Tribunal in the cases of MPR Refractories Ltd. Vs. CCE, Hyderabad (2009 (4) TMI 829 - CESTAT BANGALORE), CCE, Chennai Vs. VRW Refractories (2008 (7) TMI 647 - CESTAT, CHENNAI), Jalan Refractories (P) Ltd. Vs. CCE, Jaipur (2000 (9) TMI 192 - CEGAT, CHENNAI) and Indian Telehpone Industries Vs. CCE, Cochin (2004 (8) TMI 210 - CESTAT, BANGALORE), has consistently held that subsequent dealings between the assessee and the buyer on account of performance or otherwise of the goods is not of any concern in regard to the sale price of the goods at the time of removal. We are, therefore, of the opinion that there is no justification for treating the bonus amount as part of the price of the goods and demanding duty on the basis of bonus received from the buyers for better performance of the bricks was not includible in the assessable value of the refractory bricks. - Impugned order is set aside - Decided in favour of assessee.

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• 2015 (10) TMI 2398
  Manufacture - captive consumption - Department contends that the UDMH manufactured by the appellant and used for mixing with HH in the ratio of 75:25 has to be treated as an intermediary product and since it has been used in the manufacture of an exempted final product, the benefit of exemption notification No.67/95 is not available - Held that:- Admittedly UH25 is manufactured by mixing 75% of UDMH and 25% of HH in mixing container and thereafter thoroughly stirred for 90 minutes to meet the required density and specifications. According to the decision of the Hon ble Supreme Court, to call a process as manufacture it should result in emergence of a new product with distinct name, character and use. In this case there is no doubt that ISRO has given a new name UH25. The question that arises is whether it has attained a different character and is for a different use. As regards use, there is no dispute that both UDMH and HH25 are used for the same purpose viz., as a rocket propellant or fuel. In the absence of any evidence to show that there is a change in the character of the product and use of the product, we cannot say that Department has been able to show that a new product, as per the definition of manufacture laid down by the Hon’ble Supreme Court, has emerged. In such a situation, when by mixing UDMH and HH a new product is not emerging, it cannot be said that UDMH has been captively consumed in the manufacture of a product which is exempted and therefore duty liability has to be discharged on UDMH manufactured by the appellants and used within the factory. - appellants have been able to show that there is no manufacture and no new product is emerging by mixing UDMH and HH and therefore the stand taken by the Revenue and the impugned order are not sustainable. - Decided in favour of assessee.

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• 2015 (10) TMI 2397
  CENVAT Credit - use of Capital goods in different premises - Suppression of facts - Held that:- The appellant shifted the machine to another premises near to the factory and returned the same within 180 days. The movement of machine as well as semi finished material from the factory and finished material from the rented premises are by challans. According to the appellant, the shifting was done only due to paucity of space, and that no job work was done. The Counsel for appellant submitted that the movement of goods on challans were done as for job work though no job work was done. - appellant has taken semi finished goods outside their factory premises for completion of manufacturing process due to shortage of space in the factory, and the finishing work of stitching and packing is being done by the appellant without hiring or engaging another person for doing the said work. That as no job worker is involved the provisions of Rule (5) of Cenvat Credit Rules do not apply. - The fact that machine was used in a premises near to the factory is not disputed. So also it was used for connected process of manufacture. The process in these premises was carried out by the appellant themselves. The machine was used by appellants for the production of final products. Thus the activity of appellants in using the machine (capital goods) can be said to be part of its manufacturing activities of final products in its registered factory premises. There is no justification for denying credit. - there is no suppression of facts on the part of the appellant as he intimated the department about removal of machine by proper documents, I am of the view that the cenvat credit cannot be denied to the appellant. - Decided in favour of assessee.

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• 2015 (10) TMI 2396
  Determination of correct assessable value - Inclusion of commission paid and discounts given - Whether for the period prior to 1.7.2000 when the price on which the goods are generally sold is the correct assessable value or not - Held that:- As the issue has been settled by Hon ble Apex Court in the decision of Elgi Equipments Ltd. (2007 (8) TMI 20 - SUPREME COURT OF INDIA), therefore we hold that price at which goods have been ultimately sold to M/s. PDV shall be the assessable value. In these terms, demands for the period January, 1986 to August, 1987 as confirmed by way of impugned order is set aside. Further, we hold that for the period September, 1987 to November, 1988, the price at which the M/s. RMPL sold the goods to M/s. PDV is the assessable value. In these terms, we have decided the assessable value. As there were no malafide on the part of M/s. RFI for short payment of duty, the penalty is not imposable. - in this case, penalty of Rs. 25,000/- has been imposed on M/s. RMPL. As M/s. RMPL is an artificial person and in the facts of circumstances of the case, malafides against M/s. RMPL are not stand proved as they have conceded that the price at which M/s. RMPL sold the goods to M/s. PDV is the correct assessable value. - Decided in favour of assessee.

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• 2015 (10) TMI 2395
  CENVAT Credit - appellant was maintaining a common cenvatable register in respect of the inputs used in the manufacture of PD pumps as also in the manufacture of spare parts - spare parts manufactured by them were being cleared on payment of duty by utilizing the CENVAT credit - held that:- there is no dispute on the factual position. Admittedly during the period in question the appellant availed the credit in respect of common inputs used in the manufacture of dutiable as also exempted final product. They initially reversed the CENVAT credit relatable to the inputs used in the manufacture of the exempted final product but subsequently they reversed the entire credit, even the one which was relatable to the inputs used in the manufacture of spare parts. - Impugned order is set aside - Decided in favour of assessee.

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• CST, VAT & Sales Tax

• 2015 (10) TMI 2406
  Back to Back transactions - exemption of sales of motor spirit made at the retail outlet. - The shipping vessel places an enquiry for required quantity of HSD with the Petitioner - Petitioner in turn places a back to back purchase order/nomination of the same quantity on any of the Oil Marketing Companies - After the delivery of the HSD to the nominated vessel is complete, the Petitioner raises an invoice on the shipping line, based on the BDN - Recovery of sales dues from the bankers and debtors of the petitioner. Whether the sales made and subject matter of the order of assessment in the first Petition are within the State of Maharashtra so as to be taxable under the Maharashtra Value Added Tax Act, 2002 and therefore the action of the Respondents treating it as such can be said to be exfacie illegal. - Held that:- It is the goods which have been produced or manufactured or refined by the oil companies and which are drawn from their storage tanks in fixed quantity that are supplied on demand to the Petitioner. The manufacturers as also the refineries are very much within the State of Maharashtra viz. at Mumbai. The Petitioners are at Mumbai. Meaning thereby, their place of business is at Mumbai. It is from that place that the Petitioner requests the oil companies to supply to it the high speed diesel. It is received by the Petitioner from the oil companies at Mumbai. It may be that the Petitioner treats this as a contract on which they paid the sales tax as a component of the price. However, it is that very high speed diesel and supplied to the Petitioner at Mumbai which is carried from Mumbai in furtherance of a contract with parties like M/s. Leighton, which contract is also placed and finalised from Mumbai, through the barges of the Petitioner to the vessels of M/s Leighton and which may be stationed in territorial waters. There is sufficient territorial nexus for the Maharashtra Value Added Tax Act to apply and to be invoked to the later sale by the Petitioner of the same goods to M/s. Leighton and other entities similarly placed. We do not see how the Petitioner can escape compliance with this legislation and by contending that the contract of M/s. Leighton being a distinct contract, the sale taking place in territorial waters that the sales tax legislation or the VAT legislation of the Maharashtra State would be applicable. Its applicability has to be tested by applying the above principles and particularly the nexus theory. After having found sufficient territorial connection, namely, between the back to back transaction and the taxing authority that we are not in a position to agree with Mr. Sridharan that MVAT Act is inapplicable. Without expressing any opinion on the rival contentions as far as the exemption Notification is concerned, we would leave the Petitioners to pursue their remedies under the Act. - no relief can be granted to the Petitioners in these petitions. Rule in each of these petitions is discharged, but without any order as to costs. - Decided against assessee.

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• 2015 (10) TMI 2405
  Inter state sale or intra state sale - movement of levy rice from Yanam in the Union territory of Pondicherry to Kakinada (AP) - scope of control order - Jurisdiction of tax authorities in Andhra Pradesh - violation of Article 269 and 286 of the Constitution - Suppression of facts - Held that:- It is no doubt true that the question, whether a particular sale is an "inter-state" or an "intra-state" sale, is a mixed question of fact and law, (Sumukha Veereswari Rice Mill [1987 (3) TMI 508 - ANDHRA PRADESH HIGH COURT]), and this Court would, ordinarily, not take upon itself the task of examining such questions in Writ proceedings under Article 226 of the Constitution of India. - The questions, which this Court is called upon to examine, are on the basis of undisputed facts available on record. As the facts, necessary to determine whether the subject sales are inter-state or intra-state sales, are not in dispute, we see no reason to non-suit the petitioners on this score. Validity of order - violation of article 269 and 286 of the constitution - power of state (Andhra Pradesh) to levy tax of sale of levy rice from Yanam in the Union territory of Pondicherry to Kakinada (AP) - interstate sale or not - Held that:- In order to determine whether the sale of levy rice by the Yanam Rice Millers to FCI, Kakinada is an inter-state or an intrastate sale, it is necessary to refer to the relevant provisions of the CST Act and the A.P. VAT Act. Before doing so, however, it is necessary to examine whether the petitioners, rice millers at Yanam, are bound by the control orders issued by the Government of Andhra Pradesh under Section 3 of the Essential Commodities Act, 1955. Scope of control order - Held that:- While the obligation cast on the Yanam rice millers, in terms of the arrangement between the Government of Andhra Pradesh and the Government of Pondicherry with regards supply of levy rice by Yanam rice millers to FCI at Kakinada, is similar to the statutory obligations placed on rice millers in Andhra Pradesh under the Control Orders, that does not mean that these Control Orders stand, automatically, extended to the Union Territory of Pondicherry also. - The petitioners, rice millers carrying on business at Yanam, cannot be brought within the ambit of the Control Orders which, as noted hereinabove, is limited in its operation only to the territorial limits of the State of Andhra Pradesh, and not beyond. Interstate movement of goods - Held that:- While Yanam, which forms part of the Union Territory of Pondicherry, is adjacent to Kakinada in the State of Andhra Pradesh, both the 1984 and the 1987 Control Orders did not have extra-territorial operation, and were not automatically applicable to the Yanam rice millers. Though the arrangement, in terms of the Government memo dated 31.10.1983, did not obligate the Yanam rice millers to purchase paddy from agriculturists in the State of Andhra Pradesh, they did so, on their own volition, as they required paddy for carrying on the business of milling rice in their rice mills at Yanam. The said arrangement, in memo dated 31.10.1983, enabled the Yanam rice millers to procure paddy from agriculturists in Andhra Pradesh, and transport paddy from Andhra Pradesh to Yanam on a permit issued by the Government of A.P.; for its being milled at their rice mills in Yanam. Having done so on their own volition, the Yanam Rice Millers were thereafter obligated, in terms of the aforesaid arrangement, to transport the prescribed percentage of levy rice from Yanam for its sale and delivery to FCI/APSCSCL at Kakinada. As the sale of levy rice by the rice millers at Yanam to FCI at Kakinada, (the sale transactions brought to tax under the AP VAT Act by the impugned assessment orders), occasioned the movement of goods (levy rice) from Yanam in the Union Territory of Pondicherry to Kakinada in the State of Andhra Pradesh (from one State to another), it is evident that the sale has taken place in the course of inter-state trade and commerce, and is not exigible to tax as an intra-state sale under the A.P. VAT Act. Des weighment and ascertaning the quality of Rice at Kakinada (AP) make the sale an Intra-State Sale - Held that:- The State Legislature cannot, by law, treat such sales as "sales within the State" as it is within the exclusive domain of the appropriate legislature i.e. Parliament to fix the location of sale by way of a legal fiction or otherwise. The State, where the goods are delivered in the transaction of an inter-State sale, cannot levy a tax on the basis that one of the events in the chain has taken place within the State. - The movement of levy rice, from Yanam to FCI or APSCSCL at Kakinada in the State of Andhra Pradesh, is an inter-State movement integral to the scheme of arrangement between the Government of Andhra Pradesh, the Government of Pondicherry and the Yanam rice millers, and the sale of levy rice by the petitioners to FCI, Kakinada is an inter-state sale. The impugned assessment orders levying VAT on the petitioners, (all of whom are rice millers at Yanam), under the AP VAT Act is without jurisdiction and are, accordingly, set aside. Collection of amount in the name of VAT by the petition from the FCI (AP) but not paid to the state authorities - Held that:- While the Yanam rice millers, in the representation dated 05.10.2007, had contended that they were liable to tax under the AP VAT Act, and had thereby collected 4% extra from FCI, they have avoided payment of VAT, collected by them from FCI, to the Government of A.P contending that sale of levy rice to FCI is an inter-state sale not exigible to tax under the AP VAT Act. While these contradictory stands appear to have been taken by the petitioners only to enrich themselves, by retaining the excess amount paid to them by FCI towards the VAT component, the fact remains that acquiescence or consent would not confer jurisdiction on the assessing authority to levy tax, under the AP VAT Act, on inter-state sales. Petitioners had sought for and were paid by FCI, for the levy rice supplied by them, a higher price than what was paid to rice millers in Andhra Pradesh. The price paid by FCI, for procurement of levy rice, (from rice millers - both in Andhra Pradesh and at Yanam), included the VAT component. While the VAT component was factored into the procurement price prior to 2007-08, it was paid separately for the period subsequent to 2007-08. The VAT component of the procurement price, paid to the rice millers in Andhra Pradesh, was, in turn, paid by them, along with their returns, as VAT to the Government of Andhra Pradesh. On the other hand the Yanam rice millers, having collected the VAT component from FCI along with the procurement price, have retained the said amounts, and have not paid it to the Government of Andhra Pradesh. As the Yanam rice millers were not liable to pay tax under the AP VAT Act, the sale price, which included the VAT component, is, undoubtedly, an excess payment. As the sale of levy rice by the petitioners, who are all rice millers at Yanam in the Union territory of Pondicherry, to the FCI at Kakinada in the State of Andhra Pradesh, are sales in the course of inter-state trade and commerce falling within the ambit of Section 3(a) of the CST Act, the impugned assessment orders, subjecting these sales to tax under the A.P. VAT Act treating them as intra-state sales, are without jurisdiction and are set aside. - Decided in favour of assessee.

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• Indian Laws

• 2015 (10) TMI 2386
  Payment of royalty - whether royalty is payable at the rate mentioned in the Second Schedule to the MMDR Act on processed coal, that is, coal consumed or removed from the boundaries of the leased area in a beneficiated form or on the raw or unprocessed or ROM coal at the pit-head - Held that:- beneficiation process, as far as coal is concerned, has two significant consequences – the grade of coal improves (from Washery Grade IV it could improve to Steel Grade I) and the weight of the coal increases (from 100 tons of raw ROM coal to 105 tons [excluding rejects] of beneficiated coal). - ROM copper ore contains hardly 1% or 2% of copper but after the beneficiation process the copper extract from the ore increases to about 25%. It is thereafter sent for refining and smelting. In other words, copper ore cannot be utilized as it is or in the ROM state – it must undergo a beneficiation process from the ore and can then be used. - As mentioned in SAIL the consequences of processing dolomite or limestone has a consequence different from that of copper ore, namely, mere removal of waste and foreign matter. It appears that this process does not improve the quality of the dolomite or the limestone, though with the removal of waste and foreign matter, the weight would decrease somewhat. It may be mentioned that royalty is charged on dolomite and limestone on a tonnage basis. - nature of the mineral and the stage at which royalty is to be computed become important. The basis of levy would have to be rational and it might have different consequences at different stages. Court in the appeal filed by SAIL did not get into the question of removal of the mineral from the boundaries of the leased area but noted that the extracted mineral undergoes a process of removal of waste and foreign matter before it is removed from the boundaries of the leased area. The decision of this court on the levy of royalty turned on the consumption of the mineral through that process carried out by the holder of the mining lease. In that context it was held in SAIL that since the process of removal of waste and foreign matter amounts to consumption, the entire extracted mineral is exigible to royalty. - SAIL did not consider (and then reject) the reasoning given by the Orissa High Court that royalty is not payable on wastage that remains within the boundaries of the leased area. This was critically adverted to in an order M/s Central Coalfields Ltd. v. State of Jharkhand decided by this court on the ground, inter alia, that the distinction made by the Orissa High Court between removal of a mineral from a mine and removal from a leased area has been rejected without any reason. Section 9 of the MMDR Act has to be read and understood in conjunction with the Second Schedule to the MMDR Act. There is a good reason for it, which is that the scheme of the levy of royalty cannot be straitjacketed in view of the variety of minerals to which the MMDR Act applies and for the extraction of which royalty has to be paid. - Iron ore (with which NMDC is concerned) falls in the same generic category for levy of royalty as dolomite, limestone and coal namely on a tonnage basis but there is a crucial difference between iron ore and coal (as also between dolomite, limestone and iron ore). In the case of iron ore, beneficiation is necessary before it can be utilized. It has been observed in NMDC that "in iron ore production the run-of-mine (ROM) is in a very crude form. A lot of waste material called "impurities" accompanies the iron ore. The ore has to be upgraded. Upgrading the ores is called "beneficiation". That saves the cost of transportation. Different processes have been developed by science and technology and accepted and adopted in different iron ore projects for the purpose of beneficiation."{ National Mineral Development Corporation Ltd v. State of M.P. [2004 (5) TMI 575 - Supreme Court of India].} It is for this reason, inter alia, that the levy of royalty on iron ore is postponed, as held in NMDC, to a post-beneficiation stage. Under the circumstances, removal of beneficiated coal as against ROM coal might work to the disadvantage of the lease holder. For this reason, no similarity can be found between coal and iron ore or between coal and dolomite and limestone (apart from the fact that SAIL did not deal with removal from the leased area but consumption within the leased area). - issue of computation of royalty on minerals is rather complex and it is best left to the experts in the field and it cannot be painted with a broad brush as has been done in SAIL. That decision must be confined to its own facts with reference to consumption of dolomite and limestone. Since the Second Schedule to the MMDR Act must be read as a part and parcel of Section 9 thereof, the interpretation given in SAIL possibly cannot apply to the computation of royalty for every mineral. Similarly, Rule 64C of the MCR relates to royalty on tailings or rejects. As far as Tata Steel is concerned, its computation given in the Convenience Volume indicates that royalty is paid and payable on middlings and tailings. Rule 64C of the MCR makes it clear that royalty is payable on rejects when they are sold or consumed after being dumped. This will take care of situations such as that pertaining to silver, as mentioned in the affidavit of the Union of India. There is nothing to indicate in Rule 64B and Rule 64C of the MCR that coal has been put on a different pedestal from other minerals mentioned in the MMDR Act read with the Second Schedule thereto. It is, therefore, difficult to accept the view canvassed by the Union of India that these rules "may not be particularly applicable on coal minerals." That apart, the stand of the Union of India is not definite or categorical ("may not be"). In any event, we are not bound to accept the interpretation given by the Union of India to Rule 64B and Rule 64C of the MCR as excluding only coal. On the contrary, in NMDC this court has observed that these rules are general in nature, applicable to all types of minerals, which includes coal. The expression of opinion by the Union of India is contrary to the observations of this court. With effect from 25th September, 2000 when these rules were inserted in the MCR, royalty is payable on all minerals including coal at the stage mentioned in these rules, that is, on removal of the mineral from the boundaries of the leased area. For the period prior to that, the law laid down in Central Coalfields Ltd. will operate, as far as coal is concerned, from 10th August, 1998 when SAIL was decided, though for different reasons - High Court really gave no reason for denying the refund of the excess royalty paid by TISCO. For the reasons given in respect of Tata Steel keeping in view the decision rendered in Central Coalfields Ltd., we hold that TISCO is entitled to refund of royalty paid from 10th August, 1998 to 25th September, 2000. However, this amount need not be physically refunded but should be adjusted pro rata against future payments of royalty by TISCO over the next one year. TISCO is not entitled to refund of royalty paid after 25th September, 2000. The royalty paid by TISCO after 25th September, 2000 was correctly paid and in accordance with Rule 64B and Rule 64C of the MCR, which have not been challenged by TISCO. - Appeal disposed of.

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